"My formula for success is rise early, work late and strike oil." - John Paul Getty

SavingAdvice.com Blog

Bridging the gap between saving money and investing


Join Now or Login

Saving Money

Are Seniors Saving Enough to Retire Comfortably?

By Leave a Comment

Are-Seniors-Saving-Enough-To-Retire-Comfortably

Most people have the best intentions when it comes to saving money. However, as they experience financial challenges, tossing cash into a savings or retirement account becomes less of a priority. Instead, immediate needs take priority. For seniors, this mentality can keep them from being able to retire comfortably or, for some, they may have to put off retirement indefinitely.

Putting Off Saving

For many older adults, not saving enough is usually self-described as their biggest financial mistake. This can include anything from not putting money away for emergencies or suitably saving for retirement.

While it is possible to make up for the lost time when it comes to saving for retirement, it does make the situation harder to navigate. Late-savers don’t get all of the benefits of long-term compound interest, so they have to make larger deposits to offset any missed opportunities.

Concerns About Retirement Savings

Most Americans are worried that they won’t have enough to retire comfortably when the time comes. While many will have access to Social Security, providing them with at least some amount of income later in life, that alone typically isn’t enough to cover what they will need in retirement.

In 2019, the average senior who qualifies for Social Security benefits receives $1,461 a month. Over the course of a year, that’s only $17,532 in income. While that amount is $5,042 over the poverty line in the 48 contiguous states and DC, most would agree that living on that amount would be incredibly difficult.

On average, Social Security only replaces around 37 percent of an earner’s pre-retirement income. As of the first fiscal quarter in 2019, the median income for a person working full-time, based on data collected by the Bureau of Labor Statistics, was $905 a week, or $47,060 a year.

Without additional savings, being comfortable in retirement might not be possible.

A “Comfortable” Retirement

Often, seniors need closer to 80 percent of their pre-retirement income covered to live comfortably. While many assume that their expenses will decrease after retirement, many don’t experience a dramatic decrease. In fact, some may see their costs stay the same or even increase, depending on factors like healthcare costs and how much they spend on leisure activities.

Based on the yearly median income amount of $47,060, this means seniors should expect to need at least $37,648 annually after they retire (based on the 80 percent metric). After deducting the average Social Security payment, that leaves a shortfall of $20,116 each year that needs to come from another source.

Those who were born in 1953 are hitting full Social Security retirement age – for them, 66 – this year. With an average life expectancy, based on CDC data, of 78.7 years, that would mean 12.7 years would be spent in retirement, theoretically. That $20,116 annual shortfall, over that period, would total up to $256,108.20. And that relies on the notion that 80 percent of the median yearly income is enough to sustain them and that they don’t live longer than the average life expectancy.

Additional Savings Are a Must

For those with a high-cost medical issue or who wish to have more money available during their golden years, then additional savings is a must. Now, one method to increase income as a senior is to wait until age 70 to begin accessing Social Security benefits. The monthly payment increases by 2/3 of 1 percent for every month that a person waits until they reach age 70 (an 8 percent increase annually).

At age 70, that means the retiree gets 124 percent of their original benefit amount each year. If the person would qualify for the average $1,461 a month at full retirement age, that means they could get about $1,812 a month instead of delaying until age 70, which is around a $351 monthly ($4,212 yearly) increase. However, that is still a far cry from what a senior likely needs to be comfortable.

Planning for a Comfortable Retirement

Making up for the remaining shortfall can be difficult, but it isn’t impossible. If you are age 50 or older, you can save up to $24,500 each year in an employer-sponsored 401(k). Additionally, putting up to $6,500 in an IRA is allowed. Depending on how long the money can sit in the account and the return rate, that can put a serious dent in the shortfall.

However, even if you can’t max out your retirement, every bit you can save makes a difference. It’s always better to sock away something than do nothing. When working toward savings there a number of service available via the Internet to assist you. That said, it is wise to be vigilant when using online services and to make sure you practice online safety for retired seniors.

Additionally, working to pay off debt and reduce your expenses can help you make your retirement more comfortable. If you have fewer costs, you won’t need as much money to maintain your lifestyle. Plus, over time, you might be able to make more space in your budget for additional savings, ensuring your golden years are as bright as possible.

