Safeguarding Your Investments: Navigating the Debt Limit and the Security of Your Treasury Bonds | SmartAsset.com
Close thin
Facebook
Twitter
Google plus
Linked in
Reddit
Email
arrow-right-sm
arrow-right
Tap on the profile icon to edit your financial details.
Get ready for the trillion-dollar question: Are your Treasury bonds at risk in the face of a U.S. default? Brace yourself, because if Congress falters in raising the debt ceiling before the Treasury’s coffers run dry, the repercussions will be felt far and wide. When the government can’t foot its bills, that includes honoring payments on Treasury debt—bonds, bills and notes included. Discover the potential impact on your investments and protect your financial future.
A financial advisor can help you navigate this precarious moment. Find a fiduciary advisor today.
If you own Treasury bonds, there’s a very good chance that this will reduce the value of your investment. While the government will ultimately pay all of the interest and par value that you are owed, a default might delay those payments. It will also very likely reduce the value of your bonds on the secondary market, generating a lower return if you choose to sell them.
Here’s why.
Despite its misleading name, the debt limit does not actually limit government debt. Instead, it limits the Treasury’s ability to restructure that debt as necessary.
The total amount that the United States owes is established each year through Congress’ tax and budget process. In the annual budget, Congress makes millions of individual commitments to soldiers, sailors, teachers, air traffic controllers, corporate vendors, foreign governments and countless others. When tax revenues fall short of these commitments, the result is the total debt of the U.S.
To consolidate this debt, the Treasury issues bonds. These instruments shift the government’s obligations from a network of countless ad hoc creditors to a series of structured lenders on a fixed repayment schedule. Bonds give the Treasury the cash flow it needs to pay the bills that Congress has incurred, including past bills such as bonds issued in previous years.
The debt ceiling puts a cap on how many bonds the Treasury can issue. This eliminates its ability to restructure and consolidate, choking off the Treasury’s cash flow without affecting the government’s underlying debt.
What Will Happen to Bondholders If the Debt Ceiling Isn’t Lifted?
It’s difficult to tell exactly because this never happened before. However there are some likely results.
Investors who hold U.S. Treasury bonds are one of the great network of creditors to whom the government owes money. In their case, the government owes them regular interest payments and lump-sum repayments for matured assets. The Treasury issues these payments on a regular schedule, based on the nature of any individual asset.
Once in default, the Treasury will likely begin prioritizing payments, sending checks to some creditors while defaulting on others as cash rolls in. Among other things, in the same way that an unpaid power bill leads to penalties and fines, an extended default would likely result in penalties and lawsuits as individual creditors seek the money they are owed.
For bondholders, this could result in several significant outcomes.
First, no new assets to purchase.
Investors in U.S. debt will not be able to purchase new assets while the government is in default. The debt ceiling means that the Treasury is barred from issuing new debt instruments, so it will not sell new bonds until that limit is raised.
That does not mean that you can’t buy any Treasury bonds, just that you won’t have access to newly created and issued ones.
Second, payment disruptions are possible but unlikely.
If the Treasury has to structure payments due to cash flow issues caused by the debt ceiling, it’s likely that it will try to prioritize existing debt holders in an effort to preserve as much of the government’s credit and credibility as possible. If it has the cash on hand to do so, the Treasury will then continue issuing interest and repayments for existing bonds on schedule.
The problem is that the Treasury owes more than $1 trillion in maturity and interest payments over the course of June. It is unlikely to have this cash on hand in the absence of new borrowing.
In the event of a brief default, lasting hours or days, bondholders will probably not see any interruption in their payments. If a default lasts longer than that, the risks of a missed payment will increase, becoming a near-certainty if the government remains in default over a period of several weeks.
Third, your returns will likely suffer.
The yield on your bonds will likely be safe, even in the event of a payment disruption. However you can likely expect lower returns if you choose to sell your bonds.
If Congress defaults on the U.S. debt, it will almost certainly reduce the market value of this debt at every level. Much of the value behind these bonds is their perception as the world’s safest asset, guaranteed by both law and tradition. That confidence, once shaken, will not be easily restored. Secondary markets will almost certainly price this risk into Treasury bonds.
Beyond that, once in default credit agencies will downgrade U.S. debt. If that happens Treasury bonds will no longer meet the minimum standards for many low-risk funds and institutions, forcing them to sell their assets and flooding the market with Treasury bonds. Collectively, this will reduce the amount that buyers pay for Treasury assets, reducing the returns you can expect if you choose to sell your bonds. It will also likely push up the value of long-term bonds over short-term bonds, as investors seek the perceived security of assets that mature after the immediate default crisis has passed.
Fourth, interest rates will go up.
This is a double edged sword for investors.
As noted above, much of the value behind Treasury bonds is the idea that they are the world’s safest asset. This is priced into their interest rate. If Congress defaults on the U.S. debt it will introduce risk into Treasury borrowing. As with all debt, lenders charge higher interest rates for riskier assets. The result is that, once the debt ceiling is lifted, the Treasury will almost certainly have to pay higher interest rates for newly issued bonds.
For new investors, this will be a bit of rare good news. They will likely get better yields on new Treasury bonds going forward. For existing investors, however, this will devalue the bonds they currently hold, pushing down their value on the secondary market relative to new, higher-interest assets.
Returning to our original question, are your Treasury bonds safe? The answer is mixed.
If you are a long term investor whose goal is to collect interest payments until an asset’s maturity, then your investment is probably safe. You may see a brief disruption in your bonds’ repayment schedule, but that is unlikely to last very long. Beyond that, it is still extremely unlikely that you will lose money on this asset.
If you want to sell your bonds at any point, you will very likely lose money. The value of existing bonds will almost certainly fall (possibly quite significantly) in the event of a default.
If you are a future investor, you will probably improve your yields as the increased costs of U.S. borrowing push up the interest rates on future Treasury bonds.
But it’s critical to understand that this is entirely speculative. A U.S. default would cause chaos across every financial market, from investments to employment to borrowing and beyond. Borrowing and credit of every kind would get more expensive, likely pushing up prices in most markets and pushing prices down on most investments. There is no clear way to predict what would happen in this environment, even if these are a series of likely outcomes.
The Bottom Line
If Congress defaults on the U.S. debt, the first assets hit will be Treasury bills, bonds and notes. For current investors this will likely mean chaos. You can most likely expect Treasury payments in full, even if not on time, but secondary market returns will almost certainly plummet.
Risk Management Tips
Even if Treasury assets are supposed to be immune from risk, it’s still a part of investing overall. Managing that is a key part of managing your money.
