Considering groceries are one of the largest discretionary expenses for the average consumer, and that the couponing craze is still going strong, it comes as no surprise that new grocery and coupon apps regularly launch. In fact, you can choose from over 1,200 varieties in the Apple store right now.
As a single twenty-something with an always-changing schedule, I’m horrible at grocery shopping. With no plan to adhere to, and little motivation to cook for one, I either waste money on groceries that spoil, or spend too much of it on dining out. While I’m keeping myself full each week, I can’t say the same for my wallet. That’s why I decided to take a look at one of the newer grocery savings apps – Favado by Savings.com.
Favado aggregates all of the ongoing sales in your nearby grocery and drug stores. You can either plug in your zip code or manually search for a store, and if it’s in the app’s database, you’ll be presented with a list of the store’s current sales. In addition to the search component, you can create shopping lists derived from what’s on sale, “heart” products as your favorites and even be notified when those flagged favorites are on sale in the future.
I downloaded the free app to my iPhone (it’s also available for Android) and searched for the nearby Favado-friendly stores. My local Walgreens made the list.
When I took Favado for a spin in my Walgreens shopping cart, I was pleased to see consistency between what the app said was on sale, and what was actually on sale in the store. One of my go-to cleaning products, Clorox Wipes (originally $2.99), was on sale for $2.50 (two for $5). For my new bad habit, diet soda, the app had a special of three Pepsi 12-packs for $12 (originally $4.99 each) correctly listed as on sale for $4 each.
For extra savings, the app also has a coupon feature that shows you which coupons are available for your sale items. But as I pulled it up in the cereal aisle, I was disappointed to learn that the coupons are print-only. If you’re a planner when it comes to groceries – unlike me – then perhaps Favado’s coupon feature will be useful for you. But it’s a bust if you’re already out shopping. The more time I spent with Favado, the more I realized I’m not the type of shopper who’s going to get the most out of this app.
“We built it so that there are different kinds of people, there are the super-couponers, who want to do all of the work, find out what’s on sale, match up a coupon to it and only buy what’s on sale…but, not everybody wants to go through all of that,” said Loren Bendel, CEO of Savings.com. “Other people might just want to show up at the store and see what’s on sale right now, and make sure you don’t miss a really great sale.”
While Favado claims its “secret sauce” to be its ability to gather all of the sales in nearby stores, allowing you to compare store prices against each other, I think the app is particularly interesting because of an old-school meets new-school tactic. Behind the app are 80 plus grocery bloggers scouring the circulars and aisles for the best prices and “secret sales.”
“By secret I mean it’s not advertised,” Bendel said. “When you get your circular from a grocery store that shows all of the sales, that’s only about 20 percent of what’s on sale in that store – the rest is not advertised and people don’t know about that unless someone is walking the aisles and finding those sales.”
Knowing that actual people are walking up and down the aisles to get the information – not just robots extracting it from the Internet – is rather comforting.
Overall the app is easy to use, and I can see how it could save a certain kind of shopper both time and money in the aisles. The key phrase here is certain kind of shopper. But though I haven’t mastered the art of planning ahead when it comes to groceries (yet), this app did spark my interest in being a more proactive shopper. If you’re working toward the same goal — or you already have meal planning down to a science — this free app is worth a try.
This week we welcome Dennis Miller, the author of Reboot Retirement and a RetireMentor at MarketWatch. He’s here to share a few solutions to a growing problem: As we start to have kids at a later age, our ability to save for retirement is pushed off and diminished. How do you bounce back? Read on below.
A major generational shift has taken place, and it’s having a huge impact on when and how we save and plan for retirement. Most older baby boomers had children in their 20s and empty nests by age 50. Between the ages of 50 or so and 65, we made a big retirement savings push.
I don’t need expensive research to confirm what I see with my own eyes: Couples are marrying and having children later in life. My oldest son just turned 50, and his two children are 14 and 12. He’s right in line with his peer group.
So let’s imagine a couple whose nest is finally empty at age 62. After that, it takes them three years to become debt-free, leaving just three years to stockpile money for retirement, if they retire at 68. This couple could save 100% of their salaries and still fall short.
So what can younger baby boomers do?
Start immediately. Younger boomers have to run a different race, but they still need to start now, regardless of other drains on their resources.
