Time Can Be a Strong Ally in Saving for Retirement

Time Can Be a Strong Ally in Saving for Retirement

Father Time doesn’t always have a good reputation, particularly when it comes to birthdays. But when it comes to saving for retirement, time might be one of your strongest allies. Why? When time teams up with the growth potential of compounding, the results can be powerful.

Time and money can work together

The premise behind compounding is fairly simple. Your retirement plan contributions are deducted from your paycheck and invested either in the options you select or in your plan’s default investments. Your contribution dollars may earn returns from those investments, then those returns may earn returns themselves — and so on. That’s compounding.

Compounding in action

To see the process at work, consider the following hypothetical example: Say you invest $1,000 and earn a return of 7% — or $70 — in one year. You now have $1,070 in your account. In year two, that $1,070 earns another 7%, and this time the amount earned is $74.90, bringing the total value of your account to $1,144.90. Over time, if your account continues to earn positive returns, the process can gather steam and add up.

Now consider how compounding might work in your retirement plan. Say $120 is automatically deducted from your paycheck and contributed to your plan account on a biweekly basis. Assuming you earn a 7% rate of return each year, after 10 years, you would have invested $31,200 and your account would be worth $45,100. That’s not too bad. If you kept investing the same amount, after 20 years, you’d have invested $62,400 and your account would be worth $135,835. And after just 10 more years — for a total investment time horizon of 30 years and a total invested amount of $93,600 — you’d have $318,381. That’s the power of compounding at work.Retirement Savings

Keep in mind that these examples are hypothetical, for illustrative purposes only, and do not represent the performance of any actual investment. Returns will change from year to year, and are not guaranteed. You may also lose money in your retirement plan investments. But that’s why when you’re saving for retirement, it’s important to stay focused on long-term results.

Also, these examples do not take into account plan fees, which will impact total returns, and taxes. When you withdraw money from your traditional (i.e., non-Roth) retirement plan account, you will have to pay taxes on your withdrawals at then-current rates. Early withdrawals before age 59½ (age 55 or 50 for certain distributions from employer plans) may be subject to a 10% penalty tax, unless an exception applies. Nonqualified withdrawals from a Roth account may also be subject to regular income and penalty taxes (on the earnings only — you receive your Roth contributions tax free).

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©Copyright 2021 Broadridge Financial Solutions, Inc.

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CUSO Financial”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CUSO Financial: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. The Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is a modern wealth management solutions company and is not a Registered Investment Advisor or broker-dealer. Investment products, services and advice are only provided through CUSO Financial, a subsidiary of Atria.

Annuity Basics

Annuity Basics

An annuity is a contract between you, the purchaser or owner, and an insurance company, the annuity issuer. In its simplest form, you pay money to an annuity issuer, and the issuer pays out the principal and earnings back to you or to a named beneficiary. Life insurance companies first developed annuities to provide income to individuals during their retirement years.

Annuities are either qualified or nonqualified. Qualified annuities are used in connection with tax-advantaged retirement plans, such as 401(k) plans, Section 403(b) retirement plans (TSAs), or IRAs. Qualified annuities are subject to the contribution, withdrawal, and tax rules that apply to tax-advantaged retirement plans. One of the attractive aspects of a nonqualified annuity is that its earnings are tax deferred until you begin to receive payments back from the annuity issuer. In this respect, an annuity is similar to a qualified retirement plan. Over a long period of time, your investment in an annuity can grow substantially larger than if you had invested money in a comparable taxable investment. Like a qualified retirement plan, a 10 percent tax penalty on the taxable portion of the distribution may be imposed if you begin withdrawals from an annuity before age 59½. Unlike a qualified retirement plan, contributions to a nonqualified annuity are not tax deductible, and taxes are paid only on the earnings when distributed.