The best way to prepare for risk is with good advice. A financial advisor can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Tap on the profile icon to edit your financial details.
Just because you retire doesn’t mean you have to stop working. And when work is an option rather than a requirement, it’s possible to select a low-stress job that multiplies fulfillment without adding anxiety — but still provides a bit of much-appreciated income. There are, in fact, a variety of such low-stress, high-reward jobs well-suited to the needs of retirees.
A financial advisor can help you devise a plan that will give you the flexibility to make choices in retirement.
Working in Retirement
People may continue working after retirement for a variety of reasons, including the benefits of generating additional income, the satisfaction of making a contribution and the stimulation of staying engaged. If nothing else, work can get them out of the house and fill the hours formerly devoted to their careers.
Many jobs are, however, likely to be more trouble than they are worth to a typical retiree. If what you are after is fulfillment without stress, it doesn’t make much sense to apply for a position as, say, a law enforcement officer working undercover for a drug-smuggling ring. Fortunately, there are many jobs that offer lots of benefits without lots of stress.
Low-Stress Jobs for Retirees
The work you do in retirement can be an extension of your former career or head off in a diametrically opposed direction. Either way, here are 12 possibilities:
Tutoring
Decades of life experience can admirably equip retirees to work as part-time tutors to students at various levels of education. English as a Second Language, for example, is a subject area many retirees can assist students with, while maintaining flexible hours and keeping supervision and red tape to a minimum.
Pet Care
For people who like getting outside and spending time with animals, walking dogs is a way to get paid for enjoying themselves. Sitting, grooming and transporting dogs as well as cats and other pets can offer similar appeal.
Massage Therapist
Many massage therapists see clients at their own homes or in annexes on the property, meaning there’s no commute and little hassle or overhead. If you enjoy helping others through the healing properties of touch, this could be a retirement gig for you.
Personal Trainer
A dedicated runner, swimmer, biker or gym rat, can get paid for sharing their knowledge and passion for fitness with others who are chasing their own fitness goals. Tasks include selecting exercises, structuring workouts and developing training plans.
Consultant
If you had a lengthy career in nearly any knowledge-based field, you may be able to monetize that experience in retirement while also being able pick and choose your clients, working flexible hours and even earning a handsome income, all as a self-employed consultant to businesses.
Life Coach
If helping individuals as opposed to businesses is more your style, you can set yourself up as a life coach helping people reach fulfillment by attaining goals in their professional and personal lives.
Travel Agent
Many who love to travel find earning fees and commissions as travel agents to be a good job in retirement. The work involves recommending destinations, organizing itineraries and booking tickets for transportation, lodging, meals and events.
Library Worker
Bibliophiles can surround themselves with books and get paid for the privilege by working at the library. Many positions are part-time and tend, almost by definition, to be low in noise, hustle and bustle.
Tour Guide
Museums, historical sites, nature centers, monuments and other attractions commonly employ guides to provide visitors with information and assistance as they tour the facility. The positions are well-suited to retirees who want to make some extra money and interact with a variety of people in a relaxed environment.
Personal Shopper
Retirees can shop until they drop without having to spend a dime of their own money – and even earn a few bucks – by working as personal shoppers. This job involves serving people who need help choosing clothing and accessories that fit their personal styles.
Landscape Artist
Cultivating b eautiful landscapes is a passion for many retirees. A peaceful day tilling the soil can also be a source of income with a job as a gardener or landscaper.
Event Coordinator
If you possess robust organization skills and are detail-oriented, there is always a demand for people who can plan and coordinate weddings, parties, conferences and other events.
Bottom Line
Although there probably are as many reasons for continuing to work after retiring as there are working retirees, it’s a safe bet that few if any are showing up for work in search of added stress. Fortunately, there are plenty of jobs open to retirees that pair high levels of fulfillment with low levels of stress.
Retirement Planning Tips
Generating sufficient income in retirement can be a challenge without the help of an experienced and qualified financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Whether you are retired and working mostly for non-financial means or still in the workforce and focused on earning income, SmartAsset’s paycheck calculator will tell you how much your employer will withhold from your check for federal, state and local taxes.
Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
My baby boomer clients are finally starting to grasp the concept of the tax-free benefits of the Roth IRA. So much in fact that they want to make sure that their kids start a Roth IRA and, in some cases, even their grandchildren.
I even had one grandfather who wanted to set up a Roth IRA for his 5-year-old grandson. While giving your kids the benefit of tax-free savings sounds sweet, there are some key rules when it comes to Roth IRAs for minors.
Here’s what you need to know about how your kids can enjoy tax-free money. Be sure to check out the rest of the Roth IRA rules.
Roth IRA For Minors
Amazingly, there is no minimum age requirement to open a Roth IRA. The only requirement is that the child have “earned income”. What defines earned income? According to the IRS.gov website:
Earned income includes all the taxable income and wages you get from working. There are two ways to get earned income: You work for someone who pays you or you work in a business you own.
Does a paper route count? Sure can. What about household chores? That’s a gray area, but most tax experts lean towards no. (Be sure to always ask your tax professional). What about child actors? Absolutely. I think that means that all 8 kids of John and Kate plus 8 could start a Roth IRA. I just hope they have a good financial advisor 🙂
Other items to note is that the child will only be able to contribute to a Roth as much as they earn. The 2015 limits are $5,000 but if the child only earns $2,000 for the year, that’s all they’ll be able to put in.
Who’s the Owner?
Depending on where you go to open the Roth IRA, there may be different requirements. When I worked for my previous firm, I had a client whose 16-year-old working son wanted to start a Roth IRA. My firm allowed it, but the father had to sign for him. Once the child celebrates his 18th birthday, the Roth IRA is officially his. (We’ll talk more about that in a bit).
Drawbacks of Roth IRA’s for Kids
Hard to believe there are any drawbacks to tax-free money, but there is one. The only drawback for opening a Roth IRA in the name of a minor is that the ownership of the account passes on to the child when he or she attains maturity.
That means that at the age of 18, the child (now adult) can do with the money whatever they choose. I”ll let your imagination take over on what an 18 year would do with a windfall of money.
Can You Just Open a Roth IRA for the Child?
After funding their retirement needs, many wish to pass on any remaining to their heirs. But for some, they wish that we could have some control when their heirs could get the money. I once had a reader that wanted to know how he could give his grandson the tax-free benefit of the Roth IRA. In my opinion, this is one cool grandfather.