Make wealth accumulation a top priority. Every time you get a raise, most of it should go to paying off debt or to your 401(k) or IRA. If you’re not contributing the maximum amount to tax-preferred retirement accounts, start now.
Avoid the McMansion trap. Up until 2008, folks were buying the biggest house they could afford, because real estate was an “investment.” Houses weren’t just homes, they were moneymakers—or so we thought.
My son and his wife just bought a new house. They really liked another model that cost $25,000 more, but it would have been too big for them in 10 years or so. They made the right decision. They saved the $25,000 as well as the interest on a higher mortgage, since they had already made the maximum down payment they could afford.
Exercise common sense. I’ve made this mistake more than once: I’d get serious about diet and exercise and go way overboard, cutting my caloric intake in half and exercising to exhaustion. By the third day, my commitment would vanish. Had I paced myself, I would have been a lot more successful.
The same principle holds true for paying off debt and saving. For most folks, the best way to start is by withholding incremental amounts from their paychecks. Tackle debt the same way: cut up your credit cards and start paying a little extra on your regular payments.
Learn about investing now. It is easy to think, “Why do I need to learn about investing when I don’t have any money to invest?” I found that the more I read about investing, the more motivated I became to have money to invest. The thought of my money working for me instead of the other way around sounded quite appealing. After all, isn’t the goal to accumulate enough money and invest it wisely so we don’t need to work at all?
About Dennis: Dennis Miller is the author of Retirement Reboot, Senior Editor of Money Forever at www.millersmoney.com and a popular MarketWatch columnist. Miller’s Money is a research service with the goal of helping people reach their goal of a comfortable retirement.
When Dan Otter from 403bwise.com reached out about contributing a guest post to the site, we were thrilled — as he mentions below, 403(b) plans aren’t as widely known — or understood — as 401(k) or IRA plans, and even those who have them may lack a clear understanding of how they work. Dan was able to break down some complicated information in a way we can all understand, and bring to light a warning about fees that is important for all investors. Read on for more.
Imagine you are at a retirement plan party. Not a retirement party — there are no gold watches being given out here. But a party attended by the various retirement plans. There’s the famous 401(k) and it’s quirky but increasingly popular sibling the Roth 401(k). There’s the modest IRA, with some of its cousins: the Roth IRA, the SEP IRA, and the Rollover IRA. Even the granddaddy of them all, Social Security, is in attendance. Then there’s this other plan. It’s kind of off by itself. You can’t quite place its name. Is it called the 401b? Or, wait, isn’t it called a tax sheltered something?
Close. The plan is actually called the 403(b). But it is commonly, and erroneously, referred to as a TSA or Tax Sheltered Annuity. Created in 1958, it predates the more famous 401(k) by twenty years, yet it remains a bit of a mystery. Why? Probably because the 403(b) covers a smaller subset of employees working in generally less glamorous positions: K-12 employees, college and university employees, pubic health care workers, and not-for-profit workers. Plus, public school teachers and administrators typically have pension plans, so for them the 403(b) is a supplemental plan.
Here’s what you need to know to make small talk with and about the 403(b):
The 403(b) works much like a 401(k):
- Contributions are pre-tax
- For 2013, participants may contribute up to $17,500 in regular contributions
- Those who are age 50 at anytime during 2013 may contribute an additional $5,500
- Able to invest directly into mutual funds
- Participants cannot invest directly in individual stocks
- Most plans offer annuity products (fixed and variable)
- Not all plans offer direct investment in mutual fund products (instead they must be purchased as part of a variable annuity)
- Most plans have multiple vendors which can lead to higher costs (vendors often employ a commission-based sales force in an effort to stand out from competition — can you imagine sales people from different financial companies pitching products in the lunchroom of Apple or GE?
- Many of the variable products sold have onerous surrender charges, some lasting as long as 15 years
Why so similar yet so different? Two reasons:
- When the 403(b) began in 1958, participants could only invest in annuity products. This is why the plan is often referred to as a TSA, or Tax Sheltered Annuity. This is a misnomer, of course, and gives the false impression that participants can only invest in annuity products. The mutual fund option was added way back in 1974.