Are you on your way to a comfortable retirement? Are you worried you haven’t saved enough to support yourself in retirement? 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.

Inexpensive Alternatives to Store-Bought Greeting Cards

By 7 Comments

inexpensive alternatives to store bought greeting cards
Happy Birthday, Mothers’ Day, Fathers’ Day, Grandparents’ Day, Valentine’s Day, Sweetest Day, Hanukkah, New Year, Easter; Merry Christmas; Get Well; In Sympathy for the Loss of Your Loss of Parent, Child, Pet, Marriage; Get Well Soon; Thank You for Your Gift, Hospitality, Help; I Love You; I Miss You; I Just Want To Say Hello – and the list of greeting card occasions and sentiments goes on.

The cost of staying in touch can add up, as can the piles of cards you receive from your friends and family. Most cards get thrown out soon after they’re received, so why not consider alternative ways to celebrate and commemorate those occasions that traditionally require a card? Make your greetings stand out from the rest and send sentiments that your friends and family will remember and appreciate:

1. Buy a ream of card stock and use it to design your own cards or allow your children to design some. Even if you send a traditional store-bought card, tuck in some of your children’s artwork for a personal touch. The photograph in this article is an excellent example or some card stock that has been dressed up.

2. Send a fun postcard or a postcard from a place you visited with the recipient. Postcards save on postage as well as purchase prices.

3. For thank-you notes, take a photograph of yourself using the gift, add a note of thanks on the back, and tuck it into an envelope or glue it to card stock to create a postcard.

4. Send an e-card instead of a traditional card.

5. Send a coupon booklet – buy one for a fast food place the recipient enjoys or make a booklet of coupons for babysitting, chores, or time spent together (offered by you, the sender, to the recipient).

6. Send the cash equivalent of what you would spend on a card. I’ve once read about a woman who always sent her grandkids what she would have spent on cards, which provided a great lesson in personal finance and was appreciated much more than the cards.

7. Make a phone call or write a long letter. In place of sympathy cards, write about the things you most appreciated about the deceased and share some fond memories you have of him or her.

8. Mail a sheet of stickers or coloring book to children with a note on the cover of the book / packaging of the stickers.

9. Send the recipient a flat magnet, either chosen for him/her at a store or designed by you to suit the occasion. (Craft shops and office supply stores often sell magnetic tape and business-card-shaped magnetic backings that can stick to your design.)

10. Make a bookmark to send to a reader (or, if giving a book as a gift, tuck one inside it instead of using a card).

11. Write a funny, personalized poem or draw a calligraphy acrostic (JOHN – Joy-filled, Open-minded, Helpful Neighbor) about the recipient to give as a birthday greeting. For birthday greetings that are hand-delivered, you can also tape coins to card stock in the shape of the birthday boy/girl’s age. (The weight of the coins adds extra postage costs.)

12. For Valentine’s Day or an anniversary, tape a note to a sentimental paper souvenir your loved one didn’t realize you saved, such as a program from a high school football game in which your sweetheart played or a ticket stub from the first movie you saw together.

Whatever you decide to send, be sure to check postal regulations to find out if the size, shape, or weight requires extra postage so that your greeting doesn’t arrive postage due. Once you send a few specially chosen greetings in place of store-bought greeting cards, you may even find that your thoughtfulness is building stronger relationships as you build a bigger bank account.

Photo credit: Deborah S.

Is Putting a 20% Down Payment on a House Realistic?

By 31 Comments

Is-Putting-a-20-Down-Payment-on-a-House-Realistic
I understand the argument behind the advice of putting at least a 20% down payment on a house purchase. No one wants to pay private mortgage insurance and the idea of getting two different loans to avoid it isn’t that great either. I imagine if you are a previous homeowner and have some equity from a previous house to put down on a new one, a 20% down payment is very feasible, but what about first time home buyers?

