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eXtension Articles,Faqs- personal finance

Updated: 2017-12-13T02:40:04Z


Getting Extension on the Map: Common Indicators, Common Reporting


The recently released briefing paper, "Cooperative Extension's Capacity to Demonstrate Impact in Financial Capability and Well-Being: A Briefing Paper," is a result of almost two years of collaborative effort by Extension FRM professionals to share and document programmatic similarities across the states in an attempt to develop three programmatic tools: 1) a common logic model, 2) a list of program outputs and outcome indicators, and 3) a crosswalk of NIFA indicators to programmatic indicators provided by participants.

It was shared at a recent Extension pre-conference at the annual Association for Financial Counseling and Planning Education Symposium during a session entitled: Impactful Financial Education: How Cooperative Extension is Making a Difference. Extension professionals from over half of the states attended and embraced the ideas presented. They left the pre-conference enthusiastic about working collectively to show the impact we are having within our local communities and nationally. Plans are in the works to concept test the aggregation of an umbrella indicator during the 2018 calendar year. We are serious about moving these efforts forward.

Please join us by reviewing and sharing the link to this page (or, the individuals documents) with others. We encourage you to visit with the FRM personnel in your state to learn more about these efforts. We welcome your feedback, insights, and support of these efforts as we continue to position initiative FRM programming for the future.

In addition to the Briefing Paper, these additional files are available:

Financial Capability and Well-Being Indicator Crosswalk (pdf)

Financial Capability and Well-Being Indicator Crosswalk (xls) [coming soon]

Financial Capability and Well-Being Logic Model (pdf)

Financial Capability and Well-Being Logic Model (pub) [coming soon]

Specific Financial Capability and Well-Being Indicators (pdf)

Specific Financial Capability and Well-Being Indicators (docx) [coming soon]

Impactful Financial Education: How Cooperative Extension is Making a Difference



Extension Pre-Conference |  2017 AFCPE Symposium

Agenda and Attachments

7:15 am      Registration and Continental Breakfast – Sponsored by NEFE

8:00 am      Welcome and Introductory Activity

Erica Tobe, PhD, Michigan State University Extension

Elizabeth Kiss, PhD, Kansas State University Research and Extension  

8:15 am      Evaluation from a National Program Leader Perspective

Toija Riggins, PhD, USDA NIFA

8:30 am      Evaluation from a State Administrator’s Perspective

Michael Gutter, PhD, University of Florida/IFAS   

8:45 am      Getting Extension on the Map: Common Indicators, Common Reporting

 Maria Pippidis, M.S., University of Delaware Extension

Elizabeth Kiss, PhD, Kansas State University Research and Extension

Suzanne Bartholomae, PhD, Iowa State University Extension

9:15 am      IGNITE Presentations

Moderator: Lorna Saboe-Wounded Head, PhD., SDSU Extension  

9:45 am       Break

10:00 am     Round Table #1

10:15 am     Round Table #2

10:30 am     Debrief – Round Table and IGNITE sessions

Moderators: Elizabeth Kiss, PhD and Lorna Saboe-Wounded Head, PhD  

10:45 am     How to Create an Infographic to Present Evaluation Results

Barbara O’Neill, PhD, Rutgers Cooperative Extension

11:00 am     Create Your Own Infographic

12:00 pm     Lunch and Networking

12:30 pm     Wrap-up

Share - infographics or storyboards

Next steps, Questions

Announcement, Closing Remarks

Data Breaches, Credit Freezes, and Vigilance


Credit Freezes: Description, Pros and Cons, and Contact Information for Credit Reporting Agencies Members of the Financial Security for All Community of Practice (FSA CoP) and our educational partners have developed research-based and experience-tested materials to help Americans deal with the aftermath of the Equifax hack. Below are links to their online blogs and publications: Equifax Security Breach: Steps to Protect Yourself (Lisa Leslie, University of Florida IFAS Extension): To Freeze or Not Freeze My Credit Report (Kathy Sweedler, University of Illinois Extension): Credit Freeze Information in the Wake of the Equifax Hack (Barbara O’Neill, Rutgers Cooperative Extension): Coping With the Aftermath of the Equifax Hack (Barbara O’Neill, Rutgers Cooperative Extension):  Credit Freeze Contact Information (Barbara O’Neill, Rutgers Cooperative Extension): How to be Vigilant in the Aftermath of the Equifax Hack: Part 1 (Securing Bank Accounts and Credit) (Barbara O’Neill, Rutgers Cooperative Extension): How to be Vigilant in the Aftermath of the Equifax Hack: Part 2 (Insurance and Income Taxes) (Barbara O’Neill, Rutgers Cooperative Extension): Protecting Yourself in the Face of a Data Breach (Amanda Woods, Ohio State University Extension): Three Easy Steps to Protect Your Online Identity (National Endowment for Financial Education): Equifax Data Breach -- Steps to Protect (Money Tip$, Iowa State University Extension and Outreach): Equifax Data Breach, What Now? (Karen Lynn Poff, Virginia Cooperative Extension):               [...]

Personal Finance Webinars


Join us for free webinars featuring experts in personal finance. During our upcoming live webinars, you can interact with presenters and pose your own questions. Or you can watch a recording of any of our archived webinar presentations. Most webinars are 90-minutes in length. To participate in an upcoming or archived webinar, simply click on the title of the webinar session, below. Accredited Financial Counselors can earn Continuing Education Units (CEUs) from AFCPE for participating in live or archived webinars. Click here to learn more about earning AFC credits. Upcoming personal finance webinars: Webinar Date/Time Title (Link to Webinar) Presenter(s) AFC Credits December 5, 2017 11:00 am - 12:30 pm EST 2017 Personal Finance Year in Review Barbara O'Neill 1.5 CEUs December 6, 2017 12:30 - 1:30 pm EST America Saves Lindsay Ferguson   January 16, 2018 11:00 am - 12:30 pm EST The Blended Retirement System Launch: Questions & Answers Andy Corso   February 13, 2018 11:00 am - 12:30 pm EST Income Tax Tips for Financial Practitioners and Military Families Martie Gillen, Barbara O'Neill,  Taylor Spangler   March 27, 2018 11:00 am - 12:30 pm EST Getting to Know You: Introducing Personal Finance Managers and Cooperative Extension to Each Other Barbara O'Neill, Fred Davis, Jessica Perdew, Randi Ramcharan, Beth Darius   May 1, 2018   11:00 am - 12:30 pm EST Gender and Finance Martie Gillen, Barbara O'Neill     Archived personal finance webinars: Webinar Date Title (Link to Webinar) Presenter(s) October 31, 2017 Financial Planning Transitions for Different Generations: Touchstones, Tasks, and Teaching Strategies Barbara O'Neill October 3, 2017 CFPB Research - The Greatest Hits Irene Skricki September 12, 2017 Investing Basics & Beyond Barbara O'Neill August 15, 2017 Estate Planning for Families With Special Needs Martie Gillen July 11, 2017  Behavioral Ethics & Personal Finance: A Discussion  of Morality, Bias and Framing Michael Gutter Jerry Buchko June 28, 2017 Financial Education that Works: Principles to Support Financial Well-being Irene Skricki, Maria Jaramillo June 8, 2017 Catch-Up Retirement Planning Strategies Barbara O'Neill June 7, 2017 The New Retirementality Mitch Anthony June 6, 2017 Data Knows Best: What Research Says About Your Client's Retirement Planning Kimberly Blanton May 24, 2017 Overindulgence: How Much is Too Much? Jean Illsley Clarke, Becky Jokela, Kelly Kunkel, Ellie McCann, Lisa Krause May 16, 2017 50 Interactive Personal Finance Learning Activities Barbara O'Neill May 12, 2017 Money Apps: A Review Taylor Spangler April 26, 2017 Family Resource Management and Positive Psychology Cynthia Crawford April 25, 2017 Student Loans & Service Members Carol Kando-Pineda, Patrick Campbell March 22, 2017 Looking for Something New? Expand Your Outreach to New Audiences Kathy Sweedler March 14, 2017 Military Blended Retirement System Andy Corso February 22, 2017 Successful Saving Techniques: Insights from Behavioral Economics Research and Beyond Lauren Jones, Becky Smith, Cazilia Loibl, Khurram Imam February 21, 2017 The Time Value of Money Barbara O'Neill January 25, 2017 Promising Trends in Research: Compelling Talking Points for Educators, Practitioners and Academics Billy J. Hensley January 24, 2017 Foreclosure Process Brenda Long Erica Tobe Teagen Lefere December 14, 2016 Cooperative Extension Family Economics “Virtual Team Huddle” (Numerous presenters) November 8, 2016 Retirement Ready? Effective Strategies for Military Families Part II Sharon Danes, Kacy Mixon,Barbara O'Neill November 1, 2016[...]

