February 25, 2019

The 7 most common Social Security mistakes

"Social Security is a complicated element of anyone's retirement plan. Here are the most common mistakes individuals tend to make and how to avoid them." by Scot Landborg.

1. Turning on Social Security at 62 while you’re still working.

2. Not utilizing the restricted application strategy (if you are eligible).

3. Remarrying without understanding the consequences. 

4. Waiting on a spousal benefit until 70. 

5. Thinking if you were to die at 70 you would have been better off collecting early.

6. Neglecting to plan in case of death of spouse.

7. Not understanding how Social Security is taxed. 

Read the details by Scot Landborg at: https://www.kiplinger.com/article/retirement/T051-C032-S014-the-7-most-common-social-security-mistakes.html







Social Security 2100- a bill to ensure the viability of Social Security for the next 75 years

Social Security 2100 Act
Congress needs to act to ensure the future of Social Security.
The 2018 Social Security Trustees report projects that beneficiaries will see a 21 percent cut in benefits by 2034 unless Congress takes action to prevent the funding shortfall. The Congressional Budget Office’s estimate is more dire, setting the year at 2031.
The proposal to tax wages up to $400,00 will extend the program’s solvency for 75 years, according to Social Security’s Office of the Chief Actuary.
According to the Congressional Budget Office, because earnings for the highest-paid workers have grown faster than the average wage, about 83 percent of total earnings fell below the Social Security’s taxable wage cap in 2016, down from 90 percent in 1983. We need to increase the wages subject to Social Security so that at least 90% of wages are subject to Social Security. For low- and middle-income earners, virtually every dollar they earn is subject to SS tax while higher earners escape tax on much of their income, plus they gain much of their income from sources NOT subject to SS tax such as from investment earnings which are taxed way below wages.
How do the wealthy benefit from the shrinkage of the middle class and growth of poverty?

February 20, 2019

Help for the disabled: Household Acccomodations Guide

People with disabilities face financial challenges as they fight workplace discrimination and encounter the higher cost of living in order to accommodate their needs. 
Thanks to Denise for sending this helpful link to a comprehensive guide to home adaptations for disabled people. It can be found at:

February 13, 2019

What's the worst thing we do to the earth and how can we atone for our impact?

Why discuss climate change in a personal finance and investing blog?
Because climate disruption is affecting our lives and our finances and imposing massive costs on future generations.
So... what's the worst thing that middle class Americans do? We fly on airplanes. Flying has a large carbon footprint. Besides flying less, we can buy carbon offsets for our flights.
Writing in The Wall Street Journal (2/13/19) Scott McCartney explains that the expansion in air travel has a huge environmental impact. 

Just How Green Are U.S. Airlines? Carriers want fliers to see them as eco-friendly—but while their planes are more efficient, their greenhouse-gas emissions are rising overall

Even though planes are more efficient, more people are flying. Biofuels are a tiny drop in the bucket. So what can a passenger do? 
Buy carbon offsets for your flights.  

"Offsets are credits that enable polluters to avoid cutting their own emissions by investing in projects such as tree planting that take carbon dioxide out of the atmosphere. Many observers see offsets as the key to reducing emissions without crippling U.S. industry with high costs, though some environmentalists worry that certain offset projects won't deliver the promised benefit to the environment." from: Carbon Offsets: A Q&A. What are they? How would they work? And will they really reduce emissions? By Rob Curran

"United and Delta offer carbon calculators and links to making contributions to environmental groups with cash or miles to offset your particular emissions on a trip. Airlines say usage is very low."( So far American, the largest carrier, does not offer an offset program.)
Usage is low because most passengers don't know about them and you really have to search the website to find how to calculate and pay for the offset. 
How much should I expect to pay? One example: a round trip flight between Atlanta and New York would be less than $5. 

