What if I Live to be 100?

When you reach your 60’s, as I have, you start taking a serious look at whether you are financially ready for retirement. As I talk with people about my own tentative plans, I frequently mention this concern: “What if I live to be 100?” Usually, people laugh.

I thought about that last week as I scanned a research report released last summer: “How Well Do Retirees Assess the Risks they Face in Retirement?” published by the Center for Retirement Research at Boston College. The research identified five major risks faced by retirees:

  • Longevity Risk – risk of outliving your money
  • Market Risk – market volatility
  • Health Risk – unusually high medical or long-term care costs
  • Family Risk – divorce, death of spouse, or needs of other family members
  • Policy Risk – mostly related to changes in Social Security

The research results suggest that people are NOT very good at recognizing which risks pose the greatest threat to their retirement wellbeing. Objectively speaking, the greatest risks are (in order): 1) longevity; 2) health; and 3) market. But when people are surveyed, they focus their primary attention on market risk – the risks of ups and downs in the economy during their retirement, with longevity risk second.

The moral of the story?  Don’t laugh at me when I ask “What if I live to be 100?”

Seriously: the report makes clear that the average person does not pay enough attention to longevity risk. To build a financially secure retirement, we need to be prepared for the possibility that we might live a long time. For those of us whose entire retirement income, apart from Social Security, is held in 401ks, IRAs, and other similar accounts: we need to be prepared to stretch that money for 30 or more years. Even for those of us who have IPERS or some other guaranteed lifelong pension: we need to consider the impact inflation will have on that income over 30 years or longer.

Longevity Illustrator. Several years ago I discovered this tool created by the Society of Actuaries. It shows us the statistical probability of living to different ages. As a female in my early 60s, it tells me I have a 45% chance of living to age 90, a 23% chance of living to age 95, and an 8% chance of living to 100. Yes, the odds of living to 100 are fairly small but there is almost a 50-50 chance I’ll live to 90. That means I need to be prepared to live at least to 90 or 95. And if I want to play it safe, maybe 100!

I’d encourage you to check out the longevity illustrator for yourself, and consider the information as you review your retirement plans!

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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Managing Your Finances Amid Recession Concerns

Economists, policymakers, and news outlets are all at-odds over the U.S. economy heading toward a recession in 2023. For those paying close attention, the same debate took place prior to 2022; however, the economy mostly stayed its course, and recent economic data is pointing to the same…for now. Unfortunately, we have no way of knowing what the future holds, but there are still steps we can take to manage our finances during periods of uncertainty.

The first step in easing recession concerns is to review your current spending habits. It is very difficult to follow a financial plan, while simultaneously preparing for a potential economic downturn, if you have no idea where your money is going. But the good news…there are plenty of free tools out there to help! Utah State University’s PowerPay, the Ohio Public Employees Retirement System’s 50-20-30 Rule Calculator, and the Economic Policy Institute’s Family Budget Calculator are great for analyzing your spending in different ways.

The purpose of this exercise is not only to see where your money is going, but also to free up dollars toward your other goal: building emergency savings for the short and medium-term future. We often think of using emergency savings for an immediate, one-and-done expense; however, a recession can be much more than that for some households. That is why many financial professionals recommend having 3, 6, or even 12 months’ worth of expenses saved, depending on your situation.

On the long-term side of things, having a diversified retirement portfolio, sticking to your asset allocation, and rebalancing when necessary are all key strategies for reducing recession stress. The U.S. Securities and Exchange Commission’s Investor.gov website provides a Beginner’s Guide to Asset Allocation, Diversification, and Rebalancing (PDF format). This free publication explains the value of these strategies and how they can be utilized to benefit your savings goals.

If all else fails, please know that Iowa State University Extension and Outreach is here to help!

Ryan Stuart

Ryan is a Human Sciences Specialist in Family Wellbeing and an Accredited Financial Counselor®. He focuses on educating and empowering all Iowans to independently make positive financial decisions throughout their life course.

