RETIREMENT: THE BEST IS YET TO COME
For many individuals, the sum total of their financial knowledge comes down to two things. First, don’t put all your eggs into one basket (i.e., diversify). Second, buy low and sell high. Unfortunately, a little bit of wisdom can lead an individual into some bad mistakes from misinterpretation of these two mantras. Since most of our B&E alumni and friends have retirement accounts, we offer these points toward those investments:
Photographed by Alex Wilson
1.“He who fails to plan is planning to fail.”
Planning for retirement begins at the beginning of your career. Mutual fund commercials pose the question, “What’s your magic number?” Have you thought about other key planning numbers? How long will you live? Well, take the quiz at Living to 100 (livingto100.com) and you may be surprised to find you have a much longer retirement ahead of you. Have you continually taken advantage of lower interest rates and refinanced your home multiple times? If so, when will you finally pay off the mortgage? Old advice suggested that during retirement we would only need to spend about 70% as much as during the working life, but if you are still paying on the mortgage, that percentage rises.
2. “Death and taxes. In this world nothing can be said to be certain, except death and taxes.”
Great planning includes learning how the tax laws affect you. Have you considered the benefits of a Roth IRA or a Roth Supplemental Retirement Account (SRA), where taxes are paid today and earnings are never taxed? The current administration is proposing an overhaul of the tax system. If the proposed reduction in the corporate tax rate passes, then most individuals will see immediate increases in their current retirement portfolios. But, consider the long-term effects. If your retirement account has tax deferred components, what will be the tax rate when you retire? Will personal tax rates eventually rise to compensate for lower corporate tax rates, or will your good savings behavior put you in a higher tax bracket?
3. “The man who does not read has no advantage over the man who cannot read.”
Literacy includes financial literacy. B&E graduates are able and should maintain their financial literacy. Continue to educate yourself and share your knowledge with others. B&E has created the Center for Financial Literacy and Education to extend that knowledge to a wider audience in West Virginia. There is a clear need for increasing financial literacy across the state, as well as within WVU. The question is how to change behavior in a way to improve financial decision-making. The first step in that process is to empower individuals to make better financial decisions by arming them with the tools and confidence to better plan for their financial futures.
4. “Knowing yourself is the beginning of all wisdom.”
Where do you find the extra savings to invest in your future? Begin by tracking where you are currently spending your income and find those places where you can forego spending and save instead. Perhaps it’s cutting out the daily stop for coffee or some other daily habit. Over a working life, an extra savings of just $100 per month can translate into an extra million dollars or more at retirement.
5. “Live as if you were to die tomorrow. Learn as if you were to live forever.”
The typical options for today’s college graduate should enable them to accumulate more in their retirement accounts at the end of their working life than the sum total of their earnings over that working life. Yet, few take the time early in their careers to learn how they can manage their future and set up a retirement filled with choices. The earlier someone begins retirement planning, the greater the possibility of seeing that plan succeed. A good, early understanding increases those chances.