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  • Archive for 2009

    Test Your Financial Prowess

    Tuesday, November 17th, 2009


    How much do you know about retirement security? Find out by taking this quiz from the Wall Street Journal:

    1) What percentage of surveyed workers said that—in the wake of the financial crisis—they still plan to retire on their original schedule?

    a. 21%
    b. 31%
    c. 41%
    d. 51%

    (ANSWER: b. Only about one-third of workers, according to a survey in September by Bankrate Inc., said the recession hasn’t affected their planned retirement date. One in five said they anticipated leaving the office between one and five years later than planned.)

    2) An analysis of trading behavior over a two-year period in 401(k) plans found that the greatest percentage of workers made a change in their accounts:

    a. Once during the two years
    b. Twice during the two years
    c. Once each quarter
    d. Twice each year
    e. Never made any change

    (ANSWER: e. Looking at a group of 1.2 million workers in more than 1,500 retirement plans, a report from the University of Michigan found that 80% of workers initiated no trades in their accounts during the two-year period. Eleven percent made only one trade.”For the overwhelming majority of retirement savers,” according to the report, “there is no evidence of portfolio rebalancing, shifts in risk tolerance with age, or tactical portfolio changes.”)

    3) What percentage of participants age 55-64 in employer retirement programs made the maximum contribution to their accounts in 2008—and what percentage of workers age 50-plus took advantage of catch-up contributions?

    Maximum Catch-up
    a. 10%a. 13%
    b. 20%b. 23%
    c. 30%c. 33%
    d. 40%d. 43%

    (ANSWERS: B (maximum) and A (catch-up). Vanguard Group, in a survey of its defined-contribution plans, with more than three million participants, found that only one in five workers approaching retirement made the maximum contribution to their employer savings accounts—and only one in seven workers took advantage of catch-up contributions. )

    4) What percentage of workers and/or their spouses have tried to calculate how much money they will need to save for a comfortable retirement?

    a. 34%
    b. 44%
    c. 54%
    d. 64%

    (ANSWER: B. Fewer than half of surveyed workers in 2009, according to the Employee Benefit Research Institute, had put pencil to paper—a fundamental step in any effective retirement plan. The same percentage said they simply guessed at how much money they will need in later life.)

    5) In retirement, Social Security will likely replace what percentage of your pre-retirement income?

    a. 23%
    b. 33%
    c. 43%
    d. 53%

    (ANSWER: b. Thus, the question: If Social Security, according to the agency’s board of trustees, will provide approximately one-third of the amount needed for retirement, will your savings and assets be sufficient to generate the balance?)

    6) The single best cure for a battered nest egg is to:

    a. Invest more aggressively
    b. Save more money
    c. Work longer
    d. Plan to withdraw less money from retirement savings

    (ANSWER: c—for many people. There is, of course, no single best answer for patching a nest egg. A combination of two or more of these tactics probably would help many current and would-be retirees.)

    * WISER has many resources to help you plan for your secure retirement, including a worksheet to help you add up your sources of retirement income as well as a general budget sheet to help you get on track today!

    Source: Ruffenach, Glenn. “Have You Learned Your Lessons?” 14 Nov. 2009. The Wall Street Journal, Personal Finance. .

    No COLA this year??

    Tuesday, November 3rd, 2009


    The Social Security Administration’s announcement that it will not be providing Cost of Living Adjustment increases to its beneficiaries has caused quite a stir among seniors, nonprofits, and members of Congress. Here are some basic facts about the COLA itself, the implications of not having an increase, and the possibilities for other funding for Social Security beneficiaries.



    Social Security benefits are adjusted each year to fit the cost of living increase measured by the Consumer Price Index. Because there has been inflation every year since 1975, there has also been an increase in social security benefits to help elders with the increased costs of living. This year, however, as a result of the economic crisis, the cost of living actually decreased. Thankfully, Social Security benefits are never smaller than they were the year before, but that means this year benefits will be the same as last year (no COLA/increase).

    Even though the CPI measurement shows that the cost of living did not increase in the past year, elder advocates remind Congress that the economic crisis has hit seniors, as they pay high costs for healthcare and prescription drugs, and have few, if any, years of work to rebuild lost retirement savings. Because women live longer than men and have lower incomes due to time out of the workforce to provide caregiving and other duties, elder women are at a high risk of poverty.

    President Obama is supporting a bill to provide $250 to seniors, veterans, and individuals with disabilities to make up for the lack of a COLA. The bill is called the Emergency Senior Citizens Relief Act of 2009 (H.R. 3597, S. 1685). President Obama’s proposed legislation would cost between $13 and 14 billion, but Social Security Commissioner Michael Astrue believes this payment is necessary to protect elders against medical costs that have increased “at a rate of inflation much higher than any other commodity.”

    Opponents of the bill maintain that giving elders money even though the cost of living has not increased, will begin to transform the Social Security system into a welfare program. The COLA was designed precisely to increase only when inflation increased, and since that did not happen, seniors technically can purchase more with their benefits this year than last year. It is not Social Security’s responsibility to make up for the shortcomings of the overall economy, and beginning to compensate seniors in this way transforms the entire program from an earned benefit program to a welfare program. Finally, the country’s deficit is already large enough, without adding billions of dollars to the national debt. For these reasons, to opponents, Obama’s bill is unjustified and unnecessary.

    Regardless of whether you support or oppose Obama’s bill to provide funding for seniors this year, those are the basic facts about the COLA in our Social Security program. Check back for updates on the bill!



    Don’t Be a Statistic; Start Planning Your Financial Future!

    Friday, September 18th, 2009


    The Census Bureau’s newly released numbers highlight the challenges that almost all Americans are facing when trying to reach a financially stable retirement, and this challenge is even greater for women. A few findings from the report are as follows:



    • The wage gap between men and women grew between 2007 and 2008. Median earnings for women in 2008 were just $35,745, while median earnings for men totaled $46,367. Women are earning only 77 percent of what men earn, down from 78 percent in 2007.



    • The poverty rate increased this year also: the 2008 poverty rate was 13.2 percent, up from 12.5 percent in 2007. This is the first significant increase in the poverty rate since 2004.



    • The income deficit, the difference between a family’s income and the poverty line, for families in poverty increased between 2007 and 2008. This income deficit was largest for families with female headed households ($9,638). (Income, Poverty, and Health Insurance Coverage in the United States: 2008)


    Women clearly have many obstacles to overcome when planning for a secure retirement. According to a WISER Special Report, The Pay Gap is Connected to the Retirement Gap, almost half of all women work in lower-paying jobs that do not offer retirement plans or 401(k)s.

    In addition, women take, on average, 12 years off of work to provide caregiving. While women are busy taking care of family members, they lose years of income to add to their Social Security benefits and retirement plans.

    What Can you Do About it?

    While these statistics may seem daunting, there are lots of things women can do to start taking control of their financial futures, and the best time to start is now!



    Want an easy way to get on the right track? Check out WISER’s website to learn about saving and investing strategies. Educating yourself is a crucial step in planning your secure retirement!

    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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