MONEY Military

Are You a Service Member Returning to Civilian Life?

military mom at home in kitchen with two children
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MONEY magazine would like to tell your story—and get you free financial advice.

Are you a member of the U.S. armed forces returning to civilian life? MONEY magazine would like to tell your story—and give you free financial advice as well.

For an upcoming story in MONEY, the nation’s largest personal finance magazine, we’re looking for a member of the armed forces who has recently left the military, or is about to leave the military, after at least 15 years of service. In the article, we hope to illustrate the financial challenges a veteran and his or her family face in making the transition to civilian life—challenges that might include finding new employment, adjusting the family’s budget, or preparing for a secure retirement.

As part of the story, we’ll provide to the family a free, in-depth consultation with a financial planner who can study the family’s finances and give advice relevant to the family’s financial goals. Participants also have the opportunity to help publicize challenges faced by veterans.

The key criteria for the service member or veteran we’re looking for:

  • Military service of at least 15 years
  • Either leaving the service or retired from the service within a year
  • Willingness of veteran and family members to share details of their personal lives and their finances in the magazine
  • Willingness to be photographed for the story

To get an idea of our magazine’s approach (and the amount of financial disclosure that the story will entail), here’s a link to a similar story the magazine has run, focusing on the financial challenges faced by a couple after the husband, a soldier, was blinded in combat in Iraq: How a Blinded Soldier Pieced Together His Life — And His Finances

If you think you might be interested in participating, please fill out the confidential form below.

Along with your contact information, please include a brief description of your situation plus a little about your family’s finances, including household income, assets, and debts. All of this information will be kept private unless we follow up with you for an interview and you agree to appear in the magazine.

We’ll follow up with potential candidates.


MONEY 401(k)s

How Panicky Retirement Savers Blew It When Stocks Fell

This is long-term money.

As the market was tumbling in late August, retirement account trading spiked, new research shows. Money flowed from stocks to bonds, suggesting a discouraging level of panic on the part of some long-term investors.

Trading was twice the normal pace on Friday, Aug. 21. On Monday, Aug. 24, it increased to seven times the normal pace, according to Aon Hewitt, making Monday one of the busiest trading days on record. Yet trading in 401(k) accounts tapered off as the market regained much of its lost ground, suggesting that those who sold on the two worst days of the 11% market correction made the classic mistake of selling low and missing the rebound.

Certainly, the market may tumble again. But it might also keep moving higher. No one knows, which is why the smart move during swift corrections is to do nothing with the assets in your retirement portfolio. This is long-term money. So stick with a long- term approach.

Now that things have settled down you can look at your portfolio and make carefully considered changes. Is your asset mix appropriate? Have you rebalanced in the past year? Has your risk profile changed? Will you be retiring sooner, or later, than previously planned? These are important questions—and should be tackled while the markets are calm.

Most folks have learned that holding tight and continuing a regular regimen of contributing to retirement accounts through thick and thin is the key to long-term wealth. Consider that the market has tripled since its recession low, which was a scary time to hold tight. But 401(k) savers who stayed the course long ago made back the losses from that vicious downturn.

The trading activity that Aon Hewitt reported represents less than .2% of net 401(k) plan balances that traded on Aug. 24. So, yes, only a small group paid the price for panic. But millions of savers are vulnerable to this kind of thinking. Just 44% of 401(k) investors say they are confident in their ability to make good decisions, according to a Charles Schwab survey.

A similar number say the materials explaining their plan are more difficult to understand than their medical benefits. Seven in 10 are so baffled and frustrated they want retirement savings to surface as a campaign issue in the 2016 presidential race.

Virtually all workers understand the value of their plan. Nine in 10 would be inclined to turn down any job offer that did not include a 401(k) benefit, and 73% would rather have their portfolio grow by 15% this year than lose 15 pounds off their body, Schwab found. So saving may actually be more difficult than dieting, which is why you want to be careful with the money you manage to tuck into a 401(k) plan. That starts with keeping calm while the market gets rough.


