As you’re nearing retirement, you might be feeling anxious about it or you’re excited at the possibility of what you’ll do when you finally retire. Ideally, you’re spending your time traveling and or your favorite hobbies when they retire and not worrying about paying the bills. Unfortunately, this is what many Americans are facing. According to a survey conducted by Fidelity Investments, they found that most people are not saving early enough. In addition, certified portfolio manager and financial planner with FBB Capital Partners, Kathleen Hastings, mentioned she never witnessed a soul complain about having “too much money” for retirement. She adds it sucks to be a senior, especially one with no money.
Even if you may not currently have enough for retirement, it doesn’t mean that you can’t retire. Here are a few strategies you can to if you wish to live rich enough to live comfortably.
Save More Now
If you want to retire wealthy, the first step is to start saving as much money as you can in your savings account. Thanks to compound interest, a little bit will go far no matter how small your monthly contributions may be. The longer you can contribute, the more you will have.
Let’s say you decide to put $400 away per month once you hit 25 then increased the amount by 2.5% annual and earned 7% each year. That person would have about $1.5 million by the time they are 67. Waiting a decade later to do this would mean they would only have about $66,000 at the same age.
Don’t think of savings as a choice, think of it more as a requirement. Michael Hard, certified financial planner at Mollot Hardy, says everyone should save on either a monthly or weekly basis through automation. Those that add funds to their retirement accounts can have their money taken from their paychecks or via a scheduled deposit plan. Hardy adds that setting it up like that will eliminate the chances that you stop putting money aside for your retirement. According to Fidelity’s retirement preparedness study, Americans on average, save only 8.5% percent of their earnings each year. It’s recommended that you save at least 10% –ideally 15% — of what you earn. If you can do more than that, do it.
Reduce Unnecessary Spending
Some people may just believe that they do not have enough money to put on the side to retire, which is simply not true. You can save more than you think if you carefully comb through your budget. Tom Corely, author of “Rich Habits: The Daily Success Habits of Wealthy Individuals” states everyone should look at their statements monthly. He says you are likely to unveil payments for things you no longer use or want. It also helps to shop often for the internet, phone, and TV services for the most competitive rates.
Ken Weber, author of “Dear Investor, What the Hell Are You Doing?” and president of Weber Asset Management, believes in some risk. He mentioned that most individuals believe the key to investment success is to just save. Although this is true to a certain degree, he believes people should not just store their money in an in savings vault. Weber says you have to be willing to take some risk to get the reward later. He mentioned that for every stage of life, they should be invested with as much risk as they can tolerate. Ideally, people would put a majority of their retirement savings into a stock mutual fund when you are in the 20s or 30s.
As you get older or are near retirement age, you have the choice to lower that risk by investing in fixed-income assets like bond funds or stocks. Alternatively, you can think about a target-date fund that will automatically fix your allocation of bonds and stocks.
Mollot Hardy also adds that a person should never put all of their retirement funds in one basket. The best thing you can do is to diversify your portfolio with a combination of bonds and stocks. Getting a hold of mutual funds would be even more ideal since they contain an array of bonds, stocks, or both.
If you decide you want to invest in mutual funds, monitor the expenses and fees companies charge. It is important to keep your eyes completely peeled on this one because they can eat into your returns and decrease the amount of money you can have saved for retirement. According to the US Department of Labor, if expenses and fees on your account are 1.5%, for example, you will have a balance that is 28% less once you hit retirement compared to somewhere else where the fees were only .50%. You will likely have several plans offered to you via your 401, which all have various fees, so think about switching to investments with lower rates.
If you work somewhere where your employer matches any contribution you make to your workplace retirement plan, ensure to contribute enough to get a complete match or else you are losing cash. Most will match 50 cents for every dollar. Continuing on the investment route, you can also get tax-free retirement income with a Roth when you contribute to a Roth IRA, which can help you with taxes when you’re retired. Another option is to create a side business to increase your income. You can also get a second job or start doing the hobbies you love while making money from it. One example is to think about purchasing income-generating real estate. Todd Tresidder, a financial coach and founder of FinancialMentor.com says that the trick is to buy and finance a place carefully and not rush through it. If you are thinking about working as a self-employed, you may be able to contribute to a Simplified Employee Pension (SEP) plan or solo 401k. Using either of the two will still be tax-deductible for you.
You might also want to consider downsizing your home when you’re ready to retire. Cutting costs from rent or mortgage to utility, insurance, and maintainable fees will be reduced. While you are thinking about that, you may want to relocate to a different city or state that is cheaper.