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From Thanksgiving to just Giving

I have been excited about Giving Tuesday ever since it was created several years ago. Why? Not because I’ve adopted it as the day when I do all my giving, and not because I have an organization that receives extra giving. I’m excited because Giving Tuesday draws attention to one of the three core uses of our money — the one that gets the least attention.

The core ways in which we use our money are: Spend, Save, and Share. Financial educators (like me) don’t talk about “Sharing” nearly as much as we talk about the other two, and yet we should – it’s important. There is debate whether we humans are inherently altruistic, or whether it is something we learn. None-the-less, people who choose to give typically report that they gain some type of psychological benefit or reward when they give, regardless of whether they can give a lot or a little. It “feels good” to give.

It feels even better to give when we know that our gift is appreciated and/or that it makes a difference. When we give gifts to loved ones, we (hopefully) can see that the gift is appreciated. When we give to organizations or causes, it’s not always so easy to tell. When giving to a local organization whose work you know well, you may see evidence of their good work in your community; you may even know some of their board members personally. With large national organizations, you might want to check them out before giving: tools like CharityNavigator.org or the Better Business Bureau’s Wise Giving Alliance (Give.org) can help.

You can also do your own research by checking out the organization’s website to find annual reports of their projects and their impact; you may even be able to check financial statements to see what portion of their funds goes for administration rather than direct service. Another useful step might be a web search for the organization along with a word such as “review” or “complaints” or “scams.”

I am one who finds that it “feels good” to give. I can say that it feels even better to give when I know the organization I’m giving to is using my money wisely. For more information, check out this news item from the Iowa Attorney General.

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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Being Thankful

Thanksgiving – this season when we pause to be grateful – can become so much more than a day in which we gather with loved ones to enjoy each other’s company and share a wonderful feast. If we take it further, thanksgiving, or gratitude, can become an underlying attitude that helps us see our options and opportunities all year ‘round. That can have a big impact on our finances.

Feeling gratitude causes us to focus on what we have, rather than what we don’t have. As we deal with our finances and try to make choices about the best uses of our money, being mindful of and grateful for what we already have makes it easier to:

  • Say “no” to impulse or unnecessary purchases
  • Set money aside for future needs (including college, retirement, or other long-term goals)
  • Build an emergency fund
  • Give to worthwhile charities

Pausing and reflecting with gratitude on our possessions, and on the people and experiences in our lives, makes it easier to be satisfied.  Being satisfied makes it easier to put our money toward important uses rather than being distracted by spending opportunities with only short-lived value.

Gratitude helps us see ways in which we have more than a “bare minimum” existence – having freedom to choose how to use our money is definitely something to be grateful for. That includes small freedoms, like being able to add ice cream to our grocery cart, and bigger freedoms, like the ability to travel to see loved ones, or to provide music lessons for our child.

If you’re interested in taking your gratitude to a next level by sharing your abundance with causes important to you, stay tuned for next week’s post related to “Giving Tuesday.”

Note: freedom of choice is an essential element of financial well-being – learn more about financial wellbeing here or take the financial wellbeing quiz.

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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Rising Interest Rates and Your Spending Plan

In its ongoing fight against inflation, the Federal Reserve again hiked interest rates earlier this month to a range of 3.75 – 4.00%. This widely anticipated move continues the year-long trend of rate hikes, and it is important to understand how these moves affect your household spending plan.

The specific rate mentioned above – the Federal Funds rate – technically does not affect consumers directly. When the target range is increased, the costs for banks participating in overnight market activities increases, which will then likely be passed along in the form of higher rates on consumer debt products.

These behind-the-scenes transactions are ultimately responsible for the rising costs of credit cards, mortgages, and other loans. On a positive note, consumers can also take advantage of higher rates on treasuries, money market funds, CDs, and other short-term saving instruments. For the sake of space, I will go over two of the most common consumer rates: credit cards and mortgages.

