February 28, 2013

What % of my pay do I need to save?

While Americans say their top $ priority is saving for retirement, you wouldn't know it by the % of their pay they actually invest. Is it enough to just get the employer match? No way! Check out the recommended amount based on your age on the Squared Away Blog: http://squaredawayblog.bc.edu/squared-away/behavior/happy-retirement/

February 26, 2013

How to get ahead when living paycheck to paycheck

"Ten bucks.
More often than not, that’s all that Jackie Kane, a health-insurance troubleshooter from Kirkland, has to live on for about a week each month.
After her first-of-the-month rent and bills are paid — and before cashing her second twice-monthly paycheck — Kane, 27, is like many other single, working college grads her age.
“I buy generic groceries, split the rent on a small house with my roommate and cheer when I find quarters in the bottom of my purse,” she says."
Read a financial planner's advice for "Single, working college grad struggles to make ends meet" at: http://seattletimes.com/html/businesstechnology/2020407126_moneymakeoverkanexml.html?cmpid=2628

February 25, 2013

Should Government "live within its means" like Households?

How many times have we heard pundits and members of Congress say that the government should operate within its means like households? Check out The American Way of Debt graphic. In the link below scroll down to the graphic and click to enlarge.
Note that total household debt is $11.31 trillion! Also check out the info on "loan delinquencies."

12 Credit and Debt Myths

How much do you really know about the ever-changing world of credit and debt?
"Borrowers too often fall prey to the conventional wisdom. And it can cost them."
Check out your knowledge with this article from The Wall Street Journal by Rachel Ensign.
12 top myths: 
1. Once you marry, you're responsible for your spouse's debt.
2. Credit cards from your favorite retailers are a good deal.
3. You're too rich for federal student loans.
4. Dutifully paying off your mortgage each month will do wonders for your credit score.
5. Money from a family member makes an easy down payment on a home.
6. Today's tight lending criteria apply to auto loans too.
7. If you agree to separate your debt in a divorce, it's separate.
8. A high income and credit score means you'll be pitched the lowest interest rates on credit cards.
9. If you've looked up your credit score, you know your credit score. (You can’t just look up your score, you have to pay for it!)
10. A late credit-card payment will damage your credit.
11. All mortgage and home-equity interest is deductible.
12. Buying a home with cash is the best option, if you have the money.
BE SURE to check out The American Way of Debt graphic! How many times have we heard voters and members of Congress say that the government should operate within its means like households? Note that total household debt is $11.31 trillion! Also check out the info on "loan delinquencies."


February 23, 2013

Beware of Bogus IRS Emails

The IRS receives thousands of reports every year from taxpayers who receive emails out-of-the-blue claiming to be from the IRS. Scammers use the IRS name or logo to make the message appear authentic so you will respond to it. In reality, it’s a scam known as “phishing,” attempting to trick you into revealing your personal and financial information. The criminals then use this information to commit identity theft or steal your money.
The IRS has this advice for anyone who receives an email claiming to be from the IRS or directing you to an IRS site:
  • Do not reply to the message;
  • Do not open any attachments. Attachments may contain malicious code that will infect your computer; and
  • Do not click on any links in a suspicious email or phishing website and do not enter confidential information. Visit the IRS website and click on 'Identity Theft' at the bottom of the page for more information.
Here are five other key points the IRS wants you to know about phishing scams.
1. The IRS does not initiate contact with taxpayers by email or social media channels to request personal or financial information;
2. The IRS never asks for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts;
3. The address of the official IRS website is www.irs.gov. Do not be misled by sites claiming to be the IRS but ending in .com, .net, .org or anything other than .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on their site and report it to the IRS;
4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. Forward a suspicious email to phishing@irs.gov;
5. You can help the IRS and other law enforcement agencies shut down these schemes. Visit the IRS.gov website to get details on how to report scams and helpful resources if you are the victim of a scam. Click on "Reporting Phishing" at the bottom of the page.
(all quoted directly from IRS)

