The coronavirus has galvanized many die-hard city dwellers to pack up and flee for the suburbs or beyond. But how easy is it to pull off such a drastic move during a pandemic?
Just ask Angela Caban, a former Broadway dancer and decorative painter who, after 28 years of living in New York City, reached her breaking point in April. Quarantined in a cramped apartment in Queens, hearing sirens wailing all night, she decided to buy a house in Charleston, SC,Â an area she’d grown to love during her frequent work trips there over the years.
Yet since Caban was on lockdown in New York, she had to shop for homes remotely and make offers without seeing places in person. Here’s what it was like to buy a house sight unseen, and the lessons she learned that might inspire other longtime urbanites and first-time home buyers to make the leap themselves.
Location: Hanahan, SC
House specs: 1,804 square feet, 4 bedrooms, 2 baths, separate barn
List price: $234,000
Price paid: $232,000
How did the pandemic play into your decision to leave NYC?
You give up a lot to live in New York because it has a lot to offer, but when those things go away, you start to question why youâre giving up so much.
Once COVID-19 hit in March, April, and May, I was stuck in my apartment for three months straight with no work. I wasn’t getting unemployment because that hadnât kicked in. I had no outdoor space to speak of. I just wanted to have some room to roam, be in nature, and not feel desperate. Thatâs what put me over the edge.
I felt like no matter how difficult New York had been in the past, this was a whole new ball of wax. I was there for 9/11 and Hurricane Sandy. When other tragedies had hit New York City, people were saying, “Weâre in this together.”
When COVID-19 hit, all of a sudden there was suspicion. Everybody was frightened of everyone else.
Watch: Listing Agents Answer Our Burning Questions About the ‘Silence of the Lambs’ House
The ambulance sirens were nonstop. Plus, my small apartment was directly on the street, with the garbage cans right outside my window. So when I tried to open the windows during the pandemic, there were roaches coming in. I was like, “I can’t do this anymore.”
What made you choose Charleston as your new home?
Iâd have work meetings down here, and I had fallen in love with the area. I liked the sense of history, the weather. And financially it was doable. My mortgage now is less than half my rent for my tiny apartment in New York City.
How did your house hunt go?
I started looking near the end of April. I put an initial offer in on a house that fell through after the home inspector I’d sent to look at it said it would fall down in two years. Then I was in a panic because Iâd already given notice on my New York apartment. So basically I had six weeks total to find another house and close on it.Â
What were your biggest challenges?
There was no inventory. Every house I looked at and said, “Oh, that’s a possibility,” would be gone by the time I called. An hour after being listed, the house would no longer be accepting offers!
How did you find the house you eventually bought?
Lucky for me, this house had been on the market for 60 days. I don’t know if it was because the photos were crappy, or the fact that the neighborhood was considered a little dicey. But Iâm from New York, so the neighborhood seemed comfortable to me. I put an offer in within 48 hours of losing the other house.Â
Wasn’t it scary to buy a house you hadn’t seen in person?
I was emboldened because I could always back outâyou have two weeks to do so when bidding on a house. So I got in the car and drove down to look at it two days after my offer was accepted. I literally did it all in one day; it took me 12 hours to drive down. I saw the house and drove around for about two hours, and then I drove back because I had to start packing! I literally didn’t sleep for 26 hours. It’s probably why I have more gray hair now than I should.
How did the house look once you saw it, compared with the photos online?
It was much better than I thought. There is a lot of detailing, dental molding, wainscoting, and paneling in the living room, along with 16 windows that let in a lot of light. Plus, there’s the barn in the back that is another 600 square feet or so. My eventual plan is to make a workshop and a place to make art and teach.
How was the mortgage process?
It was a nightmare. Nobody wants to give mortgages to a single, female, sole proprietor who does not have pay stubsâespecially during COVID-19, when theyâre afraid people may default on their loan. They had also enacted new COVID-19 regulations that meant I had a boatload more paperwork. I had to submit letters from clients, proposals for work that was going to happen, invoices for work that I was still waiting to be paid for. … It was insane. I joked with them that I had to give them everything except a bone scan.
How did you finally secure the loan?
Thanks to the help of my real estate agent, John Bell of Southern Bell Living, and his mortgage broker, Ethan Lane at Mortgage Network. They were amazing, and I was an absolute basket case: “What else do you want from me? I have no place to go. I’m going to be homeless!”
I look forward to giving them both a hug someday after COVID-19 is under control.
How did you close on the house during the pandemic?
That is a whole additional saga. I was finishing up a painting job in New York when all of a sudden on Friday they said, “You’re closing on Monday,” so I had to get an attorney to attend the closing for me. To get that, I had to get a statement notarized. In the middle of COVID-19! I met the notary on the street, but then I had to have two witnesses! It took me asking 18 strangers to find two people who said they’d help.
How did you pull off a move during the pandemic?
