Women's Spotlight: Ask Carolyn: Q&As
I am turning 25 next month and I was wondering when I should start saving for retirement?
As a general rule, it is never a better time to start saving right now. If you start saving at the age of 25 and contribute $200 monthly until retiring at age 65, with an average annual rate of return of 8%, you would retire with $2,061,941.74. Wow! If you would wait to start saving until you are 40, even with an initial investment of $10,000 and contribute twice as much, or $400 per month, with the same 8% average annual rate of return, you would retire at 65 with $886,803.53. Clearly, the earlier you start saving the better off you will be. Plus, the impact on your cash flow is less if your contributions are spread out over a longer period of time.
My family is constantly on the run and it is difficult to get my banking needs to fit into my crazy schedule. Do you have any suggestions?
While York Traditions Bank offers four convenient locations to meet all of your banking needs, we also offer free 24/7 Telephone Banking, Online Banking, and Bill-Pay that can save you time and provide you with the schedule flexibility that you need. So, whether you’re at home, in the office or on the road, you can access your accounts, check your balances, transfer funds and inquire by check number or amount. Ask your employer about having your checks automatically deposited to your accounts. It’s a great time-saver. You can also deposit checks at one of our branch ATMs. For added convenience, there are approximately 30 participating Rutter’s Farm Stores in our area that provide our customers with surcharge-free ATMs. This would add even more flexibility to your schedule.
What is FDIC insurance and how should it affect my investment plans?
The FDIC insures deposits at U.S. banks that purchase the insurance. Deposits are protected up to $250,000 per depositor per type of account. This means that if you have over $250,000, only $250,000 is insured. For added coverage, consider using multiple types of accounts in your investment plan, like single ownership accounts, joint ownership accounts, IRA’s, Keogh plans, and testamentary (revocable trust) accounts. Having multiple types of accounts offers you a much higher total insured investment. A husband and wife could each have a single account and also a joint account which would offer them $750,000 worth of FDIC insured investments. Currently, all funds in a “noninterest-bearing transaction account” are insured in full by the FDIC from December 31, 2010, through December 31, 2012. This temporary unlimited coverage is in addition to, and separate from, the coverage of at least $250,000 available to depositors under the FDIC’s general deposit insurance rules.
With today’s economy, would I be in better shape financially if I paid off my debt or if I put money in a savings account?
When deciding between paying off your debt and investing in savings, consider the interest rate of each account. For example, if the interest rate on your debt is 8%, you would have to find a savings option with an interest rate equal to or greater than 8% to make investing in savings a better choice. Also, some types of home equity loans may provide tax advantages that should be included in your decision. Best advice – consult with your banker or accountant.
How do I know if it would benefit me to refinance my mortgage?
There are several things that play a part in determining if now is the time to refinance your mortgage. The most important factor is your existing interest rate versus the current rates available. If your rate is higher than the current available rates, refinancing should be investigated, especially if it is more than 2% higher. Other reasons for refinancing would be to lower your monthly payments, debt consolidation, pay off your mortgage faster or convert equity in your property to cash. To determine the actual benefit, don’t forget to factor in the closing costs involved with refinancing and compare that to your long-term savings over the life of the new mortgage.
I want to teach my children about the importance of saving money. Any ideas on how to make learning about saving fun?
There are several things you can do to help your children get excited about saving.
- Match savings: This will help them see the savings grow faster and give them a better understanding of the benefits to saving. When they are little, you may be able to match 100% and then slowly back it off as they get older.
- Offer them non-monetary savings rewards: Something as simple as a sticker, a piece of candy or a special outing can make great strides in encouraging them to save money.
- Help them set goals: Take them shopping and find something they really like. Write the price down and take a photo of it. Put the photo up somewhere in your home where they will be reminded why they are saving their money. Start with lower priced items and work your way up so they are not discouraged waiting a long time for the first item on their wish list.
How can I maximize the return on my savings and still have financial resources available when I need them?
Building a CD ladder is a great way to maximize your investment, maintain liquidity, and protect yourself against interest rate fluctuations. To do this you set up several CD’s that have different intervals so that they mature in regular intervals. For example the following plan would ensure access to some of your investment every 6 months:
Put $1,000 in a 6-month CD
Put $1,000 in a 12-month CD
Put $1,000 in a 18-month CD
Put $1,000 in a 24-month CD
When the first CD matures at 6 months, reinvest it in a 24-month CD and continue this when each one matures and you will always have access to your money on a regular 6-month interval. This is a time-tested strategy that has worked well for many of my customers.
I’m thinking about starting a business – is this a good time, or should I wait?
It really depends on your individual circumstances. A few things to remember when expanding or starting a business in a struggling economy are: be conservative in your budget and sales projections, look for a way to be unique and differentiate yourself within your industry, plan carefully and develop a partnership with your banker and seek direct advice. Even in a struggling economy a carefully planned business can succeed and make a business stronger in the long run.