<p>Yes, those are all important, even if it means they live below their means for as long as it takes to have a healthy emergency fund, nice retirement savings, savings toward a place of their own and transportation.</p>
<p>I prefer that one contributes to the 401k to the point of company match then invest other monies to an outside Roth IRA. Usually, with a 401k, you have limited choices of funds whereas with an outside Roth IRA you have a huge array of mutual funds and ETFs to pick from. </p>
<p>The disadvantage with some IRAs is that they have a minimum investment requirement. Also, some funds offer share classes that have lower expenses than the regular share class. You may have access to those lower-fee funds via the company 401k but would be a hurdle for you if you opened a Roth outside of work. For example, Vanguard has institutional share funds that require acct balances of at least $5M. It would be hard for a young adult to invest in those funds outside of the 401k.</p>
<p>
Vanguardās Admiral shares have very low ERs, and have very attainable minimum levels. For example, Total Stock Market, a very broad equity indexed fund, has ER of 0.05% in the Admiral class, which requires a balance of $10,000. Investor shares (minimum $3,000) has ER of 0.17%.</p>
<p>5 basis points (0.05%) means that your $10,000 balance costs $5 per year in expenses. I donāt think institutional share ERs are any lower. </p>
<p>OOh, hereās a nice problem to have. Not sure DS#1 can still qualify for a Rothā¦</p>
<p>This probably has been discussed before, perhaps in a different thread. DSās company offers both a tax deferred and Roth 401k. Is there a rule of thumb on when to pick which? </p>
<p>Many advisors suggest contributing to have benefit of employer match, then fund Roth, then if you still have money, max on tax deferred.</p>
<p>We havenāt always taken advantage of Roth, but are converting on some years. When we have a 2nd income again, we can do more.</p>
<p>With kids still in college, we put money into their Roth based on their earnings (one worked summer; one has a small PT job year-round). The summer worker had 3% into their IRA, because when she has enough hours, company will match and she is already use to the money being deducted.</p>
<p>Older DD felt good when during ROTC classroom session with financial talk, she knew what he was talking about and could answer in the positive about some good planning already.</p>
<p>I am also helping by having 30 year level premium term ins policies on them both, and I will be paying the premiums. Like LTC insurance, I hope never to have a use for it in my lifetime. </p>
<p>
Why do you need life insurance on your kids?</p>
<p>Just having it in place makes it one less thing to do later. I like insurance. They are way more valuable than the ins amount. If they were married it wouldnāt be appropriate for us to insure them. I know - most financial people say kids donāt need insurance. However as I said, I just like to have it in place.</p>
<p>If you (the parent) have co-signed private loans for college, etc. for your kids ā you want insurance on them with you as beneficiary so your credit doesnāt get dinged if you canāt pay them off in full immediately. The PLUS loan folks are pretty aggressive about going after parent co-signers if G-d forbid, the student passes away.</p>
<p>S1 and DIL still live like poor college students so they can save $$. Glad they have a plan for getting a house (and have thought about where they want to live a few years down the road).</p>
<p>I think the last thing Iād care about is my credit getting dinged if one of my kiddos died. The creditors would have to wait, and if they were aggressive, they could just kiss my butt.</p>
<p>I agree, but there have been a few stories in the press about banks going after parent co-signers and the parents didnāt have funds to pay them and make the vultures go away. If there is ever student loan reform, perhaps that can be addressed.</p>
<p>We have encouraged S to max out his employer Roth account, getting the max. We figure he will only earn more as he is in his career longer and tax rates will likely also rise. S gets some match from employer but we are urging him to contribute the max. Because he also runs a business he can also contribute $17,500 to a 401k, which we are also encouraging. It is a tax advantages way of saving. </p>
<p>Young peopleās deaths are mostly from accidents; for young women it could be childbirth; if in militaryā¦They ask questions about things that increase risk - planned travel outside of US in next two years; if in military; if female applicant pg; etc. </p>
<p>I got term ins quotes through Zander Ins (advertised on Dave Ramsey). I had previously bought a policy on H because we didnāt have enough ins on him. Great way to get three lowest price quotes.</p>
<p>I decided on A+ companies (versus A - on one girl, the difference in price was $12/year). One has preferred non-smoker; one has preferred best. One is $243/year and one is $220/year - each is 30 year level premium, with death benefit of $300K.</p>
<p>Since I had cancer at age 52 (and had my LTC ins in place already) I am well aware about unexpected things that can happen that may make someone un-insurable if insurance is not already in place.</p>
<p>I didnāt even think about student debt, but that is a great point. My friend who is in credit union mgmt insisted her son take out the extra disability insurance when he took out a truck note - good thing - he had a water skeedo accident (hit his face and fell into the water - good thing someone fished him out as he was face down and knocked out) - he would have been in a big financial hole.</p>
<p>An interesting article by Floyd Norris in todayās NYT about Pensions at Risk. Although the article is mostly about multi employer pensions (specifically United Mine Workers and Central States Teamsters), I think its worth reading if you have any pensions.</p>
<p><a href=āA Strategy for Pensions at Risk of Extinction - The New York Timesā>The New York Times - Breaking News, US News, World News and Videos;
<p>What about federal and state pension systems? Should we worry that at all? I know some states are facing financial problems and some have enacted legislation to reduce benefits for future retirees, e.g. creating various tiers, while not changing benefits for current retirees. I guess states can go bankrupt too?</p>
<p>Actually, Iām not sure states can technically go bankrupt, insofar as they have unlimited taxing authority. Theyād never want to raise taxes so much of course, but the ability to tax and thereby increase assets makes it difficult to claim liabilities exceed assets. Not sure about this, though. </p>
<p>Iām hoping federal pensions are fairly secure, but who really knows these days. Suspect state pensions are also pretty secureāmore so than city or county. </p>
<p>If you look at State budgets while they are tight there are items that are not required to be paid but are issues politicians choose to fund for election reasons. NJ for example has deferred pension payments for 20+ years using the funds to either cut programs or not raise taxes. </p>
<p>The pension payment for every teacher and State worker in the entire State was to be about 1- 2% of the State budget each year. Instead of paying that $150 to 650 million each year over the last 20+ the State had various rebate programs, business tax credit programs etc without paying for them. Now if you also add in all the Board of Education budgets to the State budget the cost of pensions for teachers and State workers was an insignificant % of those totals.
The pension cost for teachers is carried entirely by the State so is actually zero for every local budget.</p>
<p>My back of a napkin calculation shows me the formula actually works if both parties adhere to it. In NJ the pension has averaged a ROI of 8.9 over the past 30 years. </p>
<p>HImom, I have to do something about my eyes, or more likely, my mind. Your message kept appearing as, āIām hoping federal prisons are fairly secure, but who really knows these days. Suspect state prisons are also pretty secureāmore so than city or county.ā</p>
<p>Letās hope those prisons and pensions are secure!</p>
<p>I thought the states and cities could ditch their pension obligations if they went bankrupt. Isnāt that what happened with Detroit? I donāt quite remember.</p>