| Social Security unveils new "retirement estimator" |
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On Monday, the Social Security Administration introduced a new "calculator" Web site for those interested in determining their retirement benefits from the agency. I tried it out and found it speedy and informational. Women 60 & Single want to know how much estimated money they would receive at retirement age 62, or 66 or beyond can use the site to make those calculations. Here's the Associated Press story below on the new service.
On the Net:
Online Social Security estimator: http://ssa.gov/estimator/
By ANDREW TAYLOR<P>
<B>Associated Press Writer<P>
WASHINGTON (AP) — People planning for retirement got a new tool this week: a fast and easy online estimator for their Social Security benefits.
The Social Security Administration unveiled its new retirement estimator on its Web site Monday. It takes just a few points and clicks and some personal information to produce benefit estimates within a few minutes.
The new calculator will be followed this fall by an updated online application for benefits that Social Security Administrator Michael Astrue promises will reduce application time from the current 45-minute process to 15 minutes — and eliminate the need for follow-up visits to agency field offices.
“These initiatives will help us better handle the baby boomer wave and make it easier for the public to do business with us online,” Astrue said.
Currently, workers get an annual benefit estimate mailed to them. It’s based on prior earnings but assumes people’s salary stays the same until retirement age. The online calculator supplements the annual mailing but won’t replace it.
The online calculator permits future retirees to create a more accurate estimate of benefits since people can factor in a higher estimate of their upcoming earnings. People can also factor in different alternatives for retirement ages.
The calculator replaces a laborious online calculator that required people to type in their earnings history, which can involve guesswork for people who don’t keep voluminous records. The new version uses the Social Security database to provide accurate earnings information, though the calculator requests the most recent year of earnings since there’s a lag in getting salary information into the Social Security database.
There’s inherent uncertainty about the estimates since for many people it’s not easy to predict future earnings. That’s especially the case for younger workers.
“The closer you are to the retirement age, the more accurate this estimate is going to be,” Astrue said.
What is more, Social Security benefits are likely to be at least somewhat curbed in future years as lawmakers shore up the system to prepare for the retirement of millions of baby boomers. Social Security now runs a surplus and is expected to do so until 2017, when the agency will have to start cashing in special Treasury notes to help pay benefits.
Social Security’s trustees say it’s possible to produce actuarial balance over the next 75 years in various ways, including an increase in the combined payroll tax paid by workers and employers from 12.4 percent to 14.1 percent or an immediate reduction in benefits of 12 percent. More likely there will be some combination of the two.
Astrue also assured reporters that the agency has taken steps to make sure people’s personal information won’t be divulged. The agency has also worked up a new security system for when it accepts online applications, though many foreign-born recipients will still be required to furnish proof of retirement age at field offices.
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| Taking cues from my mother |
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Hi on a Monday morning .....
My 93-year-old mother, Helen Rose, is visiting. We had a fabulous weekend together at my house with my two sons and grandson, Jason. There are plenty of 60 & Single women like me who are working to hold on to a full-time job, deal with children and at the same time keep an eye on aging parents. As for my mother, she's been remarkably lucky to have lived in the same house on her farm for the past 71 years. She moved there in 1937 when she married my father and has been able to sustain her satisfying life in the country despite declining health affected in recent years by a stroke. I've often marveled at my mother's take on life because at the core are her financial goals shaped by the Great Depression and by her general optimism. The two have combined to give her a practical approach to finances, her family and where she fits in the scheme of things. This almost Scarlett O'Hara "tomorrow is another day" view of reality has sometimes been irksome to me because she refuses to be pulled into the dark abyss of anxiety where I sometimes live. She pays off loans early, never carries credit card debt and manages her money with an eagle eye. Sunday, she was explaining how she wants to close a savings account with U.S. Bank because it's earning only 1 percent and move it to a 3-percent Wells Fargo account. I was questioning whether all the effort was worth it. Her answer, "You have to take what you can get." Scientists have apparently studied people like my mother who tend to see the optimistic side of things. The Wall Street Journal just today carries such a report. Click here to read how people such as my mother and others stay positive about money and life.
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| Whose fault is it when you miss the retirement goal? Yours, of course. |
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Dear 60 & Single gang.....
OK, I'll admit it. My 30 years of saving and investing have not been as successful as they should have been. At 61 and soon-to-be single, I figure I have just over half the real savings I need to someday retire. So whose fault is it? Mine, of course. But on the other hand some of my assumptions based on widely distributed investing advice did not pan out as "they" said it would. I can break my miscalculations into these basic categories:
No 1. As a wife and mother, I accepted a secondary income role in relationship to my spouses.
Lesson: A man is not a financial plan.
No. 2. As a careful investor, I put savings into equity mutual funds and let them ride.
Lesson: If they aren't performing better than the market, get out. For instance, after 20 years with a Columbia Funds stock fund, I sold out in 2001 and figured I'd made just over 2 percent a year on the money. That was NOT enough to make up for inflation. Like many women, I was too conservative.
No 3. If you buy individual stocks, go with companies that you personally understand and respect. Lesson: A broker isn't necessarily your best adviser. Over the years, many stocks I've picked have done substantially better than those recommended by a broker.
