Improve Retirement Readiness by Being Realistic About Social Security

We already know that the average American is financially under-prepared for retirement, putting them at risk for lifestyle cutbacks and even hardships in retirement. A recent study (University of Michigan Retirement and Disability Research Center) showed:

  • that having unrealistically high expectations for Social Security benefits contributes to inadequate retirement savings; and
  • that the majority of workers over-estimate what they will receive in Social Security retirement income.

Those two findings combine to suggest trouble ahead. And it doesn’t take TOO much thought to reach the conclusion that everyone needs realistic expectations about Social Security income in retirement. The good news? It’s pretty easy to obtain a reasonable estimate of your Social Security income!

The Social Security Administration offers two excellent tools we can use to obtain a good estimate of what our Social Security retirement benefit will be. Both involve entering personal data, so be sure to use a secure internet connection. The Retirement Estimator provides a personalized estimate of your benefit at three ages: 62; your full retirement age (which is between age 66 and 67); and age 70. By logging into your “My Social Security” account on-line, you can see even more: you can pick a precise age at which you wish to claim social security, rather than being limited to just three options, AND you can review the earnings record shown there to make sure that all your earnings are included. Note: about a month ago I talked with a woman whose record was missing her earnings for 2018 and 2019! It’s a good thing she checked! Without those figures, her Social Security income would have been lower than what she was supposed to receive.

Suppose you discover that your Social Security income is projected to be about $2,000/month (in today’s dollars). Then you can consider: do you want to live on $2,000/month after you retire? If you’d rather have more income to live on in retirement, that’s motivation to save and invest now! To get started, learn about retirement saving options available through your employer: if a 401(k) or other tax-advantaged plan is available to you, that can be a great option. If your employer will match your contributions to a retirement account, then be sure to take advantage of that match, as well.

For those who do not have a retirement savings option available through their job, be sure to check out your Individual Retirement Account (IRA) options. The IRS Publication 590A explains the rules associated with contributing to an IRA account. You may choose to consult with a financial adviser in deciding how to invest those funds – an IRA can be invested in any type of financial account, including mutual funds, a stock and/or bond portfolio, and money market accounts. Your choice of investments, along with your decisions about how much to save, will have a huge impact on your retirement well-being. The Financial Industry Regulatory Authority (FINRA) offers great learning materials for learning to invest and for choosing financial professionals.

Sources: Squared Away Blog: Workers Overestimate their Social Security, 6-17-21, from the Center for Retirement Research at Boston College; and
Prados, María J., and Arie Kapteyn. 2019. Subjective Expectations, Social Security Benefits, and the Optimal Path to Retirement, University of Michigan Retirement and Disability Research Center.

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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Child Tax Credit Update: Non-Filers Tool

Over the next few weeks we expect to see several updates about how to access the special 2021 Child Tax Credit described in last week’s post. Reminder of what makes the 2021 credit “special:” 1) it is bigger; 2) part of it is payable in monthly advance payments beginning in mid-July; and 3) it’s available even to people who don’t file taxes and/or who don’t have income!

Today the IRS announced a new “Non-Filer Sign-Up Tool” for those who did not and will not file in 2019 or 2020.

For most households, the IRS will base the monthly advance payments on information from 2019 or 2020 tax returns. But what about people who did not file and do not NEED to file for either 2019 or 2020? Today the IRS announced a new “Non-Filer Sign-Up Tool” to help make sure those folks receive their payments. This allows parents/guardians to enter information about the people in their household, AND to enter direct deposit information so they receive their tax credit payments speedily.

Please share this information with those who need it!!

A couple of notes:

  • If you filed a 2019 or 2020 tax return, you don’t need to take any action.
  • If you used the “non-filers tool” LAST year (2020) to receive your Economic Stimulus Payment, you don’t need to take any action.
  • In the coming weeks the IRS will be adding two more tools: 1) an interactive tool to help you find out if you are eligible for the expanded Child Tax Credit; and 2) a Child Tax Credit Update Portal, where you can add children born in 2021 or make updates that matter, including changes to your address or bank information.
  • A non-profit organization has launched a consumer-friendly informational website that may be useful at https://www.getctc.org/en. I recommend sharing it widely!

