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    Celebrate Financial Literacy Month with a Checklist for the Decades

    Wednesday, 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 »

    WISER’s Financial Literacy Series: “I’m Ready to Save, Now What?”- IRAs

    Friday, April 22nd, 2011

    Whether you have $25 or $2,500 to spare, there are smart ways to invest your money to build your retirement savings. WISER is highlighting different strategies for saving, depending on your financial situation, age and personal feelings about risk taking. Use this brief to brush up on your financial knowledge to make the most of your money.

    Investigating IRAs:


    If your employer does not offer a pension plan or 401(k) type plan, it is especially important that you save for retirement in other ways. One good option is to open an Individual Retirement Account (a.k.a. IRA).

    There are two main types of IRA’s: Traditional IRAs and Roth IRAs which provide straightforward avenues through which to save money long-term.  You can open an IRA at many financial institutions, including banks, mutual fund companies and brokerage firms.  Look for a large, “no-load” mutual fund company, which means that it will not charge commission for services. You can ask for free information on IRA’s from your financial institution of choice to help you choose which IRA fits your unique situation.  Here are some basics to get you started on your decision:

    IRA Basics

    When you open a Traditional or Roth IRA, you choose the combination of investments you want to incorporate from a menu of stocks, mutual funds, CD’s, money market investments etc. In 2011, you can contribute up to $5,000 to your IRA; $6,000 if you are 50 years or older. Keep in mind that you can contribute less than the maximum amount also, every bit helps. The contribution year for your IRA starts on January 2 and ends on April 15 of the next year.

    In general, you will be penalized if you withdraw from your IRA before you reach 59 ½ years of age.  A few exceptions to this rule include: withdrawals for college tuition, certain medical expenses and first time home purchases.

    Traditional vs. Roth IRA- What You Need to Know:

    A significant difference between Traditional and Roth IRAs is how they deal with taxes.  The funds you contribute to your Traditional IRA are tax-deferred, so you pay nothing now but must pay taxes when you withdraw money at retirement. Conversely, you must pay taxes on your Roth IRA contributions, but when you withdraw funds, you can do so tax free.

    A potential perk of having a Roth IRA is that you are not forced to take minimum distributions in retirement; you can leave it untouched if you prefer.  This is important to note because your IRA tax benefits can continue even after you die for the person that inherits your IRA. (**This is the person you name as your beneficiary in the adoption agreement when you first open your IRA.)

    Check out WISER’s Fact Sheets on Traditional IRAs and Roth IRAs for specific information on contribution and deduction income limits.

    IRAs are an important piece of retirement security, especially if you do not have access to an employer-sponsored retirement plan.  Make sure to consider your financial situation and speak with someone at your preferred financial institution about using an IRA to invest in your retirement.

    Posted in Finanical Literacy Month, Roth IRA, Traditional IRA | Comments »

    WISER’s Financial Literacy Series: “I’m Ready to Save, Now What?”- CDs

    Friday, April 15th, 2011

    Whether you have $25 or $2,500 to spare, there are smart ways to invest your money to build your retirement savings. WISER is highlighting different strategies for saving, depending on your financial situation, age and personal feelings about risk taking. Use this brief to brush up on your financial knowledge to make the most of your money.

    Get Clued In on CDs:

    CD’s, or certificates of deposit, are available at most banks, credit unions, and savings and loan associations. They are similar to I bonds in that they are intended to be kept until their maturity date, at which time you withdraw the money you originally invested along with accumulated interest. Although they can be less convenient than traditional savings accounts because you cannot simply withdraw money whenever you wish, they generally earn higher interest rates. Because they are insured, they are also “risk-free.” If you are nearing retirement age (for example, retiring in one to three years), CDs are a good investment choice for you as a short-term investment, especially because they are very low-risk.

    CD Basics:

    The terms of CDs run from three months to five or more years in length, and they usually have fixed interest rates. This means that the interest rate will remain constant throughout the entire term of the CD. The minimum amount required to purchase a CD can vary depending on the financial institution where you purchase it. If you wish to receive some money during the course of the CD’s term, you can request to have the interest mailed to you intermittently, or have it moved to a checking or savings account. However, this reduces the amount of interest you earn on the CD, because you are preventing the interest from being compounded.

    Things to Think About:

    Closing Your CD: If you withdraw your money before the end of the CD’s term, you will usually be penalized for it. Unless you have an urgent need for the money, it is best to wait until the end of the CD’sterm to take out any funds.

    “Rollover”: When the end of your CD’s term is approaching, your financial institution will typically send you a document stating that you can withdraw your funds or have them “rolled over” into a new CD. If you wish to withdraw the money, make sure you know if there is a time window during which you must withdraw, otherwise the bank may deposit your money into a new CD. This means you will once again have to wait for the end of the term to receive it without penalty.

    Callable CD’s: Callable CD’s are just like regular CD’s except the issuer has the right to “call” or redeem your CD from you before it matures. This is convenient for the issuer because, if interest rates decline, they may be able to borrow money for cheaper than what they are paying you. The issuer will likely call the CD and you will have to invest your money in another CD or investment vehicle.

    Make sure you know if your CD is “callable,” and if so, after what period of time. A CD’s call date is NOT the same as its maturity date. A CD’s call date could be one year, while its maturity date is 20 years down the road. WISER’s fact sheet on “callable CDs” has useful information on the subject.

    The Securities and Exchange Commission also offers useful tips on things to consider before purchasing a certificate of deposit.

