Downsizing & Organizing

I dug out my winter clothes this week. I had to open and move several boxes and containers to find the tubs containing my clothes. I was amused when I thought about how much time a year I spend opening the wrong tubs, looking for the right tubs. I resolved right then to downsize.

Despite the fact that the average household size has declined to 2.61 persons while the average home has doubled in size since the 1950’s, people still struggle with what to do with all their stuff. In fact, one out of every 11 people rent storage space during any given year.

There are many reasons to down-size: moving to a smaller place; passing treasures on to others; generating a little extra income by selling items; or eliminating the cost of storing stuff. For me the 2 motivating factors are eliminating the time and cost to care for and store stuff; and to not leave my kids, the burden of dealing with all my stuff when it is time to settle my estate.

If you are looking for tips on organizing and downsizing your home, check out Downsizing Your Home: A Guide for Older Adults from Kentucky University Extension.

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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Plan for Change

The wife of a dear friend has lived in a care center for about 10 years now. I frequently cross paths with him and can see how much he misses her. I called him, excited to hear the details, when I saw on Facebook that she had moved back home. He explained that as her condition deteriorated over time, the cost of care in the nursing home had increased…so much so that they could no longer afford for her to live there.

That sounds like bad news, but it is truly turning into good news for them. You see, my friend has now retired from farming, and he can provide some of the care in their home. They have found it much more cost effective to hire a nurse to come at scheduled times to provide care and guidance for my friend, who wants only the best for his wife and is eager and able to be her caregiver. This solution has brought much joy to their home, as they are together again under the same roof.

As we plan for the future in retirement, we often think about three stages: early retirement when we do more traveling or activities that cost more…the middle years which cost less, when we are still healthy but do less because our goals have been met…and the later years when our health care cost rise. For my friend, the thought of bringing his wife home was not part of the original plan. Once he retired from farming and was more available to provide care, it made sense. It is important to make a plan but to also revisit that plan and see if it is still the best solution even after it has been implemented. Plans can always be revised.

The Finances of Caregiving is a series of five 2-hour workshops to expand your understanding of possible solutions for providing care for a loved one and help families plan together for the care receiver’s care. Understanding your choices means knowing your current situation. This program guides you through finding and collecting that information; it also provides information about communication strategies and options for care. To find a location of a program being offered near you, check out www.extension.iastate.edu/humansciences/finances-caregiving

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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Worried about retirement funds?

I read an article last week in the popular press (based on a legitimate research brief) that offered encouragement for those who are worried they haven’t saved enough for retirement. The research project demonstrated that if you delay retirement 3-6 months, it provides the same benefit as if you had saved an additional 1% of your income for 30 years.

If you are: a) wishing you could save more, but really can’t; or b) wishing you could go back in time and start saving more, sooner, this research is encouraging because it says you can partly make up for a savings shortfall by delaying your retirement date.  To be clear, delaying a few months doesn’t “magically” double the balance in your 401(k) or IRA account.  The delay affects your retirement income security in several ways:

  • It means additional months of contributions to your retirement account.
  • It gives your money more time to grow.
  • It reduces the number of months you’ll need to support yourself in retirement.
  • Delaying Social Security benefits beyond full retirement age results in a larger monthly benefit. (under current law).
    The fourth benefit accounts for most of the mathematical advantage of delaying retirement, but all four factors contribute. The first two actually DO increase the size of your nest egg; the third one means your money doesn’t need to be stretched so thin.

Wherever you are in your pre-retirement saving journey, it always pays to save more starting now if you can. But even a modest delay of retirement can provide a retirement lifestyle as if you’d saved more all along.

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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62? What’s the right age for Social Security?

I have often talked with people who were excited about turning age 62. Why? So they can claim Social Security retirement benefits. I understand that excitement, especially from people whose jobs are causing them problems.

In those situations, however, I hold an internal debate about whether to put on my “educator” hat and make sure they understand all the factors involved in their decision about when to claim Social Security. Note: sometimes I do provide information, and other times I do not – it depends on the situation!

