Low Cost Ways to Invest for Retirement

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Thinking about retirement?

I work with college students, young professionals and people that generally don’t have $5,000 lying around to start investing for retirement. If you do, make sure to speak with a fee-only advisor (they don’t make commissions on products so their advice is non-biased) before you start investing. If you don’t I’ve come up with a list of investment options that you can use to get into the market and stick to your spending plan.

Thrivent 50 per month investing by length of time

This image is from the Thrivent website.

It’s important to remember, that investing is always risky. There is no way to guarantee that you’ll always earn money if you are investing in stocks. Please take a look at this list of low cost options for opening an investment account and do your homework. Call the organizations. Ask questions. Google.

Investment firms that allow you to open an account with no, or a few, dollars to start are expecting that you will make a monthly contribution. Most will let you “turn off” the monthly contribution on months where you just don’t have the money to spare but once your spending plan is set, you’ve decided to pay yourself first, and you are committed to investing early and often, it’s best to set the money to transfer from your checking account to your new investment account automatically.

This is by no means an exhaustive list, but here are a few low barrier accounts you can open:

Open an Account With $0

Charles Schwab index funds – Choose an index fund with no minimum investment amount.

Nationwide Funds Group – Choose Automatic Asset Accumulation. From their website “When you invest the same amount on a regular basis, you buy fewer shares when the market is up and more shares when the market is down. This may cut your average cost per share because you’re buying fewer shares at a higher price and more shares at a lower price. This investment strategy is called dollar-cost averaging.”

A list of cheap robo-advisors can be found here. For those that are into technology want to open an account quickly (and use their spare change to do it, see Acorns app) this could be a good option.

 

Open an Account With $50

Thrivent Mutual Funds Automatic Purchase Plan – Easy to understand. Easy to set up.

 

Open an Account With $100

Monetta Low Minimum Investing – From their website, “Investing for your retirement or child’s educational expenses through a low minimum automatic investment plan (AIP) can be an effective way to accumulate assets. Funds are automatically deducted from your checking/savings account or paycheck. Studies indicate that regular automatic investing, also known as dollar cost averaging, has the potential to be an effective investment plan for long-term asset accumulation.”

 

For a few more low barrier mutual funds, visit here.

Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell specific funds.

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EMPOWERED A Financial Education Accountability Group

EMPOWERED - Young - Professionals

Most of us grew up with an older person in  our lives that told us to save for a rainy day but most of us don’t do it. Some of us aren’t sure what specific steps we need to take to get our financial house in order. Some of us know what to do but need a reminder every now and again.

During the 11 years I’ve been working as a financial education speaker I’ve come across lots of folks that want to work with me one-on-one but can’t afford the fees. I’ve been trying to figure out how to reach the largest amount of people and I think I’ve figured it out. I’ve created a five week financial education accountability group. We’ll work, as a group, on increasing our credit scores, understanding any loan products we might have or are looking to get, and beefing up our emergency savings and retirement accounts.

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Here’s how it works:

#1 You register for the 5 week program and get access to the EMPOWERED private Facebook group.

#2 You open and read an email every week detailing one aspect of personal finance.

#3 You complete the action step for the week.

#5 You participate in the weekly private Facebook group chat.

#6 You build the life you want.

 

$7 REGISTER NOW

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5 Week Financial Education Accountability Group Overview

April 22nd – May 26

 

Week 1 – Paying Yourself First

Provide apps to create a spending plan

Week 2 – Bank with a Credit Union

Find out if joining a credit union would benefit you

Week 3 – Invest

Commit to starting, or increasing, your retirement contribution

Week 4 – Understand PIL

Look over your current loans and consider refinancing

Week 5 – Understand Your Credit Scores

Pull your credit reports and correct any mistakes

 

Why It Works

Knowing that you have a group of people cheering you on from the sidelines helps you do what you know you need to do.

 

$7 REGISTER NOW

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How Much Do You Need to Have Invested for Retirement?

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This is a question that comes up with young professionals, mid-career professionals, and people about to retire. Everyone wants to know what is the magic number that one needs to have amassed before they can retire comfortably. The problem is that the number is different for each individual.

