Spring is in the air. Are looking to buy your first home or upgrade your current one? Understanding mortgage vocabulary will help your purchase or refinancing go more smoothly. Do you know the difference between pre-qualification and pre-approval mortgage?
Even though the terms sound similar, mortgage pre-qualification and pre-approval are two very different processes. A pre-qualification is designed only to give you an idea of the mortgage amount you might qualify for, based on information you provide without verification. Some mortgage professionals believe pre-qualification is virtually useless.
A pre-approval letter from a lender shows that you qualify for a specific mortgage amount based on an underwriter’s review of your actual (verified) financial information, such as your outstanding debt, credit history, income and assets. Your home buying journey will be easier with a pre-approval letter. Why? With clear verification that you will be able to get the loan you need, a seller of a home will take your offer more seriously.
If you want more information, Iowa State University Extension and Outreach offers a comprehensive homebuyer workshop online: A Place of Your Own.
I have often talked with people who were excited about turning age 62. Why? So they can claim Social Security retirement benefits. I understand that excitement, especially from people whose jobs are causing them problems.
In those situations, however, I hold an internal debate about whether to put on my “educator” hat and make sure they understand all the factors involved in their decision about when to claim Social Security. Note: sometimes I do provide information, and other times I do not – it depends on the situation!
Claiming Social Security before your full retirement age means a permanent reduction in your monthly benefit. Having the income now will be nice, but if you live to be 90 and use up your other retirement accounts, you might wish you had waited. Here’s an example of how the benefit amount is affected by the age you claim:
- Mike’s full retirement age is 66. At age 66, his monthly benefit would be $1,496.
- At age 62, the earliest age he could claim, his benefit would be $1,060.
- On the other hand if he waits till age 70, his monthly benefit rises to $2,044.
There’s not a “right” age for a Social Security claim. Your choice depends on your situation, your priorities, and what other resources you have available. If you would ask me, I wouldn’t be able to tell you what to do – only you can decide.
What I would tell you, though, is to make sure you understand all the implications of your decision. One resource to inform your planning is an ISU Extension recorded mini-lesson on Social Security Choices (20 minutes). It is one of many retirement planning resources on our “Retirement: Secure Your Future” page.
When you near the actual decision point, the best way to gather complete information about your options is to contact the Social Security Administration.
Iowa’s new legislation will allow “health benefits plans” to be sold for coverage in 2019. The health benefits contracts will not offer the ten essential areas of coverage mandated by the Affordable Care Act. Mental health, maternity care, and treatments for addiction are examples of coverage that can be dropped and may result in lower costs.
It’s important to remember the new benefits plans are not insurance. Reading the offered plan will be important to understand what is covered and your rights if you disagree with decisions to not pay a claim. The Iowa Insurance Division will not have authority over the plans and has no responsibility to review issues that arise if benefits are denied. The plans fall under ERISA laws administered by the Department of Labor.
While consumers will be able to consider selection of coverage with fewer benefits, they also will be considering a product that lacks some of the traditional back-up security used by insurance. Health insurance providers participate in a risk pool, where money can be borrowed if there are extremely high claims in any one year. The new benefits plans won’t have this protection, a reason why they are apt to be highly selective when offering coverage to clients.
Extension’s health insurance education programs encourage individuals to compare coverage to needs and to read and understand their policies. Those consumer skills will be equally beneficial when comparing health insurance policies to health benefits plans.
My 3 year-old grandson recent asked Google to, “find my sister”. It seemed like a logical request, since his mom frequently asks Google to find her phone.
During a recent visit with family, a 90+ year-old aunt had fun asking “Alexa” questions. Her daughters had no idea all the skills this piece of technology had until I shared some of the things I use it for. During our discussion I learned that this Aunt calls her daughter every day to have the news read to her because she can no longer see well enough to read. So, the family decided their mom would get a lot of use of the artificial intelligence built into these home assistance devices. She could have the news and daily bible readings read to her whenever she wanted it. AND, she could ask Alexa to call anyone on her list which could come in handy if she had fallen within earshot of the device.