IFYF Monthly Investing Messages


  Introduction Unit 1: Basic Building Blocks of Successful Financial Management Unit 2: Investing Basics Unit 3: Finding Money to Invest Unit 4: Ownership Investments Unit 5: Fixed-Income Investing Unit 6: Mutual Fund Investing Unit 7: Tax-Deferred Investments Unit 8: Investing Small Dollar Amounts Unit 9: Getting Help: Investing Resources Unit 10: Selecting Financial Professionals Unit 11: Investment Fraud     Study Guide Action Steps Monthly Investment Messages Glossary Investing For Your Future Monthly Message Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension December 2017 Ten Financial Progress Metrics  At the end of each year or the beginning of another, many people make resolutions to improve their personal finances and other aspects of their lives (e.g., health habits and relationships). If you are one of those who resolve to do better each year, you may be interested in tools and techniques that can help you assess your financial strengths and weaknesses.   The word “metric” is used a lot. According to an online dictionary, a “metric” is “a system of measurement that facilitates the quantification of some particular characteristic.” Many people are interested in measuring their progress or status. Whether it is financial literacy, or school test scores, or lifestyle habits, people to determine know how they “measure up.”   Following are ten commonly used financial planning metrics:   Consumer Debt-To-Income Ratio- Monthly consumer debt expenses (excluding a mortgage) should not exceed 15% of monthly take-home pay.  This includes payments for credit cards, car loans, and student loans. A debt-to-income ratio of 20% or more is considered a “danger zone” and a red flag for financial distress.   Credit Score- The higher the number, the better. FICO credit scores range from 300 to 850 with those in the 760+ range considered the best evidence of creditworthiness. People with high credit scores generally pay lower interest rates to borrow money than others. Two key scoring factors are debt payment history and amount of available credit used.   Emergency Fund- Financial experts generally recommend having access to enough cash to cover household expenses for at least three to six months. This money can be a combination of liquid assets (e.g., money market fund) and lines of credit (e.g., home equity line). Emergency fund adequacy is measured with a liquidity ratio: liquid assets divided by monthly expenses. Example: $10,000 ÷ $3,000 = 3.33. The result indicates how many months of living expenses can be paid from readily available cash in the event of an emergency. The higher the ratio multiple (e.g., 10 vs. 2), the better.   Expense Ratios- An expense ratio is the percentage of mutual fund assets deducted for management and operating expenses. It is found in a fund’s prospectus. The lower the expense ratio percentage, the less investors pay; for example 0.20 (1/5 of 1%) versus 1.5%. High expense ratios are a drag on investment returns and should generally be avoided.   Inflation Rate- Some people use the annual inflation rate (measured by the Consumer Price Index , CPI) as a benchmark and try to have the average annual return on all of their investments, combined, outpace the CPI by a certain percentage.   Investment Returns on Specific Securities- Investment performance is generally tracked against benchmark market indexes. Indexes are portfolios of stocks or bonds that are tracked to monitor investment performance. Some common indexes used to measure investment performance against include the Standard and Poor’s 500 (tracks 500 large U.S. company[...]

Archived Monthly Investing Messages


Introduction Unit 1: Basic Building Blocks of Successful Financial Management Unit 2: Investing Basics Unit 3: Finding Money to Invest Unit 4: Ownership Investments Unit 5: Fixed-Income Investing Unit 6: Mutual Fund Investing Unit 7: Tax-Deferred Investments Unit 8: Investing Small Dollar Amounts Unit 9: Getting Help: Investing Resources Unit 10: Selecting Financial Professionals Unit 11: Investment Fraud     Study Guide Action Steps Monthly Investment Messages Glossary Investing For Your Future Monthly IFYF Investment Message Archive Monthly Investment Message November 2017 Monthly Investment Message October 2017 Monthly Investment Message September 2017 Monthly Investment Message August 2017 Monthly Investment Message July 2017 Monthly Investment Message June 2017 Monthly Investment Message May 2017 Monthly Investment Message April 2017 Monthly Investment Message March 2017 Monthly Investment Message February 2017 Monthly Investment Message January 2017 Monthly Investment Message December 2016 Monthly Investment Message November 2016 Monthly Investment Message October 2016 Monthly Investment Message September 2016 Monthly Investment Message August 2016 Monthly Investment Message July 2016 Monthly Investment Message June 2016 Monthly Investment Message May 2016 Monthly Investment Message April 2016 Monthly Investment Message March 2016 Monthly Investment Message February 2016 Monthly Investment Message January 2016 Monthly Investment Message December 2015 Monthly Investment Message November 2015 Monthly Investment Message October 2015 Monthly Investment Message September 2015 Monthly Investment Message August 2015 Monthly Investment Message July 2015 Monthly Investment Message June 2015 Monthly Investment Message May 2015 Monthly Investment Message April 2015 Monthly Investment Message March 2015 Monthly Investment Message February 2015 Monthly Investment Message January 2015 Monthly Investment Message December 2014 Monthly Investment Message November 2014 Monthly Investment Message October 2014 Monthly Investment Message September 2014 Monthly Investment Message August 2014 Monthly Investment Message July 2014 Monthly Investment Message June 2014 Monthly Investment Message May 2014 Monthly Investment Message April 2014 Monthly Investment Message March 2014 Monthly Investment Message February 2014 Monthly Investment Message January 2014 Monthy Investment Message December 2013 Monthly Investment Message November 2013 Monthly Investment Message October 2013 Monthly Investment Message September 2013 Monthly Investment Message August 2013 Monthly Investment Message July 2013 Monthly Investment Message June 2013 Monthly Investment Message May 2013 Monthly Investment Message April 2013 Monthly Investment Message March 2013 Monthly Investment Message February 2013 Monthly Investment Message January 2013 Monthly Investment Message December 2012 Monthly Investment Message November 2012 Monthly Investment Message October 2012 Monthly Investment Message September 2012 Monthly Investment Message August 2012 Monthly Investment Message July 2012 Monthly Investment Message June 2012 Monthly Investment Message May 2012 Monthly Investment Messsage April 2012 Monthly Investment Message March 2012 Monthly Investment Message Feb 2012 Monthly Investment Message Jan 2012 Monthly Investment Message Dec 2011 Monthly Investment Message Nov 2011 Monthly Investment Message Oct 2011 Monthly Investme[...]

