Saturday, July 17, 2004

Lesson best learned young: Save money

Survey finds many here didn't

By Tim Pennington
Enquirer contributor

Susan Peskin (left) is a registered investment adviser. One of her clients is Kim Piening, 25, who is putting half her income into savings and investments and hopes to buy a house soon.
Kim Piening says she had a loving, happy childhood, but she also recalls her frugal parents rarely taking the family out to dinner or spending lavishly.

"My parents, especially my dad, drilled it home to all of us kids that you need to save money for the future," said Piening, 25, an Amberley Village resident who is an early intervention specialist for the Warren County Board of Mental Retardation and Developmental Disabilities.

"When we had jobs in high school, we always had to put 50 to 75 percent of what we earned in the bank," she said. "My parents taught us what was important, and school and saving were two of those things."

Now that she's on her own, Piening puts almost 50 percent of her earnings in savings and investment plans. She hopes one day soon to buy her own home.

"It takes a lot of discipline," Piening said. "You have to turn down a lot of things you might want to buy, but in the end there is a great payoff."

• Know your retirement needs.

Experts estimate you'll need about 70 percent of pre-retirement income, 90 percent for lower earners, to maintain your standard of living.

• Find out about Social Security benefits. Contact the Social Security Administration at (800) 772-1213 for information and to request a free "Your Social Security Statement."

• Contribute to a tax-sheltered savings plan. Your taxes will be lower, your company may kick in more.

• If your employer doesn't offer a retirement plan, suggest it start one. For information on simplified employee pensions, order Internal Revenue Service Publication 590 by calling 1-800-829-3676. If you work for a small business, ask your employer to see the Small Biz Retirement Quiz.

• Put money into an Individual Retirement Account.

• Don't touch your savings. You'll lose principal and interest, and you may lose tax benefits.

• Start early. The sooner you start saving, the more time your money has to grow.

Source: American Savings Education Council

Online resources that can help you plan for retirement
Piening is among fewer than 40 percent of Cincinnati residents who save more than $1,000 per year, according to a survey conducted by consumer advocacy group Consumer Action and Capital One, a credit-card issuer.

The survey of 401 Cincinnatians in early May also found that more than 53 percent are concerned that they are not saving enough.

"Cincinnati consumers aren't saving enough for retirement and other important life events, let alone putting something aside for financial emergencies," said Ken McEldowney, executive director for Consumer Action, whose group randomly called residents to gather the data here because it's an "average" American city.

Whole life planning

Local investment adviser Susan Peskin said she agrees with the results of the survey.

"The same people who don't put money away each paycheck are the same people who don't go to the doctor for checkups or who don't take out life insurance policies," said Peskin, whose owns Money Concepts Planning Center in Hyde Park and specializes in helping young professionals save and invest their money.

She starts each consultation with a new client with a "fact-finding session" to determine how much he can afford to put away each month. She also has clients set personal financial goals.

"I think some people don't save because they fear they may need it and it won't be available to them," Peskin said. "But I was young once, too. I know that if you can take some of that extra beer money and put it into a retirement plan, before you know it you can afford that house you always wanted."

Survey findings include:

• 41.1 percent of respondents do not invest their savings.

• In the last year, the standard savings account was the most popular choice by respondents for their investments (51.4 percent)

• Respondents reported that low interest rates, loans or other debt and not having investing "on their radar" were primary reasons for not saving enough.

Christopher Brown, a second-year law student at the University of Cincinnati, is one who refuses to put his money into a standard savings account. He opted for a mutual fund where his money can grow at a higher rate and he still has access to it.

"I'm one of those people who saves less than $1,000 a year, but what I do save I invest it wisely," said Brown, 27, of Hyde Park. "My money is directly taken from my checking account each month, and I don't have to worry about making the deposit into the mutual fund. But when I need it, it is there for me."

Looking ahead

Retirement is expensive. According to the American Savings Education Council, a nonprofit national coalition of public- and private-sector institutions raising awareness about what is needed to ensure long-term financial independence, workers will need about 70 percent of their pre-retirement income - lower earners, 90 percent or more - to maintain their standard of living when they stop working.

With Social Security paying the average retiree about 40 percent of pre-retirement earnings, the Social Security Administration is trying to educate the public by sending out annual statements detailing retirement payments each year to workers 25 and older.

Both Piening and Brown use professional financial advisers to help them with saving and investment strategies, but most local banks and lending institutions may offer those services to their customers at little or no fee. Experts also suggest making a deposit into a savings or investment account the first priority each month.

"You can still enjoy nice things," said Piening. "You just have to know when to turn things down and save the money for later."


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