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We all have money concerns, but for Black Americans they are multiplied by many factors endemic to our society and our history. Let’s explore some practical tips to overcome them.
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• Pay off high interest debt. Like credit cards.
• Build a 3-month emergency fund. Be cash ready in case of job loss.
• Maintain health insurance.
• Consolidate those student loans.
• Consider Investing, learn about mutual funds.
• For peace of mind, do a will.
• Consider term insurance to help protect your loved ones from the unexpected.
• Join your company or union retirement plan. Get those matching contributions.
• Pay bills on time to avoid late fees.
• To help you save, start a monthly budget to track expenses.
• Always be ready for any health situation. Consider hospital indemnity insurance and long-term care coverage.
• One goal is to turn your retirement savings into retirement income. An annuity is one way.
• Starting investing for your retirement. Consider a financial professional to help you.
• Try to pay off your mortgage faster. You could save thousands on interest.
• Now build a 1-year emergency fund. You’re ready for anything.
• Review your life insurance to ensure it can cover all needs.
• Increase payments to reduce high-interest debt.
• The more you increase retirement plan contributions, the more for retirement.
• Try to go to 6 months for emergency savings.
• Contribute to a health savings account (HSA) with your employer or union.
• If you ever got really sick, critical care insurance, can help. It pays you cash to help cover bills.
• Consider permanent life insurance as it won’t expire, as long as you pay the premiums.
• Pay down non-mortgage, long-term debt.
• Keep feeding your employee or union retirement plan. When you’re older, you can save even more.
• Adding more to your health savings accounts can help with future medical bills.
75%
Did you know
Black Americans feel they need more life insurance
1
"2021 Insurance Barometer Study, LIMRA and Life Happens."
"Employee Benefit Research Institute, 2021."
"Federal Reserve Board, 2019."
"The Economic Policy Institute, 2019."
Black Americans report having a three-month emergency savings fund
2
Black Americans are optimistic about their financial future
3
90%
Black Americans report having a retirement savings plan
4
Did you know that 75% of Black Americans feel they need more life insurance.
Template: 1000797-00014-00 © 2023 Prudential Financial, Inc. and its related entities, Prudential, the Prudential logo, the Rock symbol, Prudential LINK and LINK by Prudential are service marks of Prudential Financial and its related entities, registered in many jurisdictions worldwide.
• Build a 3-month emergency fund. Be cash-ready in case of job loss.
did you know that 75% of Black Americans report having a three-month emergency savings fund
did you know that 75% of Black Americans are optimistic about their financial future
did you know that 90% of Black Americans report having a retirement savings plan
reference 4. The Economic Policy Institute, 2019.
Save and invest for a more secure financial future with these timely insights.
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We all have money concerns, but for Black Americans they are multiplied by many factors endemic to our society and our history. Let’s explore the challenges and offer some practical tips for individuals striving to overcome them. By Salene Hitchcock-Gear President of Prudential Individual Life Insurance.
PLAN your goals
The Current View At the end of 2020, a full quarter of Black Americans said they were unemployed, compared with 19% of white Americans, and more than half of Black Americans had an annual household income of less than $30,000, according to the Prudential Financial Wellness Census, compared with 36% of the overall population. Given such challenges, it’s no wonder that Black Americans are 10 percentage points more likely than white families to cite financial issues as the biggest concern facing them and their families right now, according to a report from the Kaiser Family Foundation. Here’s a look at some of the biggest financial challenges facing Black Americans and strategies to address them: 1. Black students have lower levels of access to financial education. In states that do not require personal finance education in high school, only one in nine students has access to a standalone personal finance course in high school. That number falls even further —to one in 14 students—in schools with primarily Black and Brown students, according to Next Gen Personal Finance. Take action: If you are a parent or have children in your life, talk about the basics of personal finance. Setting a budget, managing what you have, and setting aside whatever you can as often as you can are easy concepts to discuss. These simple conversations start a habit of talking about financial matters and getting conversations going. There are plenty of resources to help with this, including books, podcasts, and newsletters. If you need some finance 101 guidance, consider tapping into content available through your workplace benefits (we have a quick guide), or seek out news outlets, blogs, and other online portals for more information. Talking to our younger generation about money is a key first step to making finance a focal point of learning. 2. Black households make less money than their white peers. After controlling for education, years of experience, and occupation, there’s a median annual pay disparity of $2,000 for Black women and $1,100 for Black men, according to PayScale. Over a lifetime of earnings, those differences can add up to hundreds of thousands of dollars. Take action: In today’s tight labor market, employees have more leverage to negotiate for a higher salary—or to move to an employer that offers better pay. In addition to your salary, you’ll also want to look at other components of the overall compensation, such as health insurance, retirement savings, or paid leave programs. If you feel like you are stuck in your current situation with few local options, remote work is more plentiful today than ever. Finally, if you plan on speaking to your current employer about a raise, put together a list of your accomplishments and skills to prepare for your conversation. It never hurts to reflect on and communicate the value you bring. 3. Black Americans have higher debt levels and often pay more interest on those debts. The median debt-to-asset ratio for Black households is 46.8%, compared to just 29.5% for white households, according to the Employee Benefit Resource Institute. Black Americans were also more likely to have to pay more than 40% of their income toward debt. Take action: Make a plan to pay down your debt. Our debt repayment calculator can help you decide which debt to pay down first—and where to go from there. If you have student loans, investigate whether you would qualify for federal student loan repayment programs or have access to a workplace student loan assistance plan. Your debt repayment outcomes will improve with shopping for the best possible terms. After that step, refer to strategy #2. More income will of course help you reach your goals faster. Finally, when it comes to repaying debt, be aggressive but wise. It will be beneficial to put a plan together that allows for creating an emergency fund if you do not have one. Many re-payment plans can get derailed by an unexpected large expense that leads to more borrowing. 4. Black families are less likely to own homes—a significant source of wealth generation. At the end of 2020, 44% of Black households owned a home, compared to the three-quarters of White Americans who own property, according to McKinsey. Consider the reference to the GI Bill which created home ownership wealth for White Americans, including the ability to pass on property wealth to the next generation. The disproportionate number of Black mortgage holders with distressed loans during the 2008—2010 financial crisis also impacted overall home ownership levels. Take action: Home ownership is widely viewed as a cornerstone for financial stability and opportunity to create wealth. It is for many, their most valuable asset. Along with the opportunity for your home to grow in value, tax benefits can also be helping with the overall cost. Consider your opportunities for home ownership and plan. If you already have a home, ensure that you have the lowest financing rates available as mortgage rates are still near all-time lows. If you need to work on your credit score, start by understanding what is holding your score down so that you can act as soon as you hit the right level. If this is your first home, talk to someone you know who owns a home. Budgeting and preparing for home ownership will add many additional expense items you will need to include in your overall budget. Taxes, utilities, maintenance, and other costs vary depending on the size of the home and your geographic location. When you are ready to buy a home, ask your lender whether they have any special programs to assist first-time home buyers. An FHA (Federal Housing Administration) loan, for example, can allow you to purchase a home with as little as 3.5% down, while a Community Seconds loan could provide secondary financing to cover a down payment and closing costs. 5. Black Americans are less likely to participate in the stock market. While more than half of white Americans own some equities, that number falls to about a third for Black families, according to data from the Federal Reserve. Investing in stocks is an important means of building wealth over time and generating the returns necessary for retirement. Take action: For many people, the easiest way to start investing in the stock market is through their workplace retirement plan. If your employer offers a retirement savings plan, make sure you contribute enough to earn any matching contribution your employer offers. Also be sure to evaluate the investment options and get the assistance and information you need from your employer to select an investment approach that is right for you. If you start with a low percentage contribution, you can typically increase the amount you save over time (some companies even let you do this automatically), with the goal of saving at least 10% to 15% of your income for retirement. The compounding effect of investing money over time can often help you accumulate more than you think. Related Items Editor’s note: This article first appeared on Kiplinger.com
“
”
There are many well-known historical disparities in the American financial system that have contributed to the current wealth gap between Black Americans and their White peers. The denial of access to wealth-building homeownership and education benefits in the GI Bill, redlining, and loan rejections for businesses are several critical components of today’s widely discussed racial wealth gap. Throw in historically lower wages and education gaps and you find there is a staggering difference in wealth by race. White families have roughly eight times the wealth of Black families, according to The Brookings Institution. This historical context is critical in understanding that individual achievement must be matched with policies that address the framework that has yielded this result. While there is much to do to address the broader systemic issues, every day that goes by is an opportunity to shore up individual situations. There are many steps to building and creating a bright financial future, and time is of the essence. Time and money go hand in hand in the accumulation of savings, assets, and wealth. So, while we work on the broader issues, let us look at what Black Americans are saying are their biggest concerns and identify strategies to work on them now.
There are many well-known historical disparities in the American financial system that have contributed to the current wealth gap between Black Americans and their White peers. The denial of access to wealth-building homeownership and education benefits in the GI Bill, redlining, and loan rejections for businesses are several critical components of today’s widely discussed racial wealth gap. Throw in historically lower wages and education gaps and you find there is a staggering difference in wealth by race. White families have roughly eight times the wealth of Black families, according to The Brookings Institution. This historical context is critical in understanding that individual achievement must be matched with policies that address the framework that has yielded this result. While there is much to do to address the broader systemic issues, every day that goes by is an opportunity to shore up individual situations. There are many steps to building and creating a bright financial future, and time is of the essence. Time and money go hand in hand in the accumulation of savings, assets, and wealth. So, while we work on the broader issues, let us look at what Black Americans are saying are their biggest concerns and identify strategies to work on them now. The Current View At the end of 2020, a full quarter of Black Americans said they were unemployed, compared with 19% of white Americans, and more than half of Black Americans had an annual household income of less than $30,000, according to the Prudential Financial Wellness Census, compared with 36% of the overall population. Given such challenges, it’s no wonder that Black Americans are 10 percentage points more likely than white families to cite financial issues as the biggest concern facing them and their families right now, according to a report from the Kaiser Family Foundation. Here’s a look at some of the biggest financial challenges facing Black Americans and strategies to address them: 1. Black students have lower levels of access to financial education. In states that do not require personal finance education in high school, only one in nine students has access to a standalone personal finance course in high school. That number falls even further —to one in 14 students—in schools with primarily Black and Brown students, according to Next Gen Personal Finance. Take action: If you are a parent or have children in your life, talk about the basics of personal finance. Setting a budget, managing what you have, and setting aside whatever you can as often as you can are easy concepts to discuss. These simple conversations start a habit of talking about financial matters and getting conversations going. There are plenty of resources to help with this, including books, podcasts, and newsletters. If you need some finance 101 guidance, consider tapping into content available through your workplace benefits (we have a quick guide), or seek out news outlets, blogs, and other online portals for more information. Talking to our younger generation about money is a key first step to making finance a focal point of learning. 2. Black households make less money than their white peers. After controlling for education, years of experience, and occupation, there’s a median annual pay disparity of $2,000 for Black women and $1,100 for Black men, according to PayScale. Over a lifetime of earnings, those differences can add up to hundreds of thousands of dollars. Take action: In today’s tight labor market, employees have more leverage to negotiate for a higher salary—or to move to an employer that offers better pay. In addition to your salary, you’ll also want to look at other components of the overall compensation, such as health insurance, retirement savings, or paid leave programs. If you feel like you are stuck in your current situation with few local options, remote work is more plentiful today than ever. Finally, if you plan on speaking to your current employer about a raise, put together a list of your accomplishments and skills to prepare for your conversation. It never hurts to reflect on and communicate the value you bring. 3. Black Americans have higher debt levels and often pay more interest on those debts. The median debt-to-asset ratio for Black households is 46.8%, compared to just 29.5% for white households, according to the Employee Benefit Resource Institute. Black Americans were also more likely to have to pay more than 40% of their income toward debt. Take action: Make a plan to pay down your debt. Our debt repayment calculator can help you decide which debt to pay down first—and where to go from there. If you have student loans, investigate whether you would qualify for federal student loan repayment programs or have access to a workplace student loan assistance plan. Your debt repayment outcomes will improve with shopping for the best possible terms. After that step, refer to strategy #2. More income will of course help you reach your goals faster. Finally, when it comes to repaying debt, be aggressive but wise. It will be beneficial to put a plan together that allows for creating an emergency fund if you do not have one. Many re-payment plans can get derailed by an unexpected large expense that leads to more borrowing. 4. Black families are less likely to own homes—a significant source of wealth generation. At the end of 2020, 44% of Black households owned a home, compared to the three-quarters of White Americans who own property, according to McKinsey. Consider the reference to the GI Bill which created home ownership wealth for White Americans, including the ability to pass on property wealth to the next generation. The disproportionate number of Black mortgage holders with distressed loans during the 2008—2010 financial crisis also impacted overall home ownership levels. Take action: Home ownership is widely viewed as a cornerstone for financial stability and opportunity to create wealth. It is for many, their most valuable asset. Along with the opportunity for your home to grow in value, tax benefits can also be helping with the overall cost. Consider your opportunities for home ownership and plan. If you already have a home, ensure that you have the lowest financing rates available as mortgage rates are still near all-time lows. If you need to work on your credit score, start by understanding what is holding your score down so that you can act as soon as you hit the right level. If this is your first home, talk to someone you know who owns a home. Budgeting and preparing for home ownership will add many additional expense items you will need to include in your overall budget. Taxes, utilities, maintenance, and other costs vary depending on the size of the home and your geographic location. When you are ready to buy a home, ask your lender whether they have any special programs to assist first-time home buyers. An FHA (Federal Housing Administration) loan, for example, can allow you to purchase a home with as little as 3.5% down, while a Community Seconds loan could provide secondary financing to cover a down payment and closing costs. 5. Black Americans are less likely to participate in the stock market. While more than half of white Americans own some equities, that number falls to about a third for Black families, according to data from the Federal Reserve. Investing in stocks is an important means of building wealth over time and generating the returns necessary for retirement. Take action: For many people, the easiest way to start investing in the stock market is through their workplace retirement plan. If your employer offers a retirement savings plan, make sure you contribute enough to earn any matching contribution your employer offers. Also be sure to evaluate the investment options and get the assistance and information you need from your employer to select an investment approach that is right for you. If you start with a low percentage contribution, you can typically increase the amount you save over time (some companies even let you do this automatically), with the goal of saving at least 10% to 15% of your income for retirement. The compounding effect of investing money over time can often help you accumulate more than you think. Related Items Editor’s note: This article first appeared on Kiplinger.com
Return
“Words can’t describe the relationships that have come out of the Entrepreneur Anonymous events,” said Mia Ferguson, executive director of the Pinky Cole Foundation. “It’s amazing to see the synergy between the participants and our guest speakers.” Through Prudential Financial’s sponsorship, participants will have access to the global leader’s holistic financial wellness education offering, enabling financial confidence and inspiring entrepreneurial growth. “I’m inspired by the impact Pinky Cole has had as a businesswoman and as an activist—there’s so much that aspiring entrepreneurs can learn from her, and from her path taking a great idea and building it into a thriving business,” said Shané Harris, vice president of social responsibility and partnerships and president of The Prudential Foundation. “We’re proud to be able to offer our expertise to emerging entrepreneurs through Entrepreneur Anonymous, and excited to see which of the ideas brought to this table become the next successes, creating jobs and wealth in local communities.” Entrepreneur Anonymous is one of the Pinky Cole Foundation’s many initiatives that focus on implementing change and empowering generations to win in all aspects of life, and they are happy to partner with Prudential Financial to galvanize future and current entrepreneurs. Starting this January and ending in June, Entrepreneur Anonymous will host monthly events in New Jersey with guest speakers on the last Wednesday of each month. Entrepreneur Anonymous will also continue to be hosted in Atlanta at the Russell Center of Innovation on the last Monday of each month from January to June 2023. About the Pinky Cole Foundation The Pinky Cole Foundation, founded in 2019, focuses on implementing calls to action and empowering generations to excel in life while pursuing their entrepreneurial dreams. The Pinky Cole Foundation recognizes that providing access to resources and education is key. Their goal is to empower underserved populations with the resources to help break cycles of poverty by challenging norms with a new vision, new leadership, new courage, and new collaborations. For more information, please visit pinkygivesback.com. About Pinky Cole “Pinky” Cole is a Jamaican-American restaurateur, community activist, and owner of the Slutty Vegan restaurant chain and Bar Vegan in Atlanta, Georgia. Cole is a culinary disruptor in the industry, transforming America’s view of plant-based fast food and striving to make plant-based eating delicious, accessible, and enjoyable for vegans and flexitarians alike. In addition to her work in the food industry, Pinky is also a philanthropist and head of the Pinky Cole Foundation, “empowering generations of color to win in life, financially, and in the pursuit of their entrepreneurial dreams.” To learn more about Pinky Cole, visit SluttyVeganATL.com and follow @pinky907 on Instagram. About Prudential Prudential Financial, Inc. (NYSE: PRU), a global financial services leader and premier active global investment manager with more than $1.3 trillion in assets under management as of Sept. 30, 2022, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees help make lives better by creating financial opportunity for more people by expanding access to investing, insurance, and retirement security. Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit news.prudential.com. Media Contact(s) John Garretson john.garretson@prudential.com (973) 943-0804
commitment through action
Words can’t describe the relationships that have come out of the Entrepreneur Anonymous events. It’s amazing to see the synergy between the participants and our guest speakers.
Mia Ferguson Executive Director of the Pinky Cole Foundation
Pinky Cole is excited to announce Prudential Financial as an official sponsor of Entrepreneur Anonymous January 27, 2023 The Pinky Cole Foundation, founded by Pinky Cole, one of the world’s most prominent and outspoken celebrities in food and philanthropy as the CEO and visionary behind Slutty Vegan and Bar Vegan, is excited to announce Prudential Financial as an official sponsor of Entrepreneur Anonymous, an outreach program for entrepreneurs that aims to build bridges in underserved communities. The Pinky Cole Foundation’s Entrepreneur Anonymous is a monthly seminar that establishes a premier networking and learning event for entrepreneurs seeking to build community, engage with like-minded business owners, and learn directly from accomplished business owners. The event also provides the opportunity for an in-depth Q&A along with individual opportunities to engage with guest speakers and respective leaders in various industries. Originating in Atlanta, the Entrepreneur Anonymous series will expand into the New Jersey market at the beginning of 2023, with proceeds from the monthly event supporting the foundation’s Youth Entrepreneurship Program.
Pinky Cole is excited to announce Prudential Financial as an official sponsor of Entrepreneur Anonymous January 27, 2023 The Pinky Cole Foundation, founded by Pinky Cole, one of the world’s most prominent and outspoken celebrities in food and philanthropy as the CEO and visionary behind Slutty Vegan and Bar Vegan, is excited to announce Prudential Financial as an official sponsor of Entrepreneur Anonymous, an outreach program for entrepreneurs that aims to build bridges in underserved communities. The Pinky Cole Foundation’s Entrepreneur Anonymous is a monthly seminar that establishes a premier networking and learning event for entrepreneurs seeking to build community, engage with like-minded business owners, and learn directly from accomplished business owners. The event also provides the opportunity for an in-depth Q&A along with individual opportunities to engage with guest speakers and respective leaders in various industries. Originating in Atlanta, the Entrepreneur Anonymous series will expand into the New Jersey market at the beginning of 2023, with proceeds from the monthly event supporting the foundation’s Youth Entrepreneurship Program. “Words can’t describe the relationships that have come out of the Entrepreneur Anonymous events,” said Mia Ferguson, executive director of the Pinky Cole Foundation. “It’s amazing to see the synergy between the participants and our guest speakers.” Through Prudential Financial’s sponsorship, participants will have access to the global leader’s holistic financial wellness education offering, enabling financial confidence and inspiring entrepreneurial growth. “I’m inspired by the impact Pinky Cole has had as a businesswoman and as an activist—there’s so much that aspiring entrepreneurs can learn from her, and from her path taking a great idea and building it into a thriving business,” said Shané Harris, vice president of social responsibility and partnerships and president of The Prudential Foundation. “We’re proud to be able to offer our expertise to emerging entrepreneurs through Entrepreneur Anonymous, and excited to see which of the ideas brought to this table become the next successes, creating jobs and wealth in local communities.” Entrepreneur Anonymous is one of the Pinky Cole Foundation’s many initiatives that focus on implementing change and empowering generations to win in all aspects of life, and they are happy to partner with Prudential Financial to galvanize future and current entrepreneurs. Starting this January and ending in June, Entrepreneur Anonymous will host monthly events in New Jersey with guest speakers on the last Wednesday of each month. Entrepreneur Anonymous will also continue to be hosted in Atlanta at the Russell Center of Innovation on the last Monday of each month from January to June 2023. About the Pinky Cole Foundation The Pinky Cole Foundation, founded in 2019, focuses on implementing calls to action and empowering generations to excel in life while pursuing their entrepreneurial dreams. The Pinky Cole Foundation recognizes that providing access to resources and education is key. Their goal is to empower underserved populations with the resources to help break cycles of poverty by challenging norms with a new vision, new leadership, new courage, and new collaborations. For more information, please visit pinkygivesback.com. About Pinky Cole “Pinky” Cole is a Jamaican-American restaurateur, community activist, and owner of the Slutty Vegan restaurant chain and Bar Vegan in Atlanta, Georgia. Cole is a culinary disruptor in the industry, transforming America’s view of plant-based fast food and striving to make plant-based eating delicious, accessible, and enjoyable for vegans and flexitarians alike. In addition to her work in the food industry, Pinky is also a philanthropist and head of the Pinky Cole Foundation, “empowering generations of color to win in life, financially, and in the pursuit of their entrepreneurial dreams.” To learn more about Pinky Cole, visit SluttyVeganATL.com and follow @pinky907 on Instagram. About Prudential Prudential Financial, Inc. (NYSE: PRU), a global financial services leader and premier active global investment manager with more than $1.3 trillion in assets under management as of Sept. 30, 2022, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees help make lives better by creating financial opportunity for more people by expanding access to investing, insurance, and retirement security. Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit news.prudential.com. Media Contact(s) John Garretson john.garretson@prudential.com (973) 943-0804
GreenPath offers a free session with a certified financial counselor to establish goals and explore debt repayment options. For a fee, employees or members who participate can also choose to enroll in a formal debt management plan designed to pay off outstanding balances in five years or less. Nine organizations, including Prudential, have committed to the service, which continues to draw interest. It will be available to all institutional employers in the second half of 2020. “Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress,” said Kristen Holt, president and CEO of GreenPath. Prudential offers a broad suite of workplace financial wellness offerings, including solutions designed to help individuals plan for unexpected expenses and better manage debt. Its in-plan emergency savings tool uses after-tax contributions to build savings for unexpected expenses, creating a convenient way to save for both retirement and short-term needs. Its student loan assistance platform, an online resource offered by Vault, allows employees to explore student loan consolidation and repayment options and provides a channel for employers to make repayment contributions. To learn more about Prudential’s workplace financial wellness offerings, please visit www.prudential.com/employers/financial-wellness. About Prudential Financial, Inc. Prudential Financial, Inc. (NYSE:PRU), a financial wellness leader and premier active global investment manager with more than $1.5 trillion in assets under management as of December 31, 2019, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees help to make lives better by creating financial opportunity for more people. Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit news.prudential.com. About GreenPath Financial Wellness GreenPath Financial Wellness is a national nonprofit organization that provides financial counseling, education and products to empower people to lead financially healthy lives. Working directly with individuals and through partnerships since 1961, GreenPath has assisted millions of people with debt and credit management, homeownership education and foreclosure prevention. Headquartered in Michigan, GreenPath, along with its affiliates, has more than 50 locations across the United States. GreenPath is a member of the National Foundation for Credit Counseling (NFCC) and is accredited by the Council on Accreditation (COA). To learn more about GreenPath, visit www.greenpath.org or call 866-648-8122. To hear real stories from real people about their financial wellness journey and what is possible through this partnership, listen to this podcast https://www.greenpath.com/realstories/. Media Contact(s) Anjelica Sena 973-802-6930 anjelica.sena@prudential.com Chandra Lewis 248-207-0631 Chandra@theallenlewisagency.com
2 The student loan assistance services are provided by Student Loan Benefits, Inc., doing business as Vault. Vault is a third-party provider that is independent from Prudential and its subsidiaries. Student loan assistance services are provided through a voluntary, individually selected program that is not a group insurance product and is not part of any employee benefit plan.
Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress.
Kristen Holt President and CEO of GreenPath
1030983-00001-00
February 13, 2020 NEWARK, N.J., February 13, 2020 - Recognizing the negative impact of household debt on long-term financial security and retirement readiness, Prudential (NYSE:PRU) is partnering with national nonprofit GreenPath Financial Wellness to introduce debt management advice and tools to its growing suite of workplace financial wellness solutions.
1 Access to GreenPath debt management services and Vault student loan assistance services is provided through Prudential Workplace Solutions Group Services, LLC (“PWSGS”). PWSGS is a subsidiary of Prudential Financial, Inc. PWSGS is not a licensed insurance company, does not provide insurance products or services, and does not provide investment or other advice.
As household debt continues to reach new heights, rising to $14.15 trillion in the fourth quarter of 2019 from $13.54 trillion in the third quarter of 2018, Prudential is continually looking to offer solutions such as emergency savings and student loan assistance tools to workplace clients to help employees and association members manage their finances. “It’s difficult to save for emergencies and invest in retirement when you feel crippled by debt. Debt also contributes to financial stress and negatively impacts workforce productivity,” said Vishal Jain, head of financial wellness strategy and development at Prudential Financial. “Helping individuals minimize the impact of debt is an important expansion of our financial wellness efforts, and we are excited to work with an organization like GreenPath which shares our passion for solving financial challenges.”
