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What’s on Your Goal List for 2016?

2015-08-20 08.29.08I was recently asked by my supervisor for performance goals (key actions I plan to work on); these are due by the end of the year. We do this so we keep moving forward, rather than standing still or sliding backwards in our skills and our work.

As we turn the New Year calendar, it may also be time for us all to consider setting goals for our personal lives. As the ball drops in Time Square in New York City soon, many of us make resolutions or set some goals for our lives in the next year.

As I consider my personal goals for the coming year I approach it from several directions:

  • Things I want to do – “bucket list” items.  I am sure travel will continue to be on my list.
  • Major projects that need to be done around my home: some updating of the electrical system needs to be on my list.
  • Smaller projects – I want to cull through my closet and pull out clothes I haven’t worn for a while; I can give these items to Goodwill for others to use.

Last year, I replaced a car. I visited the Grand Canyon and saw parts of Arizona I had not seen before – Sedona, Flagstaff, Jerome and Williams (where I felt like I was in the Cars movie!).  It feels good to look back and see what I accomplished in the past year.  I now want to set some clear goals for the coming year, so I can keep moving forward.

What’s on your goal list for 2016?

Susan Taylor

Susan Taylor

I have lived in Iowa for four years and bring 30+ years of Extension work experience from Illinois. Susan Taylor is a family finance specialist with Iowa State University Extension and Outreach. Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. Iowa State University Extension and Outreach brings the research from the Iowa State University and other land grant institutions to the community, providing workshops in local libraries, schools and more. We provide programs on a variety of topics including money management. Enjoy traveling, needlework and am a novice gardener.

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Granny Pods

camperMy only memory of a great-grandmother on my mother’s side is of her home; a small, silver, drag-behind camper. It was parked about 50 yards from my mother’s childhood home. My mom was the oldest of 9 and I loved going to visit her family in the wooded acreage deep in the Missouri Ozarks. We (my twin aunts who were a year younger than me, a cousin and my siblings) were a noisy, wild and crazy bunch that ran around, exploring and climbing trees. I can understand why my great-grandmother would want a place of her own with all the chaos that took place in the main house.

I stumbled across an article (https://seniorcareadvice.com/my-mother-lives-in-the-backyard-the-granny-pod-evolution.htm) addressing the looming problem of how to care for America’s rapidly aging population. The “Granny Pod” is a pre-fabricated and pre-equipped medical cottage that can be parked in the backyard of a caregiver’s home…assuming the zoning laws permit it.   This tiny house is then hooked to the existing sewer, water and power lines.

I need to point out that the article describes one particular “granny pod” product, and is not a comprehensive non-commercial overview of everything available on the market.  Even so, it provides great insight into new types of options that are arising as families seek the best environment for aging family members.  The homes described in the article cost up to $125,000 installed, complete with all things needed to age in place, including interactive video and devices that monitor vital signs and transmit real time readings to caregivers and physicians. Cameras and sensors alert caregivers to any falls, the toilet seat records weight and temperature, a hammock-like chairlift transports a resident from bed-to-bathroom, and a computer reminds residents when it is time to take medications.

The 12’ x 24’ bungalows resemble a hotel suite with living space, small kitchen and bathroom. The initial cost may seem steep, but compared to nursing home care (which can be more than $50,000 a year for a semi-private room) it will not take long to recoup the cost. What’s more, this particular company will buy back the unit when it is no longer needed. These units offer older adults some independence and closeness to family and friends instead of isolation in a distant nursing home.

It looks like my great-grandma was ahead of her time living in a Granny Pod/camper. Unlike the Tiny Houses I talked about on 12/8/15, I could see myself living out my final years in one of these. The question is…which of my kids won’t find this too close for comfort?

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Tiny Houses

house1There are a couple of new shows on TV that focus on Tiny Houses. These are homes that have less than 500 square feet of living space. Some of the home owners are looking to reduce their environmental footprint and minimize their impact on the environment. Others are looking to live debt free so as to have more money to spend on traveling or other priorities. All had to drastically downsize the amount of stuff they owned.