No. 4. Don't count on money that's not yours, either your husband's, especially if your in a second or third marriage or inheritance from your parents. Lesson: Things happen like unplanned divorces. Parents go into really expensive nursing homes and use up the money you thought you would inherit. Jobs go away. Make it your top goal to save money for retirement for yourself. Save one day at a time. Be consistent. We really are all in this world alone. Yes, you may have wonderful family and friends who can sympathize and provide emotional support. Yes, you may have a good job and what appears to be a good marriage. But taking care of yourself has got to be your business. If saving for retirement is something you're approaching as secondary to the lifestyle you're living, maybe it's time to have a talk with yourself....where do you want to be in 20 years, 10 years? Don't you really need $1 million in the bank to retire comfortably? How are you going to get there? Below is another good money management Web site. Click here for CNNmoney.com
That's all for now. Comments? - Julia
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| Nothing can prevent the tragedies in life |
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Some of you may remember that Teresa Heinz Kerry, wife of Sen. John Kerry, lost her first husband in a tragic plane crash. As heir to the Heinz fortune Teresa set up the Heinz Family Philanthropies. Below is a thorough and thoughtful piece for women dealing with unthinkable events such as the death of a spouse or an unexpected divorce. Such events can be catastrophic emotionally and financially. Click here for the HeinzFamily.org Web site.
Chapter Seven: When the Unthinkable Happens: How to Make Financial Plans for Unexpected Events
Click here
By Jeffrey R. Lewis and Maria Cordone
jlewis@heinzoffice.org and mcordone@iamaw.org.
We’ve all heard stories about the elderly widow, alone and confused about taking care of her finances, losing all her savings to the "nice young man" who offered to help her and turned out to be a scam artist. Or the middle-aged woman who divorced her husband when she discovered he had huge gambling debts. While the divorce got her out of a bad situation, it left her with nothing, having to start over at age 45. Or the 30-year-old woman who lost her home and all her possessions because her spouse was severely injured in an automobile accident, and neither she nor he had insurance to cover the cost of his hospital care. Or the 55-year-old woman who had to take minimum wage, unskilled work to pay the bills because she lost her factory job due to downsizing.
The events that create financial disasters for women are generally not the things we want to think about—the death of a spouse, a divorce, a serious illness, a disabling accident, or loss of a job. While it is easier to assume these things only happen to "other people" and could certainly never happen to us, life-altering events can, and do, happen anywhere, anytime. However, just because these events are surprising or upsetting doesn’t mean they have to be financially crippling.
Good planning can help to prevent a personal tragedy from becoming a financial disaster. That’s what this chapter is about—preventing a financial disaster by providing you with some basic information to help you make informed choices as you prepare to protect your future. First, there are six steps you can take to become more financially independent. Then, we discuss some potentially disastrous events—divorce, widowhood, unemployment, and medical emergencies—and "must dos" that can help you to be prepared should an unthinkable event occur in your life.
Your First Steps
One of the first steps you can take to avoid financial disaster is to establish your financial independence. The idea is not to create a split between you and your spouse or partner, but rather for you to have enough financial self-sufficiency that you can act on your own in an emergency. The following six steps will help you to accomplish that.
1. Maintain files of basic financial information. Be sure you have copies of all current assets; bank account numbers; safe deposit information; insurance beneficiary information; IRAs and other retirement account records; tax returns going back seven years; mutual fund statements and copies of stocks and bonds; copies of health, homeowners, auto insurance policies; the lease or mortgage information for your home; copies of a prenuptial agreement; wills, trusts and powers of attorney; and copies of birth and marriage certificates. It is also a good idea to have receipts of major appliances in a file as well.
2. Have your name on the checking account. If your husband dies suddenly, it could be very difficult to resume payment schedules if the checking account and home purchases are listed only in his name. If you are married, you should also open checking and savings accounts in your own name just in case a will is contested or some other complication arises.
3. Establish and maintain good credit. Good credit is essential to any sort of financial independence. Get credit in your own name through a personal credit card. Without good credit it will be nearly impossible for you to borrow money to purchase a home or car, or even get a credit card, without assistance. Good credit means more than just paying your bills on time. While that is a critical part of maintaining a good credit rating, you must also check your credit report and credit score every year to make sure that there are no inaccuracies. Credit Reporting Agencies collect information about you and your credit history from public records, your creditors and other reliable sources. These agencies make your credit history available to your current and prospective creditors and employers as allowed by law. Credit scores range from 300 to 850. You’ll need at least a 620 to be considered for any type of mortgage, but in order to get the best rates and most favorable terms, you’ll need a score of over 700. A recent study suggests that over 79 percent of all credit reports have at least one error. The same study showed that over 50 percent have an inaccuracy that drops a credit score by at least 50 points. Three major national agencies keep track of credit, and they often don’t coordinate. Yet, no bank or mortgage company will loan money without checking at least one of them.
The credit reporting agencies are:
Equifax PO Box 105873 Atlanta, GA 30348 (800) 685-5000
Experian PO Box 2002 Allen, TX 75013 Consumer Credit Questions (888) EXPERIAN (888-397-3742)
TransUnion Post Office Box 2000 Chester, PA 19022 (800) 888-4213
Even if you maintain a joint checking account, never let the responsibility of making payments on time fall entirely on your spouse. A spouse’s history of late payments or non-payments can destroy his wife’s credit rating. It also takes seven years for poor credit information to fall off an account. By all means, maintain joint credit accounts, but make sure that they’re paid on time—and if they’re not, get your name off the account.
3. Visit the WISER (Women’s Institute for a Secure Retirement) Web site (www.wiserwomen.org) for more information, including steps you can take to establish and maintain good credit.
4. Assess your insurance needs and buy enough to protect yourself. There are four kinds of insurance every family should have: life insurance, homeowner’s insurance, health insurance and car insurance.