The reader was roughly 60 years of age and wanted to open a Roth IRA for his five-year-old grandson. He wanted to make a $1,000 contribution into a Roth IRA thinking that the grandson would not be able to touch the money until he was age 60, and then he could benefit from the tax-free growth that the Roth IRA provides.
Just to give you an idea, if $1,000 were to earn on average 8% in a stock-like investment over the course of 55 years, it would grow to be around $101,000. The grandson would then have roughly $100,000 of tax-free money waiting for him at retirement. (At least that’s what the grandfather was hoping for).
While I appreciate the tactic that the grandfather was trying to implement, we do incur a bit of a problem. Since the grandson does not have any earned income, he would not be able to start a Roth IRA. Bummer.
Different Strategy
After the initial attempt to pass on to grandson didn’t work out, he inquired about a different approach. He wanted to know if he could open a Roth IRA for himself and then make the grandson the sole beneficiary. Thinking again that the grandson could not touch the money until age 60.
Unfortunately, in that scenario, when the grandfather passes away the grandson would inherit the account and would have access to the money immediately, and would not have to wait until age 60. In addition, the grandson would be required to take out the required minimum distributions as a non-spousal beneficiary. Unfortunately, that idea did not work either. (The grandfather was still working at this time. If he was not and didn’t have earned income, he would not be able to open a Roth.)
Another possibility
If the grandfather would wait until the grandson actually had the earned income, he could then open up a Roth IRA in the child’s name. The only downside is that the child would have access to the funds and could withdraw them at any time possibly subject to tax and penalty. But if the child was educated on the tax-free benefit waiting for him at retirement, then the grandfather’s wishes may be achieved.
Ads by Money. We may be compensated if you click this ad.Ad
As you can see, if you know the rules, your kids could benefit from the Roth IRA sooner than later. When your child starts receiving earned income, explain the benefits of the Roth IRA and get them excited. You can even help them get started.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute specific individualized tax, legal or investment advice. We suggest that you discuss your specific tax issues with a qualified tax or legal advisor.
It is always important to be cautious and protect yourself from scams. While it is not necessary to constantly worry about being scammed, it is wise to be aware of the potential for scams and take steps to protect yourself. This can include being careful about giving out personal information, avoiding deals that seem too good to be true, and using security software to protect your computer and mobile devices. By taking these precautions, you can reduce your risk of being scammed.
Here are some tips to avoid being scammed:
Be wary of unsolicited messages or calls that offer you a deal that seems too good to be true.
Don’t give out personal information, such as your Social Security number, credit card numbers, or bank account information, to anyone you don’t know and trust.
Be cautious when shopping online, and only make purchases from reputable websites.
Avoid clicking on links or downloading attachments from unknown sources, as these could be used to install malware on your computer.
Be careful when responding to messages or calls that claim to be from a government agency or other authority, as these are often scams.
If you receive a message or call from someone who claims to be from a company you do business with, hang up and call the company directly using a phone number you know to be legitimate.
Use security software and keep it up to date to protect your computer and mobile devices from malware.
If you think you have been the victim of a scam, report it to the authorities and organizations such as the Federal Trade Commission.
Here are some steps you can take to research a company before hiring them:
Check the company’s website and social media accounts to learn more about its products or services, as well as its history and mission.
Look for online reviews and ratings from other customers. This can give you an idea of the company’s reputation and the quality of their work.
Contact the company directly to ask any questions you may have. This can give you a sense of their professionalism and customer service.
Research the company’s leadership team and owners. This can provide insight into the company’s management and corporate culture.
Check if the company is licensed and insured. This is important for ensuring that the company is legitimate and can provide the services they claim to offer.
If possible, try to speak with other customers who have used the company’s services. This can provide valuable feedback and help you make an informed decision.
If you have been the victim of a scam, it is important to take action as soon as possible to protect yourself. Here are some steps you can take:
Report the scam to the authorities. This can include local law enforcement and organizations such as the Federal Trade Commission or the Internet Crime Complaint Center.
Contact your bank or credit card company to report the scam and request that any fraudulent charges be reversed.
If you gave out personal information, such as your Social Security number or bank account information, contact the relevant agencies to protect your identity and financial accounts.
Keep any evidence of the scam, such as emails or other communications, as this can be helpful when reporting the scam to the authorities.
Stay alert for any further attempts at scamming, and be cautious about giving out personal information in the future.
If you are unsure about a potential scam, don’t hesitate to seek advice from a trusted friend, family member, or a professional such as a financial advisor.
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
11 Northwestern Mutual Advisors Named Among Nation’s Best in New Barron’s Ranking MILWAUKEE, March 13, 2023 /PRNewswire/ — One of the country’s premier financial news publications has named 11 Northwestern Mutual-affiliated advisors – to its list of the nation’s top wealth professionals. “Northwestern Mutual’s comprehensive approach to financial planning is proven to deliver better financial … [Read more…]
Tap on the profile icon to edit your financial details.
Retirement is a massive financial undertaking. But it’s also more flexible than many people believe. At different stages in life, it’s really possible to retire earlier than you might realize. However, retiring at age 30 with $1 million comes with a lot of leg work and a bit of luck. It’s not impossible, but a lot of things have to go right for you. We’ll discuss what to consider.
A financial advisor can help you put a financial plan together for your retirement needs and goals.
Your Retirement Income With $1 Million
The $1 million is a common benchmark for FIRE advocates, which means “Financial Independence, Retire Early.” The basic philosophy is this: Maximize every penny of earnings early in life. Save hard, spend little and invest wisely. Then, ideally sometime before age 40, have enough cash to retire for good.
The trouble is that $1 million does not actually generate that much secure income in retirement, at least not before you can supplement it with Social Security. The rule of thumb used by most financial professionals is that you should expect a 4% drawdown each year.
This means that for a sustainable retirement, you should budget to live on about 4% of your total retirement portfolio. For a retiree with a $1 million portfolio, this comes to $40,000 per year.
We can also adjust up from 4%, given that it is admittedly very conservative. So you can hit that number holding nothing but bonds and getting no returns beyond simple coupon payments. So take a number like 6%. This gives you an annual income of $60,000.
Now, that’s not nothing. According to the Census Bureau, it’s less than the median income of $70,700. But not by that much. The problem is that you need to live on that money for a long time.
Costs of Retirement In Your 30s
When the New York Times wrote on this subject, they profiled a man who retired at 43 on his $1.2 million savings. The man’s wife still worked, supplementing the household’s budget significantly. Even still, the article wrote, the couple lived a life, “Rich on time but short on luxuries: Groceries are bought at Costco, car and home repairs are done by him.”
