A primer for parents and grandparents. A university education can often require financing and assuming debt. If your student fills out the Free Application for Federal Student Aid (FAFSA) and does not qualify for a Pell Grant or other kinds of help, and has no scholarship offers, what do you do? You probably search for a student loan. A federal loan may make much more sense than a private loan. Federal student loans tend to offer kinder repayment terms and lower interest rates than private loans, so for many students, they are a clear first choice. The interest rate on

Comparing the old rules with the new. The Tax Cuts and Jobs Act made dramatic changes to federal tax law. It is worth reviewing some of these changes as 2019 approaches and households and businesses refine their income tax strategies. Income tax brackets have changed. The old 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% brackets have been restructured to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These new percentages are slated to apply through 2025. Here are the thresholds for these brackets in 2018.1,2  Bracket Single Filers Married Filing Jointly or Qualifying Widower Married Filing Separately Head of

A to-do list for the twentysomething. Did you recently graduate from college? The years after graduation are crucial not only for getting a career underway, but also for planning financial progress. Consider making these money moves before you reach thirty.        Direct a bit of your pay into an emergency fund. Just a little cash per paycheck. Gradually build a cash savings account that can come in handy in a pinch.   Speaking of emergencies, remember health insurance. Without health coverage, an accident, injury, or illness represents a financial problem as well as a physical one. Insurance is your way of managing

How much can you contribute this year? In 2018, you have another chance to max out your retirement accounts. Here is a rundown of yearly contribution limits for the popular retirement savings vehicles. IRAs. The 2018 limits are the same as in 2016: $5,500 for IRA owners who will be 49 and younger this year and $6,500 for IRA owners who will be 50 or older this year. These limits apply to both Roth and traditional IRAs.1 What if you own multiple IRAs? This $5,500/$6,500 limit applies to your total IRA contributions for a calendar year. So, for example, should

What standbys did tax reforms eliminate?   Are the days of itemizing over? Not quite, but now that H.R. 1 (popularly called the Tax Cuts & Jobs Act) is the law, all kinds of itemized federal tax deductions have vanished.   Early drafts of H.R. 1 left only two itemized deductions in the Internal Revenue Code – one for home loan interest, the other for charitable donations. The final bill left many more standing, but plenty of others fell. Here is a partial list of the itemized deductions unavailable this year.1 Moving expenses. Last year, you could deduct such costs if

Take these financial lessons to heart. You have a chance to manage your money better than previous generations have. Some crucial financial steps may help you do just that.     Live below your means and refrain from living on margin. How much do you save per month? Generations ago, Americans routinely saved 10% or more of what they made, either depositing those savings or investing them. This kind of thriftiness is still found elsewhere in the world. Today, the average euro area household saves more than 12% of its earnings, and the current personal savings rate in Mexico is 20.6%.1

The notion that we separate from work in our sixties may have to go. An executive transitions into a consulting role at age 62 and stops working altogether at 65; then, he becomes a buyer for a church network at 69. A corporate IT professional decides to conclude her career at age 58; she serves as a city council member in her sixties, then opens an art studio at 70. Are these people retired? Not by the old definition of the word. Our definition of “retirement” is changing. Retirement is now a time of activity and opportunity.    Generations ago,

As the recovery lengthens further, this is a natural question to ask. This decade has brought a long economic rebound to many parts of America. As 2017 ebbs into 2018, some of the statistics regarding this comeback are truly impressive: *Payrolls have grown, month after month, for more than seven years. *The jobless rate is lower than it has been for more than a decade. *Business activity in the service sector has not contracted since the summer of 2009. *The economy just grew 3% or more in back-to-back quarters, a feat unseen since 2014.1,2     In the big picture, the American

Information for those giving, receiving, and organizing. Have you donated money to a crowdfunding campaign this year? You probably have. You may be wondering how the Internal Revenue Service treats these donations. Do the common tax rules apply?  The I.R.S. may or may not define such donations as charitable contributions. It depends not only on who the crowdfunding is for, but also who has organized the campaign. A donation to a qualified non-profit organization – a 501(c)(3) – is tax deductible if it is properly documented and itemized on Schedule A. Donations to crowdsourcing efforts administered by 501(c)(3)s are, likewise,

