Outside of Open Enrollment

For many companies, benefits enrollment happens in the later part of the year- October, November, December. If you missed your OE period this year, you can still take advantage of other benefits that do not require making a decision during the special open enrollment period. Not all companies offer all benefits listed below, so be sure to check your company’s benefit package to see what’s available to you.

Paid family leave for taking care of family members including being a parent and being a caregiver to a parent.

Deferred Compensation Retirement Plans aka 401(k), 403(b) or 457 plans An eligible employee can enroll any time during their employment. In addition, it is possible to change both amounts contributed as well as investments at any time. Often a retirement plan provider can also give financial advice on investing within the plan.

Employee Stock Purchase Plan Employees are able to put money aside every pay period and purchase company stock at a discount every quarter. Enrollment is necessary to take advantage of this benefit, but it can be done at any time and can be cancelled at any time.

Employee Assistance Program (EAP) The EAP is a confidential service that provides referrals and advice for employees to help deal with work-life issues, family stressors, relationship problems, financial or legal concerns. No special enrollment is needed, and it is a company paid benefit.

Healthy Life Style Programs These often include discounted or free gym membership, a reduction in health care premiums with participation and services of a dietician.

Philanthropy and Volunteering When an employee donates to a non-profit, some companies match up to a certain dollar amount per year. In addition, an employee may be able to take paid time to volunteer at a non-profit and the company may pay the non-profit a stipend for those hours.

Student Loan Refinancing As the burden of student loans is weighing down many employees, some employers are facilitating refinancing of those loans at more favorable terms through outside vendors.

Tuition Reimbursement If an employee goes back to college while working to complete either an undergraduate degree or a graduate degree, the IRS allows compaines a tax-free benefit to cover some of the costs. A company may pay more towards education and the additional amount will be taxable.

Financial Wellness Programs More and more employers are realizing that financial stresses lead to less productive employees and are offering financial education on a number of topics via different mediums.

Family Leave Some companies offer paid family leave for taking care of family members including being a parent and being a caregiver to a parent. The amount of paid time off differs for each type of leave if offered.

Discounts Some companies may have a discount program that offer on a wide range of items including computers, home goods, dining out and clothing.

To maximize utilization of employee benefits, they need to be understood. Be sure to take some time to learn about your company’s benefit package and be sure to maximize the value of your employee benefit package- you’ve earned it!

Five Easy Ways to Avoid Identity Theft in Real Life

Often when we think of identity theft, we now think of electronic means. Although this does happen, theft of financial information often happens in real life (IRL), at your mailbox and in your home.

Many people have mail delivery at the mailbox at the end of the driveway or next to the house. This is vulnerable to theft of credit card offers, bank, card or investment statements.

Many people have mail delivery at the mailbox at the end of the driveway or next to the house. This is vulnerable to theft of credit card offers, bank, card or investment statements.

Financial information can also be stolen from inside your home. This is taken by family members, friends or anyone with access to your house. Whether it is taking cash from your wallet or information from your tax return, including your social security number, there are a few things that you can do to protect yourself.

1. One of the first ways to protect your data is to sign up for financial statements to be delivered to you electronically. This means that monthly you will get an email notice that you need to log into your financial account to see the monthly statement.

2. If you still wish to get mail delivered to your home address, consider getting a locking mailbox. If you prefer, a mailbox can be rented from a local post office or a private mailbox store. These options all offer more privacy.

3. It is possible to opt out of getting credit card offers at http://www.optoutprescreen.com and to stop getting unwanted mail solicitations at http://www.dmachoice.org.

4. A cross-cut shredder is great for shredding any confidential information you get in the mail or generate. There are also places like office supply stores that will charge you per pound to shred confidential papers. If you have a large amount to shred, often commercial shredding is available, which shreds everything including all those paper clips and binders.

5. A fifth easy thing to implement is to get a locking file cabinet or file storage system for those papers that have a lot of personal data on them, especially your social security number and date of birth. This is often overlooked and can stop casual perusal of your data.

Consider the information you have around you, about you, and try to make it as secure as possible. Although it can take some time and a little money to implement these solutions, once it has been stolen it is very time consuming and painful to try to recover money or your identity. A little forethought and planning is well worth it.

Choosing a Medicare Plan

Open enrollment for Medicare every year is October 15 to December 7th . Whether you are new to Medicare or already enrolled, there is a great resource to help you choose the plan most suitable to you.

Choosing a plan that covers your current medications and health care providers is important.

You can choose the original Medicare which includes Parts A, B & D; a Medicare Advantage Plan (Part C) or can add a Medigap plan. Choosing a plan that covers your current medications and health care providers is important. Often it is an array of choices and the plan you currently have may not be the best one for you next year.

