Compare Our 401k Balances With Others In America

by David@MoneyNing.com · 56 comments

US News has a very interesting article that shows various interesting statistics on account balances Americans hold in his/her 401k accounts. If you are one of those people that always wonder how your 401k nest egg compares to others in the country, this article is for you.

First, here’s the median account balance separated by salary ranges for people in the 20s.

Salary Range

Median Account Balance

$20,000-$40,000

$6,719

$40,000-$60,000

$16,393

$60,000-$80,000

$39,383

$80,000-$100,000

$56,194

More than $100,000

$57,794

I’m very surprised by this because I cannot believe the median account balance is so high. I know data are based on facts, but it’s hard for me to imagine that someone in their 20s earning $20,000 – $40,000 a year has ON AVERAGE $6,700 in their 401k.

Now, let’s look at the average 401k asset allocation for people in their 30s.

Type of Investment

Share of Account Balance

Equity funds

57.90%

Balanced funds

13.50%

Bond funds

7.40%

Money funds

3.20%

GICs*/stable value funds

5.20%

Company stock

9.60%

Other

2.20%

Unknown

1.00

This chart shows that most Americans are too conservative in their investments and savings. We all know that stocks provide the most returns in the long term, so I would suggest people in their 30s to put more than 67.5% of their assets in stocks (equity funds + company stock), especially for money in their 401k as the investment time horizon is long.

People in their 40s might have worked for 20-30 years with the same company. Let’s see what the 401k stats are for this group of people.

Job Tenure

Average Account Balance

0-2 years

$14,725

2-5 years

$29,010

5-10 years

$49,995

10-20 years

$89,882

20-30

$133,32

This is interesting because many people change jobs for higher pay. However, this chart shows people who worked at their latest job the shortest are also the ones that have smallest 401k nest egg. This is disappointing because it means that people are cashing out their 401k when they switch jobs, taking the 10% penalty. We should always try absolutely everything possible to keep our 401k growing, not shrinking.

Let’s compare the account balances for people in the 50s and 60s.

Salary Range

50s

Median Account Balance

60s

Median

Account

Balance

Percent

Decline

$20,000 – $40,000

$76,788

$64,147

16.46%

$40,000 – $60,000

$99,932

$97,588

2.35%

$60,000- $80,000

$163,935

$160,051

2.37%

$80,000 – $100,000

$243,382

$237,303

2.50%

More than $100,000

$367,413

$350,576

4.58

At 60 and above, we are allowed to withdraw our 401k without penalty. People in the low end of the income spectrum also decrease their 401k the most which is not surprise. It is intriguing that people with the most income at more than $100,000 (and the most money in their 401k balance) take out a bigger portion of their money (4.58%) compared with people with a smaller account balance. It is anyone’s guess why this happens but my guess would be that people with a big nest egg are thinking of diversification at retirement age and their financial advisor is helping them take out more money from their 401k into other types of investments.

There are a trillion ways to interpret any every set of data, so go check out the article and see how you compare. Report back with your thoughts.

I Could Use Someone Else’s Credit Card to Buy My Groceries

by David@MoneyNing.com · 65 comments

no ID credit cardMy fiancée and I talked about the fact that we can probably use each other’s credit cards to purchase things without getting caught. We realized that more times than not, we aren’t asked to show our IDs when we use our credit cards. We decided to brainstorm where we have bought something using our credit cards without showing our ID and came up with this list.

  • Anything online
  • Restaurants
  • Groceries via self checkout
  • Gas stations
  • Drug store
  • Convenient stores
  • Coffee
  • Tons of entertainment venues

* note that this list is based on my experience in the United States.

We concluded that we can live our lives with someone else’s credit card without ever showing our ID. Even without all the online stuff because we can virtually get anything over the internet nowadays, we can still get food, gas, coffee, and have fun with someone else’s credit card without fear. Now that I think about it, I can even get a 0% balance transfer credit card without ever showing my ID in the States!

Now, what about the places that asks you for ID?

  • Larger department stores
  • Groceries at the cashier
  • Beer stores
  • Bar (if you dare use a credit card)

Obviously there are some places that asks us for our IDs when we use our credit cards. Some of these places (like the bar) actually ask because they need to ID regardless but that’s not the point. I don’t understand why some stores check our IDs and some don’t. I can understand not asking if the amount is small, but what about places where the transaction is high?

Something else that is interesting is how each country handles credit card verification. I was born in Hong Kong, and people there always check the signature on the back of our cards against the one on the receipt. Everyone can argue that the signature can be forged, but it is at least better than not checking anything at all.