This is the problem with retirement in your 30s. The odds are that it leads to a lot of sitting around asking, “Now what?”
3 Tasks to Solve
First, you will have to account for all the basic expenses of life: Housing, food, utilities and more all add up.
If you have collected $1 million at age 30, the odds are good that you live in or around a city, where the higher-paying jobs are located. For example, if you live in Washington D.C., rent alone can consume almost an entire $40,000 income. And if you move, that will mean leaving your friends and connections, as well as an entire lifestyle that you have presumably come to enjoy.
Second, there are the employment-related expenses of life. Mostly this means finding your own health insurance. At age 30, you might be able to get away with a cheaper high-deductible plan, but as you age into your 40s and 50s that will be increasingly less of an option.
Third, there are situational costs. If you have children, they will need their own care and feeding. According to SmartAsset’s 2023 study, raising a child can cost up to $30,000 annually in the U.S. And as your parents’ age, they might need care both personal and financial.
And unexpected expenses crop up on a regular basis. Home and auto repairs aren’t always do-it-yourself (DIY) projects, for example. If your car throws a rod or (to cite this writer’s experience) a four-story elm dies in your backyard, that’s thousands of dollars directly from your own pocket.
What to Look Out for at Age 30
At age 30, you have a lot of time and responsibilities ahead of you. Every retiree needs to plan for the unexpected. But when you’re a young adult, far more people will count on you and you will have far fewer resources.
Medicare and Social Security won’t kick in for several years. And Medicaid won’t help someone who is voluntarily unemployed. Family members will look to you for support, property will need tending and many of life’s biggest expenses may still be on their way.
To put it another way, you’re not a kid anymore and there is no backup plan. For the next 30 or 40 years, you are the backup plan. By retiring this early with this budget, you are planning to face that with virtually no room for error.
The FIRE Lifestyle
There is a very good reason that early retirement has caught fire (or FIRE) in recent years. Work for millennials and, as they age in, Generation Z, is worse than it was for past generations. Employers expect ever-longer hours and make ever-broader demands.
For Baby Boomers and Generation X, it can seem bizarre to plan on leaving the workforce by age 40. In large part, though, that’s because theirs was a generation that still got to clock out at 5 and only worked on the weekdays.
“The rule books our parents have given us is advice that’s perfect for 1970,” wrote the New York Times in one representative quote. “We have to throw out that rule book and write a new one.”
Current generations were brought up in an era where every job has been migrated to salaries to avoid overtime pay. And most days end well after 5:00 p.m. This is a working world of smartphones, seven-hour half-days and “just real quick” Saturday assignments. It’s easy to understand why so many young workers want to opt-out.
Considering the Alternatives
Consider the other side of that lifestyle carefully, because you may not be buying yourself the freedom that you think. You will have freedom from burning out on work culture and the stress that comes from expecting work e-mails at all hours of the day. But you may not have the freedom to for very long.
In other words, you may not have the freedom to live the kind of lifestyle that you want to enjoy. If you have a home, you may not be able to afford anything else. On a $40,000 – $60,000 per year budget, there probably won’t be much left for travel, dining and other luxuries.
Your plan might be Netflix and dinner for a long period of time, for example. If, as many young retirees do, you choose to travel, then those temporary travels may become more permanent than you’d think.
Bottom Line
Is it possible to retire at 30 with $1 million? Yes. But the odds are it’s likely that it will do more harm than good. If you have $1 million at age 30, you’re doing beyond great. If you keep this money in a series of solid, comfortable investments, then you almost certainly can retire early. The truth is, you probably can target retiring at age 40 or 45. Give this account another 10 years or so to ride. And let compound growth increase over time.
Retirement Planning Tips
A financial advisor can help you prepare for an early retirement. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Want to see how much your 401(k) will be worth when you retire? Use SmartAsset’s free calculator.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Take these steps to protect your retirement savings from a crash without sacrificing your family’s needs today.
January 27, 2023
When you’re in your 20s and 30s, retirement can feel pretty far away. You know it’s important, of course, but it’s not always top of mind. Add in the fact you’re dealing with the immediate challenges of a recession and it can be even easier to let your retirement planning slide.
But there are plenty of reasons to prioritize retirement. The good news is you can do so without putting your other priorities at risk. That’s especially important for parents, who have a lot of financial obligations—to put it mildly. In addition to funding retirement, covering the rent or mortgage and paying bills, they have financial goals for their families, such as saving for college and ensuring the kids can participate in extracurriculars.
Striking this balance while prioritizing retirement is especially important for millennials, many of whom have a way to go on their stockpile. While 8 in 10 millennials have money saved for retirement, nearly half have saved less than $10,000, according to a report by the Insured Retirement Institute. Luckily, retirement planning is a marathon and not a sprint, so these young savers still have time to retire comfortably with consistent retirement contributions.
Looking at both their budget for today and their future goals, many parents are asking: How do I protect my retirement savings during a recession while also saving for my family?
Keep your retirement savings goals front and center
To be honest, it can be kind of overwhelming to juggle all of these priorities while managing your 401(k) during a recession. Focus your attention by starting with your “why.”
Amy Blacklock, co-founder of financial blog Women Who Money, recommends you create a family financial mission statement to clarify your values and priorities. This statement should describe why your family is pursuing particular savings goals and how you’ll get there.
“If you know what your mission is for your family and yourself, it will help you stay on track when other things come up.”
Start a conversation with your family to determine your priorities and values. What you decide will then form your family’s mission statement. For example, a family may craft the following statement after talking about their goal of budgeting for retirement, Blacklock says:
“Our family’s financial mission is to save for a financially secure and fulfilling retirement. We will focus on annually maxing out our IRA contributions. We also aim to teach our children the ins and outs of money. We will steadily increase our retirement savings contributions so we may retire at age 60.”
By including objectives in your family’s mission statement, you will be regularly reminded of their importance, even as you deal with the challenges of protecting your retirement savings from a recession. Having clear objectives in place can help you stay focused on your goals, which is particularly important when you’re protecting your IRA or managing your 401(k) during a recession. It’ll also help you avoid the temptation to divert funds to other expenses, such as a bigger house or new car.
“If you know what your mission is for your family and yourself, it will help you stay on track when other things come up,” Blacklock says.
Remember why it’s important to protect your retirement savings from a recession
Your financial mission statement will help you keep a long-term perspective. This is essential for millennial parents, many of whom have lived through two recessions in their working lives.
