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    • WISER’s Commencement Speech: Real Finances in the Real World

    May 22nd, 2013

    It’s graduation season and soon it will be time for many new graduates to start paying back student loans. Loan repayment can be a stressful part of post-graduation life, but there are ways to make repayment easier and quicker. Here are some tips to help gain control over student loan repayment plans. (And If you are not a recent graduate, share this important information with your children, grandchildren, or friends.)

    Make informed decisions

    If you are still in the process of applying to schools and are worried about student loans, the Consumer Financial Protection Bureau (CFPB), a government-run consumer watch-dog group, has a great new Paying for College web application that will help you assess the financial costs of different educational options available to you. You can use this web application to find out about different types of educational financing options, as well as use the cost comparison tool to analyze the financial consequences of different schools side-by-side.

    Be in the know

    Once you take out loans to finance your education, it is important to understand those loans and your repayment responsibilities. Make sure that you know the amounts of the different loans you have, the interest rates on those loans, and who your loan servicer is.

    A loan servicer is a company that handles the billing and other services related to your loan. It is important to know who is in charge of your loans so that if you have questions or run into any problems you know exactly who to call. If you have a federal loan, click  here to access the U.S. Department of Education’s website for information on your loan servicer. If you took out a private loan, call the company that issued your loan to find out who your loan servicer is.

    Next, find out exactly how many loans you have, what you owe on each one, and what the interest rate is on each one. Often, students take out multiple loans with differing interest rates. You want to know the breakdown of exactly how much you owe and how much interest is accruing every day.

    Create an online account

    To help you keep track of your loan information, create an online account with your loan servicer. Creating an online account allows you to clearly see what outstanding loans you have, what their interest rates are, how much interest you have accrued on each loan, and how much your payments are and when they are due. An online account will also provide you with contact information for your loan servicer. You can use your online account to set up automatic payments and also to go in and make additional payments whenever you have some extra cash. Setting up automatic payments is crucial. If you forget to make a payment, you will accrue late payment charges. Setting up automatic payments insures your payments are made on time.

    Pay down your interest

    This is important advice for anyone in the loan process, whether still taking out loans or already paying them back. Even if you are still in school, you can make payments to your loans. Set a reminder every week to pay off the interest that has accrued on your loans. This will keep down the amount you owe once you graduate. If you have already graduated, work towards paying off the loan with the highest interest rate first. This loan will likely cost you the most over time, so the sooner you pay it off, the less you will have to pay overall. Remember, every payment you make usually goes to paying off the interest you have accrued first and then goes to paying down your loan’s principle balance.

    If anything happens, get in touch with your loan servicer

    If you have a problem making your payments or miss a payment by accident, contact your loan servicer immediately in order to prevent late penalty charges and to work out a repayment option that works for you.

    Pay down your loans faster

    Try to put any extra money you can towards paying down your loans faster. The quicker you pay them off, the less money you will pay overall. Try putting any work bonuses you receive towards your loans. Another trick it so take your tax return and put the refund you receive exclusively towards your student loans.

    Graduating with debt is not easy, but with tips like these you can reduce the overall cost and the amount of time it takes you to become debt free.

    And remember parents (and grandparents), don’t dip into your retirement savings to help pay for your kid’s loans. As a parent or grandparent, you may feel compelled to help your kids pay off their loans. But remember, they have a lifetime ahead to work, save, plan and re-pay. You do not have that same kind of time to re-build your nest egg. Instead, help them learn how to manage their loans and make smart financial decisions.

    Posted in student loans | Comments »

    Celebrate Financial Literacy Month with a Checklist for the Decades

    April 24th, 2013

    9 Check ListApril is Financial Literacy month, and it’s a good reminder that financial literacy is a lifelong process. There are different financial needs you face at different stages of your life.

    Get into the habit of saving as early as possible. Your 20s is a great decade to learn about investing, to enroll in your company’s benefit plan (and contribute at least enough to get any company match!), to open up a savings account, and to open a personal retirement account like an IRA. Also, start working to pay down your debt. You may have taken out loans for your education, or to buy a car, and you may have racked up some credit card debt too. Even though your 20s is pretty young, paying down your debt should be a goal you start working on as early as possible.

    Your 30s are a great age to ramp up investing in your retirement. Hopefully you’ll be in a better financial situation than you were in your 20s and so you can start saving more money. Increase the amount you invest and contribute to your 401(k) and IRA. Shoot for contributing 10% of your paycheck.

