7 Key Considerations for Getting Your Retirement Timing Right
Despite receiving high ratings and a lucrative offer of $5 million per episode, comedian Jerry Seinfeld chose to retire Seinfeld after its ninth season. Citing that it was “all about timing,” he explained at the time, “I wanted the end to be from a point of strength. I wanted the end to be graceful.”
Likewise, many aspire for a graceful transition from their careers. When it comes to retirement, timing can have a significant impact on our well-being. A study from the Center for Retirement Research at Boston College revealed that individuals who opted for retirement felt happier than those who involuntarily left their jobs.
Timing retirement “just right” is a nuanced decision and varies for each individual. However, several general principles can guide individuals in making an informed decision. Here’s a compilation of key considerations for getting the timing right.
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When it comes to retirement, timing can have a significant impact on your well-being.
A Guide to Debt: Good vs. Bad and Tips to Better Manage It
In 2022, the average American owed almost $102,000 and paid more than 9.5% of their disposable income on debt. That same year, American households owed approximately $17 trillion in total debt, up $2.75 trillion from 2019.
Let's face it: America has a debt problem. I believe that bad debt habits persist due to our country's financial illiteracy. This guide is aimed to help you understand the differences between good and bad debt and give you basic techniques and recommendations for managing and paying off your debt.
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Debt might help or hurt your long-term finances, so be mindful of its use.
Long-Term Care Planning Protects You and Your Family
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Preservation Retirement Services
From high-quality security cameras to elaborate alarm systems, people spare no expense to keep their home safe. But what are you doing to protect your retirement home?
You worked hard to build a solid foundation with good saving and spending habits, and years of investing have helped the walls of your retirement home take shape. Protecting that home is critical. While you may have a strategy to lower your taxable income or a portfolio that protects against market risk, have you thought about your long-term care (LTC) plan?
More likely than not, you’ll need some form of long-term care in retirement. Figuring out now how to handle the costs would be like building a fence around your retirement home.
14 Rapid-Fire Estate Planning Tips
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Have you ever attended a conference in which a panel took turns pronouncing tips for best practices or “life hacks” to improve your lifestyle or finances? Well, this article is a smorgasbord of 14 tips you should find useful in understanding or revising your estate planning and in your relationships with your trustee, estate planner, accounting firm and other advisers.
There’s a lot to keep up with when estate planning. These tips could help, from updating beneficiaries after changing your plan to understanding will-substitute options like transfer on death.
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Taking a day or a week off from spending not only frees up cash to pay down debt or add to savings, but can also help you reinvest in your relationships. Here’s how to do it.
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Having a solid retirement plan is key to a happy retirement. But knowing where to start or how to stay on track can be a challenge. For NYSUT Members, the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers access to a team of Certified Financial Planners® that provide members with financial counseling services. These advisors can provide you with unbiased advice that is customized for all of your retirement planning needs. For more information or to enroll, visit the member website today.
Is Your Home as Protected as You Think? It’s Time for a Policy Review
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Across my 20+ years of helping business owners with their personal and business finances, I’ve gained many valuable insights on a variety of topics. I’ve come to realize that people often pay too little attention to their insurance coverages. In particular, many people fail to understand the importance of regularly reviewing their policies. This is especially true of homeowners insurance. If you haven’t taken a recent look at your policy, you could be setting yourself up for disastrous consequences.
Although you likely purchased an appropriate amount of coverage when you first took out your policy, property values tend to rise. The coverage you had on your home 10 years ago probably won’t cut it, today. Because real estate tends to ebb and flow, it’s a good practice to review your homeowners insurance coverage annually to ensure you’re adequately covered. So, what should you look for?
It’s better to find out your coverage falls short before something happens rather than after. Here’s how to get started and what to look for as you review your policy.
What Is Life Insurance?
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Life insurance is a legally binding contract between you and an insurance company. In exchange for premium payments (and if your policy is active when you die), the insurance company will pay a lump sum of money, referred to as a death benefit, to your chosen beneficiaries. However, not all life insurance policies are the same.
There are two main types of life insurance: term and permanent.
Term life insurance covers you for a set period of time, usually 10, 20 or 30 years. If you die within this time frame, your beneficiaries will be paid the amount specified in the policy. However, if you outlive your policy, no one receives a pay out. Term life insurance is typically the cheapest option for life insurance, and has no cash value component. There are a few types of term life insurance policies.
Renewable term insurance: According to the National Association of Insurance Commissioners (NAIC), "renewable term insurance guarantees the policyholder the right to renew at the end of the contract period without evidence of insurability as long as the premium is paid."
Decreasing term insurance: With a decreasing term policy, coverage decreases over the life of the policy at a set rate. This form of insurance can be useful for paying down loans, like a mortgage, that decrease over time.
Convertible term insurance: A convertible term insurance policy allows an individual to convert a term policy to a permanent policy.
Permanent life insurance as the name suggests, covers you for the remainder of your life — as long as you keep up with the premium payments. Although more expensive than term life policies, permanent life insurance policies build cash value over time. The most well-known form of permanent life insurance is whole life insurance.
Whole life insurance: Whole life insurance offers a fixed death benefit when the policyholder dies. Both the death benefit and the premium are designed to remain constant throughout the life of the loan. With a whole life policy, a portion of each premium payment is put into a savings component referred to as the cash value. According to the National Association of Insurance Commissioners (NAIC), "Whole life policies are designed to build tax deferred cash value, which is the accumulation of premiums collected less applicable expenses and applicable insurance charges and they allow for borrowing against the cash value of the policy."
Cost: Several factors go into how much your life insurance premium will cost.
Age: The sooner you purchase life insurance, the cheaper it is. This is because when you’re young, you pose less of a risk to insurance companies due to your good health. For this reason, purchasing life insurance in your 20s, as opposed to your 50s, can save you thousands of dollars over the course of the policy.
Current health: Your health plays a big factor in determining how much your health insurance policy will cost. Are you a smoker? What's your family medical history like? Past, current and potential health issues will be considered.
Lifestyle: Do you have any high risk hobbies, like auto racing or sky diving? What about a dangerous job? These can all raise your life insurance premiums.
You'll also need to calculate how much coverage you'll need. To do so, add up all the expenses you intend to cover. In addition to funeral costs, you'll want to consider mortgages, debts, college tuitions and income replacement for your loved ones.
Life insurance can financially protect your loved ones after you pass away.
Eight Strategies for Deciding When to File For Social Security
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Waiting until age 70 to file for Social Security retirement benefits can be an effective way to reduce the risk that you’ll run out of money in your later years. But in some instances, filing for benefits at your full retirement age (FRA) or even earlier could provide the additional financial security you and your family need now. You can file as early as 62, but your payments will be reduced because you aren't typically entitled to 100% of your benefit until age 67.
In some cases, you may not be able to wait until full retirement age — let alone until age 70 — to file for benefits.
Not sure when to file? Take a look at these eight strategies for determining when to file for Social Security.
Applying at age 70 maximizes your monthly payout, but claiming early could provide advantages that can’t be quantified on a spreadsheet.
10 Things To Know Before Medicare Open Enrollment Starts
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Getting a handle on the basics of Medicare can help protect your health — and your nest egg — in retirement, so making the right choices during Medicare open enrollment is arguably one of the most important financial decisions you can make.
Open enrollment runs from Oct. 15 to Dec. 7 each year. You can tell by the advertisements that inundate the airwaves and your mailbox. You’re likely even already getting unsolicited calls and emails. All kinds of health insurance brokers and companies want to dazzle you with their offerings.
First, let’s review the basics. As most retirees know, Medicare has several parts. Part A, which is offered at no cost, generally covers hospitalizations. Part B covers outpatient medical care. Part D is prescription drug coverage provided by private insurers.
Medicare Advantage is the umbrella term for plans offered by private insurers regulated by Medicare to replace parts B and D. Medigap plans, also offered by private companies, are supplemental plans that cover copays and coinsurance charges imposed under Medicare Part B. While some people assume that Medicare will cover all their healthcare costs, experts warn there are things Medicare won't cover.
A 65-year-old retiring in 2024 could expect to spend an average of $165,000 in healthcare and medical expenses throughout retirement, according to data from Fidelity Investments. This highlights the importance of reviewing your Medicare plan choices during open enrollment each year to ensure you have the best coverage to meet your needs.
What Retirees Must Know About Telehealth
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529 Plan Contribution Deadlines
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If you are saving for college, it’s important to have information about making 529 contributions that can maximize available state tax breaks. So, here are a few reminders to help you take advantage of tax benefits associated with your 529 college savings plan—beginning with a quick overview of how 529 plans work.
Many states have year-end deadlines for making 529 college savings plan contributions.
© 2020 The Kiplinger Washington Editors Inc.
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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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How Can I Prepare for an Unexpected Financial Emergency?
Oh, the dreaded financial emergency. It crops up when you least expect it — usually late on a Friday, right? That’s when our options for resolving the issue are the most limited, whether its air conditioning on the fritz (an especially big concern during all these heat waves) or a plumbing disaster. We’re left scrambling to both secure expert help and pay for it. Or maybe you have an unexpected medical bill or lose your job. What can you do to make ends meet?
While there’s no way to know what’s going to happen or take steps, beyond the usual preventive ones, to head it off, you can at least be prepared in other ways. To find out what our options could be during a financial emergency, we at Kiplinger.com asked some of the financial experts among our Building Wealth contributors and Kiplinger Advisor Collective members to answer this question:
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We asked some of our contributing financial experts what to do to cover emergencies, in addition to having an emergency fund. They give some great suggestions.
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The 50-30-20 Budget Rule: A Simple Way to Save Money
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We asked some of our contributing financial experts what to do to cover emergencies, in addition to having an emergency fund. They give some great suggestions.
PERSONAL FINANCE
How Can I Prepare for an Unexpected Financial Emergency?
Finance Fundamentals
Debt might help or hurt your long-term finances, so be mindful of its use.
A Guide to Debt: Good vs. Bad and Tips to Better Manage It
More likely than not, you’ll need some form of long-term care in retirement. Figuring out now how to handle the costs would be like building a fence around your retirement home.
Long-Term Care Planning Protects You and Your Family
Taking a day or a week off from spending not only frees up cash to pay down debt or add to savings, but can also help you reinvest in your relationships. Here’s how to do it.
Financial Fasting Can Trim the Fat From Your Spending
PERSONAL FINANCE
LONG-TERM CARE INSURANCE
PERSONAL FINANCE
LIFE INSURANCE
INSURANCE
Car insurance protects you against financial loss in the case of an accident or theft. Here's a look at the different types of coverage you can choose.
What Does Car Insurance Cover?
Life insurance can financially protect your loved ones after you pass away.
What Is Life Insurance?
HEALTH CARE
Medicare can be complicated but we've got you covered. Here is a quick guide to the different benefits provided through each part.
What You Must Know About the Different Parts of Medicare
When it comes to retirement, timing can have a significant impact on your well-being.
RETIREMENT PLANNING
7 Key Considerations for Getting Your Retirement Timing Right
HOME INSURANCE
It’s better to find out your coverage falls short before something happens rather than after. Here’s how to get started and what to look for as you review your policy.
Is Your Home as Protected as You Think? It’s Time for a Policy Review
TAX INSURANCE
Many states have year-end deadlines for making 529 college savings plan contributions.
529 Plan Contribution Deadlines
MEDICARE
Medicare beneficiaries will have a lower out-of-pocket maximum for their Part D Prescription drug coverage in 2025.
MEDICARE ENROLLMENT
Medicare open enrollment means you're bombarded with choices. Here's what you need to know.
10 Things To Know Before Medicare Open Enrollment Starts
Three Medicare Changes on the Horizon for 2025
SOCIAL SECURITY
Applying at age 70 maximizes your monthly payout, but claiming early could provide advantages that can’t be quantified on a spreadsheet.
Eight Strategies for Deciding When to File For Social Security
Retirement Living
It’s critical to consider these core aspects of a successful retirement, both financial- and lifestyle-related, before you walk away from your career.
RETIREMENT Planning
Are You Ready to Retire? Find Out With This 10-Item Checklist
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There’s a lot to keep up with when estate planning. These tips could help, from updating beneficiaries after changing your plan to understanding will-substitute options like transfer on death.
ESTATE PLANNING
14 Rapid-Fire Estate Planning Tips
Financial Learning Center Resources
Need a Financial Planner?
Medicare open enrollment means you're bombarded with choices. Here's what you need to know.
Financial Learning Center
Powered by Kiplinger
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
Should You Leave Your Heat on All Day or Turn It Off? Which is Cheaper?
The 50-30-20 Budget Rule: A Simple Way to Save Money
Which option will help you save on your energy bills?
The 50-30-20 budget rule keeps budgeting simple. You'll prioritize savings while paying off debt, but is it right for you?
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With a bit of knowledge and a plan, you can find your way to financial freedom.
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ENERGY BILLS
REDUCE DEBT
Nine Ways to Make Paying Off Debt Less Intimidating
Kiplinger Today
Three Medicare Changes on the Horizon for 2025
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Medicare open enrollment runs from October 15 to December 7 each year. During this period, you can switch from original Medicare to a Medicare Advantage plan, or vice versa. You can also choose a new Advantage plan or new Medicare Part D prescription drug coverage. Knowing more about changes to Medicare taking effect in 2025 will help you select the best plan when the time comes.
Here are three ways Medicare will change in 2025:
Medicare beneficiaries will have a lower out-of-pocket maximum for their Part D Prescription drug coverage in 2025.
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Inflation tops health care costs as the biggest concern, and many preretirees are boosting their saving rate.
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.
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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.
Good debt can help your long-term finances, whereas bad debt hurts or ruins it. Good debt examples include:
Mortgages: Whether for your home or an investment property, mortgages buy assets. As a mortgage is paid down, equity (the difference between the property’s fair market value and the loan total) builds and can be used to sell or borrow from.
Student loans: Data shows that a college degree can significantly boost a graduate's lifetime wages, making student loans acceptable debt.
Home equity loans and lines of credit: If you own real estate, you can borrow against your equity for long-term financial gain. Home equity debt can be used to upgrade a home, buy another property or pay off higher-interest debt.
It’s important to note that good debt is still debt, so use it wisely. A few helpful tips include:
• Keep mortgage payments below 36% of income.
• Keep student loan payments below 10% of estimated monthly after-tax income.
• Home equity loans and lines of credit often require a minimum loan-to-value ratio of 80%.
• The idea is to ensure you still pay off good debt over time and manage it cash flow-wise.
Bad debt should be avoided or used with good financial habits. Bad debt includes:
Credit cards: Credit cards allow you to spend money you don’t have and carry hefty interest rates. Credit cards can simplify cash flow management, but you should use them only if you can pay them off every month.
Personal loans: Personal loans are a good alternative for consolidating and paying off high-interest debt because they have a fixed duration and payment and lower interest rates than credit cards. Avoid using them for unnecessary things such as pricey vacations or new outfits.
Buy now, pay later loans: Online retailers provide BNPL loans at the moment of sale. These loans let you make numerous interest-free payments for a charge. This idea seems great in theory, but if you make many BNPL purchases through different services or merchants in a short time, that could result in more debt than you initially meant or can afford.
Good vs. bad debt
Their responses range from setting up an emergency fund to cutting unnecessary expenses right away or tapping a home equity line of credit or your workplace benefits. They also have some ideas about what not to do, such as turn to predatory payday lenders.
Perhaps while you peruse their suggestions, you’ll be inspired to check out some of the other stellar financial advice these experts offer Kiplinger.com readers on a regular basis (just click on their name to see their contributions and learn more about them).
Here’s what our experts had to say about dealing with financial emergencies…
How can I best prepare for unexpected financial emergencies, such as job loss, medical bills or major home repairs?
“Before disaster strikes, be aware of your financial options; be proactive instead of reactive. If you should be faced with an expensive emergency repair, what lines of credit do you have access to? Borrowing from your 401(k) or 403(b) can be a way to get needed money quickly, and since you’re essentially making loan payments to yourself, interest rates are more favorable. Don’t forget to check your homeowner’s insurance policy — it may cover more home repairs than you realize. If you need quick access to money after an unexpected job loss, a home equity line of credit can be helpful to make ends meet while you look for work.” — Brianna Gutierrez, a Building Wealth contributor
‘Be proactive instead of reactive’
The most evident consideration for retirement is financial preparedness. Clearly, one can’t think of retiring if they can't afford it. But what’s the magic number?
According to Northwestern Mutual’s 2023 Planning & Progress Study, working Americans believe they need an average of $1.27 million to retire. However, many can lead a comfortable retired life with less. The ideal savings benchmark varies based on individual circumstances. Fidelity recommends targeting 10 times your pre-retirement income by age 67 to sustain your current lifestyle in retirement.
1. Consider your financial readiness
Tip 1
Consider bringing a professional trustee into your estate planning process. Effective collaboration will result in a more effective plan and more efficient administration.
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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.
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.
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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.
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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.
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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.
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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.
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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.
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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.
Learning Center Home
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.
Learning Center Home
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.
Learning Center Home
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.
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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
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:
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.
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 Basics: 11 Things You Need to Know
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.
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.
The 50-30-20 budget rule keeps budgeting simple. You'll prioritize savings while paying off debt, but is it right for you?
Beginning in 2025, people with Part D plans won’t have to pay more than $2,000 in out-of-pocket costs, thanks to a provision in the Inflation Reduction Act of 2022. The $2,000 cap will be indexed to the growth in per capita Part D costs, so it may rise each year after 2025. Part D enrollees will also have the option of spreading out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month.
This new rule applies only to medications covered by your Part D plan and does not apply to out-of-pocket spending on Medicare Part B drugs. Part B drugs are usually vaccinations, injections a doctor administers, and some outpatient prescription drugs.
If you are enrolled or looking to enroll in Medicare Part D plans in 2025, review your choices carefully by using the Medicare Plan Finder. You can compare different plans and see whether the prescriptions you take will be covered.
This change to Medicare prescription drug coverage may cause problems for some people who delay enrolling in Medicare because they are covered by employer health insurance.
1. New $2,000 annual cap on out-of-pocket prescription costs
Student Loan Counseling
Credit/Debt Counseling
Need an Attorney?
Level Term Life Insurance
Term Life Insurance
Disability Insurance
Long-Term Care Insurance
Auto and Home Insurance
Mortgage Discount Program
Synchrony Bank Savings Program
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Student Loan Counseling
Credit/Debt Counseling
Need an Attorney?
Level Term Life Insurance
Term Life Insurance
Disability Insurance
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 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.
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How to Get Your Grown Children to Move Out
Whether you’re getting married or just moving in together, every couple needs to come to an understanding about how they will handle money and learn what benefits their coupledom may afford them.
Wedding season is in full swing, and along with all the beauty and joy that it can bring, it’s also important to keep in mind that with marriage comes a fair amount of financial decisions and plans to be made. To be sure these are not always the first things we think about, but given my career in finance, I can’t help but bring them front and center.
Whether you are already part of a “we” or are forging a new connection, you’ll need a strong financial foundation for a meaningful and sustainable future. It may not sound romantic at first, but if you’re on the verge of moving your relationship forward in a big way, these three steps can help you deepen one of the most important bonds a couple can share: your finances.
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Wedding Season: 3 Steps to Empower Your Finances as a New Couple
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What Does Car Insurance Cover?
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Liability coverage, required by law in most states, is the foundation of car insurance policies. It’s designed to protect you financially if you’re found at fault in an accident and cause injury or property damage to others. Liability coverage encompasses two components: bodily injury liability coverage and property damage liability coverage.
Bodily injury (BI) liability covers injuries that you cause to someone else. Generally, it pays for the other person’s medical bills, recovery costs, and lost wages.
Property damage (PD) liability covers the cost of repairing or replacing another person’s property that you damaged. Typically, this covers damage to another driver’s vehicle, but it can also cover damage to fences, lamp posts, telephone poles, buildings, or other structures your car hits.
Liability
If your car is damaged in a collision with another vehicle or a stationary object, such as a streetlight or a tree, collision coverage pays to fix or replace it. If you’re leasing or financing your vehicle, your lender may require you to purchase collision coverage.
Collision
Personal injury protection (PIP) coverage — not available in all states — helps pay for you and your passengers’ medical expenses resulting from an accident, regardless of who is at fault, meaning you don’t have to wait for your insurance company to determine blame to be compensated. It also typically covers rehabilitation, lost wages, and funeral costs. PIP coverage is required in 18 “no-fault” insurance states, including Arkansas, Delaware, Minnesota, New York, Texas, and others.
Personal injury protection
It’s a question all drivers should know the answer to: What does car insurance cover?
While auto insurance policies can vary in terms of premiums, deductibles, and coverage limits, basic car insurance typically provides these types of coverage.
Car insurance protects you against financial loss in the case of an accident or theft. Here's a look at the different types of coverage you can choose.
NYSUT NOTE: Determine the right car insurance policy for you by using the NYSUT Member Benefits Corporation-endorsed Farmers Insurance Choice platform. Offered by Farmers GroupSelectSM, this platform allows NYSUT members to choose from multiple insurance carriers and features competitive prices and savings for stand-alone or bundled auto and home policies. For more information or to start comparing policies, visit the website today.
Before taking on debt, plan ahead. What is your debt goal? Will it help or hurt your finances?
A debt-to-income ratio under 35% is considered healthy. Keeping your debt-to-income ratio in this range ensures your monthly income can meet your debts. If your debt-to-income ratio is higher than that, then now’s a good time to plan repayment.
Here are some generally healthy habits and best practices to establish with your debt:
Healthy debt management
NYSUT NOTE: Do you have personal debt or money concerns that you need help managing? NYSUT members are able to enroll in the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. This program has been assisting consumers with eliminating debt for more than 20 years, and NYSUT members are eligible to receive a free, no-obligation, debt consultation with one of Cambridge's certified counselors. These counselors can help you better understand your situation, help you set financial goals, determine your budget and more, to help you get out of debt in a fraction of the time. Visit the member website for more information.
Everyone hopes to pass away peacefully after a long, healthy retirement. Unfortunately, life rarely plays out that way. My family could never have predicted the impact LTC would have on our finances.
When my father stopped to help someone with a flat tire on the side of a road, he was tragically sideswiped by a passing car. He spent the rest of his life recovering from the accident and never left the nursing home. Paying for 27 years of LTC cost my parents everything they had, including their 401(k) plans and the home they raised their family in.
We never saw this tragedy coming, and the same could be true for you. We don’t know what life has in store for us, but you’ll be thankful for the security LTC protection can provide.
The cost of LTC adds up quickly. On average, a semiprivate nursing home room costs over $80,000 per year, according to LongTermCare.gov. Keep in mind, the need for LTC is typically a progression: You may need in-home care to start, eventually transition into assisted living and then a nursing home. Those phases can stretch out over many years, even decades.
While traditional health care coverage and Medicare may cover some short-term services, most long-term assistance is not covered, such as an extended nursing home stay or in-home assistance. Paying for these services on your own may hinder your ability to meet day-to-day expenses in retirement, and you run the risk of depleting any legacy you were hoping to leave to your loved ones.
Planning for the worst matters
The Assistant Secretary for Planning and Evaluation (ASPE) estimates that 70% of today’s 65-year-olds will need some type of LTC in retirement. Since traditional health care coverage and Medicare do not cover any ongoing assistance, those who need LTC are left with four options:
Self-funding. You can pay for LTC out of pocket, dollar-for-dollar. If you end up being a part of the 30% who won’t need LTC in retirement, this option could work in your favor. But that’s a major gamble! There’s no way to know if you’ll need LTC or not, and being forced to self-fund your LTC needs can quickly deplete your retirement savings that were earmarked for other retirement expenditures.
Long-term care insurance. In exchange for a monthly premium, long-term care insurance policyholders can receive coverage for their LTC needs. Depending on the terms of your policy, you may pay a premium for 10, 15 or 20 years. No matter how much money you pay in premiums, most policies do not offer a payout if the policy goes unused, and there is no death benefit to your beneficiaries. Many people are uncomfortable with that risk.
Long-term care plan options
Life insurance. Most people know about term and whole, but there are other types of life insurance with features designed to protect you from LTC risk. Some indexed universal life insurance (UIL) and universal life (UL) insurance policies allow you to tap into the death benefit during your lifetime to cover any LTC costs. Unlike an LTC insurance policy, if the LTC features of a IUL or UL insurance policy go unused, your beneficiaries will receive the full tax-free death benefit when you pass away.
