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Your Complete Guide to Retiring Alone

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Saving for retirement involves lots of planning and calculations for every adult; however, if you are not married and don’t have children, you’ll need special strategies for retirement saving and planning.

If you are anticipating a single retirement, you are not alone. According to the U.S. Census, approximately half of all American adults are married. In addition, close to one-third of baby boomers don’t have children. Others may age alone due to the death of a spouse, a divorce or estranged or unavailable children.

Here’s what you need to know about retiring alone:

Create your own support system

One of the greatest challenges of retiring alone is not having a built-in support system through a spouse and children. Isolation and feelings of loneliness can be one of the strongest factors in early aging and general unwellness, so it’s a good idea to build your own support system if you’re planning on retiring single. This can take the form of a close group of friends who live near your home and are happy to join you for fun outings or occasional errands. If you don’t have this group of friends, make new ones by attending local social events through Meetup.com, befriending your neighbors in your community, or spending time at a senior center for active adults.

Identity your most trusted friend

It’s a good idea to choose one friend to serve as your emergency contact and to make decisions on your behalf in case you become incapacitated for any reason. Failure to appoint this person can mean decisions about your health and welfare can be relegated to your closest living relative, which may be someone with whom you have no relationship at all.

Choose your trusted contact and draw up a medical power of attorney so they can make decisions for you if the need arises. Save this person’s contact info in your phone, titled “In Case of Emergency,” or “ICE”, so someone can easily find this number in your contacts should the need arise.

Get creative about your housing options

When looking for a place to retire alone, there are loads of options to consider:

Move abroad to a country with a low cost of living where you can check out the sights, get to know the culture, and experiment with the cuisine.

Team up with a friend or two for built-in companionship and shared living expenses.

Choose a retirement community with senior-friendly amenities and walkable conveniences.

Consider long-term care insurance

Did you know that most adults turning age 65 will need long-term care at some point in their lives?

Long-term care can be expensive. As a single retiree, you’ll likely feel more secure knowing you have coverage for a long-term care facility or at-home care should the need arise. A long-term care policy may not be cheap, but may be worth the security it brings you.

Know your Social Security claiming options

If you have never been married, or have never had a marriage that lasted 10 years or more, your Social Security claiming options are simple. You are likely best waiting until age 70 to claim, unless you believe your life expectancy will be shorter than average. If you do claim your benefits before reaching full retirement age, and you continue working, make sure your income does not exceed the Social Security earnings limit at the time, or you may end up owing money.

If you have a previous marriage that lasted 10 years or longer, you may be able to claim a spousal benefit based on your ex’s earnings record and switch over to your own benefit amount when you reach full retirement age. If your spouse is deceased, you may be eligible for a widow/widower benefit based on your late partner’s earnings record.

Be sure to review your options carefully before making your choice.

A single retirement may look a bit different than a retirement shared with a life partner, but by planning ahead and following the tips outlined above, these can be the best years of your life.

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How Do I Choose the Right Investments for Me?

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Q: I’m ready to invest in my future, but I need some help getting started. How do I choose the investments that are right for me?

A: Investing your funds is a great way to grow your money and secure your financial future; however, choosing a first investment can be tricky.

Here’s all you need to know about the most common beginner investments and how to choose the path that best suits your needs:

Retirement plans

If you are employed, you likely already have a retirement plan through your workplace. There are many ways to maximize this account, or even open additional retirement options. Here are some of the most common retirement plans:

A. 401(k) is an employee-sponsored retirement plan. It allows eligible employees to save and invest for their own retirement on a tax-deferred basis. Employees can decide how much money they want deducted from their paycheck and regularly deposited into their 401(k), as long as contributions fall within IRS limits. Sometimes, an employer will offer to match all contributions, which is essentially free money with a guaranteed return.

Goal: Save for retirement.

Pros: Contributions are tax-free and there is generally no minimum for contributions.

Cons: Fewer investment options than other retirement accounts, may have high account fees and early withdrawal penalties.

Best choice for: All employees with a W-2, especially employees who have an employer offering to match contributions.

Best age to invest: As soon as you start working at your first job.

B. Traditional IRAs are retirement accounts that offer most individuals an upfront tax break.

Goal: Save for retirement.

Pros: Contributions and investment earnings aren’t taxed. Contributions may be tax-deductible and significantly lower your taxable income. There are no income limits for contributors.