    Stay tuned for our next installment in the Financial Literacy Series: Investigating IRAs

    Posted in CDs, Finanical Literacy Month, Investing, Savings | Comments »

    WISER’s Financial Literacy Series: “I’m Ready to Save, Now What?”- Mutual Funds

    Friday, April 8th, 2011

    Whether you have $25 or $2,500 to spare, there are smart ways to invest your money to build your retirement savings. WISER is highlighting different strategies for saving, depending on your financial situation, age and personal feelings about risk taking. Use this brief to brush up on your financial knowledge to make the most of your money.

    Demystifying Mutual Funds:

    Mutual funds can be a great investment choice for people of all ages. Although there are hundreds of different mutual funds, knowing a few general facts about them can help get you started.

    What Are Mutual Funds?


    Mutual funds are simply investments that pool the money of thousands of small investors into stocks, bonds and other securities.  The key aspect of mutual funds is that you purchase shares of several stocks, not just a single stock. This means mutual funds are less risky because your money is spread throughout several investments, whereas single stocks are based on individual companies and are subject to more volatility, or risk.

    What Should I Consider When Choosing Mutual Funds?

    With hundreds of available mutual funds to choose from, it is important to know what you are looking for in order to make a wise investment choice. In choosing how much risk to take (in general: the higher your potential rate of return, the higher the risk), the main thing you should think about is how far away you are from retirement. If you are not planning to retire for another 20 years, your investment can contain riskier funds because if you lose money, you likely have time to make it back.  When you begin to near retirement age, you should move your funds into those with lower risk and return, to secure your investment.

    Personal feelings should also be taken into account when investing. It is essential to consider your general financial situation in order to determine how much risk you can take with your money.  If you are risk averse, and do not think you will feel comfortable riding through the highs and lows of the market, it may be better for you to simply accept lower return but with peace of mind. Finally, educate yourself about the various expenses tied to certain mutual funds.

    How Do I Buy Them?

    If you purchase mutual funds through your employer’s 401(k) plan, you will be given a menu of options from which to choose that should offer well-balanced choices.  If you are buying them on your own, you have a few choices:

    – You can buy mutual funds directly from the fund companies, such as Vanguard or Fidelity.

    – You can buy them from a “supermarket” which is basically one company offering investors access to a broad range of mutual funds.  You can set up a brokerage account from one of the fund companies that will enable you to buy funds from other providers. *Be aware of fees, however, that might come along with the convenience of using a “supermarket.”

    – You can choose to go to a financial advisor or broker to purchase mutual funds. Because you have personal assistance, this option is often accompanied by sales charges, so be sure to ask about those possible fees upfront.

    Stay tuned for our next installment in the Financial Literacy Series: Get Clued in on CD’s

    Posted in Finanical Literacy Month, Mutual Funds | Comments »

    WISER’s Financial Literacy Series: “I’m Ready to Save, Now What?”- I Bonds

    Friday, April 1st, 2011

    Whether you have $25 or $2,500 to spare, there are smart ways to invest your money to build your retirement savings. WISER is highlighting different strategies for saving, depending on your financial situation, age and personal feelings about risk taking. Use this brief to brush up on your financial knowledge to make the most of your money.

    The Ins and Outs of I Bonds:

    Do you have an extra $5 each week that you could set aside towards an investment? If so, after five weeks, you can purchase an I Bond from the U.S Department of the Treasury.  I bonds can be purchased for as little as $25 or $50, all the way up to $30,000 each year. This is a great low risk investment for those who have fewer funds to work with, and/or are getting closer to retirement age.

    What are I Bonds?
    I bonds are savings bonds with interest rates tied to inflation. This interest is added to your I bond each month and compounded every six months. The current composite rate of I bonds is .74%, which holds true until May 1, 2011.  Your I bond will earn interest for 30 years, after which you should cash it in.  You can cash in your I bond any time after 12 months, but if you do so before you have had it for five years, you will lose out on at least three months of interest.

    How Can I Buy an I Bond?

    There are a few ways that you can purchase I bonds:

    – You can buy electronic savings bonds through www.treasurydirect.gov.

    – If you prefer a paper bond, you can purchase one through a bank, and it will be mailed to you within 15 days.

    – One of the newer options available is to purchase bonds using your tax return.  You can choose to receive all or a part of your tax refund in the form of a paper I bond, in multiples of $50.  Just fill out Form 8888 and include it with your federal tax return.

    – Lastly, you can set up an account called a Payroll Savings Plan which permits you to make continuous I bond purchases.  You must set up a Payroll Savings Plan in a Treasury Direct Account and then coordinate this with your employer. For more details, visit: http://www.treasurydirect.gov/indiv/help/TDHelp/help_ug_302-PRSPLearnMore.htm.

    Why Should I Purchase an I Bond?

    Treasury bonds (of which I bonds are one type) are considered to be “risk free,” unlike stocks.  I bonds are predictable and reliable, making them good options if you are saving for something like education: you can predict how long it will take you to save what you need, while earning more interest than a traditional savings account.  The safety of I bonds is also advantageous if you are nearing retirement and do not want to risk losing some of your savings without ample time to earn it back.  Finally, the interest you earn on any U.S. savings bond is exempt from state and local income taxes. You do not have to pay federal income tax until you redeem the bonds, or after 30 years.

    Stay tuned for our next installment in the Financial Literacy Series on: Demystifying Mutual Funds.

    Posted in Finanical Literacy Month, I Bonds | Comments »

    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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