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There Is No Ideal Time to Contribute to Retirement

December 28, 2023 By MelissaB 6 Comments

“Do you really think you should be voluntarily putting money into your retirement account?  It just seems like there are so many other things you could be using the money for right now.  Why don’t you wait to contribute to your retirement until you get more financially stable?”

Recently, I was lamenting our financial situation to a good friend.  I just had a dental procedure at a periodontist, I was just told my 6 year old has 8 cavities (that’s another story) that will cost $400 out of pocket to fill, and that my 10.5 year old will need braces to the tune of $5,000 or so.

Add on top of that the fact that our car has 150,000 miles on it, and we refuse to borrow for a new one, and well, I’m looking at a lot of financial stress.

Still, these expenses don’t have to be paid immediately.  I’m saving money every month for a new-to-us car when our old one finally gives out.  I may be able to wait a bit to get my son braces.

I just wanted to vent a bit to my friend and express my frustration.

I was really surprised by her answer.  She simply couldn’t understand why we would contribute to our retirement when we have so many impending expenses.

Yet, as Tracy Chapman sings, “If not now, then when?”

Good Time to Contribute to RetirementThere’s no good time to save for retirement.

You could always use the money for something else.

When my husband and I were newly married 14 years ago, I made a little over $30,000 a year.  We lived in the suburbs of Chicago, which wasn’t cheap.  My husband was a graduate student and didn’t work.  We were flat out broke.

And my employer had a mandatory rule that 8% of my gross income would go to my retirement savings.

I HATED that rule.  There were so many other things that I could have used that money for, but I had no choice.

Eleven years later, when I left the job and walked away with 11 years of retirement savings at 8% of my gross salary plus an equal match by my employer, I was ecstatic that I was forced to save for retirement.

Now, my husband is working for an employer who has the same rule, and we’re happy that 8% of his gross salary goes to his retirement account.

We’ve learned our lesson so well, in fact, we are also contributing to our Roth IRA even though money right now is T-I-G-H-T.

But really, for most Americans, money is almost always tight.

I would rather scrimp and save now, while we still have many working years left before retirement than scrimp and save during retirement, constantly worrying if I had enough money to last me until the end of my life.

So, no, my well-intentioned friend, I don’t think I should stop contributing to my retirement.  In fact, there’s no better time than now to save for retirement.

Oh and incidentally, if you are reading this and thinking about early retirement its important to consider the non-financial aspects, such as…what will you do with your time?

If not now, then when?

Do you continue to contribute to your retirement when facing large expenses, or do you wait to contribute until your finances improve?

 

MelissaB
MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Filed Under: budget, Retirement, ShareMe Tagged With: 401k, Investing, ira, Retirement

Reasons Not to Buy Long-Term Care Insurance

July 19, 2021 By MelissaB Leave a Comment

Reasons Not to Get Long-Term Care Insurance

My uncle and aunt, who are in their 80s, recently moved to a long-term care facility. The cost for two people is expensive, but they’re paying a reasonable $3,000 a month thanks to a long-term care policy my uncle bought years ago. My husband and I aren’t yet at the age where we need to buy such a policy, but we did start to research them. However, there are several reasons why we’ve decided not to buy long-term care insurance.

Why We’re Not Going to Buy Long-Term Care Insurance

We’re not buying long-term care insurance because of these drawbacks:

Premium Prices Aren’t Fixed

Rising premium costs are one of the biggest issues for us. You may buy a long-term care policy with an affordable monthly payment when you’re in your 50s. However, that payment is not fixed; over time the monthly payment will continue to increase, eventually outpricing some people’s budgets. If you can no longer afford your monthly premium before you need the care, you have lost all of the money you previously invested into long-term care insurance.

Insurance Companies Sometimes Won’t Pay

Long-term care insurance policies often have many hoops you must jump through before they will pay. Others don’t pay for the first 90 days. Or they will only cover one to three years in a long-term care facility. If you need care for a longer duration, your policy won’t cover that time.

May Never Need the Policy

After paying decade after decade for a long-term care policy, you may never need it. You may remain in good health and able to take care of yourself, or you may die suddenly in a car accident or from a heart attack. Think of the many other ways that money could have been used.

