Financial Literacy Supplement 2015 by The Washington Informer

The Washington Informer Financial Literacy Supplement 2015

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Financial Literacy is Important to Credit Success Cerita Battles Senior Vice President, Head of Diverse Segments, Wells Fargo Home Mortgage

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Wells Fargo’s 2015 How America Views Homeownership survey shows that there is a need for consumers to increase their financial literacy when it comes to the process for loan approval. While many consumers want to own a home and 80 percent of respondents say

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they know and understand the financial process involved in purchasing a home, there are still misperceptions about what it takes. One of the most persistent misperceptions in home lending is about the amount of money required for a down payment. The general population reported that a 20 percent down payment is not required to purchase a home. However, in the survey 58 percent of African Americans and 55 percent of Hispanics responded that they believe 20 percent is required, perhaps reflecting long held beliefs, or practices in competitive housing markets. The fact is there are a number of mortgage programs that allow borrowers to put down as little as 3.5 percent. Some programs, such as Veteran’s Administration and Rural Development, require no down payment for qualified borrowers and there are a host of downpayment assistance programs offered by local and state housing finance agencies that may be available for potential homeowners. There is also some misperception about credit score. While credit score alone does not determine mortgage approval, it is an important factor. In the survey, 67 percent of respondents believe they need a very good credit score to purchase a home, with nearly half (45 percent) thinking a good credit score is over 780. A credit score of 780 is generally considered excellent while a score over 660 is considered good and may be high enough for loan approval. Talking to a reputable lender like Wells Fargo can help consumers make sure they have

PHOTOGRAPHERS John E. DeFreitas, Shevry Lassiter, Roy Lewis, Corey Parrish, Travis Riddick, Nancy Shia

the right information to not only get prepared but also make informed financing choices. There are also resources online that consumers can use to educate themselves. For example, Wells Fargo’s My FirstHomeSM is a free, online education program that takes a potential homebuyer through all aspects of the homebuying process. For more information about Wells Fargo Home Mortgage or to find a local home mortgage consultant, consumers can visit www.wellsfargo.com/mortgage, call 1-877-937-9357or visit one of our home mortgage or many bank store locations. n

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Five Things to Discuss with Your Significant Other Before Purchasing a Home By Donna Greene, Regional Diverse Segments Manager, Wells Fargo Home Mortgage In a relationship, you count on your significant other to be there with you through the good and the bad. They are your best friend, your confident and your closest ally. And you count on being able to have important conversations with them as well. One of those important conversations every couple should have focuses on money and each person’s respective financial goals, especially if you are planning to purchase a home. However, 33 percent of married or partnered adults have difficulty discussing money with their significant other, according to a Wells Fargo survey on conversations about personal finance. Purchasing a home is one of the largest investments most people make in their lifetime, adults have difficulty discussing money with their significant other. When two people decide to achieve the goal of homeownership together, it’s important to understand not only your own finances and credit profile but your partner’s finances and goals as well. To help you broach this conversation with your partner, here are some things you should discuss before you move forward: Where you will live and what you want to purchase. Do you want to live in the city or the suburbs? Are you set on a single-family home or a condo? Do you want to build your home or purchase an established property? Having answers to these questions will help you speak to a lender and learn more about how the type of home you choose may affect loan approval requirements or what options exist if you want to build your home. You’ll also learn if any bond or down payment assistance programs may be offered in the municipalities you are considering. Your partner’s credit score. Lenders use customers’ credit profiles to help determine your ability to repay a loan. When purchasing a home with someone else, both of your credit scores are considered. In most cases the lowest middle credit score between the two of you will be used. If you or your significant other has a very low credit score, this may not

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only affect the loan amount you receive but also the interest rate. It may even have an impact on approval. If one of the credit scores is very low, as a couple you might discuss only one person applying for the mortgage loan. Have an honest conversation about debt. An important factor that lenders evaluate is your debt-to-income ratio. This varies by mortgage program but a good rule of thumb is to ensure your debt level is at or below 36 percent of your gross monthly income. Having an overabundance of debt could impact the amount of the loan or whether you receive mortgage approval. How much money can you put toward the purchase? It isn’t necessary for you to put 20 percent down but most loan options require some sort of down payment. In many cases lower down payment options require mortgage insurance, which will increase your monthly payment. Will one or both of you be on the note? If purchasing a home with someone else, each of you must qualify in order to be on the note, and both of you are responsible for the debt. If only one person is on the note, the other may not engage in any transactions regarding the loan. If one of you has less desirable credit, you may decide that only one of you will apply for the mortgage. You should also consult your state’s attorney general’s office to see if any community property laws exist in your state. Such laws could make a spouse legally responsible for any debt acquired by the other spouse after marriage. If such a law exists in your state, it’s important you are aware of it. Purchasing your first home is an exciting time and, for many people, a sign of success. But while you may want to rush out and start the shopping process now, take your time. Having a conversation with your significant other about the topics above beforehand will ensure you’re both on the same page and set you up to make the most of your future and the home it includes. To find answers to your other questions about credit and homeownership, visit Wells Fargo’s Smarter CreditTM Center at www. wellsfargo.com/smarter_credit or WellsFargo.com/mortgage. n

