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3 Things 7-10-23

Thing One


The $300,000 Lunch


It's too late for many of us to take full advantage of the magnificent power of compound interest, but we still can share our knowledge of it with younger people who are just getting into position to benefit from it maximally. In that vein, we share excerpts from a post on that used the simple example of eating out for lunch everyday at work to make a profound financial point. See below for the details:


"...It seems obvious that a serious handbag habit, or a penchant for champagne might damage your finances. But lunch? Seriously? Afraid so.


I know, I know. Lunch is hardly an extravagance. We all need to eat, and picking up something to take out is a far easier option than preparing something at home.


But did you ever really consider the long-term costs? Although the small daily outlay on a restaurant or cafeteria lunch (not to mention coffees, sodas, and snacks) may seem insignificant, it adds up over time. If you're like the average American office worker, you could be spending about $3,000 on lunch and coffee this year. Just imagine how that mounts up over a whole working lifetime...


According to survey findings, 82% of working Americans spend at least $20 a week on coffee, and no fewer than 89% spend at least $35 every week on lunch. That works out to at least $57.49 per week. So, let's take an average Joe example:


Spending $57.49 a week on lunch and coffees, for 50 weeks in a year, means you're handing over $2,874.50 to eat an unsatisfactory (and probably unhealthy) meal at your desk daily. And if you spend more than $11 or so per day on lunch and coffee (as many of us are guilty of doing), that figure increases rapidly...


If, instead of buying lunch — for this year only — you invest the $2,874.48 saved in a skimpy 1% interest savings account, it could become a "happy retirement" holiday once you get to the point of ditching work, turning into $3,874.85 over the course of 30 years. Just by sitting there! Putting the same amount of cash aside into a vehicle that mirrors the S&P 500 over 30 years, based on a historic average return of 7%, your savings would turn into $23,409. Of course, additional contributions will lead to even greater gains...


By continuing with your "average" annual savings from ditching takeout lunches over the course of 30 years, your pot, even at a low 1% yield, would become just over $100,000 thanks to the magic of time and compound interest. If you learn enough about investing to achieve that historic average of 7% from the S&P 500 over that period, you could accumulate an astonishing $312,362. Enough to change your retirement plans?"


The math is irrefutable and powerful. Young people in the workforce have an opportunity, hiding in plain sight, to methodically stash away hundreds of thousands (and maybe even millions) of dollars. Let's all help them see it.



Thing Two


 Student Loan Help From A Different Angle


The Supreme Court recently ruled that President Biden did not have the authority to cancel $430 billion in federal student debt.  As a result, principal and interest payments on student debt, which have been officially paused since the onset of the pandemic in March of 2020, are due to re-start.  Interest on the loans will begin to accrue again in September of 2023 and payments will begin their normal due date cycles in October.  Many people with large outstanding loan balances have found that they can’t afford to make student loan payments and save for retirement via their companies’ 401k plans.  Typically, and unfortunately for the long-term financial security of these borrowers, paying off their student loans, which can take a couple of decades, takes priority.  But there appears to be some hope for those lucky enough to work for participating companies.  Per


“You may soon be able to do both at the same time more easily. A provision in 2022′s “Secure 2.0” legislation allows companies, starting in 2024, to match a worker’s student loan payment in the form of a contribution to their workplace retirement plan.  


The idea is to provide a way for people who would otherwise have difficulty investing for retirement a way to access what financial planners refer to as “free money” while tackling a competing financial goal. Here’s how it works…


Under the new law, employers can make matching contributions to workplace plans — including 401(k)s, 403(b)s, 457(b)s and SIMPLE IRAs — based on an employee’s qualified student loan payments.

In order to qualify for the match, workers must simply certify that student loan payments have been made. Your employer is not required to request documentation of your payments.


The rules mandate that the same matching and vesting rules apply to all employees, whether you’re receiving a match for retirement plan contributions or student loan payments.


The law is designed to help workers whose debt burden could keep them from investing enough to get an employer match or, indeed, from investing altogether…”


If you or somebody you know has outstanding student loans, this new law may be of some benefit. We urge you take some time to find out.





Thing Three


Just A Thought


‘“People are frugal in guarding their personal property; but as soon as it comes to squandering time they are most wasteful of the one thing in which it is right to be stingy.” - Lucius Annaeus Seneca



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