TIME pretirement

5 Pre-Retirement Mistakes Even the Smartest People Make

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These are guaranteed ways to make it through the limbo of pre-retirement

Being in the home stretch leading up to retirement can feel great, but financial advisers say even the savviest people can miscalculate or overlook important components when it comes to their retirement plans. Unfortunately, the closer you get, the more harm those errors and omissions can do to your dream of a comfortable retirement. Here are the most common pitfalls you need to watch out for, according to financial planners:

Not creating a Social Security strategy. “One common mistake is not really thinking through when to start Social Security,” says Mike Wilson, owner of Integrity Financial Planning. In general, the breakeven age for Social security is in the low 80s, Wilson says. “If you think you’ll live past the breakeven age…wait as long as possible to start Social Security, because you’ll enjoy more dollars over a longer lifetime,” he says. But if your health is tenuous, claim your benefits early.

Married couples need to factor in the age of each spouse, expected lifespan and their respective work histories to figure out when to start claiming benefits. “If they haven’t already, create an account with the SSA,” Wilson says. “You’ve got to take some ownership and get involved in the process.”

Paying off your mortgage. Conventional wisdom says you shouldn’t enter retirement with mortgage payments hanging over your head, but if you took out a mortgage or refinanced recently, it’s possible that your interest rate is lower than what you would earn if you invested the money, says Rich Arzaga, founder and CEO of Cornerstone Wealth Management, Inc.

For instance, assume your nest egg is netting you a 7% return. If your mortgage interest rate is only 4%, it’s better to keep your money where it is because you’ll pay less to service that debt than you would earn by keeping it invested. (And you get to keep the mortgage interest tax deduction.) “You’re basically leveraging the money, you’re borrowing just like the banks do,” Arzaga says.

Taking your portfolio too conservative too soon. People in pre-retirement often make the mistake of retreating from riskier asset classes too early, says Chris Chaney, vice president of Fort Pitt Capital Group, Inc. Depending on when you retire, you could live another 20 or 30 years. “That’s a long time, and the inclination is to try and secure the cash flow and the value of their portfolio as much as possible,” Chaney says.

People assume they need to shift a big chunk of their portfolio to lower-yielding investments to safeguard it, but they forget about the flip side of investing risk: the creep of inflation. “You need an adequate amount in growth assets to be able to protect the purchasing power of your retirement assets against the corrosive effect of inflation,” Chaney says.

Skipping long-term care insurance. Paying out of pocket for long-term care can drain your nest egg. Living in a nursing home costs more than $80,000 a year, on average. Even assisted living or other forms of support can cost several thousand dollars a month.

When it comes to buying long-term care insurance, “The sweet spot where you get the highest benefit for premiums paid is 53 or 54 years old,” Arzaga says. If you’re in pre-retirement and above that age, it doesn’t mean you’ve missed the boat entirely, but it does mean you have a dwindling window of time to get an affordable policy. “Pre-retirement, the cost of insurance to cover that risk is a lot less expensive,” he says.

Not planning for a post-career life. “A lot of people don’t really think though how they’re going to occupy their time,” says Joseph Heider, president of Cirrus Wealth Management. “It’s a profound new stage of your life. and you want to make sure you’re ready for the change.”

Consider what activities or hobbies you’d like to pursue, and explore social groups and volunteer opportunities. If you’re thinking about moving, especially to a vacation locale, visit when the tourists have departed for the season.

MONEY Planning

Have You Looked at Your Retirement Accounts Lately?

As a retirement investor, you are supposed to take the long view—ignoring one-day (or one-week) plunges in the stock market, sticking to your financial plan, and staying focused on a finish line that may be decades away. But you’re also a human being, who reads the news and wonders what a 588-point, one-day drop in the Dow has done to your 401(k) or IRA balance. This is your nest egg, after all. So after last week’s pullback in stock prices and today’s gut-wrenching drop, you couldn’t be blamed for sneaking a peek, even if it’s better not to check in daily. Have you?

MONEY Financial Planning

5 Marriage Milestones That Will Forever Change How You Think About Money

sturti—Getty Images

From buying your first house to planning for retirement.

First comes love, then comes marriage …

Then come all kinds of exciting-yet-stressful life events that can completely transform your finances.