I couldnât get a truck in New York. So I packed my car and drove down to Charleston, where I dropped off my cats in the new house. Then I rented a U-Haul and drove it back to New York, hired two guys who then met me at my old apartment, packed the truck. Drove it back down to South Carolina, where I hired two more guys to help me unload the truck, and voilÃ .
Was leaving New York hard after living there for 28Â years?
Leaving was difficult because you almost feel like itâs a badge of honor that you’re a survivor in New York City. But down here, I finally feel like I can actually live my life instead of just trying to make it from one month to the next. I can think big thoughts and make big things happen, for which I simply didnât have the energy in New York.
Now that you’ve lived in Charleston for a few months, how are you feeling?
It’s like I can finally breathe, and I absolutely love it. I sit every morning out on my back patio and watch woodpeckers, blue jays, and cardinals. I have roses that are blooming that I planted.
What advice would you give first-time home buyers and others looking to move now?
When you’re looking at homes online, don’t immediately discount a property just by how it looks in its photos. It’s like online dating that way. You need to see how it feels once you’re face to face and interacting with the space. Luckily, though, the minute I saw it in person, I knew I would be very happy here.
The post ‘I Bought This House Based on Listing Photos Alone’: Was It Worth the Risk? appeared first on Real Estate News & Insights | realtor.comÂ®.
The local Arizona housing market has been hot nearly all year long. As we get closer and closer to the yearâs end, will the trends continue? We checked out all the stats for Arizonaâs market during November. Check out what we found out!
According to data from the ARMLS Â® from November 1, 2020 to November 30, 2020, monthly sales in the Phoenix metro area rose significantly from where they were at this same time last year. With a +27.4% year-over-year increase, sales landed at 8,886 for the month.
While this number is a slight drop from the previous month of October, the -8.3% month-to-month decrease in sales is in line with the typical slow down in the market as the year starts wrapping up.
At $453.9K, November saw a +6.4% year-over-year increase in average list price. Median prices also rose. With a +10.0% increase from November 2019, the median list price in November was $330K.
Average sale prices increased by +18.0% between November 2019 and November 2020, landing at $418.7K. With a slightly smaller jump, median sale prices still rose significantly with +16.8% year-over-year increase. The November median sale price was $331.0K.
As forecasts predicted, these numbers are slightly lower than sale prices in October of this year. The average sale price was -1.5% lower than that of October and the median sale price was -1% lower. For next month, the average sale price is projected to increase, while the median sale price is expected to have another small decrease. Check back next month to see how these forecasts turn out.
Days on Market (DOM)
While many metrics in the market slowed down this November compared to the previous month, the Average Cumulative Days on Market did not. This number continues to steadily drop, showing homes are being sold more and more quickly. Landing at 41, the Average DOM saw a 2-day decrease from October of this year and a 17-day decrease from November of last year.
Want to Know Your Homeâs Value?
If youâre thinking of selling soon, youâre probably wondering how much your home is worth. Click here to request your free home value report from a Homie pro!
A Message From Sales and Operations Manager, Wayne Graham
Going into December, inventory is 28.2% lower than it was a year ago. In fact, some areas are experiencing record low levels of inventory. However, In contrast to the record low levels of inventory, weâre seeing record-high levels of sales. Demand increased by 27.4% between November 2019 and November 2020. Low supply and high demand are one of the surest guarantees of rising sales prices.
But even though prices are rising, according to the National Association of Realtors Housing Affordability Index it is still very affordable to buy a home in Phoenix compared to historical market trends. This is still possible because of extremely low-interest rates. So overall, home affordability is still in a good historical place in the Phoenix area.
Turn to a Homie
With our dedicated team of professionals, we can help you navigate the real estate market easier than ever. Click to start selling or buying with a dedicated and experienced Homie agent.
The post Homieâs Greater Phoenix, AZ Housing Market Update November 2020 appeared first on Homie Blog.
If you’re thinking about how much is enough for retirement, you’re probably contemplating a retirement and need to know how to pay for it. If you are, that’s good because one of the challenges we face is how we’re going to fund our retirement.
Determining then how much retirement savings is enough depends on a number of factors, including your lifestyle and your current income. Either way, you want to make sure that you have plenty of money in your retirement savings so you don’t work too hard, or work at all, during your golden years.
If you’re already thinking about retirement and you’re not sure whether your savings is in good shape, it may make sense to speak with a financial advisor to help you set up a savings plan.
Check Out Now
- 5 Tips to Optimize Your Retirement Account Withdrawals Read Now
- People Who Retire Comfortably Avoid These Financial Advisor Mistakes
How Much Is Enough For Retirement?
Your needs and expectations might be different in retirement than others. Because of that, there’s no magic number out there. In other words, how much is enough for retirement depends on a myriad of personal factors.
However, the conventional wisdom out there is that you should have $1 million to $1.5 million, or that your retirement savings should be 10 to 12 times your current income.