Saving Up The 20% Down Payment has Huge Opportunity Costs

In the area that I currently live, the average home price is about $175,000 for a decent starter home. That’s actually a pretty low price compared to where I grew up across the state, where you can’t get a decent starter home for under $275,000. Let’s say someone wanted to buy a home for the first time. A 20% down payment for an average house in each area would be $35,000 and $50,000 respectively (and that doesn’t even include closing costs) Who has that kind of cash readily available? Not many people. So the advice many are given is to save up and wait.

Let’s look at what that would look like. Say you are able to save $500 a month towards your down payment. You are able to knock down your costs and pull aside that much every month. It would take you almost 6 years of saving $500 a month in order to afford the 20% down payment in the less expensive city and over 9 years to afford the one in the pricier area.

What if you were able to save $1,000 a month? Then it would take you 3 years and 4.5 years respectively. But saving $1,000 a month is quite difficult when you are trying to fund a retirement account and live day to day. Especially for up to 9 years. Most first home buyers are younger – probably in their 20s. In the best case scenario, you need to save for 3 years – in the worst case, it would be 9 years (this is assuming you already have a sizable emergency fund to take care of unexpected expenses).

It is even harder when you start looking at this from a market standpoint. House prices will rise. I don’t care what the housing market looks like now – eventually, the values will rise again. Let’s say values rise at a conservative 1% per year. In 3 years, each “average” house will cost at least $5,500 and $8,500 more, respectively. In 9 years, each house will cost at least $16,000 and $25,000 more, respectively.

Everyone who finally reached their 20% down payment goal will now need more money than originally thought for the down payment of a home that is now more expensive. Not to mention the money lost on throwing away rent rather than building equity (however small that amount may be in the first few years). Add to that the tax deductions missed and the missed opportunity to profit from the market’s increasing values. Ouch! Those numbers aren’t pretty. You have to spend money on housing either way – why not get some benefits from it?

Chances are, if you are saving a huge chunk of money each month for a large house down payment, you aren’t contributing the max to your retirement account. Your early investing years are the most critical for your future because of the wonderful concept called compounding interest. You could lose some very valuable interest time by waiting to invest (or increase your investment amount).

It Is Perfectly Reasonable To Buy A Home For Less Than 20% Down

Perhaps there are some people for which putting a 20% down payment on a house is not only possible but also a perfect fit for them. I personally don’t know any of those people and am not one of them. We chose to buy our house with no money down and use our monthly extra to invest more, stock up our retirement fund, fund our emergency savings, and make improvements to our house that will increase the value when we go to sell.

The funny thing is that our mortgage is not outrageous, we are not struggling to keep up with our payments and we are not in jeopardy of defaulting on our loan. The fact of the matter is that there are people who are a high risk to mortgage companies who will likely default on their loan if they get into a house with no money down. But there are also responsible people who will pay their mortgage on time every month who just want to have a choice of what to do with their extra money and how to best use it.

Can You Get A Mortgage For Less Than 20%?

Yes. You can get a mortgage for less than 20% down. The best way to find out if you can do this is to start making calls. You’ll want to talk with a mortgage broker. Probably you’ll want to talk with several. A good starting place might be USAA (they have great customer service) as well as your local credit union. Stay away from the bigger banks, they sometimes have incentives that are perverse (for example, by pushing low money down loans or adjustable rate mortgages).

What Is an Immediate Annuity and Is It Right for You?

By Leave a Comment

immediate annuity

For most people, having a source of regular income is a necessity. An immediate annuity is a financial service that provides a consistent and predictable flow of incoming funds. Essentially, the beneficiary provides a lump sum payment to the company and, in exchange, receives an agreed-upon amount every year. While an immediate annuity could help maintain cash flow, it also isn’t right for everyone.

How an Immediate Annuity Works

With any form of an annuity, you are essentially purchasing insurance that provides a known outcome. It isn’t an investment, even though they can earn a return. Instead, the primary purpose of an annuity is to give the beneficiary a guaranteed amount of money every year for the remainder of their lives or a set number of years.

An immediate annuity involves entering into a contract with an insurance company. The insurer receives a lump sum upfront. Then, the recipient receives annual payments every year.

A few factors impact how much the beneficiary receives. For example, the kind of annuity affects the annual payment, as fixed, variable, and inflation-indexed immediate annuities are all calculated differently.