Talk to a retirement planner during your lifetime about the insurance options available to you. Life insurance coverage is dependent on a medical exam, so if you have certain health issues, it may not be a viable solution for you.
Fixed indexed annuities. A fixed indexed annuity (FIA) with an income rider can include LTC benefits. If you purchase an FIA, you’ll pay an insurance company a lump sum of money, and after a certain number of years, you’ll receive an income stream that pays out monthly for the rest of your life. If you add LTC benefits to your contract, you can receive a double payout when an LTC need arises. Let’s say your FIA pays out $2,000 every month. If you need to pay for any LTC, that monthly payout will increase to $4,000.
An accelerated benefit stream can usually only kick in once you’ve held the policy for five years, and the benefit is typically capped at five years, although some policies are only three years. However, the normal income stream from an FIA will continue throughout the lifetime of the policyholder.
Financial fasting can be a reset button — not only for your finances, but for your values, sense of purpose and even your relationships. Here are a few ways that limiting your spending can change your financial well-being for the better.
1. Pay down debt faster.
The most obvious benefit of financial fasting is that it frees up cash flow fairly quickly. But that doesn’t mean that you should simply spend all that money once you break your financial fast. Consider using that moment as an opportunity to pay down debt at an accelerated rate — especially high-interest obligations like credit card debt and car loans.
2. Break the cycle of senseless spending.
We spend for different reasons. Some people lavish their grandkids with expensive gifts, while others continually chase the latest fashion trends, no matter the cost. The problem is, many people don’t recognize why they’re purchasing certain things — and that the reasons for buying them may fall apart under scrutiny.
Buying possessions, for instance, tends to provide happiness for only a short period time, but a meaningful experience can be more rewarding over the long term.
Because financial fasting pushes the pause button on spending, it can make you think longer about why you wanted to buy something in the first place.
In time, you’ll become more adept at fulfilling those needs without spending, or realize when those impulses are not needs at all. For example, if you want to spend time with your significant other, a walk along the beach or in a park may be a better, expense-free way to do that, vs going to the movies.
3. Align your purchase decisions with your values.
Financial fasting is also an opportunity to bring your spending in line with your own personal values. Growing up, many Baby Boomers like me just went to work. We put our heads down. Spending wasn’t necessarily connected to purpose or passion but providing for ourselves or others.
This can be a time to take a page from younger generations and think about the impact of your purchase decisions. If you are passionate about social awareness and responsibility, consider the many items you purchase from large companies. Should you redirect those dollars to other businesses that may have a greater impact on your local community?
As you come out of a financial fast, you’ll find yourself at a crossroads, asking: Do I continue spending the way I have in the past, or try to be the change I want to see in the world?
4. Create a space to reconnect in our relationships.
Some instinctually feel that in order to do something, you need to spend something. But when it comes to our relationships, quality time is what matters most. Some types of spending can disconnect you from those important connections, instead of creating space for you to engage with your loved ones in a meaningful way.
For example, some leisure activities — like attending plays, visiting theme parks or going to concerts — don’t actually require people to talk to each other. And costly gifts are hardly a substitute for personal connection. Unfortunately, many of our spending habits, while well-meaning and born out of kindness, fail to deepen our relationships.
Planning free activities, on the other hand, requires you to creatively collaborate with your family members and friends, fostering a sense of spontaneity and adventure. And many of the activities that don’t involve spending require us to remain in the moment, listen to others respectfully and appreciate their presence.
Financial fasting can be as stringent as abstaining from spending for a week, or as measured as skipping lunch during the workweek. What’s most important to recognize is that financial fasting can be accomplished in degrees to accommodate your comfort level and needs.
Go through your budget. Start by identifying the areas where you’re spending the most — eating out, going to movies — and the days in which you’re spending the most. This will help you target your fast and also give you ideas about how to occupy your time during a fast. Someone who regularly goes to an art museum on Sunday, for example, may instead choose to attend free art exhibitions in the area.
Plan to start small. Just like physical fasting, financial fasting is a muscle. Begin by cutting out expenses that are easy to track. That regular Friday date night at the local bistro could turn into dinner and a movie at home, for instance. Once you’ve mastered those smaller targets, then you can take a stab at an entire day without spending and, ultimately, even an entire week.
Don’t expect an overnight change. At first, you may feel as if you’re needlessly depriving yourself. But after fasting for a while, you’ll start to come out of each fast with a renewed appreciation for what money is — its purpose, significance and impact on the lives of others. That sense of connection will change how you spend that first dollar coming out of a fast.
How to plan a financial fast
Financial Fasting Can Trim the Fat From Your Spending
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One common concern among folks in their 60s is determining a prudent time to retire. After decades in the workforce, many people are understandably uncomfortable with the idea of no longer receiving a paycheck. While the top concerns are usually related to finances, there are also lifestyle adjustments that must be considered to ensure a fulfilling and secure retirement.
Before handing in your resignation letter, it’s important to consider the core aspects of a successful retirement. Below is a “retirement readiness checklist” to assess whether you are ready to retire:
It’s critical to consider these core aspects of a successful retirement, both financial- and lifestyle-related, before you walk away from your career.
Are You Ready to Retire? Find Out With This 10-Item Checklist
Debt can be a useful tool in many aspects of life, like buying a home, affording a car or growing your business. As long as a person acts responsibly and has a long runway to pay back that loan, it can enhance their life and take their career to the next level.
However, as folks enter their retirement years, many shift to living on a fixed income. Being saddled with debt, and its associated extra expenses, can be burdensome and make retirement life much more stressful. That is why I advise all retirees to eliminate all debt before retirement.
1. Wipe out all your debt.
Social Security is a crucial income source for many retired Americans. Getting it right is critical for a financially successful retirement.
If you are in good health and don’t currently need the cash flow, holding off on claiming Social Security is a smart strategy to mitigate the impact of inflation. Today, full retirement age (FRA) for a retiree to get their full benefit ranges from 66 to 67, depending on the year you were born. One can claim Social Security as early as age 62, but anything before FRA comes with a reduction in benefits up to 30%.
Conversely, Social Security will add an additional 8% delayed retirement credit to your monthly payout for each year, up until age 70, that you hold off on claiming the benefits. That’s a guaranteed annual return of 8% for deferral after your FRA.
2. Consider your Social Security claiming strategy.
Creating a budget for a multidecade retirement is not practical. Prices change, unforeseen expenses arise, and life takes unpredictable turns. However, there needs to be a general calculation to determine if you can afford a particular lifestyle.
This computation doesn’t need to involve anything fancy. Start by listing all your income sources such as Social Security, pension and portfolio or rental income. Next, tally your living expenses, like food, rent, taxes and transportation costs.
Make sure to also factor in any other costs associated with living the retirement you envision, including travel or hobbies. Finally, ask yourself two questions:
• Does my income exceed my expenses?
• Can I afford to live this lifestyle for the rest of my life?
If the answer to either of these questions is “no,” then changes must be made. You can consider working longer, even part time, moving to a cheaper locale or adjusting your retirement lifestyle.
3. Assess your income sources and expenses.
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.
Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS or Kestra AS are not affiliated with Shenkman Wealth Management. Shenkman Wealth Management does not offer tax or legal advice.
About the Author
Jonathan I. Shenkman, AIF®
President and Chief Investment Officer, ParkBridge Wealth Management
Jonathan I. Shenkman, AIF®, is the President and Chief Investment Officer of ParkBridge Wealth Management and serves as a financial adviser and portfolio manager for his clients. In this role, he acts in a fiduciary capacity to help his clients achieve their financial goals.
NYSUT NOTE: Retirement planning can be overwhelming, which is why having a solid plan in place is crucial. The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program can help. As a NYSUT member, you can get customized advice from a team of Certified Financial Planners® that can offer advice based specifically on your financial situation. And it’s all fee-based, which means no commissions from mutual funds, brokerage firms, insurance companies or any other third party. Visit the member website for more information or to get started.
A typical woman suffers a 73% drop in her standard of living post-divorce. However, her ex-husband enjoys an on-average 42% improved standard of living, according to Lenore Weitzman, a George Mason University sociology and law professor.
"Women are more likely to feel divorce's financial burden,” says Shweta Lawande, CFP ®, CDFA® and lead adviser with Francis Financial, a firm specializing in divorce financial planning. “A woman can pretty much see her retirement savings in IRAs, 401(k)s, pension plans, 457s and 403(b) plans cut in half, which can be devastating. In addition, she is unable to recover because she tends to earn less in her career and may have also taken time out of the workforce to care for children."
The divorce gap also creates inequalities between married and divorced women. For example, the Retirement Confidence Survey released in March 2020 revealed that 76% of married women voiced being very or somewhat confident they will have enough money to live comfortably throughout their retirement years. Yet only 43% of divorced women feel the same. But, of course, since that time, pandemic-related stock-market volatility has most likely caused divorced women to feel even more financially vulnerable, along with most Americans.
The Solution for Divorcing Women
According to Zeiderman, who in addition to her law degree is also a Certified Divorce Financial Analyst™, "There is no room for error at this stage of your life. Mistakes can be costly, and most women over age 50 do not have the time to recover. Therefore, hiring the right divorce team that includes a seasoned divorce lawyer and divorce financial expert is critical.”
Lawande chimes in, "The women who fare best post-divorce are those who not only have the right divorce team but have also 'leaned into' the finances. They work with their expert divorce advisers to better understand the implications of the property division, Social Security and pension payout options, spousal support payments, and health insurance coverage."
NYSUT NOTE: Now is the time to get your legal documents in order, and as a NYSUT member you can enlist the help of the NYSUT Member Benefits Trust-endorsed Legal Service Plan. This plan can assist you with all your personal legal issues – from preparing crucial legal documents to traffic violations. Provided by the law firm of Feldman, Kramer & Monaco, P.C., this plan provides unlimited access to toll-free legal advice from a national network of lawyers. For more information or to enroll, click here.
Divorce is not easy, but you do not have to do it on your own. The divorce industry has stepped up to the plate with numerous legal, financial and emotional support structures to help empower those moving from coupledom to single life with the right legal advice and financial security.
Be sure to reach out to a divorce attorney who is highly recommended in your state as well as a Certified Divorce Financial Analyst™ to ensure that you understand all the legal and financial issues of your divorce.
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.
What Is a 529 Plan?
Hands down, the 529 plan is a great way to save for college. The tax benefits are key. With a 529 plan, you pay no annual taxes on the investment gains inside the account, plus distributions for qualified expenses like tuition, certain fees and qualified room-and-board expenses are tax-free.
A relatively new provision allows account owners to withdraw $10,000 a year per student for private primary or secondary education.
Each state administers its own plan, and you are free to use any state’s plan. However, some states offer a state-tax deduction if you are a resident and use its in-state plan. That’s the basics, there is much more to know, but today I want to focus on five ways parents can maximize their 529 plan.
The Time Horizon Is Not Freshman Year
Parents of teenagers often ask me if they should open a 529. They wonder if it makes sense given how close the child may be to needing the money for college. While there are a variety of factors to consider, I remind parents the time horizon for needing the money for college is not freshman year, but by senior year. So, for instance, a parent with a 13-year-old may think they have only four years till they’ll need the 529 money, when in reality the time horizon could be eight years, since not all the money is withdrawn in the freshman year. If that is the case, then yes, eight years may still be enough time to invest in a 529. (There may be some financial aid considerations.)
Having said that, I probably wouldn’t invest all the 529 money in equity mutual funds, given the time horizon is only eight years — that is too risky. But perhaps the tuition payment earmarked for the eighth year, or senior year, could be invested in a dividend-paying mutual fund or a balanced mutual fund, since that has the longest time horizon. I suggest consulting with a qualified financial adviser who can help ensure your investment mix is aligned properly with your risk tolerance and time horizon.
Paying Private K-12 With a 529 Plan
Parents can use up to $10,000 a year from their 529 plan to pay for private K-12 tuition. If you are paying for private school out of a cash or checking account, you may want to consider first routing the payment to the 529 for the state tax deduction. This is a good idea for parents who are already contributing to a 529 plan but not up to the amount for the state tax deduction — they’d have more room to contribute.
For example, if a family is contributing $5,000 a year to their state’s 529 plan, but the state tax deduction is up to $10,000 in annual contributions, they can contribute the additional K-12 tuition payment to the 529 plan to get them to the $10,000 cap. (The $10,000 cap is an example — each state’s rules vary.) This assumes your state offers a state tax deduction for contributions, your state considers K-12 tuition a qualified expense, and there is no minimum waiting period for withdraws. It’s best to check with the 529 administrator first.
There may be some drawbacks to this approach. Namely, it can be a hassle to move money around. Also, it could lead to commingling college funds and K-12 money, which should be invested differently, given their different time horizons, but this trick could also save you a few bucks on your state taxes.
Make a List
Start by making a list of your debts. A list of liabilities includes:
Determine Responsibility
Some debts are easier to divide than others. Student loan debt is usually handled by the student. An auto loan might be assumed by the person who takes ownership of the vehicle.
Credit card debt is more difficult. Some cards may have joint responsibility, but many of us also use our individual cards for expenses for the entire family. Division of those debts may be a key financial issue in some cases.
Debt incurred during a marriage is generally the joint responsibility of both parties, as long as both are co-signers on the credit cards. In community property states, both are responsible, even for debt incurred by one partner.
Set a Deadline
It will be nearly impossible to divide your debts if they continue to grow. Set a date after which there will be no new joint debt. This will likely be the date of separation (physical or legal). Note debt balances as of that date.
After separation, debt incurred on credit cards is the responsibility of the spouse who made the purchases charged on the card. However, you can prevent any room for disagreement by using completely separate cards.
If possible, close your joint credit card accounts. Closing joint accounts will help you avoid the possibility of your ex-spouse incurring debt in your name. Open up a new credit card after you’ve separated and use it for your personal expenses going forward. This will keep your non-marital debt independent of the debts you accumulated while you were still married.
At the very least, have your name removed from any joint accounts that will continue to be used by your spouse. This will not end your liability for debts incurred up to that point, but it should end your responsibility for any new debts incurred on those accounts by your spouse. If you hold any accounts in your own name for which your spouse is an authorized signer, revoke the authorization. Keep detailed records of your charges.
Even if you disagree on responsibility for a debt, continue to pay all minimum payments on credit card accounts that bear your name. Failing to do that could compromise your credit score and adversely affect your credit history down the road.
NYSUT NOTE: Divorce can be complicated, but when you have the right team in place it can help simplify the process. The NYSUT Member Benefits Trust-endorsed Legal Service Plan is available to help provide legal assistance for many of the issues that may be affected by divorce. Provided by the law firm of Feldman, Kramer & Monaco, P.C., NYSUT members can get unlimited access to toll-free legal advice from a national network of lawyers. For more information or to enroll, click here.
1. Figure out your expenses
If you make more than you spend, you have earned the luxury of not having to budget. Budgeting is not an exercise that people enjoy. Unlike your working years, budgeting in retirement is not optional. Pull out too little money and you’ve unintentionally paid for your kids’ country club memberships. Pull out too much and you’ll run out.
Here’s a simple trick: Look at two years of annual statements from your bank accounts. Divide the total debits by 24. That’s it. This is an accurate portrayal of your monthly expenses. This should encompass everything except what you pay for before it hits your bank account (taxes, health insurance premiums, group life insurance, etc.).
2. Gross up the monthly amount to account for taxes
It’s likely that the majority of your retirement savings will be taxed in some shape or form. Roth IRAs and municipal bonds are notable exceptions.
If your monthly expenses are $10,000 and your effective tax rate (how many cents you lose on the dollar to taxes) is 20%, divide $10,000/0.8, to arrive at $12,500 per month. That’s the gross amount you’ll need every month to end up with $10,000 in your bank account to cover your expenses.
NYSUT NOTE: Getting a plan in place to manage your debt isn’t always easy. But with the help of the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program, NYSUT members have the opportunity to work with a certified counselor on possible debt elimination options. With over 20 years of experience assisting consumers with debt, Cambridge can work with you to determine the most appropriate course of action for your specific debt situation. Get a better understanding of debt consolidation, student loan repayment options and more by visiting the website today.
1. Figure out your expenses
If you make more than you spend, you have earned the luxury of not having to budget. Budgeting is not an exercise that people enjoy. Unlike your working years, budgeting in retirement is not optional. Pull out too little money and you’ve unintentionally paid for your kids’ country club memberships. Pull out too much and you’ll run out.
Here’s a simple trick: Look at two years of annual statements from your bank accounts. Divide the total debits by 24. That’s it. This is an accurate portrayal of your monthly expenses. This should encompass everything except what you pay for before it hits your bank account (taxes, health insurance premiums, group life insurance, etc.).
NYSUT NOTE: Divorce can be complicated, but when you have the right team in place it can help simplify the process. The NYSUT Member Benefits Trust-endorsed Legal Service Plan is available to help provide legal assistance for many of the issues that may be affected by divorce. Provided by the law firm of Feldman, Kramer & Monaco, P.C., NYSUT members can get unlimited access to toll-free legal advice from a national network of lawyers. For more information or to enroll, click here.
Medicare can be complicated, especially if you are a new enrollee or someone checking their plan during the Medicare open enrollment period, which is underway only for less than two more weeks.
But it's important to understand what benefits you will receive so you can decide if you want prescription drug coverage, an Advantage plan or additional coverage through Medigap. Below is a quick explanation of each part of Medicare.
If you're in a Medicare Advantage Plan or other Medicare plan, your plan may have different rules. But, your plan must give you at least the same coverage as Original Medicare. Some services may only be covered in certain facilities or for patients with certain conditions.
Part A covers inpatient care at hospitals and skilled nursing facilities as well as hospice and some home health care. If you paid Medicare payroll taxes for at least 40 quarters, the Part A premium is free. For 2024, there is a deductible of $1,632. You also must pay coinsurance for hospital stays longer than 60 days. For more details, read What You’ll Pay for Medicare in 2024.
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Medicare Part A
Medicare can be complicated but we've got you covered. Here is a quick guide to the different benefits provided through each part.
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What You Must Know About the Different Parts of Medicare
NYSUT NOTE: The NYSUT Member Benefits Corporation-endorsed Financial Counseling Program offers NYSUT members customized advice for all their financial planning needs. Whether it’s paying for college, tax planning, refinancing a mortgage, budgeting and managing debt or planning for retirement, NYSUT members can get customized advice from a team of Certified Financial Planners®. Plus it’s all fee-based — which means no commissions from mutual funds, brokerage firms, insurance companies or any other third party. Get unbiased advice from a financial expert by visiting the member website.
NYSUT NOTE: Protecting your home is a top priority for most homeowners, and finding the right policy is a crucial step. The NYSUT Member Benefits Trust-endorsed Farmers Insurance Choice platform can be a great tool for NYSUT members. Offered by Farmers GroupSelectSM, members can choose from multiple insurance carriers and receive competitive prices and savings for stand-alone or bundled auto and home policies. Find the right policy for your individual needs and make sure your home is fully covered. Visit the website today for more information.
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How the Life Insurance Game Is Changing
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.
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
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.
Good news: You can have it your way!
NYSUT NOTE: The NYSUT Member Benefits Trust-endorsed WrapPlan® II Universal Life Insurance Plan underwritten by Transamerica Financial Life Insurance Company allows you to purchase life insurance coverage that increases as your term life coverage decreases or terminates. For more information on requirements and how it works, visit the NYSUT Member Benefits website today.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2023 Future US LLC
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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.
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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.
Fill Medicare's Coverage Gaps With a Medigap Plan
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
NYSUT NOTE: As interest rates continue to increase, there is no better time to address outstanding credit card debt. The NYSUT Member Benefits Corporation-endorsed Cam-bridge Credit Counseling program can help members get a better understanding of their debt consolidation and repayment options. NYSUT members are eligible for a free, no-obligation, debt and student loan consultation with one of Cambridge's certified counselors, who will help determine the most appropriate course of action for your spe-cific debt situation. To find out how to speak to a counselor, visit the website for more information.
NYSUT NOTE: As interest rates continue to increase, there is no better time to address outstanding credit card debt. The NYSUT Member Benefits Corporation-endorsed Cam-bridge Credit Counseling program can help members get a better understanding of their debt consolidation and repayment options. NYSUT members are eligible for a free, no-obligation, debt and student loan consultation with one of Cambridge's certified counselors, who will help determine the most appropriate course of action for your spe-cific debt situation. To find out how to speak to a counselor, visit the website for more information.
NYSUT NOTE: The NYSUT Member Benefits Trust-endorsed Level Term Life Insurance Plan — provided by Metropolitan Life Insurance Company — offers level term life insurance coverage for you or your spouse/certified domestic partner. Terms are available for 10-year, 15-year and 20-year periods. For more information on requirements and term details, visit the NYSUT Member Benefits website today.
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.
Should You Leave Your Heat on All Day or Turn It Off? Which is Cheaper?
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With energy prices still high, heating your home is proving difficult for many to afford. These elevated prices are leading many to search for alternative ways to save on energy bills this upcoming winter season.
The solution can be easier than you think. If you’ve ever wondered whether or not you should leave your heat on low all day or turn it off when you’re gone, keep reading.
According to Bankrate, a typical household spent $6,888 annually on utility bills last year, shelling out $1,644 on electricity bills alone. And thanks to rising electricity prices, expect to pay more this winter.
However, there's one easy way to slash your bills: set your thermostat to the best temperature for the appropriate amount of time.
To save money on heating, the Department of Energy recommends turning your thermostat from 68°F to 70°F while you're awake and even lower when you're sleeping or away from home.
They claim you can save as much as 10% a year on heating and cooling by turning your thermostat back 7°F to 10°F for 8 hours a day from its normal setting.
You may be wondering, however, if you’d be better off turning your heat off completely. In most cases, you’d be better off turning your heat down low than turning it off entirely.
According to Wired, leaving your heat running constantly at a low temperature is best. However, they warn that keeping specific rooms in your home very cold can “reduce the overall efficiency of your heating since those rooms will soak up warmth and make your boiler or heat pump work harder.”
Plus, if you live somewhere cold, turning the heat off all day probably isn’t suitable as it can cause your pipes to freeze and burst. Or maybe you work from home. Whatever the case, dropping your thermostat instead of turning it off completely can help significantly reduce your heating costs — in some cases by 10%. You'll also maximize your savings by ensuring your home is properly insulated and loses less heat.
Purchasing a smart thermostat is a great solution for keeping your home at the appropriate temperature. With a smart thermostat, you’ll be able to control your home’s temperature conveniently from your phone. This allows you to schedule different temperatures for different times of the day or to shut your heat off/on whenever you want, even if you're not at home.
Which option will help you save on your energy bills?
Every year, Medicare’s open enrollment period runs from Oct. 15 to Dec. 7. This is the time to enroll in or make changes to any Medicare or Medicare Advantage policies, although you may be restricted from making a change regarding a supplementary policy, or Medigap.
There is another open enrollment period only for people with Medicare Advantage plans, from Jan. 1 to March 31. During this January open enrollment, you can change from one Medicare Advantage plan to another or go back to original Medicare.
But while authorities urge an annual review of your coverage, you don’t have to do anything if you’re happy with what you have. If you want to maintain your current Medicare coverage, you do not need to re-enroll.
1. Open enrollment dates
While Part D plans can change the drugs they cover, and Medicare Advantage plans can change their provider networks as well as your costs and other provisions, fewer than one-third of enrollees are estimated to take advantage of open enrollment to compare plans and reevaluate their coverage.
Tim Smolen, director of the Washington State Health Insurance Assistance Programs (SHIP), which helps residents navigate Medicare, says beneficiaries consistently care about three things during open enrollment: access, what benefits are included in their plan, and cost.
That last issue is the toughest to gauge. “It's very difficult to forecast in the year ahead how much healthcare you're going to use,” he says.
2. Few people take advantage of open enrollment
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If you haven’t used it in the past year or so and don’t expect you’ll need it in the near future, it's probably safe to get rid of it, says Aaron Traub, the Dallas organizer.
6. Ask yourself the last time you used something
How to Declutter Your Home If You're Moving or Downsizing — 8 Tips to Avoid Overwhelm
Reach out to your family and ask them to go through any possessions they may have left behind. Then invite family members over for a “give and take” visit, suggests Darcy Speed. “Explain that you are looking to declutter and encourage them to choose their favorite items. The "giver" can share the story behind the keepsake, making it even more meaningful, and then it can be taken out of the home.”