Four parties to an annuity contract

There are four parties to an annuity contract: the annuity issuer, the owner, the annuitant, and the beneficiary. The annuity issuer is the company (e.g., an insurance company) that issues the annuity. The owner is the individual or other entity who buys the annuity from the annuity issuer and makes the contributions to the annuity. The annuitant is the individual whose life will be used as the measuring life for determining the timing and amount of distribution benefits that will be paid out. The owner and the annuitant are usually the same person but do not have to be. Finally, the beneficiary is the person who receives a death benefit from the annuity at the death of the annuitant.

Two distinct phases to an annuity

There are two distinct phases to an annuity: (1) the accumulation (or investment) phase and (2) the distribution phase.
The accumulation (or investment) phase is the time period when you add money to the annuity. When using this option, you’ll have purchased a deferred annuity. You can purchase the annuity in one lump sum (known as a single premium annuity), or you make investments periodically, over time.

The distribution phase is when you begin receiving distributions from the annuity. You have two general options for receiving distributions from your annuity. Under the first option, you can withdraw some or all of the money in the annuity in lump sums.

The second option (commonly referred to as the guaranteed income or annuitization option) provides you with a guaranteed income stream from the annuity for your entire lifetime (no matter how long you live) or for a specific period of time (e.g., 10 years). (Guarantees are based on the claims-paying ability of the issuing insurance company.) This option generally can be elected several years after you purchased your deferred annuity. Or, if you want to invest in an annuity and start receiving payments within the first year, you’ll purchase what is known as an immediate annuity.

You can also elect to receive the annuity payments over both your lifetime and the lifetime of another person. This option is known as a joint and survivor annuity. Under a joint and survivor annuity, the annuity issuer promises to pay you an amount of money on a periodic basis (e.g., monthly, quarterly, or yearly). The amount you receive for each payment period will depend on how much money you have in the annuity, how earnings are credited to your account (whether fixed or variable), and the age at which you begin the annuitization phase. The length of the distribution period will also affect how much you receive.

When is an annuity appropriate?

It is important to understand that annuities can be an excellent tool if you use them properly. Annuities are not right for everyone.

Nonqualified annuity contributions are not tax deductible. That’s why most experts advise funding other retirement plans first. However, if you have already contributed the maximum allowable amount to other available retirement plans, an annuity can be an excellent choice. There is no limit to how much you can invest in a nonqualified annuity, and like other qualified retirement plans, the funds are allowed to grow tax deferred until you begin taking distributions.

Annuities are designed to be long-term investment vehicles. In most cases, you’ll pay a penalty for early withdrawals. And if you take a lump-sum distribution of your annuity funds within the first few years after purchasing your annuity, you may be subject to surrender charges imposed by the issuer. As long as you’re sure you won’t need the money until at least age 59½, an annuity is worth considering. If your needs are more short term, you should explore other options.

©Copyright 2021 Broadridge Financial Solutions, Inc.

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Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CUSO Financial”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CUSO Financial: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. The Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is a modern wealth management solutions company and is not a Registered Investment Advisor or broker-dealer. Investment products, services and advice are only provided through CUSO Financial, a subsidiary of Atria.

Send Yourself Money? That’s a Big Red Flag

Send Yourself Money? That’s a Big Red Flag

zelle phishing

Scammers are always creating new ways to steal your money. One of the recent scams utilizing peer-to-peer payment services is what’s known as the “Pay Yourself Scam.”

The gist of the scam is that someone pretending to be a representative from your bank or credit union tells you that there has been a fraudulent transaction and in order to stop it, you need to send yourself money with Zelle®. That sense of urgency really works in their favor and gets unsuspecting consumers to act immediately.

The best way to avoid this scam is to know what to look for. Here’s how it unfolds:

  • It starts with a text message from a scammer that looks like a fraud alert from your bank or credit union. It’s looks real and urgent!
  • If you respond to the text message and engage the scammer, you’ll receive a call from a number that may appear to be your bank or credit union.
  • The scammer pretends to be calling from your bank or credit union and offers to stop the alleged fraud by directing you to send yourself money with Zelle®.
  • In reality, the scammer is tricking you into sending money to their bank account.

