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Why You Should Be Comfortable With an Ever-Changing Retirement Number

By WTOP Staff

Many people like to think of reaching financial independence as saving up to a certain net worth. This is understandable. Having a numeric goal is easy to visualize and easier to calculate and plan for than not having a concrete number to work with. Unfortunately, just about everyone is going to change their number as they walk the journey, and that often throws them off. If your number changed, too, and you are wondering what’s up, here are a few reasons why.

You likely miscalculated inflation, and that changes everything. Many people underestimate inflation because 3 percent a year sounds like nothing. In reality, you are looking at everything doubling in price every 25 years even at a meager 3 percent a year increase. On the other hand, people who overestimate inflation are in just as much trouble because they are going to work much longer than they have to. After all, a 1 percent difference can mean a decade worth of working and saving.

Projecting future returns is impossible, so you could hit your number extremely early or you may never be able to. I don’t understand why everyone in the media is forced to project future returns because no one will ever get it right. Future investment returns is one thing that’s never going to be exactly estimated because you first have to know how the economy is going to expand years into the future, and then you need to know how much the investment community is willing to pay for that growth. Both are impossible to figure out. What you can control is your savings rate and what you invest in. All you can do is let the rest take its course and adjust if needed.

How you feel about wealth in a few decades will be different from how you feel today. I remember thinking $1 million was a pie-in-the-sky number when I was in college. Now, I feel like $1 million is not nearly enough to retire on because the safe withdrawal rate of 4 percent means I can only safely withdraw $40,000 a year — a figure that doesn’t cover our current family expenses. And if I factor in my inherit need to be more conservative than the 4 percent rate to feel more secure, plus paying taxes and such on that figure, I’m looking at an even lower number.

In fact, how you feel about almost everything will likely change in the future. Perhaps you really hate your job, and you are willing to scale your lifestyle back. On the flip side, you may be in an enviable position where you love your work and don’t need to retire, even if you can theoretically retire comfortably without that paycheck. Your family situation can also change. You and your partner may decide to have more kids. Or your kids can have grandkids. You probably would like to visit them often, even if you don’t need to provide any financial support. This will cost money. There are endless examples I can give here, but you get the idea. The amount of money you need to live a good life now will be different from the amount in the future because your vision of a good life will change as your situation evolves. For most of us who aren’t on the cusp of retirement, our projection of what we need to spend in retirement will be way off.

Having said all this, I actually encourage everyone to think of a number. This helps you make retirement more real, and it helps motivate you to save more. Just make sure you understand that the number will probably change, and embrace the adjustments as you make them.

David Ning is the founder of MoneyNing.com.

More from U.S. News

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Why You Should Be Comfortable With an Ever-Changing Retirement Number originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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