The MyRA Follow-Up

MyRA UpdateBack in January, President Obama introduced the MyRA – My Retirement Account. As noted by President Obama, the program’s goal is to encourage millions of Americans to build savings that can supplement Social Security benefits.

Considering that Americans already have access to a myriad of savings and retirement plans including 401(k) and 403(b)s; traditional and Roth IRAs, Rollover IRAs, health savings accounts, and 529 college savings plans, many people wondered how the MyRA was different and what exactly did it add to the mix?

Essentially, the MyRA is a type of Roth IRA. It allows after-tax dollars to grow tax-free until retirement. Geared toward lower-income Americans, one objective is to encourage people to get in the habit of saving. Supporting that idea, this new plan will allow people to open a MyRA with as little as $25, and to contribute as little as $5 in regular payroll deductions. As many have noted, private financial services companies could offer such small accounts, however, they don’t because it’s not profitable for them to do so.

What are the key overarching outlines of the plan in addition to the $25 required to open an account and the $5 minimum requirement for payroll deductions? The MyRA is available only to those who don’t have a retirement plan through their employer, there are no matching contributions, it is only available to whose household income is less than $191,000 each year and once the account balance hits $15,000 or after 30 years (or earlier if desired), it must be rolled into a private Roth IRA.

One of the things that caught my attention was the proclamation by President Obama that the investment returns will be the same as those enjoyed by federal workers who invest in the Government Securities Investment Fund (G Fund) and offered via the Thrift Savings Plan (TSP). As noted on the TSP site, the G Fund assets are managed internally by the Federal Retirement Thrift Investment Board. The G Fund buys a non-marketable U.S. Treasury security that is guaranteed by the U.S. Government. This means that the G Fund will not lose money.

As a federal employee that contributes to TSP, I am aware of the low fee – 0.027% – associated not only with this particular fund, but all of the funds available in the plan. Interestingly, Jack Lew, Secretary of the Treasury, noted that unlike federal workers who invest in the G Fund, MyRA customers will pay no fees. The only thing better than ultra-low fees are no fees!

I don’t believe this new program alone will raise our dismal savings rate or solve the retirement crisis. However, based on my understanding of the program, I do believe anything that encourages Americans to save more, and provides a low-cost mechanism for doing so, is a step in the right direction.

Initially there wasn’t a lot of information on the U.S. Treasury website. Most of the outlines of the plan were covered in this White House Fact Sheet. However, the Treasury Department now has a MyRA page on their ReadySaveGrow website. While the MyRA may not be right for all SavvyReaders, I encourage you to pass along information that might be helpful to others.

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A SavvyInterview – Talaat & Tai

Talaat and TaiI met Talaat and Tai through social media as they were standing up their blog, His & Her Money. I like the idea that a couple that are actively managing their finances together – working through their differences – are willing to share their experiences with others through their blog. I invited them to ‘sit’ for A SavvyInterview once their blog was up and running. Well, their blog is up and here they are. I hope you enjoy meeting this couple that started off as high school sweethearts, got married and started a family.

RetirementSavvy: Tell us about your blog. What was the catalyst to start it?

Talaat & Tai: is a blog that seeks to help as many people as possible achieve financial independence. We’ve witnessed too many people struggle with their finances. Not too many people know the basics of personal financial management. Our goal is to see that change. We want to shift people’s mindsets to begin to see their money as a tool to freedom, instead of a means to acquire more “things.”

The catalyst that started us on this journey was first our personal story. We got married, but we both handled money differently. One of us was good with money, while the other was not. One had a great credit score, and the other did not. One had debt, and the other did not. So, were we not compatible to have a great marriage? We beat the odds and figured this whole money thing out TOGETHER, and became debt free!

After having conversations with other couples about financial stewardship, we found that we absolutely loved helping people in this area of their lives. People locally who are in our lives have often sought us out to answer questions that they have about their money. We figured that we could help even more people by starting a blog and putting the information out for all to see.

RS: What is the one personal finance concept you believe someone seeking financial freedom should understand and practice?

