When you apply for a loan, your future lender wants to make sure that you aren’t too much of a risk on defaulting. In the past, lenders have used the Allowance for Loan and Lease Losses (ALLL) standard to evaluate the risk of your loan. However, the Financial Accounting Standards Board (FASB) has decided to switch to a new system, known as Current Expected Credit Losses (CECL). This means that, starting in 2020, loans will be evaluated differently. Here’s what you need to know about these changes.
Why The Change?
The financial crisis of 2007 was devastating for a number of reasons, but one of the biggest ones is that it demonstrated that the ALLL was not adequate for making timely adjustments. ALLL worked well for evaluating losses that would happen with some certainty, but it was not able to respond to changes that happened suddenly. The financial crisis demonstrated that the current evaluation was not able to adjust for fluctuations in the economy. As a result, The FASB decided to reevaluate how risk was calculated for loans. In 2016, they announced the new accounting standard, known as CECL, that would be implemented by 2020.
CECL is Based on GroupsUnder CECL, review for loans is mostly based on collective groups. CECL looks at your situation and puts on you in a category. Each institution will have to develop their own way of dividing these groups up, but they will be based on things such as credit score, type of loan, length of the loan, the interest rate, what year you are applying, and what your individual finances look like. Once you are placed in a category, your lender is able to determine how much risk this loan will carry. However, under CECL you can still be individually reviewed, but only when you fit a couple different requirements. Your lending institution will decide whether your loan will be individually reviewed based on your circumstances and other factors with your loan.
Understanding the Effects
In the banking industry, there has been some criticism about CECL accounts. Some lenders have a tough time adjusting to the policies since they have to implement procedures in order to pinpoint losses that could possibly happen down the road. This requires a lot more data and analysis than they have previously used. However, CECL will help lenders stay competitive and prevent a lot of the losses that many of these institutions saw during the 2007 financial crisis. To use CECL methods, bankers must always monitor the conditions in the economy, and this process heightens focus, awareness, and drive.
Most of the major changes will occur behind the scenes, and you may not see much impact on your loans as a consumer. When applying for a loan, you will still need to pay attention to your earning potential, personal debt, and credit score. While it may seem intimidating and confusing, don’t let these changes scare you when it comes to getting a new loan. Your lender will be able to guide you in the right direction.
Here are a couple interesting articles we think you’re going to like:
If your homeowner insurance rates are creeping up even though you haven’t filed any claims, it may be time to take a look at how you can bring those prices back down. Research, smart shopping and even some home upgrades can make a noticeable difference in your insurance premiums. Explore the cost-savings potential with these tips.
Save Your Way to Lower Home Insurance
(Family Features) If your homeowner insurance rates are creeping up even though you haven’t filed any claims, it may be time to take a look at how you can bring those prices back down.
Research, smart shopping and even some home upgrades can make a noticeable difference in your insurance premiums. Explore the cost-savings potential with these tips from the experts at CertainTeed, a leading manufacturer of exterior and interior building products:
Shop for the best rates. It’s easy to be complacent when you’ve used the same insurance company for years, but if getting the best rate is your objective, it’s a good idea to shop around. To do effective comparison shopping, have a copy of your current policy ready and contact a handful of competitors. Provide them the exact same coverage details so you can compare like rates, but also be ready to listen to information about additional coverage options that may suit your needs.
Combine homeowner insurance with other policies. Most insurance carriers offer multiple policy discounts, which they apply when you insure more than one item. For example, if your homeowner insurance carrier also insures your cars, you’re likely to save money on the rates for protecting both your home and automobiles.
Update your home’s first line of defense. Many homeowners focus on aesthetics when it’s time to make upgrades, but there are some important functional improvements that can make a difference when it comes to your insurance premiums. For example, as extreme weather becomes more commonplace, the first line of defense is often the type of roofing material chosen. Many insurance companies even offer discounts for using impact-resistant shingles. Check with your insurance provider before making a final selection, but in general, look for products that include “impact-resistant” in their name and specs, and “Class IV Impact Resistance,” the highest rating available for roofing materials.
