There is a right way to talk to your kids about money
– Start by teaching them that there are benefits in waiting for things. Being a parent presents us with daily challenges, including decisions about what things to expose our children to. One of the questions I am constantly asked by parents is what should they teach their children about money, and at what age. Talking about money is no different from talking about how to keep healthy or how to keep safe when using the internet. If your child thinks money is something that “mom and dad get from a machine,” then they don’t know how hard their parents work to generate an income for the family and meet all of their expenses.How to avoid outliving your retirement savings
– The 4% figure you mention comes from studies done in the 1990s to identify safe withdrawal rates that resulted in what’s known today as the 4% rule. Here’s how it works. Let’s say you have a nest egg of $1 million and inflation is running at 2% a year. Basically, the rule says if you withdraw 4% of your nest egg’s value, or $40,000 the first year of retirement, increase that withdraw by 2% to $40,800 the next year, boost it again by 2% to $41,600 the third year and continue along that path, you have roughly a 70% to 80% chance that your savings will last at least 30 years. But many retirement experts have raised doubts about this strategy in recent years. For example, research by The American College’s Wade Pfau, Texas Tech’s Michael Finke and Morningstar’s David Blanchett suggests that, given today’s low projected investment returns, you may need to limit yourself to an initial withdrawal of 3%, if not less, to avoid outliving your savings. And a recent PricewaterhouseCoopers report notes that the underlying premise of the 4% rule — i.e., that your retirement spending will rise consistently with inflation — doesn’t always jibe with how people live in retirement. Many retirees spend more freely early in retirement, then cut back only to spend more again as they incur higher medical expenses late in life.