Monthly Investment Message: November 2017


Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension November 2017 The Benefits of Financial Health This article is adapted from a previously written blog post for the eXtension Military Families Learning Network: After a successful course of treatment, many doctors tell their patients that their physical health status is NED, which is doctor-speak for No Evidence of Disease. The same NED acronym can also be applied to a person’s financial health: No Evidence of Distress. Financially healthy people with financial well-being are comfortable in the present (e.g., ability to pay bills and freedom to make choices) and on track for a secure future (e.g., resilience to pay for unexpected expenses and savings for financial goals).   According to the Consumer Financial Protection Bureau, there are four elements of financial well-being: feeling in control, capacity to absorb a financial “shock” (e,g., car accident), being on track to meet goals, and flexibility to make choices. This definition was developed  by reviewing research literature, expert opinion, and in-depth, one-on-one interviews with working-age and older consumers. The CFPB report is available online at   Financial health gives people options, opportunity, and the capacity to bounce back from life’s inevitable challenges such as unemployment, disability, a car breakdown, a sick pet…or cancer. There are many metrics to measure financial health including incremental changes in net worth (assets minus debts), a cash flow statement (income and expenses), debt-to-income ratios, progress toward the achievement of financial goals, and scores on the Rutgers Cooperative Extension Financial Fitness Quiz:    Financial health matters… to everyone. Top 1%, bottom quintile, or any income category in between, the United States is stronger as a country when people are financially healthy:   Financially Independent Citizens- Less burden on government services that everyone pays for. Happier People- Less anger about the American Dream slipping away and “haves” vs. “have nots.” Better Physical Health- Resources for healthier eating, medical care, and periodic screening exams. Stronger Economy- Resilience during economic downturns and more investors and shoppers. Fewer Predatory Loans- Less need for high-cost payday and car title lenders and check cashers.   How can Americans build financial health? By doing something- anything- that improves your finances. Any step forward is progress. Learning something new about personal finance every day, saving something in a 401(k), and building an emergency fund $1 at a time, if necessary. It all adds up.   Savings is a key factor in financial health. Other things that build financial health are:   Planning- Studies done by me and others have found an association between planning behavior (e.g., setting goals and making lists) and positive financial practices.   Prevention- Financially healthy people increase their resilience with low debt-to-income ratios and adequate insurance and emergency savings.   Progress- This means “moving the needle” forward every day with positive actions such as saving spare change in a can or jar and reducing expenses to “find” money to repay debt.   Persistence-It generally takes hard work, optimism, and discipline to become financially healthy. Perserverance during tough times and some pain (e.g., spending less to save more) is necessary.   Paychecks- Financial health requires income from an employer and/or self-employment. In later life, savings helps people create a [...]

Financial Security for All Research


Family Economics Research Family economics research focuses on how individuals and families obtain and use resources of money, time, human capital, material resources, and community services. The research also explores the relationship between individuals and families and the larger economy and studies the impact of public issues, policies, and programs on family economic well-being. This area provides research summaries of current research in family economics (with links to the complete article, if available).   Research Summaries Currently Available by Topic: Credit  Consumers' Accuracy in Estimating Their Credit Ratings Convenience Use of Credit Cards Credit Card Ownership by High School Seniors Forbearance Plans for Credit Card Accounts Debt Completing Debt Management Plans Consumer Debt Repayment and Bankruptcy What are Student Loan Borrowers Thinking? Insights from Focus Groups on College Selection and Student Loan Decision Making Deployment A Profile of Grandparents Raising Grandchildren as a Result of Parental Military Deployment Financial Literacy for Children and Young Adults Parental Influence and Teens’ Attitude Toward Online Privacy Protection Teacher Training in Personal Finance and Student’s Test Scores Teens' Financial Knowledge and Behavior Effects of Personal Financial Knowledge on College Students' Credit Card Behavior  Financial Information and Its Relationship to Knowledge and Behavior of Teens Financial Behavior and College Performance Fiscal Support for Financial Education in Schools Financial Values of Middle School Students Financial Planning  Assessing Financial Wellness Educating Widows in Personal Financial Planning Factors Related to Being in Higher Income Categories Financial Planning Personality Type Financial Risk-Taking Behavior High School Economic Education and Access to Financial Services How Financial Assets and Consumer Debt Influence Marital Conflict Impact of Financial Literacy Education Impact of Personal Finance Education Teachers’ Preparation for Teaching Personal Finance Wealth and the Acquisition of Financial Literacy Wills, Trusts and Charitable Estate Planning Women in Business-Owning Families Home Ownership Asset Ownership by Black and White Families Consumer Empowerment and Welfare with Respect to Mortgage Servicers Housing Costs and Economic Hardship for Low-Income Families Identifying Weaknesses in Practitioners’ Housing Affordability Indices Mortgage Professionals' Perspectives on Abusive and Predatory Lending Investment  Assessing Farm Households’ Investment Education Needs Automated Saving and Investing Strategies Decrease in Stock Ownership by Minority Households Effects of Capital Accumulation Ratio on Wealth Effects of Information on Consumers' Perceptions of Mutual Funds Measuring Financial Risk Tolerance Racial/Ethnic Differences in High Return Investment Ownership Risk Tolerance and Investments of Business Owners Women’s Investment Decision-Making Marriage Couples’ Money Management Behavior and Relationship Satisfaction Spousal Differences in Financial Risk Tolerance Linking Financial Strain to Marital Instability  Gendered Meanings of Assets for Divorce  Poverty Behavior Change Among Savings Program Participants Encouraging Savings by Low-Income Individuals Financial Education for Bankrupt Families Food Insecurity of Low-income Families Impact of Social and Financial Resources on Hardship Social and Financial Capital Resources Can Lessen Hardships Retirement Determinants of Asset Allocation Strategies for Retirement Saving Impact of Health on Financial Security of Older Americans Managing a Retirement Portfolio: Do Annuities Provide More Safety? Renters’ Preparation for Retirement Savings A Framework for Promoting Retirement Savings Automated Saving and Investing Strat[...]

Monthly Investment Message: September 2017


Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension September 2017 Health Savings Accounts (HSAs): An Investment Opportunity? Health Savings Accounts (HSAs) are a way that people can pay for unreimbursed medical expenses such as deductibles, co-payments, and services not covered by insurance. Eligible individuals can establish and fund these accounts only when they have a qualifying high-deductible health plan (HDHP). This means insurance with a deductible of at least $1,300 for individual coverage and $2,600 for family coverage (2017 figures). HSAs were created in 2003 so that individuals covered by HDHPs could receive tax-advantaged treatment for money set aside to pay for medical expenses. HSA tax advantages that can be substantial, and go well beyond paying for health care, especially for people in good health with relatively low outlays for medical expenses: 1) Contributions are deductible (or excluded from income that is taxable if made by an employer) 2) Withdrawals are not taxed if used for medical expenses 3) Earnings on the savings account earnings are tax-exempt 4) Unspent balances may accumulate without a maximum limit In other words, HSA money gets deposited tax-free, grows tax-free, and comes out tax-free, if used for health care expenses. As long as funds are saved and spent on qualified medical expenses, all contributions, capital gains, and withdrawals remain untaxed. Like many other bank accounts, HSAs come complete with debit cards and checks with which to pay out-of-pocket health care costs. Individuals interested in establishing an HSA must locate an entity that accepts the accounts; they cannot simply call an ordinary savings account an HSA. Two types of contributions may be made to HSAs: regular and catch-up. The annual contribution limit for an HSA for individual coverage is $3,400 in 2017. The annual limit for family coverage is $6,750. For individuals between 55 and 64, additional "catch-up" contributions to an HSA are allowed. The dollar amount is an extra $1,000 in 2017. The maximum contribution limits are adjusted for inflation and rounded to the nearest $50. Although there are no “guarantees,” living a healthy lifestyle is the best thing people can do to control health care costs. HSA owners will likely do better than break even if they are in good health. With savings on health care costs, they may be able to accumulate a sizeable nest egg. Unlike flexible spending accounts (FSAs), HSAs are not subject to a "use it or lose it" policy. Anything not spent one year carries over to the next year. About 25% of U.S. workers have HSAs. HSA funds may be put into investments approved for IRAs, such as bank accounts, annuities, certificates of deposit, stocks, mutual funds, and bonds. No matter how many times workers change employers, their account is fully portable. Account owners are immediately and fully vested. All contributions made by an employer belong to the account holder. Withdrawals not used for qualified medical expenses are included in gross income on federal income tax forms and are also subject to a 20% penalty tax. The penalty is waived in cases of disability or death and for individuals age 65 and older. After age 65, the money can be used without penalty for non-medical purposes. If the owner of an HSA account dies before funds are spent and has a surviving spouse, it becomes a HSA for that widow or widower. If someone other than a surviving spouse is the designated beneficiary, the HSA is terminated as of the date of death and the fair market value becomes taxable income to that person. If there is no designated beneficiary, the remaining assets become part of the deceased's estate. A study published in the Journal of Financial Planning in 2016 found that the tax savin[...]

