Women less prepared for retirement than men

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Photo: CNBC

From Women less prepared for retirement than men, clarionledger.com

PDF: Women retirement men

If you were to ask a person in their middle 20s about their plans for retirement, most would probably shrug their shoulders and tell you they’d given it little thought. Even many people in their 40s (while most would have thought about it) wouldn’t really have a good idea about how they planned to finance their dreams once they leave the workforce. Perhaps unsurprisingly, many of us just aren’t very good at planning for the future.

But we should be. As lifespans increase and people stay in the workforce longer, people will need to have some way to finance their lifestyle in retirement. Most retirement planning experts agree that good planning can help you overcome rising prices, economic uncertainties, and taxes. Women are at special risk for several reasons, not the least of which is because, statistically, they can expect to live longer than the men in their lives.

study this month by Transamerica’s Center for Retirement Studies  points out a number of trends and highlights the need for women to get more involved and proactive about their retirement plans.

“Today’s women are better educated and enjoy career opportunities that our grandmothers’ generation could only dream about,” noted TCRS President Catherine Collinson. “Nevertheless, women continue to encounter challenges including lower pay, time out of the workforce for parenting or caregiving, and longer life expectancies that all contribute to unique challenges in adequately saving for retirement.”

Among the most alarming findings from the study: only about 10 percent of women are “very confident” in their ability to fully retire with a comfortable lifestyle, about half of the rate for men asked the same question. A poorly planned retirement can lead to an inability to deal with the unexpected circumstances — health conditions, sudden unemployment or unforeseen expenses — that could send you into a financial tailspin.

 While about seven in 10 working women say they are participating in some type of retirement savings plan (such as a 401(k) or an employee-sponsored IRA, they probably started saving later than their male counterparts. On average, women who are investing in an employee plan started doing so at 28, compared to 26 for their male coworkers. Two years might not seem like a lot, but it adds up over time, thanks to interest and compounding. Many financial experts with whom I’ve consulted over the years advise young people to start saving for retirement as soon as they enter the workforce.
Another issue: too little savings. On average, women in the survey reported a median household retirement savings of about $34,000, with two-thirds saying they don’t know what they’ll do if they’re forced into retirement sooner than expected. When asked what amount of savings would be adequate, the average respondent said she’d like to have at least $500,000 in the bank. And while many women say they’ll count on Social Security for a portion of their income in retirement, most worry that it won’t be available to them by the time they retire.

“The facts are startling and clear. Women must begin taking greater control and gain an understanding of their true retirement outlook,” Collinson said. “By confronting challenges head-on, women can acquire essential knowledge about how to achieve financial security and create plans that can help mitigate risks and steer them on a course for financial security and a more positive outlook for their retirement ambitions.”

Here are a few of the suggestions contained in the Transamerica report; more suggestions and a report summary may be found at http://bit.ly/2nX3ILo:

  • Start saving on a regular, consistent basis. Even a few dollars can add up over years, thanks to interest and compounding.
  • Participate in any retirement plan offered through your employer. Many offer matching contributions and other benefits, which can significantly increase your investment.
  • Get educated about retirement investing, including learning about how to make your retirement savings last longer, and learn about the best (and worst) times to start drawing Social Security.
  • Get help. Seek the assistance of a qualified financial planner to take a look at your goals and devise a strategy to make it happen. Agingcare.com has some great advice on how to find a good financial adviser at http://bit.ly/2nGYqrb.

Survey: Most Americans plan to save tax refunds

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From Tax Refund: Consumers bank on it, clarionledger.com

PDF: saving-tax-refunds

Like clockwork, scammers are attempting to get at Mississippians’ tax refunds again. Each year, more and more people find themselves victimized by a variety of scams designed to steal their identities for the purpose of filing fraudulent tax returns.
Many taxpayers have tried to file their taxes online, only to find out someone had already filed in their name, grabbing their refunds. While not a new phenomenon, the amount of tax-related cybercrime has increased this year in both numbers and sophistication.