Fixed vs. Variable

Fixed annuities come with a set payment every year. Variable versions may have a guaranteed minimum payout, but it can also be tied to a specific stock market index, causing the payments to fluctuate based on market performance. Inflation-indexed immediate annuities start with smaller annual payments, though the payout rises over time to account for inflation.

The recipient’s age and the term they select also play a role. When you choose a term, you are dictating how long the annuity needs to last, whether that be a specific number of years or the rest of a person’s life, regardless of how long that will be. The recipient’s age helps the insurer estimate the person’s remaining lifespan, allowing them to calculate a yearly payment amount.

Is an Immediate Annuity Right for You (or Your Loved One)?

In most cases, an immediate annuity is a source of income for retirees or any individual who does not have a steady influx of cash due to an inability to work, such as someone with a serious disability. However, based on how the arrangement functions, younger people with longer anticipated lifespans usually don’t want to go this route even if they can’t work anymore. Since the annual payment is calculated based on how much longer the company believes the person will live (unless you use a term for only a set number of years), the yearly income may be so small that it doesn’t make sense to pursue an annuity.

Opting for an immediate annuity over other options for generating long-term income can be beneficial to some people. First, an annuity comes with a guarantee; you know exactly how much you will receive and for how long, and that provides a level of financial security. If other sources of guaranteed income (like a Social Security or pension payments) cover less than 50 percent of your expenses, then an annuity could be a smart move.

Second, healthy retirees who could outlive other forms of retirement savings may benefit from an annuity. Since life-long terms are available, an annuity prevents one source of income from running out over time. Finally, an annuity can make it harder to over-spend early in one’s retirement. Since you only receive a set amount, you can’t spend more of your annuity until the next payment arrives. If someone is concerned about making poor financial decisions should their cognitive abilities decline with age, this acts as a level of protection.

However, to start an immediate annuity, you do need a large lump sum, and that isn’t practical for everyone. Plus, the setup fees can be high, eating into that initial lump sum.

Additionally, if the recipient passes away, the benefit may expire depending on the exact terms of the arrangement. If the beneficiary is in poor health, then a significant amount of money may never be paid out, and there might not be any way for families to get it back.

Can You Get a Refund on an Immediate Annuity?

Once you sign up for an immediate annuity, changing your mind isn’t an option. Once the contract is in place, that’s it. You can’t renegotiate or ask for your money back. They also cannot be canceled for a prorated amount.

Your only alternative at that point is to use a company that provides lump-sum payments in exchange for becoming the beneficiary of the annuity. You won’t get near the full value of the remaining annuity in these arrangements, so it is important to understand that a loss is pretty much a guarantee when going this route.

Do you have (or know anyone with) an immediate annuity? Tell us about it 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.

 

Aldi Hours and Holiday Schedule 2019

By 1 Comment

aldi hours and holiday schedule
Are you planning a grocery shopping trip to Aldi? Make sure it’s open first. Check here for everything you should know about shopping at this grocery store, as well as the Aldi hours and holiday schedule before heading out.

Saving Money at Aldi Stores

Aldi is a grocery store known for amazing everyday prices. Smart shoppers who rely on Aldi can save a bundle, with some reporting cost reductions of up to 42 percent. Aldi offers great prices by using a non-standard business model. Not only do you have to insert a quarter to get a cart (though you get it back once you return it), but you’ll also need to bring your own bags. Plus, Aldi stores aren’t open 24/7, so you need to make sure your local store is open before making a trip.

Aldi Store Hours

Originally a German store, Aldi has made its way into numerous countries. Along with the United States, you can also find Aldi stores in Great Britain, Belgium, Denmark, the Netherlands, Poland, Spain, and Portugal. Additionally, many people don’t realize that Aldi is actually run by the same company as Trader Joe’s.

Aldi hours are typically the same as the standard hours of operation for many grocery chains. While each location may vary their schedule, the typical hours for opening and closing serve as a good baseline for planning purposes.

