Duggins wins Indy sweepstakes

Week two winner of the Keystone Auto Sales IndyCar Sweepstakes is Irene Duggins of Saylorsburg. The contest is sponsored by Keystone Auto Sales and winners are randomly selected.

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Six Fresh Ways to Think About Retirement Savings

Most of the ways in which people talk about retirement these days follows along a few narrow lines.

Put away 10% of your salary into a Target Retirement Fund starting at age 25 and you’ll be fine at age 65. Scoop up every bit of matching money from your employer, as that’ll help you reach your target. Your “number” – the amount you actually need to retire and maintain your current lifestyle – is enormous.

The vast majority of financial writing about retirement essentially just studies the lines of that basic story. They might look at a few different investment options. They might look at a few different account options. They might evaluate how much Social Security will help.

What they don’t do is offer different ways of looking at the situation. Often, it’s a fresh way of looking at a situation that can cause you to see it in a new light.

What follows are six different and perhaps unexpected ways to look at your retirement savings that I’ve picked up or developed over the years. Consider each of them and see what they tell you about your own retirement plans.

Remember, these ideas are merely new ways for you to wrap your mind around the challenge of retirement. They’re meant to help you consider the problem in a fresh way so that perhaps you can approach it with new insight or with different tactics.

A Few Caveats

Many of the ways described below to rethink your retirement savings rely on a few underlying principles. Rather than repeating them endlessly, here’s a summary of some of those principles. Use these as assumptions when you continue reading.

Social Security and Medicare are likely to be helpful, but it’s really hard to assess how helpful. It’s impossible to predict what kinds of benefits those programs will be offering to people in ten or twenty or thirty years. It’s probably reasonably safe to say that they will offer some positive benefit, but how much positive benefit is unclear.

Taxes are hard to predict, too. In order to use some of these tools, you should assume that you’ve taken responsibility for taxes elsewhere. This can be done by making use of tax-advantaged accounts like a Roth IRA, which has no tax burden whatsoever when used in retirement, or by accounting for taxes in your other withdrawals. Unless you’re

4% is a fairly safe withdrawal rate. It’s widely accepted that a diversely-invested retirement account / investment portfolio will pay out 4% per year to the account holder for at least 30 years. In other words, provided you don’t have all of your eggs in one basket and at least some of that money is invested aggressively, you should be able to withdraw 4% of your account balance on the day you retire each year for at least 30 years (and probably more). So, if you retired with $1 million in various accounts, you could withdraw $40,000 per year and your savings would last for at least thirty years at that withdrawal rate.

3% is a very safe withdrawal rate. Similarly, a diversely-invested set of investments should be able to pay out 3% essentially forever. So, again, with the above example, if you have $1 million in various accounts, you could withdraw $30,000 per year and your savings would last for the rest of your life at that rate, no matter how long you live.

7% is a reasonable number to use when calculating the average annual return of a long term investment. I use this number because it’s the one Warren Buffett suggests as a healthy long-term number for such calculations. It’s not perfect – obviously, the stock market and other such investments are volatile, meaning they’ll earn 15% one year, 20% the next, and -15% the next – but over the long term, that volatility averages out, leaving you right around 7%.

The $300K Standard

So, let’s take those withdrawal rates and play with them a little bit. If you have $300,000 and are planning on withdrawing at a rate of 4% per year, you’ll withdraw $12,000 a year. Another way to think about that is that it’s actually $1,000 per month for the next thirty years.

In other words, for every $300,000 you have socked away, you can start withdrawing from those accounts at a rate of $1,000 per month and it should last at least thirty years.

If you have $600,000, that’s $2,000 a month. If you have $900,000, that’s $3,000 a month. You get the idea.

If you feel better operating with a 3% withdrawal rate so that you can theoretically withdraw forever, for every $400,000 you have saved up, you can withdraw $1,000 per month and it should last forever.

Similarly, if you have $800,000, you can withdraw $2,000 a month and the account should last forever. If you have $1.2 million in there, you can withdraw $3,000 a month and the account should last forever.

So, if you want a quick analysis of where your retirement savings is sitting right now, just count the number of $300,000 levels in there. For every $300,000 you have, you can likely safely withdraw $1,000 per month in retirement. If you want to be safer, you can use the $400,000 number instead.

