Fiscal Fitness

Check Your Social Security Benefits

Claims to the contrary notwithstanding, the Social Security system is not going bankrupt anytime soon. The system as currently administered will work until roughly 2039. And even if no reform occurs, Social Security receipts at that point will still be sufficient to pay 72 percent of promised benefits.

For an estimate of what your benefits will be (before any reduction), use one of the benefit calculators at the Social Security Administration's Web site. This link shows the site's Quick Calculator (not the assumptions listed). The average monthly benefit is $845 in today's dollars.

Supplementing Social Security

If you don't want to count on the government to underwrite your retirement (and you shouldn't--unless you'd be happy living out your golden years on $845 a month), Quicken lets you calculate what you need to save to counter a possible 28 percent drop in Social Security benefits.

Determine your estimated benefit by visiting the Social Security Web site (see the preceding item), then subtract 28 percent. The average drop is $236 a month, or $2832 a year. Use Quicken's Retirement Calculator to figure out how much you must save to offset the decline in available Social Security funds that some experts predict.

Choose Planning, Financial Calculators, Retirement, and select Calculate for Annual Contribution. This opens the Retirement Calculator. Enter 0 in Current Savings and again in Other Income, then enter your age, your anticipated retirement age, and your "Withdraw Until" age. Set the Annual Yield box to whatever return you expect your investments to deliver (probably 9 or 10 percent). In the Annual Income After Taxes box, enter your annual drop in Social Security benefits (as calculated above). Select Annual Contribution in the Calculate For area, and click Calculate. The amount shown is what you should save to compensate for the possible 28 percent Social Security shortfall (the average amount is $16 a month).

How Much Life Insurance Do You Need?

Quicken's Investment Savings Calculator can determine whether you have enough life insurance to protect your family. It does this by calculating the value of the income your family will lose if they lose you.

Choose Planning, Financial Calculators, Savings; then select Make Calculation for Opening Savings Balance, and enter the number of years you want your life insurance proceeds to support your family in the Number of Years box. Enter the annual income that you want to replace through life insurance proceeds as a negative value in the Contribution Each Year box. Choose Opening Savings Balance in the Calculate For area, and then click Calculate. This will yield the amount of insurance needed to replace your income. And to show them you care, round up.

When Does Refinancing Make Sense?

Refinancing is complicated. You want to replace a mortgage bearing a high interest rate with one that carries a lower interest rate. That's the simple part. You also need to make sure that the refinancing fees don't eat up the interest-rate savings, and that you'll actually end up paying less interest. This is where it gets complicated. Fortunately, Microsoft Money's Loan Worksheet can help.

Select Go, House Center, Compare the Cost Of the Loan Or Compare Two Loans. In the Loan A boxes on Money's Loan Worksheet Web page, enter your current mortgage payment, interest rate, balance, and repayment term. Then, in the Loan B boxes, enter the new mortgage's payment, interest rate, balance, and repayment term. Refinancing makes sense if the new loan's annual percentage rate is lower than the old loan's interest rate and if you will be paying less in total interest and fees on the new loan.