Babies. Houses. Job changes. The list goes on and on.

And like any major shift, these events can stir up emotions that will not only affect your relationship, but also impact the financial decisions you make.

“Everyone tells you not to make big decisions from a place of worry or upheaval, but that’s exactly what big milestones create in our lives, making it impossible to feel like you’ve made choices from a place of peace,” says Megan Ford, LMFT, a licensed marriage therapist and president-elect of the Financial Therapy Association.

The solution?

You need to recognize (and prepare!) for the fact that these major life moments are likely to send you on an emotional roller-coaster—and spur a need for significant financial adjustments.

It’s precisely why Mary Beth Storjohann, a CFP and founder of Workable Wealth, tells all of her clients to set a monthly money “date” with a partner—a designated time to talk through the state of your finances and what emotions are coming up around them.

With regular financial check-ins, you’re more likely to discuss the big milestones before they come, Storjohann says, and be in a much better position to plan for them.

To help you navigate the ups and downs of life, we’ve asked marriage and money pros to offer their best advice for how to keep five common milestones from derailing your marriage—and finances.

Marriage Milestone #1: Buying Your First House

Purchasing a new pad is exciting—but once that first rush of adrenaline is over, the new day-to-day reality quickly kicks in, says Ford.

Aside from the increased money pressure, having to agree on every last paint color and fabric swatch can highlight your differences and drive home just how difficult compromise can be.

What You’re Both Likely to Feel … Excited, scared, proud, frustrated and overwhelmed. And while it may seem counterintuitive, buying a new home can also spark a sense of loss.

With such a big purchase comes big responsibility, and the number of unexpected expenses that often surface can lead to the realization that you’ve just lost a lot of your freedom.

“Your priorities around being able to do things—both financially and timewise—are going to shift once you’re a homeowner,” says Ford, adding that this can significantly impact the dynamic between you and your partner.

How to Keep Your Finances on Track … When a good chunk of your available funds go into your home, says Ford, you can end up house-rich and cash-poor—a recipe that’s likely to highlight financial friction between the two of you.

So before you even apply for that mortgage, have a frank conversation about how much home you can really afford—and how you’re going to finance it.

And if you find yourselves feeling maxed out once you’re in your new digs, you might want to look into refinancing your mortgage to reduce your monthly payment, says Storjohann, and even consider taking on a side gig.

And although it can be tempting to get your home pulled together quickly, you should also delay spending on other big-ticket items, like that fancy Viking range you’ve been coveting.

Read next: Buying a House Together Before Marriage? Read This First

Marriage Milestone #2: Bringing Home Your (Million Dollar) Baby

Few experiences in life can produce as much joy—as well as sleep deprivation, stress and money concerns—as a new addition to the family.

And when we say money concerns, we mean it: The average lifetime cost of raising a kid now exceeds $245,000, according to the U.S. Department of Agriculture.

What You’re Both Likely to Feel … Happy, exhausted, thrilled, depressed … and very, very stressed.

With your bills at record highs, and your savings goals more ambitious than ever (college costs how much?!), it’s no wonder many new parents tend to feel overwhelmed when they take a closer look at their finances.

It’s also understandable that you’d want to make sure your new center of the universe has the best of everything—no matter the cost.

“So many new parents feel pressured to buy the most expensive items for a baby,” Storjohann says. “That pressure to spend more than what’s really needed—or what you can actually afford—can be intense.”

How to Keep Your Finances on Track … Before your baby is born, look into exactly what you’re entitled to when it comes to your company’s maternity and paternity leave policies, says Storjohann, as well as what less obvious expenses are covered by your company benefits—such as a gym membership and even help with child care.

Bottom line: You don’t want to miss out on any paid time off or covered costs.

Also, once your baby arrives and you have a clearer picture of how much things really cost, redo your baby budget. Factor in every detail you can think of, including things like birthday gifts for other kids.

Then run the numbers and have an honest conversation with your partner about what you can afford to spend—and where you should cut back.