Many of these homes are on wheels and can be moved – some more easily than others. One young woman had a job that required her to move every 6 months and she was tired of packing and unpacking her belongings. A tiny house on wheels eliminates many of the hassles that come with each relocation. She did not want to have to spend an estimated $1500 every six months to pay someone with a semi truck to move her tiny house so…she was looking for a VERY tiny and lightweight home that she could move herself, using a pickup.

The designers/builders of these micro homes take into account the needs of each family. Some have small children. Others have teens. Some have lots of craft hobbies and wanted space to store and engage in those activities. Others love to preserve food, cook and bake…requiring full-size appliances. Some want to live off-the-grid by using solar power, collecting rainwater and using a composting toilet. Some of these structures are built with all reclaimed materials; others with all new but recycled materials.  All tiny homes need a place to park. Some can set down on the property of friends or family members; others choose to purchase land.

I know I need to downsize my stuff. It takes time, energy and space to maintain, store and insure STUFF. I have tried to picture myself living in a Tiny House after I retire, but for me retirement means I will finally have time to quilt, paint, weave baskets, garden, fish, kayak…you get the picture. I have a lot of stuff I am hanging onto and looking forward to using in retirement. Despite the real merits of this lifestyle, I don’t think a tiny house is in my future. How about you?

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Finding the Right Financial Advisor

Couple meeting with loan officer

Four years ago, I moved to Iowa. At that time I had an investment account that was located in Indiana. I wanted my investment account a little closer to where I lived. So in the process, I needed to interview current financial advisors to select the best person for my investments.

I went in with a handful of questions to ask each person. Here are few of the things I wanted to know:

Find out the educational background and current certificates and licenses the financial advisor holds, and his/her on-going educational experiences. During this conversation, you will hear clues to whether the person is genuinely qualified or boasting. Yes, the prospective advisor needs to be educated. Financial planning is a very broad discipline – including investments, insurance, cash flow, taxes, estate planning and retirement planning — and there is a lot to learn.

Credentials are important too.  The Certified Financial Planner – CFP —  designation is a good indication that an advisor knows what he or she is doing. To earn the certification they must have at least five years’ experience – meaning you are not their “guinea pig” client. With more experience comes the ability to work through multiple serious financial issues.

Understand if the advisor operates under a “fiduciary” standard. This has a legal and regulatory obligation to act in a client’s best interest at all times. Not all advisors have made that commitment.

By doing your homework, including interviewing at least three people, you can help make sure that you find the right financial advisor for you. For details see unit 10 of Investing For Your Future, a top-notch national Extension resource.

 

Susan Taylor

Susan Taylor

I have lived in Iowa for four years and bring 30+ years of Extension work experience from Illinois. Susan Taylor is a family finance specialist with Iowa State University Extension and Outreach. Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. Iowa State University Extension and Outreach brings the research from the Iowa State University and other land grant institutions to the community, providing workshops in local libraries, schools and more. We provide programs on a variety of topics including money management. Enjoy traveling, needlework and am a novice gardener.

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Cash Out 401(k)?

hammer-bank-sm shutterstock_13790779-1There are many situations where people find reasons to cash out a 401(k) retirement plan.  Sometimes it happens with a job change.  Other times a divorce leads to splitting the balance in one spouse’s retirement account.  It is done for other reasons, too.

Recently I talked with someone who withdrew a substantial sum from her then-husband’s retirement plan as part of a divorce.  It seemed like a good idea at the time, but it has turned into a huge black cloud hanging over her head.

Why?  Because she didn’t understand the tax implications.  An early withdrawal from a retirement plan affects your taxes in two ways:

  1. There’s a 10% Federal tax penalty because you withdrew before retirement age.  For example, if you withdrew $50,000, the 10% penalty would be $5,000.
  2. The amount you withdrew is added to your taxable income for the year.  If your taxable income (after deductions and exemptions) was $20,000, a $50,000 401(k) withdrawal makes it $70,000.  On the federal return, that’s enough to bump you from the 15% tax bracket into the 25% tax bracket.  It will increase your state taxes as well.  The result, for this example, could easily be an extra $10-15,000 in federal and state taxes – perhaps more (on top of the $5,000 penalty for early withdrawal).

The woman I talked with had been told by the 401(k) company that they would withhold taxes, but they didn’t withhold nearly enough.  Add on interest (for late payment) and she’ll be probably be paying that tax bill for at least 10 years.

