COVID-19 and Unemployment Insurance Benefits

This is a stressful time for individuals and communities across Iowa and we are dealing with many unknowns. Communities are impacted by the temporary closure of businesses, schools and other public facilities or events, and in some cases, quarantines. While these actions are necessary steps to help reduce exposures, it may bring financial uncertainty for many people who could experience a loss of income due to illness or workplace closures.

If you do experience unemployment, remember there are supports in place for you and your family. Iowa unemployment benefits are available to individuals who are unemployed through no fault of their own. If your employer needed to shut down operations and no work is available, you would be eligible to for unemployment benefits. Unemployment claims that are filed as a result of COVID-19 will not be charged to employers.

Many people wonder if they can receive unemployment benefits if they need to stay home from work to care for a dependent, family member or if their child has school cancellations. The answer is, “It depends”. A good approach is to contact your employer regarding potential telecommuting, sick leave, PTO, FMLA, Disability and other options they may be offering.  If those options are not available, you may file for unemployment insurance benefits to determine your eligibility.

Also note, an employer can require an employee to stay at home for the fourteen day isolation period if they have traveled out of state or had contact with someone who visited an area affected by COVID -19. Your employer should attempt to provide paid leave but if that is not available, employees might be eligible for unemployment insurance benefits.

To learn more about filing an unemployment claim, contact your local Iowa Workforce Development Center or apply online at:  https://www.iowaworkforcedevelopment.gov/file-claimunemployment-insurance-benefits.

Mary Weinand

Guest Blogger: Mary Weinand, Iowa State University Extension Family Finance Field Specialist.

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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Seek Additional Resources

Audio Blog

In all aspects of life, when we face any kind of shortage (time, money, food, etc) we generally have two choices. We can prioritize and narrow down our goals, which we have discussed in earlier posts. OR we can expand our available resources. In most cases, it’s smart to do a little of both!

The current public health crisis is wreaking havoc with the economy at large and with the economic well-being of many individual households; the widespread nature of the crisis has led to availability of expanded public supports for those whose income is disrupted. Find out if you are eligible for the unemployment relief available during the COVID-19 crisis, and apply. Learn about food pantry options in your community; spending less on food can free up funds for other critical needs and bills.

In addition, consider your personal resources. Do you own something you can sell to help you through this crisis?  If you have a boat or a snowmobile or other item of value, selling it can provide a boost. If you are currently laid off from your regular job, is there temporary work available in your community? Keep an open mind and consider all options for dealing with your current situation.

If you have lost your health insurance, check on the free or subsidized health insurance available through the Affordable Care Act: contact DHS at 855-889-7985 to see if you are eligible for free insurance, OR for subsidized insurance through the marketplace, go to www.healthcare.gov or call 800-318-2596. Through the marketplace, your share of the insurance premium is on a sliding scale depending on your income: people generally pay premiums equivalent to 2% – 8% of their income, and the government pays the remainder.

Seek other public or community assistance as well if you qualify. These resources exist because we live in a society that wants to ensure all can stay safe and healthy. Perhaps you are new to seeking help, but consider that others have needed them in the past and others will need them in the future; now is the time when you need them. If you don’t know much about available resources in your area, dial 211 or go to the website. This free service provides information and referral on a wide range of issues.

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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Communicating with creditors

When a tight financial situation leaves you truly unable to pay all your bills according to the prescribed schedule, then difficult choices must be made, as discussed in my previous post. After evaluating your situation and figuring out the best strategy you can come up with, the next step is to make some phone calls. Note: in some cases emails or on-line communication may be the company’s only option, but I encourage you to first attempt to reach creditors by phone.

As much as you might dread the phone call, communicating with creditors is essential if you cannot pay on time. The fact that you called and explained your situation will make a huge difference in their willingness to work with you. This is especially true if you have previously been a reliable customer; creditors recognize the losses people are facing during this unprecedented crisis. A couple of suggestions:

  1. Be prompt – call them before your payment is due.
  2. Be honest with them – tell the truth without embellishment or exaggeration.
  3. Ask if they have any “hardship plan” that would reduce or eliminate the fees or interest that come with late payments.
  4. Don’t make promises you can’t keep. Example: sometimes people are so nervous that when the creditor says “Will you be able to pay the remaining balance by next Wednesday,” the customer just says yes, even though it is not realistic. If they want a promise that you are not sure you can live up to, consider this option: you can promise that you will make another payment by next Wednesday, although you can’t guarantee it will be the full amount.
  5. Keep a record of what phone number you called, who you talked with, the date and time of the conversation, and what exactly was agreed.