Even $1 million may not be enough to retire comfortably. According to a report from a major personal finance website, GoBankingRates, you could easily blow $1 million in as little as 12 years.
GoBankingRates concludes that a better way to figure out how long $1 million will last you largely depends on your state. For example, if you live in California, the report found, “$1 Million will last you 14 years, 3 months, 7 days.” Whereas if you live in Mississippi, “$1 Million will last you 23 years, 2 months, 2 days.” In other words, how much is enough for retirement largely depends on the state you reside.
For some, coming up with that much money to retire comfortably can be scary, especially if you haven’t saved any money for retirement, or, if your savings is not where it’s supposed to be.
How to Become a 401(k) Millionaire
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Your current lifestyle and expected lifestyle?
What is your current lifestyle? To determine how much you need to save for retirement, you should determine how much your expenses are currently now and whether you intend to keep the current lifestyle during retirement.
So, if you’re making $110,000 and live off of $90,000, then multiply $90,000 by 20 ($1,800,000). With that number in mind, start working toward a retirement saving goals. However, if you intend to eat and spend lavishly during retirement, then you’ll obviously have to save more. And the same is true if you intend to reduce your expenses during retirement: you can save less money now.
The best way to start saving for retirement is to contribute to a tax-advantaged retirement account. It can be a Roth IRA, a traditional IRA or a 401(k) account. A 401k account should be your best choice, because the amount you can contribute every year is much more than a Roth IRA and traditional IRA.
1. See if you can max out your 401k. If you’re lucky enough to have a 401k plan at your job, you should contribute to it or max it out if you’re able to. The contribution limit for a 401k plan if you’re under 50 years old is $19,000 in 2019. If you’re funding a Roth IRA or a traditional IRA, the limit is $6,000. For more information, see How to Become a 401(k) Millionaire.
2. Automate your retirement savings. If you’re contributing to an employer 401k plan, that money automatically gets deducted from your paycheck. But if you’re funding a Roth IRA or a traditional IRA, you have to do it yourself. So set up an automatic deposit for your retirement account from a savings account. If your employer offers direct deposit, you can have a portion of your paycheck deposited directly into that savings account.
Related: The Best 5 Places For Your Savings Account.
How long do you expect to live? Have your parents or grandparents lived through 80’s or 90’s or 100’s? If so, there is a chance you might live longer in retirement if you’re in good health. Therefore, you need to adjust your savings goal higher.
Consider seeking financial advice.
Saving money for retirement may not be your strong suit. Therefore, you may need to work with a financial advisor to boost your retirement income. For example, if you have a lot of money sitting in your retirement savings account, a financial advisor can help with investment options.
Figuring out how much is enough for retirement depends on how much retirement will cost you and what lifestyle you intend to have. Once you know the answer to these two questions, you can start working towards your savings goal.
How much money you will need in retirement? Use this retirement calculator below to determine whether you are on tract and determine how much you’ll need to save a month.
More on retirement:
- Find Out Now 7 Questions People Forget to Ask Their Financial Advisors
- 7 Mistakes Everyone Makes When Hiring a Financial Advisor
- Compare Fiduciary Financial Advisors — Start Here for Free.
- 7 Situations When You Need a Financial Advisor â Plus How to Find One Read More
- 5 Tips to Optimize Your Retirement Account Withdrawals Read Now
- People Who Retire Comfortably Avoid These Financial Advisor Mistakes
Working With The Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How Much Is Enough For Retirement? appeared first on GrowthRapidly.
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Making the leap from being a renter to becoming a homeowner is a process that includes taking stock of your financial situation and determining whether you’re ready for such a massive responsibility. For most people, the primary question is affordability. Do you have enough cash in the bank to fund a down payment, or do you have a credit score high enough to qualify you for a home loan? But there are other considerations, tooâand plenty of misconceptions and myths that could keep you from making that first step.
Below, our experts weigh in on why some situations that may seem like roadblocks are actually not as daunting as they appear.
1. Buying a home means heavy debt
Some may argue that continuing to rent can spare you from taking on heavy debt. But owning a house offers advantages.
âBuying a home and using a typical loan would be spread out over 20 to 30 years. But if you can make one extra payment a year or make bimonthly payments instead, you can shed up to seven years from that long-term loan,â says Jesse McManus, a real estate agent for Big Block Realty in San Diego, CA.
Plus, as you pay your mortgage, you gain equity in the home and create an asset that can be used when needed, such as paying off debt or even buying a second home.
âCurrently, mortgage interests rates are at their lowest point in history, so … it’s a great time to borrow money,â McManus says.
2. At least a 20% down payment is needed to buy a home
âContrary to popular belief, a 20% down payment is not required to purchase a home,” says Natalie Klinefelter, broker/owner of the Legacy Real Estate Co. in San Diego, CA. “There are several low down payment options available to all types of buyers.â
These are as low as 0% down for Veterans Affairs loans to 5% for conventional loans.