If you feel overwhelmed, find professional help from an advisor if you feel you need help creating a financial plan and want to stick with it. You should look for help from a Financial Analyst (CFA), Chartered Financial Consultant (ChFC) or Certified Financial Planner (CFP)
Biden Plan Could Mean 60% Tax Rates, But Here’s Who Will Get Stuck With Higher Taxes
New York and California may start losing high-income residents by the droves next year if Democratic nominee Joe Biden wins the election in a few weeks.
That’s because the two left-leaning states would have a combined federal and state rate over 60% under Biden tax plan.
Even New York resident and rapper 50 Cent tweeted earlier this week that despite his apparent dislike for President Trump, he said “Vote Trump” and “62% are you out of ya (expletive) mind,” when he learned about Biden’s tax plan.
According to calculations from Jared Walczak of the Tax Foundation, California residents earning more than $400,000 per year could face a combined tax rate as high as 62.6% under the Biden plan. New Jersey residents could see taxes reach 58.2% and New York would top out at just over 62%.
But somehow, it could get even worse.
Tax Rates Can Still Go Higher Under Biden
Walczak points out that if you include the contributions to the tax hikes by employers, which are often passed along to employees, the combined rates would jump to over 65% in California, 62.9% in New Jersey and 64.7% in New York City. They could still go even higher if California and New York raise taxes on high earners. This is something some legislators have proposed to try and close multibillion-dollar budget gaps.
“These rates would be the highest in about three and a half decades,” said Walzcak, “and imposed on a broader tax base than was in place previously.”
The Middle Class Will Suffer?
But Home Depot co-founder Ken Langone believes the wealthy won’t pay higher taxes at all – the middle class will.
“The middle class will not be exempt. Tragically, it will punish them. It isn’t going to punish us,” said Langone.
Appearing on Fox Business yesterday, Langone said due to Biden’s tax hikes, “the middle class will be in peril.”
He said that despite Biden saying the wealthy should pay more in taxes, the middle class will feel the effects of Biden’s tax plan. Langone said he is in favor of a tax code that is more progressive and equitable. This includes eliminating loopholes that favor the rich and large corporations.
“I don’t know if there’s any of us that have done well that will have a problem with paying more taxes, but it’s a ruse to think that hitting us and us alone is going to get the job done,” Langone said, adding ““It won’t and the middle class will be in peril and when you take money out of the hands of the middle class, you do a dramatic impact negatively on the economy.”
He said that increasing taxes on the middle class will lead to a recession.
“The problem is, when you go after the middle class, you begin to attack the backbone of the economy and we will have a bad recession. We will have a very bad recession,” Langone said.
“These are very precarious times and not the time to be screwing around,” he added.
Market Volatility Rises As Election Polls Show Tightening Race
The relatively calm markets earlier this month are giving way to more volatility as we approach the election. This is according to a team of strategists at JPMorgan.
“While it is perhaps true that during the first two weeks of October risk markets were supported by a widening of US presidential odds, which by itself implied a lower probability of a close or contested US election result, over the past week or so these odds have started narrowing again,” said a team of strategists at JPMorgan Chase, led by Nikolaos Panigirtzoglou.
According to recent polls by RealClearPolitics, in key battleground states, Democratic nominee Joe Biden leads President Trump by 3.9 percentage points, 49.1 vs. 45.2. That lead has shrunk from a 5 percentage point advantage for Biden about a week ago.
A general election nationwide poll by RCP shows a wider 8.6 percentage-point lead for Biden. However, there are many who feel those polls are not correcting for sampling bias.
MarketWatch recently interviewed Phil Orlando, the chief equities strategist at Federated Hermes. There, he said he doesn’t believe the polls accurately reflect how close the race is. In relation to this, he pointed to the surprise win by Trump against Democrat Hillary Clinton in 2016.
“Our base case is that the polls are wrong, there’s an oversampling biased error that a lot of polls aren’t correcting for,” Orlando said.
With a tightening race for the White House, volatility has returned to the market. It will also likely increase in the final two weeks leading up to the election.
A report put out yesterday by SentimenTrader showed that the CBOE Volatility Index or VIX, jumped to levels last seen during the Great Financial Crisis, and tends to rise as stocks fall as it is typically used as a hedge against market downturns.
Market analysts use the ratio to measure how speculative traders are getting. A rise in the put/call ratio means that investors are expecting plenty of volatility between now and November 3.
The VIX, which measures investor bullish or bearishness on the S&P 500 for the next 30 days, is currently near 29, well above its historical average between 19 and 20. This week alone the VIX jumped 6.3%.
Source of Volatility
Jeffrey Mills, the chief investment officer at Bryn Mawr Trust, said some of the volatility likely comes from investors trying to position their portfolios based on who they perceive will win the election. “There could be some front-loaded selling but I do feel like that’s a near-term phenomenon,” he said. But he says no matter who wins, there’s really only one place to invest, and that’s the stock market.