Need help with all this?  In many communities a non-profit credit counseling service is available to help you negotiate the process.  To find a reputable credit counselor near you, check with the National Foundation for Credit Counseling; either by phone or on-line, they can do a zip code search to find the member agency nearest you.

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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Prioritizing when money is tight

Audio Blog
Weighing Priorities

As we focus on what we can control in our personal finances, the most obvious thing we control is our spending. When money is tight, choosing your top priorities is critical. Prioritizing includes expenses like groceries, household supplies and personal needs: think about needs vs. wants and use your limited funds on the things that truly bring value to your family. Prioritizing can be even more important when it comes to paying bills.

Before going to the point of skipping a bill or making a partial payment, start by getting a complete picture of all your bills and debts – total owed, monthly payment, current standing (i.e. are you currently caught up), and interest rate or fees for late payment.

Then consider each bill’s importance. They will all need to be paid eventually, and it is never desirable to leave bills unpaid or partially paid, but in times of real financial shortfall, people sometimes have no choice. So how do you choose among your many bills?

Consider what you have to lose if a bill is unpaid. Losing housing, core utilities or a vehicle is generally the greatest possible loss to a household – therefore those payments may be top priorities for many families. By contrast, getting behind on a credit card account, student loan, or medical bill payment plan may not affect your immediate well-being. Note: it may affect your credit score, and is not something to take lightly, but that is an impact you can recover from.

In addition to prioritizing among your existing bills, it is also wise to consider what bills you will continue to incur. You may have on-going monthly subscriptions – to video services, cable, newspapers, weight-loss programs, wine clubs, (the list is endless). Stop and think about whether to continue them during this time. Those are often things we enjoy, and we don’t like the idea of giving them up, but if you’re worried about paying the car insurance or water bill, then it’s appropriate to include these subscriptions as you consider options.

If your situation has left you unable to pay all your bills, be sure to communicate with those creditors. That is the topic for tomorrow’s post, so stay tuned!

The Consumer Financial Protection Bureau also offers tips for protecting your finances during this time.

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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Crisis: Focus on what you can control

If you are experiencing financial challenges due to income loss or unexpected expenses during this time of pandemic and shut-down, you’re probably feeling tremendous stress. As always, one key to managing uncertainty and stress is to focus on what you can control. There’s no benefit to expending mental and emotional energy on things outside of your influence, and that energy drain will prevent you from focusing effectively on what you CAN do.

What do you have control over? Perhaps more than you realize. You control what you do, including what bills you pay and what money you spend. You may even control the option to return purchases you haven’t yet used!

You control what you say, including to your family members and to your creditors. You also control your attitude — keeping a positive attitude focused on problem-solving will help you be open to new ideas and opportunities.

What do you NOT have control over? Prices. Your past behavior (such as building up credit card bills). The stock market. Your employer (although you may have influence – if you do, consider how to use that influence in a productive way). Don’t waste time and energy stewing over these things. They are what they are. You have choices about how to respond.

Stay tuned the rest of this week for 3 more posts about managing through a challenging time.

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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Flexible Thinking

We have all had an overload of opportunities to exercise flexible thinking in the past few weeks. Some individuals shifted the workplace from the office to their home. The normal routines are not working. A number of workers lost all income security. School-age children are on an extended holiday in March!

Most of us are comfortable following routines; we don’t like to change our habits. In “normal” times, when nothing else in our life is changing, any suggestions for financial changes tend to be ignored. A time like this, when so much in our lives is being upended, can be an opportunity to make positive changes in our financial habits! Why not take advantage of the chance to change and grow? 