One of the main reasons buyers assume they must put down 20% is that without a 20% down payment, buyers typically face private mortgage insuranceÂ payments that add to the monthly loan payment.
âThe good news is once 20% equity is reached in a home, the buyer can eliminate PMI. This is usually accomplished by refinancing their loan, ultimately lowering their original payment that included PMI,â says Klinefelter. âSelecting the right loan type for a buyerâs needs and the property condition is essential before purchasing a home.â
Watch: 5 Things First-Time Home Buyers Must Know
3. Your credit score needs to be perfect
Having a credit score at or above 660 looks great to mortgage lenders, but if yours is lagging, thereâs still hope.
âCredit score and history play a significant role in a buyerâs ability to obtain a home loan, but it doesn’t mean a buyer needs squeaky-clean credit. There are many loan solutions for buyers who have a lower than the ideal credit score,â says Klinefelter.
She says government-backed loans insured by the Federal Housing AdministrationÂ have lower credit and income requirements than most conventional loans.
âA lower down payment is also a benefit of FHA loans. Lenders often work with home buyers upfront to discuss how to improve their credit to obtain a loan most suitable for their needs and financial situation,â says Klinefelter.
McManus says buyers building credit can also use a home loan to bolster their scores and create a foundation for future borrowing and creditworthiness.
4. Now is a bad time to buy
Buying a home at the right timeâduring a buyer’s market or when interest rates are lowâis considered a smart money move. But don’t let the fear of buying at the “wrong time” stop you from moving forward. If you feel like you’ve found a good deal, experts say there is truly no bad time to buy a home.
âThe famous saying in real estate is ‘I donât have a crystal ball,’ meaning no one can predict exactly where the market will be at a given time. If a buyer stays within their means and has a financial contingency plan in place if the market adjusts over time, it is the right time to buy,â says Klinefelter.
5. Youâll be stuck and canât relocate
Some people may be hesitant to buy because it means staying put in the same location.
âI always advise my clients that they should plan to stay in a newly purchased home for a minimum of three years,” says McManus. “You can ride out most market swings if they happen, and it also gives you a sense of connection to your new space.”
In a healthy market, McManus says homeowners will likely be able to sell the home within a year or two if they need to move, or they can consider renting out the property.
âThere is always a way out of a real estate asset; knowing how and when to exit is the key,â says Klinefelter.
The post 5 Myths About Transitioning From Renter to Homeowner appeared first on Real Estate News & Insights | realtor.comÂ®.
I’m trying something new this week. I built a calculator just for you. It’s meant to help with your retirement planning and look at the next baby step on your retirement path. The calculator asks you some basic information—your age, future retirement details, whether you’re conservative or optimistic about investments—and then calculates a suggested retirement savings goal for 2021.
I know New Years is more than a month away. But it can’t hurt to start thinking about 2021’s resolutions today. Saving money can be one of those resolutions, and retirement is a great thing the save for.
But a retirement savings goal is a difficult number to quantify. What if you retire at 60? At 55? At 50? What if your investments do well? Do poorly? What if they’re somewhere in between? You certainly don’t want to run out of money, so how should you account for that? This calculator answers all these questions.
There are lots of moving pieces in retirement planning. This calculator isn’t a cure-all, but it does simplify some complex math. It boils all the inputs down into one simple output: how much should you save next year to keep you on your retirement path?
And don’t worry—I explain all of my assumptions towards the end of the post.
Go ahead—give it a shot!
There it is! The field above shows your calculated retirement savings goal for 2021. This is the amount of cash the Best Interest recommends you should put into long-term investments. If you follow this advice year after year, you’re likely to achieve your retirement goals.
Below you’ll find a few different ideas: a FAQ, some Things to Try, and a list of Assumptions.
As always, let me know if you have any questions.
Retirement Savings Goal FAQ
As you ask more questions, I’ll update the FAQ below.
“What Should I Do With the Money I Save?”
I’m happy to tell you how I invest. That’s what I’ll be doing with my retirement savings in 2021.
“I Think the Calculator is Broken…”
I did not test this calculator like a software company would, so I admit that some inputs might “break” the calculator or lead to strange results.
My first recommendation: make sure you use “realistic” inputs. I tested a bunch of realistic scenarios, and they all ended up working as expected. But I didn’t try every possible combination. If you say you’re 50 years old and want to retire at 40, then you need a time machine, not a blog calculator.
That said, if you’re being realistic and you still think it’s broken, let me know.
“My Retirement Savings Goal Seems Really High…”
First, I recommend you read the next section. Most of us will have supplemental income in retirement (e.g. social security), and the next section describes how you should incorporate that into the calculator. It’ll lower next year’s retirement savings goal.
