Estate Planning During a Pandemic – Quit Stalling
The coronavirus is taking a toll on much more than our finances; our physical and mental health are also a concern. Most people likely know someone who has been affected by the coronavirus. and they’re worried. Appropriately planning for your health care and financial needs in an estate plan can provide much-needed peace of mind.
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Every adult needs an advance health care directive, and it becomes even more important as we grow older and experience more health issues. An advance health care directive is a written plan so your wishes are known if a time comes when you cannot speak for yourself.
Start by thinking about different treatments you do or do not want in a medical emergency. Consider talking with your doctor about your family medical history and how your current health conditions might influence your health in the future. Your wishes need to be in writing, and the document should be updated as your health changes.
Review your advance health care directive with your doctor and the person you are naming as your health care proxy to be sure all forms are filled out correctly. Give each party a copy, and keep a record of who has these forms.
Keep your completed documents in a safe but easily accessible place, such as a desk drawer. You might also consider carrying a card that states you have directives and where they can be found.
Health Care components of an Estate Plan
The COVID-19 pandemic isn’t going away anytime soon. This global health crisis has proved especially dangerous for older Americans, a stark reminder to ensure your affairs are in order. Here is an overview of what you need to cover.
Should I Buy or Lease a Car?
After buying a home, one of the next major purchase decisions (and expenses) is a car. The latest headlines, including a recent article in The Wall Street Journal titled “Buying a Car Now Is Brutal,” talk about how the market for cars has been turned upside down due to lack of inventory and parts availability and the transaction price of used cars is up 24% from June 2020.
With minimal deals to be had, buying a car now appears to be more challenging than it was in the past.
Whether to lease or buy can depend on your circumstances and preferences. I made a rough calculation a few years ago while having a discussion with a co-worker (assuming the car market is behaving normally) and the conclusion was whether you bought or leased the exact same car, you would likely break even at about the three-year mark. Before that point, you may spend less on a lease, but after that, you’d tend to come out ahead by buying. Why? Because the lease payments take into account the big depreciation hit you experience with any new car, which is highest in the first two to three years. If you lease, you are still paying for the depreciation.
For example, if you buy a $50K car for cash, after three years you will be able to sell it for say $30K, which means you “spent” $20K owning the car for those three years. If you lease the car, your three years’ worth of lease payments will likely be very close to the same $20K, due to the depreciation factor. If you buy and keep the car longer than that, it continues to depreciate — but at a declining rate over time. So, owning the same car for six years is then cheaper than leasing for six years. The break-even point is around three years.
So one way to save is to buy a two- to three-year-old car that has already taken the initial depreciation hit, keep it for seven to 10 years, and hope the repairs are not expensive.
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It comes down to what type of owner you are. Do you like to hold onto your car for years or switch it out frequently? Do you drive a lot of miles? Do you dislike paying for comprehensive insurance? How you answer could help steer your decision.
11 Things You Don’t Need for College
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When it came time for her first child to go off to college, New Jersey mom Jill Tang went a little overboard with dorm shopping. “I was excited and overspent,” she concedes. “I would say that my daughter used about 70% of what we actually bought. The rest of the 30% we donated or tried to salvage in our own home.”
It’s easy for anxious families to let their guard down and fall victim to the back-to-college marketing ploys, especially after the disruption that COVID-19 had on learning. Deloitte estimates that in 2021, $26.7 billion will be spent this year on back-to-college purchases, with an average of $1,459 spent per child. But every “dorm essential” checklist has items that will still be unused or unopened at the end of the year. Here’s a college un-checklist: everything students do not need.
College sticker shock when you first see the bill for tuition, room and board (and all those nebulous activity fees) is bad enough.
Rebuilding Emergency Savings: Take a Realistic Approach
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You may have heard that you should have three to six months’ worth of essential living expenses saved in case of emergency. It’s sound guidance — but it might be the last thing you want to hear after a year marked by emergencies.
For many of us, 2020 tested our health, safety, bravery and basic financial stability more than any other period in recent memory. If you didn’t already have money saved for emergencies, last year likely wasn’t the time to start stashing it away. And if you did, it may have been a prime opportunity to dip into your reserve.
To that end, a survey from Bankrate found that 35% of Americans have less in their emergency fund now than before the pandemic started, while just 13% have more. Only a quarter have enough saved to cover six months’ worth of expenses, and one-fifth (21%) have no emergency savings at all. Despite these sobering stats, more than half (54%) of respondents said they feel at least somewhat confident in the amount they have socked away. These findings show there’s a disconnect between what people think they need to have saved versus what best practices tell us we need to have saved.
To be sure, it can be tough to anticipate how much money we’ll need to cover an emergency, whether it’s unforeseen medical expenses, helping loved ones in need, or replacing income after prolonged unemployment. These scenarios were all too common in 2020 (and continue to be), and many Americans have found themselves coming up short.
But with the benefit of hindsight, many of us may be looking to prepare for the next time we need extra funds. Starting wherever you are today and taking small, practical steps can help you develop sound and effective saving habits. To help you get started, I’ve addressed some of the most common questions about emergency savings below.
Saving for a rainy day can be a tall order, especially if you have recently experienced a financial setback. Taking even small steps can help you work toward the larger goal of building up your emergency savings.
NYSUT NOTE: The NYSUT Member Benefits Corporation-endorsed Synchrony Bank Savings Program offers online savings accounts with competitive interest rates and 24/7 online and mobile banking. Click here for more information and to get special discounted member rates.
Financial Conversation Starters for Couples
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Instead of reaching for the remote and an evening of Netflix, why not get really intimate … and talk about money instead? Sharing the same financial goals and being open about how you’re doing can be great for your relationship.
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NYSUT NOTE: As a NYSUT member, you have access to a national network of attorneys that deal with personal legal matters through the NYSUT Member Benefits Trust-endorsed Legal Service Plan. Provided by the law firm of Feldman, Kramer & Monaco, P.C., these experts offer legal assistance with everything from preparing crucial estate planning documents to dealing with traffic violations. For more information or to enroll click here.
Important Planning Considerations: Insurance & Long-Term Care
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When the topic of financial planning is raised, people’s thoughts tend to immediately focus on saving, investing and ultimately generating income in retirement. While these are certainly critical components of building a solid financial foundation, so too are strategies for protecting your income and assets from the unexpected.
The future is always an uncertainty. Therefore, you need to prepare as much as possible for the unexpected. Having the appropriate insurance protections in place — whether for your personal property, your family’s financial well-being if you should die or become disabled, or protecting your savings from being eroded by the costs of a major health care crisis — brings with it the peace of mind that your goals can still be achieved whatever the future may hold.
As you create your own plan, make sure you don’t overlook the following key income and asset protection strategies:
Your retirement plan isn’t complete until you’ve looked into getting the insurance you need, including life insurance, disability insurance and a plan for long-term care.
NYSUT NOTE: NYSUT members have access to a team of dedicated long-term care planning specialists through the NYSUT Member Benefits Trust-endorsed New York Long-Term Care Brokers program. NYLTCB is a nationally-recognized insurance intermediary that offers access to discounted long-term care insurance plans from highly-rated insurance companies. NYSUT members can get a long-term care insurance plan designed for their specific needs at a discounted member rate. Click here for more information.
How Millennials Are Changing the Life Insurance Game
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There’s nothing more impactful than the loss of someone close to you to shine a light on the need for life insurance. And this past year, most of us have experienced some sense of loss, collectively if not personally, through the grief and suffering brought on by the global pandemic. Many of us who never before spent time thinking about or planning for our own death, or that of a loved one, likely found ourselves confronting this subject over the past year.
The shift has been particularly significant among millennials, who now range from age 22 to 40, as they begin to plan for the next stage of their lives. One recent study found that millennials are the most likely to be influenced by the pandemic to purchase life insurance. Forty-five percent of millennials said they are more likely to buy life insurance due to COVID-19, compared with 15% of baby boomers and 31% of Gen Xers.
And just as millennials have redefined everything from appropriate workplace attire to car-buying options, they’re reshaping the life insurance market as well. This digital-savvy group prefers online research and information that they supplement with financial advice from a human professional to make sure they’re on the right track.
Here are several ways the life insurance market has adapted in recent years and some navigating tips for millennials considering their options:
More than any other age group, millennials are feeling the need for life insurance due to COVID-19, and the way they’re shopping for it is a little different than in years past.
NYSUT NOTE: The NYSUT Member Benefits Trust-endorsed Term Life Insurance Plan provided by Metropolitan Life Insurance Company offers term life insurance coverage for you or your spouse. With premiums especially negotiated for NYSUT members, you can ensure your family is adequately protected with crucial income to pay daily living expenses. Click here for more information or to get an application today.
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Fact: Fewer employers are offering life insurance as a benefit.
About 56% of Americans who work for private companies have access to life insurance through their employer. The number of employers offering such benefits, largely through group plans, has been in steady decline in the last decade. The result? More than 50% of those who have life insurance purchased it individually.
Your move, millennials: If your employer does offer life insurance, it’s worth reviewing the coverage options. You may find the value you need for your circumstances. You may also discover that you need to purchase additional coverage on your own. Many employer life insurance plans offer very basic coverage, and the policy may not be portable if you part ways with your employer. That’s an important factor for millennials, who tend to have higher rates of job changes.
Turning a Reverse Mortgage into a Retirement Investment Tool
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Pulling the equity out of your house through a reverse mortgage seems to fly in the face of the American dream of proudly living in a fully paidup home. That, combined with the sketchy reputation reverse mortgages have sometimes had, is why most people are wary of pursuing these loans.
But over the past decade, the U.S. Department of Housing and Urban Development strengthened regulations to protect consumers. HUD backs and oversees about 95% of reverse mortgages, and increasingly, some retirement experts believe these loans can be part of an overall investment strategy that lets people stay in their homes as they age. "Like any financial product, reverse mortgages can be a great tool," says Jennifer Fraser, director of stakeholder engagement at GreenPath Financial Wellness, a nonprofit financial counseling service. "They work well for some people and are not a great fit for others."
Reverse mortgages have been around for about 60 years, but in 1989, the law changed to allow the Federal Housing Authority to back reverse mortgages through an FHA-approved lender, and the Home Equity Conversion Mortgage was created. HECMs are the only federally insured reverse mortgages.
The following decades, however, proved a bumpy road for these loans. Stories abounded of people taking the loans out without fully understanding -- or being told -- the specifics. A minority of borrowers lost their homes because they didn't have enough money to cover property taxes, homeowners insurance and home maintenance. Once they defaulted, they faced foreclosure. "A combination of updated regulations and research means reverse mortgages are now safer for consumers," says Wade Pfau, a professor of retirement income at the American College of Financial Services.
Most people think of reverse mortgages as just a standalone loan. But some financial experts are seeing them as an investment strategy that lets people stay in their homes as they age.
Retirees: Go Ahead and Spend More in the Go-Go Years
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The investment industry is famous for focusing on “return on investment,” but when it comes to your retirement nest egg, there’s more to consider than simply saving money and earning a return on investments.
This singular focus has a significant flaw, because I believe anything that saves money or helps you squeeze the most enjoyment possible out of your time can be viewed as a return on investment during retirement.
What Retirees Must Know About Telehealth
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Don't Get Too Hung Up on a Retirement Savings Number
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The internet abounds with retirement calculators that will help you estimate the size of the nest egg you'll need so that you don't outlive your retirement savings. It makes sense. Business gurus tell us you can't improve what you don't measure.
We set other measurable goals in our lives so what's the problem with aiming for, say, $5 million in savings by age 65? It sets us up for complacency, says Vicki Bogan, associate professor of economics at Cornell University in Ithaca, N.Y. "Anchoring on a specific number -- and saying once you get [to] that number you're done — is not the best idea," she says. "The calculation of that number is predicated on a lot of assumptions."
Experts generally recommend having enough savings to generate about 80% of your preretirement income annually, after factoring in what you'll get from Social Security and any defined benefit pension. You'll need a larger amount if inflation increases, the stock market falters or your health care costs rise more than expected. Your savings goals can be scaled back if you move to a less expensive area or if inflation stays low.
Right now, a booming stock market is convincing people to retire early because they've already hit "the number," says Allison Schrager, senior fellow at the Manhattan Institute. "I can't blame them. The retirement industry has been really negligent in getting people overly focused on that number."
Meanwhile, that obsession has done nothing to improve retirement security. Only 36% of current retirees say they saved the right amount, compared with 45% who believe they saved too little and 18% who saved more than necessary, according to a 2020 survey by the Employee Benefit Research Institute.
Although having a retirement savings number is important, it's also a moving target and fixating on one number runs the risk that you won't adjust your savings goals to new circumstances, such as additional financial responsibilities, higher health care costs, inflation or the vagaries of the economy. Life isn't stationary and your retirement plan, including any target savings number, shouldn't be either.
There's tons of advice about how big your nest egg should be for retirement but focusing too much on a single figure can lead to complacency.
Instead of focusing exclusively on the size of your nest egg, create a comprehensive retirement plan that you'll refine and change over time. It should include your financial goals, a net worth statement, a working budget, debt management strategy, emergency funds and any insurance. "More than a number, every individual should have their own financial plan, which is based on data," says Aradhana Kejriwal, a chartered financial analyst and founder of Practical Investment Consulting in Atlanta. That data should incorporate estimated day-to-day living expenses in retirement, including medical costs based on your health, taxes and any large purchases you're likely to have, such as a new roof or car.
Any retirement plan also should reflect your expected retirement lifestyle, investing horizon, risk tolerance, savings goals and estate planning. You'll want to consider how your retirement savings hold up under different scenarios, simulating extreme market conditions or unexpected life events, to be sure your bases are covered. This is known as stress-testing a plan. A financial professional can help you do it, or use Microsoft's free online Retirement Financial Planner template to see how your savings and income are affected when you adjust for inflation, retirement age, health care costs or the rate of return. (At templates.office.com, type "Retirement Financial Planner" in the search bar.)
Revisit the plan every few years while you're accumulating assets and whenever you have a life change, such as switching jobs, losing a family member or moving. When you get into your 60s, revisit your plan more often "because you're in a spending phase, not an accumulation phase," Kejriwal says.
As retirement nears, the plan should factor in your required minimum distribution so that you match your income to your expenses and minimize your tax burden. You want an appropriate mix of taxable and nontaxable investments, such as a Roth IRA combined with a taxable brokerage account, as well as a balance of stocks, bonds, real estate and other assets.
This is not a competition. "You're not in a game to beat your neighbor. You're not collecting money for someone else's retirement," she says.
Consider the Big Picture
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Financial decisions often touch on underlying issues that trigger our deepest fears and dreams. Maybe you grew up financially insecure so that having a healthy savings account gives you peace of mind. Perhaps you don't really enjoy the city and would prefer to retire to a rural, low-cost community. Those feelings can be accounted for using dollars and cents with either a larger buffer of savings for someone who grew up financially insecure or a smaller nest egg for a lower cost of living. That way, you'll keep your emotions in perspective when making decisions.
Be careful with impulsive decisions, like opening a business that you're counting on to make up for a retirement savings shortfall. If you have amassed a healthy nest egg, you may feel hard-hearted turning down a plea for financial assistance from relatives down on their luck. But you worked hard for those funds, and you are relying on them to support you through your old age.
It's fine to overestimate the amount of savings you want if that helps you sleep at night. Similarly, you don't need to aim quite as high if you don't have children or other descendants to inherit your estate.
That brings us back to your retirement savings number because you'll still want one. In fact, if you're the kind of person who's motivated by a concrete and tangible goal, it's OK to set a number in your sights, Browning says. "Having a numerical target is helpful because it gives you something to aim for."
Curb Your Impulses
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NYSUT NOTE: Looking for some guidance in your retirement planning? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors to help you plan for retirement. Click here for more information about these fee-based financial counseling services.
6 Things You Can Do Right Now to Ensure Your Money Will Last in Retirement
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If you’re within six months or so of retirement, there are certain things you need to do now to help prepare yourself for the transition into retirement.
Throughout this retirement preparation process, there will be times when you feel as though you are making a series of rapid-fire micro decisions as you work through Social Security benefits, Medicare options, pension elections and retirement account distributions.
The decisions to be made are many, and understanding the long-term ramifications of those decisions is paramount, considering that your retirement years could be as many as those spent working.
The numerous options you will face can become a labyrinth of choices leading many people to attend YouTube university in search for answers, while leaning on friends and co-workers to fill in the missing pieces. The truth is, people underestimate the complexities that exist with preparing for retirement and find themselves over their head.
Unfortunately, without understanding the long-term effects of one decision over another, a retiree may be well into their retirement before problems begin to surface. For instance,
• Inflation will erode your income over time.
• Longevity may require your money to last longer than you thought.
• Market volatility can deplete your resources.
• Heath care expenses can potentially absorb most of what you have.
By the time these risks are exposed, retirees find themselves stuck. That is why retirement planning shouldn’t be viewed as a rapid-fire micro decision-making process but rather a time to design a master plan focused on what you can control and protecting yourself from what you can’t.
Think of it like building a home … you wouldn’t begin construction without first having blueprints drawn up. Your retirement plan is the blueprint for your retirement, while Social Security benefits, Medicare options, pension elections and retirement account distributions are your building materials.
Your retirement plan needs to take a holistic approach. Because there are so many decisions to make, it’s easy to get lost in the weeds. Follow these six signposts to find your way.
Going back to the home construction metaphor, to ensure you have your bases covered and are retirement ready, first consider the cost of the project. It is better to estimate the cost of your retirement now to uncover potential problems before actually retiring. Start by carefully evaluating your current thinking about your situation.
1. Develop an income plan detailing exactly how much income you will need each year to fund your retirement lifestyle
Now, before skipping over this you should consider that your lifestyle will change — along with your tax situation — which means that the amount you need now to live on will not be the same when you retire. You may need to budget even more for your early years of retirement, when you’ll be enjoying the good life. So, it is not a good idea to make general assumptions about your future income needs based on how things are while you’re working.
Carefully consider what will change and what will stay the same once you retire, adding into the mix such things as travel, health care costs and other variable expenses.
2. Identify your income sources and determine exactly how much income will be generated from each source to satisfy your annual income needs
No generalizations here … you should seek to know exactly how much you can expect from each resource you have.
This is where most people begin to struggle, because there is often a disconnect between their mindset around their assets and the need they have from them. There are generally two camps with this:
• Those who focus on protecting their principal by holding cash.
• And others who hold on to their investment portfolios in hopes for long-term growth.
Both camps are focused on growing or preserving their money, making it difficult for them to adjust for their need to receive consistent income from the assets.
3. Map your assets out and separate them by their purpose
What I find is that most people have money sitting in bank accounts, large amounts of equity in their home and money combined together in their investment portfolios.
And while this may seem an ideal arrangement, it is important to point out that cash in the bank is not earning anything, equity in a home is not earning anything and money in the stock market has varying levels of risk … none of which translates to having consistent income in retirement.
In most instances, the assets you have are either going to be spent or used for income now or in the future.
So, a good place to begin would be identifying which assets fall into these categories.
4. Have an income replacement plan in place for your spouse to cover the loss of Social Security or pension income if you were to predecease them
Developing an income strategy for retirement most often means you are relying on a husband and wife’s benefits, but those benefits are only received while both are living (in most cases).
Many people are misled into believing that as you get older your need for life insurance diminishes, and while this may be true for some, for others the need for it may actually rise.
It is a good idea to know the specifics for how benefits will adjust when a death occurs and have a plan in place to replace lost income if it is needed.
5. Have (updated) legal documents in place designating financial power of attorney, medical directives, wills and trusts
Most people kick this can down the road with the idea they will have time to get this done later. (Later meaning when they need it.)
Here is the deal: If you wait until you need these documents it will be too late to get them.
6 Things You Can Do for a Sustainable Retirement
Moving to Another State in Retirement? What You Need to Know
A pleasant retirement can mean staying put right where you are, chatting with the same neighbors, cheering the same local sports teams, and shopping at the same stores.
But plenty of Americans also get wanderlust when they reach their retirement years, trading freezing winters for subtropical environments, swapping prairies for mountains, or substituting city living for the country. In 2020, 400,000 retirees made a move, which was the highest number in five years, according to a study by the moving service company HireAHelper. Most of those retirees made their move within the confines of the state where they already lived, but 38% moved to another state.
If you guessed that traditional retirement mecca Florida was the No. 1 destination for those nomadic retirees in 2020 — you guessed wrong. Virginia topped the list, although Florida did come in a respectable second. Wyoming, Pennsylvania, and Idaho rounded out the top five.
Numerous factors can play into your decision to move to a new locale in retirement, from family considerations to weather to preferences about beaches, mountains, or culture. Finances are key as well. Let’s look at just some of the things you should keep in mind:
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Taxes: Is Your New State a Friend or Foe?
The idea of retiring, packing up and starting fresh in a sunny spot or at the foot of some cool mountains may sound intriguing, but have you really thought it out? Some financial, practical and emotional issues to take into consideration first.
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Heading into retirement brings a slew of new topics to grapple with, and one of the most maddening may be Medicare. Figuring out when to enroll in Medicare and which parts to enroll in can be daunting even for the savviest retirees. There's Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on.
And what is a doughnut hole, anyway? To help you wade into the waters of this complicated federal health insurance program for retirement-age Americans, here are 11 essential things you must know about Medicare.
Medicare is divided into parts. Part A, which pays for hospital services, is free if either you or your spouse paid Medicare payroll taxes for at least 10 years. (People who aren't eligible for free Part A can pay a monthly premium of several hundred dollars.) Part B covers doctor visits and outpatient services, and it comes with a monthly price tag—the standard monthly premium in 2022 will be $170.10, up from $148.50 per month this year. Part D, which covers prescription-drug costs, also has a monthly charge that varies depending on which plan you choose; the average Part D basic premium for 2022 will be about $33, up from $31.47 this year. In addition to premium costs, you'll also be subject to co-payments, deductibles and other out-of-pocket costs. To find the latest costs, visit Medicare.gov/your-medicare-costs.
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Beneficiaries of traditional Medicare will likely want to sign up for a Medigap supplemental insurance plan offered by private insurance companies to help cover deductibles, co-payments and other gaps. You can switch Medigap plans at any time, but you could be charged more or denied coverage based on your health if you choose or change plans more than six months after you first signed up for Part B. Medigap policies are identified by letters A through N. Each policy that goes by the same letter must offer the same basic benefits, and usually the only difference between same-letter policies is the cost. Plan F has been very popular because of its comprehensive coverage, but as of 2020, Plan F (along with Plan C) is unavailable for new enrollees. The closest substitute for Plan F is Plan G, which pays for everything that Plan F did except the Medicare Part B deductible. Anyone enrolled in Medicare before 2020 can still sign up for plans F and C.
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Medicare Comes With a Cost
Fill Medicare's Coverage Gaps With a Medigap Plan
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There’s Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare—and much more.
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Medicare Basics: 11 Things You Need to Know
You can choose to sign up for traditional Medicare: Parts A, B and D, and a supplemental Medigap policy. Or, you can go an alternative route by signing up for Medicare Advantage, which provides medical through private insurance companies. These plans also frequently include prescription drug coverage. Also called Part C, Medicare Advantage has a monthly cost, in addition to the Part B premium, that varies depending on which plan you choose. For 2022, the average monthly premium for Advantage plans is $19.
Like traditional Medicare, you'll also be subject to co-payments, deductibles and other out-of-pocket costs. In many cases, Advantage policies charge lower premiums than Medigap plans but have higher cost-sharing. Your choice of providers may be more limited with Medicare Advantage than with traditional Medicare, and recent research has found that sicker enrollees often dump Medicare Advantage in favor of original Medicare.
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If your income is above a certain threshold, you'll pay more for Parts B and D. These surcharges are based on your adjusted gross income from two years earlier. In 2022, single filers with an AGI from 2020 that exceeds $91,000 ($182,000 for joint filers) will pay a premium ranging from $238.10 to $578.30 per month, depending on their income. The standard premium in 2022 will be $170.10.
For Part D coverage in 2022, single filers with an AGI from 2020 that is more than $91,000 (or more than $182,000 for joint filers) will pay an extra $12.40 to $77.90 per month, depending on their income.
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Consider Medicare Advantage for All-in-One Plans
High Incomers Pay More for Medicare
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If you are already taking Social Security benefits, you will be automatically enrolled in Parts A and B at age 65 You can choose to turn down Part B, since it has a monthly cost; if you keep it, the cost will be deducted from your Social Security if you already claimed benefits.
For those who have not started Social Security, you will have to sign yourself up for Parts A and B. The seven-month initial enrollment period begins three months before the month you turn 65 and ends three months after your birthday month. To ensure coverage starts by the time you turn 65, sign up in the first three months.
If you are still working and have health insurance through your employer (or if you’re covered by your working spouse’s employer coverage), you may be able to delay signing up for Medicare. But you will need to follow the rules and must sign up for Medicare within eight months of losing your employer’s coverage to avoid significant penalties when you do eventually enroll.
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When to Sign Up for Medicare
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There are several enrollment periods, in addition to the seven-month initial enrollment period. If you missed signing up for Part B during that initial enrollment period and you aren't working (or aren't covered by your spouse's employer coverage), you can sign up for Part B during the general enrollment period that runs from Jan. 1 to March 31. Coverage will begin on July 1. But you will have to pay a 10% penalty for life for each 12-month period you delay in signing up for Part B. Those who are covered by a current employer's plan, though, can sign up later without penalty during a special enrollment period, which lasts for eight months after you lose that employer coverage. If you miss your special enrollment period, you will need to wait until the general enrollment period to sign up.
Open enrollment runs from Oct. 15 to Dec. 7 every year during which you can change Part D plans or Medicare Advantage plans for the following year, or switch between Medicare Advantage and original Medicare. Advantage enrollees also can switch to a new Advantage plan or original Medicare between Jan. 1 and March 31. And if a Medicare Advantage plan or Part D plan available in your area has a five-star quality rating, you can switch to that plan outside of the open enrollment period.
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In 2020 the dreaded Part D "doughnut hole" was filled. That hole is a coverage gap in which you used to face much higher out-of-pocket costs for your drugs, but that is no longer the case. For 2022, when the total amount your plan has paid for drugs reaches $4,430 then you will pay 25% of any additional costs. (This percentage used to be higher before the gap was closed.) Prescription drug manufacturers pick up 70% of that tab while insurers pay 5%.
Catastrophic coverage, with the government picking up most costs, begins when a patient's out-of-pocket costs reach $7,050, the maximum spending limit for beneficiaries in 2022, which is $500 higher than 2021’s cap. Any deductible paid before you entered the doughnut hole counts toward that annual maximum as does the 25% you contributed while in the doughnut hole and the 70% that pharmaceutical companies paid on your behalf. For the latest information, visit Medicare.gov/drug-coverage-part-d.
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A Quartet of Medicare Enrollment Periods
A Filled Doughnut Hole for Medicare Part D
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Medicare beneficiaries can receive a number of free preventive services. You get an annual free "wellness" visit to develop or update a personalized prevention plan. Beneficiaries also get a free cardiovascular screening every five years, annual mammograms, annual flu shots, and screenings for cervical, prostate and colorectal cancers.