As household debt continues to reach new heights, rising to $14.15 trillion in the fourth quarter of 2019 from $13.54 trillion in the third quarter of 2018, Prudential is continually looking to offer solutions such as emergency savings and student loan assistance tools to workplace clients to help employees and association members manage their finances. “It’s difficult to save for emergencies and invest in retirement when you feel crippled by debt. Debt also contributes to financial stress and negatively impacts workforce productivity,” said Vishal Jain, head of financial wellness strategy and development at Prudential Financial. “Helping individuals minimize the impact of debt is an important expansion of our financial wellness efforts, and we are excited to work with an organization like GreenPath which shares our passion for solving financial challenges.” GreenPath offers a free session with a certified financial counselor to establish goals and explore debt repayment options. For a fee, employees or members who participate can also choose to enroll in a formal debt management plan designed to pay off outstanding balances in five years or less. Nine organizations, including Prudential, have committed to the service, which continues to draw interest. It will be available to all institutional employers in the second half of 2020. “Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress,” said Kristen Holt, president and CEO of GreenPath. Prudential offers a broad suite of workplace financial wellness offerings, including solutions designed to help individuals plan for unexpected expenses and better manage debt. Its in-plan emergency savings tool uses after-tax contributions to build savings for unexpected expenses, creating a convenient way to save for both retirement and short-term needs. Its student loan assistance platform, an online resource offered by Vault, allows employees to explore student loan consolidation and repayment options and provides a channel for employers to make repayment contributions. To learn more about Prudential’s workplace financial wellness offerings, please visit www.prudential.com/employers/financial-wellness. About Prudential Financial, Inc. Prudential Financial, Inc. (NYSE:PRU), a financial wellness leader and premier active global investment manager with more than $1.5 trillion in assets under management as of December 31, 2019, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees help to make lives better by creating financial opportunity for more people. Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit news.prudential.com. About GreenPath Financial Wellness GreenPath Financial Wellness is a national nonprofit organization that provides financial counseling, education and products to empower people to lead financially healthy lives. Working directly with individuals and through partnerships since 1961, GreenPath has assisted millions of people with debt and credit management, homeownership education and foreclosure prevention. Headquartered in Michigan, GreenPath, along with its affiliates, has more than 50 locations across the United States. GreenPath is a member of the National Foundation for Credit Counseling (NFCC) and is accredited by the Council on Accreditation (COA). To learn more about GreenPath, visit www.greenpath.org or call 866-648-8122. To hear real stories from real people about their financial wellness journey and what is possible through this partnership, listen to this podcast https://www.greenpath.com/realstories/. Media Contact(s) Anjelica Sena 973-802-6930 anjelica.sena@prudential.com Chandra Lewis 248-207-0631 Chandra@theallenlewisagency.com
As household debt continues to reach new heights, rising to $14.15 trillion in the fourth quarter of 2019 from $13.54 trillion in the third quarter of 2018, Prudential is continually looking to offer solutions such as emergency savings and student loan assistance tools to workplace clients to help employees and association members manage their finances. “It’s difficult to save for emergencies and invest in retirement when you feel crippled by debt. Debt also contributes to financial stress and negatively impacts workforce productivity,” said Vishal Jain, head of financial wellness strategy and development at Prudential Financial. “Helping individuals minimize the impact of debt is an important expansion of our financial wellness efforts, and we are excited to work with an organization like GreenPath which shares our passion for solving financial challenges.” GreenPath offers a free session with a certified financial counselor to establish goals and explore debt repayment options. For a fee, employees or members who participate can also choose to enroll in a formal debt management plan designed to pay off outstanding balances in five years or less. Nine organizations, including Prudential, have committed to the service, which continues to draw interest. It will be available to all institutional employers in the second half of 2020. “Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress,” said Kristen Holt, president and CEO of GreenPath. Prudential offers a broad suite of workplace financial wellness offerings, including solutions designed to help individuals plan for unexpected expenses and better manage debt. Its in-plan emergency savings tool uses after-tax contributions to build savings for unexpected expenses, creating a convenient way to save for both retirement and short-term needs. Its student loan assistance platform, an online resource offered by Vault, see reference 2, allows employees to explore student loan consolidation and repayment options and provides a channel for employers to make repayment contributions. To learn more about Prudential’s workplace financial wellness offerings, please visit www.prudential.com/employers/financial-wellness. About Prudential Financial, Inc. Prudential Financial, Inc. (NYSE:PRU), a financial wellness leader and premier active global investment manager with more than $1.5 trillion in assets under management as of December 31, 2019, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees help to make lives better by creating financial opportunity for more people. Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit news.prudential.com. About GreenPath Financial Wellness GreenPath Financial Wellness is a national nonprofit organization that provides financial counseling, education and products to empower people to lead financially healthy lives. Working directly with individuals and through partnerships since 1961, GreenPath has assisted millions of people with debt and credit management, homeownership education and foreclosure prevention. Headquartered in Michigan, GreenPath, along with its affiliates, has more than 50 locations across the United States. GreenPath is a member of the National Foundation for Credit Counseling (NFCC) and is accredited by the Council on Accreditation (COA). To learn more about GreenPath, visit www.greenpath.org or call 866-648-8122. To hear real stories from real people about their financial wellness journey and what is possible through this partnership, listen to this podcast https://www.greenpath.com/realstories/. Media Contact(s) Anjelica Sena 973-802-6930 anjelica.sena@prudential.com Chandra Lewis 248-207-0631 Chandra@theallenlewisagency.com
February 13, 2020 NEWARK, N.J., February 13, 2020 - Recognizing the negative impact of household debt on long-term financial security and retirement readiness, Prudential, see reference 1, (NYSE:PRU) is partnering with national nonprofit GreenPath Financial Wellness to introduce debt management advice and tools to its growing suite of workplace financial wellness solutions.
What you can do next Use our tool as a starting point for understanding your cost of retirement. Don’t forget to add inflation (historically around 2% a year, though recently much higher) to your likely expenses. Make sure to account for possibly huge costs like long-term are. And factor in Social Security along with any other income you expect. Of course, retirement budgets and, especially, income strategies can be complicated. So, talk to a trusted financial professional about your circumstances, your goals and how to achieve them. Prudential’s editorial team provides readers with valuable information on personal finances, retirement saving and planning for the unexpected.
retire with confidence
Our tool can help you determine how much money you may need to meet your expenses in retirement.
2 min read - Mar 28,2022 - Prudential Staff Key Takeaways • Estimating your retirement expenses can help you gauge the nest egg you’ll need. • Start with the basics but plan for nice-to-haves and big potential costs like long-term care. • Don’t forget inflation, local living costs and taxes, and income you expect outside your savings.
No matter where you are on the road to retirement, getting there is only half the journey. That’s because your retirement could last as long as your career—maybe longer if you expect (or you’re forced) to retire earlier than you’d planned. This means you may need enough income to fund 30 years (or more) of living once the regular paychecks stop. That’s why it helps to know how much green you may need throughout your golden years. And while everyone’s situation is different, totaling up typical costs for the basic retirement expenses—from food to housing, transportation to health care—can put you on the starting line for estimating your own costs.
Our interactive Retirement-by-the-Numbers tool can help you determine how much money you may need to meet your expenses in retirement. It shows you the average couple’s monthly costs (before inflation) of key items for a retirement that lasts 20 years—but you can plug in your own numbers to reflect the lifestyle and location you want. This can give you a clearer picture of your destination…and what it may take to fund your retirement budget.
Prudential’s editorial team provides readers with valuable information on personal finances, retirement saving and planning for the unexpected.
What you can do next Use our tool as a starting point for understanding your cost of retirement. Don’t forget to add inflation (historically around 2% a year, though recently much higher) to your likely expenses. Make sure to account for possibly huge costs like long-term are. And factor in Social Security along with any other income you expect. Of course, retirement budgets and, especially, income strategies can be complicated. So, talk to a trusted financial professional about your circumstances, your goals and how to achieve them.
“Of all the thousands of traits psychology has studied, the two most important ones for having a long, happy, healthy, successful life are intelligence and self-control. Improving self-control starts with learning to delay gratification," says Roy F. Baumeister, Ph.D., professor of psychology at Florida State University and author of Willpower: Rediscovering the Greatest Human Strength. The widely reported "Marshmallow Test" research, developed by Dr. Walter Mischel, showed that kids who practice delayed gratification tend to have higher test scores, better social skills and better health. (Think: Study before watching TV and you get better grades.) And the good news is, the more you do it, the better you get at it. “It's like exercising a muscle," says Dr. Baumeister. Here are five simple ways to teach your kids this all-important skill: Mark time Sow the seeds of delayed gratification by giving toddlers and preschoolers their own calendars and noting special occasions that are coming up: birthdays or family events, outings to a concert or the zoo. If you don't have anything scheduled, plan something for several weeks away. Regularly talk about the event with your child (who's going, what they'll see) and mark off each square on the calendar until the big day arrives. This simple practice will not only reassure young children that those far-away events are, in fact, going to happen, but also it will (eventually) boost their patience quotient and teach them that anticipating an activity or an item can make it more enjoyable. Provide low-key chances to practice Give young kids concrete chances to experience the benefits of delayed gratification — and to develop a sense of mastery over their own behavior — by offering opportunities for them to practice self-control. You might tell your preschooler you have time to go to the park for 20 minutes now, or for 45 minutes after dinner, for instance. Even if he opts for immediate gratification at first, over time he'll realize patience has more of a payoff. Dr. Baumeister adds, however, “Special treats and rewards should be earned. Only provide them after some job is done or some success [is] achieved." Translation: Have your kids work for that shiny new toy or extra time in front of the TV. Share smart strategies Self-control doesn't translate into willpower alone. In fact, researchers now know that people who successfully resist temptations rely on savvy strategies to meet their goals. A few proven techniques for helping kids save money and head off impulse buys at the store include: • If your child wants to buy something, suggest she wait at least a week before purchasing it. By then, passions will have cooled and she'll know if she truly wants it. • If she's begging for you to buy an item for her, reframe her expectations by putting that item on a birthday or holiday wish list. Then be sure to follow through. Studies show kids won't delay gratification if they don't believe you'll be true to your word. • If your child is having a hard time saving for a big purchase, put a picture of it on her piggy bank or on a poster in her room. The visual reminder will help her pinch her pennies to reach her goal. • Teach an older teen not to carry a credit or debit card when she knows she might be tempted to spend too much money. Arm them with an allowance By the age of five or six, most kids are ready to handle an allowance and, if you make them responsible for purchasing nonessentials ranging from gum to the latest PlayStation game, they'll glean the lessons of saving, spending and budgeting while the stakes are still low. It's important for kids to “learn to save money and take pride in how it accumulates," says Dr. Baumeister. The key: Give them just enough to cover any basic expenses you expect them to pay for, plus a little more. After all, you want them to have to save up to purchase larger items — with no bailouts from you. Your kids will quickly learn that if they buy every bauble that catches their eye, they won't have the reserves needed for more meaningful purchases down the road. Show them the power of saving The lesson: Invest your money today and you can do way more with it tomorrow. Drive that point home by letting your kids play around with an online compound interest calculator. At investor.gov, they can see how much money they would make if they save $10, $20 or $50 each month. Your children might be shocked to discover that if they save just $200 a month from age 18 to age 68 earning 5% interest, they would wind up with $502,435. A whopping $382,435 would be from interest. This is an illustration and your interest rates and results may vary. What you can do next Implement an age-appropriate version of one of the five ideas presented here with your child. Study their reaction as they learn the valuable lesson of delayed gratification. Mary Giles is a former editor of Parenting and FamilyFun magazines. She has appeared frequently on The Today Show.
Plan your goals
Of all the thousands of traits psychology has studied, the two most important ones for having a long, happy, healthy, successful life are intelligence and self-control. Improving self-control starts with learning to delay gratification.
Roy F. Baumeister, Ph.D.
1023937-00002-00
May 07, 2022 - 5 min read - Mary Giles Key Takeaways • Help your kids learn delayed gratification and financial self-control. • Start now — before they're headed off to college or have a pocket full of credit cards. • Delayed gratification can be learned, and we can all get better at it with practice. Yes, your kids need to know how to balance a budget. And how to bank online. And how to negotiate for a salary and a house and a car. But, before any of that, they need to learn a more fundamental lesson: delayed gratification — the ability to resist something now in the hope of obtaining something more valued in the future. This crucial skill not only has the power to reduce requests for Lego sets and Shopkins each time you set foot in a store, but also it will help protect your kids' credit scores and keep them out of credit card debt down the road. How? By teaching them to control impulse buys and showing them the benefits of saving.
May 07, 2022 - 5 min read - Mary Giles Key Takeaways • Help your kids learn delayed gratification and financial self-control. • Start now — before they're headed off to college or have a pocket full of credit cards. • Delayed gratification can be learned, and we can all get better at it with practice. Yes, your kids need to know how to balance a budget. And how to bank online. And how to negotiate for a salary and a house and a car. But, before any of that, they need to learn a more fundamental lesson: delayed gratification — the ability to resist something now in the hope of obtaining something more valued in the future. This crucial skill not only has the power to reduce requests for Lego sets and Shopkins each time you set foot in a store, but also it will help protect your kids' credit scores and keep them out of credit card debt down the road. How? By teaching them to control impulse buys and showing them the benefits of saving. “Of all the thousands of traits psychology has studied, the two most important ones for having a long, happy, healthy, successful life are intelligence and self-control. Improving self- control starts with learning to delay gratification," says Roy F. Baumeister, Ph.D., professor of psychology at Florida State University and author of Willpower: Rediscovering the Greatest Human Strength. The widely reported "Marshmallow Test" research, developed by Dr. Walter Mischel, showed that kids who practice delayed gratification tend to have higher test scores, better social skills and better health. (Think: Study before watching TV and you get better grades.) And the good news is, the more you do it, the better you get at it. “It's like exercising a muscle," says Dr. Baumeister. Here are five simple ways to teach your kids this all-important skill: Mark time Sow the seeds of delayed gratification by giving toddlers and preschoolers their own calendars and noting special occasions that are coming up: birthdays or family events, outings to a concert or the zoo. If you don't have anything scheduled, plan something for several weeks away. Regularly talk about the event with your child (who's going, what they'll see) and mark off each square on the calendar until the big day arrives. This simple practice will not only reassure young children that those far-away events are, in fact, going to happen, but also it will (eventually) boost their patience quotient and teach them that anticipating an activity or an item can make it more enjoyable. Provide low-key chances to practice Give young kids concrete chances to experience the benefits of delayed gratification — and to develop a sense of mastery over their own behavior — by offering opportunities for them to practice self-control. You might tell your preschooler you have time to go to the park for 20 minutes now, or for 45 minutes after dinner, for instance. Even if he opts for immediate gratification at first, over time he'll realize patience has more of a payoff. Dr. Baumeister adds, however, “Special treats and rewards should be earned. Only provide them after some job is done or some success [is] achieved." Translation: Have your kids work for that shiny new toy or extra time in front of the TV. Share smart strategies Self-control doesn't translate into willpower alone. In fact, researchers now know that people who successfully resist temptations rely on savvy strategies to meet their goals. A few proven techniques for helping kids save money and head off impulse buys at the store include: • If your child wants to buy something, suggest she wait at least a week before purchasing it. By then, passions will have cooled and she'll know if she truly wants it. • If she's begging for you to buy an item for her, reframe her expectations by putting that item on a birthday or holiday wish list. Then be sure to follow through. Studies show kids won't delay gratification if they don't believe you'll be true to your word. • If your child is having a hard time saving for a big purchase, put a picture of it on her piggy bank or on a poster in her room. The visual reminder will help her pinch her pennies to reach her goal. • Teach an older teen not to carry a credit or debit card when she knows she might be tempted to spend too much money. Arm them with an allowance By the age of five or six, most kids are ready to handle an allowance and, if you make them responsible for purchasing nonessentials ranging from gum to the latest PlayStation game, they'll glean the lessons of saving, spending and budgeting while the stakes are still low. It's important for kids to “learn to save money and take pride in how it accumulates," says Dr. Baumeister. The key: Give them just enough to cover any basic expenses you expect them to pay for, plus a little more. After all, you want them to have to save up to purchase larger items — with no bailouts from you. Your kids will quickly learn that if they buy every bauble that catches their eye, they won't have the reserves needed for more meaningful purchases down the road. Show them the power of saving The lesson: Invest your money today and you can do way more with it tomorrow. Drive that point home by letting your kids play around with an online compound interest calculator. At investor.gov, they can see how much money they would make if they save $10, $20 or $50 each month. Your children might be shocked to discover that if they save just $200 a month from age 18 to age 68 earning 5% interest, they would wind up with $502,435. A whopping $382,435 would be from interest. This is an illustration and your interest rates and results may vary. What you can do next Implement an age-appropriate version of one of the five ideas presented here with your child. Study their reaction as they learn the valuable lesson of delayed gratification. Mary Giles is a former editor of Parenting and FamilyFun magazines. She has appeared frequently on The Today Show.
Saving money is an act of paying your future self. With the magic of compound interest, even a small amount of savings can lead to big results in the future. For example, if you save $25 per week (about the cost of two fast food meals), in 25 years you'd have $55,237! If you can save $75 a week ($300 a month), after 25 years you'd have $165,709. And if you can save $125 a week ($500 a month), after 25 years you'd have $276,181. (This assumes that you’d earn a hypothetical 4% annual compound rate of return on your savings.) With savings, even a small amount — left alone to grow over time — can add up. Types of savings accounts There are three main types of basic savings accounts, which earn interest on the money you keep in the account. Bank savings accounts tend to pay some of the lowest interest rates compared to other types of investments, however your money in these accounts is generally very easy to access and is often FDIC insured (up to certain limits), so there is a low risk of losing money. Money market accounts pay you an interest rate on your savings, based on a complex range of factors related to how much money you have in the account and the current level of market interest rates. Money market accounts can offer higher interest rates than basic savings accounts, but they also tend to require a minimum balance — such as $1,000 or $5,000 — and they might not be FDIC insured, so it is possible to lose money with this investment. However, in general money market accounts are considered low-risk investment for holding your cash savings, especially if the money might be needed on short notice (such as for emergencies). Certificates of deposit (CDs). CDs are another option for saving money in a low-risk/low-yield investment. With a CD, your bank pays you a fixed amount of money during a fixed amount of time. For example, you can get CDs for six months, one year, two years, three years or more, and the longer you choose to leave your money invested in the CD, the higher the interest rate you receive. CDs tend to pay higher interest rates than savings accounts and are low risk; however, the drawback is that you have restricted access to your money. If you sign up for a five-year CD and then realize after one year that you need that money, you might have to pay an early-withdrawal penalty for cashing out your money from the CD. If you want higher returns and can tolerate higher risks, it might be time to look beyond these simple savings vehicles and consider investments such as stocks and bonds. Bonds When you invest in bonds, you’re essentially lending money to a government (state, federal, city or county) or corporation, then the borrower agrees to pay you (and all its other bondholders) back over time. As a bondholder, you can receive regular income from the bond in the form of principal and interest payments, unless the bond issuer defaults (such as if a company goes bankrupt). In general, the higher the interest rate on a bond, the riskier the investment. If your bonds are highly rated — i.e., ratings companies believe the bond issuer is financially strong enough to repay its debts — they're generally considered lower risk. U.S. Treasury bonds are generally considered to be the safest type of bond investment because they are backed by the full faith and credit of the U.S. government. Many people invest in bonds (along with stocks) as part of their overall retirement savings portfolio. But remember: Bonds are not guaranteed investments. Stocks If you already have an emergency savings fund (usually three to six months of expenses), then you might want to start investing in stocks. Stocks are one of the most common forms of investments for people who are saving for retirement. With stocks, you own a share of a corporation, which entitles you to a share of the company's profits. When the company pays a dividend to shareholders, you get more money in your account. When the company's stock price goes up, so does the value of your investment. Stocks can be risky and are not guaranteed to go up in value. The price of stocks can go up or down, and sometimes the stock market fluctuates rapidly — known as market volatility. It can be risky to have too much money invested in too few companies — any individual company's stock can go down. You may want an investing strategy that includes more diversity to help with the risks of an undiversified portfolio. So, it could be time to consider mutual funds. Mutual funds Mutual funds are professionally managed portfolios of stocks, bonds and other investment assets (such as money markets, real estate or precious metals). When you invest in a stock mutual fund, you buy shares in a fund that owns shares of different companies, so you end up owning little pieces of a multitude of companies. This gives you broad diversification in your portfolio and lets you benefit from the profits of the corporate world, while (hopefully) managing and reducing your risks. However, mutual funds can be risky. There are no guaranteed returns on your investment in mutual funds. Mutual funds can also be complicated; it's important to do your research and understand the fees and risks of each fund, as well as to build a portfolio of investments that suits your overall financial goals. For example, if you have 30 years left until retirement, you may want to aim for a portfolio with a larger percentage of stocks and a lower percentage of bonds. Stocks often have a higher rate of return than bonds over the long term but also have greater risk, so as you move closer to retirement, your “safer" bond and cash investments should increase while you dial down the number of stocks in your portfolio. You should review your portfolio periodically to ensure it is meeting your objectives. A good financial planner or brokerage can help you evaluate your options for mutual funds, depending on your age, income, investing goals and risk tolerance. Also, try Prudential’s retirement investment persona tool to evaluate your preferred investment style, find out how much risk you're comfortable with, and figure out which types of investments are right for you. What you can do next Start by paying yourself first and set up a fixed savings goal, whether it's $25 a week or more. Evaluate your options — if you don't already have a savings account, consider opening one at your bank or credit union and use that to hold your emergency savings. Once you have a basic savings account, you can branch out into other investments like bonds, stocks and mutual funds. But remember, investing involves risks — it is possible to lose money when investing — so weigh the risks and trade-offs of any investment, and consider getting professional help to create a long-term strategy that suits your goals. Written by Ben Gran Ben Gran is a freelance writer based in Des Moines, Iowa. He writes about personal finance, financial services, technology and business.
invest in your future
Saving money is an act of paying your future self. With the magic of compound interest, even a small amount of savings can lead to big results in the future.
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3 min read - Jul 24, 2022 - Ben Gran Key Takeaways • With compound interest, a small amount saved today can grow into something big. • There are a variety of places to invest your savings to help your money grow — from low interest with low risk to higher risk with higher long-term growth potential. • Investing in bonds and stocks can be risky and complicated, but with professional help and a long-term strategy, you can get on track to meet your goals. One of the first rules of money management is to “live within your means" by spending less than you earn. Some people spend their entire adulthood in pursuit of that balance. But if you've already mastered the basics and have money left at the end of each month, you're likely ready to put your money to work with savings and investing accounts. Here are a few key strategies and fundamentals of saving and investing that you may want to consider. Pay yourself first Many people get caught up in a cycle of consumerism where they spend almost all of their income, or, in the case of people who have credit card debt, they spend even more money than they earn. Saving is the exact opposite of this mindset. When you start saving money, you should pay yourself first. Before you spend one dollar of your paycheck on a restaurant mealor daily latte, put some money into savings.
3 min read - Jul 24, 2022 - Ben Gran Key Takeaways • With compound interest, a small amount saved today can grow into something big. • There are a variety of places to invest your savings to help your money grow — from low interest with low risk to higher risk with higher long-term growth potential. • Investing in bonds and stocks can be risky and complicated, but with professional help and a long-term strategy, you can get on track to meet your goals. One of the first rules of money management is to “live within your means" by spending less than you earn. Some people spend their entire adulthood in pursuit of that balance. But if you've already mastered the basics and have money left at the end of each month, you're likely ready to put your money to work with savings and investing accounts. Here are a few key strategies and fundamentals of saving and investing that you may want to consider. Pay yourself first Many people get caught up in a cycle of consumerism where they spend almost all of their income, or, in the case of people who have credit card debt, they spend even more money than they earn. Saving is the exact opposite of this mindset. When you start saving money, you should pay yourself first. Before you spend one dollar of your paycheck on a restaurant meal or daily latte, put some money into savings. Saving money is an act of paying your future self. With the magic of compound interest, even a small amount of savings can lead to big results in the future. For example, if you save $25 per week (about the cost of two fast food meals), in 25 years you'd have $55,237! If you can save $75 a week ($300 a month), after 25 years you'd have $165,709. And if you can save $125 a week ($500 a month), after 25 years you'd have $276,181. (This assumes that you’d earn a hypothetical 4% annual compound rate of return on your savings.) With savings, even a small amount — left alone to grow over time — can add up. Types of savings accounts There are three main types of basic savings accounts, which earn interest on the money you keep in the account. Bank savings accounts tend to pay some of the lowest interest rates compared to other types of investments, however your money in these accounts is generally very easy to access and is often FDIC insured (up to certain limits), so there is a low risk of losing money. Money market accounts pay you an interest rate on your savings, based on a complex range of factors related to how much money you have in the account and the current level of market interest rates. Money market accounts can offer higher interest rates than basic savings accounts, but they also tend to require a minimum balance — such as $1,000 or $5,000 — and they might not be FDIC insured, so it is possible to lose money with this investment. However, in general money market accounts are considered low-risk investment for holding your cash savings, especially if the money might be needed on short notice (such as for emergencies). Certificates of deposit (CDs). CDs are another option for saving money in a low-risk/low-yield investment. With a CD, your bank pays you a fixed amount of money during a fixed amount of time. For example, you can get CDs for six months, one year, two years, three years or more, and the longer you choose to leave your money invested in the CD, the higher the interest rate you receive. CDs tend to pay higher interest rates than savings accounts and are low risk; however, the drawback is that you have restricted access to your money. If you sign up for a five-year CD and then realize after one year that you need that money, you might have to pay an early-withdrawal penalty for cashing out your money from the CD. If you want higher returns and can tolerate higher risks, it might be time to look beyond these simple savings vehicles and consider investments such as stocks and bonds. Bonds When you invest in bonds, you’re essentially lending money to a government (state, federal, city or county) or corporation, then the borrower agrees to pay you (and all its other bondholders) back over time. As a bondholder, you can receive regular income from the bond in the form of principal and interest payments, unless the bond issuer defaults (such as if a company goes bankrupt). In general, the higher the interest rate on a bond, the riskier the investment. If your bonds are highly rated — i.e., ratings companies believe the bond issuer is financially strong enough to repay its debts — they're generally considered lower risk. U.S. Treasury bonds are generally considered to be the safest type of bond investment because they are backed by the full faith and credit of the U.S. government. Many people invest in bonds (along with stocks) as part of their overall retirement savings portfolio. But remember: Bonds are not guaranteed investments. Stocks If you already have an emergency savings fund (usually three to six months of expenses), then you might want to start investing in stocks. Stocks are one of the most common forms of investments for people who are saving for retirement. With stocks, you own a share of a corporation, which entitles you to a share of the company's profits. When the company pays a dividend to shareholders, you get more money in your account. When the company's stock price goes up, so does the value of your investment. Stocks can be risky and are not guaranteed to go up in value. The price of stocks can go up or down, and sometimes the stock market fluctuates rapidly — known as market volatility. It can be risky to have too much money invested in too few companies — any individual company's stock can go down. You may want an investing strategy that includes more diversity to help with the risks of an undiversified portfolio. So, it could be time to consider mutual funds. Mutual funds Mutual funds are professionally managed portfolios of stocks, bonds and other investment assets (such as money markets, real estate or precious metals). When you invest in a stock mutual fund, you buy shares in a fund that owns shares of different companies, so you end up owning little pieces of a multitude of companies. This gives you broad diversification in your portfolio and lets you benefit from the profits of the corporate world, while (hopefully) managing and reducing your risks. However, mutual funds can be risky. There are no guaranteed returns on your investment in mutual funds. Mutual funds can also be complicated; it's important to do your research and understand the fees and risks of each fund, as well as to build a portfolio of investments that suits your overall financial goals. For example, if you have 30 years left until retirement, you may want to aim for a portfolio with a larger percentage of stocks and a lower percentage of bonds. Stocks often have a higher rate of return than bonds over the long term but also have greater risk, so as you move closer to retirement, your “safer" bond and cash investments should increase while you dial down the number of stocks in your portfolio. You should review your portfolio periodically to ensure it is meeting your objectives. A good financial planner or brokerage can help you evaluate your options for mutual funds, depending on your age, income, investing goals and risk tolerance. Also, try Prudential’s retirement investment persona tool to evaluate your preferred investment style, find out how much risk you're comfortable with, and figure out which types of investments are right for you. What you can do next Start by paying yourself first and set up a fixed savings goal, whether it's $25 a week or more. Evaluate your options — if you don't already have a savings account, consider opening one at your bank or credit union and use that to hold your emergency savings. Once you have a basic savings account, you can branch out into other investments like bonds, stocks and mutual funds. But remember, investing involves risks — it is possible to lose money when investing — so weigh the risks and trade-offs of any investment, and consider getting professional help to create a long-term strategy that suits your goals. Written by Ben Gran Ben Gran is a freelance writer based in Des Moines, Iowa. He writes about personal finance, financial services, technology and business.
Finding the right percentage for you No single rule will account for your specific circumstances. For a more customized spending plan, start with a retirement calculator. For example, AARP’s calculator lets you choose what portion of your final working income you think you’ll need during retirement, and shows you how much to save to get that. Then, adapt the calculator’s recommendation to account for your life. Consider factors like your local cost of living and how long you expect to live based on your health and family history. Check on your investments regularly—quarterly or annually—to make sure they’re working for you. Make adjustments where necessary. What you can do next Your retirement plan isn’t universal. Your timeline is yours, which means you might need help based on your needs. A financial professional can help you map out a retirement income plan that works for you. Written by Dori Zinn Dori Zinns a personal finance journalist focusing on income inequality, college affordability, investing, and more. Her work has appeared in The New York Times, Forbes, TIME, CNET, and Yahoo, among others.
Prudential does not provide tax or legal advice; please consult an independent tax advisor regarding your personal tax situation.
Financial advisor Bill Bengen designed the 4% rule in the 1990s as an easy-to-follow plan for accomplishing two critical things: Cover your costs throughout retirement while making your money last as long as you do.
No single rule will account for your specific circumstances. For a more customized spending plan, start with a retirement calculator.
