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What’s America Saves Week?

You might wonder “What is that?” America Saves Week is coordinated by America Saves and the American Savings Education Council.  Started in 2007, the week is an annual opportunity for organizations to promote good savings behavior and a chance for individuals to assess their own saving status.  Typically, thousands of organizations participate in the week, reaching millions of people.

The 2016 annual America Saves Week survey  assessing national household savings revealed:

  • Just two out of every five U.S. households report good or excellent progress in meeting their savings needs.
  • Fifty-two% are saving enough for a retirement with a desirable standard of living.
  • Only 43 percent have automatic savings outside of work.
  • More men (74 %) report saving progress than woman (67 %).
  • Those with a savings plan with specific goals (55 %) are making much more savings progress than those without a plan (23 %). Try saving at work: it is one of the most effective ways for people to save automatically. There are at least three ways you can promote automatic savings.

So, what can you do to start saving?

  • Try saving a portion of your pay automatically into a separate savings account through direct deposit.
  • Open or add to work-sponsored retirement accounts.
  • If your employer doesn’t offer a retirement plan, consider opening a myRA account.

myRA (my Retirement Account) is a new retirement savings program that helps you take control over your future. It is simple, safe and affordable retirement account created by the United States Department of the Treasury for the millions of Americans who face barriers to saving for retirement. https://myra.gov/how-it-works/

 

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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The Match: Is it enough?

If your employer matches your contributions to a retirement plan, then it is smart to contribute at least that much.  For example, if your employer matches your contributions up to 3%, then it’s smart to contribute at least 3% of your income. If you don’t, you’re turning down part of your paycheck.

Does that mean that if you’re maximizing your employer match, you’re saving enough for retirement? Not necessarily.

Your employer’s decision about how much they’ll match is not based on how much investment is needed to keep you secure. That decision is up to you.

Only you can decide how much to save toward your future.  Only you can decide to give up certain spending now, in order to have a more secure lifestyle in the future.  Our earlier post describes tools for assessing your progress toward a secure retirement.

Employers who offer a match typically match employee contributions up to 3-5% of income.  If it is a dollar-for-dollar match, then making full use of a 3% match means a total of 6% of your income is being put toward retirement (3% from you plus 3% from your employer).

Based on typical life expectancy and investment returns, experts now estimate that lifelong savings of approximately 15% of income is needed in order to provide retirement income equivalent to pre-retirement income. Of course, workers who will have other sources of retirement income (such as rental income or a traditional pension like IPERS) can achieve full income replacement with lower savings rates.  On the flip side, some workers may decide they don’t need full income replacement, and will be satisfied with a lower retirement income; a lower savings rate may work for those workers as well.

Bottom line? Planning for a secure retirement is up to you. Don’t rely on your employer’s match to determine how much you will save!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Roth vs. Traditional – Understand your Options

If stepping up your retirement planning is part of your new year’s resolution, one key is to understand the pros and cons of traditional tax-deferred accounts in comparison with Roth accounts.  Individual Retirement Accounts (IRAs) come in both “flavors,” and many employer accounts have both options as well.

The differences between Traditional and Roth affect your retirement in two main ways:

  1. How much money you’ll be able to spend in retirement after taxes; and
  2. Flexibility of withdrawals in retirement (this is affected in a couple of different ways).

Whether you are saving for retirement or are already retired and need to decide when to withdraw from which account, understanding the differences matters.  To better understand how those differences play out and how you might put them to work for you, ISU Extension and Outreach has a new on-line mini-lesson (20 min).  It’s part of our collection of retirement resources, which includes mini-lessons on five other topics and sixteen printable publications.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Year-End Statements = Opportunity

In the last ten days I have received year-end statements from all three of my retirement accounts.  The arrival of these financial statements presents great reminder to do a retirement check-up.  Now is the time to do a calculation to see whether your retirement investments are on track to give you a comfortable retirement.

There are many retirement calculators on-line; most investment firms have them.  They’re not all the same; different calculators present information in different ways, using different assumptions and perhaps emphasizing different aspects of the situation.

Calculators often have built-in assumptions about things like inflation, life expectancy, or investment return.  With that in mind:

  • Try to identify the key assumptions built into each calculator.
  • Use a variety of on-line calculators, rather than sticking with just one. Looking at the different responses you are given by different tools will make you familiar with a wider range of possibilities.

Most on-line calculators are commercial; they are posted by companies that have products or services to sell. Keep that sales motive in mind as you review the information you receive.  Occasionally, a tool will subtly steer consumers toward a particular type of product.  By being aware, you can avoid making decisions based on biased information.