If you have moved, added medications, or changed your health care provider, it may not be as easy as staying on the current plan. Often, it is hard to decide knowing you are locked in for another year.

There is help and it is FREE!

Each state has a federally funded program called the State Health Insurance Assistance Program (SHIP). This program provides health insurance counselling to seniors eligible for Medicare. The program is staffed by highly trained counsellors, many of them volunteers. They are local, talk to you one-on-one and may be able to meet you face-to- face.

It may be called SHIP in your state, or HICAP or SHIBA or something else entirely. Whatever the name, it is a great free, unbiased resource. They do not sell insurance – instead they are knowledgeable about the Medicare plans in your geographical region and the best plan for you given your medical needs and financial resources.

To find the name and contact information of the organization in your state go to medicarehelp.org. Take control of your choices and use the resources available to help you become a more informed financial and insurance consumer.

October is Financial Planning Month

October is Financial Planning Month. Why does this matter to you?

Every year, October is designated Financial Planning Month, with a week that is often also designated Financial Planning week. It is your chance to sit down with a Certified Financial Planner (CFP®) professional to ask questions about your financial situation. These planners have completed training specific to offering free advice to members of the public. Many offer free consultations at community gathering places like libraries and community centers. It is your chance to ask those burning questions and get answers. Every year, theses knowledgeable planners donate time to help the public who do not have financial resources or their own planner. Check with the Financial Planning Association (FPA) about community events in your area.

Many offer free consultations at community gathering places like libraries and community centers.

If there is not an event that is local or accessible to you, you may have other resources. Often, your employer may offer different routes for you to increase your financial knowledge. They know that money and finances can have a big impact on your ability to have a balanced life.

If your employer does not offer financial coaching and courses through Financial Knowledge, you may have access to a financial planner through your Employee Assistance Program (EAP) or even your 401(k) administrator.

Check with your Human Resources department or with your employer HR website to see if any of these resources are available to you.

If you are not currently working or if your employer does not offer these resources and you want to learn more, search the web for specific topics and conduct some research on your own.

Where ever and however you gain knowledge on your specific situation or generally financial planning, October offers an additional way for you to start to become a more informed financial consumer.

The Importance of Your Will and Trust

Your will and trust are fluid documents that require updating as life’s circumstances change. They are not a “do it once and forget it” task and here’s why…

These documents are a snapshot of your wishes at the time you signed them. Things change, we change, our family grows and shrinks, our friendship circles expand and contract and what is important to us now will change later.

For a trust, this person will be a trustee or a contingent trustee. Your trust sets out not only what to happen at your death, but also while you are alive.

Pull out your will and/or trust and look, not at the beneficiaries who will get your assets when you die but look at the people you have named to help take care of carrying out your wishes. In the case of a will, this will be the executor. They are responsible for telling the world of your passing, gathering the assets, paying off creditors, taking the estate through the probate system, keeping accounts, filing taxes – all before handing the assets over to your heirs. This person must be trustworthy, unbiased, good with detail and have the patience to deal with the process that may take up to 2 years and with people who want their money now.

Who did you name as your executor? Call/text/email them and ask them again if they are willing to do this task for you. And ask them again every few years. Their own situation can change and what they may have been able to do when you wrote your will versus what they can do now or in the future may be very different.

For a trust, this person will be a trustee or a contingent trustee. Your trust sets out not only what to happen at your death, but also while you are alive. If you are incapacitated, the trustee also administers your trust in addition to their responsibilities after you die. This is an important position, so it is key that you choose the right person. Just like for an executor, they need to have many personal skills and be a paragon.  And just like an executor, call/email/text every few years the person you have named to confirm they are still willing and able.

If you are struggling to name someone, it is possible to name a professional company or person whose job is to be the executor and/or trustee. This is often used when there is discord among families. It protects family members by not putting them in a position to make financial decisions.  Professionals are often used by someone who does not have close family member or friend capable to stepping in.

Having the will and/or trust is a good thing to do to protect your family and have your wishes carried out. Take the next step and confirm that the good people you have named to help are still be able to do so.

Gifts and Inheritance

Does it matter if you inherited an asset or were gifted the asset? The answer is yes. The reason is tax implications and basis. Basis is the price paid for the asset. For real estate it includes the purchase plus any improvements to the property. For stock, mutual funds, exchange traded funds (ETFs) and bonds, it is the purchase price plus the commission.

Many people inheriting assets choose to sell as soon as possible to minimize the amount of capital gains taxes paid.

