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  • Archive for February, 2014

    Putting America Saves Week Into Action– Step 5: Save at Tax Time

    Friday, February 28th, 2014

    For my last blog for America Saves Week, the theme is “Save at Tax Time.”

    One simple way to save is to put away that tax refund. Resist the urge to spend it all and instead put some of it in your savings account or retirement fund. The IRS makes saving during tax time pretty simple. There is a specific form, an 8888, which allows you to split your refund between two accounts.

    I filed my taxes several weeks ago and already received my refund. Many people treat their tax refund as a windfall of money and spend it immediately. WISER instead encourages saving during tax time as it is a perfect time to add a little more to your savings. So when I filed my taxes, I sent my refund to my savings account. I choose to save all of my refund, partly because it was a pretty small amount to start, but also because I would rather have that money for a rainy day than splurge on something I do not absolutely need.

    Another great way to save at tax time is to make sure you get all the tax credits for which you are eligible. Common tax credits that are often overlooked by many who are eligible is the Saver’s Tax Credit and the Earned Income Tax Credit.

    While I do qualify for those tax credits, I did learn that I qualify for Free File. Free file allows tax payers whose income is below $58,000 to file taxes for free. The IRS links to professional software programs that assist you while completing the paperwork.
    Filing online worked for me because my taxes are pretty simple and I am very comfortable with technology, but if you do not think this is the right option for you there are other resources available to help during tax time. Many local libraries and other organizations particiapte in Volunteer Income Tax Assistance, which provides free tax help if you meet certain income requirements. If you are 60 years or older, you can also participate in the Tax Counseling for the Elderly Program, which specializes in questions about pensions and retirement issues that are unique to seniors. You do not have to face the complicate issue of taxes alone

    For more assistance tools, take a look at this website.

    Make sure you ask whoever helps you file your taxes how you can send part or all of your refund to a savings account or retirement fund (like that IRA we talked about setting up yesterday!).

    Thanks everyone! It was great going through the steps of America Saves Week with you! Keep on saving!

    Putting America Saves Week Into Action– Step 4: Save for Retirement

    Thursday, February 27th, 2014

    Thursday’s step for America Saves Week is saving for retirement. See? I told you we would revisit the topic!

    Women & Retirement FactsSaving for retirement is important for everyone, but women face unique challenges that often cause financial hardships during retirement. Women are twice as likely as men to be poor in retirement, and as they grow older they grow poorer. Since women live four years longer on average than men and are three times more likely to live alone, not having enough saved for retirement is a significant problem. WISER encourages everyone to start saving for retirement early, but even if you feel a little behind with your savings, it’s never too late to start.  Every step you take now can go a long way towards achieving a more financially secure future.

    One of the best solutions to increasing your retirement savings is to participate in your company’s 401(K) plans and maximize those benefits. Try to contribute enough to receive the company match. If you are already contributing that much, plan to increase the amount you contribute by 1% in 2014.

    For me, a company 401(K) is not currently an option. I work several jobs, but they are all part time so I do not qualify for company retirement plans. This situation is one that many women face. But it does not mean that you can’t open your own retirement account.

    Now, I can guess what you’re thinking. I write about retirement issues. How can I not have an account already set up?

    The truth is I have a lot of “reasons” to wait. I am only in my early 20s. I’m a graduate student with student loans. After tuition, books, rent, and food, every penny I can save usually goes towards paying interest on my loans so that when I graduate I do not have even more loans to pay. Graduation is right around the corner, and retirement just seemed like something I could get to later.

    Working at WISER certainly exposed me to reasons why this attitude could cost me in the long run, which is why I choose “Retirement” as my reason for participating in America Saves Week. Today, I decided enough with the excuses. Setting up a retirement account now does not cost me excessively, while delaying it hurts me in the long run.

    Where to start? My first step was to research the different type of retirement accounts. I found this article particularly helpful in explaining the difference between a Tradition and a Roth IRA. After reading that article and a few more, I decided on opening a Roth IRA. One of the main differences between Traditional and Roth is that with a Traditional IRA you contributions are tax deductible (tax free), but your withdrawals are taxed. In a Roth IRA, you pay taxes on your contributions, but withdrawals are tax free. This makes Roth IRAs ideal for someone who can expect to be in a higher tax bracket when she retires. Since I am just starting my career, I know that I will be in a higher tax bracket in forty years.

    My next step was to research where to open my account. I am a fan of the breakdown by NerdWallet, but make sure you do your own research. I chose an option that had no fees or minimums, but limited stock trading options.  This option works for me since I don’t plan on doing much trading.  Once you pick your financial institution, it’s a pretty simple process to open your IRA, but it can be a time consuming. I filled out all of my information online. It took roughly 30-45 minutes but that includes taking extra time to make sure all of the information was correct. And now I have an IRA!

    Based on yesterday’s theme, I also set up transfers to my IRA automatically. Because I am still concerned about my student loans, I chose to transfer only once a month. Like WISER says, start small and grow from there.

    Putting America Saves Week Into Action– Step 3: Save Automatically

    Wednesday, February 26th, 2014

    ASWGraphicIt’s day three of America Saves Week. The strategy for today is “Save Automatically,” which is also an overall theme of America Saves Week. Saving automatically is also one of WISER’s favorite pieces of savings advice. It must be pretty important then, right?

     

    There are some great benefits to saving automatically. Most of us think about saving as an afterthought. We get our paychecks and then allocate the money for our bills, rent, groceries, and other every day expenses. Only then do we think about saving what is left, which often isn’t much. By setting up a method to save automatically, you put saving first! You don’t have to think about it or take any extra steps each month to save, and before you know it, you will have built up your savings account or retirement funds. If you save $50 a month ($25 from each bi-weekly paycheck), by the end of the year you will have you save $600 . After five years, you’ll have $3,000 PLUS compound interest. Check out WISER’s Basics of Saving and Investing to learn more about what you can do with the money you save.

    stack of coins greenSaving automatically is my favorite step so far. Why? Because it’s easy! Digital technology makes saving simple. My bank, like many others, allows me to set up automatic transfers between my checking and savings accounts. I set up an automatic, recurring transfer between my checking and savings accounts every two weeks (each time I get a paycheck). By doing this, I won’t even feel like I am missing money because it will be in my savings account before I can even think of spending it.

    An alternative way to start saving is through your employer. Many businesses allow you to split your paychecks between two accounts. You can ask your employer to deduct a certain amount and transfer it to a retirement or savings account automatically. Mentally this may be a better option for some because then you do not even see the money “disappearing” from your checking account. It goes right into your savings before you even get your paycheck.

    My bank also offers a “save the change” option. At the end of each day, the bank rounds my purchases up to the nearest dollar and transfers the difference to my savings account. I enrolled in this today! While the coin jar I set up on Monday would be helpful, I know that I use my debit card more than cash. Since this option is basically the same idea, I thought it would be an even better way to boost my savings account. My coin jar may feel neglected, but my savings account will still feel the love!

    Do any of you have other ways to save automatically? Let us know!

     

    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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