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Get started on the road to successful homeownership Learn as much as you can about buying and owning a home My FirstHome® is a free, online education program designed to help first-time and ready-again homebuyers prepare to purchase a home and become responsible homeowners. Increase your knowledge and confidence Make the most of this engaging, interactive learning experience. Buying a home is a big step. Having the right information is essential. Visit wellsfargo.com/myfirsthome today to learn more.

Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2015 Wells Fargo bank, N.A. All rights reserved. NMLSR ID 399801. AS1233579 Expires 12/2015

OCTOBER 2015 - THE WASHINGTON INFORMER FINANCIAL LITERACY SUPPLEMENT/www.washingtoninformer.com

Get Smart About Credit 10 Tips to Stay on Top of Your Credit This Fall By Ben-James Brown Wells Fargo Regional Banking District Manager, DC North District Fall can be one of the most exciting seasons of the year. For many, it’s a wonderful time filled with family gatherings and celebrations. But it can also be a busy and stressful time with kids going back to school and the transition into the holidays. With so many things happening all at once, it’s easy to forget the day-to-day responsibilities and slowly begin to drift away from your routine. During busy times, it’s important that you maintain a plan – especially when it comes to your finances. Well Fargo recently conducted the third installment of its “How America Buys and Borrows” survey. The survey reveals most Americans feel their personal financial situation is moderate to strong and few expect things to decline in the coming year. Looking ahead, 48 percent of Americans expect their situation to

improve – though that expectation is much higher among African American respondents at 66 percent. At Wells Fargo, we want to help our customers turn that positive thinking into reality. This fall, we offer these 10 tips that can help you stay on top of your credit: MONITOR YOUR CREDIT REGULARLY. Make sure you stay on top of your credit history. Be sure to check all three credit bureaus annually. KNOW YOUR CREDIT LIMITS. Being close to or maxing out your credit limits may negatively impact your credit score. GOOD SCORE = GOOD RATES. Better credit score may get you better credit interest rates. DON’T BE LATE. The first missed payment has the largest impact on a credit score, so don’t miss payments. If you are late, don’t be 30

days late, and if you have difficulty, call your lender. KNOW YOUR DEBT-TO-INCOME RATIO. Lenders look at the amount of debt you have compared to your monthly income – it’s good to keep that under 35 percent. START WITH A COLLEGE OR SECURED CREDIT CARD. If you need to establish credit, a secured credit card or a college credit card may be a good way to start. PAY DOWN HIGHEST INTEREST RATES FIRST. When trying to pay down your existing debt, pay down your highest interest debt first. LIVE WITHIN YOUR MEANS. By setting a budget and living within your means, you can avoid using credit to overextend yourself. PAY MORE THAN THE MINIMUM. Paying more than what’s due

on your credit card helps you pay down debt faster and can improve your credit score. SET UP ALERTS. Set up email and text alerts, as well as autopay, to help ensure that you pay your bills on time and build positive credit history. Strong credit is the key to a healthy financial future. It also helps with routine matters like having utilities connected to your home, getting a cell phone or even applying for a job. This fall, Wells Fargo is supporting Get Smart About Credit through the entire month of October to build awareness on the importance of credit. But most importantly, Wells Fargo is encouraging consumers to have a conversation about credit not only during this buy time, but throughout the year. For more information about credit, you can visit Smarter Credit™ Center at www.wellsfargo.com/ smarter_credit or its Hands on Banking® site at www.handsonbanking.org . n

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Maxine Waters Seeking Wage Gap Solutions By Stacy M. Brown WI Senior Writer

Rep. Maxine Waters has been organizing the Brain Trust for many years at the legislative conference / Roy Lewis photo

It’s been well-documented that Congresswoman Maxine Waters (D- California) has been out front on finding solutions to the ever-widening wealth gap in America that has resulted in devastating realities for African Americans and other minorities. And, the Democratic Congresswom an from California, who is a ranking member of the House Committee on Financial Services and perhaps one of the most powerful women in politics, isn’t backing down. During the recently-concluded Congressional Black Caucus Foundation Annual Legislative Conference in the District, Waters hosted a Financial Services Brain Trust that included Alejandra Y. Castillo, the national director for the Minority Business Development Agency in

the District and Christopher Chestnut, the CEO of the Chestnut Law Firm in Atlanta. Also included were Doyle Mitchell, the president and CEO of Industrial Bank in D.C. and Ed Lewis, the senior advisor for Solera Capital in New York. Waters said this year the wealth gap and the racial wealth gap have reached record levels. Upper class Americans now have six times more wealth than the middle class and 70 times more wealth than the lower class. Additionally, African Americans have 13 times less wealth and Latinos have 11 times less wealth than white Americans. “I have been organizing the Brain Trust for many years at the legislative conference and we are dealing with issues within financial services,” Waters said. “This time it was about the wealth gap and how we close that gap. I’ve introduced