Recently, Attorney General Jim Hood warned that Mississippi residents could be targeted by scammers trying to collect data from W-2 forms, in a new twist on a couple of old scams. Hood cited reports from the Internal Revenue Service warning business owners to be careful in providing information about employees.

The scheme works like this: A scammer sends an email to an employee in Human Resources at the business, carefully crafted to look as if it comes from the CEO or another known corporate executive. The message asks for copies of W-2 forms of all employees, and sometimes is followed by a second email requesting money be wired to a specific bank account.

Hood urged Mississippi residents to be suspicious of any such unsolicited emails and to always verify by phone that the request is legitimate.

“We have received calls and reports to our office this week from entities whose employees have fallen for this type of scam,” Hood said. “Employees who would have W-2 information, such as accounting or human resources personnel, are particularly susceptible to this scam. All types of organizations are possible targets, including schools, health care organizations, nonprofits and private businesses.”

Hood noted the scam, which first appeared a year ago, is circulating earlier in the tax season. Some businesses which got the emails last year are being targeted again.

“This is one of the most dangerous email phishing scams we’ve seen in a long time,” IRS Commissioner John Koskinen noted in a news release. “It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns. We need everyone’s help to turn the tide against this scheme.”

If businesses get such an email, forward it to phishing@irs.gov and place “W2 Scam” in the subject line, and file a complaint with the Internet Crime Complaint Center (IC3), operated by the FBI. In addition, contact the Consumer Protection Division of the Mississippi attorney general’s office at 1-800-281-4418.

Employees whose W-2s have been stolen should visit the Federal Trade Commission’s identity theft resources at http://www.identitytheft.gov,or the IRS’ site at http://www.irs.gov/identitytheft, to learn how to report the theft and get advice on what to do next. They should also file IRS Form 14039, Identity Theft Affidavit, if the employee’s own tax return rejects because of a duplicate Social Security number or if instructed to do so by the IRS.

And, the IRS notes, just because someone isn’t required to file a return or isn’t expecting a refund doesn’t mean they can’t be a victim. In all cases, the best way to avoid becoming a victim of tax refund fraud is to file taxes as soon as possible, before scammers can file and steal your identity and refund.

Keep your vacation plans within your budget and don’t overspend

Americans are taking to the nation’s highways and flyways in droves, thanks to relatively stable fuel prices and travel deals being offered by destinations. But upon their return, many Americans will be packing something extra with their souvenirs — travel debt.

In general, Americans have poor saving habits, and debt is used to fuel increasingly expensive lifestyles. In recent years, Americans have become better at saving money and reducing debt. But when it comes to vacations, many people are willing to rack up debt if it means choosing among taking the kids to Disney, taking time off closer to home or having no vacation at all. And it can be an expensive proposition; a 2013 survey found that the average vacation cost $1,145 per person.

Having available credit to pay for that can look pretty tempting, but the bill has to be paid sometime. In the late summer and early fall, the pattern always repeats itself as the bills come due for that holiday relaxation. Personal debt skyrockets, and many find themselves paying for that beach holiday for years to come, long after the memories have faded.

But it doesn’t have to be that way, notes the Financial Counseling Association of America, which represents the nation’s credit-counseling agencies.

“For those consumers that overspent on last year’s vacation, stop and ask yourselves, ‘Do I want to repeat the same pattern this year?’ ” said Kevin Weeks, FCAA president. “A little planning and compromise will allow you to have a great vacation and return home knowing you have avoided additional debt.”

Since summer’s now officially here, it may be too late for this year if you’ve already made your plans. But the FCAA notes that a sound financial plan for next year starts with a few simple questions:

How much have we saved? Determining your budget is the key to avoiding vacation debt. Calculate what you will have saved before your scheduled vacation and then plan your trip and activities based on that total amount.