What’s the key idea here? You can use this perspective to look at your retirement easily through the eyes of the amount of money you need each month to live. You can use your monthly living expenses as something of a filter to help you figure out how much you need to save.

The Poverty Line Standard

Another, similar way to look at things is to consider how much you’d have to save for retirement in order to meet the federal poverty standard on your own, without any help from Social Security. Obviously, this doesn’t really give you the most affluent of lives, but it does ensure that you’ll be able to keep food on the table and a basic roof over your head. Money above this level is mostly going to raise quality of life, but once you meet this threshold, your basic needs will be met.

The current federal poverty level is $12,060 a year for a single person, $16,240 for a family of two, $20,420 for a family of three, and so on. You can check the full listing for larger family sizes.

So, what do you need to save for retirement to meet that level?

In the case of a 4% withdrawal rate, you’d simply take the target annual number and divide it by 0.04, giving you $301,500 for a single person, $406,000 for a couple, $510,500 for a family of three, and so on. In other words, it assumes you need about $200,000 as a baseline, plus another $105,000 for each person dependent on you, give or take a little.

In the case of a lower 3% withdrawal rate – one that should last forever – you’d divide by 0.03 instead, giving you $402,000 for a single person, $541,333 for a couple, $680,666 for a family of three, and so on. In other words, it assumes you need about $260,000 for a baseline, plus another $141,000 or so for each person dependent on you (including yourself), give or take a little.

So, what’s the take home message? You can use these numbers as a baseline to figure out what you should be shooting for as a bare minimum in order to keep food on the table and a roof over your head in retirement. Yes, as noted above, Social Security and Medicare will supplement this, but it’s hard to really know how much it will be supplemented, so it’s useful to think of things without those benefits.

Living Anywhere

You might have a strong sense of what your monthly expenses are in your current area, but when you retire, you’re not going to be tied to your current area. You have the freedom to move where you wish, including areas with much lower costs of living.

For example, let’s say you currently live in Boston. When you retire, you could consider moving to, say, Des Moines, where the cost of living is about 38% less. In fact, the standard of living on a $50,000 salary in Boston is about equivalent to the standard of living on a $31,000 retirement “salary” in Des Moines.

You can figure this out by plugging your current city and lots of potential “destination” cities into this domestic cost of living calculator, which will take your current cost of living (or salary) in your current city and show you how you how much an equivalent lifestyle costs in your target city.

You can do the same thing with international cities. Take that fellow living in Boston. If that person were to move to Bangkok, Thailand, that person would be able to live a similar lifestyle 45% cheaper. That means that someone living on a $50,000 salary in Boston would be able to have a similar lifestyle on $27,500 a year in Bangkok.

You can figure out such comparisons for international cities using international cost of living comparison tool.

So, what’s the take home message here? You don’t have to live in your current location in retirement; in fact, you’re probably better off moving. There are many locations around the world and likely even around the country with a substantially lower cost of living while still maintaining most of the cultural and other features that you’ve come to rely on.

The Missing $100

Let’s say, hypothetically, you’re able to save $100 a month more for retirement starting at age 25. If you do that, by age 65, you’ll have just shy of $250,000 in your retirement accounts (assuming a 7% annual return, as noted above).

For many people, coming up with that $100 a month is a hassle. How do you squeeze $100 a month out of your spending?

Rather than looking at $100 as a lump sum, try a different approach. Pull out all of your credit card statements and bank statements for a month and walk through them, step by step. Look for any and all expenditures that seem completely silly in retrospect. Why did you spend $8 at a gas station on the 24th? Do you even remember why you withdrew that $40 from an ATM? You went to Starbucks nine times? And spent at least $6 each time? (This actually reminds me of a friend of mine who recently found himself in a cycle of buying two energy drinks every morning. I pointed out to him that the routine was costing him about $150 a month and he laughed at me and called me a joker. Except he was doing it every day, buying them from a gas station, and paying $5 a day for them. $5 times 30 is $150. Little things add up.)

Anyway, just pile up all of those little unknown expenses and unnecessary expenses. Make a big list of them. Then, once you’ve done that, total up all of those unnecessary expenses.