Homeownership is important. We’re here to help first-time homebuyers navigate the mortgage process and make buying a home affordable, even if you have:

legislation to help get the conversation started.” The measure she introduced was designed to make Congress formally recognize that the wealth gap is widening and Waters said lawmakers can’t sit idly by and simply hope things will change. The first step to resolving the problem is to acknowledge that it exists, she said. Elected in November 2014 to her thirteenth term in the U.S. House of Representatives with more than 70 percent of the vote in the 43rd Congressional District of California, Waters represents a large part of South Central Los Angeles. In addition to her other duties in Congress, Waters serves as a member of the Steering & Policy Committee and she’s also a member of the Congressional Progressive Caucus, and a member and past chair of the Congressional Black Caucus. As a national Democratic Party leader, Waters has long been highly visible in Democratic Party politics and has served on the Democratic National Committee since 1980. She was a key leader in five presidential campaigns: Sen. Edward Kennedy (1980), the Rev. Jesse Jackson (1984 and 1988), and President Bill Clinton (1992 and 1996). In 2001, she was instrumental in the DNC’s creation of the National Development and Voting Rights Institute and the appointment of Mayor Maynard Jackson as its chair. Additionally, she has led congressional efforts to mitigate foreclosures and keep American families in their homes during the housing and economic crises, notably through her role as chairwoman of the Subcommittee on Housing and Community Opportunity in the previous two Congresses. And, when it comes to her stand on the issue of the wealth gap, the longtime congresswoman isn’t

just throwing out words, there are independent numbers to back up her position. The Pew Research Center found that the wealth gap in 2014 was the widest it had been since at least 1983. For example, Pew officials noted that the median wealth of American upper-income families was nearly seven times that of middle-income families in 2013: $639,400 versus $96,500. And higher-income families’ net worth was nearly 70 times higher than low-income families. Waters called that alarming and her resolution notes that communities of color are particularly hurt by income inequality. “Wealth is the difference between sending your children to college or not. It’s the difference between retiring with a comfortable nest egg or relying on Social Security,” Waters said. “And, it’s the difference between starting your own business or working at a low-paying job. So when we talk about the wealth gap and economic equality, we’re not just talking about numbers,” she said. “We’re talking about pulling families out of poverty, keeping them out of poverty, and ensuring that their children and their grandchildren never fall back into poverty again.” Waters’ Wealth Gap Resolution has more than 50 co-sponsors that include members of the Congressional Black Caucus (CBC), Congressional Hispanic Caucus and the Progressive Caucus. Everyone in Congress and throughout government must look at ways in which the wealth gap can be addressed successfully, she said. “Members of Congress on both sides of the aisle have acknowledged just how harmful inequality and the wealth gap are for many middle class families,” Waters said. “The time is now to meet words with actions. We have a moral obligation to address this crisis with substantive solutions.” n

• Little money for a downpayment • Little or “less-than-perfect” credit history • A recent job change To get started, call 1-888-253-0993 or visit mtb.com/mortgage.

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Borrowers Beware of High-Cost Payday Loans By Charlene Crowell When it comes to consumer lending, one of the smallest loans available causes most of the largest problems: payday loans. Marketed as a shortterm loan to cover unexpected emergencies, consumers soon discover that the small-dollar loan becomes financially burdensome over several months or even years. Even worse, by the time the loan is finally paid off, the interest and fees charged for the loan often surpass the principal borrowed. Financial literacy on this predatory loan can help other borrowers to avoid what so many become entrapped in each year. No one would knowingly choose to become one of the 12 million Americans who are trapped each year in a debt cycle of triple digit interest rates that average 400 percent. Today, a total of 20 states now charge interest in excess of 400 percent APRs. Among these, eight charge APRs higher than 500 percent. Payday’s predatory nature is clearly revealed when key research findings by the Center for Responsible Lending are noted: Borrowers with five or more loans per year comprise 90 percent of all payday business. The typical payday borrower remains indebted for 212 days, not the advertised two weeks. The average payday loan of $325 will be flipped or re-borrowed eight times, boosting the interest charges alone to $468 in interest. To fully repay the loan and principal, the borrower will need to pay $793. The highest concentration of payday stores – where there are five shops for every 10,000 households –are located in states with large Black populations and comparatively low average earnings: Alabama, Louisiana, Mississippi, Missouri, Nevada, South Carolina and Tennessee. Through consumer advocacy at the state level, payday interest rate caps are now in effect in 14 states and the District of Columbia. Yet even these states continue to suffer from an adapted version of payday lending’s debt trap. Car title loans beckon bor-