  • Think about others. There are many who don’t have the luxury of working at home or the security of a steady paycheck. If you can, let family and friends know you are willing to help if finances get strained. Sometimes a message of support can lessen stress and prevent someone from feeling they don’t have options.
  • Challenge your current spending habits. If you have survived a week or two without eating out, recreational shopping, or going to the movies; can you feel better about using a part of those funds to repay a debt or add to savings and not feel deprived?
  • Define some of your benefits in a different way. Hard earned vacation pay reserved for “fun”, might be easier to use now if you think of it as “paid time off.” A restricted definition of how available funds should be used can be a deficit when there are essential bills to pay.
  • Measure your workplace adaptability. It’s a great time to be an amateur, many individuals are being thrown into an online work environment or being asked to take on new responsibilities. Some new ways of working may become standard procedures and you can be the expert from all the practice!
  • Share what you are learning, especially if it pertains to alternatives for toilet paper!!!

I wish you all the best during these challenging times, we’ll learn some things about ourselves and have some new skills when it’s over.

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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Financial Cause and Effect

As a site coordinator and quality reviewer at a local Volunteer Tax Assistance site, I am able to see hundreds of real-life examples of “cause and effect”. 

  • What EFFECT will cashing out my 401k have on my taxable income? It may CAUSE a portion of your Social Security taxable.
  • What EFFECT will $24,000 of income (with no withholdings) have on a 19 year-old full-time student living at home? The EFFECT will be felt by the student who will owe taxes and by the parents who will not be able to claim the child as a dependent.

The most recent unpleasant EFFECT was CAUSED by gambling winnings.  A very lucky woman in her 70’s received a W-G from a local casino, indicating she won $20,800 worth of winnings with NO taxes withheld. The fact that no taxes were withheld did not bother her because she also had documentation showing her losses, which far exceeded her winnings. She knew that her losses could be deducted from her winnings. What she did not understand was…

  • She could only write-off the losses that were equal to her winnings…meaning…of the 25,000 of losses she had incurred trying to win the $20,800, she could only write off 20,800.
  • What she also did not know was…The losses are reported on a schedule A, while the winnings are counted as income. Once the winnings were added to her pension income and the $26,418 of social security income, she discovered that, not only had the winnings pushed her into a higher tax bracket, her income now was high enough that $13,661 of her Social Security was now taxable. Last year, with no gambling winnings, none of her Social Security was taxed.
  • It was only after her total income was calculated that she could subtract her itemized deductions (which included her gambling losses). 

The combination of increased income (due to gambling winnings), plus the increased tax bracket, plus the increase in the taxable portion of her social security, and the fact that there were no tax withholding on the gambling winnings; this woman owed more than $2000 for her federal tax return…something she had not anticipated.

Before doing anything different with your money, it is important to stop and consider what effect it will have on your tax return.

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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Time to refinance?

cartoon house

The uncertainty (almost chaos) that we are experiencing due to the current pandemic is hurting the economy, and is a pointed reminder of the need to plan for short- and long-term financial security. Because the Federal Reserve Board has lowered interest rates, however, there is one group who might be able to benefit from the situation: those who have a mortgage at an interest rate higher than they wish.

            How do you know if refinancing is a wise choice for you? Unfortunately, I don’t have a simple answer for that question, but I can give you a few tips on how to evaluate the decision. First, two generalizations. Consumers who are most likely to benefit are those who:

  1. Have the highest interest rates on their current mortgages; and/or
  2. Have many years left to pay on their current mortgages.

Why? Because the main benefit of refinancing is to pay less interest on your mortgage over the long term. The total interest you pay depends on the interest rate and the length of time on the loan, along with (of course) how much you owe.

            If it were free, everyone would benefit from refinancing when interest rates drop, as long as they did not lengthen the remaining term on the mortgage. However, refinancing is not free. Lenders will charge closing costs that will include a loan origination fee, along with appraisal fees and other fees. Note: fees may be lower if you stay with the same lender that holds your current mortgage, but will generally be equivalent to 1-3% of the amount of the loan. If your refinance will cost $2,000, then it is only worthwhile if you will save noticeably more than $2,000 in the long run.

            Imagine that you took out a 25-year mortgage several years ago at 4.25%, with a monthly payment of $560 plus taxes and insurance. The current balance on the loan is $78,000; it will be 16 years and 1 month till it is paid off, and you will pay $29,686 in interest during those 16 years. 