How the Scam Works

So how are the scammers diverting money to their account?

When you enroll with Zelle® initially or if you switch your enrolled U.S. mobile number or email address to a different account, your bank sends you a security code to verify your identity. In this scam, the fraudster pretends to be calling from your bank or credit union saying that they need this passcode to authorize your payment to yourself. That should be a big red flag to you. Your bank will NEVER ask you for this security code, nor will they ask you to send money to yourself.

If the scammer gets the one-time passcode, they can link their bank account to your U.S. mobile number or email address. Now the money you thought you were sending to yourself is sent directly to their bank account.

Staying Safe in a World of Scammers

How can you avoid being tricked? Always keep these tips front of mind:

  • Never discuss account numbers, PINs, or other personal information with anyone who contacts you, even if they say they are from your bank or credit union.
  • If the person claiming a problem with your account needs your account information, hang up and call the bank yourself.
  • Don’t call the number in a text, email, or voice mail. It will connect you directly with the scammers. Always look up the number online or review the number listed on your debit or credit card.
  • Don’t click on text message links from people you don’t know, even if it’s pretending to be your bank or credit union. These links can be deceiving and direct you to a fraudulent site or expose your device to malware.
  • Your bank or credit union will never ask you to send money to yourself (or anyone else)!

    If you detect suspicious activity regarding Zelle®, hang up and contact your bank or credit union directly at the number listed on the back of your bank-issued debit card, in your banking app, or on their official website.

    To learn about other scams and ways to protect yourself, visit zellepay.com/pay-it-safe

*U.S. checking or savings account required to use Zelle®. Transactions between enrolled users typically occur in minutes.
Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.

Financial Success for Couples

Financial Success for Couples

Financial Success for CouplesTalking about money with your partner or spouse can be difficult. Whether it’s a new relationship or you’ve been married for 20 years. From budgeting to investing, here are a few questions to touch on with your spouse to gain financial success.

How much do you currently make?

This question may be uncomfortable for new partners or spouses, but it is an essential question for budgeting together. Knowing both incomes allow you both to understand what you can and cannot afford when purchasing large items such as houses or cars or even just budgeting for other bills.

Do you have any debt?

This can range from student loan debt, credit card balances, personal loans and much more. Being transparent with your financial standing is important in your financial success. This allows you to balance your income and debt better together as a team.

Are you comfortable carrying credit card debt?

You may be someone that absolutely can’t stand having credit card debt but have a spouse that is comfortable with their credit card always having a balance. There is no right or wrong to what you’re comfortable with. Talk about ways to balance and compromise to have financial success.

Last but not least, always be open and honest with your expectations of your finances. Transparency is necessary so not only one spouse is responsible for your financial success.

Learn how to maximize your financial success by considering investing.

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Post author: Kayce Barajas

The opinions expressed on this page are for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author of the article and may not reflect the views of the credit union.

Simulate Your Score. See Where You Stand

Simulate Your Score. See Where You Stand

Savvy Money
An essential part of your financial health is to keep an eye on your credit score. Credit scores have become such an integral part of our everyday lives. That’s why it’s extremely important that you keep track and understand how your financial decisions affect those three numbers.

Our easy-to-use Score Simulator within online and mobile banking can take away the “what ifs” and generate an approximate credit score that will help you see where you stand. The simulator is an easy way to gain valuable insights into your future eligibility for loans and credit cards.

How does the Credit Score Simulator work? The tool will share how much your credit score might increase or decrease based on your specific financial decisions.

Financial decisions such as:

  • Applying for new credit
  • Getting a new loan
  • Managing your credit card balances
  • Managing your payment activity
  • Making payments on time

Discover how different financial decisions can impact your credit score, and financial health while making reaching your goals easier than ever.

Simulate Your Score. See Where You Stand. Now.