T&T: The one concept that we wish more people would grasp, is that there is no such thing as “good” debt. We believe that all debt is bad. We believe that debt has far too many people trapped in bondage. People are making life decision based on the amount of debt that they are in. That is no way to live your life. You should not have to take a job that you are not particularly fond of, simply because it will pay you enough money to keep up with all of your debt payments. Whether or not you and your spouse decide to have children should not solely be based on the fact that you are drowning in student loan debt. We want people to understand that debt is not good and that they should work tirelessly to eliminate every shred of it in their lives. It is our conviction that becoming debt free allows you to build a life that is reflective of who you are as a person. We encourage people to strive to live a life that is full of passion and purpose, instead of debt and depression.

HandH LogoRS: What is the one area of personal finance where you two have differing opinions or different practices?

Talaat: We have differing opinions when it comes to whether or not credit cards are necessary to have. The biggest reason for that is because we have had differing experiences with the use of credit cards. I started my adult life by accumulating TONS of credit card debt, because I didn’t have good sense when it came to finances. It took a ton of hard work and a paradigm shift in thinking about money, before all of that debt was eliminated. However, being in financial quick sand like that left some scars. I went from one extreme to the other. I went from racking up multiple credit cards, to not wanting to have anything to do with another credit card ever again.

Tai: I on the other hand, have always been wise with my money, even from an early age. I have had the same credit card since I was in college. I have always paid off my balance at the end of every month and have never once been in debt. In our marriage we found a middle ground by only having one credit card that we pay off at the end of every month, whenever we choose to use it.

RS: What was the best financial advice you ever received? The worst?

T&T: The best financial advice that we have ever received was to get out of debt and stay out. The American dream has seemed to become one that is filled with debt payments. Whether it is a mortgage, a couple of car payments, furniture bills, heck you can even go and finance yourself a new pet dog. We’re so grateful to have been advised on the dangers of falling into these types of trapping and ensnaring ourselves with a bunch of debt. Our lives were truly revolutionized by this advice and we have never looked back sense.

The worst advice was to take out a line of credit on our primary residence in order to pursue investment real estate. Absolute disaster! We thought it would be a great idea to go into the real estate “flipping” game since it looked so easy on all those great television shows. Therefore we took the line of credit on our home and purchased an investment property that we renovated and placed it back on the market hoping for our big payday. Unfortunately, we listed the property on the market right when the real estate bubble burst. We were now stuck with TWO properties, our primary and “investment” residence, that we were shelling out money to maintain every month. Talk about a nightmare. We ended up taking a big loss and it took us quite a bit of time to recover.

RS: How do you define wealth?

T&T: Wealth for us is not defined by the amount of money we have or don’t have. It is first and foremost, our relationship with God, family and friends. After that, a bank account with a lot of digits would be nice too…LOL!

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Annuities – A Retirement Income Stream Option?

Insurance - AnnuitiesDuring the course of previous discussions, we have identified three general stages in an individual’s investment lifecycle: building a fiscal foundation (conducted during your 20s and 30s), accumulating wealth (occurring between the early 40s and mid-50s), and pre-retirement, the five-year period prior to your desired retirement age.

During the pre-retirement stage, debt is eliminated and a plan – considering the withdrawal rate (e.g. the 4% rule) and the order of withdrawal from the various retirement accounts – to draw down the retirement nest-egg is developed.

With a sufficient nest-egg in place, debt eliminated, and an understanding that the nest-egg has to be drawn down in a manner to ensure that it will last 30+ years if necessary, the question then becomes, “How can I turn my retirement savings into a reliable retirement income and what type of investments should be held during the retirement period?”

Last week we talked about one potential option. Income funds. These types of funds are geared toward individuals already in or entering retirement. As the name suggests, an income fund is a type of mutual fund that emphasizes current income, either on a monthly or quarterly basis. These funds attempt to meet the objective of providing steady income throughout retirement by holding some combination of government, municipal, and corporate debt obligations, preferred stock, money market instruments, and dividend-paying stocks.Annuities

This week we take a look at annuities as an option for turning your retirement savings, your nest-egg, into a reliable retirement income stream. There are basically three types of annuities: variable, fixed, and equity-index. These can either be immediate (you make a single lump-sum payment and set the starting date for the payout to begin sometime in the very near future) or deferred (you build your retirement savings over a period of years, deferring when you begin to receive the income).

Pros and Cons of Annuities – How to Evaluate Annuities [New Retirement]

Variable Annuities: A variable annuity allows individuals to invest their money within a range of mutual fund-like investments options offered by an insurance company. These investments are referred to as sub-accounts. As the name suggests, the returns of a variable annuity are not stable. They will vary with the ups and downs of the stock market. There will be downside risks as well as potential upside gains. Generally, over a longer time horizon, a variable annuity invested in a stock sub-account will likely provide a much better opportunity for inflation-protected income than a fixed annuity.