Cons: Withdrawals during retirement are taxed at your tax rate during that time. At age 70½, you are no longer allowed to make contributions. Also at age 70½, you must begin taking distributions even if you are still employed (and therefore, possibly in a high tax bracket).

Best choice for: Individuals who are currently in a higher tax bracket than what they anticipate being in during retirement and employees who don’t have access to a workplace-sponsored retirement plan.

Best age to invest: Age 18, or the minimum age allowed in your state.

C. Roth IRAs are retirement plans that do not allow for tax-deductible contributions, but feature tax-free withdrawals during retirement.

Goal: Save for retirement.

Pros: Withdrawals are tax-free. There is no age limit for making contributions.

Cons: Contributions and growth are both taxed and are not tax-deductible. There are

also income limits for eligible contributors.

Best choice for: Individuals who anticipate being in a higher tax bracket during retirement and individuals who may need to access some of their savings before they retire.

Best age to invest: Age 18, or the minimum age allowed in your state.

529 plans

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs.

The SECURE Act,  passed in 2019, expanded tax-free 529 withdrawals to include registered apprenticeship program expenses and up to $10,000 in student loan debt repayment for account beneficiaries and their siblings.

There are two primary types of 529 plans:

529 savings plans offer a place for tuition savings to grow, tax-deferred. The money in the account is usually invested in a mutual fund.

Goal: Save up for tuition costs and related expenses, like room and board.

Pros: Contributions and growth are tax-free. Withdrawals are also tax-free, as long as  they’re used for qualified education expenses. Can be used for K-12.

Cons: May have high fees and can impact the beneficiary’s eligibility to receive financial aid for college.

Best choice for: Parents looking for a safe investment for their child’s college tuition.

529 prepaid tuition plans allow the account holder to save for future tuition payments.

Goal: Prepay tuition costs at designated universities and colleges.

Pros: Lock in lower tuition rates. Make high tuition payments more manageable by spreading them over a number of years.

Cons: May have high fees and can impact the beneficiary’s eligibility to receive financial aid for college.  Tuition payments are only accepted by a limited number of states and specific higher education institutions. Can only be used for tuition expenses.

Best choice for: Parents of students who know which college they will be attending and  want to lock in lower tuition rates.

Best age to invest: It’s best to open any kind of 529 as soon as the child is born.

Annuities

An annuity is a contract between a contract holder, or annuitant and an insurance company. The contract stipulates that the insurer promises to pay the annuitant a predetermined amount of money on a periodic basis for a specified period, in exchange for regular contributions.

Many people purchase annuities to serve as retirement-income insurance, which guarantees them a regular income stream even after they’ve left the workforce, often for the rest of their life.

There are two primary categories of annuities:

Immediate annuities require the annuitant to give the insurance company a lump sum immediately and then begin receiving payments right away. The payment amount may be fixed or variable.

Deferred annuities allow the annuitant to make contributions throughout their working life which can be converted into an income stream when the annuitant reaches retirement. They can also be purchased with a lump sum.

Within these broad categories, there are several types of annuities from which to choose:

  • A fixed annuity provides a specific amount of money every month for the rest of the annuitant’s life, or for the period of time chosen, regardless of how the annuity performs.
  • Indexed annuities blend the features of fixed annuities with the potential for additional growth, depending on how the markets perform. The annuitant is guaranteed a minimum return along with a return that is directly linked to any rise in the relevant market index.
  • Variable annuities provide a return based on the performance of a portfolio of mutual funds that the annuitant has selected. The insurance company may also guarantee a minimum income stream if stipulated in the contract.

While each specific annuity will have its own pros and cons, all annuities share commonalities:

Goal: To guarantee a regular income stream even after retirement.

Pros: Generally, during the accumulation phase of an annuity contract, earnings grow tax-deferred. Withdrawals are taxed at the same tax rate as the annuitant’s income. Contributions to annuities funded through an IRA may be tax-deductible.

Cons: May have high fees. There is generally a minimum age for allowable withdrawals without penalty.

Best choice for: Immediate annuities can be a good choice for individuals who have had a one-time windfall, or who are close to retirement and have significant retirement savings they’d like to invest. All annuities can be a beneficial addition to a retirement plan, especially if the annuitant is afraid they will outlive their retirement savings.

Best age to invest: In general, the best age range for purchasing annuities is between 40-70.

Life insurance

Life insurance is an agreement between a policy holder and an insurance provider that the insurer will pay a sum of money to a designated beneficiary when the insured passes on, in exchange for monthly premiums.