Life Insurance: When it comes to life insurance, it’s essential to buy enough to cover all of your debts, like mortgages and student loans, plus 20 percent if you die. The extra 20 percent is a precautionary measure to protect your spouse in case there isn’t an opportunity for employment, there are no other benefits, or any money on the way gets trapped in red tape. A few dollars more in a monthly premium will buy a lot of breathing room later.
Life insurance may seem like one of those things you are able to do without, but it can protect you from total financial ruin if the primary earner in the family is injured or dies. In addition, if you compare the premium to the benefit, it can be fairly cost-effective. If you’re on a tight budget, avoid whole life policies, which are essentially investment vehicles, and get term life, which will protect you for a specific number of years while you’re financially more vulnerable, such as when your children are young. It won’t pay out a benefit after the term, but it is significantly less expensive than whole life, and by that time you could be more established financially.
Homeowner’s insurance is another "must have." Paying the small monthly premium is nothing compared to losing your home and its contents in a fire or other disaster. If government-subsidized insurance is available, avoid the more expensive private coverage like flood insurance in coastal areas or near larger rivers, and earthquake insurance in California.
Health insurance is a problem for many lower-income families. If you cannot afford a comprehensive plan, consider a catastrophic health insurance policy to cover a medical crisis that could ruin a family budget for years to come. For example, having your appendix taken out can cost $15,000—and there’s no scheduling an appendix attack.
Finally, car insurance is mandatory. If you’re going to drive, insure your car. Period. If you have a homeowner’s policy, you may be able to get an umbrella policy covering your car and your house at a cut rate.
5. Create and agree on a will for you and your spouse or partner. Insurance is there for the unexpected, but death is a part of life. And as we plan for life, so should we plan for death. Make sure that wills are drawn up and that you have a notarized original copy, a lawyer has a copy, and that there’s a copy in a safe deposit box. (If you don’t have a safe deposit box, consider getting one.) Review and update your will every five years or when you acquire significant new assets.
While state laws vary, surviving wives usually inherit at least half of their husband’s estates. However, given the nature of the modern family, inheritance can be contested by stepchildren, children, siblings and even cousins. While a jointly owned house will automatically go to the partner who survives, no one wants to inherit the house only to find they cannot afford the taxes that go with it. It is very important to state clearly whom you want to receive your property and possessions. If both parties die at the same time, a will is important to make sure that the surviving children are cared for, and that assets are fairly distributed among survivors.
6. Save, save, save! One reason for the high rate of poverty among older women is the lack of personal savings. According to the National Women’s 2005 Retirement Survey, many women admit to not saving enough for their retirement. When asked the question, "At the present time, do you feel that you are saving enough money for your retirement?" 62 percent of women surveyed answered "No." Among women of color, the figures are even higher—74 percent for both African American and Hispanic women. Many of these women are well aware of the importance of retirement saving, but many are unable to save or are simply unaware of the steps to take. Albert Einstein once said, "The most powerful force in the universe is compound interest." While the great physicist may have said it with a smile, for most of us, compound interest is the greatest financial gift we will experience. When you sit down to pay the bills, try to pay yourself first. Every week, put something aside and watch your money grow. If you don’t have access to a retirement plan through work, you could put your money in a pre-tax savings account like an IRA. The nice thing about these accounts is that they will lower your overall tax burden. It is important for you to put money aside on your own even if your husband is saving for his retirement. A recent survey revealed that female workers are more likely than males to say that a spouse is putting money aside in a retirement plan of his own, which indicates that many women intend to rely solely on their husbands to take care of their retirement. While you will most likely have access to your husband’s pension in the event of his death, or a portion of it in case of divorce, it’s always a good idea to have some money in your own name. This will also help your asset base in the event that you want to buy a house following a divorce or the death of your spouse. A woman needs to have her own money, even a small amount, to cover living expenses if something disastrous should occur that adversely affects the family income.
Potentially Disastrous Events
Advanced planning is one thing a woman can do to ensure that she will not slip into poverty in old age. By following the previous six steps, you can help to safeguard yourself from financial ruin in the event of divorce, death of a spouse, job loss, or a health crisis. What follows are some event-specific points that can help you navigate an event so even if it happens it doesn’t become a disaster.
Divorce
Almost half of marriages today end in divorce. And because many wives have chosen to stay home and raise their children, to make sacrifices in their careers to be more available to their families, or to give their spouses the opportunity to concentrate more fully on career achievements, the financial burden of divorce usually falls most heavily on the woman.
Bank or credit card accounts: If a divorce is necessary, and particularly in the case of a contentious divorce or a divorce from a partner who has financial problems, protect yourself and your credit status first. Close any joint bank or credit card accounts as soon as possible.
Retirement plan assets: Dividing your plan assets at the time of a divorce can difficult, even if the divorce appears to be amicable and/or there are few assets beyond a house or car. Money can bring out the worst in even the best of people. State laws recognize retirement benefits as a jointly owned asset if the benefits were earned during the marriage. This means that most types of retirement plans—for example, a pension, a 401(k) plan, or an IRA—can be divided between the spouses. However, this is not automatic. To receive a part of your spouse’s retirement benefits, you need to act. As a divorcing spouse, you must get a special court order called a Qualified Domestic Relations Order (QDRO). This document establishes your legal right to receive a portion of your former spouse’s retirement plans. For example, if your ex-husband dies first, you may be eligible to receive his survivor’s benefits, but you need a QDRO to establish that. Unless you have a QDRO stating otherwise, if he remarries, designates someone else as a beneficiary, or dies without specifying you as his beneficiary of survivors’ benefits, you could be the loser.