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3 min read - Oct 22, 2022 - Dori Zinn Key Takeaways • The 4% rule means withdrawing up to 4% of your savings each year of retirement. • Once a staple for retirement income planning, 4% might not hold up today. • Consider this and other methods to design a retirement income plan for your needs. After years of stashing money away for retirement, the day will come when you need to start spending that hard-earned cash. Question is, how much can you afford to withdraw each year without outliving your money? The “4% rule” is a common approach to resolving that. The rule works just like it sounds: Limit annual withdrawals from your retirement accounts to 4% of the total balance in any given year. This means that if you retire with $1 million saved, you’d take out $40,000 the first year. Even so, you’d also adjust this amount annually for inflation. For example, you might choose to increase withdrawals by a flat 2%—the long-term historical rate of inflation—each year. Or you might base increases on each year’s actual inflation rate. (Note that the 4% rule assumes that you have about 60% of your investments in equities [stocks] and 40% in fixed income assets [like bonds]. Also, it’s based on a tax-deferred portfolio like a traditional IRA or 401(k)—it assumes that you’ll owe tax on withdrawals. If you’re spending from a Roth, where withdrawals aren’t taxed if you meet basic criteria, your calculations may be different.) Will this method work for today’s—and tomorrow’s—retirees? Maybe. Or maybe not. Here’s why the strategy is showing its age.
Why the 4% rule used to work Financial advisor Bill Bengen designed the 4% rule in the 1990s as an easy-to-follow plan for accomplishing two critical things: Cover your costs throughout retirement while making your money last as long as you do. Historical stock market data led him to the 4% target: By considering both average returns and unexpected events like the 1929 market crash, he determined that a retirement portfolio made up of 60% equities and 40% fixed income assets should last over 30 years if you withdraw only 4% of the total annually. According to Bengen’s model, even if you retire just before a financial crisis, the negative effect on your portfolio would be mild enough to ensure at least 35 years of living expenses. (In 1990 he advised that the average American man was expected to live about 15 years after age 65, and the average woman just under 20 years. So, the 30-year buffer the rule offered made it seem like a safe—even conservative—approach to making retirement savings last a lifetime.) Still, the 4% rule comes with a major caveat: It’s not really a “rule.” That’s because everyone’s situation is different—often drastically. If you have a large retirement investment portfolio, you might not need to spend 4% of it every year. If you have limited savings, 4% might not come close to covering your needs. Even Bengen tweaked his own “rule” over the years; more recently, he advised that withdrawing 4.5% the first year would be safe. So, you should think of this rule as more of a guideline you can adapt to your circumstances and lifestyle. Risks of the 4% rule Retirement expenses aren’t the same year in, year out. Lifespans aren’t always predictable, either. Here are some key risks to consider before you adopt this (or any) set spending rule: • Sequence of returns risk. If the market experiences more downturns than upturns early in your retirement, your retirement savings may not last as long as they would if the down years come later. • Health risk. Aging means more doctor's appointments and medical bills in retirement—over $300,00 for the average 65-year-old couple. With these additional expenses—often unplanned and unexpected—it’s important to plan ahead. • Longevity risk. The average lifespan has increased by a few years since the 4% rule came around (at least before the COVID-19 epidemic). But keep in mind that not everyone is average. According to the U.S. Census, more than 60,000 women (and nearly 15,000 men) were over age 100 in 2020. • Market risk. You’ve heard it before: History doesn’t guarantee future performance. We could see unprecedented periods of inflation or market crashes that the 4% model doesn’t account for. • Social Security risk. The 4% rule assumes that you’ll also receive the full Social Security benefits you expect based on your age, career earnings, and when you start taking them. But there’s a chance these payments could decrease by the time you retire. (The Social Security Administration has warned that its trust fund could run short by 2035; however, Congress could act before then to make sure the program stays solvent.) Alternative strategies for retirement withdrawal Consider modifying the 4% rule or using a completely different approach: • Spend more conservatively. As volatility has increased and we enter what many experts see as a risky period in the markets, you might need to spend less in retirement to feel secure that you won’t outlive your savings. For example, investment advisor Morningstar recommends starting by withdrawing just 3.3% of a retirement account. You could then increase withdrawals during good years—or even every year if you’re comfortable with less certainty that your portfolio will last the rest of your life. • Spend your required minimum distribution (RMD). If most of your retirement savings are in a 401(k) or an IRA, you could dispense with the 4% concept altogether and spend only what the IRS says you must take out each year, starting at age 73. RMDs are based on how much money you have in retirement accounts and your life expectancy. Depending on your circumstances, this approach could yield more or less spending money. Also, it will only work if your RMD is enough for you to live on each year. (Roth IRAs don’t trigger RMDs, and withdrawals aren’t taxable if you meet basic criteria. Without RMDs to guide you, you’ll have to decide on your own strategy for how much to withdraw from a Roth IRA. Because Roth income is tax-free but traditional income sources aren’t, that decision could come down to your tax bracket in a given year. A financial professional can help you figure it all out.) • Maximize other income sources. If you’re able to cover your retirement expenses with other income, you could conserve more of your nest egg. If possible, consider delaying your Social Security payments until age 70. This way, you’ll receive your maximum monthly benefit. Another strategy: Work part-time (if you can) to generate extra income.
3 min read - Oct 22, 2022 - Dori Zinn Key Takeaways • The 4% rule means withdrawing up to 4% of your savings each year of retirement. • Once a staple for retirement income planning, 4% might not hold up today. • Consider this and other methods to design a retirement income plan for your needs. After years of stashing money away for retirement, the day will come when you need to start spending that hard-earned cash. Question is, how much can you afford to withdraw each year without outliving your money? The “4% rule” is a common approach to resolving that. The rule works just like it sounds: Limit annual withdrawals from your retirement accounts to 4% of the total balance in any given year. This means that if you retire with $1 million saved, you’d take out $40,000 the first year. Even so, you’d also adjust this amount annually for inflation. For example, you might choose to increase withdrawals by a flat 2%—the long-term historical rate of inflation—each year. Or you might base increases on each year’s actual inflation rate. (Note that the 4% rule assumes that you have about 60% of your investments in equities [stocks] and 40% in fixed income assets [like bonds]. Also, it’s based on a tax-deferred portfolio like a traditional IRA or 401(k)—it assumes that you’ll owe tax on withdrawals. If you’re spending from a Roth, where withdrawals aren’t taxed if you meet basic criteria, your calculations may be different.) Will this method work for today’s—and tomorrow’s—retirees? Maybe. Or maybe not. Here’s why the strategy is showing its age. Why the 4% rule used to work Financial advisor Bill Bengen designed the 4% rule in the 1990s as an easy-to-follow plan for accomplishing two critical things: Cover your costs throughout retirement while making your money last as long as you do. Historical stock market data led him to the 4% target: By considering both average returns and unexpected events like the 1929 market crash, he determined that a retirement portfolio made up of 60% equities and 40% fixed income assets should last over 30 years if you withdraw only 4% of the total annually. According to Bengen’s model, even if you retire just before a financial crisis, the negative effect on your portfolio would be mild enough to ensure at least 35 years of living expenses. (In 1990 he advised that the average American man was expected to live about 15 years after age 65, and the average woman just under 20 years. So, the 30-year buffer the rule offered made it seem like a safe—even conservative—approach to making retirement savings last a lifetime.) Still, the 4% rule comes with a major caveat: It’s not really a “rule.” That’s because everyone’s situation is different—often drastically. If you have a large retirement investment portfolio, you might not need to spend 4% of it every year. If you have limited savings, 4% might not come close to covering your needs. Even Bengen tweaked his own “rule” over the years; more recently, he advised that withdrawing 4.5% the first year would be safe. So, you should think of this rule as more of a guideline you can adapt to your circumstances and lifestyle. Risks of the 4% rule Retirement expenses aren’t the same year in, year out. Lifespans aren’t always predictable, either. Here are some key risks to consider before you adopt this (or any) set spending rule: • Sequence of returns risk. If the market experiences more downturns than upturns early in your retirement, your retirement savings may not last as long as they would if the down years come later. • Health risk. Aging means more doctor's appointments and medical bills in retirement—over $300,00 for the average 65-year-old couple. With these additional expenses—often unplanned and unexpected—it’s important to plan ahead. • Longevity risk. The average lifespan has increased by a few years since the 4% rule came around (at least before the COVID-19 epidemic). But keep in mind that not everyone is average. According to the U.S. Census, more than 60,000 women (and nearly 15,000 men) were over age 100 in 2020. • Market risk. You’ve heard it before: History doesn’t guarantee future performance. We could see unprecedented periods of inflation or market crashes that the 4% model doesn’t account for. • Social Security risk. The 4% rule assumes that you’ll also receive the full Social Security benefits you expect based on your age, career earnings, and when you start taking them. But there’s a chance these payments could decrease by the time you retire. (The Social Security Administration has warned that its trust fund could run short by 2035; however, Congress could act before then to make sure the program stays solvent.) Alternative strategies for retirement withdrawal Consider modifying the 4% rule or using a completely different approach: • Spend more conservatively. As volatility has increased and we enter what many experts see as a risky period in the markets, you might need to spend less in retirement to feel secure that you won’t outlive your savings. For example, investment advisor Morningstar recommends starting by withdrawing just 3.3% of a retirement account. You could then increase withdrawals during good years—or even every year if you’re comfortable with less certainty that your portfolio will last the rest of your life. • Spend your required minimum distribution (RMD). If most of your retirement savings are in a 401(k) or an IRA, you could dispense with the 4% concept altogether and spend only what the IRS says you must take out each year, starting at age 73. RMDs are based on how much money you have in retirement accounts and your life expectancy. Depending on your circumstances, this approach could yield more or less spending money. Also, it will only work if your RMD is enough for you to live on each year. (Roth IRAs don’t trigger RMDs, and withdrawals aren’t taxable if you meet basic criteria. Without RMDs to guide you, you’ll have to decide on your own strategy for how much to withdraw from a Roth IRA. Because Roth income is tax-free but traditional income sources aren’t, that decision could come down to your tax bracket in a given year. A financial professional can help you figure it all out.) • Maximize other income sources. If you’re able to cover your retirement expenses with other income, you could conserve more of your nest egg. If possible, consider delaying your Social Security payments until age 70. This way, you’ll receive your maximum monthly benefit. Another strategy: Work part-time (if you can) to generate extra income. Finding the right percentage for you No single rule will account for your specific circumstances. For a more customized spending plan, start with a retirement calculator. For example, AARP’s calculator lets you choose what portion of your final working income you think you’ll need during retirement, and shows you how much to save to get that. Then, adapt the calculator’s recommendation to account for your life. Consider factors like your local cost of living and how long you expect to live based on your health and family history. Check on your investments regularly—quarterly or annually—to make sure they’re working for you. Make adjustments where necessary. What you can do next Your retirement plan isn’t universal. Your timeline is yours, which means you might need help based on your needs. A financial professional can help you map out a retirement income plan that works for you. Written by Dori Zinn Dori Zinns a personal finance journalist focusing on income inequality, college affordability, investing, and more. Her work has appeared in The New York Times, Forbes, TIME, CNET, and Yahoo, among others.
Tax treatment of a deferred annuity If your investment grows during the accumulation phase, the earnings are tax deferred. This means you won’t owe federal income tax on them until you receive payouts. Tax-deferred gains allow your earnings to grow more efficiently. Thanks to compound interest—and more money working for you due to pretax contributions—your balance can grow at a faster rate than if you’d contributed after-tax money. Once the payouts start, they’ll be taxed as ordinary income. Your heirs may owe federal income tax on annuity payments or a lump sum they receive after your death. (This is different from regular life insurance benefits, which generally aren’t taxable) Even so, taxes on annuity benefits can be complex, so make sure to consult a tax professional. Is a deferred annuity right for you? If you expect a long retirement, a deferred annuity may be a valuable tool. Also, the deferred taxes on growth along with guaranteed payments can help you better manage your retirement income. Questions to ask as you evaluate your situation: • Will you have enough time for an annuity to grow before you’ll need the money? • Will you have heirs? Death benefits on deferred annuities can vary depending on the contract and the insurer that provides them. For example, some annuities pay heirs the money left in the account, while others allow you to set a minimum death benefit when you buy. Double-check the details to learn if there’s a death benefit and how much it is. • How will inflation affect the payouts you’ll receive? Review your annuity’s terms to find out if it’s likely to grow at least as fast as inflation. • What if you need to withdraw money before you reach retirement age or before the payouts begin? Depending on the terms and when you withdraw, you could be subject to extra costs and penalties. What you can do next Annuities are one piece of the retirement puzzle. A financial professional can help you determine whether a deferred annuity would be a good source of income after your working years. If so, consider when you’ll want your payouts to begin. Written by Miranda Marquit Miranda Marquit, MBA, has covered personal finance topics for nearly two decades, contributing to outlets including NPR, MarketWatch, Yahoo! Finance, and HuffPost. She also co-hosts a podcast at Money Talks News.
If you expect a long retirement, a deferred annuity may be a valuable tool. Also, the deferred taxes on growth along with guaranteed payments can help you better manage your retirement income.
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4 min read - May 09, 2022 - Miranda Marquit Key Takeaways • With a deferred annuity, you set a future date to start payments. • Deferred annuities grow over time and can provide guaranteed income. • Annuities are tax deferred—you don’t owe income tax until you receive payouts. Annuities are long-term investments meant to give you reliable and guaranteed income throughout retirement. You can buy an annuity with a single lump sum or with an initial payment plus monthly, quarterly, or annual premiums. Insurance companies sell different types of annuities to serve different needs. One kind is a deferred annuity. What is a deferred annuity? When you shop for an annuity, one consideration is when you’ll need the income. You can choose an annuity that offers income right away or at a later date. An “immediate” annuity begins payouts within one year. By contrast, with a deferred annuity, you choose a future date to begin getting payments. A deferred annuity has two main phases: • The accumulation period is when you’re investing your money. As you pay into the annuity, your account balance grows. • The payout period comes when you begin receiving money from the annuity. Another choice you’ll make when buying an annuity: Variable or fixed? • Variable annuities are linked to a range of investments whose performance will influence your payout. This means variable deferred annuities potentially can provide you with a higher payout later—but they also involve more risk because the value of those underlying investments can rise or fall. • Fixed annuities are designed for more certainty—they guarantee your principal and a set rate of return. Consider a fixed annuity if you want to feel secure that your retirement income can’t fall below a certain level. Carefully compare your annuity choices to determine what works best for you. Choices you can make now to plan for retirement Think about your goals for life after your career. You’ll likely use a variety of saving and investment tools to prepare. A deferred annuity could be among them, providing protected income during your golden years. When you buy a deferred annuity, you decide in advance when to start receiving payouts. Usually these payouts are monthly, but you may be able to withdraw on your own schedule. (By contrast, you can choose to begin monthly Social Security benefits—a form of government annuity you pay for via federal FICA taxes throughout your working years— anytime after age 62. The longer you wait to start, through age 70, the bigger your lifetime checks will be.) You’ll also choose how to receive your annuity income. The main options typically include regular payments for the rest of your life, payments over a set number of years, or a lump sum. Also, you can choose an annuity that pays money to your spouse or other heirs. This “death benefit” might come in the form of a lump sum or in continued payments. A later payout date can mean higher payments If you live a very long time, you may get more money in annuity payments than you paid in premiums. Why? Two reasons: 1. Growth over time. Investment gains and interest potentially can increase your annuity’s value. 2. A decreasing pool of owners. It’s not pleasant to think about, but some people who buy deferred annuities will die before they receive many—or any—payments. In this case, depending on the annuity contract, the insurer may have money left over to distribute to surviving annuity owners. The insurance industry calls these funds “mortality credits.”
4 min read - May 09, 2022 - Miranda Marquit Key Takeaways • With a deferred annuity, you set a future date to start payments. • Deferred annuities grow over time and can provide guaranteed income. • Annuities are tax deferred—you don’t owe income tax until you receive payouts. Annuities are long-term investments meant to give you reliable and guaranteed income throughout retirement. You can buy an annuity with a single lump sum or with an initial payment plus monthly, quarterly, or annual premiums. Insurance companies sell different types of annuities to serve different needs. One kind is a deferred annuity. What is a deferred annuity? When you shop for an annuity, one consideration is when you’ll need the income. You can choose an annuity that offers income right away or at a later date. An “immediate” annuity begins payouts within one year. By contrast, with a deferred annuity, you choose a future date to begin getting payments. A deferred annuity has two main phases: • The accumulation period is when you’re investing your money. As you pay into the annuity, your account balance grows. • The payout period comes when you begin receiving money from the annuity. Another choice you’ll make when buying an annuity: Variable or fixed? • Variable annuities are linked to a range of investments whose performance will influence your payout. This means variable deferred annuities potentially can provide you with a higher payout later—but they also involve more risk because the value of those underlying investments can rise or fall. • Fixed annuities are designed for more certainty—they guarantee your principal and a set rate of return. Consider a fixed annuity if you want to feel secure that your retirement income can’t fall below a certain level. Carefully compare your annuity choices to determine what works best for you. Choices you can make now to plan for retirement Think about your goals for life after your career. You’ll likely use a variety of saving and investment tools to prepare. A deferred annuity could be among them, providing protected income during your golden years. When you buy a deferred annuity, you decide in advance when to start receiving payouts. Usually these payouts are monthly, but you may be able to withdraw on your own schedule. (By contrast, you can choose to begin monthly Social Security benefits—a form of government annuity you pay for via federal FICA taxes throughout your working years— anytime after age 62. The longer you wait to start, through age 70, the bigger your lifetime checks will be.) You’ll also choose how to receive your annuity income. The main options typically include regular payments for the rest of your life, payments over a set number of years, or a lump sum. Also, you can choose an annuity that pays money to your spouse or other heirs. This “death benefit” might come in the form of a lump sum or in continued payments. A later payout date can mean higher payments If you live a very long time, you may get more money in annuity payments than you paid in premiums. Why? Two reasons: 1. Growth over time. Investment gains and interest potentially can increase your annuity’s value. 2. A decreasing pool of owners. It’s not pleasant to think about, but some people who buy deferred annuities will die before they receive many—or any—payments. In this case, depending on the annuity contract, the insurer may have money left over to distribute to surviving annuity owners. The insurance industry calls these funds “mortality credits.” Tax treatment of a deferred annuity If your investment grows during the accumulation phase, the earnings are tax deferred. This means you won’t owe federal income tax on them until you receive payouts. Tax-deferred gains allow your earnings to grow more efficiently. Thanks to compound interest—and more money working for you due to pretax contributions—your balance can grow at a faster rate than if you’d contributed after-tax money. Once the payouts start, they’ll be taxed as ordinary income. Your heirs may owe federal income tax on annuity payments or a lump sum they receive after your death. (This is different from regular life insurance benefits, which generally aren’t taxable) Even so, taxes on annuity benefits can be complex, so make sure to consult a tax professional. Is a deferred annuity right for you? If you expect a long retirement, a deferred annuity may be a valuable tool. Also, the deferred taxes on growth along with guaranteed payments can help you better manage your retirement income. Questions to ask as you evaluate your situation: • Will you have enough time for an annuity to grow before you’ll need the money? • Will you have heirs? Death benefits on deferred annuities can vary depending on the contract and the insurer that provides them. For example, some annuities pay heirs the money left in the account, while others allow you to set a minimum death benefit when you buy. Double-check the details to learn if there’s a death benefit and how much it is. • How will inflation affect the payouts you’ll receive? Review your annuity’s terms to find out if it’s likely to grow at least as fast as inflation. • What if you need to withdraw money before you reach retirement age or before the payouts begin? Depending on the terms and when you withdraw, you could be subject to extra costs and penalties. What you can do next Annuities are one piece of the retirement puzzle. A financial professional can help you determine whether a deferred annuity would be a good source of income after your working years. If so, consider when you’ll want your payouts to begin. Written by Miranda Marquit Miranda Marquit, MBA, has covered personal finance topics for nearly two decades, contributing to outlets including NPR, MarketWatch, Yahoo! Finance, and HuffPost. She also co-hosts a podcast at Money Talks News.
Another way to use the tool: Experiment. Enter different ages to learn if your portfolio would match what you’re trying to achieve. To invest more aggressively than usual for your age, try an age that’s five or 10 years younger. If preserving what you have is more important than growth, try an older age. Or, try adjusting your expected retirement age either way. Less aggressive vs. more aggressive A more aggressive strategy usually means more stocks and fewer bonds. That’s because stocks, which represent ownership in public companies, generally have more short-term risk but also more potential long-term gain. Bonds, meanwhile, are like loans to a company or government agency. They generally pay regular interest, and they have set maturity dates when buyers can expect to get back what they paid. Even so, bonds carry risks of their own—for example, the issuer could default on the loan, or rising interest rates could cause a bond’s price to fall. You can choose among a wide range of bonds, from those with low risk of default (but also lower payouts) to riskier, lower-rated bonds (which likely pay more). An aggressive approach could mean stronger overall gains, but you may see more ups and downs on the way there. This might suit you if you have a long time until retirement. Similarly, you might consider an aggressive approach if you expect to live a long time in retirement or you need to catch up quickly on your savings. A less aggressive investor typically holds more bonds and fewer stocks. This might lead to a smaller nest egg at retirement—but if the market crashes, you may not lose as much. Consider a more conservative approach if you’re close to retirement, or if you’ve already saved a lot and simply feel more comfortable with less risk. Whatever you choose, it’s important to make informed investment decisions. After all, you don’t want to find out later that your strategy was more aggressive or conservative than you’d needed. Understand your investing style When planning for retirement, it’s not just the date on the calendar that should dictate your investing strategy. You also need to consider the lifestyle and financial responsibilities you expect in retirement, along with other income sources that might help fund it. For instance, if you want to retire before your kids have completed college but plan to help them pay for tuition, factor that into your strategy. If you plan to downsize from a large home in an expensive area to an apartment where living costs are less, your retirement expenses might be significantly lower than your current costs. What’s your investing style? It all comes down to what types of investments you hold. Bonds, domestic stocks, international stocks and alternatives—from real estate funds to cryptocurrency—differ in their typical risk levels. Domestic and international stocks tend to be riskier than bonds. There’s also a range of risk levels within each investment type. For example, “investment grade” bonds—those that earn top safety ratings from firms like Standard & Poor’s and Moody’s—are less aggressive (and generally pay less) than low-rated, high-yield “junk” bonds. And huge “blue chip” stocks that consistently raise dividend payments to investors are more conservative than, say, “small-cap” biotechs that don’t pay dividends at all but could soar if one of their products takes off. Read more about investing • Learn the basics of saving and investing. • Get insights on how to invest for retirement at every stage of your career. Other tools • How’s your financial health? See where you stand on a range of indicators, from insurance to budgeting to retirement savings. • Have dependents who rely on your income? Estimate your life insurance needs. • What if something stopped you from working? Find out how much disability insurance you may need. What you can do next Depending on your “investing age,” you might want to re-assess whether your current portfolio reflects your priorities. Do you want a more or less aggressive asset mix? Meet with a financial professional to discuss how you can make sure you’re investing at the right risk level for your situation. Written by Jessica Sillers Jessica Sillers is a finance, insurance and business writer based in Maryland. Her work has appeared in many websites and publications including MoneyDNA, Zapier and Backer.
If the gap between your investing age and actual age is wide, ask yourself if this is what you want.
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3 min read - Jun 28, 2022 - Jessica Sillers Key takeaways • Your investing “age” depends more on your retirement plans than your birthday. • Synching your investing age with your long-term goals can help you meet them. • Each investment you make has its own level of risk and reward • It’s 2022—do you know your “investing age?” It’s not necessarily the number of candles on your birthday cake. It’s more about how much time until you plan to retire—and how your investment mix compares to others’ with a similar time frame. How to find your “investing age” To calculate your investing age: • Gather information about all your retirement accounts. Determine your overall investment mix—about how much of your money goes to domestic stocks, international stocks, bonds and alternative investments. To find out, log into your accounts or reviewing recent statements. • Enter your current age. • Enter the age at which you’d like to retire. • Use the arrows to scroll through the pie charts and find the investment mix that best represents your own. • Choose the button to reveal your investing age. What your results mean If your “investing age” is close to your actual age, your investing style likely aligns with your expected timeline to retirement. If the gap between your investing age and actual age is wide, ask yourself if this is what you want. For example, is your portfolio riskier than you’d planned, which could mean a bumpier ride than you’d like? Is it more conservative, which could fail to deliver enough growth to meet your goals?
• What if something stopped you from working? Find out how much disability insurance you may need.
3 min read - Jun 28, 2022 - Jessica Sillers Key takeaways • Your investing “age” depends more on your retirement plans than your birthday. • Synching your investing age with your long-term goals can help you meet them. • Each investment you make has its own level of risk and reward • It’s 2022—do you know your “investing age?” It’s not necessarily the number of candles on your birthday cake. It’s more about how much time until you plan to retire—and how your investment mix compares to others’ with a similar time frame. How to find your “investing age” To calculate your investing age: • Gather information about all your retirement accounts. Determine your overall investment mix—about how much of your money goes to domestic stocks, international stocks, bonds and alternative investments. To find out, log into your accounts or reviewing recent statements. • Enter your current age. • Enter the age at which you’d like to retire. • Use the arrows to scroll through the pie charts and find the investment mix that best represents your own. • Choose the button to reveal your investing age. What your results mean If your “investing age” is close to your actual age, your investing style likely aligns with your expected timeline to retirement. If the gap between your investing age and actual age is wide, ask yourself if this is what you want. For example, is your portfolio riskier than you’d planned, which could mean a bumpier ride than you’d like? Is it more conservative, which could fail to deliver enough growth to meet your goals? Another way to use the tool: Experiment. Enter different ages to learn if your portfolio would match what you’re trying to achieve. To invest more aggressively than usual for your age, try an age that’s five or 10 years younger. If preserving what you have is more important than growth, try an older age. Or, try adjusting your expected retirement age either way. Less aggressive vs. more aggressive A more aggressive strategy usually means more stocks and fewer bonds. That’s because stocks, which represent ownership in public companies, generally have more short-term risk but also more potential long-term gain. Bonds, meanwhile, are like loans to a company or government agency. They generally pay regular interest, and they have set maturity dates when buyers can expect to get back what they paid. Even so, bonds carry risks of their own—for example, the issuer could default on the loan, or rising interest rates could cause a bond’s price to fall. You can choose among a wide range of bonds, from those with low risk of default (but also lower payouts) to riskier, lower-rated bonds (which likely pay more). An aggressive approach could mean stronger overall gains, but you may see more ups and downs on the way there. This might suit you if you have a long time until retirement. Similarly, you might consider an aggressive approach if you expect to live a long time in retirement or you need to catch up quickly on your savings. A less aggressive investor typically holds more bonds and fewer stocks. This might lead to a smaller nest egg at retirement—but if the market crashes, you may not lose as much. Consider a more conservative approach if you’re close to retirement, or if you’ve already saved a lot and simply feel more comfortable with less risk. Whatever you choose, it’s important to make informed investment decisions. After all, you don’t want to find out later that your strategy was more aggressive or conservative than you’d needed. Understand your investing style When planning for retirement, it’s not just the date on the calendar that should dictate your investing strategy. You also need to consider the lifestyle and financial responsibilities you expect in retirement, along with other income sources that might help fund it. For instance, if you want to retire before your kids have completed college but plan to help them pay for tuition, factor that into your strategy. If you plan to downsize from a large home in an expensive area to an apartment where living costs are less, your retirement expenses might be significantly lower than your current costs. What’s your investing style? It all comes down to what types of investments you hold. Bonds, domestic stocks, international stocks and alternatives—from real estate funds to cryptocurrency—differ in their typical risk levels. Domestic and international stocks tend to be riskier than bonds. There’s also a range of risk levels within each investment type. For example, “investment grade” bonds—those that earn top safety ratings from firms like Standard & Poor’s and Moody’s—are less aggressive (and generally pay less) than low-rated, high-yield “junk” bonds. And huge “blue chip” stocks that consistently raise dividend payments to investors are more conservative than, say, “small-cap” biotechs that don’t pay dividends at all but could soar if one of their products takes off.
Read more about investing
• Learn the basics of saving and investing.
• Get insights on how to invest for retirement at every stage of your career.
Other tools • How’s your financial health? See where you stand on a range of indicators, from insurance to budgeting to retirement savings.
• Have dependents who rely on your income? Estimate your life insurance needs.
Written by Jessica Sillers Jessica Sillers is a finance, insurance and business writer based in Maryland. Her work has appeared in many websites and publications including MoneyDNA, Zapier and Backer.
What you can do next Depending on your “investing age,” you might want to re-assess whether your current portfolio reflects your priorities. Do you want a more or less aggressive asset mix? Meet with a financial professional to discuss how you can make sure you’re investing at the right risk level for your situation.