You may think about keeping this stuff for your heirs, but keep in mind that “very rarely do your children have the same attachments to items that you have,” says Jil McDonald, an interior designer with Jil Sonia Interior Designs in Vancouver, Canada, who recently downsized significantly. “They want to create their own new memories.” Instead, discard the items, but “take pictures and videos to keep the memories alive,” suggests John Linden, a Los Angeles-based interior designer.
7. Involve your family
Finally, be sure that your old habits don’t return “Keep up with the organization,” says Linden. “Make sure to declutter on a regular basis, and be conscious of what new items you are bringing into your home.”
For Jakob Miller, in New York, “Decluttering was a challenging but rewarding task. Not only did it make my home more organized and functional, but it also gave me a sense of peace and clarity,” he says. “Just start small, take it one step at a time. And you'll be amazed at the results.”
8. Declutter on a regular basis
Nine Ways to Make Paying Off Debt Less Intimidating
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With a bit of knowledge and a plan, you can find your way to financial freedom.
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Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
With student loans, rising housing costs and the ease of credit card use, it’s become all too simple to get into debt. In fact, it’s estimated that about two-thirds of U.S. adults carry some form of debt. And while being debt-free can provide some much-needed emotional freedom and relief, getting out of that debt can sometimes feel like a gargantuan task, especially if you've accumulated a large amount.
But according to the financial experts of Kiplinger Advisor Collective, paying off debt doesn’t have to be intimidating. If you’re ready to tackle your debt and take charge of your finances, consider these best practices for making debt repayment easier on you and your wallet.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
How does Social Security work?
Despite the popularity of Social Security, the program can be complicated. It has so many twists that it’s hard for the average person to get their arms around it.
In a nutshell, Social Security replaces a portion of your pre-retirement income. The amount of your benefit depends on your lifetime earnings. To qualify for Social Security, you must have at least 40 “credits,” which you earn by working at least 10 years. Your benefit is based on your 35 highest-earning years.
That’s where things get complicated. Despite the many gains women have made in education and the workplace, the burden of childrearing and elder care still primarily falls on them. As a result, they are more likely to have gaps in their work history. According to the Brookings Institution, motherhood reduces women’s Social Security benefits by 16% for the first child and then an additional 2% for each subsequent child. Women’s average Social Security benefits are 80% that of men, the SSA says.
2. Start with easy wins
Gather all trash, clean the fridge and pantry and then collect and organize receipts and paperwork, which likely have minimal sentimental value. Next, “look for things that are out of place, like piles of books, clothes, shoes, small appliances,” says Diane Quintana. “Can you put these things away? If you can’t put them away, can you make room for them by decluttering where they would go?”
Then move on to other smaller areas. Consider tackling individual drawers before moving up to something slightly larger, such as a closet or a spare room, suggests Darcy Speed, who trains other organizers and home stagers at Ultimate Academy. “There are usually fewer decisions to be made regarding what to keep and what to donate,” she says.
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Seeking passion and purpose in retirement
An excellent place to start looking for your second act is by considering what you're passionate about and what drives you to give back. In fact, even seniors who need a steady income stream will also benefit from starting here.
For example, many retirees find fulfillment in teaching, such as a college professor instructing students in the field in which they spent their career. Others might consider retail positions involving their career, hobbies, or pursuits that they wished they had more time for while they were working full time. For example, Billy Ozzello, bass player for the 1980s-era band Survivor, now owns a guitar shop in Indiana.
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© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
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Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
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
Chad Rixse
Chad Rixse, CRPS®, is the Director of Financial Planning and a Wealth Advisor at Forefront, a privately-owned financial services firm.
Budget your household to understand your cash flow.
Pay credit cards off in full every month.
Autopay recurring debt installments to avoid late payments.
Plan to repay high-interest debt.
Avoid using debt for lifestyle expenses.
Always have three to six months of living expenses in financial reserves for emergencies.
Track your loan balances, interest rates and minimum payments, and refinance to a cheaper rate when possible.
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Life happens, and we sometimes get into lousy debt despite our best efforts. A plan helps discipline these situations. Three main debt payment strategies include:
Debt snowball method: This method prioritizes smaller balances over interest rates. Mathematically, this strategy is not the most cost-effective or time-saving, but it might feel simpler to attain psychologically with smaller wins gained earlier on and can often free up cash flow faster by removing those lowest sums.
Debt avalanche method: This method promotes paying off highest-interest-rate balances first regardless of balance size. By paying off the higher-interest-rate balances, debt is paid down faster, and more costs are saved on interest.
Debt consolidation method: Managing various loans, credit cards and other debt can be difficult with all the different payments and due dates. For these situations, debt consolidation may be the most preferable option.
The most typical debt consolidation technique is to use a personal or home equity loan to pay down higher-interest debt. In general, the goal of debt consolidation is to lower your monthly payment to free up cash, convert your variable-interest debt to a fixed rate and/or lower your interest rate to simplify repayment and get out of debt faster.
Strategies to pay off debt
Debt might help or hurt your long-term finances and can have serious implications, so be mindful of its use. In today's world, it's tempting to utilize debt to finance purchases or make investments, but it's important to assess the pros and cons to avoid any long-term damage. Debt can help you reach your financial objectives, but only if you understand its implications and make informed decisions first.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Wrapping up
NYSUT NOTE: Securing a long-term care policy is an essential step in retirement planning, but deciding what policy is right for you and your family can be difficult. Which is why 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 (NYLTCB) program. NYLTCB is a nationally-recognized insurance intermediary that offers access to discounted long-term care insurance plans from highly-rated insurance companies, and their specialists can provide insight into different long-term care insurance providers and products, so you can choose the best coverage for you. Visit the member website for more information.
NYSUT NOTE: A life insurance policy with a living benefit can be a great option for long-term care planning. And NYSUT members now have access to the Universal Life Insurance program offering a Convalescent Care Benefit. The NYSUT Member Benefits Trust-endorsed Universal Life Insurance with Convalescent Care Benefit plus YourCare360® Care Planning Services offers added financial protection, along with access to long-term care resources. This is a great way to protect you and your loved ones. For more information and to get started, visit the member website.
Deciding what kind of fence to build around your retirement home is a personal decision. There are benefits and drawbacks to every LTC option, and what’s right for one person may not work for another.
While it’s important to be proactive, buying LTC insurance or life insurance at a young age could get very expensive after years of paying premiums. On the other hand, waiting to purchase a policy could put you at risk of paying high premiums because of any health problems you may have developed in your 50s and 60s.
It’s important to meet with a trusted financial adviser who can help you determine the right time to buy and what type of protection your family needs. No two situations are alike, but an adviser can help you weigh the pros and cons specific to your assets, family history, medical history, tax plan and beneficiary needs. I recommend working with a professional who has the experience and industry knowledge needed to keep you and your loved ones safe from the potential burden of LTC.
Finding the right fit
NYSUT NOTE: Planning and managing your finances can be a lengthy, complicated process, which can often require professional help. That’s where the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program comes in. NYSUT members have access to a team of Certified Financial Planners® that can offer unbiased advice for your specific financial situation. And it’s all fee-based, which means no commissions from mutual funds, brokerage firms, insurance companies or any other third party, just unbiased advice from a financial expert. Enroll today by visiting the member website.
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
Tim Schultz, NSSA®
Founder and President, Preservation Retirement Services
After losing both his mother to breast cancer and a significant amount of money that she left him, Tim became a Licensed Financial Professional to help people never feel as helpless as he did. As the Founder of Preservation Retirement Services, one of his joys in life is spending one-on-one time with clients to help them create safe retirement income strategies and preserve the money they worked so hard to earn.
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“Build up an emergency fund that you keep in a high-yield, FDIC-insured cash savings account. Your minimum target should be at least three to six months of essential living expenses. You can use a line of credit or credit card as a backup, but debt should be a last resort for unexpected financial emergencies, unless you are certain you can pay it off quickly or finance it at a low cost.” — Chad Rixse, a Kiplinger Advisor Collective member
Build an emergency fund in a high-yield savings account
NYSUT NOTE: Start building 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. Visit the member website for more information and to get NYSUT member-exclusive rates.
“While building an emergency fund or savings account is always an important step in being prepared for financial emergencies, it’s equally important to have emergency cash on hand. Consider keeping a small amount of cash locked in a safe at home where it is protected. Another important step is being proactive. Do you have a high amount of debt that is holding you back? Build a strategy to pay it off and commit to putting any extra funds into your savings account. For example, let’s say you commit 10% of your paycheck toward paying down your debt, and as it starts to decrease, you can start to put more money toward saving for an unexpected emergency.” — Tony Drake, a Building Wealth contributor
Emergency cash on hand is important, too
“Financial emergencies can make us feel out of control, which is why it’s so important to have a plan in place you can fall back on to protect your goals and money even in times of uncertainty. Your plans can adapt for changing needs and circumstances, but if you’re struggling with an unexpected expense or event, reach out for guidance before you reach into money you have set aside for other things like retirement. Your workplace benefits can potentially serve as a resource for professional guidance, financial education and support through a financial adviser or coach, who may be able to help you respond to your financial emergency from a more objective and strategic standpoint while also keeping your other financial goals on track.” — Kate Winget, a Building Wealth contributor
Have a plan in place and consider workplace benefits
“While having an emergency fund set aside is something I’ll always advocate for, another way to prepare for tough times is to create an emergency network for yourself of trusted individuals with diverse skill sets. By having this network, you have firsthand access to trusted resources when unexpected situations arise. Likewise, you can also offer your expertise to them in their times of need.” — Justin Donald, a Kiplinger Advisor Collective member
Build an emergency network of resources
“Just as important as having access to funds is cutting expenses. Many people wait too long to start cutting expenses. They assume the job loss, medical expenses or emergency is short-lived. Cutting unnecessary expenses as quickly as possible lowers the amount of income needed to cover expenses. Ending all subscriptions, gym memberships, lowering premiums on car insurance by driving less miles or even adjusting tax withholding (if your family income is going to be lower) can all help minimize the funds needed in an emergency.” — Erin Wood, a Building Wealth contributor
Start cutting unnecessary expenses right away
“One of the best ways to prepare for unexpected financial emergencies is to have an emergency fund. If possible, I recommend building up savings for 12 to 15 months in order to pay for medical bills or major home repairs and not be rushed into a new job. An emergency fund can be achieved through better monthly budgeting. However, aside from traditional advice, collectibles such as sports memorabilia and other items such as jewelry might be sold quickly to make up the difference. Also, stay away from predatory payday lenders.” — Carlos Dias Jr., a Building Wealth contributor
Consider selling collectibles or jewelry
“Develop muscles for spending less / beating as much as possible the inflation all around you. This will allow you to build that emergency fund, but also to get by on a smaller emergency fund when it’s needed. This may be unorthodox, and only partly get you there, but watching the documentary on minimalism (Minimalism: A Documentary About the Important Things) or doing a Marie Kondo reorg of our stuff can give you ideas on where you can spend less.” — Robert Ribciuc, a Kiplinger Advisor Collective member
Embrace spending less, minimalism, tidying up
“It always pays to be prepared, and daresay even a little paranoid about unexpected changes that life may bring. I would advocate running through some hypothetical scenarios in your head to bring some peace of mind that you can adjust to major unexpected events in life. If you have to deal with a job loss, it’s good to have an inventory of your best professional contacts that you can network with and may be able to provide introductions to new employers. You might want to research and keep track of top employers in your area that would be your first targets should you need to look for new work. Similarly, in addition to having an emergency fund, preparing for unexpected financial issues might mean keeping separate assets earmarked for paying off large bills like a home repair or medical bill. It might not warrant keeping extra cash on hand, but alternatively you might set up a lending facility like a HELOC (home equity line of credit) or credit line at your bank that is available should you need to borrow at a reasonable interest rate vs scrambling with high interest rate loans. In short, going through the thought exercises ahead of time for issues you may encounter and being prepared with solutions beforehand will save a lot of heartburn and money down the road.” — Shane W. Cummings, a Building Wealth contributor
Doesn’t hurt to be paranoid
“With a budget of essential and discretionary expenses in place, you’ll be equipped to assess which portion of an unexpected event can be managed through expense reductions and which part may need to be covered by your reserves. Additionally, I recommend exploring unconventional methods to bolster your short-term cash flow. Consider evaluating any automated savings that could potentially be deferred temporarily. Similarly, you might contemplate adjusting your tax withholdings, bearing in mind that any shortfalls must be addressed later. Occasionally, the penalties associated with safe harbor withholding minimums could be outweighed by the potential costs of selling an asset at a loss or resorting to borrowing at unfavorable terms. This strategic approach can help you navigate financial challenges more effectively.” — Thomas C. West, a Building Wealth contributor
Kiplinger Advisor Collective is the premier criteria-based professional organization for personal finance advisers, managers and executives.
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.
Explore unconventional methods of cash flow
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Once you’ve incorporated financial fasting into your daily life, you’ll realize how much the world has to offer outside of indiscriminate spending. It can help refocus your financial priorities, reel in addictive spending habits and even inspire you to financially support causes you believe in.
The difficulties associated with financial fasting are not unsubstantial — but the joys it can bring to your life, and those around you, are well worth the effort.
Reshaping your relationship with money
NYSUT NOTE: Getting your finances in order is not always a simple task, which is why establishing a strategy to manage and eliminate your debt is an important first step. NYSUT members have help from the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. Whether it’s paying off student loans, learning tips for creating and sticking to a budget, or paying down personal debt, Cambridge certified counselors can help you set financial goals to help you get out of debt in a fraction of the time. Visit the member website to get your free, no-obligation, debt consultation today.
This article has been obtained and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU, Executive Vice President of the Georgia Alabama Gulf Coast Branch of Equitable Advisors, LLC. Equitable Advisors and its associates and affiliates make no representation as to the accuracy or completeness of this information, nor do they endorse, approve, or make any representations as to the accuracy, completeness, or appropriateness of any part of any content linked to from this article. You should consult your own financial professional regarding your particular circumstances.
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
Stephen B. Dunbar III, JD, CLU
Stephen Dunbar, Executive VP of Equitable, has built a thriving financial services practice where he empowers others to make informed decisions and take charge of their future. He and his team advise on over $3B in AUM and $1.5B in protection coverage. As a National Director of DEI for Equitable, Stephen acts as a change agent for the organization, creating a culture of diversity and inclusion. He earned a bachelor's in Finance from Rutgers and a J.D. from Stanford.
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A safe withdrawal rate is the percentage that retirees can withdraw from their accounts each year without running out of money before reaching the end of their lives. This is a key aspect in determining how long you can maintain your lifestyle. A popular guideline is the 4% rule, which suggests that an individual can withdraw 4% of their total portfolio value annually to sustain their lifestyle without running out of money.
One important factor when determining your safe withdrawal rate is your legacy goal and how it impacts your retirement goals. Your legacy goal involves estate planning and how much money you’d like to leave to your children or charity. This objective will directly impact how much money you can withdraw each year from your nest egg.
4. Determine a safe withdrawal rate from your portfolio.
Medicare is a federal health insurance program that can provide coverage beginning as early as the first day of the month in which you turn 65. At age 64 and 9 months, you have a seven-month initial Medicare sign-up window. If you miss this window, you may have to pay higher premiums for the rest of your life. An exception is if you still have medical insurance through your or your spouse’s employer. In that case, you can postpone enrolling in Medicare until that coverage ends without having to pay higher premiums later.
Medigap is Medicare supplemental insurance, which is a private insurance that covers some of the out-of-pocket costs not covered by Medicare. There is a six-month enrollment window for Medigap that begins on the first day of the month in which you turn 65. During this enrollment period, you can't be denied Medigap coverage or charged extra because of poor health. However, if you miss the enrollment deadline, you may pay higher premiums for life or even be denied coverage.
5. Consider Medicare and Medigap deadlines.
Long-term care involves needing assistance with the "activities of daily living," which include bathing, dressing, grooming, using the toilet, eating and moving around. These services are not covered by Medicare and can be prohibitively expensive. It is difficult to predict how much or what type of long-term care a person might need, but the best time to think about long-term care is well before you need it so you can consider all your options.
The main strategies for paying for long-term care are self-funding, insurance or Medicaid planning. Each one of these approaches has myriad considerations and should be discussed with a professional who can help assess which option is the most suitable for your needs.
6. Plan for long-term care needs.
Keeping your finances consolidated and organized is always sensible. This is even more important as people age. As a youngster, you may be able to more easily track your multitude of accounts at various brokerage firms. This will become increasingly more cumbersome and stressful as you get older.
I suggest to all my clients approaching retirement to consolidate their accounts wherever possible. This includes rolling over old 401(k)s and/or 403(b)s, consolidating various IRAs and taxable accounts where appropriate and managing all banking (i.e., checking) at one institution.
Furthermore, having a seamless process for a child or trusted family member to make decisions on your accounts in case you no longer have capacity will save a lot of heartache and frustration later.
7. Simplify your financial life.
Being frustrated at work or trying to get away from a difficult boss are not good reasons to retire. Situations at work change daily, and bosses come and go. Making an emotionally charged decision to stop working can be devastating if not thought through fully.
The reason to retire is because one has the burning desire to pursue other interests, goals and lifestyle choices. These new pursuits should be clearly defined and laid out. Not knowing what activities and challenges you’d like to engage in when you retire may lead to boredom and more rapid mental deterioration.
8. Plan to retire TO something, not FROM something.
Working provides many benefits, including daily structure, intellectual stimulation, social interaction and a sense of purpose. Sadly, many retirees discover what they lost from being out of the workforce only after they’ve retired.
It’s essential for retirees to re-create all the aforementioned benefits gained from working while in retirement. This may include consulting part time, volunteering, philanthropic work or various other projects that can be pursued every day for several hours a day throughout your retirement years.
Many people envision their retirement as a life of leisure, sipping cocktails by the beach, playing golf or visiting their grandchildren. Unfortunately, none of these activities is a full-time pursuit. Most hobbies can’t be done full time. It's imperative for folks to develop and even test out their daily retirement routine while they are still working. This aspect of retirement readiness is just as important as the financial considerations.
9. Develop a daily routine for retirement.
While working, people are told repeatedly to save and invest. However, few people are encouraged to spend their nest egg. This shift in psyche from saving to spending is a difficult transition for many. Retirees often have feelings of guilt about spending down their nest egg, thinking perhaps the money could be better used by the kids or a charity. This is the wrong approach!
As I remind my clients, money is not a scorecard to compare to others. Rather, it’s a tool to enhance one’s life. After decades of making money, saving and investing it, you have earned the right to spend it. As long as you are spending within your means, it should be done guilt-free.
Many of these concepts require years of planning, which is why I urge clients who are entering the final phase of their careers to start contemplating these points sooner rather than later. Taking the time to methodically plan for this new stage of life will allow you to make thoughtful decisions and adequately prepare for retirement. It will ensure your golden years are how you envisioned they would be.
10. Spend your money!
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Comprehensive coverage provides damage protection for your vehicle in situations other than collisions, such as damage caused by theft, vandalism, natural disasters, falling objects, and other incidents specified by your insurance policy.
Comprehensive
If you or your passengers are injured in an accident, medical payments (MedPay) coverage helps pay for healthcare costs associated with injuries, such as hospital visits, surgery, X-rays, and more. MedPay coverage is required in some states.
Medical payments
In cases where you’re involved in a car accident with a driver who doesn’t have car insurance or has insufficient coverage, uninsured motorist (UM) and underinsured motorist (UI) coverage steps in to cover your medical expenses and property damage.
Uninsured/underinsured motorist
Accident forgiveness. With this type of coverage, your insurance company will “forgive” you if you cause an accident, meaning it won’t raise your premiums. Typically, you can qualify for one forgiven accident for a set time frame, such as every three years.
Gap insurance. If you’re leasing or financing your car, gap insurance covers the difference between the current market value of your vehicle and the amount you owe on your lease or loan in the event of a total loss. Gap insurance could be a good option in the early years of a vehicle's ownership, when the amount of your loan may exceed the market value of the car. Gap insurance coverage only adds about $20, on average, to a car insurance policy’s annual premium, according to the Insurance Information Institute (III).
Rental car reimbursement. This coverage pays for a rental car while your vehicle is being repaired or replaced following an accident.
Towing and roadside assistance. Many insurance providers offer this type of insurance, which provides roadside in the case of a breakdown or covers the cost of towing your vehicle.
Custom parts and modifications. If you added aftermarket accessories or made modifications to your vehicle, this type of coverage can help protect the custom parts and equipment you installed.
Classic car. If you drive an antique or classic car, you may want to consider getting classic car insurance — also known as collector car insurance or antique car insurance — to help protect it. According to the III, a vehicle is considered a classic car when it’s at least 25- to 30-years old.
Additional car insurance coverage options
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Part B pays for doctor visits, outpatient care and some home health care. For 2024, the deductible is $240 and the base premium is $174.70 per month. After hitting the deductible, you pay 20% of expenses unless you have either Medicare Advantage or supplemental coverage.
The penalty for failing to enroll at age 65 is a permanent 10% of the monthly premium multiplied by the number of years you could have enrolled but didn't. Exceptions are made for those with coverage through a qualifying employer health plan.
Medicare Part B
Part C is commonly called Medicare Advantage. Beneficiaries are covered for Parts A and B through private insurers instead of traditional government-administered Medicare. Most Advantage plans include prescription drug coverage. For 2024, the average monthly premium is $18.50.
Medicare Part C
Part D refers to standalone prescription drug coverage through private insurers. If your Advantage plan includes prescription drugs, you don't need Part D. If you elect original Medicare and want medications covered, you will need a Part D plan. Modern Medigap plans don't cover prescription drugs, but if you purchased a policy before Jan. 1, 2006 and still have that plan, then your Medigap policy may include drug coverage.
The average total monthly premium for Medicare Part D coverage is projected to be approximately $55.50 in 2024.
If you decide after your initial enrollment period that you want Part D, you will pay a permanent 1% penalty of the base premium multiplied by the number of months that you went without the coverage.
Medicare Part D
Supplemental coverage is commonly referred to as Medigap. This is private insurance to supplement original Medicare coverage. The plans cover part or most of the cost sharing, such as coinsurance and co-payments, for Parts A and B, depending on which lettered Medigap plan you choose.
There are 10 plans but as of 2020, new Medicare enrollees are ineligible for Plans C and F. All plans with the same letter provide the same benefits but the cost could vary by insurance company.
Medigap plans typically have higher monthly premiums than Advantage plans but lower out-of-pocket expenses.
Medigap
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As you may know, a 529 plan is a state-sponsored, tax-advantaged college savings investment plan. When you enroll in a 529 plan, the money you invest grows on a tax deferred basis. When you withdraw from the 529 plan and use the money to pay for qualified education expenses, those withdrawals are tax free.
529 plans are designed to encourage saving for college and typically cover qualified education-related expenses like tuition, fees, books, computers, and other supplies. Certain room and board expenses are usually considered to be “qualified expenses.” But sometimes, whether 529 college savings can be used to pay for the cost of room and board will depend on whether those costs exceed certain amounts.
Additionally, 529 plan funds can generally be used to pay tuition for professional and trade schools and up to $10,000 per student, per year, can be used to pay for K-12 private school tuition. In any case, keep in mind that each 529 plans may have its own specific rules regarding what particular expenses are considered to be "qualified expenses."
How Do 529 Plans Work?
A 529 plan doesn’t offer a federal income tax benefit because 529 plans are sponsored by states. As a result, the contributions to your 529 plan are not tax deductible on your federal tax return. But some states offer a state tax credit or state tax deduction for 529 college savings plan contributions that are made in your home state.
And, as previously mentioned, your 529 plan funds grow tax free and withdrawals of 529 college savings account funds that are spent on qualified expenses, are also tax free.
But remember: if you withdraw 529 plan funds and don’t use that money for qualified education-related expenses, you could face a 10% federal income tax penalty.
Do You Get a Tax Break for Contributing to a 529 Plan?
In most states, you should contribute to your 529 college savings plan by the end of the year—i.e., December 31—to maximize any state tax breaks associated with those contributions.
But in other states, you can contribute until that state’s tax filing deadline next year. (The specific deadlines vary by state). For example, some of the states that don’t have a year-end contribution deadline for maximizing 529 plan contribution benefits are Iowa, Georgia, Mississippi, Oklahoma, South Carolina, and Wisconsin.
