Archive for the ‘Retirement’ Category

myRA- Another way to Contribute

September 24th, 2015

125183558Changes – good changes – are coming in how individuals can make contributions to the new myRA accounts.  Our May post shared some details of how to enroll and who was eligible. At that time, the only way to participate was to have your employer withhold contributions from your paycheck. Beginning this fall, you can submit to the US Treasury your bank routing and account numbers for auto-withdrawals.  The new option  should make it possible for self-employed individuals to participate in this new Roth option.

When you file your tax return at the beginning of 2016 you will also be able to direct all or part of your  federal tax refund to your account. In the refund section of your tax return simply mark the “Savings” box, provide your myRA account and routing numbers, and designate how much of your refund you want to put towards your savings. If your income falls within the range that qualifies for the Retirement Savings Tax Credit, you’ll realize additional tax savings.


Retirement, Saving ,

Will Social Security Survive?

July 28th, 2015

1-intro-lgWhen I’m teaching classes about finance I frequently hear young adults question whether Social Security is going to factor into their retirement income. They often believe that it will run out of funds before they can receive any benefits. Is there truth to this assumption?

Each year the Social Security Trustees issue a financial report card. Beginning in 2020, in order to meet the current benefits schedule, Social Security will need to use taxes collected from payrolls, the interest earned by the Trust Fund and the principal in the Trust Fund. The projected date for using all the assets in the Trust Fund to pay benefits will be 2034. That doesn’t mean the program will be bankrupt. It means that benefits will have to be reduced to be in balance with the taxes collected from salaries. If the system keeps operating as is, you would still receive Social Security when you retire; it would just be a smaller amount.

The Trustees stated that an increase of 2.68% in taxes, 1.34% for you and 1.34% for your employer,  would delay the date when the Trust would be depleted to 2089. Putting this increase in place would mean that today’s 25-year-old worker could expect the full benefits that are promised today at the time they retire.

The question for young adults is “Are you willing to set money aside today for Social Security Benefits tomorrow?”

You can read the full Trustee report here:


Retirement, Saving

The Binder

May 27th, 2015


Two years ago, I piloted a program based on materials developed by the National Endowment for Financial Education: What Every Adult Child Should Know. By the end of the 7-week program, participants would have a binder full of information – the location of Wills, Powers of Attorney, Insurance Policy information; Balance Sheets, Spending Plans, Contact information for Doctors, Lists of medications, Property inventory, bank accounts and safe deposit boxes. All things needed to assist with the decisions made for the care for an aging parent.

One elderly gentleman in the class was the primary caregiver for his wife. He had tried to get their children to take the class so they would be better prepared to make decisions on behalf of he and his wife. They refused to come. Half way through the class, he fell and broke his hip and spent a couple of weeks in the hospital. His children became the caregivers for their mother in his absence. His children were lucky, because he had completed his binder. The children were able to step in and provide continuity of care, thanks to the information he had compiled in the binder.

I started to prepare my binder for the day when my children would need to make decisions for my husband and me. I also broached the subject with my dad and his wife but was brushed off – they assured us that they had everything in order: wills, advance directives, a trust. There was nothing to discuss.

On a Friday night in mid-March, I learned that my 80 year old dad, diagnosed with dementia, would be coming to live with me the next afternoon; his wife was no longer interested in being part of his life. By Tuesday, new Power of Attorney forms and Advance Directives for health care were drawn up, naming my brother and me as decision-makers on my dad’s behalf.  I wasn’t worried about money; Dad had worked hard his whole life and had more than enough resources to provide for himself and his wife: Long-term care insurance, Pensions, Social Security, Assets.

Getting the Power of Attorney document completed was valuable, but it wasn’t enough to access the resources needed to care for dad. My dad and his wife had put all their assets in a joint trust, and it took a lot of detective work to get access to his share of those assets.  It was a challenge to gain even basic income and insurance coverage because we were denied access to some key documents:

  • bank accounts
  • insurance policies;
  • pension documents
  • birth certificate
  • military discharge papers, which provide access to VA benefits.

We’ve learned a lot in the past couple of months.  One of the most important lessons?  The binder would have been useful in helping my dad.  I mentioned that two years ago I had started to prepare my binder to assist my children when they would need to make decisions on my behalf; however, I never completed the task.  I have now renewed my effort to complete my binder.  ~Brenda

Consumer Knowledge, Retirement

Temporary/Part-Time Workers Can Save!

May 7th, 2015

shutterstock_110517083Jim is a temporary full-time employee at an agriculture business; his job for the summer is to work with the grounds crew running a lawn mower. Nancy is going to start working part-time for the local grocery, stocking shelves and learning how to run the cash register. Both individuals would like to “save” a portion of their income.  I hope they know about and will consider the new MyRA, a Roth account available from the US Treasury.

The new account is available to anyone who is a wage earner and doesn’t have access to a retirement plan at work — in other words, anyone like Jim and Nancy who are temporary workers or work part-time. There is an income cap of $131,000 for individuals to use the plan. There are no fees for management and the Treasury is paying 3.19% return. Right now enrollment is limited to individuals whose employers use direct deposit for pay.

Why is this something to consider? Because you can withdraw what you’ve contributed after 5 years with no taxes or penalties. So Nancy, who is 16, would have an emergency account when she is 21 to pay for the cost of moving to take that first job after college graduation. Jim ,who is 18, will be 23 in five years and might be planning to get married and buy his first home. First time home owners can withdraw both contributions and earnings tax fee.  Even if they don’t use the account in these ways, they have a decent return on their savings.  What’s more, that savings won’t put a dent in any financial aid they qualify for when going to school, and they will have the added flexibility a Roth account provides when making financial decisions in retirement.


