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| Here's the Gist today Happy Tuesday Origin Member. April is Financial Literacy Month, and since you're reading along with us, we'll assume you're above average when it comes to money knowledge.
However, this isn't always the case. Can you guess what percentage of U.S. adults are considered 'financially literate'? A. 41% B. 57% C. 68%
Here are the topics for today: - How Being 'Lazy' Can Help Your Financial Planning
- Retirement Planning Literacy Is Low — And It's a Problem
- College Savings Money Can Now Be Put Toward Retirement
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| How Being 'Lazy' Can Help Your Financial Planning |
The paradox of choice is a reality that can be observed in all aspects of life, especially in our finances. And it's not a problem in isolation either — it leads to other issues like analysis paralysis and a proclivity toward inaction. The amount of strategies, investments, apps, and all of these tools that are meant to help our finances can weigh us down. So, what can we do about it? Simply put — be lazy. The vast majority of Americans identify money as a top source of stress in their lives, and it's no wonder this is the case. With so many options, suggestions, and comparisons at our disposal, it seems like there's always something better to do, or always a better option out there. This is a trap, and there are ways to avoid it. How to be lazy in a practical way Stop comparing your finances to other people's. The comparisons we draw to others are almost never intricate enough to take into account the many nuances of their situation, let alone our own. Comparison will hand you a long list of different financial strategies and habits you should try, only to leave you shorthanded trying to fulfill all of those ideas at once. Don't try to over-optimize your investments. Yes, optimizing your finances is important, but it can also be taken too far. Over-optimization is the antithesis of the "set it and forget it" mentality, and it often ends up robbing investors of returns while they're busy searching for perfection. Don't consider every opinion you hear. There's no shortage of advice and information being thrown at us daily online, and it can be overwhelming if you try to consider and implement all of it. Confirmation bias exists for a reason, and although it might be intellectually dishonest, it's extremely practical when it comes to helping you stick to your own goals that you thoughtfully set in place. Automate what you can. The less time you have to spend actively thinking about transferring money, logging income and expenses, and making investments, the more free you will be. Set up autopayments, auto transfers, and auto investments in as many places as you can and enjoy the "lazy" way of money management.
Make use of rules of thumb. They exist for a reason, and although they might not be perfect, sticking to a general rule of thumb is a lot better than constantly chasing the perfect approach or having no guidelines at all. Rules of thumb reduce the input (thinking) on your finances and increase the output.
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Retirement Planning Literacy Is Low — And It's a Problem |
For the past decade, the American College of Financial Services has conducted its Retirement Income Literacy Study every 3 years. The study focuses on Americans aged 50 to 75 and poses questions meant to elucidate their level of retirement planning knowledge. 2024 brought us another iteration of the survey, and the results were somewhat concerning. The data The overall average score on the 38-question retirement literacy quiz was just 31%. They also found a direct correlation between wealth and literacy — participants with more than $1.5M of investable assets had double the average score (50%) compared to those with $100,000 or less (25%). Retirees scored highest in the knowledge area of inflation with an average score of 47% on the subject, while the worst areas were annuities and investments. Participants with an ongoing relationship with a financial advisor also scored 11% higher on average. | |
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What can we do about this? Financial education and advice need to become an essential benefit. Often due to a lack of financial literacy and time to learn about it, millions of employees plan blindly or myopically for their golden years, and end up missing the mark as a result. Employees want and seek financial wellness support from their employers, which are also often the source of their retirement planning.
Access to advice and planners shows itself to be of critical importance. This is exactly the problem that Origin is here to solve — granting professional financial help to everyday people. DIY retirement planning is a very arduous undertaking that even the most proficient retirees will inevitably have blindspots in, and having a professional outside council proves invaluable.
Take every opportunity you can to learn. Even if you don't have access to a planner or financial education benefits, take the time to seek out information on your own. Even having the willingness to learn and the awareness that there's a lot you don't know can go a long way in improving your retirement planning literacy.
Lastly, get real with the numbers. Many employees go through their entire careers without running some honest numbers about how much they'll need to retire. Don't invest blindly, don't count on a pension, and don't count on Social Security. Do some honest searching and find out the reality of what you might need to retire, and the strategies available to achieve that. |
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College Savings Money Can Now Be Put Toward Retirement |
529 plans are an extremely specialized tool. While these accounts are great for educational savings, their limitations often have costly consequences in the event of an emergency or deviations from the plan. Luckily though, recent updates made by the Secure Act 2.0 are making the 529 even better. What you need to know Previously, any withdrawal used for unqualified educational expenses would be subject to a 10% penalty in addition to income taxes, with the only way to avoid those costs being to transfer the account to another beneficiary. Up until 2024, You could previously transfer funds to another family member, but now there are more options. Due to new rules under the Secure 2.0 federal law, you now also have the option to roll over up to $35,000 into a Roth individual retirement account (IRA). Per our latest data on the matter, the average 529 account has a balance of almost $28K. If you or your intended beneficiary didn't go to college or didn't need all of the account's funds, that's a hefty amount to roll over into a retirement account. Qualifications: To be eligible, the 529 account must have been active for a minimum of 15 years, and neither contributions nor earnings from the preceding five years are allowable for transfer. The total transfer amount is capped at $35,000, but transfers are confined to the annual maximum Roth contribution, set at $7,000 for individuals under 50 in 2024. Achieving the maximum transfer necessitates spreading the funds over several years.
How many would qualify? Ascensus, a financial services company, projects that approximately 15% of its approximately 6.5 million 529 accounts meet the criteria for the rollover option. This is just a snapshot, so it's likely that a similar percentage is true across the industry.
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| 👨🏫 It's B., just 57% (Zippia) 👨🏫 Teachers are now using AI to grade essays (CNN) ₿ Another Bitcoin halving is coming later this month (Axios) 🤖 Tax filers are using ChatGPT to review their returns, apparently (CNBC) |
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Advisory services are offered through Origin Advisory Services LLC ("Origin RIA"), a Registered Investment Adviser registered with the Securities and Exchange Commission and a wholly-owned subsidiary of Blend Financial Inc. DBA Origin Financial. Origin RIA's registration as a Registered Investment Adviser does not imply a certain level of skill or training. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions.
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