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Tight-Wad Tuesdays ~ The Average Person Has This Much Saved in a 401(k) — How Do You Compare?

The Average American Has This Much Saved in a 401(k) — How Do You Compare?.

I know I haven’t done a Tight-Wad Tuesdays post in like, years, but Personal Finance is still dear to my heart. (I just prepared a year ending financial report card for my family New Years day ~I am such a nerd).

I ran across this easy to read article today (its has pictures!) by the Motley Fool on doing a report card on your 401K’s. And while it is a Thursday I still thought I might lob a Tight Wad post out to help educate, enrich or inform. …or bore

Of course, a big part of YOUR family’s financial report card isn’t savings per se, but also resources built up for your retirement programs sponsored by your employer and to some degree, your bank.


That is what a 401K is, Free Money, if an employer matches your contributions, dollar for dollar. It is free money in YOUR pocket. (sorry, does anyone like the sound of that as much as I do?) Then you should ind some good or reliable mutual funds to invest your hard earned money in and watch that free money grow! It is one way to pad your nest egg as you head towards your days of not working any more.

vacation 2But 401k’s are not enough. As an ex-financial adviser I can tell you, you need more than money being saved in a 401k to live a standard of living you are used to in retirement. I mean a 401k contribution is what, 4% or 5% of your annual wages in most cases? Coupled with the employer’s match its maybe close 10% of what your check was last week. Is 10% of that paycheck what you want to live off of when you finally have the time to LIVE and travel and spoil your grandkids?

The Beverly Hills Housewives type wedding for your grands

The Beverly Hills Housewives type wedding for your grands

That’s where a few good DRIPs (Dividend Reinvestment Plans) can come in handy to add a lot of value and cash flow to your nest egg. Contributing to a DRIP account regularly in small amounts is a safe, slow and steady way to build wealth over time, with guaranteed growth through reinvested dividends.

dripWhen you retire simply chose to accept the quarterly dividends as cash payouts instead of reinvesting them. And if you begin funding a DRIP account when you are younger instead of older that quarterly dividend will be larger than that of what your employer generously gives you matching your 401K contribution right now.

So how do YOU want to live in your retirement?

vacation 3

Your 401K may not be enough. Check out this easy read by the Motley Fool and see how your 401K stacks up to those of your peers saving. Their graphs are broken down by ‘savings per age’ and ‘savings per income’ using simple Medians (average) and Mode (most common) illustrations.Fooltmf234x60_13001

All you have to do is know how much you and / or your household has it its 401k balances right now.

The Average American Has This Much Saved in a 401(k) — How Do You Compare?.

Do you know?

Do you trust that your balances will magically be enough?

MS-Nest Egg

If you have any questions or concerns or ideas about your savings plans, just ask. I don’t need to know how much, or where, or even get paid. (its just nice to know I got you seriously thinking about it) I just need to know your goals and how you feel about risk in your investments.

Tight-Wad Tuesday’s ~ What a surprise!

I was trying to think of some cheery way to start off a personal financial post for this Tight-Wad Tuesdays but my cold put up a wall of accessing warm-n-fuzzy land.

But THEN I got a little gift in the (e)mail from an new,blogger that made my day, Gull at The Magfiqueway. Check out the surprise: http://themagfiqueway.wordpress.com/2013/02/05/reader-appreciation-award-i-feel-blessed/ . She ‘smiles’ through her writing, is very likeable, open to everyone and a bit of a fashionista. OK, a BIG fashionista! Drop by and say Hello.

I’ve enjoyed this blogging world from meeting many new and interesting people. I’ve said this before. But it really tickles me when I can connect with someone from around the world; someone from a far-eign land, maybe different culture, different life yet we can still find things to make each other smile. Too cool! The world is a smaller place now and filled with great, interesting people that one ought to know, like you; and Ms. Gull! Thanks WordPress.

So did you guess what the $219,000 stood for? I was afraid it was too ambiguous but then outta nowhere Kelly (One Fit Momma), up in Canada, nabbed it. I mean she defined the answer word for word. It turns out she spent some time in the financial industry too, illustrating again that there is way more to a book then just the cover. Great job Kelly!

So, yes $291,000 is what you and your spouse will need just to eat in your retirement. 2 people x 3 meals a day x 20 years x 365 days / year x $5.00 / meal. Just to eat? What about other things in your retirement like utilities, medical, along with the things you’ve earned the right to do like travel and spoil those cute grand kids? How much will that take over time? And at tomorrow’s costs?