Given that rocky past, millennials tend to have less wealth today than previous generations did at the same age, the Pew Research Center notes.1 The center found that the median net worth of households headed by millennials (ages 20 to 35 in 2016) was about $12,500, compared with $20,700 for households headed by boomers the same age in 1983. Gen X households at the same age had a median net worth of about $15,100. This disparity underlines the importance of protecting your 401(k) in a recession.
Andy Hill, founder of the blog and podcast Marriage, Kids and Money, learned this lesson first-hand during the Great Recession. During the housing crisis and subsequent 2008 recession, Hill owed $180,000 on his home mortgage, but the house’s value had sunk to $110,000. Getting out of that underwater mortgage required him to temporarily decrease funding to other financial priorities, including retirement.
“If you’ve been through a recession and you’ve been impacted, then you’re going to remember it,” he says. “I certainly did.”
For millennials like Hill, personal experience with a recession has prepared them for future challenges. They know how important it is to help protect your retirement savings from a crash.
While funding your retirement may seem like a long-term goal for you and your spouse, it actually helps your kids, too. “You have to take care of yourself first, or you run the risk of not being able to and sticking that responsibility on others later,” Blacklock says. When you put the burden on your children to support your retirement later on in life, they’re forced to divert the resources that they need to prepare for their own later years, she adds.
After all, while saving for college or a home is important, these costs can be funded through other means. For example, your kids can pay for college through scholarships, work-study programs or loans. But the same can’t be said for your expenses after you leave the workforce, Hill says.
“There are no retirement scholarships, unfortunately,” Hill notes.
Reduce your spending before cutting into retirement savings
When you’re in a recession, tough choices are inevitable. You may wonder: How do I protect my 401(k) in a recession while also paying my bills? With your financial mission statement in place and your reasons for saving top of mind, you can make these decisions with confidence.
Start by assessing your current situation. Did you or your partner lose your job, or take a hit to your income? It’s a scary situation, but avoid a knee-jerk response rooted in fear. Instead, review your current income and expenses to see where you can adjust your budget.
Take a look at your current spending. Housing, utilities, insurance, food and transportation all likely fall into the “need” category, while things like streaming service subscriptions, restaurant meals and gym memberships go into the “want” bucket.
“You need to cut out everything that is not a need to keep your family going,” Blacklock says. It won’t be easy, but remember that the pain of austerity won’t last forever. “As soon as your income increases, you can start adding things back in.”
Try paring back your spending to the essentials. If you can keep contributing to your retirement savings at the current rate after trimming your spending, that’s a smart way to go, Hill says.
For families still falling short, it may be time to tap into emergency savings to cover your essential expenses. Using your emergency fund to pay your bills can help prevent you from dialing back your retirement contributions. And it’s definitely a better bet than withdrawing your retirement savings, Hill notes.
For one thing, you’ll likely face early withdrawal penalties if you pull out your retirement savings early, Hill notes. That $50,000 in your 401(k) may look like a good chunk of change, but it’ll be partially eaten away by fees and taxes, he cautions. And just as importantly, removing that cash now can dramatically reduce your total savings in the future.
You can use a compound interest calculator to determine your specific return—and how it would be affected by pulling out your funds prematurely. For example, if you have $50,000 in your retirement savings today and plan to contribute $100 per month, your savings will total $494,000 in 30 years, assuming a 7% annual return. But if you take out $40,000 to spend now, leaving just $10,000 in the account, you’ll see a much different result. Even if you keep contributing $100 a month, your total savings will only hit $189,000—less than half the amount if you’d kept your retirement savings in place.
If you can keep contributing to your retirement savings at the current rate after trimming your spending, that’s a smart way to go.
When it comes to managing your 401(k) during a recession, that’s a strong incentive to keep your savings where they are. But in the end, you have to make the decision about what’s best for you and your family. If you’ve already cut your budget down to needed expenses, tapped into your emergency fund, researched new ways to make money and reduced your retirement contributions, well, you may consider withdrawing contributions from your Roth IRA or borrowing from your 401(k), Hill says. Just be sure you’ve exhausted all those options.
“If you’re in a dire situation, you’ve got to do what you’ve got to do, but there are so many things to do before you even consider that,” he says.
Don’t overreact to the markets when managing your 401(k) in a recession
Even when you have your goals top of mind, it can be tempting to respond to market volatility by taking some sort of action, whether it’s withdrawing your funds or selling stocks to protect your retirement savings from a crash. But Hill recommends resisting that urge.
“There’s lots of swings, ups and downs, and they can be uncomfortable, but they’re not abnormal. This is reasonable volatility in the market. And in order to be a long-term investor, you have got to keep riding the roller coaster,” Hill says.
In other words, even if the market goes down, you can count on it eventually going back up. But you don’t want to miss out on that rise by prematurely withdrawing your funds. It’s important to keep your hands off your retirement savings to avoid locking in losses, but it also prevents triggering potential fees and unwanted tax implications.
“If you withdraw early or you sell, it’s going to be a lot more difficult to achieve those long-term retirement savings goals,” Hill says.
Whether your savings are in a 401(k) through your employer, an IRA account or stocks you manage on your own, there’s a big incentive to keep them in place: the opportunity for compound growth.
“By leaving your retirement savings alone, you’re allowing it to grow and you’re allowing your money to make money on itself,” Blacklock says. “The longer it’s invested, obviously the more money you’ll have.”
Create a plan for rebalancing your portfolio
As you think about how to protect your retirement savings from a crash, you may be tempted to rebalance your portfolio given the ups and downs in the stock market. But it’s important to keep yourself from taking any abrupt action, Hill says.
“By leaving your retirement savings alone, you’re allowing it to grow and you’re allowing your money to make money on itself.”
Ideally, you should already have an investment policy statement in place that outlines how often you rebalance your portfolio, Blacklock says. This way you’ll know that on a regular cadence, say every six months, you’ll review the investments with your advisor to determine if you need to make any changes to your strategy.
If you don’t have this plan, now can be a good time to create one. Work with your financial advisor to assess your mix of stocks and bonds. That said, don’t try to rebalance on a faster scale than you’d initially planned for, Hill says, as you don’t want to overreact to market volatility. You want to keep a level head when protecting your 401(k) in a recession. In partnership with your advisor, keep a long-term perspective.
“Always, always, always work with your trusted financial advisor and make those decisions together,” Hill says.
Don’t let a crisis derail your long-term goals
Between job losses and uncertainty in the markets, it can be tempting to make rash decisions during a recession. But if you take a deep breath, assess your finances and reflect on your options, you can determine your next step with care.
