"Money is usually attracted, not pursued." - Jim Rohn

SavingAdvice.com Blog

Bridging the gap between saving money and investing

Retirement

How to Retire Well in California

By Leave a Comment

how to retire well in california

For many, retiring to California is the dream. You can enjoy the warm weather, expansive beaches, breathtaking wine country, and so much more of what the state has to offer. However, if you want to retire well in California. You have to be prepared. While there are numerous options for relaxation and entertainment, and solid access to critical amenities. California is pretty expensive. If you want to retire well in California. Here’s what you need to know.

Cost of Living

A cost of living score represents how expensive it is to live in a particular area. The United State’s national average is listed at 100. If a score is above that mark. It means it costs more to live there than the average. California’s score is 142.7.

In fact, California costs more than the average in every major cost of living category. The worst area is housing, where California has a score of 203.4. The average home value in California is over $578,000. But certain cities come up far higher. For example, San Francisco is nearly $1.2 million. While San Jose is over $877,000.

Now, some come in below the California average. For instance, Sacramento and Fresno both cost less, sitting at $299,200 and $212,700, respectively. Those are closer to the national average. That average is listed as just shy of $249,000.

But you won’t just pay more for housing. Food, transportation, and utilities all cost more, too. Even its lowest score, a 113.0 in the health category, isn’t a great sign. Essentially, heading to California means spending more than the average across the board.

Tax Considerations

California is known for its high taxes. While the state doesn’t tax Social Security, which is a boon for retirees, it does tax every other kind of retirement income. How much you’ll pay depends on your income level, though it will fall between 1 and 13.3 percent.

Additionally, sales tax can be incredibly high in California. The state charges 7.25 percent. Then, individual districts can take on more, ranging from an additional 0.10 and 1.00 percent. Certain areas even have several district taxes stacked on top of each other, making it even more expensive.

There are some potential property tax breaks available to seniors. However, they are not nearly as generous as some other states make available.

Part-Time Job Opportunities

Usually, part-time job opportunities for retirees in California are plentiful. However, the COVID-19 pandemic altered the landscape dramatically. California is experiencing prolonged business closures and limitations, making it hard for anyone to find jobs.

Until the pandemic resolves, employment is simply more difficult. However, if a recovery occurs, retirees can likely find plenty of options available.

Best Cities for Retirees in California

If you want to retire well in California, heading to the right cities is a must. Your money will go further in some areas, allowing you to enjoy more of what the state has to offer without financial hardship.

Fresno is an excellent choice for retirees, offering lower housing costs and an exceptional location near a variety of national parks. Modesto offers city living at an affordable price, while Sacramento is great for amenities and doesn’t require you to break the bank.

If you want to live beach side. Santa Barbara can be a less expensive choice. It offers warm sand and moderate temperatures. It also offers a slew of outdoor activity options. However, it isn’t necessarily cheap. It just costs less than some other coastal cities.

For wine lovers, Santa Rosa might be the right choice. It’s moderately priced (based on California standards), and has a reputation for being an enjoyable place to live. Especially for retirees.

How Much Money You Need to Retire Well in California

With its higher cost of living, it shouldn’t be a surprise that you’ll need more money to retire well in California. While precisely what you’ll want to have available varies depending on the city you choose. Plan for about $90,500 a year. That would cover your expenses and give you a buffer in many cases, allowing you to enjoy your retirement with greater ease.

Do you have any tips that can make it possible for someone to retire well in California without breaking the bank? Share your thoughts in the comments below.

Read More:

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. If you want to be able to customize your blog on your own domain and need hosting service, we recommend trying BlueHost. They offer powerful hosting services for $3.95/month!

What Is the Difference Between a Will and a Trust?

By Leave a Comment

Difference between a will and a trust

Deciding what to do to provide for your family after you’re gone is an immensely important decision. Everybody wants to ensure their family’s safety and well-being, and save up their whole lives to do so. One of the most popular ways to keep your family covered post-mortem is a will. The alternative for a lot of people, in retirement and in death, is a trust. There are benefits and drawbacks to both, and sometimes it is just good to know that there is a difference. So, what is the difference between a will and a trust?

What Assets Are Covered

With a will, the idea is simple: Whatever assets you own, outside of any trusts or joint tenancies, are covered by the will. you can allocate them however you like, and split them up among different people. You can also include things like naming a guardian for your children, which is pretty unique to a will. Children are obviously not assets, but it is good to note that this can be done through a will. In addition, you are able to give your last wishes, and requests for funeral arrangements in your will.

With a trust, only what you include in the trust is covered. Namely, a trust is usually only regarding material and liquid assets, not guardianship or last wishes. This is a good way to shield liquid assets from certain taxes, and make sure that you have the ability to control when it is accessible. Assets in a trust are protected from court proceedings as well; the trust is a legal document declaring that another person is now holding those assets.