I felt horrible for this woman and the hardships she is facing, but there was nothing I could suggest that would change her situation.  What I can do, though, is to continue to share information, hoping to help others to avoid this situation.  Remember:

  • In a job change or divorce, you don’t have to withdraw from a 401(k) – instead, you can roll the funds into an IRA.  This prevents tax hassles and builds retirement security.
  • If you do consider an early withdrawal from a 401(k) plan (for whatever reason), be sure to consult a tax specialist who understands the details of your situation.  You will still need to pay the taxes, but you’ll plan for that up front and prevent a decade-long debt to the IRS.

Early withdrawals from a 401(k) take careful planning.  ~Barb

Barb Wollan is a Family Finance specialist and a VITA volunteer tax preparer

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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You Don’t Know What You Don’t Know

expensesWe – my brother and I – received some legal papers in the mail today that had A LOT of blanks that need to be filled. My task is to create a spending plan for how we will meet Dad’s future needs. There is a need for more than one spending plan. The financial needs at the end of life are different than those when you first retire; which is also different than the time between the beginning and the end. Some of the variables include: medication, travel and hobbies, housing needs, etc.

For dad, the final years are easy to calculate. We know where he will be living and how much it will cost to live his final days/months/years in a Memory Care Unit. It is the time between now and then that gets fuzzy.

I envision dad living with me until he needs to go to the Memory Care Unit. My brother reminded me that, just because dad is living with me, it doesn’t mean he isn’t incurring the same expenses he would incur if he were living in an Assisted Living facility; our home (staffed by my husband and me) IS the Assisted Living facility. So for the sake of filling in the blanks on the legal document, I had to put a dollar figure on the value of living in my home – and all the assistance that come with it. It would be a huge headache to actually calculate how much he eats, how much time we spend doing his laundry, cooking, assisting, medicating, etc. The easier way to find the numbers was to contact the Assisted Living Care Center just down the road and ask how much they would charge, if dad were living there.

Rent is based on square footage and includes housekeeping, laundry and 2 meals a day:

  • 625 sq.ft = $1536.75/mo.
  • 725 sq. ft – $1792.25/mo.
  • 750 sq. ft = $1864.75/mo.

The level of care needed is an additional charge, in 15 minute units

  • Level I (18 units/mo.) = 4.5 hours a month = $788
  • Level II (110 units/mo.) = 27.5 hours a month = $1284

I can calculate some additional costs based on the past 6 months he has lived with me: life insurance, medication, co-pays, dental, optical, medical mileage, hair cuts, cell phone, supplements and publications.

My favorite saying is, “You don’t know, what you don’t know”. As you look at my numbers, are there other expenses I am forgetting?  ~Brenda

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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myRA- Another way to Contribute

125183558Changes – good changes – are coming in how individuals can make contributions to the new myRA accounts.  Our May post shared some details of how to enroll and who was eligible. At that time, the only way to participate was to have your employer withhold contributions from your paycheck. Beginning this fall, you can submit to the US Treasury your bank routing and account numbers for auto-withdrawals.  The new option  should make it possible for self-employed individuals to participate in this new Roth option.

When you file your tax return at the beginning of 2016 you will also be able to direct all or part of your  federal tax refund to your account. In the refund section of your tax return simply mark the “Savings” box, provide your myRA account and routing numbers, and designate how much of your refund you want to put towards your savings. If your income falls within the range that qualifies for the Retirement Savings Tax Credit, you’ll realize additional tax savings.

Joyce

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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Will Social Security Survive?

1-intro-lgWhen I’m teaching classes about finance I frequently hear young adults question whether Social Security is going to factor into their retirement income. They often believe that it will run out of funds before they can receive any benefits. Is there truth to this assumption?

Each year the Social Security Trustees issue a financial report card. Beginning in 2020, in order to meet the current benefits schedule, Social Security will need to use taxes collected from payrolls, the interest earned by the Trust Fund and the principal in the Trust Fund. The projected date for using all the assets in the Trust Fund to pay benefits will be 2034. That doesn’t mean the program will be bankrupt. It means that benefits will have to be reduced to be in balance with the taxes collected from salaries. If the system keeps operating as is, you would still receive Social Security when you retire; it would just be a smaller amount.