Do our expectations match our budget? While a Hawaiian beach vacation may sound great, if your budget won’t allow it you may have to consider a beach closer to home. By compromising on location, you may be able to upgrade your lodging or add an excursion to the trip. The main thing is keep your expenses within the funds you have allocated for your vacation.

Can we stay home and still have fun? Should you find that your budget simply won’t allow traveling for vacation, you can still enjoy time off from your normal daily routine. Become a tourist in your own city or town and take advantage of the cultural and fun venues that are in your own backyard.

Doing your homework may reveal special deals and coupons. And if you’re willing to postpone your vacation to an “off-peak” time, you could save big.

  • Hotels and airlines know when the demand is highest and set their prices accordingly. Just waiting a few days past a peak point — such as a holiday — could save you thousands.
  • Once you have set your budget, stick to it.
  • Even the best budget is useless if you don’t use it. Some experts advise that each family member has an allocated amount they can spend. While giving a cash allowance to each family member is one solution, cash could be lost, stolen or make your family a target for thieves. A prepaid card, preloaded with a set amount, might be a good choice.
  • Start early. As soon as you have put away the luggage from this year’s trip, start planning the next one.
  • And finally, make a pact with yourself not to use your credit card while on the road unless there’s an emergency.
  • Avoiding the urge to pull out the plastic to pay for something you didn’t intend to buy can wreck your careful plans.
  • If you need help planning for your vacation, FCAA counselors are available nationwide with free budgeting advice.

Visit FCAA.org to find a member office.

Originally published in the Clarion-Ledger on 6/25/15.

Americans are not saving enough

Originally published in the Clarion-Ledger, 4/4/2015.

PDF: Americans not saving enough

I was opening the garage door a few days ago and I heard a loud grinding sound. “That’s not good,” I thought to myself, then noticed that the door wouldn’t open all the way. Looking up at the door mechanism, my youngest son pointed out that the spring appeared to have broken in two. “Oh great,” I muttered to myself. “There goes summer vacation.” From past experience, such repairs aren’t cheap; such an event can detour you from even the most carefully-laid plans.

That’s how life goes, isn’t it? We’re going along just fine, trying to keep our ducks in a row, and suddenly, a garage door breaks, or a water heater goes out, or your kid needs a new band instrument. Having savings can certainly help in situations like this. But a new study from Bankrate.com has found that, while the economy is getting better in some areas, one key factor that is apparently not improving is how much money we’re putting away for the future.

Savings are important, because consumers who have put aside some money for the future are a lot more likely to go into debt, and having money in the bank can bolster our ability to support the economy, and can even lead to less worry and stress.

Bankrate’s study looked at Americans’ savings habits, and there were some interesting findings. Perhaps the most surprising is that it’s not the rich who set the standard for saving; it’s the middle class. More than a third of households with annual income between $50,000 and $74,999 are saving more than 10% of their incomes, a rate that outpaces even the highest-income households.

“This proves the old adage that what counts isn’t how much you make, but how much you have left over,” said Greg McBride, CFA, Bankrate.com’s chief financial analyst.

Overall, the study found that most Americans are saving no more than five percent of their incomes, and about one in five are savingnothing at all. More than a quarter of us are saving something, but not more than five percent.

Many financial experts recommend saving at least 10 percent of your income, but that’s a hard sell these days, since the economy has been slow to recover from the recession. Many families are finding themselves in a hand-to-mouth existence, not really drowning, but treading water. Without savings, a financial crisis – such as losing a job, having to replace a car, or a medical event – can send a family over the edge, into a cycle of debt or even bankruptcy.

The study looked at not just savings, but how Americans feel about their financial picture in general. There is reason for optimism in the numbers. Nearly a third of respondents said their financial situation has improved from one year ago and just 18% said it has deteriorated. Overall, the study found the second-highest level of optimism since the monthly survey began in 2010.

Here’s a few more findings:

Job security is rising – Those who are feeling more secure in their jobs than one year ago outnumber those who are feeling less secure by a margin of greater than two-to-one (27% to 13%).

