Monday, May 21, 2012

College Savings vs. Retirement Savings - How To Strike A Balance

RetirementRetirement (Photo credit: Tax Credits)
Saving money for both college and retirement goals at the same time can be challenging. The cost of a college education continues to rise faster than inflation, at roughly 5 percent per year. According to the College Board, the average costs for four years at a private college is now more than $150,000 — including $38,589 for the 2012-13 school year. Even going to your state’s university, it runs close to half that total at an average of  $17,131 a year. This is peanuts compared to what you need to save for retirement.

With the good intentions of keeping their kids out of debt, parents are footing the bill for college costs. They are putting thousands of dollars away for college expenses that would of otherwise gone to retirement savings. A recent study from Ameriprise Financial shows that only 24 percent of baby boomers were saving any money for retirement, in 2007 the percentage was 44 percent. Many college parents will be experiencing substantially reduced retirement lifestyles because of their kindness. 

Prioritize.

Put retirement saving back where it should be, "first". Your kids can finance college or attend a college where the costs are more in line with the families finances. Sacrificing your retirement plan to help your kids is never a good idea. Your kids will understand, besides tell them if you don't save for retirement you will have to move in with them when your old. That will help them get the picture.

Start Early.

The key to saving for anything is to start early. Start saving for college when the child is born. Waiting even a few years causes you to have to save more monthly and the amount of compound growth will be greatly reduce. Even just saving $50 or $100 per month will help you accumulate a large college fund after 18 years. Set up a 529 college savings plan to take advantage of the tax-free withdrawals for education costs.

Make it a Family Project.

Include your children in their college savings plan. Over the years, your children receive cash gifts for birthdays and holidays. A large portion of those gifts should be put in the college saving account. It's a good lesson in teaching your children the importance of saving and participating in the families financial goals. Why should the parents be the sole provider of college finances? Teaching your children the value of paying their own way has incredible benefits all through their adult lives.

Pick an Affordable College.

Pick a college the family can afford. A prestigious college is all well and good if you have the cash to pay for it. But if the family doesn't, is it worth putting the family in massive debt for only four years of college, just to have a diploma from an ivy league school. Other ways to save college costs is to attend a local two year community college and finish at the more expensive college. Staying in state will also afford you much more savings than traveling out of state.

Remember parents, giving your children a good college education doesn't have to mean breaking the bank and sacrificing your own retirement. It is possible to do both in a reasonable way. 

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Sunday, May 20, 2012

Social Security Fund Depletion Set To Occur Sooner Than Expected

Roosevelt Signs The : President Roosevelt sign... (Photo credit: Wikipedia)According to a Summary of the 2012 Annual Reports by the Social Security and Medicare Board of Trustees, Social Security is expected to have depleted its funds a few years sooner than originally expected.

Social Security’s trustees released new estimates of the benefit program, funded through dedicated payroll taxes that are intended to provide Americans a degree of economic security as they grow old and/or become disabled, predicting the retirement portion of the program will run dry by 2035. The United States’ single largest program benefits 44 million senior citizens and survivors of deceased workers.

The program’s Disability Insurance fund, supporting 11 million disabled Americans, is expected to run dry in 2016, and Medicare is now projected to be out of funds by 2024.















The trustees said that to keep the Social Security trust funds solvent over the next 75 years, Congress could take a number of steps:


  • increase the payroll tax rate from its current level of 12.4 percent to 15.01 percent;
  • reduce benefits by 16.2 percent;
  • find alternative sources of revenue;
  • adopt some combination of these approaches.


For my fellow mid 50 year olds, these numbers are not going to effect us. We will be receiving our check fully funded by the government. It's the 20, 30, and 40 year old workers who are going to pay the price for the governments mismanagement of the Social Security System. They are paying into a system that will probably never be able to give them the same level of benefit we see today.

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Saturday, May 19, 2012

Contactless Payments Good For Mastercard But Bad For Consumers

Universal contactless smart card reader symbolUniversal contactless smart card reader symbol (Photo credit: Wikipedia)
We all know that when using credit cards to make purchases we tend to spend 18% more than if we used cash. The convenience of a credit credit and its psychological detachment from real money makes us spend more. Don't think it can get worse than that? With the current introduction of contactless payment methods we now are going to spend 30 percent more, according to a new study released by Mastercard.

Contactless payments come about when credit cards or smart phones that feature smart chips implanted with radio frequency identification, generally referred to as RFID. Consumers merely "wave" the card or smart phone across a payment terminal instead of having to "swipe" the card through the terminal.

Contactless payment methods are becoming a lot more common. Visa has lately ushered in PayWave; MasterCard has PayPass and American Express has
Express Pay. The MasterCard study anticipates 150 million mobile devices will be contactless enabled within the next a couple of years.

The MasterCard study took some of their customers and divided the accounts into low, medium and high spend segments according to their monthly spending prior to ushering in the contactless payment methods. The 30% increase in spending was consistent across all three segments.

The study also found that after the first contactless transaction, users spend an average of 25 percent more online, 64 percent more abroad and 20 percent
more in recurring payments.

"While this increased spending may be good news for banks and retailers, contactless payments can be dangerous to the household budget," says Bill Hardekopf, CEO of LowCards.com. "You can now make a purchase with just a wave of your phone without a thought about how much the purchase really costs. It could make it too easy for some people to buy something spontaneously or throw a few more items into the shopping cart. Making good spending decisions takes analysis and discipline. We probably need to feel the pain of money leaving our bank account to help us evaluate if we can afford it and if we really need it."



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Thursday, May 17, 2012

Investing In Gold Takes Many Forms

American Gold EagleAmerican Gold Eagle (Photo credit: Wikipedia)I always found investing a fascinating subject. Having your money work for you and growing in value made a lot of sense to me. Sending your money off to your financial planner to invest for you is what most people usually do. But some investors choose a different path and invest in gold and choose to physically hold the gold in their possession, which they can't do with a paper share investment.

Gold is one of the few investments where you can actually see and hold it. Many people combine their investing goals with their love of coin collecting by investing in gold coins. Many countries issue their own gold coins like the American Eagle, Canadian Maple Leaf, the South African Krugerrand, and the Austrian Philharmonic.

The U.S. government issues gold coins which are authorized by the U.S. Congress, minted at the U.S. Mint and produced with a U.S. Mint mark and U.S. Dollar denomination...making them Legal Tender.

The US Money Reserve offers a wide variety of gold numismatic coins including American Eagle proof gold coins and modern Congressional gold coins available in mint and proof grades. Many gold coin investors realize the added value and security of holding gold coins minted by the U.S government and which are also legal tender.

Gold and gold coins can be a part of a diversified investment strategy. Being weighted in any investment to a great percentage is not good investment practice. But being diversified is good practice and gold can be a small part of that.
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