I know, I know, not needing the policy is a risk for any insurance coverage, and we still purchase them. However, consider the tens of thousands of dollars that you’ll pay for a policy you may not need. Buying such a policy often doesn’t make financial sense.

What We’re Doing Instead

Reasons Not to Get Long-Term Care Insurance
Photo by Olga Kononenko on Unsplash

We used a calculator to determine how much long-term care insurance would cost for us to purchase in our early 50s. Instead of investing in long-term care insurance, we’re investing that money in our retirement accounts (in addition to what we’re already regularly investing for retirement) so it can grow thanks to compound interest. The plan is to make our retirement fund as large as possible so we won’t need long-term care insurance. We’ll also be able to sell our house and have it for equity.

In this sense, we’re planning to self-insure so we can get quality care if needed without paying for a long-term care insurance policy for years.

Final Thoughts

Some people swear by long-term care insurance. The policy is doing its job for my aunt and uncle. However, after my husband and I looked at the price and compared it with all of the potential policy exclusions, we’ve decided there are several reasons not to buy long-term care insurance. Instead, we will be working to save and invest enough money to self-insure.

Read More

How to Use Retroactive COBRA Insurance

The Five Most Common Retirement Planning Mistakes

There Is No Ideal Time to Contribute to Retirement

MelissaB
MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Filed Under: Insurance, Retirement Tagged With: elder care, Insurance, long-term care insurance, Retirement

How To Accumulate Assets and Diminish Liabilities

May 10, 2021 By MelissaB Leave a Comment

Accumulate Assets and Diminish Liabilities

There are a few financially intelligent, dedicated among us that are intent on creating wealth early in life. But, unfortunately, most younger Americans are more interested in accumulating homes, cars, clothes, and other items to make life more comfortable. However, if we can change our mindset and realize when enough is enough, we can more easily accumulate assets and diminish liabilities.

Change Your Mindset

So many of us spend our 20s and our 30s trying to accrue items. We buy houses, buy a car, furnish our homes, go on great vacations. While there’s nothing wrong with any of these things, they do hinder our ability to accumulate assets and diminish liabilities. Most Americans this age think their 20s and 30s are a time to accumulate things and show that they’re successful. This mindset is wrong if you’re looking to retire comfortably.

Instead, think of your 20s, 30s, and even 40s as a time to accumulate assets and diminish liabilities. For instance, Tom graduated from college with $35,000 in student loan debt. He landed a job out of college paying $85,000. For the first two years of that job, Tom rented a room rather than an apartment and ate the proverbial beans and rice. He lived a completely spartan life so he could pay off that student debt in two years. His only object was to diminish his liabilities. That is the type of thinking and acting that helps secure your financial future.

Recognize When Enough Is Enough

Accumulate Assets and Decrease Liabilities
Photo by Scott Lorsch on Unsplash

Likewise, many of my friends are in their 40s and have teenagers. Time and time again, these friends upsize their house, spending perhaps 1.5 or 2 times what their original house cost, so they have more space. But, just a few years later, the teens go off to college, and now the parents are empty-nesters in a big house.

My husband and I already live in a modest house, but we’re looking to relocate. Even though we have three teens or nearly teens, when we buy a new house, we plan to buy one the same size or smaller than our current house. We know the empty nest is right around the corner and don’t want to pay more for a mortgage, utilities, and property taxes than we have to. Buying this way will help us diminish our liabilities so we can continue to save for our retirement.

Final Thoughts

If you can change your mindset and recognize when enough is enough, you can easily accumulate assets and diminish liabilities. When you save yourself money by not buying a fancy new car but instead contenting yourself with your 10-year-old car, or when you forego buying a bigger house when you have teens, you can use that extra cash to invest. As you invest more and more, you are accumulating assets.

Realize that most of your life is about building wealth. Then, when you’ve reached your financial life goals, you can ease up and spend a little more freely.

Read More

How to Quit Staying Broke

Why It’s Paramount You Differentiate Equity from Net Worth

10 Everyday Items You Can Save Money on Today

MelissaB
MelissaB

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.

www.momsplans.com/

Filed Under: budget, Retirement, Saving Tagged With: assets, increase wealth, liabilities

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