For many Americans, the total of those unnecessary and forgotten expenses, those ones that feel utterly silly and unnecessary in retrospect, add up to well over $100 a month. Doubt it? Try it for yourself and find out.

What’s the key idea? You probably already have the money you need for baseline retirement savings, or enough to boost your retirement savings up to respectability. You’re spending it on absolutely forgettable and frivolous things, things that add no lasting value whatsoever to your life. What those things are costing you, though, is a secure life when you’re old.

Gigging in Retirement

This strategy is worth telling a couple of stories about.

At the local bicycle shop that I use when I need repairs or parts, there’s a guy in his sixties that seems to be the “chief bicycle repairman.” There are three or four people who repair bikes, but he does most of the work, it seems, and handles a lot of the customer conversation. One day, I happened to mention that I write about finances for a living and he simply laughed and said, “This is my retirement!” It turns out that he’d been passionate about bicycles all of his life, found himself near retirement age, and just retired so he could work part time in a bike shop, make enough money to supplement his retirement income and Social Security, and spend all day doing what he enjoys, talking about bicycling and repairing bicycles. The guy couldn’t be happier.

Similarly, when I first moved to my current town, there was an elderly fellow that ran a small trading card shop in a small strip mall in our town. He didn’t have a lot of customers and didn’t make a whole lot of money, but I did notice that most of the time, when I stopped in there, there were always either a few people in there chatting with him or else he was sorting and organizing cards. When he passed away, the shop closed, and I happened to be there when his son was closing out the shop. It turns out that this was the older guy’s retirement gig – he’d enjoyed sports cards all of his life, so he just took his collection as a foundation and opened a shop to trade and sell the cards, organize and appreciate them, and talk to others passionate about it. He didn’t make enough from the shop to live on, but he made enough to supplement his retirement savings and Social Security.

You can probably see the parallels in these two stories. These two people had spent most of their adult lives engaged in a hobby they loved, acquiring so much domain knowledge about the hobby that when it was time to retire, they could easily use that domain knowledge to get a gig of some kind using that knowledge and passion. It didn’t have to be a lot of money or a full time gig, but just enough to keep a bit of cash flowing in while they engaged in the things that they’d always been passionate about.

What does that look like for you? What do you spend your free time on when you have it? Would you have fun working in a shop related to that passion on a part time basis some day, just to be able to revel in the hobby?

Make that part of your retirement plan. If you spent, say, 20 hours a week engaged in exploring your hobby in this way, passing along knowledge and simply enjoying a passion of yours, how would that change your retirement outlook? Would a part-time job fulfill that desire?

It might be as simple as doing something like working as a secretary at your church, or fulfilling some odd job at a nonprofit you care about. You might go into business on your own, writing ebooks or magazine articles or making nature videos on Youtube.

The point is to translate a passion you have into a low-key way of making money in retirement, banking on years of knowledge accumulated from many years with that hobby or passion. You don’t have to turn it into a high-pressure business because the purpose here is to be supplemental – this is a side gig, meant to supplement your retirement income with a few dollars.

Remember, a 20 hour a week job making $10 an hour earns you $200 a week. $200 a week over the course of a year is about $10,000. That’s a very nice supplement. As pointed out above, that’s the equivalent of $300,000 in retirement savings. Not only that, it’s 20 hours spent something you’d do anyway, as part of a hobby.

What can you do to prepare? Give yourself breathing room in your daily life to enjoy a passion. Build your knowledge of that passion along the way and look for a way, someday, that you could make a little money doing more or less what it is that you enjoy.

No “Death Wish”

One of the most popular arguments against saving for retirement is the idea that it would somehow be a “waste” to have saved a lot of money and then to die before you could ever spend it. If you saved a million for retirement and then dropped dead on retirement day, what good was all of that effort?

Well, let’s turn that around a little bit.

First of all, the average American will live until they’re 79. Women live even longer than that, on average, in part due to men being more likely to take on risky occupations when they’re younger. If you plan to retire at age 65, it’s worth noting that you have only a 17% chance of dying before then, and that percent goes down every single day you live. In other words, if you’re shooting to retire at age 65, there’s an 83% chance you’re going to start drawing down your retirement savings at that point.

Why would you plan your life around something that has a 17% chance of happening and ignore something that has an 83% chance of happening?