At church, a week ago, a friend had a diabetic reaction. She is on an insulin pump which could communicate with her doctors through her smart phone. She also carried a small device that could tell her what her blood sugar levels were without pricking her finger. We keep fruit juice boxes in the office just for occasions like this…this was the 3rd scare that I was aware of. She was so confused. She was not sure if the phone in her hand was hers and when we tried to access her numbers in the phone, she didn’t know what the passcode was to get into the phone; in fact, she was sure HER phone didn’t require a code. Several juice boxes later, she was able to enter the passcode in her phone and access the information she needed to help us, help her.
Some of what today’s technology does seems frivolous especially if you consider the price tag. I recognize the fact that you have to “use it as a toy” before you can truly discover the amazing potential these devices have. I also know that the price drops the longer it is in use. As for my friend with diabetes, I worry about her ability to call for help when her disease takes over her ability to think well enough to access the information in her phone. I can see the potential for the technology to help her control her sugar levels but there is a downside.
How has technology improved your life and save you money?
Yes, if you have a Medicare Card, you will be receiving a new card in the mail soon. What is different? Your Social Security Number WILL NOT be on the new card. You will have a unique Medicare Number and this will happen automatically.
Why the change? – to protect your identity. Experts have long recommended that we avoid carrying our Social Security card or our number in our wallets, because if stolen or lost people can use it to set up accounts in our name. Until now, however, people who used Medicare didn’t have a choice. It’s generally important to have your health insurance card with you, and unfortunately the Medicare card contained a Social Security number. Consumer advocates have been asking for this to change, and now it will!
New cards will be mailed between April 2018 and April 2019; not everyone will receive their new card at the same time. Here in the Midwest, the new cards will start arriving after June 2018.
After you receive your new card, destroy your old card by shredding it. Start using your new card right away. Note: If you have a separate Medicare Advantage Card, you may need to keep the old card because you still need it to receive treatment.
Share your new card and Medicare number with your doctors, pharmacists, health care providers, insurers or people you trust to work with Medicare on your behalf.
The new card is paper; you will be able to print your own replacement card if you need one. Keep the new card with you. You will need to provide your Medicare card when you need care. If you forget your new card, health professionals may be able to look up your Medicare number online.
Beware! There will be scams – so watch out for them:
- Don’t pay for your new card – it is free. If someone calls and says you need to pay for it –it’s a scam.
- Don’t give personal information to get your card. If someone calls, claiming to be from Medicare, asking for your Social Security number or bank information – it’s a scam – Hang up.
- Guard your card. Safeguard the card as you would any other health insurance or credit card. Even though it no longer contains your Social Security number, you will still want to protect your card because identity thieves could use it to get medical services.
For more information about changes to your Medicare card, check out this short video or go to medicare.gov
I often talk with people who don’t have health insurance. Mainly that happens when I’m volunteering at a VITA (Volunteer Income Tax Assistance) site, because people without insurance generally need to pay a “penalty” as part of their tax return. What I hear from many of them is this: “Paying the penalty costs a lot less than paying insurance premiums, and I never go to the doctor anyway, so why bother?”
Well… there’s another way to look at that. I recently had a conversation with an administrator of a large employer health plan. He commented that in any given year about 15% of the plan participants never go to the doctor – never use their (employer-provided) health insurance. However, as he looks at the usage data, he has observed that it is very common that when those folks start using their health insurance, they become big users. In other words, they go to the doctor often.
That bit of information struck me as SO important. People who don’t seek health care on a regular basis are likely to miss opportunities for prevention, early detection or early intervention. As a result, they end up with bigger (and costlier) health problems.
When we do outreach to help folks make informed health insurance choices, one of the major points we explore reflects exactly that reality: having health insurance is good for…
- Your finances (by minimizing the financial impact of major health events), and
- Your health (since people who have insurance are likely to have better long-term health outcomes).
