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Investing and Retirement

A vast majority of workers are financially unprepared for retirement. You may have put off investing as a young worker because retirement seemed like such a long time away. As we get older, life often catches up to us! Maybe you wanted to invest more but by the time you paid for housing, medical care, etc., there wasn't much left to invest. Or perhaps you were one of the many families who had investments and retirement funds virtually disappear with the economy.

No matter your situation, it's never too early (or late) to make plans for your future financial security. The following resources will help you put your money to work for you, to better meet your mid- and long-term goals.

Compounding is Like Magic

Rosemary K. Heins, Extension Educator

January 2014

Albert Einstein is often cited as saying, "compounding is the greatest mathematical discovery of all time." And we are cautioned, if a deal is too good to be true it's probably not true. However, the magic of compounding is true.

Simply the money you save earns money. Then the money your money earned earns more money and so on...the longer you save the better compounding works for you. In fact, saving a little for a long time generally adds up faster than saving a lot for a short period of time and it's easier to do.

Here's an example: If you save $100 a month, or only $25 per week, at the end of one year, you could have $1,212.96, assuming only a 2% interest rate. Keep saving at this level and after five years, you could have more than $6,300. Only $6,000 is what you've set aside, and the rest is due to the "magic" of compounding. This is what you want to work for you in a retirement plan.

The longer you can keep your money growing for you, the faster it will add up. Now you may not earn two percent per year, depending on when you start and where you choose to invest. You could earn more at times, and at times less. However, in a very real sense, time is money when it comes to saving for retirement or other long term goals such as a child's future education or a special vacation. The impact of compounding over time is magical.


American Savings Education Council, "The "Magic" of Compounding",

Investing Tips for Any Time of the Year

Rosemary K. Heins, Extension Educator — Family Resource Management

Reviewed June 2013 by the author.

At the end of a year, people think about ditching bad habits and starting the New Year with new and better ones. You don’t have to wait until the December 31 to do this to change the shape of your finances. Here are some quick tips to challenge one’s self.

  • Save and Invest. Don’t underestimate your ability to save and invest. Compound interest helps even modest amounts grow.
  • Lighten your credit load. Few investments pay off as well, or with less risk than, eliminating high-interest debt on credit cards or other loans.
  • Boost your ‘rainy-day’ fund. This is money you set aside for emergencies in a bank account to cover sudden unemployment or other emergencies. Many experts will suggest keeping six months of expenses in such an account but for many households this is not reality. Start somewhere, like having an extra house or rent payment set-aside, then increase it to two month of housing payments. Suddenly it grows.
  • Take charge of your money. Know where it goes by tracking spending and then set up a plan for how to spend it monthly and stick to it.
  • Pay yourself first. Make savings a regular expense that is for you. Regular deductions from a paycheck or bank account are easy ways to accomplish this and keeps you on track to achieve long-term goals.
  • Finally, know your investment self. Use that knowledge to find investments that are a good match for you, based on your goals and your ability to take risks.

If you want to learn the basics about investing check out the Invest NOW: Money in Retirement Online Course. Work on changing the shape of your finances!

Social Security Benefit Estimate

Rosemary K. Heins, Extension Educator — Family Resource Management

Reviewed June 2013 by the author.

A retirement planning tool that was eliminated as a budget cutting move in the past couple years was the annual Social Security Benefit Estimate. Workers received a personal annual paper statement about 3 months before their birthday summarizing current Social Security benefits. Many individuals and financial planners protested since this was a valuable tool in the financial planning process.

Early in 2012 the Social Security Administration resumed paper statements but only to workers over 60 who are not currently receiving benefits. Workers turning age 25, will receive a statement as well. Others can get access to their statements but only online.

The new online Social Security Statement is available at Once verified, people will create "My Social Security" account with a unique user name and password to access their online statement. In addition, the portal also includes links to other information online services such as, applications for retirement, disability and Medicare.

The Social Security Administration anticipates that the online service may not work smoothly for some due to the need to verify identity with information that matches Social Security records. Those who cannot verify online initially can visit their local Social Security office and present an identity document in order to create an account and gain access to the online version of the statement.

More information on the Social Security Benefit statement can be found at the Social Security Administration website. Remember, this is one tool to use in planning for your retirement security.


United States Social Security Administration. (2013, May 9). My social security. Washington, D.C.: United States Social Security Administration.

Purchase Savings Bonds Online

Rosemary K. Heins, Extension Educator — Family Resource Management

Reviewed June 2013 by the author.

Paper savings bonds no longer exist but savings bonds are not going away. As of January 1, 2012 people can only purchase savings bonds through an online account. This action, by the US Department of Treasury will save American taxpayers approximately $70 million over the first five years.

Electronic saving bonds, both Series EE or I, have been available through TreasuryDirect, a secure, web-based system since 2002. The online service makes it easy and convenient to purchase and manage bonds free of charge. Buyers will no longer need to worry about misplacing, losing or storing paper bonds.