For example, NorthGate Class IV impact-resistant shingles from CertainTeed are engineered to have a higher probability of resisting hail. These shingles are made using rubber-like polymers that offer flexibility and impact resistance, as well as crack and shrink resistance, even in cold weather. So when severe weather strikes, your home can be protected and stay looking good.
Install a home security system. An intruder alarm can provide more than peace of mind. Insurance companies often reward homeowners who take steps to minimize the chances of burglary or vandalism. After all, a well-protected home is less likely to result in a claim for losses. Some companies offer varying degrees of discounts on insurance rates depending on the type of system you install, so be sure to thoroughly research the options. For example, a system that simply emits a loud noise when triggered may generate one level of discount, while a system that dispatches emergency personnel when activated can lead to an even better rate.
Insurance rates are one place to save money on your home costs. Learn more about impact-resistant shingles and how they can save your home and wallet at certainteed.com.SOURCE:
Understanding and managing personal information is vital to achieving life goals such as owning a home, financing your education or having the convenience of credit cards for everyday purchases. With responsible financial behaviors, discipline and consistency, you’ll be on your way to improving your credit, and in turn, feeling more confident about your overall financial health.
(BPT) - It’s always a good time to reassess financial goals and work toward improving your overall financial health. No matter what your financial goals may be, having the right information and tools in place is key to getting you on track to take control of your credit.
Taking the first step towards financial wellness can provide a sense of empowerment as you get rid of everyday financial stressors, which is why many see a positive connection between financial control and self-perception. Though increasing your credit score might seem daunting, following these healthy credit behaviors can help you make positive changes to your financial health and even your personal well-being.
Understand your credit: When starting on your journey to better financial health, begin by familiarizing yourself with your current credit standing, as well as understanding what factors may be negatively impacting your credit score. A great place to start is with your Annual Credit Report, which provides one free credit report each year from all three nationwide credit reporting agencies. The information in these reports directly impacts credit scores, so it’s important to carefully review for any factors that could cause your score to be lower than it should be. This TransUnion Credit Score Overview is also a helpful educational resource and provides tips towards building a healthier credit standing.
Review your report and take action: While assessing your credit report, carefully review for any inaccuracies or problem areas that may negatively affect your credit score. For instance, high accumulations of debt such as maxed out credits cards and unpaid bills will likely be reflected in your credit report. Unpaid collections are also commonly reported delinquencies that can cause a big hit, even when as low as $100 or less. Prioritize addressing these smaller problem areas first before they get worse. Inaccurate information caused by identity theft can also lower your credit score and should be disputed online.
Create a plan for better credit: After resolving any outstanding issues identified while reviewing your credit report, create a plan towards improving your financial health, which should include:
1) On-time payments: Paying your bills on time and in full each month is key as it builds a positive history of on-time payments and responsible credit use.
2) Credit utilization: It is recommended to maintain a low credit utilization ratio, that is, how much of your available credit you’re using at any given time. It is recommended that you use no more than 30 percent of the available credit, otherwise, your score could be suffering.
3) Evaluate your credit cards: Before opening or closing any credit cards, do your research on the different types of credit cards and the benefits they have. Do one or more of your cards have an annual fee that you could live without? Strategize which cards you use regularly and keep daily spending concentrated to one or two cards total. However, don’t close an old account just because you aren’t using it. Longstanding credit accounts are vital for building credit as this demonstrates a responsible credit history.
Remain vigilant about credit monitoring and protection: Once you’re in control of your credit, the next step is to be diligent about monitoring your credit and cautious about your personal information, which includes fraud protection. Fraudsters may take out loans, lines of credit, or rent apartments in your name, which can negatively affect your credit if it results in a non-payment. If you think your information has been compromised, you can protect your credit by freezing it at all three credit reporting agencies. With TransUnion, you can simply freeze and unfreeze your credit with the touch of a button through the myTransUnion app at any time.
Understanding and managing personal information is vital to achieving life goals such as owning a home, financing your education or having the convenience of credit cards for everyday purchases. With responsible financial behaviors, discipline and consistency, you’ll be on your way to improving your credit, and in turn, feeling more confident about your overall financial health.
For more information, visit TransUnion.com.