If you are contemplating divorce, visit WISER’s Web site (www.wiserwomen.org) for a list of questions you need to ask in order to assert your right to pension and 401(k) plan assets. Don’t wait until it’s time to retire—that’s too late.
Health insurance: Don’t fall into the same trap that Mary did. When she divorced her husband, her lawyers got her the house, but didn’t advise her to attach her husband’s health insurance. Mary was left without coverage, and when her young child became ill, she incurred significant medical expenses. Ultimately, she lost the house that she worked so hard to get in the divorce settlement.
If your ex-husband is the primary breadwinner and his employer provides the family health insurance, you will most likely be able to continue your health insurance coverage temporarily thanks to legislation passed in 1986 called The Consolidated Omnibus Reconciliation Act of 1986 or COBRA for short. Generally, COBRA allows you to continue with your husband’s group coverage for up to 36 months after your divorce or legal separation—though you will have to pay for this coverage. Note: COBRA coverage will terminate sooner than 36 months if you remarry or obtain coverage under another group health plan.
Social Security: These benefits are not marital property. If you meet Social Security’s requirements, you can receive benefits based on your former spouse’s work. In general, if you were married at least 10 years and you are unmarried when you make a Social Security claim, you can be eligible as early as age 62 for Social Security benefits as a divorced spouse, or at age 60 if you are a divorced widow. For more information on divorced spouse’s benefits from the Social Security Administration, call (800) 772-1213 or check online at http://www.ssa.gov/gethelp1.htm. 6
Widowhood:
For millions of women, widowhood comes a lot earlier than they expect. It is not surprising that two-thirds of women over age 85 are widows; but a report by the Women’s Institute for a Secure Retirement (WISER) shows that one-third of all widows lost their husbands before age 60. The following checklist prepared by WISER is something you should read now. It provides information you need to have before you become a widow, so that if and/or when it happens, you will be prepared—no matter how old you are.
Widow’s Checklist
? Expenses are likely to be 80 percent of what they were before the husband dies, but a widow’s income may only be two-thirds of what it was prior to the spouse’s death. Pension benefits from the husband’s work generally are reduced by 50%, and Social Security benefits may be reduced by a third or more.
? Federal pension law requires company and union pension plans to provide a joint and survivor’s benefit option. The survivor pension can only be given up if the wife gives her permission in writing.
? When selecting the pension benefit, a wife needs to consider the options very carefully. The joint and survivor annuity offers a smaller monthly payment than other pension benefit options. However, for women who expect to depend on their husband’s pension for a source of income in retirement, this is generally the better option.
? If a wife and husband chose a "joint and survivor’s benefit" when he retired, the widow will receive a benefit equal to half of what he had been receiving. However, if they did not choose that option, the pension benefit stops when the husband dies, because the payments would be based only on the husband’s lifetime.
? Different rules apply to certain other retirement savings plans, such as 401(k)s. Death benefits from a 401(k) are generally paid out in a lump sum, which can be rolled over—tax-free—into an Individual Retirement Account (IRA).
? If the spouse worked at a state, local or federal government job, then the widow must find out what the special rules are that apply to that pension.
** This Checklist is available courtesy of Women’s Institute for a Secure Retirement (WISER), and can be found at www.wiserwomen.org.
What widowhood can do to personal finances: Take note of the first item on the list: Your expenses as a widow are likely to be 80 percent of what they were prior to your husband’s death, but your income may only be 66 percent of what it was before. And that’s not all. If you are an older widow, the death of a spouse can cut your widow’s pension benefits by 50 percent. You used to receive both his and your Social Security retirement benefits. Now, you receive only the higher of the two, and this can be a cut in total benefits of one-third or more.
On the positive side, the Social Security program provides a safety net for widowed women with children. As a young widow, you can collect benefits until your children are age 16 and the children themselves can collect until they are 18. Survivor’s benefits can also go to a widow age 60 or older, children younger than 18, disabled adult children, and dependent parents. Note: An older widow’s benefits continue throughout her life; survivor benefits for young widows with 7
children, and survivor benefits for children, end when the children reach age 16 and 18 respectively.
Widowhood and pensions: Most of us don’t want to talk about death with our spouses, but it’s important that we do, especially when it comes to pension benefits. Be smart. Find out everything you can about your spouse’s pension and survivor’s benefits.
Federal law requires company and union pension plans to provide a joint and survivor’s benefit option; as a wife, you should not give up that benefit unless you have your own sources of retirement income. Taking the joint and survivor option means that the pensioner has an option of taking a larger payment during his lifetime, or taking a slightly smaller one, which then provides a survivor annuity for his spouse. If you have no independent source of income, you should never give up your right to a survivor pension even if it means living on slightly less during your husband’s lifetime. (Giving up that right must be done in writing.) If your husband dies, and you have a survivor benefit, you will get a portion of his pension benefit amount. If the two of you did not choose the joint and survivors benefit, his pension stops at his death, and you, the widow, get nothing.
The law applies different rules to retirement savings plans such as 401(k)s. Death benefits from the 401(k) are usually paid out in a lump sum. There are tax consequences if you, as a widow, receive a lump sum before you are age 59 ½. Consult with a tax lawyer or accountant and roll the money over into an Individual Retirement Account (IRA), or put money aside for taxes if you need to use some of the money for expenses. A few dollars spent on a good accountant or a lawyer could save you thousands in unnecessary taxes later.