Financial Security for All Contents


Hot Topics: Data Breaches, Credit Freezes, and Vigilance Money Management in Times of Disaster Student Loans Military Money: Military Families Learning Network Small Steps to Health and Wealth Affordable Care Act Children and Money Consumer Credit Consumer Education Estate Planning Financial Planning Process Health Finance Health Insurance FAQs Home Ownership Insurance Legal Topics Lifestyle Transitions Managing Money in Tough Times Money Emotions Money Smart Week Paying for College Research on Family Economics Retirement Planning Saving and Investing Talking About Money Finance Calculators Partners [...]

If a Disaster Strikes, Could Your Finances Weather The Storm?


Managing Finances in Times of Disaster As the process of healing and rebuilding continues ever so slowly in areas ravaged by Hurricane Harvey and Hurricane Irma, many of us are taking a closer look at our own lives. While most of us don't live in hurricane-prone areas, we are all reminded of the possibility of disaster knocking at our door. Mother Nature may provide the most striking examples with hurricanes, earthquakes and tsunamis, but a house fire, car accident, serious illness, flooding or a lost job could prove just as devastating. We all hope it never does, but if disaster should strike, finances are the last thing you'll want to worry about. You can make it easier on yourself, and your loved ones, if your finances are in order. Disaster-proof your finances with a budget. Here are a few suggestions to help in the same Create a Monthly Spending Plan The US Bureau of Economic Analysis estimates that personal savings as a percentage of disposable personal income has been less than 4 percent in 2017. If you're on par for average here, you probably won't need to wait for Mother Nature to create a disaster, you're creating your own. Create a Budget, and Stick to It Since budgets are in that same category as diets – most of us begin one every January and are done by February – you need to find one that works for you in order to stick with it. For most of us, that means finding a software program that is automatic and able to easily track transactions from multiple checking accounts, debit cards and credit cards. But even if you use cash and the paper envelope method of budgeting, create a spending plan, and stick to it. Make sure you set aside some money for personal spending for those impulse buys. This will give you some freedom without negatively affecting your overall plan. Back up your Financial Records, or use a Web-based System If you are not taking advantage of the Internet to track and control your finances, you may be taking an unnecessary gamble. PC-based systems, as well as paper, can be destroyed in a disaster. In a column for the Baltimore Sun, titled "Flood might destroy your PC, but not off-site backup files," Mike Himowitz described how even a broken water pipe or a small house fire could destroy your computer, and the records held on it. "More importantly, with online banking, you can access your account and pay bills from any PC that has an Internet connection," stated Himowitz. "One of the main concerns voiced by those who fled their homes to escape Hurricane Katrina is that they have no access to their money and no physical way to pay their bills. With online transactions, your physical location - and the location of the PC you're using - no longer matter." Himowitz suggests that using a storage company to provide online backup, although pricey, can be a wise investment. However, for far less money, you can also use a secure online spending management program, like Mvelopes Personal ( It will help track and control your finances, and pay your bills from any computer with an Internet connection – and you don't have to worry about expensive backup storage. Create an Emergency Fund Set aside the equivalent of three to six months' living expenses in an emergency fund. An easily accessible emergency fund is one of the single most important things you can do for your financial wellbeing. In the event that disaster strikes, if you don't have enough set aside to cover basic living expenses, including mortgage, food, and car payments, things could quickly go from bad to worse. If setting aside this much money seems unattainable, start small. Cut out those daily trips to the vending machine. You'll be amazed how quickly the money adds up. Use cash gifts, tax refunds and annual bonuses to build your f[...]

Monthly Investment Message: August 2017


Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension August 2017 Retirement Planning is a 40-Year Journey The retirement planning process has been described as a “40 (or more) year journey” from the start of someone’s working life in their 20s through retirement in their 60s (or beyond). However, it is actually much longer, if you consider how long someone can live during retirement. Unlike shorter-term financial planning goals like buying a car, a house, or saving for a child’s education, retirement planning can literally take place for seven or eight decades from the start to the end of someone’s adult life (e.g., 20s through 80s or 90s).   Workplace retirement planning programs often target a wide swath of worker demographics ranging from recent college graduates in their 20s to soon-to-retire employees in their 50s, 60s, and beyond. Financial objectives for each group are different, however. The focus for young adults is saving early and often, preferably with automated retirement savings plan deposits. Other key topics for young adults are repaying student loan debt and basic investing principles to make informed retirement plan investment decisions.   For older workers, the focus of financial education efforts tends to shift to retirement income catch-up strategies, the question of “Have I saved enough money?” the mechanics of applying for retirement income benefits (e.g., Social Security and/or a pension) and making withdrawals from tax-deferred savings plans to comply with IRS required minimum distribution (RMD) regulations and to avoid outliving one’s assets. Older late savers are also often seeking creative options to stretch their retirement savings throughout their lifetime.   Regardless of someone’s stage in life and where they are on their retirement planning journey, five retirement planning principles are timeless and apply to everyone:   First, Get Started- Set a goal and make a savings plan. Determine your retirement savings need with a Ballpark Estimate calculation (see below) and then develop an action plan to save the required amount.   Save Early and Often- Set up automatic savings plans through an employer and/or investment company so that deposits are made regularly (e.g., 5% of income every payday), regardless of stock market conditions.    Invest Part of a Raise- When you get a raise, bonus, freelance work pay, or other increase in income, invest half of it. If your employer offers “auto escalation,” sign up so that raises take effect automatically.   Don’t Delay Any Further- It’s never too late to start investing for retirement. If you haven’t saved anything yet for retirement, the best day to get started is today.   Stay Educated About Retirement Planning- Changes to Social Security rules and retirement savings plans are not unusual so it is important to stay up to date via financial publications, media, social media, etc.   There are many available websites that can help people with personalized retirement planning calculations and other planning tasks related to retirement planning.  Below are three examples:   Ballpark Estimate (American Savings Education Council):  Provides a rough estimate of the amount of money that someone needs to save for retirement.   Compound Interest Calculator: Shows what an investment deposit will grow to at a specific interest rate over a specific number of years.   Life Expectancy Calculator:[...]