Related investment pages • The basics of saving and investing Investing consistently over time can lead to a sizeable nest egg. But make sure you know the difference between stashing cash into savings and investing it. • The economic and stock market terms you should know It’s like learning a new language when you decide to invest for the first time. We’ll walk you through the main concepts you need to understand as you start investing. • How to invest in a downturn How you act during a stock market downturn can have huge implications for your retirement account. Learn how to stay level-headed even if the market crashes. Other useful calculators and tools • Retirement calculator Use this calculator to figure out how much money you need to retire—and how much you should save now. • What’s your investing age? The type of companies and asset classes you should invest in depends on your age. Use this tool to see if you’re investing in the right industries for your age bracket. • View financial tools Still figuring out your financial action plan? Our interactive tools can put you on the right track.
1 The invested amount is provided for illustrative purposes and does not reflect an actual investment and there is no guarantee of expected future results.
Even minor changes to your budget can yield incredible results when you invest the money instead of spending it.
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If you’re not sure how much you spend in each category, examine your credit card and bank account transactions from the past year. Open a spreadsheet or use a pen and paper to write down all the recurring services and subscriptions. Sometimes you might pay for a whole year of service upfront. Make sure to include these yearly memberships in your calculation. When you’ve gone through the whole year, sort each expense into categories. Add up these expenses to find the yearly total for each group and divide it by 12 to calculate the monthly average. Use that monthly figure when you’re inputting numbers into the calculator. It’s important to go through a full year of credit card and bank transactions because some services, like magazines, only bill once a year. You should also scan your transactions from apps, which may include recurring expenses that you split with a friend or partner. Step 2: What if you invested instead? Once you’ve input all the relevant categories, the calculator will automatically show how much you spend on the various services over time. The calculator will include the following results: • Total spending per month • Total spending over one year • Total spending over 10 years • Total spending over 30 years Next, if you click on the “See Now” button on the bottom right, you’ll be taken to the next page. The calculator shows an example how much an investment account could be worth in 30 years if you had invested all of the money instead of spending it on services. Of course, you cannot abandon all your monthly expenses. You can then click back to the previous page. If, instead, you decide you want to cut half of the cable bill, you can remove your other costs. Click the “See Now” button again to calculate the long-term impact of investing that half of the cable bill you want to cut. By playing with the tool, you can determine how much a cut in each category could help your retirement savings or investments. The results will show that you don’t need to invest thousands of dollars every month to end up with a large portfolio. Step 3: Send yourself the results Users can create a free Prudential profile to save the results and have them emailed to you by clicking the “Save/Send My Results” button at the bottom of the page. You’ll need to supply your first and last name, email address, and password to make a profile. The calculator assumes a 6% annual cost increase, which accounts for companies raising the cost of investing services over time. The calculator also uses a 3% rate of growth compounded annually, which is intended to represent the kind of return rate an average investor can expect. If you’re ready to reallocate some of your discretionary money toward stocks, bonds, real estate, or another asset class, you can find a Prudential professional to help you set up an account. Look for a professional near you who specializes in investments and retirement.
When deciding to save for your future, one major step is figuring out just how much you can set aside for an investment plan. But if you don't have much money left over at the end of the month after paying expenses, putting aside money for retirement savings may feel unattainable. That’s when it’s particularly helpful to reconsider your budget to reshape your financial future. The key is understanding just how much you are spending each month on non-essential expenses. Use our investment calculator to really look at where your money is going, and what would happen if you used those funds for retirement savings instead. Once you understand where you can save and reallocate money towards your investment plan, building your nest egg won’t seem so impossible. Connect with a financial professional • Get complimentary financial guidance that’s focused on your goals and how to reach them. • Schedule an appointment • Find a financial professional How to use our investment calculator: Step 1: Input your recurring expenses. This calculator allows you to visualize how reducing or eliminating recurring services or subscriptions can free up money you can then use to invest. Even minor changes to your budget can yield incredible results when you invest the money instead of spending it. Many consumers sign up for subscriptions and services, stop using them, and then forget about it. Using this calculator can show the benefits of regularly culling your subscription list—while also reminding you of services you might want to cancel. In this section, you’ll input how much you spend every month on various non-essential items. The categories include: • Dining out • Cable TV • Internet • Gym membership • Newspaper subscription • Magazine subscription • Online streaming services • Online subscription services • Others To select a particular service, click on the box until it’s highlighted. You can click on as few or as many boxes as you want. After you click on the box, input the monthly expense amount for that category.
When deciding to save for your future, one major step is figuring out just how much you can set aside for an investment plan. But if you don't have much money left over at the end of the month after paying expenses, putting aside money for retirement savings may feel unattainable. That’s when it’s particularly helpful to reconsider your budget to reshape your financial future. The key is understanding just how much you are spending each month on non-essential expenses. Use our investment calculator to really look at where your money is going, and what would happen if you used those funds for retirement savings instead. Once you understand where you can save and reallocate money towards your investment plan, building your nest egg won’t seem so impossible. Connect with a financial professional • Get complimentary financial guidance that’s focused on your goals and how to reach them. • Schedule an appointment • Find a financial professional How to use our investment calculator: Step 1: Input your recurring expenses. This calculator allows you to visualize how reducing or eliminating recurring services or subscriptions can free up money you can then use to invest. Even minor changes to your budget can yield incredible results when you invest the money instead of spending it. Many consumers sign up for subscriptions and services, stop using them, and then forget about it. Using this calculator can show the benefits of regularly culling your subscription list—while also reminding you of services you might want to cancel. In this section, you’ll input how much you spend every month on various non-essential items. The categories include: • Dining out • Cable TV • Internet • Gym membership • Newspaper subscription • Magazine subscription • Online streaming services • Online subscription services • Others To select a particular service, click on the box until it’s highlighted. You can click on as few or as many boxes as you want. After you click on the box, input the monthly expense amount for that category. If you’re not sure how much you spend in each category, examine your credit card and bank account transactions from the past year. Open a spreadsheet or use a pen and paper to write down all the recurring services and subscriptions. Sometimes you might pay for a whole year of service upfront. Make sure to include these yearly memberships in your calculation. When you’ve gone through the whole year, sort each expense into categories. Add up these expenses to find the yearly total for each group and divide it by 12 to calculate the monthly average. Use that monthly figure when you’re inputting numbers into the calculator. It’s important to go through a full year of credit card and bank transactions because some services, like magazines, only bill once a year. You should also scan your transactions from apps, which may include recurring expenses that you split with a friend or partner. Step 2: What if you invested instead? Once you’ve input all the relevant categories, the calculator will automatically show how much you spend on the various services over time. The calculator will include the following results: • Total spending per month • Total spending over one year • Total spending over 10 years • Total spending over 30 years Next, if you click on the “See Now” button on the bottom right, you’ll be taken to the next page. The calculator shows an example how much an investment account could be worth in 30 years if you had invested all of the money instead of spending it on services. Of course, you cannot abandon all your monthly expenses. You can then click back to the previous page. If, instead, you decide you want to cut half of the cable bill, you can remove your other costs. Click the “See Now” button again to calculate the long-term impact of investing that half of the cable bill you want to cut. By playing with the tool, you can determine how much a cut in each category could help your retirement savings or investments. The results will show that you don’t need to invest thousands of dollars every month to end up with a large portfolio. Step 3: Send yourself the results Users can create a free Prudential profile to save the results and have them emailed to you by clicking the “Save/Send My Results” button at the bottom of the page. You’ll need to supply your first and last name, email address, and password to make a profile. The calculator assumes a 6% annual cost increase, which accounts for companies raising the cost of investing services over time. The calculator also uses a 3% rate of growth compounded annually, which is intended to represent the kind of return rate an average investor can expect. If you’re ready to reallocate some of your discretionary money toward stocks, bonds, real estate, or another asset class, you can find a Prudential professional to help you set up an account. Look for a professional near you who specializes in investments and retirement.
May 15, 2019 - 3 min read - Beth Braverman Key Takeaways • Many families are unprepared for a minor financial emergency. • Setting money aside for unexpected expenses can keep you out of debt. • Creating a habit of saving can have lifelong financial benefits. When the government shut down for 35 days in January 2019, millions of federal workers and contractors, and their families, found themselves scrambling to make ends meet. Nearly half fell behind on their bills, and more than a quarter missed a mortgage or rent payment, according to a Prudential survey of those who went unpaid during the shutdown. Every family in America should have an emergency fund to handle unforeseen events. Here are three important reasons why: You never know when you'll need it Life is full of unexpected events, and it's impossible to know when they'll hit (just that they will, eventually). Just as government workers couldn't have predicted they'd go a full month without receiving a paycheck, you never know when your car is going to break down, or a roof will spring a leak. Having the cash on hand to deal quickly with such events can prevent the financial burden from compounding. If you have enough money to pay for car repairs or cover a rental car while yours is in the shop, for example, you don't have to also worry about missing work because you can't get there. If you have the cash to pay your utilities while you're out of work recovering from surgery, you don't have to worry about having your water shut off. Even one missed mortgage payment can lead to a lower credit score, which can make it harder or more expensive to borrow money in the future. An emergency fund allows you to plan for any of those events, even if you don't know when they're going to happen. Ultimately, you should aim to set aside three to six months' worth of expenses in an account that you can quickly access when needed. Having an emergency fund will reduce your stress Emergencies, by their nature, are nerve-wracking, whether you're dealing with a medical crisis or a job layoff. More than 80% of those affected by the government shutdown said their overall stress levels spiked, with half reporting that they became much more stressed. While emergencies and disasters can feel emotionally overwhelming, knowing that you've got a financial safety net in place can reduce those effects. You can avoid financial pitfalls Without an emergency fund, those in crisis might have to make money moves that have long-term consequences. Withdrawing money from your retirement account, for example, or using high-interest credit cards can throw your entire financial plan off course. More than four in 10 federal workers borrowed money to help meet their financial obligations and day-to-day expenses during the shutdown. Having an emergency fund gives you money to cover your ongoing bills in the short-term without having to take on additional debt. That way, once the emergency has passed, you can focus on rebuilding your emergency fund, rather than dealing with new creditors. An emergency fund forces you to live below your means Spending less money than you make is one of the basic rules of personal finance, but it's hard to do when you're used to living paycheck-to-paycheck. By committing to saving an emergency fund, you'll get into the habit of setting aside a portion of your income on a regular basis and eventually, you'll be used to living your life without that money. Once you've funded your emergency savings, you can comfortably redirect that portion of your income toward other financial goals. What you can do next Begin building up your emergency fund by setting up a regular, automatic deposit into a designated account. While you should aim for three to six months' worth of expenses, even a small amount of cash set aside for the unexpected can help. Beth Braverman is a freelance writer covering personal finance, parenting, and careers. Her work has appeared in dozens of publications, including Consumer Reports, CNBC.com, and CNNMoney.com. She lives with her family in Westchester County, N.Y.
plan your goals
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Generation 3: Be intentional and creative As a millennial, I’ve had to be creative and intentional to come up with a strategy to break the curses of my generational wealth gap. 2021 threw me several devastating curveballs, so I put my creativity and intent to work by building a new financial plan that included being open to starting a part-time position and a new business. My plan helped me see that I needed to use all my assets and resources, including my legal background. I now have two incorporated businesses, a teaching position and the goal to become totally debt free. (Yes, I even want to rid myself of the “good” debt, like a mortgage, and don’t want my businesses to borrow a penny.) This, actually, is a break from tradition: I don't know anyone in my family who owns a home without a mortgage or a profitable business without any debt. A new tradition? Being in business for myself is the biggest generational shift I can make. Why is this important? According to the Los Angeles Urban League, “The COVID-19 pandemic has had a devastating impact on minority- and women-owned entrepreneurs in general. The implications for Black-owned business owners have been even more devastating. In 2020, Black business ownership rates dropped over 40%, the largest of any racial group.” The last entrepreneur in my family was likely my great-great-grandmother (the farmer my grandmother lived with). I’m building my businesses without loans, and taking the time to grow at a pace I’m sure most entrepreneurs would think is too slow. But I’m doing so in the hopes of building businesses that will still exist and make a difference in the lives of others long after I’m gone. Here's what you can do to create a financial plan and spur growth by being intentional and creative: • Forgive yourself for past financial mistakes and setbacks, no matter how bad it feels to be in the position you’re in. As long as you want to do better, you will. • Be honest with yourself about your current situation by mapping out your income, expenses and debts. It might feel scary at first, but having a clear picture of where you stand is the only way to move forward. • Prepare an emergency fund for any worst case scenarios, such as loss of income, a major accident or an unexpected expense. This number will vary for everyone; enough money for three to six months is a great place to start. • Tap into your hobbies, interests and skills to see if there are additional ways to generate income. • Don't be afraid to ask for help and use the resources available to you. If you need help figuring out why to invest or how to plan for your taxes, reach out to a financial professional, read books and articles, or even take a class to learn what you need to know. Each of these stories demonstrates that generational wealth has many sides. Creating it takes time—more than some of us might have to give. But if we start now and are transparent—with ourselves, our family and financial professionals—about what we're doing and what we're going through, we might be lucky enough to convince future generations that this is a cause worth continuing. What you can do next Think ahead to your financial future as well as those of coming generations. Ask yourself what you can do now to narrow the wealth gap—including creating an estate plan and getting educated about investing—and make these steps part of your financial plan. Jala Eaton is a seasoned personal finance writer, estate planning attorney and certified trust & fiduciary advisor (CTFA). Blogging as Your Wealth Bestfriend®, her work has also appeared in Business Insider, Parents, Real Simple, The Skimm, Yahoo News and others.
As a millennial, I’ve had to be creative and intentional to come up with a strategy to break the curses of my generational wealth gap.
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Feb 22, 2022 - 5 min read - Jala Eaton Key Takeaways • Black families—particularly Black women—have to contend with a significant wealth divide. • Closing the wealth gap doesn’t happen overnight—it's a multigenerational effort. • Creating an intentional, educated financial plan is one of the best ways to shrink the gap. I recently had the pleasure to represent the youngest of three generations of Black women—my grandmother, my mother and me—at a family celebration. This gathering got me thinking about the wealth gap and how it disproportionately affects Black people—particularly Black women. According to Goldman Sachs, Black women face a wealth gap of more than 90% compared to white men. Each generation has faced or is facing particular challenges when it comes to closing this divide. Being with my family inspired me to highlight how we are tackling these challenges and making strides to shrink the gap: Generation 1: Create a clear estate plan My grandmother grew up in Deep South and spent most of her time with her grandmother, who farmed the land they lived on. My grandmother eventually moved away, and the land remained in the family. Think of her surprise when she found out that she—along with 70 of her distant relatives—had inherited the land she grew up on! That’s not hyperbole. Imagine inheriting property and having to figure out all the heirs who may have a claim to it in the past 109 years with little information about almost any of them. In my grandmother's situation, it's easy to see how many dozens of people could be attached to the property—but without legal paperwork, the title is unclear and, thus, unmarketable. Since no one was willing to split the legal fees, my grandmother, motivated by her desire to have the property remain in the family for generations, took on the responsibility of hiring an attorney and petitioning the court to clear the title to the property (a long legal process). Through her efforts, I've learned that generational wealth truly requires selfless acts. Her work so far has brought partial victory: A portion of the title to the property has been cleared. (The court applied the various state succession laws and divided some of the land among heirs related by blood to prior owners.) This is just the beginning. It will take years and substantial financial resources before the entire property is truly owned, free and clear, by all the families involved. Where there's no will... Many people think they don’t need a written plan to pass down property (in fact, only 44% of American adults have a will) and that transfer of ownership happens automatically. The reality is it rarely, if ever, does. In some states, when a property owner dies without a will or trust, their land becomes what’s known as “heirs’ property,” meaning the owner’s descendants inherit it. These can be anyone alive and related to the owner when the owner dies. But without a will, it's hard to establish legal ownership of the property because there isn’t a clear deed or trust. What makes this situation even more confusing is that family members could still live on the property and even pay taxes, believing they own the property. But in reality, there’s no clear legal “owner.” Every time an heir passes away, the title and ownership get more complicated as the land continues to be passed down to more descendants. Estate planning requires action and knowledge building—not just from you but from your family. Everyone should understand the plan and know what to do when the time comes. If you own real estate, here's how you can learn from my family's situation and protect your assets: • Create and maintain a family tree to help you see how many potential living heirs you have. • Work with an attorney to create a valid estate plan. This should include a trust, will, advanced directive (aka living will) and power of attorney so your property goes to those you want to have it. Discuss your estate plan with your family. • Allocate money in your plan for paying property taxes and/or a mortgage. You can use insurance policies for this, and you can consult a financial advisor for help. Generation 2: Build financial education My mother came from humble beginnings and has always been a saver. A few years ago, after she retired from a career in education, I sat down with her to discuss her financial goals. She told me she wanted to save her way to wealth, but investing wasn’t in her plans. Initially, she was resistant about investing in the stock market—I’d say she went in kicking and screaming—but quickly warmed to the idea after I helped educate her on how stock investments could grow her assets even further. Now, she has caught the investing bug! She has added two brokerage accounts (one for herself and one for her granddaughter) and a trust. Her portfolios perform amazingly well. Occasionally, I even hear her say she wants to keep diversifying her assets and is open to new investments, including cryptocurrencies! She often shares her story with others and encourages them to jump into investing. From nothing to something To say we’ve come a long way is an understatement. I’m proud of my mother because she was initially skeptical about putting her money anywhere other than in a bank account or a certificate of deposit (CD). Now, she makes smart investing decisions that start with education as her foundation. She puts in the work to learn and understand an investment instead of rushing blindly to put money in. My hope is that she takes the time to be present in the moment and be proud of what she’s built because it’s impressive. She’s truly gone from nothing to something, and education is what helped her get there. If you’re looking to begin or continue your investment journey, here’s how to build financial education to drive success: • Set your financial goals. Do you want to buy a house, build a safety net for your family or set yourself up for a comfortable retirement? Begin by mapping out what you want to achieve, which will help you carve out a path to get there. • Do research using your goals as a guide. Look into which investment accounts and options would work best for your situation. • Create a financial plan. Work with a financial advisor to develop a road map for money management, taxes, retirement, investments, risk management and estate planning that meets your needs. • Make investing easier. Set up automatic transfers from your bank account to your investments. This will give you one less thing to think about. You can also set calendar reminders for yourself, or schedule regular meetings with your financial advisor, to review your investments and make necessary adjustments.
Feb 22, 2022 - 5 min read - Jala Eaton Key Takeaways • Black families—particularly Black women—have to contend with a significant wealth divide. • Closing the wealth gap doesn’t happen overnight—it's a multigenerational effort. • Creating an intentional, educated financial plan is one of the best ways to shrink the gap. I recently had the pleasure to represent the youngest of three generations of Black women—my grandmother, my mother and me—at a family celebration. This gathering got me thinking about the wealth gap and how it disproportionately affects Black people—particularly Black women. According to Goldman Sachs, Black women face a wealth gap of more than 90% compared to white men. Each generation has faced or is facing particular challenges when it comes to closing this divide. Being with my family inspired me to highlight how we are tackling these challenges and making strides to shrink the gap: Generation 1: Create a clear estate plan My grandmother grew up in Deep South and spent most of her time with her grandmother, who farmed the land they lived on. My grandmother eventually moved away, and the land remained in the family. Think of her surprise when she found out that she—along with 70 of her distant relatives—had inherited the land she grew up on! That’s not hyperbole. Imagine inheriting property and having to figure out all the heirs who may have a claim to it in the past 109 years with little information about almost any of them. In my grandmother's situation, it's easy to see how many dozens of people could be attached to the property—but without legal paperwork, the title is unclear and, thus, unmarketable. Since no one was willing to split the legal fees, my grandmother, motivated by her desire to have the property remain in the family for generations, took on the responsibility of hiring an attorney and petitioning the court to clear the title to the property (a long legal process). Through her efforts, I've learned that generational wealth truly requires selfless acts. Her work so far has brought partial victory: A portion of the title to the property has been cleared. (The court applied the various state succession laws and divided some of the land among heirs related by blood to prior owners.) This is just the beginning. It will take years and substantial financial resources before the entire property is truly owned, free and clear, by all the families involved. Where there's no will... Many people think they don’t need a written plan to pass down property (in fact, only 44% of American adults have a will) and that transfer of ownership happens automatically. The reality is it rarely, if ever, does. In some states, when a property owner dies without a will or trust, their land becomes what’s known as “heirs’ property,” meaning the owner’s descendants inherit it. These can be anyone alive and related to the owner when the owner dies. But without a will, it's hard to establish legal ownership of the property because there isn’t a clear deed or trust. What makes this situation even more confusing is that family members could still live on the property and even pay taxes, believing they own the property. But in reality, there’s no clear legal “owner.” Every time an heir passes away, the title and ownership get more complicated as the land continues to be passed down to more descendants. Estate planning requires action and knowledge building—not just from you but from your family. Everyone should understand the plan and know what to do when the time comes. If you own real estate, here's how you can learn from my family's situation and protect your assets: • Create and maintain a family tree to help you see how many potential living heirs you have. • Work with an attorney to create a valid estate plan. This should include a trust, will, advanced directive (aka living will) and power of attorney so your property goes to those you want to have it. Discuss your estate plan with your family. • Allocate money in your plan for paying property taxes and/or a mortgage. You can use insurance policies for this, and you can consult a financial advisor for help. Generation 2: Build financial education My mother came from humble beginnings and has always been a saver. A few years ago, after she retired from a career in education, I sat down with her to discuss her financial goals. She told me she wanted to save her way to wealth, but investing wasn’t in her plans. Initially, she was resistant about investing in the stock market—I’d say she went in kicking and screaming—but quickly warmed to the idea after I helped educate her on how stock investments could grow her assets even further. Now, she has caught the investing bug! She has added two brokerage accounts (one for herself and one for her granddaughter) and a trust. Her portfolios perform amazingly well. Occasionally, I even hear her say she wants to keep diversifying her assets and is open to new investments, including cryptocurrencies! She often shares her story with others and encourages them to jump into investing. From nothing to something To say we’ve come a long way is an understatement. I’m proud of my mother because she was initially skeptical about putting her money anywhere other than in a bank account or a certificate of deposit (CD). Now, she makes smart investing decisions that start with education as her foundation. She puts in the work to learn and understand an investment instead of rushing blindly to put money in. My hope is that she takes the time to be present in the moment and be proud of what she’s built because it’s impressive. She’s truly gone from nothing to something, and education is what helped her get there. If you’re looking to begin or continue your investment journey, here’s how to build financial education to drive success: • Set your financial goals. Do you want to buy a house, build a safety net for your family or set yourself up for a comfortable retirement? Begin by mapping out what you want to achieve, which will help you carve out a path to get there. • Do research using your goals as a guide. Look into which investment accounts and options would work best for your situation. • Create a financial plan. Work with a financial advisor to develop a road map for money management, taxes, retirement, investments, risk management and estate planning that meets your needs. • Make investing easier. Set up automatic transfers from your bank account to your investments. This will give you one less thing to think about. You can also set calendar reminders for yourself, or schedule regular meetings with your financial advisor, to review your investments and make necessary adjustments. Generation 3: Be intentional and creative As a millennial, I’ve had to be creative and intentional to come up with a strategy to break the curses of my generational wealth gap. 2021 threw me several devastating curveballs, so I put my creativity and intent to work by building a new financial plan that included being open to starting a part-time position and a new business. My plan helped me see that I needed to use all my assets and resources, including my legal background. I now have two incorporated businesses, a teaching position and the goal to become totally debt free. (Yes, I even want to rid myself of the “good” debt, like a mortgage, and don’t want my businesses to borrow a penny.) This, actually, is a break from tradition: I don't know anyone in my family who owns a home without a mortgage or a profitable business without any debt. A new tradition? Being in business for myself is the biggest generational shift I can make. Why is this important? According to the Los Angeles Urban League, “The COVID-19 pandemic has had a devastating impact on minority- and women-owned entrepreneurs in general. The implications for Black-owned business owners have been even more devastating. In 2020, Black business ownership rates dropped over 40%, the largest of any racial group.” The last entrepreneur in my family was likely my great-great-grandmother (the farmer my grandmother lived with). I’m building my businesses without loans, and taking the time to grow at a pace I’m sure most entrepreneurs would think is too slow. But I’m doing so in the hopes of building businesses that will still exist and make a difference in the lives of others long after I’m gone. Here's what you can do to create a financial plan and spur growth by being intentional and creative: • Forgive yourself for past financial mistakes and setbacks, no matter how bad it feels to be in the position you’re in. As long as you want to do better, you will. • Be honest with yourself about your current situation by mapping out your income, expenses and debts. It might feel scary at first, but having a clear picture of where you stand is the only way to move forward. • Prepare an emergency fund for any worst-case scenarios, such as loss of income, a major accident or an unexpected expense. This number will vary for everyone; enough money for three to six months is a great place to start. • Tap into your hobbies, interests and skills to see if there are additional ways to generate income. • Don't be afraid to ask for help and use the resources available to you. If you need help figuring out why to invest or how to plan for your taxes, reach out to a financial professional, read books and articles, or even take a class to learn what you need to know. Each of these stories demonstrates that generational wealth has many sides. Creating it takes time—more than some of us might have to give. But if we start now and are transparent—with ourselves, our family and financial professionals—about what we're doing and what we're going through, we might be lucky enough to convince future generations that this is a cause worth continuing. What you can do next Think ahead to your financial future as well as those of coming generations. Ask yourself what you can do now to narrow the wealth gap—including creating an estate plan and getting educated about investing—and make these steps part of your financial plan. Jala Eaton is a seasoned personal finance writer, estate planning attorney and certified trust & fiduciary advisor (CTFA). Blogging as Your Wealth Bestfriend®, her work has also appeared in Business Insider, Parents, Real Simple, The Skimm, Yahoo News and others.
Zina Kumok is a freelance writer specializing in personal finance. She has written for the Associated Press, Indianapolis Monthly and more. She also writes a blog about how she paid off her student loans in three years.
A good financial advisor won't judge you for posing questions or for revealing less-than-flattering details about your financial situation.
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Questions to ask During your initial meeting, ask the financial advisor about how they’re compensated. Some receive a fee for the conversation. Others will deduct a percentage—typically 1% a year—of the amount of money you let them manage. And still others will receive a commission for selling you certain investments. It's important to know how they’re paid, since it helps shape their advice. Also ask about the specific services they provide. You want to make sure they can tackle the issues you need. The key to the conversation? If you don’t understand something, ask for clarification. A good financial advisor won't judge you for posing questions or for revealing less-than-flattering details about your financial situation. What to ask your financial advisor each year Whether your life stays the same or changes drastically, it helps to meet with your financial advisor once a year. At the follow-up meeting, ask about anything that's cropped up since your last appointment, such as whether a recent market downturn has delayed your plans to retire or if you need to ramp up saving for your child’s college education. What you can do next If you’re married, talk to your spouse about the questions you may have for the advisor, then draft a list of basic questions to ask via email or phone before your first official meeting. You can find a Prudential professional near you by searching here.
Mar 24, 2021 - 3 min read - Zina Kumok Key Takeaways • Write down questions to ask in your first meeting, and bring a notepad to record the answers. • Find out about pricing, available services and how the advisor is compensated before you pay for the consultation. • If you don't understand something—anything—ask for clarification. Meeting with a financial advisor for the first time can feel a little like working with a personal trainer. You might have some trepidation, but it becomes progressively easier as you adjust to the process. To get the most out of your first meeting, bring a list of questions. Here are some important considerations and things to ask. What to know before meeting with a financial advisor Wondering how to find a good financial advisor? Like any important decision, it takes a little research to find the best option for your circumstances. Before you schedule a meeting with a financial advisor, take some time to compare various advisors to see who best fits your needs. Do you have questions about your investment portfolio? Are you worried about budgeting? Do you want to get a retirement plan in place? Make sure the advisor specializes in your specific concerns. Many will answer questions via email before you set up a meeting. Use those answers to help form your decision. What information does an advisor need? Depending on the kinds of services you’re looking for, a financial advisor may need to know: • The amounts in your checking, savings and retirement accounts • Your total debt balance, including mortgage, auto loans, student loans, credit cards, personal loans, lines of credit and more • Your investments, any pension or stock options and whether your company matches your retirement plan contributions • Your savings goals, like paying for a child’s college education or remodeling your kitchen What to bring to your first meeting Take a few days to brainstorm questions before the meeting. Bring a notepad (or your phone) with your questions and refer to it if needed. Make sure to also take notes on what the advisor says. You should also print out statements from your banks, lenders and investment providers. Bring copies of your current insurance policies as well, since your advisor will want to know every financial tool at your disposal.