Fortunately, there are free non-commercial retirement calculators available on-line as well. Here are two provided by non-commercial organizations:

  • Ballpark E$timateThis tool is, as its name suggests, a ballpark estimate.  It doesn’t go into great detail.  It is especially appropriate for people who are a long way from retirement, don’t have detailed retirement goals, but just want to be sure they’re on track.
  • Department of Labor Retirement Calculator This tool provides detailed on-line worksheets for examining retirement expenses as well as your income.  It is particularly useful for those who are fairly close to retirement and ready for more detailed planning.

If you work with a financial adviser, he or she plays a key role in your retirement planning; even then, however, it is wise to take an active role in the planning.  Your adviser will be the first one to tell you that you must be the one to make the final decisions.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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How Your Employer Impacts Your Finances

6870886851_76c9703cca_z retirement savingsI was visiting with a young family member and they shared their employer’s expectations for employee’s to donate generously to the corporate identified charities. The employer has set up an option through payroll to make those contributions and track involvement.

For families who are not in the stage of paying down debt or establishing a solid emergency fund, workplace giving through a payroll contribution has some advantages. For tax purposes, this method eliminates the need to get documentation about a donation directly from the organization, unless the contribution is more than $250 per month.  In some cases, employers provide a matching gift, so an initial donation could amount to even more giving. Additionally, a donation goes further because a payroll contribution reduces administrative costs by being funneled directly to the organization.

While working on changes to some retirement education programs, there were several articles extolling the positive impact when employers institute “automatic enrollment,” which means they withhold a certain percentage of their employees’ pay, put it into the 401(k) with identified investments, and then give the employees the opportunity to opt-out of the plan. The Bureau of Labor reports, of employees covered by a retirement plan at work, 30% fail to participate and estimates are the figure would drop to 15% if automatic enrollment was standard practice.

On both counts I see the value in the steps taken, but when you look more closely you discover some flaws. Financial planning emphasizes customizing steps to the specific risk factors of clients. A young family might be in a position where applying income earned to debt reduction makes more financial sense. A smart alternative for them would be to donate time and energy to local charities. Smaller amounts, lower than what an employer withholds from income that doesn’t compete with immediate needs, placed in wisely selected investments could also generate a realistic retirement nest egg.   In the long run, if debt is reduced and emergency funds are built, an employee might be less likely to borrow from the retirement account or liquidate it early.  As always, standard financial recommendations and actions might solve an identified lack of action, giving back to the community and contributions to retirement savings,  but can create unintended results. It’s okay to exercise your options and personalize how your paycheck is distributed.

Joyce

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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The Benefit$ of Returning to Iowa

vetsMy daughter, her husband and two kids have lived with my husband and me since her husband retired from the Air Force in late April. Last week their belongings arrived from Japan, filling our two-car garage. We are excited to have them living close now, after 6 years of living so far away. We are doubly blessed now that her husband has found employment 20 minutes from our home. Soon, they will purchase and move into their first home. In May of 2014, Governor Branstad signed the Home Base Iowa bill, making this all possible.

The Home Base Iowa bill was designed to support veterans already living in Iowa and to provide  financial and employment incentives to attract those leaving the military. My daughter and her family are the recipients of some of these benefits.

My son-in-law received preferential treatment as he began his job search.  His current employer was not actively seeking new employees when he willingly interviewed and hired him. His employer said he always tries to find a place for any vet wanting to stay in the state.

The Military Homeownership Assistance Program provides $5000 in down payment and closing cost assistance. At tax time, the assessed value of their home will be reduced for property tax purposes, by $1850, reducing their tax obligation.

When he is ready to retire, his retirement benefits will be exempt from state income taxes.

My daughter and family are excited about this new phase of life and look forward to moving into their new home. The VA Loan process is now in the third month and moves agonizingly slow, but the savings will be well worth wait.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Auto-pilot on your 401(k)?

money jar - cropDid your employer auto-enroll you in a retirement savings plan when you started your job?  If so, your employer is following a trend that has been emerging over the past ten years or so.  Auto-enrollment means just what it sounds like: you are automatically signed up for the 401(k) plan (or whatever plan your employer offers).  People can opt out, of course, but if they’re typical human beings, they probably won’t make the effort to opt out.  [Yep, most of us give in to inertia — just leave things the way they are!]