Monthly Investment Message: June 2017


Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension June 2017 Income Taxes on Investment Profits A high priority financial goal for many people is to have a comfortable lifestyle in later life. Investing can help. Most people do not become wealthy from their earnings alone but, rather, by investing a portion of their income and letting it grow for several decades. Through a combination of regular investment deposits and compound interest, it is possible to build a large amount of wealth over time.   With investing earnings come income taxes, however. An exception is interest earned on municipal bonds, which are tax-exempt at the federal, and perhaps state and local, level. Roth IRA earnings are also not taxed if certain conditions are met. When an investor sells securities- even municipal bonds- and earns a profit, capital gains are realized and income tax is due. A capital gain is defined as the increase in value of a capital asset such as real estate or investments (e.g., stocks and mutual funds). In other words, people realize capital gains when they “buy low” (e.g., stock purchased for $10 a share) and “sell high” (e.g., stock sold for $20 a share).   When investors sell a capital asset, the difference between its basis (generally the amount paid for it) and its sale price is a capital gain or loss. Capital gains may be short- or long-term. A short-term capital gain is a gain made on capital assets that are held for a year or less and a long-term gain is a gain on assets held more than one year. Both types of capital gains must be claimed on tax returns that determine an investor’s income tax payment.   It is often wise for investors, especially those with significant assets, to monitor their tax withholding status. If additional withholding is needed to cover the taxes due on investment gains, investors have two possible strategies. One is to set aside a portion of their investment profit and use it to pay quarterly estimated taxes to the IRS. The other is to have more tax withholding taken out of their paychecks with which to pay taxes.   Short-term capital gains are taxed as “ordinary income” (i.e., income other than long-term capital gains, such as salaries) based on an investor’s marginal tax rate which is determined by tax filing status (e.g., single, married filing jointly, etc.) and household taxable income. Long-term capital gains are taxed at a lower capital gains tax rate which is determined by an investor’s marginal tax rate. Long-term capital gains tax rates range from 0% to 20%, depending on an investor’s financial status.   Taxpayers in the 10% and 15% federal marginal tax brackets pay a 0% long-term capital gains (LTCG) tax rate and most taxpayers qualify for the 15% LTCG rate, which covers taxpayers in the wide swath of the 25%, 28%, 33%, and 35% tax brackets. The highest LTCG tax rate is 20%, which is paid by high-earning investors in the highest (39.6% rate) federal income tax bracket. State income tax rates on investment profits vary among states.   Mutual fund investors can also earn taxable capital gains when the funds that they invest in sell securities and realize a profit.  In other words, the gain is realized by a mutual fund itself rather than by individual investors who sell securities profitably. In this situation, investors receive a 1099-DIV form from the fund that lists the amount of the capital gain distribution and the amounts that are classified as short-term and long-term.   If capital losses exceed capital gains, the excess can be deducted on a tax return, and used to reduce other income up to an annual limit of $3,000. If the total ne[...]

Monthly Investment Message: May 2017


Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension May 2017 The Benefits of Being a Future-Minded Planner Want to be a successful investor? Develop your future-mindedness. That is the conclusion of a recent study that found a connection between positive financial behaviors, such as saving and investing, and impulsiveness and materialism. When people focus on their future they tend to be less impulsive spenders, regardless of their level of financial literacy. In fact, the strongest predictor of good financial decisions in the study was not financial literacy, but focus on the future. Other studies have found similar results, which is not surprising because personality traits affect patterns of thinking and behaving and are relatively stable over time. A 2015 study found that having a long planning horizon plays an important role in explaining household asset accumulation and financial security. In addition, the study found that households with an older white male head, married spouses, and people who have more years of education had higher odds of having a longer planning horizon. The annual Savings Survey conducted by the Consumer Federation of America has consistently found that people with a “savings plan with specific goals” save more successfully than those without a plan. People who are planners are goal-oriented, careful about spending money, and more likely than non-planners to make savings progress and have sufficient savings for emergencies and retirement. Many people who are planners make “to-do” lists to keep track of the tasks they plan to accomplish, meet deadlines, and schedule time wisely. A 2003 study explored the financial impacts of a household’s “propensity to plan” and found that those with a higher planning propensity spend more time developing financial plans and that this planning is associated with increased wealth. The authors noted that “planners” may be better able to control their spending, and thereby achieve their goal of wealth accumulation. A very strong relationship was uncovered between people’s propensity to plan and budgeting behavior. Another study found that people who reported frequent planning behavior also performed a variety of positive health and financial practices more frequently. Additional evidence of the positive impact of planning was found in a study of the retirement preparation of two age cohorts at two points in time. Planners in both cohorts arrived close to retirement with much higher wealth levels and displayed higher financial literacy than non-planners, even after controlling for many sociodemographic factors. The co-authors concluded that differences in planning behavior helped explain why household retirement assets differed and why some people have very little or no wealth close to retirement. Several organizations have recently conducted research to classify people according to their financial practices in an attempt to identify attributes of financially successful people. Each entity has used a different term to describe a positive constellation of financial behaviors: Financial Well-Being (Consumer Financial Protection Bureau or CFPB), Financial Health (Center for Financial Services Innovation or CFSI), and Financial Capability (FINRA Investor Education Foundation). All of these groups include goal-setting and future planning in their descriptions of financially successful people. For example, people with financial well-being “are setting goals that are important to them and working toward those goals whether or not they have a formal financial plan,” according to the CFPB, and “planning [...]

Monthly Investment Message: April 2017


Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension April 2017 The Rule of 72: Applications for Investors To quickly estimate how long it will take for a sum of money to double, divide 72 by the expected interest rate that can be earned on a savings or investment product. For example, $2,000 placed in an IRA invested in a stock mutual fund would grow to $4,000 in nine years at an 8% average annual return (72 divided by 8). The Rule of 72 assumes that the interest rate stays the same for the life of an investment and that all earnings are reinvested.   Let’s look at how $2,000 could grow over an investor’s lifetime. If a $2,000 investment is made at age 22 and earns an average 8% return, an investor would have the following amounts:   $4,000 at age 31 (nine years later) $8,000 at age 40 (nine more years) $16,000 at age 49 (nine more years) $32,000 at age 58 (nine more years) $64,000 at age 67 (nine more years)   Note that age 67 is currently the full retirement age (FRA) for persons born in 1960 or later to receive an unreduced Social Security benefit. It is, thus, a target retirement age for many young adults.   If a $2,000 investment is made at age 31, instead of age 22, and earns an average 8% return, an investor would have the following amounts:   $4,000 at age 40 (nine years later) $8,000 at age 49 (nine more years) $16,000 at age 58 (nine more years) $32,000 at age 67 (nine more years)   Note that the late starter’s savings is just half of the first investor’s amount. The second investor lost the last doubling period, where the real payoff occurs, by waiting an extra decade to start investing. In other words, procrastination is very costly. Compound interest is very much like the final questions on the initial Who Wants to be a Millionnaire? game show format, where large dollar amounts get doubled on the final questions.   You can also use the Rule of 72 to estimate the interest rate required to double a sum of money. Divide the desired number of years desired to reach a financial goal into 72 to estimate the interest rate that is needed to achieve a financial goal on time. For example, if you want to double your money in ten years, you’ll need to earn 7.2% (72 divided by 10).  To double money in eight years, you’ll need to earn 9%. The higher the interest rate, the faster a sum of money will double.   A third use of the Rule of 72 is to determine the effects of inflation on a sum of money. By dividing an assumed inflation rate, say 4%, you can see that the purchasing power of a dollar will be cut in half every 18 years (72 divided by 4). The Rule of 72 shows that, even with a relatively low rate of inflation, prices will rise and cut purchasing power significantly over time. This is especially important for retirees living on a fixed income to understand. Their retirement savings will lose ground if their after-tax rate of return doesn’t outpace inflation. Sadly, $2,000 placed in a certificate of deposit (CD) earning 1% will double to $4,000 in 72 years.   A helpful tool to quickly do Rule of 72 calculations is the online MoneyChimp calculator at   The calculator also includes simple estimates for other growth factors such as tripling or quadrupling a sum of money.   Check out our Archived Monthly Investing Messages [...]

