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Increase Contributions to Build a Bigger Nest Egg

Contributing to a 401(k), 403(b), or IRA (individual retirement account) is a sure fire way to help save for retirement. The money you can contribute, aided by tax advantages, grows, and = by the time you need it - most likely will have increased substantially. If your employer matches your 401(k) contribution, don't pass up this free money by neglecting to make your own contribution.

However, you'd be at an even greater advantage if you make regular incremental increases to these vehicles throughout your working years. The earlier you start, the better, and the payoff can be substantial toward building a bigger nest egg.

For example, someone who starts contributing 5% annually to a 401(k) at age 30, and keeps the contribution the same for the next 30 years, would have $305,865 at age 60. But if that same person at age 30 increases her contribution at 15% for the next 20 years, she would have $694,133 at age 60 - more than doubling her nest egg. Both examples assume an average portfolio return of 8% with a mixture of stocks and bonds.

You can contribute up to 20% of your earnings to a 401(k), 403(b), or Section 457, up to a maximum of $13.00 for 2004. The maximum increases to $14,000 in 2005 and to $15,000 in 2006.

You can contribute up to $3,000 a year to an IRA in 2004, $4,000 in 2005-2007, and $5,000 in 2008. Those age 50 and older have a catch-up deal; they can contribute an extra $500 through 2005 and an extra $1,000 a year starting in 2006 and thereafter. Call Energy People Federal Credit Union for more information about investing.

Bankruptcy Ain't Cheap

A national credit counseling expert says consumers pay more - a lot more - for credit after filing bankruptcy. Steve Rhode, president and founder of Myvesta.org, says families with clean credit pay an average of $1,100 each month for mortgage and auto loans. Because of higher interest rates, a post-bankruptcy family pays almost $1,900 for the same items.

A mortgage of $132,930, with a fixed interest rate of 6.75% for 30 years, translates to a monthly payment of $862. For post-bankruptcy filers, the interest rate jumps to 13%, and a monthly payment of $1,470.
An auto loan of $17,000, with an interest rate of 9% for a five-year term, translates to a monthly payment of $353. After bankruptcy, the interest rate jumps to 15%, and a monthly payment of $404.
The average credit card interest rate jumps from 17% to 24% for people who've filed bankruptcy. With a credit card debt of $2.800 at 17%, you'd need about 32 years to pay off the debt by making only minimum payments. At 24%, you never would pay off the credit card debt; interest costs would keep payments going for eternity

If you're concerned about your debt load, ask someone at Energy People Federal Credit Union for Referral to a nonprofit credit counselor. You may be able to find cheaper and less painful solutions.