In all cases—and because you are not limited to choosing a 529 plan from your home state—it’s important to know which 529 plan contribution deadlines apply to you. Check your 529 plan rules or talk with a professional advisor who may be able to help you maximize your state tax benefits.
How Late Can I Contribute to a 529 Plan?
529 college savings plans do not have set individual annual contribution limits like 401(k) plans do. Instead, annual, and aggregate, contribution limits for 529 plans vary by state.
It’s also important to keep in mind that contributions to your 529 plan are treated as gifts for federal income tax purposes. In 2023, under the gift tax exclusion rules, you can contribute up to $17,000 tax free per donor. However, gifts over $17,000 must be reported on a federal gift tax return. That doesn’t necessarily mean that you will be subject to tax on your gift though, because the lifetime federal gift tax exemption amount is quite high.
How Much Can I Contribute to a College 529 Plan in 2023?
From a tax perspective, if your student doesn’t attend college and you withdraw 529 college savings plan funds for other than qualified education-related expenses, then the money you take out of the 529 plan would be subject to the 10% federal income tax penalty.
Additionally, the 529 plan funds that you withdraw for non-education-related expenses, would be considered taxable income — which could impact your federal and state taxes.
What if My Child Doesn’t Go to College?
Because so much about 529 plans varies by plan and by state, you should familiarize yourself with the specific rules governing your plan.
Also, consult a qualified financial planner or other trusted advisor if you are uncertain about those rules or about how to get the most tax benefit from your 529 college savings plan.
529 Plans: What You Can Do
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Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
As you know, homeowners insurance will cover the expenses (minus deductibles) to replace, repair or even rebuild your home, exterior structures and belongings in the event of a natural or man-made disaster. For example, if a hailstorm destroys your roof, homeowners insurance should cover the costs to replace or repair your roof. Similarly, homeowners insurance will help you rebuild if fire engulfs your house, detached garage or shed.
When you experience this type of catastrophe, you still need a place to stay while your home is being repaired or rebuilt. Homeowners insurance will cover the costs of your alternative living arrangements during that time. Additionally, homeowners insurance is there if your home is burglarized. Your homeowners policy helps to replace any valuables that are stolen.
It’s important to thoroughly examine which events your policy will cover and look for any gaps that might exist within your coverage. This is especially true in our current market. With recent price increases in real estate, it’s possible that the property replacement value on your homeowners policy won’t cover the increase to your property’s current value.
Property Damage and Loss
As a homeowner, you’re responsible for what takes place on your property. Unfortunately, that means you could be held liable if someone tripped and fell on your porch steps, causing personal injury. The good news is homeowners insurance provides you with liability coverage for such unfortunate occasions. The personal liability portion of your homeowners policy helps to cover their medical and legal expenses. Therefore, you want to understand exactly how much of those expenses your policy covers. If the neighbor breaks their ankle in some fantastical way and requires multiple surgeries to repair it, the expenses could add up very quickly. In such a scenario, you’re not just looking at medical expenses. More than likely, you’re going to be faced with legal expenses for a litigation that, at bare minimum, seeks to replace lost earnings.
These fees could very easily get out of control. So, you must know exactly how much your policy will pay in an event like this. Being proactive with your review could help you identify where you need to supplement your personal liability coverage.
Personal Liability
As you progress through your homeowners policy review, you’re probably going to uncover several exclusions. These are certain events or disasters that your policy will not cover. For instance, your policy may cover property damage caused by hurricanes, but it might not cover flood damage. That could create problems, as hurricanes often cause flooding.
It’s possible that your home could survive the hurricane but then undergo extensive damage from the subsequent flooding. As the floodwaters rushed into your home, they destroyed your floors, walls and belongings. However, since the floods caused the damage, not the hurricane itself, your homeowners policy wouldn’t cover your costs to clean up, replace, repair and rebuild.
You can see the problem with this, and unfortunately, many homeowners assume they’re covered in such a situation because the flooding was caused by the hurricane. As a result, they fail to add the additional coverage to their policy and find themselves completely ruined when disaster strikes. This is why you must carefully read through your policy, paying close attention to the wording that’s used. In the end, it could be the difference between a setback and total devastation.
Similarly, many homeowners policies don’t cover property damage caused by sinkholes or vandalism. So, check your policy to see what types of disaster damage it does cover. You may need additional coverage. That’s OK. Policies like flood insurance, vandalism insurance, etc. are available. Reviewing your coverage will ensure you can address the exclusions in your policy before it’s too late.
Exclusions
I’ve also seen clients struggle with their homeowners policies because of unique or expensive properties and collections in their homes. Standard homeowners insurance will replace your basic personal property worth a couple of thousand dollars. However, I know many people have property worth much more than that. In fact, my wife’s wedding and engagement rings are worth more than that. Additionally, some firearms collections, coin collections, fine art or antiques are worth more than the standard coverage will cover.
Therefore, if you have items of personal property worth more than a couple of thousand dollars, you’ll probably need to add a rider – “scheduled coverage” – to your policy. While you might pay higher premiums, oftentimes scheduled coverages don’t carry a deductible.
Additional Riders
All of this brings us to the crucial question: Just how much insurance coverage do you need? The only way you’re going to find your specific answer is through an annual review of your homeowners policy. Approach your review with the understanding that the value of your property might have changed since you purchased your homeowners policy. Because value goes both ways, it’s also possible that you could be paying for more insurance than you need. Compare the amount of your coverage to the current value of your home, personal belongings and assets.
So, how much coverage do you really need?
How Much Homeowners Insurance Coverage Do You Need?
Obviously, you need to cover the structure of the home. However, you’re not basing this on the value of the house when you purchased it. Instead, you’re looking at your home’s replacement value.
Let’s assume you purchased your home for $200,000, in 2008 when the housing market was suffering. However, the housing market is booming in 2021. Therefore, your home could be worth $400,000 or $600,000 now. This means you would need to pay someone between $400,000 and $600,000 to replace your home as it was if it were to burn down or get carried away by a tsunami. So, if your policy only covers the original $200,000 value, it will only cover 33%-50% of the home’s current replacement value. That would create a major problem for most people.
Enough to Replace Your Structure
Beyond replacing your home, you’ll need to replace the belongings that were in it. This includes everything inside your house. From clothes, towels and silverware to televisions, furnishings, books (this would be a huge line item in my home), etc. Therefore, it’s vital that you have enough coverage to replace everything in your home.
Many homeowners policies cover personal property up to 50% or 75% of the home’s value. This means, if you have a $100,000 home, your policy may only provide $50,000 to replace lost items.
Have you ever tried to figure out the replacement cost of all the things in your home? You may be surprised at how quickly you’d blow through your policy’s personal belonging limits. That’s why I often tell clients to inventory and archive everything in their homes. This is easy to do. Just take your phone and walk through every room, capturing each item on camera. Open every drawer, cabinet or door and describe everything you see. Once you’ve done this, you can get a homeowners policy that will cover the replacement value of what you own.
Enough to Replace Your Belongings
Finally, you must make sure you have enough liability protection to cover medical and/or legal expenses that could arise due to accidents in your home. You don’t want to owe anything out of your own pocket. Therefore, if your policy provides $100,000 to $300,000 in liability coverage, it may be wise to purchase $300,000 to $500,000 of protection. These expenses compound and can quickly get out of control. It’s much better to pay a little more on your insurance premiums than to find yourself footing the bulk of someone’s medical and legal bills because they exceeded your policy’s personal liability coverage.
Additionally, if you’re operating your business within your home, you may need to add a rider to your homeowners policy that will protect you if there’s an accident that happens while someone’s at your home for business purposes.
I know that life is busy. Conducting an annual review of your homeowners insurance policy might not be high on your list of priorities right now, but it should be. Oftentimes, it’s very easy to develop a sense of comfortability in doing things the way we’ve always done them. However, just because you bought a good policy from a decent insurance agent doesn’t mean it’s still the best one for you.
I review my own homeowners policy annually. Specifically, I look at my home's current value compared to the replacement value coverage I have on it. Likewise, I look at the value of my personal belongings compared to the replacement value coverage I have on them. As the value of my home and my belongings increases, I want to make sure my homeowners policy increases to cover it.
Enough to Protect Your Assets
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.
Certified Financial Planner Board of Standards Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
About the Author
Justin Goodbread, CFP®, CEPA, CVGA
President, WealthSource Partners
Justin A. Goodbread is a CERTIFIED FINANCIAL PLANNER™ practitioner and an adviser with WealthSource® Knoxville. After years of working in a large firm, he ventured out on his own in 2009, starting Heritage Investors, and eventually joining WealthSource® Partners LLC in 2022. As a serial small-business owner, Goodbread has bought and sold multiple businesses. He uses this experience, along with his continuing education, to help business owners grow and sell what is often their largest asset.
NYSUT NOTE: Having a solid insurance policy in place can make a big difference when unexpected issues arise. And with so many choices, it’s difficult to determine which policy is right for you. Fortunately, NYSUT members have access to a number of quality, competitive insurance programs that are endorsed by The NYSUT Member Benefits Trust. From life insurance, home & auto, and long-term care to dental plans and pet insurance, NYSUT Member Benefits has you covered. Visit the website for more information about the programs currently available to you and your loved ones.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Retirement isn’t solely about savings; age matters, too. For penalty-free withdrawals from traditional retirement accounts, you need to be at least 59 ½. However, the rule of 55 allows those leaving their job at 55 or older to withdraw from their current employer’s plan without penalties.
Given most retirees describe Social Security as a major income source, it's vital to plan this aspect of your retirement thoughtfully. The full retirement age is 67 for those born after 1960. By delaying until 70, you boost your benefit, though you’ll have to lean on other funds in the meantime. Starting claims early at 62 reduces your benefit, but you’ll get more checks over time.
If you’re lucky enough to receive a pension, keep in mind it might also be curtailed if age and service requirements aren't met.
2. Age matters in deciding when to retire
Your health can dictate the right time to retire. If work strains your well-being or if retirement offers better health prospects, it might be time to reconsider your career. According to the 2023 Transamerica Annual Retirement Survey, health concerns prompted 45% of retirees to retire earlier than planned.
Healthcare coverage is vital in this equation. With Medicare only starting at 65, ensure you’re protected. If you plan on retiring before this age, look into alternatives like securing a policy through the marketplace or opting into your spouse’s plan, if possible.
3. How your health plays into retirement timing
If you love your job and derive satisfaction and purpose from it, delaying retirement might be appealing. Transamerica reports that 56% of those who retired later than planned did so because they enjoyed their work and wanted to stay active and mentally sharp.
Conversely, if work-related stress is detrimental, an earlier retirement or career change might be beneficial. A report from the National Bureau of Economic Research found that retirement often leads to immediate and sustained boosts in life satisfaction and overall well-being.
4. How is your career satisfaction?
While it’s hard to predict market movements, you may want to tread carefully if you’re thinking of retiring during a major downturn. Significant losses or depletions to savings early in retirement – known as sequence risk – could derail your retirement plans by diminishing the longevity of your nest egg.
A poor economy may also be reason to think twice about your timing. Although, economic pressures may force some companies to offer appealing packages that make it better to retire sooner than later. These factors might be beyond your control, but they can present challenges or opportunities worth planning around.
5. Looking at market and economic conditions
Many retirees, according to a survey from Retire with Possibilities, said the biggest challenge of retirement was the loss of daily structure and routine. The transition to retirement often means a shift from established routines and social engagements.
To make this transition smoother, it’s essential to have a clear vision for your post-retirement life. Without concrete plans, retirement can feel overwhelming – or boring. Before you take the step, ensure you have activities and goals to pursue. Embrace new experiences, volunteer and remain open to various pursuits to keep retirement fulfilling and vibrant.
6. Did you forget to plan activities for retirement?
What value do retirement activities hold if you’re experiencing them alone? According to a Merrill Lynch/Age Wave study, a majority of retirees (61%) value the company they keep over the activities they do (39%).
While you shouldn’t rush into retirement just because your peers are, their decisions can influence your considerations. Notably, spouses play a significant role in each other’s retirement decisions. However, synchronizing retirement dates, even among spouses, isn’t always the best approach, given factors like age differences and financial needs.
But given our inherent desire for social connections, it’s apt to say that in retirement, teamwork really does make the dream work. Perhaps the central question isn't solely “When should I retire?” but rather “When should we retire?”
7. The company you keep can determine retirement timing
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Make sure your estate planner understands your business. Institute a Take Your Adviser to Work Day so your key advisers witness firsthand production, business practices and the roles of your key employees (including your children working for the company).
Tip 2
Discuss with your legal adviser the use of transfer on death (TOD) and payable on death (POD) options to pass accounts or other assets to your beneficiaries. Many banks are promoting designated TOD/POD beneficiaries without fully explaining possible adverse outcomes.
For example, when your selected payee dies, will the remaining funds on deposit belong to his/her estate, go to their heirs at law or lineal descendants, or will account custodians lock down the account until a court designates the proper payees? Finally, overuse of TOD/POD accounts can leave your executor with no liquidity to pay the estate’s debts and taxes because all the liquid assets have already been passed out.
Tip 3
If you control a closely held company, ensure that your estate planner reviews the terms of any buy-sell provisions in the shareholder and operating agreements to ensure that these terms are coordinated with liquidity available to your trust or estate.
Tip 4
Ask your estate planner to include substance abuse powers and protections for beneficiaries in your trust documents. Nonprescription drug use has risen to endemic levels in many states. Give the trustee powers to deal with any known or likely substance abuse issues, such as the power to:
Tip 5
Pay costs directly to vendors rather than to the beneficiary
Require testing and treatment programs and pay for them with trust funds
Withhold mandatory distributions until the beneficiary meets certain testing and treatment standards
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Ask your estate planner to use active voice in all your forms, communications and agreements. Active voice (subject, verb, object) identifies the person who is or will exercise the power or duty to avoid ambiguity and provide clarity.
“The Trustee shall distribute all the income…”
Passive voice (object, verb, subject or no subject) allows the actor to be less identified in order to emphasize only the authority but not identify responsibility.
“All income shall be distributed…”
Tip 6
Be careful with your personal information and documents. Today’s standards expect estate planners and financial advisers to never email sensitive information without encryption, to use secure systems to send documents and confidential/sensitive information and to use multifactor authentication on all remote access.
Please don’t open attachments from anyone you don’t know or even click on a suspicious email — even emails that appear to come from someone you know. If you didn’t expect an invitation, a document or a link to some article, pick up the phone and call the sender for guidance before opening the email.
Tip 7
Ask your estate planner to review the trust’s express standards of care with you. You need to understand the duties and liabilities of the trustee(s) and trust adviser, whether they are expressly fiduciaries or nonfiduciaries. When a trust states that a trust adviser is not a fiduciary and is not liable for actions taken in good faith, then any actions they take must be in good faith — this is a standard of care, and they are liable for actions taken in bad faith.
Trustees are wary of terms that allow advisers to direct the trustee with liability only for intentional misconduct while the trustee is liable for any breach of trust. The only source of restitution for following an imprudent direction is the trustee. Smart trustees will require separate indemnification for all directives under these circumstances, likely aggravating your beneficiaries.
Tip 8
Ask your estate planner to ensure that your trust absolves successor trustees of all prior acts of the predecessor trustee. When a trustee is named successor trustee, they will look for language in the document that absolves them of the predecessor trustee’s prior acts of commission or omission. If not in the document, the successor trustee will require that all qualified beneficiaries sign a release and indemnification.
Tip 9
Tip 10
Don’t allow any time to pass between finishing your new or updated estate plan to update your beneficiary designations. If you need assistance, ask your estate planner to review your existing deeds, titles, account details and beneficiary designations for any necessary changes. Your new estate plan may be worthless if your beneficiary designation forms are not completed correctly. Ensure that the beneficiary designations properly identify a qualified beneficiary, are properly structured for a conduit or accumulation trust and are compatible with the mandatory and discretionary distribution requirements of the trust.
Tip 11
If you are a beneficiary of a trust, you are allowed to review the trust administration and ask questions of the assigned trust officer. Make an appointment to discuss the terms in the trust regarding:
Tip 12
How often you get statements or an annual accounting
Whether you qualify for discretionary and/or mandatory income and principal distributions
The standards the trustee must follow for making such distributions (i.e., what can the trustee pay directly to you and what costs and goods can the trustee pay for?)
Whether your outside income and assets must be considered and to what extent
Your income tax liability for the trust and how the investment decisions contribute to “phantom” income
How your trustee’s use of the power to adjust between income and principal may be applied to your benefit
Whether distribution decisions need to consider the effect on generation-skipping tax-exempt and nonexempt trusts
Whether you have any control over the use of trust benefits during your lifetime or at your death (i.e., a power of appointment, a power to withdraw, a power to direct the trustee, etc.)
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When you update your estate, ask your attorney to consider drafting trust restatements and new wills rather than trust amendments and codicils. Modern word processing makes it just as easy to prepare complete restatements rather than multiple amendments. It eliminates the confusion of moving back and forth between documents.
Tip 13
It may make sense to use the same accounting firm to prepare your personal tax returns and the fiduciary tax returns for any trust related to your personal tax liability. Many trust companies have an arrangement with a CPA firm that will result in faster and cheaper preparation fees.
Tip 14
NYSUT NOTE: Building your estate plan can be complicated but it is a vital step in your retirement planning. Which is why enlisting help from a legal expert may be a good idea. NYSUT members are eligible to enroll in the NYSUT Member Benefits Trust-endorsed Legal Service Plan. This plan — provided by the law firm of Feldman, Kramer & Monaco, P.C. — offers expert advice on personal legal issues, including preparation of crucial estate planning documents. Visit the member website to ensure you and your loved ones are covered.
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
Timothy Barrett, Trust Counsel
Timothy Barrett is a senior vice president and trust counsel with Argent Trust Company. Timothy is a graduate of the Louis D. Brandeis School of Law, 2016 Bingham Fellow, a board member of the Metro Louisville Estate Planning Council, and is a member of the Louisville, Kentucky and Indiana Bar Associations, and the University of Kentucky Estate Planning Institute Program Planning Committee.
Don’t rely on your recollection or summaries from your other advisers regarding gift and estate tax returns you have filed or your past use of your lifetime estate tax exemption, annual exclusion gifts, withdrawal notices and GSTT (generation-skipping transfer tax) allocations. Obtain and save actual copies of all these documents (with any required appraisals) in your own records to ensure they match up. Protect yourself by documenting your file with your contemporaneous notes and communications regarding such gifting. As the taxpayer, you and your estate bear the responsibility to maintain records and the burden of proof in any tax controversy.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
We’ve heard about the supposed benefits of fasting for physical health, but have you considered financial fasting to address your financial wellness?
The idea is simple: Don’t spend money during a set period of time, or in a particular expense category, such as entertainment or dining.
From the outset, financial fasting sounds easy. In practice, it can be anything but.
That’s because spending is often disconnected from the values and intentions of near-retirees. Unlike Millennials and Gen Zers, prior generations have generally had fewer qualms about purchasing products and services from companies that don’t align with their principles. The act of swiping a credit card can feel as routine and trivial as opening a door. And as Baby Boomers retire, some are tempted to treat every day like a Saturday — chockful of travel plans, reservations and shopping.
Financial fasting can put the value of a dollar back into perspective, shoring up your bank account and breaking the habit of mindless spending. By doing so, it can force you to reassess your values and reconnect with those closest to you.
In what follows, I’ll explain the many ways financial fasting can positively impact your lifestyle — and how to plan your first financial fast.
The benefits of financial fasting
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.
While divorced women workers stand out in the survey as having the lowest retirement confidence, they also lack knowledge about what they need for a financially secure future. For example, fewer than half of the divorced women were very or somewhat confident in knowing how much money they needed to save by retirement to live comfortably in their golden years. So not only do divorced women fret about having enough savings for their golden years, they are also struggling with even knowing how much they will need.
To help close the gap, Lawande suggests that women become more educated about their financial situation and work with a Certified Divorce Financial Analyst™ to understand better how they need to plan for retirement and even everyday money issues. She also recommends that they hire a lawyer who is well versed in their state's laws to ensure that they have a financially advantageous settlement agreement.
Matrimonial attorney Lisa Zeiderman of Miller Zeiderman LLP says women typically feel the financial repercussions of divorce more intensely than men. "Getting a divorce will absolutely impact how much money you will have for retirement. Divorce and the loss of retirement assets can hit you hard. This is especially true if you haven't hired a lawyer who will advocate for you and if you have not taken steps to protect you and your financial future."
Good debt can help your long-term finances, whereas bad debt hurts or ruins it. Good debt examples include:
Mortgages: Whether for your home or an investment property, mortgages buy assets. As a mortgage is paid down, equity (the difference between the property’s fair market value and the loan total) builds and can be used to sell or borrow from.
Student loans: Data shows that a college degree can significantly boost a graduate's lifetime wages, making student loans acceptable debt.
Home equity loans and lines of credit: If you own real estate, you can borrow against your equity for long-term financial gain. Home equity debt can be used to upgrade a home, buy another property or pay off higher-interest debt.
It’s important to note that good debt is still debt, so use it wisely. A few helpful tips include:
Good vs. bad debt
Good debt can help your long-term finances, whereas bad debt hurts or ruins it. Good debt examples include:
Mortgages: Whether for your home or an investment property, mortgages buy assets. As a mortgage is paid down, equity (the difference between the property’s fair market value and the loan total) builds and can be used to sell or borrow from.
Student loans: Data shows that a college degree can significantly boost a graduate's lifetime wages, making student loans acceptable debt.
Home equity loans and lines of credit: If you own real estate, you can borrow against your equity for long-term financial gain. Home equity debt can be used to upgrade a home, buy another property or pay off higher-interest debt.
It’s important to note that good debt is still debt, so use it wisely. A few helpful tips include:
Keep mortgage payments below 36% of income.
Keep student loan payments below 10% of estimated monthly after-tax income.
Home equity loans and lines of credit often require a minimum loan-to-value ratio of 80%.
The idea is to ensure you still pay off good debt over time and manage it cash flow-wise.
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Strategies to pay off debt
Life happens, and we sometimes get into lousy debt despite our best efforts. A plan helps discipline these situations. Three main debt payment strategies include:
Debt snowball method: This method prioritizes smaller balances over interest rates. Mathematically, this strategy is not the most cost-effective or time-saving, but it might feel simpler to attain psychologically with smaller wins gained earlier on and can often free up cash flow faster by removing those lowest sums.
Debt avalanche method: This method promotes paying off highest-interest-rate balances first regardless of balance size. By paying off the higher-interest-rate balances, debt is paid down faster, and more costs are saved on interest.
Debt consolidation method: Managing various loans, credit cards and other debt can be difficult with all the different payments and due dates. For these situations, debt consolidation may be the most preferable option.
The most typical debt consolidation technique is to use a personal or home equity loan to pay down higher-interest debt. In general, the goal of debt consolidation is to lower your monthly payment to free up cash, convert your variable-interest debt to a fixed rate and/or lower your interest rate to simplify repayment and get out of debt faster.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
NYSUT NOTE: Do you have personal debt or money concerns that you need help managing? NYSUT members are able to enroll in the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. This program has been assisting consumers with eliminating debt for more than 20 years, and NYSUT members are eligible to receive a free, no-obligation, debt consultation with one of Cambridge's certified counselors. These counselors can help you better understand your situation, help you set financial goals, determine your budget and more, to help you get out of debt in a fraction of the time. Visit the member website for more information.
Parents can use up to $10,000 a year from their 529 plan to pay for private K-12 tuition. If you are paying for private school out of a cash or checking account, you may want to consider first routing the payment to the 529 for the state tax deduction. This is a good idea for parents who are already contributing to a 529 plan but not up to the amount for the state tax deduction — they’d have more room to contribute.
For example, if a family is contributing $5,000 a year to their state’s 529 plan, but the state tax deduction is up to $10,000 in annual contributions, they can contribute the additional K-12 tuition payment to the 529 plan to get them to the $10,000 cap. (The $10,000 cap is an example — each state’s rules vary.) This assumes your state offers a state tax deduction for contributions, your state considers K-12 tuition a qualified expense, and there is no minimum waiting period for withdraws. It’s best to check with the 529 administrator first.
There may be some drawbacks to this approach. Namely, it can be a hassle to move money around. Also, it could lead to commingling college funds and K-12 money, which should be invested differently, given their different time horizons, but this trick could also save you a few bucks on your state taxes.