    In your 40s, look into ways you can increase your retirement savings. There may be ways to save more that you don’t know about, so ask around. Consider hiring a financial planning professional if you are concerned that you are not on the right track.

    When you turn 50 you are eligible for IRA catch-up contributions. This means that you are able to contribute more money to your IRA than you were before, to help you save for retirement. Make sure to take advantage of this if you can.  Also, think about what insurance you might need in the future. Look into long-term care insurance. Generally, the younger you are when you enroll, the lower the premium will be.

    During your 60s, finalize your retirement strategy. Make sure you understand what your Social Security benefit will be at various ages and factor this into your decision on when to retire. If you cannot afford to retire, consider your options for continuing to work, even if on a reduced schedule. Remember, if you hold off on retiring, the higher your Social Security benefit will be when you do retire. And  don’t forget to apply for Medicare three months before you turn 65.

    Once you turn 70, your Social Security benefit can no longer increase, so start collecting it if you haven’t already. Also, if you have a traditional IRA that you have not taken withdrawals from yet, you must start taking money out after age 70 and a half. Otherwise, you may get hit with a big tax penalty. Required minimum distributions may also be required for other defined contribution plans like 401(k) plans. This is also the time to evaluate whether your income needs are being met. If they are not, you should review your options and try and find ways to reduce your living expenses.

    All of this information and more can be found on WISER’s checklist, Financial To-Dos for the Decades. This is great resource for yourself and for your friends and family in any stage of life.

    Keep in mind, it is important to know what to focus on now so that when you retire you are financially secure and can enjoy the decades to come!

    Posted in Finanical Literacy Month | Comments »

    Not your grandmother’s savings bonds: purchasing savings bonds electronically

    March 1st, 2013

    As highlighted in our last blog, savings bonds are still a great way to save. But how you purchase them is changing. Starting last year, the sale of paper bonds—the kind you used to be able to walk into a bank and purchase—were discontinued. You now have to purchase them electronically through the Treasury. This can take some know-how to get set up, and we’re here to help.

    The U.S. Treasury’s Bureau of the Public Debt (soon to be renamed Bureau of the Fiscal Services) operates an online account system in which U.S. citizens can invest in savings bonds, as well as marketable securities. The website is www.treasurydirect.gov. Outside of purchasing a savings bond through your tax filing, it is now the only way to purchase bonds. It can be a bit confusing, and the Bureau is planning an upgrade, but to help you now, here are some tips for setting up an account. Below is a picture of the home page, with a red arrow showing the link to “open an account.”

    Before you start, you need to have ready:

    • An e-mail account, and be able to access it during the sign-up process. You will be sent your account number and one time passcode in separate e-mails after you complete the initial application.

    • Your bank account number and the bank’s routing number—the money you use to purchase the bonds will be transferred from that account.

     

    Purchasing Savings Bonds once you’ve set up a Treasury Direct account

    Below is another screen shot of the home page with an arrow showing where you log in to your account.

    You will have to log into your account using the one-time passcode sent to you via e-mail.  If you are using your own computer and want to register it, check the box below where you enter the passcode, otherwise you will have to get a new passcode e-mailed to you every time you access your account.

    Once you have done that, you have to enter the password you created in the set-up process. You will then be taken to the Account Summary page; Click on the BuyDirect tab at the top of the page.

    There will be an assortment of Securities and Bonds listed; to purchase an I Bond, click Series I – an accrual-type security with a combination interest rate of a fixed and an inflation rate.

    You can set up automatic purchases (the “set and forget” kind of savings plan that is a sure way to build a nest egg) in the Purchase Frequency section.

    Happy Saving!

                           

    Posted in America Saves Week, I Bonds | Comments »

    U.S. Savings Bonds: Still a Great Way to Save

    February 27th, 2013

    This week is America Saves Week, a national effort to focus on the importance of savings. As grandmother would say, “it is not how much you make that matters, it is how much you save.”

    One of the most “American” ways to build savings is through U.S. Savings Bonds. But most people think of them as old-fashioned—the birthday gift you got from your grandmother (and as a 10 year old, you thought booooring!) U.S. Bonds, however, are still a very good way to save, and the way you can purchase them is changing.

    An easy way to buy bonds now is from your tax refund. Using IRS form 8888, you can “split your refund” and use part or all of it to buy a U.S. I Bond. The I Bond is issued at face value, unlike other bonds you may remember. A $100 bond costs $100, and interest is added to that amount. Its rate is reset based on the inflation rate. This feature– interest adjusted based on inflation–is something financial money managers seek for high-dollar portfolios for a reason: while inflation has been low recently, it is an economic fact of life and it will eat away at your savings.

