The earthquake that rattled us out of bed Monday morning also served as a reminder: it’s time to check the emergency supplies. And it occurred to me that preparing for emergencies has a lot in common with preparing for retirement. Consider:
Most people are woefully unprepared. Not just “under-prepared” but not even being in the same room as prepared. When it comes to retirement savings, one-third of workers have less than $1,000 set aside and 60% have less than $25,000, according to the most recent survey by Employee Benefit Research Institute and Greenwald and Associates.
The solution: Use your imagination. Emergency preparedness experts recommend thinking, in detail, about how you would feed, shelter and tend to the hygiene needs of your family if you were without power, water or a roof for three days. Walking yourself through those days will get you motivated to make your life easier should something happen. A similar exercise can jumpstart your retirement planning: Go to the Social Security estimator, see what you’re scheduled to get at retirement, and imagine trying to live on that.
Many people are overwhelmed. The list of emergency supplies you’re supposed to keep in your home, car and office can be pretty daunting, especially if you’re on a budget. Likewise, the amounts of money people are supposed to save for retirement can seem unrealistically large.
The solution: Start small. Anything you scrape together will help. Getting a kit together can start with some canned goods and a few gallons of water stored in a plastic tote. Getting your retirement together can start with a 1% contribution to a 401(k) or an automatic transfer to an IRA. Build from there, as you can.
You can’t “set it and forget it.” Once you’ve assembled them, disaster supplies have to be regularly checked to see what’s expired or wandered off. (Somebody may have pilfered the batteries in an “emergency” for a game console, for example.) Likewise, once you start saving for retirement, you need to check in to make sure your investments are properly allocated and regularly rebalanced. Changes in your life or your plans can necessitate changes in your retirement savings, as well.
The solution: Put it on your calendar. Schedule checkups at least once a year.
By the way, you can find lists of emergency supplies at the Red Cross and FEMA’s Ready.gov sites. Or check out this great graphic from the LA Times, which shows how you can store what you need in a clean plastic trash can.
If you’re interested, here are some of the supplies we keep around the house (as well as my notes about what I need to replace/get):
Outside in storage bins:
- Water [need more; we have about half of the two gallons per person per day recommended]
- Food (we have canned food + can opener, peanut butter, crackers, energy bars; I need to add more pet food now that we have a cat]
- Cat and dog crates
- Tent, cookstove, fuel
- Shovel, hatchet, crowbar, hacksaw
- Plastic sheeting (to replace windows), duct tape [need to get: staple gun]
- Plastic goggles, hard hats (protection for clearing debris) [need to find: the work gloves that wandered off]
- Gas shut off tool (we had an automatic shutoff installed, but I like to be sure)
- Flashlight, lantern, batteries [looks like I moved the portable radio to some other site; now I just have to remember where]
- Emergency toilet (bucket with a snap-on seat, garbage bags and kitty litter), toilet paper, wipes
- Bleach, castille soap, towels
- Mylar blankets & rain ponchos
- Need: Fire extinguisher, hygiene kit [toothbrushes, floss, hairbrush]
- Bottled water
- Energy bars
- First-aid kit
- Sneakers, socks, extra sweaters and coats
- Multi-tool (oooo I love my Leatherman)
- Wind-up/solar-powered flashlight/radio/cell phone charger
- Regular blanket, mylar blankets & rain ponchos
Today’s top story: How to cope when friends and family steal your identity. Also in the news: How to deal with defaulting on your student loans, storing your digital items for free, and five tax credits and deductions you should know about.
When Family and Friends Steal Your Identity
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Debt Adviser: How to deal with student loan debt default
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How to store your e-memories for free
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5 Tax Credits and Deductions You Need to Know About
Don’t give Uncle Sam more than you absolutely have to.
Retirement: A third have less than $1,000 put away
A scary situation.
Dear Liz: Regarding the reader who was worried about not having sufficient tax deductions: I recommend charitable giving. As our mortgage interest per payment fell, I augmented it with charitable giving to maintain the same annual total for income tax deductions (interest plus charity). As the years go by, our interest decreases and charity increases. Payments to charity accomplish a social benefit, while interest payments just line the pockets of bankers. We give to a broad variety of charities: national, local and international organizations, religious and secular, health and social care, care for children at risk, veterans, Red Cross, etc. The great thing about charitable giving is that we get to choose whom we wish to help. When asked, most organizations will keep your demographic information private so that you are not inundated with requests via the sale of donor lists.
Answer: Thanks for sharing your approach, but people should understand that it requires paying out more money over time to maintain the same level of itemized deductions.
Mortgage payments typically remain the same over the life of the loan, with the amount of potentially deductible interest shrinking and the amount applied to the principal increasing with each payment. So as the amount of deductible interest declines, you would have to increase your contributions to charity in addition to making your mortgage payment each month if you wanted to keep your itemized deductions unchanged.
Today’s top story: The pros and cons of couples keeping their finances separate. Also in the news: What you need to know about deducting mortgage interest, how paying old debt will affect your credit score, and when to have the retirement talk.
Should Couples Keep Their Financial Assets Separate?
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Tips for couples: How to have the retirement talk
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When we were in Italy two years ago, we found our old-school magnetic-stripe cards wouldn’t work in automated kiosks. That included our British Airways card, which had a chip, but no PIN. Without a personal identification number to punch in, it was useless.
Unfortunately, many articles about where to get chip-and-PIN cards in the U.S. make the mistake of thinking chip-and-signature cards are the same thing. They’re so not.
Because we’re going to Europe again soon, I hit up Bill Hardekopf of LowCards.com for a list of U.S. issuers that offer the real deal. The few organizations on this list have many members that travel overseas. And here they are:
Andrews Air Force Base Federal Credit Union. “You can join by becoming a member of the American Consumer Council which is open to all so essentially is open membership,” Hardekopf said. Membership is $5.
Pentagon Federal Credit Union. You can join this credit union is you’re a member of one of a host of associations. If you’re not already a member of one, you can join Voices for America’s Troops for $15.
Or you can just wait, if you don’t have an overseas trip planned. True chip-and-PIN cards should be here by October 2015, when merchants without the terminals to process the cards and banks that have failed to issue them will have to pay for fraud. As Ron Lieber of the New York Times put it, “It’s an elaborate game of chicken, fitting for an industry where the major players spent years embroiled in a lawsuit.” Ultimately, though, more secure cards will benefit banks, merchants and consumers.
Today’s top story: How the habits of early retirees could lead you to retirement. Also in the news: Things to consider when saving for a mortgage, easing financial worries with smartphone apps, and what to do when your friends are big spenders.
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Retire early by picking up these habits.
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Faster access to your money could mean less of it.
Today’s top story: How to build credit at any age. Also in the news: The best length of time for car loans, getting the most from store reward programs, and what heirs need to know about reverse mortgages.
Am I Too Old to Build Credit?
Should you take on a six-year car loan?
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Getting the most from that annoying loyalty card.
What Heirs Need to Know About Reverse Mortgages
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