Goal: Ensure that one’s family will be provided for after their passing. The payout can also be used to cover funeral expenses and related costs, and to pay off any outstanding debts the policyholder may have had.

Best choice for: Anyone looking to secure the financial future of their children, spouse and family members.

Best age to invest: Individuals in their 20s and 30s will likely get the best rates on a life insurance policy.

There are two primary kinds of life insurance:

Term life insurance only covers the insured for a set term, generally between 10 and 30 years.  The benefit is paid out only if the insured passes away during the term.

Pros: Cheaper premiums and more flexibility.

Cons: No cash value; may not serve its purpose if the policy holder outlives the term.

Permanent life insurance covers the insured for life as long as the premiums are paid. Some permanent life insurance policies also allow the policyholder to accumulate a cash value.

Pros: Tax-deferred growth, lifetime coverage and cash value for loans.

Cons: Costly premiums and less flexibility.

Your Turn: Do you have another beginner investment to add to our list? Share it with us in the comments.

Are you looking for a place to start investing in your future? Connect with us today at 503-275-0300 or email info@usacu.org for more information!

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The Importance of Being Financially Fit

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Are you ready to stretch those financial fitness muscles? We hope so, because it’s time to get financially fit!

Being financially fit means living a life of complete financial responsibility. The Center for Financial Services Innovation (CFSI), also known as the Financial Health Network, defines four basic components of financial health: Spend, Save, Borrow and Plan. These components reference everyday financial activities. As such, every choice you make in terms of these four activities either builds or detracts from your financial fitness. Like physical fitness, you can beef up those fitness muscles a little bit more each day.

Being financially fit is crucial for a well-balanced, stress-free life. Here’s why (and how):

Expand your financial knowledge

A financially fit person is constantly broadening their money knowledge. They read personal finance books and blogs, attend financial education seminars and are aware of the evolving state of the economy. This enables them to make monetary decisions from a position of knowledge and power, leaving much less up to chance or luck.

Stick to a budget

A financially fit person knows that tracking monthly expenses is key to financial health. They are careful to set aside money from their monthly income for all fixed and discretionary expenses and to stay within budget for each spending category.

Minimize debt

A financially fit person is committed to paying down debts and seeks to live debt-free. Constant budgeting, ongoing financial education and planning ahead enables them to make it through the month, and through unexpected expenses, without spiraling into debt.

Maximize savings 

A financially fit person prioritizes savings. In fact, savings is a fixed item on their monthly budget instead of something that only happens if there’s money left over. This allows them to think ahead and build a comfortable nest egg or emergency fund. In turn, having a robust safety net means sleeping better at night knowing there’s money available to cover unexpected expenses or a change in life circumstances.

Maintain complete awareness of the state of your finances

A financially fit person knows exactly how much money they owe, the accumulated value of their assets and the complete sum of their fixed and fluctuating expenses. This awareness takes the stress out of money management, allowing them to make better financial choices.

Maintain a healthy credit score

A financially fit person knows that an excellent credit history and score is a crucial component to long-term financial health. They are careful to pay all bills on time, hold onto their credit cards for a while and to keep their credit utilization low. This enables them to qualify for long-term loans with favorable interest rates, which saves them money for years to come.

Help your money go further

A financially fit person does not waste large sums of money on interest charges for purchases made using borrowed funds via credit cards or loans. They live within their means and only use these resources for purchases they can actually afford, or for large, long-term assets, like a car or a house. This means they have more funds at their disposal to help build their wealth through savings and investments.

Create concrete financial goals

A financially fit person has long-term and short-term financial goals. This enables them to keep their focus on the big picture when making everyday money choices, empowering them to actually realize their financial dreams.

Achieve financial independence

A financially fit person is independent. They don’t rely on loans from friends or family members to get by, and they don’t need to pay with plastic at the end of the month because they ran out of money. Their well-padded emergency fund means they don’t depend on their monthly income to put bread on the table, either. By sticking to a budget, prioritizing savings and maintaining an awareness of their finances, they are strong, secure and completely independent.

Being financially fit means living a life without battling anxiety about getting through the month or stressing about the future. You can achieve financial fitness by committing to making choices in each of the four components of financial health (spend, save, borrow, plan) that are forward-thinking and help to build your financial wellness.