    The current I-bond rate (in effect until April 30, 2013) is 1.76%–try finding a CD at that rate! Plus, you can buy one for as little as $50. There are no fees, they are guaranteed, and if you need money for an emergency, you can cash it out after a year.

    To bring attention to this opportune time to buy a bond, there is a national sweepstakes being held called “Save Your Refund.” Through a very simple on-line application, if you buy a savings bond through your tax filing, you can enter a weekly drawing for $250 (five winners a week) AND be included in the $25,000 grand prize drawing on April 19, 2013. This makes buying a bond not only smart, but fun. Check it out at www.saveyourrefund.com 

    When you purchase a bond via your tax filing, a paper bond will be mailed to you. This is now the ONLY way to get a paper bond because in January 2012, the U.S. Treasury stopped issuing them. This means the old-fashioned savings plan has gone electronic, and you must create an account on TreasuryDirect.com to buy bonds. It is not as easy as walking into the bank to get a savings bond, but in our next post, we’ll walk you through how to become a saver via TreasuryDirect.

    Posted in America Saves Week, I Bonds | Comments »

    America Saves Week: Set a Goal. Make a Plan. Save Automatically.

    February 25th, 2013

    America Saves Week 2013

    This year’s America Saves Week motto is Set a Goal. Make a Plan. Save Automatically. These are important steps in building yourself a secure retirement.

    Set a Goal.

    In our Winter 2012 Newsletter, we reported that the Employee Benefit Research Institute (EBRI) found that 42% of workers determine their retirement goal by guessing. And while some people might feel that knowing ‘the number’ is too scary, it turns out, figuring it out may make you more confident. According to EBRI’s research, workers who have done the math are far more confident about achieving their goal than those who haven’t. There are lots of online tools to help you set your goal.  To start, get help figuring out what kind of saver you are by taking this Retirement Personality Profiler quiz. Then read our article about online financial calculators and use them to help determine your retirement goal. You may need some help in figuring out some important retirement information, such as how long you are likely to live. This is a central question to retirement planning because you don’t want to outlive your money. Try taking the following longevity calculator Living to 100. Additionally, you may wondering what the impact on your take home pay will be if you increase your contribution to your 401(k) plan. Use this payroll deduction calculator to find out.

    Make a Plan.

    Once you have your retirement goal, it’s time to make a plan for how you will achieve it. Part of this plan is knowing that you will have financial setbacks in life and you need to be prepared for those by setting up an emergency fund. Your emergency fund should equal three to six months of your expenses (rent, food, transportation), and will allow you to pay for unexpected costs that arise, such as needing to fix your car, having to pay for an unexpected health problem or suddenly losing your job. Keeping that in mind, start saving for retirement as soon as possible. To begin, you should be participating in a retirement savings account.  If your employer has a company retirement plan–like a 401(k)—sign up if you haven’t already.  Make sure you are contributing enough to receive the maximum amount of any company match, if not more.  If you do not have a company plan, or you want to open other retirement accounts, look into a traditional IRA or Roth IRA. Find out the rules regarding these accounts. Total annual IRA contributions for 2013 are capped at $5,500 (or $6,500 for people 50 and older). If you are able to contribute the maximum and have money left over, invest it. If you are not able to contribute the maximum, don’t worry! Contribute what you can and it will add up.

    Save Automatically.

    It is best to save automatically so that you don’t spend that money elsewhere. Have a certain amount of money automatically taken out of your paycheck or bank account every month and put into your retirement savings accounts. Many employers allow you to divide your paycheck into different accounts through direct deposit. Take advantage by putting part of your pay into a savings account. If you get paid in cash, take a small amount to the bank to deposit into a savings account each week. Another quick way to immediately start saving is to have your tax refund automatically put into a savings bond. Visit the IRS website for information on how to set that up. You can also use this time to see what other tax credits you might be eligible for. For example, learn about the Federal Saver’s Tax Credit and Earned Income Tax Credit to see if you qualify.  And be sure to check WISER’s blogs later this week for more information about saving with savings bonds.

    Posted in America Saves Week | Comments »

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    WISER

    About Us

    WISER is a nonprofit organization that works to help women, educators and policymakers understand the important issues surrounding women's retirement income. WISER creates a variety of consumer publications including fact sheets, booklets and a quarterly newsletter that explain in easy-to-understand language the complex issues surrounding Social Security, divorce, pay equity, pensions, savings and investments, banking, home-ownership, long-term care and disability insurance.

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