On top of tax concerns, social security issues, and  income vs outgo histories, you also have to think about lifestyle. Most people have some idea, even if it ends up being wrong, about what they’d like their retirement years to look like. To get a ballpark figure I’d suggest:

#1 Take a look at the actuarial charts to find out how long you might live.

Of course none of us knows when our lives will be over but drawing from social security records, actuarial tables can help you get an idea of if you should plan to be in retirement for 20 years or 40 years. This simple calculator is a great place to start.

#2 Take a look at your Social Security Administration account.

Think about when you’d like to start drawing social security and how much you might be getting. Things like who applies first, if you’re married, and how far away you start drawing from when you reach full retirement age matter. Visit the Social Security Administration’s calculators page to start.

#3 Consider how much you live on right now.

One of the many challenges of trying to decide how much money you might need to be able to retire is not knowing how expenses will rise and fall over time. Some thinking says that early in retirement, you’ll spend on leisure activities (travel, golfing, etc.) while later in retirement you’ll spend those same dollars on healthcare. Whatever you spend in a year right now, use that as a base number to think about how much you might spend in retirement.

#4 Do the math.

Since you already how many years you should be planning for, how much you can expect to earn from Social Security, and what your yearly spending is now all you’ve got to do is a little simple math.

First, subtract how many years the calculator said you may live until from the age at which you want to retire. Example: My calculator says I’ll live to be around 94 year old. If I plan to retire at 70:

94 – 70 = 24 years in retirement

I need to plan to be in retirement for 24 years.

Next, let’s find out how much I can expect to get from the Social Security Administration. I used the quick estimator and saw that I’d earn $1.360 per month in retirement. That’s about $16,320 per year.

$1,360  x  12 months = $16,320 per year from Social Security

Next,consider how much you’ll need to have invested. Let’s say that I spend $70,000 per year. I just learned that I’ll get $16,320 per year from Social Security. That means I’ll have to have $53,680 per year of money I’ve invested.

Lastly, multiply the number of years by how much you spend in one year. Example: I’ll need to prepare for 24 years (from the example above) and I spend about $53,680 per year.

$53,680  x  24 years = $1,288,320

I need to have access to $1.2 million dollars. That sounds like a lot of money. Let’s further assume that I have nothing invested. Nada. This calculator will help you figure out how much you need to start aggressively investing.

If you’re a young professional and would like to better understand how to get started on the right foot check out my book 10 Things College Students Need to Know About Money. If you’ve already made a few mistakes, check out my best selling book Money Matters: The Get It Done in 1 Minute Workbook.

Regardless of where you are starting from, remember that building the life you want IS possible. Don’t worry about what you didn’t do before. Start from now. You can do it.

#FinancialEducationForALL

 

ShayOlivarriaHeadshotShay Olivarria is the most dynamic financial education speaker working today. Previous clients include: SCE Credit Union, American Airlines Credit Union, the Yorba Linda Water District, Verizon, among others. She has written three books on personal finance, including Amazon Best Seller “Money Matters: The Get It Done in 1 Minute Workbook”. Shay has been quoted on Bankrate.com, FoxBusiness.com, NBC Latino and The Credit Union Times.The 2nd edition of “10 Things College Students Need to Know About Money” is available now.

 

 

 

 

Baltimore May Sell Homes for $1 Each

Baltimore one dollar house

Like Philadelphia and Detroit, Baltimore has lots of empty, crumbling houses. The solution has been to tear the houses down but it looks like a program from the 1980s to help people become home owners may get a second chance:

From the Greater Greater Washington website:

The estimated cost to restore the properties was as a high as $100,000, so the city made low-interest loans available to new owners. With a one percent interest rate, Clarke’s resolution notes that new homeowners could pay as little as $300 per month to repay the loan. With the same terms in the 1980s, H.O.M.E.S. says no new owner defaulted on their loans.

