What’s Your Number to Start Saving for Retirement?

September 2nd, 2014

6870886851_76c9703cca_z retirement savings

So you just got your first job and you think retirement is a long time from now.  But saving money towards retirement today means you will put in less than if you wait to start your retirement fund.  What?

The chart and explanation below explain how this works.

Annual Savings Rate
Required by middle-income family replacing 70% of pre-retirement income

Retire
At age:  
                   % of income to save if starting at age:

                                 age 25                age 35                   age 45

62                              15%                      24%                           44%

65                              10%                      15%                           27%

67                                7%                       12%                           20%

70                                4%                       6%                             10%

                                                                      Source: Boston College Center for Retirement Research

A recent study from Boston College Center for Retirement Research found that 50% of working families won’t have a big enough nest egg to maintain their standard of living in retirement. Two reasons behind the lack of nest egg are low saving rates and lower stock market returns.

Consider a middle income person who wants to retire at age 65.  As the chart shows, he needs to save 15% of his preretirement income annually, starting at age 35. Note: that pace of savings assumes that the retirement account earns 4% a year more than inflation.

There are huge benefits by starting the saving and investing earlier as well as big benefit in delaying retirement:

  • If that middle income person starts at age 25 instead of 10 years later, he can reach his nest egg target size by saving just 10% a year.
  • But someone who does not start until age 45 must sock away a daunting 27% of income to retire at 65 or 20% to stop at age 67.

The data view someone who is 54 to 56 years old to be middle income if he earns $45,500 to $97,500. At ages 30 to 32, that range is $36,500 to $68,500.

By delaying retirement, you give yourself longer to contribute and can put in a smaller amount.  To illustrate, let’s return to that middle income person who starts saving at age 35 and needs to save 15% annually if he retires at age 65.  Delaying retirement will help.  If he wait until 67 to retire, he will need to save 12% a year, according to the Boston College study. If he keeps working until age 70, a 6% yearly savings rate will get the job done.

Iowa State University Extension and Outreach has updated Retirement publications. Retirement: Secure Your Future materials are available at www.extension.iastate.edu/humansciences/retirement.

Happy Saving – Susan

Goals, Retirement, Saving

Couples and Money

August 29th, 2014

YMYF-CoupleBankFormThis week I saw a report from a respected source which found that within couples, dishonesty about money is surprisingly common.  A third of those who manage money jointly admitted to hiding financial information from their partner – even hiding bank accounts!

Money management is a central element in any household.  Being straightforward and cooperative with your partner on money management brings at least three benefits:

  • Stronger finances and more progress toward financial goals.
  • Stronger, healthier relationship.
  • Children in the household will learn healthier money attitudes and develop stronger money skills.

Both partners in any couple need to be very aware of the household’s finances, including: how much money do you have, how much do you owe, what are the monthly bills, what insurance coverage you have and why, and where are important papers kept.  This is true even if one partner actually takes care of most financial tasks.  Why?

  • Survival – if something happened to one partner, the other needs to be able to find information and take care of business.
  • Shared power – any time all or most of the power (including power over finances) rests with one partner, the relationship is at risk.

Some strategies that can help you build joint money management and awareness include:

  • Shared financial goals, discussed and written down, then reviewed periodically.
  • Regular meetings (weekly, bi-weekly, or monthly) to plan for upcoming financial decisions and needs.
  • Equal access to account information (printed statements or on-line account access) – for bank and investment accounts and also for credit and debt accounts.

Sometimes people resist sharing all information because one partner gets irritated by certain small spending habits of the other (such as regular coffee purchases, or picking up magazines).  In addition, it can be tedious to keep track and report ever purchase of an ice cream cone or a new pair of socks.  When you think about it, It would be difficult to purchase gifts for each other if all spending must be disclosed!

A nice way to allow each partner some freedom for independent spending is for each to have an allowance.  (did you think allowances were just for kids?  Nope! They can be great for adults too!)  Then each partner has some autonomy, and some financial privacy within limits.

If you manage money with a partner, what can you do to make sure your financial relationship is cooperative and straightforward?

