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  • Posts Tagged ‘finance’

    How To Keep Retirement Savings On Track While Caregiving

    Thursday, November 30th, 2017

    women

    November is National Family Caregivers Month—an annual event celebrated by WISER and partner organizations of family caregivers across the country. It’s a time to raise awareness of family caregiver issues, celebrate their efforts and increase support. This month’s theme “Caregiving Around the Clock” emphasizes that caregiving is a 24 hours a day, 7 days a week job.

    Caregiving is a consuming role—physically, mentally and financially—yet many who take on the work don’t identify with the job or fully realize the toll it takes. Often, it comes on unexpectedly, and sometimes the responsibilities may be shared. For example, caring for an elderly parent might be divided between siblings or a paid worker. Still, even if you are doing the actual work of caregiving part-time or just a few hours a week, the effort affects every part of your life. It becomes something you have to think about and plan for around the clock.

    The financial challenges of caregiving often come as a surprise to caregivers, as the day-to-day costs can really add up. Many smart retirement planners who believe that they have everything properly planned for are still often unprepared for the financial shock that caregiving for a family member can bring.  Even if the role of caregiver comes unexpectedly, there are ways to keep your retirement savings on track while caring for others.

    Create, and stick to, a household budget.

    Caregiving can affect your daily and long term spending in unexpected ways. That’s why it’s important to create and follow a budget. If you already have one, adjust it to consider your new expenditures. You may also have a lower income if you decide to stop working or reduce your hours. While you’re at it, have financial conversations with the person you’re providing care for, too. It’s easy for costs to balloon, and when mental and physical capacities diminish, the elderly can also be at an increased risk for being victimized by financial scammers.

    Try to avoid leaving your job.

    It can be tempting (or in some cases a necessity) to run to a loved one’s side when they need care. Doing so, though, can be extremely harmful to your finances. Leaving your job will mean losing compensation and benefits, and maybe skills and contacts. If at all possible, try to exhaust all other options before leaving your job or see if you can at least work reduced hours instead of quitting entirely.  If you have a retirement plan or pension through your employer, try to work at least as long as needed to be fully vested in your company’s retirement plan. If you are cutting back on hours, see if there is a minimum number of hours you can work to get reduced benefits.

    Be smart about the financial support you provide your loved ones

    Don’t drain your savings to help the person you are caring for financially. Usually, the major expense for older adults is health care. Drug plans run through Medicare and private companies may help cover the rising costs of medicine. Low-income seniors may also be eligible to receive help paying their premiums or for additional uncovered medical costs. Information about getting help paying for Medicare costs is available at Medicare.gov. The Eldercare Locator, a public service of the U.S. Administration on Aging is also a great resource for connecting with trusted resources in your community that can help with caregiving and other services for older adults and their families.  Visit eldercare.gov or call 1-800-677-1116.

    For more information and resources for managing your finances while caregiving, download WISER’s publication: Financial Steps for Caregivers. Included in the booklet is a budget worksheet that includes categories for caregiving costs.

    Here’s Why Financial Literacy Is For Everyone

    Thursday, April 20th, 2017

    little blog pictureApril is Financial Literacy Month.

    “Financial Literacy” is a somewhat new term and trend in the United States, and for that reason, some find it off-putting and discouraging. Don’t let the fancy phrasing scare you, though. The reality is, financial literacy simply means knowledge about money and savings. Even though most of us didn’t learn the basics of financial knowledge in an educational setting (hopefully that will change in the future!), important, life-changing saving information is easily within reach.

    In fact, understanding of the importance of financially literacy only became widespread in the past fifteen years or so. In 2002, the U.S. Department of Treasury created the Office of Financial Education as a way to organize its efforts in the area. The next year, Congress passed the Fair and Accurate Credit Transactions (FACT) Act, which established the Financial Literacy and Education Commission, a group that later published a “National Strategy on Financial Literacy.”

    That means that, hopefully, financial education will become a standard and required part of education. However, just because it wasn’t something you learned about in school doesn’t mean you cannot become extremely knowledgeable on investing, saving, retirement and other financial topics. It is important for everyone to educate themselves about their finances, but know that you don’t need to be a financial expert to make smart decisions. Some basic information can go a long way.

    In particular, it is important to know what you should be doing at every stage of life to make sure you are on track financially and preparing for long term financial security. WISER’s “7 Life Defining Financial Decisions” booklet breaks down key topics into stages and explains how to approach each one.

    For example, when it comes to jobs and careers, when taking a job, consider not only salary but also benefits. There are two basic kinds of employer-sponsored pension plans: defined benefit and defined contribution plans. When leaving a job, it is important to consider that changing jobs, even for higher pay, can cost you a bundle in lost benefits and retirement income. If at some point in your life you decide to stay home full time, think through the family finances, including retirement planning. Where there are large upsides, you will lose compensation, benefits, job skills and contacts if you leave work completely.

    The booklet offers more advice on financial decision-making at every stage of life. By focusing on life stages and basic information, financial literacy is within reach for everyone.

    Why Saving As A Young Person Is Important

    Thursday, March 23rd, 2017

    “Live while you’re young!” “Youth is wasted on the young!” “I’ll sleep when I’m dead!” “Live in the moment!”

    Everywhere they turn, young people are inundated with messages encouraging them to live now, worry later. In financial terms, that translates to “spend now, save later”—and it’s a hard message to ignore. The internal justifications to spend instead of save often sound like this: all of my friends are planning an expensive trip overseas, why shouldn’t I join them? Why not rack up credit card debt—I’ll be able to pay it off later, when I’m older and have a higher paying job! I’m only young once!

    The same mentality leads to young people to taking out large amounts of student loans, beyond what they may be able to afford or what may be worthwhile. According to new research from the National Endowment for Financial Education, more than 70% of millennials (people ages 23 to 35) have at least one long-term debt, which could be student loans or something else, like a car loan. About 34% of millennials have two long-term loans. These numbers alone are troubling, but to make matters even worse, the research also found that about a quarter of millennials with a retirement account took out a loan or hardship withdrawal in the last 12 months. This emphasizes that many young people are prioritizing the present much more than the future when it comes to finances.

    This trend is putting young people at a serious financial disadvantage—making it more difficult to purchase a home, open a business, or pursue other ventures later in life. Here are several additional reasons why saving as a young person is important:

    Financial Habits Are Set When You’re Young

    The same holds true for any habit: the earlier you adopt it and the more often you carry it out, the more likely it is to stick. Being smart with money is no different. If you are careless about money for most of your life, it will be extremely difficult to switch gears and become a scrupulous saver once there is truly something to save for—like a child or a home. The inverse is also true. If you are smart with money from a young age and put in place good habits, like putting a certain amount of your paycheck each month into savings, you are likely to carry those habits later in life.

    Saving a Little Now Equals A Lot Once You Retire

    We often hear about “the power of compound interest.” We,ll that power is only powerful if you start saving young. The more years that go by, the more powerful compound interest becomes. If you save a little bit as a young person, that money will accrue interest and, by the time it’s time to retire 30 or so years later, a little bit of money will have grown into a lot of money. You can only take advantage of this is if you save early.

    Cost of Living Grows As You Age

     It’s easy to assume that because you can support yourself now, you’ll be able to do so later. However, the cost of living grows dramatically as you age. The odds increase that you will become a caregiver, in terms of both finances and time, for an aging parent or a child. Medical costs also increase as you age. Your salary will also likely grow, but it may not grow enough to support these costs, let alone enough to put aside enough for retirement, when your income will decrease dramatically. Saving early helps ensure financial stability throughout your entire life.

    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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