NYSUT NOTE: Securing a long-term care policy is an essential step in retirement planning, but deciding what policy is right for you and your family can be difficult. Which is why 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 (NYLTCB) program. NYLTCB is a nationally-recognized insurance intermediary that offers access to discounted long-term care insurance plans from highly-rated insurance companies, and their specialists can provide insight into different long-term care insurance providers and products, so you can choose the best coverage for you. Visit the member website for more information.
Life insurance. Most people know about term and whole, but there are other types of life insurance with features designed to protect you from LTC risk. Some indexed universal life insurance (UIL) and universal life (UL) insurance policies allow you to tap into the death benefit during your lifetime to cover any LTC costs. Unlike an LTC insurance policy, if the LTC features of a IUL or UL insurance policy go unused, your beneficiaries will receive the full tax-free death benefit when you pass away.
Talk to a retirement planner during your lifetime about the insurance options available to you. Life insurance coverage is dependent on a medical exam, so if you have certain health issues, it may not be a viable solution for you.
NYSUT NOTE: A life insurance policy with a living benefit can be a great option for long-term care planning. And NYSUT members now have access to the Universal Life Insurance program offering a Convalescent Care Benefit. The NYSUT Member Benefits Trust-endorsed Universal Life Insurance with Convalescent Care Benefit plus YourCare360® Care Planning Services offers added financial protection, along with access to long-term care resources. This is a great way to protect you and your loved ones. For more information and to get started, visit the member website.
Deciding what kind of fence to build around your retirement home is a personal decision. There are benefits and drawbacks to every LTC option, and what’s right for one person may not work for another.
While it’s important to be proactive, buying LTC insurance or life insurance at a young age could get very expensive after years of paying premiums. On the other hand, waiting to purchase a policy could put you at risk of paying high premiums because of any health problems you may have developed in your 50s and 60s.
It’s important to meet with a trusted financial adviser who can help you determine the right time to buy and what type of protection your family needs. No two situations are alike, but an adviser can help you weigh the pros and cons specific to your assets, family history, medical history, tax plan and beneficiary needs. I recommend working with a professional who has the experience and industry knowledge needed to keep you and your loved ones safe from the potential burden of LTC.
Build an emergency fund in a high-yield savings account
“Build up an emergency fund that you keep in a high-yield, FDIC-insured cash savings account. Your minimum target should be at least three to six months of essential living expenses. You can use a line of credit or credit card as a backup, but debt should be a last resort for unexpected financial emergencies, unless you are certain you can pay it off quickly or finance it at a low cost.”
— Chad Rixse, a Kiplinger Advisor Collective member
Emergency cash on hand is important, too
“While building an emergency fund or savings account is always an important step in being prepared for financial emergencies, it’s equally important to have emergency cash on hand. Consider keeping a small amount of cash locked in a safe at home where it is protected. Another important step is being proactive. Do you have a high amount of debt that is holding you back? Build a strategy to pay it off and commit to putting any extra funds into your savings account. For example, let’s say you commit 10% of your paycheck toward paying down your debt, and as it starts to decrease, you can start to put more money toward saving for an unexpected emergency.”
— Tony Drake, a Building Wealth contributor
Have a plan in place and consider workplace benefits
“Financial emergencies can make us feel out of control, which is why it’s so important to have a plan in place you can fall back on to protect your goals and money even in times of uncertainty. Your plans can adapt for changing needs and circumstances, but if you’re struggling with an unexpected expense or event, reach out for guidance before you reach into money you have set aside for other things like retirement. Your workplace benefits can potentially serve as a resource for professional guidance, financial education and support through a financial adviser or coach, who may be able to help you respond to your financial emergency from a more objective and strategic standpoint while also keeping your other financial goals on track.”
— Kate Winget, a Building Wealth contributor
Build an emergency network of resources
“While having an emergency fund set aside is something I’ll always advocate for, another way to prepare for tough times is to create an emergency network for yourself of trusted individuals with diverse skill sets. By having this network, you have firsthand access to trusted resources when unexpected situations arise. Likewise, you can also offer your expertise to them in their times of need.”
— Justin Donald, a Kiplinger Advisor Collective member
Start cutting unnecessary expenses right away
“While having an emergency fund set aside is something I’ll always advocate for, another way to prepare for tough times is to create an emergency network for yourself of trusted individuals with diverse skill sets. By having this network, you have firsthand access to trusted resources when unexpected situations arise. Likewise, you can also offer your expertise to them in their times of need.”
— Justin Donald, a Kiplinger Advisor Collective member
Consider selling collectibles or jewelry
“One of the best ways to prepare for unexpected financial emergencies is to have an emergency fund. If possible, I recommend building up savings for 12 to 15 months in order to pay for medical bills or major home repairs and not be rushed into a new job. An emergency fund can be achieved through better monthly budgeting. However, aside from traditional advice, collectibles such as sports memorabilia and other items such as jewelry might be sold quickly to make up the difference. Also, stay away from predatory payday lenders.” — Carlos Dias Jr., a Building Wealth contributor
Embrace spending less, minimalism, tidying up
“Develop muscles for spending less / beating as much as possible the inflation all around you. This will allow you to build that emergency fund, but also to get by on a smaller emergency fund when it’s needed. This may be unorthodox, and only partly get you there, but watching the documentary on minimalism (Minimalism: A Documentary About the Important Things) or doing a Marie Kondo reorg of our stuff can give you ideas on where you can spend less.”
— Robert Ribciuc, a Kiplinger Advisor Collective member
Doesn’t hurt to be paranoid
“It always pays to be prepared, and daresay even a little paranoid about unexpected changes that life may bring. I would advocate running through some hypothetical scenarios in your head to bring some peace of mind that you can adjust to major unexpected events in life. If you have to deal with a job loss, it’s good to have an inventory of your best professional contacts that you can network with and may be able to provide introductions to new employers. You might want to research and keep track of top employers in your area that would be your first targets should you need to look for new work. Similarly, in addition to having an emergency fund, preparing for unexpected financial issues might mean keeping separate assets earmarked for paying off large bills like a home repair or medical bill. It might not warrant keeping extra cash on hand, but alternatively you might set up a lending facility like a HELOC (home equity line of credit) or credit line at your bank that is available should you need to borrow at a reasonable interest rate vs scrambling with high interest rate loans. In short, going through the thought exercises ahead of time for issues you may encounter and being prepared with solutions beforehand will save a lot of heartburn and money down the road.”
— Shane W. Cummings, a Building Wealth contributor
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
The benefits of financial fasting
Financial fasting can be a reset button — not only for your finances, but for your values, sense of purpose and even your relationships. Here are a few ways that limiting your spending can change your financial well-being for the better.
1. Pay down debt faster.
The most obvious benefit of financial fasting is that it frees up cash flow fairly quickly. But that doesn’t mean that you should simply spend all that money once you break your financial fast. Consider using that moment as an opportunity to pay down debt at an accelerated rate — especially high-interest obligations like credit card debt and car loans.
2. Break the cycle of senseless spending.
We spend for different reasons. Some people lavish their grandkids with expensive gifts, while others continually chase the latest fashion trends, no matter the cost. The problem is, many people don’t recognize why they’re purchasing certain things — and that the reasons for buying them may fall apart under scrutiny.
Buying possessions, for instance, tends to provide happiness for only a short period time, but a meaningful experience can be more rewarding over the long term.
Because financial fasting pushes the pause button on spending, it can make you think longer about why you wanted to buy something in the first place.
In time, you’ll become more adept at fulfilling those needs without spending, or realize when those impulses are not needs at all. For example, if you want to spend time with your significant other, a walk along the beach or in a park may be a better, expense-free way to do that, vs going to the movies.
3. Align your purchase decisions with your values.
Financial fasting is also an opportunity to bring your spending in line with your own personal values. Growing up, many Baby Boomers like me just went to work. We put our heads down. Spending wasn’t necessarily connected to purpose or passion but providing for ourselves or others.
This can be a time to take a page from younger generations and think about the impact of your purchase decisions. If you are passionate about social awareness and responsibility, consider the many items you purchase from large companies. Should you redirect those dollars to other businesses that may have a greater impact on your local community?
As you come out of a financial fast, you’ll find yourself at a crossroads, asking: Do I continue spending the way I have in the past, or try to be the change I want to see in the world?
4. Create a space to reconnect in our relationships.
Some instinctually feel that in order to do something, you need to spend something. But when it comes to our relationships, quality time is what matters most. Some types of spending can disconnect you from those important connections, instead of creating space for you to engage with your loved ones in a meaningful way.
For example, some leisure activities — like attending plays, visiting theme parks or going to concerts — don’t actually require people to talk to each other. And costly gifts are hardly a substitute for personal connection. Unfortunately, many of our spending habits, while well-meaning and born out of kindness, fail to deepen our relationships.
Planning free activities, on the other hand, requires you to creatively collaborate with your family members and friends, fostering a sense of spontaneity and adventure. And many of the activities that don’t involve spending require us to remain in the moment, listen to others respectfully and appreciate their presence.
How to plan a financial fast
Financial fasting can be as stringent as abstaining from spending for a week, or as measured as skipping lunch during the workweek. What’s most important to recognize is that financial fasting can be accomplished in degrees to accommodate your comfort level and needs.
Go through your budget. Start by identifying the areas where you’re spending the most — eating out, going to movies — and the days in which you’re spending the most. This will help you target your fast and also give you ideas about how to occupy your time during a fast. Someone who regularly goes to an art museum on Sunday, for example, may instead choose to attend free art exhibitions in the area.
Plan to start small. Just like physical fasting, financial fasting is a muscle. Begin by cutting out expenses that are easy to track. That regular Friday date night at the local bistro could turn into dinner and a movie at home, for instance. Once you’ve mastered those smaller targets, then you can take a stab at an entire day without spending and, ultimately, even an entire week.
Don’t expect an overnight change. At first, you may feel as if you’re needlessly depriving yourself. But after fasting for a while, you’ll start to come out of each fast with a renewed appreciation for what money is — its purpose, significance and impact on the lives of others. That sense of connection will change how you spend that first dollar coming out of a fast.
NYSUT NOTE: Planning and managing your finances can be a lengthy, complicated process, which can often require professional help. That’s where the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program comes in. NYSUT members have access to a team of Certified Financial Planners® that can offer unbiased advice for your specific financial situation. And it’s all fee-based, which means no commissions from mutual funds, brokerage firms, insurance companies or any other third party, just unbiased advice from a financial expert. Enroll today by visiting the member website.
Once you’ve incorporated financial fasting into your daily life, you’ll realize how much the world has to offer outside of indiscriminate spending. It can help refocus your financial priorities, reel in addictive spending habits and even inspire you to financially support causes you believe in.
The difficulties associated with financial fasting are not unsubstantial — but the joys it can bring to your life, and those around you, are well worth the effort.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
3. Assess your income sources and expenses.
Creating a budget for a multidecade retirement is not practical. Prices change, unforeseen expenses arise, and life takes unpredictable turns. However, there needs to be a general calculation to determine if you can afford a particular lifestyle.
This computation doesn’t need to involve anything fancy. Start by listing all your income sources such as Social Security, pension and portfolio or rental income. Next, tally your living expenses, like food, rent, taxes and transportation costs.
Make sure to also factor in any other costs associated with living the retirement you envision, including travel or hobbies. Finally, ask yourself two questions:
• Does my income exceed my expenses?
• Can I afford to live this lifestyle for the rest of my life?
If the answer to either of these questions is “no,” then changes must be made. You can consider working longer, even part time, moving to a cheaper locale or adjusting your retirement lifestyle.
4. Determine a safe withdrawal rate from your portfolio.
A safe withdrawal rate is the percentage that retirees can withdraw from their accounts each year without running out of money before reaching the end of their lives. This is a key aspect in determining how long you can maintain your lifestyle. A popular guideline is the 4% rule, which suggests that an individual can withdraw 4% of their total portfolio value annually to sustain their lifestyle without running out of money.
One important factor when determining your safe withdrawal rate is your legacy goal and how it impacts your retirement goals. Your legacy goal involves estate planning and how much money you’d like to leave to your children or charity. This objective will directly impact how much money you can withdraw each year from your nest egg.
As I have repeatedly pointed out, this is just a back-of-the-envelope framework. Here are a few of the major things that could throw it off:
5. Consider Medicare and Medigap deadlines.
A safe withdrawal rate is the percentage that retirees can withdraw from their accounts each year without running out of money before reaching the end of their lives. This is a key aspect in determining how long you can maintain your lifestyle. A popular guideline is the 4% rule, which suggests that an individual can withdraw 4% of their total portfolio value annually to sustain their lifestyle without running out of money.
One important factor when determining your safe withdrawal rate is your legacy goal and how it impacts your retirement goals. Your legacy goal involves estate planning and how much money you’d like to leave to your children or charity. This objective will directly impact how much money you can withdraw each year from your nest egg.
6. Plan for long-term care needs.
Long-term care involves needing assistance with the "activities of daily living," which include bathing, dressing, grooming, using the toilet, eating and moving around. These services are not covered by Medicare and can be prohibitively expensive. It is difficult to predict how much or what type of long-term care a person might need, but the best time to think about long-term care is well before you need it so you can consider all your options.
The main strategies for paying for long-term care are self-funding, insurance or Medicaid planning. Each one of these approaches has myriad considerations and should be discussed with a professional who can help assess which option is the most suitable for your needs.
7. Simplify your financial life.
Keeping your finances consolidated and organized is always sensible. This is even more important as people age. As a youngster, you may be able to more easily track your multitude of accounts at various brokerage firms. This will become increasingly more cumbersome and stressful as you get older.
I suggest to all my clients approaching retirement to consolidate their accounts wherever possible. This includes rolling over old 401(k)s and/or 403(b)s, consolidating various IRAs and taxable accounts where appropriate and managing all banking (i.e., checking) at one institution.
Furthermore, having a seamless process for a child or trusted family member to make decisions on your accounts in case you no longer have capacity will save a lot of heartache and frustration later.
8. Plan to retire TO something, not FROM something.
Being frustrated at work or trying to get away from a difficult boss are not good reasons to retire. Situations at work change daily, and bosses come and go. Making an emotionally charged decision to stop working can be devastating if not thought through fully.
The reason to retire is because one has the burning desire to pursue other interests, goals and lifestyle choices. These new pursuits should be clearly defined and laid out. Not knowing what activities and challenges you’d like to engage in when you retire may lead to boredom and more rapid mental deterioration.
9. Develop a daily routine for retirement.
Working provides many benefits, including daily structure, intellectual stimulation, social interaction and a sense of purpose. Sadly, many retirees discover what they lost from being out of the workforce only after they’ve retired.
It’s essential for retirees to re-create all the aforementioned benefits gained from working while in retirement. This may include consulting part time, volunteering, philanthropic work or various other projects that can be pursued every day for several hours a day throughout your retirement years.
Many people envision their retirement as a life of leisure, sipping cocktails by the beach, playing golf or visiting their grandchildren. Unfortunately, none of these activities is a full-time pursuit. Most hobbies can’t be done full time. It's imperative for folks to develop and even test out their daily retirement routine while they are still working. This aspect of retirement readiness is just as important as the financial considerations.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Liability
Liability coverage, required by law in most states, is the foundation of car insurance policies. It’s designed to protect you financially if you’re found at fault in an accident and cause injury or property damage to others. Liability coverage encompasses two components: bodily injury liability coverage and property damage liability coverage.
Bodily injury (BI) liability covers injuries that you cause to someone else. Generally, it pays for the other person’s medical bills, recovery costs, and lost wages.
Property damage (PD) liability covers the cost of repairing or replacing another person’s property that you damaged. Typically, this covers damage to another driver’s vehicle, but it can also cover damage to fences, lamp posts, telephone poles, buildings, or other structures your car hits.
Collision
If your car is damaged in a collision with another vehicle or a stationary object, such as a streetlight or a tree, collision coverage pays to fix or replace it. If you’re leasing or financing your vehicle, your lender may require you to purchase collision coverage.
Comprehensive
Comprehensive coverage provides damage protection for your vehicle in situations other than collisions, such as damage caused by theft, vandalism, natural disasters, falling objects, and other incidents specified by your insurance policy.
Medical payments
If you or your passengers are injured in an accident, medical payments (MedPay) coverage helps pay for healthcare costs associated with injuries, such as hospital visits, surgery, X-rays, and more. MedPay coverage is required in some states.
Personal injury protection
Personal injury protection (PIP) coverage — not available in all states — helps pay for you and your passengers’ medical expenses resulting from an accident, regardless of who is at fault, meaning you don’t have to wait for your insurance company to determine blame to be compensated. It also typically covers rehabilitation, lost wages, and funeral costs. PIP coverage is required in 18 “no-fault” insurance states, including Arkansas, Delaware, Minnesota, New York, Texas, and others.
Uninsured/underinsured motorist
In cases where you’re involved in a car accident with a driver who doesn’t have car insurance or has insufficient coverage, uninsured motorist (UM) and underinsured motorist (UI) coverage steps in to cover your medical expenses and property damage.
Part A covers inpatient care at hospitals and skilled nursing facilities as well as hospice and some home health care. If you paid Medicare payroll taxes for at least 40 quarters, the Part A premium is free. For 2024, there is a deductible of $1,632. You also must pay coinsurance for hospital stays longer than 60 days. For more details, read What You’ll Pay for Medicare in 2024.
Medicare Part A
Part B pays for doctor visits, outpatient care and some home health care. For 2024, the deductible is $240 and the base premium is $174.70 per month. After hitting the deductible, you pay 20% of expenses unless you have either Medicare Advantage or supplemental coverage.
The penalty for failing to enroll at age 65 is a permanent 10% of the monthly premium multiplied by the number of years you could have enrolled but didn't. Exceptions are made for those with coverage through a qualifying employer health plan.
Medicare Part B
Part C is commonly called Medicare Advantage. Beneficiaries are covered for Parts A and B through private insurers instead of traditional government-administered Medicare. Most Advantage plans include prescription drug coverage. For 2024, the average monthly premium is $18.50.
Medicare Part C
Part D refers to standalone prescription drug coverage through private insurers. If your Advantage plan includes prescription drugs, you don't need Part D. If you elect original Medicare and want medications covered, you will need a Part D plan. Modern Medigap plans don't cover prescription drugs, but if you purchased a policy before Jan. 1, 2006 and still have that plan, then your Medigap policy may include drug coverage.
The average total monthly premium for Medicare Part D coverage is projected to be approximately $55.50 in 2024.
If you decide after your initial enrollment period that you want Part D, you will pay a permanent 1% penalty of the base premium multiplied by the number of months that you went without the coverage.
Medicare Part D
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
1. Wipe out all your debt.
Debt can be a useful tool in many aspects of life, like buying a home, affording a car or growing your business. As long as a person acts responsibly and has a long runway to pay back that loan, it can enhance their life and take their career to the next level.
However, as folks enter their retirement years, many shift to living on a fixed income. Being saddled with debt, and its associated extra expenses, can be burdensome and make retirement life much more stressful. That is why I advise all retirees to eliminate all debt before retirement.
How Do 529 Plans Work?
As you may know, a 529 plan is a state-sponsored, tax-advantaged college savings investment plan. When you enroll in a 529 plan, the money you invest grows on a tax deferred basis. When you withdraw from the 529 plan and use the money to pay for qualified education expenses, those withdrawals are tax free.
529 plans are designed to encourage saving for college and typically cover qualified education-related expenses like tuition, fees, books, computers, and other supplies. Certain room and board expenses are usually considered to be “qualified expenses.” But sometimes, whether 529 college savings can be used to pay for the cost of room and board will depend on whether those costs exceed certain amounts.
Additionally, 529 plan funds can generally be used to pay tuition for professional and trade schools and up to $10,000 per student, per year, can be used to pay for K-12 private school tuition. In any case, keep in mind that each 529 plans may have its own specific rules regarding what particular expenses are considered to be "qualified expenses."
Do You Get a Tax Break for Contributing to a 529 Plan?
A 529 plan doesn’t offer a federal income tax benefit because 529 plans are sponsored by states. As a result, the contributions to your 529 plan are not tax deductible on your federal tax return. But some states offer a state tax credit or state tax deduction for 529 college savings plan contributions that are made in your home state.
And, as previously mentioned, your 529 plan funds grow tax free and withdrawals of 529 college savings account funds that are spent on qualified expenses, are also tax free.
But remember: if you withdraw 529 plan funds and don’t use that money for qualified education-related expenses, you could face a 10% federal income tax penalty.
How Late Can I Contribute to a 529 Plan?
A 529 plan doesn’t offer a federal income tax benefit because 529 plans are sponsored by states. As a result, the contributions to your 529 plan are not tax deductible on your federal tax return. But some states offer a state tax credit or state tax deduction for 529 college savings plan contributions that are made in your home state.
And, as previously mentioned, your 529 plan funds grow tax free and withdrawals of 529 college savings account funds that are spent on qualified expenses, are also tax free.
But remember: if you withdraw 529 plan funds and don’t use that money for qualified education-related expenses, you could face a 10% federal income tax penalty.
How Much Can I Contribute to a College 529 Plan in 2023?
529 college savings plans do not have set individual annual contribution limits like 401(k) plans do. Instead, annual, and aggregate, contribution limits for 529 plans vary by state.
It’s also important to keep in mind that contributions to your 529 plan are treated as gifts for federal income tax purposes. In 2023, under the gift tax exclusion rules, you can contribute up to $17,000 tax free per donor. However, gifts over $17,000 must be reported on a federal gift tax return. That doesn’t necessarily mean that you will be subject to tax on your gift though, because the lifetime federal gift tax exemption amount is quite high.
What if My Child Doesn’t Go to College?
From a tax perspective, if your student doesn’t attend college and you withdraw 529 college savings plan funds for other than qualified education-related expenses, then the money you take out of the 529 plan would be subject to the 10% federal income tax penalty.
Additionally, the 529 plan funds that you withdraw for non-education-related expenses, would be considered taxable income — which could impact your federal and state taxes.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Do You Get a Tax Break for Contributing to a 529 Plan?
A 529 plan doesn’t offer a federal income tax benefit because 529 plans are sponsored by states. As a result, the contributions to your 529 plan are not tax deductible on your federal tax return. But some states offer a state tax credit or state tax deduction for 529 college savings plan contributions that are made in your home state.
And, as previously mentioned, your 529 plan funds grow tax free and withdrawals of 529 college savings account funds that are spent on qualified expenses, are also tax free.
But remember: if you withdraw 529 plan funds and don’t use that money for qualified education-related expenses, you could face a 10% federal income tax penalty.
Property Damage and Loss
As you know, homeowners insurance will cover the expenses (minus deductibles) to replace, repair or even rebuild your home, exterior structures and belongings in the event of a natural or man-made disaster. For example, if a hailstorm destroys your roof, homeowners insurance should cover the costs to replace or repair your roof. Similarly, homeowners insurance will help you rebuild if fire engulfs your house, detached garage or shed.
When you experience this type of catastrophe, you still need a place to stay while your home is being repaired or rebuilt. Homeowners insurance will cover the costs of your alternative living arrangements during that time. Additionally, homeowners insurance is there if your home is burglarized. Your homeowners policy helps to replace any valuables that are stolen.
It’s important to thoroughly examine which events your policy will cover and look for any gaps that might exist within your coverage. This is especially true in our current market. With recent price increases in real estate, it’s possible that the property replacement value on your homeowners policy won’t cover the increase to your property’s current value.
Personal Liability
As a homeowner, you’re responsible for what takes place on your property. Unfortunately, that means you could be held liable if someone tripped and fell on your porch steps, causing personal injury. The good news is homeowners insurance provides you with liability coverage for such unfortunate occasions. The personal liability portion of your homeowners policy helps to cover their medical and legal expenses. Therefore, you want to understand exactly how much of those expenses your policy covers. If the neighbor breaks their ankle in some fantastical way and requires multiple surgeries to repair it, the expenses could add up very quickly. In such a scenario, you’re not just looking at medical expenses. More than likely, you’re going to be faced with legal expenses for a litigation that, at bare minimum, seeks to replace lost earnings.
These fees could very easily get out of control. So, you must know exactly how much your policy will pay in an event like this. Being proactive with your review could help you identify where you need to supplement your personal liability coverage.
Exclusions
As you progress through your homeowners policy review, you’re probably going to uncover several exclusions. These are certain events or disasters that your policy will not cover. For instance, your policy may cover property damage caused by hurricanes, but it might not cover flood damage. That could create problems, as hurricanes often cause flooding.
