Planning for 2022 and Beyond

A new year provides many of us with the opportunity to try something different or reflect upon what we accomplished during the previous year, but it is also a great time to revisit our plans for the future. This could not be more relevant for my family as we have spent the past week mourning the loss of a loved one, while concurrently going through the painstaking process of executing a will, finding proper long-term care for a disabled surviving spouse, and carrying out final wishes for a family spread out all over the country.

And while this certainly is a difficult time, I cannot express how much easier it has been due to the basic estate planning conversations we coincidentally had earlier in 2021. Talking about the end of life’s journey is never fun; however, we were able to take care of a lot over the past few days because of these prior conversations, and with very little legal assistance.

I encourage you to take action soon to ensure that you have made appropriate preparations for your own death, as well as to encourage or assist those you care about to do the same. At the bare minimum, the following documents should be in place for each individual:

  • Advance Medical Directive – this allows a person to decide in advance who will make health care decisions for them if they become incapacitated and are unable to make their own decisions.
  • Durable Power of Attorney – in this document, the writer appoints an individual he/she trusts to make other legal decisions, primarily financial, on their behalf if they become incapacitated.
  • Last Will and Testament – this document provides key information and instructions regarding the distribution of assets, disposition of remains, and other final wishes on behalf of a deceased individual. It also can include instruction on who should be the guardian of any minor children of the individual who has died.
  • Beneficiary Designations – perhaps the simplest part of the estate planning process, setting up beneficiaries for life insurance policies, retirement accounts, etc. allows account owners to predetermine the distribution of those assets after their death, and also to avoid the probate process for those assets.

This is not meant to be an exhaustive list of things that need to be taken care of; however, having the above protections in place ahead of time will save your loved ones a lot of time, money, and stress when the unfortunate time of a loved one’s passing ultimately arrives. You can learn more by visiting the Iowa Legal Aid website, or by attending one of the many Iowa State University Extension and Outreach programs available for Aging and Caregiving. The Iowa Concern Hotline (800-447-1985) has an attorney on staff who can provide information on legal topics as well.

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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Inflation: Choose Your Changes

Someone asked me a couple weeks ago whether I had written a blog post yet on inflation, which has certainly been in the news lately. My first thought was “Well no – there’s nothing we can do about inflation, and we can’t foresee the future… so what could I write?” It dawned on me later that in fact there ARE some points I can share to help us all deal with higher prices.

If prices go up and our income doesn’t increase enough to keep pace, it’s a lot like getting a pay cut. Our normal patterns of spending and saving no longer work – something has to change. For some people the change involves minor sacrifice – perhaps eating out fewer times a week, or at less-expensive restaurants. For other people, higher prices may mean much more challenging changes.  The good news is that at least YOU are the one who gets to decide what changes to make. Ideas for making the changes less painful:

  1. You may be able to use non-monetary resources to meet some of your needs. For example, if you usually buy birthday cakes for your family, perhaps you can make them instead. OR perhaps you have a friend who could make the cake in exchange for you watching her children one Saturday.  Think about ways in which you can use your own time and energy and skills to accomplish things that you usually pay for. And remember that your friends also have skills they may be willing to share. Common examples include: cooking from scratch rather than using convenience foods, shoveling your own snow instead of paying someone else, learning to cut family members’ hair to avoid the cost of regular haircuts, giving gift certificates for your time and talent (I’ll bake you a pie!) in place of purchased gifts.
  2. Make use of community resources that are available. Even if you have never before applied for energy assistance or used the free tax preparation available in your community, when times are tight, using these services and others can make a big difference.
  3. Careful shopping can make limited funds stretch further. Even with increased prices, retailers still have sales, and generics are still less expensive than brand names. Sometimes changing where we shop and what brand we buy makes it possible to save money even without severely cutting back our shopping list.
  4. When the reality is that we are going to need to “do without” something, we can consider our priorities and choose what to keep and what to give up. One person might “give up” their morning stop at a coffee shop, so they could continue to pay for their streaming services or premium cable; another person might make the opposite choice.
    Recognizing that we have a choice can help our attitude: we don’t “have to” give up anything; instead, we choose what to give up. For example, instead of feeling deprived about not going out for lunch every day, we can feel proud about bringing lunch to work so that we can continue to use funds for something more important.

