4 popular benefits that can help protect your retirement savings

(BPT) – Would you plug a leak if it cost $6 billion a year?

That’s the amount of “leakage” or retirement savings lost every year from retirement savers defaulting on their loans from 401(k) plans, according to a 2014 report by the Pension Research Council (PRC), Borrowing from the Future: 401(k) Plans and Loan Defaults. Draining retirement savings for other purposes ultimately makes is harder to prepare for retirement.

But loans and withdrawals from 401(k) plans are sometimes the only options available to workers who are faced with unexpected financial emergencies. Bankrate.com’s 2016 Financial Security Index finds that 29 percent of Americans have no savings to address emergencies. But other options are increasingly becoming available.

“Employers are focusing more on improving their employees’ financial wellness by making available educational programs and introducing financial products that can help workers protect their savings,” says Tom Foster, spokesperson for workplace solutions at Massachusetts Mutual Life Insurance Co. (MassMutual). “It’s important to make sure you’re aware of all of the benefits your employer makes available and how they can help you manage your personal finances.”

Benefits are being introduced at the workplace to help employees address financial emergencies such as a critical illnesses, disabilities, accidents, big car repair bills or other misfortunes without cracking open their retirement savings:

* Pre-approved emergency loans: Some programs allow employees to obtain credit online without having to fill out forms or visit a bank. The most helpful programs prequalify employees for credit based on their employment and their ability to repay. Often, employees can repay the loans through payroll deduction. The rates on such loans can be as low as 6 percent.

* Critical illness coverage: Medical treatment and other expenses related to a serious illness can quickly run into several thousands of dollars, especially with the growing prevalence of high-deductible health care coverage. Critical illness policies provide cash for insureds to pay for a myriad of expenses, from medical deductibles and co-pays to pharmaceuticals and comfort-related costs if an employee or a family member suffers a serious illness.

* Accident insurance: Few emergencies can derail personal finances more quickly than an injury caused by an accident, especially for those who live paycheck to paycheck. More than 40 million injuries are treated by emergency rooms every year, according to the 2014 FastStats report on Emergency Department Visits by the U.S. Centers for Disease Control. Policies typically pay cash in a lump-sum to cover anything from medical insurance deductibles and co-pays, down time from work and other unanticipated expenses.

* Disability protection: Many people can’t make ends meet for more than a few weeks without a paycheck. A disabling accident or illness can easily knock someone out of work for weeks or even months. Group disability policies are available to cover short-term disabilities that last as long as six months or long-term disabilities that can take years or even become permanent. Many workers should consider securing a policy that protects at least 50 percent of their paycheck and buy additional coverage of up to 60 percent or 70 percent, if available.

Many employers make these benefits available on a voluntary basis, meaning employees pay the premiums at relatively low group rates.

“Taken together or individually, these protection benefits can help shield you against financial misfortunes and give you an alternative to tapping your retirement savings,” Foster said. “Then, as your financial situation improves, you can gradually boost your personal and retirement savings to enhance your financial wellness.”

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Wireless home phone devices offer savings and mobility

(BPT) – It seems more and more of us are “cutting the cord” these days, moving away from hard-wired connections to cable TV, internet service and more. The freedom to go wireless offers options that we couldn’t have imagined just five or 10 years ago — you can stream movies on your phone while sitting in the backyard, or do a Google search as you wait in line at the grocery store.

The last bastion of hard-wired service, the good old home telephone, is undergoing this transformation as well. Cellular providers now offer devices that let you turn your traditional home phone into a line on your cellular account. You keep your home phone number, and even continue using your existing home telephone. But you’re no longer required to stay tethered to phone jacks — nor do you have to keep your home phone at home.

Small device, simple setup

Wireless home phone service is offered under various names — usually Wireless Home Phone or Home Phone Connect. It allows a regular wired telephone to connect to cellular networks as if it were a mobile phone.

Connections are made via a small device you can place almost anywhere in your home. It’s about the size of a wireless router, and contains the necessary electronics to provide voice-only telephone service to your phone from one or two jacks on the back of the unit. It also has a small radio antenna and a transceiver for the wireless side of the connection.

The only plug-ins required are your phone (or its charging base) into one of the rear jacks, and a power cord. Most wireless home phone devices also include LED indicator lights on the front to show signal strength and indicate waiting voicemail messages.

Savings on landline, long distance

If you already have cellphone service, you can add wireless home phone to your account for the cost of purchasing the device (expect to pay around $50), plus the cost of adding a secondary line for the service, which can be as little as $10 per month.