For parents, that means finding a way to keep supporting your family while also prioritizing your long-term financial goals, including retirement. Protecting your retirement savings from a recession is the smart thing you can do, both for yourself and for your family.
Now that you know how to protect your 401(k) or other retirement savings in a recession, check out these top retirement savings mistakes to avoid.
1 “Millennial life: How young adulthood today compares with prior generations.” Pew Research Center, Washington, D.C. (January 30, 2019) https://www.pewresearch.org/social-trends/2019/02/14/millennial-life-how-young-adulthood-today-compares-with-prior-generations-2/
You May Be Eligible to Save Over $10K in an HSA in 2024 After Largest-Ever Contribution Limit Increase
Close thin
Facebook
Twitter
Google plus
Linked in
Reddit
Email
arrow-right-sm
arrow-right
Tap on the profile icon to edit your financial details.
People with health savings accounts (HSAs) got some good news this week when the IRS rolled out the largest contribution limit increases in history.
In 2024, an individual with self-only coverage can save up to $4,150 in an HSA, while a family can sock away up to $8,300. Catch-up contributions still allow people 55 and older to save an extra $1,000 per year, meaning some married couples will soon be allowed to save more than $10,000 in an HSA.
A financial advisor can help you plan for retirement, including your future healthcare costs. Find an advisor today.
HSAs are tax-advantaged savings vehicles that help people enrolled in high-deductible health plans (HDHPs) save for annual medical expenses. But unlike flexible spending accounts (FSAs), funds in an HSA can be carried over from year to year, making these accounts an important component of long-term financial plans.
Largest Increases on Record
Next year’s HSA contributions limit increases will be the largest on record since HSAs were first introduced in 2003. The IRS adjusts these limits each year to keep pace with inflation.
For individuals, the savings cap will rise 7.8% from $3,850 in 2023, while families will see their limit increase 7.1% from $7,750. A year ago the limits rose 5.5% and 6.2%, respectively. However, persistent inflation is pushing these caps even higher on Jan. 1, 2024.
HSA contribution limits for an individual with single, self-coverage:
2023: $3,850
2024: $4,150
HSA contribution limits for an individual with family coverage:
2023: $7,750
2024: $8,300
The changes will also affect what constitutes an HDHP. In 2024, health plans will qualify for HSAs if their deductibles are at least $1,600 for self-only coverage and $3,200 for family coverage.
Why HSA Contribution Limits Matter
Higher contribution limits not only mean that people can save more for qualified medical expenses, but they also provide an even larger potential tax break for HSA owners. Since contributions are tax-deductible, higher caps mean a person with an HSA will be able to reduce his taxable income by several hundred dollars more in 2024 than in 2023.
Of course, that’s not the only tax advantage of an HSA. Money that’s kept in this type of account also grows tax-free and can be withdrawn free of tax, provided it’s used to pay for qualified expenses.
And since HSA funds carry over each year, they’re a great way for pre-retirees to save up for the onerous healthcare expenses they may encounter in retirement.
A recent study from the Employee Benefit Research Institute found that despite the coverage offered by Medicare, retirees should prepare to pay significant out-of-pocket costs for their healthcare. These costs include a wide range of expenses, including insurance premiums, program deductibles and prescription drug treatments.
In fact, even with supplemental Medicare gap insurance, men will need an average of $166,000 in savings to pay for their healthcare needs in retirement. Since women have longer expected lifespans, that number is even higher: $197,000. Meanwhile, the average two-person household should anticipate needing $318,000, according to EBRI.
Bottom Line
With inflation remaining elevated, the IRS has increased the amount of money that individuals and families can save in their HSAs in 2024. The contribution limit increases are the largest on record. People with self-only coverage will be able to sock away $4,150 in 2024, while families will be permitted to save $8,300. The $1,000 catch-up contribution remains unchanged, meaning married couples can save $10,300 in an HSA in 2024.
Tips for Contributing to an HSA
Some HSAs allow you to invest your contributions in mutual funds and other financial products. Be sure to read our latest HSA investment guide to help you determine how you should invest your HSA funds. Our asset allocation calculator can also help you find an investment mix that suits your tolerance for risk.
A financial advisor can help you integrate your HSA savings into a comprehensive financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Patrick Villanova, CEPF®
Patrick Villanova is a writer for SmartAsset, covering a variety of personal finance topics, including retirement and investing. Before joining SmartAsset, Patrick worked as an editor at The Jersey Journal. His work has also appeared on NJ.com and in The Star-Ledger. Patrick is a graduate of the University of New Hampshire, where he studied English and developed his love of writing. In his free time, he enjoys hiking, trying out new recipes in the kitchen and watching his beloved New York sports teams. A New Jersey native, he currently lives in Jersey City.
[Note from editor: The “Mastermind Showcase” highlights companies and news from members of the GEM. Today’s showcase: Prisidio]
A cloud-based vault to securely store, organize, and share all life’s essential documents and information, Prisidio provides cybersecurity and data protection solutions that protect users’ sensitive data and digital assets. Its software is used to store birth certificates and IDs, wills, the location of important physical and digital spaces like safe deposit boxes, or a digital inventory of financial and sentimental valuables. This protected data can then be accessed by the vault owner, via mobile or web, or by those invited to access the specific items in the vault, like a family member, lawyer, or financial advisor. The vault owner can keep track of all activity occurring within their vault through instant mobile notifications or the vault’s action log.
What we like: A digital version of a safe deposit box, built for the mobile and cloud world we now live in. Real estate and finance documents are a critical piece of virtually every family estate, and Prisidio makes them findable and shareable among families and other trusted connections.
Long-term financial goals are an essential part of financial planning. They help you define your aspirations and create a roadmap for achieving them.
Long-term goals aren’t easy to achieve. But why?
Could it be that motivation wanes over time? Perhaps external circumstances change. Maybe it has to do with the feasibility of the goals.
Many people have trouble sticking to something over the course of a single year let alone several years or decades.
Perhaps that’s why long-term goals – like most financial goals – are so difficult to achieve.
How do we fight against whatever it is that holds us back from achieving these financial goals? Is it possible to win?
Yes. It is.
Today I’d like to share with you some ways you can achieve your long-term financial goals. I won’t claim it will be easy, but it will be worthwhile.
So whether you need to pay off debt, build an emergency fund, save for your kids’ college education, or invest for retirement, here are some ways you can make it hap’n, cap’n.