UK is taking a dramatic approach to this. They have gone to something called “chip and pin” where each credit card requires a pin similar to what we required for debit cards in the US. My friend actually went to UK recently and they won’t allow him to rent a car with his credit card because his credit card did not support the chip and pin technology. A nationwide change to combat this might be a little extreme but at least the country is telling their citizens that they will put in the effort to stop croaks.

How do you feel about this whole subject? Have you actually caught someone using someone else’s credit card? Have you accidentally used a card that’s not yours? Share with us your thoughts.

ATM Receipts – Wells Fargo vs Bank of America

by David@MoneyNing.com · 12 comments

My fiancée and I happened to withdraw money from our respective banks (Wells Fargo and Bank of America) recently and I want to show everyone the ATM receipts to see if they provide different information.

front of wells fargo atm receipt

As you can see above, they both provide the date and time of the transaction as well as the location. Furthermore, the last four digit of the account number is shown along with the amount withdrawn and available balance.

Personally, I like the Wells Fargo ATM receipt more because it is better organized. Looking at it carefully, we can also see that everything is better spaced out on the Wells Fargo version.

The back of the receipts are quite different however.

back of bank of america atm receipt

The Wells Fargo version uses the back to show some advertisements for their website as well as their 1-800 phone number (compared to Bank of America showing the number on the front without the website address). Again, Wells Fargo’s receipt is better because the bank is able to use the receipt more fully than its competitor.

Since Bank of America wastes the back of all their ATM receipts, I am going to suggest using…

money ning atm receipt

🙂

How One Couple Saved for Their Dream Home In 5 Short Years

by David@MoneyNing.com · 10 comments

saving for a houseIt can be done. One couple managed to save $98,000 in 5 years to buy their first house in New York. These two can-doers were by no means earning high salaries (a little over $100,000 combined by the end of the 5 years and much less at the beginning) all the while living in Manhattan, one of the most expensive cities in the world.

To save for the down payment on the $445,000 apartment, they quit smoking, stop meeting their friends for beers after work, stop buying new clothes, gadgets, and pretty much everything they didn’t absolutely need. The question they often asked themselves was “Do I want the house or an iPod? or Do I want a latte or the house?”

The beginning was especially tough because they weren’t used to skipping all the luxuries but they slowly got used to the habit of not consuming much more than the necessities. During the first year, they saved $8,000. In the next two years, they saved a combined $30,000 and $40,000 in the fourth year alone. Their savings was up to $98,000 by the fifth, allowing them to pursue their dream of owning a place they can call their own.

If they can do it, so can you. How many times have you thought about the difficulty of saving money and simply gave in to the spending temptations? With a can-do attitude, you can achieve financial freedom too.

Thank you NY Times, the article serves as an inspiration for all of us. It is also a wake up call for people who make $100,000 a year without being able to save a dime.

How to Save Money on Air Travel

by David@MoneyNing.com · 3 comments

airport terminalI’m in the airport on my way to Canada right now. While I’m bored, I figured that I should write to you about some of the ways you can save money in the airport since everything is more expensive inside than out.

Airline Tickets
I mainly use Expedia because of its flexibility in combining flights from different carriers. For example, I flew from Los Angeles to New York for a couple night stay on American Airlines, then to Canada on Delta. On the way back, I’m flying from Canada to Texas on an Air Canada flight, then a few days later to Los Angeles on Alaska Airlines. This way, I end up in 3 different cities for the price of 2.

The main money saving technique is exploiting the use of the online reservation services. Whether it is Expedia promo code or Priceline promo code, there is an option to try out your many different routes without driving someone and yourself crazy over the phone. You can ultimately plan and pick the best route if you are a little flexible with the dates and times of departure and arrival.

Car Rental
Nothing seems to beat the name your own price with Priceline. If you have done this enough times, you will roughly know the approximate price that your price offer will get accepted. If you are new at this, go to priceline.com and click on name your own price to give the car rentals an offer. Note that this option is only available if you are renting and returning to the same airport, which applies to most people’s travels. If they don’t accept, then you just go back a couple days later to try a new offer. You will always end up paying a lower price than using conventional methods.

2006_a_clio_3.jpgOne of the things the car companies came up with is filling the gas tank up for you. The per gallon price car rentals charge is actually quite good, but the fine print says that you will pay for one full tank. So whether you leave ¼ of it empty or ¼ of it full, you will still be charged for the full tank. I honestly never opt for this option since I rather go fill it up myself, which is cheaper 99.9% of the time.

Where you actually rent the car actually makes a huge difference with pricing too. If you are renting the car from car rentals that are inside the airports, the before tax price will be higher. On top of that, car rentals inside the terminal will cost you extra taxes. So, it is often wise (if you can afford the lack of convenience) to rent a car that has a branch outside of the airport. If you do that though, be careful on the hours of operations since the ones that are not inside airports often have operating hours so make sure you don’t arrive to a closed car rental.