Buying an old dilapidated house is not the feint of heart. The house is falling apart, in some cases, and the neighborhood doesn’t have many retail businesses available that a young person or young family might want. You’ll put lots of blood, sweat, and tears into a house to make it a home. For some, the work won’t be worth it but for others …  it might just be a dream come true.

 

$10,000 African American Study Abroad Scholarship

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Did you know that the United Negro College Fund had a $10,000 scholarship to help Black students in the United States study at a University on the continent of Africa?

The Joseph A. Towles African Study Abroad Scholarship is named in memory of Dr. Joseph A. Towles, a black social anthropologist and specialist in the study of African cultures. Dr. Towles, a native of Virginia, earned his doctorate at the Makerere University in Kampala, Uganda.

This makes me wish I was still in school so I could apply for this scholarship. I’ve been to twenty countries on five continents but I’ve never had the pleasure of studying at a university abroad. There are only three more days to get your application in. Hurry. This is a great opportunity.

African American Study Abroad Scholarship
United Negro College Fund
Deadline to Apply: Nov. 3, 2017
Award Amount: up to $10,000

By providing financial assistance for UNCF students to study at an established university within the continent of Africa, The Joseph A. Towles Scholarship will allow students to receive an incredible academic experience and exposure to the rich traditions within African cultures.

Click here to visit the United Negro College Fund’s page.

Financial Apps for Lazy People

lazyIf you’re like me, you want to use your money well. You want to buy things you want. You want to pay yourself first by setting a few dollars aside for emergencies and investing a few coins for retirement. You want to pay your bills on time, and in full every month but those things rarely happen the way you know they should. Behavioral economics explains that most people do better when things are automated and we don’t have to actively make choices. Why do you think so many people know exactly what they need to do and then they still don’t do it?

Making good financial decisions with every single purchase day in and day out is challenging. Instead of making things harder for yourself why not use automatic savings and/or investment apps? Here is a round up of what’s available.

 

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Apps for Automatic Saving

Digit – There is a free trial period of 100 days. It’s $2.99 a month after that. It basically uses an algorithm to figure out how much money can be moved from your checking account into your Digit savings account. Digit accounts are FDIC insured. There is a desktop version and an app. FAQs are here.

Qapital – Free. You set “rules” that tell the app when and how much money to move to your Qapital account to reach your savings goals. It’s a little more complicated than Digit. Qapital accounts are FDIC insured. App only. FAQs are here.

To read a comparison of Digit and Qapital, click here.

 

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Apps for Automatic Investing

Acorns – It’s $1 per month for accounts with less than $5,000 in them. The app rounds up the change from purchases and invests the change in the stock market. Find out more here.

Stash – There is a $5 minimum and $1 monthly fee for accounts under $5,000. You decide when to invest and how much to invest. Find out more here.

 

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Apps to Manage it All

Mint – Free.

YNAB You Need a Budget – Free for 34 days and $4.17 every month after that.

 

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Personal Finance Software

Quicken Money – if you’re not a fan of phone apps but you’d still like to keep an eye on your money, this may be the software for you. It tracks spending, can track investments, and even comes with a free app if you’re so inclined.

 

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Other Options

If all this sounds like a little too much, you can stick with the tools provided by your financial institution (many offer programs to help you save the change from transactions or create a holiday savings account), invest in your 401k or 403b through your job, or invest for retirement on your own by opening an Individual Retirement Account (IRA) through whatever company suits you.

Whatever works for you is best. There is no right or wrong. It’s important that you start now though. Even if you can only use the change from your purchases, something is always better than nothing. Take advantage of compound interest and start now.

 

 

 

 

Good Bye MyRA

poverty cycle

 

MyRA was a program started to help young people and the working poor invest for retirement. Contributions could be as low as $5. The hope that young people and people with few resources could take part in investing for retirement (because we all know Social Security isn’t gonna be enough) was a lofty goal. This may have been especially helpful for people of color since we’ve all read the studies about net worth and cycles of poverty.

Unfortunately, the MyRA program will be stopped under the Trump administration. It was never really given the resources to take off. That was the main reason given for its close. The working poor don’t have lots of options to move up the socio-economic ladder and now they’ll have one less option.