Source: https://www.irs.gov/newsroom/irs-unveils-online-tool-to-help-low-income-families-register-for-monthly-child-tax-credit-payments
For more information: https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

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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Attention Parents! New Child Tax Credit Features

The American Rescue Plan Act, a huge federal COVID recovery bill passed in March, did more than provide for $1400 stimulus payments. One of its provisions will soon begin impacting millions of American families with children: advance payment of the expanded child tax credit. Those affected should:

  • Plan now for best use of extra funds.
  • Make a point to pay attention to IRS updates on this topic over the next several weeks.
  • Watch their mail – the IRS has begun this week to mail a general information letter to all families it believes to be eligible. In July, they will mail individualized letters specific to each household, telling what to expect.

Expanded Credit. The Child Tax Credit was formerly $2,000 per child; it was unavailable to families with no income, and the amount was limited for families with very low income. For 2021 only:

  • Families with children who will still be under age 18 at the end of the year (born after December 31 2003) are eligible for the full amount of the credit, even if they had no or low income.
  • The amount of the annual credit is increased to $3,000 for most children, and to $3,600 for children under 6 (born after Dec 31 2015).

NOTE: the expanded credit is available to families with incomes below $75,000 (single); $112,500 (head of household); or $150,000 (married-joint). Families with higher incomes will still receive the $2,000 child tax credit under the previously-existing rules.

Advance Payment. Instead of waiting until tax time next February, eligible families will begin receiving monthly advance payments for part of the Child Tax Credit. This means that beginning about July 15 through December, families will receive monthly payments from the IRS equal to $250 per child. The amount will be $300 for younger children eligible for the $3,600 credit. These advance payments will equate to half of the total tax credit; the remainder will be paid as part of the household’s tax refund next spring.

Consider focusing on family stability. Before making special purchases, families may wish to use the funds to get current and/or stay current on all household expenses (rent, utilities, child care, etc). Building a savings cushion also promotes stability: 1) providing funds in case of unexpected expenses such as car repair or appliance replacement; AND/OR 2) covering upcoming expected costs such as back-to-school, holidays, or property taxes. A savings cushion to cover extra expenses can prevent financial setbacks, promote family stability, and reduce financial stress.

Paying off debt is also a good use of extra funds, especially debts with high interest rates. HOWEVER, it is often wise to build a savings cushion even before all debt is paid off. Without that savings, every unexpected expense simply creates more debt and more stress.

Watch for Updates! The IRS will base payments on information from 2020 tax returns. If your situation changes, you will be able to let them know of changes through one or more on-line portals they will create in the near future (similar to the “Check Your Refund” portal, or the “Get My Payment” portal used for stimulus payments). The portal(s) will allow families to enter information such as: bank information for direct deposit; a new child in your household; updated mailing address. The portal will also allow you to decline the advance payments and choose to receive the entire amount with your tax refund after the year is over.

The IRS reference page for the advance child tax credit is here.

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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More: Assistance for Internet and Technology

The Federal Communications Commission (FCC)’s Emergency Broadband Benefit launched on May 12th. This benefit provides a discount of $50 per month for eligible low-income households or $75 per month for households on Tribal lands to cover internet bills, as well as discounts on some devices. This program can also be combined with Lifeline benefits.

Reliable home internet and technology provide older adults with more options to access important services and supports, including legal assistance, telehealth services, and portals for economic impact payment eligibility and benefits programs. The FCC has announced that eligible households can apply for the program in three ways: 
– Contact participating broadband providers directly to learn about their application process.  
– Visit GetEmergencyBroadband.org to apply online and to find participating providers.
– Call (833) 511-0311 for a mail-in application, and return it along with proof of eligibility to: Emergency Broadband Support Center, P.O. Box 7081, London, KY 40742. 

Individuals who use videophones and are fluent in American Sign Language (ASL) may call the FCC’s ASL Consumer Support Line at (844) 432-2275 (videophone).   There are resources available to help advocates advertise the program to their clients and community, and it is especially important to share this information with populations who face the greatest barriers to connectivity, including older adults of color, those living in rural areas, and other marginalized groups. The Federal Communications Commission (FCC)’s Emergency Broadband Benefit launched on May 12th. This benefit provides a discount of $50 per month for eligible low-income households or $75 per month for households on Tribal lands to cover internet bills, as well as discounts on some devices. This program can also be combined with Lifeline benefits.