For a gift, the original basis follows the asset. So if $X was paid for the asset, the basis stays at X when gifted. For an inherited asset, the basis resets at the date of death (or 6 months later) of the person leaving the inheritance. Many people inheriting assets choose to sell as soon as possible to minimize the amount of capital gains taxes paid.

An example:

Jia “got” shares from her Dad. Her father had bought shares every paycheck from the company he worked for as a young man. Her father paid anywhere from $0.64 per share to $2.34 per share.

Dad’s Average Cost Basis per share: $1.29 Fair Market Value (FMV) at date of gift per share: $70.81 FMV at date of Dad’s death per share: $89.39

Gifting: Dad gifts the shares while he is alive and his basis goes along with those shares. Jia sells the shares 10 years later when the FMV is $121.34, so her capital gain is $120.05 and she pays capital gains tax. If she had sold immediately on receiving the gift, her capital gain would have been $69.52 per share.

Inheritance: When Dad died, Jia inherited the shares from a non-retirement account. When she decided to sell 10 years later, the share price was $121.34. Jia’s basis is the value of the shares on the day her dad died. Her basis is $89.39 per share while her realized capital gain is $31.96 per share. She will be paying capital gains tax on the $31.96 per share. If Jia had decided to sell immediately after inheriting, and the stock price had not changed, her capital gain would have been zero.

Think of the tax implications as you inherit or are gifted assets. In addition, consider them as gift assets or write your estate plan. Decisions you make now can affect those who will inherit later.

Paying Down Credit Cards

There are a few strategies to accelerating paying down credit cards. Before we discuss those, let’s acknowledge that it is hard. Credit card debt can creep up, especially during times when income is insufficient for basic needs. Debt can also happen when we deliberately buy items, services or experiences we have not saved for. The interest charged and late charges are responsible for the debt growing.

Credit card debt can creep up, especially during times when income is insufficient for basic needs.

One of the first strategies is to examine your credit card bill every month. There may be services you are paying for that you no longer use or need. Think about gym membership, streaming services or donations to a charity you no longer support. Cancelling these monthly costs can help.

Write out a list of your credit cards (you can include other debts like student loans), along with the amount you owe, the current interest rate and the minimum payment due. This can be very daunting if you are unsure or scared about your debt level. Using a spreadsheet with formulas showing date paid off with current payment is very helpful and motivating.

The monthly amount you saved in #1, or any extra money can be applied to paying down the loan with the highest interest rate. Maintain paying the minimum amounts on the other cards. Once this card is paid off, take the total amount you were paying on this card and attack the next highest interest card. Repeat until all are paid off.

If you like more instant gratification, take extra money and pay off the credit card with the lowest amount due. After that is paid off, repeat or use the strategy above.

Paying your debt on time will alleviate those extra late charges. You may also find that as you pay your cards off, your interest rates may go down. Paying down debt also improves your credit score that may also lower your interest rates. It is all connected. Update your spreadsheet as you go and see the improvement.

Saving for emergencies in addition to paying cards off is a way to avoid getting into debt. Once you are out of the grind of credit card debt, pay your card balances off monthly. Creating a plan to tackle this debt is the first step. Congratulations on taking it!

Costs of Vehicle Ownership

When designing a spending plan or budget it is important to consider all costs associated with owning a vehicle. Often these can be hidden or we do not stop to consider them. Even an older vehicle with no monthly payment and an excellent driver with low insurance rates may cost as much as $4,250 a year to operate.

A more expensive vehicle has higher monthly payments if financing, while a larger vehicle has higher fuel costs, especially as the cost of gas increases.

Even if you change your own oil there are costs associated with this twice a year (or more) task. In addition, as your vehicle ages with more mileage on the odometer, maintenance costs increase and tires need to be replaced on a regular basis. Repairs are the occasional items that need to be changed out such as a radiator or a cracked windshield. Costs may also include an insurance deductible due to an accident. There sometimes comes a point when maintenance costs to keep a vehicle on the road may exceed the vehicle’s value.

Registration costs at the Department of Motor Vehicles in your state depend on the age and value of your vehicle, although a small portion of this fee may be tax deductible. Tickets for infractions, while not generally an annual cost, prove that none of us are perfect. Parking tickets, speeding tickets, failure to come to a complete stop among others, all add up.

Insurance premiums can be a major cost depending on the value of the vehicle, the coverage and the deductible you choose. If you are accident-prone then your insurance rates reflect that. Your state will dictate the legal minimum coverage. Each insurance claim has “points” which allows the insurance company to raise your rates for three years until those points drop off your record. A ticket will also add points to your record. Don’t forget the add the costs of traffic school to avoid points to increase your insurance rates. Paying your insurance premium monthly will cost you about 10% more than if you pay annually.

