What I’ve Been Up To

This Week in Your Wallet: Speed Saving, Social Security Strategies, Why Stocks Are Scary

What’s better than a glowing tan at the end of summer? The answer is a glowing savings account. Recently on DailyWorth, I offered 11 ways to save over $1000 this summer. From your daily commute – to your monthly cable bill – I pulled together some common areas where you’re probably overspending, and tips for pumping the brakes.

And yes, I meant that literally. Your path to saving Benjamins can start on the road this summer. If you drive more sensibly (i.e. adhere to the speed limit and refrain from rapid acceleration and excessive braking), you should be able to sock away a good $100 in fuel economy alone. Pair that controlled cruising with a gas savings card via Stop & Shop, and shave money off the cost of each fill-up. (The last time I used my card, I saved 60 cents on each gallon – roughly $9 bucks overall.  I was thrilled!) Or, eliminate your daily commute two times a week by carpooling, biking or using public transportation, and save an average $7 a day.

Switching gears to monthly bills: suspend your gym membership this summer and take your workouts outside. Considering the average gym membership is $55 a month, you can save $165 (and get a nice dose of vitamin D, too) by suspending – not cancelling – your gym membership this summer. Along the same lines, if your son or daughter is going to summer camp – or someone on the family plan won’t be needing the phone for a few months – suspend that line too. You (and your family) can save a rough $40 per month per line (on a smartphone).

The above already totals to $585 worth of potential savings. For more ways to save, check out the original post.

Maximizing Social Security

Couples who are looking to maximize their take from Social Security are likely familiar with what’s called a “file and suspend” strategy. (The higher earning spouse applies for benefits at full retirement age, then suspends payments – allowing the amount of benefits to continue to grow, roughly 8% a year, until age 70.  At the time of the initial application, the lower earning spouse files for a spousal benefit – 50% of the higher earner’s benefit. And presto: You’re growing benefits and receiving them simultaneously.)

But how about if you’re single? CPA Robert Klein reported on research conducted by Social Security Guru Mary Beth Franklin that shows the strategy can work for you, too. It doesn’t allow you to draw money immediately as couples can, but it does have the impact of effectively insuring your past benefits should you decide you want them before age 70. At that point, you simply contact Social Security – in writing – and tell them you want benefits reinstated, as well as benefits for the suspended months – in other words, back pay.

Here’s Klein’s example: “Assuming that you qualify for a maximum monthly retirement benefit at age 66, which is currently $2,642, file and suspend at age 66, and make your retroactive benefit payment request a month before your 70th birthday, you would receive a lump-sum payment of $126,816 ($2,642 x 12 months x 4 years) plus cost of living adjustments, or COLAs, for the last four years. In addition, you would begin receiving monthly benefits of $2,642 increased by cumulative COLAs since your full retirement age plus future COLAs for the rest of your life.”

Why would you want to do this? If you were to find out at age 69, for instance, that you were very ill.  Or if, for whatever reason, you had an immediate need for a lump sum of money. Klein goes on to write that couples who need back pay before age 70 can also take advantage of the strategy. It’s worth taking a look at his in-depth story here.) And if you’re nudging up against Social Security, anything by Mary Beth Franklin becomes required reading.

Millennial women fear investing, too

Last year we learned that 34% of wealthy women think the stock market is too risky, and that 41% feel it’s not the best place for growing savings. And despite 91% of women saying it’s important that they feel confident in their abilities to invest, 58% of these women don’t have any interest in learning about the market. New research from Wells Fargo (which also conducted the earlier study) finds this fear and indifference to be trickling down.

As USA TODAY reports, millennial women show less interest and confidence than millennial men when it comes to the market. For instance, 49% of women, compared to 69% of men, agree the stock market is the best place to invest for retirement. While Karen Wimbish, director of Retail Retirement at Wells Fargo, says she’s happy to see millennials warming up to the idea of the markets overall, she’s still concerned over the lower percentage of women.

For the record, I am too. If you’re afraid of dipping a toe into the waters, that’s something you’re going to have to get over. The best way? Get in the game. Make sure you’re in your company’s retirement plan if one is open to you, and if not, that you’re contributing automatically each month to a Roth IRA. (If you kick in $458 a month you’ll make a full $5500 contribution by year end; those 50+ can contribute $541.) If you’re at a loss for where to put them, choose a target-date retirement fund with a date in the title that’s akin to when you plan to retire. You’re now investing. If you’re up for doing more, there are plenty of online resources, books and tools to get the ball rolling. Or, consult a fee-only financial advisor. You can see ratings and reviews of advisors here.

The path to financial independence

Speaking of millennials, there are some essential, financial steps for young workers to take after getting employed. The Wall Street Journal offers six moves to make within the first five years of entering the workforce. For starters, create and stick to a budget. Write down your financial goals with pen and paper, and then plug them into a budgeting app. Most importantly, revisit your goals every six months to update and re-evaluate. (Really, this is an important move for anyone to make, regardless of how long you’ve been in the workforce.)

After creating a budget with your new salary, start saving for emergencies. Don’t become one of the 26% of Americans, who doesn’t have any emergency savings  – or the 67% who have saved less than the recommended six months’ worth (according to Bankrate.com). The sooner you prioritize it – the better off you’ll be for the unexpected (i.e. losing your first job). So, create a separate fund, automate your payments and let it grow. Along the same lines, start thinking about retirement. A good goal to have within your first five years is saving roughly 15% of your salary. If that’s impossible (i.e. low salary, student debt payments, etc.), then bump up your contributions as soon as you can, and make sure you’re contributing enough to get the employer match. If your boss doesn’t offer a plan, then consider opening the aforementioned Roth IRA account, which you can read more about here.

Have a great week,

Jean