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Planning Your Retirement
A Woman's Journey: Making Smart Financial Choices Along The Way
(NAPS)-The current generation of working women is more likely than their mothers' to work outside the home, hold college degrees and still take time off to care for their families. And while women have more economic opportunity than ever before, it comes with big financial responsibilities. This is especially true when it comes to funding their retirement.
Today's working women fully expect to work outside the home longer than previous generations. This is a good thing financially for a number of reasons. Working longer:
• Gives you more time to save;
• Increases your monthly Social Security benefit (up until age 70); and
• Means fewer nonworking years to finance.
While you may fully expect to work well into your 60s or longer, health problems, the need to care for a chronically ill family member or lack of job opportunities could get in the way of your plans. While there isn't much you can do to prevent the unexpected from happening, you can take steps that will limit the financial impact of a sudden turn of events.
Investment Basics
A good investment plan is built on three key pieces of information: how much you will need to support your retirement lifestyle, how long you have between now and then and how comfortable you are with taking financial risk. Your answers can drive your investment strategy and how to divide your savings among investments to reach your goal.
Figuring out how much you will need to support your retirement involves a number of factors, such as inflation and taxes, the likelihood of living a long life, the types of income you expect to receive in retirement, how you plan to invest and spend your money when you're retired and whether you want to leave anything to the next generation.
If you're among the majority of working women who expect to have an active life in retirement, you will want to consider your spending needs for both basic living expenses and special interests. It's also important to consider your needs for medical care beyond what Medicare provides.
A good financial goal for retirement is to replace 100 percent of your preretirement income for each year in retirement. Some financial planners have traditionally suggested a lower goal, since some costs tend to go down in retirement, like taxes and commuting costs. But with the cost of health care on the rise, chances of living a long life and your desire to remain active during retirement, a better solution is for women to aim for a higher goal.
Starting Early
It might be hard to believe, but there's plenty of room for retirement planning as soon as you enter the job market. The earlier you start saving and planning, the easier it will be to reach your goal.
Experts recommend looking at retirement not as the end of something, but as a new beginning. It all comes down to knowing what luggage you'll need for this trip into your future. Don't wait until the last minute to pack.
One good source of information on planning for retirement is a free booklet from the MetLife Mature Market Institute called "What Today's Woman Needs to Know." It was created in cooperation with the Women's Institute for a Secure Retirement. It includes information, resources and a checklist of retirement planning and savings to-dos for women ranging in age from their 20s to their 70s. You can get a copy by calling (203) 221-6580, e-mailing maturemarketinstitute@ metlife.com, visiting www.mature marketinstitute.com or writing MetLife Mature Market Institute, 57 Greens Farms Road, Westport, CT 06880.
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| | Knowing Your Credit Score
(NAPS)-Quick...what's your credit score? If you don't know, you're not alone. Two-thirds of all Americans don't have a clue, either.
That's an astounding percentage, since a consumer's credit score influences many aspects of his or her financial world.
When people talk about "your credit score," they're usually talking about your current FICO(r) score. FICO is an acronym for Fair Isaac Corporation-the inventor of the credit score, a three-digit number generally ranging from 300 to 850. The higher the number the better.
The fact is that a large number of American consumers continue to face the challenge of understanding basic personal finances. The inability of many people to make decisions about their personal finances remains a serious issue.
To improve consumer access to credit information, Congress enacted legislation called the Fair and Accurate Credit Transactions (FACT) Act. It gives you the right to receive a free credit report from the three major credit bureaus once a year.
The reality, however, is that seeing your credit report is only one part of the credit equation and does not provide a complete picture. You also need to see and understand your FICO credit score-which is designed to provide lenders with an idea of how likely you will be able to pay back a loan or line of credit. The higher the score, the more likely it is you will be approved for a loan and the less you'll likely have to pay in interest or finance charges.
For example, according to figures from Fair Isaac, people with a FICO score of 760 can get a $300,000, 30-year fixed mortgage with an APR of 5.78 percent and a monthly payment of $1,756. But, with a FICO score of between 500 and 579, the same $300,000 loan would have an APR of about 9.46 percent, which means a monthly payment of $2,521-more than a 40 percent increase. In many instances, people with low FICO scores have blemishes on their credit report that may preclude their being offered credit at all. You can view Fair Isaac's calculators at www.myFICO.com.
At the Web site, you can see how certain financial decisions can make a difference to your score. Other calculators show how interest rate changes can affect your card balances or how much you could save by consolidating your credit cards on to a lower-rate card.
It's important to remember that a credit score adjusts with changes in your credit history and profile. Your score can rise when you take positive steps, such as making a series of on-time payments or paying off a balance. It can fall with negative actions such as missing payments or defaulting on a loan.
Your FICO score is not affected directly by your income. Income may well be part of a lender's assessment, but it's not used in the FICO score calculation.
"Payment history, credit usage, how long you handle credit and the type of credit you have all affect your credit score. If there is one thing that all consumers can do to improve their credit score it is to make payments on time," said Dave Tomlinson, senior vice president of Marketing, Washington Mutual (which now goes by WaMu) Card Services.
Getting access to credit scores traditionally costs about 10 dollars but may be worth the investment. Tomlinson notes that WaMu provides its credit cardholders with free monthly online access to their FICO scores-which can save you money and is a great tool to have quickly available at your convenience.
"Consumers have the power," said Tomlinson, "to avoid the traps that can damage their credit profiles and credit scores. They just have to take advantage of resources that can teach them how to flex their financial muscles."
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