Planning for Retirement, Part II

This week, we’ll return and discuss some retirement terms.

What are defined contribution plans? Defined contribution plans are employer-sponsored plans, where the employee contributes to their own individual account, with a possible percent match from the employer. That match may be contingent on the employee remaining at that job for a certain period of time. Examples of defined contribution plans include 401(k)s, 403(b)s, and 457(b)s.

What are defined benefit plans? Defined benefit plans are retirement plans where an employer will pay retired employees a defined amount based on a formula that often uses factors such as highest earning salaries and years of employment. Another term for defined benefit plans are pension plans.

What is portability? Portability is the ability to move funds from one employer-sponsored plan to another employer sponsored plan. Some plans can be kept with your former employer, many plans can be rolled into your new employee sponsored plan, and the majority of plans can be rolled into an IRA, which is an individual retirement contribution plan.

What are tax deferred contributions? Tax deferred contributions are not taxed until you withdraw those funds from that plan. Examples include traditional 401(k), 403(b), and IRA plans. Tax deferred is different than tax deductible – tax deductible lowers your taxable income reported to the IRS. An example of this would be charitable contributions – even if you don’t itemize, you can reduce your taxable income by up to $300 with a $300 donation to a non-profit.

What are tax exempt withdrawals? Tax exempt withdrawals are withdrawals from a retirement plan in which no taxes are due. An example of this would be a Roth 401(k), 403(b), or IRA plan. Roth retirement plans are funded by post-tax contributions, but have tax exempt withdrawals, while traditional retirement plans are funded with tax deferred contributions but have taxable withdrawals.

Next week, we’ll return and discuss the differences between 401(k)s, 403(b)s, 457(b)s and IRA plans.

Planning for Retirement, Part I

This week, we’ll discuss some questions and scenarios to get us thinking about saving for retirement!

Let’s start with a scenario.

Let’s say Aliyah saves $75 a month for retirement from age 18 to 28, then stops. If her retirement investments return 8%, she will have around $260,000 from just $9000 in contributions.

Now let’s say that Jason also saves $75 a month. However, he doesn’t start until age 28. He attempts to make up for this by savings all the way until age 65. Despite over $33,000 in contributions, close to four times as much as Aliyah, at 8% he will have around $200,000 in retirement savings, roughly $60,000 less than Aliyah.

This illustrates just how important saving early for retirement is in order to take advantage of cumulative growth.

Now let’s look at some data to see if people are saving for retirement early, like Aliyah in our scenario.

According to the 2016 Retirement Confidence Survey, by Employee Benefit Research Institute and Greenwald & Associates, while over 70% of employees age 35 and older are saving for retirement, only about half of employees between the ages of 25-34 have started, during the time period most beneficial for cumulative growth of retirement funds. Looking at more data from that survey, for those same employees ages 25-34 – less than 25% have at least $25,000 in savings and investments, and 60% have less than $10,000. In our earlier scenario, investing just $75 a month, and doing it for only ten years from age 18 to 28, Aliyah had over $25,000 in savings by age 35.

Part of this lack of savings may be a lack of planning. While the earlier years are so important for long-term retirement savings, the majority of young employees aren’t even thinking about it. Data from that same survey show that less than half of employees ages 44 and younger have begun figuring out how much money they’ll need to put aside to live comfortably in retirement. 

Over the next few weeks, we’ll discuss various terms, investment plans, how to calculate what you’ll need, and withdrawal strategies for retirement.

[Replay] Ten Tips for Managing your Private Well Water Supply – Part II

This week, we’ll wrap up our replayed post on ten tips for managing your private well water supply. Check out our post last week for the first five!

6. All water tests should be done by a certified lab. After you receive your results, compare them to the standards set for public systems by the EPA, which generally serves as good guidelines for private systems, and feel free to contact us if you have any questions!
7. Inspect your well annually for any cracks, holes, or corrosion, and ensure your well cap is secure. Every three years, or if you suspect a problem sooner, have your well inspected by a licensed well drilling contractor with a Water Well and Pump classification. For a list of contactors who provide well inspections, check out Virginia Household Water Quality Program’s Wellcheck initiative linked below!
8. Keep careful records of your well installation, maintenance, inspection, and all water tests.
9. If a well on your property is no longer in use, have it properly abandoned by a licensed well contractor. Wells that are left unsealed or improperly abandoned can serve as a direct pathway for surface water to enter the groundwater supply, causing contamination. Remember, ground water is a shared resource!
10. If you have a spring instead of a well, make sure the spring box is sealed to prevent contamination. Springs are very susceptible to contamination, so be sure to test your spring every year for coliform bacteria! Continuous treatment for bacteria is often required to ensure spring water is safe to drink.