Why Long-Term Financial Goals Are Important
Long-term financial goals provide direction and motivation for your financial decisions. By defining your long-term goals, you will have a clear picture of what you want to achieve and what steps you need to take to get there. Setting long-term financial goals can help you:
Stay focused on your priorities: Setting long-term financial goals will help you prioritize your financial decisions and avoid getting distracted by short-term financial needs or impulses.
Achieve financial stability: Long-term financial goals can help you create a safety net, build wealth, and prepare for unexpected events such as medical emergencies or job loss.
Enjoy the benefits of compound interest: Investing in long-term goals, such as retirement or education, can help you take advantage of the power of compound interest and grow your wealth over time.
1. Capture your long-term goals in your to-do list.
Long-term goals of the financial sort are usually more like projects than individual tasks.
For example, if you want to pay off your debt, chances are that you don’t just have one credit card to pay off – you might have three credit cards, a vehicle loan, and a student loan to overcome (if not more).
“Pay off debt” would be the project. “Pay off Visa #1” would be the task.
The truth is that without writing down your projects and tasks within a task management system of some type, you’re much less likely to accomplish your long-term goals.
There’s just something about seeing your long-term goals on paper (or on a screen) that makes them real. The very act of writing them down is a type of commitment.
Give it a whirl. Write down your long-term financial goals and review them on a regular basis.
2. Don’t bury your long-term goals.
It’s not enough to write down your long-term financial goals. Additionally, you need to make them readily available to your eye.
One idea that I’ve found works well is to write down your goals on a whiteboard where you can’t help but see them. But that’s not for everybody.
The point is that you need to find a way to see your long-term goals in the context of all your other goals (namely, your short-term goals). If only your short-term, urgent goals are displayed for you to see, you’ll tend to focus on those instead of kicking butt on your long-term goals.
Don’t bury your long-term goals. They’re important too!
3. Dedicate certain days of the week to long-term goals.
One helpful tip I derived from Strategic Coach was to dedicate certain days of the week to certain goals. This has proved to be very helpful in my own life, and I believe it will in yours, too.
For example, you could dedicate a certain day of the week to managing your finances and brainstorming ways to improve your financial future. Perhaps you have a day off of work that would work best for you.
Now, I can hear you saying, “Oh Jeff, if I only had a day for such tasks – I’m way too busy with other stuff!” That’s fair.
But here’s the thing, you don’t just have to make this day about finances – you can make it about your other long-term goals too. Add in health, family, and other areas of responsibility. Consider this day (or these days) of the week to be all about bettering yourself and your life. Can’t you make time for that?
4. Prioritize your long-term goals properly.
When it comes to long-term financial goals, you need to properly prioritize them. There are some preliminary goals that should only take you less than a month, like setting up a budget and cutting expenses, but we’ll leave that for another article.
What are some common long-term financial goals and in which order should you complete them? Generally, I recommend you complete the following long-term financial goals in the order they are displayed below:
Build Your Emergency Fund
Think of your emergency fund as the foundation of your financial future. Without some liquid money, you’re going to be out of luck when financial disaster strikes. Believe me, they happen.
Your car engine might explode. Your kneecap might explode (ouch). Your water heater might explode. There are so many things that can explode . . . and it’s not easy to just walk away from those explosions while keeping your cool. It’s stressful!
But you know what would make those situations a little less stressful? You guessed it: an emergency fund baby!
Wipe Out Your Debt
Once you have your foundation in place, it’s time to knock out that debt. This can take several years or a few months – it depends on how much debt you have and how quickly you can shovel money at it.
Write down all of your debts and attack them one by one. It’s easier that way.
Start Investing for Retirement
Now it’s time to start investing for your latter years. Why? It’s possible that your earning potential can go down when you’re physically unable to work. Who knows, you might have a self-sustaining business upon reaching retirement age, but don’t count on it. Invest for the future!
Helping people retire well is what I do.
Start Saving for Other Long-Term Goals
This might include saving for your kids’ college education, purchasing a new vehicle, saving for a home renovation, or another goal that will take some time.
By prioritizing your long-term goals in the proper way, you can ensure that should you experience a slump in income, you aren’t wiped out due to a lack of financial planning.
5. Discover and focus on your motivations.
I’m convinced that one of the main reasons people don’t accomplish their long-term goals is because they really haven’t discovered their motivations.
For example, everyone knows it’s a good idea to pay off debt. It’s a financial goal that’s been embedded in our minds by countless financial advisors. But unless you discover your motivation for paying off debt, chances are you’ll give up before you achieve your goal.
In fact, if you’re paying off debt for the sake of paying off debt, you might as well give up now. You’re not going to be motivated enough to get the job done.
Instead, focus on some common motivations that can become your motivations. Here are some great reasons why people want to pay off debt:
To not have to pay interest on their purchases
To free up money for vacations
To free up money for investing for retirement
To not have to worry about those bills
To reduce the amount of stress in their lives
To free up the time it takes managing debt to focus on family
These are just a few of the motivations of others. What’s your motivation?
Assign a motivation for every long-term goal you have. Otherwise, you’re just trying to accomplish your long-term goals for the sake of accomplishing them – that’s not a real motivating factor if you ask me!
Long-Term Goal Examples
Long-term financial goals can take many forms, depending on your values, aspirations, and time horizon. Here are some examples of long-term financial goals in the SMART framework:
Example 1: Save for Retirement
Specific: Save $1 million by age 65 for retirement.
Measurable: Save $500 per month in a retirement account.
Achievable: Based on current income and expenses, it is feasible to save $500 per month for retirement.
Relevant: Retirement is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal by age 65.
Example 2: Pay off Debt
Specific: Pay off $30,000 in credit card debt.
Measurable: Pay $500 per month towards credit card debt.
Achievable: Based on current income and expenses, it is feasible to pay $500 per month towards credit card debt.
Relevant: Paying off debt is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal within 5 years.
Example 3: Invest in Education
Specific: Save $50,000 for a child’s college education.
Measurable: Save $200 per month in a 529 college savings plan.
Achievable: Based on current income and expenses, it is feasible to save $200 per month for college education.
Relevant: Investing in education is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal in 18 years.
Example 4: Buy a House
Specific: Save $100,000 for a down payment on a house.
Measurable: Save $1,000 per month in a high-yield savings account.
Achievable: Based on current income and expenses, it is feasible to save $1,000 per month for a down payment.
Relevant: Buying a house is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Achieve this goal in 5 years.
Example 5: Start a Business
Specific: Launch a profitable business in the next 5 years.
Measurable: Develop a business plan and secure funding within the next 12 months.
