Retirement's Newest Challenge: Low Interest Rates
MAYBE THEY'VE LEARNED SOMETHING from watching their parents: 58% of today's 18- to 21-year-olds have already started saving up for the future, says the recently released Young Americans & Money Bank of America/USA Today Better Money Habits Report. Even better, more than a quarter of 22- to 26-year-olds have opened 401(k)s. That's the good news as we mark National Retirement Security Week.
With interest rates at historic lows, on the other hand, making that money go the distance is getting to be a challenge. "Those just starting out can look forward to rates slowly rising. But today's retirees are feeling the pinch of lower rates", says Karin Kimbrough, head of Macro and Economic Policy at Merrill Lynch Wealth Management. Watch "Are You Meeting Your Need for Investment Income" for some helpful suggestions.
For more retirement advice, tune in to our webcast, "Social Security, Medicare & More: Understanding Your Retirement Choices," on October 25 at 7 p.m. (ET). In addition to Kimbrough, panelists include Kirstin Hill, head of Personal Retirement Solutions at Bank of America Merrill Lynch, and financial journalist Philip Moeller, author of the recently released Get What's Yours for Medicare: Maximize Your Coverage, Minimize Your Costs and co-author of the best-selling Get What's Yours: The Secrets to Maxing Out Your Social Security. Merrill Lynch New England Division Executive Linda Houston moderates. Send us your toughest retirement questions—our panelists will address as many as they can.
Picking a College Major That Matters (and Pays)
HERE'S THE DEAL: YOU'RE A FRESHMAN or sophomore on campus, looking forward to exploring new skills and interests, and you're supposed to decide, right now, what you're going to do with the rest of your life. It's that high-stakes college quiz called, "Choosing a Major!" Ready or not, most colleges want you to select a main area of study.
Your choice will be easier if you answer a few basic questions first: What professions are most likely to have jobs waiting to be filled when you graduate? Will you be proud of that job? And will it pay a decent salary?
The following slides, which show the top 3 majors in each area, contain a surprise or two. For instance, why is there such a demand for operations research analysts? (Hint: think big data.) And have you ever considered a career as a cartographer? One thing the slides make clear: When it comes to job satisfaction, money isn't everything.
There's another concern at least as important as picking a major, and that's paying for it. For excellent tips on pulling off that trick, see Paying Off Student Loans and The Basics Q&A: Paying Off Grad School Debt.
Crowd-funding the Election: What You Need to Know When Giving Online
IN THIS ERA OF CROWD-FUNDING, when the ease of donating money online is transforming social giving, is it any wonder that online giving is disrupting the political landscape, too? Ever since 20001 or thereabouts, digital campaign solicitations have been slowly gaining favor over traditional methods of political fundraising such as phone and direct-mail appeals. Today, you can even give via text message or by swiping your card through a mobile payment reader.
Making a campaign contribution online is certainly convenient. Just bear in mind, if you donate: the same best practices you use when giving to any of your favorite causes—or purchasing anything online, for that matter—apply here as well. Below are three tips for staying safe, courtesy of the Bank of America–sponsored educational website BetterMoneyHabits.com.
1. Make sure there’s a lock icon in the browser address of any site before making a donation.
2. Never use an open Wi-Fi network, such as the free Internet access offered by your favorite coffee shop, when donating online. The information you share there is especially vulnerable to cyber thieves.
3. Take the time to create different passwords for all your accounts and don’t use passwords that are obvious, like your name or email address.
This advice is echoed by Craig Froelich, Bank of America’s chief information security officer. “Many of the recent cyber-attacks against online social platforms have disclosed usernames and passwords," he says. “That’s reinforced the need to use complex passwords, use different passwords on different sites, and regularly change your passwords."
One more word of advice: Watch out for those pesky auto-renewal settings. If you accidently click the box that authorizes an auto-renewal of the charge to your credit card, you may discover you’re becoming a major donor, sending $50 or $100 not once, but every month.
Should You Pay Your Kids Cash for Chores? Here's What the Experts Say.
IT'S COMMON PRACTICE TO EXPECT KIDS to perform household chores to earn their allowance. But what if your kids balk at making their beds and taking out the trash?
"A more effective approach might be to tell them they're getting an allowance just for being part of the family—and that chores are a family responsibility," suggests Stacy Allred, managing director, Merrill Lynch Wealth Management Center for Family Wealth Dynamics and Governance™, one of the panelists in our recent "Your Children and Money" webcast.
"In adulthood, household chores are simply matters of life," adds panelist Michael Liersch, head of behavioral finance and goals-based consulting, Merrill Lynch Wealth Management. "By tying the allowance directly to a set of chores, you risk creating the misperception that everyday responsibilities should be rewarded."
What many parents miss, note the panelists, is the opportunity to use the allowance as a teachable moment—an opportunity to pass along some valuable financial lessons.
"Probably the most important thing that you're going to transfer to your children isn't money—it's knowledge and information and experience around budgeting, saving, smart spending and investing, and really just what your values and attitudes about money are," says Dr. Meg Jay, psychologist and author of the best-selling "The Defining Decade: Why Your Twenties Matter—and How to Make the Most of Them Now."
To send the right message, Allred recommends asking your children to break down their allowance into three categories: save, spend and share. This approach opens the door to discussions around your family's values, such as the purpose of money and how best to use it. As children get older, says Allred, you can add investing to the list.
Encouraging your kids to set aside a certain amount each month toward future purchases—say a bike or a video game—also leads to more thoughtful spending. "Delayed gratification is something that we imagine people are born with," says Jay. "But it's something that we're all practicing all the time."
WATCH A REPLAY of this webcast to hear more practical suggestions for raising financially savvy kids. For additional information, check out Merrill Lynch's "Financial Education Handbook: Practical Ideas to Engage the Rising Generation."