Mar 24, 2021 - 3 min read - Zina Kumok Key Takeaways • Write down questions to ask in your first meeting, and bring a notepad to record the answers. • Find out about pricing, available services and how the advisor is compensated before you pay for the consultation. • If you don't understand something—anything—ask for clarification. Meeting with a financial advisor for the first time can feel a little like working with a personal trainer. You might have some trepidation, but it becomes progressively easier as you adjust to the process. To get the most out of your first meeting, bring a list of questions. Here are some important considerations and things to ask. What to know before meeting with a financial advisor Wondering how to find a good financial advisor? Like any important decision, it takes a little research to find the best option for your circumstances. Before you schedule a meeting with a financial advisor, take some time to compare various advisors to see who best fits your needs. Do you have questions about your investment portfolio? Are you worried about budgeting? Do you want to get a retirement plan in place? Make sure the advisor specializes in your specific concerns. Many will answer questions via email before you set up a meeting. Use those answers to help form your decision. What information does an advisor need? Depending on the kinds of services you’re looking for, a financial advisor may need to know: • The amounts in your checking, savings and retirement accounts • Your total debt balance, including mortgage, auto loans, student loans, credit cards, personal loans, lines of credit and more • Your investments, any pension or stock options and whether your company matches your retirement plan contributions • Your savings goals, like paying for a child’s college education or remodeling your kitchen What to bring to your first meeting Take a few days to brainstorm questions before the meeting. Bring a notepad (or your phone) with your questions and refer to it if needed. Make sure to also take notes on what the advisor says. You should also print out statements from your banks, lenders and investment providers. Bring copies of your current insurance policies as well, since your advisor will want to know every financial tool at your disposal. Questions to ask During your initial meeting, ask the financial advisor about how they’re compensated. Some receive a fee for the conversation. Others will deduct a percentage—typically 1% a year—of the amount of money you let them manage. And still others will receive a commission for selling you certain investments. It's important to know how they’re paid, since it helps shape their advice. Also ask about the specific services they provide. You want to make sure they can tackle the issues you need. The key to the conversation? If you don’t understand something, ask for clarification. A good financial advisor won't judge you for posing questions or for revealing less-than-flattering details about your financial situation. What to ask your financial advisor each year Whether your life stays the same or changes drastically, it helps to meet with your financial advisor once a year. At the follow-up meeting, ask about anything that's cropped up since your last appointment, such as whether a recent market downturn has delayed your plans to retire or if you need to ramp up saving for your child’s college education. What you can do next If you’re married, talk to your spouse about the questions you may have for the advisor, then draft a list of basic questions to ask via email or phone before your first official meeting. You can find a Prudential professional near you by searching here.
From Dr. King’s time to today, collaborations are key to driving equality forward. By Lata Reddy, senior vice president, Inclusive Solutions at Prudential February 24, 2021 The past year has seen a resurgence in Black Americans’ fight for equal treatment under the law and equitable investment in their communities, with nationwide protests sparking comparisons to the civil rights movement led by Dr. Martin Luther King Jr. a little more than 50 years ago. At the same time, the COVID-19 pandemic has laid bare the systemic racism that still pervades society and erased much of the financial gains Black Americans have made in recent years, with nearly one quarter seeing their household income reduced by half or more, according to Prudential’s Financial Wellness Census. One of Prudential’s partners in addressing the key issue of financial inclusion for Black Americans is Dr. DeForest “Buster” Soaries, a pastor, chairman and founder of the dfree® Financial Freedom Movement. I spoke with Dr. Soaries about Dr. King’s legacy, his focus on driving broad economic prosperity and the opportunity for institutions and organizations to collaborate in pursuit of that shared goal. I was very young when Dr. King was assassinated, but his legacy was a key reason I decided to pursue a career as a civil rights attorney and I ended up going to law school with Bernice King, Dr. King’s youngest daughter. What are your memories from that time? I will never forget what happened on April 4, 1968. I was a junior in high school in Montclair, New Jersey, and I went to my grandmother’s house to steal a piece of pie. I was thwarted in my attempt by seeing her sitting at her dining room table with tears in her eyes. I had never seen my grandmother cry before. She said, “They shot Dr. King today.” I didn’t really know much about Dr. King. But on that day, when I saw that my beloved grandmother’s life affected so significantly by the life of one man, I decided that I wanted my life to be as impactful as Dr. King’s was on my grandmother. What type of leaders do we need today? When Dr. King led, there was a need for articulate, dynamic and charismatic leadership to represent the masses. The challenges we face now are much more widely distributed. We’re no longer necessarily looking for charismatic leaders who can speak to a crowd of 250,000 people. Leadership today is more by sector than global. Today, we have a different kind of dynamic, and so we need a multiplicity of leaders, whether it’s in the arts or the sciences, academia or financial services. How are you seeing people collaborate, and how important is that in getting the work done? We see strong collaboration among Black Americans within specific industries, and we see the emergence of sectors where networking, mentoring, advising and watching each other’s backs is becoming the norm. Now, I think we need to collaborate across sectors. If you look at Dr. King’s model, he formed collaborations. There would have been no March on Washington had the church leaders not collaborated with the labor leaders. That model is what King called "The Beloved Community," and there is no reason for corporate leaders to exempt themselves from The Beloved Community. There’s a lot being said about the expectation for corporations to play a leadership role in addressing societal issues, to demonstrate a sense of purpose through their business strategy. What are your thoughts on that? We cannot overestimate the impact of having a viable corporate community. The free enterprise system in corporate America is critical to the kind of quality of life that all of us want and we need to appreciate that. You run a program called dfree® and Prudential is a partner. Let’s talk a bit about that program and our partnership, and why partnerships like ours are so important. Experts say Black Americans are the most optimistic people in the country. But, beneath that veneer of optimism, there’s a tactical pessimism that has become too normal for people, where we just don’t see our way out. I realized that a problem I kept bumping into in my work with my congregation and community was financial incapacity, where middle income families were living paycheck to paycheck. The families had great jobs, and were executives, but had no savings accounts. After doing some research into the issue, we found that having no financial plan or budget at all was an almost self-inflicted barrier to financial freedom. Remarkably, the work we had begun doing matched and aligned with the results of the study that Prudential had done on the African American financial experience. In response, in 2005, my team and I launched dfree®, a Financial Freedom movement composed of a curriculum designed to help individuals become debt-free, avoid financial pitfalls, and create savings and investment plans to ensure better financial futures, including funding their retirement dreams. The partnership between Prudential and dfree® is a paradigm of possibility for companies that really want to connect with the community in a way that’s meaningful, respectful and mutually beneficial. Prudential, as you know, was founded here in Newark. Following the 1967 civil unrest, we decided to take an affirmative role in the revitalization of the city. We started seeding what we thought would be fruitful investments. We can look around now and tell the through-line of how those investments have paid off for the city and its residents. Prudential invests in relationships and partnerships that demonstrate what justice really looks like. We need more templates like that, which can be replicated. We know that the more corporations embed this kind of behavior into their business model, the better off we’ll all be. When directed in the right way, we can make a huge impact at a scale that is sustainable for generations to come. So where are we going? What would you like to see? What would you like to see us do together that we haven’t done yet? From my vantage point, I believe strongly in the power of capital markets to make a change. And the power of business. At Prudential, it’s about returning to our original charter, which was to drive progress, not just generate profits. We use our capital to help create the change we seek, especially as we continue to advance the work on Prudential’s nine racial equity commitments. Access to capital is critical to the health of any community. I make no bones about sharing the value of a partner like Prudential as it relates to creating not only sustainable lifestyles, but also a legacy once we’re gone. The whole strategy of partnering with existing companies and helping them expand outward is empowering, and it’s progressive. Media Contact(s) Harold Banks 973-216-4833 harold.banks@prudential.com
Committed to an inclusive renaissance for all Detroiters Prudential believes Detroit’s limitless potential should not be limited to a select few. That’s why the firm is partnering with national nonprofit GreenPath Financial Wellness to introduce debt management advice and tools to its growing suite of workplace financial wellness solutions. Founded in 1961 and headquartered in Metropolitan Detroit, GreenPath has helped empower people nationwide to lead healthier financial lives. Both organizations realize input from the community is key in developing population-specific solutions to improve debt and credit management, boost financial wellness, and increase homeownership. In 2021, GreenPath launched its innovative “Detroit Voices” research initiative with the goal of soliciting community feedback to build relevant financial education. The nonprofit also provides in-depth homebuyer counseling and housing classes for prospective buyers, and foreclosure prevention and support services to help distressed borrowers stay in their homes. GreenPath’s workplace program participants and other members can take advantage of a free session with a Prudential financial professional to establish goals and explore debt repayment options. For a fee, they can also choose to enroll in a formal debt management plan designed to pay off outstanding balances in five years or less. These kinds of inititives can make a real and positive difference in helping Black Detroiters break the debt cycle. They’re able to find ways to save for a down payment on a home or a car, or save for college, or build an emergency fund. Lowering debt also reduces financial stress and improves workforce productivity. Notes Vishal Jain, vice president, Strategic Initiatives, EC-Financial Wellness at Prudential, “Helping individuals minimize the impact of debt is an important expansion of our financial wellness efforts, and we are excited to work with an organization like GreenPath, which shares our passion for solving financial challenges.” Kristen Holt, president and CEO of GreenPath, agrees. “Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress.” Through education, advice, and partnership with organizations like GreenPath, Prudential is working to help residents and neighborhoods of color benefit from the renaissance that is driving Detroit forward.
Both organizations realize input from the community is key in developing population-specific solutions to improve debt and credit management, boost financial wellness, and increase homeownership.
One of the great urban success stories of the past decade is the economic revitalization of Detroit, Michigan. New companies, jobs, and workers have invigorated this once-dying industrial port into a thriving technology center, service sector, and advanced manufacturing hub. This new renaissance has expanded beyond the city’s modernized downtown and other business districts to encompass previously blighted and abandoned neighborhoods. However—and ironically—one group is lagging behind in achieving homeownership: Black Detroiters, who compose 77% of the city’s population, the largest percentage of any major metropolitan area. According to a 2021 report commissioned by the National Fair Housing Alliance, in the 10 years from 2009 to 2019, homeownership among all groups in the city (except Hispanics) declined. However, among white residents who compose 9.5% of the population, homeownership stood at 53% compared to 45% among Black residents. One reason for the disparity is clear: That same report revealed that mortgage applications from Black homebuyers in Metro Detroit were more likely to be denied, with nearly 40% of Black applicants facing rejection compared with 18% of white homebuyers. And according to a 2019 CNBC report, Detroit ranks among the bottom five U.S. cities in median credit scores, tied with much smaller communities such as East St. Louis, Illinois, and Chester, Pennsylvania. Nationwide, the housing gap is just as stark. According to the U.S. Census Bureau, 76% of white households owned their homes at the end of the second quarter of 2020, compared to just 47% of Black households. That’s a 29 percentage-point difference, perpetuated by decades of housing and economic policies favorable toward white buyers and designed to exclude Black buyers. Owning a home versus renting contributes to wealth creation, but discrimination in housing and credit markets has clearly limited Black families’ ability to attain housing equity.
One of the great urban success stories of the past decade is the economic revitalization of Detroit, Michigan. New companies, jobs, and workers have invigorated this once-dying industrial port into a thriving technology center, service sector, and advanced manufacturing hub. This new renaissance has expanded beyond the city’s modernized downtown and other business districts to encompass previously blighted and abandoned neighborhoods. However—and ironically—one group is lagging behind in achieving homeownership: Black Detroiters, who compose 77% of the city’s population, the largest percentage of any major metropolitan area. According to a 2021 report commissioned by the National Fair Housing Alliance, in the 10 years from 2009 to 2019, homeownership among all groups in the city (except Hispanics) declined. However, among white residents who compose 9.5% of the population, homeownership stood at 53% compared to 45% among Black residents. One reason for the disparity is clear: That same report revealed that mortgage applications from Black homebuyers in Metro Detroit were more likely to be denied, with nearly 40% of Black applicants facing rejection compared with 18% of white homebuyers. And according to a 2019 CNBC report, Detroit ranks among the bottom five U.S. cities in median credit scores, tied with much smaller communities such as East St. Louis, Illinois, and Chester, Pennsylvania. Nationwide, the housing gap is just as stark. According to the U.S. Census Bureau, 76% of white households owned their homes at the end of the second quarter of 2020, compared to just 47% of Black households. That’s a 29 percentage-point difference, perpetuated by decades of housing and economic policies favorable toward white buyers and designed to exclude Black buyers. Owning a home versus renting contributes to wealth creation, but discrimination in housing and credit markets has clearly limited Black families’ ability to attain housing equity. Committed to an inclusive renaissance for all Detroiters Prudential believes Detroit’s limitless potential should not be limited to a select few. That’s why the firm is partnering with national nonprofit GreenPath Financial Wellness to introduce debt management advice and tools to its growing suite of workplace financial wellness solutions. Founded in 1961 and headquartered in Metropolitan Detroit, GreenPath has helped empower people nationwide to lead healthier financial lives. Both organizations realize input from the community is key in developing population-specific solutions to improve debt and credit management, boost financial wellness, and increase homeownership. In 2021, GreenPath launched its innovative “Detroit Voices” research initiative with the goal of soliciting community feedback to build relevant financial education. The nonprofit also provides in-depth homebuyer counseling and housing classes for prospective buyers, and foreclosure prevention and support services to help distressed borrowers stay in their homes. GreenPath’s workplace program participants and other members can take advantage of a free session with a Prudential financial professional to establish goals and explore debt repayment options. For a fee, they can also choose to enroll in a formal debt management plan designed to pay off outstanding balances in five years or less. These kinds of inititives can make a real and positive difference in helping Black Detroiters break the debt cycle. They’re able to find ways to save for a down payment on a home or a car, or save for college, or build an emergency fund. Lowering debt also reduces financial stress and improves workforce productivity. Notes Vishal Jain, vice president, Strategic Initiatives, EC-Financial Wellness at Prudential, “Helping individuals minimize the impact of debt is an important expansion of our financial wellness efforts, and we are excited to work with an organization like GreenPath, which shares our passion for solving financial challenges.” Kristen Holt, president and CEO of GreenPath, agrees. “Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress.” Through education, advice, and partnership with organizations like GreenPath, Prudential is working to help residents and neighborhoods of color benefit from the renaissance that is driving Detroit forward.
Early career: Build the nest When you’re just starting out, you might not think about—let alone think you can afford—saving for retirement. But time is on your side. Any money you set aside early in your career will have many years to grow. In fact, thanks to the power of compound interest, the sooner you start saving for retirement, the less you'll probably have to save to reach your goal. Likewise, the more you invest early on, the better off you'll likely be later. Maximize your workplace plan If you have a retirement savings plan (like a 401(k), 403(b), or 457) at work, take full advantage of it. These tax-favored plans let you invest in a menu of stock, bond, and other funds, and the money comes directly from your paycheck, so you're less likely to miss it. With a “traditional” account, you invest pretax dollars and will owe income tax on withdrawals (presumably when you’re retired and in a lower tax bracket). With a “Roth” account, you invest after-tax dollars—but withdrawals are tax-free if you meet certain criteria, which works best if you don't need a current tax break or expect your bracket to be higher down the road. In 2023 you can contribute up to $22,500 to a workplace plan ($30,000 if you’ll be at least age 50 by Dec. 31). So, enroll as soon as you can, and contribute as much as you can. (If your employer offers a match, save at least enough to earn every extra dollar they’ll give you.) And over time, try to save more. Open an IRA If you’ve maxed out on your employer’s plan, want more investment choices or simply don’t have a plan at work, consider an individual retirement account (IRA). Like workplace plans, traditional IRAs give you a tax break upfront (contributions are tax deductible). Meanwhile, Roth IRAs work with after-tax dollars but offer tax-free withdrawals when you retire. Depending on your income, in 2023 you can contribute up to $6,500 to IRAs ($7,500 if you’ll be 50+ by year-end). Diversify your investments Diversification, or dividing your money among different types of investments, should be a key part of your retirement savings strategy. By “spreading your risk” across a range of asset classes (stocks, bonds, cash, etc.) and subclasses (anything from large-company U.S. stocks to Eastern European government bonds), you insulate your portfolio against severe loss if one investment suddenly loses value. Mutual funds and exchange-traded funds (ETFs) offer a degree of diversification—each holds dozens, even hundreds or thousands, of investments at once. In particular, low-cost “index” funds, which aim to match the performance of broad sections of the market, can help you save money while mitigating some risk. Take your time In general, the longer your “time horizon” (how many years until you’ll need your money), the more risk you can afford to take to seek greater long-term rewards. Because you’ll have more time to recover from losses, that means focusing on equities (stock investments), which have outperformed other types of investments over long periods—but with serious road bumps along the way. Later, you’ll want to shift toward fixed income (bond) investments, which have provided more stability (with smaller long-term returns). Consider a target-date fund If you don’t want to figure out exactly where to invest and when to make changes, a target-date fund can do the work for you. These “funds of funds” invest in a range of stock and bond funds, and their holdings gradually shift from more aggressive (stocks) to more conservative (bonds) over time. So, you can simply choose a fund whose target date is closest to the year you plan to retire. Mid-career: Stay on track Once you're well into your career, your earning power and, hopefully, retirement savings have gained momentum. Maybe you’ve gotten that big promotion. Maybe you've changed careers or started a business. Maybe you've paid off college loans and freed up extra cash. Because your financial situation is likely more secure, it's important to take a closer look at your strategy. Evaluate your investing style With retirement still decades away, you might be able to tolerate an aggressive mix of investments—more stocks, fewer bonds, and less cash. Prudential’s What’s Your Investing Age? tool can help you assess your investing style. Start thinking about retirement income Mid-career is also a good time to consider how much money you’ll need for a retirement that could last 30 years or more. At this point it’s hard to forecast your lifestyle and expenses after work. But instead of targeting a “number” for your savings, think about how your nest egg will generate monthly income. Prudential's retirement calculator can put you in an income mindset, and show you if you’re on track to meet your needs (and if not, whether to make changes while time is on your side). Save more as you earn more Lifestyle creep is a significant challenge to retirement saving. Rising incomes and busier lives can mean a nicer car, larger house, costlier vacations, and extra conveniences. It’s great to enjoy life as you're living it, but don’t neglect your future. Increased income can be an opportunity to live better—and invest more for retirement. For example, earmarking half (or more) of each pay raise or bonus for retirement—or merely boosting your savings by 1% a year—can be a relatively painless way to grow your nest egg. Late career: Putting your savings to work If you’re in your 50s or 60s, retirement is no longer a far-off goal but an imminent event. While it’s tempting to stand back and view the culmination of your life's work, making sure you’ll be ready to retire comfortably can be stressful. But it doesn't have to be. Know your numbers It’s important to have a solid understanding of your overall financial portrait. This includes how much you spend each month today, what you expect to spend in the future (including potential health care costs)—and how much you’ll be able to withdraw from your savings without running out of money. This is even more critical if you're far from your "full" retirement age but want to retire early. Catch up when you can If your retirement savings aren’t where you want them to be by your 50s, don’t fret. There's a good chance you’ve entered your peak earning years. Maybe your kids are out of school, your mortgage is paid off, and you have more disposable income. Plus, once you hit the big 5-0, the IRS lets you make extra, "catch-up" contributions to workplace retirement plans and IRAs. Don’t forget about Social Security America’s financial safety net has become a lifeline for many retirees. But hopefully you'll have saved enough for Social Security to be a solid supplement to other retirement income. How much you'll receive depends on what you paid into the system during your career and when you begin taking payments. (Hint: The later you start, through age 70, the bigger your monthly checks will be.) That's why it's important to understand your Social Security benefits. Consider an annuity for lifetime income Once you’ve retired, the main goal of your investments isn’t long-term growth (though you do want your money to outpace inflation). Instead, you want to generate enough income to live on, for as long as you live. Shifting at least some of your nest egg to an annuity* could provide you with protected payments for life. What you can do next If you haven’t started investing (or saving more) for retirement through a workplace plan or IRA, now's the time. Online tools like Prudential’s retirement calculator and What's Your Investing Age? can help you evaluate your risk tolerance and project your retirement income—but be prepared to adjust your saving and investing strategies along the way. Of course, everyone’s situation is different, and when it comes to investing, there are no guarantees. So, talk things through with a financial professional. They can review your specific situation and help set goals to keep you on track. Ben Gran is a freelance writer based in Des Moines, Iowa. He writes about personal finance, public policy, financial services, technology and business.
Retire with confidence
*Annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. A financial professional can provide you with details. This does not constitute tax advice. Please consult an independent tax advisor.
When you’re just starting out, you might not think about - let alone think you can afford - saving for retirement. But time is on your side.
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Oct 22, 2022 | 5 min read | Ben Gran Key takeaways • How you invest for retirement rests on your age, goals, and risk tolerance. • Maximize your contributions to retirement plans such as 401(k)s and IRAs. • Increase your savings every year (and play “catch-up” when you're over 50). There are many ways to invest for retirement; the ones you choose will depend on your age, career status, financial situation, retirement lifestyle goals and comfort with investment risk. But wherever you are, the right strategy can pay off in spades. Here’s a list of tips to consider at each age and career stage. 1. Early career 2. Mid-career 3. Late career
Oct 22, 2022 | 5 min read | Ben Gran Key takeaways • How you invest for retirement rests on your age, goals, and risk tolerance. • Maximize your contributions to retirement plans such as 401(k)s and IRAs. • Increase your savings every year (and play “catch-up” when you're over 50). There are many ways to invest for retirement; the ones you choose will depend on your age, career status, financial situation, retirement lifestyle goals and comfort with investment risk. But wherever you are, the right strategy can pay off in spades. Here’s a list of tips to consider at each age and career stage. 1. Early career 2. Mid-career 3. Late career Early career: Build the nest When you’re just starting out, you might not think about—let alone think you can afford—saving for retirement. But time is on your side. Any money you set aside early in your career will have many years to grow. In fact, thanks to the power of compound interest, the sooner you start saving for retirement, the less you'll probably have to save to reach your goal. Likewise, the more you invest early on, the better off you'll likely be later. Maximize your workplace plan If you have a retirement savings plan (like a 401(k), 403(b), or 457) at work, take full advantage of it. These tax-favored plans let you invest in a menu of stock, bond, and other funds, and the money comes directly from your paycheck, so you're less likely to miss it. With a “traditional” account, you invest pretax dollars and will owe income tax on withdrawals (presumably when you’re retired and in a lower tax bracket). With a “Roth” account, you invest after-tax dollars—but withdrawals are tax-free if you meet certain criteria, which works best if you don't need a current tax break or expect your bracket to be higher down the road. In 2023 you can contribute up to $22,500 to a workplace plan ($30,000 if you’ll be at least age 50 by Dec. 31). So, enroll as soon as you can, and contribute as much as you can. (If your employer offers a match, save at least enough to earn every extra dollar they’ll give you.) And over time, try to save more. Open an IRA If you’ve maxed out on your employer’s plan, want more investment choices or simply don’t have a plan at work, consider an individual retirement account (IRA). Like workplace plans, traditional IRAs give you a tax break upfront (contributions are tax deductible). Meanwhile, Roth IRAs work with after-tax dollars but offer tax-free withdrawals when you retire. Depending on your income, in 2023 you can contribute up to $6,500 to IRAs ($7,500 if you’ll be 50+ by year-end). Diversify your investments Diversification, or dividing your money among different types of investments, should be a key part of your retirement savings strategy. By “spreading your risk” across a range of asset classes (stocks, bonds, cash, etc.) and subclasses (anything from large-company U.S. stocks to Eastern European government bonds), you insulate your portfolio against severe loss if one investment suddenly loses value. Mutual funds and exchange-traded funds (ETFs) offer a degree of diversification—each holds dozens, even hundreds or thousands, of investments at once. In particular, low-cost “index” funds, which aim to match the performance of broad sections of the market, can help you save money while mitigating some risk. Take your time In general, the longer your “time horizon” (how many years until you’ll need your money), the more risk you can afford to take to seek greater long-term rewards. Because you’ll have more time to recover from losses, that means focusing on equities (stock investments), which have outperformed other types of investments over long periods—but with serious road bumps along the way. Later, you’ll want to shift toward fixed income (bond) investments, which have provided more stability (with smaller long-term returns). Consider a target-date fund If you don’t want to figure out exactly where to invest and when to make changes, a target-date fund can do the work for you. These “funds of funds” invest in a range of stock and bond funds, and their holdings gradually shift from more aggressive (stocks) to more conservative (bonds) over time. So, you can simply choose a fund whose target date is closest to the year you plan to retire. Mid-career: Stay on track Once you're well into your career, your earning power and, hopefully, retirement savings have gained momentum. Maybe you’ve gotten that big promotion. Maybe you've changed careers or started a business. Maybe you've paid off college loans and freed up extra cash. Because your financial situation is likely more secure, it's important to take a closer look at your strategy. Evaluate your investing style With retirement still decades away, you might be able to tolerate an aggressive mix of investments—more stocks, fewer bonds, and less cash. Prudential’s What’s Your Investing Age? tool can help you assess your investing style. Start thinking about retirement income Mid-career is also a good time to consider how much money you’ll need for a retirement that could last 30 years or more. At this point it’s hard to forecast your lifestyle and expenses after work. But instead of targeting a “number” for your savings, think about how your nest egg will generate monthly income. Prudential's retirement calculator can put you in an income mindset, and show you if you’re on track to meet your needs (and if not, whether to make changes while time is on your side). Save more as you earn more Lifestyle creep is a significant challenge to retirement saving. Rising incomes and busier lives can mean a nicer car, larger house, costlier vacations, and extra conveniences. It’s great to enjoy life as you're living it, but don’t neglect your future. Increased income can be an opportunity to live better—and invest more for retirement. For example, earmarking half (or more) of each pay raise or bonus for retirement—or merely boosting your savings by 1% a year—can be a relatively painless way to grow your nest egg. Late career: Putting your savings to work If you’re in your 50s or 60s, retirement is no longer a far-off goal but an imminent event. While it’s tempting to stand back and view the culmination of your life's work, making sure you’ll be ready to retire comfortably can be stressful. But it doesn't have to be. Know your numbers It’s important to have a solid understanding of your overall financial portrait. This includes how much you spend each month today, what you expect to spend in the future (including potential health care costs)—and how much you’ll be able to withdraw from your savings without running out of money. This is even more critical if you're far from your "full" retirement age but want to retire early. Catch up when you can If your retirement savings aren’t where you want them to be by your 50s, don’t fret. There's a good chance you’ve entered your peak earning years. Maybe your kids are out of school, your mortgage is paid off, and you have more disposable income. Plus, once you hit the big 5-0, the IRS lets you make extra, "catch-up" contributions to workplace retirement plans and IRAs. Don’t forget about Social Security America’s financial safety net has become a lifeline for many retirees. But hopefully you'll have saved enough for Social Security to be a solid supplement to other retirement income. How much you'll receive depends on what you paid into the system during your career and when you begin taking payments. (Hint: The later you start, through age 70, the bigger your monthly checks will be.) That's why it's important to understand your Social Security benefits. Consider an annuity for lifetime income Once you’ve retired, the main goal of your investments isn’t long-term growth (though you do want your money to outpace inflation). Instead, you want to generate enough income to live on, for as long as you live. Shifting at least some of your nest egg to an annuity* could provide you with protected payments for life. What you can do next If you haven’t started investing (or saving more) for retirement through a workplace plan or IRA, now's the time. Online tools like Prudential’s retirement calculator and What's Your Investing Age? can help you evaluate your risk tolerance and project your retirement income—but be prepared to adjust your saving and investing strategies along the way. Of course, everyone’s situation is different, and when it comes to investing, there are no guarantees. So, talk things through with a financial professional. They can review your specific situation and help set goals to keep you on track. Ben Gran is a freelance writer based in Des Moines, Iowa. He writes about personal finance, public policy, financial services, technology and business.