Claiming Social Security before your full retirement age means a permanent reduction in your monthly benefit. Having the income now will be nice, but if you live to be 90 and use up your other retirement accounts, you might wish you had waited.  Here’s an example of how the benefit amount is affected by the age you claim:

  • Mike’s full retirement age is 66. At age 66, his monthly benefit would be $1,496.
  • At age 62, the earliest age he could claim, his benefit would be $1,060.
  • On the other hand if he waits till age 70, his monthly benefit rises to $2,044.

There’s not a “right” age for a Social Security claim. Your choice depends on your situation, your priorities, and what other resources you have available.  If you would ask me, I wouldn’t be able to tell you what to do – only you can decide.

What I would tell you, though, is to make sure you understand all the implications of your decision. One resource to inform your planning is an ISU Extension recorded mini-lesson on Social Security Choices (20 minutes). It is one of many retirement planning resources on our “Retirement: Secure Your Future” page.

When you near the actual decision point, the best way to gather complete information about your options is to contact the Social Security Administration.

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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Are You Medicare Eligible? – New Cards Coming Soon

Yes, if you have a Medicare Card, you will be receiving a new card in the mail soon.  What is different?  Your Social Security Number WILL NOT be on the new card.  You will have a unique Medicare Number and this will happen automatically.

Why the change? – to protect your identity. Experts have long recommended that we avoid carrying our Social Security card or our number in our wallets, because if stolen or lost people can use it to set up accounts in our name. Until now, however, people who used Medicare didn’t have a choice. It’s generally important to have your health insurance card with you, and unfortunately the Medicare card contained a Social Security number. Consumer advocates have been asking for this to change, and now it will!

New cards will be mailed between April 2018 and April 2019; not everyone will receive their new card at the same time. Here in the Midwest, the new cards will start arriving after June 2018.

After you receive your new card, destroy your old card by shredding it.  Start using your new card right away. Note: If you have a separate Medicare Advantage Card, you may need to keep the old card because you still need it to receive treatment.

Share your new card and Medicare number with your doctors, pharmacists, health care providers,  insurers or people you trust to work with Medicare on your behalf.

The new card is paper; you will be able to print your own replacement card if you need one.  Keep the new card with you.  You will need to provide your Medicare card when you need care.  If you forget your new card, health professionals may be able to look up your Medicare number online.

Beware! There will be scams – so watch out for them:

  1. Don’t pay for your new card – it is free. If someone calls and says you need to pay for it –it’s a scam.
  2. Don’t give personal information to get your card. If someone calls, claiming to be from Medicare, asking for your Social Security number or bank information – it’s a scam – Hang up.
  3. Guard your card. Safeguard the card as you would any other health insurance or credit card.  Even though it no longer contains your Social Security number, you will still want to protect your card because identity thieves could use it to get medical services.

For more information about changes to your Medicare card, check out this short video or go to medicare.gov

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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Need it? Use it? Afford it?

Yep, that’s Glen with his golf cart: snow blade in the front; a 50# bag of sand in the back and chains on the wheels. Mark proudly boasts, “Had Dad been born today, he would have gone to college and been an engineer. He can invent and create anything!”

I used to wonder why people would buy a golf cart…it is expensive; it is used for a few short months; and it takes the exercise out of the sport.  However, if you were to drive through any of the small towns in my area, you are sure to see people driving golf carts to visit friends or to run home from the camp ground on the far side of town; one elderly woman enclosed her cart with plastic so she could drive it year round…without a drivers license.

Seeing Glen and his golf cart made me stop and think…how much of the stuff I own was purchased with a single purpose in mind and is underutilized? I reached out to a couple of my kids this weekend, asking if they wanted a few of these things that I no longer have time to use. It created a bit of concern, “Mom’s giving her stuff away…WHY?”

I have Spring Fever. I have a goal of removing 50 bags of stuff from my home by Easter. If I don’t use it, don’t need it or can’t afford it…it is gone. By “can’t afford it,” I mean “do I really want to store it?” It costs money to store, insure, clean and maintain stuff.

How about you?  Spring is coming! Take a look at YOUR stuff. How much is it costing you to hang on to it?

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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When I’m 65

Several reminders lately have made me well aware of the fact that I am rapidly approaching a certain mile marker…I now qualify for the Senior discounts at restaurants, mail with special offers comes to my home daily, etc. So, when information about the TV series When I’m 65 came across my news feed, I decided I needed to add this to our queue so it will be recorded.

