Being Impatient With Your Money

You are looking at your quarterly statements and see over the past few years your 401(k)/403(b) is growing BIGGER AND BIGGER. You may start looking at what you can do NOW with that money. Vacation to Europe, new car, or your child's education. "Hey I have years before I retire".

But wait, what is the cost of you being Impatient!! You are not 59 1/2 years old, so you have to pay 10% in penalty charges and ordinary income tax. In the case of 403(b)/Roth 403(b) annuities you have to pay surrender charges. You can use  the withdrawal as a loan, but have to pay it back within a certain period of time (usually 5 yrs) plus interest.

That's money you have taken out that is no longer generating interest and compounding interest (interest on top of interest) for you. Instead of maybe $300,000 at the full retirement age of 67(if you are born after 1959), you may have $200,000. A big difference when people are living more into their 80's and 90's (at least 20 years in retirement).

However, there are certain instances in which you can get access to your money with minimum penalty, including hardship for unemployment and eviction from your house, if there is no other resources.

Read more  Rules for Early Withdrawal from a Retirement Fund

What are your thoughts on early withdrawal of your retirement fund? Are you impatient when it comes to your retirement fund?

Rhonda W.

Retirement vs Travel, Emergency Fund, & Debt Payment

When I tell people I'm a Retirement Specialist with ValuTeachers, they want to know for themselves how do I fund my own retirement, "I have high credit card debt", "I want to buy a house", "I want to pay for my kids College education", etc.  My thought is why can't you do both: Fund your Retirement and your other obligations/hobbies at the same time.

The Trevi Fountain in Rome, Italy.
Personal photo from Rhonda W.

TRAVEL: I love to travel and give it priority in my life. You learn so much from travel. My twin sister Sharee recently shared our love of travel on the Holstee Manifesto page. Prior to 2009 I didn't have a car payment so I saved what I used to spend on car payments to fund my retirement by maxing out my Roth Account ($5,000). My income in Education was not very high so I supplemented my income with various part time jobs (SAT proctoring, working football games, concert events, family shows, etc). Many people saw me at so many places they wondered when I sleep. I make it a priority to not only fund my retirement, but also Travel. 

EMERGENCY FUND: This is an area I need to improve on. You need to have 6 months to a year worth of monthly expenses in your Emergency fund. I have used my emergency fund to pay for unexpected expenses (car maintenance, health expense, etc). You can still do both: Fund your Retirement and your Emergency Fund.

DEBT PAYMENT: In 2009 I was in a car accident. Thus, I had to make car payments again. I bought a used car. With this new payment I wasn't able to finance my Roth Account to the max or fund my emergency account at the level I felt comfortable with. However, I still made it a priority to pay off my credit card balance each month. If I'm not able to pay off the full balance, I pay at least half of what I placed onto the card that month. I use Reward Cards so I get cash back or can redeem the rewards for Gift cards(great to redeem as a Birthday and Anniversary gifts). I still fund my retirement and pay down my debt.

The point is even if you have a hobby (in my case travel), funding an emergency account, and/or paying your credit cards, you still need to fund your retirement account. The standard amount to save is 15% of your gross pay. I looked at my gross pay the other day, took 15%, and it gave me an amount I should be investing. I looked at the actual figures and I was paying $5 more than I should. I was investing 7% into my State retirement fund, $100 into a 403b(LSW/National Life Group), $100 into a Roth 403b(LSW/National Life Group), and $25 into a Roth IRA with Edward Jones Investment.

You can do this. Go ahead and invest in your retirement. Whether you are in the education profession/non-profit sector or not remember to invest first in your State Retirement and then other supplemental places (Roth IRA, Traditional IRA, 401k, 403b, Roth 403b).

Rhonda W.

August 26th is Women's Equality Day

Hi my name is Rhonda Washington and on August 6, 2012 I became a part-time Retirement Specialist with ValuTeachers. I continue to work full-time at a Technical College in Columbia, SC. In addition, I moonlight as a filmmaker/videographer. I have an undergraduate degree in Business Management from Clemson University, Master's degree in Sport Management from Georgia Southern University, and in 2010 an MBA from Webster University.

Picture from catalisthealth.com

I recently read a National Life Group (which ValuTeachers is associated with) article that August 26th was officially declared Women's Equality Day by President Obama last year. On that date in 1920, the 19th Amendment to the U.S. Constitution was signed, giving women the right to vote.

In terms of finance this date reminds me that women need to be educated on their finances. Specifically, investing, whom they leave up to their husband. What if you get a divorce? Your husband dies unexpectedly? What if you remain single and never marry?

Read More Women's Financial Responsibility Grows Faster Than Knowledge

Women are the least likely to save for their own retirement, instead focusing on their kids, husband, and parents need. I encourage women to prepare for your future security by participating fully in the retirement plans by your employer. Not convinced. This year, the Council of Women and Girls released Women in America: Social and Economic Indicators, the most comprehensive report in 50 years on the status of women in our country. The report sheds light on issues women face in employment, crime, health, and family life.

What does equality mean for women who participate in retirement plans? 
Women earn less and participate for fewer years in the workplace than men, resulting in lower retirement benefits. If you work in the field of education or non-profit organization, you can contribute for 2012 up to $17,000 to your 403(b) plans. If eligible for the catch up amounts, you can contribute an additional $5,500 for those 50 or older.

Continue reading my future blogs as I post about how I became financial savvy and can help you as well.

Rhonda W.