Rays Take:The economy is in flux and theres a lot of uncertainty over the direction of the capital markets and interest rates. Its a familiar refrain by this point. Volatility has increased to a numbing level where perhaps we arent paying attention as closely as we should to whats happening in the financial world around us.

Were living longer and a lot has been written about the looming retirement crisis in this country especially for baby boomers.

According to National Association of Personal Financial Advisors (NAPFA), 56 percent of US adults dont have a budget and 39 percent of US adults have no non-retirement savings. Also per NAPFA, in 1991, only 11 percent of American workers expected to retire after age 65. In 2012, that percentage rose to 37 percent.

According to the Urban Institute April 2013 Retirement Security Data Brief, between 2007 and the time the market bottomed out in 2009, 37 percent of retirement funds had been erased. Much has since been recovered, but those were the numbers. Pensions are making headlines in a bad way, as reduced investment returns and increased longevity are reducing payments. These are only a few numbers highlighting the lack of retirement readiness in America and also the overall poor state of finances nationwide.

The retirement of baby boomers will have the biggest impact on our economy in the coming years. In 2003, 82 percent of boomers were part of the labor force. Ten years later, that number declined to 66 percent, and it has continued to fall ever since. It is too soon to gauge the impact of the millennials in the workforce, but their habits appear different. With all else equal, fewer workers mean less economic growth.

Unfortunately, many people put off retirement planning for any of a variety of understandable reasons. Some worry that it will just be too depressing, and in fact prove that theyll never be able to retire. The need for a financial plan has never been greater.

Danas Take:Recent news stories have torched the dream of a secure retirement for many baby boomers. Memphis and Shelby County are denying responsibility for paying retirement benefits to a generation of teachers. Retired Memphis firefighters are struggling to make ends meet now that health insurance costs have multiplied.

Now would be a wise time to consult a financial adviser and ask about these possibilities. What if my retirement benefits dont pan out as promised? Will I have enough personal savings and investments to maintain my standard of living? Might I need to downsize my lifestyle now to insure a more comfortable life later?

Make sure your assumptions are realistic for the coming years. Happiness can last for decades if we scale back and conserve resources along the way.

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Watch Service>Ray Brandon, CEO of Brandon Financial Planning, and his wife, Dana, a licensed clinical social worker, can be reached at brandonplanning.com.

Millennials save more than expected

Category: Savings

Updated: 14/04/2016
First Published: 14/04/2016

Millennials are often thought to be spenders rather than savers, but it seems that this assumption could be wrong: research from Zopa has found that those aged 18-35 actually save more than their older counterparts, with it highlighting a clear difference in attitude and spending habits.

The figures show that so-called millennials (18-35 year-olds) save an average of 10.9% of their monthly post-tax income, while Gen Xers (36-54 year-olds) save just 8.8%. This shows that, contrary to popular belief, the younger generation is actually more financially responsible than people tend to give them credit for, a fact highlighted by the finding that they wish they were able to save more, with closer to 17% of their monthly income being the ideal figure.

Millennials are also savvier when it comes to their spending habits, and are prepared to spend far less on everyday essentials than their parents generation. For example, millennials would be willing to spend £2.68 on a cup of coffee while their older counterparts would splash out £3.07, and its a similar story in terms of a pint of beer (£3.87 vs. £4.74), a cinema ticket (£7.83 vs. £8.30) and even a week-long holiday in Europe (£416 vs. £490).

However, just because theyre not willing to spend over the odds, it doesnt mean that millennials are debt-free. In fact, theyre more likely to view debt as a normal part of life, with 46% expecting to manage with some form of long-term debt. Their view of manageable personal debt is also higher than that of the older generation, coming in at an average of £5,892 compared with £4,251, a difference of 39%.

Millennials have been characterised in some quarters as spendthrifts, but this research shows that most young people have a very responsible and positive attitude towards their finances, in most cases beating the odds heavily stacked against them, said Giles Andrews of Zopa. In recent years, low interest rates have discouraged millennials from investing in their future, so its vital that young people are now given innovative ways to grow their money by making saving and investing worth their while.

Arguably, one way to encourage this has been the announcement of the Lifetime ISA, a savings vehicle that will allow those aged 18-40 to save for their pension or first home. Indeed, 45% of millennials surveyed said that this new ISA would make them more inclined to put money away, and they have a similar feeling towards the Innovative Finance ISA.

This arrangement allows investments made through peer-to-peer lending sites to come within your tax-free ISA allowance, and it gives investors the chance so secure far higher returns than with a traditional cash ISA. Given that 61% of millennials said theyd be more likely to save or invest if interest rates were higher, this could prove to be a great driver, and could mean that millennials save even more in the future.

Many people may be left struggling from new tax rules which could makesome savers pay tax on money they havent received yet.

From April 6, savers are no longer taxedon interest when it is paid into their account. A basic-rate taxpayer is able to earn up to pound;1,000 interest a year before income tax starts being paid.

For higher-rate taxpayers, the new Personal Savings Allowance is capped at pound;500 interest a year, and additional rate taxpayers must pay Income Tax on all their savings interest that isnt earned within an ISA.