Enroll now and check your credit report today through your online banking!

Scam Alert: Fake Fraud Alert Calls

Scam Alert – Fake Fraud Alert Calls

Some members have reported receiving calls from fraudsters pretending to be a GCEFCU supervisor. Shortly after, the member receives a fraud alert from the credit union asking them if they conducted a transaction. The fraudster tells the member to reply YES. By doing this, the fraud freeze is lifted from the debit card and the fraudster is able to charge more money to the member’s account.

In the cases that we have investigated, the fraudster calls the member and proceeds to ask for identifying information, such as your card number, pin, or online banking login information. GCEFCU will never ask for this information.

Here are a few things to remember if you receive a text that claims to be from GCEFCU:

🔹We will NEVER ask for your PIN or online banking password.
🔹We will NEVER ask for your debit/credit card number or CVV number.
🔹Don’t click any links or phone numbers in the text message. Instead, exit the text and call the credit union directly.
🔹You can forward fraudulent texts to 7726 (SPAM) to report it to your phone carrier.
🔹Remember to check your account daily and report any unusual activity.

If you have any questions, please don’t hesitate to give us a call at 281-487-9333.

Here is an example image of the fraudulent text:

fraud text image

Closing a Retirement Income Gap

Closing a Retirement Income Gap

When you determine how much income you’ll need in retirement, you may base your projection on the type of lifestyle you plan to have and when you want to retire. However, as you grow closer to retirement, you may discover that your income won’t be enough to meet your needs. If you find yourself in this situation, you’ll need to adopt a plan to bridge this projected income gap.

Delay retirement: 65 is just a number

One way of dealing with a projected income shortfall is to stay in the workforce longer than you had planned. This will allow you to continue supporting yourself with a salary rather than dipping into your retirement savings. Depending on your income, this could also increase your Social Security retirement benefit. You’ll also be able to delay taking your Social Security benefit or distributions from retirement accounts.
At normal retirement age (which varies, depending on the year you were born), you will receive your full Social Security retirement benefit. You can elect to receive your Social Security retirement benefit as early as age 62, but if you begin receiving your benefit before your normal retirement age, your benefit will be reduced. Conversely, if you delay retirement, you can increase your Social Security benefit.
Remember, too, that income from a job may affect the amount of Social Security retirement benefit you receive if you are under normal retirement age. Your benefit will be reduced by $1 for every $2 you earn over a certain earnings limit ($18,960 in 2021, up from $18,240 in 2020). But once you reach normal retirement age, you can earn as much as you want without affecting your Social Security retirement benefit.
Another advantage of delaying retirement is that you can continue to build tax-deferred (or in the case of Roth accounts, tax-free) funds in your IRA or employer-sponsored retirement plan. Keep in mind, though, that you may be required to start taking minimum distributions from your qualified retirement plan or traditional IRA once you reach age 72, if you want to avoid harsh penalties.
And if you’re covered by a pension plan at work, you could also consider retiring and then seeking employment elsewhere. This way you can receive a salary and your pension benefit at the same time. Some employers, to avoid losing talented employees this way, are beginning to offer “phased retirement” programs that allow you to receive all or part of your pension benefit while you’re still working. Make sure you understand your pension plan options.

Spend less, save more

You may be able to deal with an income shortfall by adjusting your spending habits. If you’re still years away from retirement, you may be able to get by with a few minor changes. However, if retirement is just around the corner, you may need to drastically change your spending and saving habits. Saving even a little money can really add up if you do it consistently and earn a reasonable rate of return. Make permanent changes to your spending habits and you’ll find that your savings will last even longer. Start by preparing a budget to see where your money is going. Here are some suggested ways to stretch your retirement dollars:

  • Refinance your home mortgage if interest rates have dropped since you took the loan.
  • Reduce your housing expenses by moving to a less expensive home or apartment.
  • Sell one of your cars if you have two. When your remaining car needs to be replaced, consider buying a used one.
  • Access the equity in your home. Use the proceeds from a second mortgage or home equity line of credit to pay off higher-interest-rate debts.
  • Transfer credit card balances from higher-interest cards to a low- or no-interest card, and then cancel the old accounts.
  • Ask about insurance discounts and review your insurance needs (e.g., your need for life insurance may have lessened).