Fixed Annuities: In short, a fixed annuity offers a guaranteed minimum rate of return for a stated period of time. While a fixed annuity will provide a stable retirement income, the fixed return is very likely to be eroded by inflation. Some fixed annuities do offer the option to have the payments increase each year. However, as you might suspect, there will be a cost associated with that feature. The cost of the inflation protection aside, these types of annuities generally cost less compared to variable annuities.

Equity-index Annuities: A newer flavor of annuity, this type earns interest that is linked to a stock or other equity index. One of the most commonly used indices is the S&P 500. They differ from other types of annuities because of the way it credits interest to your annuity’s value. Most fixed annuities only credit interest calculated at a rate set in the contract. Conversely, equity-indexed annuities credit interest using a formula based on changes in the index to which the annuity is linked. The formula decides how the additional interest, if any, is calculated and credited. How much additional interest you get, and when you get it, depends on the features of your particular annuity. Additionally, equity-indexed annuities, like fixed annuities, also promise to pay a minimum interest rate. That rate will not be less than this minimum guaranteed rate even if the index-linked interest rate is lower. The value of the annuity will also not drop below a guaranteed minimum.

What Annuities Offer a Retirement Plan [Financial Advisor]

There you have an overview of the three types of annuities. While I have touched on some of the pros and cons, instead of repeating what is already out there, I have included the links to a few articles that do a good job of laying them out in greater detail. As with all decisions regarding retirement planning, I strongly recommend you conduct your due diligence, paying close attention to all fees/costs, prior to committing to any of these products.

Are annuities already part of your retirement portfolio?  If not, do you see them as part of your future?

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#CreamCityHustle – Update #3

September 6th – Update #3

BrianSome great news. Mr. Brian Tramuel, a well-known, long-time reader has agreed to come aboard as the Editor. I reached out to Brian because I know he shares a passion for personal finance and he possesses a flair for writing. Take a moment to check out his work at I’m certain he’ll catch the occasional grammatical error missed by myself and my home editing team – my wife and brother – but more importantly, he’ll ensure that there is a flow to the story that keeps readers engaged and help me pull off the blending of real personal finance concepts shared within the framework of a fictional thriller. With that, below is a preview of a little more material from the book. In this passage, Marcus is speaking with a young lady, a teller at a bank, he has been trying to date:

Sensing an opening, he asked, “When are you going to let me take you out to dinner?”
Without missing a beat, she replied, “As soon as you ask, probably.”
Taken aback for a minute, but just a minute, Marcus had to gather his composure. “Well let’s see, I’m working tonight and tomorrow, how about Friday night?”
“That’s fine.”
“Can I get your …” Looking down, he saw that she had written down her number on the receipt she had just slid his way.
“Have a good day, Mr. Williams. Next guest in line, please.”


August 23rd – Update #2

Cream City Hustle CoverThe novel is going well. In fact, I suspect I will be able to release it earlier than originally planned. Perhaps around the end of September. Currently, the novel is at about 36,000 words. Based on where story is and how I plan to conclude it, I suspect it will end at around 55,000 – 60,000 words.

As I indicated in the Introduction to Cream City Hustle, I was looking for a name for the story’s antagonist. There were a lot of good suggestions. Family members had suggestions, some were made here on the blog and a few were made on Facebook. Ultimately I settled on Caine, short for Cocaine, the suggestion submitted by long-time reader Brian. Here is a short passage that addresses how he came to possess the nickname:

Earned in Chicago – where he cut his teeth in the drug game – Caine was proud of the name bestowed upon him, and the fact that in a mere four years, he had become the largest dealer of Cocaine in the city.

And below is where Marcus, the story’s protagonist, and Caine meet for the first time:

They made their way down the hall toward the door at the end. Just short of the door, Drake guided him to a stop and tapped lightly on the door. “Yeah,” a voice called out from the other side. “Watch him,” Drake instructed his partner who had taken up a position behind Marcus’ left shoulder, as he opened the room’s door and let himself in.

An indecipherable, hushed conversation was all that Marcus could hear from the other side of the door. Moments later, the door opened and Drake waved Marcus in. Marcus stepped in a few steps with his shadow close behind. “That will be all. Thank you, Ricky,” said the man seated in the chair. “Yes, Sir,” replied Ricky as he retreated from the room, closing the door behind him.