When buying a vehicle, apart from the above costs, there are other things to consider. Do you need a vehicle that size? Are you buying it for the occasional ski trip (consider renting for that short period of time)? Are you keeping up an image (does it matter what others think)? Are you buying that vehicle to help with the environment (are there better ways to help)? Do you need a vehicle (consider car share alternatives as well as electric bikes, scooters, public transit, taxi and taxi-equivalents)?

Take a hard look at your lifestyle. If you are considering relinquishing a vehicle, park it for a while over different seasons and see how practical that option can be. Consider downsizing your vehicle, if you want to save on gas, insurance and registration. A more radical change is moving to an urban area where a vehicle is not a viable transportation option. Everyone’s situation is unique, change is not for everyone but maybe it is for
you.

Age Matters

Many of us think of retirement happening at the age of 65. It’s important to be aware of many decision points along the way.

Age 50: If you have an active retirement plan, be it a 401(k), an IRA, a 457 plan or others, you can add more funds every year than those under 50. (Known as the catch- up provision)

Age 55: If you have an employer sponsored plan like a 401(k) and you retire between 55 and 59½, you can take withdrawals from your plan without having to pay a 10% IRS penalty. These must be taken over the first five years and must be the same amount every year. It is tricky, so see a tax advisor.

Age 59½: Yay, no 10% tax penalty on withdraws from any of your retirement plans (except the Roth which you must have first funded five years previous). If you funded your retirement plan with pre-tax money, taxes are still due but no penalty for early withdrawal. Of course, if you have an employer sponsored plan and are still working, there may be constraints on withdrawals.

Age 62: The first age you are eligible to take a Social Security retirement benefit. This may be based on your own working record or that of your spouse, your ex-spouse or your divorced spouse. Be aware that if you start at age 62, your benefits will be lower and will remain low throughout your lifetime.

Age 65: Medicare Eligibility Enrollment into this health insurance starts three months before your birthday and continues for three months after for a total of seven months. If you miss this window, generally your premiums will be higher forever.

Age 67: This is the Full Retirement Age (FRA) for Social Security retirement benefits for those born in 1960 and later. For those born before 1960, it will be some age between 65 and 67. FRA is used as the age that the Social Security Administration decides the base of your benefit, and thus how much less it will be if you file for benefits before this age, and how much more it will if you start your retirement benefit after this age. Your benefit has a cost of living increase built in.

Age 70: Welcome to the age that your Social Security benefit is the maximum if you have not yet started. Every year you wait until your FRA up to 70 to start your benefit, it increases 8%.

Age 70 ½: The IRS has decided that now you must start withdrawing funds from your retirement plans. This is called the Required Minimum Distribution (RMD). Generally, the first year the withdrawal amount is about 3.5% of the funds, and that percentage increases every year. If you do not take your RMD, the penalty is hefty – 50% of what you should have taken out.

Mid-Year Tune Up

The year is half over which means it is an excellent time to do a little financial clean up and catch up!

401(k), 457 or 403(b) Contributions: Make sure you are on track to fully fund your employer sponsored retirement plan for 2019, especially if you have a company match. Who doesn’t like free money?

Take a little time to look at the options that are available and confirm they still work for your investment strategy.

If you want to put in even more than $19,000, check with your plan sponsor to see if you have a non-deductible, non-Roth contribution available to you. If so, this is a great addition and may be able to be converted to a Roth 401(k) with an in-plan conversion. As a reminder, these plans can only be funded through payroll contributions.

Retirement Plan Investments: Take a little time to look at the options that are available and confirm they still work for your investment strategy. No strategy? Use your retirement plan provider resources to help you to create an investment strategy.

Flexible Spending Account: As this account has a limit to the amount of funds you can carry forward to 2020, ensure you are on track to use all the funds you would have saved by the end of the year.

Open Enrollment: Find out when your open enrollment period begins. This is the time to compare health plans and choose the most appropriate one for you and your family’s needs. In addition, look at the flexible spending plan (FSA) and decide how much to contribute. A Health Savings Account (HSA) may also be available depending on your choice of health plan.

Non- Retirement Investment Accounts: You have probably been looking at your investment accounts recently and consider selling off some holdings that have lost money – not just this year but since you bought them. This loss can be used to offset any gains in investment accounts, drop your taxable income by $3,000 and even carry forward to 2020; if the loss is large enough.

Holiday Expenses: Get a jump start on saving for the holiday season by putting away a little money every month. Include in your budget not just gifts and decorations but anticipated entertaining costs, costs of traveling to see relatives or having them come to you and any other expenses you may incur. This way, you are more prepared for when December rolls around and you will not have the dreaded debt hangover in 2020.