Legal Processes

Wills have to go through something called probate, or the proving of a will. This is a legal process in which the subjects of a will meet with lawyers to confirm that the will is really what the owner of the assets intended. This ensures that nobody defrauds a wealthy families assets. It is a very vital step, as wills are activated when you die, and you aren’t there to oversee their implementation.

Trusts don’t go through probate, because they are initiated at the time they are created. Since you would be transferring assets while you are still alive, probate is a redundant and unnecessary process. Therein lies a major difference between these two strategies: when they take place. A trust will be activated right away, so if the assets in question are ones you will need access to while you are alive, it may not be the best move.

Read More:

 

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. If you want to be able to customize your blog on your own domain and need hosting service, we recommend trying BlueHost. They offer powerful hosting services for $3.95/month!

 

ETFs Can Help You Recession-Proof Your Retirement Savings – Here’s How

By Leave a Comment

Recession-proof your retirement

Amid the COVID-19 pandemic and what seems like a million other things, we are entering the beginning of what is likely to be an ugly recession. Thankfully, there are a few things you can do to safeguard your finances in the event of another economic collapse. Here is a look at how to recession-proof your retirement savings.

Yes, A Recession is Coming

Personal finance expert Suze Orman has warned that the financial situation in America is about to get significantly worse. Although the coronavirus pandemic is still a large issue in the United States, many of the relief programs put in place to help individuals impacted are coming to an end. The expiring programs include:

  • Eviction and foreclosure protection
  • $600 unemployment checks
  • Student loan forbearance

These things together add up to be more harmful than The Great Recession of 2008. “We have a perfect storm coming right now,” said Orman. “You have all these things happening at once.”

Orman’s biggest piece of advice at this point in time is to stack away as much cash as you can into an emergency fund. However, many Americans are left wondering about what they should do when it comes to investing in and protecting their retirement savings.

How Index ETFs Recession-Proof Your Retirement

Three words: Exchanged Traded Funds (ETFs for short).

ETFs are one of the best ways to help you recession-proof your retirement portfolio. Index ETFs specifically allow you to track indexes like Dow Jones or the S&P. While you cannot invest in an index directly, you can invest in an index ETF. This means you are investing in all the companies within the Dow Jones (or your chosen index).

You can also invest in ETFs that focus solely on one type of business. For instance, there are tech ETFs that allow you to invest in a variety of tech companies at once. There are ETFs for beauty, pet-care brand, energy, retail, you name it!

Because ETFs are typically a good gauge of the market as a whole, your investments will follow the market trends. You may be thinking, “Well, if we are about to go into a recession, why would I want that?”

Well, the truth is, the stock market will likely bounce back and, with it, so will your retirement savings. Even if your ETF investments take a hit at first, they will also grow exponentially when the market starts to climb again. And, unlike investing in specific companies, it isn’t likely it will ever completely tank and you won’t lose everything.

Top-Performing ETFs Last Week

ETFs are good investments for most people because, as mentioned above, they typically bounce back with the market. They also provide diversification in your investment portfolio without any additional effort. This year, due to the pandemic, the types of ETFs that are performing well have been altered slightly.

Tech stocks and ETFs have been the standout star performers on the market in 2020. This is because many people are practicing social distancing and staying at home, which means more online shopping and technology use. Other ETFs that seem to be performing well are…

  • Biotech ETFs (specifically those looking in COVID treatments and testing)
  • Cannabis ETFs
  • Energy ETFs
  • Healthcare ETFs

If you are interested in learning more about ETFs and how index ETFs can help recession-proof your retirement, consider signing up for The Motley Fool Stock Advisor. 

Read More

How Much Money Do You Need to Retire Comfortably?

By Leave a Comment

Retire Comfortably

Retirement is pretty complicated. While it seems like a simple task to save money for a long time, so you can live off it for a short time; this is a wild oversimplification. As a result, it is difficult to put a single figure on what it will take to retire comfortably. So, we are going to break it down a couple of different ways.

The first will be those who want the most secure and conservative retirement through municipal bonds. Second, those who are willing to use retirement or index funds. The more conservative option you choose, the more money you will need to save. Disclaimer: Regardless of the route you choose, you should always be contributing your maximum employer match to an IRA/401(K). It’s free money.

Municipal Bonds: Safe but Slow

This is by far the most conservative way of doing things, but it takes the most money as a result. In addition to your employer match contributions to your retirement fund, most of your savings will take the form of municipal bonds. These are bonds sold by the government, and they guarantee a small return on your money. Not only is the return guaranteed, but the gains are also tax-free.