With most carriers, you’ll simply share the airtime minutes on your existing monthly cellular plan with your home phone line. Nationwide coverage is also a feature of most cellular calling plans, so in addition to your redundant landline service, you eliminate the need for a long distance carrier. There are even special rates just for seniors: for instance, Consumer Cellular, which specializes in service to users over 50 years of age, offers no-contract, post-paid plans at discounted rates to AARP members.

If you don’t currently have cellular service, you can still convert your landline to mobile simply by ordering a wireless home phone device, then signing up for a monthly service plan that covers the number of minutes you’re likely to use each month.

Never miss a call — anywhere you go

Wireless home phone service redefines the meaning of “home.” The device is completely portable, so your service is, too; you can make and receive calls anywhere you have access to a cellular signal and an electrical outlet. Set it up anywhere you want in your home — you’re no longer restricted to locations near a wall jack.

Perhaps more significantly, you can take it with you to a second home, a hotel or even a campsite and still receive calls made to your home telephone number, if cellular reception and a power source are available. It also works well with home phones that have additional handsets. By connecting the wireless home phone device to the base of your primary cordless phone, it becomes accessible to your other cordless extensions, giving you even more calling flexibility.

Making the cut

Like any cord cutting measure, wireless home phone service isn’t necessarily for everybody. Your telephone service becomes completely dependent on a cellular signal — if, for instance, the nearest cell tower experiences an outage, you’ll be unable to make anything except emergency calls. There’s also no data signal on the line, so wireless home phone devices can’t be used with medical monitoring devices or fax machines.

But if you’ve been seeking a way to cut the costs of your landline service while also keeping your longtime home telephone number, it offers a practical and affordable solution. You save on monthly service, eliminate long distance charges, and the portability offers true modern luxury, especially for “snowbirds” or retirees who travel frequently. It’s a nice way to make yourself feel at home — wherever you go!

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Pension plan funding shortfalls threaten retirees in all 50 states

(BPT) – Everyone knows it is important to save for retirement in order to build a nest egg and enjoy the “golden years.” So why is it that state and local governments many times act irresponsibly when it comes to saving for the future of public employees?

Government pensions are the way in which state and local public employees like teachers, police officers and firefighters receive retirement benefits. Typically both the employee and the government set aside money each year to be invested. The investments will hopefully grow over time, and both the annual contributions and the investment growth is understood to form the pool of money public employees will be able to use once they reach retirement. That’s the theory.

Unfortunately, according to Unaccountable and Unaffordable 2016, a new, state-by state analysis from the American Legislative Exchange Council (ALEC), government pensions are being massively underfunded across the states, and now hardworking taxpayers are on the hook. What is the price tag? Across the 50 states, unfunded pension obligations now total $5.6 trillion. Now, that number sounds large at a national scale, but what does it mean for the average American? To be exact, this state pension debt equates to an average price tag of $17,427 for every man, woman and child in the United States.

There are numerous reasons why pension liabilities are so large. For one, the stock market is not growing as quickly as many assumed it would, exiting the recent economic downturn. Therefore, investments for many pension funds are not meeting expectations. The average pension fund assumes they will earn a whopping 7.37 percent on their investments over the long term. These overly-optimistic assumptions fly in the face of what many financial experts are calling a “new normal” of lower than expected investment earnings in the future.

Another inconvenient truth is that many state governments have failed to deposit the annually required contributions into pension funds every year. The urge to spend more money on other government projects, however well intentioned, has diverted much-needed contributions away from pensions and has contributed significantly to unfunded liabilities.

When pensions are unstable, millions of Americans are faced with an uncertain retirement. However, this is not only a problem for government workers — it affects all Americans. Without a sustainable solution to underfunded pensions, higher taxes will be the reality for all hardworking taxpayers.

What’s more, an increasing percentage of state budgets are being drained to pay pension benefits, with less money available for important functions like funding public schools and fixing roads. One especially sobering story comes from Illinois, where since 2009, this trend is so extreme that 89 cents out of every new dollar of education spending has gone to teacher pensions, leaving just 11 cents for salaries, textbooks, building costs and the various in-classroom costs of education. And by 2025, Illinois will spend more on teacher-retirement costs than it will spend on the classroom.

Pension funding is not a Republican vs. Democrat issue. It’s a retirement issue that affects all Americans. Unfunded pension liabilities will be harmful to the future of workers, retirees and taxpayers alike, if forward-thinking policymakers do not tackle pension reform in a timely fashion.

To find out more about how prepared your state is and to see the full report, Unaccountable and Unaffordable 2016, is available at Alec.org/PensionDebt2016.

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