State, local and federal government pensions have rules that are different from those for private pensions. Government human resource offices can provide all the rules and regulations as they apply to spouses and widows. As a spouse, you should get this information in advance, so you don’t end up unprepared should the unexpected happen.
For example, after leaving her job as a nurse to raise her kids, Nikki’s husband, a military contractor who was an Army reservist, was deployed and killed in the line of duty. Left to care for three small children on her own, hundreds of miles from her family, it took her almost a year and intervention from her Member of Congress before Nikki discovered all the veteran’s benefits that were due her and her children. This raises an important point: When it comes to any type of federal benefits, if the system is wearing you down, contact your Member of Congress. However, there is much you can do before that time to prevent these situations from putting a strain on your life and the well-being of your children. Talk to the human resources employees who staff the offices where your spouse worked and read whatever is available. Know what you are entitled to so that if a tragedy happens, you will know what to do.
Unemployment
If you lose your job, unemployment insurance is available to you. While the monthly benefits are less than a typical salary, and only temporary (up to 26 weeks), it can make the difference between paying the mortgage or being able to keep that health insurance, and declaring bankruptcy. If you lose your job and do not get another one immediately, take advantage of unemployment insurance. That’s what it is there for. 8
It is important that, from the time you begin collecting unemployment, you start looking for another job. Employment counselors tell many sad stories of individuals who collected unemployment insurance for months, confident of their ability to eventually get work, only to find that their skills were out-of-date and jobs were scarce when the unemployment insurance ran out.
Medical Emergencies
Finally, be aware that unexpected illnesses or hospitalizations can easily break a family budget. If you need assistance, hospitals can help people with low incomes pay their hospital bills by processing an application through the state’s charity care program, if one exists. Many states also have created pools of money to cover those without insurance. The Bureau of Primary Health Care sponsored by the U.S. Department of Health and Human Services, will help you find a clinic that will give you care even if you do not have health insurance. To find the clinics available in your city go to http://ask.hrsa.gov/pc/.
If you have very low or no income, you and your children may be eligible for the government-sponsored Medicaid and State Children’s Health Insurance Programs (SCHIP). Call your state Medicaid office for more information on eligibility for these programs.
Conclusion
Nothing can prevent the tragedies in life. You can’t cheat death, accidents happen, and not all jobs or marriages will last. But by arming yourself with household financial knowledge, creating a private credit history, purchasing the necessary insurance, and saving, you can make the difference between spending your retirement years in financial hardship and enjoying the best that your later years have to offer. No one can predict the future, but you can plan for the unexpected and help to ensure that you are protected no matter what lies ahead.
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| Running on empty? Some of us..... |
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Some of you may have missed the page one story in Sunday's Columbian from Washington Post writer Nancy Trejos on a new study saying that nearly three in five middle-class retirees will probably run out of money if they maintain their pre-retirement lifestyles. This study goes along with the message we've been sending to 60 & Single women that saving for retirement must be a top priority. Below is Trejos' story:
Many Retirees Face Prospect of Outliving Savings, Study Says
By Nancy Trejos
The Washington Post<P>
WASHINGTON — Nearly three out of five middle-class retirees will probably run out of money if they maintain their pre-retirement lifestyles, a new study from Ernst & Young has concluded.
The study, set to be released Monday, finds that Americans will have to drastically reduce their standard of living before retirement to live comfortably, or even avoid destitution, later in life. Middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to minimize their chances of outliving their financial assets, the study found. Workers seven years from retirement will have to cut their spending by even more — 37 percent.
"People are going to have to adapt in a number of ways that they weren’t anticipating or hoping for," said Tom Neubig, national director of the Quantitative Economics and Statistics practice at Ernst & Young. "I think a lot of people are hoping to maintain roughly the same standard of living after retirement. Our study suggests they are going to have to make some changes."
About 77 million baby boomers are expected to retire over the next few years. The study warns of an impending national crisis if workers, and lawmakers, do not react now to the changing pension structures in corporate America. Most companies have moved away from defined-benefit plans, in which they provided their retirees with a set benefit each month, to defined-contribution plans such as 401(k)s, in which the employee takes most of the responsibility for saving money. But with the U.S. savings rate abysmally low and people underestimating their life spans, economists warn that aspiring retirees will have to work longer if they do not spend less, no small feat at a time when inflation and the cost of living are rising. Fluctuating investment returns on 401(k)-style plans in this wobbly stock market are not helping matters.
"Most people, if they look at their life expectancy and they think they will live to 90, they are nuts to retire at 60. They’re going to be living in poverty at 80," said Peter Morici, an economist at the University of Maryland. "I think it’s a wake-up call to baby boomers to get serious about getting their houses in order."
The study was commissioned by Americans for Secure Retirement, a coalition of more than 50 organizations representing women’s, small business, agricultural, Hispanic and African-American groups, among others. It looked at married and single near- and recent retirees at three pre-retirement income levels: $50,000, $75,000 and $100,000.
Retirees would be much better prepared if they had a guaranteed source of retirement income beyond Social Security, the study concluded. Married couples relying on income aside from Social Security and making $75,000 at retirement have a 31 percent chance of running out of money if they maintain their pre-retirement lifestyles, the study pointed out. But those who rely solely on Social Security have a 90 percent chance.
Congress has taken up the matter. One bill, for instance, would make it easier for workers to get a particular non-Social Security retirement vehicle: an annuity, which is an income-generating contract between the employee and an insurance company. The legislation would exclude from taxation 50 percent of the income received from a lifetime annuity, up to $20,000 per year.