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rowers who have clear title to their vehicles. In exchange for a loan that is comparable to a fraction of the car’s market value, borrowers are charged predatory lending rates on this product as well. If the borrower becomes delinquent on payments, their private transportation is seized. Then after losing the personal transportation, the borrower will still owe the balance of the loan, additional interest charges continue to accrue and new fees added such as repossession. Problematic payday lending has also captured the attention of the Consumer Financial Protection Bureau (CFPB) the sole federal agency charged with protecting consumers from financial abuse. Beyond public hearings in Alabama and in Tennessee, CFPB has also received nearly 6,000 complaints from troubled borrowers. Of these, the most frequent complaint was about charged fees or interest that borrowers did not expect. After reviewing borrower information, CFPB’s standard operating practice is to contact the business being charged for information. Of all the categories of financial issues, payday lenders were the highest in failing to provide CFPB a timely response. Anyone who has borrowed a payday loan and would like to make a complaint can file one online with the Consumer Financial Protection Bureau. Additionally, more information on payday lending’s debt trap is online at: http://stopthedebttrap.org/. Until federal and/or more state actions rein in these triple-digit profiteers, most of the nation will continue to suffer financially, stripping hard-earned income from people who need to stretch every dollar and dime as far as they can. There is nothing fair about deceiving customers of the debt they incur from payday lending. Being informed is the best preventive measure a borrower can have. Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene. crowell@responsiblelending.org. n

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CBC Forum Addresses Economic Equality for Blacks By William J. Ford WI Staff Writer @jabariwill Dawn Oneal makes less than $10 an hour as an early child care worker in DeKalb County, Georgia. Her husband, however, remains unemployed, occasionally finding construction jobs. I am paid $8.50 an hour for taking care of America’s greatest asset,” said Oneal, 48, a member with the Service Employees International Union (SEIU) leading the “Fight for $15” campaign. “Life in DeKalb County is hard. The Fight for $15 and Black Lives Matter go hand-inhand. It was time to take a stand. Oneal and four other panelists participated in a forum Sept. 18 called “From Ferguson to $15: The Economic Path Forward” during the Congressional Black Caucus Foundation’s 45th Annual Legislative Conference at the Walter E. Washington Convention Center in Northwest. Rep. Keith Ellison (D-Minnesota) led the discussion and informed the audience on legislation geared to ensure Blacks are treated equally at work and in the community. Ellison and presidential candidate Sen. Bernie Sanders (I-Vermont) both introduced

Rep. Keith Ellison (D-Minnesota) led the discussion and informed the audience on legislation geared to ensure Blacks are treated equally at work and in the community.

legislation this summer in the House and Senate, respectively, to raise the national minimum wage from $7.25 an hour to $15 an hour. Sanders, a Democratic presidential candidate, also introduced a bill Sept. 17 called the “Justice Is Not for Sale Act” with Ellison and two other fellow House Democrats to ban private prisons. Continued on Page 14

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Let’s Narrow the Racial Wealth Gap By Using an Alternative Scoring Model

By Michael Grant Michael Grant, President, National Bankers Association Wealth offers security and privilege that can last for generations. For minority households striving to achieve the American Dream, homeownership is often the surest path. Yet, in today’s environment and more than 50 years since the passing of the Civil Rights Act, the United States continues to experience a widening racial gap in home ownership. Current policies are making homeownership for millions of creditworthy people of color unnecessarily difficult. More than ever, the U.S. needs a more modern approach to determining creditworthiness. It’s a relatively simple solution to a destructive divide among our nation’s households.

Homeownership and small business development were becoming the new norm in communities of color. That halted in 2008 when the Great Recession, created by an avoidable subprime crisis, hit the urban communities. Since the Great Recession, the racial wealth gap only widened during the economic recovery: non-minority households were better positioned to recover their losses through stocks and other assets, leaving people of color, who often hold much of their wealth in home equity, to face a slow and painful recovery. We’ve seen this notably in communities like Prince George’s County in Maryland, once seen as a symbol of the African-American middle class. Today, it is experiencing some of the highest foreclosure rates in the country. Cities with high African-American and Hispanic populations, like Hartford, CT and Newark, NJ, reported in 2014 the highest number of homeowners stuck in loans far more than their homes are worth. Lending to African Americans and Latinos in 2012 was down by more than 50 and 45 percent, respectively, relative to where it stood prior to the subprime crisis. While housing inequity has been problematic for decades, many policy makers are largely unaware of the direct link that credit scores have on housing opportunities. The nation’s government-sponsored enterprises