Our increased longevity poses a retirement planning challenge. Some of us may retire at 65 and live to 100 or 105. Advances in health care may make this a strong possibility. The corresponding question is: will we outlive our money?   More people are spending more of their lives in retirement. According to the actuaries at Social Security, today’s 65-year-olds have roughly a 25% chance of living into their nineties, and about one in ten will live to 100 or longer. Clearly, this puts a strain on Social Security. When it first sent out retirement benefits in 1940, the average life

Here are some things you might want to do before saying goodbye to 2017.  What has changed for you in 2017? Did you start a new job or leave a job behind? Did you retire? Did you start a family? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and 2018 begins.    Even if your 2017 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can plan to save some taxes and/or build a little

Resist the temptation. Your future self will thank you. Retirement accounts are not bank accounts. Nor should they be treated as such. When retirement funds are drawn down, they impede the progress of retirement planning, even if the money is later restored. In a financial crush, a retirement account may seem like a great source of funds. It is often much larger than a savings account; it is technically not a liquid asset, but it can easily be mistaken for one. The central problem is this: when you take a loan or an early distribution from an IRA or a

What is in it? What could its changes mean for you, if they become law? Major changes may be ahead for federal tax law. At the start of November, House Republicans rolled out their plan for sweeping tax reforms. Negotiations may greatly alter the content of the bill, but here are the proposed adjustments, and who may and may not benefit from them if they become law. The corporate tax rate would fall from 35% to 20%. Wall Street would cheer this development, perhaps with a significant rally. Sole proprietorships, partnerships, and S corporations would also see their top tax

Financial burdens could alter their retirement prospects. Imagine retiring with $50,000 of debt. Some new retirees owe more than that. Outstanding home loans, education debt, small business loans, and lingering credit card balances threaten to compromise their retirement plans. How serious is the problem? A study from the University of Michigan’s Retirement Research Center illustrates how bad it has become. Back in 1998, 37% of Americans aged 56-61 shouldered recurring debt; the average such household owed $3,634 each month (in 2012 dollars). Today, 42% of such households do – and the mean debt load is now $17,623.1 Are increased mortgage

Make the most out of your 403b or 457 investment. The first thing you need to honestly need to do is ask yourself if you know what funds you are invested in your 403b or 457 plan.  If your answer is no, it’s ok, you aren’t the only one.  But you probably aren’t going getting as much out of your investment as you should be. Another thing is that you don’t open your 403b or 457 plan statements.  Fortunately not paying attention probably hasn’t hurt you over the last couple of years. Finally, you haven’t changed anything with investments in

Investors may be lulled into a false sense of security by this market. Will the current bull market run for another year? How about another two or three years? Some investors will confidently say “yes” to both questions. Optimism abounds on Wall Street: the major indices climb more than they retreat, and they have attained new peaks. On average, the S&P 500 has gained nearly 15% a year for the past eight years.1 Stocks will correct at some point. A bear market could even emerge. Is your investment portfolio ready for either kind of event? It may not be. Your

Earning too much may cause portions of your retirement benefits to be taxed. You may be shocked to learn that part of your Social Security income could be taxed. If your provisional income exceeds a certain level, that will happen. Just what is “provisional income”? The Social Security Administration defines it with a formula. Provisional income = your modified adjusted gross income + 50% of your total annual Social Security benefits + 100% of tax-exempt interest that your investments generate.1 Income from working, pension income, withdrawals of money from IRAs and other types of retirement plans, and interest earned by

What beneficiaries need to know and consider. At first glance, the rules surrounding inherited IRAs are complex. Here are some questions (and potential answers) to consider if you have inherited one or may in the future. Who was the original IRA owner? If the original owner was your spouse, you have a fundamental choice to make. You can roll over your late spouse’s IRA into an IRA you own, or you can treat it as an inherited IRA. If the original owner was not your spouse, you must treat the IRA for which you are named beneficiary as an inherited

These tools can shield inherited IRA assets from lawyers and creditors. Inherited IRA assets are vulnerable in bankruptcy proceedings. Many older IRA owners and their beneficiaries do not realize this, but it is true. In Clark, et ux v. Rameker (2014), the Supreme Court ruled 9-0 that inherited IRAs cannot be defined as “retirement funds” under federal bankruptcy law. They now lack the protection that retirement savings accounts commonly get in bankruptcy courts.1 So today, a longstanding estate planning dictum is being reevaluated. If you have non-spousal heirs who seem at risk for bankruptcy, you might want to leave your