“These things can add up to thousands of dollars a year,” Storjohann says. “Figuring out how you’re going to adjust can feel empowering and reduce your stress.”

Marriage Milestone #3: Your Combined Income Dips

Whether one of you intentionally leaves a job—perhaps to take care of children or start a new business—or you’re dealing with unexpected job loss, making less money as a couple can create a lot of strain.

What You’re Both Likely to Feel … Anxiety, pressure, fear and maybe even resentment.

“When one partner has to pick up all of the financial slack, it can be really tough on a marriage,” Ford says. “Not only does the working partner feel extra stress and responsibility, but the partner who’s not making money can feel shame.”

How to Keep Your Finances on Track … If a job loss is unexpected, you should discuss together just how much you’re going to tap into your emergency fund, as well as where you can cut back expenses for the short-term.

And regardless of whether you can or can’t plan for a loss of income, says Storjohann, you should be prepared for it by having a retooled household budget at the ready.

Another crucial move, says Ford, is for both partners to continuously identify and discuss their feelings, so they don’t fester.

“When you keep emotions locked up, they end up taking on a life of their own—and have the potential to cause you to make rash financial decisions,” she says.

Marriage Milestone #4: You Have to Care for an Elderly Parent

When a parent or loved one reaches the point of needing your help—both physically and financially—the situation can shift how you spend your time and finances.

There’s even a term for those who find themselves having to juggle the competing demands of caring for young kids and elderly parents at the same time—the sandwich generation.

What You’re Both Likely to Feel … Sadness, worry, guilt, anger and frustration. And those are just some of the emotions you may be experiencing.

Not only are you worried about your aging parent, but you’re also feeling the ripple effect on your own finances and commitments. All of this rearranging of time and money can be stressful—especially if you’re also taking care of your children.

And you may feel angry and frustrated because you’re the one having to carry the burden for everyone—which can lead to guilt, says Ford. And that guilt can create even bigger money worries if it causes you spend more money than you can afford.

“It can be very scary to pull money from your retirement accounts if you don’t have a system in place, and having a plan ensures what you’re taking out of savings is sustainable.”

How to Keep Your Finances on Track … Ideally, this is something you and your partner will talk about—and plan for—well before your loved ones need elder care, says Storjohann.

“This is actually part of the discussion when my husband and I have our monthly money dates,” she says. “It’s crucial to talk about who might need our help one day, and what we, as a couple, are willing to do to support those people.”

Her advice if you’re feeling guilty about not being able to do enough?

“I recommend saying to family, ‘This is what I have to help support you, but that’s all I can do at this time,’ ” she says. “The more parameters you’re able to set, the less obligated you’ll feel to go above and beyond.”

Marriage Milestone #5: You’re Ready to Retire

After years of being knee-deep in deadlines and conference calls, your time hasfinally come to clock in for the last time.

But while you thought you’d be celebrating that much-deserved retirement on your first European cruise, you haven’t even booked your tickets yet.

What You’re Both Likely to Feel … Elation, fear, relief, stress and more. Ford says that, in her practice, she’s seeing a lot of retired couples who should be rejoicing—but who are worried and unhappy instead.

“People are living longer and saving less—and that can create a stress storm that impacts marriages,” she explains.

And for those who have carefully saved, says Ford, they face a big adjustment when it comes to actually tapping into those accounts.

How to Keep Your Finances on Track … First, Storjohann suggests coming up with a list of all the things you want to do in retirement.

“This will put you in the best position to come up with a spending plan for those retirement goals,” she says. “It can be very scary to pull money from your retirement accounts if you don’t have a system in place, and having a plan ensures that what you’re taking out of your savings is sustainable.”

Plus, if after doing that plan, you find your retirement spending isn’t going to allow you to live your current lifestyle, it gives you time to reassess.

For example, you might want to scale back on spending in your golden years in certain areas, or consider taking on a part-time job in retirement, so that you can withdraw less.

Feeling particularly anxious that you haven’t saved enough? You may want to consider easing into retirement part-time—often referred to as semi-retirement.

“I think a lot of new retirees benefit from getting used to the retirement lifestyle in stages,” Storjohann says. “It can help you figure out what it is you really want to do—and how, exactly, you’ll pay for that.”

LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the individuals interviewed or quoted in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.

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MONEY financial advice

How to Manage Your Finances Without an Adviser

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Getty Images

A financial professional explains how to avoid needing his help.

As a financial planner, I’d like to let you in on a little secret: Everyone has the ability to manage their finances on their own. In theory.

The information and knowledge you need to make the right financial decisions is at your fingertips. You simply need to do three things: learn, apply and manage. Let me explain:

Learn the Fundamentals

There is a ton of technical financial information out there, and it takes time to learn what you need to know. The Internet, though, has made this process easier.

You need to focus your attention on these areas:

  • General principles of financial planning
  • Insurance
  • Investing
  • Taxes
  • Retirement
  • Estate planning

If you look at those areas and feel overwhelmed, I understand. It’s a lot.

On the other hand, if you look at that list and feel that you know it all, I’d suggest rethinking that. No one out there knows it all. There is always something else to learn.

Again, the Internet makes finding this information easier, but there’s a catch. You need to carefully validate the sources of the information you collect before accepting it as true and accurate. Many financial blogs and podcasts can be extremely valuable, but others are based more on personal experience than on years of education, training, and professional work. Personal stories can help you tune in to your own situation, but they might not reflect a comprehensive understanding of finance or relevant laws and regulations.

Read next: How Do I Figure Out My Financial Priorities?

Wise Bread and Daily Finance offer advice from both bloggers and professional advisers. Bankrate has calculators that help you visualize how various savings and debt repayment strategies will impact your finances. Play with the numbers and notice how a slight adjustment to a periodic savings amount or interest rate can completely alter your results.

Apply Your Knowledge

Knowing that you need to budget and understand your cash flow is one thing, but actually doing it is another.

Start with the basics. You need to track all your money coming in (your total income) and everything going out (your fixed expenses and your discretionary spending). Once you know what your money is doing, you can set up a budget to help keep you on track from month to month. From there, you can determine what you’ll contribute to savings and investments. Make those transfers automatic.

After you set up the basics, your financial planning needs get more complicated. For example, you might start out by calculating how much money you need in your emergency reserve account, but then realize that you also need to figure out how much to save for retirement. Additionally, anyone earning income is exposed to various risks, including becoming disabled, so you’ll want to find the best way to protect yourself.

It’s all about understanding your unique circumstances, applying appropriate strategies and setting up systems to help you stay on track. There’s no right answer—only the answer that works and makes sense for you.

Much of what applying your knowledge looks like in practice is simply taking action and holding yourself accountable. It can help to write out your financial goals and check in with those regularly to remind yourself why you’re working hard to manage your money.

And to make sure you stay on the right track over time, you should set up check-in points periodically throughout the year. For example, you might want to revisit your budget monthly, your investments quarterly, and your overall financial plan annually.

Manage Your Behavior

This is by far the most challenging piece, because emotions often cloud our thinking. It can feel simple to manage our own money when times are good. However, we often fall prey to recency bias—assuming that what happened in the recent past will continue into the future. Confidence (or fear) projected into the future can distract us from making prudent decisions.

When things get stressful, you get distracted. Other things take up your time, energy, and attention, diverting you from managing your finances.

As you continue to learn, you might also find yourself confused by a myriad of opinions and different ways of doing things. Decision fatigue can set in. It can become extremely challenging to make even the simplest of decisions as you start questioning yourself and your knowledge.

After all, there’s a lot on the line—your money and your life. You don’t want to make a mistake, and you want to do everything you can to maximize your financial resources. Your decision-making can become clouded by fear, and it can just as easily be affected by greed.

To successfully manage your own money, you need to manage your own behavior. That means taking small, consistent actions over time. You need to create your plan of action and stick with it through market ups and downs, through everything from personal struggles to professional triumphs.

Why Work With a Financial Planner Anyway

All that being said, it’s worth reiterating that managing your own behavior is the most difficult part of managing your personal finances. Most people cannot do it successfully.

Most mistakes happen when people depart from rational decisionmaking with their finances. Hopes, dreams, fears, and other emotions start creeping in. We all do this.