Retirement, Saving

Social Security Reform: 2005

May 5th, 2015

1-intro-lgMy co-workers know that when I don’t have a desire to finish a task I’ll procrastinate by finding something to clean, sort or do that involves anything but sitting and typing. During this morning’s exercise in avoidance,  I came across an old file titled, Social Security Reform.

The materials collected were from 2005. The hot political discussion at the time was to change Social Security and allow individuals to move part of their contributions into private investment accounts. By law Social Security funds must be invested in government securities, and many viewed this investment as secure but under par for return. The proposal was met with mixed reviews;  many of the documents I had collected questioned the impact. Evidence could be found that suggested such a change would result in reduced retirement income for some individuals.

Each year the status of the Social Security program and it’s Trust Fund are reviewed and recommendations for change are made. The recurring themes  resulting from the review are to increase retirement ages, increase withholding from pay, and raise the dollar amount that is subject to the withholding tax.

I guess Congress has the same bad habit that I do, if you don’t want to deal with it at the moment, procrastinate! Perhaps in this case it was a good thing, the loss of investments in 2008 made us all aware that with expectations for high return come the risk of high losses. It stopped the political promotion of the idea that we should invest Social Security funds in equities. Unfortunately, just like the work I left undone on my desk this a.m., the Social Security program still needs to be fine tuned. Perhaps, just like my work, it doesn’t need any creative touches but time on task.


Consumer Knowledge, Retirement

Money Smart Week – April 18-25, 2015

April 21st, 2015

IMG_0039Money Smart Week, started 13 years ago by the Federal Reserve Bank of Chicago, is designed as a public awareness campaign to help consumers better manage their personal finances. Here in Iowa, more than 200 partner organizations have joined in the fun, promoting financial education with many interesting opportunities to learn. All Money Smart Week programs are free, and strictly educational (no marketing allowed).

ISU Extension and Outreach has been a MSW partner for many years. Programs are offered for audiences from preschoolers to seniors. From scout nights to shred days, essay and poster contests, geocache for college cash, piggy banks, books, and kites – in many cases, a chance to win a prize makes the learning even more fun. Educational program topics include: establishing a budget, protecting financial information, raising money-smart kids, and more.

Go to for more details about activities in your area. Check out your local libraries for a display as well as programming. Spread the knowledge!

Consumer Knowledge, Credit, Goals, Retirement, Saving, Uncategorized

The Lost Pension

November 13th, 2014

imagesMoneyIf you’ve read the state-wide news recently you know that a grocery store in Iowa has filed for bankruptcy. Included in the details is the report that pension benefits have been suspended. I was puzzled by a press statement that an individual had lost a significant sum of retirement money. The wording might have been misleading because individuals don’t contribute to pension plans; they are totally funded by the employer. Unlike a 401K , what you have is a promise of future benefits if the company remains in business and is financially sound. So will the individual lose all those promised payments?  Maybe, maybe not.

Companies who still offer a pension plan can participate in the Pension Benefit Guaranty Corporation (PBGC).  PBGC  is a US government agency created in 1974. PBGC is not funded by general tax revenues; it collects insurance premiums from employers that sponsor insured pension plans. The premiums are invested to earn revenue and PBGC receives any remaining balances in a pension account if a company is dissolved due to bankruptcy.

The benefit for employees  who are eligible for an insured pension is a guarantee they will receive at least part of their benefits if the company fails. The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly. For plans that end in 2014, the maximum guarantee for workers who retire at age 65 is $59,318.16 yearly ($4,943.18 monthly). The guarantee is lower for those who retire early or when there is a benefit for a survivor. The guarantee is increased for those who retire after age 65.

At the PBGC website you can find out if your company participates; track down a lost pension; and find resources related to retirement.  A search of the site didn’t answer the question about the grocery store, but I did find my husband’s pension fund.



Insurance, Retirement

When Dad Speaks, I Listen…

September 30th, 2014

father and daughter picWhen my dad speaks, I listen.  He is not E.F. Hutton but he is the best I have.  My dad is pretty soft spoken so you need to pay attention.

Recently I was reading an article that made me think of my dad.  Another daughter had a conversation with her father in which he shared his go-to mantra:  “A big part of wealth building is to spend less and live within your means.  When the good years come along, sock away as much as you possibly can, because you never know when a bad patch might arise.”

My father shared with me to put money in an IRA annually.  At the time it was $166.66 per month and then there was benefit at income tax time too.  By doing that 30 plus years ago – and compounding and the time value of money – I have a nice pool of money for retirement.

Another lesson learned from my father was the process of buying a car.  I personally hate that it takes much longer than I think it should.  When I was in college, my dad was purchasing a car for my sister and we were in the showroom for four plus hours. – Does my dad like to dicker? – Yes.  I remember when the papers were signed that he was within $200 of an earlier offer.  I learned it pays to do your homework!  Decades later, the Internet helps with that homework, so you can go in with a game plan – knowing what your vehicle is worth as well as what the sticker price is before you buy.

Dad does present lessons to remember.

~ Susan

Consumer Knowledge, Credit, Retirement, Saving, Smart shopping, Spending plans

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

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

Happy Saving – Susan

Goals, Retirement, Saving


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