Even then, let’s look at that 17%. Let’s say you do die early and don’t get to spend what you saved. That means that you probably died unexpectedly and left some family members in a pickle – a spouse, or perhaps some children. That savings will ensure that they have a good life. Remember, 55% of American adults are married and around 53% of people have children – and those aren’t the same groups, though there’s overlap.

So, there’s less than a 10% chance that you’ll die before age 65 with no survivors.

But let’s look even further at that tiny group. Let’s say you’re in that 7% or 8% of people who will die before age 65 with no survivors. Your retirement savings can do great things in the world. You can leave it to your preferred charity. Donating $500,000 to a charity that you really care about, like, say, Habitat for Humanity, can make an enormous difference in a lot of lives. Perhaps you could leave it to a relative who could really use a boost in life – that money could transform their life.

The key thing to remember is that there’s more than a 90% chance that you’ll either live past 65 or have children or a spouse when you pass away. That alone is more than enough of an argument for some retirement savings. But even if you’re not in that group, your retirement savings still has tremendous positive power in the world.

Saving for the future is almost always a net benefit.

Some Final Thoughts

Hopefully, one (or more) of these different perspectives on saving for retirement clicked with you and helped to shape your thinking about your financial goals and your financial plans going forward. While these ideas aren’t hard plans themselves, what they each can do is provide the reasoning for and the motivation for retirement savings for you.

Sometimes, it’s just a matter of finding the right angle that makes sense to you.

Good luck!

The post Six Fresh Ways to Think About Retirement Savings appeared first on The Simple Dollar.

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What to Expect When You’re Divorcing: The Real Costs of Living Single Again

When Sean Sutherland‘s divorce was finalized, he realized he had to toss his original plans for the future out the window.

Uncertainty about starting a new life started creeping into his head.

He was faced with questions about life after divorce he wasn’t sure how to answer: Will one income sustain me? Do I want to stay in an area that’s associated with memories of the relationship and people close to it?

While Sutherland, a Baltimore resident, considers himself lucky for having generous and supportive friends during his time of need, he still felt a financial burn from the startup costs of his new life.

Even though his divorce was finalized in January 2016, he still feels that burn to this day.

Life After Divorce Is Costly for Everyone

Sutherland isn’t alone in that he still feels the financial impact of his divorce.

It’s well-known that getting a divorce is an expensive process. Between litigation fees, charges for document copies, attorney bills and more, the expenses can leave you financially drained.

But the money woes don’t stop there — it’s actually where they begin. Once the papers are signed and the judge approves your divorce, your world opens up to a whole new variety of expenses.

The true cost of life after divorce includes everything from establishing separate residences and obtaining new insurance policies to getting back in the dating field.

Here are some examples of just how much it costs to start your life over again.

You’ll Have to Find New Living Arrangements

You and your ex-spouse probably shared an apartment or home, meaning you’ll be faced with finding new living arrangements.

If you’re renting, chances are you’ll have to come up with some large upfront costs, such as a security deposit, and first and last month’s rent.

Depending on your divorce agreement, you might not get all of your previous home’s furnishings, which means you’ll have to pay to replace those, too.

Lizabeth Cole, director of public relations and communications at The Penny Hoarder, had to start nearly from scratch after her divorce was finalized.

While she took small pieces of furniture from her former home, she had to replace all of her bigger furniture, along with linens, kitchenware, towels and more.

On top of that, she had to pay a security deposit and first month’s rent for her new apartment. In total, she estimates she spent about $3,000 on securing and furnishing her new residence.

Depending on location and the size of the home, these costs vary widely.

Rebuilding Your Savings Might Take Time

For Sutherland, the 50-50 split of his savings was the biggest financial strain. He said he funded their nest egg, with the intention of the two of them living off it in the future. But he and his ex-wife agreed to split it in the divorce, which left him in a new reality.

“It certainly derailed the plans I had and the vision for what my future would be,” Sutherland said. “Cutting a net worth in half is a big hit for anyone to take, let alone someone who was still pretty young and in the early stages of my career.”

Sutherland lost around $15,000 when he split the savings with his ex; it’s taken him nearly two years to get within reach of where he was before the divorce.

You’ll Have to Pay the Bills on Your Own

It’s common for people to combine finances with their significant other.

