New CA Bill Forces All Employees to Invest for Retirement

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Senate leader Kevin de León has put forth a bill that would require all California companies, that have at least five employees, to offer their own retirement investment plan or enroll workers in the new California Secure Choice Retirement Savings Program. Though employees could always invest for retirement using an IRA, while getting almost the exact same benefits of the Secure Choice program, many people haven’t taken advantage. As Time Magazine says, ” .. when it comes to putting money away, an employer nudge really matters: 90% of those with workplace plans save for retirement vs. only 20% of those without one.”

What bill does:

  • Requires that employers with more than 5 employees offer some kind of retirement investment plan to employees.
  • Offers a way for employees to invest for retirement directly from their paycheck.
  • Starts employee contributions at between 2% and 5% of their paychecks (the exact details haven’t been hammered out yet).
  • Automatically enrolls employees (about 6.8 Californians) unless the employee chooses to opt out.

What the bill doesn’t do:

  • Does not require employers to “match” contributions or provide funds for the retirement of employees.
  • Does not assume the risk of investing (investors could lose money).
  • This program does NOT provide assured payouts during retirement (it is NOT a pension plan).

San Jose’s Mercury News:

At first the money would be invested in safe, low-yield U.S. Treasury notes. After three years, the funds would likely shift to a diverse portfolio of stocks and bounds. These options would be developed by the Secure Choice Retirement Savings Investment Board. The accounts would likely be Roth IRAs, a mode that allows for tax-free withdrawals upon retirement.

The amount of money deducted from a worker’s payroll would escalate over time, up to 10 percent, but employees would be able to set the amount themselves.

Time Magazine:

All told, at least 30 states are in various stages of setting up retirement plans—some mandatory for employers and some voluntary—according to the Georgetown University Center for Retirement Initiatives.

At any rate, the Secure Choice Retirement Savings Plan is heading to an employer near you. I’m waiting to hear more about the specific details but this is coming. Do you think it will encourage more employees to invest for retirement? Head over to the Bigger Than Your Block Facebook page and give your opinion.

 

 

 

 

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myRA Might Be the Solution for High School and College Students

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If you’ve read “10 Things College Students Need to Know About Money” you know that I am a HUGE advocate of young people investing from retirement as soon as they have earned income. For many people that time is while in high school or college while you’re working part-time or eeking a living out of financial aid. Often, young people don’t know how to open an Individual Retirement Account (IRA) or don’t think they have enough money to open one (get my list of investment accounts you can open for less than $100 here).

The United States government is here to help with the new myRA (my retirement account, get it?). According to the U.S. Treasury,  these accounts are:

  • Easy to set up (you can have the money deducted from your payroll check if you wish)
  • Designed to help people with little money or no access to a retirement plan from work.
  • No risk of losing money (funds are invested in a Thrift Savings Plan-like account)
  • The funds you invest are NOT tax-deductible but you also can take them out whenever you like without penalty.

The best part? There is no minimum amount required to start an account and according to Forbes, ” additional contributions only have a minimum of $5.” The goal is really to get you into the habit of investing when you are young and have few dollars. The return isn’t great (think 1% or 2% per year) compared to a regular traditional or Roth IRA or 401(k)/403(b) but starting now with a few dollars and little interest is better than not doing anything.

Fool.com also notes:

Account holders can contribute up to $5,500 per year ($6,500 if over 50) and may continue to contribute until their total account balance reaches $15,000. All funds are invested in a newly created Treasury bond

Once you’ve grown a nest egg big enough to open a traditional or Roth IRA, or you have a job that provides a 401(k) or 401(b) hopefully with matching, you can roll the money over into a new account.

Click here to find out more about myRA accounts.

 

 

What I Learned from Jim Uren’s Webinar on Social Security Benefits

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I learned about Jim Uren’s webinar, How to Get More Out of Social Security: Discover how Savvy Single Women are Collecting Thousands More in Retirement, on Facebook and decided I’d click on and see what I could learn. It turned out that he has some really good tidbits.

First, what are social security benefits?

You pay into social security every two weeks. The government takes it out along with taxes. That means that social security benefits are something you’ve paid into and something is owed to you in retirement. You’re eligible to receive benefits once you turn 62 but to get full retirement benefits you’ll have to wait until you’re 67 years old. The Social Security Administration sends out a physical booklet telling you how much your expected benefits are to-date every five years. If you want to know now, you can create an online account at SSA.gov. If you choose to create an online account, the Social Security Administration will no longer send you a physical booklet.

Anyhoo, back to the Jim Uren webinar. I learned:

  • Women lose about $80,000 due to decisions made about when to take benefits and how to take those benefits.
  • A person needs to have 10 years (40 quarterly credits) to receive social security.
  • You can start taking social security at 62, but there will be a penalty every year until you reach ACTUAL retirement age, currently 67 years old. If you start at 62 the penalty could be as high as 30% of your benefit.
  • If you wait to take your benefit, you’ll get a percentage bonus every year you wait, until 70 years old. If you wait until 70 you’ll earn a 24% bonus.
  • You can switch from your benefits to your deceased partner’s benefits, or vice versa.
  • You have 12 months to make any changes, after that everything in set in stone.