It’s possible that your home could survive the hurricane but then undergo extensive damage from the subsequent flooding. As the floodwaters rushed into your home, they destroyed your floors, walls and belongings. However, since the floods caused the damage, not the hurricane itself, your homeowners policy wouldn’t cover your costs to clean up, replace, repair and rebuild.
You can see the problem with this, and unfortunately, many homeowners assume they’re covered in such a situation because the flooding was caused by the hurricane. As a result, they fail to add the additional coverage to their policy and find themselves completely ruined when disaster strikes. This is why you must carefully read through your policy, paying close attention to the wording that’s used. In the end, it could be the difference between a setback and total devastation.
Similarly, many homeowners policies don’t cover property damage caused by sinkholes or vandalism. So, check your policy to see what types of disaster damage it does cover. You may need additional coverage. That’s OK. Policies like flood insurance, vandalism insurance, etc. are available. Reviewing your coverage will ensure you can address the exclusions in your policy before it’s too late.
Additional Riders
I’ve also seen clients struggle with their homeowners policies because of unique or expensive properties and collections in their homes. Standard homeowners insurance will replace your basic personal property worth a couple of thousand dollars. However, I know many people have property worth much more than that. In fact, my wife’s wedding and engagement rings are worth more than that. Additionally, some firearms collections, coin collections, fine art or antiques are worth more than the standard coverage will cover.
Therefore, if you have items of personal property worth more than a couple of thousand dollars, you’ll probably need to add a rider – “scheduled coverage” – to your policy. While you might pay higher premiums, oftentimes scheduled coverages don’t carry a deductible.
How Much Homeowners Insurance Coverage Do You Need?
All of this brings us to the crucial question: Just how much insurance coverage do you need? The only way you’re going to find your specific answer is through an annual review of your homeowners policy. Approach your review with the understanding that the value of your property might have changed since you purchased your homeowners policy. Because value goes both ways, it’s also possible that you could be paying for more insurance than you need. Compare the amount of your coverage to the current value of your home, personal belongings and assets.
So, how much coverage do you really need?
Enough to Replace Your Structure
Obviously, you need to cover the structure of the home. However, you’re not basing this on the value of the house when you purchased it. Instead, you’re looking at your home’s replacement value.
Let’s assume you purchased your home for $200,000, in 2008 when the housing market was suffering. However, the housing market is booming in 2021. Therefore, your home could be worth $400,000 or $600,000 now. This means you would need to pay someone between $400,000 and $600,000 to replace your home as it was if it were to burn down or get carried away by a tsunami. So, if your policy only covers the original $200,000 value, it will only cover 33%-50% of the home’s current replacement value. That would create a major problem for most people.
Enough to Replace Your Belongings
Beyond replacing your home, you’ll need to replace the belongings that were in it. This includes everything inside your house. From clothes, towels and silverware to televisions, furnishings, books (this would be a huge line item in my home), etc. Therefore, it’s vital that you have enough coverage to replace everything in your home.
Many homeowners policies cover personal property up to 50% or 75% of the home’s value. This means, if you have a $100,000 home, your policy may only provide $50,000 to replace lost items.
Have you ever tried to figure out the replacement cost of all the things in your home? You may be surprised at how quickly you’d blow through your policy’s personal belonging limits. That’s why I often tell clients to inventory and archive everything in their homes. This is easy to do. Just take your phone and walk through every room, capturing each item on camera. Open every drawer, cabinet or door and describe everything you see. Once you’ve done this, you can get a homeowners policy that will cover the replacement value of what you own.
Finally, you must make sure you have enough liability protection to cover medical and/or legal expenses that could arise due to accidents in your home. You don’t want to owe anything out of your own pocket. Therefore, if your policy provides $100,000 to $300,000 in liability coverage, it may be wise to purchase $300,000 to $500,000 of protection. These expenses compound and can quickly get out of control. It’s much better to pay a little more on your insurance premiums than to find yourself footing the bulk of someone’s medical and legal bills because they exceeded your policy’s personal liability coverage.
Additionally, if you’re operating your business within your home, you may need to add a rider to your homeowners policy that will protect you if there’s an accident that happens while someone’s at your home for business purposes.
I know that life is busy. Conducting an annual review of your homeowners insurance policy might not be high on your list of priorities right now, but it should be. Oftentimes, it’s very easy to develop a sense of comfortability in doing things the way we’ve always done them. However, just because you bought a good policy from a decent insurance agent doesn’t mean it’s still the best one for you.
I review my own homeowners policy annually. Specifically, I look at my home's current value compared to the replacement value coverage I have on it. Likewise, I look at the value of my personal belongings compared to the replacement value coverage I have on them. As the value of my home and my belongings increases, I want to make sure my homeowners policy increases to cover it.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
1. Consider your financial readiness
The most evident consideration for retirement is financial preparedness. Clearly, one can’t think of retiring if they can't afford it. But what’s the magic number?
According to Northwestern Mutual’s 2023 Planning & Progress Study, working Americans believe they need an average of $1.27 million to retire. However, many can lead a comfortable retired life with less. The ideal savings benchmark varies based on individual circumstances. Fidelity recommends targeting 10 times your pre-retirement income by age 67 to sustain your current lifestyle in retirement.
2. Age matters in deciding when to retire
Retirement isn’t solely about savings; age matters, too. For penalty-free withdrawals from traditional retirement accounts, you need to be at least 59 ½. However, the rule of 55 allows those leaving their job at 55 or older to withdraw from their current employer’s plan without penalties.
Given most retirees describe Social Security as a major income source, it's vital to plan this aspect of your retirement thoughtfully. The full retirement age is 67 for those born after 1960. By delaying until 70, you boost your benefit, though you’ll have to lean on other funds in the meantime. Starting claims early at 62 reduces your benefit, but you’ll get more checks over time.
If you’re lucky enough to receive a pension, keep in mind it might also be curtailed if age and service requirements aren't met.
3. How your health plays into retirement timing
Your health can dictate the right time to retire. If work strains your well-being or if retirement offers better health prospects, it might be time to reconsider your career. According to the 2023 Transamerica Annual Retirement Survey, health concerns prompted 45% of retirees to retire earlier than planned.
Healthcare coverage is vital in this equation. With Medicare only starting at 65, ensure you’re protected. If you plan on retiring before this age, look into alternatives like securing a policy through the marketplace or opting into your spouse’s plan, if possible.
4. How is your career satisfaction?
If you love your job and derive satisfaction and purpose from it, delaying retirement might be appealing. Transamerica reports that 56% of those who retired later than planned did so because they enjoyed their work and wanted to stay active and mentally sharp.
Conversely, if work-related stress is detrimental, an earlier retirement or career change might be beneficial. A report from the National Bureau of Economic Research found that retirement often leads to immediate and sustained boosts in life satisfaction and overall well-being.
5. Looking at market and economic conditions
While it’s hard to predict market movements, you may want to tread carefully if you’re thinking of retiring during a major downturn. Significant losses or depletions to savings early in retirement – known as sequence risk – could derail your retirement plans by diminishing the longevity of your nest egg.
A poor economy may also be reason to think twice about your timing. Although, economic pressures may force some companies to offer appealing packages that make it better to retire sooner than later. These factors might be beyond your control, but they can present challenges or opportunities worth planning around.
6. Did you forget to plan activities for retirement?
Many retirees, according to a survey from Retire with Possibilities, said the biggest challenge of retirement was the loss of daily structure and routine. The transition to retirement often means a shift from established routines and social engagements.
To make this transition smoother, it’s essential to have a clear vision for your post-retirement life. Without concrete plans, retirement can feel overwhelming – or boring. Before you take the step, ensure you have activities and goals to pursue. Embrace new experiences, volunteer and remain open to various pursuits to keep retirement fulfilling and vibrant.
Kiplinger is part of Future plc, an international media group and leading digital publisher
© 2024 Future US LLC
Tip 1
onsider bringing a professional trustee into your estate planning process. Effective collaboration will result in a more effective plan and more efficient administration.
Tip 2
Make sure your estate planner understands your business. Institute a Take Your Adviser to Work Day so your key advisers witness firsthand production, business practices and the roles of your key employees (including your children working for the company).
Tip 3
Discuss with your legal adviser the use of transfer on death (TOD) and payable on death (POD) options to pass accounts or other assets to your beneficiaries. Many banks are promoting designated TOD/POD beneficiaries without fully explaining possible adverse outcomes.
For example, when your selected payee dies, will the remaining funds on deposit belong to his/her estate, go to their heirs at law or lineal descendants, or will account custodians lock down the account until a court designates the proper payees? Finally, overuse of TOD/POD accounts can leave your executor with no liquidity to pay the estate’s debts and taxes because all the liquid assets have already been passed out.
Tip 4
If you control a closely held company, ensure that your estate planner reviews the terms of any buy-sell provisions in the shareholder and operating agreements to ensure that these terms are coordinated with liquidity available to your trust or estate.
Ask your estate planner to include substance abuse powers and protections for beneficiaries in your trust documents. Nonprescription drug use has risen to endemic levels in many states. Give the trustee powers to deal with any known or likely substance abuse issues, such as the power to:
Ask your estate planner to include substance abuse powers and protections for beneficiaries in your trust documents. Nonprescription drug use has risen to endemic levels in many states. Give the trustee powers to deal with any known or likely substance abuse issues, such as the power to:
Tip 4
If you control a closely held company, ensure that your estate planner reviews the terms of any buy-sell provisions in the shareholder and operating agreements to ensure that these terms are coordinated with liquidity available to your trust or estate.
Tip 6
Ask your estate planner to use active voice in all your forms, communications and agreements. Active voice (subject, verb, object) identifies the person who is or will exercise the power or duty to avoid ambiguity and provide clarity.
“The Trustee shall distribute all the income…”
Passive voice (object, verb, subject or no subject) allows the actor to be less identified in order to emphasize only the authority but not identify responsibility.
“All income shall be distributed…”
Tip 7
Be careful with your personal information and documents. Today’s standards expect estate planners and financial advisers to never email sensitive information without encryption, to use secure systems to send documents and confidential/sensitive information and to use multifactor authentication on all remote access.
Please don’t open attachments from anyone you don’t know or even click on a suspicious email — even emails that appear to come from someone you know. If you didn’t expect an invitation, a document or a link to some article, pick up the phone and call the sender for guidance before opening the email.
Tip 8
Ask your estate planner to review the trust’s express standards of care with you. You need to understand the duties and liabilities of the trustee(s) and trust adviser, whether they are expressly fiduciaries or nonfiduciaries. When a trust states that a trust adviser is not a fiduciary and is not liable for actions taken in good faith, then any actions they take must be in good faith — this is a standard of care, and they are liable for actions taken in bad faith.
Trustees are wary of terms that allow advisers to direct the trustee with liability only for intentional misconduct while the trustee is liable for any breach of trust. The only source of restitution for following an imprudent direction is the trustee. Smart trustees will require separate indemnification for all directives under these circumstances, likely aggravating your beneficiaries.
Tip 9
Ask your estate planner to ensure that your trust absolves successor trustees of all prior acts of the predecessor trustee. When a trustee is named successor trustee, they will look for language in the document that absolves them of the predecessor trustee’s prior acts of commission or omission. If not in the document, the successor trustee will require that all qualified beneficiaries sign a release and indemnification.
Tip 9
Ask your estate planner to ensure that your trust absolves successor trustees of all prior acts of the predecessor trustee. When a trustee is named successor trustee, they will look for language in the document that absolves them of the predecessor trustee’s prior acts of commission or omission. If not in the document, the successor trustee will require that all qualified beneficiaries sign a release and indemnification.
Tip 11
Don’t allow any time to pass between finishing your new or updated estate plan to update your beneficiary designations. If you need assistance, ask your estate planner to review your existing deeds, titles, account details and beneficiary designations for any necessary changes. Your new estate plan may be worthless if your beneficiary designation forms are not completed correctly. Ensure that the beneficiary designations properly identify a qualified beneficiary, are properly structured for a conduit or accumulation trust and are compatible with the mandatory and discretionary distribution requirements of the trust.
If you are a beneficiary of a trust, you are allowed to review the trust administration and ask questions of the assigned trust officer. Make an appointment to discuss the terms in the trust regarding:
If you are a beneficiary of a trust, you are allowed to review the trust administration and ask questions of the assigned trust officer. Make an appointment to discuss the terms in the trust regarding:
Tip 12
If you are a beneficiary of a trust, you are allowed to review the trust administration and ask questions of the assigned trust officer. Make an appointment to discuss the terms in the trust regarding:
Tip 13
When you update your estate, ask your attorney to consider drafting trust restatements and new wills rather than trust amendments and codicils. Modern word processing makes it just as easy to prepare complete restatements rather than multiple amendments. It eliminates the confusion of moving back and forth between documents.
About the Author
Chad Rixse
Chad Rixse, CRPS®, is the Director of Financial Planning and a Wealth Advisor at Forefront, a privately-owned financial services firm.
NYSUT NOTE: Do you have personal debt or money concerns that you need help managing? NYSUT members are able to enroll in the NYSUT Member Benefits Corporation-endorsed Cambridge Credit Counseling program. This program has been assisting consumers with eliminating debt for more than 20 years, and NYSUT members are eligible to receive a free, no-obligation, debt consultation with one of Cambridge's certified counselors. These counselors can help you better understand your situation, help you set financial goals, determine your budget and more, to help you get out of debt in a fraction of the time. Visit the member website for more information.
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Looking for a straightforward budget that helps you save money and more effectively manage your finances? Consider the 50-30-20 budget rule. Created by U.S. Senator Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan, the 50-30-20 rule has been a gold standard for budgeting since 2006. This budgeting tactic can be a great first step for anyone looking to better manage their money, as it keeps things simple while helping you prioritize saving and paying off debt.
One major benefit of this plan is its flexibility. The rule can be adapted to best fit your household's particular needs. In fact, you may find that the 60/30/10 method may be a better fit for your household, given elevated costs on everything from housing to groceries.
The main takeaway of the 50-30-20 rule is that it helps you determine exactly where your money is going each month, which in turn helps you make changes in your spending. Here's what you need to know about the 50-30-20 budget rule.
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© 2024 Future US LLC
The CMS hopes to end sales incentives in 2025 for Medicare Advantage and Part D plans. Salespeople sometimes get incentives, such as hefty bonuses, when they enroll Medicare beneficiaries into private insurers’ Medicare Advantage plans, Medigap or Part D prescription drug plans. The coming rule change is meant to disincentivize steering people to insurance plans to earn perks and not serve the best interests of Medicare beneficiaries.
The new rule prohibits offering incentives to salespeople to enroll people and limits compensation to fixed caps. The new rule also says it will stop brokers and agents from receiving “administrative fees” above Medicare’s fixed compensation caps. In most states, that cap has been $611 for new Medicare Advantage signups and $306 for renewals. Part D plans have had lower caps: $100 for initial enrollment and $50 for renewals.
In 2025, the government will increase the compensation for initial enrollments in Medicare Advantage and Part D plans by $100, which much higher than the proposed increase of $31. CMS believes this increase will provide agents and brokers with sufficient compensation, eliminate the current variability in payments and improve the predictability of compensation for agents and brokers.
3. A crackdown on agents and brokers who sell 3 types of Medicare policies
The best time to claim your Social Security benefits depends on you, your current situation, your future needs, if your married, single, have children and more.
If you’re approaching retirement, or you’ve retired but haven’t yet filed for Social Security, you’ve no doubt heard about the advantages of waiting until age 70 to claim your benefits. Although you can file for benefits as early as age 62, your monthly payout can be as much as 30% lower than the amount you’ll receive if you wait until your full retirement age (FRA). (For people born in 1960 or later, FRA is 67). Your annual cost-of-living adjustment will be lower, too, because the COLA is based on the amount of your benefit.
If you delay starting benefits until after you reach full retirement age, you’ll receive an 8% delayed-retirement credit for each year you postpone claiming benefits from that age until age 70. Workers who reach full retirement age at 67, for example, would receive a 24% increase in benefits by waiting until age 70 to file. (Social Security provides a "quick calculator" you can use to estimate your benefits based on the year you plan to retire.)
Yet despite those advantages, less than 10% of retirees wait until age 70 to claim benefits, and about 30% claim them at 62, according to the Congressional Research Service.
1. It's all about the timing
In some cases, individuals don’t have the luxury of waiting until full retirement age — let alone until age 70 — to file for benefits. Although 68% of workers expect to retire at age 65 or older, in reality, only 31% of retirees managed to work that long, according to research by J.P. Morgan Asset Management.
Among those who retired earlier than planned, over one-third cited health problems or disabilities, 31% cited corporate downsizing, and 16% said they retired early to take care of a spouse or other family member. When that happens, claiming Social Security — even with the haircut — can provide much-needed financial stability, says Ashton Lawrence, a certified financial planner in Greenville, S.C. “It’s crucial to balance short-term financial needs with the long-term benefits of delayed claiming.”
Other retirees file for Social Security as early as 62 because they don’t expect to live long enough to benefit by waiting. Niv Persaud, a CFP with Transition Planning & Guidance in Atlanta, says one of her clients is in remission after a cancer diagnosis and doesn’t have a family history of longevity. Although she understood that waiting until age 70 would increase the size of her benefits, “given her ongoing health issues and family history, she preferred claiming her benefit early,” Persaud says.
2. File now or wait until later?
The break-even point is the age at which the value of claiming larger benefits for a shorter period — starting at age 70, for example — outweighs the benefits of claiming a smaller payout for a longer period — say, by starting at age 62.
Estimates of break-even points vary, but an analysis by J.P. Morgan Asset Management recommends claiming benefits as early as 62 if you don’t expect to live past 77. If you expect to live beyond 77, postpone benefits until at least your full retirement age, and if you expect to live beyond age 81, consider waiting until age 70 to file for benefits.
Most Americans will live past age 77, and many will live into their 80s or beyond. According to the Social Security Administration, a 62-year-old man has a 71% chance of living to at least age 77 and a 58% chance of living to age 81; a 62-year-old woman has an 80% chance of living to at least 77 and a 69% chance of living to 81.
"Even if your parents died in their fifties or sixties, advances in diagnosis and treatment of common diseases, along with differences in lifestyle, could enable you to live much longer than they did," Persaud says.
3. The break-even point in claiming Social Security
Federal withholding tax from Social Security
As mentioned, one way to avoid tax surprises is to have federal income taxes withheld from your Social Security payments.
Estimated tax payments on Social Security income
If you prefer not to have taxes deducted from your monthly Social Security payments, you can make quarterly estimated tax payments to the IRS. That can help you avoid underpayment penalties since the U.S. tax system operates on a "pay-as-you-go" basis. That means the IRS expects you to pay a portion of your income as soon as you earn it.
A certified, not-for-profit credit counselor can work with a consumer to help craft a debt management plan. But that’s not all — they can also provide services for improving credit scores and better managing personal finance, such as creating effective budgets or sitting down to review credit reports and offering tips for raising scores. Most nonprofit credit counseling services are available at no charge; lists of certified counselors can be found at www.NFCC.org or www.ConsumerCredit.com.
2. Work with nonprofit credit counselors.
NYSUT NOTE: Did you know that NYSUT members’ children can receive financial counseling, with the member present, from a Certified Financial Planner through the NYSUT Member Benefits Corporation-endorsed Financial Counseling Program? The program provides access to a team of planners who offer objective financial advice for members and their families.
“Learn how debt products work. Find the interest rates, repayment terms, fees and penalties in your agreements. Learn about alternate repayment options like consolidation or deferment. Research the consequences of nonpayment (e.g., interest, fees, credit impact). With a clear picture of how your debt works, you can make a plan to deal with it that works for you, and it won't feel so intimidating.” — Dana Miranda, You Don't Need a Budget
Gain a clear understanding of how debt works
NYSUT NOTE: If you need something more customized, NYSUT Member Benefits endorses a Financial Counseling Program with bespoke financial planning advice. This expert guidance can be helpful whether you're just getting started saving for retirement or trying to get a handle on your spending. This program is available for only $260 a year, but the advice is invaluable.
We’ve all heard stories about individuals who passed away quietly after a life of frugality, leaving a fortune to their unsuspecting heirs or, occasionally, a beloved pet.
The reality is a lot less riveting. According to the Washington Post, the average American has inherited only about $58,000 as of 2022, taking into account that most of us won't receive any form of inheritance. The Federal Reserve also reports that from 1989 to 2007, on average, only 21% of American households at a given point in time received a wealth transfer.
Complicating matters is the fact that many estate plans contain a smorgasbord of items, including real estate, investments, cash, retirement savings accounts and life insurance plans. It could take months to track down these assets and divide them among the estate’s heirs, and you could incur significant legal fees — particularly if the estate was large or your relative died without a will. There are also different rules for different heirs: Spouses, for example, enjoy some tax breaks and exemptions that aren’t available for adult children or other heirs.
For example, Brian Lee of Tacoma, Wash., got a crash course in estate law after his late father’s brother and sister died almost within a year of each other, in late 2015 and 2017. Neither of his father’s siblings had children when they died, so their estates were divided among their nieces, nephews and other surviving relatives.
Lee ended up with a six-figure inheritance, but because his uncle died without a will, settling the estate took months and cost thousands of dollars in legal fees. Lee’s aunt had a will, with Lee as the executor, which made “all the difference in the world in terms of the process,” Lee says.
Here's what you need to know in order to handle an inheritance like a pro.
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
Erin Bendig
Personal Finance Writer
Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.
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
Vanessa Okwuraiwe
Principal, Edward Jones
As a principal at Edward Jones, Vanessa Okwuraiwe is part of the strategic leadership team that helps the firm achieve its goal of being a place of belonging for all and to fulfill its purpose of making a meaningful impact in the lives of clients, associates and communities. She is a thought leader in Financial Wellness with a focus on building financial resilience across all communities.
Living within your means isn’t enough
If you want to grow significant wealth, you need to live significantly below your means. That means maintaining a lot of space between how much you earn and how much you spend. The available cash flow that gap creates should then be directed to savings and, perhaps more importantly, long-term investments.
I’m not here to tell you to stop spending money on your daily coffee. This isn't about nitpicking your expenses. It's more about big-picture choices — meaning major lifestyle decisions that can place huge fixed costs into your budget, like where you live and what kind of car you drive.
While you can get frugal if you want to, giving up coffees or meals out is not going to move the needle so much as the bigger choices that can eat up thousands of dollars in cash flow each month.
People who choose to keep traditional Medicare may also enroll in a supplemental Medigap plan from a private insurer to cover costs like copays. Traditional Medicare, when not paired with Medigap, does not have a limit on out-of-pocket expenses in a year.
Medigap policies, which cannot be paired with Medicare Advantage plans, have standardized benefits. Most states offer 10 types of Medigap policies, but premiums vary by insurer. You can compare costs, benefits and availability on Medicare’s website.
If you have a Medicare Advantage plan, you may switch to traditional Medicare, but you may have trouble getting a Medigap policy. Some states offer more protections than others, but, in general, your first time enrolling in Medicare is your best opportunity to get a Medigap policy.
3. Limits on Medigap changes
These plans have a monthly cost, in addition to the Part B premium, that varies depending on the plan. The plans frequently include prescription drug coverage and limits on annual out-of-pocket costs for covered services.
They also may offer extras not included by traditional Medicare, such as dental, hearing and vision coverage and gym memberships. They are able to do this because they manage costs, partly by limiting beneficiaries to in-network providers. During open enrollment, experts recommend checking to make sure your preferred providers remain in the network for your plan.
Three in 10 beneficiaries in Medicare Advantage plans said they did not use any of their plan’s supplemental benefits in the past year, according to a study by The Commonwealth Fund. The study also found evidence that Medicare Advantage plans were more likely to burden patients with the need to obtain prior approvals, so check plan requirements carefully.
Starting in 2025, Medicare Advantage plans will be required to send policyholders a personalized “Mid-Year Enrollee Notification of Unused Supplemental Benefits” in July. It will list all supplemental benefits the person hasn’t used, the scope and out-of-pocket cost for claiming each one, instructions on how to access the benefits and a customer service number to call for more information.
4. Medicare Advantage differences
These plans have been criticized in recent years for their aggressive marketing tactics. Some beneficiaries have reported having good experiences with their Advantage plans until they get sick and find themselves fighting for coverage.
In 2023 and 2024, the government agency managing Medicare issued new rules to protect seniors against these aggressive marketing practices. These rules prohibit ads that omit the plan name or use Medicare logos to imply that their messaging is from the government.
