Carrie Schwab-Pomerantz, the daughter of brokerage services legend Charles Schwab, says sharing her father's passion for helping all Americans become financially secure led her to write her new book, The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions, published Tuesday.
Schwab-Pomerantz, 54, is senior vice president of the company her father founded and a member of President Obama's Advisory Council on Financial Capability.
She says her father taught her some valuable lessons early on. "My dad was a struggling businessman until I was in my 20s. He always taught me to save. He taught me a strong work ethic."
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He also impressed upon her the importance of diversification. "I'm a big believer in creating a diverse portfolio. Having a diversified portfolio of stocks, bonds and cash is one of the most important principles of successful investing. It's how we manage risks."
Schwab-Pomerantz has her own tips, especially getting started early. "We want to get people to start saving for their retirement when they are younger. If you start in your 20s and you save 10% to 15% of your income for the rest of your life, you'll have a comfortable retirement. But if you wait until your 40s to start saving for retirement, you have to increase that to 25% to 40% of your income," she warns.
Studies showing the amount that people have saved for retirement vary, she says, but according to an Employee Benefit Research Institute survey, about 60% of American workers have less than $25,000 in savings and investments, not counting their primary residence and entitlement benefits.
For most people, that's not nearly enough, she says. Her recommendation: "We have a rule of thumb that says in order to feel confident that your money will last throughout retirement, you should save roughly 25 times the amount of your first year's planned withdrawal."
She also advises people who are way behind in saving not to give up, explaining, for example, that a 50-year-old who maxes out his or her 401(k) contribution could save $17,500 a year plus make an additional catch-up contribution of $5,500 for a total savings of $23,000 a year.
While the book revolves around questions that particularly concern finances after 50, Schwab-Pomerantz also offers what she says are her top ten recommendations for every age.
They include figuring out your net worth; tracking your spending and making a budget; reducing your debt; creating an emergency fund; determining if your retirement savings are on track, automating your finances; taking a close look at your portfolio; reviewing your insurance, creating or updating your estate plan; and organizing your records.
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