The Prosperity Blog

Financial Flexibility: Saving Too Much in All the Wrong Places?

“30% of workers dipped into retirement funds during 2020.”  (Forbes, Janurary 6, 2021)

saving-too-much

Since the 2008 Financial Crisis, more people have been raiding their 401(k)s than ever before, but not for retirement. In 2013, the Los Angeles Times reported on a HelloWallet study showing that one in four Americans were borrowing from retirement accounts to pay bills.

Bloomberg News noted the findings of a Wells Fargo study showing that workers were increasingly tapping their 401(k) retirement accounts. According to the report, people in their 50s were the most likely to borrow against their retirement savings. More than $70 billion was being withdrawn annually for mortgage payments, college tuition, even credit cards. (And that was before the pandemic.)

Not surprisingly, this trend was accelerated by the events of 2020. A national survey conducted by Kiplinger’s magazine and Personal Capital in November 2020 found that people have withdrawn or borrowed significant sums from retirement accounts. Thirty-two percent (32%) of respondents said they withdrew $75,000 or more from a retirement account, while 58% took loans borrowed between $50,000 and $100,000. Additionally, more than a third (35%) said they now plan to work longer due to the financial impact of the pandemic. (View detailed survey findings here.)

“The past year rocked the confidence of most Americans saving for retirement,” said Mark Solheim, Editor of Kiplinger’s. “With many people dipping into their retirement savings or planning to work longer, 2020 will have a lasting impact for years to come.”

A Symptom of Bigger Problems.

While noted as an alarming problem by financial experts, the rampant borrowing from retirement accounts is actually a symptom of two larger problems. The first is plain enough: American’s haven’t saved enough.

The second problem may be less obvious, but no less critical to understand and correct: Many people lack financial flexibility—including (and perhaps even especially) those who HAVE saved diligently.

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Convertible Term Insurance: The Third Option

“The third option is that other possibility…”
– Lynn Barrette, Counselor and inspirational blogger

Life Insurance: It’s Not An Either/Or Decision

“Whole Life or Term Insurance?” It’s a never-ending debate amongst financial advisors and self-proclaimed experts. Today, we’d like to suggest a third option.

But first… let’s summarize the two most popular and obvious choices:

Term life insurance is life insurance purchased for a limited time, such as 15 or 20 years. Term insurance is affordable, providing the insured with more coverage for less premium. Thus it puts a greater protection in place, in the form of a death benefit. However, term life insurance policies rarely provide that benefit, because of the limited time frame of the coverage. They are less expensive because they almost always expire (like product warranties) before they’re likely to be used.

Like most other insurances, term life is an “if” insurance, not a “when” insurance. A benefit is paid only IF your house burns down, IF your car is vandalized, or IF someone passes away long before expected.

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Buying a New Car? What to Consider in 2021

“I’ve always been asked, ‘What is my favorite car?’ and I’ve always said ‘The next one.’ ”

Carroll Shelby, American automotive designer and racecar driver

Are you considering buying a new car—or perhaps a used car this year? If so, you’re not alone. And there are some things to be aware of in the current environment that can help you make the best choice!

In this article, we’ll consider:

  • The trends that may impact your vehicle’s future value
  • How to buy a vehicle in the most financially-savvy way
  • What to know before you negotiate
  • Helpful resources to assist you.

One of my mentors, Peter Diamandis, predicts that self-driving cars will make car ownership a thing of the past for urban dwellers within a few years. Already, we’ve seen taxis, Uber, Lyft, and public transit replace car ownership for many in cities such as New York and San Fransisco. The transportation-as-a-service trend continues, but it hit a hitch in 2020.

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7 Habits for a Wealthy New Year

For most people, 2020 went down as the year that did not go quite as planned. Which reminds me of the saying, “Man makes plans, and God laughs.”

We have limited control our circumstances and our environment. Likewise, we have only partial control of our results. As James Clear points out, every athlete strives to win the race or the gold medal, but only one will.

What we CAN control is ourselves.

You determine your thinking and your behavior.

We’re not sure who said it first (it’s been attributed to Abraham Lincoln, Peter Drucker and others), but we love the saying: “The best way to predict the future is to create it.” And the best way to create that future is through focusing your thoughts and actions towards the future you want.

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A Season of Giving

With Christmas upon us, it’s easy to see
shelves of things we’d like to receive. 
While freedom of money and freedom of time,
means finding enjoyment and feeling sublime, 
let’s remember what holidays are about

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Is College Still Worth It?

Is College Still Worth It?

Is a college degree worth the investment of time and money? Is a degree still a prerequisite for success? What does it really cost, who pays the price, and how does one make the most of the investment? What does financial planning for college look like? (Read our Ultimate Guide to Financial Planning Myths to learn how to save for college more efficiently.)

These are questions that students and parents alike are beginning to ask. Especially now, with many colleges offering only virtual classes, questions about the value and fit of college are louder than ever. (For ideas on funding college, read our Ultimate Guide to Financial Planning Myths.) This is the start of financial planning for college students.

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SELF-INSURANCE: A DIY Project to Avoid!

Ever take pride in something you did on your own? It could be something as simple as preparing an expense tracking sheet or as involved as a home repair. American society celebrates those that are self-made. It’s why we hold entrepreneurs on a pedestal; like Steve Jobs that took Apple from a garage to the iconic company, it is today. The American dream still holds power today, founded on the principles of working hard, being self-sufficient, and tackling the world one day at a time.

But when it comes to insurance, is it the right choice to “do-it-yourself”? “Self-insurance” is the idea that one can insure themselves by simply building more assets. Unfortunately, the reality of “self-insurance” is that it is no insurance at all.

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