Medicare Offers More Free Preventive Services
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Although most Medicare Advantage plans have been covering telehealth for years, traditional Medicare used to restrict the service only to certain devices and practitioners, and patients had to be at a Medicare facility. When the coronavirus pandemic hit, telehealth was expanded so that patients could use smartphones in their own homes to consult with a broader range of medical professionals, a feature that could become permanent.
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While Medicare covers your health care, it generally does not cover long-term care—an important distinction. Under certain conditions, particularly after a hospitalization to treat an acute-care episode, Medicare will pay for medically necessary skilled-nursing facility or home health care. But Medicare generally does not cover costs for "custodial care"—that is, care that helps you with activities of daily living, such as dressing and bathing. To cover those costs, you will have to rely on your savings, long-term-care insurance or Medicaid—if you meet the income and asset requirements. Traditional Medicare also doesn't cover routine dental or eye care and some items such as dentures or hearing aids.
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Medicare Expands Telehealth Offerings
What Medicare Does Not Cover
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If you disagree with a coverage or payment decision made by Medicare or a Medicare health plan, you can file an appeal at Medicare.gov. The appeals process has five levels, and you can generally go up a level if your appeal is denied at a previous level. Gather any information that may help your case from your doctor, health care provider or supplier. If you think your health would be seriously harmed by waiting for a decision, you can ask for a fast decision to be made and if your doctor or Medicare plan agrees, the plan must make a decision within 72 hours.
You Have the Right to Appeal a Medicare Decision
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Social Security Basics: 12 Things You Must Know About Claiming and Maximizing Your Social Security Benefits
For many Americans, Social Security benefits are the bedrock of retirement income so maximizing this stream of income is critical.
The rules for claiming Social Security benefits can be complex, but this guide will help you successfully navigate the details. Educating yourself can ensure that you claim the maximum amount to which you are entitled.
Here are 12 essential details you need to know.
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Know Your Social Security ‘Full Retirement Age’
Claiming Social Security benefits at the right time means more money in your pocket. Here's a guide to everything from knowing your full retirement age to taking Social Security spousal benefits.
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Getting Married? Let's Talk Taxes
Congratulations if you're getting (or got) married this year! I hope you and your new spouse have a long and wonderful life together. As you've probably guessed, things will be different in so many ways once the wedding and honeymoon are over. Many of the changes will be immediate and clear, but some aspects of the transition from single to married life will be quite complicated and might not become apparent for a while – like your taxes.
When you file your federal income tax return next year, be prepared for changes. The most obvious difference is that you and your new spouse can file just one tax return together, instead of each of you filing your own return (although you still have the option of filing two separate returns). Also expect some variation in the tax breaks available to you. You might qualify for some additional credits, deductions, or exclusions once you're married – but you might lose some, too. There are also a few things you can do before the end of the year that could cut your tax bill when you file your return next year, impact your tax refund, avoid problems with the IRS, or even save money for retirement.
But don't start feeling anxious or overwhelmed by all the potential twists and turns just yet. We'll walk you through the most common tax changes and requirements newlyweds face so you can prepare for them in advance. That way, when you're ready to work on your 2022 tax return next year, you'll already have a greater understanding of what to expect and how to deal with any marriage-related issues that may pop up.
Taxes are different when you're married vs. single. Get up-to-speed now on the tax changes you'll see after tying the knot.
How to Qualify for Public Service Loan Forgiveness
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Here's a guide to everything from knowing your full retirement age to taking Social Security spousal benefits.
BASICS
Social Security Basics:
12 Things You Must
Know About Social Security Benefits
Finance Fundamentals
It comes down to what type of owner you are. Do you like to hold onto your car for years or switch it out frequently? How you answer could help steer your decision.
Should I Buy or Lease a Car?
College sticker shock when you first see the bill for tuition, room and board (and all those nebulous activity fees) is bad enough.
11 Things You Don’t Need for College
Sharing the same financial goals and being open about how you’re doing can be great for your relationship.
Financial Conversation Starters for Couples
CARS
COLLEGE
PERSONAL FINANCE
LIFE INSURANCE
HAPPY RETIREMENT
The idea of retiring, packing up and starting may sound intriguing, but have you really thought it out? Some issues to take into consideration first.
Moving to Another State in Retirement? What You Need to Know
Millennials are feeling the need for life insurance due to COVID-19, and the way they’re shopping for it is different than in the past.
How Millennials Are Changing the Life Insurance Game
MEDICARE
There’s Medicare Part A,
Part B, Part D, Medigap plans, Medicare Advantage plans
and so on. We sort out the confusion about signing up
for Medicare—and much more.
Medicare Basics: 11 Things You Need to Know
The COVID-19 pandemic isn’t going away soon. This health crisis is dangerous for older Americans. Here is an overview of what you need to cover.
ESTATE PLANNING
Estate Planning During a Pandemic – Quit Stalling
LONG TERM CARE INSURANCE
Your retirement plan isn’t complete until you’ve looked into getting the insurance you need, including a plan for long-term care.
Important Planning Considerations: Insurance & Long-Term Care
RETIREMENT PLANNING
There's tons of advice about how big your nest egg should be for retirement but focusing too much on a single figure can lead to complacency.
Don't Get Too Hung Up on a Retirement Savings Number
HEALTH INSURANCE
You may receive a bill because your insurance company denied a claim—but that doesn’t mean you have to pay it.
RETIREMENT
To have a happy, successful retirement, you need to do more than maximize your return on investment, you need to maximize your return on time.
Retirees: Go Ahead and Spend More in the Go-Go Years
How to Appeal an Unexpected Medical Bill
MAKING YOUR MONEY LAST
Most people think of reverse mortgages as just a standalone loan. But some financial experts are seeing them as an investment strategy that lets people stay in their homes as they age.
Turning a Reverse Mortgage into a Retirement Investment Tool
Retirement Living
Your retirement plan needs to take a holistic approach. Follow these six signposts to find your way.
RETIREMENT Planning
6 Things You Can Do Right Now to Ensure Your Money Will Last in Retirement
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Saving for a rainy day can be a tall order, especially if you have recently experienced a financial setback. Taking even small steps can help you work toward the larger goal of building up your emergency savings.
SAVINGS
Rebuilding Emergency Savings: Take a Realistic Approach
Financial Learning Center Resources
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To have a happy, successful retirement, you need to do more than maximize your return on investment, you need to maximize your return on time.
Financial Learning Center
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There’s Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare—and much more.
There’s no one-size-fits-all formula for how much you’ll need.
Emergency Funds: How to Get Started
You worked hard to build your retirement nest egg. But do you know how to minimize taxes on your savings?
RETIREMENT
10 Questions Retirees Often Get Wrong About Taxes in Retirement
It’s often smart to borrow to boost your income and your assets.
Good Debt, Bad Debt: Knowing the Difference
CREDIT & DEBT
MEDICARE
Medicare Basics: 11 Things You Need to Know
SOCIAL SECURITY
Why visit a government office to get your Social Security business done? You can do much of that online.
14 Social Security Tasks You Can Do Online
Finding the lowest rate to protect you and your vehicle can be a challenge.
Reshop Your Car Insurance
INSURANCE
Parents may now use money from their 529 college-savings plans to help their children pay off student loans.
A New Way to Pay College Loans
STUDENT LOANS
Kiplinger Today
People have lots of questions about the new $3,000 or $3,600 child tax credit and the advance payments that the IRS will send to most families in 2021. Here are answers to some of those questions.
CORONAVIRUS AND YOUR MONEY
MOBILE VERSION TO BE COMPLETED AFTER DESKTOP APPROVAL
There are limits on what debt collectors can do to recoup what you owe. If you have medical debts, you have even more rights.
ESTATE PLANNING
How to Keep Tabs on Your Credit Reports
Free weekly access is ending, but several services let you view your credit files more than once a year.
CORONAVIRUS AND YOUR MONEY
RETIREMENT
You might be surprised to see some of the things you'll find yourself spending less or more on in your golden years.
10 Things You'll Spend Less and More on in Retirement
Retirement Living
CORONAVIRUS AND YOUR MONEY
The pandemic has created significant challenges for all types of senior living communities.
A COVID Storm Hits Senior Living
TRAVEL
Retirees wanting to take a cruise should plan for additional safety measures, such as temperature checks and wearing a mask in public areas.
How Cruise Ships Are Setting Sail During COVID
Use our road map to find an advisor who will truly look out for your best interests.
Financial Planning
How to Find a Financial Planner You Trust
Financial Learning Center Resources
Need a Financial Planner?
Long-Term Care Insurance
Auto and Home Insurance
Mortgage Discount Program
Synchrony Bank
Savings Program
403(b) Field Guide
Getting Married? Let's Talk Taxes
Millennials Want a Different Kind of Retirement
Taxes are different when you're married vs. single. Get up-to-speed now on the tax changes you'll see after tying the knot.
Here’s what Millennials’ retirement dreams look like… and how they can get there.
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The Department of Education revamped the Public Service Loan Forgiveness program started under the Bush administration. See if you qualify for student loan forgiveness.
PERSONAL FINANCE
GETTING MARRIED
PAYING FOR COLLEGE
How to Qualify for Public Service Loan Forgiveness
Kiplinger Today
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Now Is the Time to Protect Your
Health Care Decision-Making Rights
Even an expense can be viewed as an “investment” if that expense saves money in other ways. Take energy-efficient home upgrades, for example. If it costs $3,000 to insulate a home with new technology and that saves $50 per month on the power bill, then that $3,000 cost should not be viewed just as an expense. It should also be considered an investment. That $50 saving per month equates to annual savings of $600, which goes directly back into the homeowner’s pocket.
You can think about it like investing $3,000 in a bond or CD that pays interest of $600 per year, which is the same as earning a 20% return. It shouldn’t matter whether that $600 comes from interest on an investment or savings from an expense. At the end of the day, it’s money back in your pocket.
Expenses as a Return on Investment
How to Appeal an Unexpected Medical Bill
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Getting a bill for a medical procedure or an appointment you thought your insurance would cover can throw you for a loop. But if you think the bill was sent to you in error or you believe the amount listed is wrong, you can—and should—fight back. First, though, you need to know common mistakes to look for, as well as what your insurance plan does and does not cover.
Start by reviewing your insurer’s explanation of benefits. Was the service in network—that is, from providers that have typically agreed to reduced reimbursement from your insurance company? Next, call your insurer and ask the insurance representative to explain why the claim was denied (in part or in full), why certain services weren’t covered and what you need to do to fix it.
Denials of claims for in-network procedures are usually the easiest to resolve, says Katalin Goencz, a medical insurance and reimbursement specialist in Stamford, Conn. (Goencz also serves as the president of the nonprofit group Alliance of Claims Assistance Professionals.) If a provider sends incorrect information, it is required to resubmit corrected info directly to the insurance company once the provider has been alerted, she says. For example, an error in how a procedure was coded could lead to a denial, as could an outdated insurance card.
In some cases, you could simply be billed erroneously. For example, the Coronavirus Aid, Relief and Economic Security (CARES) Act mandated that providers offer COVID-19 vaccines and boosters at no charge. Providers are prohibited from charging co-payments or administrative fees. However, you could receive a bill for a COVID-19 vaccination if the provider bills you directly instead of your insurer or due to human error in medical billing systems. If you’re charged for a vaccine, call your provider and dispute the charges. Your insurer may also be willing to help you get the bill waived.
Likewise, the Affordable Care Act requires your insurance to cover all of the costs of annual physical exams and other preventive care. However, if your doctor decides to order extra tests, such as an electro-cardiogram to track heart issues, your insurance company may conclude that the service isn’t a necessary part of your physical exam and send you a bill.
You may receive a bill because your insurance company denied a claim—but that doesn’t mean you have to pay it.
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Inflation tops health care costs as the biggest concern, and many preretirees are boosting their saving rate.
The pandemic has altered retirement plans for some Americans, and inflation has emerged as a top concern, according to a new national poll of retirees and near-retirees by Kiplinger and wealth management firm Personal Capital.
One-third of respondents in the poll say the pandemic has convinced them that they will need a bigger nest egg for retirement. And 36% believe it has lowered their current (or anticipated) standard of living. Nevertheless, most respondents say they are still confident that they will have enough income to live comfortably throughout retirement.
Among those who are planning to retire within the next five years, more than four out of 10 have already started saving more. Nearly one-fourth have delayed their retirement date, and a similar percentage say they now plan to work part-time in retirement.
Investors have largely stayed the course since early 2020, despite a volatile stock market. Most respondents (63%) say their investment outlook has not changed since early 2020, even after a sudden but short-lived bear market that was followed by stocks scaling to new heights. But more than one-fifth say they have become more risk averse after seeing how quickly the market can change. Only 13% report feeling more bullish about stocks.
Higher-income investors ($200,000+) were almost three times more likely than less-affluent investors to say they became increasingly bullish in 2020 and added stocks to their portfolio. They were also more likely to report a “significant” increase in the value of their portfolio during the pandemic compared with investors who have lower income. The asset allocation of investors remains conservative across genders and ages and regardless of whether investors are retired or not. On average, portfolios were made up of 35% stocks, 26% cash, 15% bonds, 9% real estate and 15% other. (Figures are medians unless otherwise indicated.)
Has the pandemic changed your current or anticipated standard of living in retirement?
• No, my (our) anticipated standard of living remains the same: 58%
• Yes, but only lowered it slightly: 27%
• Yes, significantly for the worse: 9%
• Yes, my (our) standard of living will likely be better than anticipated: 6%
6. Who Is Your Financial Power of Attorney?
This document is a staple of any estate plan, allowing your parents to name a primary and secondary person to make financial decisions on their behalf if they become incapacitated.
If you are named as the person to make financial decisions, find out where all of your parents’ financial assets are held. In addition, obtain information about their Medicare policy, any pensions and Social Security benefits. It even helps to know their utilities companies, just in case you need to pay these bills and must prove power of attorney.
Living a Life of Purpose after Retirement: 3 Action Steps to Take
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When someone asks about what you do, the answer shouldn’t be, “I’m retired.” There is more to the second half of your life … a lot more.
Action #1: Reinvent Yourself
St. Augustine said that asking yourself the question of your own legacy — “What do I wish to be remembered for?” — is the beginning of adulthood.
In Bob Buford’s book Halftime, Bob quotes Matthew 13:5-9, which illustrates the eventual harvest of a farmer who sows his seed. Bob uses this verse to point toward his own epitaph of 100x. He says, “I want to be remembered as the seed that was planted in good soil and multiplied a hundred-fold. It is how I wish to live…how I attempt to envision my own legacy…to be a symbol of higher yields, in life and in death.”
The theme of the book is what the title suggests: that wherever you are right now, you are at halftime in your life, and the second half should be the better half.
Every day up until your retirement transition, you dedicated eight or more of the 24 hours a day that you had to someone or something to earn a living. That commitment of time and what you were responsible for during that time manifests into a sense of purpose. When that time commitment goes away, so can that sense of purpose.
Your purpose while working may have been closely associated with your daily projects, leading a team, fulfilling a role or other responsibilities. It could have been a sense of belonging to a team, a brotherhood (or sisterhood), a company or group that gave you motivation each day to go to work. This is all left behind once you retire, and what often happens after the “retirement party” is over is the onset of feeling lost, unfulfilled, bored or even depressed.
This underscores the importance of viewing retirement as a transition, not as your new reality.
When I consult with clients who are retiring, I often encourage them to begin thinking about how they will spend their time once they make the transition. This conversation is not only important for cash flow planning, but it is the first step in helping them begin to think beyond the transition of retirement and about their purpose.
Playing golf, traveling and spending time with grandkids are all great things, but they are not anyone’s purpose. When asked what someone does, unless they are a professional golfer, they aren’t going to say they golf. They may play golf, but it is not their purpose.
Author and futurist Buckminster Fuller has a question designed for finding your life’s mission: “What is it on this planet that needs doing that I know something about, that probably won’t happen unless I take responsibility for it?”
The transition of retirement is not the destination; it is the transition to what is next. It is your opportunity to reinvent yourself and live out the second half of your life with purpose.
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3 Strategies to Avoid Running
Out of Money in Retirement
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For a financially sustainable retirement that could last 30 years or more, here are three ways to help manage your risks and avoid financial roadblocks in your golden years.
The trend of increasing life expectancy means that Americans are much more likely to live 25, 30 or even 35 years in retirement. The benefits of this trend include spending more time with your family and a higher chance of meeting your great-grandchildren. The downsides include the increased potential for running out of money close to the end of this retirement.
Today’s retirees can expect to live 40% longer than those who retired 70 years ago. Recent research reveals that affluent Americans are likely to live longer. This means that if you’ve had consistent access to health care and high income, you are more likely to enjoy a longer lifespan. Men in the top quintile of income born in 1960 will live on average 12.7 years longer than men who are in the lowest quintile of income; for women the equivalent is 13.6 years.
These raw numbers can be headache-inducing. However, the implications are profound. What they mean basically is that those who have recently retired or who are getting ready to retire, one out of three women and one in five men can expect to live to 90 years or beyond.
As retirements lengthen, they require more financial resources to support not only day-to-day expenses, but also the increased health care expenses that can crop up due to aging. It’s no surprise then, that 60% of pre-retirees surveyed by Allianz fear running out of money in retirement.
Fortunately, holistic retirement planning built around three strategies — minimizing taxes, managing savings and reducing market downside risks — can mitigate the risk of running out of money in retirement.
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Do You Want to Pay Cash or Finance?
Depending on interest rates, it may make sense to pay cash if you have sufficient cash available. If you have $50K sitting in cash earning 1% but your loan would be at 6%, it may make financial sense to pay cash. If the $50K is all you have in emergency savings, you may not want to tie up funds in a depreciating asset and prefer to go the finance route, especially if you are still working. Another consideration would be the probability of you replacing that $50K with new savings once it has been used to buy the car. Some people psychologically have a harder time paying themselves back than paying the bank. Interest rates for new cars are usually lower than for used cars and often the dealer may offer very low-interest financing.
If your $50K is invested in the equity market and you expect a 7% return or more over time (although the market can go either way), you may prefer to finance and leave your money to grow.
Another important aspect for retired clients is if your money is all in an IRA or other retirement account — taking out a $50K lump sum to buy a car may actually be a $70K withdrawal once you factor in taxes and may push you into a higher tax bracket for that year.
Maintenance and Depreciation Costs
If you are buying a car, you would want to check into what is covered under warranty and for how long. Anything not covered would be your responsibility and an extra expense. Some warranties on new cars are not worth the paper they are printed on (expensive mechanical systems that tend to give trouble are sometimes not covered) and often the dealer will try and talk you into purchasing an extended warranty.
Should you buy an extended warranty? Well, it’s a gamble that works similar to insurance, but you would want to understand the types of repairs you are insuring against to make sure the coverage is worth it (they don’t cover everything). Some warranties are expensive, and it may make sense to just save the cash you would pay for the warranty in case the car needs repairs. If you cannot afford to repair the car if you had a costly problem, then it may make sense.
Another point to consider is if you have an accident with a car you own, when you try to resell it you are going to get a lower value for it. Some insurance policies offer coverage for this possibility. Before choosing a car, check out resale values for that type of car so when you are ready to sell, you will have an idea on the future valuation.
In order to get a sense of how much a car costs, TrueCar.com or Edmunds.com are great tools. TrueCar aggregates all the new or used cars in the area based upon factors you determine (make, year, model, etc.).
Most car dealers have some negotiating room, which can be up to a couple thousand dollars, especially if a new model is coming out, so do your research before negotiating.
Things to Consider When Buying a Car
Lease Commitment
If you tend to keep cars for a long time, purchasing may be the way to go, but if a shiny new toy every few years is your thing, you might want to look into leasing. If you believe your circumstances may change, such as a new baby on the way, elderly parents coming to live with you or a future move from a summer climate to a winter climate, leasing provides more flexibility since you are not committed to the car for more than two to four years. Also, you will likely be able to get more car for your money with a lease.
There is usually an upfront cost to leasing, which is an amount due at signing (tax, tag, title, down payment, delivery costs, etc.). This lump sum usually reduces your monthly payments and may be required depending on your credit. Some dealers offer $0 down, but all this does is increase your monthly payments; it is all a numbers game — a higher down payment means lower monthly payment and vice versa. To get an idea on what you are really paying each month on average, you may want to divide the down payment by the months of the lease.
Maintenance & Mileage
Some brands have scheduled maintenance included, which can be quite convenient. However, there are also several coverages, such as tire protection and dent and scratch insurance, that you can buy that will increase your lease payment. Most standard lease offers allow 10,000-mile limits per year. If you drive more than 10,000 miles, this will also increase your payments on the front end, or on the back end when you return the car you will be required to pay for the extra miles.
It is usually cheaper to pay for the miles before you return the car, and in some cases there is a time frame (you have to buy the extra miles three months before the end of the lease). Extra mileage can range from around $0.15 to $0.30 per mile and can add up fairly quickly. At $0.30 a mile 3,000 extra miles will cost you $900.
So, if you drive more than 15,000 miles annually, purchasing a car maybe cheaper for you — and if you are driving 25,000 miles a year this can get restrictive and expensive. Keep in mind even on a purchased car, the increased mileage will fetch you a lower sales price when you are ready to sell anyway.
Things to Consider When Leasing a Car
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NYSUT NOTE: Interested in buying or leasing a new vehicle? Take advantage of the NYSUT Member Benefits Corporation-endorsed Buyer's Edge, Inc. program. This unique buying service can be used to purchase a variety of major products and services, including new and used vehicles. Get more information on Buyers Edge, Inc. and how to save on your purchases by clicking here.
This article was written by and presents the views of our contributing adviser(s), not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Roxanne Alexander, CFP®, CAIA, AIF®, ADPA®
Senior Financial Adviser, Evensky & Katz/Foldes Financial Wealth Management
Roxanne Alexander is a senior financial adviser with Evensky & Katz/Foldes Financial handling client analysis on investments, insurance, annuities, college planning and developing investment policies. Prior to this, she was a senior vice president at Evensky & Katz working with both individual and institutional clients. She has a bachelor’s in accounting and business management from the University of the West Indies, she received an MBA at the University of Miami in finance and investments.
Should I Buy or Lease a Car?
Insurance Costs
Leases also require full insurance coverage to protect you and the leasing company, so if you want to pay for less insurance, purchasing may be a better alternative. Additionally, leased cars usually have GAP insurance built in; this pays the difference between what you owe and what your car is worth if stolen or totaled in an accident. Loans do not usually have this coverage, so you would need to check with your insurance company to see if this is something they offer.
There are some companies/websites that will allow you to lease a car on a month-to-month basis, which may be beneficial depending on your circumstances. If you have to terminate your lease early, www.swapalease.com is a useful website that I have used several times in the past and found very efficient; however, not all car brands are supported.
Tax Benefits
Lastly, if you own your own business and can use lease payments or mileage allowance as a tax write-off, this may be another factor to consider.
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New Hardcopy Textbooks
For decades, universities required students to purchase those 10-pound tomes of knowledge––their prices even heftier than their weight. But recently, hardcopy textbooks have given way to digital e-books. According to Educause, a non-profit advocating for information technology in higher education, the number of college students using an e-textbook for coursework rose from 42% in 2012 to 66% in 2016.
Depending on the university, students may either purchase a subscription code for e-textbooks through their school, or purchase e-textbooks off of popular platforms such as Bookshelf, McGraw Hill-Connect, and Google Books. With one subscription or account, students can access the textbook across multiple devices, including their laptop, phone, or even a touch-screen tablet to take notes. Platforms themselves offer a range of functions, from basic highlighting, to annotation, to embedded quizzes.
The shift hasn’t just been to digital; renting a hardcopy book (consider pioneer Chegg.com for this) has become just as popular as owning one, and it’s becoming easier to get by with used text as well. Sites such as SlugBooks.com, CampusBooks.com and BookFinder.com can help you comparison-shop for new and used books, e-books, and rentals. If you are looking specifically for second-hand books, students often sell their old textbooks on eBay, Facebook or other marketplaces.
Laptops have become the central workstation for students. Know which features are necessary, and which aren’t.
Students should strive for portability, long battery life, ample storage space, and powerful CPUs––the portion of a computer that retrieves and executes instructions. Premium features such as 4K displays are nice to have, but they drive up the cost and drive down battery life.
You can find a laptop that hits all the necessary requirements under $1,000. Here are three great examples.
The 2021 HP Envy 13 offers the best of both worlds: efficiency and affordability at $749.99 (retail). The powerful performance from the 11th Gen Core i5 CPU, coupled with the longevity of a 10-hour battery life, will power you through all-day studying (or gaming). At the feather’s weight of 2.9 pounds, HP Envy 13 also boasts a 13.3-inch screen with slim bezels (the framing around the laptop) and a wide and bright 1080p display. Download as many PDFs as you want––256GB allows you ample space.
If the student prefers MacOS over Windows10, then consider the Apple MacBook Air of late 2020, whose M1 chip makes it one of the fastest ultrathin laptops ever. At $849.99, you’ll enjoy a wide 13.3-inch display, an air-like weight at 2.8 pounds, and a 14-15-hour battery life that’s unrivaled by any Windows10 laptop. Several other features can come in clutch, such as the built-in 720p webcam for virtual sessions and the 256 GB of storage space.
If the student values touch-screen capabilities, then consider Microsoft’s Surface Pro 7 at $749.99. Combining the best features of a laptop and a tablet, this ultra-slim 2-in-1 runs all your favorite Windows applications while allowing you to draw and touch the 12.3” display. The built-in kickstand, keyboard add-on (an additional $270), and Surface Pen add-on (an additional $70) can quickly transform the tablet to a laptop that weighs less than two pounds. The 10.5 hours of battery life and 128GB storage space are impressive for a hybrid this size.
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Fancy Laptop
Parents may recall the satisfaction of handing in a nicely formatted and stapled packet of paper, but that’s a bygone. Universities use online submissions platforms, such as DropBox.com or Canvas, to lessen person-to-person contact while also making it easier for the professors to put each assignment through plagiarism and proofreading software.
If a class does require a hard copy of a paper, most libraries or computer labs have printers that charge pennies a page.
Still not convinced to forgo the printer? Consider the cost. Even the cheapest printers are $40. It’s another $70 or so to replace all four ink cartridges, and $4 per pack of paper.
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Printer
Bringing a car to college is more of a hassle than a convenience––on the student and on the wallet.
In a nine-month academic year, a new small sedan would rack up about $5,000 in expenses, including costs for gas, depreciation, standard maintenance and insurance, according to AAA (yes, a used car would cost less). Parking permits would add even more to the bill, at generally hundreds of dollars a year. Keeping the car parked at home could lower insurance premiums, too.
If you are concerned that your student’s residence is far away from the main campus, most universities have on-campus shuttle services that transport students around the campus and possibly nearby surrounding areas, which typically contain university-affiliated off-campus housing. And of course, there's always bicycles (or now, e-bikes).