The standard Aldi hours are Monday through Sunday:

Monday: 8:00 am – 10:00 pm
Tuesday: 8:00 am – 10:00 pm
Wednesday: 8:00 am – 10:00 pm
Thursday: 8:00 am – 10:00 pm
Friday: 8:00 am – 10:00 pm
Saturday: 8:00 am – 10:00 pm
Sunday: 10:00 am – 4:00 pm

If you are near an Aldi in a big city, you may find that they are open longer each day. However, some small-town Aldi stores open later and close earlier. For example, a small town location may operate from 9:00 am to 9:00 pm instead of 8:00 am to 10:00 pm.

Aldi Holiday Schedule 2019

Along with Christmas, Aldi locations also close for a few other holidays during the year. However, they are open on many too. Here is an overview of the Aldi Holiday Schedule for 2019:

January 1 (Tuesday): Aldi is closed on New Year’s Day
January 21 (Monday): Aldi is open on Martin Luther King Jr. Day
February 14 (Thursday): Aldi is open on Valentine’s Day
February 18 (Monday): Aldi is open on Presidents’ Day
March 17 (Sunday): Aldi is open on St. Patrick’s Day
April 19 (Friday): Aldi is open on Good Friday
April 20 (Saturday): Aldi is open on Easter Saturday
April 21 (Sunday): Aldi is closed on Easter Sunday
April 22 (Monday): Aldi is open on Easter Monday
May 12 (Sunday): Aldi is open on Mother’s Day
May 27 (Monday): Aldi is open on, but with limited hours, on Memorial Day
June 16 (Sunday): Aldi is open on Father’s Day
July 4 (Thursday): Aldi is open, but with limited hours, on Independence Day
September 2 (Monday): Aldi is open, but with limited hours, on Labor Day
October 14 (Monday): Aldi is open on Columbus Day
October 31 (Thursday): Aldi is open on Halloween
November 11 (Monday): Aldi is open on Veteran’s Day
November 28 (Thursday): Aldi is closed on Thanksgiving Day
December 24 (Tuesday): Aldi is open, but with limited hours, on Christmas Eve
December 25 (Wednesday): Aldi is closed on Christmas Day
December 31 (Tuesday): Aldi is open, but with limited hours, on New Year’s Eve
January 1 (Wednesday): Aldi is closed on New Year’s Day 2020

On any days where Aldi has limited hours, you’ll need to check your local store to confirm when they are open. You can use Aldi’s store locator to check each location’s hours of operation or contact your store by phone and request the information.

Many grocery stores deviate from their usual operating hours around Christmas and Aldi is no different. On Christmas Eve, many Aldi locations close early, giving their staff a chance to be home with their families.

If you need to shop at Aldi on Tuesday, December 24, 2019, make sure to check with your local store before you make a trip. Each location may have slightly different holiday hours on Christmas Eve, so it is wise to contact your Aldi and confirm they will be open.

On Christmas Day, Wednesday, December 25, 2019, all Aldi stores are closed. You cannot shop at any Aldi on Christmas Day, regardless of whether you are in a big city or small town.

Preparing for a Trip to Aldi

If you’ve never been to an Aldi before, but want to experience the cost-savings to make the holidays more affordable, you do need to prepare in advance. Along with a shopping list, you’ll need to have a quarter with you. The shopping carts at Aldi need a quarter to unlock them, making them movable. When you return the cart at the end of your trip, you get your quarter back.

What You Need

The quarter is actually a way that Aldi controls some of their overhead costs, even though they don’t keep the quarters. Getting the coin back encourages shoppers to put away their carts. This ensures that employees don’t have to retrieve the carts, allowing Aldi to keep their staffing costs down and to pass the savings on to shoppers.

Additionally, it is usually best to bring your own reusable shopping bags. Aldi does not provide bags or boxes to carry your purchases for free. If you do not bring your own, you’ll have to pay for bags at Aldi. Again, this helps each store keep its operating expenses low, giving the ability to offer big savings to you.

Use the Aldi Mobile App

The Aldi mobile app is also handy. Not only can you use it to find your closest store, check hours of operation, and a place to make and store a shopping list, it also makes viewing the weekly sales flyer a breeze. You can see it all in the app, ensuring you don’t miss out on a great deal when you shop.

Do you shop at Aldi? Share your experience 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.

Photo: Flickr/Mike Mozart