In 2025, the Centers for Medicare & Medicaid Services hopes to end sales incentives for Medicare Advantage and Part D plans. Salespeople sometimes get incentives, such as hefty bonuses, when they enroll Medicare beneficiaries into private insurers’ Medicare Advantage plans, Medigap or Part D prescription drug plans. The coming rule change is meant to disincentivize steering people to insurance plans to earn perks and not serve the best interests of Medicare beneficiaries.
5. Medicare Advantage issues
Beneficiaries of traditional Medicare pay a standard monthly rate of $174.70 for Medicare Part B in 2024, an increase of $9.80 from $164.90 in 2023. The annual deductible for all Medicare Part B beneficiaries is $240 in 2024, an increase of $14 from the annual deductible of $226 in 2023. This rate applies to individuals with incomes less than $103,000, with income-related monthly adjustments applying at various levels to people who make more.
The Medicare Part A inpatient hospital deductible that beneficiaries pay if admitted to the hospital is $1,632 in 2024, an increase of $32 from $1,600 in 2023. Beneficiaries are required to pay a coinsurance amount of $408 per day for the 61st through 90th day of a hospitalization in a benefit period, compared to $400 a day in 2023, and $816 per day for lifetime reserve days, up from $800 a day in 2023.
For beneficiaries in skilled nursing facilities, the daily coinsurance for days 21 through 100 of extended care services in a benefit period is $204 in 2024; this was $200 in 2023.
Average premiums, benefits and plan choices for Medicare Advantage and the Medicare Part D prescription drug program remained stable in 2024, according to the Center for Medicare and Medicaid Services.
The average monthly plan premium for Medicare Advantage plans, which includes Medicare Advantage-prescription drug plans, is $18.50 in 2024, which is an increase of $0.64 from last year. Most enrollees who kept their plans experienced little or no premium increase for 2024, with nearly 75% of beneficiaries not seeing any premium increase.
In 2024, the out-of-pocket limit for Medicare Advantage plans may not exceed $8,850 for in-network services and $13,300 for in-network and out-of-network services combined. These out-of-pocket limits apply to Part A and B services only, and do not apply to Part D spending.
Medicare premiums for 2025 haven't been announced yet, but they are typically announced shortly before open enrollment begins. However, there is some information we know about Part D: In 2025, Medicare beneficiaries will pay no more than $2,000 out of pocket for prescription drugs covered under Part D. Part D enrollees will also have the option of spreading out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month. This new rule applies only to medications covered by your Part D plan and does not apply to out-of-pocket spending on Medicare Part B drugs.
6. Medicare premiums
People with higher income are charged higher Part B and D premiums — the income-related monthly adjustment amount, or IRMAA. In 2023, a single person with an income between $97,000 and $123,000 was charged $230.80 a month for Part B, compared to premiums of $164.90 for people who earned less. In 2024, people who make between $103,000 and $129,000 pay an extra $69.90 a month, for a total of $244.60.
Your income for IRMAA purposes is calculated based on income two years before the plan year.
Medicare will determine the 2025 IRMAA charge in the fourth quarter of 2024. That is why your IRMAA determination is based on 2023 filing status and income — it's the last data point Medicare can obtain from the IRS to determine the 2025 IRMAA charge.
7. Watch out for IRMAA
You can appeal your IRMAA if your income is significantly lower now than two years ago due to a life-changing event, such as retirement, divorce or death of a spouse, or if you think the government made a mistake. Beyond that, the only way to avoid the surcharge is to have less modified adjusted gross income (MAGI), which includes all taxable income from work and investments, as well as the taxable portion of your Social Security.
Unfortunately, most popular deductions, such as charitable donations and mortgage interest, do not reduce your MAGI. However, withdrawals from Roth IRAs don’t count toward your MAGI. If you’re still working, you can contribute more toward tax-deferred retirement accounts to lower your income. Another option is to delay starting Social Security.
8. Avoiding the surcharge
In general, you initially enroll in Medicare within three months before and three months after turning 65. Failing to do so can result in financial penalties, increasing your premiums for the rest of your life.
However, there are exceptions, including many people who receive health insurance through their employer or through their spouse’s job, as long as the workplace has 20 or more employees. Be sure to check with your employer about how it handles your group health coverage at age 65.
Be warned of the “COBRA trap” — insurance you may receive after you leave your job does not eliminate the requirement that you apply for Medicare at age 65.
If you miss the Medicare annual open enrollment deadline, there are still some ways you can salvage your status.
9. When do you have to enroll in Medicare?
The choices can seem overwhelming, and the marketing can be confusing and misleading. Fortunately, each state has unbiased experts who can walk you through the different plans and help you make sure your plans are the best for your needs.
State Health Insurance Assistance Programs can be found through www.shiphelp.org or by calling 877-839-2675. You can also call Medicare directly at 1-800-MEDICARE (1-800-633-4227) 24 hours a day during open enrollment, including weekends, for assistance.
10. Help is available
Medicare Advantage plans often tout the coverage that they provide and traditional Medicare doesn't — dental, vision, hearing and fitness benefits. Most Medicare Advantage plans offer at least one supplemental benefit, and the median number provided is 23, according to the Centers for Medicare & Medicaid Services (CMS).
Three in 10 beneficiaries in Medicare Advantage plans said they did not use any of their plan’s supplemental benefits in the past year, according to a study by The Commonwealth Fund. The study also found evidence that Medicare Advantage plans were more likely to burden patients with the need to obtain prior approvals, so check plan requirements carefully.
Starting in 2025, Medicare Advantage plans will be required to send policyholders a personalized “Mid-Year Enrollee Notification of Unused Supplemental Benefits” in July. It will list all supplemental benefits the person hasn’t used, the scope and out-of-pocket cost for claiming each one, instructions on how to access the benefits and a customer service number to call for more information.
2. A new midyear notification to Medicare Advantage policyholders
Even if you’ve decided that delaying benefits until age 70 is in your best interest, covering expenses in the interim can be a challenge. But if you’re married, there’s a strategy you can use to bridge the gap. Consider having the lower-earning spouse file for benefits at full retirement age, or even as early as 62 if necessary. Use the lower-earning spouse’s benefits, along with income from other sources, to pay expenses while the higher earner’s benefits — which will get the biggest boost from delayed-retirement credits — continue to grow until the higher earner turns 70.
Marguerita Cheng, a CFP with Blue Ocean Global Wealth in Potomac, Md., worked with a married couple who wanted to provide financial assistance to an aging parent and a disabled sibling. They elected to have the wife, who was the lower earner, file for benefits before she reaches full retirement age, while the husband will wait to file for benefits until at least his full retirement age or possibly age 70, she says. "Having access to funds they can use to help family members provides them with peace of mind," Cheng says.
This strategy could also enable married couples to get the most out of their survivor benefits. A surviving spouse who has reached full retirement age is eligible for up to 100% of the deceased spouse’s benefit or, if the deceased spouse had not yet filed for benefits, 100% of the amount the deceased spouse would have received had he or she filed. For that reason, it may make sense for the higher earner to delay benefits until age 70, even if he or she doesn’t expect to live past 81, in order to preserve the maximum benefit for the surviving spouse.
While having the higher earner wait until age 70 to apply for Social Security will increase survivor benefits, it won’t affect spousal benefits, which allow the lower-earning spouse to receive benefits based on the higher earner’s work record. The most a spouse can receive in spousal benefits is 50% of the higher earner’s primary insurance amount, which is the amount that spouse is entitled to at full retirement age.
4. Strategies for couples
If you’re a widow or widower, you can file for survivor benefits as early as age 60, but you must have been married to the deceased for at least nine months at the time of death. If you choose to take survivor benefits this early, it will be reduced by about 29%.
A surviving spouse can collect 100% of your late spouse’s benefit if you have reached full retirement age. Keep in mind that the full retirement age for survivor benefits is different than for retirement and spousal benefits — it is 66 and 2 months for people born in 1957, 66 and 4 months for those born in 1958, and gradually increases to 67 over the next several years.
"If your own benefit will be less than the survivor’s benefit, a better strategy is to file for your own benefits at age 62 and switch to survivor benefits when you reach full retirement age, which is when those benefits reach their maximum," says Michelle Gessner, a CFP with Gessner Wealth Strategies in Houston. (Survivor benefits aren’t eligible for delayed retirement credits, so there’s no upside to waiting until age 70.)
“Taking your own benefit at 62 doesn’t preclude the survivor’s benefit from growing in the background, which is typically not the case with other benefits offered through Social Security,” Gessner says. "Conversely, if your own benefit will be larger, you could claim survivor benefits as early as 60 and allow your own benefits — which are eligible for delayed credits — to grow until you reach age 70, at which point you could switch to your own benefits."
If you’re divorced, you’re also eligible for survivor benefits as early as age 60 — or as early as 50 if you have a disability — if the marriage lasted at least 10 years and you didn’t remarry before age 60. (If you remarry after you turn 60, it won’t affect survivor benefits.) As is the case with surviving widows and widowers who aren’t divorced, you can file for your own benefits early and allow your survivor benefits to grow, or vice versa.
5. Strategies for surviving spouses
If you’re eligible for Social Security and have minor children, they may also be eligible for benefits, but only if you’re receiving benefits. Your child (or children) must be younger than 18 (or 19 if still in high school). Unless a child is disabled, benefits will stop when your child turns 18 — or, if your child is in high school, benefits will last until they graduate or two months after they turn 19, whichever comes first.
Dependent grandchildren are also eligible for benefits. Minor children can receive up to half of the amount the parent will receive at full retirement age. In the case of multiple children, Social Security caps the amount a family can receive at 150% to 188% of the parent’s FRA benefit.
Benefits paid to a minor child won’t reduce the amount you’re eligible to receive when you file. However, if you start benefits early — at age 62, for example — so that your children will receive payments, your benefits will still be permanently reduced. "For that reason," Lawrence says, "you should weigh your family’s immediate financial needs against the increase in your benefits you’d receive by filing later."
6. Strategies for parents of minor children
While preserving survivor benefits is an important consideration for married retirees, it’s not an issue for singles. If you don’t need the income, it still makes sense to wait until you reach full retirement age to file, but waiting until age 70 may be less compelling.
One of Persaud’s single clients decided to claim at age 67 after learning that she would receive only about $100 a month in additional benefits if she wanted until age 70. Filing for benefits helped alleviate stress about her finances, “and $100 wasn’t going to make or break her,” Persaud says.
If you have chronic health problems that could affect longevity, claiming benefits at full retirement age, or even earlier, will provide you with income to enjoy the time you have left.
If you’re divorced, you can still receive benefits based on your ex-spouse’s earnings instead of your own, as long as you were married at least 10 years, you’re 62 or older, and you’re currently unmarried. As with a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit, but that benefit will be reduced if you claim before your full retirement age.
Taking a benefit on your ex-spouse’s record has no effect on his or her benefit or the benefit of your ex’s current spouse. 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.
7. Strategies for singles
Although Social Security represents a significant and reliable slice of your retirement income, you may have other financial resources, such as IRAs and 403(b) plans, taxable brokerage accounts, and, if you’re lucky, a defined-benefit pension plan. With that in mind, reviewing Social Security as a component of your overall retirement portfolio can help you determine the optimal time to file for benefits.
For example, if you’re forced to retire in a year that your portfolio has dropped 15% to 20% — and you don’t have other sources of income — filing for Social Security could enable you to avoid taking withdrawals that would lock in those losses, says Andrew Herzog, a CFP with the Watchman Group in Plano, Texas. "Though filing early will reduce your benefits, it could also provide enough time for your portfolio to recover before you need to take withdrawals."
Another factor to consider is the projected returns for your portfolio and the types of investments you own. For example, filing for Social Security before age 70 could enable you to postpone converting an annuity into a guaranteed income stream, which would result in a higher rate of return, Lawrence says.
Some retirees believe returns on their portfolios could outperform the return they’ll receive by delaying Social Security — especially if they reinvest their benefits. However, Social Security’s annual COLA, combined with the guaranteed 8% annual return for delayed-retirement benefits, is a high hurdle to overcome.
Outperforming that return would require an aggressive investment strategy and a high tolerance for risk, according to a recent paper by Wade Pfau and Steve Parrish in the Journal of Financial Planning. Even then, the authors conclude that based on historical data, it’s uncommon for investment returns to beat the implied benefit of delaying Social Security for long-lived retirees.
Finally, if you’re determined to leave a legacy, filing for benefits before age 70, or even full retirement age, could reduce the amount you’ll need to withdraw from your savings, thus increasing the amount you’ll be able to leave to your heirs. Filing for Social Security “isn’t always about maximizing benefits,” Cheng says. “The decision to claim Social Security is as much a personal decision as a financial one.”
8. Social Security and your investments
Cash reserves
Similar to saving for college costs, you can estimate future costs and what you need to save each month. Although self-funding is possible, it is prohibitive. You would need significant savings to cover potential long-term care costs.
Getting a handle on the basics of Medicare can help protect your health — and your nest egg — in retirement, so making the right choices during Medicare open enrollment is arguably one of the most important financial decisions you can make.
Open enrollment runs from Oct. 15 to Dec. 7 each year. You can tell by the advertisements that inundate the airwaves and your mailbox. You’re likely even already getting unsolicited calls and emails. All kinds of health insurance brokers and companies want to dazzle you with their offerings.
First, let’s review the basics. As most retirees know, Medicare has several parts. Part A, which is offered at no cost, generally covers hospitalizations. Part B covers outpatient medical care. Part D is prescription drug coverage provided by private insurers.
Medicare Advantage is the umbrella term for plans offered by private insurers regulated by Medicare to replace parts B and D. Medigap plans, also offered by private companies, are supplemental plans that cover copays and coinsurance charges imposed under Medicare Part B. While some people assume that Medicare will cover all their healthcare costs, experts warn there are things Medicare won't cover.
A 65-year-old retiring in 2024 could expect to spend an average of $165,000 in healthcare and medical expenses throughout retirement, according to data from Fidelity Investments. This highlights the importance of reviewing your Medicare plan choices during open enrollment each year to ensure you have the best coverage to meet your needs.
2. Few people take advantage of open enrollment
While Part D plans can change the drugs they cover, and Medicare Advantage plans can change their provider networks as well as your costs and other provisions, fewer than one-third of enrollees are estimated to take advantage of open enrollment to compare plans and reevaluate their coverage.
Tim Smolen, director of the Washington State Health Insurance Assistance Programs (SHIP), which helps residents navigate Medicare, says beneficiaries consistently care about three things during open enrollment: access, what benefits are included in their plan, and cost.
That last issue is the toughest to gauge. “It's very difficult to forecast in the year ahead how much healthcare you're going to use,” he says.
3. Limits on Medigap changes
People who choose to keep traditional Medicare may also enroll in a supplemental Medigap plan from a private insurer to cover costs like copays. Traditional Medicare, when not paired with Medigap, does not have a limit on out-of-pocket expenses in a year.
Medigap policies, which cannot be paired with Medicare Advantage plans, have standardized benefits. Most states offer 10 types of Medigap policies, but premiums vary by insurer. You can compare costs, benefits and availability on Medicare’s website.
If you have a Medicare Advantage plan, you may switch to traditional Medicare, but you may have trouble getting a Medigap policy. Some states offer more protections than others, but, in general, your first time enrolling in Medicare is your best opportunity to get a Medigap policy.
4. Medicare Advantage differences
These plans have a monthly cost, in addition to the Part B premium, that varies depending on the plan. The plans frequently include prescription drug coverage and limits on annual out-of-pocket costs for covered services.
They also may offer extras not included by traditional Medicare, such as dental, hearing and vision coverage and gym memberships. They are able to do this because they manage costs, partly by limiting beneficiaries to in-network providers. During open enrollment, experts recommend checking to make sure your preferred providers remain in the network for your plan.
Three in 10 beneficiaries in Medicare Advantage plans said they did not use any of their plan’s supplemental benefits in the past year, according to a study by The Commonwealth Fund. The study also found evidence that Medicare Advantage plans were more likely to burden patients with the need to obtain prior approvals, so check plan requirements carefully.
Starting in 2025, Medicare Advantage plans will be required to send policyholders a personalized “Mid-Year Enrollee Notification of Unused Supplemental Benefits” in July. It will list all supplemental benefits the person hasn’t used, the scope and out-of-pocket cost for claiming each one, instructions on how to access the benefits and a customer service number to call for more information.
5. Medicare Advantage issues
These plans have been criticized in recent years for their aggressive marketing tactics. Some beneficiaries have reported having good experiences with their Advantage plans until they get sick and find themselves fighting for coverage.
In 2023 and 2024, the government agency managing Medicare issued new rules to protect seniors against these aggressive marketing practices. These rules prohibit ads that omit the plan name or use Medicare logos to imply that their messaging is from the government.
In 2025, the Centers for Medicare & Medicaid Services hopes to end sales incentives for Medicare Advantage and Part D plans. Salespeople sometimes get incentives, such as hefty bonuses, when they enroll Medicare beneficiaries into private insurers’ Medicare Advantage plans, Medigap or Part D prescription drug plans. The coming rule change is meant to disincentivize steering people to insurance plans to earn perks and not serve the best interests of Medicare beneficiaries.
6. Medicare premiums
Beneficiaries of traditional Medicare pay a standard monthly rate of $174.70 for Medicare Part B in 2024, an increase of $9.80 from $164.90 in 2023. The annual deductible for all Medicare Part B beneficiaries is $240 in 2024, an increase of $14 from the annual deductible of $226 in 2023. This rate applies to individuals with incomes less than $103,000, with income-related monthly adjustments applying at various levels to people who make more.
The Medicare Part A inpatient hospital deductible that beneficiaries pay if admitted to the hospital is $1,632 in 2024, an increase of $32 from $1,600 in 2023. Beneficiaries are required to pay a coinsurance amount of $408 per day for the 61st through 90th day of a hospitalization in a benefit period, compared to $400 a day in 2023, and $816 per day for lifetime reserve days, up from $800 a day in 2023.
For beneficiaries in skilled nursing facilities, the daily coinsurance for days 21 through 100 of extended care services in a benefit period is $204 in 2024; this was $200 in 2023.
Average premiums, benefits and plan choices for Medicare Advantage and the Medicare Part D prescription drug program remained stable in 2024, according to the Center for Medicare and Medicaid Services.
The average monthly plan premium for Medicare Advantage plans, which includes Medicare Advantage-prescription drug plans, is $18.50 in 2024, which is an increase of $0.64 from last year. Most enrollees who kept their plans experienced little or no premium increase for 2024, with nearly 75% of beneficiaries not seeing any premium increase.
In 2024, the out-of-pocket limit for Medicare Advantage plans may not exceed $8,850 for in-network services and $13,300 for in-network and out-of-network services combined. These out-of-pocket limits apply to Part A and B services only, and do not apply to Part D spending.
Medicare premiums for 2025 haven't been announced yet, but they are typically announced shortly before open enrollment begins. However, there is some information we know about Part D: In 2025, Medicare beneficiaries will pay no more than $2,000 out of pocket for prescription drugs covered under Part D. Part D enrollees will also have the option of spreading out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month. This new rule applies only to medications covered by your Part D plan and does not apply to out-of-pocket spending on Medicare Part B drugs.
7. Watch out for IRMAA
People with higher income are charged higher Part B and D premiums — the income-related monthly adjustment amount, or IRMAA. In 2023, a single person with an income between $97,000 and $123,000 was charged $230.80 a month for Part B, compared to premiums of $164.90 for people who earned less. In 2024, people who make between $103,000 and $129,000 pay an extra $69.90 a month, for a total of $244.60.
Your income for IRMAA purposes is calculated based on income two years before the plan year.
Medicare will determine the 2025 IRMAA charge in the fourth quarter of 2024. That is why your IRMAA determination is based on 2023 filing status and income — it's the last data point Medicare can obtain from the IRS to determine the 2025 IRMAA charge.
8. Avoiding the surcharge
You can appeal your IRMAA if your income is significantly lower now than two years ago due to a life-changing event, such as retirement, divorce or death of a spouse, or if you think the government made a mistake. Beyond that, the only way to avoid the surcharge is to have less modified adjusted gross income (MAGI), which includes all taxable income from work and investments, as well as the taxable portion of your Social Security.
Unfortunately, most popular deductions, such as charitable donations and mortgage interest, do not reduce your MAGI. However, withdrawals from Roth IRAs don’t count toward your MAGI. If you’re still working, you can contribute more toward tax-deferred retirement accounts to lower your income. Another option is to delay starting Social Security.
9. When do you have to enroll in Medicare?
In general, you initially enroll in Medicare within three months before and three months after turning 65. Failing to do so can result in financial penalties, increasing your premiums for the rest of your life.
However, there are exceptions, including many people who receive health insurance through their employer or through their spouse’s job, as long as the workplace has 20 or more employees. Be sure to check with your employer about how it handles your group health coverage at age 65.
Be warned of the “COBRA trap” — insurance you may receive after you leave your job does not eliminate the requirement that you apply for Medicare at age 65.
If you miss the Medicare annual open enrollment deadline, there are still some ways you can salvage your status.
1. New $2,000 annual cap on out-of-pocket prescription costs
Beginning in 2025, people with Part D plans won’t have to pay more than $2,000 in out-of-pocket costs, thanks to a provision in the Inflation Reduction Act of 2022. The $2,000 cap will be indexed to the growth in per capita Part D costs, so it may rise each year after 2025. Part D enrollees will also have the option of spreading out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month.
This new rule applies only to medications covered by your Part D plan and does not apply to out-of-pocket spending on Medicare Part B drugs. Part B drugs are usually vaccinations, injections a doctor administers, and some outpatient prescription drugs.
If you are enrolled or looking to enroll in Medicare Part D plans in 2025, review your choices carefully by using the Medicare Plan Finder. You can compare different plans and see whether the prescriptions you take will be covered.
This change to Medicare prescription drug coverage may cause problems for some people who delay enrolling in Medicare because they are covered by employer health insurance.
2. A new midyear notification to Medicare Advantage policyholders
Medicare Advantage plans often tout the coverage that they provide and traditional Medicare doesn't — dental, vision, hearing and fitness benefits. Most Medicare Advantage plans offer at least one supplemental benefit, and the median number provided is 23, according to the Centers for Medicare & Medicaid Services (CMS).
Three in 10 beneficiaries in Medicare Advantage plans said they did not use any of their plan’s supplemental benefits in the past year, according to a study by The Commonwealth Fund. The study also found evidence that Medicare Advantage plans were more likely to burden patients with the need to obtain prior approvals, so check plan requirements carefully.
Starting in 2025, Medicare Advantage plans will be required to send policyholders a personalized “Mid-Year Enrollee Notification of Unused Supplemental Benefits” in July. It will list all supplemental benefits the person hasn’t used, the scope and out-of-pocket cost for claiming each one, instructions on how to access the benefits and a customer service number to call for more information.
How to Qualify for Social Security Spousal Benefits
Whether you’re currently married or divorced determines how you can qualify for spousal benefits.
Married
You can qualify for spousal benefits if you meet all these requirements:
3. The break-even point in claiming Social Security
The break-even point is the age at which the value of claiming larger benefits for a shorter period — starting at age 70, for example — outweighs the benefits of claiming a smaller payout for a longer period — say, by starting at age 62.
Estimates of break-even points vary, but an analysis by J.P. Morgan Asset Management recommends claiming benefits as early as 62 if you don’t expect to live past 77. If you expect to live beyond 77, postpone benefits until at least your full retirement age, and if you expect to live beyond age 81, consider waiting until age 70 to file for benefits.
Most Americans will live past age 77, and many will live into their 80s or beyond. According to the Social Security Administration, a 62-year-old man has a 71% chance of living to at least age 77 and a 58% chance of living to age 81; a 62-year-old woman has an 80% chance of living to at least 77 and a 69% chance of living to 81.
"Even if your parents died in their fifties or sixties, advances in diagnosis and treatment of common diseases, along with differences in lifestyle, could enable you to live much longer than they did," Persaud says.
4. Strategies for couples
Even if you’ve decided that delaying benefits until age 70 is in your best interest, covering expenses in the interim can be a challenge. But if you’re married, there’s a strategy you can use to bridge the gap. Consider having the lower-earning spouse file for benefits at full retirement age, or even as early as 62 if necessary. Use the lower-earning spouse’s benefits, along with income from other sources, to pay expenses while the higher earner’s benefits — which will get the biggest boost from delayed-retirement credits — continue to grow until the higher earner turns 70.