So does this make you think a little bit? Do you have a plan? Are you ready to make a plan?

The good news is that younger readers have lots of time to prepare.  If you are close to my age, you better have a plan in place.

How do you want to live your golden years?

Have you ever thought about this? On a budget or a lifestyle that you worked hard to earn? And people are living longer every year!

The good news is I am here to offer some suggestions to help you get started. It’s what I do, er, did. You can thank me later. There are several, easy, almost painless ways to build wealth for your style of living. It is up to you to commit to them.

But wait!

People say, I’m scared; I don’t know anything about investing, I’m afraid I’ll make a mistake; I don’t know where to start, I don’t have any money to get started. I’m not that smart.

If you know that $10 in sales is better than $7 you are equipped to do this. If you can divide $1.56 into $43.80 you have the technical know how to make a fortune (Dividend Yield). I think, if you are smart enough to write a coherent blog and disciplined enough to do it on a regular basis you will be fine. If you know how to do a little research online and have confidence in yourself you can do great things!

MS-Nest Egg

Simple plans to build for a comfy retirement nest egg:

  • 401k’s: simply this is free money. If you have one at work, enroll and put at least the % of your wages that your employer will match. FREE MONEY. Make a good salary or live below your means? Put another % or two in.  Over time this can be your best ally for a jet set retirement. But, a 401K (free money), by itself, is not all the answer. $219,000? Travel? Grand kids? You’ll need more!

Here and here are a couple of posts that discuss how your 401K can perform like the Dream Team. If you have funds in a 401K you want them to perform like LeBron, not Randy Moss. If you  have 15 minutes you can have yourself an All-Star team in your 401K

  • Dividend Reinvestment Plans (DRiPS): Simple, slow, painless, investing on auto pilot, where you don’t need a lot of $$ to get started and dividends build up over time and snowball into a great sums of money along with a comfy quarterly dividend in retirement.


DRIPS, I believe, are the easiest way to accumulate wealth. Again, the younger the better. We have several plans we are in now, so I am not just preaching. I have gone over them in detail in previous Tight Wad Tuesday posts here and here and ending up here. Any questions, I am here to help!

  • Regular contributions to an IRA at your bank or other financial institution. The key here is low cost investing and fees. If you have to pay more than 1.5% commission you are paying too much. DRIPS are far better at low cost investing.
  • Join an Investment Club: Invest with your friends! Google investment clubs in your area where people like yourself get together and learn about stocks and investing. Club’s often invest a little bit of money to get their feet wet but you can take those experiences, plus leverage everyone else’s research in the club, to make very qualified decisions on your own.Bivo-friends

You can invest a little bit of money with the club but put your new found knowledge to work for you at home. Investment clubs can be fun, you don’t necessarily need to be a nerd to join one. Don’t look at me! Simply joining others interested in being smart with their money and watching it grew a little (a lot). I ran an investment club in the 90’s with the likes of Air Force pilots, grad students and future Senators! We do look kinda nerdy, don’t we?


Does any of this make sense? Would you like to learn more?

Investing doesn’t have to be complicated with pyramid schemes or selling futures. Simple investing strategies include ‘Follow the Leader(s) (i.e. Wal-Mart, Apple), Dogs of the Dow or Value investing, and Dividend Investing where your risk and returns are minimized by regular quarterly dividends. These are easy steps that make sense, easy to research and follow. And whether you prefer to do some research on line or with the help of an investment club these strategies can work for you. I have a few links in my TWT header to get you started.


The catch? First you have to know what kind of investor you are?

Does investing make you lose sleep at night or do you feel confident in your good choices? What is your timetable before you need to access your savings? As you get older you typically move from an aggressive to somewhat conservative stance, not wishing to lose the empire that you built. Understanding what kind of risk you are willing to accept should be a place to start.

If you are interested, next Tuesday I will offer an Investor Risk survey used by Charles Schwab associates to map out what kind of investor you are. A  short few, simple questions will reveal what type of Warren Buffett you are deep down inside.

It’s your life. You are educated, have the initiative, and the good research skills to be good at this.

Don’t you deserve some $15.00 meals in your retirement, instead of $5.00 meals? Don’t you deserve to travel to see all those other great places and meet interesting people, like Gull and Kelly, from around the world when you finally have the time?

I think you deserve it. You just have to start somewhere / sometime.


Congratulations again Kelly and thanks to Gull for a wonderful Tuesday surprise!