It’s easier to manage our behavior when we have an outside perspective. While we can’t necessarily see the bigger picture when we’re immersed in it, someone looking in from the outside, from an objective point of view, may be able to help steer us in the right direction. That’s where a professional financial planner can add a lot of value.

It’s possible to manage your own money, but it’s not probable that everyone can do it successfully. There is a reason why even some financial planners have financial planners. Everything is easier when you have someone who can help hold you accountable. A professional financial planner may be able to help you find more success than you would achieve on your own—even if you know all the right money moves to make.

Get started on your own by educating yourself, applying your knowledge, and practicing smart (rational!) behavior around money management. Then, for long-term success in avoiding behavioral traps and pitfalls, consider working with a financial adviser. Carl Richards put it bluntly but accurately: It’s well worth it to “put someone between you and stupid.”

Eric Roberge, CFP, is the founder of Beyond Your Hammock, where he works virtually with professionals in their 20s and 30s, helping them use money as a tool to live a life they love. Through personalized coaching, Eric helps clients organize their finances, set goals, and invest for the future.

MONEY financial literacy

The Financial Literacy Test You Need to Pass

Martin Shields—Getty Images

Answer these 5 questions to find out how much you know about money.

It’s generally useful to be literate in at least one spoken and written language. But that’s not the only kind of literacy that matters. We need to be savvy about managing (and growing!) our money, too. Here’s a financial literacy test that will help you figure out where you are on the road to financial success.

Answer the following questions without reading below them until you’re done:

  1. What is your net worth?
  2. Is it more important to pay off high-interest rate debt or save for retirement first?
  3. When should you start saving for retirement?
  4. How much money will you need to have accumulated for retirement?
  5. Do stocks, bonds, or real estate grow fastest over long periods?

Now let’s review each question and what your answer reveals.

What is your net worth?
There isn’t exactly a right or wrong answer to this question, though an answer of $0 or negative $100,000 would clearly be undesirable. Instead, the way to get this question right is to know what your net worth is, roughly.

Many people have no idea, because they haven’t given much thought to the matter. But as you take control of your finances, and aim to build a comfortable future, it’s important to have a handle on how financially healthy you are.

To determine your net worth, add all your assets together, including cash, savings and investing accounts, and the value of your home, car, and other belongings. Then subtract from that total all your debt, including the balance on any mortgage, car loan, or credit card account. What do you get?

Ideally, your net worth is positive — and poised to grow. If it’s negative, or lower than you want it to be, start figuring out how much money you have coming into your household, where it’s all going, and what changes you might be able to make to boost your net worth.

Is it more important to pay off high-interest rate debt or save for retirement first?
Tackling the debt should be your priority. With pensions having been phased out at myriad companies, it’s more important than ever for us to save for our retirements. But don’t do so while carrying high-interest rate debt, or you’ll likely end up losing ground.

You can hope to earn close to the stock market’s long-term annual average growth rate of around 10% with your stock investments, and that can turn a single $10,000 stub into almost $26,000 in a decade. But if you’re carrying $10,000 in credit card debt and are being charged 25% interest, you can expect that balance to soar to more than $90,000 in a decade, if you don’t pay it off pronto.

It’s OK to maintain low-interest rate debt, such as a mortgage, while saving and investing for retirement; but debt with steep rates should be tackled as soon as possible. Otherwise, what you owe is likely to grow faster than what you own.

When should you start saving for retirement?
The right answer here is as soon as possible. It’s easy to assume that it’s safe to put it off while you’re in your 20s and even 30s, but that would be a big mistake. The later you start saving and investing for retirement, the more aggressive you’ll have to be. If you start at age 45, for example, you’ll have only 20 years to accumulate your nest egg, while someone starting at age 25 will have 40 years — twice as long.

That’s important, because the longer your money has to grow, the faster it can do so. Consider that if you save and invest just $5,000 per year, and it grows at 10% annually, it will become $315,000 in 20 years. That total wouldn’t just be twice as much over 40 years — it would be $2.4 million! If you sock away just $1,200 at age 18 and it grows at 10% for 47 years until age 65, it will top $100,000. Your earliest dollars have the most growth potential.

