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  • Archive for the ‘Retirement Readiness Checklist’ Category

    Taking the First Step towards a Secure Financial Future

    Monday, February 1st, 2016

    CalculatorNow that the confetti has settled from New Year’s Eve celebrations, tax season is upon us, and you may have noticed a familiar document in your mailbox: your W2s.  Although preparing taxes can be an extra strain on what is an already busy schedule, it also presents an annual opportunity to evaluate your finances and think about long-term financial planning.

    Unlike not paying your taxes, nobody will come after you if you’re not planning for retirement—but that doesn’t make it any less essential. Failing to think about how you will continue to finance your lifestyle once you are no longer working can spell disaster in the final stages of life. The I’ll worry about it later attitude can mean putting off planning until it is too late.

    Facing retirement planning head-on can be daunting, but taking the process step-by-step can ease the intimidation factor. The first step in long-term financial planning is figuring out, based on your current financial picture, the difference between your expected retirement income and need. If this figure is calculated early, there will be plenty of time to take steps to close that gap. Research by EBRI shows that those who take the time to calculate that number- regardless of its size- feel more confident in their ability to afford a comfortable retirement.

    If you are married or have a partner, do this exercise together. However, women are likely to live longer than their spousesso keep in mind how your retirement income might change if your spouse passes away.

    The first step in calculating your expected retirement gap is totaling your expected sources of retirement income. There are usually three sources of retirement income, often referred to as the three legged stool: Social Security, employer-provided pensions or retirement plans, and personal savings and investments.

              1. Social Security: Social Security is an important source of retirement income, especially for women. To find out your Social Security benefit, sign up for an account at www.ssa.gov/myaccount.

              2. Pensions and Retirement Plans: Traditional employer-provided pension plans offer you a set amount each month after your retirement based on your salary and how many years you worked. 401(k) and 403(b)-type plans allow you to invest money in a fund that you will have access to when you retire.

              3. Personal Savings and Investments: Personal savings and investments may be spread throughout a number of accounts. This could include your home, however, since it is not a liquid asset, be careful how you calculate it, and consider whether you plan to rent or sell it after retirement.

    Refer to page 11 of WISER’s Financial Steps for Caregivers booklet for a worksheet that will help you add up your sources of retirement income.

    The second step in calculating your expected retirement gap is figuring out how much you will need in retirement. Many experts recommend expecting to need at least 85% of your pre-tax income in order to maintain your current living standard. WISER instead recommends 100% to take into account the longer life spans of women and to safeguard for unexpected healthcare costs.

    Calculate the difference between the numbers you found in steps one and two to find the gap between your retirement income and need. The good news is there are many easy-to-use online calculators that can help you with these steps. Check out the calculators tab at www.retireonyourterms.org for a variety of retirement planning tools. Once you have that number, you can begin to take steps to close the gap, such as prioritizing investing and finding more ways to save.

    Whether you feel you are over-prepared or woefully unprepared for retirement, acknowledging the current state of your finances is a crucial first step towards achieving security during your later years of life.

     

    5 Steps for Your End-of-Year Financial Planning

    Wednesday, December 17th, 2014

    As 2014 comes to a close, this is a perfect time to review your finances, make last minute adjustments to your savings, and plan for the future. These five steps will help you make the most of your December and ensure you start 2015 as financially fit as you can.

     

    1. Add money to your 401(k).

    Give yourself the gift of retirement savings. In 2014, you can contribute up to $17,500 to your 401(k) plan. If you are 50 or older, you can contribute an additional $5,500 as a catch-up contribution. WISER recommends making contributions throughout the year, but even if you cannot reach the max, contribute at least enough to get the benefit of your employer match (if your company offers one).

    It’s tempting to put off saving, especially during the holidays when you are buying gifts for others, but contributing to your retirement now saves you more in the long run.

    2. Open up a Roth Individual Retirement Account (IRA).

    If you don’t have a retirement plan through your employer, this step is the next best one to take. Find out if you are eligible for a Roth IRA. The contribution limits to IRAs are smaller than 401(k)s — $5,550 in 2014, or $6,500 if you are over age 50.

    To learn more about IRAs and how to decide which type is best for you, see our page about ways to save for retirement. You have until April 15, 2015 to make IRA contributions for 2014. 

    3. Don’t forget to take your required minimum distribution.

    If you are 70½ or older, you generally must start taking money out of your taxable retirement accounts by December 31st. Of course, there are a number of exceptions to these very complicated rules so check with your tax advisor or accountant. If you do not take out the required minimum, you may have to pay a steep penalty to the IRS. Not sure what your required minimum distribution is? The financial industry regulator, FINRA, offers a calculator to help you figure it out. You can also check out this WISER newsletter for more detailed information.

    5 documents.hand copy4. Find and review important documents.

    At bare minimum, you should review your beneficiaries on financial accounts and insurance policies annually. Make sure you have a designated beneficiary for each account or policy. If there were any significant changes in your life and family such as a birth, marital status change, or death, your accounts should reflect the change. Now is also a great time to gather documents and records you’ll need to complete you 2014 tax returns. If you start preparing now, you can file for your tax refund sooner!

    We also recommend reviewing your personal end-of-life documents such as your health care directive. While this time of year may be busy, it’s also a perfect time to consider letting others know where these important documents are kept. Step 6 of our Financial Steps for Caregivers booklet offers lots of information on the types of documents you need. Most Americans do not have up-to-date documents, so start thinking about how you can prepare your family’s paperwork.

    5. Make tax-effective, charitable contributions.

    You probably know that you can deduct all kinds of charitable contributions from your taxes, including cash, stocks, donated clothing, and even the cost of ingredients you bought for a soup kitchen! In order to maximize the benefit from these charitable gifts, you’ll need to itemize your deductions when filing your taxes. In many cases, donating is a great way to lower your tax bill. (If you are looking to make any end-of-year donations, you might consider a gift to WISER!)

     

    The holiday season is a busy time of year, but it also provides a great opportunity to get your finances organized and on track. If you can’t take all of these steps right now, choose at least one or two of them and commit to checking them off your list. Then ring in the New Year with even greater peace of mind about your financial future.

    Happy Holidays!

    Your 2012 Spending Plan

    Monday, January 16th, 2012

    This new year you may find yourself in a new financial situation. Whether for better or worse, it is important to take the time to assess where you stand and make a spending budget for 2012. (more…)

    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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