  • What if you could refinance at 3.5%?  If closing costs were $2,000 and you borrowed the money to pay those costs, then you would be borrowing $2,000. You could get a 15-year mortgage with a payment of $572 (plus T&I); the total interest you would pay would be $22,938; that would save you over $5,500 in interest! Of course your payment and savings would be lower if you paid the closing costs in cash.
  • Even better, refinancing at a 3.0% rate (15 years) would lower your payment on an $80,000 loan to $553 (plus T&I), and reduce total interest to $19,419, for a total savings over $10,000.

A caution: Refinancing only makes sense if there is no penalty for pre-paying your existing mortgage. Iowa law prohibits pre-payment penalties, so for Iowa-based loans it’s not an issue, but it is an issue to be aware of in other states. For more information, explore the Consumer Financial Protection Bureau web page on mortgages.

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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Volatile Markets

Watching your investment portfolio fall in value is never fun. You and I both wish we had a crystal ball to answer questions like: How long will it last? Is it a good time to buy or shift assets to stocks? How will this impact my retirement plans? Is the best course of action to stay on track?

A historic look at the stock market shows a majority of years with positive returns. Data from accounts that regularly move money in and out of the markets offer evidence that unless the timing is perfect, the account holder is likely to miss periods of growth and/or sell investments at a time that turns out to be less than ideal. With that in mind, in most situations it is good advice to “stay the course”. Based on history, it is appropriate to feel confident that when an account has an ample time frame, recovery does occur after dips.

One action to consider at this time would be to look at your overall balance and distribution of assets. If the current markets are making you feel really uncomfortable, it could be a sign your risk tolerance does not matched your allocations; if so, you can develop a plan to revise your allocations and re-balance your portfolio.

The Secure Act changed required minimum distributions (RMD) rules, allowing individuals to wait until age 72. It is a silver lining for some retirees, allowing recovery time for investments before the first withdrawal is required.

The drop in stock values is also a positive for individuals who have planned Roth conversions. Moving investments at low value will result in lower taxes for the distributions and result in upside growth in a non-taxable account.

Turning the current volatile economic situation into an opportunity to learn more about your finances is also a positive action step. Evaluating your spending and savings habits can lead to reduction of debt, building an emergency fund, and keeping your finances on track.

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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Income Taxes in Retirement

United States tax forms

As a volunteer tax preparer with VITA (Volunteer Income Tax Assistance), I frequently wish people understood taxes better. In recent weeks I’ve done three tax returns for people who, in their first year of retirement, cashed out their entire IRA or 401(k) account (ranging from $15,000 to $60,000).

In most cases, these new retirees used the funds for their long-term benefit – major home improvements and other purchases that will help them in the long run. I think they probably thought about the fact that spending the money now means they’ll live on more limited income for the rest of their lives, and they decided that was okay with them.

But I do NOT think they understood the tax implications of their decision, and I found myself wishing I would’ve had the chance to explain it all before they decided to withdraw the whole amount at once. Here are some things retirees should know:

  1. Withdrawals from “traditional” IRA, 401(k), and similar retirement plans will generally be included in your taxable income. Large withdrawals can easily move you into a higher tax bracket, meaning that you pay a higher tax rate on some of that income. For a single person, income above about $53,000 is typically subject to a 22% tax rate, rather than the lower 10% or 12% rate.
  2. The first year of retirement is especially tricky for income tax purposes, because usually the person also had employment income for part of the year, which may contribute to bumping them into a higher tax bracket.
  3. Social Security income is only partly taxable (at most 85% of it is subject to tax). How much is taxable depends on how much other income you have that year. When a person has very low income, none of their Social Security income will be taxable; as their income increases, the portion of Social Security subject to tax also increases. That means that large withdrawals from retirement accounts can create a double-whammy by increasing the taxable amount of Social Security as well has increasing total income.

I know that some of the clients I served paid at least $5,000 more in income tax than they would have if they had spread their retirement plan withdrawals over five years, or even over two or three years. I’m also pretty confident that they did not really understand the tax impact when they made the decision to withdraw it all at once.

Bottom line? Before making decisions about withdrawing from retirement plans, consider various options and get information from someone who is knowledgeable about taxes. If you don’t have a tax expert to ask, try using IRS form 1040-ES (estimated taxes) OR the IRS online withholding estimator to compare different options. Note: remember to consider state income taxes, as well.

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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