Financial Planning, On Investing, Retirement Planning, Work and Career

The Impact of Retirement Plan Fees on Your Ability to Retire and Quality of Life During Retirement

August 11, 2017

When I was an inexperienced investor, I spent a lot of time researching potential company stocks and index (or mutual) funds. In retrospect, most of the performance indicators I paid attention to were important for evaluating a purchase. However, expense ratio (a.k.a retirement savings account fees or expenses) was one element I wish I had taken more seriously.

I didn’t even know about compounding when I made my first stock purchase back in 2009. And once I learned about compounding, I didn’t know that fees also compound while my savings compound. Even after I became aware of expense ratios, it didn’t occur to me right away that I needed to learn what those fees are or read about their potential impacts.

That was, until last year. Those sayings that go like, “You don’t know what you don’t know.” and “You don’t know how little you know until you start learning.” are so true in this case. To this date, every day, I’m still finding out I have a lot to learn on investing, growing and protecting my money.

In this article, I bring your attention to retirement account fees and their potential impacts when left ignored. These fees are typically a small percentage of your account balance, making it easy for uninformed investors to ignore or overlook. Yet, the fees can slowly eat away your investment returns over 5, 10, 15 or 20 years time span.

retirement fees impact

Using research studies on 401(k) plans and number examples, I shared below how retirement savings account fees can dramatically affect your ability to retire and how much money you have during retirement.  The contents and messages are also applicable to IRAs and any types of individual retirement savings accounts where someone (or an entity) is involved in helping you manage your money.

Did You Know?

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Kids and Money, Money Psychology

My Toddler’s Early Lessons of Money, Exchange and Delayed Gratification

August 3, 2017

My family and I recently visited Washington D.C. One day, my daughter and I had an engaging conversation on money, exchange and delayed gratification. And I’ve decided to share that conversation here in hope that you and your children might benefit.

The Situation

The conversation occurred as the three of us were walking along the National Mall, while passing by the carousel. My soon-to-be-3-years-old toddler loves carousels and Ferris wheels. As anticipated, Ruby asked me if she could ride the carousel. I fell conflicted. On the one hand, I wanted her to join the other kids in the carousel area and have an even greater time during our visit. On the other hand, we were pressed for time as we had already made plans with other family members for dinner and a nighttime bus tour.

early money delayed gratification lessons

I didn’t want to just respond to Ruby with a plain “no”. The three of us were having a great day, and I wasn’t going to let that moment ruin the beautiful memory. I had to quickly come up with a strategy to distract her, and give her enough reasoning to move along (both physically and emotionally). All meanwhile, conveying my words and wishes in a manner that she’d understand.

Moreover, I didn’t want to do a quick fix. I have learned that Ruby’s memory is pretty good nowadays. There were times in the past when I didn’t do a good job explaining to my daughter why she was denied of something, and she’d cry on and off for 30 plus minutes until her feelings got resolved. I wasn’t going to let something similar happen right there then.

The Conversation

Below detailed how the conversation went (in Mandarin):

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Financial Freedom, Financial Independence, Financial Journey, Financial Planning, Investing, Lifestyle, Money Habits, Retirement Planning

This is Financial Freedom: June 2017 Non-W2 Incomes Report & Bi-annual Recap

July 7, 2017

In this article, I share our financial freedom number, our 2017 bi-annual recap of non-W2 incomes and the wealth building strategies we use to grow our daily worth.

Our Financial Freedom Number

A little over a year ago, I started taking my financial learning seriously (you can read my story here). I read that financial freedom (financial independence) is reached when one has enough passive and/or residual incomes to cover all basic expenses. Certainly, “basic” is a relative word, however you’d like to define that for yourself or your household.

My husband and I have calculated that our basic monthly expenses is about $3,500. This number includes $1400 for housing (utilities included), $1,000 on groceries plus dining out/entertainment once per week; $300 on personal/household expenses, $80 on phone services, $250 on various insurances we carry, $200 on vacation, $120 on gas/car, $50 for charity, and $100 on the unaccounted items/events (e.g., gifts).

June 2017 Non-W2 Incomes Report and Bi-annual Recap

Once we summed up our June 2017 non-W2 incomes and did a bi-annual recap, the numbers in front of us confirmed that we’ve reached the financial freedom stage.

Below is a chart detailing our June report.

June 2017 non-w2 incomes report

For months, we anticipated that June was going to be an amazing month for us. To our surprise, the total amount we received way exceeded our expectations. This number is bigger than the one from our December 2016 report (typically, December is supposed to be the best month for dividends/interest payouts).