"It’s that paycheck every month for the rest of their lives that will allow people to have some standard of living," said Joe Reali, chairman of Americans for Secure Retirement, which has life insurance companies as members.
But David Armstrong, managing director of Alexandria, Va.-based Monument Wealth Management, said the best way for Americans to live well in retirement is to plan for it early. Save your money and make sure you start your 401(k) at an early age, he said. Figure out what your nonnegotiable expenses and assets are. If you don’t have enough money to cover your necessities, he said, cut out any luxuries in your lifestyle.
"Eating out five nights a week, is that something that is important or is that something you can forgo?" he said. "Retirement ends up being a negotiation."
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| 60 & Single Women Buying Cars |
A Capital One survey from a couple of years ago showed that 77 percent of women said they would bring a man to a dealership with them to make sure they get a good deal on a car purchase. What hogwash. Women do all the shopping, so why should buying a car be so uncomfortable? Here are articles and tips lists for 60 & Single women who may be considering a car purchase.
Tips Make Women Confident Car Buyers: NBC4.com
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| Some Financial Pitfalls of Working Past Retirement Age |
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Dear 60 & Single colleagues -- Charlie Bishop, a principal with First Pacific Associates in Vancouver wrote a column in his recent newsletter about retirement planning. I'm passing it on. In an earlier blog item, I mentioned that the number of women 65 and older who are still working had increased by one-third in the past 10 years because many can not afford to stop working. Charlie explains below some of the complications of working and taking Social Security and handling health care insurance issues. Thanks, Charlie - Julia
Some Financial Pitfalls of Working Past Retirement Age
By Charles B. Bishop, MS, CFP, Vancouver
For many Americans, working past normal retirement age is a financial necessity. Other people are just not ready emotionally and need to work for their own mental health. For those that decide to continue to work there are some financial issues that need to be considered. First is the possible reduction in Social Security benefits. This is fairly well known: If you collect Social Security benefits before "normal retirement age," currently age 66, you will lose one dollar of benefits for every two dollars you earn over the annual limit. Currently, that amount is $13,560 per year. The real problem comes in the following year: You may not be working in that year but that is when you will have your benefits reduced.
Second is a possible reduction of pension benefits from your employer. If you work for a company that has a traditional pension plan (an income based on years of service and average income) there is a potential problem. Because these types of plans are dependent on your earnings you may suffer a pension penalty if you are working part-time. For example, if your pre-retirement income was $100,000 per year and you are considering working half-time for $50,000 per year you may have your pension be calculated using the $50,000 income rather than the $100,000 in pre-retirement income. And that could permanently reduce your benefits.
If you find yourself in this situation we suggest you research your benefits carefully before agreeing to work part-time.
According to Toddi Gutner, writing for Yahoo Finance (May 1, 2009) the last year information was available, 2003, there were about four million people between the ages of 62 and 65 drawing Social Security benefits. Of those, about 1.6 million were working at least part time.
Third is the possible medical insurance coverage gap. If you are 65 and eligible for Medicare but continue to work for an employer that provides health insurance medical coverage and supplemental insurance plans may not be available to you since they are being paid for by the employer. This is a huge disincentive for an employer to hire an older worker. There is the potential here for lost coverage at eventual retirement.
Fourth are the possible tax penalties for working after normal retirement age. When you are collecting Social Security benefits, theoretically, the payments are free of federal tax. But when you have modest levels of income you can have between 50 percent and 85 percent of your Social Security income taxed. See your tax advisor for specific information about how this can affect you. The bottom line is that for all practical purposes your benefits can be reduced due to income taxes.
Fifth, keep in mind the Required Minimum Distribution rules for traditional IRAs and other pre-tax retirement accounts. It is not optional to begin withdrawals from these accounts after you turn 70 and one-half. These withdrawals will be taxed at your highest tax rate. They too will be added to your income to see how much of your Social Security income will be taxed as well.
None of this should be construed as advice not to work in retirement. It may be very beneficial for you to do so in financial or emotional terms. But carefully look at the impact of doing so before you commit.
Charles B. Bishop, MS, CFP
First Pacific Associates
Investment advisory services and securities offered through KMS Financial Services, Inc. |
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| 9 Tips for Job Hunting in Tough Times |
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Here's a job-search advice piece from Barbara Pachter, a national speaker, trainer, coach and author of numerous business books. This dropped into my e-mail Friday, so I thought I'd pass it along. Pachter specializes in business etiquette and communication. There are about 12,000 people looking for jobs in Clark County and more who are worried about their job security. Maybe this will help, especially those women who are 60 & Single. - Julia
Despite The Economy, Don't Put Your Job Search On Hold.
9 Tips For Job Hunting When Times Are Tough
Recent news reports about the job market are not encouraging-lay offs, outsourcing, and hiring freezes have become the norm. Clearly, the economy has gone south, but unfortunately your bills haven't! You still need a job. Should you just take any job that comes along? Or maybe you've been wanting to change career fields. Should you wait until the economy turns around? According to business communications and etiquette expert Barbara Pachter you shouldn't let a discouraging job market discourage you from finding the right job. "Yes, times may be tough," says Pachter, author of the strategic guide for increasing employability When The Little Things Count. And They Always Count ($13.95 paperback), "but there are still openings and not all business sectors are losing jobs, and some, like the federal government are adding them."
Pachter says that tough times mean that job searchers need to be even more focused, and need to be persistent. "The professionals who are polished and prepared at all times, always have an advantage, especially in a tough job market."