There are intricacies to every filing and so many things to consider, but the webinar gave me some new ideas to think about. In case you’d like to speak to the man, himself contact Jim Uren at Phase 3 Advisory.

Retirement Survey 2016

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Are you investing for retirement? Do you use a work-sponsored plan? An individual retirement account? Will you have enough money to retire on?

Take our anonymous 9 question survey to help us learn how to serve you better. We don’t collect any identifying information from you. We just want to know about the trends in retirement so we can plan webinars, books and speaking events to help you plan.

Thank you for taking a moment to share. Don’t forget to invite others to share as well.

 

 

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Shay Olivarria is the most dynamic financial education speaker working today. She speaks at high schools, colleges, and companies across the country. 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, among others. To schedule Shay to speak at your event visit www.BiggerThanYourBlock.com.

Pretending to be Financially Secure

aightI just read Unemployed, 55, and Faking Normal. The article is about women that are now unemployed or underemployed. These are women that are educated. These are women that are used to living comfortably. Now, they are looking at homeless people and wondering how similar their stories might be. The first bit that really jumped out to me was:

The gender wage disparity gap costs women $431,360 over the course of their lives, according to the Center for American Progress.

That is a LOT of money. We know that women earn less (last count was $0.73 on the dollar) than men and live longer than men (women will die at 81 while men will die at 76, according to the Center for Disease Control) so women are caught in a double whammy.

The prospect is even worse if you are a woman of color: Today, three in 10 single black women over 65 and early 4 in 10 older single Hispanic women live in poverty, a rate more than twice that of white women, according to the Women’s Institute for a Secure Retirement (WISER).

What can we do to change this?

#1 Educate girls and women about personal finance concepts like compound interest, dollar cost averaging, net worth, etc.

#2 Start girls saving (in credit unions) and investing (in individual stocks or mutual funds) early.

#3 Encourage girls and women to grow a skill set that will bring in enough money for them to live on and grown their investments.

#4 Provide information to help girls and women invest in retirement accounts as soon as they have earned income (first job).

Social security won’t cover all your costs in retirement and having a job in your 20s or 30s doesn’t mean you won’t be unemployed in your 50s or 60s. Taking the time to invest in yourself might be the difference between surviving and thriving. Start now.

 

 

 

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Another Reason to Open a Roth IRA: Paying for College

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I was reading the business section of the LA Times when I came across this nugget:

Because you make Roth IRA contributions with after-tax dollars, you can withdraw them at any time without taxes or penalties, just like 529 plans.

I knew that. I’ve done that, but it never occurred to me to contribute with the intention of using that money for college costs. Do you know what that nugget means? It means that:

  • Instead of opening two accounts and having to schedule two contributions, you can open one.
  • You can take out the money you put in, not the interest that you’ve earned, to pay for college costs after letting it grow for years and years.
  • If you don’t end up using it for college expenses you can let it continue to grow until retirement.
  • If you do want to use the money for college costs, the money in your Roth IRA with not count against your child for financial aid like a 529 plan would.

That is revolutionary. You can contribute, let the money grow, it won’t count against your kid when you apply for financial aid (FAFSA, scholarships, loans, etc.), and you can leave it there to continue to grow until you need it for retirement. The absolute best part? You can leave the funds left in the account after you die to your spouse OR any beneficiary that you designate and that money can continue to grow.

There seems to be no downside to opening a Roth IRA.

 

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Not Enough Money for Retirement? 8 Countries to Live In

retire-abroadWe talk a lot about investing for retirement, not investing enough for retirement, and how to get the most out of your retirement dollar. What we normally don’t talk about it what to do when you just don’t have enough money.

Investopedia has a great list of eight countries you can live in when you only have $200,000 invested and your Social Security check of about $1,300 per month to count on. My favorites are:

Thailand – I’ve been there (only Bangkok) and it’s a cool place where you can live a pretty American life, if you choose to. I rented a one bedroom apartment with air conditioning in a condo building. There was a night market a few blocks away with things to buy and food to eat (they had a Mexican taco truck. Yum!) in a mall with a grocery store and a McDonalds and a coffee shop. The only strange thing is the ode to the King is played twice per day on tv  in train stations, and before movies. Just be quiet and stand and you’ll be fine.

Ecuador – I have never been but I hear a LOT of good things about it. Ecuador has topped many great-places-to-retire lists.

Costa Rica – Again, never visited but I hear that it’s a great place to live if you want an eco-friendly spot. They also say that it’s beautiful. I can’t wait to visit …. one day.

Spain – My first international trip was to Spain (I wanted to see the Al-Hambra) so I know a bit about it and feel that I could live a comfortable life there. I traveled from Madrid to Malaga, Seville and Cordoba. One could live a decent life there, as long as you like pork. They eat a lot of pork in Spain. Lol Push back against being colonized by Muslims for 400 years? Lol Anyhoo, living there could work.

Check out the whole list over at Investopedia.