After that, there’s a stark realization here. Retirement is expensive! If you hope to retire soon, live a rich retirement, and/or have a long retirement, then you’ve got to save a lot of money.
There’s a reason why your younger years are so important for investing.
“How Should I Consider Supplemental Income in Retirement?”
There are dozens of ways you might supplement your income in retirement. Common examples include Social Security and pensions. The lotto doesn’t count.
If you fall into one of these camps, I recommend re-running the analysis after reducing your “Annual Spending in Retirement.” Let’s work through an example.
The calculator is pre-set to assume $36,000 in annual spending. The average Social Security pay-out in 2020 is about $1500 per month, or $18,000 per year. Therefore, I’d recommend adjusting the calculator’s “Annual Spending in Retirement” to $18,000 ($36k – $18k = $18k).
“Why Is My Retirement Savings Goal NEGATIVE?!“
There are a few simple explanations why your savings goal might be negative.
The first and most common: you already have enough money saved for retirement! This is really good. This especially applies if you’ve been diligently saving for years and plan a low-cost retirement.
If you doubt you already have enough saved, go back and check your calculator inputs.
If you’ve checked your inputs and something still seems wrong, let me know.
“I Have NO IDEA What My Spending in Retirement Will Be. Help!”
Fair enough. It’s hard to predict what you’ll spend in retirement.
My recommendation: start with what you spend right now. And if you don’t know what you spend right now, that’s your sign that you should start budgeting.
Once you know how much you spend right now, take your largest expenses and scale them for retirement. Here’s my personal example of simple scaling:
- Housing – I expect this to decrease, since I’ll have my mortgage paid off when I retire. (-$900) per month.
- Kids – I don’t have any now, and I also plan that I won’t have any who I’m actively supporting when I’m retired. No change in this category.
- Automotive – about the same.
- Food, consumer good, etc. – about the same.
- Medical – to be safe, I’m going to increase this number. Based on some quick research, +$500 per month.
- Fun stuff – I think I’ll do a bit more fun stuff in retirement. For now, I’ll allocated +$200 per month to fun.
That’s it. This brief, simple scaling suggests I’ll spend about $200 less in retirement than I’m spending now.
But Jesse—by the time you retire, won’t the Best Interest be pulling in millions of dollars due to its amazing ability combine financial education with entertainment?!
Maybe, but I’m playing it safe for now.
“Should I Include Taxes?”
Most likely! Let me give you my personal example. About 75% of my current retirement savings lie in accounts that will get taxed upon withdrawal in retirement.
So if I need $40K for my actual spending, I’ll probably need to withdraw between $45K and $50K—the extra goes to income tax and capital gains tax. As such, I should input that $45 – $50K value into the Annual Spending on the calculator.
“Is My ‘Current Long-Term Investments’ Just My Net Worth?”
Not quite. Net worth includes many assets and liabilities that should not be considered long-term investments.
Your emergency fund is part of net worth, but it’s not growing like an investment. Your house might be a long-term asset, but you likely won’t be selling it in order to retire. And you debts count against your net worth, yet don’t count against your long-term assets. You can simultaneously save for retirement and pay down your debt.
Things to Try in the Retirement Savings Goal Calculator
Here are some cool ideas I recommend you try with the calculator. Keep two things in mind as you play around. The first is to investigate how changes in your life today can affect your long-term goals. The second is to realize that certain things—like market performance—are out of your hands, yet can still affect you.
1) Play With the Optimism/Pessimism Slider
Market performance plays a huge role in the retirement savings goal calculator. It controls both how your nest egg with grow leading up to retirement and how your nest egg will shrink as you withdraw in retirement.
If you’re too optimistic, you might not save enough. If you’re too pessimistic, you might end up saving more than you’ll ever need—and thus work longer than you need to.
I recommend you play around with the slider to understand the range of recommended savings goals. If you can, set the bar high and aim for a conservatively large savings goal in 2021. As the years go by, you can always reevaluate.
Remember—saving more money in your younger years is vital.
2) Give Yourself Some Extra Years
We don’t often get to play God, so take this chance to tack on extra years at the end of your life. Running out of money in retirement is not ideal, so this exercise will give you some buffer years at the end of your life—and will increase your 2021 retirement savings goal accordingly.
3) Go Fat, Go Lean
Take your 2021 savings goal—let’s say it’s $10,000.
Now we’re going to try to re-create that $10,000 result in two separate ways.
First, try to decrease your Annual Spending by 50% while also decreasing your retirement age. Tweak your retirement age until your recommended 2021 retirement savings goal ends up around $10K again. This gives you a rough idea of how quickly you could achieve a “lean” retirement. You’d be leading a spartan lifestyle, but retirement could be closer than you think.
Second, try to increase your Annual Spending by 50% while also increasing your retirement age. Again, tweak your retirement age until the calculator recommends saving $10,000 in 2021. This gives you an idea of how much more time you’d need to work in order to eventually live a “fatter” retirement. You could afford a lot more—-but at what cost? It’ll likely lead to many more years of work.