Tips For Tight Wad$: Time, Time, Time is on your side

If I could find a way to insert a WAV file in these darn WordPress posts I would right now as the Rolling Stones have the ideal background music for this next post. ~Darn you WordPress, no WAV files at WordPress!

My wife wants to buy a larger house, again. We need a bigger one for the kids and I am personally tired of this ‘fixer-upper’ but I will get back to this.

Just let me start with the idea “time Is on your side” when it comes to personal finance. Some people may debate this over  the last decade or so. I say maybe they weren’t so smart with their money and lived beyond their means (a future Tight Wad post). But time can certainly work positively or negatively in your personal finance.

Let me give you an example. Interest! In our house, interest is a 4 letter word. We don’t mention it. We don’t buy it. What do you get for buying interest? Less disposable income? Interest can work against you in your credit cards, home purchases, credit score and so forth. You have heard the sad stories so I won’t take up your time here with that. Simply, don’t buy interest. Lots of companies want to sell you things interest free.

For example, look for the terms, 6 or 12 months ‘interest free’ or ‘same as cash’ when buying a large ticket item. Figure out what you can afford in your monthly budget, extend that across the months in the terms and then stick to it. Bam! You just bought a new roof or siding or that coveted patio set without paying a single dime in interest. Don’t pay interest! Over time it can eat you up! And you have better things to do with your money, right?

Let me give you another example. I am not getting political here I just want use this for an example. I heard last year President Obama made roughly $800,000 a year.  Senator Romney made over $20 million last year. Obama paid taxes around 20% (yet another Tight Wad post) while Romney paid only in the 15% tax level. How? Most of Senator Romney’s money comes from stock and bond income or dividends…accumulated over time. Dividends are taxed at a lower rate than personal income.

Here’s where I plug Dividend Reinvestment accounts again, or DRIPs.  DRIPs clearly are a way to let time work for you in building wealth. This investing is not sexy or glamorous at first.  Its not a get rich quick scheme. But put on auto pilot it can build Romney-like wealth over time. Well, not quite that much. MY dividends received for the first 10 years or so were nothing to brag about but now, they are starting to look a little sexier now, by reinvesting the dividends paid.

Coke for instance, is netting a positive 68% growth over the last 10 years for me, with dividends reinvested. 68%! By the time my girls are in school I will look REAL sexy thanks to Coke and a few other DRIPs. LOL not literally mind you but enough to swagger into Perkins for the early bird special. I can here the popular girls saying, “Ohh, yuck, totally gross!”

Which brings me back to my wife wanting to buy a house. We have been in this house for about 10 years and, financially, we’re ready to move. How? Write this down…Bi-monthly mortgage payments. if you never heard of these before they make time work for you!

Several years ago the end of the month looked very bleak for us. The last 10 days of the month I had to cover the mortgage, my car loan, the cable bill, cell phone bill and an unfriendly adoption loan payment. Ouch! I stumbled upon bi-monthly mortgage payments.

If you have never heard of these, simply, bi-monthly mortgage payments are just splitting you mortgage bill in half and paying half on the 15th of the month and half on the 29th of the month. You are not paying any more money per month than normal; just splitting it up. That’s it. Put it on automatic drafts from the bank and it is mindless. Even faster payments to principle are bi-weekly mortgage payments, making half a mortgage payment every other week.

What does this do? You are paying more ‘principle’ off early this way. This amounts to an extra mortgage payment being made each year. Less principle means paying less interest. That’s not enough for you? Look what mortgage calculator web site has to say:

“With the bi-weekly mortgage plan each year, one additional mortgage payment is made. That extra payment goes toward the principal of the loan. Since the homeowner is reducing the amount of the loan balance quicker, they are also reducing the amount of interest charged over the life of the loan.

Here’s an example:

A 30 year mortgage for $100,000 at a rate of 6.5% means the homeowner will pay $127,544 in interest throughout the life of the loan. This also includes a $100,000 principal for a grand total of $227,544. Paying one-half of the regular monthly mortgage bi-weekly makes the interest $97,215, which is a savings of $30,329. The homeowner would have to earn over $42,000 before taxes in order to net that much money.

Benefits of Bi-Weekly Mortgage Payments

Here are some things that a bi-weekly mortgage schedule can do:

  • The mortgage will be paid off faster. A 30-year mortgage can be paid off in about 22 years. (!)
  • Equity will build in the home more quickly.
  • The homeowner can arrange to have payments taken directly from the homeowner’s bank account automatically.
  • The homeowner will save thousands of dollars over the term of the mortgage. For example: By paying biweekly on a 3o-year fixed rate mortgage of $100,000 at 6.5% interest, the homeowner could save over $30,000.