Inside the Terminal
Now that the TSA has disallowed liquids going through security, many people are forced to buy water bottles inside the terminal. Vendors know this, and I’ve seen the price of a bottle of water gone way up. For example, some of the shops out here right now are charging $3.00 per bottle of water… Something you can try is to actually just buy a cup of coffee at Starbucks, which can cost from $2.50 – $5.00. Then, you can ask for a cup or two of cold/hot water. Actually, they are supposed to be willing to give you water without the purchase, but you don’t want to set that kind of an example for your kids would you?

img_2274.jpgYou would want to eat before you get to the airport, since there is much more selection outside the airport. If you plan to feast, business class might not be a bad idea since you can actually eat and drink (even alcohol) all you want. Of course, it might or might not make sense depending on the deal you can get on this. (For example, the points needed to upgrade to business class might be worth it dollar for dollar but buying business class on an overseas flight would not make sense for just the free food).

Those of us that think the airport lounge is way too expensive definitely have a point, as they are $50 per day last time I checked. However, some of us might think it is worth it if we are actually staying inside the airport for a couple hours. The lounges supply drinks, snacks and a very comfortable environment. If you can live on the snacks, then that chunk of cash might not sound so bad if you were going to eat in those restaurants that give you crappy food for $20-$25 dollars anyway. On top of that, there are power outlets that you don’t have to fight for inside so you might save on having to buy those mobile battery chargers too.

Oops. They are making their last call so I have got to get on the airplane. I don’t need to explain to my co-workers that the reason why I missed my plane is because I was blogging. I will write again when I am in Canada.

Car Ownership Cost Goes Beyond the Purchase Price

by David@MoneyNing.com · 12 comments

z8.gifWould you rather own a brand new BMW 7-series instead of the car you are driving now if the purchase price is the same? What if I tell you that it will cost you $150 USD if you lose the key to the BMW? What about $6000 to fix a dent on your door? Would you still want to own one if you found out that you will spend twice as much on gas every month?
For many of us, the experience of buying a car consists of comparing the prices of the different vehicles that interests us. Very few of us will actually check out the mileage per gallon for those cars, and even fewer will compare the cost of repair, or to insure the vehicles. For the majority of us, we are just not paying enough attention to our finances this way. If you try to save money by clipping coupons but don’t do a full analysis when you purchase a car, you are being penny wise and pound foolish.

Here are some of the car related costs that you need to analyze before you jump into the purchase:

Different Gas Octane Levels – This is almost never a consideration, but there are some cars that required the premium type of gas because the engine is tuned that way. Unlike what some people believe, not putting the correct type of gas that the car owner’s manual recommend as the minimum will hurt the engine, shorting its life. The difference between being able to buy the regular octane gas vs premium gas could be 10%, which can add up.gaspump.jpg

Mileage Per Gallon (MPG) – This is getting much more attention these few years because of the rise in oil prices. However, most people use this information to pick a general brand of cars or one category with another. What we really should look at is the mileage per gallon of the different cars we are considering buying.

You also want to look at the highway and city MPG separately. There is no sense buying a car that is more efficient on highways when you mostly drive in stop-and-go traffic.

Repair and Maintenance Cost – Check out the average repair and maintenance cost on sites like Edmunds.com. This is especially important if you tend to go to the dealership for service they charge even more for maintenance. If you are buying a car with the latest technology, make sure you search online and find out whether or not a third party repair shop can even service or repair your car since some of the car companies are starting to sell cars that have proprietary electronics that are not repairable or serviceable outside of their dealerships.

When figuring out the maintenance cost, don’t look at just the service costs either. Make sure you figure out the cost like tires as well. To give you an example, I know someone who spent $6,000 on a set of 4 new tires for his range rover!

Car Insurance – Insurance for different cars can vary greatly. Don’t just assume that a higher priced car will have a high insurance premium. Everything from the type of car to the color will affect the monthly payment, so research thoroughly. Remember to ask lots of questions and getting real quotes on specific cars wouldn’t be a bad idea either.

Finance Options – Different car makers may have different deals on finance options, making the monthly payments vary significantly. Remember to check and ask about them when you are considering since a 0% APR loan and a 5% APR loan makes a world of difference.

Depreciation – You might be better off buying a car that is more expensive if the resell value of the car is also higher. You should factor in the difference between the purchase and selling price of the vehicle to see how much owning the car is costing you per year instead of just looking at the up front cost.

How many of these did you check when you bought your car? I for one did not check any of the above when I bought my 2004 RSX-S a few years ago, but now I know. Next time I buy a car, I wouldn’t be so ignorant.

Let me know if I’m missing anything and I will add it to the list.

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