The room was dark. Darker than what was natural. The soft glow from the only source of light in the room, a small lamp in the corner, illuminated why. Behind Caine’s left shoulder, the only window in the room had been covered with a black drape. No sunlight or moonlight was going to pierce that heavy cloth.

Drake and Marcus just stood there and Caine sat in his chair. Even seated, it was clear that this was a big man. Marcus figured he was two to three inches taller than himself and easily 40 pounds heavier. This was a big brotha. As he took in the whole scene, the two images that came to his mind as he looked at Caine in his oversized chair were Robert DeNiro playing Luis Cyphre in Angel Heart and the Joffrey Baratheon character in Game of Thrones. Caine certainly had a high opinion of himself, sittin’ in that big-ass chair.

I hope you enjoyed the preview and I look forward to your feedback.


August 12th – Update #1 

Below is the first paragraph from my novel in progress, Cream City Hustle. The opening paragraph introduces the story’s protagonist, Marcus. At this point, I have about 13,000 words written and it is going well as I have a very good idea where I want the story to go. Also of note, some subtle changes have been made to the book’s cover. See Below. The leaf has been brought to the fore, weaved between the ‘L’ and ‘E’ in Hustle.

“Damn!” Marcus swore under his breath as he blew into his cupped hands, trying to warm them and fend off the cold November air. One day, not soon unfortunately, he would leave this city behind. As much as he loved catching the occasional Brewer’s game in the spring, spending time at Lake Michigan in the summer and watching the Packers in the fall, he hated winters in Milwaukee, his hometown and the place he had called home all 19 years of his life. Absolutely hated it! “What did you say?”asked Train. “I hate the snow and it’s too damn cold out here,” Marcus told him, blowing more hot air into his cupped hands. “How much longer will we have to wait?” It was a rhetorical question of course. Like him, Train had no idea how much longer they would have to wait for Trevor, Marcus’ supplier.


August 6th - Introduction to Cream City Hustle

I recently started my first novel, Cream City Hustle, a personal finance thriller set in Milwaukee. I’m looking for a good name (nickname) for the antagonist, a would be drug kingpin. Any suggestions? I’ll be sure to give a shout out in the Acknowledgements to the person that comes up with the chosen name when the book is published.

I plan to offer updates as I make progress. Look for a preview of the first paragraph or two next week. I look forward to getting reader feedback.

This is the working book cover…

Cream City Hustle Cover

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MoneyConscious Student

Money Conscious StudentI share an affinity with David and John, authors of #MoneyConscious Student. Through our connections on various social media and shared interest in personal finance, I have come to learn that they reside in Denver (where I grew up), they enjoy wine (I love a good glass of red) and that we share a passion for trying to help others achieve financial freedom.

As they note on their blog, Debt Free Guys, their mission is to help each person become Money Conscious which results in the elimination of debt and the empowerment to achieve financial success.

Debt Free GuysLike my own struggles, touched on in my book, David and John confide that despite having had thirteen years of experience working in financial services between them, they were financial messes, living in a basement apartment with $51,000 of combined credit card debt.

The pair accurately note that far too many people go through their financial lives unconscious; hence the title of the #MoneyConscious series and the first book in the series, #MoneyConscious Student, which focuses on young people and the challenge of paying for education beyond high school. John and David noted that they start the series with students because they believe the skyrocketing cost of college tuition is one of the greatest long- term threats to the U.S. economy. I absolutely agree with their assessment.

MoneyConscious StudentThe goal of #MoneyConscious Student, as articulated by John and David, is to prepare students to start their adult lives debt-free. Though short, at only 19 pages in the .pdf version I read, the book touches on ways students can financially prepare for post-secondary school, manage their finances while still in school, and explore alternatives to four-year colleges.

I appreciate the way John and David offer succinct, concrete guidance for paying for a post-secondary education while keeping debt in control. Additionally, as a retired Soldier, I salute the fact they note that military service is a viable option, one often overlooked by too many parents and students.

Are you a student, or the parents of a student looking for a guide to help you navigate the potentially deadly waters of financing education? Look no further. #Money Conscious Student is available at Smashwords, iTunes and Barnes & Noble for the low, low price of FREE, through the end of September.


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