  1. Credit Cards – most credit cards utilize an adjustable rate, which is more susceptible to immediate changes in the market. Individuals carrying a balance from month-to-month will experience higher borrowing costs, and extend their payoff timeline, especially if they are making the same monthly payment. You can likely find your current rate on a monthly statement.
  2. Mortgages – on the flip side, most mortgages fall under the fixed-rate category. While new homebuyers, and those with adjustable-rate mortgages (ARMs), are facing higher borrowing costs, those with an existing fixed-rate mortgage are not impacted.

Unfortunately, consumers cannot control effective interest rates; however, you can at least minimize the impact on your spending plan. Forgoing a major purchase, shopping around for the best rates, improving your credit, and making extra debt payments are all potential strategies for protecting your personal finances during a rising interest rate environment. Human Sciences Specialists, with a focus in Financial Health and Wellbeing, are also here to help if you find yourself in a tight spot with your spending plan!

Ryan Stuart

Ryan is a Human Sciences Specialist in Family Wellbeing and an Accredited Financial Counselor®. He focuses on educating and empowering all Iowans to independently make positive financial decisions throughout their life course.

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Tips for Health Insurance Enrollment Season

It’s health insurance enrollment season for most Americans! Health insurance choices are some of the most important choices we make: they determine what doctors and other providers we can see affordably, what premiums we pay, and how much we’ll pay out of pocket each time we receive care. These choices have a huge impact on our finances – and also on our health! After all, if it’s not affordable to seek care, we will often put off the care we need; the delay can lead to poorer health outcomes.

So take control of your health care options by making informed choices! Two key principles to keep in mind:

  1. Think beyond monthly premiums. Consider how much health care you use in a typical year. Depending how often you need care, and what kind of care you need, you may be better off financially by choosing a higher-premium plan that has a lower deductible and lower co-pays.
  2. Pay attention to the provider network available as you look at your choices. Make sure the insurance plan you choose allows you to see the providers that you prefer, and that are convenient for you to see.

Tips for those not covered through their employer:

Looking for insurance on your own, with no employer plan? Deadline: December 15.
The Health Insurance Marketplace (www.healthcare.gov or 800-318-2596) is the only place to find comprehensive insurance plans that cover all ten essential benefits. These plans may look expensive if you look only at the retail price. However, many Americans, including middle-class Americans, are eligible for assistance in paying the premiums on these plans through a Premium Tax Credit based on your family size and income. That assistance was expanded during the COVID emergency, and that expansion continues through 2025, so it is worth checking out. Find a health care navigator to assist you; if there is a local non-profit community health care center near you, contact them for help. Alternatively, this site can help you find individuals who have agreed to help consumers select health insurance; to avoid commercial bias, look for one labeled as an “assister” rather than one who is an “agent or broker.”

Wondering how much your premiums might be? The Kaiser Family Foundation has a subsidy calculator that can give you a solid estimate.

Any plan you find outside of the Marketplace is technically not even qualified to be called “insurance,” because it excludes certain types of care; it will have some other label, such as a “health plan.” You may have reasons for considering one of those plans, but read carefully to learn what is not covered; anytime something is offered at a lower price than its competition, you know that some tradeoff is involved.

Signing up for Medicare coverage?  Deadline: December 7.
An increasing number of older Americans are selecting the highly-advertised Medicare Advantage plans; unfortunately, research is showing that some advertising for Medicare Advantage plans is extremely misleading or even fraudulent. This does not mean that all Medicare Advantage plans should be avoided, but rather that you should choose very carefully. Likewise if you choose Traditional Medicare, be sure you have good information about any supplement plans or Part D prescription drug plans you consider. The best source for information and guidance in selecting Medicare plans is SHIIP – the Senior Health Insurance Information Program. Find an Iowa SHIIP office near you OR use this link to seek out SHIIP in other states.

Free Coverage may be available to you! Enrollment is open anytime for eligible households.
In Iowa and the majority of states, Medicaid coverage has been expanded beyond the old limits (which limited coverage to families with children and disabled individuals). Now anyone with income below the threshold is eligible, regardless of family composition. What’s more, the income thresholds have been increased. This year for a family of two, the income limit is $24,352; for a family of four, the limit is  $36,908.  NOTE: those limits are approximate; there are some nuances in calculating income so that in some situations people are eligible even if their income is slightly higher than the standard limit.  In Iowa, this state hotline can help you enroll: 855-889-7985.