The Benfits of Procrastination

Of course it is better to starting investing for long term goals, especially retirement, earlier rather than later to take advantage of compounding of interest and investment returns. However, for persons nearing retirement, there are some advantages of waiting. Tthere are many financial decisions best made by procrastinators. The longer the wait, the better they turn out, like some fine wines. Here are some financial moves that are just as well delayed.
Transferring from a traditional individual retirement account to a Roth IRA.  
Buying TIPS. Treasury inflation protected securities 
"Buying a fixed annuity. Annuities are like flat-screen televisions. They keep getting better and cheaper."
"Paying off that mortgage. Should you hurry to kill your loan by paying extra principal every month? Not usually.
And, although not mentioned in the article, delaying retirement is often the best move for making money last. 
Read the details and rationale at: http://www.reuters.com/article/2013/02/20/column-stern-advice-idUSL1N0BK7QU20130220

February 20, 2013

Teaching Kids About Money

“Money as You Grow, developed by the President's Advisory Council on Financial Capability, provides 20 essential, age-appropriate financial lessons—with corresponding activities—that kids need to know as they grow. Written in down-to-earth language for children and their families, Money as You Grow will help equip kids with the knowledge they need to live fiscally fit lives. The lessons in Money as You Grow are based on more than a year of research, and drawn from dozens of standards, curricula, and academic studies.” http://www.moneyasyougrow.org/

February 8, 2013

Feb 13 FPW: Earthquakes and Homeowners Insurance

Join us Wednesday February 13 to learn about Homeowners Insurance with a special emphasis on earthquake and flood insurance, both coverages NOT included in standard HO policies. 90% of Utahns live in earthquake country, and unlike California, Utah legislators have not seen fit to recognize the danger and mandate appropriate building codes. Utah may be a dry state but every year serious localized flooding damages property. Join us at 11:30 in the USU Taggart Student Center room 336 (bring your lunch) or at 7 pm in the USU Family Life Center (corner of 500 North and 700 east with easy free parking). The program is free and open to everyone, even men. :) Bring a friend. We will be giving away some products to protect yourself and your belongings when the earthquake strikes (It's not a matter of IF but WHEN) and some personal finance magazines.

NOT planning to retire?

Plenty of baby boomers claim their retirement plan is to NOT retire. I suspect most who hold this view do so because they can't afford to stop working, although some truly love their work. About 1/3 of American workers have no employer-provided retirement plan and even more are living paycheck to paycheck. Be aware that plenty of data indicate many retirees had no choice... due to layoff, ill health and other reasons, they did NOT get to choose when to retire. Laid-off 60 somethings are unlikely to get re-employed at their previous pay,if at all. Nonetheless, if you find yourself in the never planning to retire group, you need to read:  "Advice for the new anti-retirees." Heather Struck advises:
HAVE A BACKUP PLAN: Save for retirement, even if you want to keep working. !!   Read the details at: http://www.reuters.com/article/2013/02/07/moneypack-retire-never-idUSL1N0AT9B720130207

February 6, 2013

4 Reasons to Save your Tax Refund

Emily Brandon writes: "Your tax refund is likely to be one of the biggest paydays you will get this year. There are many benefits to saving at least part of your refund, and sometimes you can get additional perks if you save in specific ways. Here are some great reasons to save your tax refund:
Buy savings bonds on your tax return.
Get a tax break with your IRA.
Never pay taxes again with a Roth.
Win a prize. If you save part of your tax refund for the future you may become eligible to win a prize. The Doorways to Dreams Fund, a nonprofit organization aimed at improving the financial security of low and moderate income consumers, is giving away a $25,000 prize and forty $250 awards to tax filers age 18 and older who save at least $50 of their federal tax refund using IRS Form 8888 at SaveYourRefund.com."
Get more info at: http://money.usnews.com/money/blogs/planning-to-retire/2013/02/05/4-great-reasons-to-save-your-tax-refund