Oct 22, 2022 | 5 min read | Ben Gran Key takeaways • How you invest for retirement rests on your age, goals, and risk tolerance. • Maximize your contributions to retirement plans such as 401(k)s and IRAs. • Increase your savings every year (and play “catch-up” when you're over 50). There are many ways to invest for retirement; the ones you choose will depend on your age, career status, financial situation, retirement lifestyle goals and comfort with investment risk. But wherever you are, the right strategy can pay off in spades. Here’s a list of tips to consider at each age and career stage. 1. Early career 2. Mid-career 3. Late career Early career: Build the nest When you’re just starting out, you might not think about—let alone think you can afford—saving for retirement. But time is on your side. Any money you set aside early in your career will have many years to grow. In fact, thanks to the power of compound interest, the sooner you start saving for retirement, the less you'll probably have to save to reach your goal. Likewise, the more you invest early on, the better off you'll likely be later. Maximize your workplace plan If you have a retirement savings plan (like a 401(k), 403(b), or 457) at work, take full advantage of it. These tax-favored plans let you invest in a menu of stock, bond, and other funds, and the money comes directly from your paycheck, so you're less likely to miss it. With a “traditional” account, you invest pretax dollars and will owe income tax on withdrawals (presumably when you’re retired and in a lower tax bracket). With a “Roth” account, you invest after-tax dollars—but withdrawals are tax-free if you meet certain criteria, which works best if you don't need a current tax break or expect your bracket to be higher down the road. In 2023 you can contribute up to $22,500 to a workplace plan ($30,000 if you’ll be at least age 50 by Dec. 31). So, enroll as soon as you can, and contribute as much as you can. (If your employer offers a match, save at least enough to earn every extra dollar they’ll give you.) And over time, try to save more. Open an IRA If you’ve maxed out on your employer’s plan, want more investment choices or simply don’t have a plan at work, consider an individual retirement account (IRA). Like workplace plans, traditional IRAs give you a tax break upfront (contributions are tax deductible). Meanwhile, Roth IRAs work with after-tax dollars but offer tax-free withdrawals when you retire. Depending on your income, in 2023 you can contribute up to $6,500 to IRAs ($7,500 if you’ll be 50+ by year-end). Diversify your investments Diversification, or dividing your money among different types of investments, should be a key part of your retirement savings strategy. By “spreading your risk” across a range of asset classes (stocks, bonds, cash, etc.) and subclasses (anything from large-company U.S. stocks to Eastern European government bonds), you insulate your portfolio against severe loss if one investment suddenly loses value. Mutual funds and exchange-traded funds (ETFs) offer a degree of diversification—each holds dozens, even hundreds or thousands, of investments at once. In particular, low-cost “index” funds, which aim to match the performance of broad sections of the market, can help you save money while mitigating some risk. Take your time In general, the longer your “time horizon” (how many years until you’ll need your money), the more risk you can afford to take to seek greater long-term rewards. Because you’ll have more time to recover from losses, that means focusing on equities (stock investments), which have outperformed other types of investments over long periods—but with serious road bumps along the way. Later, you’ll want to shift toward fixed income (bond) investments, which have provided more stability (with smaller long-term returns). Consider a target-date fund If you don’t want to figure out exactly where to invest and when to make changes, a target-date fund can do the work for you. These “funds of funds” invest in a range of stock and bond funds, and their holdings gradually shift from more aggressive (stocks) to more conservative (bonds) over time. So, you can simply choose a fund whose target date is closest to the year you plan to retire. Mid-career: Stay on track Once you're well into your career, your earning power and, hopefully, retirement savings have gained momentum. Maybe you’ve gotten that big promotion. Maybe you've changed careers or started a business. Maybe you've paid off college loans and freed up extra cash. Because your financial situation is likely more secure, it's important to take a closer look at your strategy. Evaluate your investing style With retirement still decades away, you might be able to tolerate an aggressive mix of investments—more stocks, fewer bonds, and less cash. Prudential’s What’s Your Investing Age? tool can help you assess your investing style. Start thinking about retirement income Mid-career is also a good time to consider how much money you’ll need for a retirement that could last 30 years or more. At this point it’s hard to forecast your lifestyle and expenses after work. But instead of targeting a “number” for your savings, think about how your nest egg will generate monthly income. Prudential's retirement calculator can put you in an income mindset, and show you if you’re on track to meet your needs (and if not, whether to make changes while time is on your side). Save more as you earn more Lifestyle creep is a significant challenge to retirement saving. Rising incomes and busier lives can mean a nicer car, larger house, costlier vacations, and extra conveniences. It’s great to enjoy life as you're living it, but don’t neglect your future. Increased income can be an opportunity to live better—and invest more for retirement. For example, earmarking half (or more) of each pay raise or bonus for retirement—or merely boosting your savings by 1% a year—can be a relatively painless way to grow your nest egg. Late career: Putting your savings to work If you’re in your 50s or 60s, retirement is no longer a far-off goal but an imminent event. While it’s tempting to stand back and view the culmination of your life's work, making sure you’ll be ready to retire comfortably can be stressful. But it doesn't have to be. Know your numbers It’s important to have a solid understanding of your overall financial portrait. This includes how much you spend each month today, what you expect to spend in the future (including potential health care costs)—and how much you’ll be able to withdraw from your savings without running out of money. This is even more critical if you're far from your "full" retirement age but want to retire early. Catch up when you can If your retirement savings aren’t where you want them to be by your 50s, don’t fret. There's a good chance you’ve entered your peak earning years. Maybe your kids are out of school, your mortgage is paid off, and you have more disposable income. Plus, once you hit the big 5-0, the IRS lets you make extra, "catch-up" contributions to workplace retirement plans and IRAs. Don’t forget about Social Security America’s financial safety net has become a lifeline for many retirees. But hopefully you'll have saved enough for Social Security to be a solid supplement to other retirement income. How much you'll receive depends on what you paid into the system during your career and when you begin taking payments. (Hint: The later you start, through age 70, the bigger your monthly checks will be.) That's why it's important to understand your Social Security benefits. Consider an annuity for lifetime income Once you’ve retired, the main goal of your investments isn’t long-term growth (though you do want your money to outpace inflation). Instead, you want to generate enough income to live on, for as long as you live. Shifting at least some of your nest egg to an annuity* could provide you with protected payments for life.
Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress
To learn more about Prudential’s workplace financial wellness offerings, please visit www.prudential.com/employers/financial-wellness. About Prudential Financial, Inc. Prudential Financial, Inc. (NYSE:PRU), a financial wellness leader and premier active global investment manager with more than $1.5 trillion in assets under management as of December 31, 2019, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees help to make lives better by creating financial opportunity for more people. Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit news.prudential.com. About GreenPath Financial Wellness GreenPath Financial Wellness is a national nonprofit organization that provides financial counseling, education and products to empower people to lead financially healthy lives. Working directly with individuals and through partnerships since 1961, GreenPath has assisted millions of people with debt and credit management, homeownership education and foreclosure prevention. Headquartered in Michigan, GreenPath, along with its affiliates, has more than 50 locations across the United States. GreenPath is a member of the National Foundation for Credit Counseling (NFCC) and is accredited by the Council on Accreditation (COA). To learn more about GreenPath, visit www.greenpath.org or call 866-648-8122. To hear real stories from real people about their financial wellness journey and what is possible through this partnership, listen to this podcast https://www.greenpath.com/realstories/. MEDIA: Anjelica Sena 973-802-6930 anjelica.sena@prudential.com Chandra Lewis 248-207-0631 Chandra@theallenlewisagency.com
“Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress,” said Kristen Holt, president and CEO of GreenPath. Prudential offers a broad suite of workplace financial wellness offerings, including solutions designed to help individuals plan for unexpected expenses and better manage debt. Its in-plan emergency savings tool uses after-tax contributions to build savings for unexpected expenses, creating a convenient way to save for both retirement and short-term needs. Its student loan assistance platform, an online resource offered by Vault, allows employees to explore student loan consolidation and repayment options and provides a channel for employers to make repayment contributions.
As household debt continues to reach new heights, rising to $14.15 trillion in the fourth quarter of 2019 from $13.54 trillion in the third quarter of 2018, Prudential is continually looking to offer solutions such as emergency savings and student loan assistance tools to workplace clients to help employees and association members manage their finances. “It’s difficult to save for emergencies and invest in retirement when you feel crippled by debt. Debt also contributes to financial stress and negatively impacts workforce productivity,” said Vishal Jain, head of financial wellness strategy and development at Prudential Financial. “Helping individuals minimize the impact of debt is an important expansion of our financial wellness efforts, and we are excited to work with an organization like GreenPath which shares our passion for solving financial challenges.” GreenPath offers a free session with a certified financial counselor to establish goals and explore debt repayment options. For a fee, employees or members who participate can also choose to enroll in a formal debt management plan designed to pay off outstanding balances in five years or less. Nine organizations, including Prudential, have committed to the service, which continues to draw interest. It will be available to all institutional employers in the second half of 2020.
MEDIA: Anjelica Sena 973-802-6930 anjelica.sena@prudential.com Chandra Lewis 248-207-0631 Chandra@theallenlewisagency.com
As household debt continues to reach new heights, rising to $14.15 trillion in the fourth quarter of 2019 from $13.54 trillion in the third quarter of 2018, Prudential is continually looking to offer solutions such as emergency savings and student loan assistance tools to workplace clients to help employees and association members manage their finances. “It’s difficult to save for emergencies and invest in retirement when you feel crippled by debt. Debt also contributes to financial stress and negatively impacts workforce productivity,” said Vishal Jain, head of financial wellness strategy and development at Prudential Financial. “Helping individuals minimize the impact of debt is an important expansion of our financial wellness efforts, and we are excited to work with an organization like GreenPath which shares our passion for solving financial challenges.” GreenPath offers a free session with a certified financial counselor to establish goals and explore debt repayment options. For a fee, employees or members who participate can also choose to enroll in a formal debt management plan designed to pay off outstanding balances in five years or less. Nine organizations, including Prudential, have committed to the service, which continues to draw interest. It will be available to all institutional employers in the second half of 2020. “Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress,” said Kristen Holt, president and CEO of GreenPath. Prudential offers a broad suite of workplace financial wellness offerings, including solutions designed to help individuals plan for unexpected expenses and better manage debt. Its in-plan emergency savings tool uses after-tax contributions to build savings for unexpected expenses, creating a convenient way to save for both retirement and short-term needs. Its student loan assistance platform, an online resource offered by Vault, allows employees to explore student loan consolidation and repayment options and provides a channel for employers to make repayment contributions.
As household debt continues to reach new heights, rising to $14.15 trillion in the fourth quarter of 2019 from $13.54 trillion in the third quarter of 2018, Prudential is continually looking to offer solutions such as emergency savings and student loan assistance tools to workplace clients to help employees and association members manage their finances. “It’s difficult to save for emergencies and invest in retirement when you feel crippled by debt. Debt also contributes to financial stress and negatively impacts workforce productivity,” said Vishal Jain, head of financial wellness strategy and development at Prudential Financial. “Helping individuals minimize the impact of debt is an important expansion of our financial wellness efforts, and we are excited to work with an organization like GreenPath which shares our passion for solving financial challenges.” GreenPath offers a free session with a certified financial counselor to establish goals and explore debt repayment options. For a fee, employees or members who participate can also choose to enroll in a formal debt management plan designed to pay off outstanding balances in five years or less. Nine organizations, including Prudential, have committed to the service, which continues to draw interest. It will be available to all institutional employers in the second half of 2020. “Navigating debt and finances can be confusing and stressful. We are thrilled to partner with a like-minded leader in workplace financial wellness to reach more people with our proven tools to reduce debt and financial stress,” said Kristen Holt, president and CEO of GreenPath. Prudential offers a broad suite of workplace financial wellness offerings, including solutions designed to help individuals plan for unexpected expenses and better manage debt. Its in-plan emergency savings tool uses after-tax contributions to build savings for unexpected expenses, creating a convenient way to save for both retirement and short-term needs. Its student loan assistance platform, an online resource offered by Vault, see reference 2, allows employees to explore student loan consolidation and repayment options and provides a channel for employers to make repayment contributions.
To learn more about Prudential’s workplace financial wellness offerings, please visit www.prudential.com/employers/financial-wellness. About Prudential Financial, Inc. Prudential Financial, Inc. (NYSE:PRU), a financial wellness leader and premier active global investment manager with more than $1.5 trillion in assets under management as of December 31, 2019, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees help to make lives better by creating financial opportunity for more people. Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit news.prudential.com. About GreenPath Financial Wellness GreenPath Financial Wellness is a national nonprofit organization that provides financial counseling, education and products to empower people to lead financially healthy lives. Working directly with individuals and through partnerships since 1961, GreenPath has assisted millions of people with debt and credit management, homeownership education and foreclosure prevention. Headquartered in Michigan, GreenPath, along with its affiliates, has more than 50 locations across the United States. GreenPath is a member of the National Foundation for Credit Counseling (NFCC) and is accredited by the Council on Accreditation (COA). To learn more about GreenPath, visit www.greenpath.org or call 866-648-8122. To hear real stories from real people about their financial wellness journey and what is possible through this partnership, listen to this podcast https://www.greenpath.com/realstories/.
To learn more about Prudential’s workplace financial wellness offerings, please visit
About GreenPath Financial Wellness GreenPath Financial Wellness is a national nonprofit organization that provides financial counseling, education and products to empower people to lead financially healthy lives. Working directly with individuals and through partnerships since 1961, GreenPath has assisted millions of people with debt and credit management, homeownership education and foreclosure prevention. Headquartered in Michigan, GreenPath, along with its affiliates, has more than 50 locations across the United States. GreenPath is a member of the National Foundation for Credit Counseling (NFCC) and is accredited by the Council on Accreditation (COA). To learn more about GreenPath, visit www.greenpath.org or call 866-648-8122. To hear real stories from real people about their financial wellness journey and what is possible through this partnership, listen to this podcast
About Prudential Financial, Inc. Prudential Financial, Inc. (NYSE:PRU), a financial wellness leader and premier active global investment manager with more than $1.5 trillion in assets under management as of December 31, 2019, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees help to make lives better by creating financial opportunity for more people. Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit
In general, mortgages that help first-time buyers allow for moderate credit scores, a lower down payment, assistance with down payments, and sometimes aid with closing costs. These features can be critical for new buyers, who don’t have an old house to sell (to raise funding for the new one). Types of home loans for first-time buyers While veteran homebuyers can also take advantage of many of these programs, they tend to aid buyers who have lower incomes, weaker credit scores, or less in savings. Those three factors also tend to skew toward younger and first-time buyers. 1. HomeReady mortgage Available through federal government backed Fannie Mae, HomeReady® mortgages offer competitive interest rates to low-income home buyers with good credit. They allow you to get 100% of your down payment and closing costs from outside sources such as gifts, grants, or secondary loans (like from a family member). Note: If both you and your spouse are new homebuyers, one of you will have to complete homeownership education and counseling to qualify. Best for: Low-income buyers with credit scores of at least 620 2. Home Possible mortgage Offered through the other government mortgage originator, Freddie Mac, Home Possible® loans allow buyers to put sweat equity toward their entire down payment and closing costs by making improvements to the home before they close. (The improvements replace the down payment.) You can also get help from outside sources such as gifts, grants, or secondary loans. To qualify, your income can’t exceed 80% of the area median in the location where you want to buy. Best for: Very low- to moderate-income homebuyers 3. FHA loan Buyers with low credit scores will find FHA (Federal Housing Administration) loans easier to qualify for than, say, HomeReady loans. The reason: You only need a credit score of 500 when you put down 10% of the purchase price, or 580 with as little as 3.5% down. The trade off: Your initial costs will probably be higher than with other programs because you can’t avoid paying a down payment, and you’ll have to buy private mortgage insurance (PMI) that stays in place until your equity reaches the standard 20% of the home’s value. Best for: Homebuyers with credit scores below 620 4. FHA 203(k) mortgage Aimed largely at boosting homeownership in lower-income areas, the FHA 203(k) mortgage enables buyers to spend at least $5,000 to “rehab” the home they want. You can make structural changes ranging from fixing up the kitchen to tearing down a home to the foundation and rebuilding it. (FHA’s “Limited 203(k)” mortgage program enables smaller renovations up to $35,000.) It also lets you finance both the purchase price and home improvement costs. One thing you can’t do? Add a pool. Best for: Homebuyers with ambitious renovation plans 5. HomeStyle Renovation Mortgage With 3% down and a credit score of at least 620, you can use Fannie Mae’s HomeStyle® loan to buy a home that needs a lot of work, as long as it’s a permanent change you want to make to the property. The loan allows you to also secure a secondary loan to finance your down payment and closing costs, if needed. (Note that you’ll probably need to buy private mortgage insurance if your down payment is below 20%.) Best for: Financing repairs and upgrades that cost up to 75% of the home’s post-renovation value 6. Community Seconds/Affordable Seconds Certain loans allow secondary financing to cover your down payment and closing costs if you don’t have the cash. Fannie Mae calls their program Community Seconds, while Freddie Mac calls theirs Affordable Seconds. The loan itself will come from a federal agency, state or municipality, a nonprofit organization, or employer, among other sources. This enables you to get into a home even if you don’t have enough initial savings to do so. Best for: Buyers who can’t afford a down payment. 7. VA loan The U.S. Department of Veterans Affairs subsidizes mortgages for military service members who meet length and character-of-service requirements, and spouses of service members who were killed, taken prisoner, or went missing in action. With a VA Home Loan, you can put nothing down and pay no monthly mortgage insurance. Most borrowers have to cover a funding fee, which you can pay up-front or hrough financing. Veterans of Native American descent (or whose spouse is Native American) can also qualify for the Native American Direct Loan, which may offer even lower interest rates. Best for: Qualifying military service members and surviving spouses 8. USDA Guaranteed Loan To increase homeownership in rural areas, the U.S. Department of Agriculture’s Rural Development agency helps lenders make guaranteed, no down-payment mortgages available to borrowers in areas with populations below 35,000. The one caveat? Your income can’t surpass 115% of the area’s median. Best for: Moderate-income homebuyers in less-populated areas 9. USDA Direct Loan Home buyers who can’t qualify for a USDA Guaranteed Loan can try for a Direct Loan. The agency issues its own funds for below-market-rate loans to applicants who don’t have enough for safe, secure, and sanitary housing. It provides an option for lower-income buyers who seek a house or apartment in a more rural area of the country. (The amount of financial assistance you can get depends on your adjusted gross income and the area where you plan to buy.) Best for: “Very low- and low-income” homebuyers in less-populated areas How first-time homebuyer programs can help First-time buyer loan options all have at least one feature that makes it easier to own a home. Putting less money down, securing lower interest rates, or cutting closing costs can all offer valuable ways to reduce the cost of the mortgage over the life of the loan. Among the benefits: Low or no down payment. A conventional down payment may require 20%, but even buyers who aren’t first-timers can put as little as 0% down with some of these programs. Help with closing costs. With average closing costs running between 2% and 5% of the loan, you’d have to pay $6,000 to $15,000 to snag a $300,000 mortgage. This can be a deal breaker for many but assistance greatly reduces this expense or gets rid of it altogether. • Lower interest rate. First-time home loans often feature the best available market rates (and sometimes even less), which means a lower monthly payment. If you get a fixed rate mortgage, your monthly payments will likely stay low for the life of the loan. • Lower credit score requirements. Lenders generally require a credit score in the mid 700s or higher to get the best interest rate on a mortgage, but first-time buyer programs are more generous and don’t always charge higher rates to borrowers with lower scores. • Opportunity to buy a fixer-upper. You can greatly reduce mortgage costs when you buy a home that needs work. A renovation loan can help you secure the loan and even earn sweat equity in some cases. How to get a first-time homebuyer mortgage To secure a mortgage, first decide which loans to apply for, then see which lenders will approve you and offer you the best deal. If you can’t get approved at all, spend a few months working to improve your credit score, boost your income, or manage your debt, then try again. If you don’t want to dive into the details of these lending programs, consider working with a mortgage broker who will understand what you truly qualify for. But you can figure out some things before you talk to a lender. For example, if you haven’t served in the military, you can’t get a VA loan. Or if you want to buy a condo in a big city, take the USDA off your list. Another tactic: Apply for different loans from different lenders. Government agencies and related entities like Fannie Mae, Freddie Mac, the VA, and the USDA establish minimum guidelines lenders must follow, but lenders can set their own, higher standards—and these can vary from one to the next. If one lender rejects you for an FHA loan because of your 610 credit score, for example, you might find another who approves you at 580. Ideally, you’ll be okayed by at least three lenders, which will allow you to compare offers and choose the best deal. What you can do next Go to AnnualCreditReport.com to get your free credit report from each of the Big Three credit bureaus—TransUnion, Equifax and Experian—and make sure the information is accurate. (If not, follow the bureaus’ directions to get them corrected or launch disputes.) Then, use a free credit score service (provided with many bank and credit card accounts these days) to see where you stand and what aspects of your credit you may need to work on. If you find you have to pay back debt to secure a mortgage, form a plan to start paying some of it off and better position yourself to score a home loan. Written by Amy Fontinelle Amy Fontinelle is a writer and editor specializing in mortgages, insurance, retirement planning, and other aspects of personal finance.
If you’re new to homeownership, you won’t run into something called “the first-time homebuyer loan.”
5 min read - May 03, 2021 - Amy Fontinelle Key takeaways • Many home loans have features that help first-time buyers. • First-time homebuyer loans offer down payment assistance, affordable rates, and easier credit. • Don’t assume a low income or poor credit will prevent you from qualifying for a mortgage. Buying a house or apartment can feel daunting at times, especially for first-time homebuyers. The good news: A variety of specialized programs and loans can help you navigate and secure your new place. While you have many things to learn and decisions to make in the search, it’s easier than ever to qualify for home financing you can afford. What is a first-time homebuyer loan? If you’re new to homeownership, you won’t run into something called “the first-time homebuyer loan.” Rather, many mortgages have features that help newbies, such as lower qualification standards around credit scores, debt, income, and down payments, that make it easier to secure a loan and gain the keys to that first house.
5 min read - May 03, 2021 - Amy Fontinelle Key takeaways • Many home loans have features that help first-time buyers. • First-time homebuyer loans offer down payment assistance, affordable rates, and easier credit. • Don’t assume a low income or poor credit will prevent you from qualifying for a mortgage. Buying a house or apartment can feel daunting at times, especially for first-time homebuyers. The good news: A variety of specialized programs and loans can help you navigate and secure your new place. While you have many things to learn and decisions to make in the search, it’s easier than ever to qualify for home financing you can afford. What is a first-time homebuyer loan? If you’re new to homeownership, you won’t run into something called “the first-time homebuyer loan.” Rather, many mortgages have features that help newbies, such as lower qualification standards around credit scores, debt, income, and down payments, that make it easier to secure a loan and gain the keys to that first house. In general, mortgages that help first-time buyers allow for moderate credit scores, a lower down payment, assistance with down payments, and sometimes aid with closing costs. These features can be critical for new buyers, who don’t have an old house to sell (to raise funding for the new one). Types of home loans for first-time buyers While veteran homebuyers can also take advantage of many of these programs, they tend to aid buyers who have lower incomes, weaker credit scores, or less in savings. Those three factors also tend to skew toward younger and first-time buyers. 1. HomeReady mortgage Available through federal government-backed Fannie Mae, HomeReady® mortgages offer competitive interest rates to low-income home buyers with good credit. They allow you to get 100% of your down payment and closing costs from outside sources such as gifts, grants, or secondary loans (like from a family member). Note: If both you and your spouse are new homebuyers, one of you will have to complete homeownership education and counseling to qualify. Best for: Low-income buyers with credit scores of at least 620 2. Home Possible mortgage Offered through the other government mortgage originator, Freddie Mac, Home Possible® loans allow buyers to put sweat equity toward their entire down payment and closing costs by making improvements to the home before they close. (The improvements replace the down payment.) You can also get help from outside sources such as gifts, grants, or secondary loans. To qualify, your income can’t exceed 80% of the area median in the location where you want to buy. Best for: Very low- to moderate-income homebuyers 3. FHA loan Buyers with low credit scores will find FHA (Federal Housing Administration) loans easier to qualify for than, say, HomeReady loans. The reason: You only need a credit score of 500 when you put down 10% of the purchase price, or 580 with as little as 3.5% down. The trade-off: Your initial costs will probably be higher than with other programs because you can’t avoid paying a down payment, and you’ll have to buy private mortgage insurance (PMI) that stays in place until your equity reaches the standard 20% of the home’s value. Best for: Homebuyers with credit scores below 620 4. FHA 203(k) mortgage Aimed largely at boosting homeownership in lower-income areas, the FHA 203(k) mortgage enables buyers to spend at least $5,000 to “rehab” the home they want. You can make structural changes ranging from fixing up the kitchen to tearing down a home to the foundation and rebuilding it. (FHA’s “Limited 203(k)” mortgage program enables smaller renovations up to $35,000.) It also lets you finance both the purchase price and home improvement costs. One thing you can’t do? Add a pool. Best for: Homebuyers with ambitious renovation plans 5. HomeStyle Renovation Mortgage With 3% down and a credit score of at least 620, you can use Fannie Mae’s HomeStyle® loan to buy a home that needs a lot of work, as long as it’s a permanent change you want to make to the property. The loan allows you to also secure a secondary loan to finance your down payment and closing costs, if needed. (Note that you’ll probably need to buy private mortgage insurance if your down payment is below 20%.) Best for: Financing repairs and upgrades that cost up to 75% of the home’s post-renovation value 6. Community Seconds/Affordable Seconds Certain loans allow secondary financing to cover your down payment and closing costs if you don’t have the cash. Fannie Mae calls their program Community Seconds, while Freddie Mac calls theirs Affordable Seconds. The loan itself will come from a federal agency, state or municipality, a nonprofit organization, or employer, among other sources. This enables you to get into a home even if you don’t have enough initial savings to do so. Best for: Buyers who can’t afford a down payment. 7. VA loan The U.S. Department of Veterans Affairs subsidizes mortgages for military service members who meet length and character-of-service requirements, and spouses of service members who were killed, taken prisoner, or went missing in action. With a VA Home Loan, you can put nothing down and pay no monthly mortgage insurance. Most borrowers have to cover a funding fee, which you can pay up-front or through financing. Veterans of Native American descent (or whose spouse is Native American) can also qualify for the Native American Direct Loan, which may offer even lower interest rates. Best for: Qualifying military service members and surviving spouses 8. USDA Guaranteed Loan To increase homeownership in rural areas, the U.S. Department of Agriculture’s Rural Development agency helps lenders make guaranteed, no-down-payment mortgages available to borrowers in areas with populations below 35,000. The one caveat? Your income can’t surpass 115% of the area’s median. Best for: Moderate-income homebuyers in less-populated areas 9. USDA Direct Loan Home buyers who can’t qualify for a USDA Guaranteed Loan can try for a Direct Loan. The agency issues its own funds for below-market-rate loans to applicants who don’t have enough for safe, secure, and sanitary housing. It provides an option for lower-income buyers who seek a house or apartment in a more rural area of the country. (The amount of financial assistance you can get depends on your adjusted gross income and the area where you plan to buy.) Best for: “Very low- and low-income” homebuyers in less-populated areas How first-time homebuyer programs can help First-time buyer loan options all have at least one feature that makes it easier to own a home. Putting less money down, securing lower interest rates, or cutting closing costs can all offer valuable ways to reduce the cost of the mortgage over the life of the loan. Among the benefits: Low or no down payment. A conventional down payment may require 20%, but even buyers who aren’t first-timers can put as little as 0% down with some of these programs. Help with closing costs. With average closing costs running between 2% and 5% of the loan, you’d have to pay $6,000 to $15,000 to snag a $300,000 mortgage. This can be a deal breaker for many but assistance greatly reduces this expense or gets rid of it altogether. • Lower interest rate. First-time home loans often feature the best available market rates (and sometimes even less), which means a lower monthly payment. If you get a fixed-rate mortgage, your monthly payments will likely stay low for the life of the loan. • Lower credit score requirements. Lenders generally require a credit score in the mid-700s or higher to get the best interest rate on a mortgage, but first-time buyer programs are more generous and don’t always charge higher rates to borrowers with lower scores. • Opportunity to buy a fixer-upper. You can greatly reduce mortgage costs when you buy a home that needs work. A renovation loan can help you secure the loan and even earn sweat equity in some cases. How to get a first-time homebuyer mortgage To secure a mortgage, first decide which loans to apply for, then see which lenders will approve you and offer you the best deal. If you can’t get approved at all, spend a few months working to improve your credit score, boost your income, or manage your debt, then try again. If you don’t want to dive into the details of these lending programs, consider working with a mortgage broker who will understand what you truly qualify for. But you can figure out some things before you talk to a lender. For example, if you haven’t served in the military, you can’t get a VA loan. Or if you want to buy a condo in a big city, take the USDA off your list. Another tactic: Apply for different loans from different lenders. Government agencies and related entities like Fannie Mae, Freddie Mac, the VA, and the USDA establish minimum guidelines lenders must follow, but lenders can set their own, higher standards—and these can vary from one to the next. If one lender rejects you for an FHA loan because of your 610 credit score, for example, you might find another who approves you at 580. Ideally, you’ll be okayed by at least three lenders, which will allow you to compare offers and choose the best deal. What you can do next Go to AnnualCreditReport.com to get your free credit report from each of the Big Three credit bureaus—TransUnion, Equifax and Experian—and make sure the information is accurate. (If not, follow the bureaus’ directions to get them corrected or launch disputes.) Then, use a free credit score service (provided with many bank and credit card accounts these days) to see where you stand and what aspects of your credit you may need to work on. If you find you have to pay back debt to secure a mortgage, form a plan to start paying some of it off and better position yourself to score a home loan. Written by Amy Fontinelle Amy Fontinelle is a writer and editor specializing in mortgages, insurance, retirement planning, and other aspects of personal finance.
