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Tag: Debt

Will 30 Year Olds Ever Get To “Retire”?

Written by support@seostats.com on . Posted in Retirement.

If you’re in your 30s right now, you might feel that those golden years of retirement may never happen. Experts are predicting that Millennials will have to keep working until they drop dead. But can this really be true?

You might have heard that retirement isn’t what it used to be. In fact, who calls it the “Golden Years” anymore? These days, our vision of life in our 60s and beyond more than likely contains some version of ourselves working… working and seriously downsizing our lifestyle expectations.

But it’s not just a 30-something’s vision of the future: it’s already happening. Even older generations are facing a completely different retirement scene right now: they’re working longer, living longer, and they’re forced to rely less and less on Social Security.

So, what will retirement be like for people who are in their 30’s now?

 

30-Somethings Face a Different World Than Previous Generations

Back when Social Security was invented, the retirement age was set at 65. That seemed reasonable for the day, since the average life expectancy was around 62.

Today, people who retire at 65 need to come up with a “second chapter” because, well… with an average life expectancy almost 20 years longer, chances are there will be a second chapter.

And if your second chapter doesn’t involve some sort of income-producing activity, then you’re going to need a whole lot of money saved up before you can even think about signing up for painting classes, hitting the golf course, or whatever it is you plan on doing in retirement.

But things don’t look so good on that front. Take a look at how your elders are doing in that department…

 

Americans Don’t Seem to be Good at Saving. At ALL.

38% of Americans don’t save at all for retirement. Even for those who do save, the average savings of a 50 year old is only $42,797.

I’m not sure how everyone plans on affording retirement, but if they think Social Security will carry them through, they really haven’t been reading the news in the last 10 years! Social Security will be around, probably, but it’s predicted that it will cover only a fraction of your living costs.

 

Think Your Fortune 500 Career Will Save You? Maybe.

Maybe you feel invincible: you’re in your 30s, you have a well-paying job, and life seems rosy, retirement seems doable. I’m just going to play devil’s advocate with you for a moment: what if your job is no longer there in 20 years?

I don’t mean the exact job you hold right now. I mean your industry: it can change, making your type of job obsolete. Technology is advancing so fast that many jobs are going the way of the ten-cent candy bar. One of the most respected financial advisors in the nation, Ric Edelman, talks about this on the “Between Now and Success” podcast hosted by Steve Sanduski.

 

You Might Even be Peaking Right Now With Your Salary (Yes, in Your 30s)

You’re probably not going to have that Fortune 500 or otherwise high-paying job when you hit your late 40s or 50s.

I’ve seen it first-hand. When I worked at Morgan Stanley, you could look around the building and hardly see anyone over 50. Why? Because you either get too burned out to keep it up, or you make too much money and they replace you. Of course no one ever gets fired… they leave the firm for new opportunities (wink wink).

The older you get, the harder it will be to command the salary you are currently receiving.

 

What Can You Do?

I want to stress that there are things you can do right now, while you are in your 30s, to ensure you don’t end up destitute and unhappy during retirement. Start planning now for your next career. Then, start living below your means, or at least within your means. Finally, save for the unknown.

Need help with any of that? A financial planner can get you started on a pathway to a secure retirement- start now while you’re in your 30s!

Should I Pay Off My Mortgage Early?

Written by support@seostats.com on . Posted in Financial Planning.

I am commonly asked “should I try and pay off my mortgage early?”

My response is, “why do you want to pay it off early?”  Frequently the answer is, “because it’s my only debt and I want to be debt free”.

Don’t get me wrong, living debt-free is ideal, however not all debt is created equal and living a completely debt-free life is not realistic for many people.  Mortgage debt compared to other types of debt, such as, credit card debt should not always be considered “bad”.

Let’s take a look at 3 reasons why you shouldn’t pay off that mortgage debt early:

 

1.    It’s the cheapest money you will ever borrow

Loans are provided to consumers based upon their credit worthiness and the asset that the loan is being made against, known as collateral.  Interest rates are higher for those with lower credit scores and for loans that have collateral in which it may be difficult for the lender to recoup should the borrower default.

As collateral goes, a house, a tangible asset, is one of the most desirable types of collateral for lenders.  In comparison to a credit card, where the collateral is your ability to pay it back.

30 year fixed mortgage rates are still in the all-time low vicinity (the lowest average rate on record was 3.31 percent according to Freddie Mac’s Primary Mortgage Market Survey).  Borrowing money today at current rates under 4% is a good deal.

 

2.    What other goals are you sacrificing to pay down your mortgage early? 

Investing as early as possible in your retirement is important.  The biggest advantage investors have is time, the earlier you start investing the longer compounding has a chance to work its magic.

Not investing in your 401k/IRA because you are putting all of your extra disposable income toward paying off your mortgage early is not something I would recommend.

Besides, why are you in a rush to get a 4% return (what you are earning by paying off that mortgage early) when stocks historically return 6-7% over the same time period?

 

3.    What does your “emergency fund” look like?

 What is an “emergency fund” and why should I have one?  It’s an account, usually a savings account, which holds cash that equates to 3-12 months of living expenses.  I recommend that all of my clients have one.

Life happens.  Your basement may flood, your car could break down, and there is always a chance you could lose your job.  Having these funds set aside provides a cushion so you can handle these unexpected budget items without racking up credit card debt and/or dipping into your investments.

While living debt-free is a smart goal, remember that not all debt is created equal.  With a sound financial plan you can work towards your goals and carry some debt.

Not convinced? Follow our flowchart shown above to see if paying off that mortgage makes sense for you!