GIG Economy Retirement Planning

As more and more people work as freelancers, independent contractors, and sharing economy workers, concerns grow regarding retirement for this group. A recent study revealed that very few full-time gig economy workers have an adequate retirement plan. Relying on Social Security is probably not enough since those funds will not likely cover retirement living expenses.

Most gig economy workers are one-person businesses, many with limited financial literacy.  As a result, they do not properly plan for retirement savings.  Self-employed individuals also face the challenge of volatile income streams. And, they lack employer-provided benefits, such as health and disability insurance, unemployment benefits, and paid time off. In addition, these gig economy workers are responsible for paying 100 percent of their Social Security and Medicare taxes through self-employment tax.

Some advantages of gig economy workers are:

  • deducting most business-related expenses, reducing their taxable income.
  • access to Simplified Employee Pensions (SEPs) that allow self-employed people to contribute to a tax-deferred retirement fund.
  • the ability to supplement their retirement income as they may continue to work part-time with customers and clients in their later years.

While gig workers face several financial challenges, programs are surfacing to help the self-employed save for retirement and achieve better long-term financial security. These include:

  • Open Multiple Employer Plans (MEPs) or Pooled Employer Plans (PEPs) that let employers combine resources for independent workers to purchase group health and disability insurance.
  • A proposed Portable Benefits for Independent Workers Pilot Program Act to establish a fund through the U.S. Department of Labor.
  • Several states are creating automatic-enrollment IRAs involving government-facilitated programs administered by private financial firms.

For additional information on retirement planning in the gig economy, go to:

Teaching Suggestions

  • Have students talk to a freelancer or independent contractor to obtain information about their financial planning activities.
  • Have students create a financial plan with recommendations for a freelancer or independent contractor.

 Discussion Questions 

  1. What do you believe are the benefits and drawbacks for gig economy workers?
  2. Describe actions you would recommend to self-employed individuals for improved personal financial security.

 

Retirement Planning and Saving: Mistakes to Avoid

Millions of working Americans find it’s a challenge just to pay for their house, car, insurance, child care and other expenses each month. So how can people even think about setting aside money for their retirement 20, 30 or even 40 years away? We can’t predict the future, but we can help you learn from the past. Here’s a list of common mistakes and miscalculations on the road to financial security — wrong turns we want you to avoid.

Saving too little.  How much of your money should go to retirement savings?

When in doubt, perhaps the simplest approach is to try to put 10 to 20 percent of your income each year into money toward your retirement. Regular, automatic savings programs also help make it “painless” to set money aside.

Starting too late. The sooner you begin saving, even with relatively small amounts contributed year after year, the faster you can develop a solid retirement fund. Through the magic of compound interest, a little bit of money saved over a long period can grow to be a lot of money.

Not diversifying enough. Putting all your (nest) eggs in one basket can be a problem if the approach you take doesn’t perform well or actually loses money. Consider a mix of savings and investments that might perform reasonably well under any economic or market conditions.

Not doing your homework. A wrong move can cost you thousands of dollars in taxes, fees, penalties or bad investments. Learn as much as you can about planning and saving for retirement.

Falling for retirement rip-offs. If you get a call, letter or visit from someone peddling financial products with features that seem too good to be true, trust your instincts.  If you think you’ve been approached by a con artist or you’ve been victimized by someone offering a financial product or service, report it to the Federal Trade Commission (visit ftc.gov/complaint or call toll-free 1-877-FTC-HELP). If the scam is internet-related, send an email to the federal government’s Internet Crime Complaint Center.

For more information, click here.

Teaching Suggestions

  • Ask students if anyone has started to save for retirement. What was their motivation to start early?
  • Ask students to prepare and share a list of resources that can be used to learn more about retirement planning and investing for retirement.

Discussion Questions

  1. Why is it important to start early and save for retirement even when you are in your 20’s?
  2. What should you do if a financial product and its features seem too good to be true?
  3. How even a little bit of money saved over a long period of time can grow to be a lot of money at retirement?

Questions to Ask Yourself as You Plan for Retirement

Deciding when to start receiving your retirement benefits from Social Security is a decision that only you can make, and you should make that decision with as much information as possible.  There are a lot of important questions to answer.  Should you claim benefits earlier and get a smaller monthly payment for more years?  Or should you wait and get bigger monthly amount over a shorter period?

There are no right or wrong answers, but consider these four important questions as you plan for your financial secure retirement:

  1. How much money will I need to live comfortably in retirement?
  2. What will my monthly Social Security retirement benefit be?
  3. Will I have other income to supplement my Social Security benefits?
  4. How long do I expect my retirement to last?