Reliable home internet and technology provide older adults with more options to access important services and supports, including legal assistance, telehealth services, and portals for economic impact payment eligibility and benefits programs. The FCC has announced that eligible households can apply for the program in three ways: 
– Contact participating broadband providers directly to learn about their application process.  
– Visit GetEmergencyBroadband.org to apply online and to find participating providers.
– Call (833) 511-0311 for a mail-in application, and return it along with proof of eligibility to: Emergency Broadband Support Center, P.O. Box 7081, London, KY 40742. 

Individuals who use videophones and are fluent in American Sign Language (ASL) may call the FCC’s ASL Consumer Support Line at (844) 432-2275 (videophone).  

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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Get Help Paying the Internet Bill

In a new program from the Federal Communications Commission, qualifying households are eligible for a temporary monthly discount on their broadband internet service; in most cases, the discount is $50/month. The income guidelines are low, so only a fraction of Americans will qualify, but if someone you know is eligible, that $50/month could make a huge difference to their family.

You may qualify if any one of the following applies to you:

  • People with incomes below 135% of the poverty level. That’s about $17,000/year for a single person, or $35,000/year for a family of four.
  • You are eligible for Food Assistance, Medicaid, Free or Reduced School Lunch, or Lifeline benefits.
  • You participate in certain tribal programs, including BIA General Assistance, Tribal Head Start, Tribal TANF, or emergency food distribution.
  • You are a student receiving a Pell Grant.
  • Your household has lost significant amount of income due to pandemic-related job loss. NOTE: this qualification includes people with incomes well above the 135% poverty threshold.

The funding is temporary, and will end when the program runs out of money OR six months after the US Department of Health and Human Services declares an end to the COVID public health emergency. Apply now in order to take advantage of this opportunity.

To Apply: Go to https://getemergencybroadband.org/ where you will find all the details and the on-line application form.

Source: Consumer Action, which offers this information in Spanish.
The Federal Communications Commission offers pdf fact sheets in Arabic, Amharic, Burmese, Chinese-Traditional, Chinese-Simplified, French, Haitian Creole, Korean, Portuguese, Russian, Somali, Tagalog, and Vietnamese as part of their outreach toolkit.

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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Garden Season: Invest wisely

I had a garden last year like I have most of the past 20-plus years. I’ve never been a GREAT gardener, but I’ve enjoyed having some fresh produce that I grew myself. Last year was extremely disappointing, however — very little to harvest. Somewhere along the line I realized that I had skipped the step of adding fertilizer to the soil. I knew better too – I had learned that lesson early on.

I was disappointed to have so little produce, of course, but mostly I was disgusted with myself for investing the time, energy and money (for plants/seeds and for watering) without taking the simple extra step that would have made my efforts pay off. One careless oversight made most of my investment go to waste.

You can bet I’m going to be smarter this year. I will make sure to fertilize as recommended. For those of us who are not already gardening experts, good information is the key to having our investments pay off. There are many sources of information – some provide trustworthy information while others are just passing on rumors or trying to sell a product. Evaluate the source of any information you use as you plan, plant, and tend your garden this summer. One source of information you know you can trust is Iowa State University Extension and Outreach. Check out our Horticulture and Home Pest News site for a wealth of information to meet your needs. It includes an encyclopedia, with topics alphabetically, along with a “browse by topic” section, a search function and more.

Happy gardening!

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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Where’s My Refund? Where’s my EIP?

I am one of several Iowa State University Extension and Outreach Field Specialists that assist families with tax preparation and e-filing. This past week, I have been receiving at least one phone call a day from individuals wanting to know where their refund is. Many tell me they have already been to the website to check their status. The only place individuals should be checking their refund status is at the IRS.gov web site. Likewise, if you are wondering about the status of your Third Economic Impact Payment (generally $1400/person), the IRS web site is your source.

IRS.gov is the only safe place to check your refund or your stimulus payment

Refund Status. There are ONLY THREE QUESTIONS that need to be answered when using the Get Your Refund Status link on the IRS.gov website: 1) The Social Security number of the person listed on the return as the FIRST NAME on the return (not the spouse); 2) Your FILING STATUS (single, married filing jointly, head of household, married filing separately, or qualifying widow(er)); and 3) the amount of your refund, which is found on line 35A of page 2 of your federal tax return.

