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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. http://pbgc.gov/home.html  A search of the site didn’t answer the question about the grocery store, but I did find my husband’s pension fund.

Joyce

 

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

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

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

Retirement: Secure Your Future

July 24th, 2014

money jar - smallHow do I know if I’m saving enough for retirement? Should I accept an  early retirement offer? When should I start taking Social Security distributions? Will I have enough income or will I need to continue working?

To help individuals make informed decisions as they head toward retirement, family finance specialists for Iowa State University Extension and Outreach have revised the “Retirement: Secure Your Future” publication series. It is now available for free download from the ISU Extension and Outreach online store. “Retirement: Secure Your Future”  consists of 16 publications designed to inform adults of all ages of key concepts and management decisions related to retirement. The series includes tips for individuals just entering the workplace, worksheets to determine income needs in retirement, estimation exercises to see if you are on track or need to make adjustments in your contributions, housing and legal considerations as you age, and more.

The Retirement Transitions series (PM 1825 a-d) is a new addition for individuals nearing retirement. Four topic areas are covered that explain options for income distributions: Strategies for Retirement Income, Social Security, Required Minimum Distributions, and Income Annuities will explain the pros and cons of the choices retirees must make. Reading will prepare you for the conversations you may have with professionals when it’s time to structure your retirement income flow.

Whether you are 20, 30, 40, 50 or 60, taking time to do some retirement planning results in greater financial security.

Joyce

Retirement

It’s Money Smart Week – April 5-12, 2014

April 8th, 2014

images msw 2014

Money Smart Week, started 12 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 to promote financial education and a chance to learn too.  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 contests, poster contests and chances to win a prize makes the learning fun.  Educational program topics include: establishing a budget, protecting financial information, raising money-smart kids, and more.

Here is the website www.MoneySmartWeek.org for more details about activities in your communities.  Check out your local libraries for a display as well as programming.  Spread the knowledge!

~Susan

Consumer Knowledge, Credit, Insurance, Retirement, Saving, Spending plans

What Does Your Spouse Know About Finances…

January 14th, 2014

imagesMoneyIn most couples, one spouse manages the bills and the assets.   But both spouses need a baseline understanding of the family’s finances.  Only 28% of couples were “completely confident” that either spouse alone was prepared to steer their joint retirement finances (from a recent study from Fidelity Investments). 

Several years ago, I met a couple who had been married 45 years.  From day one, they sat down, opened their bills, and wrote out the checks each month together.  This was a healthy way to approach the couple’s finances.

As we know, things happen: Disability, Divorce or Death can place new responsibilities on spouses – even when they are unprepared.  The result can range from difficult to disastrous.  My aunt’s mother had never written a check, or driven a car in fifty-plus years of marriage, and had many struggles when she was widowed.These situations are out there and do happen.

Considering the “what-ifs” can open uncomfortable questions for couples who are not accustomed to sharing financial information.  We think it can wait until tomorrow, but talking about these issues helps us to plan ahead – and prevent those difficult or disastrous results.  

A key item of information to share is an inventory of assets. This includes the following items and more:

  1. Retirement accounts, checking accounts, whose name is on what account and remember to share the log-ins and passwords for the online assets; 
  2. Insurance policies and their status and the beneficiary for each account;
  3. Where the emergency fund is located and how to access it;
  4. Each parnter should understand both partners’ current and future income sources, including stock options and deferred compensation.

Other assets include: House, car, boat, airline miles, hotel points and vacation timeshares. There may be a collection that is valuable over time.  (Example: my aunt’s brother collected coins all over the world and when he died suddenly, his spouse did not have a clue of the value of the collection.)

Create a list in the order the assets should be tapped either in retirement or in case of emergency, with an eye toward maximizing the asset’s value and avoiding taxes or penalties for early withdrawal.  Put the list in a safe place after you have discussed it with your spouse.

~Susan

Goals, Insurance, Retirement, Saving, Uncategorized

Secure Your Social Security Account

September 12th, 2013

my-ssaWhether you realize it or not, you have an on-line account with social security.  If you’ve never checked it out, I recommend that you log in today, and set a user name and password.  Here’s why:

1) The “My Social Security” account is useful: it includes a record of your earnings for each year of your working life, and offers a tool that estimates what your retirement benefit will be if you claimn social security at different ages. Brenda wrote a post about it a while back.  It’s useful after you start receiving benefits, as well.

2) Just recently, however, something more alarming was brought to my attention by a social security staff member.  Until you log in, there’s a chance someone else could log in as you if they know several key facts about you.  If a malicious person did that, it would be illegal; I have no doubt it could be fixed, but it certainly would be a hassle, and it might cause more serious problems.  As a result, it is definitely wise to log in and set up your account as soon as possible — do it today!

~Barb

Retirement, Smart shopping

Aging In Place

September 10th, 2013

AgeInPlaceTwo years ago on a very cold winter night, the water pipes to the upstairs bathroom broke, ruining the ceiling in the kitchen. We decided this was the perfect time to remodel the kitchen. We moved a door, made the kitchen/dining room an open floor plan (and planned for a future ramp) which would allow easy access and mobility should one of us need a walker or wheel chair.

This past winter, the upstairs heat-run pipe broke, ruining the ceiling in the downstairs bathroom. My husband wonders if I did that on purpose, since I proposed another remodeling project.  This time we knocked out a wall between two bedrooms and created a master bedroom, walk-in closet and bath that included a shower that was wheel chair accessible.

Most Americans, according to AARP, plan to remain in their home as long as possible.  Home modifications can be costly, but when weighed against the cost of residential care, chances are high the modifications will seem cheap, particularly when the happiness of staying home is factored into the equation.  I am glad we are making these modifications to our home now, while we are both employed, able to do some of the work ourselves and able to do a little each year (spreading out the cost) rather than waiting till we are retired, on a fixed income and have to remodel everything all at once because of a sudden change in our health or mobility.  What are your plans for Aging in Place?  ~Brenda

Retirement, Smart shopping, Spending plans

my Social Security

June 4th, 2013

signin1A couple of months before each birthday, I would receive a Social Security statement in the mail. It provided estimates of benefits I would receive if I became disabled, or retired early…at full retirement age…or at the age of 70. It also provided a table with my yearly income which was always good to look over for errors.

Social Security stopped mailing these statements to individuals who had July 2011 birthdays, but anticipated resuming the mailings to workers when they reached 60.

Now, anyone age 18 and older can sign up for a my Social Security account to get a personalized online Social Security Statement – the same information that came on the statement in the mail.  In addition, the portal also includes links to information about other online services, such as applications for retirement, disability and Medicare.

Social Security beneficiaries and Supplemental Security Income (SSI) recipients can now access their benefit verification letter, payment history, and earnings record instantly using their online account.  The benefit verification letter serves as proof of income to secure loans, mortgages and other housing, and state or local benefits.  I also proves current Medicare health insurance coverage, retirement or disability status, and age.  People can print or save a customized letter.

This new online service allows people to conduct business with Social Security without having to visit an office or make a phone call. Beneficiaries also can change their address and start or change direct deposit information online. For more information, visit www.socialsecurity.gov/myaccount.  ~Brenda

Retirement