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(GSEs), Fannie Mae and Freddie Mac, rely on outdated credit scoring models from FICO in making mortgage lending decisions. These FICO models, which are now generations old, monopolize the market and lenders are left without a choice of scoring models when originating loans to be sold to the GSEs. With credit scores being a determining factor in obtaining a mortgage, this action by the GSEs needlessly locks out of the housing market millions of creditworthy consumers, especially low income families and people of color. We need a challenge to the outdated credit scoring models locked-in by the GSEs. My suggestion is a clarion call for alternative credit scoring models that will bring between some 30-35 million Americans into the discussions of who should and should not be worthy to receive mortgage loans in this country. By using larger swaths of data to build models and by taking into consideration alternative payments such rent, utilities, cell phones and cable, newer, more inclusive credit scoring models, like the Vantage Score model, can more accurately report credit behavior for larger numbers of consumers. Revising the GSE guidelines can give lenders the flexibility to choose between validated models that best fit their businesses and customers. If these newer models were adopted, it could open the door for people of color seeking responsible and sustainable mortgage credit without loosening standards. According to some estimates, more inclusive credit scoring models could also expand annual purchase mortgage lending to people of color by 32% over 2013 levels. The additional revenue from new home purchases could spur the housing ecosystem, the broader economy and foster healthy competition and innovation among credit scoring models. The imperative to improve access to mortgage credit safely and soundly in order to fix the widening wealth and homeownership gap cannot be overstated. Just as Congress, overtime, saw the competitive value inherent in having two competing mortgage GSEs, so too, it seems clear that competition in permissible credit scores that can be used to underwrite mortgages to be sold to the GSEs

Support Minority And Women-Owned Banks The National Bankers Association was founded in 1927, as the Negro Bankers Association, this name was changed to the National Bankers Association in 1948 and incorporated as a 501(c)6 trade association on April 18, 1972 in the District of Columbia. Today, it is the most recognized trade association for the nation’s 177 minority and women-owned banks (MWOBs). Our members include banks owned by African-Americans, Native-Americans, American-Indians, East-Indians, Hispanic-Americans, Asian-Americans and Women. Approximately 22% of MWOB’s are NBA members. They are located in 29 states and 2 territories spanning 60 cities and the District of Columbia and employ over 15,000 people. MWOBs, with few exceptions, serve distressed communities plagued by many social and economic problems. Our institutions are deeply committed to providing employment opportunities, entrepreneurial capital and economic revitalization in neighborhoods which often have little or no access to alternative financial services. UNIQUE FEATURES OF MWOBS: • Located primarily in urban centers • Provide the primary source of job creation and entrepreneurial capital for small businesses in minority communities • Believe that risk is determined by neither race nor sex • Maintain a positive approach to lending PURPOSE • To serve as an advocate for the nation’s minority and women owned banks on legislative and regulatory matters concerning and affecting our members and the communities they serve. • To maintain an information flow to our member banks relating to the sound and profitable operation of their banks. • To provide a forum for personal interaction between banks with similar problems and marketing opportunities. • To provide quality service at lower costs to our member banks. NATIONAL BANKERS ASSOCIATION 1513 P Street, NW • Washington, D. C. 20005 (202)588-5432 • http://nationalbankers.org

cannot harm and can only benefit lenders, borrowers, investors and the American economy as a whole. Federal Housing Finance Agency Director Mel Watt has urged the GSEs to consider this effort this year but that’s only the beginning. It’s an issue that should be squarely placed in front of President Obama, HUD Secretary Julian Castro, key legislators and industry influencers in Wash-

OCTOBER 2015 - THE WASHINGTON INFORMER FINANCIAL LITERACY SUPPLEMENT/www.washingtoninformer.com

ington D.C. if it is to be taken seriously. To be sure, waiting until the next Administration is not an option. The time to act is now. Michael Grant is President of the National Bankers Association, the most recognized trade association for the nation’s 177 minority and women-owned banks (MWOBs). Grant can be reached at mgrant@ nationalbankers.org n