Once you get a divorce, though, you no longer have someone to split bills with. If you’ve been doing this for dozens of years, you may find it difficult at first to adjust your spending habits.

There are plenty of ways to get back on track after a breakup, though. Doing things such as re-evaluating your budget, thinking twice before making emotional purchases and preparing for financial success can help you get acclimated to only having your own money to spend.

You Need Your Own Insurance Policies

No longer being married means you may not have the advantage of bundled services, such as auto and health insurance.

Examples of policies and services you will have to hold on your own include:

• Auto insurance: If you and your spouse were on the same auto insurance policy, you may have received a multicar discount. Now you will have to seek out your own plan, and it might cost more to cover your car. According to The Zebra, a single person saves about 5.6% when they get married, which equates to about $74 extra. Getting divorced increases premiums to nearly the same rate a single person pays.

• Health insurance: If your ex had you on their health insurance plan, you will now have to find your own coverage.

• Disability insurance: After getting divorced, you may owe your ex-spouse alimony or child support. You may want to purchase disability insurance so you can make the court-mandated payments should you unexpectedly experience an illness or accident that prevents you from earning money.

You’re Now a Single Tax Filer

Filing joint taxes when you’re married usually means you get certain benefits, like tax breaks and increased standard deductions. That means that as a single filer, you could see your income taxes increase.

Don’t Forget About the Cell Phone Plans

If you and your ex-spouse or significant other split a cell phone bill, you’re going to have to think about what to do next.

Many cell phone plans involve contracts that are costly to terminate. However, if your divorce isn’t exactly amicable, you might want to consider canceling the plan.

Erin Routzahn, senior account manager at The Penny Hoarder, shared a cell phone plan with her ex-boyfriend of two years. After they separated, they opted to terminate the plan.

The total cost to cancel it was $300, which they split.

Your Mental Health — an Overlooked Cost of Divorce

Caring for your mental health may not be an expense you considered part, but Elise Pettus, founder of divorce community group UNtied, thinks you should factor it in.

She compares divorce process to the grieving process, saying you might be “grieving the dream of having a family.”

“I do think therapy is a good idea,” Pettus said. “One of the things I see happen again and again is how helpful it is to have a community of others who are going through the same thing.”

If you’re turned off by traditional therapy due to the stigma or cost, there are outside resources available to help you. Examples include communities like UNtied or divorce recovery support groups. Some of these programs charge membership fees, and some don’t. Be sure to do your research.

Good News: You’ll Probably Need to Think About the Costs of Dating Again

After recovering emotionally from your divorce, you may consider dating again. While this is an exciting time in your personal recovery, keep in mind that it can be expensive.

Many adults spend $150 to $250 on a single date, including dinner, drinks and transportation.

Due to the rapid expansion of dating technology, we’re going on more first dates. That being said, some leave the traditional standards of who should be paying for the first date in the dust. Some people split the bill, others go simply for the free food.

The good news is, you don’t always have to go out to dinner for a date. Consider doing cheap or free activities such as bike riding or happy-hour hopping to save on costs.

A New Life: Expensive at First, But Worth It

The costs of starting a new life after divorce are significant, but with a new beginning comes hope.

Joy Prosperity Coaching founder and business coach Joy Passey signed her divorce papers in March 2014, after 13 years of marriage. Although she had to find her own health insurance plan, she also spent money on self-care and time with her friends.

“My friends said I became more fun when I got divorced,” Passey wrote in an email. “Ha! I also started improvisational classes and started performing again. I became a better version of my former self after my divorce!”

If you find yourself struggling financially while you readjust to life on your own, know that you aren’t alone.

Sutherland rebuilt his savings by working as much as possible in the months following the divorce. He even took on a second job, where he worked most weekends. For him, rebuilding his savings came as a “mental victory,” and keeping busy with multiple jobs helped him move on.

Sutherland offers a few words of advice to those who may feel like they aren’t able to get back on track financially:

“The best advice I can give is that you will get through this: Once the immediate shock is over, do your best to replace the funds you’ve lost — increase your savings, decrease your spending, but do so on your own terms. Only you can know what the right pace is for cutting back or cutting loose with your spending during these tough times.”

Here’s to new beginnings.

Kelly Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.

This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.

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