Opening a TreasuryDirect account allows an investor to:

  • Buy, manage and redeem Series EE and I electronic savings bonds.
  • Convert Series EE and I paper saving bonds to electronic through the SmartExchange feature.
  • Purchase electronic savings bonds as a gift. Remember though, you’ll need to have the social security number of the person, whom the gift if for.
  • Enroll in a payroll savings plan for purchasing electronic bonds.
  • Invest in other Treasury securities such as bills, notes, bonds, and Treasury Inflation-Protected Securities (TIPS).

Those holding paper savings bonds can continue to redeem them at financial institutions. Bonds, which have not matured, but were lost, stolen or destroyed, can be reissued.

Even though savings bonds have been around since 1935 they are still a good investment tool for small amounts of savings. Only now you need to purchase them online.


United States Department of Treasury. (n.d.). Washington, D.C.: United States Department of Treasury.

Expectations and Reality of Working for Pay in Retirement

Rosemary K. Heins, Extension Educator — Family Resource Management

Reviewed June 2013 by the author.

Many workers express or desire to work for pay into retirement years. This could mean less hours in a current career or a new job at less than full time. How many actually do?

The 2012 Employee Benefit Research Institute Retirement Confidence Survey answers that and many other questions. Basically, the survey has consistently found that workers are far more likely to expect to work for pay in retirement than those retirees who have actually worked. The percentage of workers planning to work for pay in retirement now stands at 70 percent, compared with just 27 percent of retirees who report they worked for pay in retirement.

Retirees who have worked for pay in retirement most often say they did so because they wanted to stay active and involved or enjoyed working, but the percentage who report working solely for nonfinancial reasons is small.

Ninety percent identify at least one financial reason for having worked, such as wanting to buy extras, a decrease in the value of their savings or investments, needing money to make ends meet, or keeping health insurance or other benefits.

Yet few retirees who have not already worked for pay in retirement anticipate returning to paid employment. Just two percent say it is very likely they will work for pay some time in the future, and only eight percent say it is somewhat likely.

Full details of the 2012 Retirement Confidence Survey are available on line at the website. Find out more about how retirement expectations may conflict with reality from this report.


Employee Benefit Research Institute (EBRI). (2010). Retirement confidence survey (RCS). Washingotn, D.C.: Employee Benefit Research Institute (EBRI).

Helping Low-income Workers Save for Retirement

Rosemary K. Heins, Extension Educator — Family Resource Management

Reviewed June 2013 by the author.

How can employers increase their workers retirement savings? Auto-enrollment in 401 (k) plans was encouraged by provisions of the Pension Protection Act of 2006. Does this work with low-income workers, too?
This legislation provides legal and regulatory incentives for employers to automatically sign up or enroll new workers in their 401 (k) retirement savings plan, as a way to boost participation and individual retirement savings. Workers can still opt out of auto-enrollment but are required to take steps to not participate. Plans with an auto-contribution escalation provision automatically increase workers annual rate of saving in their plan to ensure their savings increase with income and salary increases.

A recent study by the nonpartisan Employee Benefit Research Institute and the Defined Contribution Institutional Investment Association found these provisions had a tremendously positive impact on worker’s retirement savings. It will significantly improve workers’ retirement income adequacy.

Increasing the auto-contribution escalation cap had by far the greatest impact of any single factor for helping workers being able to retire with 80% real replacement of their work income into retirement. It was good news for all income levels including low-income workers.

Remember these results when looking at saving for retirement. As a worker, participate in saving for your retirement through any 401 (k) or similar type of plan and increase it when income or salary increases. You’ll thank yourself in your ‘golden years’.

For more information contact Employee Benefit Research Institute.


Employee Benefit Research Institute (EBRI). (2010). The impact of PPA on retirement savings for 401(k) participants. Washingotn, D.C.: Employee Benefit Research Institute (EBRI).

Financial Capability Study: Minnesota Findings

Rosemary K. Heins, Extension Educator — Family Resource Management

Reviewed June 2013 by the author.

Recently the state-by-state 2012 Financial Capability Survey results were released. This study was conducted by the FINRA Investor Education Foundation. The results revealed that Minnesotans are close to the national average in the results.

There were five major result categories. The first category was Spending versus Saving. 39 percent of Minnesotans reported spending less than their household income. The national average was 41 percent.

In the category Unpaid Medical Bills, 22 percent of Minnesotans said they had unpaid medical bills. This compares with 26 percent of nationwide respondents.

The third category is Rainy Day Funds. 55 percent of Minnesotans reported not having rainy day savings to cover three months of unanticipated financial emergencies. This compares with 56 percent of Americans nationwide.

In the category Credit Card Problems, 32 percent of Minnesotans reported paying only the minimum payment during the past year, compared with 34 percent of all Americans.

The final category was Financial Knowledge which was based on five basic financial literacy questions. Minnesotans answered on average 3.02 financial literacy questions correctly. The national average was 2.88 correct answers.

