Financial Fears

By Claudia Mollerup-Madsen

Halloween is coming up! As Americans, we like to celebrate this time by having fun with fear. Ghosts, goblins, and witches provide entertainment for all ages. But the reality is, we face real fears as adults. A Chapman University survey in 2017 found that 50% of those surveyed reported being afraid of running out of money.  

Let’s unpack this financial fear. Americans are not saving enough for retirement – one in three Americans have less than $5,000 saved for retirement. If you are one of those who feel you are not saving enough, do not be afraid, it is never too late. Thanks to the power of compound interest, the earlier you start saving, the better; because anything that you save today is another dollar for tomorrow.

If you have not signed up for your employer’s retirement plan such as a 401(k) you might consider doing so today and making regular contributions. If you do not have an employer sponsored plan, open a Traditional IRA or Roth IRA. Ideally, you should aim to contribute 10% of your income to your retirement each month, but it is a good idea to start somewhere; even if you don’t contribute 10% at first. I strongly recommend that you plan for retirement today. Having a plan in place can help you plan for a retirement-age goal, but will also show you the cost of the lifestyle you want to live when you retire. While it may be harder to predict that information the younger you are, you should still draft a plan now to get a better idea of what you will need for the future. This will allow you to adjust your savings as needed through the years.

Another fear that we financial advisors hear a great deal about comes from parents: they are afraid they aren’t saving enough money to send their children to college.

If you are a parent, you know the desire to provide well for your children.  For most of us, this includes paying for all or part of their college. It can be scary to think of the cost of college today (especially for multiple children) when the average public school in the South costs approximately $20,000 a year.

It’s worrisome to think you may not be able to afford higher education when the time comes. To better help combat that fear and pay for college, consider opening a 529 College Savings Account. A 529 plan allows you to save for qualified higher education expenses including tuition, mandatory fees, room and board, and other expenses. Best of all, there are no taxes on gains when used for qualified expenses. Plus, a 529 can even be applied to private school tuition for kindergarten through twelfth grade. 

Halloween should be a time to have fun with mummies and ghosts, not to let stressful financial situations scare you.   Start your retirement and college savings accounts today.  If you have already begun saving, look for opportunities to contribute additional savings.  You will thank yourself later.

Claudia Mollerup-Madsen is a Financial Advisor with the Wealth Management Division of Morgan Stanley in Houston.