Happy Thanksgiving from WISER!

Looking for a gift idea you can feel good about? Well look no further than I Savings Bonds. One thing to be thankful for today is the new and improved interest rate on I Savings Bonds. While I Savings Bonds were earning 4.28% this time last year, the interest rate has increased to a whopping 5.64% through April 30, 2009. I Savings Bonds are government-issued bonds that earn interest each month, and the interest is compounded every six months. The I Bond is currently providing a higher return than the EE Bond. Since becoming available, the I Bond has been very popular; sales of over $3.2 billion were reported in the first year.

Here are a few things you should know about the I Bond:

• You can buy I Bonds at face value; for example, you would pay $50 for a $50 bond.
• Earnings are exempt from state and local income taxes
• Federal income taxes can be deferred for up to 30 years, or until you cash them in, whichever comes first.
• You can earn interest on them for up to 30 years and can cash them out after 5 years without losing interest (You will lose three months' interest if you cash them in sooner.)
• You can now buy savings bonds with automatic deductions from your checking or savings account on a regular basis through the Easy Saver plan, or on the Internet.
  

I Bonds are a great gift for kids! You can show them how to calculate the value of their savings bonds every year. For more information on I Bonds, go to www.savingsbonds.gov or call 800-487-2663.

Financial Priority #3: Saving for Your Retirement

Of course, retirement seems a long way off for someone just starting out in their career, but creating a long-term retirement savings strategy and then actually starting it is one of the smartest decisions you can make as a young person. After making sure you've got health insurance coverage and setting up a strategy to pay off high-interest debt, planning for your retirement is an essential step towards a secure retirement.

Compound interest on money you save in an Individual Retirement Account (IRA) or other kind of retirement savings vehicle will similar grow over time at an impressive pace. Take advantage of that compound growth by investing in your 20s rather than waiting until you’re closer to retirement and have less time for your money to grow!

So, what can you do now to be secure later?

• If your employer sponsors a retirement plan, and especially if your employer will match any contribution you make to the fund, that is absolutely your best option. Not signing up for a plan that includes employer contributions is like leaving money on the table!
  

• If the employer-sponsored option is not available to you, you can start a Roth IRA for yourself with a relatively small amount of savings. For example, it’s possible to open an account with a leading investment firm if you have $1000, but you will be charged a $10 annual fee. When your account balance reaches $5000 the annual fee disappears so it may make sense for you to save your money in a bank account (with no annual fee) until you reach the $5000 threshold. Or, if you would be too tempted to make withdrawals from a personal savings account, go ahead and start a Roth IRA with less than $5000 and the $10 annual fee will be an an incentive to contribute as much as you can afford.
  

• As was discussed is an earlier post, Roth IRAs are the best fit if you are currently in a low tax bracket but expect, or hope, to be in a higher-earning tax bracket by the time you are ready to retire. This is because Roth IRAs, as opposed to traditional IRAs, are set up such that you contribute after-tax income to the account (meaning, the amount of money you chose to contribute to a Roth IRA is not tax-exempt) but then don’t pay any taxes on the money you withdraw when you reach age 59½. Since taxes are generally expected to rise over time, this scheme essentially allows to you spend more of the retirement money you save on yourself rather than to pay taxes.

• Roth IRAs are also a valuable resource for young people because they allow you to start saving for your old age, but you don’t necessarily have to wait until your old age to use some of that money. For example, starting five years after you opened the account, you’re allowed to withdraw contributions from your Roth IRA (note: you can’t take out interest earned, only the money you originally deposited) to pay for expenses like certain necessary medical costs, to buy your first home, and to pay for higher education.
  

Follow this three part guide to economic security and get your financial priorities straight: first, your health; next, pay off debt so you can start to save; and finally, start saving for retirement in your 20s so you can reap the benefits of investing early! Look for more helpful financial advice for women of all ages from WISER in the future!