Achievable: Based on current skills and experience, it is feasible to develop a business plan and secure funding within the next 12 months.
Relevant: Starting a business is a long-term financial goal that aligns with personal values and aspirations.
Time-bound: Launch the business within the next 5 years.
Long-Term Goal
Specific
Measurable
Achievable
Relevant
Time-bound
Save for Retirement
Save $1 million by age 65 for retirement.
Save $500 per month in a retirement account.
Based on current income and expenses, it is feasible to save $500 per month for retirement.
Retirement is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal by age 65.
Pay off Debt
Pay off $30,000 in credit card debt.
Pay $500 per month towards credit card debt.
Based on current income and expenses, it is feasible to pay $500 per month towards credit card debt.
Paying off debt is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal within 5 years.
Invest in Education
Save $50,000 for a child’s college education.
Save $200 per month in a 529 college savings plan.
Based on current income and expenses, it is feasible to save $200 per month for college education.
Investing in education is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal in 18 years.
Buy a House
Save $100,000 for a down payment on a house.
Save $1,000 per month in a high-yield savings account.
Based on current income and expenses, it is feasible to save $1,000 per month for a down payment.
Buying a house is a long-term financial goal that aligns with personal values and aspirations.
Achieve this goal in 5 years.
Start a Business
Launch a profitable business in the next 5 years.
Develop a business plan and secure funding within the next 12 months.
Based on current skills and experience, it is feasible to develop a business plan and secure funding within the next 12 months.
Starting a business is a long-term financial goal that aligns with personal values and aspirations.
Launch the business within the next 5 years.
Need More Long-Term Goal Examples?
Knowing I’m not the only goal-setting freak that exists in this world, I asked fans from the Good Financial Cents Facebook page what their long-term goals (big shout to the Fincon community for contributing, too!).
Fincon Community Long-Term Goals
Here’s a great list of examples of long-term goals:
Bob Lotich at SeedTime.com says:
[I want] to provide a comfortable life for my family, to have enough cash to maintain a flexible lifestyle, and to use everything else to financially support charities and organizations that are making a huge impact on the world.
Ryan Guina at TheMilitaryWallet.com says:
[I want] to become financially independent. What this means to me: to have no consumer or mortgage debt and have enough resources in savings and investments to cover my everyday living expenses without relying upon income from my job. This will provide more freedom in pursuing activities based on fulfillment vs. the need to generate revenue.
Larry Ludwig at InvestorJunkie.com says:
[I want] to be financially free. I define it specifically as to accumulate $10,000,000 in investment assets that can generate at minimum 4% per year of income.
Teresa Mears at LivingOnTheCheap.com says:
[I want] to support myself, both now and in retirement, and enjoy life. What else is there?
Steve Chou at MyWifeQuitHerJob.com says:
[I want] to generate enough income so that I can spend more time with my family and be there for the kids. Growing up, my parents worked their butts off so I could go to a good school but I didn’t see them very often during the week. With my kids, I’m going to send them to a good college and always be present.
Grayson Bell at DebtRoundup.com says:
[I want to] build a business and a financial stockpile to allow my family and I to travel when and where we want to. I don’t want to be stuck due to a job or financial situation. This will require scaling my business and looking for more opportunities to expand my passive income streams.
Robert Farrington at TheCollegeInvestor.com says:
[I want] to generate enough passive income to replace my current income. This will require a long-term strategy of earning more money (through my salary and side hustles) and investing the excess. The goal, of course, is to retire early while still being able to provide the quality of life I want.
My Lifetime Goals
Long-term goals can be difficult to articulate but deserve to be written down. I previously shared my lifetime goals on this post. Looking them over I recognize I would make a few tweaks, but; for the most part, they are still align with what I want to achieve in life. Here’s a look:
1. Spiritual leader of my household. I want my kids to see me first as a God-loving father who puts his faith first before success. I want to continually love and support my wife, and do so in an Godly manner.
2. Live a long and filling life with my wife and family. Raise my kids with the philosophies of: working hard, but not sacrificing “work” for what you love; love first; and treat people with respect (Golden Rule)
3. Have several multiple-system driven businesses that produce >$100,000 a month of passive income.
4. Live in multiple countries (5+) for an extended period of time (minimum 3 weeks) with entire family
5. Inspire over 1,000,000 people to invest in themselves. This can be through traditional investing (Roth IRA, 401k), obtaining a higher degree or certification, or investing in a small business.
6. Be a successful entrepreneur and best-selling author of numerous works. I want to be recognized as as a hard worker who put his family and faith first.
The Bottom Line – Long-Term Financial Goals
Setting long-term financial goals is an important step towards achieving financial stability and building wealth. By defining your values, aspirations, and time horizon, you can create a roadmap that aligns with your priorities and guides your financial decisions.
Remember to monitor your progress, stay motivated, and seek professional advice when needed. With discipline and perseverance, you can achieve your long-term financial goals and secure your financial future.
Here’s your homework
I want you to implement at least one of these strategies for reaching your long-term goals over the next year. When the year is over, write me. Tell me how well the strategy worked out for you. I want you to put your heart and soul into one or more of these strategies.
Why? I want you to see success.
Make it hap’n, cap’n!
FAQs – Long-Term Financial Goals
How do I balance saving for long-term goals with short-term needs?
It’s important to strike a balance between saving for your long-term financial goals and meeting your short-term needs. You can achieve this by creating a budget that allocates some of your income towards both short-term and long-term goals.
This way, you can address your immediate financial needs while also making progress towards your long-term goals.
How can I stay motivated to achieve my long-term financial goals?
Staying motivated to achieve your long-term financial goals can be challenging, especially if your goals are several years away.
One way to stay motivated is to break your long-term goals into smaller, manageable milestones. Celebrate each milestone as you reach it, and use the progress you’ve made as motivation to keep going.
How do I know if I’m on track to achieve my long-term financial goals?
Regularly monitoring your progress towards your long-term financial goals is essential to staying on track.
You can use financial planning tools and software to track your progress and adjust your plan as needed. You can also work with a financial advisor or planner to evaluate your progress and make any necessary adjustments to your plan.
Can I adjust my long-term financial goals as my situation changes?
Yes, it’s important to be flexible and adjust your long-term financial goals as your situation changes. Life is unpredictable, and unexpected events can impact your financial situation. Review your financial plan regularly and adjust it as needed to ensure that it aligns with your current situation and goals.
Need some more long-term goals? Check out The Top 10 Good Financial Goals That Everyone Should Have. If you’re a baby boomer, check out 5 Financial Goals for Baby Boomers.