The Importance of Financial Literacy in our Schools By Jacqueline Boles Industrial Bank Senior Vice President, Director of Retail Banking Our nation is still facing a critical time, as our economy is not where we need it to be and families are still facing financial challenges never before imagined. We drive through communities of all income levels and witness personal belongings piled high at the curb’s edge, evidence of yet another family displaced by eviction or foreclosure. Our nation is facing a financial storm that many may not survive. Many ask, ‘What can be done about income inequality?” Why is it when we focus

on the critical aspects of our life, we fail to adequately focus on managing our personal finances? Evident is the need to mandate the inclusion of financial literacy and empowerment into the educational curriculum beginning at the elementary school level. Children must learn the value of saving. Differentiating needs versus wants, as it relates to budgeting, is also essential to solid money management. Learning to maintain healthy finances should begin with their grade school allowances. Every child should be required, or at least encouraged, to open a savings account and then taught the fundamentals of saving and budgeting during their primary

years. As they approach middle school, children should study strategic investment practices and begin to position their funds for future growth. The high school focus could then shift to understanding the importance of managing credit, thus avoiding the devastation that occurs when credit cards are sent to their college dorms, despite their lack of income. According to the 2004 Nellie Mae study, the average college senior graduated owing credit card debt in excess of $2864. Over 43% of college students hold an average of 4 credit cards and 65% of them failed a basic financial literacy test. Many of our children will

earn the degrees and other highly regarded credentials, but be labeled unemployable because of failing credit scores. It is imperative that we focus on financial education and empowerment beginning with our youth. All school systems must incorporate a comprehensive financial literacy program into the standard curriculum. Subjects must include: Banking, Saving and Investing, Budgeting, Credit, Future Planning, Identity Theft, and Homeownership. We must ensure that when faced with future economic stresses, our children will be unaffected by the conditions that are rampant today, assured that their core values will generate

better financial decisions. By instilling a solid understanding of financial management, a large population of our youth will realize homeownership and investment rewards at much earlier ages than their parents. They will possess the knowledge and skills to manage their household finances despite external economic conditions. Knowledge is power. Now is the time to empower our children with the information required to sustain a bright and a secure tomorrow. As always, Industrial Bank stands ready to serve as your financial partner to support you as you look to invest in yourself, invest in your dreams, and invest in your future. n

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Create Your Own Personal Pension? It’s Possible (BPT) - Retirement planning has certainly changed a lot over the years, hasn’t it? First came pensions, or defined benefit plans, with their guaranteed income for life. After that it was 401(k)s. These plans focused on growing wealth from the stock and bond markets. Your pension and 401(k) were meant to work together but now pensions are disappearing and many people are left with just their 401(k) plan. Your 401(k) is an important piece of your retirement savings but it was never intended to be your sole retirement solution. Instead, your 401(k) was meant to provide additional retirement savings that worked with your pension, savings and other income sources to paint a full retirement picture. But now for many people the pensions are gone and while you have other savings avenues - what can you do to

replace this lost retirement income? One option could be a deferred income annuity (DIA). A DIA allows you to set up a guaranteed income stream beginning later in your life. With a DIA it’s important to remember that the guaranteed income is based on the strength and claims paying ability of your financial institution so it’s important to choose the right partner. DIA’s are traditionally funded with a lump sum payment up front and the contract promises to pay you a lifetime income stream starting with a date of your choice. For example, let’s say you purchased a DIA with a $50,000 lump sum. That money will then be held by your financial institution for a defined period, according to the contract, where it will grow with interest. After a specified amount of time has passed, you can start

receiving payments. This guaranteed stream of income can then be used to supplement additional retirement savings and help you fill a void in your retirement portfolio. A DIA is one example of the many options that are available when it comes to retirement strategies and that’s good news for any investor seeking retirement income. With traditional pensions disappearing from the landscape, there are still plenty of options that let you design personal solutions for your own retirement. The key is knowing your options and working with a financial professional who can help guide you toward a stable retirement, that way you’ll be ready for any changes that happen in your retirement planning until it’s finally time for you to enjoy the fruits of all that hard work and smart saving. n

Your 401(k) is an important piece of your retirement savings but it was never intended to be your sole retirement solution.

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Change the Wealth Gap, Change the Mindset Theodore R. Daniels Founder and President Society for Financial Education and Professional Development, Inc. Recent data from credible reports reveal alarming wealth gaps between African American and White populations in the United States. These statistics indicate that: • For every $13 of wealth that Whites have, African Americans have $1; • The median wealth of African-American households, is $11,400; $141,000 for Whites; • 48% of African Americans own a home, compared to 75% of Whites; • The largest portion of African-American wealth is in residential real estate; • African Americans are conservative investors, investing a higher portion of funds in insurance, savings bonds and certificates of deposit; • African Americans have higher debt loads, including car loans, credit card debt, and student loans;

