Routing Number: 307070021
Construction at Cordera May 30 - June 12
Storm sewer repair construction will take place at the Cordera branch May 30 – June 12, 2017. During this time the Drive-Up/ATM can only be accessed from the east entrance off of Cordera Crest Avenue. Members visiting the Cordera lobby will use the main entrance off of Union Boulevard and park in the west parking lot. The sidewalks and main branch lobby doors will still be accessible during construction.
Routing Number: 307070021

Retirement Center

Retirement Budgeting Basics

Planning for retirement may seem like a daunting task or a dream that is so far out in the future that it would be pointless to start planning now. However, retirement should be a savings priority, ahead of college funds and other long-term savings goals. Whatever you dreams are; we can help you put a number to it. Understanding this is the first step to making retirement a reality.

  • How much should I be saving now?

    Another question that all-too-often results in a annoying answer. You should save as much as you can, but not more than you can. A better answer is that retirement should be your savings priority, ahead of college funds or other long-term savings simply because you can’t get a loan to retire, but you can for virtually everything else. If you feel like your monthly contributions are just drops in the bucket, stop focusing on the bucket. Instead, take a look at your monthly picture. Make a pie chart with five big slices: Bills, debt, spending, short-term savings and long-term savings. This isn’t yet the time to go through and figure out how to trim your bills or refocus your spending, just look at those five. How much of your long-term savings is being used for retirement? Could that number be higher? If so, put more into retirement. If you want to find ways to reduce your costs so you can save more money for retirement, look at those categories again and start making cuts from right to left. First, cut some spending from other long-term savings. Then short-term savings, spending, debt and finally bills.

    You’ve probably read something about how unprepared many Americans are for retirement, and how much you’ll need to save every year depending on your current age. For today, forget all that. Just do one small thing: calculate your retirement needs. At what age will you want to retire? What would you like your retirement to look like? Whatever your dreams are; put a number to it. Knowing this is the first step to making it a reality.

    What will you need in retirement?

    Here’s a fact: the basic cost of the average American family’s lifestyle is about $4,000 a month. That’s the price for basic necessities including mortgage, food, insurance, electricity, taxes, and such.

    Most people have not calculated what retirement will cost and think more about what they’ll do when they retire than how they’ll save the money it’ll take to make those plans a reality. While it’s important to know what you’re saving for, it’s equally important to know what that might cost. After all, you positively don’t want to reach retirement only to find that your savings can’t fund your expenses.

    Are you saving too much? The only way to answer this question is with a clear figure of what you’ll need in retirement. Knowing that, everything else will fall into place because then you can calculate what you should be saving now to achieve the level you need or want for the future.

    What are your basic living costs in retirement? Do you really know what life will cost in 20, 30 or more years? Or how long you’ll live in retirement? Some plan for 10 and live for 20 … or plan for 20 and get 2. Additionally, health care bills may be higher by then, or you may want to eat out every night.

    It’s up to the individual to calculate those expenses, figuring out what kind of lifestyle he’ll want to live – and then saving above and beyond his basic expenses.

    So where do you stand?

    Based on your calculations of your needs and what you’ve already saved up and, assuming a conservative growth rate, will your savings be large enough to cover the income gap you face? There is no guarantee that your job or your partner’s job will continue until you hit a ripe old age, or that Social Security will provide what you expect. You’d probably rather save what you can while you can in the event that you’re unable to save as much as you need to later. If you wind up being over prepared, well, that beats being unprepared any day.

    Even factoring in a desirable lifestyle, some people do save more than is ultimately necessary. While that really isn’t a problem, there’s something to be said for improving the quality of life today by scaling back on retirement savings. While that probably won’t mean a late model car with no lasting value, it may mean something like a swimming pool which would promote a better quality of life. Knowing that such a purchase won’t ruin your future, you’ll have the confidence to live a little more in the present.


New budgeting apps can help you save

One of the keys to saving money for your future is to learn how to budget it today. But all too often, budgets can become a time-consuming and stressful process which can scare many people away. Budgeting shouldn't be scary or complicated! New apps are being released that can take the pain and hassle out of budgeting your money.

  • Is there a tool that can help me with budgeting?

    Everyone has felt the panic that comes when you need to buy something but aren’t sure if you can swing it. For instance, you may not know if paying for a tank of gas or a week of groceries will keep you from paying your electric bill. Making a budget is helpful, but it can be a bulky and time-consuming process.

    That’s where Level Money comes in. Level Money is a no-frills budgeting app for iOS and Android that was released earlier this year. It’s free on both iTunes and the Android Marketplace.

    Setup is quick and easy. You need to create a separate, strong password for it, which is an excellent precaution should your phone ever be lost or stolen. You then link it to your checking accounts and your credit cards. During setup, the app asks you to identify which incoming transactions to your checking accounts are part of your regular income and which are irregular, like gifts or tax refunds.

    Once the app can identify how much you make, you can add your regular bills. Then, you tell the app how much you want to save each month. With this information, it keeps track of your monthly discretionary income (the leftover part) and tells you how much you have available each day, week or month. It’s that simple.