This short list is only a starting point. We would love to have you share your strategies for dealing with inflation! Please share in the comments!

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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The App Economy and Your Taxes

Like everything else, the pandemic also shifted how individuals earn income through various “side hustles.” Uber, Lyft, and other commonly used digital services took a temporary break during the shutdowns, while newer app-based options such as Robinhood (investing), Coinbase (cryptocurrency), and FanDuel (sports betting) – just to name a few – gained more and more attention. Much of that attention was focused on the ability to make money without ever leaving your couch; however, one little important detail is often left out – you will likely be responsible to pay taxes on some, or all, of that potential income. If you think you might be in that boat for 2021, then keep reading!

  • Investment and speculation apps have been significantly increasing in popularity, but the tax implications are among the least understood. The taxes are very similar whether you are dabbling in individual stocks, ETFs, or Bitcoin, with the big one being capital gains and losses. Other taxes may be due on investments that produce interest and dividends, or hold collectibles, real estate, and foreign property as the underlying asset. You may receive the proper tax forms if you use a more traditional brokerage company; however, you may be responsible for keeping track of your own cryptocurrency transactions.
  • Gambling and sports betting is not a new phenomenon; however, a recent Iowa law permitted the use of online sports betting apps without the need to visit a casino. This change increased sports betting across the state, but consumers may be unfamiliar with the tax consequences of betting on their favorite teams.

Always be sure to check with a tax professional, or contact your local VITA tax site, if you participate in the App Economy and are unsure about the tax implications!

Reminders: 1) If you have a sizable amount of income for which taxes are not withheld, you are supposed to pay quarterly installments to the IRS, and may face a penalty if you have not submitted enough tax payments throughout the year; and 2) For income earned from independent work, your earnings will be subject to self-employment tax as well as income tax.

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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Health Insurance Decision Time

Once again it is time to make health insurance decisions. If you are insured through your workplace, your deadlines will be determined by your employer. If you are insured through Medicare (including Medicare Advantage plans), you have between now and December 7 to make changes; your best resource for unbiased assistance in Iowa is the Senior Health Insurance Information Program. Similar resources are available in other states, as well.

If you are not yet eligible for Medicare, and do not have affordable insurance available through an employer, then the Health Care Marketplace is the place to turn for quality health insurance plans* that do not consider pre-existing conditions. The base premium for plans in the Marketplace is affected by your location, your age, and use of tobacco. That is because health care costs vary by location, and are higher for people who are older and who use tobacco. Two other factors also affect your cost:

  • Type of plan (bronze, silver, gold, platinum) you choose. All of these plans are quality* plans, but it is valuable to understand the difference. Bronze plans have the lowest premiums, because they have higher deductibles and co-payments. Premiums increase as you go up in metal value. Platinum plans have the highest premiums, but lower deductibles and co-pays. This post from 2014, when the Health Care Marketplace was new, provides more detail.
  • Your income. That’s right. Two people might pay different premiums even if they are both 30-year-old non-smokers who live in the same county and both chose a silver plan. The Marketplace is designed to provide more help in paying for health insurance to people who need it more. So when you enroll in a Marketplace plan, you will estimate what your household’s income will be for 2022. Based on that estimate, the system determines what your share of the premium for a silver plan should be, and the remaining amount will be covered by an Advance Premium Tax Credit, which is an estimate of how much help you are eligible for. All this is based on a baseline silver plan; you will get the same amount of help toward your premiums regardless of what “metal color” plan you choose. At the end of they year, your tax return will show your actual total income for the year. The actual income will be used to determine your final Premium Tax Credit amount. If you received too much or too little in advance, the difference will be taken care of on your tax return, by either increasing or decreasing your tax refund or the amount of tax you owe when you file. The Kaiser Family Foundation offers a useful tool to give you an idea of how much help you may be able to receive.