These results show that Minnesotan’s were just slightly better than the national average so there is much room for improvement. Residents of California, Massachusetts and New Jersey scored the highest of all states. For more information on this research and to test yourself on the Financial Knowledge questions, go to the website . And to increase your financial knowledge on many topics check out the Extension website at


FINRA Investor Education Foundation. (2013). National financial capability study. Washington, D.C.: FINRA Investor Education Foundation.

Determining Retirement Savings Need

Rosemary K. Heins, Extension Educator — Family Resource Management

Revised June 2013.

Do you have any idea how much you need to save for retirement? For those already in retirement you may be saying “I should have saved more!”

The 2013 Retirement Confidence survey by the Employee Benefit Research Institute (EBRI) showed that less than half of workers (46%) report they and/or their spouse have tried to calculate this figure. This is comparable to most of the yearly measurements taken from 2003-2012. It comes at a time when workers have an increasing individual responsibility in retirement planning.

The likelihood of doing a retirement savings needs calculation increases with household income, education and financial assets. In addition, married workers, retirement savers (compared to non-savers), and participants in defined contribution plans more often reported trying to do a calculation. Instead of doing a systematic retirement needs calculation, many workers simply guess at how much they will need to accumulate.

If you are interested in calculating your retirement needs, there is a helpful tool called the "Ballpark Estimate". This was developed originally by the American Savings Education Council (part of EBRI). It is available from many websites in an easy, interactive calculator format or one can print it out to complete it.

Additional retirement direction can be gained through Planning Ahead for Retirement, an online publication available from the University of Minnesota Extension. Download it from the Personal Finance section of the Extension website at

Be smart — figure out what you’ll need — then plan how you’ll meet your retirement goal.


Danes, S. M. (2013, Mary). Planning ahead for retirement. St. Paul, MN: University of Minnesota Extension.

Employee Benefit Research Institute. (2012). 2012 retirement conference survey – 2012 results. Washington, D.C.: Employee Benefit Research Council.

Employee Benefit Research Institute. (1996-2013). Ballpark E$timate. Washington, D.C.: Employee Benefit Research Institute.

Helman, R., M. Greenwald & Assoc., Adams, J. D., Copeland, C., and VanDerhei, J. (2013, March). The 2013 retirement confidence survey: Perceived savings needs outpace reality for many (Issue Brief No. 384). Washington, D.C., Employee Benefit Research Institute. 

Compounding is Like Magic — What does compounding mean and how does it help you save money faster? Transcript and audio (1:45)

Invest NOW: Money in Retirement Online Course — Online course that will give you the basic education you need to start investing for your future.

Investing Tips for Any Time of the Year — Work on changing the shape of your finances! Transcript and audio (2:01)

Purchase Savings Bonds Online — As of January 1, 2012 people can only purchase savings bonds through an online account. Transcript and audio (2:00)

Take the Road to Financial Security for Later Life Online Course — Free online course gives you an introduction to the road for financial security.

Take the Road to Financial Security Workshop — Arrange for us to come and teach this important topic. Excellent resource for employee groups, community organizations, and more.

Across Generations: Dealing with Life Transitions — Advice on how to evaluate, set goals and share your plans with others.

Planning Ahead for Retirement — Guides you in developing a retirement plan that takes into account the financial, emotional, and social aspects of your life.

Financial Security in Retirement (122 K PDF) — Minnesota Department of Commerce and University of Minnesota Extension — This Financial Literacy Guide gives reviews how planning and using the right resources and tools can help ensure that you are financially secure in retirement.

Expectations and Reality of Working for Pay in Retirement — Many workers express or desire to work for pay into retirement years. How many actually do? Transcript and audio (1:57)

Determining Retirement Savings Need — Guidelines to help you save enough for your retirement. Transcript and audio (1:57)

Helping Low-income Workers Save for Retirement — How can employers increase their workers retirement savings? Transcript and audio (2:01)

Social Security Benefit Statement — The Social Security Administration is launching a new online statement for those not receiving a paper copy. Transcript and audio (2:09)

Other Recommended Resources

Financial Capability Study: Minnesota Findings (audio; 2:04) — Find out how Minnesotans rate with making ends meet, planning ahead, and more. Transcript and audio (#)

Making the Most of What You Have — Look at your total financial picture and determine which assets you might use to meet family obligations.

Dollar Works 2 — Teach others how to manage their personal finances and make sound decisions about money. This comprehensive curriculum has a unit on Saving and Investing.

Planning for a Secure RetirementPurdue University — Online module to help you plan for retirement.

AARP Retirement Planning — Provides retirement strategies, and lifestyle tips, news, and other educational information for seniors.

When To Start Receiving Retirement BenefitsUnited States Social Security Administration — Outlines things to consider before making the decision to retire.

Minnesota Board on Aging — Gateway to services for Minnesota seniors and their families.

United States Social Security Administration — Find out about available benefits, estimate future benefits, view your Social Security statement, and more.

Senior Citizens' — Resource center for government resources in money, housing, health, and more.

Administration of AgingUnited States Department of Health and Human Services — Find local programs, check for benefits, find helpful resources, and more.

Additional Online Resources

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