Children under 19 may be covered for free even if family income is 2-3 times the normal limit, through the Child Health Insurance Program, known in Iowa as HAWK-I.

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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Just Around the Corner – 2022 Tax Filing

While tax filing season is still three months away, this is the time to start thinking about your 2022 return. There are several tax-law changes and updates taxpayers need to be aware of. Many big federal tax breaks enacted as part of the COVID response expired at the end of 2021, and are unlikely to be extended.  The temporary improvements made to the child tax credit, child and dependent care credit, and earned income credit returned to their pre-2021 rules at the end of December 2021.

The 2021 changes to the child tax credit included an increase that was made fully refundable, applied to children up to 17 years of age, and half the credit amount was paid in advance through monthly payments from July to December last year. Again, those changes will applied to 2021.  For the 2022 tax return, the credit returns to a non-refundable status.

In 2021, the credit for dependent care expenses (day care costs) allowed up to $8000 in eligible expenses for one qualifying child/dependent ($16,000 for two or more). The maximum tax credit available was 50% of your eligible expenses, if your income was $125,000 or below. Note: people with higher incomes still received some credit, just not the maximum amount. As you prepare your 2022 return, the allowable expenses will drop back to only $3000 for 1 child or $6,000 for more than one child.  The full credit, equal to 35% of eligible expenses, will only be allowed for families making less than $15,000 a year in 2022; again, though, families with incomes above that threshold can still receive a tax credit of 20% of eligible expenses.

The “childless” Earned Income Tax Credit enhancements also expired at the end of 2021. To qualify, childless workers must again be between 25 – 64 years old (in 2021 the minimum age was generally 19, and there was no maximum age). In addition, the rule allowing you to use your 2019 earned income to calculate your EITC if it boosted your credit amount no longer applies.

The standard deduction amounts were increased for 2022 to account for inflation.

  • Married couples get $25,900 ($25,100 for 2021), plus $1,400 for each spouse age 65 or older ($1,350 for 2021).
  • Singles can claim a $12,950 standard deduction ($12,550 for 2021) — $14,700 if they’re at least 65 years old ($14,250 for 2021).
  • Head-of-household filers get $19,400 for their standard deduction ($18,800 for 2021), plus an additional $1,750 once they reach age 65 ($1,700 for 2021).
  • Blind individuals will have an extra $1,400 to their standard deduction ($1,350 for 2021). That grew to $1,750 if they’re unmarried and not a surviving spouse ($1,700 for 2021).

Avoid being caught by surprise. For 2021, many saw a nice bump in their tax refund check because of the tax breaks created for that year only, and also due to the addition of any stimulus payments that had been missed during the year.  Refunds for the 2022 tax year will likely be smaller. Now would be a good time to analyze how the sunsetting of those tax laws will affect your 2022 return.  It is not too late to have additional withholdings pulled from your pay checks to ensure you will not owe a great deal when your 2022 return is prepared and filed. To check to see if your withholdings are adequate, use the IRS withholding estimator.

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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Sports Betting and Gambling Resources

I will admit it – I have been spending a decent amount of time watching football recently. And who can blame me? There have been entertaining and surprising games every weekend, but one of the biggest surprises for me didn’t take place on the field. It happened during the commercial breaks – over, and over, and over. Another admission…I do not watch a lot of traditional television. So, it’s entirely possible I am just missing the massive amount of sports betting commercials on tv. It’s so prevalent that online betting is even included in the pregame shows with the commentators.

Sports betting, in it’s current form, really dates back to 2018 and a decision made by the Supreme Court. Since then, it has been adopted in different ways, shapes, and forms by many states, including Iowa. It is probably too early to understand the impact; however, there are some early results and plenty of resources available for those experiencing a challenge with sports betting, and gambling, in general.