For more information, click here.

Teaching Suggestions

  1. Ask students to survey retired individuals or people close to retirement to obtain information on the main sources of retirement income.
  2. Ask students to survey local businesses to determine the types of retirement plans available to employees.

Discussion Questions

  1. What types of retirement income should be the main emphasis of a retirement program?
  2. What actions might be appropriate by government and individuals to guarantee the continuing financial stability of the Social Security program?

New Service at Social Security

In December 2016, Social Security launched a new service for my Social Security account holders where they can check on the status of an application for benefits or an appeal filed with Social Security.  The service provides detailed information about retirement, disability, survivors, Medicare, and Supplemental Security Income claims and appeals filed either online at socialsecuarity.gov or with a Social Security employee.

The ability to check your application status is available online to everyone who has or opens a secure my Social Security.  You can open an account at www.socialsecurity.gov/myaccount.  The service provides important information about your claim or appeal including

  • date of filing,
  • current claim location,
  • scheduled hearing date and time, and
  • claim or appeal decision.

If you are unable to open a my Social Security account you can still call 1-800-772-1213 to check your claim status by using the automated system using the confirmation number you received when you filed your claim.

For more information click here.

Teaching Suggestions

You may want to use the information in this blog and the original article to

  • Stress the importance of learning about my Social Security and other services provided by the Social Security Administration.
  • Encourage students to visit the Social Security website and open a my Social Security account.

Discussion Questions

  1. What might be some advantages of opening my Social Security account?
  2. What might be some drawbacks to open my Social Security account?
  3. Can hackers get into your my Social Security account?

Social Security Retirement Estimator

How the Retirement Estimator Works

The Retirement Estimator provides estimate based on your actual Social Security earnings record.  Social Security can’t provide your actual benefit amount until you apply for benefits, they will be adjusted for cost-of-living increases.  And that amount may differ from estimates provided because:

  • Your earnings may increase or decrease in the future.
  • After you start receiving benefits, they will be adjusted for cost-of-living increases.
  • Your estimated benefits are based on current law. The law governing benefit may change because, by 2034, the payroll taxes collected will be enough to pay only about 79 cents for each dollar of scheduled benefits.
  • Your benefit amount may be affected by military service, railroad employment or pensions earned through work on which you did not pay Social Security tax.

For more information, click here.

Teaching Suggestions

  • Ask students to gather the information they will need to calculate their retirement benefit.
  • Help students understand that their social security benefits will be reduced if they retire before their retirement age.

Discussion Questions

  1. Is it better if you wait until your retirement age to collect social security benefits?
  2. What might be the consequences if you decide to work after you retire?

The 1-Page Financial Plan: 10 Tips for getting what you want from Life

Carl Richards, author of The One Page Financial Plan, knows the financial mistakes–including the ones he has made–that people make.  Based on his experience as a financial planner, he provides 10 tips to help people get what they want from life.  Note:  An explanation and examples to illustrate each tip are provided in this article.  His tips are:

  1. Ask why money is important to you.
  2. Guess where you want to go.
  3. Know your starting point.
  4. Think of budgeting as a tool for awareness.
  5. Save as much as you reasonably can.
  6. Buy just enough insurance today.
  7. Remember that paying off debt can be a great investment.
  8. Invest like a scientist.
  9. Hire a real financial advisor.
  10. Behave for a really long time.

For more information, click here. 

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Illustrate how each tip provided in this article could affect an individual’s financial plan.
  • Encourage students to read the entire article to help determine what’s really important in their life.

Discussion Questions

  1. It’s often hard (or maybe close to impossible) to determine what you value and where you want to go in the next 20 to 30 years with perfect accuracy. Still, experts recommend that you establish a long-term financial plan.  What steps can you take to make sure your plan will meet your future needs?
  2. Why is it important to evaluate your plan on a regular basis and make changes if necessary?

Financial Security and Longevity

While Americans are living longer and healthier lives, they also are facing more financially fragile situations. Uncertainty related to financial health in the later years of life has become more common. Lower, less predictable incomes among those retiring within 10 years has resulted in difficulty paying their bills. This group also reports a lower net worth. In 2013, the typical 56- to 61-year-old had an average of $17,000 in retirement savings. This lower level of net worth is partially the result of higher levels of debt than the previous generation. This debt is in the form of higher mortgages and education loans, including amounts owed for their children’s education.