If your student still needs to bring a car, consider offsetting the cost by putting it to use with rideshare or delivery work, always popular in college towns. For Uber, drivers must own a four-door vehicle, have a valid U.S. driver’s license, have at least one year of licensed experience in the U.S. (three years if they’re under age 23), and pass the driver screening online. To do DoorDash deliveries, you must have a valid domestic driver’s license, car insurance, and a clean driving record.
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Car
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11 Things You Don’t Need for College
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Kris Hui, a lifestyle Youtuber and San José State University Alumnus, recalls bringing 30 pairs of shoes for her first semester at college. Her side of the closet could only fit three pairs, leaving rain boots and flats sprawled across her room.
Colleges often provide only a dresser and a closet you’ll likely have to share with your roommate. Bulky apparel like jackets and boots can easily fill up most of this prime real estate. Pack light and consider changing out wardrobes during trips home from school. If you thrive on turnover, thrift stores (a college-town staple) can fill gaps. Just remember to sell as much as you buy.
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The Entire Wardrobe
Most freshmen eat the majority of their meals in dining halls or other on-campus food spots. So most kitchen appliances are expensive, bulky, and unnecessary for underclassmen. Exceptions include mini-fridges and microwave ovens, which might be available for rental. However, before making a purchase, check if your student’s setup includes community kitchens, which tend to offer a range of full-scale appliances. Also, check the building rules for restrictions on what appliances are even allowed.
The same thing goes for cleaning gadgets. Robotic vacuums, mops, or air purifiers are not the most cost- or space-efficient methods to stay clean and hygienic. Instead, consider arming students with antibacterial spray or wipes and help them do a deep-clean during visits. And while a hand-held vacuum might make the cut, don't rule out the 19th-century technology of dustpan and broom.
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Appliances
If you have family health coverage, your child likely won’t need campus health insurance because they’ll be covered under that plan until the age of 26. Make sure that your plan covers out-of-network costs or that healthcare providers near the campus are in-network.
If your plan does not cover out-of-network costs or local healthcare providers are not in-network, a campus health-insurance plan may be a more cost-effective option. Compare the price of campus insurance with the cost of keeping the student on your policy and paying extra for any out-of-network care or clinic visits. "Be aware that many schools require kids to show proof of insurance before they start, and some will automatically enroll students in the campus insurance if they don't actively opt out by showing proof of alternative insurance,” says Lisa Zamosky, senior director of consumer affairs for eHealth.inc.
Some college policies have low coverage maximums, which could leave you with thousands of dollars in uninsured expenses. Your child can also buy an individual policy through the local health insurance exchange (search by state at Healthcare.gov).
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Campus Health Insurance
We've seen those fancy dorm rooms on Pinterest, too. Chandeliers? Take a reality check. Outfitting your home away from home is expensive, a potential challenge to maintain, and potentially distracting.
An overly decorated dorm room takes effort, space, money, and time that freshmen don’t have. The last thing a student wants during exam season is to be swamped amid unnecessary clutter. Colleges will provide, at minimum, a bed, mattress, desk, and chair for residential students. Everything beyond that is generally on you. Cheap personalization? Try string lights, plastic ivy, and DIY photo murals.
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Furniture and Decoration
We often counsel buying in bulk to save money, but that almost never breaks right for college students, who generally do not have the storage space for enough bath and shower products for a full school year. Instead, bring a normal set of toiletries and replenish when needed. Many campuses have Amazon Hub, a locker delivery service where products can be shipped and picked up by students.
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Toiletries for the Rest of the Year
Parents’ instinctual fear of under-nourishing their child often means that they’ll pick the biggest meal plan possible, or load up their new student’s meal account with enough money to feed the football team. Unfortunately, meal points or money added to a meal plan usually don’t roll over from year to year – if you don’t use the money, you lose it.
If the school gives first-years an option to choose their meal plan, it’s best to start low and see how much your student needs. Many colleges give you the opportunity to replenish meal-plan funds midyear. You could also supplement your kid’s meal plan with gift cards to local grocery stores or restaurants. You can buy gift cards at GiftCertificates.com.
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A Super-Size Meal Plan
Though borrowing money for the ever-rising cost of higher education is often unavoidable, try to steer clear of private student loans. They usually carry variable rates (as opposed to the fixed rates of federal loans), have fewer repayment options, and allow students to rack up high balances.
Start with the free money (scholarships and grants). Then max out federal loans (subsidized first, then unsubsidized) before even considering private debt. If you’ve maxed out on federal loans and are considering sizable private loans to fill the gap, there’s a decent chance you’re overborrowing.
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Private Loans
First things first: determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. If your birthday falls between 1955 and 1959, it gradually climbs to 67. If you are born in 1960 or later, your full retirement age is 67.
You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.
To be eligible for Social Security benefits in retirement, you must earn at least 40 "credits" throughout your career. You can earn as many as four credits each year, so it takes 10 years of work to qualify for Social Security.
In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.
How Your Social Security Benefits Are Earned
Your Social Security benefits are based on the 35 calendar years in which your income was the highest. If you have fewer than 35 years of earnings, each year with no earnings will be entered as zero. You can increase your Social Security benefit at any time (even via part-time work during retirement) by replacing a zero or low-income year with a higher-income year.
There is a maximum Social Security benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2021, the maximum monthly benefit is $3,113. For someone filing at age 70, the maximum monthly amount is $3,895.
To estimate your benefits, use the Social Security's online Retirement Estimator.
How Your Social Security Benefits Are Calculated
One of the best features of Social Security benefits is that the government adjusts the benefits each year based on inflation. This is called a cost-of-living adjustment, or COLA, and helps your payments keep up with increasing living expenses. The Social Security COLA is quite valuable; it’s the equivalent of buying inflation protection on a private annuity, which can get expensive.
Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. In 2021, Social Security beneficiaries saw a 1.3% COLA in their monthly Social Security benefits. The COLA for 2022 is 5.9%, which is the largest adjustment since 1982.
Here’s what COLAs have been in other recent years:
• 2009: 5.8%
• 2010: 0%
• 2011: 0%
• 2012: 3.6%
• 2013: 1.7%
• 2014: 1.5%
• 2015: 1.7%
• 2016: 0%
• 2017: 0.3%
• 2018: 2%
• 2019: 2.8%
• 2020: 1.6%
• 2021: 1.3%
• 2022: 5.9%
There’s an Annual Social Security Cost-of-Living Adjustment (COLA)
You can collect Social Security benefits as soon as you turn 62, but taking benefits before your full retirement age means a permanent reduction in your payments — of as much as 25% to 30%, depending on your full retirement age.
If you wait until you hit full retirement age to claim Social Security benefits, you’ll receive 100% of your earned benefits. But you can also get a big bonus by waiting to claim your Social Security benefits at age 70 — your monthly Social Security benefit will grow by 8% a year until then. Any cost-of-living adjustments will be included, too, so you don't forgo those by waiting.
Waiting to claim your Social Security benefits can help your heirs as well. By waiting to take her benefit, a high-earning wife, for example, can ensure that her low-earning husband will receive a much higher survivor benefit in the event she dies before him. That extra income of up to 32% could make a big difference.
Your Monthly Social Security Benefits Increase the Longer You Wait to Claim
Social Security Basics: 12 Things You Must Know About Claiming and Maximizing Your Social Security Benefits
Marriage brings couples an advantage when it comes to Social Security. One spouse can take what's called a spousal benefit, worth up to 50% of the other spouse's Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouse's own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 -- bringing in $500 more in income per month. (Note: The higher-earning spouse must apply for his or her own Social Security benefit first.)
Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earner’s benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.
Another spousal-benefit tactic: In some cases, a spouse who is delaying his or her own benefit but still wants to bring some Social Security income into the household can restrict their application to a spousal benefit only. To use this strategy, the spouse restricting his or her application must be at full retirement age and he or she must have been born on or before January 1, 1954. So the lower-earning spouse, say the wife, applies for benefits on her own record. The husband then applies for a spousal benefit only, and he receives half of his wife's benefit while his own benefit continues to grow. When he's 70, he can switch to his own, higher benefit.
There’s a Social Security Spousal Benefit
Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 (or up to age 19 if they are full-time students who haven't graduated from high school) and disabled children older than 18 may be able to receive up to half of a parent's Social Security benefit. The disability must have occurred before the age of 22. The adult child can continue collecting the benefit even after the parent has died, as long as the disability prevents them from working.
Children Can Also Collect Social Security Benefits
Just because you're divorced doesn't mean you've lost the ability to get a Social Security benefit based on your former spouse's earnings. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and you are single.
Like a regular spousal benefit, you can get up to 50% of an ex-spouse's benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex-spouse's record has no effect on his or her benefit or the benefit of your ex's new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still start collecting Social Security based on the ex's record, though you must have been divorced for at least two years.
Note: Ex-spouses can also take a survivor benefit if their ex died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.
A claiming strategy if you’re divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.
You Can Claim Social Security Benefits Earned by Your Ex-Spouse
There aren't many times in life you can take a mulligan. But Social Security offers you the chance for a do-over. Let's say you claimed your benefit, but regretted the decision and wished you had waited. Within the first 12 months of claiming Social Security benefits, you can withdraw the application. You will need to pay back all the benefits you received, including any spousal benefits based on your record. But you can later restart your Social Security benefits at the higher amount you’ll earn by waiting.
Early claimers have another opportunity for a do-over: They can choose to suspend their Social Security benefit at full retirement age. Say you took your benefit at age 62. Once you turn full retirement age, you can suspend your benefit. You don't have to pay back what you have received, and your benefit will earn delayed retirement credits of 8% a year. Wait to restart your benefit at age 70, and your monthly payment will get up to a 32% boost — which could erase much of the reduction from claiming early.
You Can Undo a Social Security Benefits Claiming Decision
Most people know that you pay tax into the Social Security Trust Fund throughout your career, but some retirees don't realize that you also have to pay tax on your Social Security benefits once you start taking them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven't been increased since then.
It doesn't take a lot of income for your Social Security benefits to be taxed. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.
You may also have to pay state income taxes on your Social Security benefits.
You May Have to Pay Taxes on Social Security Benefits
Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test for annual income, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2021 is $18,960. Once you are past full retirement age, the earnings test no longer applies, and you can make as much money as you want with no impact on benefits.
Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full year’s worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed — and increased — as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.
Beware the Social Security Earnings Test
© 2022 The Kiplinger Washington Editors Inc.
Fidelity Investment's 2021 Couples & Money Survey highlights that couples who make decisions about their finances together experience positive benefits. These are heartening statistics in contrast to the 2014 American Psychological Association's survey revealing that 31% of adults with partners cite money as a major source of conflict in a relationship.
In light of these findings, consider these talking points:
• What do you like about your (and your partner's) approach to money today?
• What do you not like about each of your approaches?
• How would you like to improve your conversations about money?
Conversation Starter 1: Money talks pay off
Your finances go beyond your monthly cash flows, annual budget and retirement savings. Depending on the nature of your relationship with your partner, seemingly insignificant daily decisions — like whether to order in dinner or subscribe to that new streaming service — have the power to influence your quality of life now and your opportunities in the future.
Rather than getting overwhelmed by all your choices, focus on the big picture, i.e.: the six interdependent pieces that comprise your unique financial puzzle:
1. Income
2. Expenses
3. Insurance
4. Investments
5. Debt
6. Financial obligations to other people
Conversation Starter 2: Are we focusing on the big picture?
Six key financial planning factors
Caroline Wetzel, Procyon Partners White Paper; Source: Financial Planning: Building Your Personal Roadmap
As part of focusing on the big picture, for your next talking points, consider:
Do you understand the details for each of the six pieces of your own financial puzzle? For instance, how much of your current income are you saving and investing? What kinds of investment risk are you taking across your retirement and brokerage accounts? When it comes to your debt, what is your current payoff plan?
Does your partner understand the details for the six pieces of his/her financial puzzle?
Which pieces of your respective financial puzzles do you share as a couple? Keep separate? Why?
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Ready to do something special with your love? How about taking a little time out together and talking about something that really matters, like each other and your finances?
Here are three conversations starters for the two of you, as you ruminate over some rosé.
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If you share responsibility for any of the six pieces of your unique financial puzzle with your partner, it is essential to continuously clarify the “WHO”:
Conversation Starter 3: When did we last talk about ‘WHO’?
© 2022 The Kiplinger Washington Editors Inc.
Financial Conversation Starters for Couples
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Who is monitoring which piece of the big picture, and where are access details stored? Delegating responsibility for a piece of the financial puzzle is not abdicating responsibility for it. It's OK if your partner takes on responsibility for a piece of the puzzle; however, you have to understand how he/she is doing it. For instance, if you trust your partner to oversee your investments, and he/she engages a fiduciary financial team to manage them, it is essential that you have a relationship with that team, you know how to contact them, and you understand how to access your account information.
How is each piece of the big picture doing (now)? Keep each other accountable for monitoring your respective pieces of your shared financial picture. In the same way that having a membership to the gym doesn't make you physically fit, being responsible for a piece of your shared financial puzzle alone doesn't mean that the piece of the puzzle is being cared for like it should. For example, if you agree as a team that you will save 15% of your income to retirement and investment accounts, who is checking to make sure that you're doing it? How is this person keeping you both informed of your progress, and how are you as a team adjusting your approach in light of your progress?
Ownership: As far as your investments, insurance and the other pieces of your big picture goes, does the titling and do the terms of each piece (still) make sense? Life is constantly changing. Just because you and your partner agreed to structure a shared piece of your financial puzzle in a certain way in the past does not mean that it continues to make sense for you. Perhaps you purchased a life insurance policy to cover your children's education expenses and a large mortgage and now your kids have grown and you've downsized? Maybe you cited someone as a beneficiary on one of your accounts, and you have changed your mind?
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There are so many ways to express your love for your partner. Own your wealth and the power it presents you and your sweetheart every day. Have the courage to be vulnerable with each other, create a safe space to talk about your finances, and strategically use your individual and shared resources to realize your dreams.
NYSUT NOTE: Need help with financial planning? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide you with fee-based financial counseling services. Click here for more information.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Caroline Wetzel, CFP®, CDFA®, AWMA®
Vice President, Private Wealth Adviser, Procyon Partners
Even in retirement, you can expect to pay taxes. Some states are friendlier on this count than others, so it pays to know the situation before you load up the moving van.
Florida, for example, doesn’t have a state income tax. Neither does Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming. All other states do.
So, if you move in retirement from New York to Florida, you rid yourself of a state income tax, but if you move from New Hampshire to North Carolina, you gain a tax.
Another consideration is that 33 states have neither an estate tax or an inheritance tax (on the other hand, several states are much less tax friendly). Let’s revisit our previous example states. New York has an estate tax, but Florida has neither an estate nor an inheritance tax, so once again, a retiree could ditch a tax with a Florida move. New Hampshire and North Carolina have neither of these taxes, so that’s a wash.
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Homeowners Insurance: A Bigger Factor Than You Might Think
Homeowners insurance is a stealth cost that could catch you off guard, depending on which state you are saying farewell to and which state is your destination. The average cost of annual premiums fluctuates wildly, from $376 in Hawaii to $1,353 in Florida to $3,519 in Oklahoma. The potential for local natural disasters (such as hurricanes, tornadoes, and earthquakes) plays a role in those premiums.
It’s worthwhile to research how much more — or less — you could pay for homeowners insurance depending on the direction of your move.
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House Size: Bigger Isn’t Better
When shopping for your new retirement dream home, remember this: Sometimes retirees move into a larger and more expensive house than necessary. Do you need three bedrooms and two bathrooms for two people, even if you expect visits from your children and grandchildren? They can always stay in a nearby hotel. Even if you spring for the hotel bill for their short stay, that likely would be cheaper than the extra money you would pay for a larger house.
Also, don’t forget that the larger the house, the higher the property tax, the higher the insurance bill and the costlier the upkeep.
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Community Personality and Location: Try It on for Size
Before you buy a house in your new location, give the area a trial run by renting first or at least by paying it an extended visit. A place that seems like nirvana may, in reality, be less than what you desire — so you don’t want to invest in a property before you’re certain. I had clients who longed to move from Florida to the mountains of North Carolina in retirement, so for three weeks, they rented a house that was at an elevation of 3,500 feet. It was beautiful, but for them, the downsides became apparent quickly. The drive from the house to the main road took 20 minutes. Then it was another 20 minutes to the nearest supermarket. So, running out for groceries required an 80-minute round trip. They gave up the idea of living on the mountain and found a place closer to town.
You also want to consider what kind of community is important to you. If you desire an active community, then a neighborhood where everyone sits in rocking chairs on the front porch may not be for you. Also, some places (Florida, for example) have strong homeowners associations and subdivisions with deed restrictions, so if you come from a state where you’re not used to such restrictions, it may require an adjustment.
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Family Considerations: Further Apart or Closer Together?
Don’t overlook the emotional impact of leaving your family and friends behind, and perhaps the expense of staying connected. Will you feel the need to travel back often? If so, are there direct flights from a nearby airport?
Sure, we interact these days through Zoom and similar platforms, and that’s a convenient way to see each other, speak with each other and share what’s happening in our lives. But still, is it the best way to feel connected?
On the other hand, some retirees move out of state to be closer to their children and grandchildren. While that can be great for some families, it could be a bumpy road for others. Maybe you leave your friends behind only to discover the family you’ve moved to be nearby are so busy with careers and school that you see much less of them than you’d hoped. Of maybe you see more of them than you’d like! It happens.
The good news is that many people create an enjoyable retirement for themselves by staying put in their home communities, and others create wonderful retirements by venturing out to new places.
You just need to figure out which of these is financially and emotionally best for you.
© 2022 The Kiplinger Washington Editors Inc.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Peter Blatt, Investment Adviser Representative, J.D.
President, Center for Asset Management
Medicare Basics: 11 Things You Need to Know
Medicare Basics: 11 Things You Need to Know
Medicare Basics: 11 Things You Need to Know
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6. Have a contingency plan in place to cover health care costs if you were to find yourself needing long-term nursing care
This is an area that so many people ignore, crossing their fingers and hoping nothing happens to them that would require this level of care. However, considering the cost of nursing care, it is not something to ignore. You need to know how this cost will be covered if you find yourself needing care.
The cheapest way to cover this risk is through insurance, but some may choose to spend down a portion of their assets to cover the costs. Either way, it is a good idea to have this mapped out and know how you plan to cover the cost if incurred.
Wherever you are in your thinking, there is an opportunity to improve your probability for a successful retirement. To get started, figure out where you are, know where you’re going and then identify what obstacles stand in your way.
© 2022 The Kiplinger Washington Editors Inc.
6 Things You Can Do Right Now to Ensure Your Money Will Last in Retirement
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NYSUT NOTE: Did you know that The NYSUT Member Benefits Trust-endorsed Legal Service Plan — provided by the law firm of Feldman, Kramer & Monaco, P.C. — offers expert legal assistance that can assist you with everything from preparing crucial estate planning documents to dealing with traffic violations? Get more information or enroll on the NYSUT member website.
NYSUT NOTE: Looking for assistance with long-term care planning? NYSUT members have access to the NYSUT Member Benefits Trust-endorsed New York Long-Term Care Brokers program. This team of dedicated long-term care planning specialists will provide, explain and compare the different long-term care insurance providers and products to help you choose the best coverage for you. Need more general financial assistance? Check out the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program, which offers a team of Certified Financial Planners® and Registered Investment Advisors to provide you with fee-based financial counseling services. Click here for more information.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Brian Skrobonja, Investment Adviser Representative
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019 and 2020 Brian was awarded Best Wealth Manager and the Future 50 in 2018 from St. Louis Small Business.
One of the biggest dangers in retirement is losing buying power, not merely having inadequate wealth. "The average person invests to spend," Schrager says. "The number you should be worried about is 'How much can I spend each year?' That's not just a function of the stock market; it's a function of interest rates." Higher interest rates can undermine stocks and raise the costs of any variable-rate debt you owe. On the plus side, rising rates can improve returns on fixed-income investments like bonds. Your retirement savings and expenses must fit into any interest rate scenario.
Many retirement spending models use the 4% rule as the average percentage to withdraw each year from an investment portfolio without dipping into the principal. Just like "the number," these targets can also be deceptive as well as dependent on market conditions and life expectancy. The 4% rule originated from an exhaustive 1994 study of historical market conditions, which found that, under every scenario, the withdrawal rate wouldn't deplete a retirement fund for 30 years. But if someone retires at 65 and lives to 100, they could run out of funds under that same model.
These models also don't account for how your spending might change throughout retirement. "As much as we try to calculate what we'll need for retirement, at the end of the day, we don't really know," says Rich Jones, founder of personal finance podcast Paychecks and Balances in Mountain View, Calif. "A lot of people don't think about the cost of living" where they retire. For Jones, retiring in his current, expensive home city would look very different than hanging his hat in Albany, N.Y., where he grew up.
Similarly, your current spending may be nothing like your retirement expenses because when we have more leisure, we often spend more. "The bigger question you should ask is 'What type of life am I aiming for?'" says Chris Browning, host of the Popcorn Finance podcast. "Do you want to live a simpler life and move somewhere cheaper and slower paced than where you're living? Do you want the ability to give money to family and friends?" That clear vision -- backed up with a written budget -- can guide you in setting and adjusting savings targets as well as motivate you to build wealth.
In retirement, health care costs escalate dramatically. Working households spend about 6% of their annual budget on health expenses, versus 14% for retirees, according to the Kaiser Family Foundation. A heterosexual, 65-year-old married couple spends, on average, about $300,000 on medical expenses in retirement, up 88% since 2002, a Fidelity Investments report found. "You need to allow for flexibility because your life is going to change over time," Browning says. Although you may be perfectly healthy now, "things could happen, and there could be additional costs associated with your care."
Understand How Your Spending Might Change
Don't Get Too Hung Up on a Retirement Savings Number
Life insurance
More than 30 million Americans who own life insurance policies don’t have enough coverage, according to a recent LIMRA study. While the average shortfall in coverage is around $225,000, it’s even greater for high income earners.
Why such a large coverage gap? Often, it’s because people tend to treat life insurance as a “check the box” task. They’ll buy a $500,000 policy when they’re younger (figuring it’s more than enough coverage to replace lost income), and then put it aside and forget about it.
But your life and wealth are constantly evolving. A policy that would replace a decade’s worth of income when you were making $50,000/year, suddenly only covers two years when your salary has climbed to $250,000. In addition, you may now have a couple of children — meaning it’s not just a matter of replacing income but funding college educations.
There are no hard and fast rules when it comes to determining how much coverage is enough. The amount will vary greatly depending on your level of wealth, your liabilities and your personal circumstances. Often, the best place to start is by asking yourself the following four questions:
Disability insurance
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How much would your spouse need to pay off any mortgages if something happens to you?
How much beyond what you’ve already saved will be needed to fund your children’s future educational costs?
Are you carrying any other debt or liabilities that will need to be paid off if you die?
And how much of an additional safety net would your family need to ensure they would be able to maintain their lifestyle?
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Keep in mind that the younger and healthier you are when you purchase a policy — whether term, universal or whole life — the easier the process will be and the more affordable the annual premiums.
Even as you get older and your income replacement needs diminish, life insurance can still play an important role in your financial plan. It can serve as an additional source of tax deferral if you’re already maxing out your 401(k) and IRA accounts but want to save more for retirement. It can enhance the value of wealth you place in trust to transfer to the next generation. And it can serve as a way to leverage your RMDs (if you don’t need them for income) to provide an additional legacy for your heirs.
You probably have some sort of group disability insurance through your employer to help replace your income if you ever get sick or injured and are unable to work. But did you know that the average employer policy only covers about 60% of your salary, with a cap on monthly benefits? And if you work in a profession where commissions and bonuses make up a major portion of your compensation, most employer disability policies don’t cover this income.
Take time to figure out just how much any existing disability coverage would provide you with each month. If it isn’t enough to cover your monthly expenses, you may want to consider a supplemental individual disability policy to cover that gap.
Not only will an individual policy travel with you if you switch employers, any monthly benefits you receive from the insurance won’t be taxed (unlike employer-paid policy benefits, which are usually taxable). Make sure, however, to carefully review each policy’s “definition of disability” when shopping for coverage, as they can vary greatly. Some policies might pay if you can’t perform your specific job, while others might only pay if you are completely unable to work. And one policy might only pay benefits for a few years, while another might provide coverage until you reach age 65.
Important Planning Considerations: Insurance & Long-Term Care
Long-term care insurance
According to the U.S. Department of Health and Human Services, 70% of adults who are turning 65 today will require some type of long-term care (e.g., home health care, a nursing home stay, or time in an assisted-living facility) during their lives. These are costs that are NOT covered by Medicare.
And the potential expenses associated with long-term care are so high (on average $55,000/year for a full-time home health aide; and $93,000/year for a semi-private room in a nursing home), that they can quickly drain a lifetime’s worth of savings — assets that might otherwise provide a legacy for your heirs.
Yet long-term care is one of the most challenging insurance needs to plan for. Firstly, none of us want to spend a lot of time contemplating our own physical or cognitive decline. In addition, traditional long-term care insurance carries a very real risk that you might pay years of premiums without ever needing any of the benefits (in which case your premiums are lost). But there are other alternatives such as hybrid life and long-term care insurance policies — where you can “tap into” the policy’s death benefit to pay long-term care expenses, with the remainder being passed on to your heirs when you die — as well as long-term care insurance riders that can be added to certain types of annuities.
The important thing is to not wait until you start experiencing a physical or cognitive decline before seeking out coverage. The underwriting/approval process can be rigorous, and you’ll likely be declined for coverage if a serious ailment or health issue has already arisen.
Typically, in order to be considered a “coverable” long-term care event, you must be unable to perform at least two activities of daily living (ADLs), or suffer a cognitive impairment. There are six common ADLs as defined by most medical professionals:
• Eating — maintaining the ability to feed yourself.
• Dressing — retaining the ability to dress and undress.
• Transferring — having the ability to sit, stand and move about (mobility).
• Bathing — having the ability to bathe/shower and groom yourself.
• Toileting — retaining the ability to safely use (on and off) and maintain proper hygiene.
• Continence — being able to control bodily functions.
Contrary to popular belief, however, you don’t have to be admitted into a nursing home to claim benefits. A typical long-term care policy can be used in a variety of situations, including in-home care, rehabilitation services, assisted living or nursing home care. So, “aging in place” in the comfort of your own home is still a viable option.
Don’t procrastinate
From managing cash flow to funding your children’s education, saving for retirement, and protecting future income and assets, a well-crafted financial plan gives structure and direction to your life. Having the right protections in place serves as your plan’s “safety net” — ready to catch you in the event of a mishap.
Planning, however, isn’t a one-and-done event. It’s a continuous process that needs to evolve as your life and circumstances evolve. Protection needs and coverage amounts will increase and decrease as you progress through various life stages. But the sooner you commit to planning, the easier it will be and the more options you’ll have available to you.
Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax adviser.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Martin Schamis, CFP®
Vice President & Head of Wealth Planning, Janney Montgomery Scott
Martin Schamis is the head of wealth planning at Janney Montgomery Scott, a full-service financial services firm, providing comprehensive financial advice and service to individual, corporate and institutional investors. In his current role, he is responsible for the strategic direction of the Wealth Planning Team, supporting more than 850 financial advisers who advise Janney’s private retail client base. Martin is a Certified Financial Planner™ professional.
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Millennials are comfortable researching and buying nearly everything from groceries to cars online. Life insurers and agents were already making enhancements to digital tools to make it easier for consumers to research and purchase life insurance online, but the pandemic accelerated those improvements. It’s now easier than ever to gather quotes from multiple insurers, research potential providers, and even go through the application and delivery process entirely online.
In addition, physicals for many policies are optional (but you might still want one). A growing number of insurers have ditched the physical examination requirement in recent years, meaning you can purchase a life insurance policy without a medical exam or blood tests. Exam-free policies typically have faster underwriting times than traditional policies, and they offer the convenience of avoiding an additional appointment. But they’re not the right choice for everyone. Exam-free policies, for example, typically cost more than those that include a physical, and coverage may be capped at $500,000.
Your move, millennials: Given the ease with which you can research and purchase insurance, you now have a marketplace of tools and options at your disposal. The sooner you get started the better, since prices only go up as you get older.
Trend alert: The process continues to get faster and easier…
Millennial consumers love customization. With so much information readily available, there is quite a bit you can do on your own if you choose to. And when you are ready and have questions or want a more guided experience, there is a financial professional who will be able to help. Whether by phone, by video, online or the good old-fashioned face-to-face meeting, a financial professional is always a great stop on this journey to be sure you have considered your needs and options. There are nuances to the features and benefits of life insurance, and an experienced professional can help you sort it all out. Among millennials who purchased life insurance in the pandemic, more than half used a live adviser, and 30% used both a live adviser and online elements in their purchase, according to Boston Consulting Group.
In addition to helping provide financial security for your loved ones in case you pass away, many life insurance policies now also offer optional riders (sometimes at additional cost) that can help address other concerns, like chronic illness or longevity risk.
Your move, millennials: Choose the method that works best for you. That may be an online-only purchase, using a live adviser, or some combination of the two. If you’re not sure where to turn for help, your employer may provide access to an adviser. It is also likely that friends or family members may have a referral for you. This is one of the most common ways advisers acquire new clients. Finally, many states have registration requirements and often have online directories of licensed financial professionals. Without a referral from someone you trust, it is a good rule of thumb to select two to three people to interview so that you can find the best person for you.
As millennials become more likely to purchase life insurance, insurers have evolved their offerings to create new products and innovations to meet their needs. That’s great news for first-time applicants who may find a much more painless process than expected.
Good news: You can have it your way!
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Salene Hitchcock-Gear, President of Prudential Individual Life Insurance, Prudential Financial
Salene Hitchcock-Gear represents Prudential as a director on the Women Presidents’ Organization Advisory Board and also serves on the board of trustees of the American College of Financial Services. In addition, Hitchcock-Gear has a bachelor’s degree from the University of Michigan, a Juris Doctor degree from New York University School of Law, as well as FINRA Series 7 and 24 securities licenses. She is a member of the New York State Bar Association.
Advance Health Care Directive
A health care power of attorney is a legal document naming a health care proxy. This is someone who can review your medical records and make decisions, such as how and where you should be treated. This person would come into play if you were incapacitated and unable to make medical decisions for yourself.
Choose your health care proxy carefully. This person will potentially have to make difficult decisions, so a close family friend or relative (who is not a spouse or child) may be a good choice.
Health Care Power of Attorney
A living will is different from a will. It’s a type of advance health care directive that specifically deals with end-of-life decisions for people who are terminally ill or permanently unconscious. This legal document covers specific medical treatments, such as resuscitation, mechanical ventilation, pain management, tube feeding and organ and tissue donation. When writing a living will, think about your values. It’s also important to talk to your doctor, your health care proxy and your family and friends about your decisions.
Living Will
By creating a financial power of attorney, you can choose someone to help with your finances if you become incapacitated and unable to do so. You can choose how much control your power of attorney will have, like accessing accounts, selling stock and managing real estate. Choose someone you trust completely, such as a spouse, an adult child, a close friend or sibling.
Financial Components of an Estate Plan
Financial Power of Attorney
You can set up a qualified trust to protect your assets as you pass them down to your heirs. If your children or grandchildren aren’t old enough or mature enough to handle their inheritance, you can set up a trust that gives them a small amount of money each year, increasing that amount as they get older. You can also leave money specifically for paying down an adult child’s mortgage, wedding expenses or student loans. If charitable giving is a priority of yours in retirement, a charitable trust can protect your assets until they are distributed to the charities of your choosing.
Trusts
One of the biggest mistakes people make is forgetting to update their plans. Life insurance policies, bank and brokerage accounts and retirement plans typically all have beneficiary forms, and these forms typically override your will. You should update all of these forms, along with your estate plan, every couple of years and after every major life change, including marriages, divorces, deaths or births.
Now more than ever, it’s important you discuss with your loved ones your health care wishes and how you wish to pass on your assets. Your loved ones need to know if you have a will or trust, who is listed as beneficiaries on your accounts and who the attorney is who created the plan. Your family should also be introduced to your financial adviser. We enjoy these meetings where we get to know our clients’ kids and grandkids. Those you trust should also know where you keep your important documents. Also, make sure you are reviewing and updating your estate plan when you review your retirement plan each year or every six months.
Estate planning is a key piece of a comprehensive retirement plan.
Beneficiaries
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Tony Drake, CFP®, Investment Advisor Representative
Founder & CEO, Drake and Associates
Tony Drake is a CERTIFIED FINANCIAL PLANNER™ and the founder and CEO of Drake & Associates in Waukesha, Wis. Tony is an Investment Adviser Representative and has helped clients prepare for retirement for more than a decade. He hosts The Retirement Ready Radio Show on WTMJ Radio each week and is featured regularly on TV stations in Milwaukee. Tony is passionate about building strong relationships with his clients so he can help them build a strong plan for their retirement.
© 2022 The Kiplinger Washington Editors Inc.
How much do I need to have saved?
As noted above, typical guidance suggests you should have three to six months’ of basic living expenses in your emergency fund. Granted, that’s a pretty wide range — so what should you aim for? Everyone’s circumstances are different, but if you have children or ongoing medical expenses, it can be wise to plan for the higher threshold or more.
Not to mention, the events of 2020 showed us that certain industries are particularly hard hit by economic crises — for indeterminate periods of time. If you’re in a job that’s vulnerable to market fluctuations, you may need an even higher target.
For most people, essential living expenses include housing, food, utilities, transportation and health care. Depending on your family, they might also include child care or eldercare costs, or education expenses. If you have debts, they might also include minimum monthly payments to your lenders.
To determine your emergency savings target, take an average of how much you spend on all of your essentials in a given month and multiply it by six (or nine or 12, depending on the number of months you want to prepare for). Don’t just estimate: review your bank and credit card statements to get an accurate picture of your spending. The totals may surprise you. Of course, a loss of income isn’t the only type of financial emergency, so you may want to build in a cushion for home repairs, unforeseen medical events or the sudden need to travel or relocate.
Meeting your current expenses can be hard enough without the additional pressure of saving for future unknowns. But understand that funding an emergency reserve doesn’t happen overnight; you can set aside smaller amounts over time until you arrive at your target. There are a number of strategies you can apply as you source this money.
First, you can factor saving for this purpose into your monthly budget. This may require pulling back in certain non-essential categories until you’ve met your goal, but remember that these adjustments can be incremental and temporary. For example, with many of us spending more time at home, money previously spent on dining, entertainment, travel and commuting might be steered toward emergency savings instead.
Next, if you’re working, you can dedicate part of your bonus or tax refund to your emergency reserve. While it can be tempting to treat those dollars as “fun money” or use them on short-term expenses, your future self may thank you for allocating some of them to your rainy-day fund.
Another possibility is starting a side business. If your friends are always saying, “You should charge for that!” when commenting on your hobbies and skills, give it some serious consideration. There are many online platforms that could help you earn money for your time and wares.
Lastly, if you have money invested, take a look at your total financial picture to ensure you’ve got an appropriate ratio of liquid cash on hand for emergencies. A financial professional can be a great resource for providing tailored guidance on asset allocation.
You can also mix and match these strategies to make the task of saving more manageable and potentially meet your goal sooner.
Where do I get the money from?
Put your rainy-day fund in a liquid account — for example, a high-yield savings account — that can be accessed quickly if an emergency strikes. Importantly, keep this money in its own account, separate from those you use to pay bills and make purchases day to day. This way, you’ll have an easier time preserving it for when you really need it.
Where do I keep it?
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If you find yourself in the midst of an emergency and haven’t built up sufficient savings, the guidance above may feel like too little, too late. Fortunately, there are short-term sources of funding and relief available, from temporary loan forbearance and debt relief, to lines of credit and new credit cards with zero-interest promotional periods, to employer assistance and unemployment.
What if I need money fast but don’t have enough in my emergency fund?
© 2022 The Kiplinger Washington Editors Inc.
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Rebuilding Emergency Savings: Take a Realistic Approach
Life is unpredictable — but just because you can’t predict the future, it doesn’t mean you can’t plan for the possibility of financial emergencies.
It’s easy to fall into the trap of “status quo bias,” assuming whatever you have stashed away now is sufficient for the future. However, taking a moment to evaluate your current level of savings versus how much you actually need can motivate you to take action and better prepare your finances for future emergencies.
The bottom line
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Krystal Barker Buissereth, CFA®
Head of Financial Wellness, Morgan Stanley
Krystal Barker Buissereth, CFA®, is a Managing Director and the Head of Financial Wellness for Morgan Stanley at Work. In this role, she is responsible for working with corporate clients and organizations on creating, implementing and managing financial wellness programs that meet the needs of their employees.
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If your spouse dies before you, you can take a Social Security survivor benefit. However, that won't be in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death (or 100% of what your spouse would have been eligible to receive if he or she hadn't yet taken benefits).
A widow or widower can start taking a survivor benefit at age 60. However, the payment will be reduced because it's taken before full retirement age. If you remarry before age 60, you are not eligible for a survivor benefit. If you remarry after age 60, you may be eligible for a survivor benefit based on your former spouse's earnings.
Eligible children who are under age 18 (up to age 19 if attending high school full time) or were disabled before age 22 can also receive a Social Security survivor benefit. It would be worth up to 75% of the deceased's benefit.
There Are Social Security Survivor Benefits for Spouses and Children
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
Find Income-Producing Assets
When you’re looking to fill your income gap, the obvious solution is to generate more income to fill it. How this is done can vary from person to person, but the primary outcome you’re looking for is income regardless of how you go about it.
If you’re wanting to remain active, you can consider taking on a part-time job, start or buy a business, acquire some rental properties or work another full-time job that you enjoy.
If you prefer not to work and want passive income, then you’re going to have to rely on income-oriented investments. This would be through specific types of income annuities or select alternative investments that are designed specifically for income.
When doing this, be sure you are working with a qualified professional who is properly licensed and who can education you on your options.
This article was written by and presents the views of our contributing adviser(s), not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Brian Skrobonja, Investment Adviser Representative
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019 and 2020 Brian was awarded Best Wealth Manager and the Future 50 in 2018 from St. Louis Small Business.
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How to Know When You Can Retire
NYSUT NOTE: Are you considering professional financial planning guidance? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide members with fee-based financial counseling services. Get unbiased advice that is customized specifically for you and your financial situation. Visit the website for more information or to enroll.
© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Learning Center Home
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© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Learning Center Home
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When you’re looking to fill your income gap, the obvious solution is to generate more income to fill it. How this is done can vary from person to person, but the primary outcome you’re looking for is income regardless of how you go about it.
If you’re wanting to remain active, you can consider taking on a part-time job, start or buy a business, acquire some rental properties or work another full-time job that you enjoy.
If you prefer not to work and want passive income, then you’re going to have to rely on income-oriented investments. This would be through specific types of income annuities or select alternative investments that are designed specifically for income.
When doing this, be sure you are working with a qualified professional who is properly licensed and who can education you on your options.
This article was written by and presents the views of our contributing adviser(s), not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Brian Skrobonja, Investment Adviser Representative
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019 and 2020 Brian was awarded Best Wealth Manager and the Future 50 in 2018 from St. Louis Small Business.
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NYSUT NOTE: Are you considering professional financial planning guidance? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide members with fee-based financial counseling services. Get unbiased advice that is customized specifically for you and your financial situation. Visit the website for more information or to enroll.
© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Learning Center Home
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How to Know When You Can Retire
Getty Images
You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Learning Center Home
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How to Know When You Can Retire
How to Know When You Can Retire
Getty Images
You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Learning Center Home
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Find Income-Producing Assets
When you’re looking to fill your income gap, the obvious solution is to generate more income to fill it. How this is done can vary from person to person, but the primary outcome you’re looking for is income regardless of how you go about it.
If you’re wanting to remain active, you can consider taking on a part-time job, start or buy a business, acquire some rental properties or work another full-time job that you enjoy.
If you prefer not to work and want passive income, then you’re going to have to rely on income-oriented investments. This would be through specific types of income annuities or select alternative investments that are designed specifically for income.
When doing this, be sure you are working with a qualified professional who is properly licensed and who can education you on your options.
Get A Checklist
It is always a good idea to work off of a checklist, and regardless of where you are in this process, there are likely a few tweaks that can help increase your probability for a successful retirement. I encourage you to formulate a plan that articulates where you are, where you’re going and what needs to be done to start receiving the income you need.
You can download a retirement checklist for free and use it as a guide as you prepare for your retirement. In addition, taking a retirement readiness quiz can be a good idea, too. A quiz is a useful tool to measure your level of understanding about a topic or your readiness for progressing toward something.
This article was written by and presents the views of our contributing adviser(s), not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Brian Skrobonja, Investment Adviser Representative
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019 and 2020 Brian was awarded Best Wealth Manager and the Future 50 in 2018 from St. Louis Small Business.
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NYSUT NOTE: Are you considering professional financial planning guidance? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide members with fee-based financial counseling services. Get unbiased advice that is customized specifically for you and your financial situation. Visit the website for more information or to enroll.
© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
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You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Learning Center Home
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This article was written by and presents the views of our contributing adviser(s), not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Brian Skrobonja, Investment Adviser Representative
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019 and 2020 Brian was awarded Best Wealth Manager and the Future 50 in 2018 from St. Louis Small Business.
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Learning Center Home
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NYSUT NOTE: Are you considering professional financial planning guidance? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide members with fee-based financial counseling services. Get unbiased advice that is customized specifically for you and your financial situation. Visit the website for more information or to enroll.
© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
Getty Images
You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
Learning Center Home
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This article was written by and presents the views of our contributing adviser(s), not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Brian Skrobonja, Investment Adviser Representative
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019 and 2020 Brian was awarded Best Wealth Manager and the Future 50 in 2018 from St. Louis Small Business.
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Learning Center Home
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NYSUT NOTE: Are you considering professional financial planning guidance? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide members with fee-based financial counseling services. Get unbiased advice that is customized specifically for you and your financial situation. Visit the website for more information or to enroll.
© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
Getty Images
You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Learning Center Home
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Find Income-Producing Assets
When you’re looking to fill your income gap, the obvious solution is to generate more income to fill it. How this is done can vary from person to person, but the primary outcome you’re looking for is income regardless of how you go about it.
If you’re wanting to remain active, you can consider taking on a part-time job, start or buy a business, acquire some rental properties or work another full-time job that you enjoy.
If you prefer not to work and want passive income, then you’re going to have to rely on income-oriented investments. This would be through specific types of income annuities or select alternative investments that are designed specifically for income.
When doing this, be sure you are working with a qualified professional who is properly licensed and who can education you on your options.
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Learning Center Home
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NYSUT NOTE: Are you considering professional financial planning guidance? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide members with fee-based financial counseling services. Get unbiased advice that is customized specifically for you and your financial situation. Visit the website for more information or to enroll.
© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
Getty Images
You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
What to Do and How to Know When You Can Retire
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Learning Center Home
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Find Income-Producing Assets
When you’re looking to fill your income gap, the obvious solution is to generate more income to fill it. How this is done can vary from person to person, but the primary outcome you’re looking for is income regardless of how you go about it.
If you’re wanting to remain active, you can consider taking on a part-time job, start or buy a business, acquire some rental properties or work another full-time job that you enjoy.
If you prefer not to work and want passive income, then you’re going to have to rely on income-oriented investments. This would be through specific types of income annuities or select alternative investments that are designed specifically for income.
When doing this, be sure you are working with a qualified professional who is properly licensed and who can education you on your options.
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Learning Center Home
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NYSUT NOTE: Are you considering professional financial planning guidance? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide members with fee-based financial counseling services. Get unbiased advice that is customized specifically for you and your financial situation. Visit the website for more information or to enroll.
© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
Getty Images
You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
Calculate Your Income Need
Before you jump in and begin picking from the assorted list of investments that you found on the internet or that a broker recommended, you should understand that this is the very last step in the process. You would be well advised to set all of that aside for now and begin with your income needs. You cannot sidestep this, because you have to know this figure before you can do anything else.
To do this right, sort through and total up all your bank payments, then your insurance payments, then your tax payments, then your monthly living expenses, and don’t forget the irregular expenses throughout the year, like gifts and travel. You want to know how much money you spend over the course of a year.
Another point to make here, realize that this spending amount will be for when you are retired – not while you’re working. Things are going to look different for you in retirement, so be sure to think about how you will be spending your time in retirement. You’ll have a lot of time to fill!
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When you’re looking to fill your income gap, the obvious solution is to generate more income to fill it. How this is done can vary from person to person, but the primary outcome you’re looking for is income regardless of how you go about it.
If you’re wanting to remain active, you can consider taking on a part-time job, start or buy a business, acquire some rental properties or work another full-time job that you enjoy.
If you prefer not to work and want passive income, then you’re going to have to rely on income-oriented investments. This would be through specific types of income annuities or select alternative investments that are designed specifically for income.
When doing this, be sure you are working with a qualified professional who is properly licensed and who can education you on your options.
This article was written by and presents the views of our contributing adviser(s), not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Brian Skrobonja, Investment Adviser Representative
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019 and 2020 Brian was awarded Best Wealth Manager and the Future 50 in 2018 from St. Louis Small Business.
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Learning Center Home
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NYSUT NOTE: Are you considering professional financial planning guidance? The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® and Registered Investment Advisors that provide members with fee-based financial counseling services. Get unbiased advice that is customized specifically for you and your financial situation. Visit the website for more information or to enroll.
© 2022 The Kiplinger Washington Editors Inc.
How to Know When You Can Retire
Getty Images
You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually take the plunge.
See if you can relate to this … You have contributed to a 401(k), 403(b) or other employer-sponsored account at work, maybe you’re paying extra on the mortgage or have already paid it off, you keep cash on hand for those unexpected expenses or upcoming big-ticket purchases and you often wish there was a way to pay less in taxes.
You have worked for 30 or 40 years and are at or approaching Social Security eligibility and are now looking at when to take Social Security to maximize your benefits.
Sound familiar? Now, here’s what often comes next … You look at the account statements and begin to wonder whether the investments you have are the right ones to own for where you are in life. You begin weighing your options for making withdrawals from your retirement accounts. You aren’t sure exactly how this is done, and you’re nervous about the risk of a stock market pullback and the possibility of running out of money. And then it happens, you begin searching the internet for answers. (That may even be how you ended up here!) After a lot of searching and reading you realize that there are just too many opinions to choose from, and you resort to simply eliminating options that you’re not as familiar with or have heard negative things about. Then you take what’s left and try to put together a coherent strategy while continuing a search to find information that supports what you have contrived.
This is an all-too-common situation. Maybe this is exactly where you are or perhaps it describes something similar, but either way, you wouldn’t be reading this far into the article without some truth to what I am describing.
Regardless of the details, what you do next is critical to your long-term success. The decisions you make will determine the trajectory of your financial future, and it’s imperative to have a good plan to follow.
Calculate Your Income Gap
Once you have this figure, subtract from it your Social Security or pension benefits. Any fixed income you have coming is already solved for, so we have to figure out what your “income gap” is between what you need and what income you already have coming in.
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Important Planning Considerations: Insurance & Long-Term Care
LONG TERM CARE INSURANCE
Your retirement plan isn’t complete until you’ve looked into getting the insurance you need, including a plan for long-term care.
LIFE INSURANCE
Millennials are feeling the need for life insurance due to COVID-19, and the way they’re shopping for it is different than in the past.
How Millennials Are Changing the Life Insurance Game
ESTATE PLANNING
The COVID-19 pandemic isn’t going away soon. This health crisis is dangerous for older Americans. Here is an overview of what you need to cover.
Estate Planning During a Pandemic
Saving for a rainy day can be a tall order, especially if you have recently experienced a financial setback. Taking even small steps can help you work toward the larger goal of building up your emergency savings.
SAVINGS
Rebuilding Emergency Savings: Take a Realistic Approach
HAPPY RETIREMENT
Finance Fundamentals
When it came time for her first child to go off to college, New Jersey mom Jill Tang went a little overboard with dorm shopping. “I was excited and overspent,” she concedes. “I would say that my daughter used about 70% of what we actually bought. The rest of the 30% we donated or tried to salvage in our own home.”
It’s easy for anxious families to let their guard down and fall victim to the back-to-college marketing ploys, especially after the disruption that COVID-19 had on learning. Deloitte estimates that in 2021, $26.7 billion will be spent this year on back-to-college purchases, with an average of $1,459 spent per child. But every “dorm essential” checklist has items that will still be unused or unopened at the end of the year. Here’s a college un-checklist: everything students do not need.
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New Hardcopy Textbooks
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Fancy Laptop
Laptops have become the central workstation for students. Know which features are necessary, and which aren’t.
Students should strive for portability, long battery life, ample storage space, and powerful CPUs––the portion of a computer that retrieves and executes instructions. Premium features such as 4K displays are nice to have, but they drive up the cost and drive down battery life.
You can find a laptop that hits all the necessary requirements under $1,000. Here are three great examples.
The 2021 HP Envy 13 offers the best of both worlds: efficiency and affordability at $749.99 (retail). The powerful performance from the 11th Gen Core i5 CPU, coupled with the longevity of a 10-hour battery life, will power you through all-day studying (or gaming). At the feather’s weight of 2.9 pounds, HP Envy 13 also boasts a 13.3-inch screen with slim bezels (the framing around the laptop) and a wide and bright 1080p display. Download as many PDFs as you want––256GB allows you ample space.
If the student prefers MacOS over Windows10, then consider the Apple MacBook Air of late 2020, whose M1 chip makes it one of the fastest ultrathin laptops ever. At $849.99, you’ll enjoy a wide 13.3-inch display, an air-like weight at 2.8 pounds, and a 14-15-hour battery life that’s unrivaled by any Windows10 laptop. Several other features can come in clutch, such as the built-in 720p webcam for virtual sessions and the 256 GB of storage space.
If the student values touch-screen capabilities, then consider Microsoft’s Surface Pro 7 at $749.99. Combining the best features of a laptop and a tablet, this ultra-slim 2-in-1 runs all your favorite Windows applications while allowing you to draw and touch the 12.3” display. The built-in kickstand, keyboard add-on (an additional $270), and Surface Pen add-on (an additional $70) can quickly transform the tablet to a laptop that weighs less than two pounds. The 10.5 hours of battery life and 128GB storage space are impressive for a hybrid this size.
Laptops have become the central workstation for students. Know which features are necessary, and which aren’t.
Students should strive for portability, long battery life, ample storage space, and powerful CPUs––the portion of a computer that retrieves and executes instructions. Premium features such as 4K displays are nice to have, but they drive up the cost and drive down battery life.
You can find a laptop that hits all the necessary requirements under $1,000. Here are three great examples.
The 2021 HP Envy 13 offers the best of both worlds: efficiency and affordability at $749.99 (retail). The powerful performance from the 11th Gen Core i5 CPU, coupled with the longevity of a 10-hour battery life, will power you through all-day studying (or gaming). At the feather’s weight of 2.9 pounds, HP Envy 13 also boasts a 13.3-inch screen with slim bezels (the framing around the laptop) and a wide and bright 1080p display. Download as many PDFs as you want––256GB allows you ample space.
If the student prefers MacOS over Windows10, then consider the Apple MacBook Air of late 2020, whose M1 chip makes it one of the fastest ultrathin laptops ever. At $849.99, you’ll enjoy a wide 13.3-inch display, an air-like weight at 2.8 pounds, and a 14-15-hour battery life that’s unrivaled by any Windows10 laptop. Several other features can come in clutch, such as the built-in 720p webcam for virtual sessions and the 256 GB of storage space.
If the student values touch-screen capabilities, then consider Microsoft’s Surface Pro 7 at $749.99. Combining the best features of a laptop and a tablet, this ultra-slim 2-in-1 runs all your favorite Windows applications while allowing you to draw and touch the 12.3” display. The built-in kickstand, keyboard add-on (an additional $270), and Surface Pen add-on (an additional $70) can quickly transform the tablet to a laptop that weighs less than two pounds. The 10.5 hours of battery life and 128GB storage space are impressive for a hybrid this size.
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New Hardcopy Textbooks
For decades, universities required students to purchase those 10-pound tomes of knowledge––their prices even heftier than their weight. But recently, hardcopy textbooks have given way to digital e-books. According to Educause, a non-profit advocating for information technology in higher education, the number of college students using an e-textbook for coursework rose from 42% in 2012 to 66% in 2016.
Depending on the university, students may either purchase a subscription code for e-textbooks through their school, or purchase e-textbooks off of popular platforms such as Bookshelf, McGraw Hill-Connect, and Google Books. With one subscription or account, students can access the textbook across multiple devices, including their laptop, phone, or even a touch-screen tablet to take notes. Platforms themselves offer a range of functions, from basic highlighting, to annotation, to embedded quizzes.
The shift hasn’t just been to digital; renting a hardcopy book (consider pioneer Chegg.com for this) has become just as popular as owning one, and it’s becoming easier to get by with used text as well. Sites such as SlugBooks.com, CampusBooks.com and BookFinder.com can help you comparison-shop for new and used books, e-books, and rentals. If you are looking specifically for second-hand books, students often sell their old textbooks on eBay, Facebook or other marketplaces.
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Car
Bringing a car to college is more of a hassle than a convenience––on the student and on the wallet.
In a nine-month academic year, a new small sedan would rack up about $5,000 in expenses, including costs for gas, depreciation, standard maintenance and insurance, according to AAA (yes, a used car would cost less). Parking permits would add even more to the bill, at generally hundreds of dollars a year. Keeping the car parked at home could lower insurance premiums, too.
If you are concerned that your student’s residence is far away from the main campus, most universities have on-campus shuttle services that transport students around the campus and possibly nearby surrounding areas, which typically contain university-affiliated off-campus housing. And of course, there's always bicycles (or now, e-bikes).