~Barb

Uncategorized

If you got married this year…

August 26th, 2014

wedding ringsIf you got married this year, or are going to get married this year, congratulations!

During the past months your mind may have been occupied with details of wedding, honeymoon, housing decisions, moving, or other events.  In the midst of those big events, it’s easy for some small-but-important details to be overlooked.  Remember to:

Notify Social Security and get a new Social Security card  if your name changed.  If you don’t, you’ll run into problems when it’s time to file your tax return!  (I speak from personal experience on this…)

Check your tax withholdings to be sure you are having the right income tax amount taken out of your paycheck.  Your filing status and total income will be different on this year’s tax return, and if you are having too much or too little taken out of your paychecks then problems can result.  The IRS Withholding Calculator is an easy tool to make sure you are on track.

Notify www.healthcare.gov   If you purchased health insurance in the new Marketplace, log in to your www.healthcare.gov account and let them know of the change in your marital status, household size, and income.  Changes in income and family size will affect the amount of “premium tax credit” which you receive toward your health insurance premiums.

Best wishes for “happily ever after.”  ~Barb

NOTE: the IRS has more info for newlyweds, including you tube videos and podcasts.

Consumer Knowledge , , , ,

Learning About Money

August 21st, 2014

cf_money  kidsWe were lucky enough to spend a day with my daughter and 6 year old grandson at the Iowa State Fair, a place where everyone is faced with a steady stream of smells and visually attractive displays to convince you to buy, buy, buy.

I was impressed watching my daughter as she helped my grandson begin to recognize that money is a limited resource and you have to make choices. She evidently had given him a set sum of money to spend. When he asked for something, she would let him know how it would impact his budget and then tell him they would come back for it later if he didn’t find something else he wanted more.

Children as young as 3-4 can begin to learn about money. Parents often share shopping time with their children, and can create appropriate learning activities while  they are doing their own shopping. Some of the lessons learned last a lifetime.   The Consumer Financial Protection Bureau has a resource for parents which identifies the most appropriate financial lessons to teach depending upon a child’s age. Learn more by visiting: http://www.consumerfinance.gov/parents/

How did our visit to the fair turn out? The big slide was closed because of rain, so Grandma didn’t get to treat, but the final choice made by my grandson was a camo belt. I think he’s on the right track.

Joyce

Consumer Knowledge, Saving, Smart shopping, Spending plans

Wealth

August 19th, 2014

Sold Home For Sale Sign in Front of New HouseWealth is measured by the assets you own minus your liabilities (debts). A typical list of assets includes real estate, stocks and other securities, retirement accounts, business property, and of course cash.  When it comes to smart investing, financial experts encourage being diversified across a variety of stocks to lower risk, but often individuals haven’t been encouraged to apply the advice to the big picture.

Home ownership, considered the “American Dream”, should be in balance with contributions to retirement accounts, cash savings and other assets.  What we’ve learned, after the 2008 Great Recession, is the recovery of wealth held as home ownership has been much slower than wealth held in the form of other assets. Unfortunately, this means middle and lower income individuals have and will continue to feel the impact of this sluggish real estate market.

Is the “American Dream” of owning your own home still good financial advice? Yes, if it is 25%-30% of your overall investments. The fact that qualifications for a home mortgage continue to remain high and it’s more difficult to purchase a home might not be as bad as you think if it results in increased efforts to build a cash reserve and contribute to retirement accounts.

Joyce

 

 

Saving

To Insure or Not to Insure

August 14th, 2014

You cinsurancean get health insurance, car insurance, homeowner’s and renter’s insurance. You can protect your wedding, your life and your vacation with insurance. There is even insurance for above average snowfall, kidnapping and ransom insurance, pet insurance, flood insurance and insurance for body parts like hands, if your livelihood depended on them.

Sometimes, it makes more sense to take the time and spend the money to prevent the problem rather than pay for insurance to fix the problem after the fact. For instance, mold could be an issue in my basement. If I…keep the humidity between 30% and 60% by using a dehumidifier or air conditioner; use throw rugs instead of carpets; use mold resistant paints and fix leaky pipes and faucets, I can eliminate my need to buy add-on coverage to my homeowners policy (an endorsement) for mold which would cost me a couple thousand dollars per year.

