Helping My Daughter with her Retirement Account

[PandaBear]

A little background.......dd started her first "real" job about 18 months ago. Because she works for the county, she pays into PERS. We encouraged her to also invest into a retirement account, and she did start with about 5%. We encouraged her to put in more, but she explained to us why it just ' not possible. We dropped it, as she has to make her own decisions. She loves to travel and goes on a bunch of trips.

Fast forward to today. She met with an adviser from Fidelity at work, who told her it was great she was putting away something, but suggested to her to try for 10-15%. So, she wants to do so. (Of course, when mom and dad say it.....what do they know?? But when someone else suggests it......it's a go! But that's okay.....I'm thrilled she's being way responsible with her money than I ever imagined)

My question is.......is there anything I should share with her about Fidelity? I know I put money into a 403b at work, and I picked just about the worst program I could have done....I've made virtually no money in the account. So I want to help her not make the mistake I made.

Also, she was able to buy life insurance for about $4 a month for a 60K policy. She did so and named her brothers as beneficiaries (as they have done for their work policies). In reviewing her check stub, we discovered she is actually being charged $40 per month for a 500K policy! She's going to see if she can change it. Is there any reason she should keep it? I told her not to keep it.

Thank you.

 

[Jerry1]

The only reason I can think to keep the work policy is if relinquishing now will prevent her from getting it in the future. Also, make sure she’s actually paying for it. My company use to add it to my gross so that it was taxed, so I didn’t actually pay it.

Also, I’m hard pressed to understand why she needs any life insurance but I don’t know her full situation.

 

[pb4uski]

No, there is no reason for her to have $500k of life insurance from what you wrote.

 

[jazz4cash]

Why does she need life insurance? Four bucks a month won’t make a difference, but who needs protection from the loss of her income if she is deceased?

The employer will negotiate with Fido on which specific funds are offered. There may be non-Fido funds in the plan. You could look over the Excellent Fido website with her and use some of the tools there if she is so inclined. The young people in my life just want a quick easy answer without a lot of detail so the target date choices fill the bill

 

[mrfeh]

My question is.......is there anything I should share with her about Fidelity? I know I put money into a 403b at work, and I picked just about the worst program I could have done....I've made virtually no money in the account. So I want to help her not make the mistake I made.

Not sure why you're specifically mentioning Fidelity, but I suggest she read this:

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

If that's asking too much, at her age, I suggest putting the funds in FXKAX or a target date fund:

https://fundresearch.fidelity.com/mutual-funds/category-performance-annual-total-returns/FREE

 

[pacergal]

When my DD started her work retirement savings, I sat down with her and we reviewed the offerings the plan had. I suggested a simple target date fund, which she did.

I can't think of why your daughter would need life insurance if no one is relying on her income. I would not sign up, unless it was free. We had a basic $30,000 policy at work that was no cost, so I a always took that. Then bought a term life policy after marriage and kids.

 

[oscar1]

Did the same with my daughter recently (5th grade math teacher). She is required to contribute the SS equivalent 6.2% to her state retirement plan but we have always encouraged 20% when raising her. So, she contributes another 6% to individually managed Roth at Schwab and another 8% monthly to her emergency fund and anything leftover to her brokerage account. Her emergency money is in Schwab SWVXX (~1.5% - it,s an emergency fund!) but her IRA and Roth are in 4-star 2060 target index fund Schwab (SWYNX) which is the most aggressive target fund with very low expense ratio at Schwab.

 

[MI-Roger]

For Life Insurance she only needs enough to pay for Funeral or Cremation expenses. No dependents, so nothing more than Final Services coverage.

And that is only to prevent Mom & Dad from covering the costs.

 

[RobbieB]

I agree, she doesn't need any life insurance at this time. When she has children she will.

Invest in equities is my advice.