If your student still needs to bring a car, consider offsetting the cost by putting it to use with rideshare or delivery work, always popular in college towns. For Uber, drivers must own a four-door vehicle, have a valid U.S. driver’s license, have at least one year of licensed experience in the U.S. (three years if they’re under age 23), and pass the driver screening online. To do DoorDash deliveries, you must have a valid domestic driver’s license, car insurance, and a clean driving record.
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The Entire Wardrobe
Kris Hui, a lifestyle Youtuber and San José State University Alumnus, recalls bringing 30 pairs of shoes for her first semester at college. Her side of the closet could only fit three pairs, leaving rain boots and flats sprawled across her room.
Colleges often provide only a dresser and a closet you’ll likely have to share with your roommate. Bulky apparel like jackets and boots can easily fill up most of this prime real estate. Pack light and consider changing out wardrobes during trips home from school. If you thrive on turnover, thrift stores (a college-town staple) can fill gaps. Just remember to sell as much as you buy.
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Appliances
Most freshmen eat the majority of their meals in dining halls or other on-campus food spots. So most kitchen appliances are expensive, bulky, and unnecessary for underclassmen. Exceptions include mini-fridges and microwave ovens, which might be available for rental. However, before making a purchase, check if your student’s setup includes community kitchens, which tend to offer a range of full-scale appliances. Also, check the building rules for restrictions on what appliances are even allowed.
The same thing goes for cleaning gadgets. Robotic vacuums, mops, or air purifiers are not the most cost- or space-efficient methods to stay clean and hygienic. Instead, consider arming students with antibacterial spray or wipes and help them do a deep-clean during visits. And while a hand-held vacuum might make the cut, don't rule out the 19th-century technology of dustpan and broom.
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Campus Health Insurance
If you have family health coverage, your child likely won’t need campus health insurance because they’ll be covered under that plan until the age of 26. Make sure that your plan covers out-of-network costs or that healthcare providers near the campus are in-network.
If your plan does not cover out-of-network costs or local healthcare providers are not in-network, a campus health-insurance plan may be a more cost-effective option. Compare the price of campus insurance with the cost of keeping the student on your policy and paying extra for any out-of-network care or clinic visits. "Be aware that many schools require kids to show proof of insurance before they start, and some will automatically enroll students in the campus insurance if they don't actively opt out by showing proof of alternative insurance,” says Lisa Zamosky, senior director of consumer affairs for eHealth.inc.
Some college policies have low coverage maximums, which could leave you with thousands of dollars in uninsured expenses. Your child can also buy an individual policy through the local health insurance exchange (search by state at Healthcare.gov).
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Furniture and Decoration
We've seen those fancy dorm rooms on Pinterest, too. Chandeliers? Take a reality check. Outfitting your home away from home is expensive, a potential challenge to maintain, and potentially distracting.
An overly decorated dorm room takes effort, space, money, and time that freshmen don’t have. The last thing a student wants during exam season is to be swamped amid unnecessary clutter. Colleges will provide, at minimum, a bed, mattress, desk, and chair for residential students. Everything beyond that is generally on you. Cheap personalization? Try string lights, plastic ivy, and DIY photo murals.
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11 Things You Don’t Need for College
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Car
Bringing a car to college is more of a hassle than a convenience––on the student and on the wallet.
In a nine-month academic year, a new small sedan would rack up about $5,000 in expenses, including costs for gas, depreciation, standard maintenance and insurance, according to AAA (yes, a used car would cost less). Parking permits would add even more to the bill, at generally hundreds of dollars a year. Keeping the car parked at home could lower insurance premiums, too.
If you are concerned that your student’s residence is far away from the main campus, most universities have on-campus shuttle services that transport students around the campus and possibly nearby surrounding areas, which typically contain university-affiliated off-campus housing. And of course, there's always bicycles (or now, e-bikes).
If your student still needs to bring a car, consider offsetting the cost by putting it to use with rideshare or delivery work, always popular in college towns. For Uber, drivers must own a four-door vehicle, have a valid U.S. driver’s license, have at least one year of licensed experience in the U.S. (three years if they’re under age 23), and pass the driver screening online. To do DoorDash deliveries, you must have a valid domestic driver’s license, car insurance, and a clean driving record.
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The Entire Wardrobe
Kris Hui, a lifestyle Youtuber and San José State University Alumnus, recalls bringing 30 pairs of shoes for her first semester at college. Her side of the closet could only fit three pairs, leaving rain boots and flats sprawled across her room.
Colleges often provide only a dresser and a closet you’ll likely have to share with your roommate. Bulky apparel like jackets and boots can easily fill up most of this prime real estate. Pack light and consider changing out wardrobes during trips home from school. If you thrive on turnover, thrift stores (a college-town staple) can fill gaps. Just remember to sell as much as you buy.
© 2022 The Kiplinger Washington Editors Inc.
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Know Your Social Security ‘Full Retirement Age’
First things first: determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. If your birthday falls between 1955 and 1959, it gradually climbs to 67. If you are born in 1960 or later, your full retirement age is 67.
You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.
How Your Social Security Benefits Are Earned
To be eligible for Social Security benefits in retirement, you must earn at least 40 "credits" throughout your career. You can earn as many as four credits each year, so it takes 10 years of work to qualify for Social Security.
In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.
How Your Social Security Benefits Are Calculated
Your Social Security benefits are based on the 35 calendar years in which your income was the highest. If you have fewer than 35 years of earnings, each year with no earnings will be entered as zero. You can increase your Social Security benefit at any time (even via part-time work during retirement) by replacing a zero or low-income year with a higher-income year.
There is a maximum Social Security benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2021, the maximum monthly benefit is $3,113. For someone filing at age 70, the maximum monthly amount is $3,895.
To estimate your benefits, use the Social Security's online Retirement Estimator.
There’s an Annual Social Security Cost-of-Living Adjustment (COLA)
One of the best features of Social Security benefits is that the government adjusts the benefits each year based on inflation. This is called a cost-of-living adjustment, or COLA, and helps your payments keep up with increasing living expenses. The Social Security COLA is quite valuable; it’s the equivalent of buying inflation protection on a private annuity, which can get expensive.
Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. In 2021, Social Security beneficiaries saw a 1.3% COLA in their monthly Social Security benefits. The COLA for 2022 is 5.9%, which is the largest adjustment since 1982.
Here’s what COLAs have been in other recent years:
• 2009: 5.8%
• 2010: 0%
• 2011: 0%
• 2012: 3.6%
• 2013: 1.7%
• 2014: 1.5%
• 2015: 1.7%
• 2016: 0%
• 2017: 0.3%
• 2018: 2%
• 2019: 2.8%
• 2020: 1.6%
• 2021: 1.3%
• 2022: 5.9%
Social Security Basics: 12 Things You Must Know About Claiming and Maximizing Your Social Security Benefits
There’s a Social Security Spousal Benefit
Marriage brings couples an advantage when it comes to Social Security. One spouse can take what's called a spousal benefit, worth up to 50% of the other spouse's Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouse's own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 -- bringing in $500 more in income per month. (Note: The higher-earning spouse must apply for his or her own Social Security benefit first.)
Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earner’s benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.
Another spousal-benefit tactic: In some cases, a spouse who is delaying his or her own benefit but still wants to bring some Social Security income into the household can restrict their application to a spousal benefit only. To use this strategy, the spouse restricting his or her application must be at full retirement age and he or she must have been born on or before January 1, 1954. So the lower-earning spouse, say the wife, applies for benefits on her own record. The husband then applies for a spousal benefit only, and he receives half of his wife's benefit while his own benefit continues to grow. When he's 70, he can switch to his own, higher benefit.
Children Can Also Collect Social Security Benefits
Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 (or up to age 19 if they are full-time students who haven't graduated from high school) and disabled children older than 18 may be able to receive up to half of a parent's Social Security benefit. The disability must have occurred before the age of 22. The adult child can continue collecting the benefit even after the parent has died, as long as the disability prevents them from working.
There Are Social Security Survivor Benefits for Spouses and Children
If your spouse dies before you, you can take a Social Security survivor benefit. However, that won't be in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death (or 100% of what your spouse would have been eligible to receive if he or she hadn't yet taken benefits).
A widow or widower can start taking a survivor benefit at age 60. However, the payment will be reduced because it's taken before full retirement age. If you remarry before age 60, you are not eligible for a survivor benefit. If you remarry after age 60, you may be eligible for a survivor benefit based on your former spouse's earnings.
Eligible children who are under age 18 (up to age 19 if attending high school full time) or were disabled before age 22 can also receive a Social Security survivor benefit. It would be worth up to 75% of the deceased's benefit.
You Can Claim Social Security Benefits Earned by Your Ex-Spouse
Just because you're divorced doesn't mean you've lost the ability to get a Social Security benefit based on your former spouse's earnings. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and you are single.
Like a regular spousal benefit, you can get up to 50% of an ex-spouse's benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex-spouse's record has no effect on his or her benefit or the benefit of your ex's new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still start collecting Social Security based on the ex's record, though you must have been divorced for at least two years.
Note: Ex-spouses can also take a survivor benefit if their ex died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.
A claiming strategy if you’re divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.
You Can Claim Social Security Benefits Earned by Your Ex-Spouse
Just because you're divorced doesn't mean you've lost the ability to get a Social Security benefit based on your former spouse's earnings. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and you are single.
Like a regular spousal benefit, you can get up to 50% of an ex-spouse's benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex-spouse's record has no effect on his or her benefit or the benefit of your ex's new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still start collecting Social Security based on the ex's record, though you must have been divorced for at least two years.
Note: Ex-spouses can also take a survivor benefit if their ex died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.
A claiming strategy if you’re divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.
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Social Security Basics: 12 Things You Must Know About Claiming and Maximizing Your Social Security Benefits
There’s a Social Security Spousal Benefit
Marriage brings couples an advantage when it comes to Social Security. One spouse can take what's called a spousal benefit, worth up to 50% of the other spouse's Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouse's own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 -- bringing in $500 more in income per month. (Note: The higher-earning spouse must apply for his or her own Social Security benefit first.)
Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earner’s benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.
Another spousal-benefit tactic: In some cases, a spouse who is delaying his or her own benefit but still wants to bring some Social Security income into the household can restrict their application to a spousal benefit only. To use this strategy, the spouse restricting his or her application must be at full retirement age and he or she must have been born on or before January 1, 1954. So the lower-earning spouse, say the wife, applies for benefits on her own record. The husband then applies for a spousal benefit only, and he receives half of his wife's benefit while his own benefit continues to grow. When he's 70, he can switch to his own, higher benefit.
You May Have to Pay Taxes on Social Security Benefits
Most people know that you pay tax into the Social Security Trust Fund throughout your career, but some retirees don't realize that you also have to pay tax on your Social Security benefits once you start taking them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven't been increased since then.
It doesn't take a lot of income for your Social Security benefits to be taxed. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.
You may also have to pay state income taxes on your Social Security benefits.
© 2022 The Kiplinger Washington Editors Inc.
Fidelity Investment's 2021 Couples & Money Survey highlights that couples who make decisions about their finances together experience positive benefits. These are heartening statistics in contrast to the 2014 American Psychological Association's survey revealing that 31% of adults with partners cite money as a major source of conflict in a relationship.
In light of these findings, consider these talking points:
• What do you like about your (and your partner's) approach to money today?
• What do you not like about each of your approaches?
• How would you like to improve your conversations about money?
What do you like about your (and your partner's) approach to money today?
What do you not like about each of your approaches?
How would you like to improve your conversations about money?
Conversation Starter 1: Money talks pay off
Fidelity Investment's 2021 Couples & Money Survey highlights that couples who make decisions about their finances together experience positive benefits. These are heartening statistics in contrast to the 2014 American Psychological Association's survey revealing that 31% of adults with partners cite money as a major source of conflict in a relationship.
In light of these findings, consider these talking points:
Conversation Starter 2: Are we focusing on the big picture?
Fidelity Investment's 2021 Couples & Money Survey highlights that couples who make decisions about their finances together experience positive benefits. These are heartening statistics in contrast to the 2014 American Psychological Association's survey revealing that 31% of adults with partners cite money as a major source of conflict in a relationship.
In light of these findings, consider these talking points:
What do you like about your (and your partner's) approach to money today?
What do you not like about each of your approaches?
How would you like to improve your conversations about money?
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Conversation Starter 1: Money talks pay off
Fidelity Investment's 2021 Couples & Money Survey highlights that couples who make decisions about their finances together experience positive benefits. These are heartening statistics in contrast to the 2014 American Psychological Association's survey revealing that 31% of adults with partners cite money as a major source of conflict in a relationship.
In light of these findings, consider these talking points:
What do you like about your (and your partner's) approach to money today?
What do you not like about each of your approaches?
How would you like to improve your conversations about money?
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Financial Conversation Starters for Couples
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Taxes: Is Your New State a Friend or Foe?
Even in retirement, you can expect to pay taxes. Some states are friendlier on this count than others, so it pays to know the situation before you load up the moving van.
Florida, for example, doesn’t have a state income tax. Neither does Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming. All other states do.
So, if you move in retirement from New York to Florida, you rid yourself of a state income tax, but if you move from New Hampshire to North Carolina, you gain a tax.
Another consideration is that 33 states have neither an estate tax or an inheritance tax (on the other hand, several states are much less tax friendly). Let’s revisit our previous example states. New York has an estate tax, but Florida has neither an estate nor an inheritance tax, so once again, a retiree could ditch a tax with a Florida move. New Hampshire and North Carolina have neither of these taxes, so that’s a wash.
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Homeowners Insurance: A Bigger Factor Than You Might Think
Homeowners insurance is a stealth cost that could catch you off guard, depending on which state you are saying farewell to and which state is your destination. The average cost of annual premiums fluctuates wildly, from $376 in Hawaii to $1,353 in Florida to $3,519 in Oklahoma. The potential for local natural disasters (such as hurricanes, tornadoes, and earthquakes) plays a role in those premiums.
It’s worthwhile to research how much more — or less — you could pay for homeowners insurance depending on the direction of your move.
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House Size: Bigger Isn’t Better
When shopping for your new retirement dream home, remember this: Sometimes retirees move into a larger and more expensive house than necessary. Do you need three bedrooms and two bathrooms for two people, even if you expect visits from your children and grandchildren? They can always stay in a nearby hotel. Even if you spring for the hotel bill for their short stay, that likely would be cheaper than the extra money you would pay for a larger house.
Also, don’t forget that the larger the house, the higher the property tax, the higher the insurance bill and the costlier the upkeep.
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Moving to Another State in Retirement? What You Need to Know
Taxes: Is Your New State a Friend or Foe?
Even in retirement, you can expect to pay taxes. Some states are friendlier on this count than others, so it pays to know the situation before you load up the moving van.
Florida, for example, doesn’t have a state income tax. Neither does Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming. All other states do.
So, if you move in retirement from New York to Florida, you rid yourself of a state income tax, but if you move from New Hampshire to North Carolina, you gain a tax.
Another consideration is that 33 states have neither an estate tax or an inheritance tax (on the other hand, several states are much less tax friendly). Let’s revisit our previous example states. New York has an estate tax, but Florida has neither an estate nor an inheritance tax, so once again, a retiree could ditch a tax with a Florida move. New Hampshire and North Carolina have neither of these taxes, so that’s a wash.
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Heading into retirement brings a slew of new topics to grapple with, and one of the most maddening may be Medicare. Figuring out when to enroll in Medicare and which parts to enroll in can be daunting even for the savviest retirees. There's Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on.
And what is a doughnut hole, anyway? To help you wade into the waters of this complicated federal health insurance program for retirement-age Americans, here are 11 essential things you must know about Medicare.
Medicare is divided into parts. Part A, which pays for hospital services, is free if either you or your spouse paid Medicare payroll taxes for at least 10 years. (People who aren't eligible for free Part A can pay a monthly premium of several hundred dollars.) Part B covers doctor visits and outpatient services, and it comes with a monthly price tag—the standard monthly premium in 2022 will be $170.10, up from $148.50 per month this year. Part D, which covers prescription-drug costs, also has a monthly charge that varies depending on which plan you choose; the average Part D basic premium for 2022 will be about $33, up from $31.47 this year. In addition to premium costs, you'll also be subject to co-payments, deductibles and other out-of-pocket costs. To find the latest costs, visit Medicare.gov/your-medicare-costs.
Beneficiaries of traditional Medicare will likely want to sign up for a Medigap supplemental insurance plan offered by private insurance companies to help cover deductibles, co-payments and other gaps. You can switch Medigap plans at any time, but you could be charged more or denied coverage based on your health if you choose or change plans more than six months after you first signed up for Part B. Medigap policies are identified by letters A through N. Each policy that goes by the same letter must offer the same basic benefits, and usually the only difference between same-letter policies is the cost. Plan F has been very popular because of its comprehensive coverage, but as of 2020, Plan F (along with Plan C) is unavailable for new enrollees. The closest substitute for Plan F is Plan G, which pays for everything that Plan F did except the Medicare Part B deductible. Anyone enrolled in Medicare before 2020 can still sign up for plans F and C.
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Consider Medicare Advantage for All-in-One Plans
You can choose to sign up for traditional Medicare: Parts A, B and D, and a supplemental Medigap policy. Or, you can go an alternative route by signing up for Medicare Advantage, which provides medical through private insurance companies. These plans also frequently include prescription drug coverage. Also called Part C, Medicare Advantage has a monthly cost, in addition to the Part B premium, that varies depending on which plan you choose. For 2022, the average monthly premium for Advantage plans is $19.
Like traditional Medicare, you'll also be subject to co-payments, deductibles and other out-of-pocket costs. In many cases, Advantage policies charge lower premiums than Medigap plans but have higher cost-sharing. Your choice of providers may be more limited with Medicare Advantage than with traditional Medicare, and recent research has found that sicker enrollees often dump Medicare Advantage in favor of original Medicare.
If your income is above a certain threshold, you'll pay more for Parts B and D. These surcharges are based on your adjusted gross income from two years earlier. In 2022, single filers with an AGI from 2020 that exceeds $91,000 ($182,000 for joint filers) will pay a premium ranging from $238.10 to $578.30 per month, depending on their income. The standard premium in 2022 will be $170.10.
For Part D coverage in 2022, single filers with an AGI from 2020 that is more than $91,000 (or more than $182,000 for joint filers) will pay an extra $12.40 to $77.90 per month, depending on their income.
If you are already taking Social Security benefits, you will be automatically enrolled in Parts A and B at age 65 You can choose to turn down Part B, since it has a monthly cost; if you keep it, the cost will be deducted from your Social Security if you already claimed benefits.
For those who have not started Social Security, you will have to sign yourself up for Parts A and B. The seven-month initial enrollment period begins three months before the month you turn 65 and ends three months after your birthday month. To ensure coverage starts by the time you turn 65, sign up in the first three months.
If you are still working and have health insurance through your employer (or if you’re covered by your working spouse’s employer coverage), you may be able to delay signing up for Medicare. But you will need to follow the rules and must sign up for Medicare within eight months of losing your employer’s coverage to avoid significant penalties when you do eventually enroll.
There are several enrollment periods, in addition to the seven-month initial enrollment period. If you missed signing up for Part B during that initial enrollment period and you aren't working (or aren't covered by your spouse's employer coverage), you can sign up for Part B during the general enrollment period that runs from Jan. 1 to March 31. Coverage will begin on July 1. But you will have to pay a 10% penalty for life for each 12-month period you delay in signing up for Part B. Those who are covered by a current employer's plan, though, can sign up later without penalty during a special enrollment period, which lasts for eight months after you lose that employer coverage. If you miss your special enrollment period, you will need to wait until the general enrollment period to sign up.
Open enrollment runs from Oct. 15 to Dec. 7 every year during which you can change Part D plans or Medicare Advantage plans for the following year, or switch between Medicare Advantage and original Medicare. Advantage enrollees also can switch to a new Advantage plan or original Medicare between Jan. 1 and March 31. And if a Medicare Advantage plan or Part D plan available in your area has a five-star quality rating, you can switch to that plan outside of the open enrollment period.
Medicare Basics: 11 Things You
Need to Know
Medicare Basics: 11 Things You Need to Know
Medicare Basics: 11 Things You Need to Know
In 2020 the dreaded Part D "doughnut hole" was filled. That hole is a coverage gap in which you used to face much higher out-of-pocket costs for your drugs, but that is no longer the case. For 2022, when the total amount your plan has paid for drugs reaches $4,430 then you will pay 25% of any additional costs. (This percentage used to be higher before the gap was closed.) Prescription drug manufacturers pick up 70% of that tab while insurers pay 5%.
Catastrophic coverage, with the government picking up most costs, begins when a patient's out-of-pocket costs reach $7,050, the maximum spending limit for beneficiaries in 2022, which is $500 higher than 2021’s cap. Any deductible paid before you entered the doughnut hole counts toward that annual maximum as does the 25% you contributed while in the doughnut hole and the 70% that pharmaceutical companies paid on your behalf. For the latest information, visit Medicare.gov/drug-coverage-part-d.
Medicare beneficiaries can receive a number of free preventive services. You get an annual free "wellness" visit to develop or update a personalized prevention plan. Beneficiaries also get a free cardiovascular screening every five years, annual mammograms, annual flu shots, and screenings for cervical, prostate and colorectal cancers.
Medicare Basics: 11 Things You Need to Know
Although most Medicare Advantage plans have been covering telehealth for years, traditional Medicare used to restrict the service only to certain devices and practitioners, and patients had to be at a Medicare facility. When the coronavirus pandemic hit, telehealth was expanded so that patients could use smartphones in their own homes to consult with a broader range of medical professionals, a feature that could become permanent.
While Medicare covers your health care, it generally does not cover long-term care—an important distinction. Under certain conditions, particularly after a hospitalization to treat an acute-care episode, Medicare will pay for medically necessary skilled-nursing facility or home health care. But Medicare generally does not cover costs for "custodial care"—that is, care that helps you with activities of daily living, such as dressing and bathing. To cover those costs, you will have to rely on your savings, long-term-care insurance or Medicaid—if you meet the income and asset requirements. Traditional Medicare also doesn't cover routine dental or eye care and some items such as dentures or hearing aids.
If you disagree with a coverage or payment decision made by Medicare or a Medicare health plan, you can file an appeal at Medicare.gov. The appeals process has five levels, and you can generally go up a level if your appeal is denied at a previous level. Gather any information that may help your case from your doctor, health care provider or supplier. If you think your health would be seriously harmed by waiting for a decision, you can ask for a fast decision to be made and if your doctor or Medicare plan agrees, the plan must make a decision within 72 hours.
What do you like about your (and your partner's) approach to money today?
What do you not like about each of your approaches?
How would you like to improve your conversations about money?
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If you’re within six months or so of retirement, there are certain things you need to do now to help prepare yourself for the transition into retirement.
Throughout this retirement preparation process, there will be times when you feel as though you are making a series of rapid-fire micro decisions as you work through Social Security benefits, Medicare options, pension elections and retirement account distributions.
The decisions to be made are many, and understanding the long-term ramifications of those decisions is paramount, considering that your retirement years could be as many as those spent working.
The numerous options you will face can become a labyrinth of choices leading many people to attend YouTube university in search for answers, while leaning on friends and co-workers to fill in the missing pieces. The truth is, people underestimate the complexities that exist with preparing for retirement and find themselves over their head.
Unfortunately, without understanding the long-term effects of one decision over another, a retiree may be well into their retirement before problems begin to surface. For instance,
Inflation will erode your income over time.
Longevity may require your money to last longer than you thought.
Market volatility can deplete your resources.
Heath care expenses can potentially absorb most of what you have.
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Going back to the home construction metaphor, to ensure you have your bases covered and are retirement ready, first consider the cost of the project. It is better to estimate the cost of your retirement now to uncover potential problems before actually retiring. Start by carefully evaluating your current thinking about your situation.
1. Develop an income plan detailing exactly how much income you will need each year to fund your retirement lifestyle
Now, before skipping over this you should consider that your lifestyle will change — along with your tax situation — which means that the amount you need now to live on will not be the same when you retire. You may need to budget even more for your early years of retirement, when you’ll be enjoying the good life. So, it is not a good idea to make general assumptions about your future income needs based on how things are while you’re working.
Carefully consider what will change and what will stay the same once you retire, adding into the mix such things as travel, health care costs and other variable expenses.
2. Identify your income sources and determine exactly how much income will be generated from each source to satisfy your annual income needs
No generalizations here … you should seek to know exactly how much you can expect from each resource you have.
This is where most people begin to struggle, because there is often a disconnect between their mindset around their assets and the need they have from them. There are generally two camps with this:
6 Things You Can Do Right Now to Ensure Your Money Will Last in Retirement
4. Have an income replacement plan in place for your spouse to cover the loss of Social Security or pension income if you were to predecease them
Developing an income strategy for retirement most often means you are relying on a husband and wife’s benefits, but those benefits are only received while both are living (in most cases).
Many people are misled into believing that as you get older your need for life insurance diminishes, and while this may be true for some, for others the need for it may actually rise.
It is a good idea to know the specifics for how benefits will adjust when a death occurs and have a plan in place to replace lost income if it is needed.
5. Have (updated) legal documents in place designating financial power of attorney, medical directives, wills and trusts
Most people kick this can down the road with the idea they will have time to get this done later. (Later meaning when they need it.)
Here is the deal: If you wait until you need these documents it will be too late to get them.
NYSUT NOTE: Did you know that The NYSUT Member Benefits Trust-endorsed Legal Service Plan — provided by the law firm of Feldman, Kramer & Monaco, P.C. — offers expert legal assistance that can assist you with everything from preparing crucial estate planning documents to dealing with traffic violations? Get more information or enroll on the NYSUT member website.
Don't Get Too Hung Up on a Retirement Savings Number
Understand How Your Spending Might Change
One of the biggest dangers in retirement is losing buying power, not merely having inadequate wealth. "The average person invests to spend," Schrager says. "The number you should be worried about is 'How much can I spend each year?' That's not just a function of the stock market; it's a function of interest rates." Higher interest rates can undermine stocks and raise the costs of any variable-rate debt you owe. On the plus side, rising rates can improve returns on fixed-income investments like bonds. Your retirement savings and expenses must fit into any interest rate scenario.
Many retirement spending models use the 4% rule as the average percentage to withdraw each year from an investment portfolio without dipping into the principal. Just like "the number," these targets can also be deceptive as well as dependent on market conditions and life expectancy. The 4% rule originated from an exhaustive 1994 study of historical market conditions, which found that, under every scenario, the withdrawal rate wouldn't deplete a retirement fund for 30 years. But if someone retires at 65 and lives to 100, they could run out of funds under that same model.
These models also don't account for how your spending might change throughout retirement. "As much as we try to calculate what we'll need for retirement, at the end of the day, we don't really know," says Rich Jones, founder of personal finance podcast Paychecks and Balances in Mountain View, Calif. "A lot of people don't think about the cost of living" where they retire. For Jones, retiring in his current, expensive home city would look very different than hanging his hat in Albany, N.Y., where he grew up.