Are you looking for more financial tips? What if you could get paid to learn about finance? Well, now you can. USAgencies Credit Union has partnered with Zogo, an app where users earn money while they learn about money. Download the free app using code “USACU”, and earn while you learn about finance!

Connect with us today at 503-275-0300 or email info@usacu.org to learn more.

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Your Complete Guide to Using Your Credit Cards

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Q: I’d love to improve my credit score, but I can’t get ahead of my monthly payments. I also find that my spending gets out of control when I’m paying with plastic. How do I use my credit cards responsibly?

A: Using your credit cards responsibly is a great way to boost your credit score and your financial wellness. Unfortunately, though, credit card issuers make it challenging to stay ahead of monthly payments and easy to fall into debt with credit card purchases. No worries, USAgencies Credit Union is here to help!

Here’s all you need to know about responsible credit card usage.

Refresh your credit card knowledge

Understanding the way a credit card works can help the cardholder use it responsibly.

A credit card is a revolving line of credit allowing the cardholder to make charges at any time, up to a specific limit. Each time the cardholder swipes their card, the credit card issuer is lending them the money so they can make the purchase. Unlike a loan, though, the credit card account has no fixed term. Instead, the cardholder will need to make payments toward the balance each month until the balance is paid off in full. At the end of each billing cycle, the cardholder can choose to make just the minimum required payment, pay off the balance in full or make a payment of any size that falls between these two amounts.

Credit cards tend to have high interest rates relative to other kinds of loans. The most recent data shows the average industry rate on new credit cards is 13.15% APR (annual percentage rate) and the average credit union rate on new credit cards is 11.54% APR.

Pay bills in full, on time

The best way to keep a score high is to pay credit card bills in full each month — and on time. This has multiple benefits:

  • Build credit — Using credit responsibly builds up your credit history, which makes it easier and more affordable to secure a loan in the future.
  • Skip the interest — Paying credit card bills in full and on time each month lets the cardholder avoid the card’s interest charges completely.
  • Stay out of debt — Paying bills in full each month helps prevent the consumer from falling into the cycle of endless minimum payments, high interest accruals and a whirlpool of debt.
  • Avoid late fees — Late fees and other penalties for missed payments can get expensive quickly. Avoid them by paying bills on time each month.
  • Enjoy rewards — Healthy credit card habits are often generously rewarded through the credit card issuer with airline miles, reward points and other fun benefits.

Tip: Using a credit card primarily for purchases you can already afford makes it easier to pay off the entire bill each month.

Brush up on billing

There are several important terms to be familiar with for staying on top of credit card billing.

A credit card billing cycle is the period of time between subsequent credit card billings. It can vary from 20 to 45 days, depending on the credit card issuer. Within that timeframe, purchases, credits and any fees or finance charges will be added to and subtracted from the cardholder’s account.

When the billing cycle ends, the cardholder will be billed for the remaining balance, which will be reflected in their credit card statement. The current dates and span of a credit card’s billing cycle should be clearly visible on the bill.

Tip: It’s important to know when your billing cycle opens and closes each month to help you keep on top of your monthly payments.

Credit card bills will also show a payment due date, which tends to be approximately 20 days after the end of a billing cycle. The timeframe between when the billing cycle ends and its payment due date is known as the grace period. When the grace period is over and the payment due date passes, the payment is overdue and will be subject to penalties and interest charges.

Tip: To ensure a payment is never overdue, it’s best to schedule a time for making your credit card payments each month, ideally during the grace period and before the payment due date. This way, you’ll avoid interest charges and penalties and keep your score high. Allow a minimum of one week for the payment to process.

Spend smartly

Credit cards can easily turn into spending traps if the cardholder is not careful. Following these dos and don’ts of credit card spending can help you stick to your budget even when paying with plastic.

Do:

  • When making a purchase, treat your credit card like cash.
  • Remember that credit card transactions are mini loans.
  • Pay for purchases within your regular budget.
  • Decrease your reliance on credit cards by building an emergency fund.

Don’t:

  • Use your credit card as if it provides you with access to extra income.
  • Use credit to justify extravagant purchases.
  • Neglect to put money into savings because you have access to a credit card.

Using credit cards responsibly can help you build and maintain an excellent credit score, which will make it easier to secure affordable long-term loans in the future. As a member of USAgencies Credit Union, you have access to your credit score and credit report for free with My Credit Score!

Have more questions about credit cards? Connect with us at 503.275.0300 or visit us at USACU.org.