Debt’s causing less discomfort – Consumers’ comfort level with debt decreased slightly over the past month, but continues to remain positive relative to a year ago. 23% of respondents are feeling more comfortable with their debt and 20 % are feeling less comfortable than March 2014.

Men are feeling more comfortable with savings – For the first time since the survey started, men are demonstrating more comfort with their savings than one year previous.

So, how do you put away money when it’s hard just to make ends meet? There are a lot of ideas out there, but I’ve found a lot of great advice from a site called Feed the Pig (feedthepig.org), run by the American Institute of CPAs. Feed the Pig has a lot of advice about clever ways to save. Here are a couple of their recommendations:

Always be saving. Regardless of what else you’re doing, such as paying down debt, don’t neglect the need to put some money aside.

Don’t get discouraged. Don’t let mistakes or detours stop you from achieving your long-term goals.

Also, many experts recommend finding savings in everyday things. For example, if you go to a coffee shop every day, cut back to three times a week and drink coffee from the office. If you spend $6.00 on that mocha latte, take the $12.00 you would have spent, and put it in the bank instead. If you did that for a year, you would have $624.00 squirreled away for the future.

That’s just one of many tips out there for people who are trying to get serious about savings.

If you’re looking for some seriously creative ideas about savings, visit Americasaves.org, which is run by the Consumer Federation of America. While we might not all be natural savers, anyone can learn.

More Americans using tax refunds to attack debt, save

Originally published in the Clarion-Ledger on 3/19/2015.

PDF: More Americans using tax refunds to attack debt, save

If you’ve watched TV lately, you have probably noticed a lot more commercials for retailers of big-ticket items like appliances and electronics.

Some businesses are even offering to help you file your taxes or let you borrow your anticipated refund. Of course, there’s a reason for all this: Retailers know many Americans will be getting a pile of money from their tax refunds. Many businesses consider tax refund season to be like a second holiday season, as families wait to be able to pay for those purchases in cash.

Indeed, there is a lot of money at stake. Just a couple of weeks ago, the IRS reported that the average refund so far in the 2015 filing season is $3,120, producing an economic impact of $125 billion. That sudden windfall would be a big temptation for many, especially when so many Americans squeak by paycheck to paycheck.

But lest we assume that our fellow Americans are not being thrifty when it comes to using that windfall, a new study by Bankrate.com suggests they’re going to be far more strategic with that money than previously thought. According to the study, more than one in three Americans (34 percent) who expect to get something back from Uncle Sam are actually planning on using it to attack their debt. And the next biggest use for that money? Savings.

It’s a common misconception that people will spend this windfall on a shopping spree or vacation, but according to the Bankrate.com study, just 3 percent plan to splurge. That’s downconsiderably from just a few years ago. In 2010, it was more than twice that. Now, regarding the notion of the tax refund itself, you can almost hear the accountants out there trying desperately to get their clients’ attention. Many financial experts believe it reflects bad financial management.

“It’s surprising that so many people still prefer to get a big refund, rather than adjust their withholding to get their money throughout the year,” said Bankrate.com tax analyst Kay Bell. “You’d think during lean times they’d need the money more to meet their monthly expenses. But old and bad tax habits die hard,” she said.

And the notion of the refund is still very popular: About 38 percent of Americans prefer to receive a big refund. In the eyes of many, it’s a kind of forced savings.

If we choose to ignore the warnings of financial experts, however, and get our tax refund anyway, using it to erase debt may be our best decision. Over the long term, eliminating even a portion of debt can save thousands in interest. And if you have no debt, saving or investing it can reap rewards in the future.

Of course, there’s another side to this entirely. Ultimately, it’s our hard-earned money, so it’s not up to financial experts, or the government — or anyone else — to tell us how to use it. So regardless of how you use it — to attack debt, to save or to spend — enjoy. Happy tax season!