Retirement eNews

1) SAVE MORE, OR PREPAY YOUR MORTGAGE?

Many people can afford to save for retirement or make an extra payment every month against their mortgage principal, but not both. Which route should you take? Three finance experts suggest considering these factors before you decide:

1. Do you itemize deductions? If so, the federal and state tax deductions help offset the interest you pay on your mortgage. You may be able to earn more from investing your money than you'd save by prepaying your mortgage.
2. Would you earn an employer match by putting the money into retirement savings? Say your employer will contribute 50 cents for every dollar you save. That's a 50% return on investment — a far better deal than prepaying a 7% mortgage.
3. Do you have an even more important use for the money? For example, it may be much smarter to pay off credit-card debt that's costing you 15% to 20% or more.

People who already have a substantial nest egg usually benefit the most from mortgage prepayment, say the authors of the National Bureau of Economic Research study.

For more about the advantages of retirement plan contributions, visit:
http://retirement.unionplus.org/money-for-retirement/retirement-401k-plans.cfm

2) CONGRESS CONSIDERS THE AUTOMATIC IRA

If your spouse or child works for a small business without a retirement plan, they might soon be enrolled in an "automatic IRA" funded through payroll deductions.

The new savings plan would cover many of the 75 million employees and self-employed who don't have any kind of retirement plan at work. Companies that have been in business for at least 2 years and have at least 10 workers would be required to offer the A-IRA. It would be "automatic" in the sense that employees would have to opt out if they didn't want to contribute - a feature that tends to dramatically increase participation.

As yet, the new IRA is only a proposal in Congress. To learn more about its status, look up H.R. 2167 at:
http://www.govtrack.us

3) EARN 7% A YEAR BY POSTPONING SOCIAL SECURITY?

Like most people, you may be planning to take Social Security as soon as you can, at age 62. The tradeoff is that the monthly check for the rest of your life will be about 25% lower than if you start collecting at your full retirement age (65, 66, or 67, depending on when you were born). Even if you won't need the money right away, some financial advisors recommend signing up early and investing your benefit checks for later.

Now, an economist suggests waiting to collect even if you do need the money. Laurence J. Kotlikoff, an economics professor at Boston University, points out that your Social Security benefit will increase by 7% every year you put it off between 62 and 66, and 8% a year between 67 and 70. That beats most other secure investments.

This strategy may be useful if you can fill the gap by working part-time or cashing in low-yielding investments. There are tax implications, though, and you're gambling that you'll live long enough to make the delay worthwhile. So while the idea has merit, consult a good financial advisor to be sure it makes sense for you.

Your annual Social Security statement shows your estimated retirement benefit at different starting ages. For more information, visit:
http://www.ssa.gov/retire2/applying1.htm

Tips to find a financial advisor are available here:
http://retirement.unionplus.org/getting-help/financial-advisor.cfm

4) TEST YOUR INVESTOR IQ

Here's a good question for anyone who needs to grow their money: If you have $200 in a savings account that pays 10% a year, how much would there be in the account at the end of 2 years? (Scroll down to the end of this e-mail for the correct answer.)

(a) $242
(b) $220
(c) $240

The financial world can be surprising. If you're a relatively new investor, taking the following quiz will help you with the basics:
http://www.sec.gov/investor/tools/quiz.htm

Consider yourself fairly experienced? Try this somewhat tougher quiz, which includes links for more information about each answer:
http://apps.nasd.com/quiz/nasd/investorquiz.aspx

5) MAKING YOUR OPINION COUNT

Is the U.S. on the right track to give its citizens the opportunity for a secure retirement? If you don't think so, be sure to speak up!

If you want to be more active, consider attending the Alliance for Retired Americans Legislative Conference September 4-7 in Washington, D.C. Big-name speakers who have addressed past conferences include Hillary Rodham Clinton and Nancy Pelosi. Workshops and training sessions will coach participants on how to communicate older Americans' priorities to elected officials.

For more information, click on Events at:
http://www.retiredamericans.org

6) FIT CHANCE: THE SENIOR OLYMPICS ARE BACK

The biennial Senior Olympics begin in Louisville, Kentucky, on June 22. About 12,000 senior athletes are expected to compete in more than 800 events, including track and field, cycling, and swimming. Let's cheer them on - and then roll off the couch, lace up our own shoes, and get fit for 2009!

You'll find more info at the official website:
http://www.2007seniorgames.com