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All this said, when you say you're "trying to convince a 30-year-old daughter to save for retirement," that doesn't bode well. It requires self-discipline and delayed gratification and, if she's not on board with it, it's probably not going to happen. Perhaps you could start a separate account to leave to her in lieu of a traditional inheritance, like a trust fund for old age. Generally, you can't make others do stuff.
Last edited by otterhere; 02-05-2016 at 12:41 PM..
I've always worked... got my own jobs all through high school and prior.
During High School I worked for a specialty classic car parts and restoration business... met lots of well off people... some rich... most, just very comfortable so spending money on restoring a 1930 Cadillac wasn't a problem.
Almost each and everyone told me to invest in Real Estate and the sooner the better... and I listened.
Bought my first home at age 22... and it was a dump... posted pictures of it before.
Moved in and started making repairs and then found a similar property in a little better area and rented out the first one... I also helped several of my friends buy duplexes, triplexes up to a fourplex.
Most are no longer in the rental property business... all benefited immensely and it gave them the leg up to buy a home where they wanted when it was time to start a family...
Others, like me stayed in... now the properties are paid for...
It requires self-discipline and delayed gratification and, if she's not on board with it, it's probably not going to happen.
I don't want to give the impression that she is undisciplined or throwing money away. She is serious minded and making double payments a few times a year on a monthly student loan bill. She likes to travel and makes plans to save for trips. She is very much "pay as you go". I'm just trying to get her to recognize the priority of retirement planning. I retired at 52 and I'm afraid she thinks it is an easy road. Things were a little different 30 years ago and it is harder now.
The article I linked to was about all single people, not only women. I only mentioned women because the OP was asking specifically about her daughter. Also, because I was referencing the fact that many Americans' Social Security is penalized if they become family caregivers ... something that hits women statistically far more often than men, although I know there are a couple of male caregivers for the elderly on the Caregivers Forum.
I don't want to give the impression that she is undisciplined or throwing money away. She is serious minded and making double payments a few times a year on a monthly student loan bill. She likes to travel and makes plans to save for trips. She is very much "pay as you go". I'm just trying to get her to recognize the priority of retirement planning. I retired at 52 and I'm afraid she thinks it is an easy road. Things were a little different 30 years ago and it is harder now.
Is she a fed? Maybe she has payroll deductions that put money in a thrift savings account. In other words, she never sees the money so it's not obvious she's saving.
As a grown person, I would never tell my mother anything about my finances. I wouldn't think it was any of her business.
That's fine but IT is normally fairly high income and you enjoyed a 401(k) match that most people don't get. Median household income in the United States is $50K. At that income level, it's tough to pay all your bills and accrue much of a retirement nest egg when you don't have 401(k) matching.
I'm twice divorced with no children. Try applying "divide your net worth by 2" divorce math to your personal financial balance sheet a couple of times and see where you stand. Inflation adjusted, my net worth was higher in 1998 than it is now. It's been stated many times but the formula for economic success is to get married, stay married, and save and invest a big chunk of that dual income. I've had problems with the "stay married" part. Fortunately, I'm high enough income to recover from it but I'm not going to have the lavish retirement I envisioned for myself in 1995.
Actually, I worked for an educational institution where the staff salaries are generally less than private industry. And, when, I first started at this institution only certain levels of employees were eligible for 403b and matching contributions. I was not in that category initially.
As far as I can figure, singles miss out on a few things. First is the SS advantage of receiving half of a spouse's benefits when the spouse dies. Of course if the spouse is self employed this doesn't pertain. Second, there are tax benefits such as the 500K exclusion on capital gains upon selling a house. If you are single and wisely purchase a property that appreciates after a number of years, your exclusion is only 250K. So, if your property gains are much higher, you lose a lot to taxes. Passing property on to kids also has some built in tax exclusions. Bottom line is if you are single, you give more money away via taxes. Third, singles miss out on the "two can live as cheaply as one" concept. A working couple buys a $200K house (or a $2M house) and enjoys it much more than if each of them owned a $100K (or $1M) house. And in many areas the nicer, more expensive house has the chance of gaining a higher percentage of appreciation too.
However, if one member of the couple wastes money, both are in trouble. Having kids can offset any of the financial perks of being a couple. And heaven forbid, if one parent is forced to raise the kids alone, that parent can have a very hard financial road ahead. Single women are more likely to be chosen to care for an ailing/aging parent, too. Another financial knock (although she can claim head of household for fed taxes).
My thought is that each young person needs to plan their future as if they will always be alone and totally dependent on their own efforts. If they marry well, then that will be a bonus. If they have good kids and stay married, then that will be extremely wonderful. But no matter what, each person should save as if they must depend on themselves. Spend less than they make, maximize free money (401K match?), think of themselves first.
As far as I can figure, singles miss out on a few things. First is the SS advantage of receiving half of a spouse's benefits when the spouse dies. Of course if the spouse is self employed this doesn't pertain.
Self employed people pay into social security if their net profit is more than $400 They pay 15.3% of that net profit, an employee pays half that amount, his/her employer pays the other half. Collecting SS if your or your spouse was self-employed work the same was as they do for everyone else.
Self employed people pay into social security if their net profit is more than $400 They pay 15.3% of that net profit, an employee pays half that amount, his/her employer pays the other half. Collecting SS if your or your spouse was self-employed work the same was as they do for everyone else.
SunGrins, have your daughter read this article: The High Price of Being Single in America - The Atlantic
There are people who dispute some of its findings, but overall it issues the same warning the NCOA puts out. Single women are getting punished financially for being single in many different ways and need to look out for their future welfare.
I read the article and questioned some of its findings especially with regards to high-earning professional women like myself and my sisters.
The article did cited a case of a woman making $80K but it was not clear what spousal salary was used in the calculations.
The so-called 'marriage penalty' when a couple earn equal wages is a fact of life for many professional or high-wages couples.
I plugged in some typical numbers in this calculator
For a couple each earns $100K in salaries with $20K in CG/dividend etc. the marriage penalty is ~$10K in 2015.
Granted that two persons can live more cheaply together than separately but one can always find a room mate or just live together and not married. In addition, marriage usually resulted in children which are enormously expensive.
So I certainly dispute the notion that single, never-married people are at a financial disadvantage in comparison to a married person. However if the single status is the result of a divorce then it is a big disadvantage, maybe more so to SAHM especially when she was too old to enter or re-enter the work force.
Back to the OP's question : "How does a single-for-life person plan for retirement? How different from a couple?, I'd think that it is really not much difference from a couple. One just have to save, maximize 401K, IRA, learn to invest, get all the legal documents (will, POA for Heathcare/finance, living will) in place. I also want to add that it is important to develop healthy habits (eat right, exercise, have a 'balanced'/stress-free life). This last item applies to everybody but may be even more important to singles since they have nobody to help in their old ages.
My daughter is 33 years old and single. She had just bought her first home. I setup Roth IRA for her ever since her very first paid job (delivering pizza during the summer in HS). I also made sure that she had all the legal documents. She broke up with her fiancee early last year but currently has a serious boyfriend. She may or may not get married. If she does, I will definitely advise her to consult a lawyer for a prenuptial agreement.
Last edited by BellaDL; 02-06-2016 at 10:02 AM..
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