If you follow our previous 2017 non-W2 income reports up to June, our average is $3,528.23 = [($8,021.13 + $2,142.44 + $2098.93 + $5,249.31 + $1,704.66 + $1,952.92)] / 6 months

This $3,528.23 number is very close to our estimated monthly expenses. By definition, my family and I have currently reached the financial freedom stage.

Wealth Building Strategies We Use

My husband and I attribute this favorable return on our investments on the following factors:

(1) We continue to have a high savings rate;

(2) We continue to build our investment portfolio using our savings;

(3) Having a well-managed investment portfolio (we slightly adjusted our asset allocations back in September 2016 – types of equities, percentages and diversification);

(4) We continue to learn new things financially and put new knowledge into actions;

(5) We openly talk about and discuss money topics with others (once in a while we learn something new in the process); and

(6) We use Personal Capital, a free financial tool, to track our net worth, view our investment performance, analyze our asset allocations and project our retirement goals. I wrote a comprehensive review of Personal Capital on another post. I encourage you to check it out.

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Girlfriend to Girlfriend Money Chat, Kids and Money, Lifestyle, Marriage and Money, Money Habits, Purchase Decisions

Five Ways I’m Currently Growing My Family’s Daily Worth

June 18, 2017

The Then and Now

In several of the early articles of this blog (such as here, here and here), I mentioned that my husband loves numbers, analytics and investing. And he’s very good at all three. He started educating himself on personal finances, the stock markets and investing while in his mid 20s, and he continues to do so each day. Even though he’s not a day trader, he follows the markets (and major headlines) daily and analyzes our investment portfolio performance against several market indices. We use Personal Capital to track our finances and net worth. You can read my comprehensive review of this free online financial tool here.

From the start of our relationship, he’s always been the one that spends more time taking care of our equities (stocks) and fixed income (bonds) investments. This is still true even after I had my transformative moment (you can read about my story here). Despite my accelerated learning of the stock markets and investing in the past year, he’s still the more knowledgeable one.

building wealth daily worth

One thing that has been different in our relationship since that transformative moment is that nowadays I take a much more active role making investing decisions with my husband. I have a desire to learn from him (and many others) and continue to build my financial knowledge. Whereas before, I was glad to let him take care of all investments-related matters. Even when he tried to get me involved, I quickly dismissed his efforts.

Two People in a Relationship

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Financial Freedom, Financial Journey, Financial Planning, Lifestyle, Retirement Planning

May 2017 Non-W2 Incomes Report

June 9, 2017

Hello readers. Even though it’s not officially summer, it seems like that’s what’s been on everyone’s mind around here. Pool and BBQ parties are in full swing. I briefly looked at upcoming free family events in the city and there are some great ones I plan taking my daughter to this month.

My family and I recently came back from a week-long vacation by the Gulf of Mexico. We spent half of our time in Port Aransas (Mustang Island and North Padre Island) and the other half in South Padre Island (including Port Isabel).

What’s my impression of the Texas coast (several years ago, I also visited Galveston and Rockport)? My view is pretty biased considering that I’ve lived in the California coast for over a decade and have visited some amazing beaches and seen beautiful water in other parts of the world. There’s not much to say about the Texas coast other than it is a good place that tides me over (my craving for beach and sun) until our next vacation to the French Riviera (or other parts of the Mediterranean) or Hawaii.

With that said, I did enjoy my time there. We visited a different beach every day, playing in the sand and putting our feet in the warm gulf water (a very good surprise!). It was a very slow-paced vacation, which was very different than most of the other vacations we’ve had. There wasn’t much else to do other than heading to the beach which was precisely the part that made this vacation very relaxing. We took our time enjoying hour-long breakfasts, meandering along the beach, soaking in the sun and building sandcastles. We also took the time to watch the sunset and go on short cruises.

Of the 8 years that my husband and I have been together, we’ve probably traveled 20 times together. And this most recent trip was the easiest and most relaxing…relaxing in the sense that time didn’t matter as there was no set itinerary.

When we arrived home the following day, we reviewed our finances. And below is a summary of our May 2017 Non-W2 incomes report. The total amount is very similar to that of April 2017. Neither my husband nor I received any dividend/interest payments in our Roths. You’ll also notice that I took out the row tracking “Her 401(k)” and added in a new row now tracking “Her IRA”.

may income report

We started tracking these numbers back in December 2016. You can view our past reports and why we’re doing this here. We use Personal Capital, a free financial tool, to track our net worth, view our investment performance, analyze our asset allocations and project our retirement goals. I wrote a comprehensive review of Personal Capital on another post. I encourage you to check it out.

This is it for now. Thank you for stopping by. I’m looking forward to our June numbers. According to my husband, June should be a great month for us. We’ll see. As stated before, this is the first time we’re tracking our non-w2 incomes systematically over a period of time. 

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