(BPT) - The homebuying process is exciting, but can also seem fraught with added costs, like a home inspection, title insurance and closing costs. And if you can’t afford a full 20 percent down payment on a conventional home loan, then you will most likely pay for private mortgage insurance (MI). Some people consider private MI yet another added cost, but it helps creditworthy middle-income homebuyers qualify for home financing sooner with a low down payment. Is it really an added cost if it saves time and money in the long run?
For most people, low down payment home loan options include conventional loans with private MI and government-backed loans like those offered by the Federal Housing Administration (FHA). While comparable, each of these options has important differences. For example, the minimum down payment for an FHA mortgage is 3.5 percent while it’s only 3 percent on a conventional, privately insured mortgage.
Another key feature of private MI is that it can be canceled when a borrower reaches 20 percent equity in his or her home. Borrowers who purchase a home with private MI can typically cancel it within 5 to 7 years, resulting in their monthly bill going down. Private MI’s cancelability makes it a more affordable option over FHA-backed mortgages, which typically require mortgage insurance premiums for the entirety of the loan term. Both are offered by most mortgage lenders, so it’s smart to ask a loan officer for both options so you can compare and do the math.
The myth that a homebuyer needs 20 percent down to obtain a mortgage is simply not true. Low down payment mortgages are widely available and used every day across the country. In 2018, the National Association of Realtors found that first-time homebuyers typically put down 7 percent, while repeat buyers put down an average of 16 percent. Many homebuyers choose a lower down payment option to preserve some savings for home improvements or save for other goals. The time it could take to save up a 20 percent down payment is significant. On average, it could take up to 20 years to save a full 20 percent, plus closing costs, for a $257,700 house — the national median sales price. With home prices on the rise, the amount of time it takes to save up could only increase. Private MI can mean the difference between getting into the home of your dreams sooner or waiting for years.
For over 60 years, more than 30 million homeowners of all backgrounds have used private MI to successfully buy their homes. In the past year alone, private MI helped more than one million borrowers nationwide purchase or refinance a mortgage. According to a study by U.S. Mortgage Insurers, 56 percent of purchase borrowers were first-time homebuyers and more than 40 percent had incomes below $75,000.
For decades, millions of homeowners and prospective homebuyers have relied on private MI to help them affordably and responsibly purchase their homes — in turn helping them build personal wealth. Today’s historically low mortgage interest rates are a good reason to buy a home now. It is estimated that in 2019, the average rate for a 30-year fixed-rate mortgage will be around 5 percent. Borrowers should take advantage of these historically low mortgage interest rates because experts forecast that primary mortgage rates are on the rise.
Getting a mortgage with private MI and keeping more of your hard-earned money in the bank can be a very smart way to invest in your future. Check out lowdownpaymentfacts.org to learn more.
(BPT) - If you haven't made solid financial plans, now would be a good time to consider a life insurance policy to protect you and your family in your time of need - or protect your loved ones in your absence.
Given the importance of life insurance, it's surprising that 37.5 million American households lack such a policy, according to the 2016 Facts About Life study by the industry group LIMRA. That may be because many people misunderstand how such policies work and how much they cost. For example, recent Insurance Barometer studies by LIMRA and Life Happens found 63 percent of Americans cite expense as the reason they don't carry term insurance, yet 80 percent overestimate the cost - millennials by 213 percent and Gen Xers by 119 percent.
While some Americans hope to rely on other sources to protect their families, they may not realize all the benefits life insurance offers. Every family has different needs, and some life insurance products are flexible enough to offer customizable options to provide a measure of financial security to your spouse and children - the people that matter most.
Consider these other common myths about life insurance:
Myth: Life insurance is only available through financial advisors. In fact, quality policies for your entire family are often available through your employer or your spouse's employer. For example, Boston MutualLife Insurance Company offers a range of workplace solutions paid for by employers, employees or both, including permanent life, term life, critical illness, accident and disability insurance. Talk to your company's HR department about the process involved in securing comprehensive coverage for your family.
Myth: Workplace policies can't offer enough options for your needs. You'll find that well-established life insurance companies understand the market well enough to offer a range of flexible products, including policies that are payroll deductible, stable in cost regardless of your age, portable when you're changing jobs and available with add-on riders or other insurance types through the same carrier.
