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  • Posts Tagged ‘financial planning’

    It’s Never Too Early to Talk to Children about Retirement

    Thursday, December 22nd, 2016

    Sonya Meets Her Future SelfRetirement is a concept that most adults don’t fully comprehend, let alone kids. 401(K)s, mutual funds, compounding interest, Social Security… all of the terms and jargon surrounding retirement saving can be confusing even to the most well-educated person. One of the best ways to make sure that children grow to understand the importance of retirement saving is to start planting the seeds of knowledge at a young age. The movement to educate children about financial literacy at school is gaining traction across the country, but it is still important to talk to children about the importance of long-term savings outside of the classroom too.

    A valuable tool for introducing the concept and value of long-term saving is WISER’s publication, Sonja Meets Her Future Self. The illustrated children’s book tells the story of a young girl named Sonja who travels through time and meets herself at different points in her life. The book was published in collaboration with the Wyoming Retirement System. You can download the book here to share with the children in your life. You can also watch a narrated video of the story. After you finish, here are some lessons you can discuss together:

    1. Make Sure To Always Save Part Of What You Make

    In the story, Sonja’s grandpa takes her to the bank to open an account, and every week after that, they go to the bank together to deposit part of her allowance. This is a great reminder to kids that even if they are making a small amount of money each week, it is worthwhile to put some aside. Once they get older and their paycheck grows, their weekly savings will as well. Although many transactions are done online, the weekly act of visiting the bank the way Sonja and her grandpa did can be a much more lasting reminder to always put something aside.

    2. When You Do Buy Something, Choose Something With Lasting Value

    Following her grandpa’s advice, Sonja begins saving a little bit of money every week. But he also makes sure to let her know that “it’s OK to spend money.” When you do, it should be for something really worthwhile. In Sonja’s case, she saved enough of her allowance each week to eventually be able to buy her first skateboard. She rides the skateboard all the time, and it even allows her to travel into the future—a purchase well worthwhile! When she is 18, Sonja tells her younger self that she used the money she has been putting away each week from her part-time job to buy herself a used car—another smart, worthwhile purchase. Sonja didn’t buy things she used once and then got bored with, she bought items with real value that she made long-term use out of. Her spending options are a great lesson that spending money is not bad, as long as you are smart about it.

    3. If You Save A Little Bit Over A Long Time, Eventually You Will Have A Lot

    Sonja started saving every week at the age of 11. At first, she only saved up enough to buy a skateboard, but eventually she had enough to buy a used car, and eventually enough to live off of in retirement. Her saving story is a great lesson that even if you only save a little bit, over a long time, it will grow.

    During this gift-giving season, share the story of Sonja with a child in your life.  It is a gift that can last a lifetime!

    Taking the First Step towards a Secure Financial Future

    Monday, February 1st, 2016

    CalculatorNow that the confetti has settled from New Year’s Eve celebrations, tax season is upon us, and you may have noticed a familiar document in your mailbox: your W2s.  Although preparing taxes can be an extra strain on what is an already busy schedule, it also presents an annual opportunity to evaluate your finances and think about long-term financial planning.

    Unlike not paying your taxes, nobody will come after you if you’re not planning for retirement—but that doesn’t make it any less essential. Failing to think about how you will continue to finance your lifestyle once you are no longer working can spell disaster in the final stages of life. The I’ll worry about it later attitude can mean putting off planning until it is too late.

    Facing retirement planning head-on can be daunting, but taking the process step-by-step can ease the intimidation factor. The first step in long-term financial planning is figuring out, based on your current financial picture, the difference between your expected retirement income and need. If this figure is calculated early, there will be plenty of time to take steps to close that gap. Research by EBRI shows that those who take the time to calculate that number- regardless of its size- feel more confident in their ability to afford a comfortable retirement.

    If you are married or have a partner, do this exercise together. However, women are likely to live longer than their spousesso keep in mind how your retirement income might change if your spouse passes away.

    The first step in calculating your expected retirement gap is totaling your expected sources of retirement income. There are usually three sources of retirement income, often referred to as the three legged stool: Social Security, employer-provided pensions or retirement plans, and personal savings and investments.

              1. Social Security: Social Security is an important source of retirement income, especially for women. To find out your Social Security benefit, sign up for an account at www.ssa.gov/myaccount.

              2. Pensions and Retirement Plans: Traditional employer-provided pension plans offer you a set amount each month after your retirement based on your salary and how many years you worked. 401(k) and 403(b)-type plans allow you to invest money in a fund that you will have access to when you retire.

              3. Personal Savings and Investments: Personal savings and investments may be spread throughout a number of accounts. This could include your home, however, since it is not a liquid asset, be careful how you calculate it, and consider whether you plan to rent or sell it after retirement.

    Refer to page 11 of WISER’s Financial Steps for Caregivers booklet for a worksheet that will help you add up your sources of retirement income.

    The second step in calculating your expected retirement gap is figuring out how much you will need in retirement. Many experts recommend expecting to need at least 85% of your pre-tax income in order to maintain your current living standard. WISER instead recommends 100% to take into account the longer life spans of women and to safeguard for unexpected healthcare costs.

    Calculate the difference between the numbers you found in steps one and two to find the gap between your retirement income and need. The good news is there are many easy-to-use online calculators that can help you with these steps. Check out the calculators tab at www.retireonyourterms.org for a variety of retirement planning tools. Once you have that number, you can begin to take steps to close the gap, such as prioritizing investing and finding more ways to save.

    Whether you feel you are over-prepared or woefully unprepared for retirement, acknowledging the current state of your finances is a crucial first step towards achieving security during your later years of 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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