So if we have health insurance, let’s ask ourselves: are we making good use of it?
Down the road, we’ll probably be glad we did!
Is your W-4 declaration of withholding allowances the same one you filled out when you started working for your organization, and that was decades ago? The W-4 form tells your employer the amount of federal and state income tax to withhold from your paycheck. Our tax laws are a “pay as you go” model. A penalty is assessed if you don’t have sufficient funds withheld to cover your expected tax liability.
When a tax return results in a “taxes due” outcome, individuals are likely to take action – they change their withholding elections to avoid having to pay next year. On the other hand, when tax returns result in significant refunds, taxpayers don’t always take steps to adjust withholding, even though that would place more income in their own hands to manage.
W-4 forms aren’t user friendly and that may be a reason we avoid updating them. It may also take a trip to the HR office if you can’t submit the form online. To change a pension or annuity withholding you will use a W-4P.
It’s easy to make errors, especially if you have multiple sources of income. The IRS has a Withholding Calculator available to help. It has been newly updated to reflect the recent changes in tax law that will impact 2018 tax returns. IRS Publication 505 is recommended for individuals who have self-employment income or must claim capital gains. (This one is not yet updated for the new tax legislation).
Round up your most recent paycheck stub and tax return before you start. Remember: federal and state treasuries make lousy savings depositories.
When a family saves for an agreed-upon goal, there is more buy-in to succeed.
Are you dreaming of a vacation? You are not alone. Nearly half of people –no matter their age, income, or gender – say vacation is one of their savings priorities. How are they working toward their vacation fund goal? Only 40% indicate they are on track to meet their vacation savings goal. Sixty percent of the savers do not feel on track but are working on the vacation savings goal.
If you and your family have a goal (a vacation or some other goal), you need a plan to succeed. If the whole family is helping, it will be a lot easier to follow the plan. Here are some examples of common-sense ways people have planned and saved for a specific goal:
- My brother-in-law took a job in Geneva, Switzerland. I immediately decided I wanted to visit. That meant considering how I would pay for the trip, airfare, Eurail pass and spending money? At the time, I received reimbursement for miles driven on my job. My gasoline was already paid for, so if I banked the payment checks in an account, I would soon have enough funds for a Europe vacation.
- Several years ago, a friend found out her daughter-in-law was expecting twins. Upon getting that news, she and her husband saved their coins for six months and were able to purchase a dresser for their new grandsons. They had a deadline – the birth of the grandsons, and the coins added up over time to purchase the piece of furniture. This week, those grandsons will be thirteen.
America Saves can offer more ideas.
Today’s theme for America Saves Week is – Save the Extra. Saving a little does add up and can make a big difference. So, where and how do you find the “extra” to save?
- Save the tax refund (all or some of it). Put it into a retirement account and it will help reduce your taxable income next year.
- Save the extra paycheck you will receive in March and August (if you are paid bi-weekly). If you are paid monthly, save the extra bump in funds you will see in your checks on those months.
- Consider saving a percentage of every pay-raise.
We’re more likely to save a windfall than a small amount consistently over a long period of time. This tax season, get ahead of your financial goals by saving at least $50, and reward yourself with SaveYourRefund by entering to win one of over 100 prizes up to $10,000.
I would love to hear your saving strategies and sources of “windfall” cash.
In our early 20’s, my husband and I drove a Ford Pinto to Colorado. Our modest vacation was inexpensive. When we had children, camping in a tent at a state park meant family fun.
It wasn’t always easy to set funds aside and not use them for immediate needs. Employer’s mandatory retirement savings made a difference. If you want to avoid a sleeping bag or to travel in a non-air conditioned car in your 70’s, find out if you are maxing out your contribution.
Adding one more retirement fund today with modest amounts means a better chance you can rent a nice motel room in the future!
America Saves and Retirement: Secure Your Future can help.