The container flew from my hand and crashed on the ground of the farm lot. My husband stood and watched as I unloaded my frustration and anger. My job that day, while my husband was at his off-farm job, had been to visit with the agriculture lender. It had not gone well. A banker’s pen had drawn lines through our spending plan. The lender, the third in a revolving door of employees, had edited our Cash Flow statement to reflect his view of our potential for success. Our hard work and determination not to default on loans had not been acknowledged. There was no sign of a continued partnership, and our communications with the previous loan officer were not in our file. We were expendable as loan clients during the 80’s farm crisis.
Personal finance is not just about numbers – balancing a checkbook or keeping good records. It reflects our values, priorities, and goals. It’s personal. We definewho we are as we provide for our families and participate in the communities where we live. This personal investment makes it difficult for us to acknowledge that we have no control over certain outside events – events that sometimes send a wrecking ball through it all. COVID-19 will have this impact on families, just like the Farm Crisis of the 80’s did in rural Iowa.
We survived that unpleasant time. We focused on our priorities and recognized that not all financial lenders would be able to support our goals. When rejection seemed likely, we found new partnerships. When resources became available to reduce our dependence on others, we repaid debts. It took time.
Emotional balance is essential if we are to use our minds to identify solutions and put together steps toward resolving financial problems. Dealing with your feelings is a priority. Communication with family and supportive people can sustain you while you improve your financial situation.
This summer my husband and I will post a Heritage Farm sign on the original 80 acres purchased in 1870 by his Great Great Grandfather. Life events can be survived! Understanding and taking control of finances is a powerful thing, often requiring assistance. Don’t hesitate to find that trustworthy assistance.
Retirement begins for me at the end of this week and I want to thank you for reading the Money Tips blog. I hope you continue to find this a place for financial news, management advice and resources.
My local grocery store announced that they will limit fresh meat purchases to four items for the current time. Many grocery chains have set limits to prevent shortages. The slowdown of processing at meat packing plants has made this step necessary to balance supply and demand.
I called the meat department for details. A prepackaged retail item counts as one item. Meat case items can be bundled: for example, if I request 5 pounds of ground meat and have it wrapped in 1-pound packages, the five will be over-wrapped with one price tag and count as one item. Canned meat items, including tuna, salmon, spam, etc., do not count toward the purchase limit. Be sure to check with your local store; their policies might be different.
Eggs, peanut butter and beans are nutritious substitutes for red meats and poultry. Stores may also be marketing institutional cuts. These are larger pieces of meat such as whole loins or rump roasts that can be cut into individual servings and frozen. Another approach is to cook the large cut, then divide the meat into packages appropriate for recipes that call for pre-cooked meats. To freeze meat for later use, place it in a plastic freezer bag and over-wrap with heavy foil or freezer paper. Be sure to add a label with date.
Cutting back on serving sizes or using recipes that stretch the protein content are other solutions. Stir-fry recipes put more emphasis on vegetables. Rice, pasta and beans in a recipe may make it possible to reduce the amount of meat or poultry to ¾ or ½ the amount in the original recipe and still supply adequate nutrition. Low cost, protein-stretching recipes are available at the Spend Smart Eat Smart website.
To extend the quality of raw meats in your refrigerator, store the cuts at 40 degrees or less. The meat drawer is designed to provide the ideal conditions for storage. The temperature in the freezer compartment should be zero degrees or less. If your refrigerator does not have an internal thermometer, you can purchase one at appliance or hardware stores.
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.
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.
Mobile banking continues to grow in popularity. The new apps, however, aren’t without risks of errors.
When making payments via transfer be sure to double check the payment and confirm you are using the correct person or business receiving the payment, before hitting send. You can issue a stop payment for a check, dispute credit card payments, or cancel an auto bill payment, but a transfer is permanent and cannot be reversed. If it is the first time you have sent money to someone, ask that they send a request for payment or send them a small test payment to confirm it is the right person.
Money transfers are immediately removed from your account, but the receiver usually has a waiting period before the transferred funds can be spent or withdrawn.
If the transaction will be used on a tax return, you may want to use an alternative method. The IRS does not consider a transaction valid without printed proof. Apps are revised and updated. The software developer is not obligated to provide you with permanent access to previous transactions.
Fraudulent apps closely resemble the legitimate ones. Names and logos can easily be copied and used to build very close look a-likes. Verify the source of the app by visiting the company through another URL, before downloading and entering personal information or account details.
The Secure Act was originally written to make changes to retirement laws. The act passed through the House last May and was held by the Senate until November when it was added to the Appropriations Bill and signed into law in December.
The law change catching attention is the starting age for required minimum distributions (RMDs). If you are retired and reached 70 1/2 before the end of 2019 you are required to take distributions. Everyone else can wait until the year they reach age 72. The annual RMD amount continues to be based on life expectancy tables published by the IRS.
The other change attracting attention relates to distribution rules for inherited retirement accounts. These accounts, including IRAs, 401(k)s and other similar qualified accounts, generally have named beneficiaries. When there is just one beneficiary and it is the spouse, then the withdrawal rules are the same as if the account originally belonged to the spouse. The SECURE Act did not change this.
However, when the account beneficiary is not the spouse, the rules for taking distributions have changed. In general, the beneficiary must take distributions on a schedule that will liquidate the account within ten years. Stretch IRAs, which set up for distributions over the beneficiary’s life expectancy, are no longer an option. Beneficiaries will want to plan for the tax implications of those distributions.
