Hopefully, you'll live a nice, long life after you hit 65. But those social security checks from the government aren't going to be enough to live off of (and let's face it, social security probably won't even be around by the time we hit retirement).
So how much should you save? I'd say the golden number for how much to save is anywhere from 15-20% of your total income, the higher the better (at least, when you're young). Also, if you work at a job that gives you a pension after you retire (like a government job), then you don't have to save as much. You should consider this when choosing your first job.
Monday, April 25, 2016
When to Start Saving for Retirement
There are a lot of misconceptions about saving for retirement. One of them is that you start saving for retirement when you're around middle age, and you're salary is high (or at least, higher than when you started working). But this is not the case.
Through my work, I have come to learn that the opposite is true: you need to start saving NOW. When you've just started working, you should have a strict budget; instead of buying the new PlayStation or going on that trip with all your friends, you should save that money for retirement. When you're young, you don't have kids to pay for or, and you may not even have a mortgage or a car loan yet. This is when you need to start saving.
I know it's exciting to have your first professional job, now you have money and can buy the things you want, but what you really need is to save, save, save. Your future self will thank you. Because once you hit the age where you want to get married and have kids, you can cut back on the saving, because the dividend and interest money you get off the money you saved when you were young will make it so you don't have to save as much in the future.
Bottom line, SAVE NOW! This is something you can't put off.
Through my work, I have come to learn that the opposite is true: you need to start saving NOW. When you've just started working, you should have a strict budget; instead of buying the new PlayStation or going on that trip with all your friends, you should save that money for retirement. When you're young, you don't have kids to pay for or, and you may not even have a mortgage or a car loan yet. This is when you need to start saving.
I know it's exciting to have your first professional job, now you have money and can buy the things you want, but what you really need is to save, save, save. Your future self will thank you. Because once you hit the age where you want to get married and have kids, you can cut back on the saving, because the dividend and interest money you get off the money you saved when you were young will make it so you don't have to save as much in the future.
Bottom line, SAVE NOW! This is something you can't put off.
Sunday, April 24, 2016
Online Statements
Some of our statements we get online. While it would seem like it would be much easier to do things online, it is actually a huge pain.
Because of all the security on these sites, in order to access the online statements, we have to have an account set up for us. To get this account, we have to ask the plan administrator to ask the statements company, Like Morgan Stanley, to set it up. All this can take days to set up, which means we have to put work for that plan aside for a while.
Once we have an account, a password must then be created for us. The company gives the password to the plan administrator, then the administrator gives the password to us. However, these passwords expire within a few hours of being created if they are not used to log in. The first 3 times we got passwords, too much time must have passed, because we were unable to log in with it. By the time we finally got the password to work, we hours had passed.
And when we finally did log in, there was a SECURITY QUESTION! So we had to email the plan administrator to find out what town she was born in so we could finally access these plans and get going with the work we had to do.
All in all, I much prefer having physical statements to online statements. It takes a long time to sort them all, but it's much less frustrating than dealing with all the excess security. Sorry trees. You lose this round.
Because of all the security on these sites, in order to access the online statements, we have to have an account set up for us. To get this account, we have to ask the plan administrator to ask the statements company, Like Morgan Stanley, to set it up. All this can take days to set up, which means we have to put work for that plan aside for a while.
Once we have an account, a password must then be created for us. The company gives the password to the plan administrator, then the administrator gives the password to us. However, these passwords expire within a few hours of being created if they are not used to log in. The first 3 times we got passwords, too much time must have passed, because we were unable to log in with it. By the time we finally got the password to work, we hours had passed.
And when we finally did log in, there was a SECURITY QUESTION! So we had to email the plan administrator to find out what town she was born in so we could finally access these plans and get going with the work we had to do.
All in all, I much prefer having physical statements to online statements. It takes a long time to sort them all, but it's much less frustrating than dealing with all the excess security. Sorry trees. You lose this round.
What I'm Currently Doing
This month, we just got 3 huge bins of account statements. I'm opening them and sorting them to DC and DB plans. DB goes upstairs and I don't deal with them. As for DC plans, I alphabetize them and file them away in the file cabinet, where we use them later for our beloved excel documents.
Form 5500
The IRS Form 5500 is for reporting a retirement plan's financial condition, investments and operations. This is so the government can make sure that nothing iffy is going on with the plan. (for example, there was a series of unusually large deposits into an account, suggesting potentially illegal activity). It is filed annually, depending on a date set by the plan.
The main part of the Form 5500 is two pages long and requests certain information about the plan, including its name, the date it first became effective, plan sponsor information, information about the plan administrator, a breakout of the number of participants in the plan at the end of the plan year, how the plan is funded or benefits are provided, the schedules that are attached to the Form, and specific characteristics of the plan (for example, if it provides matching contributions).
The main part of the Form 5500 is two pages long and requests certain information about the plan, including its name, the date it first became effective, plan sponsor information, information about the plan administrator, a breakout of the number of participants in the plan at the end of the plan year, how the plan is funded or benefits are provided, the schedules that are attached to the Form, and specific characteristics of the plan (for example, if it provides matching contributions).
Depending on how big the plan is, we either file a 5500 short form (for plans with 100 or less participants) or a 5500-EZ form (for plans with greater than 100 participants). Here is an example of a form:
Monday, April 18, 2016
Everything Hangs In The Balance
One of the most annoying things about accounting is having to make sure everything balances. Whether it's $50,000 or a few cents, it all has to be accounted for.
While entering data from my spreadsheets into other spreadsheets, I encountered this problem: there was an entire 12 cents missing. 12 whole cents! It might not seem important, but if you're being paid to keep track of someone's money, you better be keeping track of it. It took me over an hour to figure out where this 12 cents was and why it wasn't balancing out. I had to re-check all the numbers I entered into the spreadsheet, which is difficult when you have to keep switching between tabs (which is why most of the people I work with have 2 screens).
Eventually I was able to find the 12 cents: there was a plan for an employee within the company that was with a different financial institution, so his account wasn't in my first spreadsheet with all the account data, but it was already accounted for in the balance sheet. This account earned, wait for it, a whopping 12 cents in dividends the entire year! This just goes to show how time consuming it can be to account for money that really doesn't even matter and nobody cares about (sorry penny, but let's face it, all you're good for is scraping the silver stuff off a lottery ticket).
While entering data from my spreadsheets into other spreadsheets, I encountered this problem: there was an entire 12 cents missing. 12 whole cents! It might not seem important, but if you're being paid to keep track of someone's money, you better be keeping track of it. It took me over an hour to figure out where this 12 cents was and why it wasn't balancing out. I had to re-check all the numbers I entered into the spreadsheet, which is difficult when you have to keep switching between tabs (which is why most of the people I work with have 2 screens).
Eventually I was able to find the 12 cents: there was a plan for an employee within the company that was with a different financial institution, so his account wasn't in my first spreadsheet with all the account data, but it was already accounted for in the balance sheet. This account earned, wait for it, a whopping 12 cents in dividends the entire year! This just goes to show how time consuming it can be to account for money that really doesn't even matter and nobody cares about (sorry penny, but let's face it, all you're good for is scraping the silver stuff off a lottery ticket).
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