Open enrollment for 2022 health plans in the Marketplace continues through January 15, but if you want your coverage to begin as early as possible (January 1) then you need to enroll by December 15. Enrolling between December 16 and January 15 will get you coverage that begins February 1. Enroll online at www.healthcare.gov OR call 800-318-2596. A link is also available to find local help. You have the option to choose (filter) whether you wish to find an agent/broker OR would rather get help only from an assister.

*What do I mean by “quality” plans? The biggest factor is that a quality plan covers all ten essential types of health care. By contrast there are plans (sometimes referred to as “junk plans”) that purport to provide health coverage, but exclude certain categories. I’ve heard of situations where people are excited to get health insurance, but then when need arises they discover it doesn’t cover hospitalization, or it only pays $100/day toward hospital care, or has some other substantial limitation. In addition marketplace do not have annual or lifetime limits on what they will pay for an individual’s care. Another key “quality” factor is that the plans have been actuarially evaluated as providing appropriate coverage for an appropriate cost. In other words, they are not set up to make big profits for the company.

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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Confused about recent Federal Student Loan changes? Look no further!

If the Federal Student Loan changes over the past 18 months weren’t confusing enough, the U.S. Department of Education recently announced several more that may leave you wondering how you are affected this time around. The original COVID-19 Emergency Relief measures are tentatively set to expire on January 31, 2022, but the new provisions are either permanent, expire on October 31, 2022, and/or impact a smaller group of borrowers:

  • On August 20, the U.S. Department of Education announced that eligible Servicemembers would automatically, and retroactively, receive a 0% interest-rate benefit if they deployed to areas qualifying for imminent danger or hostile fire pay. This is not a new benefit; however, Servicemembers previously needed to submit a form, with supporting documentation, to find out if their loans and deployment qualified for the 0% interest waiver. 
  • Several updates have been made over the past few months regarding Federal Student Loan Servicers. PHEAA (FedLoan Servicing), Granite State, and Navient will no longer service U.S Dept of Ed-owned loans when their contract expires. Current borrowers will receive numerous notifications throughout the loan transfer process. Watch for those notifications: be sure to save the information or respond as requested.
  • The often-troubled Public Service Loan Forgiveness (PSLF) Program is receiving a giant makeover. Some of the provisions are temporary, while some remain unchanged. Regardless, these changes are significant and remain in effect until October 31, 2022. 

Are you still unsure of how these changes affect you? Contact an Iowa State University Extension and Outreach Financial Educator today! 

The information provided is educational in nature to help you make your own informed decisions and is not intended to substitute for professional advice or serve as an endorsement of any financial product or service. Consult with licensed professionals prior to implementing any of the information provided to determine the course of action is best for you. 

Ryan Stuart is a Human Sciences Specialist, Family Wellbeing, with Iowa State University Extension and Outreach. Ryan will be joining the regular blog team soon, so watch for more posts from him.

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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Medicare Open Enrollment – So What?

Medicare’s annual open enrollment period for 2022 coverage began last Friday and continues through December 7. But why does it matter? Most people enroll in Medicare when they turn 65 — doesn’t that take care of it? The answer is: probably not.

NOTE: Even if you are too young for Medicare, this blog post may be worth your attention if there are people you care about who are enrolled in Medicare. I’d encourage you to touch base with them to make sure they understand their options, and the mailings they are receiving, and help them get help if they need it.

During open enrollment each year, consumers have options to make changes. They also may receive a small deluge of marketing mail, email, and perhaps even phone calls. It’s important that they understand what their options are, and that they pay attention to mailings — especially those from Medicare itself (CMS – The Center for Medicare and Medicaid Services) AND from their current insurance company(ies). There are generally three types of choices consumers make during Open Enrollment:

  • Prescription Drug (Part D) Plan. This may be the most common decision people make during open enrollment. Most Medicare participants also enroll in a separate insurance plan to help cover prescription costs. These plans are offered by CMS in partnership with private insurance companies, and you may literally have dozens of plans to choose from. Some people make the mistake of assuming that if they like their current plan, they should just stay with it. The reason that’s a mistake is that plans can change substantially from one year to the next. Maybe this year, your plan covered your medications nicely, with low co-pays; but next year, they could choose to drop one of your medications or attach a much higher co-pay. So even if your own medications haven’t changed, it is smart to use the Medicare on-line tool to see which plans offered in your area will cover your medications at the lowest cost to you. (SHIIP can help with this — see below)
  • Medicare Advantage Plan. Some consumers choose Medicare Part C (Advantage) plans instead of traditional Medicate Part A and B. These are managed care plans operated by private insurance companies in partnership with CMS; they generally have a defined network of participating hospitals, doctors and other medical providers. They often cover services not covered by traditional Medicare (including vision or dental care), but may also have more restrictive coverage on some services as compared to traditional Medicare. Many Advantage plans also have prescription drug coverage built in. These plans can change from year to year as well, and open enrollment is the time to make a change if you wish to.
  • Medicare Supplement Plans. Many consumers who use traditional Medicare Part A and B also enroll in a supplemental insurance plan, sometimes referred to as Medigap insurance (because it covers gaps – including deductibles and co-pays – that Medicare does not cover). These plans are offered by private insurance companies. Open enrollment is also a time to evaluate your supplement coverage.

Health insurance is complicated for people of any age. Fortunately, excellent help and information is available through the Senior Health Insurance Information Program (SHIIP). SHIIP is an office within the Iowa Insurance Division, so it is completely non-commercial and not sales-oriented. Note: similar agencies are available in other states too. The SHIIP website offers a wealth of information. In addition, they have a helpline during business hours at 800-351-4664 (TTY 800-735-2942). Most valuable of all, however, is the corps of highly-trained volunteers located in counties across the state. Find SHIIP volunteers near you! These SHIIP volunteers kick into high gear during fall open enrollment, typically offering appointments to help consumers understand their options for Part D (Prescription coverage) and other coverage.

If you, or someone you care about, need help during Medicare Open Enrollment, I urge you to connect with your local SHIIP resource today! For general information about Medicare, the annual “Medicare and You” handbook is the best starting point.

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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URGENT – Mortgage Forbearance Deadlines this Week!

We mentioned Mortgage Forbearance earlier as a helpful tool for homeowners who are having trouble with their mortgage payments. Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited time while you build back your finances. The CARES Act (passed back in April of 2020) required that when a mortgage is backed by a Federal Agency, the borrower is automatically eligible for 3-6 months of forbearance if they are experiencing financial hardship resulting (directly OR indirectly) from COVID-19. Forbearance creates a helpful reprieve for struggling families.

The deadline to apply for forbearance under the CARES Act is September 30, 2021 IF your mortgage is backed by HUD/FHA, USDA, or the VA! That means NOW is the time for action. NOTE: if your loan is backed by Fannie Mae or Freddie Mac, there is not currently a deadline for requesting an initial forbearance.

Not Sure About Your Mortgage? Contact your mortgage company and ask them about your mortgage — asked if was backed by any of the agencies listed above. It that answer is “yes,” and if you are struggling with payments and bills, apply right away: ask your mortgage company to provide the needed application materials.

What does it mean to have your mortgage “backed” by a government agency? That simply means that when you bought your home, you qualified for special terms – often a lower down payment, reduced fees, or preferential interest rate thanks to a government program. I remember that when I bought my first house it was an FHA Loan; many first-time homebuyers qualify for special terms, and others do as well. If you are not sure, there is no harm in asking!

The Consumer Financial Protection Bureau provides more information about forbearance. Financial assistance for homeowners at imminent risk of foreclosure may be available as well; the Iowa Finance Authority provides more information, about help that is currently available, and notes that more assistance, authorized under the American Rescue Plan Act, will be available within the next several months.

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 Bills

When money is tight, we sometimes have to make VERY difficult choices. 

What do I mean by “difficult?” I’m NOT talking about “which sweater should I buy?”  That does not qualify as a difficult choice in the true sense of difficult choices. I am talking about “I have 8 bills to pay, and I can only pay 5 of them.”