The length of these payouts vary, but you can usually find 5% returns on bonds of about 6 months in length; that is what we will use to measure. So, if you contribute everything you save to municipal bonds, you can land a 10.25% return on the year for your money. So, all you have to do is calculate that growth over time.

Your goal is to save up enough to make a “salary” in interest. So, your yearly take from municipal bonds will be around 10% of whatever you commit to the bonds each year (assuming the average of 5% over 6 months). So, if you want to make $60,000 as your retirement “salary,” you will need to save $600,000 of cash assets to commit to these bonds by the time you retire.

Stock Market Accounts: More Risk, More Reward(?)

This is sort of a blanket category including 401(K)s, IRAs, index funds, and mutual funds. These can be more lucrative than municipal bonds but are also a little bit riskier. With stock accounts, your average yearly return is 7-8%. Now, you may be asking yourself, “Why would I take on more risk if the yearly take is less than municipal bonds?” There are a few reasons why stocks are often more profitable:

  • While gains from municipal bonds aren’t taxed, the income with which you buy them is. With retirement accounts, your money is shielded from the IRS and goes straight into the account. If you don’t pull the money out before retirement age, you will also not have the gains taxed. So, you end up with a lot more money than you would with the more conservative route.
  • Municipal bonds are straightforward. You buy a bond with a certain promised return, and at the end of the term, you get that return (as long as the issuer doesn’t default). With stock accounts, you can take full control of your money and invest it how you wish. Some people can elevate their gains to 10-11% on the year pretty consistently by taking manual control of their money.
  • Once you buy a municipal bond, that money is tied up until the term ends, and you receive payment. With stock accounts, you can pull out any amount of the money at any time in the case of an emergency. Now, this does mean it gets taxed as ordinary income if you take it out before your retirement, but it is still nice to have the ability to liquidate when the need arises.

So What Will I Need?

For obvious reasons, it is hard to put a dollar figure on what you will need using the stock strategy. Your gains will depend on your savvy (or that of whoever handles your funds), as well as market fluctuations. Odds are, though, it will end up taking less money to retire comfortably this way.

While the cost is a little more of a headache, it is often worth it. Your choice should fit what is best for you, just keep in mind the pros and cons. Happy saving!

 

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. If you want to be able to customize your blog on your own domain and need hosting service, we recommend trying BlueHost. They offer powerful hosting services for $3.95/month!

 

Here’s How to Retire Well in Alabama

By Leave a Comment

how to retire well in alabama

If you’re looking for a place to retire, Alabama should be on your list. In comparison to many other states, Alabama is incredibly affordable. Plus, it’s considered tax-friendly for retirees, and that’s an important part of the equation. Finally, the state has a lot to offer in the way of entertainment, relaxation, and amenities. If you want to know how you can retire well in Alabama, here’s what you need to know.

Cost of Living

In the United States, a cost of living score of 100 is average. States that come in below 100 have a lower cost of living, meaning it’s a more affordable place to live. Alabama’s score comes in at 82.3.

Part of why Alabama shines when it comes to affordability is the cost of housing. The median home value in Alabama comes in at $143,072 while the national median is more than $100,000 higher, coming in at $248,857.

In certain cities, including Huntsville and Mobile, the cost of housing is 25 percent lower than the national average or more. Grocery prices are also slightly below the average. Between those two points alone, it can make the higher than average utility costs no big deal by comparison.

Tax Considerations

While sales tax in Alabama can be a bit on the high side, Alabama is otherwise pretty tax-friendly for retirees. Social Security isn’t subject to income tax, for one, and that can make a substantial difference. Government and private pensions, including military retirement, also aren’t subject to taxation.

Additionally, wage income tax isn’t incredibly high, which could make working part-time more financially viable. However, it is important to note that unless you have a Roth IRA or Roth 401(k), IRA and 401(k) distributions are taxed in Alabama.

Finally, property tax rates are incredibly low in Alabama. Plus, once you reach age 65, you’re exempt from state property taxes as long as you proactively claim the deduction. Just keep in mind that you may have to pay county or city property taxes, though they are usually pretty reasonable.

Part-Time Job Opportunities

Generally speaking, retirees can find part-time job opportunities in Alabama. Before the COVID-19 pandemic, Alabama was experiencing economic growth, a situation that usually leads to an increasing number of job opportunities.

Even during the pandemic, Alabama’s unemployment rate stayed below the national average. In May 2020, Alabama came in at 9.9 percent while the United States as a whole sat at 13.3 percent.

While the coronavirus pandemic ultimately makes all employment a bit trickier, if conditions begin to return to normal, retirees may find options in Alabama. Until that time, it’s a bit difficult to gauge.

Best Cities for Retirees in Alabama

Many cities in Alabama are excellent options for retirees. Orange Beach is a favorite, with over 28 percent of the population being senior citizens. There are plenty of recreational opportunities as well as retirement centers, which can make the slightly higher taxes worthwhile.