- Public sector 403(b) plans (like those for public school teachers) fall outside the rules of ERISA (Employee Retirement Income Security Act), meaning there is much less employer oversight. Furthermore, unlike the ERISA-based 401(k), there are no fee disclosure rules for public 403(b) plans. This can leave participants in the dark about fees.
Retirement plan researcher The Spectrem Group reports that of the approximately $882 billion in 403(b) plans, the majority of the money sits in annuity products (approximately 46% in fixed annuities; 31% in variable annuities; and just 23% in mutual funds). Why should this matter? Most fixed and variable annuities are sold through commission-based sales agents. While variable annuities do offer access to mutual funds, they average about 2.25% in fees. This contrasts with index mutual funds, which can cost as little as 0.10%. This stark fee disparity can have a huge impact on return. Consider the fate of three hypothetical investors. Each contributes $250 a month over 35 years. Each realizes an 8% average annual return. However, each contributes to a different product. The result?
- The hypothetical Variable Annuity investor pays 2.25% in fees and accumulates $336,320 in savings.
- The hypothetical Mutual Fund investor pays 1.40% in fees and accumulates $409,585 in savings.
- The hypothetical Index Mutual Fund investor pays 0.18% in fees and accumulates $548,750 in savings.
It doesn’t take a math teacher to realize it is better to accumulate more savings.
If you find yourself stuck in a bad 403(b) plan, lobby your employer. Show them this and other fee impact information. Point out that employers are also participants. Point out that it is in their interest to have the best possible plan. Rally co-workers to your side. It may take time, but change can happen. Now, if you find yourself stuck at a party with retirement plans, you need to get a new group of friends.
About Dan: Dan Otter is a writer and teacher who operates the 403(b) education and advocacy website 403bwise.com. In 2012 Money Magazine named him a Money Hero for his efforts to improve the financial well being of others.
My 54-year-old husband has a 401(k) account with his previous company with approximately $300,000. It has been doing well, so should he leave it there or transfer it? For tax purposes, should we buy Roth IRAs in each of our names?
Hi Joanne, your husband probably wants to roll that 401(k) over to an IRA, which will give him more control over the money and possibly better — or at least more — investment options. He could roll it into a Roth IRA, but keep in mind you’ll have to pay taxes on any pre-tax assets you roll over, which is likely that entire $300,000 balance. I’d advise that you only do that if you have the money to pay the taxes out-of-pocket — in other words, don’t use funds from the 401(k) to cover the taxes. Once converted, you can pull that money out in retirement tax free, which is a nice perk.
The other option? You could roll the 401(k) into an IRA, then each open a Roth and make contributions there. If you don’t have income of your own, you can contribute as a spouse with your husband’s income. The 2013 contribution limits are $5,500 per person, but you can contribute an extra $1,000 if you are over age 50. That means collectively you could put $13,000 a year into Roth accounts, assuming you are both over age 50. It won’t give you any tax savings now — a Roth’s contributions are made with after tax dollars, so you don’t get a tax deduction — but again, you can pull the funds out in retirement tax free, which can be even better.
You don’t mention if your husband has a 401(k) at his new company, but if he does, he should contribute enough to that account to grab any matching dollars, then contribute to the Roth, then go back to the 401(k) with anything else.
At 54, I am basically starting over financially. Since 2010 I have paid off $47,000 in credit card debt. I received my house in a divorce settlement in August 2012. It’s $60,000 underwater. I have $67,000 in a 401(k). I have less than $1,000 in cash savings. I have a good, secure job that pays well. I can currently pay all my bills and have disposable income available to help me rebuild. My first goal: Build up an emergency reserve fund of $20,000. Where do I put the money so that it is “available” but not so “available” for an emergency?
Good for you for paying off all that debt! And I agree that an emergency fund should be your next goal, particularly because it sounds like you are single now and living on one income — you need a safety net in case something goes wrong.
As for where to stash that emergency fund, the point is that this money is available to you, so you can access it if you need it, without penalty. That means retirement vehicles and other accounts that lock up your savings, like CDs, are out. You also want to preserve principal here, not chase yield, so don’t worry too much about interest rates.
That said, I think an online bank is a good place to toe the line. You’ll earn some interest — around 1%, which is more than you’re likely to find off-line — and your savings will be FDIC insured. But you’ll also have a few barriers to getting at that money. Most of these accounts don’t come with a debit card, so you’ll have to make a transfer to your checking account and that won’t happen by the time the pizza delivery guy shows up at your door — especially if you don’t house your checking account at the same online bank. This, by the way, is Money Rule #11: If you can’t see it and you can’t touch it, you won’t spend it.