When you need to consider which bills to pay, a key is to ask “what would be the consequences of not paying each bill?” With that in mind, there are three types of bills that generally need top priority. These are bills that are necessary to:

  1. Keep you safe and healthy (for example, picking up your prescription medicines)
  2. Keep you housed (for example, paying rent or mortgage)
  3. Keep your employment (for example, renewing your professional license, or keeping transportation to work)

These three priorities go beyond actual bills, too. For example, buying groceries is not a “bill,” but having healthy food is essential to keeping you and your family safe and healthy. Likewise, if driving is the only way to get to work, then your car needs gas. Applying those three priorities will help you make the difficult choices about what bills to pay and what money to spend.

Asking for help is important too. Sometimes direct help is available for your bills; for example, the Low Income Home Energy Assistance Program (LIHEAP) can help with heating/utility bills if you qualify. In other cases, getting help with something else can free up some money for your bills. For example, getting food from a food pantry would make money available to pay more of your bills.

Using these three priorities is a short-term solution. When you’re in a difficult situation, you need a short-term plan to get you through the week or the month. But when the problem continues over time, the short-term solution is no longer enough. Longer-term changes will be needed, such as increased income, or a permanent reduction in expenses.

If you face a situation where long-term changes are needed to resolve your financial challenges, it is often wise to seek help assessing your situation. ISU Extension and Outreach specialists can help you examine your options. We cannot tell you what to do – only you can make that decision – but we may be able to help you identify new options, or thoroughly assess the pros and cons of various actions. Find and contact your local educator 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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Aging Safely – Self or Others

While we’re all aging, some of us are further along in the process than others! But even you’re still very young, you probably have people you care about who might be labeled an “older adult.” With age comes certain privileges and freedoms, but we also have to acknowledge that aging also brings cognitive changes as well as physical changes. This is true even for those with no cognitive impairment or dementia – everyone’s brain changes as they age.

This cognitive aging can lead to “diminished financial capacity” – a term used to describe a decline in a person’s ability to manage money and financial assets to serve his or her best interests, including the inability to understand the consequences of investment decisions. Some errors that occur due to diminished financial capacity may be minor, like forgetting to pay a bill, but serious errors that threaten our financial security are possible.

Happily, there are steps we can take to protect ourselves and those we care about. These steps include:

  • keeping important documents organized and easy to find;
  • providing names of “trusted contacts” to your financial professionals;
  • creating (or updating) a power of attorney;
  • and more.

The Consumer Financial Protection Bureau (CFPB) provides a practical breakdown of steps that will protect you as you age, and also steps to help you assist an older friend or relative you are concerned about: Planning for diminished capacity and illness. None of us likes to think about possible future problems, but if something happens, we know we’ll be glad we did!

NOTE: People of all ages can be injured in accidents or suffer illness that diminishes ability to manage finances and make decisions. The steps outlined by the CFPB are appropriate for adults of all ages to consider.

For more details about cognitive aging and how it affects different types of mental functioning differently, see a trio of articles from The Center for Retirement Research at Boston College, starting with Cognitive Aging: A Primer.

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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New Option on the Advance Child Tax Credit Portal

Families can now easily update their mailing address in the IRS Child Tax Credit portal. This is very important for families who choose to receive their payments in the mail, rather than by direct deposit.

To use the portal, go to the IRS Child Tax Credit page and select “Manage Payments.” The portal now allows users to:

  • Change their mailing address;
  • Switch from receiving a paper check to direct deposit;
  • Change the account where their payment is direct deposited; or
  • Stop monthly payments for the rest of 2021.

If you run into challenges using the portal, our July 12 post offers a few tips. An earlier post explains what is different about the Child Tax Credit in 2021, including who is eligible for the expanded credit. If you previously were eligible, based on your income in prior years, but are no longer eligible now, you might consider opting out of the advance payments, which are being sent monthly on the 15th of each month through the end of 2021.

Log into the portal by midnight (Eastern Time) on August 30 if you want the changes to kick in for the September 15 payment. The IRS expects to add a few more functions to the Child Tax Credit portal in coming months, including the ability to:

  • Add or remove children in most situations;
  • Report a change in marital status; or
  • Report a significant change in income.

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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