Did you catch that? You can pay off your mortgage as much as 8 years early! What could you do with the extra money of a mortgage payment laying around each month? Not to mention the “saving money on the I-word” part” .

And that is where we are at right now with our mortgage. We have paid off plenty of principle in 10 years to allow us to take some profits and move to a bigger pad for the kids. It is quick and easy. Just make a phone call to your mortgage lender and its done in 5 minutes. Five minutes saves you thousands and thousands of dollars; or rubles, pesos, or francs. JDI!

So my point here is (time, time, time, is on your side. yes it is!) Time is a friend of yours.  ~ My wife says ‘cheese’ is a friend of hers. My friend has been Jose C! But time wants to be your friend too. If you have a mortgage right now and you are paying a single payment a month take a look at this and what it can do. If you are going to be buying a home in the future please keep this in mind, “bi-monthly mortgage payments” . You will own that home A LOT faster or be able to trade up earlier too. There’s no catches here. Its just being smart with your money. There’s nothing wrong with being a Tight Wad!

For more information on bi-monthly mortgage savings Google the term(s) or click right here. And please don’t forget to invite us over to your mansion so we can awe. ~ I’m really good at that’ the ‘aweing’! And I can bring some snacks…

Live Well! Be Thrifty!

Tight-Wad Tuesdays: We can all be Millionaires!

So you know, Mom loved the Sonic Blast, I do not bring home rich desserts that often for her, especially on a gym day (it was more of a reward) and Dylan and Skylar are ready to move on to Lesson II in ‘Baby Can Read’ already. So all the girls in my home are happy…today!

So I wanted to ask you, are you ready to learn how to become a millionaire for your retirement?

We all have been educated in different areas. While I love to learn more about some things I feel pretty secure on some areas of my education. One area is Personal Finance. I want to tell you of an easy, safe, and virtually painless method to accumulate wealth over time.

Wait! Don’t go! This is my soapbox moment; something I feel strongly about. I am not making any money off of this. You are! I just want to tell you how. It is so easy. You don’t need to be wealthy or have a six figure income. Ideally this type of investing is best for young adults; singles in their 20’s, young married couples with little debt, or 30ish professionals looking to map out their future and so on. We did not start until I was in my 40’s.

This type of building wealth, with little money to start, is called “Dividend Reinvestment Plans” or DRiPs for short. They are so simple. They should be taught in our schools, but they are not. You don’t hear about them because the big boys (banks and investment firms) don’t make any money from them.
WHAT: In a nutshell DRIP investing is owning a few shares of a great company that pays a regular quarterly dividend. Ideally the dividend is generous in relation to the stock price (dividend yield, I talk more about this later). You own the share of stock and make regular monthly purchases, like $50, every month to buy more shares of that stock. So you slowly accumulate more shares over time. The dividends, paid quarterly, are not taken as cash but instead are reinvested as more shares of stock.

Now you know, the more shares of stock you own, the higher your quarterly dividend payout ($ dividend amount  x   # shares of stock owned = dividend payout). So the paid dividend is reinvested and grows larger each time, building more and more shares. Simple, right? Kind of a snowball effect!

The stock shares do accumulate slowly over time (drips) with small regular monthly purchases. You might only receive $10 or $15 in dividend in new shares at first (still beats what interest you would get in a bank’s savings account). In a few years you have accumulated more shares and now that dividend looks more like $40 or $50.

You keep making regular monthly purchases and reinvesting your dividends over time and you can grow to hundreds and then thousands of shares (if you start early enough). Now how much would 1000 shares of Coke be worth at retirement? If Coke paid $1.00 per share dividend and you owned 1000 shares, how much would that dividend pay out be? How many more shares of stock would that buy? Plus you get a progressively larger pay out every 3 months! And its even better than that!
HOW:  The slow and steady accumulation of shares and wealth is only one aspect of this. The ‘wealth’ is the CHEESE. The plans method is its simplicity. Can you spare $50 a month? Pack your lunch twice a week? Once you build this into your family budget it is painless. If you, or your spouse,  gets a new job or a raise consider picking up a second DRIP.

We did this. We started off with two DRIPS and since have picked up a few more for a broader exposure. Can you imagine slowly building 1000+ shares in 5 or more great companies? That is our goal. You don’t need a large sum of money to start, just a little bit of room in your budget. It is investing on a shoestring and retiring with the whole shoe store! And as simple as a monthly transfer to your savings.