What to consider when you’re investing Remember that all investments carry risk. Being clear about your goals and your feelings about investing can help you determine where your money should go. • Goals. Your financial goals are unique to you. Whether you’re saving for a down payment on a home, a new car or a major trip, the amount and timing can help determine where it makes sense to put your money. • Timing. While investment accounts can often be a great way to grow your money for the long term, you shouldn’t plan to use it for at least five years, preferably longer. (If you plan to use the money within the next couple years, it’s a good idea to try to minimize your risk through safer options like high-interest savings accounts.) • Risk tolerance. Your risk tolerance refers to how well you can stomach the market’s short-term ups and downs—and even risk losing money—to pursue your goals. Some of that reflects how much risk you’re willing to take with your investments and stay invested even when the market drops while some reflects your “time horizon,” or how long until you’ll need your money. (In general, the more time you have, the more risk you can afford to take, knowing that you’ll have opportunities to make up for any losses down the road.) Historically, stocks have outperformed bonds in the long run, but their ride has been much bumpier. What you can do next If you have, or expect to have, $2,000 (or any windfall) to invest, open or fund an account that’s in line with your investment goals. It might help to talk to a financial professional for help with navigating your next steps. Dori Zinn is a personal finance journalist focusing on income inequality, college affordability, investing and more. Her work has appeared in The New York Times, Forbes, TIME, CNET and Yahoo, among others.
Remember that all investments carry risk. Being clear about your goals and your feelings about investing can help you determine where your money should go.
Dec 07, 2021 - 4 min read - Dori Zinn Key takeaways • Putting a windfall into an IRA, taxable brokerage account or 529 college savings plan can give your goals an important boost. • Get to know your investing options—stocks, bonds, funds and more—before you pony up a penny. • When choosing investments, make sure to consider your goals, time horizon and risk tolerance. Perhaps you get an unexpected bonus at work. Or maybe a loved one leaves you cash in their will. You might even have scored a small lottery win. However you get your windfall, you might suddenly find yourself with an extra $2,000. Here’s how you can start investing to meet your financial goals. It’s a good idea to talk to a financial professional, even if it’s early on in the process. With their help, you can feel confident as you explore ways to invest $2,000 right now. How to invest $2,000 Investing $2,000 (or any amount) will require you to have some type of investment account. This could be anything from a taxable brokerage account to a tax-favored retirement account. IRA: Traditional or Roth Individual retirement accounts (IRAs) are for people who might not have a workplace retirement account, like a 401(k), or who want to save outside their employer-sponsored plan, perhaps for a wider range of investment choices or to lower costs.
• Traditional IRA. Contributions may be tax deductible, but you’ll owe income tax when you withdraw your money in retirement.
• Roth IRA. You contribute money that’s already been taxed, but when you withdraw (in retirement), you usually won’t have to pay tax on it.
While annual contribution limits are the same for both types of IRA—$6,000 (or $7,000 if you’ll be at least age 50 by year-end)—there are some other notable differences between the two. The best type of IRA for you depends on your income now and later: If you think your income (and tax bracket) will be lower when you withdraw than it is now, a Traditional IRA might be better for you. By contrast, a Roth IRA is likely a better choice if you expect to be in a higher tax bracket when you retire. Don’t know your financial future? Many people “hedge” their tax bets by holding both kinds of accounts. Taxable brokerage account You can use a brokerage account to invest for many long-term goals. Unlike retirement accounts, brokerage accounts have no tax advantages, but there aren’t any limits on how much you can contribute, either. There are a few types of accounts to choose from, based on the kind of investor you are and how you want to manage your money. If you want (and have the time) to research, choose and manage your investments, you can sign up with a brokerage firm (online or off) and hand-pick stocks, bonds, funds and other options. If you’re more hands-off and want to leave most of the work to professionals, you can get a fee-based managed account. These used to be limited to people with lots of money to invest, but now “robo-advisors” have entered the mix. Robo-advisors are digital platforms that use algorithms and software to build and manage your investments, and minimums and fees are usually far lower than traditional managed accounts require. (For a middle ground, some firms offer “hybrid” accounts that mix automated investing with human guidance.)
529 college savings plan A state-sponsored 529 plan is a professionally managed investment account whose earnings grow—and can be withdrawn—federal tax-free to cover qualified education-related expenses. These include college tuition, fees, room and board (with limits)—along with up to $10,000 in private K-12 costs or to pay down student loans.
Besides the federal tax break, many states offer residents tax deductions or credits on 529 contributions too. And 529 proceeds are portable—for example, if a child doesn’t end up in college, you can name a sibling as beneficiary instead. Just keep in mind that if you don’t use the money for education costs, you could owe a 10% tax penalty on withdrawals. Where can you invest $2,000? The type of account you have is only part of your investment journey. You still need to choose where your money goes. You can explore different types of investments, including:
• Stocks. These represent small slivers of ownership (shares) of public companies, traded on a platform like the New York Stock Exchange. While stocks have the most potential growth, they also carry the greatest risk.
• Bonds. These are loans you make to a company or government entity in return for a stated rate of interest. You’re guaranteed your “principal” (the face amount of the bond) back when the bond matures. (If the issuer goes bankrupt, bondholders are the first to get paid.) Most bonds have an “inverse” relationship with interest rates—when rates fall, bond prices rise, and vice versa.
• Mutual funds. A mutual fund pools together money from many investors and invests it in typically hundreds or even thousands of stocks, bonds or other securities at once. This provides natural diversification—it tempers the risk that trouble with one investment will affect the whole portfolio.
• Exchange-traded funds (ETFs). Like mutual funds, ETFs invest in many different assets at once. The key differences: ETF shares are bought and sold, and their prices change, throughout the day. (By contrast, mutual fund shares trade once a day, after the market closes.) And because of how they trade and other factors, ETFs tend to trigger lower taxes than mutual funds. What’s more, most ETFs are “índex” funds, which aim to match the performance of a specific market or industry. (This “passive” strategy keeps costs down because the funds’ managers already know what investments are in their stated index.) By contrast, most mutual funds are “actively” managed—they aim to outperform similar funds and do lots of research to do so. They pass along their costs to investors with generally higher “expense ratios” (annual operating fees, deducted from returns)—but can potentially perform better—than index funds.
• Exchange-traded funds (ETFs). Like mutual funds, ETFs invest in many different assets at once. The key differences: ETF shares are bought and sold, and their prices change, throughout the day. (By contrast, mutual fund shares trade once a day, after the market closes.) And because of how they trade and other factors, ETFs tend to trigger lower taxes than mutual funds. What’s more, most ETFs are “índex” funds, which aim to match the performance of a specific market or industry. (This “passive” strategy keeps costs down because the funds’ managers already know what investments are in their stated index.) By contrast, most mutual funds are “actively” managed—they aim to outperform similar funds and do lots of research to do so. They pass along their costs to investors with generally higher “expense ratios” (annual operating fees, deducted from returns)—but can potentially perform better—than index funds. What to consider when you’re investing Remember that all investments carry risk. Being clear about your goals and your feelings about investing can help you determine where your money should go. • Goals. Your financial goals are unique to you. Whether you’re saving for a down payment on a home, a new car or a major trip, the amount and timing can help determine where it makes sense to put your money. • Timing. While investment accounts can often be a great way to grow your money for the long term, you shouldn’t plan to use it for at least five years, preferably longer. (If you plan to use the money within the next couple years, it’s a good idea to try to minimize your risk through safer options like high-interest savings accounts.) • Risk tolerance. Your risk tolerance refers to how well you can stomach the market’s short-term ups and downs—and even risk losing money—to pursue your goals. Some of that reflects how much risk you’re willing to take with your investments and stay invested even when the market drops while some reflects your “time horizon,” or how long until you’ll need your money. (In general, the more time you have, the more risk you can afford to take, knowing that you’ll have opportunities to make up for any losses down the road.) Historically, stocks have outperformed bonds in the long run, but their ride has been much bumpier. What you can do next If you have, or expect to have, $2,000 (or any windfall) to invest, open or fund an account that’s in line with your investment goals. It might help to talk to a financial professional for help with navigating your next steps. Dori Zinn is a personal finance journalist focusing on income inequality, college affordability, investing and more. Her work has appeared in The New York Times, Forbes, TIME, CNET and Yahoo, among others.
2 Michael Kitces, “Does Monte Carlo Analysis Actually Overstate Tail Risk In Retirement Projections?,” Nerd’s Eye View, July 5, 2017 (kitces.com/blog/monte-carlo-analysis-risk-fat-tails-vs-safe-withdrawal-rates-rolling-historical-returns/)
You can also ask an advisor what they expect for realistic returns from your nest egg and how much income it should generate each year. Another way to help protect at least some of your income is to use part of your savings to buy a fixed annuity—an insurance contract that can provide guaranteed payments for life and shield that money from stock market risk. By running the numbers and setting up an income plan, you can set safe spending goals. What you can do next Retirement is meant to be the golden years of your life. So, take steps now to help ensure they don’t turn to lead: Continue (or start) saving as much as you can to create not only the retirement income you’re pretty sure you’ll need, but to provide a safety net in case of common pitfalls. And consider meeting with a trusted financial advisor—sooner rather than later—to discuss how to manage your budgeting challenges, set up checks and balances, and develop an income plan you can live with. This does not constitute tax advice. Please consult a tax advisor. David Rodeck is a freelance writer specializing in making insurance, investing, and retirement planning understandable.
You can also ask an advisor what they expect for realistic returns from your nest egg and how much income it should generate each year.
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Jan 05, 2023 - 5 min read - David Rodeck Key takeaways • Retirement can cost more than you think, throwing off your financial plans. • Health care expenses—for Medicare and long-term care—can catch you off guard. • Knowing potential pitfalls ahead of time can help you prepare. This article originally appeared on Oct. 24, 2022. It has been updated to reflect recent legislation. Frequently, you have just one shot to prepare for and manage your retirement savings. To paraphrase Lin-Manuel Miranda, that’s a shot you don’t want to throw away. Trouble is, if the numbers don’t work out as you expect, it can throw off your plan and leave you with less than you anticipated to cover all your financial goals. Here are six potential pitfalls and financial surprises that throw people off track, along with strategies to handle them. Health care costs are still high, even with Medicare Once you turn 65, you’re eligible to join Medicare. But although the government helps cover your health care expenses, it doesn’t pay for everything. Indeed, hefty deductibles and copayments might still come out of your pocket. To help cover these costs, you can sign up for extra private insurance, like Medigap or Medicare Advantage. Medigap always charges a monthly premium. While there are free versions of Medicare Advantage—with perks often promoted by celebrity pitch people—plans with more coverage usually charge premiums too. For example, an average retired couple age 65 in 2022 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement. So if you can, earmark that much of your retirement savings for health care. If you’re currently enrolled in a high-deductible health plan (HDHP), with a deductible of at least $1,500 for individuals and $3,000 for families, you can also save through a health savings account (HSA). Not only are these accounts triple tax-free (pretax contributions, tax-deferred growth, tax-free withdrawals for qualified health care costs), but you can keep (and use) them throughout retirement. If you end up retiring before 65, you can’t join Medicare—which might mean buying an individual health insurance policy. Since premiums are based on your age, this cost can really add up. It may be worth remaining at work—if you can, of course—to maintain health care benefits until you turn 65 and qualify for Medicare. Spending can be higher than you’d thought As the saying goes, every day is Saturday in retirement. Problem is, that can lead to more spending than you expect—which might demand more income than you initially planned for. The conventional wisdom says you can get by with 80% of your final work income. But that’s far from guaranteed, and many retirees end up spending 90% or even 100% (or more) after work—especially early on, when they’re more physically fit and active. One way to fine-tune your plan is by writing down your ideal retirement budget. Include where you plan to live, what you’ll do, and how much you think it might cost. (Make sure to include inflation when you crunch the numbers.) This exercise should be more accurate when you’re closer to retirement, rather than decades away. It can help you begin thinking about whether you’ll have a low-cost lifestyle or more expensive hobbies like travel.
1 Fidelity Benefits Consulting estimate, August 29, 2022. Health care and nursing home costs may vary by state. health(https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs)
With a target budget in mind, use a retirement savings calculator to see whether you’re setting aside enough to reach your goals. Saving beyond your minimum target provides a deeper cushion in case costs are higher than you expect. (Alternatively, you can try to delay retirement or work part-time to make your savings last longer.)
Your tax rate may not go down In theory, you should owe less income tax once you stop working. But in reality, your tax bill may stay the same—or even rise. For instance, if you save only through a traditional, pretax retirement plan, like a 401(k), 403(b), or 457(b) at work or an IRA outside it, your withdrawals in retirement are 100% taxable at your regular income rate—and you may be forced to start taking required minimum distributions (RMDs) after age 73 (or, beginning in 2033, age 75). (The good news: After-tax Roth versions of those accounts can enable tax-free withdrawals. Also, thanks to the SECURE 2.0 Act of 2022, you’ll face only a 25% tax hit—down from 50%—if you fail to take RMDs, and starting in 2024, Roth 401(k) accounts won’t have required distributions at all.) At the same time, you may have fewer tax deductions in retirement, such as for children or contributions to a traditional retirement plan. Also, the IRS could tax part of your Social Security payments if you have more than $25,000 in income as an individual ($32,000 for married couples). To get an idea of how much you might owe in taxes, estimate how much taxable retirement income you can expect, which allows you to gauge your tax bracket (at least based on current laws). To minimize taxes, consider saving through an after-tax Roth IRA or, if available, a Roth 401(k), 403(b), or 457(b). By giving up a tax break now, you can enjoy tax-free withdrawals in retirement. (Even so, tax planning for retirement can be complicated, so consider working with a financial planner on a strategy to maximize your income while minimizing taxes.) Downsizing doesn’t create the windfall you expect If you hope to boost your nest egg by downsizing—selling your home and moving to a smaller (or at least cheaper) one in retirement—it may not be as lucrative as you think. Buying and selling a home comes with numerous expenses, like repairs to get a property ready for sale, real estate commissions, home inspections, and closing costs. At the same time, you’ll need to find an appropriate smaller home, condo, or apartment. Given the current real estate market, at least, buying your next place could wipe out all of your gains. If you want to downsize, consider whether it’s a good fit for your retirement lifestyle. If it leads to extra money, see it as a bonus—but don’t depend on it. Medicare doesn’t cover long-term care The need for long-term care (LTC) can mean health care spending for a nursing home or assisted living facility, as well as having a nurse take care of you at home. The federal Administration for Community Living estimates that someone turning 65 today has almost a 70% chance of needing some type of long-term care—and one in five will need it for more than five years. These costs can be considerable, potentially running over $90,000 per year, depending on the type of care you need. Unfortunately, Medicare generally doesn’t cover them. Medicaid (federal coverage for those with low income) might, but only after you’ve spent down virtually all your other assets. To prepare, earmark part of your savings for LTC. On average, men require 2.2 years of care, while women need 3.7 years. Alternatively, you can buy an LTC policy (though premiums have been skyrocketing, and coverage is getting harder to find) or a life insurance policy with LTC coverage or related “living benefits.” Note that these policies can also be expensive, especially as you get older—which is why most people buy coverage before age 65. Your savings drain quicker than expected Whether due to more spending than expected, a market downturn, or low interest rates, you might deplete your retirement nest egg faster than you’d anticipated. That’s why it’s important to draw up a budget when you first retire. Save as much as possible during your career, and include the option to work part time at the start of your retirement. One way to determine the viability of your portfolio is to discuss it with a financial advisor you trust. They might run a “Monte Carlo” simulation—basically, a computer analysis of the probability that your retirement saving and investing strategy will meet your needs. This can help you understand the savings you may need to last through retirement. (Keep in mind, some say Monte Carlo models are too conservative and lead retirees to spend less than they can afford to early in retirement.)
Your tax rate may not go down In theory, you should owe less income tax once you stop working. But in reality, your tax bill may stay the same—or even rise. For instance, if you save only through a traditional, pretax retirement plan, like a 401(k), 403(b), or 457(b) at work or an IRA outside it, your withdrawals in retirement are 100% taxable at your regular income rate—and you may be forced to start taking required minimum distributions (RMDs) after age 73 (or, beginning in 2033, age 75). (The good news: After-tax Roth versions of those accounts can enable tax-free withdrawals. Also, thanks to the SECURE 2.0 Act of 2022, you’ll face only a 25% tax hit—down from 50%—if you fail to take RMDs, and starting in 2024, Roth 401(k) accounts won’t have required distributions at all.) At the same time, you may have fewer tax deductions in retirement, such as for children or contributions to a traditional retirement plan. Also, the IRS could tax part of your Social Security payments if you have more than $25,000 in income as an individual ($32,000 for married couples). To get an idea of how much you might owe in taxes, estimate how much taxable retirement income you can expect, which allows you to gauge your tax bracket (at least based on current laws). To minimize taxes, consider saving through an after-tax Roth IRA or, if available, a Roth 401(k), 403(b), or 457(b). By giving up a tax break now, you can enjoy tax-free withdrawals in retirement. (Even so, tax planning for retirement can be complicated, so consider working with a financial planner on a strategy to maximize your income while minimizing taxes.) Downsizing doesn’t create the windfall you expect If you hope to boost your nest egg by downsizing—selling your home and moving to a smaller (or at least cheaper) one in retirement—it may not be as lucrative as you think. Buying and selling a home comes with numerous expenses, like repairs to get a property ready for sale, real estate commissions, home inspections, and closing costs. At the same time, you’ll need to find an appropriate smaller home, condo, or apartment. Given the current real estate market, at least, buying your next place could wipe out all of your gains. If you want to downsize, consider whether it’s a good fit for your retirement lifestyle. If it leads to extra money, see it as a bonus—but don’t depend on it. Medicare doesn’t cover long-term care The need for long-term care (LTC) can mean health care spending for a nursing home or assisted living facility, as well as having a nurse take care of you at home. The federal Administration for Community Living estimates that someone turning 65 today has almost a 70% chance of needing some type of long-term care—and one in five will need it for more than five years. These costs can be considerable, potentially running over $90,000 per year, depending on the type of care you need. Unfortunately, Medicare generally doesn’t cover them. Medicaid (federal coverage for those with low income) might, but only after you’ve spent down virtually all your other assets. To prepare, earmark part of your savings for LTC. On average, men require 2.2 years of care, while women need 3.7 years. Alternatively, you can buy an LTC policy (though premiums have been skyrocketing, and coverage is getting harder to find) or a life insurance policy with LTC coverage or related “living benefits.” Note that these policies can also be expensive, especially as you get older—which is why most people buy coverage before age 65. Your savings drain quicker than expected Whether due to more spending than expected, a market downturn, or low interest rates, you might deplete your retirement nest egg faster than you’d anticipated. That’s why it’s important to draw up a budget when you first retire. Save as much as possible during your career, and include the option to work part time at the start of your retirement. One way to determine the viability of your portfolio is to discuss it with a financial advisor you trust. They might run a “Monte Carlo” simulation—basically, a computer analysis of the probability that your retirement saving and investing strategy will meet your needs. This can help you understand the savings you may need to last through retirement. (Keep in mind, some say Monte Carlo models are too conservative and lead retirees to spend less than they can afford to early in retirement.) see reference 2
Jan 05, 2023 - 5 min read - David Rodeck Key takeaways • Retirement can cost more than you think, throwing off your financial plans. • Health care expenses—for Medicare and long-term care—can catch you off guard. • Knowing potential pitfalls ahead of time can help you prepare. This article originally appeared on Oct. 24, 2022. It has been updated to reflect recent legislation. Frequently, you have just one shot to prepare for and manage your retirement savings. To paraphrase Lin-Manuel Miranda, that’s a shot you don’t want to throw away. Trouble is, if the numbers don’t work out as you expect, it can throw off your plan and leave you with less than you anticipated to cover all your financial goals. Here are six potential pitfalls and financial surprises that throw people off track, along with strategies to handle them. Health care costs are still high, even with Medicare Once you turn 65, you’re eligible to join Medicare. But although the government helps cover your health care expenses, it doesn’t pay for everything. Indeed, hefty deductibles and copayments might still come out of your pocket. To help cover these costs, you can sign up for extra private insurance, like Medigap or Medicare Advantage. Medigap always charges a monthly premium. While there are free versions of Medicare Advantage—with perks often promoted by celebrity pitch people—plans with more coverage usually charge premiums too. For example, an average retired couple age 65 in 2022 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement, see reference 1. see reference 1. So if you can, earmark that much of your retirement savings for health care. If you’re currently enrolled in a high-deductible health plan (HDHP), with a deductible of at least $1,500 for individuals and $3,000 for families, you can also save through a health savings account (HSA). Not only are these accounts triple tax-free (pretax contributions, tax-deferred growth, tax-free withdrawals for qualified health care costs), but you can keep (and use) them throughout retirement. If you end up retiring before 65, you can’t join Medicare—which might mean buying an individual health insurance policy. Since premiums are based on your age, this cost can really add up. It may be worth remaining at work—if you can, of course—to maintain health care benefits until you turn 65 and qualify for Medicare. Spending can be higher than you’d thought As the saying goes, every day is Saturday in retirement. Problem is, that can lead to more spending than you expect—which might demand more income than you initially planned for. The conventional wisdom says you can get by with 80% of your final work income. But that’s far from guaranteed, and many retirees end up spending 90% or even 100% (or more) after work—especially early on, when they’re more physically fit and active. One way to fine-tune your plan is by writing down your ideal retirement budget. Include where you plan to live, what you’ll do, and how much you think it might cost. (Make sure to include inflation when you crunch the numbers.) This exercise should be more accurate when you’re closer to retirement, rather than decades away. It can help you begin thinking about whether you’ll have a low-cost lifestyle or more expensive hobbies like travel.
5 min read - Oct 27, 2022 - Deborah Abrams Kaplan Key takeaways • 401(k)s are tax-advantaged workplace retirement savings plans. • Annuities offer guaranteed lifetime income—and some can invest and grow. • More employers are offering annuities in their 401(k) plans. At some point in your career, you’ll likely want to retire. There are many different options for stashing retirement savings away so that you’ll be able to afford it—and for providing income throughout your golden years. But the types of retirement vehicles you choose can affect how easy it is to access your money, and how much you’ll owe in taxes on it.