The changes to how your savings are taxed mean that banks will now pay your interest gross, rather than taking basic rate tax automatically. If you earn more interest than the PersonalSavings Allowance permits for your tax bracket then you will need to fill out a tax return to pay what isowed.

[Related story:London is now home of the worlds first local currency machine]

Unfortunately, some people may find they owe tax on savings they dont have access to. This is because if you have a fixed-rate bond, in many cases, the interest is added to the account annually even though you may not have access to it for years.

Tax on that interest is due in the year it is paid, so you could need to pay tax before the account has matured. And its not just those with traditional fixed-rate accounts that are affected - last year, many thousands of savers rushed to snap up three-year Pensioner Bonds and could find themselves in the same hole.

The liability for tax will arise when the interest is added to the account, regardless of the fact customers may not cash in until the end of the term, a spokesperson for National Savings amp; Investments told Money Mail.

[Related story:Branch closures arent the answer to customer banking woes]

Will it affect me?

This depends on a number of factors. Firstly, how interest is paid on your accounts. Some fixed-term bonds add the interest annually while some dont add interest until the bond matures.

If your interest is paid annually then you need to calculate whether you will earn more interest than is allowed under the Personal Savings Allowance.

Bonds that pay all the interest upon maturity could also cause tax shocks because the taxman will count that interest in the year it is added to your account andyou cantspread it over the years the bond existed.

As a result, you could find yourself exceeding your PersonalSavings Allowance for that one year due to a hefty interest payment.

If you have exceeded the allowance for the tax year you will need to fill out a self-assessment form declaring the interest to the taxman. As the Personal Savings Allowance only came into effect this April the first self-assessment forms will not be due until October 2017.

The new Personal Savings Allowance is great but it is messy, says Sue Hannums from SavingsChampion.co.uk.

The days of simple savings are gone and anyone taking out a fixed rate bond will now need to factor in the potential tax bill when choosing an account. This could deter people from taking out fixed rate bonds, but only time will tell.

Want better returns? Compare high-interest current accounts

If you're fed up with the paltry returns offered by most savings accounts, it may be worth moving your cash into a high interest-paying current account.

Several current accounts pay returns more than three times higher than those offered by easy access savings and instant access ISAs, although the downside is that interest is usually only paid on balances up to a certain amount.

High interest current accounts

Nationwide's FlexDirect account, for example, currently offers an annual equivalent rate (AER) of 5% on balances up to £2,500, while TSB's Classic Plus Account offers the same rate on balances up to £2,000. It's worth noting however, that the Nationwide account only pays 5% for the first year. After that, the AER falls to 1%. You must pay in at least £1,000 each month to qualify for this account.

Current account returns are now paid without any tax being deducted following the introduction of the new Personal Savings Allowance on April 6. The allowance means that most UK adults can earn up to £1,000 interest a year on their savings without having to pay any tax on their money. Higher rate tax payers will be able to earn £500 interest tax free. Additional rate taxpayers do not receive a personal tax allowance.

If you have a large savings pot, Santander's 123 account may be worth considering, as it pays 3% per cent AER on balances between £3,000 and £20,000. You'll also earn 1% cashback on any Santander mortgage payments (of up to £1,000 a month) that come out of your account, as well as on any water and council tax bills, and 2% on your energy bills. Mobile, home phone, broadband and paid-for TV packages will net you 3% cashback.

However, the Santander account has a £5 monthly fee, and you must pay in at least £500 a month and have at least two direct debits on the account to apply.

Kevin Mountford, head of banking at comparison website Moneysupermarket.com said: "Many of the higher in-credit rate current accounts require customers to meet a minimum funding amount or cap the balance for which interest is paid, so it is important know what restrictions there are before you make the switch."

  • Compare current accounts across the market
Incentives to switch

Several current accounts offer generous incentives to switch your account to them, so it's worth factoring these in too. For example, Mamp;S Bank will give you a £100 gift card when you switch to its current account. Although you won't earn any interest from this account it does give you access to the Mamp;S Monthly Saver account, which pays a 6% AER fixed rate for 12 months. You can also earn one point for every £1 spent on your Mamp;S debit card in Mamp;S in store and online.

Clydesdale Bank also regularly offers switching incentives to its current account, most recently offering £150. This deal ended on March 31 but keep an eye out for new offers. You'll earn 2% AER interest when you're in credit on balances up to £3,000 in this account.

If you tend to spend more time in the red than in the black, then you might want to consider First Direct's 1st Account. This account not only pays a s£100 witching bonus, but it also offers a £250 interest-free overdraft. Youll be charged an annual percentage rate (APR) of 15.9% on any borrowing over this amount.

If you tend to go overdrawn by more than this regularly, Nationwide's FlexDirect account is a good option as it offers a fee-free overdraft for 12 months. You'll need to pay off your overdraft during this period though, or when it finishes you'll be charged a daily usage fee of 50p on arranged overdrafts of £10 or more.

To get a full comparison of current accounts across the market, click here