And of course, the most important thing about an emergency fund is that it is there when you really need it, so an online bank will keep that cash liquid so you won’t have to pay a penalty if you need to make an early withdrawal.
This week we welcome Steven Lockshin, a frequent source in Jean’s reporting and the author of a new book, Get Wise to Your Advisor: How to Reach Your Investment Goals Without Getting Ripped Off. We receive a lot of questions about how to find a financial planner or investment advisor you can trust, so I know Steven’s advice will be helpful.
Investing is much easier than many investors fear it may be. However, like dieting, where we often may know what to eat but do not have the discipline to eat properly; investors often get carried away and make less than optimal decisions. And, with so many different ways to access investments — from stocks to bonds to ETFs, mutual funds, and a myriad of packaged combinations of these vehicles — it’s no wonder many investors hire an advisor or broker to help them sort through these decisions.
You can imagine how important it is to choose the right advisor, but that decision may prove equally as challenging as figuring out what to do on your own. There are almost as many choices in types of advisors as there are types of investments. There are brokers, insurance salesmen who sell investments, independent advisors (Registered Investment Advisors), banks, financial planners, and the list goes on. So, how do you find an individual or company to help you sort through this maze and avoid being sold a bill of goods from a seasoned salesperson, rather than a qualified advisor?
You Don’t Know What You Don’t Know. With so many different types of products and difficult to understand fees, simplicity is often the key. Be aware that complexity breeds risk for you. Simple solutions, including target date or asset allocation funds, do much of the work for you and without emotion. There are also online solutions like Betterment.com or Wealthfront.com that automate investing and savings for you at a fraction of the cost of retail advisors – and do it quite well!
Find a Fiduciary. The word “fiduciary” may not mean a lot to most investors, but it is an essential term that you should rely upon. In simple terms it means find an advisor who:
- Has no economic conflicts of interest. You can find this out by asking one simple question, “Do you make commissions on my account or do you make more by selling me one solution/product over another solution/product?” If the answer is yes, you need to ask additional questions or consider finding someone who can answer this question with a firm “no.” Chapter 8 of Get Wise to Your Advisor has an entire checklist of questions for your current or future advisor – with an answer key!
- Has the skills and qualifications to serve your needs. Check their history through the FINRA or the SEC website and ask questions to understand their level of education and experience in the financial services industry. You’ll be surprised to know that there are almost zero education requirements to become a financial advisor.
Understand Your Costs and Don’t Over-Pay. Good financial advice can be had for as little as 0.15% (that’s $150 per $100,000 invested) per year of your assets under advisement and shouldn’t exceed 1.0%. Make sure you understand what you’re paying. Trust, but verify. The industry is riddled with conflicts of interest, buried fees, and unnecessary complexity. However, by asking a few questions and doing just a bit of homework, you can find a true fiduciary advisor who will take care of your savings and investing needs while you take care of your family and your career.
About Steven: Steven D. Lockshin is the founder and former CEO of Convergent Wealth Advisors and author of Get Wise to Your Advisor — his effort to educate consumers on how to identify a proper advisor. Lockshin advises some of the world’s wealthiest families, professional athletes, and Hollywood “A-listers.” He has been ranked repeatedly as one of the top advisors in the nation by Barron’s magazine. Lockshin is an advocate for consumers when it comes to affording them the highest possible standard of care from investment brokers and advisors.
My husband will have a pension and an annuity through his work for retirement, but we also opened a Roth IRA for him about two years ago. I have a Traditional IRA. We currently only have the ability to put $5,000 in a year. Does it make sense to place that $5,000 in just his Roth IRA given the tax ramifications at retirement age or continue to split the $5,000 between the two? We are currently in the 25% tax bracket. My traditional IRA is valued at about $30,000 and his is near $13,000.
Just to recap, here’s the difference: You contribute after-tax dollars to both accounts. With a Traditional IRA, you may receive a tax deduction on your contributions, but you are taxed when you pull them out in retirement. With a Roth, there’s no tax deduction today — but when you tap the account in retirement, you tap it tax-free, meaning your earnings are completely untaxed. There are other differences, aside from taxes, that are important to note, particularly as you near retirement: A Traditional IRA means required minimum distributions at age 70 ½. You may leave the money in a Roth IRA untouched for as long as you like, making it a good way to pass an inheritance if that is your goal.
