Get smart with your money
Today’s top story: How to protect your bank account. Also in the news: How to financially survive moving, how to rebuild your credit, and how to curb your impulse buying.
5 Steps You Can Take to Protect Your Bank Account
Defending your assets.
Married and moving? Heed these money tips
Packing is stressful enough.
How to build, or rebuild your credit
Starting over.
Put a 30-Day Delay on All Impulse Purchases to Ensure You Really Need It
Find out how much you really want it.
Dear Liz: I’m engaged to be married and need your advice on getting started in the world of shared finances.
My fiance is 43, I’m 31. He’s debt free, with a savings account but no retirement fund. I have $34,000 in student loans (consolidated at 4.25%) and it weighs heavily on my mind as I’m desperate to become debt free. I’m debt free otherwise with $10,000 in savings.
We both make good money but my income as a freelancer is sporadic, while his is steady with periodic bursts of additional income.
We want to be debt free as a couple, save up a solid emergency fund and start making up for lost time on retirement savings, all while being aware that a family and a house might not be far away.
He’s very supportive and wants to pay off my student loans. Should I let him and pay “us” back to the emergency fund or maybe a house down-payment fund? What’s our best course of action to start on a solid financial footing?
Answer: You’re already behind on retirement savings, which should have started with your first job. Your fiance is even farther behind.
Don’t let your zeal to repay your debt blind you to the very real risk that you might not be able to save enough for a comfortable retirement if you don’t get started now.
If your education debt consists of federal student loans, then your low rate is fixed. The interest probably is tax deductible, which means the effective rate you’re paying is just a little over the inflation rate. It isn’t quite free money, but it’s pretty cheap.
You don’t need to be in a rush to pay it off, particularly with all your other financial priorities looming.
Instead, get going on some retirement accounts. Your fiance should take advantage of his workplace plan, if he has access to one.
Most employer-sponsored workplace plans have company matches, which really is free money you shouldn’t leave on the table. An individual retirement account or Roth IRA can supplement the plan or be a substitute if he doesn’t have access to a workplace plan.
As a freelancer, you have numerous options for setting aside money for retirement, including Simplified Employee Pensions (SEP), Savings Incentive Match for Employees (SIMPLE) and solo 401(k)s that would allow you to contribute more than the standard $5,500 annual limit for an IRA.
Ideally, you would be saving around 15% of your income and your fiance 20% or more.
If you can’t hit those targets just yet, start saving what you can and increase your contributions regularly. Work your other goals around the primary goal of being able to afford a decent retirement.
Dear Liz: I’d like to get something straightened out. Between things that you and other columnists have said, we laymen have been told that if we wait until we’re 70 to start taking Social Security, we’ll get 8% more for each year we delay, and a total of 40% more than if we start taking it at our retirement age.
But the retirement age is 66, not 65. So there’s a four-year difference, which would produce an increase of only 32%. Even if the yearly increase is exponential (compounded), the total increase after four years would be 36%. So where does that 40% figure come from?
Answer: It didn’t come from this column, so it probably came from someone who was writing when 65 was the full retirement age.
As you note, the full retirement age is now 66 and will move up to 67 for people born in 1960 and later.
Delayed Social Security benefits max out at age 70, so there are fewer years in which a benefit can earn a guaranteed 8% annual return for each year it’s put off. Delayed retirement credits aren’t compounded, but the return is still better than you could get guaranteed anywhere else.
That doesn’t mean delaying Social Security past full retirement age is always the right choice. Social Security claiming strategies are complex, with a lot of moving parts, particularly if you’re married.
Before filing your application, you should use at least one of the free calculators (AARP has a good one on its site) and consider using a paid version, such as MaximizeMySocialSecurity.com, if you want to tweak some of the assumptions or if you have a particularly complicated situation.
Today’s top story: Where you can do your back-to-school shopping tax-free! Also in the news: Personal finance apps for young people, what to do when your identity is stolen, and money moves every 20-something should make before the end of summer.
18 States Where You Can Do Your Back-to-School Shopping Tax-Free
More money for school supplies!
10 Personal Finance Apps For Teens And Young Adults
The earlier they start, the better off they’ll be.
9 Things to Do Immediately After Your Identity Is Stolen
Don’t panic.
6 Money Moves Every 20-Something Should Make Before Summer Is Over
Getting yourself on the right track for the rest of the year.
Top 10 U.S. Cities To Retire If You Still Want To Work
In case you’re not ready to golf full-time.
Today’s top story: Avoiding financial aid scams. Also in the news: Escaping the credit card fee trap, a beginner’s guide to your company’s stock plan, and the credit score for small businesses.
Not So FAFSA: How to Avoid a Student Aid Scam
Protecting both your information and your child’s.
How to Escape the Credit-Card Fee Trap
Don’t give the banks more than they already want.
A Beginner’s Guide to Your Company’s Employee Stock Plans
Learning the ins and outs of your company’s stock options.
The credit score you’ve never heard of
If you’re a small business owner, pay attention.
Today’s top story: What your bank won’t tell you when you get a mortgage. Also in the news: Retiring your debts before retirement, health care to-dos that can save you money, and apps that can keep your cell phone safe from security threats.
4 Things Your Bank Won’t Tell You When You Get a Mortgage
What you should know.
Before Even Thinking About Retiring, Retire Your Debts
Why your debt needs to retire before you do.
7 Summer Health Care To-Dos That Can Save You Money
Take a hard look at your health care costs.
5 Apps to Keep Your Cellphone Safe From Security Threats
Protecting yourself from identity theft.