• Lower credit scores than other groups; • Lower savings for emergencies; - Greater utilization of alternative credit, i.e. payday lending and title loans; and • Lower retirement savings participation to employer/ employee contribution plans (401k and 403(b)), and more frequent withdrawals from these accounts. These factors have a tremendous impact on the ability to create wealth. We must change our financial decision-making to close the wealth gap. This can only happen by becoming financially literate. Financial literacy helps individuals make informed and sound financial decisions regarding: the use of credit, establishing and accomplishing financial goals,

saving and investing, risk management (insurance) retirement and tax planning. Mismanagement of credit leads to a drainage of individual or household incomes, and limits saving and investing. Moreover, leading financial studies indicate that individuals and households whose level of financial literacy is highest have the greatest amount of wealth and economic security. Additionally, increasing the financial literacy of African Americans could also help eliminate socioeconomic problems negatively impacting communities. African Americans generate billions of dollars through income each year. Much of this income is used for consumer consumption that limits the ability to save. Data shows that the African-American population is culturally programmed to spend a greater por-

tion of their income on consumer items and invest less than other demographic groups. Moreover, a large portion of this money is also lost by participating in non-traditional borrowing and entering into transactions without understanding the nature of these transactions and their limited value. Unfortunately, without financial education, this pattern of spending and mismanagement of financial resources may continue from one generation to the next. The following steps are needed to close the wealth gap: • Develop a personal budget that identifies all income and expenses; • Decrease credit limits on credit cards; • Establish limits on the price paid for major and non-major purchases;

• Maintain a small cash balance in your checking account; • Avoid keeping large sums of cash in your pocket; • Establish spending limits for entertainment/recreational activities; and • Avoid social pressures to buy to impress others. It is vital to engage in long-term financial planning and develop a savings plan that includes: • Increasing savings to 7-10% of your income, including contributions to your retirement plan; • Developing a financial safety-net for illness, emergencies or job loss; • Making investments that yield long-term growth of assets; • Purchasing a home; and • Starting an early savings plan for college education (529 or state college savings plans). Remember, money is a powerful tool to sustain and create wealth for you and your family. For information about SFEPD and our “Financial Success” newsletter, visit www.sfepd.org. n

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Life Insurance Tips for Every Stage of Your Life (StatePoint) For many, life insurance is a one-time purchase. But your policy should keep pace with your life circumstances. Life insurance plays a key role in financial confidence and planning, according the Lincoln Financial Group’s recent M.O.O.D of America Survey (Measuring Optimism, Outlook and Direction), which found that 77 percent of policy owners feel prepared to protect their wealth compared to 61 percent of non-owners. Additionally, the survey found that life insurance owners feel more prepared for retirement, and potential income disruption. YOUNG NEWLYWEDS You may rely on two salaries to maintain your lifestyle. Would one person be able to continue living in the same manner on just one income? Are your savings adequate for your spouse to afford rent or mortgage payments and pay off debts without you?

Premium rates are based on age and health status, so the earlier you buy, the less you’ll potentially pay. Consider locking in lower rates now. Term life insurance is typically the most affordable option, providing coverage for a set number of years. Identify financial obligations and purchase a policy big enough to cover them. As your financial commitments increase, you can add more coverage as needed. GROWING FAMILIES Between diapers, childcare, dance lessons, braces and education, raising a child in the United States can cost around $250,000 for a middle-income family, according to USDA estimates. Life insurance is crucial for allowing your family to maintain the lifestyle you’ve built for them, even if the unthinkable happens. The primary breadwinner should have a policy big enough to replace the income required to

see children through to adulthood. But a non-working spouse might need coverage too. If that spouse was gone, there might be added household expenses, such as childcare. Revisit your life insurance after the birth of every child. If coverage is lacking, consider a small policy alongside your existing one, which is generally more cost-effective than buying one larger policy. RETIREMENT-READY The kids are grown, the house is paid off, and you’re embarking on retirement. Do you still need life insurance? If no one is depending on you financially, it may be safe to scale down and maintain a smaller policy and focus on longterm care insurance instead. But, you might also have good reasons to maintain status quo. For example, how big a hardship would it be for your spouse to lose your pension and Social Security benefits? Life insurance can help offset those losses and is useful in

helping inheritors pay taxes on a large estate. Or if you have a cash value policy, perhaps you have plans to leverage it as a source of supplemental retirement income. Remember, life insurance doesn’t need to be static. It can be adjusted to fit your changing needs. For more tips, visit www.

lfg.com. Additional information on the solutions available for meeting specific needs can be found at www.lfg.com/LIAM. No matter your age, plan your legacy and have a clear idea of what to leave behind for your loved ones. n

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organizing director of Fight for $15. “These workers have been able to change the politics in this country.” Fells announced a Fight for $15 rally will take place Nov. 10 in 230 cities nationwide with a platform to demand businesses and politicians to increase pay for low wage workers that include fast-food employees. Tefere Gebre, executive vice president with the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), said eight out of 10 Blacks join a union, versus four out of 10 whites. “Unions have a history of helping Black people,” he said. “Without a union, there would not be a Black middle class.” Tyrone Heath of Pittsburgh joined a union this year after working at least five years as a home care worker. He receives less than $600 every two weeks with no holiday pay, no sick days and no health insurance. “I’m a five-time felon but I’ve been clean since 2002 staying out of trouble,” Heath, 40, said. “I came to let people here at the caucus know what is going on. I am one of many people who struggle to make it, but I have no place to go but up.” n

