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  • Archive for the ‘Finanical Literacy Month’ Category

    Get Back to the Basics: 8 Financial Questions You Should Know How to Answer

    Wednesday, April 30th, 2014

    Smart Piggy BankAs Financial Literacy Month comes to a close, we came up with 8 questions we think you should know how to answer. They range from personal questions to straight definitions. Try answering them first, and then take a look at our answers and explanations for more information!



    1)      What is your monthly budget?

    2)      What is your net worth?

    3)      What is your “full retirement age” to receive Social Security benefits?

    4)      Every year, each U.S. citizen is entitled to one free credit report from each of the credit bureaus. Do you know the names of these three credit agencies and how to access your credit report?

    5)      Do you know how compound interest works?

    6)      What is the difference between immediate and deferred annuities?

    7)      How much do experts recommend keeping in your savings account for “rainy days?”

    8)      When trying to figure out how much to save for retirement, you must consider how long you expect to live (keeping in mind that women live longer than men). What is a good rule of thumb to follow to figure how much savings you will need to cover your lifespan?


    Question 1: Monthly Budget

    The first step to saving is to know how much money you spend, where you spend it, and what you can cut. Obviously everyone’s budget is different, but we have some tips to help you figure it out. Start by adding up your total annual income (after taxes) including salary and money regularly received from any other sources. Divide this number by 12. This gives you an idea of how much you have to work with each month. Next, keep track of your expenses for a month and organize them into categories. Make sure to include all of your bills! If you’re having trouble thinking of everything you spend money on, take a look at our budget worksheet to see common categories and expenses. These two steps will help you understand your monthly budget by showing how much money you have and how much you’re spending. If you are spending more than you are earning, you will have to cut expenses or find ways to supplement your income.

    Question 2: Net worth

    Net worth is your total amount of assets, minus your liabilities. In other words, it is how much you own, minus how much you owe to others. Again, your net worth will depend on your own finances. It is important to know where you stand financially when considering all of your assets.  We have a worksheet to help you with this question!

    Question 3:

    “Full retirement age” is the age at which you can receive the full benefits of Social Security. If you were born in 1960 or after, your full retirement age is 67. If you were born earlier than 1960, your full retirement age varies slightly depending on the year you were born. Our chart can help you figure out when you are entitled to full Social Security.

    Question 4: Credit Reports

    The federally- recognized credit bureaus are Equifax, Experian, Transunion. If you plan on making a large purchase soon, you can choose to get all three at once. If you are not, consider receiving a report from only one bureau at a time and spacing them out so you can track your credit over the year. If you are paying off debt, you may want to view your credit report over time to see where you are improving and where you may need some assistance. The Federal Trade Commission has great information about how to order your credit report and imposter websites to look out for.

    Question 5: Compound Interest

    Compounding is a principle in which the interest you earn on your original investment can ALSO earn interest. So, for example, if you had $2000 in your account, with a compounded interest rate of 10%, at the end of the first year you would have $2200, which is your original amount plus interest. With compounding, at the end of your second year you would have $2420.  Your $200 worth of interest also earned interest. If your interest is not compounded, you would only have $2400.

    Compounding is great when it comes to saving because that extra interest adds up quickly! But be careful when loans or credit cards have compound interest. You will end up paying more each year.

    Question 6: Annuities

    Immediate annuities are ones that pay a fixed amount for as long as you live, or for a certain number of years as defined by your agreement. Deferred annuities are investments that delay payments until a future date. There are some great reasons to consider buying an annuity upon retirement, including having a fixed, certain income. But as with any financial product, you need to do your homework to make sure it is right for you.  We have more information and facts on our website.

    Question 7: Savings Accounts

    Experts recommend having about six months’ worth of living expenses saved in a savings account. This amount will help cover unexpected periods of unemployment or other emergencies. Even if you can’t easily save 6 months’ worth of income, any amount in an emergency fund is better than nothing.  Check out our tips on saving to help you reach this goal!

    Question 8: Live Long

    Start by estimating your expected lifespan. On average, people who reach 65 will live into their 80s. However, since 25% could live much longer, experts suggest saving for an additional 10 years. While this rule of thumb is not perfect, you are less likely to run out of money if you plan to live that much longer. For more tips and information on living to 100 and beyond, see our latest newsletter.

    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!

    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 $5,500 to your IRA; $6,500 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.


    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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