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What’s a 401(k), and how does it work? A 401(k) is a type of “defined contribution” (DC) retirement plan: Unlike traditional “defined benefit” (DB) pensions, with DC plans, employees or organization members are responsible for funding their own accounts. (Employers may contribute to their employees’ accounts too.) With a 401(k), you can have a portion of your wages deducted from your paycheck and invested in a range of mutual funds and sometimes other investments. Other defined contribution plans include 403(b)s (available to some public school and hospital employees) and 457(b)s (for some government and nonprofit workers). 401(k)s and similar plans offer important tax advantages: In a traditional 401(k), you contribute pretax dollars, and the account can grow tax deferred until you withdraw from it, typically in retirement. At that point, you’ll owe regular income tax at your then-current rate. You may also be able to choose a Roth 401(k): You contribute money that’s already been taxed, but distributions are tax-free if you hold the account for at least five years and meet other criteria. • Investment types: A 401(k) plan allows you to choose from a menu of mutual funds that invest in stocks or bonds, “target-date” funds that hold a broad range of investments and grow more conservative over time, and sometimes funds that hold shares of the employer’s stock. • Contribution limits: In 2023, the IRS says you can contribute up to $22,500 to your 401(k) ($30,000 if you’ll be at least age 50 by Dec. 31). There's also a combined limit on how much an employee and employer can contribute each year. Thanks to the SECURE 2.0 Act of 2022, you’ll be able to save even more if you’re between ages 60 and 63. Beginning in 2025, savers in this age range can put away an additional $100,000, or 50% over the regular catch up limit (whichever is higher). • Vesting: This refers to how much of the account you own. Your contributions (and their earnings) are always yours to keep. But your employer may have a vesting schedule for their contributions (and related earnings) to encourage you to stay at the company. For example, you might become fully vested after you’ve been employed for three years—after that, you’d own the entire account even if you leave your job. Or, you might vest incrementally—say, 25% after one year, 50% after two years and so on. • Portability: When you leave a company, you’ll typically have four options: keep your money in the employer’s plan; roll some or all of your account over to your new employer’s 401(k) or to your own individual retirement account (IRA); or cash it out (this will trigger income taxes and a possible early-withdrawal penalty, so do it only if you absolutely need the money). Required minimum distributions (RMDs): Traditional IRAs, along with traditional and Roth 401(k)s (unless you’re still working for the employer), have federally required minimum amounts you must withdraw each year, starting at age 73. 401(k) advantages There are many benefits to a 401(k). • There may be a match. Some employers encourage you to invest in your future by matching a portion of what you put in your account. That’s like getting free money, so you should consider saving at least enough to earn the full match. • It’s automatic. Once you set up contributions from your payroll, investing becomes routine and easier to fit in your budget. (If you don’t see the money, you’re less likely to miss it.) The same goes for automatic contribution increases—maybe by one or two percentage points a year—a (relatively) painless way to help your account grow. • Your investment might grow. With multiple investment options, you can often choose how much risk you want to take with your money (or, if target-date funds are available, choose the one that best matches your situation). The money can compound and grow over time—even more so with regular investing and employer matching. • You get tax breaks. When you contribute to a traditional 401(k), you may pay less in taxes during your working years. That’s because the money you put in comes from your paycheck before taxes are taken out. This lowers your taxable income (and also means that every dollar you contribute costs less than a dollar in take-home pay). With a Roth 401(k), you get the tax benefit down the road: You contribute after-tax dollars, but the account can grow tax-free, and you won’t owe taxes when you withdraw if you meet certain criteria. 401(k) disadvantages There can also be some negatives. • Limited investment options. Your choices include only what’s on your employer’s or organization’s menu. • You don’t have full control over when to take money out. Besides taxes and possible penalties on withdrawals before age 59½, you’ll face required minimum distributions (RMDs) later—you have to withdraw a certain amount each year starting at age 73. That may not work well with your needs or with the value of your investments. • You might owe more tax than you expect. Usually, people assume they’ll be in a lower tax bracket—and face lower income taxes—after they retire and start withdrawing from their accounts. But that’s not always the case, and you may owe more than you anticipated. What's an annuity, and how does it work? An annuity is an insurance product that provides regular income payments for life. Typically purchased through an insurance company, it can help protect and, depending on the kind of annuity, even grow your retirement income—with taxes deferred until you start taking payments. Some annuities can provide benefits right away. For instance, if you have a lump sum of money, you can buy an “immediate” annuity and start receiving payments (with interest) at once. Or, an annuity can be deferred: You make either a lump-sum payment or multiple payments first, then start to receive income installments later. Types of annuities You can also categorize annuities by how the payments are determined. • Fixed: These annuities guarantee payments at a specific rate and amount, no matter what happens in the market. • Variable: Variable annuities are tied to the ups and downs of the stock market, and the income you receive can fluctuate based on market conditions. These annuities involve more risk but have higher potential for growth. • Indexed: These annuities pay interest based on the performance of an index—an often large group of stocks that track a portion of the market (like the S&P 500® index of large companies listed on U.S. stock exchanges) rather than the overall market itself. Annuity advantages Annuities provide important advantages for retirement: • They ensure steady income. You get a source of regular, reliable income. • You control the terms. If you’re married, you can usually choose to take full payments for the rest of your life or partial payments that will continue to go to your spouse if you should die first. Also, you decide how much risk to take. You can choose a lower-risk fixed annuity (so you know exactly how much you’ll receive), or a variable annuity (which rises and falls with the market—it involves more risk, but also potentially more growth). • They can offer some growth potential. Annuities can provide income for life, but you still can seek more growth by selecting a more aggressive variable annuity. • There’s no limit. You can put as much money as you like in an annuity. For example, you might choose to guarantee some income with an annuity while keeping the rest of your retirement money in an account that can continue to grow. Annuity disadvantages Annuities also have their potential downsides. • You might make more money investing. With annuities, you’re often trading hopes of growth—and beating inflation—for the security of guaranteed payments. • The provider could fail. Like any insurance product, annuity guarantees are only as strong as the company that provides them. • Typically, they’re hard to get out of. Once you've bought an annuity, you’ll likely be committed to it and unable to get your money back except according to the terms of your contract. • Variable annuities can be expensive. While these annuities usually offer the most potential for growth, they also tend to come with multiple fees. What to consider when you choose In some ways, annuities and workplace retirement accounts are two sides of the same coin. A defined contribution plan like a 401(k) is considered a good way to accumulate (save) retirement funds even if you’re starting from scratch. By contrast, annuities are for the decumulation (withdrawal) phase of retirement; because they typically require a large initial amount to provide the income you’ll need, they’re considered best for preretirees (typically over age 50) who’ve already built up a nest egg and are concerned about having a reliable retirement income stream in addition to Social Security. But that’s a conventional way of thinking about it, and it may not apply to you. There are reasons to choose one over the other, and there are times to consider holding multiple retirement vehicles. If an employer offers a 401(k) (or similar plan), it’s a smart idea to take advantage of it. Besides the tax breaks, you can usually invest more each year than you can with an IRA. And if your employer matches contributions, think about saving at least enough to take full advantage of that money. But not all employers offer a 401(k). And if you work part time, you might not have access to a workplace plan at all. In that case, you might want to consider purchasing an annuity, either with a lump sum (if you have it) or with regular payments. Or if you’re approaching retirement and are concerned about stock market risk, putting some of your money in an annuity may be a safer choice. It’s also important to consider how much income you want in retirement. Some annuities guarantee a set payout at regular intervals, while a 401(k)’s return may depend on market factors—and you may not be able to control your withdrawal schedule. And if you start contributing to a 401(k) later in life, your money has less time to grow. Can you roll over an annuity into a 401(k)? The short answer: Yes, but it’s complicated. You can sometimes roll an annuity into a 401(k) plan if the annuity is already held in a “qualified” retirement account like an IRA. However, both the 401(k) and annuity provider must have rules that allow this. The SECURE 2.0 Act of 2022 made it easier for employers to add annuities to their 401(k) investment options—so that may be available to you if it’s not already. Even so, while annuities are pretty common in 403(b) plans, less than one in five 401(k)s currently offer them.* What you can do next You might want to evaluate your retirement saving and income options with a trusted financial professional who can help you choose what’s best for your situation. There’s no reason to stick with only one vehicle to provide income during retirement, and with changes like those in the SECURE 2.0 Act, it’s worth reviewing your choices. Given your financial goals, sometimes having multiple retirement accounts and products like annuities are the best ways to go. Of course, you should consult your tax and legal advisors regarding your circumstances. Written by Deborah Abrams Kaplan Deborah Abrams Kaplan covers personal finance and insurance for publications and brands. She previously investigated professional liability claims for an insurance company. *Prudential does not currently offer these options.
Two common tools in the retirement box are 401(k) plans and annuities. They can both be useful as you plan for your future, but there are important differences between them.
What’s a 401(k), and how does it work? A 401(k) is a type of “defined contribution” (DC) retirement plan: Unlike traditional “defined benefit” (DB) pensions, with DC plans, employees or organization members are responsible for funding their own accounts. (Employers may contribute to their employees’ accounts too.) With a 401(k), you can have a portion of your wages deducted from your paycheck and invested in a range of mutual funds and sometimes other investments. Other defined contribution plans include 403(b)s (available to some public school and hospital employees) and 457(b)s (for some government and nonprofit workers). 401(k)s and similar plans offer important tax advantages: In a traditional 401(k), you contribute pretax dollars, and the account can grow tax deferred until you withdraw from it, typically in retirement. At that point, you’ll owe regular income tax at your then-current rate. You may also be able to choose a Roth 401(k): You contribute money that’s already been taxed, but distributions are tax-free if you hold the account for at least five years and meet other criteria. • Investment types: A 401(k) plan allows you to choose your investments. Typically, you can pick from a menu of mutual funds that invest in stocks or bonds, “target-date” funds that hold a broad range of investments and grow more conservative over time, and sometimes funds that hold shares of the employer’s stock. • Contribution limits: In 2023, the IRS says you can contribute up to $22,500 to your 401(k) ($30,000 if you’ll be at least age 50 by Dec. 31). There's also a combined limit on how much an employee and employer can contribute each year. Thanks to the SECURE 2.0 Act of 2022, you’ll be able to save even more if you’re between ages 60 and 63. Beginning in 2025, savers in this age range can put away an additional $100,000, or 50% over the regular catch-up limit (whichever is higher). • Vesting: This refers to how much of the account you own. Your contributions (and their earnings) are always yours to keep. But your employer may have a vesting schedule for their contributions (and related earnings) to encourage you to stay at the company. For example, you might become fully vested after you’ve been employed for three years—after that, you’d own the entire account even if you leave your job. Or, you might vest incrementally—say, 25% after one year, 50% after two years and so on. • Portability: When you leave a company, you’ll typically have four options: keep your money in the employer’s plan; roll some or all of your account over to your new employer’s 401(k) or to your own individual retirement account (IRA); or cash it out (this will trigger income taxes and a possible early-withdrawal penalty, so do it only if you absolutely need the money). Required minimum distributions (RMDs): Traditional IRAs, along with traditional and Roth 401(k)s (unless you’re still working for the employer), have federally required minimum amounts you must withdraw each year, starting at age 73. 401(k) advantages There are many benefits to a 401(k). • There may be a match. Some employers encourage you to invest in your future by matching a portion of what you put in your account. That’s like getting free money, so you should consider saving at least enough to earn the full match. • It’s automatic. Once you set up contributions from your payroll, investing becomes routine and easier to fit in your budget. (If you don’t see the money, you’re less likely to miss it.) The same goes for automatic contribution increases—maybe by one or two percentage points a year—a (relatively) painless way to help your account grow. • Your investment might grow. With multiple investment options, you can often choose how much risk you want to take with your money (or, if target-date funds are available, choose the one that best matches your situation). The money can compound and grow over time—even more so with regular investing and employer matching. • You get tax breaks. When you contribute to a traditional 401(k), you may pay less in taxes during your working years. That’s because the money you put in comes from your paycheck before taxes are taken out. This lowers your taxable income (and also means that every dollar you contribute costs less than a dollar in take-home pay). With a Roth 401(k), you get the tax benefit down the road: You contribute after-tax dollars, but the account can grow tax-free, and you won’t owe taxes when you withdraw if you meet certain criteria. 401(k) disadvantages There can also be some negatives. • Limited investment options. Your choices include only what’s on your employer’s or organization’s menu. • You don’t have full control over when to take money out. Besides taxes and possible penalties on withdrawals before age 59½, you’ll face required minimum distributions (RMDs) later—you have to withdraw a certain amount each year starting at age 73. That may not work well with your needs or with the value of your investments. • You might owe more tax than you expect. Usually, people assume they’ll be in a lower tax bracket—and face lower income taxes—after they retire and start withdrawing from their accounts. But that’s not always the case, and you may owe more than you anticipated. What's an annuity, and how does it work? An annuity is an insurance product that provides regular income payments for life. Typically purchased through an insurance company, it can help protect and, depending on the kind of annuity, even grow your retirement income—with taxes deferred until you start taking payments. Some annuities can provide benefits right away. For instance, if you have a lump sum of money, you can buy an “immediate” annuity and start receiving payments (with interest) at once. Or, an annuity can be deferred: You make either a lump-sum payment or multiple payments first, then start to receive income installments later. Types of annuities You can also categorize annuities by how the payments are determined. • Fixed: These annuities guarantee payments at a specific rate and amount, no matter what happens in the market. • Variable: Variable annuities are tied to the ups and downs of the stock market, and the income you receive can fluctuate based on market conditions. These annuities involve more risk but have higher potential for growth. • Indexed: These annuities pay interest based on the performance of an index—an often large group of stocks that track a portion of the market (like the S&P 500® index of large companies listed on U.S. stock exchanges) rather than the overall market itself. Annuity advantages Annuities provide important advantages for retirement: • They ensure steady income. You get a source of regular, reliable income. • You control the terms. If you’re married, you can usually choose to take full payments for the rest of your life or partial payments that will continue to go to your spouse if you should die first. Also, you decide how much risk to take. You can choose a lower-risk fixed annuity (so you know exactly how much you’ll receive), or a variable annuity (which rises and falls with the market—it involves more risk, but also potentially more growth). • They can offer some growth potential. Annuities can provide income for life, but you still can seek more growth by selecting a more aggressive variable annuity. • There’s no limit. You can put as much money as you like in an annuity. For example, you might choose to guarantee some income with an annuity while keeping the rest of your retirement money in an account that can continue to grow. Annuity disadvantages Annuities also have their potential downsides. • You might make more money investing. With annuities, you’re often trading hopes of growth—and beating inflation—for the security of guaranteed payments. • The provider could fail. Like any insurance product, annuity guarantees are only as strong as the company that provides them. • Typically, they’re hard to get out of. Once you've bought an annuity, you’ll likely be committed to it and unable to get your money back except according to the terms of your contract. • Variable annuities can be expensive. While these annuities usually offer the most potential for growth, they also tend to come with multiple fees. What to consider when you choose In some ways, annuities and workplace retirement accounts are two sides of the same coin. A defined contribution plan like a 401(k) is considered a good way to accumulate (save) retirement funds even if you’re starting from scratch. By contrast, annuities are for the decumulation (withdrawal) phase of retirement; because they typically require a large initial amount to provide the income you’ll need, they’re considered best for preretirees (typically over age 50) who’ve already built up a nest egg and are concerned about having a reliable retirement income stream in addition to Social Security. But that’s a conventional way of thinking about it, and it may not apply to you. There are reasons to choose one over the other, and there are times to consider holding multiple retirement vehicles. If an employer offers a 401(k) (or similar plan), it’s a smart idea to take advantage of it. Besides the tax breaks, you can usually invest more each year than you can with an IRA. And if your employer matches contributions, think about saving at least enough to take full advantage of that money. But not all employers offer a 401(k). And if you work part time, you might not have access to a workplace plan at all. In that case, you might want to consider purchasing an annuity, either with a lump sum (if you have it) or with regular payments. Or if you’re approaching retirement and are concerned about stock market risk, putting some of your money in an annuity may be a safer choice. It’s also important to consider how much income you want in retirement. Some annuities guarantee a set payout at regular intervals, while a 401(k)’s return may depend on market factors—and you may not be able to control your withdrawal schedule. And if you start contributing to a 401(k) later in life, your money has less time to grow. Can you roll over an annuity into a 401(k)? The short answer: Yes, but it’s complicated. You can sometimes roll an annuity into a 401(k) plan if the annuity is already held in a “qualified” retirement account like an IRA. However, both the 401(k) and annuity provider must have rules that allow this. The SECURE 2.0 Act of 2022 made it easier for employers to add annuities to their 401(k) investment options—so that may be available to you if it’s not already. Even so, while annuities are pretty common in 403(b) plans, less than one in five 401(k)s currently offer them.*
What’s a 401(k), and how does it work? A 401(k) is a type of “defined contribution” (DC) retirement plan: Unlike traditional “defined benefit” (DB) pensions, with DC plans, employees or organization members are responsible for funding their own accounts. (Employers may contribute to their employees’ accounts too.) With a 401(k), you can have a portion of your wages deducted from your paycheck and invested in a range of mutual funds and sometimes other investments. Other defined contribution plans include 403(b)s (available to some public school and hospital employees) and 457(b)s (for some government and nonprofit workers). 401(k)s and similar plans offer important tax advantages: In a traditional 401(k), you contribute pretax dollars, and the account can grow tax deferred until you withdraw from it, typically in retirement. At that point, you’ll owe regular income tax at your then-current rate. You may also be able to choose a Roth 401(k): You contribute money that’s already been taxed, but distributions are tax-free if you hold the account for at least five years and meet other criteria. • Investment types: A 401(k) plan allows you to choose your investments. Typically, you can pick from a menu of mutual funds that invest in stocks or bonds, “target-date” funds that hold a broad range of investments and grow more conservative over time, and sometimes funds that hold shares of the employer’s stock. • Contribution limits: In 2023, the IRS says you can contribute up to $22,500 to your 401(k) ($30,000 if you’ll be at least age 50 by Dec. 31). There's also a combined limit on how much an employee and employer can contribute each year. Thanks to the SECURE 2.0 Act of 2022, you’ll be able to save even more if you’re between ages 60 and 63. Beginning in 2025, savers in this age range can put away an additional $100,000, or 50% over the regular catch-up limit (whichever is higher). • Vesting: This refers to how much of the account you own. Your contributions (and their earnings) are always yours to keep. But your employer may have a vesting schedule for their contributions (and related earnings) to encourage you to stay at the company. For example, you might become fully vested after you’ve been employed for three years—after that, you’d own the entire account even if you leave your job. Or, you might vest incrementally—say, 25% after one year, 50% after two years and so on. • Portability: When you leave a company, you’ll typically have four options: keep your money in the employer’s plan; roll some or all of your account over to your new employer’s 401(k) or to your own individual retirement account (IRA); or cash it out (this will trigger income taxes and a possible early-withdrawal penalty, so do it only if you absolutely need the money). Required minimum distributions (RMDs): Traditional IRAs, along with traditional and Roth 401(k)s (unless you’re still working for the employer), have federally required minimum amounts you must withdraw each year, starting at age 73. 401(k) advantages There are many benefits to a 401(k). • There may be a match. Some employers encourage you to invest in your future by matching a portion of what you put in your account. That’s like getting free money, so you should consider saving at least enough to earn the full match. • It’s automatic. Once you set up contributions from your payroll, investing becomes routine and easier to fit in your budget. (If you don’t see the money, you’re less likely to miss it.) The same goes for automatic contribution increases—maybe by one or two percentage points a year—a (relatively) painless way to help your account grow. • Your investment might grow. With multiple investment options, you can often choose how much risk you want to take with your money (or, if target-date funds are available, choose the one that best matches your situation). The money can compound and grow over time—even more so with regular investing and employer matching. • You get tax breaks. When you contribute to a traditional 401(k), you may pay less in taxes during your working years. That’s because the money you put in comes from your paycheck before taxes are taken out. This lowers your taxable income (and also means that every dollar you contribute costs less than a dollar in take-home pay). With a Roth 401(k), you get the tax benefit down the road: You contribute after-tax dollars, but the account can grow tax-free, and you won’t owe taxes when you withdraw if you meet certain criteria. 401(k) disadvantages There can also be some negatives. • Limited investment options. Your choices include only what’s on your employer’s or organization’s menu. • You don’t have full control over when to take money out. Besides taxes and possible penalties on withdrawals before age 59½, you’ll face required minimum distributions (RMDs) later—you have to withdraw a certain amount each year starting at age 73. That may not work well with your needs or with the value of your investments. • You might owe more tax than you expect. Usually, people assume they’ll be in a lower tax bracket—and face lower income taxes—after they retire and start withdrawing from their accounts. But that’s not always the case, and you may owe more than you anticipated. What's an annuity, and how does it work? An annuity is an insurance product that provides regular income payments for life. Typically purchased through an insurance company, it can help protect and, depending on the kind of annuity, even grow your retirement income—with taxes deferred until you start taking payments. Some annuities can provide benefits right away. For instance, if you have a lump sum of money, you can buy an “immediate” annuity and start receiving payments (with interest) at once. Or, an annuity can be deferred: You make either a lump-sum payment or multiple payments first, then start to receive income installments later. Types of annuities You can also categorize annuities by how the payments are determined. • Fixed: These annuities guarantee payments at a specific rate and amount, no matter what happens in the market. • Variable: Variable annuities are tied to the ups and downs of the stock market, and the income you receive can fluctuate based on market conditions. These annuities involve more risk but have higher potential for growth. • Indexed: These annuities pay interest based on the performance of an index—an often large group of stocks that track a portion of the market (like the S&P 500® index of large companies listed on U.S. stock exchanges) rather than the overall market itself. Annuity advantages Annuities provide important advantages for retirement: • They ensure steady income. You get a source of regular, reliable income. • You control the terms. If you’re married, you can usually choose to take full payments for the rest of your life or partial payments that will continue to go to your spouse if you should die first. Also, you decide how much risk to take. You can choose a lower-risk fixed annuity (so you know exactly how much you’ll receive), or a variable annuity (which rises and falls with the market—it involves more risk, but also potentially more growth). • They can offer some growth potential. Annuities can provide income for life, but you still can seek more growth by selecting a more aggressive variable annuity. • There’s no limit. You can put as much money as you like in an annuity. For example, you might choose to guarantee some income with an annuity while keeping the rest of your retirement money in an account that can continue to grow. Annuity disadvantages Annuities also have their potential downsides. • You might make more money investing. With annuities, you’re often trading hopes of growth—and beating inflation—for the security of guaranteed payments. • The provider could fail. Like any insurance product, annuity guarantees are only as strong as the company that provides them. • Typically, they’re hard to get out of. Once you've bought an annuity, you’ll likely be committed to it and unable to get your money back except according to the terms of your contract. • Variable annuities can be expensive. While these annuities usually offer the most potential for growth, they also tend to come with multiple fees. What to consider when you choose In some ways, annuities and workplace retirement accounts are two sides of the same coin. A defined contribution plan like a 401(k) is considered a good way to accumulate (save) retirement funds even if you’re starting from scratch. By contrast, annuities are for the decumulation (withdrawal) phase of retirement; because they typically require a large initial amount to provide the income you’ll need, they’re considered best for preretirees (typically over age 50) who’ve already built up a nest egg and are concerned about having a reliable retirement income stream in addition to Social Security. But that’s a conventional way of thinking about it, and it may not apply to you. There are reasons to choose one over the other, and there are times to consider holding multiple retirement vehicles. If an employer offers a 401(k) (or similar plan), it’s a smart idea to take advantage of it. Besides the tax breaks, you can usually invest more each year than you can with an IRA. And if your employer matches contributions, think about saving at least enough to take full advantage of that money. But not all employers offer a 401(k). And if you work part time, you might not have access to a workplace plan at all. In that case, you might want to consider purchasing an annuity, either with a lump sum (if you have it) or with regular payments. Or if you’re approaching retirement and are concerned about stock market risk, putting some of your money in an annuity may be a safer choice. It’s also important to consider how much income you want in retirement. Some annuities guarantee a set payout at regular intervals, while a 401(k)’s return may depend on market factors—and you may not be able to control your withdrawal schedule. And if you start contributing to a 401(k) later in life, your money has less time to grow. Can you roll over an annuity into a 401(k)? The short answer: Yes, but it’s complicated. You can sometimes roll an annuity into a 401(k) plan if the annuity is already held in a “qualified” retirement account like an IRA. However, both the 401(k) and annuity provider must have rules that allow this. The SECURE 2.0 Act of 2022 made it easier for employers to add annuities to their 401(k) investment options—so that may be available to you if it’s not already. Even so, while annuities are pretty common in 403(b) plans, less than one in five 401(k)s currently offer them.
*Prudential does not currently offer these options.
What you can do next You might want to evaluate your retirement saving and income options with a trusted financial professional who can help you choose what’s best for your situation. There’s no reason to stick with only one vehicle to provide income during retirement, and with changes like those in the SECURE 2.0 Act, it’s worth reviewing your choices. Given your financial goals, sometimes having multiple retirement accounts and products like annuities are the best ways to go. Of course, you should consult your tax and legal advisors regarding your circumstances. Written by Deborah Abrams Kaplan Deborah Abrams Kaplan covers personal finance and insurance for publications and brands. She previously investigated professional liability claims for an insurance company.
Footnote: Prudential does not currently offer these options.
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Dec 21, 2018 Key Takeaways • Income and housing wealth are main obstacles to retirement preparedness for Blacks and Hispanics. • A lack of wealth transfer across Black and Hispanic families has exacerbated the financial situation. • While deep-seated and problematic, the dialogue must continue on how to address these challenges. Over the 10 years from 2007 to 2016, the percentage of Black households at risk of not being able to maintain their standard of living in retirement rose from 52 to 54 percent, the Center for Retirement Research (CRR) at Boston College found using the NRRI. During that same period, the number of Hispanic households at risk rose from 51 to 61 percent. By contrast, the percentage of white households at risk rose from 42 to 48 percent. A stunning 41 percent decline in Hispanics’ median housing wealth during that period accounts for much of the retirement risk increase for Hispanic households, according to the CRR. Hispanics were especially impacted by the downturn in housing prices between 2007 and 2016. While the latest NRRI points to a worsening retirement security gap for Black and Hispanic American households, it doesn’t address the full extent of the challenges facing Black and Hispanic households. Median income for Black and Hispanic households was not only much lower than white households in 2016, it had declined since 2007. Clearly, the income gap between white households and Black and Hispanic households has worsened. The findings of the CRR are consistent with those of Prudential’s Financial Wellness Census ™, which surveyed more than 3,000 adults about their financial health. In the study, Blacks and Hispanics reported significantly less retirement savings and are more likely to worry about their financial future. Yet in a bright spot, among households with incomes above $50,000, a greater percentage of Black and Hispanic households feel they’re on track to help their children with a down payment of a home, and more are on track to reduce or pay off student loans • Closing the retirement security gap will not be easy, but here are a few things that could help. • Increase partnering between private corporations and nonprofit institutions. • Improve access to workplace retirement plans. • Engage financial services firms in grassroots marketing partnerships, with trusted community leaders. • Increase access to financial wellness programs. Percentage of U.S. households at risk of not being able to maintain their standard of living in retirement Financial status of 2007 2016 Black 52 54 Hispanic 51 61 White 42 48 Prudential served as the exclusive sponsor of the National Retirement Risk Index.
Read More To view a summary of the results, read Black and Hispanic Households Face Retirement Challenges
You may also be interested in other Financial Wellness or NRRI topics.
Download the CRR Issue Brief.
Prudential served as the exclusive sponsor of the National Retirement Risk Index.
Dec 21, 2018 Key Takeaways • Income and housing wealth are main obstacles to retirement preparedness for Blacks and Hispanics. • A lack of wealth transfer across Black and Hispanic families has exacerbated the financial situation. • While deep-seated and problematic, the dialogue must continue on how to address these challenges. Over the 10 years from 2007 to 2016, the percentage of Black households at risk of not being able to maintain their standard of living in retirement rose from 52 to 54 percent, the Center for Retirement Research (CRR) at Boston College found using the NRRI. During that same period, the number of Hispanic households at risk rose from 51 to 61 percent. By contrast, the percentage of white households at risk rose from 42 to 48 percent. A stunning 41 percent decline in Hispanics’ median housing wealth during that period accounts for much of the retirement risk increase for Hispanic households, according to the CRR. Hispanics were especially impacted by the downturn in housing prices between 2007 and 2016. While the latest NRRI points to a worsening retirement security gap for Black and Hispanic American households, it doesn’t address the full extent of the challenges facing Black and Hispanic households. Median income for Black and Hispanic households was not only much lower than white households in 2016, it had declined since 2007. Clearly, the income gap between white households and Black and Hispanic households has worsened. The findings of the CRR are consistent with those of Prudential’s Financial Wellness Census ™, which surveyed more than 3,000 adults about their financial health. In the study, Blacks and Hispanics reported significantly less retirement savings and are more likely to worry about their financial future. Yet in a bright spot, among households with incomes above $50,000, a greater percentage of Black and Hispanic households feel they’re on track to help their children with a down payment of a home, and more are on track to reduce or pay off student loans • Closing the retirement security gap will not be easy, but here are a few things that could help: • Increase partnering between private corporations and nonprofit institutions. • Improve access to workplace retirement plans. • Engage financial services firms in grassroots marketing partnerships, with trusted community leaders. • Increase access to financial wellness programs. Percentage of U.S. households at risk of not being able to maintain their standard of living in retirement
The financial status of Black households in 2007 was 52% rising to 54% in 2016 The financial status of Hispanic households in 2007 was 51% rising to 61% in 2016 The financial status of White households in 2007 was 42% rising to 48% in 2016
2 AARP, “How Employers Can Support Working Caregivers: Eldercare Benefits and Other Caregiver Programs Are Powerful Retention Tools,” June 2013, https://www.aarp.org/work/employers/info-06-2013/employers-support-working-caregivers.html (Accessed November 2019).
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1 SHRM, “Employers See Opportunity to Help Workers Take Care of Others,” August 2017.
May 28, 2018 Key Takeaways • Balancing eldercare with other obligations is a challenge for a growing number of American families. • Caregiving challenges cost employers in lost productivity, absenteeism, and workday interruptions. More than three out of four employers believe caregiving benefits for family members will grow in importance to their company. A growing number of American families are taking on the task of caring for an aging parent, requiring them to balance eldercare with other family and work obligations. As employers look to help their employees – and gain a competitive edge in the war for talent – they have a unique opportunity to help employees navigate these challenges. More than three-quarters of employers believe caregiving benefits for elderly or ailing family members will grow in importance to their companies over the next five years.
As far back as 2013, the AARP estimated that eldercare costs businesses annually: • $5.1 billion in absenteeism • Nearly $6.3 billion in workday interruptions (e.g., coming in late, leaving early, taking time off, or spending work time on eldercare matters) • $6.6 billion to replace employees who had left their jobs • $17.1 billion to $33.6 billion in lost productivity, depending upon the level of care involved
As a result, employers are likely to look at ways to assist their workers who are impacted by the growing caregiving crisis.
As far back as 2013, the AARP estimated that eldercare costs businesses annually: • $5.1 billion in absenteeism • Nearly $6.3 billion in workday interruptions (e.g., coming in late, leaving early, taking time off, or spending work time on eldercare matters) • $6.6 billion to replace employees who had left their jobs • $17.1 billion to $33.6 billion in lost productivity, depending upon the level of care involved - see reference 2
May 28, 2018 Key Takeaways • Balancing eldercare with other obligations is a challenge for a growing number of American families. • Caregiving challenges cost employers in lost productivity, absenteeism, and workday interruptions. More than three out of four employers believe caregiving benefits for family members will grow in importance to their company. A growing number of American families are taking on the task of caring for an aging parent, requiring them to balance eldercare with other family and work obligations. As employers look to help their employees – and gain a competitive edge in the war for talent – they have a unique opportunity to help employees navigate these challenges. More than three-quarters of employers believe caregiving benefits for elderly or ailing family members will grow in importance to their companies over the next five years. see reference 1