However, if you want to retire well in Alabama, that isn’t your only option. Greenville is a popular choice, as well as Wetumpka and Attalla.

If you want easy access to medical professionals, consider Guntersville, Cullman, or Jasper. Fairhope, a former utopian community near Mobile, can also be a great option, or, if you’re looking for historic charm, consider Eufaula.

How Much Money You Need to Retire Well in Alabama

In general, retiring in Alabama costs much less. With about $898,000 stashed away, you can typically live out your retirement years in the state. Considering that the national average is $1.1 million, and that’s a pretty substantial savings.

However, if you want to live comfortably, you may need more than $55,000 a year available. Considering that’s about half of what it takes to maintain a great quality of life in Hawaii, Alabama looks like a steal.

Do you have any tips that can help someone retire well in Alabama? Share your thoughts in the comments below.

Read More:

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started. If you want to be able to customize your blog on your own domain and need hosting service, we recommend trying BlueHost. They offer powerful hosting services for $3.95/month!

Here Are 3 Of The Best States For Military Retirees

By Leave a Comment

best states for military retirees

When your military career comes to a close, you are often faced with a tough decision. Military retirees can essentially move to any state in the nation, allowing them to set up their post-military life. Deciding where to go is a challenge for many, especially since every state offers something different. If you are trying to figure out the best states for military retirees and whether one, in particular, is right for you, here’s what you need to know.

Understanding Military Retirement

Military retirement isn’t always the same as a traditional retirement. Active duty personnel can be eligible after 20 years of service. Suggesting that a person signed up for the military at age 18, they could qualify for retirement when they are 38 years old.

That means many military retirees aren’t necessarily leaving the workforce. When they decide where to retire, they usually factor in job prospects, as many will continue working full-time, potentially for the next two to three decades.

However, you aren’t required to retire from the military after 20 years of service. A person could remain in the military until they reach the mandatory retirement age of 62, in most cases, creating an opportunity for over 40 years of service.

There can also be other forms of military retirement to consider, as well. For example, a person may end up medically retired before the 20-year mark. Depending on the reason for the retirement, whether they choose to pursue additional work opportunities after separating from service could vary.

Choosing Where to Head After Retiring from the Military

Which states are best for military retirees isn’t universal. Each of the situations above could lead to different needs, altering where they may be best off.

Additionally, there are also other factors to consider. Some retirees would rather be near friends and family or in a particular region. If this preference is important, it needs to be part of the decision-making process.

Ultimately, military retirees need to examine the pros and cons of different options. That way, they can choose a destination that will serve them well for the years, if not decades, to come.

3 of the Best States for Military Retirees

1. Virginia

One of the biggest reasons to choose Virginia is for federal jobs and defense-related contractor positions. With its proximity to Washington DC and numerous government and military installations, opportunities in those arenas are plentiful.

Additionally, the climate is relatively mild, and housing in certain cities is decently affordable. There’s also access to military bases for medical care as well as VA hospitals in many metro areas.

It’s important to note that Virginia does fully tax military retirement pay. However, if you’re looking for a state with exceptional job opportunities for those with military and defense experience, it’s worth keeping on the table. Plus, sales tax in Virginia is relatively low, helping to offset the presence of an income tax.

2. Florida

If you don’t want to pay state income tax on your military retirement pay, Florida is a great option. The state doesn’t have its own income tax, allowing you to keep more of your money in your pocket.

Florida also offers a great quality of life for those who would like to retire near beaches and in a warmer climate. Additionally, the healthcare services for veterans are fairly accessible. Along with VA facilities, there are numerous military bases throughout the state, giving retirees access to certain clinics and other on-base or on-post amenities.

Defense contractor and federal positions are also widely available in Florida. This creates career-oriented opportunities for those who aren’t leaving the workforce.

3. New Hampshire

When it comes to state income taxes, New Hampshire only levels one on dividend and interest. That means, by and large, your military retirement pay isn’t going to be taxed.

Additionally, the state has a surprisingly high number of defense contractor positions, something that may appeal to military retirees who aren’t leaving the workforce yet. The state doesn’t have a sales tax, either, which makes daily living more affordable.

Housing itself isn’t necessarily incredibly expensive in New Hampshire. However, the property tax rates are some of the highest in the nation. But, since there isn’t income or sales tax to contend with, that isn’t necessarily a major financial burden as it is offset by savings in taxation.

Ultimately, all three of the states above are top contenders for anyone retiring from the military. However, they each come with pros and cons. It’s wise to consider your unique needs and preferences as you make a decision. That way, you can head to a state that offers everything you require and is a place that you’ll enjoy long-term.

Can you think of any other states that are great for military retirees? Share your thoughts in the comments below.

Read More:

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.