Monthly Investment Message: March 2017


Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension March 2017 Don’t Overwithhold Income Tax Money- Invest It Many people deliberately have extra federal and state income taxes withheld from their paychecks. Two advantages of overwithholding are that there’s no access to this money and, therefore, it can’t be spent recklessly, and the refund makes a nice windfall once a year to pay off debts or buy “big ticket” items. Two disadvantages are that taxpayers must wait a year to collect their money and the government pays no interest.   Perhaps the biggest disadvantage, however, of overwithholding is the risk of having a tax refund delayed as a victim of tax identity theft. This happens when fraudsters use stolen personal identification information (e.g., name and Social Security number) to file a fraudulent tax return claiming a fraudulent refund. Victims can wait months for their money as they take steps to file paperwork to verify their identity with the IRS. Tax identity theft is a commonly reported type of identity theft according to the Federal Trade Commission (FTC).   Tax liability, or the amount that a person owes, is based on taxable income and tax deductions, exemptions, and credits.  A small refund, say $500 or less, may be fine, but if you’re getting back more, you’re losing foregone interest on money that could have been saved.  You also run the risk of having to wait for a large sum of money if you are an identity theft victim. Social Security numbers are often obtained illegally through database hackings that people have no control over.   The amount of the income tax withholding is based on the number of allowances that a person notes on their W-4 form that is filed with their employer. Essentially, if income taxes are overwithheld, a paycheck is smaller, and a tax refund is larger.  In simple terms, tax withholding can be explained this way: More withholding = Smaller paycheck = Bigger tax refund Less withholding = Larger paycheck = Smaller tax refund or taxes owed to the IRS   W-4 forms are required the first day on a job. The Employee’s Withholding Allowance Certificate section on the bottom of the W-4 form tells employers how much tax to withhold based on a formula from the IRS.  Anyone can change their W-4 form at any time with their employer and undo their overwithholding. Just be careful not to overdo it. Essentially, taxpayers must pay 90% of their current year tax liability to avoid a penalty plus interest.  However, there is a “safe harbor” exception rule: no penalties are due if a taxpayer paid at least as much (i.e., 100%) of their prior year’s tax bill (i.e., the tax due shown on their prior year’s tax return) or 110% of the prior year’s tax amount if adjusted gross income (AGI) was more than $150,000.   Employees can also request to have additional taxes withheld from a paycheck to cover taxes owed on taxable income such as capital gains, investments, and self-employment.  For example, they could put “0 allowances + $50” on their W-4 form. Another reason to have extra taxes withheld is the “marriage tax” where married couples with two employed spouses pay more tax together than they would if each spouse filed as a single taxpayer. This is especially true if each spouse has a similar income such as two spouses earning $35,000 for a total combined gross income of $70,000.   In cases where workers are self-employed, similar types of calculations are required. However, in this case, tax payments are estimated and remitted directly to the IRS rather than b[...]

What are Student Loan Borrowers Thinking? Insights from Focus Groups on College Selection and Student Loan Decision Making


Johnson, C. L., O’Neill, B., Worthy, S., Lown, J. M., Bowen, C. F. (2016). What are student loan borrowers thinking? Insights from focus groups on college selection and student loan decision making. Journal of Financial Counseling and Planning, 27(2), 184-198.

Brief Description: This study used data from online focus groups to understand college students’ decision-making process when borrowing money to finance their education. Respondents were asked eight questions regarding their college selection and student loan decision-making. Results suggest that (a) students relied heavily on advice from parents, guidance counselors, and friends; (b) attending college was not possible without student loans; and (c) students knew very little about the loans they would be responsible for repaying.

Implications: The collected qualitative data paints a picture of students who felt they had no other choice but to borrow money to invest in their human capital to secure a better future. Financial educators and counselors should help student loan borrowers make informed decisions about education and debt. The authors determined the following areas to be important for practitioners: simplify student loan decisions; provide “reputation resources”; increase loan repayment awareness; increase online student loan resource awareness; address the social and emotional impacts; explore cost reduction alternatives; explore differentiation techniques; discourage frivolous spending of student loan refunds; explore graduate school funding resources; and encourage immediate savings.

Monthly Investment Message: February 2017


Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension February 2017 Factors That Affect Investment Risk Tolerance To help investors objectively assess their investment risk tolerance, Rutgers Cooperative Extension has an online Investment Risk Tolerance Quiz at  Developed by Dr. Ruth Lytton at Virginia Tech and Dr. John Grable at the University of Georgia, the quiz has 13 multiple choice questions and provides users with instant feedback about their capacity to handle investment risk.    The questions on the quiz are based on both thoughts about risk in hypothetical situations and current investing behavior. The higher a quiz taker’s total score, the greater the level of investment risk tolerance.  Investors with a high risk tolerance are generally more comfortable than others keeping a large percentage of their portfolio in stocks (or stock mutual funds) and less likely to panic and sell during market downturns.    What factors determine investment risk tolerance?  This question is the subject of much research. Women have often been found to be more conservative investors than men and people are generally less fearful in situations where they have some knowledge and/or experience. Below are factors that can affect investment risk-taking:   Emergency Savings- Investors with adequate cash reserves can handle more investment risk than those with meager emergency savings. An adequate emergency fund is an important pre-requisite for investing.   Investment Objectives- People with long-term financial goals, such as retirement savings, often invest more aggressively than those with short-term goals that require safety of principal.   Time Horizon- Investors with five to ten (or more) years until a financial goal have time to recoup a loss and can afford to invest more aggressively. Ditto for younger investors who have time on their side.   Net Worth- Investors can afford to take more risk when they have more assets. Investing your only $5,000 is very different than investing $5,000 when you have $100,000 more.   The Sleep Test- Conservative investors cannot stand as much anxiety related to the performance of their investments as aggressive investors and still be able to sleep at night.   Risk-Taking Propensity- Studies have found that people who are less inclined to take risks in daily life tend to choose conservative or moderate investments, while those inclined to take risks invest more aggressively.   Stock Market Performance- Studies have found that people tend to say they have a higher investment risk tolerance when the stock market is performing well and feel the opposite way during market downturns.   It is important to remember that there is no such thing as a risk-free investment.  All savings and investment products have some type of risk.  An example is purchasing power risk for cash assets, such as CDs and Treasury bills.  Because they earn a relatively low taxable return, inflation can erode their value over time.   Another common type of investment risk, found in fixed-income investments such as bonds, is interest rate risk.  This is the inverse relationship between bond prices and interest rates.  When interest rates rise, bond prices fall, and vice versa. In a rising interest rate environment, investors can lose money if bonds are sold prior to maturity.   Stock investors face market risk, which is the risk that the price of individual securiti[...]

What Are the Minimum and Maximum Amounts That Can be Saved Each Year in an IRA?


Federal tax law limits 2017 contributions to a traditional and/or Roth IRA to $5,500 for a worker with earned income ($6,500 for those who are age 50 or older before the end of the year). An additional $5,500 can also be saved for a worker’s spouse, regardless of whether or not the spouse is employed. In addition, spouses who are age 50 or older can contribute an additional $1,000 ($6,500 total) for a total of $13,000 of contributions if both individuals are age 50 and older.

