I’ve heard you tell people that having $90,000 to $100,000 saved up for retirement isn’t enough. That’s what I’ve got set aside right now, and I’m pretty sure it’s all I’ll ever need. Why do you think everyone should have a million or two saved up?
The amount you’re talking about isn’t enough to retire on with any kind of dignity, and here’s why. If you make 10 percent off your money it means you’re living on just $10,000 a year. That’s below the poverty level.
Don’t misunderstand my message. I’m not about being greedy, and money is not the key to happiness. Money is good for three things — personal security, helping others, and it’s good for fun. You need to do some of all three.
What I AM about is changing my family tree. With money we can leave behind the training to have good money in good people’s hands, and that can have a huge positive impact on this culture. I want good people to have big piles of money in order to do good things.
Now, I want you to understand something else. I don’t want to leave my kids in a situation where they have lots of money and no sense of responsibility. I want to train them to bust loose with this big pile of cash that I’ll leave them, and not only have an impact three generations down the line in our own family tree, but to impact the whole community in a fabulous way.
An older friend of ours is going through a bad time right now, because he had a lengthy and expensive hospital stay and no insurance. Is it even possible to retire with no health insurance and be OK?
It’s possible, but it’s very tough. You’re taking a huge risk if you allow yourself to be in that situation.
Medical bills are the No. 1 cause of bankruptcy in America. The second biggest cause is credit cards. If you don’t have an emergency fund or health insurance, then you’re a moving target. Murphy WILL hunt you down and eat you out of house and home.
Health insurance is something I strongly advise having, Karen, because it’s a basic part of any sound financial plan. You need it, because if you don’t have it you run the risk of having to crack open and scramble your nest egg if serious health issues arise.
In your opinion what are the advantages and disadvantages of pre-paid tuition plans?
I don’t like pre-paid tuition plans, and I don’t recommend them. The reason I don’t like pre-paid tuitions plans is that anytime you pre-pay something, your rate of return is only that of the rate of inflation.
On average, the inflation rate on tuition during the last 25 years has been about seven percent. In other words, you’re making seven percent on your investment. This is a bad rate of return when you consider that 96 percent of all growth stock mutual funds have averaged 12 percent or more over the last 25 years.
I recommend an Educational Savings Account (ESA). The ESA can be a mutual fund, which I also recommend, that grows tax-free if used for college. Plus, you can put as much as $2,000 per child, per year, into an ESA.
Stay away from pre-paid tuition plans. It’s like savings bonds versus mutual funds. You can do much, much better!
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