Similarly, your current spending may be nothing like your retirement expenses because when we have more leisure, we often spend more. "The bigger question you should ask is 'What type of life am I aiming for?'" says Chris Browning, host of the Popcorn Finance podcast. "Do you want to live a simpler life and move somewhere cheaper and slower paced than where you're living? Do you want the ability to give money to family and friends?" That clear vision -- backed up with a written budget -- can guide you in setting and adjusting savings targets as well as motivate you to build wealth.
In retirement, health care costs escalate dramatically. Working households spend about 6% of their annual budget on health expenses, versus 14% for retirees, according to the Kaiser Family Foundation. A heterosexual, 65-year-old married couple spends, on average, about $300,000 on medical expenses in retirement, up 88% since 2002, a Fidelity Investments report found. "You need to allow for flexibility because your life is going to change over time," Browning says. Although you may be perfectly healthy now, "things could happen, and there could be additional costs associated with your care."
What do you like about your (and your partner's) approach to money today?
What do you not like about each of your approaches?
How would you like to improve your conversations about money?
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More than 30 million Americans who own life insurance policies don’t have enough coverage, according to a recent LIMRA study. While the average shortfall in coverage is around $225,000, it’s even greater for high income earners.
Why such a large coverage gap? Often, it’s because people tend to treat life insurance as a “check the box” task. They’ll buy a $500,000 policy when they’re younger (figuring it’s more than enough coverage to replace lost income), and then put it aside and forget about it.
But your life and wealth are constantly evolving. A policy that would replace a decade’s worth of income when you were making $50,000/year, suddenly only covers two years when your salary has climbed to $250,000. In addition, you may now have a couple of children — meaning it’s not just a matter of replacing income but funding college educations.
There are no hard and fast rules when it comes to determining how much coverage is enough. The amount will vary greatly depending on your level of wealth, your liabilities and your personal circumstances. Often, the best place to start is by asking yourself the following four questions:
Life insurance
More than 30 million Americans who own life insurance policies don’t have enough coverage, according to a recent LIMRA study. While the average shortfall in coverage is around $225,000, it’s even greater for high income earners.
Why such a large coverage gap? Often, it’s because people tend to treat life insurance as a “check the box” task. They’ll buy a $500,000 policy when they’re younger (figuring it’s more than enough coverage to replace lost income), and then put it aside and forget about it.
But your life and wealth are constantly evolving. A policy that would replace a decade’s worth of income when you were making $50,000/year, suddenly only covers two years when your salary has climbed to $250,000. In addition, you may now have a couple of children — meaning it’s not just a matter of replacing income but funding college educations.
There are no hard and fast rules when it comes to determining how much coverage is enough. The amount will vary greatly depending on your level of wealth, your liabilities and your personal circumstances. Often, the best place to start is by asking yourself the following four questions:
Important Planning Considerations: Insurance & Long-Term Care
How much would your spouse need to pay off any mortgages if something happens to you?
How much beyond what you’ve already saved will be needed to fund your children’s future educational costs?
Are you carrying any other debt or liabilities that will need to be paid off if you die?
And how much of an additional safety net would your family need to ensure they would be able to maintain their lifestyle?
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According to the U.S. Department of Health and Human Services, 70% of adults who are turning 65 today will require some type of long-term care (e.g., home health care, a nursing home stay, or time in an assisted-living facility) during their lives. These are costs that are NOT covered by Medicare.
And the potential expenses associated with long-term care are so high (on average $55,000/year for a full-time home health aide; and $93,000/year for a semi-private room in a nursing home), that they can quickly drain a lifetime’s worth of savings — assets that might otherwise provide a legacy for your heirs.
Yet long-term care is one of the most challenging insurance needs to plan for. Firstly, none of us want to spend a lot of time contemplating our own physical or cognitive decline. In addition, traditional long-term care insurance carries a very real risk that you might pay years of premiums without ever needing any of the benefits (in which case your premiums are lost). But there are other alternatives such as hybrid life and long-term care insurance policies — where you can “tap into” the policy’s death benefit to pay long-term care expenses, with the remainder being passed on to your heirs when you die — as well as long-term care insurance riders that can be added to certain types of annuities.
The important thing is to not wait until you start experiencing a physical or cognitive decline before seeking out coverage. The underwriting/approval process can be rigorous, and you’ll likely be declined for coverage if a serious ailment or health issue has already arisen.
Typically, in order to be considered a “coverable” long-term care event, you must be unable to perform at least two activities of daily living (ADLs), or suffer a cognitive impairment. There are six common ADLs as defined by most medical professionals:
Long-term care insurance
According to the U.S. Department of Health and Human Services, 70% of adults who are turning 65 today will require some type of long-term care (e.g., home health care, a nursing home stay, or time in an assisted-living facility) during their lives. These are costs that are NOT covered by Medicare.
And the potential expenses associated with long-term care are so high (on average $55,000/year for a full-time home health aide; and $93,000/year for a semi-private room in a nursing home), that they can quickly drain a lifetime’s worth of savings — assets that might otherwise provide a legacy for your heirs.
Yet long-term care is one of the most challenging insurance needs to plan for. Firstly, none of us want to spend a lot of time contemplating our own physical or cognitive decline. In addition, traditional long-term care insurance carries a very real risk that you might pay years of premiums without ever needing any of the benefits (in which case your premiums are lost). But there are other alternatives such as hybrid life and long-term care insurance policies — where you can “tap into” the policy’s death benefit to pay long-term care expenses, with the remainder being passed on to your heirs when you die — as well as long-term care insurance riders that can be added to certain types of annuities.
The important thing is to not wait until you start experiencing a physical or cognitive decline before seeking out coverage. The underwriting/approval process can be rigorous, and you’ll likely be declined for coverage if a serious ailment or health issue has already arisen.
Typically, in order to be considered a “coverable” long-term care event, you must be unable to perform at least two activities of daily living (ADLs), or suffer a cognitive impairment. There are six common ADLs as defined by most medical professionals:
This article was written by and presents the views of our contributing adviser(s), not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Brian Skrobonja, Investment Adviser Representative
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019 and 2020 Brian was awarded Best Wealth Manager and the Future 50 in 2018 from St. Louis Small Business.
Fact: Fewer employers are offering life insurance as a benefit.
About 56% of Americans who work for private companies have access to life insurance through their employer. The number of employers offering such benefits, largely through group plans, has been in steady decline in the last decade. The result? More than 50% of those who have life insurance purchased it individually.
Your move, millennials: If your employer does offer life insurance, it’s worth reviewing the coverage options. You may find the value you need for your circumstances. You may also discover that you need to purchase additional coverage on your own. Many employer life insurance plans offer very basic coverage, and the policy may not be portable if you part ways with your employer. That’s an important factor for millennials, who tend to have higher rates of job changes.
Good news: You can have it your way!
Millennial consumers love customization. With so much information readily available, there is quite a bit you can do on your own if you choose to. And when you are ready and have questions or want a more guided experience, there is a financial professional who will be able to help. Whether by phone, by video, online or the good old-fashioned face-to-face meeting, a financial professional is always a great stop on this journey to be sure you have considered your needs and options. There are nuances to the features and benefits of life insurance, and an experienced professional can help you sort it all out. Among millennials who purchased life insurance in the pandemic, more than half used a live adviser, and 30% used both a live adviser and online elements in their purchase, according to Boston Consulting Group.
In addition to helping provide financial security for your loved ones in case you pass away, many life insurance policies now also offer optional riders (sometimes at additional cost) that can help address other concerns, like chronic illness or longevity risk.
Your move, millennials: Choose the method that works best for you. That may be an online-only purchase, using a live adviser, or some combination of the two. If you’re not sure where to turn for help, your employer may provide access to an adviser. It is also likely that friends or family members may have a referral for you. This is one of the most common ways advisers acquire new clients. Finally, many states have registration requirements and often have online directories of licensed financial professionals. Without a referral from someone you trust, it is a good rule of thumb to select two to three people to interview so that you can find the best person for you.
As millennials become more likely to purchase life insurance, insurers have evolved their offerings to create new products and innovations to meet their needs. That’s great news for first-time applicants who may find a much more painless process than expected.
How Millennials Are Changing the Life Insurance Game
There is a lot to this if done correctly, and at some point you’re probably going to want some professional help, but there are a few things you can do to get moving in the right direction.
Health Care components of an Estate Plan
Advance Health Care Directive
Every adult needs an advance health care directive, and it becomes even more important as we grow older and experience more health issues. An advance health care directive is a written plan so your wishes are known if a time comes when you cannot speak for yourself.
Start by thinking about different treatments you do or do not want in a medical emergency. Consider talking with your doctor about your family medical history and how your current health conditions might influence your health in the future. Your wishes need to be in writing, and the document should be updated as your health changes.
Review your advance health care directive with your doctor and the person you are naming as your health care proxy to be sure all forms are filled out correctly. Give each party a copy, and keep a record of who has these forms.
Keep your completed documents in a safe but easily accessible place, such as a desk drawer. You might also consider carrying a card that states you have directives and where they can be found.
Health Care Power of Attorney
A health care power of attorney is a legal document naming a health care proxy. This is someone who can review your medical records and make decisions, such as how and where you should be treated. This person would come into play if you were incapacitated and unable to make medical decisions for yourself.
Choose your health care proxy carefully. This person will potentially have to make difficult decisions, so a close family friend or relative (who is not a spouse or child) may be a good choice.
Health Care components of an Estate Plan
Advance Health Care Directive
Every adult needs an advance health care directive, and it becomes even more important as we grow older and experience more health issues. An advance health care directive is a written plan so your wishes are known if a time comes when you cannot speak for yourself.
Start by thinking about different treatments you do or do not want in a medical emergency. Consider talking with your doctor about your family medical history and how your current health conditions might influence your health in the future. Your wishes need to be in writing, and the document should be updated as your health changes.
Review your advance health care directive with your doctor and the person you are naming as your health care proxy to be sure all forms are filled out correctly. Give each party a copy, and keep a record of who has these forms.
Keep your completed documents in a safe but easily accessible place, such as a desk drawer. You might also consider carrying a card that states you have directives and where they can be found.
Financial Power of Attorney
By creating a financial power of attorney, you can choose someone to help with your finances if you become incapacitated and unable to do so. You can choose how much control your power of attorney will have, like accessing accounts, selling stock and managing real estate. Choose someone you trust completely, such as a spouse, an adult child, a close friend or sibling.
Trusts
You can set up a qualified trust to protect your assets as you pass them down to your heirs. If your children or grandchildren aren’t old enough or mature enough to handle their inheritance, you can set up a trust that gives them a small amount of money each year, increasing that amount as they get older. You can also leave money specifically for paying down an adult child’s mortgage, wedding expenses or student loans. If charitable giving is a priority of yours in retirement, a charitable trust can protect your assets until they are distributed to the charities of your choosing.
Estate Planning During a Pandemic – Quit Stalling
How much do I need to have saved?
As noted above, typical guidance suggests you should have three to six months’ of basic living expenses in your emergency fund. Granted, that’s a pretty wide range — so what should you aim for? Everyone’s circumstances are different, but if you have children or ongoing medical expenses, it can be wise to plan for the higher threshold or more.
Not to mention, the events of 2020 showed us that certain industries are particularly hard hit by economic crises — for indeterminate periods of time. If you’re in a job that’s vulnerable to market fluctuations, you may need an even higher target.
For most people, essential living expenses include housing, food, utilities, transportation and health care. Depending on your family, they might also include child care or eldercare costs, or education expenses. If you have debts, they might also include minimum monthly payments to your lenders.
To determine your emergency savings target, take an average of how much you spend on all of your essentials in a given month and multiply it by six (or nine or 12, depending on the number of months you want to prepare for). Don’t just estimate: review your bank and credit card statements to get an accurate picture of your spending. The totals may surprise you. Of course, a loss of income isn’t the only type of financial emergency, so you may want to build in a cushion for home repairs, unforeseen medical events or the sudden need to travel or relocate.
Rebuilding Emergency Savings: Take a Realistic Approach
What if I need money fast but don’t have enough in my emergency fund?
If you find yourself in the midst of an emergency and haven’t built up sufficient savings, the guidance above may feel like too little, too late. Fortunately, there are short-term sources of funding and relief available, from temporary loan forbearance and debt relief, to lines of credit and new credit cards with zero-interest promotional periods, to employer assistance and unemployment.
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The Department of Education revamped the Public Service Loan Forgiveness program started under the Bush administration. Here's how to see if you qualify for student loan forgiveness.
Any return on investment, whether it is the purchase of a stock or bond or simply an expense that results in savings, can help investors reach their long-term financial goals. By the same logic, anything that helps you make the most out of your time can also be viewed as an “investment.” Retirees often focus on how much money they need to save and how much income they need to generate from investments, but they shouldn’t overlook considering their return on time. Everyone needs to know what a “return on retirement” really means to them.
One challenge in quantifying a return on time, especially as it relates to retirement, is that retirement is not a single, consistent block of time. Breaking it down into decades can serve to evaluate what a return on time really means during the retirement years:
Time as a Return on Investment
The Go-Go Years (age 65 to 75) is a decade to focus on family, friends, travel, hobbies and anything else on the bucket list that requires an active lifestyle.
The Slower-Go Years (age 76 to 85) will be different. They may still be “go” years, but they will likely be slower-go years in many respects.
The Won’t-Go Years (age 86 to 100) are a time when it may be more difficult to sustain as active a lifestyle as in the prior two decades.
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The Go-Go Years may cost more because this decade is likely to include dining out, travel, social events and other potentially expensive activities. However, if planned appropriately, these expenses may yield a much greater return on time. This time will be filled with making more memories and surrounding ourselves with the things we enjoy most, so it is OK that it may lead to higher expenses if the planning has been done to support that. The return on time, while still not completely quantifiable, is easier to understand in this context.
Return on Time: The Go-Go Years (age 65 to 75)
The Slower-Go Years may still involve an active lifestyle, social events and many of the activities associated with the go-go years, but travel and other costlier expenses may start to decline. This can still be a time to focus on hobbies, outings and friends and family, but the return on time may not be as impactful as in earlier years.
Focusing on lower expenses during this time to make up for higher expenses during the previous decade can make sense, because each dollar spent is likely to yield a lower return on time anyway.
Return on Time: The Slower-Go Years (age 76 to 85)
The Won’t-Go Years can be slightly more difficult to assess in terms of living expenses and return on time. That’s because medical costs and other health-related expenses are more likely to increase. However, those are inevitable, so there often is no choice about how that money is spent. For that reason, each dollar spent during these years is less likely to result in a positive return on time.
It does not mean there aren’t still ways to earn a significant return on time during these years, but it is more likely to be accomplished through the activities that are less expensive, like surrounding ourselves with family and friends. A return on time in these years can be achieved by more face-to-to face time with loved ones without the expenses of travel and other costly activities.
Return on Time: The Won’t Go Years (age 86 to 100)
Multiple studies have shown a direct correlation between social activities, friendships and overall health. It should not come as a surprise, but a study cited in a Medical News Today article shows that enjoying close ties with family, friends and other loved ones makes us happier and improves overall life satisfaction.
What a Return on Time Means to Your Health
Getting a Return on Retirement
Spending money on travel and events during the Go-Go Years, focusing on less-expensive hobbies and activities during the Slower-Go Years, and simply spending time with those close to us and staying social during the Won’t-Go Years will all serve to generate a return on time during retirement in their own ways.
You want permission to spend your money and see a bigger future than your past, but I believe you won’t get there without focusing on a return on retirement and what that really means to you. Focus on that future.
David Bach contributed to this article.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Craig Kirsner, Investment Adviser Representative
President, Stuart Estate Planning Wealth Advisors
Craig Kirsner, MBA, is a nationally recognized author, speaker and retirement planner, whom you may have seen on Kiplinger, Fidelity.com, Nasdaq.com, AT&T, Yahoo Finance, MSN Money, CBS, ABC, NBC, FOX, and many other places. He is an Investment Adviser Representative who has passed the Series 63 and 65 securities exams and has been a licensed insurance agent for 25 years.
© 2022 The Kiplinger Washington Editors Inc.
Most insurance companies allow you to file or appeal a claim online, which is useful because the system will usually flag missing or incorrect information. Goencz says some problems with out-of-network claims occur when a provider gives you a piece of paper to file with your insurance company but the paperwork has missing or incorrect information. If filing online isn’t an option, download and print out a paper claim form from the insurer’s website.
The No Surprises Act, which took effect in January, prohibits providers from charging patients out-of-network rates for emergency care and ancillary services, such as anesthesiology, for nonemergency procedures delivered by out-of-network providers at in-network facilities. The law also applies to out-of-network charges for air ambulances, which can cost thousands of dollars. If you receive an out-of-network charge for services covered by the legislation, file an appeal with your insurance company.
For nonemergency procedures, some out-of-network providers at in-network facilities can charge the higher rates if they give you an estimated bill at least 72 hours in advance and you agree to pay it. For procedures scheduled within that 72-hour window, you must be notified about the higher cost the day the appointment is made.
Finally, don’t let fears about your credit record deter you from challenging a medical bill. Debt collectors are required to wait 180 days from the time a medical bill becomes delinquent before reporting it to the three major credit bureaus. That provides extra time either for your insurance to pay the bill or, if it’s not covered, for you to work out a payment plan with the hospital or medical services billing department. In addition, if your insurance company pays a medical bill in full, the default account must be immediately removed from your credit report.
How to appeal
Before you schedule a medical procedure, make sure you understand what is and isn’t covered by your insurance plan. Log on to your insurance company’s website and review your benefits, or call your insurance company and talk to a representative. Call the providers you plan to use to make sure they still accept your insurance. That’s important because a provider may have made recent changes that aren’t reflected on your insurance company’s website.
Ask the insurance representative about reimbursement rates for the procedure you need, or get an estimate from the online portal. Keep good records in the event you need to challenge a bill from your provider.
Goencz says one of her clients got an estimate from his insurance company for a colonoscopy, but when his claim was processed, it didn’t cover the entire cost. Because he had a record of the estimate, she says, “they paid up.”
Avoid Surprise Medical Charges
© 2022 The Kiplinger Washington Editors Inc.
Reforms, Pitfalls and Misunderstandings
First, the basics. A reverse mortgage is a loan, with the interest on it compounding, but unlike a traditional mortgage, you or your estate repays the principal and interest at the end of the loan.
Federally insured HECMs have strict requirements. You must be age 62 or older, and as of 2022, the loan can't be based on a home value greater than $970,800, even if the house is worth more. Typically, you must have at least 50% equity in the home, which must be your principal residence. In 2021, the average age of an HECM borrower was 73 years old, with the average home value $415,000, according to Steve Irwin, president of the National Reverse Mortgage Lenders Association. Besides HECMs, a small number of private reverse mortgages are available in some states through specific lenders. Typically, private reverse mortgages are more appropriate for someone younger than 62 who has a high-dollar-value house or lives in a condominium. Condos aren't always eligible for HECMs.
The lender takes over a house when the borrower dies or moves out for more than a year, but heirs are entitled to any leftover home equity and can even use it to pay off the reverse mortgage and reclaim the house. Because a reverse mortgage is considered a nonrecourse loan, you or your heirs can't owe more than the home's fair-market value. Mortgage insurance, which FHA requires borrowers to have, protects the lender if the home's value falls.
But other pitfalls exist, some of which HUD has addressed. The agency now requires that borrowers receive counseling at HUD-approved sites before closing on an HECM and limits how much a borrower can draw at closing or in the loan's first year. HUD also mandates a financial assessment of the borrower's sources of income, including Social Security, pensions and investments. The amount you can borrow depends on your age (with older homeowners typically receiving more) and your house value, the amount of equity in it and interest rates. Although other debts are considered, there is no debt-to-income ratio requirement.
One important provision that HUD addressed pertains to spouses who aren't named on the reverse mortgage. Before 2014, the nonborrowing spouse could be evicted from the home or required to repay the reverse mortgage loan if the borrowing spouse died or moved into assisted living. HUD made it easier for an eligible nonborrowing spouse to stay in the house, although the reverse mortgage payments cease. The reverse mortgage is paid off when the nonborrowing spouse dies or moves out of the home.
HUD's changes have helped. The number of reverse mortgage defaults have fallen to about 1.5% in 2019, compared with between 3.6% and 5% before 2014, says Irwin. According to HUD, 49,207 HECMs were taken out in 2021. Nevertheless, some people still don't know what a reverse mortgage is, says Cora Hume, a lawyer in the Office for Older Americans in the Consumer Financial Protection Bureau. "If people are taking out a product and don't understand it, that's a problem."
Irwin notes that about 40% of potential applicants who go through counseling to take out the loans decide not to proceed. Expense is a factor. Reverse mortgage fees, which are usually rolled into the loan, can be high. For example, fees and the required mortgage insurance are about $25,000 for an $800,000 house, according to Pfau.
The reverse mortgages themselves can be paid out in four different ways: a lump sum when the loan is taken out; tenure, which is equal monthly payments as long as at least one borrower lives and continues to use the home as a main residence; term, which consists of equal monthly payments over a fixed period; or a line of credit, also known as a standby mortgage, that can be used until the money is gone. Only the lump sum option qualifies for a fixed interest rate. Everything else has a variable rate.
Turning a Reverse Mortgage into a Retirement Investment Tool
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NYSUT NOTE: Interested in more information on reverse mortgages? Check out the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program –an HUD-approved counselor for reverse mortgages. All NYSUT members are eligible to receive a free, no-obligation, debt consultation with one of Cambridge's certified counselors. For additional information or to get started check out the NYSUT member website.
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A Built-In Portfolio Neutralizer
Although most people think of reverse mortgages as a standalone loan, it's time to consider them differently, says Jack Guttentag, a professor emeritus of finance at the University of Pennsylvania's Wharton School. "The way their full power can be realized is within the structure of a retirement plan." For example, he says, typically as people age, they are told to reduce portfolio risk by holding fewer stocks. If you have an HECM line of credit, he says, it acts "as a builtin neutralizer" for a more stock-heavy portfolio, letting you remain invested in equities longer.
That's why Ken Hillenburg, 72, from Temecula, Calif., decided to take out a reverse mortgage on the house he and his family have lived in for 34 years. A career in medical sales left him with a nice portfolio, but after retiring, he started thinking about how he could leave the most to his three adult children. Hillenburg had seen the commercials on television touting reverse mortgages and had a rudimentary understanding of them. Although his house is currently valued at about $850,000, real estate prices in his area have fluctuated dramatically over the years.
After much research, he decided to take out a reverse mortgage, using some of the money to pay the home's existing mortgage, which was approximately $1,500 monthly, and living off the rest. "We can now spend money out of the portfolio by choice, not necessity, and we protected the house," he says. "There will still be a fair amount of equity in it depending on how long we live," he says. "And if we go in the middle of a severe housing downturn, the kids won't be responsible for anything."
Pfau says if people plan to stay in their home for the foreseeable future and are interested in using a reverse mortgage as part of their retirement strategy, "it makes sense to incorporate it as early as possible rather than leaving it as a last resort." A line of credit through a reverse mortgage is like an insurance premium, he says. If you never need the insurance, "that's great, and if you do, then you have it."
Hillenburg used government and independent third-party websites to do his research, rather than lenders' sites, to get information that was as objective as possible. The Consumer Financial Protection Bureau, reversemortgage.org, which is run by the National Reverse Mortgage Lenders Association, and AARP offer a variety of information, including reverse mortgage calculators.
Reverse mortgages certainly aren't for every older homeowner, Irwin says, and people should never feel pressured into taking one out, "but for the right person under the right circumstances, this is a safe and good option to consider for effectively aging in place."
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Expenses as a Return on Investment
Even an expense can be viewed as an “investment” if that expense saves money in other ways. Take energy-efficient home upgrades, for example. If it costs $3,000 to insulate a home with new technology and that saves $50 per month on the power bill, then that $3,000 cost should not be viewed just as an expense. It should also be considered an investment. That $50 saving per month equates to annual savings of $600, which goes directly back into the homeowner’s pocket.
You can think about it like investing $3,000 in a bond or CD that pays interest of $600 per year, which is the same as earning a 20% return. It shouldn’t matter whether that $600 comes from interest on an investment or savings from an expense. At the end of the day, it’s money back in your pocket.
Understanding insurance and what your policies protect (and don’t)
Establishing and funding an emergency account
Knowing the difference between good and bad debt
Considering your estate planning needs
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Time as a Return on Investment
Any return on investment, whether it is the purchase of a stock or bond or simply an expense that results in savings, can help investors reach their long-term financial goals. By the same logic, anything that helps you make the most out of your time can also be viewed as an “investment.” Retirees often focus on how much money they need to save and how much income they need to generate from investments, but they shouldn’t overlook considering their return on time. Everyone needs to know what a “return on retirement” really means to them.
One challenge in quantifying a return on time, especially as it relates to retirement, is that retirement is not a single, consistent block of time. Breaking it down into decades can serve to evaluate what a return on time really means during the retirement years:
Return on Time: The Go-Go Years (age 65 to 75)
The Go-Go Years may cost more because this decade is likely to include dining out, travel, social events and other potentially expensive activities. However, if planned appropriately, these expenses may yield a much greater return on time. This time will be filled with making more memories and surrounding ourselves with the things we enjoy most, so it is OK that it may lead to higher expenses if the planning has been done to support that. The return on time, while still not completely quantifiable, is easier to understand in this context.
Return on Time: The Slower-Go Years (age 76 to 85)
The Won’t-Go Years can be slightly more difficult to assess in terms of living expenses and return on time. That’s because medical costs and other health-related expenses are more likely to increase. However, those are inevitable, so there often is no choice about how that money is spent. For that reason, each dollar spent during these years is less likely to result in a positive return on time.
It does not mean there aren’t still ways to earn a significant return on time during these years, but it is more likely to be accomplished through the activities that are less expensive, like surrounding ourselves with family and friends. A return on time in these years can be achieved by more face-to-to face time with loved ones without the expenses of travel and other costly activities.
Retirees: Go Ahead and Spend More in the Go-Go Years
What a Return on Time Means to Your Health
Multiple studies have shown a direct correlation between social activities, friendships and overall health. It should not come as a surprise, but a study cited in a Medical News Today article shows that enjoying close ties with family, friends and other loved ones makes us happier and improves overall life satisfaction.
Getting a bill for a medical procedure or an appointment you thought your insurance would cover can throw you for a loop. But if you think the bill was sent to you in error or you believe the amount listed is wrong, you can—and should—fight back. First, though, you need to know common mistakes to look for, as well as what your insurance plan does and does not cover.
Start by reviewing your insurer’s explanation of benefits. Was the service in network—that is, from providers that have typically agreed to reduced reimbursement from your insurance company? Next, call your insurer and ask the insurance representative to explain why the claim was denied (in part or in full), why certain services weren’t covered and what you need to do to fix it.
Denials of claims for in-network procedures are usually the easiest to resolve, says Katalin Goencz, a medical insurance and reimbursement specialist in Stamford, Conn. (Goencz also serves as the president of the nonprofit group Alliance of Claims Assistance Professionals.) If a provider sends incorrect information, it is required to resubmit corrected info directly to the insurance company once the provider has been alerted, she says. For example, an error in how a procedure was coded could lead to a denial, as could an outdated insurance card.