The fact is…we all – no matter our age – really do need to take steps to help secure our financial futures. Consider watching the Iowa Public TV showing of the When I’m 65 on IPTV.1 on Sunday, December 10 at 2 PM. It will be repeated at 3 AM on the 11th. For more information, go to http://www.iptv.org/series/25099/when-im-65/0 .

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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(Financial) Independence Day

Each year we celebrate our nation’s independence and honor the work and sacrifice of those early Americans who made it possible.

Independence (or Freedom, or Liberty – pick the word you like best) isn’t something that just happens.  It takes work, and, yes, sacrifice.  Are you working (and even sacrificing) to achieve your own financial independence?

Personally, I am planning that the day I fully retire will be my “independence day”  – the beginning of the time when I have the freedom to spend my time as I wish, without worrying about living up to the expectations of my employer.  I will have the liberty to spend (or not spend) as I see fit, writing my own paycheck as I see fit. I haven’t set the date yet – it’s 5-10 years away – but I believe that the work I’m doing now and the sacrifices I’m making now will pay off with a new level of liberty, which I will enjoy!

Of course, I will not have unlimited freedom.  I will still need to live within the laws of the land and pay my electric bill if I want to keep the lights on.  But I expect to have considerable freedom to travel and enjoy some leisure activities that are meaningful to me.

What are you willing to sacrifice to ensure you have the freedom you want when you retire?  Check out Retirement Secure Your Future and the Ballpark Estimate of Retirement Savings Needs to move forward toward your independence day!

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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Fiduciary Standards

If I retire today, I have access to accumulated funds in an employer managed retirement fund. I can transfer the money to a private IRA and put it under the management of a financial advisor I select. I could also purchase an annuity; a contract that is offered by an insurance company that operates similar to a pension and would pay me regular monthly income.

I won’t be given a detailed sheet explaining the commissions or fees collected as a result of my choices. I’ll have to trust the guidance provided by the financial advisors I consult and accept that there will be fair compensation for their knowledge and work completed on my behalf.

Today, financial advisors who sell “retirement” classified products must follow the “suitability” standard. They can recommend financial products they reasonably believe are appropriate based on the client’s financial needs, objectives and unique circumstances. A key distinction in terms of loyalty is also important, they can place the interests of their employer and themselves first, not necessarily the client served. It can result in recommendations for products that have higher commissions and fees.

In June, these same financial advisors will be placed under a stricter “fiduciary” standard. The Department of Labor’s definition of a fiduciary demands that advisors act in the best interests of their clients, and to put their clients’ interests above their own. It states that all fees and commissions must be clearly disclosed in dollar form to clients. The advisors are bound legally and ethically to the standard.

The rule change has faced several challenges, but the June 9, 2017 implementation has been announced with a transition period that ends on January 1, 2018. Consumers should see improved disclosure and will have greater control over the fees they pay for retirement-focused financial products.

To learn more visit: http://www.investopedia.com/updates/dol-fiduciary-rule/

 

 

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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How Would Tax Law Changes Impact You?

Everyone is subject to tax laws, so we all have a reason to pay attention to proposals that are being discussed in Washington DC. When changes are introduced, it’s human nature for proponents to emphasize the positive and omit details that might disappoint.  As citizens and consumers, it is wise for us to look beyond the “selling points” and examine the details.

One proposal is to raise the standard deduction and eliminate personal exemptions. Analysis of the proposal by a respected non-partisan organization points out that the move would benefit single individuals and couples, but not large families. It remains to be seen if changes in child care credits will equalize the loss of additional personal exemptions.

Changes in tax rates also have hidden impacts. Analysis once again raises the question of where the income breaks will occur. Using the current tax table, adjusted gross income between $15,000 and $19,625 is taxed at 10%; under the proposed changes, that group would see an increase to 12%.

When deciding on a traditional versus Roth retirement account, one factor individuals consider is whether they expect their taxes to be higher or lower during retirement. If you currently pay taxes in the highest tax brackets, there is a good chance you will see a reduction in tax rate after you retire. Analysis indicates that under the proposed changes, a similar reduction may not be experienced by individuals in the middle or lower income brackets.

We will need more details before we can determine how proposed tax law changes may impact us; in the meantime you can learn what experts in the field predict at the Tax Policy Center.

Joyce

 

 

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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