Getting insurance is all about taking the risk of loss and putting that burden onto someone else. Are you protecting yourself again a risk that you could easily prevent and eliminate the need and cost of insurance?  ~Brenda

Consumer Knowledge, Insurance, Smart shopping

Co-Housing

August 12th, 2014

Recentlimagey, I saw a special feature during the news that brought attention to a creative way two single moms were able to survive in the current economy. By combining households, working opposite shifts and sharing parenting responsibilities and resources, they were able to eliminate childcare expenses, keep a roof over their heads and food on their table.

More recently, I read about the co-housing strategy being applied by people in their 50’s and 60′s. About 1 in 3 Boomers are unmarried and when faced with retirement, many women (and some men) grow concerned about the future. Besides saving money and sharing resources, there is research that show people live longer, happier lives when they have the benefit of living with others…much like the Golden Girls, a sitcom of the 80′s.

There are challenges and many things to consider before deciding to share a home. Good housemates understand the sense of community and sharing space. They are stable, confident, responsible and flexible.

Before deciding to share a home, test out the idea by cooking together, going on vacation together and spending quality time together. It is important to make sure you are truly compatible. ~Brenda

 

Retirement, Smart shopping

Use Your Time Wisely

August 7th, 2014

We all have to wait for things – like repairs to your car, waiting to see a doctor, standing in line at the post office, or checkout line at the grocery store.  The last two items usually happen faster than the car repair or waiting for a doctor.  While waiting, do you grumble? read the array of magazines? or do you use your time effectively?

Recently I was waiting for a friend and I had brought a book that I was reading for church and a guidebook for an upcoming trip. Last week,  I waswifi_waiting waiting for my car tune-up; I knew that the waiting area had Wi-Fi so this time I brought my laptop to work on some news releases and answer other communication.  Another person had a book that she was reading.  Another person was using their Smart phone to respond to text messages.  They, like me, had planned ahead for the waiting time.

You might not like to stop and take the time to plan for the times you have to wait – but these situations do happen.  Be prepared.  Use your time wisely and get something accomplished.

~Susan

Consumer Knowledge, Goals

Skills to Pay The Bills

August 5th, 2014

Skills to Pay the bills

The unemployment rate is finally going down.  But you may still be looking for a job.  The U.S. Department of Labor has developed a curriculum with six short videos called Skills to Pay the Bills.

This curriculum was created for youth development professionals to use with youth ages 14 to 21.  It offers an introduction to workplace interpersonal and professional skills, and can be useful in both in-school and out-of-school environments. It can also be helpful to adults of any age.

The program is comprised of modular, hands-on, engaging activities that focus on six key skill areas: communication, enthusiasm and attitude, teamwork, networking, problem solving and critical thinking, and professionalism.  Each skill area provides a short video that captures the topic.  The videos are on YouTube and average around 2 ½ minutes long.  The videos can be accessed by anyone, whether or not they are participating in a structured program.

The full curriculum may be accessed at:  http://www.dol.gov/odep/topics/youth/softskills/

Good luck with your job search.

-Susan

 

 

Consumer Knowledge, Saving, Smart shopping, Uncategorized

Vehicle Recalls: Be Aware

July 31st, 2014

wrench

Vehicle recalls are happening frequently these days.  Nearly every major auto maker has issued a recall for some models in the last year or two.  Most recalls involve some type of repair that needs to be done, and will be paid for by the manufacturer.  As a consumer I have two concerns:

  • How will I know if the car I’m driving has a recall?  I might not hear it on the news and I might not receive a letter (even though they try to notify owners)…
  • What if I’m buying a used vehicle – how can I know if it has had a recall, and whether the needed repairs have been done?

Fortunately, a single resource addresses both of those questions:  www.SaferCar.gov .  At this site, you can look up a particular model and year to find out if recalls have been issued.  In addition, you can enter the vehicle identification number (VIN) of a vehicle you might want to buy, and you will be able to find out if needed recall-related repairs have been made on that vehicle.

This is one case where a vast computer database helps consumers stay safe.

~ Barb

Consumer Knowledge, Smart shopping ,