Reduce discretionary expenses such as lunches and dinners out.
Earmark the money you save for retirement and invest it immediately. If you can take advantage of an IRA, 401(k), or other tax-deferred retirement plan, you should do so. Funds invested in a tax-deferred account may grow more rapidly than funds invested in a non-tax-deferred account.

Reallocate your assets: consider investing more aggressively

Some people make the mistake of investing too conservatively to achieve their retirement goals. That’s not surprising, because as you take on more risk, your potential for loss grows as well. But greater risk also generally entails potentially greater reward. And with life expectancies rising and people retiring earlier, retirement funds need to last a long time.
That’s why if you are facing a projected income shortfall, you may want to consider shifting some of your assets to investments that have the potential to substantially outpace inflation. The amount of investment dollars you might consider keeping in growth-oriented investments depends on your time horizon (how long you have to save) and your tolerance for risk. In general, the longer you have until retirement, the more aggressive you can typically afford to be. Still, if you are at or near retirement, you may want to keep some of your funds in growth-oriented investments, even if you decide to keep the bulk of your funds in more conservative, fixed-income investments. Get advice from a financial professional if you need help deciding how your assets should be allocated.
And remember, no matter how you decide to allocate your money, rebalance your portfolio periodically. Your needs will change over time, and so should your investment strategy. Note: Rebalancing may carry tax consequences. Asset allocation and diversification cannot guarantee a profit or insure against a loss. There is no guarantee that any investment strategy will be successful; all investing involves risk, including the possible loss of principal.

Accept reality: lower your standard of living

If your projected income shortfall is severe enough or if you’re already close to retirement, you may realize that no matter what measures you take, you will not be able to afford the retirement lifestyle you’ve dreamed of. In other words, you will have to lower your expectations and accept a lower standard of living.
Fortunately, this may be easier to do than when you were younger. Although some expenses, like health care, generally increase in retirement, other expenses, like housing costs and automobile expenses, tend to decrease. And it’s likely that your days of paying college bills and growing-family expenses are over.
Once you are within a few years of retirement, you can prepare a realistic budget that will help you manage your money in retirement. Think long term: Retirees frequently get into budget trouble in the early years of retirement, when they are adjusting to their new lifestyles. Remember that when you are retired, every day is Saturday, so it’s easy to start overspending.

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Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CUSO Financial”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CUSO Financial: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. The Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is a modern wealth management solutions company and is not a Registered Investment Advisor or broker-dealer. Investment products, services and advice are only provided through CUSO Financial, a subsidiary of Atria.

Investment Planning: The Basics

Investment Planning: The Basics


Why do so many people never obtain the financial independence that they desire? Often it’s because they just don’t take that first step — getting started. Besides procrastination, other excuses people make are that investing is too risky, too complicated, too time consuming, and only for the rich.
The fact is, there’s nothing complicated about common investing techniques, and it usually doesn’t take much time to understand the basics. One of the biggest risks you face is not educating yourself about which investments may be able to help you pursue your financial goals and how to approach the investing process.

Saving versus investing

Both saving and investing have a place in your finances. However, don’t confuse the two. Saving is the process of setting aside money to be used for a financial goal, whether that is done as part of a workplace retirement savings plan, an individual retirement account, a bank savings account, or some other savings vehicle. Investing is the process of deciding what you do with those savings. Some investments are designed to help protect your principal — the initial amount you’ve set aside — but may provide relatively little or no return. Other investments can go up or down in value and may or may not pay interest or dividends. Stocks, bonds, cash alternatives, precious metals, and real estate all represent investments; mutual funds are a way to purchase such investments and also are themselves an investment.
Note: Before investing in a mutual fund, carefully consider its investment objectives, risks, charges, and fees, which can be found in the prospectus available from the fund. Read the prospectus carefully before investing.