How much money will you need to have accumulated for retirement? There’s no one-size-fits-all answer here. You’ll probably need to crunch some numbers on your own to arrive at a decent estimate.

For starters, note that, per many experts, a relatively safe annual withdrawal rate from your nest egg in retirement is 4% (adjusted for inflation each year), if you want your money to last. Thus, estimate how much annual income you’d like in retirement, and multiply it by 25 to determine how big a nest egg you need. Want $50,000 annually? Aim for $1.25 million.

Of course, you can also factor in Social Security income and any other expected income. (As of June, the average Social Security benefit was $1,335 per month, or $16,000 per year.) If you earn an above-average income, and assume an annual income of $22,000 from Social Security, then you’ll only have to aim for $28,000 annually on your own, which would mean a nest egg of $700,000.

Do stocks, bonds, or real estate grow fastest over long periods?
The answer here is clear, and it’s stocks. If you don’t understand how much you can expect to earn on various kinds of investments, you can leave thousands or hundreds of thousands of dollars on the table during your investing lifetime.

Check out this data from Wharton Business School professor Jeremy Siegel, who has calculated the average returns for stocks, bonds, bills, gold, and the dollar, between 1802 and 2012:

Asset Class Annualized Nominal Return
Stocks 8.1%
Bonds 5.1%
Bills 4.2%
Gold 2.1%
U.S. Dollar 1.4%

Source: Stocks for the Long Run.

The annualized rate for stocks from 1926 to 2012 was 9.6%, by the way. Stocks overpower bonds over both the long run and — usually — the short run. Siegel’s data shows stocks outperforming bonds in 96% of all 20-year holding periods between 1871 and 2012, and in 99% of all 30-year holding periods.

Meanwhile, the research of Nobel-prize-winning economist Robert Shiller, famous for his studies of the housing market, has home prices averaging annual growth of about 5% in the post-war period since World War II.

Don’t doom yourself to financial illiteracy. Keep reading and learning about smart money management, and your future may be much brighter. Give yourself a financial literacy test every now and then, too, to keep yourself on your toes.

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MONEY Workplace

Why Your Paycheck Is So Much Smaller Than Your Salary

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Count the deductions.

Gross salary? Net salary? FICA? You may notice when you add up a years’ worth of paychecks, the sum doesn’t match your promised salary. Check out some of the reasons these numbers aren’t equal below.

1. Income Tax

Income in the U.S. is taxed at the federal, state and local government levels. The IRS administers federal income tax progressively, meaning rates are determined by income level. Your first income dollar is taxed differently than your highest-income dollar. (You can see which tax bracket you fall into here.) The W-4 form you filed when you were first hired dictates how much is taken out for the federal government and it is deducted incrementally from each paycheck. (You may owe more or less than this estimate and thus may get a tax bill or refund come tax time.) State and local taxes vary based on location but also can be deducted from your paycheck.

2. Social Security

To help you cope with loss of regular income in retirement, the federal government requires employers to withhold a certain percentage (currently 6.2% from both employee and employer) of employee paychecks for Social Security benefits. The Social Security Administration takes the average of your highest-earning 35 years of covered wages, indexes for inflation and provides you with some income in the form of benefits.

3. Medicare

Similar to Social Security, Medicare withholdings are mandatory. These taxes go toward the Medicare insurance that you will qualify for once you are 65. Both employer and employee pay 1.45% of gross income into the system on the employee’s behalf and it provides coverage for major medical expenses. As of 2013, there is an additional tax for those with $200,000 of annual income or more.

4. Retirement Contributions

Plans like 401(k)s and 403(b)s are tax-deferred through your employer. These contributions can be taken directly out of your regular paychecks and go toward your retirement savings. The more you assign toward these accounts, the lower your federal income tax withholding will be.

5. Insurance Deductions

Health care (like medical and dental) and life insurance premiums paid through your employer are taken out at payroll as a deduction. Your health insurance premiums are not subject to FICA or Medicare taxes.