Myth: Young, healthy people don't need life insurance. The truth is, your health can change at any time and it's best to expect the unexpected. Uninsured people can easily leave behind personal, medical or mortgage debts and/or funeral expenses that end up burdening family members or executors when they die.
Myth: Your life insurance policy only covers you, not your family. Not true. Some products protect you, your spouse, your dependent children and even your grandchildren, often at one affordable cost. That's why marriage and becoming a parent can be excellent reasons for buying new policies.
Investing in life insurance is a crucial step to take to protect yourself and your family from unexpected losses. But it doesn't have to be confusing or complicated. Find more detailed information about life insurance options for you and your family at www.BostonMutual.com.
From heading off to college to marrying the love of your life to taking those dream vacations, life’s biggest moments are often tied to being financially responsible. A credit card is one tool that can help you achieve your financial goals while offsetting some costs along the way. These tips from financial experts can help you maximize financial tools like credit cards throughout life’s milestones.
A Financial Planning Tool for Every Stage of Life
(Family Features) From heading off to college to marrying the love of your life to taking those dream vacations, life’s biggest moments are often tied to being financially responsible.
While memories of your first dance as newlyweds don’t often include the cost of the band, money is frequently front and center when planning for some of life’s larger events. From early adulthood through retirement, a credit card is one tool that can help you achieve your financial goals while offsetting some costs along the way.
“No matter your stage in life, it’s important to plan ahead and have the right tools to meet your financial needs,” said Jason Gaughan, credit cards executive at Bank of America. “A credit card offers flexibility, convenience and an increasing amount of rewards that can make your budget go even further.”
These tips from financial experts can help you maximize financial tools like credit cards throughout life’s milestones.
“Though credit can be a somewhat foreign topic for beginners, online resources such as Bank of America’s Better Money Habits offers tips to help young adults learn about things like how your credit score is calculated, the difference between a credit report and credit score and explains why it’s important to understand before signing up for a credit card,” said Lysandra Perez, a relationship manager for Bank of America who is responsible for educating clients on establishing strong financial habits including managing and building credit.”
According to BetterMoneyHabits.com, an important rule for building strong credit is to spend no more than 30 percent of your available credit line. The online resource also recommends that students look for credit cards that offer low interest rates and no annual fee to help minimize finance charges if they aren’t able to pay their bills in full each month.
“Establishing strong financial habits early on can help set you up for future credit opportunities later in life,” Perez said.
Using a credit card that offers rewards tied to interests is a strategy some young adults utilize. According to a Bank of America survey, 91 percent of Millennials ages 23-29 plan to use a rewards card to help pay for upcoming travel.
“It’s common for people in their mid-to-late 20s to prioritize maximizing credit card rewards,” Gaughan said. “They understand using a card for smaller, everyday purchases like coffee and groceries can be an easy way to earn points to pay for fun events like a trip abroad or home for a college reunion.”
Saving and tracking rewards is key during this period, too. Digital tools like My Rewards provide new visibility into the rewards you earn and how to maximize their value. Also look to explore banking rewards options like Preferred Rewards, which can offer special perks and benefits like credit card rewards bonuses, discounts on home and auto loans, interest rate boosters and no-fee ATM transactions.
Marriage and Parenthood
These years typically require more financial savviness to make every dollar count as large expenses requiring loans, such as houses and cars, are more prevalent during this stage.
Along with larger purchases, these years also often come with grocery store trips, filling up the gas tank for carpool duty and buying new clothes as your kids grow. Look for a cash back card that lets you earn rewards on your everyday purchases and offers redemption for cash back to cover expenses or invest in a savings account.
“There are many ways to continue saving and investing once in retirement,” said David Poole, head of Merrill Edge Advisory, Client Services and Digital Capabilities at Bank of America. “Credit cards that allow you to invest rewards back into your retirement fund is an easy way to continue contributing to your 401(k).”
Credit cards can also help retirees fulfill long-standing travel goals. Some like the Bank of America Premium Rewards card offer lucrative travel benefits such as earning two points for every dollar spent on travel and dining purchases. Look for points that are flexible and can be used toward future travel purchases or as cash back.
“With so many credit card options available, it’s important to understand what your current needs are,” Gaughan said. “Do your research, develop a strategy and work with your financial institution to determine the best card for your lifestyle.”