If you don’t have this much money available to contribute, that’s okay. Simply save whatever you can, subject to minimum deposit amounts required by an IRA custodian (e.g., bank or mutual fund). Any savings is better than no savings! Minimum deposits required to set up an IRA vary with the financial institution and type of investment. For example, a bank may require a minimum of $500 to purchase a CD for an IRA and a mutual fund may require a $1,000 minimum deposit or higher.

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Are Accounts at a Bank Combined for FDIC Insurance?


The Federal Deposit Insurance Corporation (FDIC) guarantees that bank deposits up to $250,000 are safe. All of your single accounts at the same FDIC-insured bank are added together, and the total is insured for up to $250,000. For retirement savings accounts, the limit for FDIC insurance is also $250,000. All of your self-directed retirement savings accounts at the same insured bank are added together and the total is insured for up to $250,000.

This FDIC fact sheet explains the maximum insurance coverage available for various types of accounts:

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How Long Can Negative Information Remain in a Credit Report?


A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for up to 10 years.

There is no time limit on reporting information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance.

Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations for your state of residence runs out, whichever is longer.

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Can You Make a Tax-Free 529 Plan Contribution Larger Than the Annual Gift Tax Exclusion?


Although the IRS typically allows people to gift no more than $14,000 a year (2017 figure) to another person without a federal gift tax, you can contribute up to $70,000 to a 529 plan in one year. A special tax law allows you to aggregate five years of the allowable $14,000 annual gift-tax exclusion (5 x $14,000 = $70,000) to jump-start a 529 plan.

While you will not be able to make any further gifts to the 529 plan for the next five years, this strategy often has merit for donors who can afford it. Depending on the investment options that are selected, compounding can potentially make the earnings on a 529 account grow faster than if a donor invested $14,000 annually in each of the next five years.

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When Can Someone Withdraw Money from a Roth IRA Without Owing Income Taxes?


You can withdraw money that you have contributed to a Roth IRA (i.e., your own money) at any time because the account was funded with after-tax dollars on which income taxes were already paid.

You can withdraw the earnings from a Roth IRA tax free in the following situations:

1. You have reached the age of 59½, and at least five years have passed since your Roth IRA account was opened. Earnings can be withdrawn tax-free beginning on the first day of the fifth taxable year after the year the Roth IRA was established. That means January 1, 2022 for Roth IRAs established in 2017.

2. You want to use the money to become a "first-time homeowner," which means someone who has not owned a house during the past two years. Withdrawals of up to $10,000 are allowed.

3. You are disabled. In addition, if a Roth IRA owner dies, his or her named beneficiaries can make tax-free withdrawals.

For more information about Roth IRAs, see

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What is the Required Minimum Distribution (RMD) Rule for Tax-Deferred Retirement Plans Like IRAs and 401(k)s?


“RMD” is an abbreviation for “required minimum distribution.” This is the amount of money that retirees age 70½ and older are required to withdraw from their tax-deferred plans such as IRAs and 401(k) and 403(b) plans. RMD rules are serious business. The penalty for not withdrawing the proper amount is a 50% excise tax on the amount not distributed as required. For example, if you don't withdraw a required $1,000 from your traditional IRA or tax-deferred employer plan, the tax penalty is $500. For a taxpayer in the 25-percent income tax bracket, that's twice what you would have paid in taxes if you'd followed the distribution rule. If you don’t understand the tax law regarding calculating required minimum withdrawals, you might want to consult an accountant or other professional tax adviser. The only exception to the RMD beginning at age 70½ is for those who are still working for the company where they have a retirement savings account (e.g., 401(k) or 403(b) plan). They can delay their beginning withdrawal date until April 1 of the year following the year that they retire. This is called the “still working exception.” For all others, the first RMD can be taken as late as April 1 of the year following the year that someone turns 70½. For example, if you turned 70 on November 1, 2016, and 70½ on May 1, 2017, you must take your first RMD no later than April 1, 2018. If you postpone your initial RMD until the following year, however, you will have to take two distributions during that first year. Therefore, for most people (unless you expect a big drop in income), it is preferable to take the first RMD at age 70½ so that the withdrawals are spread over two tax years rather than being bunched up into one. How do you determine your RMD so you are sure to withdraw enough money to comply with IRS rules? Follow these five steps: 1. Determine the distribution year. The account balance used to compute the RMD is based on the balance in a person’s retirement account on December 31 of the previous year. 2. Calculate the account balance. Begin with the balances in all retirement accounts. An exception is Roth IRAs, where withdrawals are tax-free if an account has been open for at least five years. 3. Look up the life expectancy factor on which RMDs are based. A copy of the IRS Retirement Plan Uniform Distribution Table can be found at 4. Divide the account balance by the life expectancy factor. An example is that the life expectancy factor for a 70-year-old is 27.4. If a retiree has a $100,000 IRA balance the previous December 31, the RMD would be $3,649.64 ($100,000 divided by 27.4). A separate table is used for married couples with more than a 10-year age difference between spouses. 5. Take the RMD. Retirees must make their RMD withdrawal by the end of the distribution year. If they have multiple IRAs, they must aggregate the balances in each. The actual withdrawal can come from any one, or a combination, of their accounts as long as at least the required minimum amount is taken. One final note: The answer to this question referred specifically to required minimum distributions. Retirees can always withdraw more than the RMD. After age 59½, retirement plan owners can withdraw as much money as they want from tax-deferred accounts without penalty. Taxes are due on the withdrawn amount, however, so advance planning?perhaps with a profess[...]

What Are the Tax Laws About Giving Gifts?


If you gave any one person gifts valued at more than $14,000 (2017 figure), it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift. The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.

You make a gift when you give property, including money, or the use or income from property, without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit:

* Tuition or medical expenses that you pay directly to an educational or medical institution or health care provider for someone's benefit

* Gifts to your spouse

* Gifts to a political organization for its use

* Gifts to charities

If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift. That means that both you and your spouse could each have given up to $14,000 to the same person ($28,000 total) in 2017 without being liable for gift taxes.

For more information, get the IRS Publication 950, "Introduction to Estate and Gift Taxes," IRS Form 709, "United States Gift Tax Return," and "Instructions for Form 709." They are available at the IRS Web site at under "Forms and Publications" or by calling toll free 1-800-TAX-FORM (1-800-829-3676).

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Is There a Good "One-Stop" Source of Information About Tax and Social Security Limits That Change Every Year?


Yes. The College For Financial Planning publishes "Annual Limits Relating to Financial Planning" at the beginning of each year. For the 2017 version of this publication, as well as previous years, see



What Are the Long-Term Average Annual Returns on Investments?


According to the investment research firm Ibbotson Associates, these were the annual returns on various types of investments from 1926 through 2015:

* Small company stocks: 12.0%

* Large company stocks; 10.0%

* U.S. Government bonds: 5.6%

* U.S. Treasury bills: 3.4%

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At What Age Can I Avoid the Social Security Earnings Limit?


The earnings limit for Social Security benefits no longer applies once you reach your full retirement age (FRA). For people born between 1943 and 1954, FRA is age 66. Therefore, the earnings limit will no longer apply to you once you reach age 66. FRA for those born in 1960 and later is age 67. The 2017 earnings limit for Social Security beneficiaries who have not reached their FRA is $16,920.

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How Long do Taxpayers Have to Claim a Tax Refund?


