The Employee Benefit Research Institute in Washington just sent over another retirement plan participation profile, this one for 30-somethings.

The good news: more workers in their 30s participated in retirement plans than those in their 20s. (See June 6 post for the 20-something profile.)

The bad news: The numbers could still stand to be higher.

In 2003 the most recent year for which EBRI has data available the percentage of 30-something workers that participated in any type of employer-sponsored plan: 56.1 percent, compared with 36.6 percent for 20-somethings. Those participating in a 401(k) plan: 38.2 percent, compared with 25.1 percent for 20-somethings.

-KRT

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THINKING OF TAPPING HOME EQUITY?

Got an e-mail recently from a reader named Jill, 38, about credit card debt. She has $20K in credit card debt and is considering using a home equity line of credit loan to pay off that debt. She heard from a friend that she can deduct the interest paid on the HELOC and wants to know if that is true and what else she needs to know.

First of all, yes, you can deduct from your taxes interest paid on your mortgage whether it is the primary loan or a HELOC. But beware, unlike credit card debt, which is not secured, a mortgage is a secured loan. That means defaulting could cost you your house.

Also, the experts I have talked to generally say that rolling credit card debt into your mortgage is OK if it is a one-time thing and you stick to a budget from then on. It is not cool if you just go out and run up the cards again.

One last thing to consider, the rates on HELOCS like interest rates overall have been rising. The average rate on a $30K HELOC is 7.21 percent, according to Bankrate.com.

And, HELOC interest rates are variable, fluctuating as the Federal Reserve raises short-term rates. The Fed has raised rates 16 times since June 2004.

There’s another way to tap home equity – a home equity loan. Home equity loan rates are higher than HELOCS but they are fixed. The rate on a $30K home equity loan is 8.37 percent, according to Bankrate.com.

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FUN MATH

Interviewing a wealth manager recently, I was reminded of a cool calculation for figuring out how long it will take your investments to double in value. It’s called the Rule of 72 and it’s math that even I can do.

Here’s how it works.

Start by making an assumption for the compound annual return you expect to achieve and divide the number 72 by that. The number you get is the number of years it will take to double your money. Say, you assume a 6 percent compounded annual rate of return. Seventy-two divided by six is 12. You’d double you money in 12 years.

You can also use the Rule of 72 to figure out how long it will take for inflation to double your cost of living. Say your lifestyle now costs you $75,000 a year. Assume 3 percent inflation and your looking at a $150K/year lifestyle in 24 years.

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Amy Baldwin covers money-related topics for 20- and 30-somethings in “Out of the Red.” Have a question about your personal finances? Contact her at (704) 358-5179 or abaldwincharlotteobserver.com. Leave your name and daytime phone number.

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