Exceptions to the ten year distribution schedule include: disabled beneficiary, chronically ill beneficiary, beneficiaries not more than ten years younger than the deceased, and children that have not reached the age of majority. Separate rules apply to these individuals, and also to situations where multiple beneficiaries are named, so professional guidance is recommended.
More about the Secure Act will follow in subsequent posts……
Welcome to part two of our review of the the Secure Act! We’ll introduce you to some of the other retirement plan changes employees can expect to hear about as new rules and options are added to their plans.
A part-time employee who has worked a minimum of 500 hours each year for three continuous years can now begin making retirement savings contributions to an employer’s retirement plan. This change expands eligibility beyond the old rules that allowed an employer to use a 1,000-hours-worked rule before full time employees are allowed to participate in a retirement plan.
New tax credits are available for small business owners who start a retirement plan for their employees. Additional credit is given if the plan uses an automatic enrollment structure. The additional business tax credit is also available if an existing plan is converted to automatic enrollment. The business tax credits range from $500 to $5000 and can be claimed for three years. Small employers can also participate in multiple-employer plans that allow many unrelated businesses to join together to share costs of plan administration.
Old rules allowed employers to include annuity options in their 401K plans, but if the insurance company selling the annuity contract failed, the employer was required to guarantee the continuation of the contract payments. The Secure Act removed the employer’s responsibility to protect retirees. The inclusion of annuities in retirement plan menus is expected to increase.
The cap for auto enrollment contributions to an employer’s retirement plan was 10% of employee pay; the amount has been raised to 15%. Employers must continue to give employees the option, once a year, to change their contribution.
The Secure Act also removes the restriction that prohibited individuals age 70 1/2 or older, who are still working, from making contributions to an IRA.
In our next post we will visit some of the non-retirement changes included in the new Secure Act.
Eligibility for participation in retirement savings plans, incentives for small businesses to establish retirement plans, and rules for contributions and distributions are the main focus of the Secure Act, but there are other changes worth understanding in the new law.
Loans allowed by an employer from retirement funds can no longer be distributed through a credit card account or similar arrangements. If received through a credit card, the funds must be claimed as income and are subject to taxes and penalties.
Withdrawals from retirement accounts can now be made for the birth or adoption of a child within one year of the event. The limit is $5000 per account owner and it has to be claimed as income, but there will be no penalty tax added.
At least once a year, your retirement account report must include a statement of monthly benefits the owner can expect in retirement. The amount will be based on a single lifetime or joint lifetime annuity.
403B and 457 plans have new rules for transferring account funds to a new employer’s plan or to a qualified plan distribution annuity.
And in areas unrelated to retirement accounts:
529 plans can now be used to cover the costs of registered apprenticeships, homeschooling costs, private elementary, secondary and religious schooling. Up to $10,000 can be used to repay student loan debt. (State alignment is necessary so check your state rules.)
The Kiddie Tax on unearned income is being reset to rules in place before the 2017 TCJA law. Under TCJA, unearned income was subject to the Estate or Trust tax rates. Amended returns can be filed for 2018.
The penalty for failing to file a tax return is a maximum of $400 or 100% of the tax due.
Rules and implementation guidelines will further define these changes, so check with financial professionals and your employer’s HR departments for more details.
The government has been robbing the Social Security Trust!
Most of us have heard this version of Social Security history. Is it true?
Myth is a more correct answer.
Social Security’s history includes details of social movements taking place long before the Act became law in the 1930’s. The movements focused on providing some level of income security for individuals who aged out of the workforce.
Two decisions – both made at the time the bill was written – explain part of how the Social Security Trust Fund was diminished:
Benefits were earned when a worker had made three years of contributions prior to reaching the age of 65. BUT – to be fair to workers who would not be able to make three full years of contributions prior to their 65th birthday, the legislation granted them annual payments as well. In the period 1937 to 1939, this annual payment resulted in a payout of $25,562,000. The actual amount paid out is larger as the payments would have continued until death.
Social Security was also set up as a “pay as you go” program. What came into the fund was paid out. Ida Mae Fuller is the first person to apply for and receive a monthly benefit. She contributed a total of $24.75 in the three years prior to reaching her 65th birthday. Her first benefit check was $22.54. Because she lived many years past age 65, Ms. Fuller’s $24.75 investment yielded a total retirement benefit of $22,888.92. Part of her payment would have come from new contributions and part from income earned from the excess deposits.
Social Security never achieved the trust fund it needed to give it stability. Benefits paid to American retirees in the early days of the program were far in excess of the contributions. Legislative changes expanding benefits and building in cost of living adjustments have continued to keep the fund from building a sufficient cash reserve that would generate earnings to sustain long term benefits.
The Pilgrims celebrated their first successful harvest in 1621. The feast was a three-day celebration that included the survivors of the Mayflower and Native Americans. The newcomers had adapted to the new environment and learned how to grow and harvest the food they needed to survive the winter months.
It would be awesome to be able to say that as a nation we have developed into a country where everyone is self-sufficient and can meet their own needs, but individuals and families still struggle.
Thanksgiving’s celebration is an opportunity to share, and making contributions to the food pantry would be a great way to support community members. A call to the local pantry can help with ideas of what to purchase. Suggested items are easy to open canned vegetables, fruit, meats, beans, soups, and stews. Peanut butter, cereals, crackers, and pasta are also good choices. Think about complete meals that can be prepared with simple tools and few additional needed ingredients. Don’t overlook spices that can help enhance meals prepared with standard food pantry items.
Another approach is to focus on a specific group – infants, young children, cultural groups living in your community – and bundle together foods appropriate for their preferences and eating habits. More ideas can be found here.
Money Tips authors, Brenda, Barb and I, wish you a joyful Thanksgiving!