When I try this exercise, I get the following:
- My normal input –> retire at 55
- Lean = 50% less retirement income –> retire at 43
- Fat = 50% more retirement income –> retire at 63
I’m not sure when I want to retire. But the spectrum of potential retirement lifestyles necessitate a spectrum of career lengths and savings.
The entire “FIRE” movement is based on these spectra of retirement lifestyles and career lengths.
Assumptions in the Calculator
An analysis is only as good as its assumptions. If I assume that I can run at 60mph, then my path to become a world-record holder is paved with gold. Usain Bolt, I’m coming. Bad assumptions = bad answers.
So here are some of the most important assumptions from today’s retirement savings goal calculator.
I assumed 2.5% inflation per year. That applies to every year in the calculator. It affects how your current 2020 spending gets multiplied to reach a future nest egg goal. This is as good an assumption as one can make based on historical inflation rates.
Portfolio Makeup and Performance
Like the original Trinity Study, I assumed that your portfolio would comprise a 50/50 mix of stocks and bonds. Important note! Many portfolios—especially if you’re young—will leaning much heavier into stocks than bonds. This makes your portfolio riskier, but also is more likely to lead to better long-term returns. This is why I recommend you toggle to Optimism/Pessimism slider.
But let’s go back to the 50/50 portfolio. The Optimism/Pessimism slider affects the stocks’ simulated performance, varying between 1.9% growth per year and 11.1% growth per year. These numbers represent the worst 30-year annual return and best 30-year annual return in S&P 500 history, respectively. The bonds were assumed to return a steady 5% per year.
If you’re interested in the market’s past (and potential future) performance, this decade-by-decade comparison is a good starting place.
So when the slider is set at 0, the stock portion returns 1.9% and the bond portion returns 5%. The net result is a 3.45% return. When the slider is set at 10, the stock portion returns 11.1% and the bond portion still returns 5%, leading to a net 8.05% return.
Each increase of 1 on the slider will increase your annual portfolio return by about 0.5%.
This is way too coarse for some people. For a future iteration, I’d like to add functionality where you can choose your own stock/bond allocation. If you’d be interested in something more, let me know.
“The 4% Rule”
The 4% Rule is a brief nickname for the outcome of the famous Trinity Study. The rule states that…
- if you’re planning a 30-year retirement
- and if your portfolio is 50/50 stocks and bonds
- and you want to be 95% confident in your retirement planning
Then you can withdraw 4% of your nest egg in Year 1 of your retirement, and then increase that withdrawal in each subsequent year to account for inflation. This makes your nest egg target easy to calculate—it’s your annual spending divided by 4%, which is equivalent to your annual spending multiplied by 25.
If you want more conservativism or if your retirement will last longer than 30 years, then you’ll want a “lower” rule (e.g. 3.5%). This increases what your target nest egg would
If you want to be more optimistic about your investments, or if your planned retirement is shorter than 30 years, then you’ll want a “higher” rule (e.g. 5%).
For this calculator, I used your input of “optimism or pessimism” to scale this “rule” between 3.5% (pessimistic) and 4.5% (optimistic). Then I scaled that number using your planned retirement length. Longer retirements scale the number down, shorter retirements scale the number up.
Clear the Memory
Thanks for giving the calculator a try. It’s my first attempt. If you didn’t get the memo earlier, I’d love to get feedback.
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With the stock market still in roller coaster mode and more and more companies reducing or eliminating retirement benefits, many peopleâfrom Boomers and Generation Xers to savvy Millennialsâare facing the fact that they need to seize control of their retirement financial plan. And they need to do it sooner rather than later.
Boomers in particular are quickly realizing that the landscape for long-term savings has changed dramatically since they signed up for their 401(k)s in the 1970s, 1980s or 1990s.
Planning wasnât as crucial back then, said David Krasnow, 44, President/CEO of Pension Advisors in Cleveland. âBetween pension plans, 401(k)s, and home equity, it was assumed that the continual growth of investments and home value together with Social Security would provide plenty of money when employees stopped working,” he said. With a formula that basic, professional planners didn’t need deep investment expertise to deliver solid results.
“There were few certifications or fee disclosure requirements,” Krasnow pointed out. “The same person who sold you health insurance might sell you an investment program.”
That laissez-faire approach might have worked for people who worked, uninterrupted, until 65 (not facing protracted periods of unemployment) and not as contractors and/or part-timers or small-business owners. It worked when the stock market produced steady 8% gains per year, not tumultuous volatility. It worked when companies offered generous 401(k) matchesâand stayed out of bankruptcy to actually fund pensions. And it worked when home property values were growingâor at least stable.
But it doesn’t work now, and this is why:
- We canât assume continual growth of investments or home equity. Nor can we count on Social Security to be solvent 30-40 years from now. That’s the new economic normal.