Why invest?

You invest for the future, and the future is expensive. For example, because people are living longer, retirement costs are often higher than many people expect. Though all investing involves the possibility of loss, including the loss of principal, and there can be no guarantee that any investment strategy will be successful, investing is one way to try to prepare for that future.
You have to take responsibility for your own finances, even if you need expert help to do so. Government programs such as Social Security will probably play a less significant role for you than they did for previous generations. Corporations are switching from guaranteed pensions to plans that require you to make contributions and choose investments. The better you manage your dollars, the more likely it is that you’ll have the money to make the future what you want it to be.
Because everyone has different goals and expectations, everyone has different reasons for investing. Understanding how to match those reasons with your investments is simply one aspect of managing your money to provide a comfortable life and financial security for you and your family.

What is the best way to invest?

  • Get in the habit of saving. Set aside a portion of your income regularly. Automate that process if possible by having money automatically put into your investment account before you have a chance to spend it.
  • Invest so that your money at least keeps pace with inflation over time.
  • Don’t put all your eggs in one basket. Though asset allocation and diversification don’t guarantee a profit or ensure against the possibility of loss, having multiple types of investments may help reduce the impact of a loss on any single investment.
  • Focus on long-term potential rather than short-term price fluctuations.
  • Ask questions and become educated before making any investment.
  • Invest with your head, not with your stomach or heart. Avoid the urge to invest based on how you feel about an investment.

Before you start

Organize your finances to help manage your money more efficiently. Remember, investing is just one component of your overall financial plan. Get a clear picture of where you are today.
What’s your net worth? Compare your assets with your liabilities. Look at your cash flow. Be clear on where your income is going each month. List your expenses. You can typically identify enough expenses to account for at least 95 percent of your income. If not, go back and look again. You could use those lost dollars for investing. Are you drowning in credit card debt? If so, pay it off as quickly as possible before you start investing. Every dollar that you save in interest charges is one more dollar that you can invest for your future.

Establish a solid financial base: Make sure you have an adequate emergency fund, sufficient insurance coverage, and a realistic budget. Also, take full advantage of benefits and retirement plans that your employer offers.

Understand the impact of time

Take advantage of the power of compounding. Compounding is the earning of interest on interest, or the reinvestment of income. For instance, if you invest $1,000 and get a return of 8 percent, you will earn $80. By reinvesting the earnings and assuming the same rate of return, the following year you will earn $86.40 on your $1,080 investment. The following year, $1,166.40 will earn $93.31. (This hypothetical example is intended as an illustration and does not reflect the performance of a specific investment).
Use the Rule of 72 to judge an investment’s potential. Divide the projected return into 72. The answer is the number of years that it will take for the investment to double in value. For example, an investment that earns 8 percent per year will double in 9 years.

Consider whether you need expert help

If you have the time and energy to educate yourself about investing, you may not feel you need assistance. However, for many people — especially those with substantial assets and multiple investment accounts—it may be worth getting expert help in creating a financial plan that integrates long-term financial goals such as retirement with other, more short-term needs. However, be aware that all investment involves risk, including the potential loss of principal, and there can be no guarantee that any investment strategy will be successful.

Review your progress

Financial management is an ongoing process. Keep good records and recalculate your net worth annually. This will help you for tax purposes, and show you how your investments are doing over time. Once you take that first step of getting started, you will be better able to manage your money to pay for today’s needs and pursue tomorrow’s goals.

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Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CUSO Financial”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CUSO Financial: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. The Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is a modern wealth management solutions company and is not a Registered Investment Advisor or broker-dealer. Investment products, services and advice are only provided through CUSO Financial, a subsidiary of Atria.