In some cases, you could simply be billed erroneously. For example, the Coronavirus Aid, Relief and Economic Security (CARES) Act mandated that providers offer COVID-19 vaccines and boosters at no charge. Providers are prohibited from charging co-payments or administrative fees. However, you could receive a bill for a COVID-19 vaccination if the provider bills you directly instead of your insurer or due to human error in medical billing systems. If you’re charged for a vaccine, call your provider and dispute the charges. Your insurer may also be willing to help you get the bill waived.
Likewise, the Affordable Care Act requires your insurance to cover all of the costs of annual physical exams and other preventive care. However, if your doctor decides to order extra tests, such as an electro-cardiogram to track heart issues, your insurance company may conclude that the service isn’t a necessary part of your physical exam and send you a bill.
How to appeal
Most insurance companies allow you to file or appeal a claim online, which is useful because the system will usually flag missing or incorrect information. Goencz says some problems with out-of-network claims occur when a provider gives you a piece of paper to file with your insurance company but the paperwork has missing or incorrect information. If filing online isn’t an option, download and print out a paper claim form from the insurer’s website.
The No Surprises Act, which took effect in January, prohibits providers from charging patients out-of-network rates for emergency care and ancillary services, such as anesthesiology, for nonemergency procedures delivered by out-of-network providers at in-network facilities. The law also applies to out-of-network charges for air ambulances, which can cost thousands of dollars. If you receive an out-of-network charge for services covered by the legislation, file an appeal with your insurance company.
For nonemergency procedures, some out-of-network providers at in-network facilities can charge the higher rates if they give you an estimated bill at least 72 hours in advance and you agree to pay it. For procedures scheduled within that 72-hour window, you must be notified about the higher cost the day the appointment is made.
Finally, don’t let fears about your credit record deter you from challenging a medical bill. Debt collectors are required to wait 180 days from the time a medical bill becomes delinquent before reporting it to the three major credit bureaus. That provides extra time either for your insurance to pay the bill or, if it’s not covered, for you to work out a payment plan with the hospital or medical services billing department. In addition, if your insurance company pays a medical bill in full, the default account must be immediately removed from your credit report.
© 2021 The Kiplinger Washington Editors Inc.
Avoid Surprise Medical Charges
First, the basics. A reverse mortgage is a loan, with the interest on it compounding, but unlike a traditional mortgage, you or your estate repays the principal and interest at the end of the loan.
Federally insured HECMs have strict requirements. You must be age 62 or older, and as of 2022, the loan can't be based on a home value greater than $970,800, even if the house is worth more. Typically, you must have at least 50% equity in the home, which must be your principal residence. In 2021, the average age of an HECM borrower was 73 years old, with the average home value $415,000, according to Steve Irwin, president of the National Reverse Mortgage Lenders Association. Besides HECMs, a small number of private reverse mortgages are available in some states through specific lenders. Typically, private reverse mortgages are more appropriate for someone younger than 62 who has a high-dollar-value house or lives in a condominium. Condos aren't always eligible for HECMs.
The lender takes over a house when the borrower dies or moves out for more than a year, but heirs are entitled to any leftover home equity and can even use it to pay off the reverse mortgage and reclaim the house. Because a reverse mortgage is considered a nonrecourse loan, you or your heirs can't owe more than the home's fair-market value. Mortgage insurance, which FHA requires borrowers to have, protects the lender if the home's value falls.
But other pitfalls exist, some of which HUD has addressed. The agency now requires that borrowers receive counseling at HUD-approved sites before closing on an HECM and limits how much a borrower can draw at closing or in the loan's first year. HUD also mandates a financial assessment of the borrower's sources of income, including Social Security, pensions and investments. The amount you can borrow depends on your age (with older homeowners typically receiving more) and your house value, the amount of equity in it and interest rates. Although other debts are considered, there is no debt-to-income ratio requirement.
One important provision that HUD addressed pertains to spouses who aren't named on the reverse mortgage. Before 2014, the nonborrowing spouse could be evicted from the home or required to repay the reverse mortgage loan if the borrowing spouse died or moved into assisted living. HUD made it easier for an eligible nonborrowing spouse to stay in the house, although the reverse mortgage payments cease. The reverse mortgage is paid off when the nonborrowing spouse dies or moves out of the home.
HUD's changes have helped. The number of reverse mortgage defaults have fallen to about 1.5% in 2019, compared with between 3.6% and 5% before 2014, says Irwin. According to HUD, 49,207 HECMs were taken out in 2021. Nevertheless, some people still don't know what a reverse mortgage is, says Cora Hume, a lawyer in the Office for Older Americans in the Consumer Financial Protection Bureau. "If people are taking out a product and don't understand it, that's a problem."
Irwin notes that about 40% of potential applicants who go through counseling to take out the loans decide not to proceed. Expense is a factor. Reverse mortgage fees, which are usually rolled into the loan, can be high. For example, fees and the required mortgage insurance are about $25,000 for an $800,000 house, according to Pfau.
The reverse mortgages themselves can be paid out in four different ways: a lump sum when the loan is taken out; tenure, which is equal monthly payments as long as at least one borrower lives and continues to use the home as a main residence; term, which consists of equal monthly payments over a fixed period; or a line of credit, also known as a standby mortgage, that can be used until the money is gone. Only the lump sum option qualifies for a fixed interest rate. Everything else has a variable rate.
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What a Return on Time Means to Your Health
Turning a Reverse Mortgage into a Retirement Investment Tool
Although most people think of reverse mortgages as a standalone loan, it's time to consider them differently, says Jack Guttentag, a professor emeritus of finance at the University of Pennsylvania's Wharton School. "The way their full power can be realized is within the structure of a retirement plan." For example, he says, typically as people age, they are told to reduce portfolio risk by holding fewer stocks. If you have an HECM line of credit, he says, it acts "as a builtin neutralizer" for a more stock-heavy portfolio, letting you remain invested in equities longer.
That's why Ken Hillenburg, 72, from Temecula, Calif., decided to take out a reverse mortgage on the house he and his family have lived in for 34 years. A career in medical sales left him with a nice portfolio, but after retiring, he started thinking about how he could leave the most to his three adult children. Hillenburg had seen the commercials on television touting reverse mortgages and had a rudimentary understanding of them. Although his house is currently valued at about $850,000, real estate prices in his area have fluctuated dramatically over the years.
After much research, he decided to take out a reverse mortgage, using some of the money to pay the home's existing mortgage, which was approximately $1,500 monthly, and living off the rest. "We can now spend money out of the portfolio by choice, not necessity, and we protected the house," he says. "There will still be a fair amount of equity in it depending on how long we live," he says. "And if we go in the middle of a severe housing downturn, the kids won't be responsible for anything."
Pfau says if people plan to stay in their home for the foreseeable future and are interested in using a reverse mortgage as part of their retirement strategy, "it makes sense to incorporate it as early as possible rather than leaving it as a last resort." A line of credit through a reverse mortgage is like an insurance premium, he says. If you never need the insurance, "that's great, and if you do, then you have it."
Hillenburg used government and independent third-party websites to do his research, rather than lenders' sites, to get information that was as objective as possible. The Consumer Financial Protection Bureau, reversemortgage.org, which is run by the National Reverse Mortgage Lenders Association, and AARP offer a variety of information, including reverse mortgage calculators.
Reverse mortgages certainly aren't for every older homeowner, Irwin says, and people should never feel pressured into taking one out, "but for the right person under the right circumstances, this is a safe and good option to consider for effectively aging in place."
NYSUT NOTE: The NYSUT Member Benefits Corporation-endorsed Synchrony Bank Savings Program offers online savings accounts with competitive interest rates and 24/7 online and mobile banking. Click here for more information and to get special discounted member rates.
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People with student loans who work in qualifying non-profit or government jobs may have their loans forgiven after ten years of qualifying payments to a qualifying loan program. These payments may be adjusted in consideration of the borrowers’ income level.
The first borrowers would have been eligible for forgiveness in October 2017 (remember, the program was launched in 2007). But four months before that, the Consumer Financial Protection Bureau reported problems: “Borrowers report that servicers delay or deny access to loan forgiveness through wrong information about their loans, flawed payment processing, and bungled job certifications.”
One major complication involves how federal student loans originated. Prior to 2010, federally backed student loans were issued by financial institutions and not directly by the federal government. PSLF applies only to direct student loans, or those issued by the federal government. Earlier loans could be consolidated into direct loans, and payments made after that consolidation would apply toward PSLF.
What Went Wrong with Public Service Loan Forgiveness?
When Your Neighbors Are Misers
“If it were me, I would alert my city or county authorities, law enforcement, code enforcement and elected representative. As it is a human-interest story, local television and newspapers should be notified. Also, I would contact my own homeowners insurance company, putting them on notice of this potential claim, as that is my obligation under the policy.”
When Michele told me that a consultation with a lawyer costs too much — in view of her clearly having the financial means and obvious need for legal help — I said: “You are being unreasonable, unfair to yourself and are exposing friends and family who visit you to a known risk of injury – and then you would be sued!
“Receiving your lawyer’s letter, these cheapskate neighbors will realize that you have the ability to drag them into court. I would expect them to react in a very different way, so after we speak, schedule a consultation with an attorney, please!”
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Over the last decade Millennials have gotten a lot of attention (good and bad) for their “slacktivism,” job hopping, mountains of student debt and FOMO culture. But Millennials are growing up, and many of them are prioritizing financial independence and thinking seriously about their path to retirement. Perhaps unsurprisingly, and in contrast to the generations before them, they have different ideas about what that path and the ultimate destination will look like.
According to a new Schwab study, Millennials are more likely to prioritize travel over homeownership in retirement. They want the freedom to use their savings to pursue their desired lifestyle and passions more than chase financial stability. They want flexibility and new experiences more than traditional retirement pursuits.
Here’s what Millennials’ retirement dreams look like … and how they can get there.
Millennials Want a Different Kind of Retirement
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As for the path to reach these non-traditional goals, Millennials are looking for flexibility on that front too. They are less focused on a specific retirement savings amount. Instead, they see the accumulation process as more of a continuum, and they want to pursue their passions along the way toward retirement – not just in retirement. Additionally, they are less interested in preserving their wealth in retirement and will not spend as much time managing their investments as Boomers.
Some of these Millennial preferences may seem out of line with responsible retirement goals, but this is a generation of action. Millennials, to their credit, are already starting to save much earlier than their predecessors and over the course of the pandemic, many have stepped up their engagement and focus on financial planning.
It's also worth noting that Millennials aren’t simply re-writing the script for retirement because they can. Major economic and societal shifts are driving these changes in how younger people approach money, careers and life. They have encountered challenges that are different from the generations before them. The cost of homeownership has risen, pensions plans have dwindled, student debt has risen dramatically – just to name a few.
The Millennial Road to Retirement
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Millennials Want a Different Kind of Retirement
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4 Steps to Build a Resilient Financial Life
NYSUT NOTE: Get your financial goals in order with the help of the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. This program can assist members with a better understanding of debt consolidation, student loan repayment options and more. Cambridge has been assisting consumers with eliminating debt for more than 20 years, and NYSUT members are eligible to receive a free, no-obligation, debt and student loan consultation with one of Cambridge's certified counselors. Visit the website today for more information and to get started.
© 2022 The Kiplinger Washington Editors Inc.
How to Get Your Grown Children to Move Out
The number of adults who live with their parents has been increasing for decades. For many, that’s a good thing. But if you’d like to uproot yours, here’s how.
If your adult children are still living in your home past when you thought you’d have the place to yourself, well at least you’re not alone. Nearly a third of Americans between the ages of 18 and 34 (and more than half of those 18-24) live with their parents, according to data from the U.S. Census. And those numbers have been steadily increasing over the last 60 years. (The pandemic gave those numbers a boost in 2020, but they’ve retreated somewhat in 2021; see table below for a deep dive)
Many people like these multigenerational arrangements. They can be mutually beneficial, financially and practically speaking. But sometimes there’s an unpleasant imbalance. The progeny doesn’t pull their weight around the house, say, or just generally impedes what many parents expected to be their “empty nest” years – the reasons are myriad.
What if you want yours to move out, and they’ve rooted themselves firmly in your basement? What can you do? Therapists and financial advisors have some recommendations; most of them involve collaborative negotiations, reasonable expectations and an assisted pathway to your offspring living on their own. You could charge them rent, but covertly set some of the money aside to help them pay for their own home, for example.
Sometimes that’s not enough. Sometimes it takes tough love and drastic steps. Sometimes – yes – the police might even get involved. Read on for some specifics.
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Both Gen Z and Millennials Are “Failing to Launch”
The generations that have drawn most attention of late for being unending dependents are younger millennials and now members of Gen Z. But going back through time, no generation can claim to be fully independent of its parents. In 1960, in fact, nearly 23% of people between 18 and 34 lived in their parents’ home.
The arrangement is so common, in fact, that therapists have a name for it: “failure to launch.” And they’ve developed strategies for parents to help the not-so-young ones along toward establishing themselves and enabling them to live on their own.
The Benefits of Staying at Home
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Multigenerational living has a long history. Tara Unverzagt, a certified financial therapist in Torrance, Calif, rejects the idea of “failure to launch,” suggesting there is no failure at all. Unverzagt notes that adult kids staying at home peaked in the 1940s and then dropped to the lowest in the 1960s and has been rising ever since. “In the 1940s, culturally, no one questioned adult kids living at home,” she said. “Humans are social creatures and extended families living together actually makes a lot of sense. And not living together is a very ‘American’ concept. Around the world in many cultures, it's common for adult kids to live at home or for parents to live with adult kids.”
Indeed, immigration may be contributing to the increase in multigenerational households in the U.S. According to a study by the Pew Research Center, much of the growth has been driven by groups, including Asian, Hispanic and Blacks, who are more likely to live in extended families, particularly if they are immigrants.
Unverzagt said a friend of her daughter’s, who is about 26 years old, is moving out of his parents’ home to live with friends. The parents, who are immigrants, “were very upset and couldn’t understand why he would move out. They especially couldn’t understand why he would pay so much for rent when he could live with them rent-free.”
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Adults With Their Parents Are Better Off Financially
How to Get Your Grown Children to Move Out
People living in extended families are less likely to be poor, the Pew report says. And most people cite financial concerns as a reason for their living arrangement. This is especially true as rents rise and the cost of buying homes is spiking out of reach, particularly for first-time buyers, at the same time many struggle to pay student loans.
Another major reason cited is caregiving, including adult and child care. The parents of these young adults can watch the grandchildren while their parents work, for example, and the young adults can help their aging parents.
Jerrold Shapiro, a psychology professor at Santa Clara University, said he has neighbors who are a couple in their sixties or seventies whose son has custody of his two children. The son and his children live with the couple, who take care of their grandchildren while their son works.
“They’re delighted,” Shapiro said.
In fact, 57% of adults living in multigenerational households reported the experience as very or somewhat positive, compared to just 17% who said it was somewhat or very negative, with another 26% saying it was neither positive nor negative.
“If it’s working for everybody, I kind of go by ‘if it ain’t broke, don’t fix it,’” said Shapiro, who wrote a book, Finding Meaning, Facing Fears Living Fully Twixt Midlife and Retirement. “You can explore what the downside risk is …. There is always in every relationship, there is always a homeostasis, a balance between the need for security and the need for freedom.”
Interestingly, parents in the Pew survey were more likely than their adult children to see the living arrangement as positive (60% vs 52%) while at the same time, were more often the ones paying the rent or mortgage.
There are many areas here that will need to be addressed, but I feel the most important is creating a lifelong income plan. This process starts with estimating the pre-tax income you will need in retirement. This can be easier said than done, but a good starting point is using 70%-80% of your employment income.
Now that you know your “guesstimated” need, list the income sources that you can count on. These include Social Security, any defined benefit pensions, part-time work, etc. That will help you figure out what gap exists – if any – between the income you need and what you’ll have. If, for example, your estimated need is $8,000 a month and your Social Security and part-time work income is estimated at $7,000, you have a $1,000 gap to fill.
You also need to consider the tax implications of your assets and how that flows down to your retirement income plan. If, for example, your income sources – such as tax-deferred retirement accounts – are subject to taxes, then you will need to subtract the estimated amount of taxes from the income you will receive. That means if you plan to withdraw $3,000 a month from your tax-deferred retirement account and you are in the 20% federal tax bracket, you will owe $600 a month in taxes, reducing the actual income you can use to $2,400 a month.
Once you’ve determined your income gap and taken any taxes into consideration, you will need a plan to fill that gap. There are many options and strategies available, depending on your risk tolerance, and your knowledge about what is available, as well as the reasons why and why not for each. Some of the possible strategies could include a high-dividend investment account, a guaranteed* income annuity, a laddered bond portfolio, or just taking a chance and withdrawing from the stock market.
How to Get Your Grown Children to Move Out
While student loan forgiveness may be up in the air, the administration has taken steps to reform debt relief programs that already exist. The Department of Education revamped the Public Service Loan Forgiveness (PSLF) program, which was started under the Bush administration in 2007. The program is designed to reduce student debt for graduates who go on to work in a range of government, nonprofit and healthcare jobs; see below for a list and more details.
Announced last October, the new rules include a limited requirement-waiver that allows eligible borrowers to have payments that were previously excluded counted toward loan forgiveness. The waiver ends October 31 of this year. To see if you qualify, go to studentaid.gov/pslf/ to use the PSLF Help Tool, which will generate the form you need. And make sure to have your old W-2 forms on hand. To see if your employers—past and present—qualify as an eligible or ineligible employer you will have to enter the employer’s tax identification number which is in box b of your W-2. For more information on the tool and how to use it, go to studentaid.gov/articles/become-a-pslf-help-tool-ninja/.
The waiver seems to have worked as it's supposed to for at least one now-former debtor. Ricardo Maldonado of New York City recently tweeted how roughly $139,000 worth of his federal student loans (connected to a graduate degree) was forgiven thanks to the PSLF waiver. Maldonado applied for forgiveness back in November 2021. After applying he got letters updating him about the process and received official notice of forgiveness on May 31, 2022.
Maldonado says that the PSLF form was easy to manage for himself thanks to having one employer for the past 15 years, but more importantly “[It] was useful seeing folks say that [forgiveness] was possible,” he said via a direct message on Twitter.
The PSLF program covers a wide range of jobs, including virtually all direct government employment (whether federal, state, local or tribal). Many jobs at nonprofits as well as public health work also qualify. Some exceptions include Labor unions or partisan political organizations. Members of Congress are also specifically excluded. The program also has provisions that work must be full time (at least 30 hours a week), though this can be through multiple jobs with qualified employers.
Positions include:
Who Qualifies for Public Service Loan Forgiveness?
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Public school employees
Emergency management
Military service: service on behalf of the U.S. armed forces or the National Guard
Public safety
Law enforcement: crime prevention, control or reduction of crime, or the enforcement of criminal law
Public interest law services: legal services provided by an organization that is funded in whole or in part by a local, state, federal, or tribal government
Early childhood education including licensed or regulated child care, Head Start, and state-funded prekindergarten
Public service for individuals with disabilities and the elderly
Public health including:
Nurses
Nurse practitioners
Nurses in a clinical setting
Full-time professionals engaged in health care practitioner occupations, health support occupations, and counselors, social workers, and other community and social service specialist occupations as such terms are defined by the Bureau of Labor Statistics
Public library services
School library or other school-based services
More detail is available at: https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service/questions.
NYSUT NOTE: Interested in student loan forgiveness and other repayment options? Check out the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. This program helps NYSUT members better understand their student loan re-payment options like student loan forgiveness programs, income-based repayment plans and more. Click here for more information and a free, no obligation consultation with one of Cambridge's nationally-certified counselors.
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The road to retirement has only gotten more challenging over the course of Millennials’ lifetimes. The good news is that many timeless financial planning strategies can be readily adapted to fit their needs.
Here are the top tips I share with Millennials for reaching the retirement of their dreams:
Tips to Help Millennials on Their Path
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Stash some cash: The first step to planning for the rest of one’s financial future is creating a financial cushion to fall back on in preparation for the inevitable disruptions life will bring. A few months’ worth of savings is a good place to start an emergency fund.
NYSUT NOTE: Start saving for your emergency fund with the help of the NYSUT Member Benefits Corporation-endorsed Synchrony Bank Savings Program. This program offers online savings accounts with competitive interest rates and 24/7 online and mobile banking. Click here for more information and to get special discounted member rates.
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Focus on your financial state, not your retirement date: Don’t think of retirement as an arbitrary date when a switch is flipped and retirement begins. Instead, target a financial state that would provide for the flexibility to make work optional. That could look like saving enough by the time you are 60 to be able to stop working if you needed to, but with the idea that you will continue working and saving until you are emotionally ready to retire. It is important to crunch the numbers to figure out how much will be needed to feel comfortable. From there, adjust your savings accordingly to grow that nest egg.
Grow it and protect it: We all want to grow our savings and investments to sustain us through our lifetimes. But don’t lose sight of protecting what’s already in place. There’s no such thing as a “sure thing,” and that means that diversification is important to potential growth along with stability. Don’t risk more than you can afford and be ready to re-evaluate your risk tolerance over the course of your investing journey.
Don’t be derailed by FOMO: Hot new investment trends can be very enticing, but getting caught up in the rush toward shiny possibilities can lead to setbacks that limit future potential. Remember that investing is about helping grow money over time to reach your goals and not speculating or chasing fads.
Think long and short: Retirement planning is a long process that requires time and patience. It also requires flexibility to adapt to changing circumstances. No one can predict all the challenges that lie ahead, or if their future self might look at things a bit differently than their present self. Create a plan and revisit it at least once a year, knowing that there will be changes along the way.
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NYSUT NOTE: It’s never too early to begin financial planning for retirement, and the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program is here to help. Gain access to a team of Certified Financial Planners® and Registered Investment Advisors that will provide NYSUT members with unbiased advice customized specifically for you and your financial situation. Visit the website for more information or to enroll today.
Diversification strategies do not ensure a profit and do not protect against losses in declining markets. Investing involves risk, including loss of principal.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
About The Author
Amy Richardson, CFP®
Schwab Intelligent Portfolios Specialist, Charles Schwab
Amy Richardson is a CERTIFIED FINANCIAL PLANNER™ professional and Schwab Intelligent Portfolios Specialist. Amy focuses on providing internal teams, clients and prospects with education, updates and information about Schwab’s investment offerings and philosophy, including Schwab Intelligent Portfolios (Schwab’s automated investing service) and Schwab Intelligent Portfolios Premium (combining automated investing with a comprehensive financial plan and unlimited guidance from a CFP® professional).
Just like Boomers and Gen X’ers, Millennials have distinct generational characteristics that set them apart, but at the same time they are not a monolith. Millennials will take many different approaches and paths to retirement. Their personal lives will take unexpected twists and turns that may change some of their goals along the way.
Sound financial planning that begins early is the key to success no matter the desired destination. That much never changes.
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Getting Married? Let's Talk Taxes
There's a lot of paperwork to do after you get married. Your employer might need you to fill out some forms related to your benefits. If you change your name or move, that's a trip to the motor vehicle department to fill out more forms. Want to set up a joint bank account? Yep, there's a form for that, too. The list goes on and on.
And, of course, there are also a few forms you'll want to fill out for tax purposes (in addition to your regular tax return). For instance, let the IRS know if you're moving by filing Form 8822. If you're changing your name, there's a place on the form to record that, too.
If you're changing your name, you might already have requested a new Social Security card on your to-do list. But there's also a tax reason for doing this. When you file your tax return next year, the IRS is going to have problems processing your return and issuing a refund if the name on the return doesn't match the name in the Social Security Administration's records. Use SSA Form SS-5 to apply for a new Social Security card. You'll also have to submit documentation to prove your identity, support the requested change, and show a reason for the name change.
If you buy health insurance through an Obamacare exchange (e.g., HealthCare.gov), make sure you let the exchange know that you got married. Why? Because it's a "change of circumstances" that could impact the qualification for and/or the amount of the premium tax credit. Advance payments of the credit could be affected, too. If you don't report the change and your advance payments are more than the credit you're ultimately allowed to claim, your refund will be reduced or the amount of tax you have to pay when you file your tax return will go up.
Change Your Records After Marriage
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Marriage penalties can also be triggered by other provisions in the tax code containing a threshold or other dollar amount applicable to joint filers that is less than twice the amount applicable to single filers. For example, the threshold for the highest capital gains tax rate for joint filers ($517,200) is less than twice the threshold amount for single filers ($459,750), which creates a marriage penalty for some couples. And those same families could be penalized again because the joint filer's AGI threshold ($250,000) for having to pay the 3.8% surtax on net investment income is also less than twice the threshold for single taxpayers ($200,000).
Elderly married couples face their own type of marriage penalties. For 2022, the additional standard deduction for two married people who are at least 65 years old is $2,800. However, two single 65-year-olds can each claim a $1,750 extra standard deduction, which adds up to $3,500 in total. The cut-off amounts for determining how much of your Social Security benefits are taxed can also create marriage penalties for seniors. That's because the various thresholds for joint filers are less than twice the amount for single people.
The $10,000 limit on the deduction for state and local taxes (a.k.a., the SALT deduction cap) penalizes married couples, too. Once you're married, you can't deduct more than $10,000 in state and local taxes (the limit is $5,000 for married people filing a separate return). However, both you and your loved one would each be able to deduct up to $10,000 – for a total of $20,000 – if you weren't married.
There are other places in the tax code where marriage penalties can pop up, including with the:
• Additional Medicare tax (payment threshold);
• Adoption credit and exclusion for employer-provided adoption benefits (phase-out threshold);
• Alternative minimum tax (exemption amount);
• Earned income tax credit (phase-out thresholds);
• Exclusion for Series EE and I bonds used for education (phase-out thresholds);
• IRA deduction (phase-out thresholds);
• Mortgage interest deduction (limit on loan amount); and
• Roth IRA contribution limits (income thresholds).
Be careful if these tax provisions affect you. I'm certainly not suggesting you call off the wedding because you may be hit with a marriage penalty. But when you walk down the aisle, have a plan in mind to address any potential marriage penalties you may face in the future.
Getting Married? Let's Talk Taxes
It's not all bad news for married couples. Depending on your situation, your federal income tax can also go down as a result of getting married. This is commonly called a "marriage bonus."
Theoretically, the tax brackets could trigger a marriage bonus if, for any given tax rate, the minimum taxable income for the joint filers' tax bracket is more than twice the minimum amount for the single filers' bracket. However, that doesn't happen with the current tax brackets, and it didn't happen before the 2017 law.
Nevertheless, a marriage bonus can still occur under the current tax brackets if one spouse makes considerably more money than the other (or if only one spouse has taxable income). When this does happen, some of the higher-income spouse's earnings are essentially pulled down to a lower bracket and taxed at a lower rate. That results in a lower overall tax bill for the couple.