Marguerita Cheng, a CFP with Blue Ocean Global Wealth in Potomac, Md., worked with a married couple who wanted to provide financial assistance to an aging parent and a disabled sibling. They elected to have the wife, who was the lower earner, file for benefits before she reaches full retirement age, while the husband will wait to file for benefits until at least his full retirement age or possibly age 70, she says. "Having access to funds they can use to help family members provides them with peace of mind," Cheng says.
This strategy could also enable married couples to get the most out of their survivor benefits. A surviving spouse who has reached full retirement age is eligible for up to 100% of the deceased spouse’s benefit or, if the deceased spouse had not yet filed for benefits, 100% of the amount the deceased spouse would have received had he or she filed. For that reason, it may make sense for the higher earner to delay benefits until age 70, even if he or she doesn’t expect to live past 81, in order to preserve the maximum benefit for the surviving spouse.
While having the higher earner wait until age 70 to apply for Social Security will increase survivor benefits, it won’t affect spousal benefits, which allow the lower-earning spouse to receive benefits based on the higher earner’s work record. The most a spouse can receive in spousal benefits is 50% of the higher earner’s primary insurance amount, which is the amount that spouse is entitled to at full retirement age.
5. Strategies for surviving spouses
If you’re a widow or widower, you can file for survivor benefits as early as age 60, but you must have been married to the deceased for at least nine months at the time of death. If you choose to take survivor benefits this early, it will be reduced by about 29%.
A surviving spouse can collect 100% of your late spouse’s benefit if you have reached full retirement age. Keep in mind that the full retirement age for survivor benefits is different than for retirement and spousal benefits — it is 66 and 2 months for people born in 1957, 66 and 4 months for those born in 1958, and gradually increases to 67 over the next several years.
"If your own benefit will be less than the survivor’s benefit, a better strategy is to file for your own benefits at age 62 and switch to survivor benefits when you reach full retirement age, which is when those benefits reach their maximum," says Michelle Gessner, a CFP with Gessner Wealth Strategies in Houston. (Survivor benefits aren’t eligible for delayed retirement credits, so there’s no upside to waiting until age 70.)
“Taking your own benefit at 62 doesn’t preclude the survivor’s benefit from growing in the background, which is typically not the case with other benefits offered through Social Security,” Gessner says. "Conversely, if your own benefit will be larger, you could claim survivor benefits as early as 60 and allow your own benefits — which are eligible for delayed credits — to grow until you reach age 70, at which point you could switch to your own benefits."
If you’re divorced, you’re also eligible for survivor benefits as early as age 60 — or as early as 50 if you have a disability — if the marriage lasted at least 10 years and you didn’t remarry before age 60. (If you remarry after you turn 60, it won’t affect survivor benefits.) As is the case with surviving widows and widowers who aren’t divorced, you can file for your own benefits early and allow your survivor benefits to grow, or vice versa.
6. Strategies for parents of minor children
If you’re eligible for Social Security and have minor children, they may also be eligible for benefits, but only if you’re receiving benefits. Your child (or children) must be younger than 18 (or 19 if still in high school). Unless a child is disabled, benefits will stop when your child turns 18 — or, if your child is in high school, benefits will last until they graduate or two months after they turn 19, whichever comes first.
Dependent grandchildren are also eligible for benefits. Minor children can receive up to half of the amount the parent will receive at full retirement age. In the case of multiple children, Social Security caps the amount a family can receive at 150% to 188% of the parent’s FRA benefit.
Benefits paid to a minor child won’t reduce the amount you’re eligible to receive when you file. However, if you start benefits early — at age 62, for example — so that your children will receive payments, your benefits will still be permanently reduced. "For that reason," Lawrence says, "you should weigh your family’s immediate financial needs against the increase in your benefits you’d receive by filing later."
7. Strategies for singles
While preserving survivor benefits is an important consideration for married retirees, it’s not an issue for singles. If you don’t need the income, it still makes sense to wait until you reach full retirement age to file, but waiting until age 70 may be less compelling.
One of Persaud’s single clients decided to claim at age 67 after learning that she would receive only about $100 a month in additional benefits if she wanted until age 70. Filing for benefits helped alleviate stress about her finances, “and $100 wasn’t going to make or break her,” Persaud says.
If you have chronic health problems that could affect longevity, claiming benefits at full retirement age, or even earlier, will provide you with income to enjoy the time you have left.
If you’re divorced, you can still receive benefits based on your ex-spouse’s earnings instead of your own, as long as you were married at least 10 years, you’re 62 or older, and you’re currently unmarried. As with a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit, but that benefit will be reduced if you claim before your full retirement age.
Taking a benefit on your ex-spouse’s record has no effect on his or her benefit or the benefit of your ex’s current spouse. 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.
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The 60/30/10 rule
A flexible alternative to the traditional 50/30/20 rule is the 60/30/10 rule, which allocates 60% for essential expenses, 30% for discretionary spending and the final 10% for savings or paying down debt. This new model works better for a growing number of individuals who spend a higher portion of their monthly income on necessities.
And that number is growing. The number of cost-burdened (when a household has a cost ratio of over 30%) renter-occupied households was 20.1 million in 2021, according to the U.S. Census Bureau. That marks an increase of around 1 million households since 2019. Approximately 31% of all households are spending 30% or more of their income on housing alone, according to USAFacts.
However, since only 10% is budgeted towards savings or paying down debt with this rule, individuals should be more mindful of their discretionary spending, looking for additional savings opportunities where they can.
Other ways to save on energy costs
What is the 50-30-20 budget rule?
The 50-30-20 rule is a form of budgeting that splits your monthly, after-tax income into three major categories: necessities, wants and savings.
The first step is to inventory your current retirement accounts and savings. If you were automatically enrolled in a workplace retirement plan, locate statements or records of those accounts. If you've changed jobs in the past, it’s not uncommon to have investment balances spread across multiple institutions. Many retirement plans will allow incoming rollovers, so with some effort these balances can be combined into a single account, making tracking your savings much easier. It’s always important as well to evaluate the fees and investment options for your current retirement account. If your plan is costly and offers poor investment options, you may benefit from consolidating old accounts elsewhere, such as in an individual retirement account (IRA).
Several apps are available that can help you link and view all your accounts in one place. While your bank might offer this functionality, you can also consider options like Quicken Simplifi or YNAB. Personally, I use Simplifi, which is similar to the now-defunct Mint. It’s excellent for creating custom spending categories, as well as tracking assets, liabilities and spending. In addition to investments, compile an inventory of your cash savings and any other accounts that may ultimately fund your retirement.
Thinking ahead: Will you be receiving any future income from sources like Social Security, a pension or an inheritance? These should be factored into your retirement planning. Social Security benefits depend on your earnings history and require a certain number of credits to qualify. It’s prudent to review your recorded Social Security earnings to make sure they are being calculated correctly. If you have the ability to increase your earnings in the future, this will also slowly improve your future expected Social Security income, as it is based on your highest-earning years. If you have a private pension from an employer, that should be factored in as well. Be aware that certain pension programs (such as teachers’ pensions) may reduce your expected Social Security payments.
1. Take stock of your current and future financial resources
If you’re not currently saving for retirement, the next step is to review your budget and determine if there is room to start making contributions. Perhaps you have some debt that needs to be paid down first, or you have some expenses that can’t be reduced immediately. The goal should be to start contributing 1% of your income to your retirement savings and then increase that amount over time. A modest goal would be to increase your savings rate by 1 percentage point at the end of each calendar year, which may coincide with annual raises you receive.
Ideally, a good time to increase your savings rate (or deferral to a retirement plan) is immediately when you receive a pay raise. This way, it feels like the increase in savings is coming from your raise rather than your current paycheck. While this may seem like a slow start, simply getting started and staying on the path can pay off in the long run. If you get in the habit of frequently adjusting your savings, it will become too easy to reduce your savings rate when it feels uncomfortable. It’s helpful when your savings are on autopilot and you don’t think about it on a daily basis.
2. Determine a reasonable saving plan (even if you can’t implement it right away)
If you have specific retirement goals and don’t want to compromise to achieve them, there are typically two major factors you can influence to help get you there: your expenses and the rate of growth of your portfolio.
Many people used the COVID pandemic as an opportunity to review and adjust their spending habits. Depending on your financial resources, projected assets at retirement (including other income sources) and anticipated spending needs, you might need to revise your budget. A financial adviser can help you create a retirement forecast, or you can use basic calculators available on your 401(k) plan’s website. If your forecasted success rate is good but not high enough that you aren’t worried about running out of money in retirement, you might consider adjusting your discretionary expenses slightly to add a little bit more to your savings each month.
If you are facing a significant gap in your forecasted financial resources and your future needs, it may be time to consider lifestyle changes. We have all faced a lot of challenges in the last several years, with inflation impacting essential needs like shelter, vehicles and food. Everyone can be creative with how they approach necessary changes to their lifestyle. If your job is remote, you may consider relocating to a lower-cost area where you could save a significant amount on rent or a mortgage. Additionally, if you live in a state that is particularly vulnerable to increases in homeowners insurance rates, such as California and Florida, you may need to think long-term about your true home costs.
If you have flexibility in your discretionary spending, such as eating out versus cooking at home or shopping habits— focus on these areas to make adjustments. The sooner you increase your savings, the more you can benefit from compound interest over time.
3. Review your expenses
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Take advantage of credit card points and miles
Make sure you book flights, hotels, and other large expenses with the best cash back credit cards, ones that offer you cash back on each purchase. You won’t pay less up front, but you’ll basically give yourself a rebate when you earn money on your expenses. As a bonus, many credit cards offer extra cash back when you charge certain travel categories. Here's a look at some of the best travel rewards credit cards.
Don’t forget about using airline miles to help pay for your vacation flights. Why else have you been saving them up? Additionally, look into your corporate benefits — many companies offer discounts on transportation and hotels.
What buyers need to know
Home buyers who use a buyer’s agent will probably be the first to notice how the rules have changed, because they’ll be required to enter into a written agreement that details how much they’ll pay the agent in commissions if the seller doesn’t agree to pay the full amount. (Some states required written contracts before the new rules took effect, but now buyers in all states will have to sign contracts.)
In the past, home buyers would typically work with a buyer’s agent without a formal contract in place because it was understood that the seller would pay the entire commission.
Don’t commit to a long-term, exclusive contract until you’ve had an opportunity to view several homes and determine whether you want to work with the agent, the Consumer Federation of America (CFA) says.
Zillow, the online real estate brokerage, recommends signing a seven-day touring agreement before entering into a contract with an agent. Its website contains samples of state-specific touring agreements (not all states are represented). Zillow’s touring agreement states that buyers won’t be charged a fee for touring services and stipulates that if the buyer wants to hire the agent for additional services, the parties will reach a separate agreement.
Consumer Advocates in American Real Estate, a nonprofit group, offers a template for an agreement to tour homes. The site also offers templates of compensation agreements for buyer’s and seller’s agents.
If after touring homes you decide to hire a buyer’s agent, don’t hesitate to negotiate, says Steve Brobeck, executive director of the CFA. He recommends offering 2% of the sale price or lower, depending on the services required.
If you’re willing to do some of the work yourself — for example, you prefer to do your own home search but want help making an offer — the agent may be willing to accept a flat fee for specific services, says Richard Hopen, founder of SmartBuyers AI, which provides education and advice for home buyers. Some real estate brokerage firms are already experimenting with new pricing models, such as offering buyers and sellers a menu of services, with a billing rate for each service available.
When reviewing a contract, look for red flags, such as a requirement to compensate an agent before you decide to become a client, or a provision that combines compensation for the listing agent and buyer’s agent, which violates the spirit of the new rules, the CFA says.
Because you must enter into a contractual agreement, it’s more important than ever to work with a competent, reputable real estate agent, Brobeck says. Start by asking friends and relatives who have purchased homes for referrals, with the goal of identifying at least three prospective agents to interview, he says.
Use real estate websites such as Zillow and Realtor.com to research an agent’s recent sales and customer reviews. Finally, a prospective agent should provide you with a copy of the contract, be willing to discuss the terms and give you plenty of time to review it.
“Big debt usually doesn't happen all at once. The opposite is true as well. Start small. Begin with your smallest credit card balance, pay it off and then add that payment amount to the next-largest debt. The math says to pay the highest balance and interest first, but math doesn't always tell the whole story. Human emotion matters, too. If you don't see progress and then give up, the math doesn't matter.” — Rod Griffin, Experian
Take the 'snowball' approach
“I would recommend leveraging a debt management app and expert advice to make debt repayment easier and less intimidating. Debt management apps can help you track payments, set reminders and visualize progress. Additionally, consult with a financial adviser to receive personalized strategies for negotiating better terms with creditors. This way, you can manage a less stressful debt repayment plan.” — Jabin Geevarghese George, Tata Consultancy Services Ltd.
Use tech and expert advice to get organized
“Getting out of debt does not have to be a gargantuan task; getting into overwhelming debt is a gargantuan task. To get out of debt, stop using credit. If you don't have the cash in the bank, you can't afford it. Pay at least the minimum on each obligation, but focus on debts charging the highest interest first. Finally, always remember that credit cards are not an alternate source of income.” — Deborah W. Ellis, Ellis Wealth Planning
Change your mindset and habits around credit
“Generally speaking, you need to know the monthly (or whatever makes sense) debt service amount that you are comfortable with — and sure to make — and then commit to that. However, what complicates this strategy is the interest rate you signed up for. If it is high, you should retire that debt as soon as you can, or else you will end up in a situation where you are not really retiring the debt.” — Zain Jaffer, Zain Ventures
Pay attention to your interest rates
“Try the ‘snowflake’ technique to tackle debt: Sell unused items, cut back on habits and apply any savings to your debt. Quick wins build momentum and confidence, making the larger debt feel less daunting.” — Amrita Choudhary, Wasabi Technologies
Leverage any savings with the 'snowflake' method
“Break debt repayment down into manageable steps by creating a detailed budget and prioritizing high-interest debts first. Use the ‘snowball’ or ‘avalanche’ method to stay motivated with quick wins or interest savings. This approach makes the process less overwhelming, provides a clear road map and helps maintain momentum, making debt repayment more achievable and less intimidating.” — Stephen Nalley, Black Briar Advisors
Break repayment into manageable steps
“Research lesser-known debt forgiveness or relief programs that might apply to your specific circumstances. These might include certain government grants or nonprofit initiatives.” — Manoj Kumar Vandanapu
Look into debt forgiveness or relief programs
“Budgets and financial prioritization are important to set yourself on the right path, but staying on the path is the hardest part. I recommend sharing your experience and journey with others by seeking out a mental and emotional support network. Debt reduction is a long process, and it can feel like running through molasses. Don't go it alone and you are more likely to succeed.” — Stephen Kates, Annuity.org
Share your experience with others
50% — necessities
When following the 50-30-20 budget, you'll start by allocating 50% of your income towards necessities. These are expenses that you just can't avoid, such as:
• Housing
• Utility bills
• Food
• Transportation
• Child care
• Insurance (car, home, life)
30% — wants
Let's face it, life would be miserable if you didn't have a few splurges every once in a while. Luckily, with the 50-30-20 budget, you'll allocate 30% of your take-home income towards wants. This category obviously includes all non-essential purchases, such as:
• Subscription streaming services, such as HBO Max or ESPN Plus
• Vacations
• Dining out
• Theatre, concerts, sports matches
• Child care
• Leisure goods, luxury household items, apparel
20% — savings
Finally, the remaining 20% of your income should be put in savings, whether it's longer-term savings, like your retirement account, or for more short-term savings needs e.g. a rainy day fund, or to pay off any debt you have. While this section makes up the smallest portion of your overall income, it's the most important.
When adhering to the 50-30-20 rule, consider interest rates on any debt you may have. If interest rates on that debt are high, it's recommended to put all 20% towards paying off that particular debt. However, if the interest rates on your debt are fairly low, consider putting 10% towards savings and using the remaining 10% to make payments against debt.
In fact, you can search for the best savings rates below by using our tool, in partnership with Bankrate. Find the best rates from banks and credit unions that are FDIC or NCUA insured.
Example of a 50-30-20 budget
$2,500: 50% of your income, is allocated towards necessities — rent, utilities and groceries.
$1,500: 30% of your income, is allocated towards things you want, whether it’s the latest iPhone or a fresh outfit.
$1,000: 20% of your income, is set aside for saving or for paying off debts.
If you have low-interest debt, you might consider putting 10% ($500) towards an emergency fund and another 10% towards a personal loan.
Here’s an example of budgeting using the 50-30-20 rule.
If you bring home $5,000 after-tax each month, according to the rule you'd split your income as follows:
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Bottom line on the 50-30-20 rule
Overall, the 50-30-20 rule is a simple guideline for budgeting. However, it may not be the right fit for everyone’s financial situation. For example, you may have a lot of expenses each month that take up more than 50% of your monthly income, leaving little to allocate towards wants or savings. On the other hand, it can be a useful framework for individuals who prefer a structured, straightforward approach to budgeting.
Do an energy audit — by making improvements identified in a home energy audit, you can save between 5% and 30% on your monthly energy bill. Tax credits for energy-efficient home improvements include the Energy Efficient Home Improvement Credit, which is equal to 30% of the costs for all eligible home improvements made during the year, and the High-Efficiency Electric Home Rebate Program, which offers $1,600 for insulation, air sealing, and ventilation.
Make sure your home is well insulated so it loses less heat. If you don't already have it, insulation is a good investment as it reduces your future bills.
Consider a heat pump for heating and cooling your home. A recent National Renewable Energy Lab (NREL) study found that heat pumps would lower energy bills for most Americans (62% to 95% of households, depending upon heat pump efficiency).
Switch to LED lightbulbs — they use 75% less energy than incandescent/halogen lightbulbs.
Consider whether solar panels could be an option for your property.
Place your thermostat where it will give you the most accurate temperature — avoid drafty windows or direct sunlight.
Wash your clothes in cold water — this can cut your energy usage in half when doing laundry.
Bundle up — wear warm clothes and use blankets to avoid turning up the heat.
Use your dishwasher. Not only will washing your dishes in the dishwasher save you more time than handwashing them, but it'll also use less water and save energy. Overall, you'll save money by using the dishwasher vs. washing by hand.
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Bottom line
Overall, keeping your heat set to 68°F to 70°F during the day, and 7°F to 10°F lower when you're not home, is the best way to save on heating costs. Purchasing a smart thermostat gives you the option of controlling the heat in your home conveniently from your phone, helping you to save money on utility bills during cold spells.
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
Erin Bendig
Personal Finance Writer
Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.
“Learn how debt products work. Find the interest rates, repayment terms, fees and penalties in your agreements. Learn about alternate repayment options like consolidation or deferment. Research the consequences of nonpayment (e.g., interest, fees, credit impact). With a clear picture of how your debt works, you can make a plan to deal with it that works for you, and it won't feel so intimidating.” — Dana Miranda, You Don't Need a Budget
Gain a clear understanding of how debt works
“Big debt usually doesn't happen all at once. The opposite is true as well. Start small. Begin with your smallest credit card balance, pay it off and then add that payment amount to the next-largest debt. The math says to pay the highest balance and interest first, but math doesn't always tell the whole story. Human emotion matters, too. If you don't see progress and then give up, the math doesn't matter.” — Rod Griffin, Experian
Take the 'snowball' approach
“I would recommend leveraging a debt management app and expert advice to make debt repayment easier and less intimidating. Debt management apps can help you track payments, set reminders and visualize progress. Additionally, consult with a financial adviser to receive personalized strategies for negotiating better terms with creditors. This way, you can manage a less stressful debt repayment plan.” — Jabin Geevarghese George, Tata Consultancy Services Ltd.
Use tech and expert advice to get organized
“Generally speaking, you need to know the monthly (or whatever makes sense) debt service amount that you are comfortable with — and sure to make — and then commit to that. However, what complicates this strategy is the interest rate you signed up for. If it is high, you should retire that debt as soon as you can, or else you will end up in a situation where you are not really retiring the debt.” — Zain Jaffer, Zain Ventures
Pay attention to your interest rates
“Break debt repayment down into manageable steps by creating a detailed budget and prioritizing high-interest debts first. Use the ‘snowball’ or ‘avalanche’ method to stay motivated with quick wins or interest savings. This approach makes the process less overwhelming, provides a clear road map and helps maintain momentum, making debt repayment more achievable and less intimidating.” — Stephen Nalley, Black Briar Advisors
Break repayment into manageable steps
50% — necessities
When following the 50-30-20 budget, you'll start by allocating 50% of your income towards necessities. These are expenses that you just can't avoid, such as:
• Housing
• Utility bills
• Food
• Transportation
• Child care
• Insurance (car, home, life)
Let's face it, life would be miserable if you didn't have a few splurges every once in a while. Luckily, with the 50-30-20 budget, you'll allocate 30% of your take-home income towards wants. This category obviously includes all non-essential purchases, such as:
Subscription streaming services, such as HBO Max or ESPN Plus
Vacations
Dining out
Theatre, concerts, sports matches
Child care
Leisure goods, luxury household items, apparel
30% — wants
Finally, the remaining 20% of your income should be put in savings, whether it's longer-term savings, like your retirement account, or for more short-term savings needs e.g. a rainy day fund, or to pay off any debt you have. While this section makes up the smallest portion of your overall income, it's the most important.
When adhering to the 50-30-20 rule, consider interest rates on any debt you may have. If interest rates on that debt are high, it's recommended to put all 20% towards paying off that particular debt. However, if the interest rates on your debt are fairly low, consider putting 10% towards savings and using the remaining 10% to make payments against debt.
In fact, you can search for the best savings rates below by using our tool, in partnership with Bankrate. Find the best rates from banks and credit unions that are FDIC or NCUA insured.
30% — wants
Let's face it, life would be miserable if you didn't have a few splurges every once in a while. Luckily, with the 50-30-20 budget, you'll allocate 30% of your take-home income towards wants. This category obviously includes all non-essential purchases, such as:
Subscription streaming services, such as HBO Max or ESPN Plus
Vacations
Dining out
Theatre, concerts, sports matches
Child care
Leisure goods, luxury household items, apparel
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Example of a 50-30-20 budget
Here’s an example of budgeting using the 50-30-20 rule.
If you bring home $5,000 after-tax each month, according to the rule you'd split your income as follows:
Do an energy audit — by making improvements identified in a home energy audit, you can save between 5% and 30% on your monthly energy bill. Tax credits for energy-efficient home improvements include the Energy Efficient Home Improvement Credit, which is equal to 30% of the costs for all eligible home improvements made during the year, and the High-Efficiency Electric Home Rebate Program, which offers $1,600 for insulation, air sealing, and ventilation.
Make sure your home is well insulated so it loses less heat. If you don't already have it, insulation is a good investment as it reduces your future bills.
Consider a heat pump for heating and cooling your home. A recent National Renewable Energy Lab (NREL) study found that heat pumps would lower energy bills for most Americans (62% to 95% of households, depending upon heat pump efficiency).
Switch to LED lightbulbs — they use 75% less energy than incandescent/halogen lightbulbs.
Consider whether solar panels could be an option for your property.
Place your thermostat where it will give you the most accurate temperature — avoid drafty windows or direct sunlight.
Wash your clothes in cold water — this can cut your energy usage in half when doing laundry.
Bundle up — wear warm clothes and use blankets to avoid turning up the heat.
Use your dishwasher. Not only will washing your dishes in the dishwasher save you more time than handwashing them, but it'll also use less water and save energy. Overall, you'll save money by using the dishwasher vs. washing by hand.
The 60/30/10 rule
A flexible alternative to the traditional 50/30/20 rule is the 60/30/10 rule, which allocates 60% for essential expenses, 30% for discretionary spending and the final 10% for savings or paying down debt. This new model works better for a growing number of individuals who spend a higher portion of their monthly income on necessities.
And that number is growing. The number of cost-burdened (when a household has a cost ratio of over 30%) renter-occupied households was 20.1 million in 2021, according to the U.S. Census Bureau. That marks an increase of around 1 million households since 2019. Approximately 31% of all households are spending 30% or more of their income on housing alone, according to USAFacts.
However, since only 10% is budgeted towards savings or paying down debt with this rule, individuals should be more mindful of their discretionary spending, looking for additional savings opportunities where they can.
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
Erin Bendig
Personal Finance Writer
Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.