Find more information and credit card options at bankofamerica.com/creditcards.
Photos courtesy of Getty ImagesSOURCE:
Bank of America
With the increasing likelihood that Social Security and Medicare benefits may be reduced in the future, it’s more important than ever to use every technique available to maximize your retirement savings. These three outside-the-box strategies could make an enormous difference in your retirement readiness. The sooner you start, the more you may save.
(BPT) - Individuals who rushed to prepay property taxes after the passage of the Tax Cuts and Jobs Act may have saved some money in 2018 — but that’s pennies compared to the long-term tax savings taxpayers should take advantage of before the TCJA’s individual tax provisions are expected to expire in 2026, according to Robert Fishbein, vice president and corporate counsel at Prudential Financial.
Also expected to expire in 2026? According to trustees for Social Security, that’s when Medicare’s main trust fund will run out of money. With the increasing likelihood that Social Security and Medicare benefits may be reduced in the future, it’s more important than ever to use every technique available to maximize your retirement savings.
Three outside-the-box strategies could make an enormous difference in your retirement readiness. The sooner you start, the more you may save.
Fund an HSA for retirement health care
Estimates suggest even a healthy 65-year-old couple will need at least $275,000 to cover retirement health care costs. A Health Savings Account, or HSA, provides a way to save that money without paying a dime in taxes. An HSA account is available to individuals enrolled in a high deductible health insurance plan.
First, these individuals can fund their HSA through a tax-deductible contribution or pre-tax payroll deduction. Second, any interest and investment gains are tax-free. Finally, the funds can be withdrawn tax-free to pay for qualified medical expenses— a triple tax advantage over a traditional savings account.
The best part? There is no requirement to use HSA funds in the year of contribution, which means funds can grow on a tax-favored basis for future health care expense needs.
For 2018, family contribution limits are $6,900, or $7,900 if you are 55 or older, and those amounts are indexed for inflation in future years. If you start contributing the maximum even as late as age 55, and earn 3 percent per year, you could have more than $90,000 to pay for your retirement health care by age 65. If you start contributing the maximum as early as age 40, you could have saved almost $270,000. These funds will continue to grow tax-free in retirement until you need them.
If you don’t use HSA funds in full before you die, excess funds are subject to income tax, but will be otherwise available for your heirs.
Consider a Roth IRA conversion
The typical dogma says that converting an IRA or traditional 401(k) to a Roth IRA does not make sense if you expect your tax rate in retirement to be lower than at the time of conversion. However, lesser known benefits of a Roth IRA may make it worthwhile to have at least part of your retirement assets in Roth IRA form.
Start with no required minimum distributions. With a Roth you aren’t forced to draw down your funds once you attain age 70½ and can continue to benefit from the tax-free growth, thereby maximizing the after-tax funds eventually available for you or your heirs.
Another significant benefit of a Roth IRA or Roth 401(k) is tax diversification. For example, you may choose to take taxable distributions up to a certain amount and then tax-free distributions to avoid a higher income tax bracket.
If you are a high-income taxpayer, Roth IRA distributions are not considered income when determining thresholds for increased Medicare premium charges or the 3.8 percent income tax surcharge on investment gain. If your income is more modest, Roth IRA distributions are not considered income when determining whether you are subject to income tax on Social Security benefits.
If anything, a conversion is more attractive now since you have an opportunity to convert and pay income tax with marginal rates that are generally lower than under prior law. Since individual tax law changes are temporary and tax rates will revert to the former higher amounts starting in 2026, you have an eight-year window to benefit from lower rates.
Make “backdoor” Roth IRA contributions
The tax law prescribes income limits so high-income individuals may not make a direct contribution to a Roth IRA. However, there are no income limits on converting traditional IRA funds to a Roth IRA.
Any person under age 70.5 who has earned income by year-end can make an IRA contribution. While income limits may prevent you from making a pre-tax contribution, you can make this contribution even if you have fully funded a 401(k) or another employer plan.
Once you have made your contribution to a traditional IRA, simply convert that amount to your Roth IRA. As long as this is your only traditional IRA and you have made an after-tax contribution, then an immediate conversion will have converted a tax-deferred asset into a potentially tax-free asset. If you have multiple IRAs, the IRAs are aggregated to determine how much is taxable upon conversion.