To address these concerns, several policy actions are proposed:

  • Requiring and supporting strategies for to build effective financial capability, including coaching and workforce development programs.
  • Tax policies and other incentives that encourage savings and investment among lower-income and lower-wealth families.
  • Policies to increase educational opportunities without excessive debt.
  • Efforts for protection from financial difficulties caused by medical catastrophe.
  • Policies for improved housing stability of both owners and renters.

For additional information on financial security and longevity, click here.

Teaching Suggestions

  • Have students interview people to determine common actions used to save for retirement.
  • Have students create a presentation to suggest action for improved financial security for various income levels.

Discussion Questions 

  1. What are some financial pressures faced by households as people approach retirement age?
  2. What actions might government and business take to reduce the financial pressures of people approaching retirement age?

 

Mutual Fund Rankings, 2015

“If a bull market must continually climb a wall of worry, then the current bull, which started more than six years ago, should be on the brink of exhaustion.”

As a preamble to Kiplinger’s 2015 Mutual Fund Rankings, this article describes the concerns that investors have about interest rates, corporate earnings, the economy, political upheaval, and other factors that could impact not only mutual fund investments, but all investments and the U.S. and the world economy.

In addition the article also provides links to Kiplinger’s Mutual Fund Finder tool and specific information about the top-performing mutual funds including large-company stock funds, midsize-company stock funds, small-company stock funds, hybrid funds, large-company foreign stock funds, small- and midsize foreign stock funds, global stock funds, diversified emerging-market funds, regional and single-country funds, sector funds, and alternative funds.

For more information, click here.  

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Remind students that there are many factors that can affect mutual fund investments.
  • Show students how to use the link to the Kiplinger Mutual Fund Finder tool that is described in the article.
  • Stress the importance of a long-term investment program–especially when planning for retirement.

Discussion Questions

  1. Assuming you believe there is a strong possibility the value of your mutual funds will decrease over the next 12 months, would you sell your funds or would you hold them? Explain your answer.
  2. Depending on your answer to the above question, what factors did you consider to help make your decision?
  3. Pick one fund you believe could help obtain your investment goals. Then use the Kiplinger Mutual Fund Finder to research the fund. Based on the information, would you still want to invest in this fund.

Retirement Can’t Wait

A few decades ago, Americans had a pretty solid three-legged retirement stool.  Social Security and personal savings combined with traditional pensions led to good middle-class retirements for millions.  But today’s stool is a little too wobbly to support that lifestyle for coming generations of workers and retirees.  The Great Recession shows all of us just how vulnerable 401(k) type plans and IRAs can be, and with the savings rates dangerously low, the need to strengthen the system is clear.  Today, workers are largely responsible for their own retirement investments.  The days of a defined benefit pension that you couldn’t outlive are a thing of the past.  Today, we have to take greater ownership for starting our savings, managing and then figuring out how much to draw in retirement.

Most workers need advice on how to invest their 401(k) and IRA savings.  Too often, that advice is not delivered in the customer’s best interest.  The Labor Department is working with the financial services industry, consumer groups and Members of Congress to come up with a plan that protects retirement savings from financial conflicts of interest.

For more information, click here.

Teaching Suggestions

  • Ask students to analyze their current assets and liabilities for retirement planning.
  • Will your students’ spending patterns change during retirement?
  • What are the basic steps in retirement planning?

Discussion Questions

  1. Why is retirement planning so important for today’s workers?
  2. Can you depend on Social Security and your company pension to pay for your basic living expenses in retirement? Why or why not?
  3. Why is it important to start early for a secure retirement?

The Retirement Number Secret No One Wants to Tell You

There’s a substantial gulf between the amount of money Americans have actually saved for retirement and what they might need to last throughout their golden years.”

This article reports the results of a survey conducted by the Employee Benefits Research Institute which discovered that nearly three in five people surveyed had saved $25,000 or less for their retirement.  Even worse—more than a quarter of those surveyed had saved less than $1,000.

To help plan for retirement, many financial experts suggest that you need between 70 and 85 percent of whatever yearly income you had during your career in order to sustain the lifestyle you enjoyed prior to retiring.  While these calculations provide a recommended dollar amount to provide retirement income, the same calculations often create two problems.  First, there is often a big gap between what people have saved and what they need for retirement.  Second, the amount of money you need in retirement is based on what’s important to you and the standard of living you want in retirement.  And the you may be the most important part of retirement planning.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Explain why you should plan for retirement early in your career rather than waiting until you are about to retire.
  • Reinforce the concepts of the time value of money and a long-term saving and investing program.

Discussion Questions

  1. Many financial experts suggest you begin retirement planning as soon as you begin your career. What are the benefits of planning for retirement planning sooner rather than later?
  2. How is the time value of money related to a long-term investment program and retirement planning?