In addition, Pachter offers these nine tips to help you land the job you want:
1. Approach your job search as if it was your job. If you are currently unemployed, work every day at your search. If you are still employed, set aside time for your search. Prepare your resume. Stay focused. It's easy to avoid looking. Set a number of activities, contacts or connections that you make each week.
2. Find a coach. Have a coach or mentor with whom you check in periodically. Let him or her know how your search is progressing. It's good to be accountable to someone during a job search.
3. Google yourself. Many HR executives tell me they always Google candidates to see what kind of information appears. Potential employers will also check what you have posted on Facebook, your blog or YouTube.
4. Use the old-fashioned approach, also. Yes, it's worth it to post your resume on web sites like Monster.com and to visit company web sites to find job openings, but don't forget offline methods either. I know people who still find jobs from the want ads in their local paper. And job fairs can be gold mines too. Don't forget to tap into the career center at your alma mater--they often have great connections.
5. Think about who you know. Again and again, people tell me that they got their jobs from people that they know, so let people know you are looking. Build a network and look for ways to add people to it. If you aren't already, get involved in your professional or civic organizations. It will keep you active in your profession, help you learn about openings and meet more people for your network.
6. Never assume you're a good interviewee. When I coach professionals, I am sometimes stunned at the things they unknowingly do in a mock interview - from chewing finger nails and twirling hair to speaking too softly and letting cell phones ring. If you can, get professional help for interviewing. At the very least role play with a friend and record yourself. You may be surprised by what you see.
7. Thank the people who have helped you. Say thank you and/or send thank you notes to those who have assisted you in your search. One manager went out of her way to give a recommendation to a co-worker for a promotion. The woman got the promotion and never even thanked the manager who helped her. The manager said she would never help that individual again!
8. Help others. What goes around really comes around again, so help others. When you can, be a resource to others. If you hear of an opening that is appropriate for someone, let the person know.
9. Have hope. Looking for a job is a stressful experience even in the best of economic times, and if you're unemployed, it's even more stressful. But remember, if you're qualified and are a good worker, you will find a job. It may take awhile, but it will happen. In the meantime, be sure to take care of yourself by eating right, exercising and staying busy. Consider a part-time or temporary job in another field or a volunteer position. You never know who you might meet or what you may discover-maybe a whole new career passion.
For a free copy of Pachter's communication newsletter, "Competitive Edge," call 856-751-6141 (NJ) or go to www.pachter.com. |
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| Advice to live and work by |
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The best work place, money management advice I ever got:
Buy and hold (blue chips). - My mom.
Only spend money you have. - My dad.
If it isn't on sale, don't buy it. - My mom.
Take care of your car. - My second husband.
Take a deep breath because it will all change tomorrow. - My third husband.
If you don’t have all the information, go walk the dog. - My sister, Jane.
You can do it. - My friend Roberta.
Figure out your net worth, it will make you feel better. - My friend Karey.
Don’t use up your savings for everyday expenses. - My dad.
Always pay off your credit card. - Any fool knows this.
Never borrow as much as the bank says you can. - Any fool knows this, too.
Cry with your eyes open. - My friend Karen.
Dear bloggers, please add your own money management and work place slogans below or send them to me, Julia Anderson at julia.anderson@columbian.com.
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| Are you prepared to lose your job? |
Sorry, we've been a bit busy the past couple of days laying off people at The Columbian. Like a lot of newspapers, we are facing some difficult economic challenges, which leads me to think about 60 & Single women who might face a job loss. Earlier this year, we heard from several over-60 women who had moved in with their kids because of lack of employment. Financial security can become a big challenge for older women. Twenty percent of us live in poverty, according to the U.S. Census Bureau. So listed below are Web sites that could be a resource for those women facing a layoff and those who have lost jobs and are looking for a new one.
From WorkingGirl.com Click here,
Job hunting: How to Deal with Rejection Click here.
Seven Tips for Recovery After You Lose Your Job: Newsday. Click here.
Are you Prepared to Lose Your Job Tomorrow?: FinanceViewPoint.com Click here.
Are you prepared to lose your job? ChicagoTribune.com. Click here.
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| BettyConfidential helps you become the woman you want to be |
There's no lack of Web sites offering support and help for women. I ran across BettyConfidential.com recently as an online community that "will challenge you to think outside yourself and kick-start your dreams." Here's an article on the Web site called "Wake Up, Your Life's Half Over." Click here.
The site offers an entire category of financial planning and advice information. Happy reading. - Julia
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| Women must think big when they start a business |
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Research shows that women are starting businesses at a higher rate than men and own some 41 percent of all the privately held companies in the U.S. These entrepreneurs include stay-at-home moms looking for additional income and 60 & Single women looking for a second career. But here's the startling fact: Only 3 percent of all these women-owned businesses gross $1 million or more a year. Gwen Martin at the Center for Women's Business Research wanted to know why. Messages that women receive who are contemplating a new business may be working against them, Martin found. What women hear is that they should go slow, work part-time and avoid risk. "This advice might be well-intentioned but we aren't telling women how to think big," she said.
Martin's comments are included in a More magazine article on how to build a successful business, which offers Five "rules" for turning a good idea into a highly profitable one. Rule No. 1: Give customers what they want. Rule No. 2: Give your brand a mission. For more click here.