While we spend much time on our investment strategies to help gain an extra percentage or two of investment yield, these tax planning strategies can be a more reliable way of maximizing your after-tax retirement income and wealth for your family — no matter how Social Security and Medicare turn out.
Prudential Financial, its affiliates, and their financial professionals do not render tax or legal advice. Please consult with your tax and legal advisors regarding your personal circumstances.
Are today’s senior citizens sufficiently prepared for retirement or have past financial mistakes impeded their progress? What did older Americans wish they knew about managing finances when they were younger? This study from Mike Brown of LendEDU reveals key insights that can help investors of all ages.
For the everyday consumer, getting a grasp on finances can be stressful or even seemingly impossible.
It could take years of balancing a budget and living paycheck-to-paycheck - a crash course of sorts - to full understand the ins-and-outs of personal finance allowing someone to position him or herself for a better financial future.
Unfortunately for some, irresponsible management of finances, such as taking on too much debt or not saving enough, could lead to irreversible damage.
In our latest survey of 1,000 senior citizens, LendEDU sought to uncover how older Americans are faring financially and if they made the right decisions throughout life to live comfortably in their later years.
Are today’s senior citizens sufficiently prepared for retirement or have past financial mistakes impeded their progress? What did older Americans wish they knew about managing finances when they were younger?
Here were a few key takeaways from the study:
Observations & Analysis
More Than Half of Senior Citizens Underprepared for Retirement, Most Wish They Started Saving Sooner!
To gather the data for LendEDU’s story, we surveyed 1,000 Americans, all of whom were at least 65 years of age.
One of the first questions we asked the respondent pool was the following: “What is the biggest financial regret you have from your twenties?”
The plurality of the respondents, 21.4 percent, indicated that the biggest financial regret from their twenties was not saving enough for retirement. Other popular answer choices included spending too much money on nonessential things (17 percent), not investing (12.3 percent), and getting into too much debt (10 percent).
Circling back, it was quite telling that senior citizens regret not saving enough for retirement in their twenties. Getting a jumpstart on retirement is essential to living a comfortable life in one’s later years. Due to compound interest, the earliest possible start to retirement saving will be the most beneficial as your money will have more time to grow.
Professor Timothy Wiedman of Doane University, 66, agreed with most senior citizens who took this survey in that his biggest regret was not getting a jump on retirement while in his twenties.
“I put off starting to save for retirement and didn't open my first IRA until I was a bit over 31 years old. I justified this by telling myself that I could always "catch up" later on my long-term financial plans after establishing a solid career and seeing my income increase,” said Wiedman.
Wiedman soon realized the delay had a substantial impact on his ability to save and earn.
“But the earning power of compound interest is based on time, so an initial delay can have severe consequences. Thus, for young folks these days, opening a Roth IRA as early as possible is vital,” he said. “For example, if a 23-year-old fresh out of college puts $3,000 per year into a Roth IRA that earns a 7.8 percent average annual return, 44 years later at retirement, that $132,000 of invested funds will have grown to $1,009,275. On the other hand, starting the same Roth IRA 20 years later will yield very different results.”
So we know that many older Americans seriously regret not saving for retirement early enough. But were they able to salvage that lost time? Are they prepared for retirement?
The following question was proposed to all 1,000 senior citizen respondents: “As of today, do you believe that you have saved enough for retirement?
The strong majority of older Americans, 54.6 percent, admitted that they do not believe they have saved enough for retirement, while only 26.6 percent think they are on the right track, and 18.8 percent are still unsure.
It came as quite a surprise that so many senior citizens believe they are not aptly prepared for life after work when they should be enjoying warm weather and leisure activities.
But once again, it goes to show the potentially crippling effects of not saving enough for retirement at a younger age. Quite a few senior citizen respondents wished they had saved more in their twenties and that sentiment transferred over to this more black-and-white question.
For reference of what is to come, a LendEDU study found that of 500 millennials who consider themselves to be saving for retirement, 41 percent are using a savings account to save for retirement. A savings account - even a high interest savings account - likely won't produce anywhere near the growth delivered by a 401(k) or individual brokerage account, which 59.4 percent of respondents used.
