NYC Wife Shocked by Husband’s 401(k) Balance

I recently ran across an article about the couple below that left me completely irritated about millennial marriages and marriages in general when it comes to financial communication.

business-insider-article

The highly attractive couple shown here were recently featured in Business Insider via Yahoo Finance.  In the feature, the wife recounted the time she realized that her husband saves a much higher percentage of his individual income than she does her individual income—three times higher to be exact.

After coming to this realization, she finally gets her bearings and decides that she will up her 2 percent retirement contributions to 8 percent with the eventual hope of reaching the 12 percent milestone that her husband is currently at.

This may seem like the end of the story and a happy ending, but I can’t help but wonder why her husband was so oblivious to this massive miscommunication problem as it relates to their long-term financial future.

Other than purchasing a house (the reason for his wife’s great discovery happened), the husband in this relationship has done nothing to truly unite himself with his wife.  He’s done nothing to visibly prepare his marriage to last the long haul, at least in terms of finances.

Given that the number one reason for divorce in North America today is money fights and money problems, I hope this couple really improves their financial communication.  As a fellow millennial, I want their marriage to thrive financially.  Not just for the wealth, but for the dreams.

As a world-famous John Maxwell says, “Teamwork makes the dream work!”

Follow Ben on Twitter @Ben_Baxter or on AL.com here.

Potential Retirement Nest Egg for a Median Household in Each Alabama County by Age 67

The following chart shows what a current median-age, median-income household in each Alabama county will have saved for retirement by age 67.  The most recent median age data was collected from the U.S. Census Bureau, and the most recent median household income (HHI) was collected from the Alabama Center for Business and Economic Research.  Annualized rate of return of investing is set at 9 percent inside a tax-free growth Roth IRA, Roth 401(k), or Roth 403(b).  The savings rate per year is set at 15 percent of median household income.  The assumption is that each median household starts with zero saved in retirement, and that each median household never gets an annual pay raise.

County County Seat Median HHI Median Age Retirement Value at 67
Tuscaloosa Tuscaloosa $46,892 32.4 $1,594,896
Lee Opelika $41,256 31.0 $1,592,745
Shelby Columbiana $69,432 38.6 $1,331,831
Pike Troy $31,844 31.5 $1,175,095
Madison Huntsville $58,833 38.4 $1,150,001
Autauga Prattville $54,366 38.3 $1,072,737
Montgomery Montgomery $43,054 35.8 $1,072,574
Elmore Wetumpka $54,298 38.4 $1,061,356
Russell Phenix City $35,585 34.9 $963,211
Jefferson Birmingham $44,852 37.6 $945,107
Mobile Mobile $42,943 37.3 $930,623
Limestone Athens $51,175 39.3 $918,721
Dale Ozark $41,940 37.4 $900,434
St. Clair Ashville $50,571 39.9 $857,498
Coffee Elba $46,931 39.2 $850,561
Chilton Clanton $41,450 38.9 $772,872
Morgan Decatur $45,082 40.2 $742,825
Calhoun Anniston $41,123 39.4 $731,286
Houston Dothan $40,124 39.3 $720,328
Blount Oneonta $45,567 40.9 $702,017
Bibb Centreville $39,546 39.6 $689,998
DeKalb Fort Payne $36,241 39.0 $669,382
Franklin Russellville $33,881 38.4 $662,267
Marshall Guntersville $36,536 39.2 $662,165
Baldwin Bay Minette $49,626 42.6 $648,075
Escambia Brewton $37,077 39.8 $634,714
Talladega Talladega $39,999 40.9 $616,235
Cullman Cullman $39,922 40.9 $615,049
Lauderdale Florence $41,324 41.3 $612,532
Macon Tuskegee $28,518 37.6 $600,922
Barbour Clayton $34,971 39.8 $598,662
Etowah Gadsden $39,904 41.5 $580,138
Colbert Tuscumbia $43,057 42.3 $579,064
Washington Chatom $41,321 41.9 $577,840
Cleburne Heflin $40,418 41.9 $565,213
Perry Marion $27,403 37.9 $561,419
Sumter Livingston $25,413 37.2 $555,895
Lawrence Moulton $41,574 42.5 $548,275
Butler Butler $32,512 40.5 $520,527
Hale Greensboro $33,315 40.8 $518,225
Dallas Selma $26,602 38.5 $515,109
Clarke Grove Hill $36,620 41.9 $512,101
Walker Jasper $37,245 42.3 $500,900
Crenshaw Luverne $34,445 41.5 $500,773
Marengo Linden $32,977 41.3 $488,807
Bullock Union Springs $26,580 39.5 $468,199
Monroe Monroeville $34,733 42.3 $467,117
Pickens Carrollton $31,933 41.5 $464,253
Lowndes Hayneville $30,675 41.2 $459,103
Jackson Scottsboro $36,923 43.1 $459,020
Randolph Wedowee $36,939 43.3 $450,225
Chambers LaFayette $34,116 42.5 $449,920
Covington Andalusia $36,149 43.1 $449,398
Henry Abbeville $39,930 44.2 $444,947
Marion Hamilton $37,707 43.9 $432,974
Geneva Geneva $34,425 43.1 $427,965
Fayette Fayette $35,664 43.5 $426,150
Clay Ashland $35,940 43.7 $420,994
Tallapoosa Dadeville $36,779 44.2 $409,835
Wilcox Camden $24,035 40.4 $388,516
Lamar Vernon $34,553 44.4 $377,378
Winston Double Springs $35,528 44.7 $376,476
Cherokee Centre $38,013 45.9 $356,450
Choctaw Butler $35,049 45.3 $349,476
Greene Eutaw $26,504 42.7 $342,737
Conecuh Evergreen $29,101 44.2 $324,277
Coosa Rockford $34,679 46.8 $296,217

Follow Ben on Twitter @Ben_Baxter or on AL.com here.