    The simplicity is also where the app shows its greatest weaknesses. It lacks support for joint accounts and expenses. That means if you and your partner have merged finances, Level Money won’t work very well. It also breaks down if you have an irregular income, like if you’re a freelancer or work in commissioned sales. There’s also no way to handle some ordinary financial transactions, like splitting dinner with friends who pay you in cash.

    In addition, there’s not a lot of automation. While you can tell the app how much you’d like to save, you have to make those transfers between checking and saving manually. You also have to do so outside the app. It’s frustrating, but not a deal-breaker.

    Still, if your finances are simple, Level Money is a quick, easy-to-use, and uncomplicated budgeting app. It lacks the power and versatility of Mint and other more robust apps, but it can resolve that terrifying uncertainty. Give Level Money a try if you’re looking for an effortless solution to a real problem.


Learning your savings priorities

Preparing for retirement can be difficult when you're trying to save and budget for multiple long-term goals. Saving for a child's education and your retirement can be one of the hardest decisions of all. It seems natural to put your child's needs first; however, not being prepared for retirement can put you in a vulnerable position that can affect you and your children.

  • Should I save for my child's college first, or my retirement?

    It’s a good question. We all want to put our kids first, but the earlier you start saving for retirement, the better. And having put your own need for a good night’s sleep on hold for your newborn, giving up many of your ‘druthers’ during their toddler years, and possibly putting your own career or other dreams on hold to raise your child, it seems natural to put your child’s needs first again by saving for college and forgoing your retirement savings for now.

    Don’t do it.

    For one thing, your child can get student loans, work their way through college, or get scholarships and/or grants. None of that can be said for your retirement. Many people have put themselves through college, and came out stronger because they did. But reaching your retirement underfunded is not a good idea. Not only will it leave you in a vulnerable position, it’ll put a financial pressure on your child, possibly at a time that he’s just starting to build a family of his own.

    So, for the good of both you and your child, start saving for your own retirement. As the college years approach, you’ll be able to see how–and if–you’ll be able to help finance your child’s education.


Making up for lost savings time

It's never too late to start saving. Even if you waited longer than you thought you would to start preparing for retirement - there is no time like the present. Starting to save later in life might be a little trickier, since you won't have as long to save; however, controlling your spending decisions now and saving money going forward will only better prepare you for retirement.

  • How can I “turbo-charge” my retirement savings to catch up?

    The good news is that you still have a lot of peak earning years ahead of you. Many people don’t hit their professional stride until they reach their 40s, 50s and 60s, and they have their best earning years, by far, later in life. If you qualify for a traditional pension, so much the better, because many systems use your highest-paying three or five years to calculate your benefits. These traditional pensions, however, are getting quite uncommon.


    The bad news is this: Interest rates are at or near record lows. That’s great for borrowers, but it makes things a lot harder on savers. Chances are, you will need to save a lot more money to generate a given level of retirement income than your ancestors did a generations ago.


    Here are some principles:


    Restrain from unnecessary spending. Learn to enjoy cooking, rather than eating out. Cut back on cable TV packages and take up exercise instead. The lower your monthly expenses, the more free cash flow you will have available to invest. All solutions to your problem start with this one step.


    Pay down consumer debt and credit card debt. With credit card interest rates in the high 20s for some people, this is often the very best return on your investment you can get. Every dollar you pay down in credit card debt sooner or later nets you a return on investment equal to the interest rate on the card – with no risk, and no taxes due.


    Next, make sure you are making the most of your tax-advantaged retirement savings opportunities. Are you working for someone else? Increase your 401(k) contributions. Maximize your IRA or Roth IRA contributions if you are eligible. Own some annuities, which are tax deferred (but gains are eventually taxed as income), and some people buy and hold mutual funds or ETFs. These aren’t tax-deferred, but index funds are very tax-efficient, and if you hold them longer than a year, they are taxed at more favorable long-term capital gains rates, rather than ordinary income rates.


    Do you own your own business? Can you start one? If so, you have some additional options: You can form and contribute to a SEP IRA, or simplified employee pension plan. This plan allows you to contribute up to 25 percent of your income from the business into a SEP IRA, or up to $49,000 per year, tax-deductible. No taxes are due until you take the money out. Some businesses may be better off forming a SIMPLE IRA or Solo 401(k), depending on the specifics. Consult a qualified financial advisor with experience in retirement planning to find out which alternative is most appropriate for you and which will enable you to maximize your contributions.

    Still have more money to sock away? An experienced life insurance agent can help you create a life insurance-based retirement savings plan. Premiums aren’t deductible, but they grow tax-free, and if you structure the property correctly, you can access the cash value tax-free later in life to supplement your retirement income. Meanwhile, your family gets a tax-free death benefit if you die, and the waiver of premium feature available will provide the unique benefit of continuing your scheduled premium contributions if you are disabled – making it the only retirement plan that “self-completes” in the event of disability.
    These plans work best for those who are in good health and can pass a medical exam, get a “preferred” rating or better from the life insurance company, and who have substantial free cash flow to sock away, funding the policy up to the legal limit, which your life insurance advisor can calculate for you.


