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When you retire, how much money do you need to have saved?   If there is a million dollar question, or a $4 million, or $10 million, I guess this would be it.   In my personal finance class, a student asked how much money you will need to retire.   We started going through the time value of money equations -present value and future values of lump sums and annuities to calculate how much one would need; which started me thinking long and hard about this questions.   I told my students it was keeping me up at night and this is why it is such a hard question to answer: 1. It depends on when you want to retire.   I asked my class and it ranged from age 45 to never retiring.   The person who retires at age 45 will need a lot more money saved in retirement than the person who never wants to quit working.   I’ve always said, “If you can turn your passions into profit, you never have to work a day in your life.”   I also believe that meaningfu...

This past Saturday we lay to rest my neighbor’s father. He was a famer, rancher, cowboy, gentleman, and a friend to all. He died doing what he loved doing best, checking on his cows and spraying fences. He was teaching this 50 something city boy professor how to become a farmer and I kind of think he enjoyed seeing an old dog try to learn some new tricks; a desk jockey work a field and get cow sh*t on him. His untimely death got me thinking about balance and how we live our lives each day. Personal finance is about planning and saving for the future, but it is also about living for today. How do you find balance in your personal finance life? Do you save every penny so you can retire like my roommate from college who just retired after 30 years of teaching? Do you plan on working until you are 70+ and therefore not need so much in retirement to still afford your lifestyle? What do you plan to leave to your heirs? Someone said you lived your life right when the check to the und...

Today is the 4th of July and time that we celebrate our freedom as Americans and those who have given so much to keep us free. Thank you to all who have served. The celebration gives us pause to consider our financial freedom. What is your definition of financial freedom? One definition of financial freedom (financial independence ) is when your passive income exceeds your expenses. You no longer have to work another day in your life for money as all of your financial needs are met from the income of your investments. For many of us, we work the greater share of our life to save for retirement – hopefully the point of our financial freedom. Our retirement savings, along with social security hopefully provides enough income that we don’t need to supplement our income with another job. When you think about retirement and financial freedom, how much money do you need to live the life you want? Are there avenues to reach your financial freedom sooner? Increase your level of investment? Do ...

Not ready for retirement yet? You see your net worth decreasing? You are not alone. In fact, retirement may be a dirty word in your household as you wonder how long you are going to have to keep working. In a new survey released by TD Ameritrade Holding Corporation, one out of every two Americans surveyed were not looking forward to retirement. The Federal Reserve Board’s Survey of Consumer Finances reported Monday that the average American family saw their net worth decrease 39% from 2007-2010. Other statistics show that 69% of the respondents have no specific savings goal. Those that did respond had an average retirement savings goal of $750,000. Only 54% were confident that they would reach their retirement savings goal. What is one to do? Hopefully, the housing and stock market will bounce back and increase net worth, but that can’t be counted on. One way to increase your net worth so to prepare for retirement is to maximize your 401k plan at work. Make sure you are depositing enou...

What happened to your debts when you die? As seniors increase their debt during retirement, you should know what happens to debts when you die.  According to FoxBuisness.com “Nearly 40% of all seniors say they have accumulated debt in their retirement years with no plans to pay it off in their lifetime.  Are the heirs and next of kin responsible? There is not an easy answer and it all depends on the situation.  The first thing to do in all cases is to notify all creditors of the death. Normally, the estate and the executor who handles the estate will liquidate the assets, pay creditors and distribute the proceeds according to your last will and testament or it will be distributed according to state laws. If there is not enough money to pay all creditors, the general order of who gets their money is: 1.  Funeral expenses, taxes and administrative fees 2.  Secured creditors such as mortgage loans, car loans, etc.  These creditors have the rights to the assets...

This was the year long debate in our household. In 2010, the federal government dropped the income limit for moving savings from a traditional to a Roth IRA. Additionally, you had a one-time option to pay taxes on the current value of the converted funds over a two-year period. The converted asset then grows tax-free. To get this tax break off any future earnings of the converted funds, you have to pay income tax on the value of the funds moved. From Kelly Greene's Wall Street Journal article on 9.30.2011 , "The federal government allows the tax-law equivalent of a do-over, says Maria Bruno, an investment analyst at fund giant Vanguard Group, whose customers converted more than 230,000 traditional IRAs to Roths last year, and which has processed 3,900 do-overs this year, as of Monday." We are one of the 3,900 who converted back. This was a highly contested move in our household. Bob is sure with the current level of the national debt, that by the time we withdraw the reti...

In reading the Sunday, September 26th Cedar Rapids Gazette, there was an article “ From Boom to Bust ” by Susan Tompor that got me thinking what it would take for me to retire. Susan also wrote the article “How to Prepare for Retirement” to help you plan. One of the things she stated in her “ How to Prepare ” article is “that you want to spend 4 percent or less each year from your retirement saving.” So….how much is it going to take? Other experts say that you will need 80-100 percent of your pre-retirement income in retirement. If we put together all of this, and for ease of numbers, say you make $100,000 before you retire, you want 100 percent of your pre-retirement income, and you are only going to spend 4 percent of your retirement per year, you would need $2.5 million in retirement savings. Now this does not include your Social Security income. Right now, you can start collecting Social Security at ages 62, but if you want to receive your full Social Security benefit, you must wai...

As the New Year begins, it is time to reevaluate budgets, investments and giving. On Saturday, January 2nd we were driving and listening to one of our favorite money broadcast: Marketplace Money . They had an article about the Fifty Percent League that made us rethink our giving. As Marketplace Money states: “The Fifty Percent League is made up of people who believe it’s their moral obligation to give away as much of their money as they can.” We believe in the 80-10-10 rule where you live on 80% of your income, save 10% of your income and give away 10% of your income. This Saturday was the first time we heard about the Fifty Percent League and it made us question if we were giving enough to the causes we believe in. The article interviews Pilar Gonzales, who only makes about $35,000 but gives away at least twenty-five percent of her income. Even though she does not make a lot of money, she has placed her priorities in helping others and is living out her values. No matter how much...