February 5, 2013

Consider the Impact of Collecting Social Security Retirement Benefits Early

As many older workers find themselves out of work as a result of the lingering effects of the global financial crisis, it can be tempting to begin collecting Social Security benefits at age 62.  Policy analyst Bruce Bartlett writes for The New York Times Economix blog (2/5/13), “there is a huge financial price to be paid for drawing Social Security benefits early and an enormous payoff for delaying the decision to claim benefits. Unfortunately, I think many workers have a “use it or lose it” attitude, incorrectly thinking their benefits will be bumped up when they reach the full retirement age or ignorant that their benefits rise when receipt of them is delayed.”
Persons who collect SS benefits prior to their full retirement age “lose $1 of benefits for every $2 of earnings they receive above $15,120 – equivalent to a 50 percent marginal tax rate on an annual income barely above the minimum wage.” Because delaying collecting SS results in a higher benefit for each year one delays up to age 70, “Social Security benefits are… 57 percent higher at age 70 than at age 62.” “The delayed retirement credit is an extraordinarily good deal – where else can one get a guaranteed 8 percent annual return these days? The lower interest rates are, the better deal it is.” If you realize you made a mistake in collecting early, you are allowed one year in which to repay benefits received and “reset” the clock.  By choosing to delay benefits to your full retirement age or as late as age 70 you essentially earn an 8% guaranteed return. By ensuring a larger SS benefit, it can be easier to decide how to spend your retirement savings during the early go-go years of retirement. Read the full article with links to helpful resources at: http://economix.blogs.nytimes.com/2013/02/05/one-recession-cost-is-lower-social-security-benefits/?src=recg

How much of SS Benefit is Taxable?

Up to 85% of Social Security retirement benefits are subject to income taxes for persons with $34,000 income and above. Check out this table to calculate if your benefits are taxable, and if so, what percent are subject to income taxes:  http://networthadvice.com/2013/01/23/are-social-security-benefits-taxed/

2013 Retirement Account Contribution Limits

Retirement account contribution limits for 2013 have been increased. 
-Maximum annual IRA contribution (under age 50): $5,500
-Maximum annual IRA contribution (age 50 and over): $6,500
-401(k), 403(b), and 457 deferral limit (under age 50): $17,500
-401(k), 403(b), and 457 deferral limit (age 50 and over): $23,000
-Maximum additions to defined contribution plans (ex. SEP): $51,000
-Maximum SIMPLE salary-deferral limit (under age 50): $12,000
-Maximum SIMPLE salary-deferral limit (age 50 and over): $14,500
Additionally, the deduction for taxpayers making contributions to a traditional IRA is phased out for singles who are covered by a workplace retirement plan and have a modified adjusted gross income between $59,000 and $69,000. For married couples filing jointly in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $95,000 to $115,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $178,000 and $188,000.
Finally, the AGI phase-out range for singles making contributions to a Roth IRA is $112,000 to $127,000. For married couples filing jointly, the income phase-out range is $178,000 to $188,000.

Social Security Payroll Taxes Return to 2010 Level

In 2010, Congress lowered the Social Security payroll tax in an effort to stimulate the economy. That reduction in the SS payroll tax expired on Dec. 31, 2012, and thus the FICA (payroll) tax has now returned to the level it was at prior to Congress’s intervention.  Folks: This is NOT a tax increase! Before 2010, employers withheld 7.65 percent of employees’ paychecks to fund Social Security and Medicare. Social Security receives 6.2 percent of the withholdings, and Medicare receives 1.45 percent. When Congress was trying to stimulate the economy in 2010, they lowered the Social Security tax to 4.2% so people would have larger take-home checks and thus spend more.  Repeat: this is NOT a tax increase, it is simply terminating the temporary tax cut. While the tax cut may have helped stimulate the economy, it worsened the long term projections for Social Security. You can’t have your cake and eat it, too.
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