    Want more ideas? If you are self-employed and have your own business, you have few or no employees and a steady stream of cash flow, you can make nearly unlimited tax deductible contributions to an insured pension fund, under Section 412(i) of the Internal Revenue Code. (Make sure you have an experienced advisor working with you on these. This might not be a job for your nephew who is just getting started in the life insurance business).


    Are you renting? It might be time to buy. That may sound expensive now, but interest rates are extremely low as of this writing. If you’re in your 40s, you will have that 30-year mortgage paid off in your 70s. At that time, you may want to convert the equity in your home to a stream of income via a reverse mortgage. It’s not for everyone, but if you rent rather than buy, you won’t have that option. You can make that decision when you get there.


    Above all, save money. Squirrel money away every way you can. Cash is still king, and there’s no substitute for healthy cash reserves in your AAFCU account, whether in checking, certificates or other conservative savings options. You might not get a great return, but it’s safe, secure and steady. Most of your success is going to come from controlling spending decisions, rather than from making brilliant investment decisions. Set things up so you don’t have to be brilliant to succeed. Just be sensible.


    You do that by reducing expenses and saving money.


Social Security's impact on retirement

Social Security benefits can provide an added layer of comfort to your retirement. Planning around them, though, requires knowing the amount of your benefit.

  • How will Social Security impact my retirement goals?

    Effective retirement planning is a simple equation. You have to make sure your passive sources of income meet or exceed your monthly expenses. For most of your income, like your retirement accounts, CDs and investments, that income is easy to calculate. You know the rate of return and you know the amount you have saved.

    One potential source of retirement income that’s a lot harder to predict, though, is Social Security. While it shouldn’t be your only source of retirement income, Social Security benefits can provide an added layer of comfort to your retirement. Planning around them, though, requires knowing the amount of your benefit.

    That can be a tricky process. The complex web of contributions and regulations can make figuring out your monthly benefit a nightmare. You may need something stronger than a COLA once you’re done working your way through the nightmare of acronyms and bureaucratic doublespeak that make up Social Security laws.

    Fortunately, this part of your retirement planning just got a lot easier. A new wave of apps called Social Security benefit calculators can simplify the process dramatically. They couldn’t be much easier to use.

    Just input your yearly income, your age, and the date of your retirement. The program takes that information and generates a monthly benefit for you. Some of these programs even include an inflation adjustment tool to let you see how your benefit may change in response to changing economic conditions.

    Basic calculators, like those available from the Social Security Administration, will do that and nothing more. These more advanced utilities will let you adjust the information you get based upon a variety of factors. This helps you to visualize the kind of portfolio performance you’d need to supplement your Social Security income.

    More than figuring out how much your benefit will be, though, these utilities let you fiddle with numbers to see how to best optimize your Social Security benefit. By changing your retirement date, modifying your income and/or shuffling other variables around, you can see how your retirement income will change in response to your decisions. These adjustments can help you make an informed decision about how and when to retire.

    More to the point, these tools will help you make the difficult decision about when to claim Social Security. The monthly benefit you and your spouse will receive increases every year between the time you turn 62 and the time you turn 70. The caveat to this increase is that you’ll likely have less time to spend it. Balancing these demands can be made easier with a calculator tool.

    But keep in mind, there are more than a few hazards to making firm plans using one of these utilities. Even the best Social Security benefit calculator can’t predict the future.

    Social Security regulations are a hot-button political issue. Things like cost of living and inflation adjustments can change in response to political as well as economic circumstances. If these regulations change, so will your benefit. Social Security itself is always in jeopardy, too. It’s the single largest expenditure in the federal budget and it comes under fire every year. If you build your retirement around Social Security income, you might be in trouble as government budgets get tighter.

    Also, remember that these tools are for informational purposes only. You shouldn’t interpret these results as a guarantee of benefit. Many personal circumstances are considered when figuring your benefit and no calculator can capture them all. Treat this information as a useful planning guideline, but not as a contract.

    The most basic planning tool is offered by the Social Security Administration. It’s regularly updated and provides the most direct pipeline to the byzantine network of regulations that govern Social Security. While it doesn’t allow you to customize your results much, it’s a good introduction to planning.

    Probably the best tool of the bunch is SSAnalyze! SSAnalyze offers the greatest range of flexibility in input options. It allows you to set a range of life expectancies, adjust for changes in income (if your spouse was to retire early or you were to go part-time), and account for a large number of household arrangements (domestic partnerships, blended families, and so on). SSAnalyze! has a little bit of a learning curve, and anticipating the results can be daunting, but the flexibility of this powerful tool makes it a great resource for retirement planning.

    No matter the result you get from your experience with a Social Security calculator, it’s only one part of the retirement planning package. You need to take this information and add it to the list of things you know about your retirement options and plans. If you want personalized financial advice that uses that information to get you on the path to your truly golden years, speak with a representative from your credit union today. The trained financial service experts there can set you up with a range of savings and investment instruments that will let you enjoy the retirement lifestyle of your dreams. Call or stop by AAFCU today, and get on the path to your financial future.