Skip the Valentine's Day Roses if you care about the Environment

Quoted from NY Times Climate Forward By Jillian Mock
"Another Valentine’s Day is here, and we all know what that means: paper Cupids, heart-shaped boxes of chocolates and the classic bouquet of red roses. Lots and lots of roses. This year, Americans are expected to spend $1.9 billion on flowers alone, according to the National Retail Federation.
But those beautiful blooms may come with an environmental price tag. Most of the fresh flowers sold in the United States are grown in Colombia or Ecuador, where there is plenty of sunshine and balmy weather. Flowers are so perishable that most are transported in refrigerated airplanes, an extremely carbon-intensive way to travel. What’s more, growing flowers can be a thirsty, pesticide-heavy endeavor, with the potential to contaminate or strain local water resources, said Kathleen Buckingham, a research manager in the forests program at the World Resources Institute.
Flowers grown closer to home could have an even larger carbon footprint. In colder regions, even temperate California, the flower industry relies on energy-intensive greenhouses. While airfreight is costly in terms of carbon emissions, heating and cooling greenhouses is much more so. A 2007 report by a researcher at Cranfield University in England found that growing 12,000 roses in Europe produced about six times the carbon emissions as growing those flowers in Kenya and flying them to Europe.
So what’s a romantic to do this Thursday? You could skip the flowers altogether, or look for responsibly grown blooms. Organizations like Fair Trade USA and the Rainforest Alliance examine flower farms and give their stamp of approval to farms that mitigate environmental impacts and ensure that workers, who are predominantly women, receive fair wages, health care and other benefits. Not all programs incorporate greenhouse gas emissions in their standards, however, and this remains a problem for the flower industry to tackle, Ms. Buckingham said.
Your local florist may be able to help you learn more, as many track where their flowers come from, said Cheryl Denham, an owner of Arizona Family Florist in Phoenix.
So, no matter how you decide to celebrate Valentine’s Day this year, try to show the planet a little love, too."

Mistakes are common in health care bills

Here's a key way to prevent paying more for your health care than you should

 "At least 50 percent of the claims reviewed on behalf of DirectPath's clients contain an error, according to the employee-benefits manager."
"Simple mistakes can result in higher bills, which means you should be checking every single bill you receive from a doctor or other provider."
"Mistakes are rampant," said Bridget Lipezker, senior vice president of advocacy and transparency at employee-benefits manager DirectPath. "In the complicated world of health-care billing, don't make the assumption that a medical bill is right."
Learn more from Sarah O'Brien: 

Understanding Diversification with the Callan Periodic Table of Investment Returns

"The Periodic Table of Investment Returns depicts annual returns for 10 asset classes, ranked from best to worst performance for each calendar year."
Click on: Download the PDF.
I like this visual presentation of how asset categories fluctuate from yielding the highest returns one year to the lowest (or much lower) in subsequent years. The table is a great reminder of the benefits of diversification and NOT trying to time the market or pick the "best" investment.

February 9, 2019

Why save when interest rates are so low?

"What’s the point in saving your hard-earned dollars if you don’t know what it’s for?" asks Ross Menke. "By visualizing that future experience, you’ll feel in real time what lies ahead."
Jonathan Clements explains:
"To get started with visualization, write down your goals in great detail. Once your specific goals are established, write down how achieving those goals will make you feel. When you’re retired, what will your day be like from morning until evening? What challenges are you likely to face? Write down everything from how the coffee will taste, to what car you will be driving, to the clothes you will be wearing on the golf course."
Details at: https://humbledollar.com/2019/01/picture-this/

Back to Basics: Compound Interest

Suppose you started with one penny on the first day of the month and then doubled it each day—to two cents, then four, then eight and so on.
After 10 days, you’d have $5. After 20 days, you’d have $5,000 and, after 30 days, you’d have more than $5 million.
Read the details in Jonathan Clements' blog: https://humbledollar.com/2019/01/repeat-for-emphasis/

Want to buy happiness?