If those millennials wish to find themselves in a better position than more than half of the baby boomers at the age of retirement, they should probably switch from a savings account to a robo-advisor, 401(k), or brokerage account.
Additionally, when we asked our senior citizen respondents to answer what they know about personal finance today that they had not known at 25, 15.68 percent of the answers were: “I know how to save for retirement.”
The plurality of answers, 28.68 percent, pertained to learning how to live within one’s means, while 25.95 percent of answers were: “I know how to budget.”
Dr. John Story, a 60-year-old college professor at the University of St. Thomas, Houston, summed up this question quite well and further reinforced the importance of getting a jump start on retirement.
“I wish I had known the true cost of debt, and the flipside, the real value of long-term saving.”
With a Lack of Retirement Funds, Many Seniors Relying on Social Security and Life Insurance
As one gets older, there are two components that are thought to be key to achieving a sustained financial comfort. One is life insurance, a product, while the other is Social Security, a benefit.
Life insurance and Social Security benefits become all the more crucial for senior citizens when they have not saved enough for retirement, which is the case for over half of our respondents.
Not surprisingly, many poll participants indicated that they are relying heavily on both things to live their later years comfortably due to a lack of sufficient retirement savings.
In comparison to life insurance, older Americans were more likely to list Social Security benefits as important to their financial strategy. A majority, 69.1 percent, stated that Social Security benefits are a critical component, while 18.7 percent said the opposite, and 12.2 percent were still undecided.
Whereas life insurance must be purchased, Social Security is a benefit that can be qualified for by being of age and by working for a certain number of years (usually 10).
Life insurance is purchased by many senior citizens because it can solidify the financial security of loved ones should the buyer pass away.
While a majority was not achieved, 46.9 percent of senior citizens indicated that life insurance was an important part of their financial strategy. 34.1 percent said that the insurance product does not hold much weight for their financial plan, while 19 percent were unsure.
Considering many of LendEDU’s respondents are not sufficiently prepared for retirement, having life insurance or access to Social Security benefits could become quite pivotal for living comfortably in their later years.
All data within this report derives from an online poll commissioned by LendEDU and conducted online by polling company Pollfish. In total, 1,000 respondents ages 65 and up and residing in the United States were surveyed. These respondents were found via age and location filtering on Pollfish, and then were selected at random from Pollfish’s U.S. user panel of over 100 million. The poll was conducted over a 5-day span, starting on March 26, 2018, and ending on March 30, 2018. Respondents were asked to answer all questions truthfully and to the best of their ability.
Full Survey Results
1. What do you know about personal finance today that you didn't know when you were 25? (Select all that apply)
a. 25.95% of answers were "I know how to budget"
b. 28.68% of answers were "I know how to live within my means"
c. 15.68% of answers were "I know how to save for retirement"
d. 8.57% of answers were "I know how to invest in the stock market"
e. 14.65% of answers were "I understand how consumer credit works"
f. 6.48% of answers were "None of the above"
2. What is the biggest financial regret you have from your twenties?
a. 21.4% of respondents answered "I didn't save enough for retirement"
b. 17% of respondents answered "I spent too much money on nonessential things"
c. 12.3% of respondents answered "I didn't invest my money"
d. 5.5% of respondents answered "I made poor investment decisions"
e. 2.8% of respondents answered "I didn't save enough for my child's education"
f. 10% of respondents answered "I got myself into too much debt"
g. 5.1% of respondents answered "Took a job where I made more money but did not enjoy it"
h. 5.8% of respondents answered "Took a job where I made less money but enjoyed it"
i. 20.1% of respondents answered "None of the above"
3. Is life insurance a critical component of your financial strategy?
a. 46.9% of respondents answered "Yes"
b. 34.1% of respondents answered "No"
c. 19% of respondents answered "Unsure"
4. As of today, do you believe that you have saved enough money for retirement?
a. 26.6% of respondents answered "Yes"
b. 54.6% of respondents answered "No"
c. 18.8% of respondents answered "Unsure"
5. Are Social Security benefits a critical component of your financial strategy?
a. 25.8% of respondents answered "Yes"
b. 29.7% of respondents answered "No"
c. 44.5% of respondents answered "Unsure"
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