Retirement US News

Share Retirement Dreams for Chance to Win Free Book

Let’s dream a little bit.  Most people think more about their next vacation than they ever think about retirement.  But I believe that’s mostly because people get sidetracked by the numbers and forget the dreams.

So leave a comment and share what your retirement dreams are.  For your participation, one lucky commenter will win a free copy of the #1 New York Times Bestselling book, Retired Inspired.

Follow me on Twitter @Ben_Baxter or on AL.com here.

Retire Inspired Giveaway

Resist Urge to Panic about the Stock Market

Please sit down.  Take a deep breath and look at the accompanying chart.

Standard and Poors Jan 1950 - Dec 2015

Standard and Poors Jan 1950 – Dec 2015

 

If you are even remotely good at reading a graph, you know this represents the stock market.  More specifically, it is a graph of the S&P 500—the gold standard for measuring the health of the stock market and the economy as a whole.

Look at the chart closely. What do you see? If you are being honest with yourself, you see that the stock market as a whole has a long-term track record of positive growth.  As a result, if your personal investment portfolio is diversified enough, it will also mirror the positive growth of the stock market.

If your personal investment portfolio is not diversified (i.e. all of your eggs are in one basket), then you are probably asking for trouble.  Get a great advisor and make a change today.

Ben Baxter is editor for Baxter & Friends.  Follow him on Twitter @Ben_Baxter

How My New Car Cost Me $1,000,000

“I Will Always Have a Car Loan”

The next time that you hear someone say this phrase, please sprinkle holy Evian on them immediately and then refer them to this blog. That phrase is not only false, but it will cost us MILLIONS of dollars over our lifetimes.  Millions? Yes, millions! Let’s break things down so we can get a clearer picture of what I mean.

The average brand new car in March 2014 was $32,086 with an average monthly car loan payment of $710 with the assumption of a 48 month loan term at 3% interest.   For the record, this example has already made our total loan repayment $34,068 before we really get too deep. Yes, we just lost $2000 before we even left the car dealership lot. But let’s move on to bigger fish.

Typically, cars lose 20% in depreciation in the first year, 15% in the second and third year, and then 10% in the fourth year. So in this example, this would mean that the car is worth $16,691.

The average age of cars on the road in the United States today is a little over 11 years old. Most automobiles are pretty dependable nowadays because of the advances in quality and technology—so 11 years is not a stretch at all. So given that information, we could have owned the same car for over 50% less money if we had just waited a few years and bought with cash. But, I’m still not done.

Let’s assume we repeat this “gotta have a new car” buying habit for 40 years. For simple math purposes, let’s assume each new car costs exactly as much as the first car did.

So after 40 years, we have bought 10 cars and lost:

(a) a whopping $20,000 to car loan interest

(b) a monstrous $173,950 to depreciation

But it gets worse, you also lost:

(c) a life-changing $2.36 million dollars!

2MILLION DOLLARS

(Assumes we invested $404 per month in lost depreciation and car loan interest every month into a good mutual fund at 10% rate of return for 40 years)

CAN YOU AFFORD TO LOSE THIS MUCH MONEY?

For giggles, let’s assume we learned our lesson on the first car, but we still bought the first car anyway. In that scenario, let’s deposit $404 per month for just four years and then wait 40 years. After 40 years, you still lost the opportunity to:

(d) a still life-changing $760,000 dollars!

700K

CAN YOU AFFORD TO LOSE THIS MUCH MONEY?

Never Leave Kids an Inheritance

Please let me clarify before you start calling me a cold-hearted jerk.  As long as children are still dependents, then I believe parents should do everything in their power to perpetually provide for their spouse and children from the grave—hefty term life insurance and thoughtful savings invested into a good mutual fund (an endowment per se).  Whether the children are 2 years old or 17 years old, that is my firm stance.

However! The average age of death is roughly 75 years old, and parents are typically 20-30 years older than their descendants.  So in this example, the “children” are between 45 to 55 years old.  Suffice it to say, it is fairly disingenuous to call someone who might have grandchildren a “child.”  For that very reason, I wouldn’t give my children anything if I make it into my twilight years.

Yep, I would leave my “children” absolutely nothing.  Zip.  Zilch.  Natta.  Zero.

But what are a few reasons why I would do this?

(1) Proverbs 22:6 | “Train up a child in the way he should go: and when he is old, he will not depart from it.”  As a result, I do not worry about my future adult children.  I trust them to do well (better than well) because that is what Baxters do—pray hard, love hard, and work hard.  Because of early guidance and early monetary investment, our children will be far more successful than we could have ever imagined them to be.

(2) Actual Children | The amount of actual young children, orphans especially, who could benefit from the death of an old geezer is almost endless.

(3) Other Elderly People | There are so many widows, widowers, and otherwise disabled elderly who could really use a leg-up from a person who knows (or knew) exactly how they feel.

(4) Worthwhile Charities | Do you know who usually leaves big gobs of money for shelters that take care of battered women? Usually old dead people.  What about animal shelters? Again, old dead people. How about full ride academic scholarships? Once again, old dead people.  With all that good going around, why wouldn’t I want to be an awesome dead person too?

What about you? In an ideal world, would you give all your money to your kids?

Retirement

PS: All of this assumes that I do not have a successful business that my children could potentially become owners of one day. In that case, a succession plan is necessary so that that transition is a smooth one and not a train wreck.  However, since successful businesses are statistically improbable, I am assuming I just have a regular job that I have retired from.