Stimulus Payment Status. Here again, the IRS has THREE QUESTIONS, although they are different. The needed information is: 1) Your Social Security number; 2) Your date of birth; and 3) Your mailing address. The mailing address can be tricky if you have moved recently. Generally, you should enter the mailing address on the most recent tax return the IRS has processed from you. However, if you have not filed a tax return in recent years, use the mailing address on file at Social Security or the Veterans Administration. Note: The tool to check your stimulus payment only relates to the third economic impact payment, authorized in the American Rescue Plan signed in mid-March. If you have not received either of the first two payments, your only option is to file a 2020 tax return, even if you have no income to report. The tax return allows you to claim the first two stimulus payments, and also sets the wheels in motion to process your third payment.

If you “google” where’s my refund and are taken to a website that asks for additional information, such as your salary, mother’s maiden name, or any other personal information, you are in the wrong place; you may be giving your personal information to someone who is stealing your identity.

~ 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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Funeral Assistance in COVID Deaths: Avoid Scams

If you lost a loved one to COVID-19, you may be eligible for a government program that pays for funeral expenses. The Federal Emergency Management Agency (FEMA) will pay up to $9,000 for funeral expenses for loved ones who died of COVID-19. Survivors can apply for benefits by contacting FEMA, toll-free, at 844-684-6333. To find out if you qualify, read FEMA’s Funeral Assistance FAQs.

Unfortunately, FEMA reports that scammers are contacting people and pretending to offer to register them for assistance. To avoid those scams, here are some tips:

  • FEMA will not contact you until you call or apply for assistance.
  • The government won’t ask you to pay anything to get this benefit. 
  • Don’t give your own or your deceased loved one’s personal or financial information to anyone who contacts you out of the blue.

If you think you got a scam call, hang up and report it to the FEMA Helpline at 800-621-3362 or the Federal Trade Commission at ReportFraud.ftc.gov.

Source: Reprinted from CFPB news. They also provide information about other scams, including general scams as well as other COVID-related scams.

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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Remote Work

Over the past year, many Iowans have experienced working remotely. Their experiences have convinced them – and their employers – that remote work can continue to be a viable option, with or without a pandemic. Over the past year, many Iowans have experienced working remotely. Their experiences have convinced them – and their employers – that remote work can continue to be a viable option, with or without a pandemic.

Remote work is likely here to stay. Having the skills to be successful in remote work can open employment possibilities for Iowans no matter where they live. Iowans can gain these skills through the Remote Work Certificate. ISU Extension and Outreach offers the virtual course in partnership with Utah State University Extension. The four-week course is open to adult learners and requires approximately 30 hours to complete. Participants work at their own pace but must participate in four weekly virtual workshops and submit weekly assignments. The course simulates remote work. Participants work independently on the assignments and meet as a group each week for one-hour via Zoom to practice technology, etiquette and virtual small-group work. Participants are divided into work groups made up of individuals across the U.S. to complete a project.

Participants must have broadband internet access, a Web camera and microphone, and basic computer proficiency. The course registration fee is $249 and upon completion participants receive a Remote Work Certificate. A new session begins each month, except in July and December. Upcoming sessions are listed and registration information is available on the Human Sciences Extension and Outreach website at https://www.extension.iastate.edu/humansciences/remote-work.

Five human sciences specialists coordinate the course and provide support for participants. At the end of the four-week course, participants who would like one-on-one assistance in setting career goals, identifying gaps in skills and finding opportunities for remote work can schedule time with a specialist. Participants take the course for many reasons. Some are preparing for remote employment. Some are transitioning from an on-site job to remote work. Others are looking for professional development and are investing in themselves. Remote work can provide self-employed entrepreneurs with flexibility and access to a larger pool of contract work to select from as they build their business.