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| Saving later and at a lower rate |
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I'm sitting at home in front of my computer watching the rain patter on my deck railing. Today was supposed to be an outdoor day of yard work, but here I am inside with a cup of coffee thinking about being 60 & Single. More information turns up every day about how tough it is for women to retire. I've been pondering those same issues for the same reasons: I worked only two years in my early 20s before staying home and having kids for 10 years. Of course I helped my first husband start his medical practice but no pay was involved there. I re-entered the work force in my mid-30s and have been chucking money into a 401(k) since then. But it's turning out to not have been enough for several reasons. I didn't really think through my end goal or how much I really needed to save to get there. I just sort of decided what I was comfortable saving in relation to my immediate expenses and needs. Yes, there were some great trips. Yes, there were super vacations with my kids and grandkids. And yes, I pretty much enjoyed a comfortable life. But now I realize that without too much trouble, without too much sacrifice, I could have saved a lot more money for retirement and I wouldn't be looking at a big change in lifestyle when I do. Articles turn up on a regular basis about this "saving" issue and women.
Here's one below from at the Associated Press about why women face bigger challenges in retirement and that many are ill prepared to handle them.
B>By CANDICE CHOI<P>
<B>Associated Press Writer<P>
NEW YORK (AP) - Four out of five workers aren't saving enough to maintain their lifestyle after retirement, with women being at a disadvantage because of their longer life spans and lower pay, according to a study released Tuesday.
On average, employees are projected to replace just 85 percent of their income in retirement, compared with the 126 percent they would need when factoring in inflation, longer life spans and medical costs, the study by Hewitt Associates found.
The study looked at the projected retirement levels of nearly 2 million current workers of varying ages at 72 large U.S. companies and used actual employee balances.
People would need to save from 10 percent to 12 percent of their income throughout their career to keep up the same lifestyle after retirement, said Alison Borland, one of the study's authors.
The study found just 19 percent of workers were on track to do so.
These workers typically started saving early in their career - sometime in their 20s - and didn't cash out the savings when they switched jobs, Borland said.
"Once you get into your 30s and 40s and later, it gets very difficult to start saving enough," she said.
Most people contribute an average of 8 percent of their income into savings plans, she said. Some may also have pension or profit-sharing plans to boost savings, she said.
Of those studied, more than 1.2 million employees (67 percent) are expected to have less than 80 percent of what they would need to maintain their lifestyle at retirement.
Those who don't contribute to 401(K) plans face an even bleaker future; these workers will likely only be able to provide less than 40 percent of their projected needs, according to the study.
While the same percentage of men and women contributed to retirement plans, women faced an 8 percent greater shortfall in savings.
The biggest reason for the gap was a disparity in pay; women earned an average of $57,000 while men earned an average of $84,000. Since medical costs are not adjusted by gender, women's savings didn't go as far.
Women are also expected to live longer than men, meaning they have to spend at a lower rate while also covering medical costs for a longer period. Finally, women tend to be in and out of the work force more frequently for family reasons, leading to breaks in savings.
Women also started saving later and at a lower rate, the study found.
The result was that women had accumulated 84 percent of pay, while men of the same age accumulated 101 percent.
The Hewitt study projects workers will need to save enough to receive 126 percent of their income each year to maintain their standard of living, thanks to rising medical costs, inflation and longer life spans mean.
Traditionally, it was thought people needed to replace about 80 percent of their income to maintain their lifestyle after retirement. That level assumes workers will be paying fewer taxes and will no longer need to save for retirement.
It also assumes people have paid off mortgages and debt, which will not be the case for many.
"Many of us will have years left on our mortgages when we retire," said Sheryl Garrett, founder of Garrett Planning in Shawnee Mission, Kan.
Many people are also forced out of work sooner than 65.
Staying in the work force longer can have a dramatic impact on retirement savings, Garrett said. Working even just a few extra years can make a difference, she said.
"It's that many fewer years you're drawing on your nest egg, and that many more years that you're saving," she said. |
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| Independence Day and 529 Plans |
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Independence Day is a time for families to gather around the barbecue and enjoy the holiday. It's also a day when grandparents get to see their grandchilren and realize how fast those children are growing up and will need money to pay for college or other training.
Today is a day when grandmothers can think about how to help their grandchildren in a meaningful cost-effective way by establishing for them a 529 savings plan. These savings plans have some advantages that a regular savings account does not. They earn money tax-deferred and offer the contributor (that would be the grandmother) more control over how the money is distributed ...it has to go to some sort of education-related expense.
In the spirit of the Fourth of July, here's to 60 & Single grandmothers who think long-term about helping their grandchildren to their own independence day.
Listed below are three Web sites where you can find out more about 529 Plans:
College 529 Plans can be a great gift for grandkids - USA Today, click here.
Savingforcollege.com, 529 FAQs Click here.
Fidelity.com, 529 profiles. Click here. |
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| Older Americans, a few facts from the Census Bureau |
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Here are a few population facts and projections from a new U.S. Census Bureau report:
- There were 37.3 million people 65 and older in the U.S. on July 1, 2006. That's about 12 percent of the nation's total population.
- By 2050, there will be 86.7 million people in the U.S. 65 and older, representing 21 percent of the total population.
- In 2006, the median household income with householders 65 and older was $27,798, up 3.4 percent from the previous year.
- The poverty rate for people 65 and older in 2006 was 9.4 percent. There were 3.4 million seniors in poverty, a decline from 3.6 million in 2005.
- The percentage of people 65 and older who were married in 2006 was 53 percent. Thirty-two percent were widowed.
- In 2006, there were 72 men for every 100 women 65 and older in the U.S. For those 85 and older, it drops to 47 men per 100 women.
The conclusion to be drawn from these statistics is that a great number of women will be single at some point before they die either because of the death of a spouse or divorce. Women must consider this reality as they move into their older years and make financial plans for their retirement. For more census data, click here. |
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