So the question now is whether you want to pay taxes today, or tomorrow — and whether making a required distribution at age 70 1/2 matters to you. If the required distributions aren’t an issue — you know you’re going to need this money in retirement — then you can look squarely at the tax issue: Do you think your tax rate is lower now than it will be in retirement, or higher? If it’s lower, that argues for paying taxes on the money now, through a Roth. If it’s higher, you may want to defer taxes as long as possible and go with the Traditional IRA. Unless you strongly know differently, the Roth is usually a fantastic deal. And if you don’t think you’ll need the money in retirement because of that pension and annuity, it’s a good idea to choose a vehicle that won’t require distributions.
Should you invest in your 401(k) if your company will match? I asked the same question to Al Roker and Willie Geist this morning on TODAY. Check out the video below to see the right answer, and even more information on making the most of your 401(k).
It’s no secret that the cost of college is getting pricier and pricier; near-daily headlines about the increased burden of student loan debt and skyrocketing tuition clutter our news feeds and invade dinnertime conversations. What is more of a mystery to most Americans is what to do about this cost: recent surveys reveal that just 17 percent of families used a 529 plan to pay for college in 2013, and less than one-third even know what a 529 plan is. However, a growing number of people believe these tax-advantaged investment accounts — offered by each state and specifically designated for higher education costs — should not just be less of a secret, but open to the kind of crowdfunding that helps pay for things like Hollywood movies and new technology ventures.
“Don’t shortchange what $50 to $60 per month from a handful of people can do [for your college savings],” said Marcos Cordero, founder of Gradsave.com. It’s a site that lets friends and relatives make contributions to a child’s college savings account. “If you save $100 per month, it’s $42,000 when the kid is 18. A grandma to put in $25, an uncle to put in $50, [plus] your own $100, that makes a big difference.”
Cordero founded Gradsave in January of 2012, after being asked to be a godfather and realizing that there was no easy way to donate to his new goddaughter’s fledgling college savings account. Through Gradsave, he’s trying to simplify the process: after choosing a 529 plan, parents can go to Gradsave, create a profile, and link it to that 529 plan. Then, they can share the link with their friends and relatives, and all the interested donors need to do is follow the link. They don’t need the newborn’s social security number or any sensitive information, and there is no fee to contribute money to a child’s account — in the interest of building his user base, Cordero said Gradsave went fee-free about a month ago.
Gradsave is not the only site of its kind; sites like FiPath, GiveCollege, Gift of College and SallieMae’s Ugift program all allow interested friends and relatives to donate to a child’s college savings plan on either a one-time or recurring basis. Some, however, come with a fee, so it’s important to read the fine print on each site to determine which one is right for you.
“Know the cost,” cautioned Mike Fitzgerald, chair of the College Savings Plan Network. “What are they taking out for their services?”
Fitzgerald said that if using a third-party crowdfunding service like GiveCollege (which does have a fee depending on the size of the gift) gives you pause, there’s nothing wrong with contributing to a newborn’s college savings account the old-fashioned way.
“Contact the 529 plan itself,” he said. “It will be the identity protected, and it will be no cost. I know of no state that charges anything for it.”
Regardless of the means of distribution — old fashioned checks, contacting the 529 plan itself, or using an online college registry like Gradsave — what Cordero and Fitzgerald both agree on is the importance of letting friends and relatives help save for the cost of college, and that if you have a newborn (or even not so newborn), to not be shy about asking for college savings donations rather than teddy bears and onesies.
“Parents should be completely comfortable in letting their friends and family know that there is a college savings register for their kids. People gave savings bonds [years ago]… it’s always been there,” Cordero said. “It takes a village to raise a child. Now, it takes a village from a financial perspective.”
This morning on Today, I sat down with two couples on different ends of the retirement spectrum: one couple, in their 30′s, have not started saving. The other couple, in their 70′s, are finally both retired — but admit they wish they had started saving a bit earlier. To see what I said to both couples about jumpstarting their savings and making their money last, check out the video clip below.