Even though your net income may not be all you hoped for when you got your salary statement, it is important to know where that money is going and how it may help you in the future.

More From

MONEY Retirement

Why Keeping Your Retirement Funds In One Place Pays Off

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: I am retired with the majority of my assets in IRAs. For a sense of security I have kept my money in several accounts, with Fidelity and Vanguard. They’re far from a Bernie Madoff risk, but I figure why not spread it around just in case? I also worry about a cyber-attack on the holder of all my assets. Am I being too paranoid or could I safely consolidate all my eggs into one basket? — Bob Drahushuk

A: There are plenty of good reasons to consolidate your investments at one firm rather then spreading them over multiple accounts, says Mark Hebner, founder and president of Index Fund Advisors in Irvine, Calif. You’ll find it easy to ensure that you have the right asset allocation, you can save on administrative fees, and some firms reduce transaction costs for larger balances. It means less paperwork, and you have just one firm to deal with when you want to make a transaction. It’s also simpler for your spouse and heirs when you pass away.

But if splitting your investments between two brokerages will give you peace of mind, do it, says Hebner. There’s no harm. You can use an account aggregator such as or Quicken to keep tabs on your overall portfolio, he adds.

As for the risk of losing your money in a Madoff-like Ponzi scheme, keeping your money at large, well-respected brokerages, as you are doing, will mitigate that. You aren’t alone, though, in your concerns about cyber attacks on financial institutions. The Securities and Exchange Commission has beefed up its examination of brokerage cyber security policies. But most large firms, including Fidelity, Vanguard, and Schwab, have policies that guarantee reimbursement against unauthorized activity in your account.

Beyond Ponzi schemes and hackers, Hebner says that since the 2008 market crash, clients worry more about the risk of brokerage firm failing. You have protection there too.

The Securities Investor Protection Corp. (SIPC) steps in if a brokerage goes out of business and will reimburse your account up to $500,000 per account holder and per account (coverage of cash is $250,000). In the Madoff case, customers got money back that they deposited with him but not any of the fictitious profits Madoff claimed, says Steve Harbeck, SIPC president and CEO of SIPC, which is a non-government organization funded by member securities firms. “We protect cash deposited with an institution and any securities bought with that money for member brokerages.”

Brokerage bankruptcies are rare, though—just 328 cases since SIPC was created in 1970 and 625,000 customer claims. The SIPC has reimbursed $2.34 billion in claims and administrative costs, but that number is skewed by Madoff, which accounts for $1.8 billion of the $2.34 billion. Not including the continuing Madoff case, fewer than 400 people haven’t received the full amount of their assets left with a collapsed SIPC-member firm because it was above the limit, according to SIPC. But most major brokerage firms also carry private insurance beyond SIPC limits known as “excess SIP insurance.”

That should give you peace of mind whether or not you consolidate your accounts, says Hebner. But do whatever helps you sleep at night.

“There’s enough to worry about when it comes to the ups and downs of the financial markets. You should feel as comfortable as you can about any possible risks to your account,” says Hebner.

TIME Social Security

More Than Half of Americans Think Social Security Is Doomed

Poll released for the 80th anniversary of President Franklin D. Roosevelt signing the Social Security Act into law

More than half of all Americans who are still working doubt they will ever receive Social Security benefits, according to a new poll.

Gallup—which released the poll numbers for the 80th anniversary of President Franklin D. Roosevelt signing the Social Security Act into law on Aug. 14, 1935—also found that two-thirds of Americans believe the Social Security system is in serious trouble.

Over the past 80 years, Social Security has become a major piece of the U.S. economic landscape and an important part of retirement plans. But changes in the nation’s demographics have led to projections that the system will be unable to pay retirees their full benefits starting in 2034.

Gallup found that 66% of Americans surveyed in July and August believe Social Security is in a state of crisis, which is in line with historical poll numbers: At least two-thirds of Americans have believed that retirement benefits were in jeopardy since 1998.

Of the two primary approaches to fixing the Social Security system, 51% of Americans of all ages would prefer raising taxes, while 37% would rather cut benefits.

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