“There is going to be this continued pull toward equity markets — where else are you going to go when you need to earn a certain percentage to fund retirement, fund education?”
If investors are moving money today based on who they think will win the election, Daniel Clifton, head of policy research at Strategas Securities said each candidate will likely benefit different sectors.
A Biden victory will be good for stocks in the infrastructure, renewable energy and technology sectors, said Clifton.
If President Donald Trump is reelected, Clifton said there’s “huge upside” in some sectors. These include defense, financials and even the for-profits like prisons, education and student loan lenders.
Tesla Keeps Streak Intact, Posts Profitable 3rd Quarter
The winning streak continues Tesla posts a profitable 3rd quarter, it’s fifth consecutive. The EV company posted a net profit of $331 million for the three-month period ended Sept. 30. Tesla also confirmed its goal of delivering 500,000 vehicles within the year. CEO Elon Musk calls the latest quarter as Tesla’s “best quarter in history.” The company posted a record of $8.77 billion in revenue against estimates of $8.28 billion. This is an increase of 39% from a year ago. Analysts surveyed by FactSet expected sales of $8.28 billion. Shares went up over 3% at about $438 in after-hours trading. Since January, Tesla shares have grown 500%.
500,000 Deliveries on Target
Despite the pandemic, the company will proceed with its original goal of 500,000 cars in 2020. In a statement, Tesla affirmed its goal. “While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target,” it said. This entails building more cars at its Shanghai factory, and improvements in logistics and delivery.
Earlier in October, Tesla reported 139,593 vehicle deliveries in the quarter. This places the 500,000 targets is within reach. Model 3 and Model Y took up the bulk of deliveries and growth during the period. The more expensive Models S and X dropped by 12% compared to 2019. As such, Tesla started slashing prices for its higher-end models to increase demand. The Model S reduced its prices twice to $69,420.
China Remains the Crucial Market
China remains the key market for Tesla’s profitable 3rd quarter. Tesla’s auto sales in China climbed nearly 13% in September, their sixth straight monthly gain. The company’s Shanghai Gigafactory raised production due to demand. Demand for the Model 3, especially in China, led to a retooling. From 150,000 units per year, it now handles 250,000.
China’s “Golden September, Silver October” is the country’s high point in car purchases. Sales reached 2.57 million vehicles last month. The China Association of Automobile Manufacturers (CAAM) said that sales were still down. For 2020, 17.12 million vehicles got sold, which is 6.9% below last year.
Electric vehicles enjoyed brisk sales during the period. Sales increased by 67.7% to 138,000, which is the third straight month of gain. Tesla reduced its Model 3 prices by 8%, down to 249,900 yuan ($36,805).
Based on September sales, the momentum looks to carry over to October. Haitong International analyst Shi Ji expects even better numbers this month. He said: “Based on our dealer channel checks, the growth in momentum extended into the October Golden Week, as retail sales exceeded dealers’ expectations”
A Decrease in Credit Sales
While revenue rose, regulatory credits fell down from $428 million to $397 million. Ben Kallo of RW Baird observed that “Regulatory credits are a big part of the EPS beat. But that’s part of the game: Tesla’s competitors are paying them, and Tesla is reinvesting that into their factories in Berlin and Texas.”
Tesla generates extra income by selling credits. Manufacturers buy these credits to comply with carbon-emissions standards. They come from all over California, Europe, and other areas. Investors prefer seeing profits from the core business of selling cars. A Bloomberg analyst thinks that the S&P snub might be due to credit sales. Analyst Michael Dean noted “question marks about the sustainability of regulatory emission-credit sales, which are currently underpinning earnings.”
For 2021, Tesla aimed for even more increases in production. This includes its all-electric semitrailer truck and its pickup truck. The company hopes to get more cars out of its China factory. It also expects its newest plants in Berlin and Texas to start churning cars. Musk estimates the 2021 production could reach 840,000 to 1 million vehicles.
The company also laid out plans during its recent “Battery Day” event. Musk announced that the company will start making its own “tabless” batteries. These batteries improve the cars’ range and power. The improvements will help bring down the cost to produce a car. Soon, Tesla hopes to launch a vehicle priced under $25,000.
Watch this as Yahoo! Finance reports on Tesla earnings: Tesla posts a profitable 3rd quarter, it’s fifth consecutive and EPS estimates:
Are you thinking of buying an electric vehicle? If so, will you get a Tesla? Or do you see yourself holding out for more choices in the near future? Let us know what you think about EVs, and if you’re planning on getting one soon? Drop a line on the comments section below.
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