The course also is appropriate for high school seniors who want to enter the workforce upon graduation. Many already possess the necessary technology skills, and the course can add the experience of remote work that may appeal to potential employers. Other students will find remote work valuable as they pay their way through college. By working remotely, they won’t have to find a different job when they return home during semester breaks. ~Brenda Schmitt

Photo credit: insta_photos/stock.adobe.com

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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Affordable Health Insurance: ARPA Expansions

The American Rescue Plan Act of 2021 (ARPA) has put into place several temporary expansions to the Affordable Care Act (ACA) provisions that can help Americans access health coverage at affordable prices. In general, these benefits apply to people who purchase health insurance in the Marketplace (created by the ACA) because they do not have an affordable option available through employment. The expansion has two dimensions: 1) more people are eligible for help paying the health insurance premiums for plans purchased in the Marketplace, AND 2) those who are eligible for help are now eligible for MORE help, so that their share of the monthly premium can be reduced.  People who are unemployed will especially benefit.

The Health Insurance Marketplace is now open for enrollment through August 15, so if this information makes you want to enroll in a plan OR change the plan you chose, you should be able to do so in the next few weeks. NOTE: The law took effect March 11. The agency in charge of the Health Insurance Marketplace expects to be ready to implement many of the changes on April 1. Suggestion: if you call or log in to the Marketplace in early April, ASK if the new rules are yet in place. It might be worth waiting a week or two in order to be sure the changes have been built into the system.

More Help. The ACA created a maximum cost people would have to pay for health insurance premiums, stated as a % of your income. The ARPA dramatically reduced that percentage of income for 2021 and 2022.  For example, suppose you are a 2-person household with income of $43,000/year (which is just under 250% of the poverty level); under the ACA your share of the premium for a benchmark silver plan would have been 8% of your income; under the new ARPA guidelines, your share of the premium cost for that same silver plan is just 4% of your income. Implications:

  • Some people who previously decided health insurance was too expensive will NOW decide it is affordable under the new rules.
  • People who chose a less-expensive bronze plan despite its higher deductible and copays may NOW decide a silver plan is worthwhile.
    This is of special value to those who are at or below 250% of the federal poverty mark, because these folks are eligible for plans that sell for a “silver” price but have smaller deductibles and copays so that they are more like a gold or platinum plan. In other words, folks under the 250% level can get a premiere plan for a budget price.
    It’s sort of like getting a brand-new luxury SUV for the price of a 2014 compact sedan!
  • If you are already enrolled in a Marketplace plan, there is a good chance that your share of the monthly premium is reduced under the new rules. Consider contacting the Marketplace (800-318-2596) sometime later in April.

More People Eligible.  Under the original ACA rules, if your income was over 4 times the poverty level, you were not eligible for help paying for health insurance. Under the ARPA expansion, people of any income level are eligible if the cost of the Marketplace plan would exceed 8.5% of their income. This will be especially valuable for those in their 50’s and 60’s, since health insurance premiums rise with age. This provision is also in effect for 2021 and 2022. 
Implication: some people with incomes above the 400% threshold may have compromised to save money by purchasing health coverage that was poorer quality (that is, it does not meet the ACA standards related to broad coverage and value). With the new cap of 8.5% of income regardless of income level, these folks might now be able to purchase a high-quality plan for an affordable price.

Huge Benefit for Those Unemployed at ANY time during 2021.  Note: this benefit is ONLY in effect in 2021.  If you receive(d) Unemployment Income at ANY time during the 2021 calendar year, special rules apply for your eligibility. With regard to eligibility for help paying for health insurance in the Marketplace, any income above 133% of the poverty level will be disregarded. That means these households will be eligible for the “platinum-like” silver plans for FREE – the premiums will be entirely covered by the subsidy.  Note: all other qualifications must also be met. For example, if you have workplace coverage available that is considered affordable, then you will not be eligible for the free silver plan.  However, if you are unemployed now, take advantage of the free silver plan. If you get a new job in a couple months that provides insurance, you can then drop the silver plan.
For those whose incomes are below 100-133% of poverty, they will be eligible for Medicaid coverage (also free), even in states where Medicaid was not expanded.

COBRA Subsidy. For people who lost health coverage due to being laid off or having their work hours reduced, the government will cover the cost of their COBRA premiums for up to six months, from April 1 – September 30, 2021. Check with your employer about how this might help you. Even if you lost your job months ago and did not sign up for COBRA at that time, you should now be able to sign up for COBRA.
Note: if you are in this group, you might also benefit from Marketplace insurance or Medicaid, so be sure to evaluate all your options.

Primary Source: Kaiser Health News Details for the % of income (paragraph 3) from Kitces.com
For more information see: https://www.healthcare.gov/more-savings/

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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