The Trustees stated that an increase of 2.68% in taxes, 1.34% for you and 1.34% for your employer,  would delay the date when the Trust would be depleted to 2089. Putting this increase in place would mean that today’s 25-year-old worker could expect the full benefits that are promised today at the time they retire.

The question for young adults is “Are you willing to set money aside today for Social Security Benefits tomorrow?”

You can read the full Trustee report here: http://www.socialsecurity.gov/OACT/TR/2015/

Joyce

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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The Binder

binder

Two years ago, I piloted a program based on materials developed by the National Endowment for Financial Education: What Every Adult Child Should Know. By the end of the 7-week program, participants would have a binder full of information – the location of Wills, Powers of Attorney, Insurance Policy information; Balance Sheets, Spending Plans, Contact information for Doctors, Lists of medications, Property inventory, bank accounts and safe deposit boxes. All things needed to assist with the decisions made for the care for an aging parent.

One elderly gentleman in the class was the primary caregiver for his wife. He had tried to get their children to take the class so they would be better prepared to make decisions on behalf of he and his wife. They refused to come. Half way through the class, he fell and broke his hip and spent a couple of weeks in the hospital. His children became the caregivers for their mother in his absence. His children were lucky, because he had completed his binder. The children were able to step in and provide continuity of care, thanks to the information he had compiled in the binder.

I started to prepare my binder for the day when my children would need to make decisions for my husband and me. I also broached the subject with my dad and his wife but was brushed off – they assured us that they had everything in order: wills, advance directives, a trust. There was nothing to discuss.

On a Friday night in mid-March, I learned that my 80 year old dad, diagnosed with dementia, would be coming to live with me the next afternoon; his wife was no longer interested in being part of his life. By Tuesday, new Power of Attorney forms and Advance Directives for health care were drawn up, naming my brother and me as decision-makers on my dad’s behalf.  I wasn’t worried about money; Dad had worked hard his whole life and had more than enough resources to provide for himself and his wife: Long-term care insurance, Pensions, Social Security, Assets.

Getting the Power of Attorney document completed was valuable, but it wasn’t enough to access the resources needed to care for dad. My dad and his wife had put all their assets in a joint trust, and it took a lot of detective work to get access to his share of those assets.  It was a challenge to gain even basic income and insurance coverage because we were denied access to some key documents:

  • bank accounts
  • insurance policies;
  • pension documents
  • birth certificate
  • military discharge papers, which provide access to VA benefits.

We’ve learned a lot in the past couple of months.  One of the most important lessons?  The binder would have been useful in helping my dad.  I mentioned that two years ago I had started to prepare my binder to assist my children when they would need to make decisions on my behalf; however, I never completed the task.  I have now renewed my effort to complete my binder.  ~Brenda

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Temporary/Part-Time Workers Can Save!

shutterstock_110517083Jim is a temporary full-time employee at an agriculture business; his job for the summer is to work with the grounds crew running a lawn mower. Nancy is going to start working part-time for the local grocery, stocking shelves and learning how to run the cash register. Both individuals would like to “save” a portion of their income.  I hope they know about and will consider the new MyRA, a Roth account available from the US Treasury. https://myra.treasury.gov/about/

The new account is available to anyone who is a wage earner and doesn’t have access to a retirement plan at work — in other words, anyone like Jim and Nancy who are temporary workers or work part-time. There is an income cap of $131,000 for individuals to use the plan. There are no fees for management and the Treasury is paying 3.19% return. Right now enrollment is limited to individuals whose employers use direct deposit for pay.

Why is this something to consider? Because you can withdraw what you’ve contributed after 5 years with no taxes or penalties. So Nancy, who is 16, would have an emergency account when she is 21 to pay for the cost of moving to take that first job after college graduation. Jim ,who is 18, will be 23 in five years and might be planning to get married and buy his first home. First time home owners can withdraw both contributions and earnings tax fee.  Even if they don’t use the account in these ways, they have a decent return on their savings.  What’s more, that savings won’t put a dent in any financial aid they qualify for when going to school, and they will have the added flexibility a Roth account provides when making financial decisions in retirement.

Joyce

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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