- Weâre anticipating living longer, staying active longer (which influences spending and other financial considerations), and with advancing age, facing the likelihood of considerable medical-related expenses.
- Our parents are living longer. Boomers looking to retire may want to help fund their parents’ later years as well as their own. And, of course, there’s the question of children and grandchildren, and whether (and how much) to spend on them when you don’t have a full income.
- Traditional pensions or other employee-sponsored retirement plans may not be sufficient sources of retirement funds.
- Investment products are more plentiful and more complex (read: confusing) than ever.
- Retirees often continue working long past their 60s, which affects traditional assumptions about how much savings is needed when they do stop working.
So what does all of this mean for anyone intent on building a solid retirement financial plan?
1. Recognize the Need for a Professional Adviser
âIn a constantly improving market I used to be able to manage my mutual fund investments on my own,” said Peter Doris, 66, a career and nonprofit expert from Philadelphia. “Now I need a professional’s help. It isnât just a question of putting money aside. Itâs a question of being really smart and current about each investment, and I simply don’t have the time or the background.”
2. Do Your Homework
âThere is a minimum set of skills and knowledge base you must have, even if you use a professional,â said Jim McGrath, an Executive Vice President of Law and Administration, 67, in Orland Park, Ill. âTake seminars, do online research and read up so that you have solid financial literacy,” he suggests. “You can’t make informed decisions without fully understanding your choices, their projected outcomes and their potential risks.â
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3. Be on the Same Page With Your Significant Other
If you’re married or in a relationship, make sure both spouses/partners are in agreement about life planning, investment objectives, reasonable returns and levels of acceptable risk. âMy wife and I built our business together,â said Ted Vlamis, 78, an active CEO in Wichita. âShe knows the numbers, so there are no surprises. We know that the chances are good that one partner will outlive the other, and any survivor shouldn’t be blindsided by financial problems they knew nothing about … or have to face, unprepared and grieving, the host of decisions that have to be made about a business or an investment portfolio.”
4. Own It
Dr. Deborah Ewing-Wilson, 58, a neurologist in a large Ohio medical system, advises people to “give the same due diligence to their personal and financial lives that they give to their work and businesses.” It’s time-consuming and sometimes tedious, she admits, but then again so is taking care of one’s health. “Iâm here to help educate, recommend, and advise, but I canât take responsibility for anyone else’s behavior or decisions,” she says. “It’s the same with a financial plan.” In other words, it’s your money, your plan, your life.
5. Start Now
âFind a professional you trust, start saving as soon as you can, and stay on top of your plan, ready to make decisions as markets–and your lifeâevolve,â says Rich Iafellice, 57, vice president of an engineering services firm near Akron. He suggests working with an adviser who works on a fee basis, not on a percentage of growth of your portfolio. âThat way they’re focused solely on your needs and risk tolerance, not the potential for them to make big profits off of a portfolio that might be too ambitious for your comfort.â
Two last caveats: When shopping for an investment adviser, look for the designations CFP (certified financial planner), PFS (personal financial specialist) and CFA (chartered financial analyst). Anyone with these credentials has to have completed training from an accredited body, and passed rigorous exams demonstrating their competence. Certification is only one indicator of ability, however. The real test is whether an adviser has been successful for an extended period of time and is recommended by people you trust and respect.
More Money-Saving Reads:
- Whatâs a Good Credit Score?
- How to Get Your Free Annual Credit Report
- Whatâs a Bad Credit Score?
- How Credit Impacts Your Day-to-Day Life
The post Will You Ever Be Able to Save Enough for Retirement? appeared first on Credit.com.
We are in the midst of a major economic shift. While workers in the past could expect to keep a stable job with a traditional employer for decades, workers of today have found they must either cobble together a career from a variety of gigs, or supplement a lackluster salary from a traditional job by doing freelance work in their spare time.
Though you can make a living (and possibly even a good one) in the gig economy, this kind of work does leave gig workers vulnerable in one very important way: retirement planning.
Without the backing of an employer-sponsored retirement account, many gig workers are not saving enough for their golden years. According to a recent report by Betterment, seven out of 10 full-time gig workers say they are unprepared to maintain their current lifestyle during retirement, while three out of 10 say they don’t regularly set aside any money for retirement.
So what’s a gig worker to do if they don’t want to be driving for Uber and taking TaskRabbit jobs into their 70s and 80s? Here are five things you can do to save for retirement as a member of the gig economy. (See also: 15 Lucrative Side Hustles for City Dwellers)
1. Take stock of what you have
Many people don’t have a clear idea of how much money they have. And it’s impossible to plan your retirement if you don’t know where you are today. So any retirement savings should start with a look at what you already have in the accounts in your name.
Add up how much is in your checking and savings accounts, any neglected retirement accounts you may have picked up from previous traditional jobs, cash on hand if your gig work relies on cash tips, or any other financial accounts. The sum total could add up to more than you realize if you haven’t recently taken stock of where you are.