If you’re interested in getting your well water tested, please check out the flyer below and contact Glenn Sturm (me!) at gjsturm@vt.edu or 804-815-9458!

[Replay] Ten Tips for Managing your Private Well Water Supply – Part I

Over the next two weeks, we’ll replay ten tips for managing your private well water supply. This comes from a publication by Virginia Cooperative Extension’s Virginia Household Water Quality Program – for more information check out the this link!

1. Make sure your well is properly constructed. Well casing should be 12” above the ground, with a sanitary, sealed well cap or secure concrete cover to prevent contamination from insects and surface water. Sanitary well caps for drilled wells often involve a two-piece cap with a rubber gasket, with vertical screws to hold the two pieces together and create a watertight seal. If you are unsure of your well construction, please check out Virginia Household Water Quality Program’s Wellcheck initiative linked here!

2. Be sure the ground slopes away from your well to prevent surface water from pooling around the casing, which can cause contamination and damage your system.

3. Ensure your well is at least 100 feet away from potential contamination sources, such as chemical storage, oil tanks, and septic tanks. If you have a septic tank, have it pumped regularly.

4. Keep the area around your well clean and accessible. Make sure the area is free of debris, paint, motor oil, pesticides and fertilizers. Do not dump waste near your well or near sinkholes, as this may contaminate your water supply.

5. Have your water tested once a year for total coliform bacteria, which will give an indication whether there is a likelihood of more dangerous bacteria present, like E. coli, that could potentially cause illness. If your total coliform and E. coli tests are done separately, consider doing the E. coli test if you have a positive total coliform test. Also, every three years, test for pH, total dissolved solids (TDS), nitrate, and other contaminants of local concern.

If you’re interested in getting your well water tested, please check out the flyer below and contact Glenn Sturm (me!) at gjsturm@vt.edu or 804-815-9458!

The When, How, and What’s of Healthy Eating

This week, we’ll discuss the when, the how, and the what for eating healthy!

When should you eat?

In order to better control the amount you eat and avoid becoming too hungry between meals, the typical suggestion is to eat a meal roughly every 4-6 hours when you’re awake. People who skip meals or go long periods between meals will not only get hungry, but often crave and snack on high fat, high sodium, and/or higher sugar foods. Avoiding skipping breakfast is particularly important, with numerous studies linking skipping breakfast to a higher risk of obesity – losing the opportunity for a filling, nutrient-packed breakfast, and often replacing it with unhealthy snacking throughout the morning. If you do choose to snack, try and have healthy snacks available, like fresh fruits and vegetables or yogurt, and plan on set times for snacking to avoid mindlessly grazing the entire day.

How should you eat?

A number of studies point to not only portion sizes increasing over time, but when we’re presented with larger portions, we tend to keep eating even if we’re no longer hungry! To counter this, serve smaller portions on smaller plates and give yourself some time to see if you’re still hungry before potentially getting a second serving. Additionally, research has pointed to a connection between slower eating and lower calorie intake, increased feeling of fullness, less frequent snacking, and interestingly enough, more vivid memory and enjoyability of meals. To slow down your eating, take smaller bites and chew thoroughly. Put down your fork or spoon between bites, frequently taking a sip of water before picking it up again – which will also help with hydration!

What should you eat?

This is where the USDA’s MyPlate comes in. Based on recommendations from the US Dietary Guidelines, MyPlate suggests that half of your plate or meals should be non-starchy fruits and vegetables, while the other half makes up proteins and grains, with at least half of your grains being whole grains, and the majority of your proteins being lean meat or plant-based proteins to avoid consuming too much saturated fat. Additionally, be sure to get regular servings of low or non-fat dairy, and if you cannot or choose not to consume dairy, be sure to find an adequate source of calcium as a replacement. Try to avoid too much of the high sodium foods, and limit the consumption of sugary drinks that add empty calories.

That concludes our discussion, comment below if you have any questions or suggestions for future topics!