The Iowa Racing and Gaming Commission provides oversight for the state’s gambling activities, while the Iowa Department of Public Health provides treatment and prevention services. Workers with an Employee Assistance Program (EAP) may have access to counseling services for those experiencing a challenge with gambling. Iowa State University Extension and Outreach does not cover gambling-specific topics, but we do have a wide variety of financial education topics for Iowans in need!

Ryan Stuart

Ryan is a Human Sciences Specialist in Family Wellbeing and an Accredited Financial Counselor®. He focuses on educating and empowering all Iowans to independently make positive financial decisions throughout their life course.

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Medical Debt on your Credit Report?

Negative information on your credit report can hurt you, by making it hard to rent an apartment or a job, OR by making you pay more for a loan or for insurance. When medical debt gets sent to a collection agency, that becomes a negative item on your credit report. One in five American consumers are affected by medical debt on their credit report.

Recent changes by the three major national credit bureaus (Equifax, Experian and TransUnion) will improve this situation for some, but not all, consumers.

Two changes were implemented July 1, 2022:

  1. Medical debts that were in collections for a time, but were then paid in full will be removed from your credit report completely.
    This means that medical debts will be treated differently than other debts. If I get behind on my car payment for a couple of months, but then get caught up, the fact that I was behind for a while will CONTINUE to show up on my credit report.
  2. Medical debts in collections will not appear on a credit report until one full year after the original date of delinquency. Previously, the wait was six months.
    This change helps consumers in situations where the problem lies in a billing error or incorrect insurance processing, rather than in consumer non-payment. A year provides enough time that the dispute will likely be resolved before a debt appears on a credit report.

Beginning in 2023, the third change will kick in:

  • Medical collections under $500 will never appear on a credit report.

These three changes will help many consumers reach a higher credit score, opening up opportunities and reducing costs of borrowing and insurance. Unfortunately, a large number of Americans with unpaid medical debts larger than $500 will not be helped by this change.

The Consumer Financial Protection Bureau issued an analysis of the change last summer. It is hoped that the changes will reduce the number of situations in which consumers feel they MUST pay a medical bill, even if they believe it is incorrect, in order to “avoid ruining their credit.”

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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“Forgive My Student Loan? But I just paid it off!”

Graphic from https:studentaid.gov

The announcement by President Biden last month about the new plan to forgive up to $10,000 (or $20,000, in some cases) of student loan debt has been great news for many Americans, but there may be people who are groaning instead of celebrating. If you are one of those people, I may have good news for you!

Here’s the kind of scenario that may have people groaning:
Jane Doe owed $5,500 on her student loans as of March 1, 2020. Even when the COVID-related “student loan pause” kicked in March 13, 2020, she kept making payments of $215/month, because her income stayed steady and she just wanted to be done with the loan. She made her final payment a month ago and celebrated being out of debt!

But then – on August 24 came the announcement that she would be eligible to have up to $10,000 in student loans cancelled! GROAN…. “Oh if only I hadn’t made those payments – I would have been out of debt anyway, and I could’ve saved that $215/month!”

Here’s the good news: Jane Doe can apply to her loan servicer for a refund of the payments she made voluntarily during the student loan pause! And THEN she can apply for up to $10,000 of loan cancellation. In some cases the refund may occur automatically. Note: she will only be eligible for $5,500 loan cancellation because that’s what her balance was when the pandemic hit. The debt cancellation is “up to” $10,000, but if your loan balance is less than $10,000, the cancellation is limited by the amount of your debt.

Did you continue to make payments on your student loans during the student loan pause (administrative forbearance) that began March 13, 2020?  You can apply to get those payments refunded to you, and if you’re eligible for student loan cancellation, you may WISH to request a refund if those payments brought your loan balance below $10,000. Contact your loan servicer to start that process.

THEN, stay tuned for information on how to apply for the debt cancellation. The government expects the application to open in early October. To verify that you are eligible for the loan cancellation AND to minimize administrative glitches, check step one and follow step two provided by Federal Student Aid.

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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