Even if you truly have nothing more than pocket lint and a couple quarters to your name, it’s better to know where you are than proceed without a clear picture of your financial reality. (See also: These 13 Numbers Are Crucial to Understanding Your Finances)
2. Open an IRA
If you don’t already have a retirement account that you can contribute to, then you need to set one up ASAP. You can’t save for retirement if you don’t have an account to put money in.
IRAs are specifically created for individual investors and you can easily get started with one online. If you have money from a 401(k) to roll over, you have more options available to you, as some IRAs have a minimum investment amount (typically $1,000). If you have less than that to open your account, you may want to choose a Roth IRA, since those often have no minimums.
The difference between the traditional IRA and the Roth IRA is how taxes are levied. With a traditional IRA, you can fund the account with pre-tax income. In other words, every dollar you put in an IRA is a dollar you do not have to claim as income. However, you will have to pay ordinary income tax on your IRA distributions once you reach retirement. Roth IRAs are funded with money that has already been taxed, so you can take distributions tax-free in retirement.
Many gig workers choose a Roth IRA because their current tax burden is low. If you anticipate earning more over the course of your career, using a Roth IRA for retirement investments can protect you from the taxman in retirement.
Whether you choose a Roth or a traditional IRA, the contribution limit per year, as of 2018, is $5,500 for workers under 50, and $6,500 for anyone who is 50+.
3. Avoid the bite of investment fees
While no investor wants to lose portfolio growth to fees, it’s especially important for gig workers to choose asset allocations that will minimize investment fees. That’s because gig workers are likely to have less money to invest, so every dollar needs to be working hard for them.
Investing in index funds is one good way to make sure investment fees don’t suck the life out of your retirement account. Index funds are mutual funds that are constructed to mimic a specific market index, like the S&P 500. Since there is no portfolio manager who is choosing investments, there is no management fee for index funds. (See also: How to Start Investing With Just $100)
4. Embrace automation
One of the toughest challenges of being a gig worker is the fact that your income is variable — which makes it very difficult to plan on contributing the same amount each month. This is where technology comes in.
To start, set up an automatic transfer of an amount of money you will not miss. Whether you can spare $50 per week or $5 per month, having a small amount of money quietly moving into your IRA gives you a little cushion that you don’t have to think about.
From there, consider using a savings app to handle retirement savings for you. For instance, Digit will analyze your checking account’s inflow and outflow, and will determine an amount that is safe to save without triggering an overdraft, and automatically move that amount into a savings account. You can then transfer your Digit savings into your retirement account.
5. Invest found money
An excellent way to make sure you’re maxing out your contributions each year is to change your view of "found money." For instance, if you receive a birthday check from your grandmother, only spend half of it and put the rest in your retirement account. Similarly, if you receive a tax refund (which is a little less likely if you’re a gig worker paying quarterly estimated taxes), send at least half of the refund toward your retirement.
Any gig workers who often receive cash can also make their own rules about the cash they receive. For instance, you could decide that every $5 bill you get has to go into retirement savings. That will help you change your view of the money and give you a way to boost your retirement savings.
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Utahâs real estate market has been hot nearly the whole year. How did it perform in November? Homie has your update!
Data from Utah MLS from November 1, 2020 to November 30, 2020.
According to data from the Utah MLS, Utah had 4,335 sales from November 1, 2020 to November 30, 2020. Of those sales, 75.6% were single-family homes, while 24.4% were multi-family residences.
The sales this month are slightly lower than the 5,602 sales in October of this year, but itâs a +18% increase from November 2019, which is an even larger percentage increase than the year-over-year comparison we saw in October. This means the market is following the usual end-of-year slowdown, but the market is still quite strong compared to a year ago.
Even though monthly sales saw the usual end-of-year slow-down, sale prices continued to rise. At $379K, Utahâs median sale price rose +2.4% from October of this year and 16.8% from November 2019.
List Price (Per Square Foot)
List prices in Utah rose during November along with sales prices. Novemberâs median list price per square foot was $175.92, which is up from the previous monthsâ median of $170.25 per square foot.
Days on Market (DOM)
Homes in Utah continue to sell quickly. The Average Cumulative Days on Market (DOM) during November was 9. This is a 72% decrease from November of last year. Prospective Utah homeowners will need to act quickly to get the homes theyâre interested in.
Number of Homes Listed With Homie
A total of 182 homies listed their homes with Homie during the month of November. This number is up from 154 during the same time period last year.
Turn to a Homie
Homieâs local real estate agents can help you navigate Utahâs hot housing market and find your ideal home. Work with a Homie to get an amazing deal whether youâre buying or selling. Click the links to get in touch with your dedicated agent.
The post Homieâs Utah Housing Market Update November 2020 appeared first on Homie Blog.