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    Why Saving As A Young Person Is Important

    Thursday, March 23rd, 2017

    “Live while you’re young!” “Youth is wasted on the young!” “I’ll sleep when I’m dead!” “Live in the moment!”

    Everywhere they turn, young people are inundated with messages encouraging them to live now, worry later. In financial terms, that translates to “spend now, save later”—and it’s a hard message to ignore. The internal justifications to spend instead of save often sound like this: all of my friends are planning an expensive trip overseas, why shouldn’t I join them? Why not rack up credit card debt—I’ll be able to pay it off later, when I’m older and have a higher paying job! I’m only young once!

    The same mentality leads to young people to taking out large amounts of student loans, beyond what they may be able to afford or what may be worthwhile. According to new research from the National Endowment for Financial Education, more than 70% of millennials (people ages 23 to 35) have at least one long-term debt, which could be student loans or something else, like a car loan. About 34% of millennials have two long-term loans. These numbers alone are troubling, but to make matters even worse, the research also found that about a quarter of millennials with a retirement account took out a loan or hardship withdrawal in the last 12 months. This emphasizes that many young people are prioritizing the present much more than the future when it comes to finances.

    This trend is putting young people at a serious financial disadvantage—making it more difficult to purchase a home, open a business, or pursue other ventures later in life. Here are several additional reasons why saving as a young person is important:

    Financial Habits Are Set When You’re Young

    The same holds true for any habit: the earlier you adopt it and the more often you carry it out, the more likely it is to stick. Being smart with money is no different. If you are careless about money for most of your life, it will be extremely difficult to switch gears and become a scrupulous saver once there is truly something to save for—like a child or a home. The inverse is also true. If you are smart with money from a young age and put in place good habits, like putting a certain amount of your paycheck each month into savings, you are likely to carry those habits later in life.

    Saving a Little Now Equals A Lot Once You Retire

    We often hear about “the power of compound interest.” We,ll that power is only powerful if you start saving young. The more years that go by, the more powerful compound interest becomes. If you save a little bit as a young person, that money will accrue interest and, by the time it’s time to retire 30 or so years later, a little bit of money will have grown into a lot of money. You can only take advantage of this is if you save early.

    Cost of Living Grows As You Age

     It’s easy to assume that because you can support yourself now, you’ll be able to do so later. However, the cost of living grows dramatically as you age. The odds increase that you will become a caregiver, in terms of both finances and time, for an aging parent or a child. Medical costs also increase as you age. Your salary will also likely grow, but it may not grow enough to support these costs, let alone enough to put aside enough for retirement, when your income will decrease dramatically. Saving early helps ensure financial stability throughout your entire life.

    America Saves Week: Spotlight on Latina Caregivers

    Monday, February 27th, 2017

    America Saves Week (February 27 – March 4, 2017) is an annual opportunity for individuals to assess their savings and take financial action. Each year, we and other organizations across the country encourage savers – or potential savers –to set a goal, make a plan, and save automatically.

     

    America Saves Week is a time when everyone, no matter their income level, age, ethnicity, or gender can think about their savings habits. Even if you already save, the week offers an opportunity to take stock of your savings, make sure you are on track and perhaps encourage others in your life to save more.

    This year, WISER is partnering with MANA, A National Latina Organization to highlight the importance of saving, particularly among Latina caregivers. Caregivers are vulnerable to some unique challenges when it comes to saving. Oftentimes, caregiving responsibilities cause caregivers to have to leave their workplace or reduce hours, and many pay out-of-pocket for caregiving costs which can impact their own future financial security. A MetLife study showed that caregivers lost $303,880 in wages, Social Security benefits, and private pensions over their lifetime as a result of caregiving responsibilities.[i]

    For Latina caregivers, the challenges of caregiving are compounded by additional factors that make it all the more difficult, yet even more important to save.  While many Americans struggle with long-term financial security, the wealth gap is especially pronounced for Latinas – wealth of the typical white household is 10 times that of the typical Hispanic household. Latinas earn $.55 for every dollar white, non-Hispanic men earn, and median wages for Latinas in the United States are $30,293 per year, compared to median compared to median wages of $55,470 annually for white, non-Hispanic men.[ii]  Finally, Latinas live longer on average and therefore need more retirement income.

    Saving can be difficult when it feels like your income is already being stretched too thin. But it is important to remember that you can start small, with small savings goals, and build on those savings over time. You might be surprised how quickly it can add up, which can provide additional motivation to save.  This week, WISER encourages everyone to visit American Saves (www.americasaves.org) for savings tips, tools and resources.  If you don’t have access to a retirement savings account through an employer, another great way to save is through the myRA; a savings account available through the U.S. Treasury.  There is no cost to open a myRA and there are no fees.  You can contribute any amount that fits your budget, even if it is just a few dollars at a time. Learn more about this savings option at www.myra.gov.

    For more saving and retirement planning information, and resources specifically for caregivers, check out WISER’s guide, “Financial Steps for Caregivers: What You Need to Know About Protecting Your Money and Retirement.”

    [i] The MetLife Mature Market Institute, MetLife Study of Caregiving Costs to Working Caregivers, June 2011

    [ii] U.S. Census Bureau. (2015). Current Population Survey (CPS), Annual Social and Economic (ASEC) Supplement.

    Why Women Pay More For Healthcare- And What It Means For Retirement

    Thursday, January 26th, 2017

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    It’s no secret that women pay more for many things—compare the prices of women’s drugstore products to men’s and the difference is obvious. But did you know women will also pay more for healthcare over their lifetimes? A recent report revealed that, on average, a 30-year-old healthy woman will pay $118,632 more for healthcare over her lifetime than a man. The report was released by HealthView Services, and it’s worth a look—it includes several projections, included expected Medicare costs depending on age, race and health conditions.

    More specifically, the report predicts that women who are currently age 30 will likely live to 91-years-old and spend $548,098 on healthcare. Comparably, men will live to 87 and spend $429,466 on healthcare. The difference is attributed to the longer life expectancies of women.  Healthcare costs are extremely high in the final years of life, explaining the more than $100,000 difference.

    So what does this all have to do with retirement? Those high healthcare costs will be levied on women during their retirement years, at a time when funds are already tight for women who, on average, have less in savings than men. The retirement gap exists primarily because women on average earn less than men during their careers and are more likely to take time off for caregiving. As a result, HealthView Services calculated that women end up with 23% less in Social Security payments than men.

    These numbers are a reminder that women need to factor in the growing cost of healthcare as they age into retirement planning. Women are also more likely to need long-term care because of their longer life expectancies. According to a report from Genworth, the cost of that can be very expensive—the average cost of a private room in a nursing home is $92,000 per year and home care costs are on average about $3,500 per month. In addition to greater life expectancies than men, women spend more twice as many years in a disabled state as men do: 2.8 years if they live past 65, 3 years if they live past 80 (American Association for Long Term Care Insurance).

    When planning for retirement, it’s extremely important to factor in the high, growing cost of health care in your final years. For more information and resources on health care and retirement planning, including long-term care, visit WISER’s page on health care.

    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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