This Week In Your Wallet – February 22, 2011
Hi –
I’ve gone back to school. Well, not really, but that’s what it feels like. I spent President’s Day weekend touring college campuses with my teenager (and enriching his wardrobe at a succession of college bookstores — I’ve proven to be a bit of a sucker for U. apparel). And just in case you were wondering, the answer is yes: Seeing the price-tags is excellent incentive for continuing to fund that 529. Here’s what you need to know to make you money (or save you money) from this week’s news:
Why It’s More Important Than Ever To Pay The Rent On Time
No, I’m not talking about the possibility of eviction. I’m talking about keeping your credit score up. One of the three major credit bureaus, Experian, recently bought a smaller bureau that tracks rental payment histories and as a result, Experian is now factoring your history of paying your rent into your credit score. Paying on time can enable you to borrow more and less expensively in the future. And not paying on time can result in limited access to credit and higher credit prices as well as higher prices on homeowners and auto insurance, a tougher time getting a job and difficulty renting an apartment in the future.
Lowcards.com’s Bill Hardekopf, who is also author of The Credit Card Guidebook, points out that this is really good news for people who are renting now – because it gives them a way to build up their credit score to qualify for a mortgage with a lower rate in the future. He expects that if this works well for Experian, other credit bureaus will look to expand their reports to include rental info as well.
Note: Starting in July, anyone who denies you credit or charges you more because of your credit has to give you a copy of your credit score – not just report but score. This includes landlords and utility companies. You can, of course, already get a copy of each of your credit reports for free once a year at annualcreditreport.com.
Why Retirement Is Keeping You Up At Night
A new study from Allianz Life reveals that nearly half of Americans age 44 to 55 feel unprepared for retirement – and two-thirds of those 44+ fear outliving their money more than they feel dying. Yikes. If you’re one of them, here’s what you can do about it:
- Know what you need. It’s very, very difficult to run a race when you don’t know where the finish line is. You NEED to run the numbers to figure out how much you need in retirement using a retirement calculator on the internet or working through it with a financial advisor. In order to do this you’ll need to know your current retirement account balances and how much you can expect from Social Security (you can get this from ssa.gov). Then go to choosetosave.org and run the ballpark retirement estimator.
- Save more. In most cases the retirement estimator is going to tell you to save more. The best way to do this is automatically. Call your benefits department and increase your 401(k) contribution by 3%. Then, if you’re not maxed out, do the same next year. If you don’t have a 401(k), open an IRA with a discount brokerage firm and automatically have as much as you can transferred in every time you get paid (do it right after you get paid so the money will be there). You can put $5000 a year into an IRA. If you get paid every two weeks try to get that automatic contribution at $192 so that you max out.
- Annuitize. Once you get to retirement, I like the idea of creating a pension for yourself by turning some of your nest egg into an immediate annuity that lasts for a lifetime. You won’t want to turn all of your retirement account into an annuity, just enough to cover what you know to be your fixed costs. If your fixed costs go up later, then you can annuitize another chunk down the road. (The older you are, the more you’ll receive from the same amount of money because you won’t have as long to live. A 65-year-old woman will get a monthly income of around $1150 for life by annuitizing $200,000. A 70-year-old woman would get about $125 more.) And note: It is cheaper to do this by annuitizing directly from your retirement account than by taking a lump sum out of your retirement account and annuitizing after because the fees for doing it directly are usually MUCH lower.
Why You Should Buy Airline Tickets On Tuesday or Wednesday
Finally, a few quickies.
- The Wall Street Journal notes you’re better off buying an airline ticket on a Tuesday or a Wednesday. By the weekend, prices go up.
- CNBC.com points out that if you move, you should be sure to let your bank know of your new address – ASAP. It’s not just that you don’t want your statements to fall into the hands of id thieves, but that banks are starting to impose returned mail fees.
- And I want you to know about Broadwaybox.com – my favorite source for discount theater tickets. I recently got tix for Billy Elliot and The Book of Mormon (which looks to be this season’s hot ticket) at huge discounts. And I saved a few extra bucks each by printing them myself.
Jean