Auto-enrollment is a good thing, over all.  It helps people get started with retirement savings.  But just because you were auto-enrolled, that doesn’t mean that you should stick with auto-pilot for the long term.  Here are a couple of ideas to consider, either when you start or sometime down the road:

  • Consider gradually increasing your contribution.  Many employers auto-enroll employees at 3% of their pay.  Saving three percent over the long-term is not enough for most people to build retirement security.  If you increase your contribution every year when you get a raise, you’ll hardly miss the money.
  • Maximize your employer match.  Some employers match contributions up to 5% of pay — or higher.  If you are enrolled at 3%, but your employer would match 5%, then you’re not taking advantage of all your employer might offer.
  • Examine the “automatic” investment selection.  Most employer-based retirement plans offer several different types of investments (usually a selection of mutual funds).  Employers usually chose a moderate-to-conservative investment when they auto-enroll their employees.  At some point, when you have had a chance to learn about the options, it would be wise to evaluate whether the automatic option was the best one for you.

Read more tips from FINRA (www.finra.org), which is an excellent source for investing information.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Documents Needed When You Get “The Call”

papersAs our parents age, it is a time of celebration and preparation. Celebration because of all they have experienced and the wisdom they have shared with us. Preparation because end-of-life is a given for us all. Some people easily talk about their end-of-life wishes and some do not even want to go there.

My brother and I got “the call” on Saturday – our mother had a severe stroke. We drove the long hours to reach her and spend the last days by her side. She wasn’t able to speak or move one side of her body. She was in pain. She wasn’t going to recover. As we were together in the hospital, we quickly realized there were documents we needed with us so decisions could be made on her behalf.

We fetched the following documents:

  • power of attorney
  • long term care insurance policy
  • durable power of attorney for health care
  • living will (also called advance directives)
  • will

You may want to think ahead too of what your family will need if you are unable to make health care decisions for yourself or you are nearing the end of your life. It isn’t always easy to fill out this paperwork but doing so makes it much easier on the family that will care for you when the time comes. They then know your wishes and their roles in the decisions they will be asked to make.

To get you started, download PM 1463 from the Iowa State University Extension and Outreach Store – Money Mechanics: Estate Planning and Legal Issues in Later Life .

ISU Extension and Outreach Human Sciences specialists in family finance offer a workshop series called The Finances of Caregiving. Contact your family finance specialist about this new program. It helps the caregiver and care receiver organize all the information needed into one place and prompts discussions among family members to make decisions about end of life issues.

SandraGuest Blogger – Sandra McKinnon is a Family Finance Specialist that wants you to start preparing for end of life issues now.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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After The Call

phone callWe got “the call.” Mom had a major stroke one Saturday evening and was buried the next Saturday.

The chaotic week left my brother and I to work and talk together like never before.

The unexpected death put us in a whirlwind – emotionally, physically and psychologically.

There were initial decisions to be made with the funeral home plus meetings with the lawyer.

Add to the mix the fact that both of us live several hours away and are still employed full-time, and you can envision the hectic atmosphere.  We made hurried decisions – each individually regarding our own jobs and families, and also jointly regarding family needs and immediate plans.  And we acted on those decisions to the best of our ability, from the hospital and from the town of our loved one.

Thankfully, our mother was organized – in her own way. Finding necessary files and contact information was confusing, especially when we didn’t really know what we were to be looking for. For example, we spent time frantically texting relatives and digging through mom’s old high school and college yearbooks for information for her obituary and funeral program.

I’m a practical person and I think I’m organized for end of life paperwork. I now ask myself, what will make sense to my son when he has to come to town after receiving “the call?” How can I help him avoid the chaos and the whirlwind?

Before you receive “the call,” start a folder, notebook or file.

Add to it 2 quick things:

  • Your own obituary.  It took me 10 minutes to do my own, because I knew the information or knew where to look to get it. Doing so ahead of time saves my son from trying to find all the dates of marriage and graduations, and listing of relatives (alive or passed). It can always be updated.
  • The free publication Decisions After a Death. It will get you thinking about what documents you’ll need to get your hands on now and who to contact.

Then work on preparing yourself and loved ones. ISU Extension and Outreach Human Sciences specialists in family finance offer a workshop series called The Finances of Caregiving. Contact your family finance specialist about this new program. It helps the caregiver and care receiver organize all the needed information into one place, and prompts discussions among family members to make decisions about end of life issues.

SandraGuest Blogger, Sandra McKinnon is a Family Finance Specialist that wants you to start preparing for end of life issues now.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Money Smart Week 2016

Next week is Money Smart Week! Started 14 years ago by the Federal Reserve Bank of Chicago, Money Smart Week is designed as a public awareness campaign to help IMG_0039consumers better manage their personal finances. There are programs in all 50 states. 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 www.MoneySmartWeek.org for more details about activities in your area. Check out your local libraries for a display as well as programming. Spread the knowledge!

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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