I will give some specifics next week on the way to start DRIP accounts and help you pick some great Dividend paying companies the following week in Tight Wad Tuesdays. I just want you to understand what DRIPS are and how they work. Simply, you buy a few shares of stock, put them in your name, and have a Transfer Agent, like Computershare, take care of the regular monthly purchases for you, usually automatic bank drafts. You get a statement at the end of the month saying the amount of the purchase and your accumulated shares.

Now if you are not a little bit excited about this either I am not doing my job right or you are not concerned about a comfy retirement. So I want to offer some ideas from the Fools,

The Lowdown
…Drip plans constitute the closest thing to getting your shares “straight from the tap.”

“… plans are designed to allow investors to begin investing relatively small initial sums. You then have the option to amass a more significant position over time via low- or no-cost optional cash payments, which can typically be made monthly or as often as you can afford.”
So you buy shares, regularly over time, paying little to no commissions on each monthly purchase. Again, the CHEESE, is building wealth over the reinvestment of dividends…. in addition to the ‘Dollar-Cost Averaging’ idea and ‘Compounded Annual Growth’. Consider why reinvesting dividends rocks

“One of the best things about Drips is that they allow you to have all dividends reinvested back into company stock, even if the dividends just buy fractions of shares.

Consider Ford Motor Co. (NYSE: F  ) . If you bought some shares of it at the end of 1980 and hung on for 18 years to the end of 1998, they would have appreciated nearly 3,900% (22.7% annually). That’s amazing enough. But get this — if you’d been reinvesting dividends to purchase more shares, your total return would skyrocket to 12,300%, or 30.7% per year! An initial $1,000 investment would have grown to $39,000 without reinvesting dividends and $124,000 with reinvested dividends.

  • Over the same 18-year period, Pfizer advanced 22.3% annually without reinvestment and 25.3% with it.
  • J.P. Morgan shares grew 12.3% without reinvestment and 17% with.
  • Coca-Cola (NYSE: KO  ) appreciated 24% without reinvestment and 27% with it. 

Over a decade or two, these differences can amount to doubling your money.”

Those returns were after 18 years of investing and reinvesting. If you start when you are 30 the timeline expands to more than 30 years, and can practically double the returns listed above. Coke has actually returned over 55% for me since 2004. That is 8 years of reinvestment growth over some very turbulent times in the markets. And now those reinvested dividends are actually larger than my monthly contributions. And growing!

So get started early, be patient, watch the account grow!
I think I have taken up enough of your time for now. If you have any questions at all please contact me via the email on my gravatar. We do own a small handful of DRIPS, so I know the process. I want to end with a summary of the DRIP advantages: Thanks for stopping by! Your future is worth your investment…..


1) You don’t need to be rich!:You don’t need a large amount of money to start. Usually owning one share is all that is required to enroll in a DRP.
2) Significant accumulation over time: DRPs are a cost-effective way to put stock dividends to better use — purchasing more shares of the company — than simply spending the money or having it sit in a money market account. Over a long-term horizon the paid dividends can grow exponentially!
3) Investing on a budget: Most companies allow investors to purchase additional shares through a Dividend Reinvestment Plan for nominal fees — or often no fee at all. These stock purchase provisions, allow an investor to send in as little as $10 to $50 at a time to purchase additional stock.
4) NO Commission investing!: About 100 companies have DRPs that allow investors to purchase stock at a discount to the current market price. These discounts can range anywhere from one to ten percent…with little to NO commissions!
5) Virtually ‘Painless’ building of wealth: DRPs “force” investors to buy stock on a regular basis and hold on to that stock (dollar-cost averaging). As a result, investors adopt a long-term horizon and often invest small amounts of money on a regular basis — money that they usually don’t even miss.
6) Comfortable Cash-Flow in retirement: When you reach your retirement age the accumulated piles of stock could amount to a significant cash flow if you decide to stop reinvesting the dividends and take the quarterly payout instead. ~ but please don’t do this before retirement!

7) Stock Slumps are OK: When the price of your stock goes down it is actually OK..you are buying MORE shares then. More shares = more accumulated shares for reinvested dividend shares!

Like all important financial decisions you should do a fair amount of research first.  I will leave a few links to further define and illustrate the Dividend Reinvestment Plan; in addition to the links in my post. See you next week!

Drip Investing, Step By Step

What are Dividend Reinvestment Plans (DRPs)?

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