Here's an example of how unequal incomes can create a marriage bonus: Dave and Sally are married in 2022. Sally has $250,000 of taxable income during the year, while Dave has $30,000. If they file a joint return, the combined taxable income of $280,000 lands them in the 24% bracket and results in a $54,871 tax bill. If they were still single, Sally would be in the 35% tax bracket and owe $61,253 in tax, while Dave would be in the 12% bracket and owe $3,395 in tax – for a combined total of $64,648 in taxes due. Because they're married, Dave and Sally get a marriage bonus of $9,777 ($64,648 – $54,871 = $9,777).
You might also benefit from being married if a larger tax break is available only if you file a joint return. For example, a married couple that sells their home can exclude up to $500,000 from the capital gains tax if they satisfy all the necessary requirements. However, a single person who sells a home can only exclude up to $250,000. So, if you own a house and are planning to sell it, you might want to wait until after the nuptials to put up a "for sale" sign on your front lawn.
A "Marriage Bonus" Could Lower Your Taxes
Since your tax bill could go up or down once you're married, it's a good idea to check your tax withholding as soon as possible after the wedding and make any necessary adjustments. When you file a joint tax return next year, you'll get a tax refund if the combined amount withheld from your and your spouse's pay in 2022 is more than the tax your family owes. Of course, if the amount withheld is less than the taxed owed, then you must pay the difference when you file your return – plus a penalty if the difference is above a certain amount. Ideally, the amount withheld and the amount you owe are pretty close. That way, you won't have to pay more at tax time, you'll avoid any underpayment penalties, and you won't be giving Uncle Sam an interest-free loan (which is essentially what happens if you have too much withheld).
It's easy to adjust your withholding so that it comes close to your expected tax liability as a married couple. Just complete a new Form W-4 and give it to your employer (check with your HR department to see exactly who should receive the form). Your employer must implement any change by the start of the first payroll period ending on or after the 30th day after you submit a new W-4 form. To help you determine if and/or how much to adjust your 2022 withholding, use the IRS's Tax Withholding Estimator.
If you're retired, check the withholding from your retirement accounts. Use Form W-4P to adjust withholding from periodic payments from a 401(k) plan, pension or traditional IRA. (Periodic payments are made at regular intervals for at least one year.) If you're receiving non-periodic payments, use Form W-4R. Submit these forms to the plan, pension or IRA administrator. For Social Security benefits, use Form W-4V to request withholding at a rate of 7%, 10%, 12% or 22% (those are your only options).
Check Your Tax Withholding After Getting Married
Speaking of retirement, how you save for retirement can change after you're married, too. As mentioned above, there are potential marriage penalties associated with the IRA deduction and Roth IRA contribution limits. Specifically, for 2022, if both spouses are covered by a retirement plan at work, each spouse's IRA deduction is phased-out if your AGI is between $109,000 and $129,000 – compared to $68,000 to $78,000 for single filers. If only one spouse is covered by an employer's plan, the phaseout range for contributions by the spouse not covered by a workplace plan is from $204,000 to $214,000. (If you're married, each spouse calculates their deduction separately.) As for the 2022 Roth IRA contribution limits, they phase out for married couples with an AGI of $204,000 to $214,000. For singles, it's $129,000 to $144,000.
There's some good news, though. For example, the maximum Saver's Credit, which incentivizes lower-income people to save for retirement, is doubled for married couples filing a joint return – from $1,000 to $2,000. For 2022, joint filers must have an AGI of $68,000 or less ($34,000 or less for single filers) to claim the credit.
Another perk helps spouses who are unemployed or don't make much money save for retirement. Normally, you must have earned income to contribute to an IRA, and your contributions can't exceed your total earned income for the year. However, under the "spousal IRA" rules, a spouse with earned income can contribute to an IRA for the other spouse who has little or no income as long as the total contributions to both spouses' IRAs don't exceed the couple's joint earned income (the IRA contribution limits applicable that year for each spouse also apply).
A person who inherits an IRA from a deceased spouse is also in a better position than other people who inherit an IRA. For most people who inherit an IRA, the inherited account must be drained within ten years of the original owner's death. That also means that you'll have to pay taxes on IRA funds within ten years. But the ten-year rule doesn't apply if the original owner was your spouse (it also doesn't apply if the beneficiary is a minor child of the account owner, disabled, chronically ill, or not more than ten years younger than the original IRA owner). As a result, you can stretch out withdrawals from the IRA – and tax payments – over your own lifetime at a pace that's up to you (hence the nickname "stretch IRAs"). A spouse can also roll the inherited IRA over to his or her own IRA instead of keeping it as a separate account.
Saving for Retirement When You're Married
Congratulations if you're getting (or got) married this year! I hope you and your new spouse have a long and wonderful life together. As you've probably guessed, things will be different in so many ways once the wedding and honeymoon are over. Many of the changes will be immediate and clear, but some aspects of the transition from single to married life will be quite complicated and might not become apparent for a while – like your taxes.
When you file your federal income tax return next year, be prepared for changes. The most obvious difference is that you and your new spouse can file just one tax return together, instead of each of you filing your own return (although you still have the option of filing two separate returns). Also expect some variation in the tax breaks available to you. You might qualify for some additional credits, deductions, or exclusions once you're married – but you might lose some, too. There are also a few things you can do before the end of the year that could cut your tax bill when you file your return next year, impact your tax refund, avoid problems with the IRS, or even save money for retirement.
But don't start feeling anxious or overwhelmed by all the potential twists and turns just yet. We'll walk you through the most common tax changes and requirements newlyweds face so you can prepare for them in advance. That way, when you're ready to work on your 2022 tax return next year, you'll already have a greater understanding of what to expect and how to deal with any marriage-related issues that may pop up.
Taxes are different when you're married vs. single. Get up-to-speed now on the tax changes you'll see after tying the knot.
Getting Married? Let's Talk Taxes
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Literally the first thing you're asked to do when filling out a 1040 form is to pick your filing status. Married couples can either check the "married filing jointly" or "married filing separately" box – those are the only two choices in most cases. And even if you're only married for part of the year, you're considered married for the full year for tax purposes if you're married on the last day of the year.
Pick your filing status carefully, though. As you'll see, there are important consequences that go along with this decision. Most of the time, married couples are better off filing a joint return. But that's not always true. For some couples, filing separate returns is the better option. It all depends on your own unique set of circumstances.
Perhaps the biggest disadvantage to filing separate returns is that certain tax breaks will be unavailable or limited. For example, married couples filing separately generally can't claim the:
(Note: Married couples living apart may be able to claim some of these tax breaks if they meet the requirements for an exception.)
In addition, your child tax credit could be lower, taxes on your Social Security benefits could be higher, and if one spouse itemizes instead of taking the standard deduction then both spouses must itemize. Depending on your situation, other drawbacks to filing separate returns are possible, too.
When might filing separate returns be beneficial? If one spouse has a relatively high income and the other spouse has a relatively low income, then filing separately might make sense. The spouse with the lower income would benefit from being in a lower tax bracket and might also qualify for some income-based tax breaks that otherwise wouldn't be available.
Filing separate returns also might be a good idea if one spouse has a lot of medical bills during the year. People who itemize can deduct their medical expenses, but only to the extent that the total amount exceeds 7.5% of their adjusted gross income. Meeting that AGI threshold is easier if only the income of the spouse with big medical bills is included on the tax return.
If one spouse doesn't want to be responsible for the other spouse's tax filings – as is the case with a joint return – then separate returns is the way to go. Filing separately can also prevent all or part of one spouse's tax refund being taken to pay for the other spouse's debts. And, again, there could be other reasons why married couples might want to file separate tax returns – it all depends on their own facts and circumstances.
Tax Filing Status Options for Married Couples
You've probably heard that married couples can sometimes pay more in tax than if they remained single. This can actually happen, and it's known as a "marriage penalty." Common sense tells us that, in order to keep things equal, dollar amounts in the tax code applicable to a married couple filing a joint return should be twice as much as the comparable amounts for single filers. After all, there are two taxpayers represented on a joint return, but only one on a single return. However, that's not always how it works. Sometimes an amount applied to joint filers is less than twice the amount for single filers – and this can create a marriage penalty.
For instance, one way a marriage penalty can be triggered is when, for any given tax rate, the minimum taxable income for the joint filers' tax bracket is less than twice the minimum amount for the single filers' bracket. (This type of marriage penalty is also more likely to occur if each spouse earns about the same amount each year.)
Here's an example of how tax bracket ranges can create a marriage penalty: Ron and Donna each have $150,000 of taxable income in 2017, which is the year they got married. For that tax year, the 28% tax bracket went from $91,900 to $191,650 for single filers, and from $153,100 to $233,350 for joint filers. Note that the minimum amount for joint filers was less than twice the minimum amount for single filers ($153,100 < $91,900 × 2). The next bracket – for the 33% tax rate – went from $191,650 to $416,700 for single filers, and from $233,350 to $416,700 for joint filers. (Again, the minimum amount for joint filers was less than twice the minimum amount for single filers.) When Ron and Donna combined their taxable income for a joint return ($300,000), they fell within the higher 33% bracket and owed $74,217 in tax. However, if Ron and Donna had still been single, they both would have ended up in the lower 28% bracket and owed $34,982 – for a combined tax bill of $69,964. However, since they're married and filed a joint return, Ron and Donna were hit with a marriage penalty of $4,253 ($74,217 – $69,964 = $4,253).
Before the 2017 tax reform law, this was a fairly common occurrence for higher-income couples. Now, however, only the top tax bracket (37% rate) contains this type of marriage penalty trap. As a result, only couples with a combined taxable income over $647,850 are at risk of suffering a penalty when filing their 2022 federal tax return. Unfortunately, though, the 2017 law is set to expire after 2025. So, unless Congress extends the current tax rate structure, more families will be hit with a marriage penalty beginning with the 2026 tax year.
A "Marriage Penalty" Can Increase Your Tax Bill
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Adoption credit or exclusion for employer-provided adoption benefits;
American opportunity credit;
Child and dependent care credit;
Credit for the elderly or disabled;
Earned income credit;
Exclusion for interest on cashed series EE or I U.S. savings bonds used to pay for higher education expenses.
Lifetime learning credit;
Premium tax credit; and
Student loan interest deduction.
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Unless you live in a state with no income tax, getting married will affect your state tax return, too. Many states force you to use the same filing status on your state return that you use on your federal return, which makes the decision for your federal return even more important if you live on one of those states. A few states even let you split out income for each spouse on a joint state return, which could lower your state tax bill.
Tax bracket-based marriage penalties are more common under state tax laws than under federal law. You can also have marriage penalties baked into state tax breaks just like they are in the federal tax code. And, of course, marriage bonuses are possible on the state level, too.
If you submit a new W-4 to adjust your federal tax withholding, your employer should also adjust any state tax withholding that's required (local tax withholding might be necessary as well).
Please check with the state tax agency where you live to learn more about how your state taxes could change after getting married.
State Taxes and Marriage
Step 3: Be realistic
Practice makes perfect, so think of your financial life like playing a game of darts, where each triangle on that dart board is a different aspect of what you said you were going to spend or save to reach your goals. The more you practice throwing that dart, the better you're going to be at hitting the mark consistently.
Of course, many of us live paycheck to paycheck or rack up debt to make ends meet. If that’s where you are today, it still helps to get a clearer picture of your goals, income, spending, needs and wants. Write it all down and try to identify places where you can potentially cut back. For example, you probably need your cellphone, but is there a less expensive plan that could work? If there’s really no wiggle room, look for ways to bring in additional income — maybe turning that passion project into a side hustle or picking up a flexible part-time job.
Making ends meet can be tough, so it’s important to put energy into building a financial cushion when you have the chance. You may have also heard that it's a good idea to have three to six months of essential expenses saved up as an emergency fund, but for many of us, that’s easier said than done. Just keep in mind that savings don’t appear overnight. Start small, figure out what works for your lifestyle, and save — even if it’s $5 at a time.
What Went Wrong with Public Service Loan Forgiveness?
People with student loans who work in qualifying non-profit or government jobs may have their loans forgiven after ten years of qualifying payments to a qualifying loan program. These payments may be adjusted in consideration of the borrowers’ income level.
The first borrowers would have been eligible for forgiveness in October 2017 (remember, the program was launched in 2007). But four months before that, the Consumer Financial Protection Bureau reported problems: “Borrowers report that servicers delay or deny access to loan forgiveness through wrong information about their loans, flawed payment processing, and bungled job certifications.”
One major complication involves how federal student loans originated. Prior to 2010, federally backed student loans were issued by financial institutions and not directly by the federal government. PSLF applies only to direct student loans, or those issued by the federal government. Earlier loans could be consolidated into direct loans, and payments made after that consolidation would apply toward PSLF.
The PSLF program covers a wide range of jobs, including virtually all direct government employment (whether federal, state, local or tribal). Many jobs at nonprofits as well as public health work also qualify. Some exceptions include Labor unions or partisan political organizations. Members of Congress are also specifically excluded. The program also has provisions that work must be full time (at least 30 hours a week), though this can be through multiple jobs with qualified employers.
Positions include:
The PSLF program covers a wide range of jobs, including virtually all direct government employment (whether federal, state, local or tribal). Many jobs at nonprofits as well as public health work also qualify. Some exceptions include Labor unions or partisan political organizations. Members of Congress are also specifically excluded. The program also has provisions that work must be full time (at least 30 hours a week), though this can be through multiple jobs with qualified employers.
Positions include:
The PSLF program covers a wide range of jobs, including virtually all direct government employment (whether federal, state, local or tribal). Many jobs at nonprofits as well as public health work also qualify. Some exceptions include Labor unions or partisan political organizations. Members of Congress are also specifically excluded. The program also has provisions that work must be full time (at least 30 hours a week), though this can be through multiple jobs with qualified employers.
Positions include:
The road to retirement has only gotten more challenging over the course of Millennials’ lifetimes. The good news is that many timeless financial planning strategies can be readily adapted to fit their needs.
Here are the top tips I share with Millennials for reaching the retirement of their dreams:
The road to retirement has only gotten more challenging over the course of Millennials’ lifetimes. The good news is that many timeless financial planning strategies can be readily adapted to fit their needs.
Here are the top tips I share with Millennials for reaching the retirement of their dreams:
NYSUT NOTE: Interested in student loan forgiveness and other repayment options? Check out the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. This program helps NYSUT members better understand their student loan re-payment options like student loan forgiveness programs, income-based repayment plans and more. Click here for more information and a free, no obligation consultation with one of Cambridge's nationally-certified counselors.
Stash some cash: The first step to planning for the rest of one’s financial future is creating a financial cushion to fall back on in preparation for the inevitable disruptions life will bring. A few months’ worth of savings is a good place to start an emergency fund.
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NYSUT NOTE: Start saving for your emergency fund with the help of the NYSUT Member Benefits Corporation-endorsed Synchrony Bank Savings Program. This program offers online savings accounts with competitive interest rates and 24/7 online and mobile banking. Click here for more information and to get special discounted member rates.
Just like Boomers and Gen X’ers, Millennials have distinct generational characteristics that set them apart, but at the same time they are not a monolith. Millennials will take many different approaches and paths to retirement. Their personal lives will take unexpected twists and turns that may change some of their goals along the way.
Sound financial planning that begins early is the key to success no matter the desired destination. That much never changes.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2022 Future US LLC
Literally the first thing you're asked to do when filling out a 1040 form is to pick your filing status. Married couples can either check the "married filing jointly" or "married filing separately" box – those are the only two choices in most cases. And even if you're only married for part of the year, you're considered married for the full year for tax purposes if you're married on the last day of the year.
Pick your filing status carefully, though. As you'll see, there are important consequences that go along with this decision. Most of the time, married couples are better off filing a joint return. But that's not always true. For some couples, filing separate returns is the better option. It all depends on your own unique set of circumstances.
Perhaps the biggest disadvantage to filing separate returns is that certain tax breaks will be unavailable or limited. For example, married couples filing separately generally can't claim the:
Literally the first thing you're asked to do when filling out a 1040 form is to pick your filing status. Married couples can either check the "married filing jointly" or "married filing separately" box – those are the only two choices in most cases. And even if you're only married for part of the year, you're considered married for the full year for tax purposes if you're married on the last day of the year.
Pick your filing status carefully, though. As you'll see, there are important consequences that go along with this decision. Most of the time, married couples are better off filing a joint return. But that's not always true. For some couples, filing separate returns is the better option. It all depends on your own unique set of circumstances.
Perhaps the biggest disadvantage to filing separate returns is that certain tax breaks will be unavailable or limited. For example, married couples filing separately generally can't claim the:
Literally the first thing you're asked to do when filling out a 1040 form is to pick your filing status. Married couples can either check the "married filing jointly" or "married filing separately" box – those are the only two choices in most cases. And even if you're only married for part of the year, you're considered married for the full year for tax purposes if you're married on the last day of the year.
Pick your filing status carefully, though. As you'll see, there are important consequences that go along with this decision. Most of the time, married couples are better off filing a joint return. But that's not always true. For some couples, filing separate returns is the better option. It all depends on your own unique set of circumstances.
Perhaps the biggest disadvantage to filing separate returns is that certain tax breaks will be unavailable or limited. For example, married couples filing separately generally can't claim the:
Tax Filing Status Options for Married Couples
Literally the first thing you're asked to do when filling out a 1040 form is to pick your filing status. Married couples can either check the "married filing jointly" or "married filing separately" box – those are the only two choices in most cases. And even if you're only married for part of the year, you're considered married for the full year for tax purposes if you're married on the last day of the year.
Pick your filing status carefully, though. As you'll see, there are important consequences that go along with this decision. Most of the time, married couples are better off filing a joint return. But that's not always true. For some couples, filing separate returns is the better option. It all depends on your own unique set of circumstances.
Perhaps the biggest disadvantage to filing separate returns is that certain tax breaks will be unavailable or limited. For example, married couples filing separately generally can't claim the:
Getting Married? Let's Talk Taxes
A "Marriage Penalty" Can Increase Your Tax Bill
You've probably heard that married couples can sometimes pay more in tax than if they remained single. This can actually happen, and it's known as a "marriage penalty." Common sense tells us that, in order to keep things equal, dollar amounts in the tax code applicable to a married couple filing a joint return should be twice as much as the comparable amounts for single filers. After all, there are two taxpayers represented on a joint return, but only one on a single return. However, that's not always how it works. Sometimes an amount applied to joint filers is less than twice the amount for single filers – and this can create a marriage penalty.
For instance, one way a marriage penalty can be triggered is when, for any given tax rate, the minimum taxable income for the joint filers' tax bracket is less than twice the minimum amount for the single filers' bracket. (This type of marriage penalty is also more likely to occur if each spouse earns about the same amount each year.)
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Here's an example of how tax bracket ranges can create a marriage penalty: Ron and Donna each have $150,000 of taxable income in 2017, which is the year they got married. For that tax year, the 28% tax bracket went from $91,900 to $191,650 for single filers, and from $153,100 to $233,350 for joint filers. Note that the minimum amount for joint filers was less than twice the minimum amount for single filers ($153,100 < $91,900 × 2). The next bracket – for the 33% tax rate – went from $191,650 to $416,700 for single filers, and from $233,350 to $416,700 for joint filers. (Again, the minimum amount for joint filers was less than twice the minimum amount for single filers.) When Ron and Donna combined their taxable income for a joint return ($300,000), they fell within the higher 33% bracket and owed $74,217 in tax. However, if Ron and Donna had still been single, they both would have ended up in the lower 28% bracket and owed $34,982 – for a combined tax bill of $69,964. However, since they're married and filed a joint return, Ron and Donna were hit with a marriage penalty of $4,253 ($74,217 – $69,964 = $4,253).
Before the 2017 tax reform law, this was a fairly common occurrence for higher-income couples. Now, however, only the top tax bracket (37% rate) contains this type of marriage penalty trap. As a result, only couples with a combined taxable income over $647,850 are at risk of suffering a penalty when filing their 2022 federal tax return. Unfortunately, though, the 2017 law is set to expire after 2025. So, unless Congress extends the current tax rate structure, more families will be hit with a marriage penalty beginning with the 2026 tax year.
Marriage penalties can also be triggered by other provisions in the tax code containing a threshold or other dollar amount applicable to joint filers that is less than twice the amount applicable to single filers. For example, the threshold for the highest capital gains tax rate for joint filers ($517,200) is less than twice the threshold amount for single filers ($459,750), which creates a marriage penalty for some couples. And those same families could be penalized again because the joint filer's AGI threshold ($250,000) for having to pay the 3.8% surtax on net investment income is also less than twice the threshold for single taxpayers ($200,000).
Elderly married couples face their own type of marriage penalties. For 2022, the additional standard deduction for two married people who are at least 65 years old is $2,800. However, two single 65-year-olds can each claim a $1,750 extra standard deduction, which adds up to $3,500 in total. The cut-off amounts for determining how much of your Social Security benefits are taxed can also create marriage penalties for seniors. That's because the various thresholds for joint filers are less than twice the amount for single people.
The $10,000 limit on the deduction for state and local taxes (a.k.a., the SALT deduction cap) penalizes married couples, too. Once you're married, you can't deduct more than $10,000 in state and local taxes (the limit is $5,000 for married people filing a separate return). However, both you and your loved one would each be able to deduct up to $10,000 – for a total of $20,000 – if you weren't married.
There are other places in the tax code where marriage penalties can pop up, including with the:
Be careful if these tax provisions affect you. I'm certainly not suggesting you call off the wedding because you may be hit with a marriage penalty. But when you walk down the aisle, have a plan in mind to address any potential marriage penalties you may face in the future.
Additional Medicare tax (payment threshold);
Adoption credit and exclusion for employer-provided adoption benefits (phase-out threshold);
Alternative minimum tax (exemption amount);
Earned income tax credit (phase-out thresholds);
Exclusion for Series EE and I bonds used for education (phase-out thresholds);
IRA deduction (phase-out thresholds);
Mortgage interest deduction (limit on loan amount); and
Roth IRA contribution limits (income thresholds).
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Getting Married? Let's Talk Taxes
A "Marriage Bonus" Could Lower Your Taxes
It's not all bad news for married couples. Depending on your situation, your federal income tax can also go down as a result of getting married. This is commonly called a "marriage bonus."
Theoretically, the tax brackets could trigger a marriage bonus if, for any given tax rate, the minimum taxable income for the joint filers' tax bracket is more than twice the minimum amount for the single filers' bracket. However, that doesn't happen with the current tax brackets, and it didn't happen before the 2017 law.
Nevertheless, a marriage bonus can still occur under the current tax brackets if one spouse makes considerably more money than the other (or if only one spouse has taxable income). When this does happen, some of the higher-income spouse's earnings are essentially pulled down to a lower bracket and taxed at a lower rate. That results in a lower overall tax bill for the couple.
Here's an example of how unequal incomes can create a marriage bonus: Dave and Sally are married in 2022. Sally has $250,000 of taxable income during the year, while Dave has $30,000. If they file a joint return, the combined taxable income of $280,000 lands them in the 24% bracket and results in a $54,871 tax bill. If they were still single, Sally would be in the 35% tax bracket and owe $61,253 in tax, while Dave would be in the 12% bracket and owe $3,395 in tax – for a combined total of $64,648 in taxes due. Because they're married, Dave and Sally get a marriage bonus of $9,777 ($64,648 – $54,871 = $9,777).
You might also benefit from being married if a larger tax break is available only if you file a joint return. For example, a married couple that sells their home can exclude up to $500,000 from the capital gains tax if they satisfy all the necessary requirements. However, a single person who sells a home can only exclude up to $250,000. So, if you own a house and are planning to sell it, you might want to wait until after the nuptials to put up a "for sale" sign on your front lawn.
Tax Filing Status Options for Married Couples
Saving for Retirement When You're Married
Speaking of retirement, how you save for retirement can change after you're married, too. As mentioned above, there are potential marriage penalties associated with the IRA deduction and Roth IRA contribution limits. Specifically, for 2022, if both spouses are covered by a retirement plan at work, each spouse's IRA deduction is phased-out if your AGI is between $109,000 and $129,000 – compared to $68,000 to $78,000 for single filers. If only one spouse is covered by an employer's plan, the phaseout range for contributions by the spouse not covered by a workplace plan is from $204,000 to $214,000. (If you're married, each spouse calculates their deduction separately.) As for the 2022 Roth IRA contribution limits, they phase out for married couples with an AGI of $204,000 to $214,000. For singles, it's $129,000 to $144,000.
There's some good news, though. For example, the maximum Saver's Credit, which incentivizes lower-income people to save for retirement, is doubled for married couples filing a joint return – from $1,000 to $2,000. For 2022, joint filers must have an AGI of $68,000 or less ($34,000 or less for single filers) to claim the credit.
Another perk helps spouses who are unemployed or don't make much money save for retirement. Normally, you must have earned income to contribute to an IRA, and your contributions can't exceed your total earned income for the year. However, under the "spousal IRA" rules, a spouse with earned income can contribute to an IRA for the other spouse who has little or no income as long as the total contributions to both spouses' IRAs don't exceed the couple's joint earned income (the IRA contribution limits applicable that year for each spouse also apply).
A person who inherits an IRA from a deceased spouse is also in a better position than other people who inherit an IRA. For most people who inherit an IRA, the inherited account must be drained within ten years of the original owner's death. That also means that you'll have to pay taxes on IRA funds within ten years. But the ten-year rule doesn't apply if the original owner was your spouse (it also doesn't apply if the beneficiary is a minor child of the account owner, disabled, chronically ill, or not more than ten years younger than the original IRA owner). As a result, you can stretch out withdrawals from the IRA – and tax payments – over your own lifetime at a pace that's up to you (hence the nickname "stretch IRAs"). A spouse can also roll the inherited IRA over to his or her own IRA instead of keeping it as a separate account.
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Since your tax bill could go up or down once you're married, it's a good idea to check your tax withholding as soon as possible after the wedding and make any necessary adjustments. When you file a joint tax return next year, you'll get a tax refund if the combined amount withheld from your and your spouse's pay in 2022 is more than the tax your family owes. Of course, if the amount withheld is less than the taxed owed, then you must pay the difference when you file your return – plus a penalty if the difference is above a certain amount. Ideally, the amount withheld and the amount you owe are pretty close. That way, you won't have to pay more at tax time, you'll avoid any underpayment penalties, and you won't be giving Uncle Sam an interest-free loan (which is essentially what happens if you have too much withheld).
It's easy to adjust your withholding so that it comes close to your expected tax liability as a married couple. Just complete a new Form W-4 and give it to your employer (check with your HR department to see exactly who should receive the form). Your employer must implement any change by the start of the first payroll period ending on or after the 30th day after you submit a new W-4 form. To help you determine if and/or how much to adjust your 2022 withholding, use the IRS's Tax Withholding Estimator.
If you're retired, check the withholding from your retirement accounts. Use Form W-4P to adjust withholding from periodic payments from a 401(k) plan, pension or traditional IRA. (Periodic payments are made at regular intervals for at least one year.) If you're receiving non-periodic payments, use Form W-4R. Submit these forms to the plan, pension or IRA administrator. For Social Security benefits, use Form W-4V to request withholding at a rate of 7%, 10%, 12% or 22% (those are your only options).
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Check Your Tax Withholding After Getting Married
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