“The system is broken. A core government function is public safety. Why would we privatize essentially a core function of government? Because it makes some people a lot of money,” Ellison said. “We are fighting on two fronts: the fight for dignity in reference to the criminal justice system and the fight for economic dignity.” According to a U.S. Census Bureau report on income and poverty released during the caucus, Blacks had the lowest median income among all races last year at $35,398, compared to more than $60,000 for whites. It also highlights the estimated unemployment rate among blacks exceeds 10 percent, double that of whites. A Pew Research Center survey conducted in 2013 outlined 70 percent of Blacks said those in their community are treated less fairly than whites when dealing with the police, compared to 37 percent of whites who agree. Kendall Fells said Blacks are most affected by low wages which hurt their communities. “Organizing is a skill set that is essential to African American communities,” said Fells,

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Report Reveals Untold Story of African-American Consumers Nielsen’s Analysis: ‘Blacks Increasingly Affluent, Educated and Diverse’

By D. Kevin McNeir WI Editor African-American consumers continue to forge new inroads and break outdated stereotypes on a number of fronts from education and income to social media and civic engagement. So say the writers of a recently-published report produced by industry leader, The Nielsen Company. Combined with an influx of affluent and educated Black immigrants, the buying power and influence of the Black consumer rightfully demands far more attention – attention that many point out has been long overdue. During the 45th Annual Congressional Black Caucus Foundation ALC meetings, held, in Washington D.C., Sept. 16 – 20, executives from Nielsen shared more insights on the untold story of the African-American consumer. Participants that greeted the enthusiastic crowd and highlight-

ed parts of the landmark report included: Cheryl Pearson-McNeil, senior vice president, U.S. Strategic Community Alliances and Consumer Engagement, Nielsen; the Rev. Jacques Andre McGraff, co-chair, Nielsen’s African-American Advisory Council; and Denise Rolark Barnes, publisher, The Washington Informer and chairman of the National Newspaper Publishers Association [NNPA]. Special guests in the audience included: the Rev. Dr. Benjamin Chavis, president and CEO, NNPA; and the Rev. Jesse Jackson. “The size and influence of affluent African Americans is growing faster than that of non-Hispanic whites across all income segments and the impact is being felt across industries,” Pearson-McNeil said. “These larger incomes are attributed to a number of factors including youthfulness, immigration, historic educational attainment and

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constant, relevant dialogue across various social media channels that have an impact on African-Americans’ decisions as brand loyalists and ambassadors.” “Savvy marketers are taking notice,” she added. DeGraff praised Nielsen for continuing to produce its “Diverse Intelligence Series.” “We believe this ‘untold story’ is both timely and critical to understanding African Americans in 21st century America,” he said. “This is a treasure – a jewel – that everyone needs to see. Blacks are part of the American landscape. We spent $1 trillion last year on consumer goods. No one can ignore us or what Nielsen has put together in its fifth year of developing this report.” Rolark Barnes said business leaders should not make the mistake of “underestimating the value of the Black dollar.” “The NNPA has been involved with Nielsen for the past four years and as always, this report

sets the record straight,” she said. “The Black press intends to use the findings and beat out story after story like a drum. For 75 years we’ve served the role as the voice of Black America so we’re used to telling untold stories. And from the barber shop to the pulpit we’re going to get the word out – Blacks are powerful consumers,” Rolark Barnes said. Highlights from the report, which examines trends in Black households who earn $100,000 or more annually include: • Fifty-four percent of Black immigrants are U.S. citizens, compared to 47 percent of all immigrants. • Blacks expect brands to reflect their own values: 40 percent of Blacks say they expect brands to support social causes. • Blacks spend more time watching TV (42% more) on PCs (13% more) and listening to radio (4% more) than the total population.

• In 2014, 70.9% of Black high school graduates enrolled in college, exceeding the rate of both whites and Hispanics. • Black household income rates increased at every level above $60,000. • The largest increase in Black households between 2005 and 2013 came at incomes of $200,000, which increased by 138%, compared to a 74% increase in total households at this income level. Pearson-McNeil said the results from the report illustrate how mainstream media often gets the “story” about Black consumers wrong. “Our results show that what tends to be shared on the evening news or in many of the country’s newspapers [white] is not reflective of what’s really happening as it relates to Black consumers and Black households,” she said. “This report really gives you the untold story and it’s probably one that’s rarely shared.” n

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