Ross Menke's five strategies:
1. Help others,
2. don't let special treats become routine,
3. favor experiences over possessions,
4. hire others to do chores you hate, and
5. pay now but consume later.
Read Jonathan Clements' advice at https://humbledollar.com/2019/01/spending-happily/

Homeownership Reality

One of my favorite financial writers, Jonathan Clements, writes about "House Rules" in a recent blog post: 
“Real estate discussions almost invariably fall hostage to anecdotal evidence. We all know folks who supposedly made a mint in real estate, as well as people who lost their shirt. But forget the anecdotal evidence, and instead focus on statistics and commonsense. To that end, here are my 13 rules for real estate:
1. Homeownership isn’t as safe as it feels.
2. We shouldn’t buy unless we can see staying put for at least five years.
3. Over the long haul, home prices nationwide should rise roughly in line with per-capita GDP.
4. The land underneath our homes should appreciate, but the dwelling itself will depreciate
5. Any gain in our home’s value will likely be largely or entirely offset by transaction costs, maintenance, property taxes and homeowner’s insurance.
6. The benefits of leverage are often offset by the cost of leverage.
7. The mortgage-interest tax deduction has always been overrated—and, today, that’s truer than ever
8. If you’re a homeowner with a fixed-rate mortgage, what you really want is inflation.
9. While a home’s price appreciation and mortgage-interest tax deduction will likely prove disappointing, homeowners enjoy one huge benefit: They get to live in the place.
10. All homes should be priced to deliver the same expected total return.
11. A paid-off home is the cornerstone of a comfortable retirement.
12. Remodeling is a money loser.
13. A real estate agent’s greatest financial incentive isn’t to get us the best price, but to get us to act quickly.”

February 8, 2019

Do 401k and IRA Contributions Reduce My Social Security Benefits?

Mike Piper, author of The Oblivious Investor Blog, explains:
"pre-tax contributions that you make to an employer-sponsored retirement plan such as a 401(k) reduce your income tax, but they do not reduce your Social Security tax. The same goes for traditional IRA contributions, as well as contributions to a SEP or SIMPLE IRA.
And because they have no effect on the amount of your income that’s subject to Social Security taxes, pre-tax contributions to an IRA, 401(k), 403(b), etc. do not reduce the Social Security benefits that you will eventually receive."

Individual Retirement Account Update

The amount you can invest in an IRA is increased for 2019. You can still contribute for 2018 before you file your income tax return. 
Quoted from the IRS website: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

For 2019, your total contributions to all of your traditional and Roth IRAs cannot be more than:
  • $6,000 ($7,000 if you’re age 50 or older), or
  • your taxable compensation for the year, if your compensation was less than this dollar limit.
For 2015, 2016, 2017 and 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than:
  • $5,500 ($6,500 if you’re age 50 or older), or
  • your taxable compensation for the year, if your compensation was less than this dollar limit.
The IRA contribution limit does not apply to:

Thinking of buying a condo? Do your homework first

Having lived in a homeowners association for more than 25 years and having recently bought a condo, I'm well aware of the differences between owning a single family home and living in some type of home owners association. A recent article does a great job of explaining what condo (and HOA) owners need to know and ask about before they buy. Deb Hipp wrote:

8 Things to Know Before Buying a Retirement Condo: In many ways, this purchase is much different than buying a house

Note that the same "rules' apply regardless of whether the purchase if for retirement living.

Buying a Condo Isn’t Like Buying a House

1. What information must the seller provide?
2. Is the reserve fund adequate?
3. What’s in the annual budget?
4. Are there assessments?
5. Is the condo warrantable?
5. Is there pending or potential litigation involving the complex or the unit?
7. What is the master insurance policy deductible?
8. How well-managed is the homeowners’ association? 
Other suggestions:  talk to as many residents as possible to find out what they like and dislike the most about living there, problems they experience, how well they know their neighbors, etc. 

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