Tax law provides most taxpayers with a three-year window of opportunity for claiming a tax refund. If no return is filed to claim a refund within three years, the money becomes the property of the U.S. Treasury. The three-year limit begins on the date that the tax return was originally due.

For example, for 2016 returns due on the tax filing date in April 2017, the window of opportunity ends three years later in April 2020. The law requires that the tax return be properly addressed, mailed, and postmarked by that date. Since you don't owe the government any money, there is no penalty for filing a late return that qualifies for a refund.

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If You Have Not Earned the Maximum Amount Allowed to be Contributed to an IRA, Can You Still Contribute That Amount?


You are allowed to contribute the greater of 100% of your earned income (salary or wages from a job or self-employment income) or $5,500 to a Roth and/or traditional IRA in 2017. If you are age 50 by year's end, or older, you can contribute up to an extra $1,000 ($6,500 total).

However, if you earn less than $5,500 by the end of the calendar year, you can only contribute up to the amount of your annual earnings.

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Can You Split Your IRA Contribution Between Both a Traditional and a Roth IRA?


Yes, as long as the total amount of your contributions to more than one IRA does not exceed the maximum annual contribution limit which, in 2017, is $5,500 for workers under age 50 and $6,500 (with an additional $1,000 catch-up amount) for workers age 50 and over by year-end.

Be sure to check the administrative fees and minimum deposit requirements of your IRA plan custodian(s), however. Multiple accounts could mean that you'll be charged multiple fees to administer your IRA accounts. You may also receive multiple account statements and more paperwork during tax season.

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How Does Your Age Determine the Amount of Your Social Security Benefit?


Basically, the longer you wait to claim a Social Security benefit, the more money you will receive. Under current Social Security guidelines, the earliest age that you can collect benefits is age 62. However, benefits at age 62 are permanently reduced by 25%. For example, if your monthly benefit at age 66 is $1,000, you would receive only $750 at age 62.

If you wait until age 70 to start collecting benefits, the amount you will receive is 132% of the full retirement benefit at age 66. For example, that $1,000 benefit at age 66 would rise to $1,320 at age 70.

Obviously, many personal factors need to be considered in addition to these mathematical calculations. Key factors include a need for income, health status, and a spouse's need for income, if married.

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Can Money Withdrawn From a 403(b) Plan in Retirement Be Put Into a Roth IRA?


It depends. You must have earned income to contribute to an IRA of any type, including a Roth IRA. This means that you must have a salary, hourly wage, or net earnings from consulting or a small business.

If you have earned income, the maximum amount that a person over age 50 can deposit in 2017 in a Roth IRA is the larger of 100% of earnings or $6,500 (the regular $5,500 contribution plus an additional $1,000 catch-up contribution). Roth IRA contributions are not tax deductible. Instead, they are funded with after-tax dollars (i.e., income that has already been taxed).

There's no age limit for contributions to Roth IRAs. For regular IRAs, you lose the ability to make contributions in the year you turn age 70½ but not for Roth IRAs. If you have earned income, you can contribute to Roth IRA at age 80, 85, or 90.  There's also no lower age limit. A minor with earned income that can be documented can set up a Roth IRA and contribute to it if a plan custodian allows.

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What Are the Income Restrictions to Qualify for a Deductible Traditional IRA?


People with earned income who are not in an employer-sponsored retirement plan, regardless of income level, may qualify for a tax deductible traditional IRA. Another group of taxpayers who can deduct a traditional IRA contribution in full are those with an employer-sponsored plan who have incomes in 2017 under $62,000 (single) and $99,000 (married couples filing jointly). The phase-out ranges (where contributions are limited in gradual steps as income increases) for singles and couples are $62,000 to $72,000 and $99,000 to $119,000, respectively.

Above these amounts, taxpayers can make a non-deductible, tax-deferred traditional IRA contribution. A working spouse who is not covered by an employer-sponsored plan may have a fully deductible traditional IRA even if the other spouse is in an employer-sponsored plan if the household adjusted gross income is less than $186,000 in 2017. The phase-out range for deductible contributions is from $186,000 to $196,000.

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What Are the Income Restrictions to Qualify to Contribute to a Roth IRA?


Below are the income restrictions for 2017 Roth IRA contributions:

• Roth IRAs are fully available to single filers whose adjusted gross income (AGI) is less than $118,000. No participation is allowed if your AGI is more than $133,000. Thus, the phase-out range, where contributions are limited in gradual steps as income increases, is between $118,000 and $133,000.

• Roth IRAs are fully available to joint filers whose AGI is less than $186,000. There is a phase-out range between $186,000 and $196,000. Married couples cannot contribute to a Roth IRA if their AGI is more than $196,000.

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What were Traditional IRA and Roth IRA Contribution Limits in the Past?


Individual retirement accounts (IRAs) were introduced in 1974. Anyone with earned income can make the maximum traditional IRA contribution as long as they had at least that much income in a given year. A non-working spouse can establish his/her own traditional IRA if the earned income of the working spouse equals or exceeds the total contributions to both partners’ IRAs.

From 1974 until 1980, the limit for contributions was $1,500 per individual. From 1981 until 2001, it was $2,000. The IRS raised the contribution limit for individuals under 50 years old to $3,000 in 2002 through 2004, then to $4,000 in 2005 and 2006, and $5,000 in 2008 through 2012. In 2013, the maximum IRA contribution limit was raised to $5,500. It is still $5,500 in 2017.

Starting in 2002, individuals 50 years old and older were allowed to make higher "catch up" contributions to their traditional IRAs. In 2002, the IRS established "catch up" contributions for traditional IRAs at $3,500. In 2005, it was raised to $4,500, $5,000 in 2006, and $6,000 in 2008, which was the limit through 2012. In 2013, the maximum contribution limit for older workers was raised to $6,500 (2015 limit).

Individuals can no longer make contributions to traditional IRAs once they reach the age of 70½ years. This differs from Roth IRAs that allow contributions at any age as long as someone has earned income. Roth IRAs were established by the Taxpayer Relief Act of 1997 and first available in 1998. The total contributions allowed per year to all IRAs cannot exceed the amounts previously mentioned. For more information on IRAs, see Publication 590 on the IRS Web site at

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How Does Losing a Job Affect Your Income Taxes?


There are a number of ways that income taxes can be affected by the loss of a job. Below are descriptions of three common situations and information from the IRS about how they affect federal income taxes:

  1. You get a new job but earn less than you did before: If you had a high income previously, where certain tax deductions were limited, you may no longer be subject to income-based phase-outs. If your income was more moderate before and is now reduced even further, you may be able to qualify for the earned income tax credit.
  2. You lose your job and receive severance pay: Severance pay is taxable income, as are payments for accumulated vacation or sick time. You should ensure that enough taxes are withheld from these payments or make estimated tax payments to avoid a big bill at tax time and possible tax penalties.
  3. You lose your job and receive unemployment compensation: Like severance pay, unemployment compensation payments are taxable. As with severance pay, you should ensure that enough taxes are withheld from these payments or make estimated tax payments to avoid a big bill at tax time and possible tax penalties.

Other possible ways that unemployment can affect income taxes include tax deductions for job search expenses, tax deductions for moving to a new job at least 50 miles from your home, and taxes on early withdrawals (prior to age 59½) from an IRA or 401(k). For additional information on tax topics, see the IRS Web site at

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What is the Final Deadline to Make an IRA Contribution?


The IRS is firm on the tax filing deadline. An IRA contribution for the prior calendar year must be made by the tax filing deadline, which does not include extensions. Contributions made after April 15th (or an alternate date if this date falls on a holiday or a weekend) will count as a contribution for the current tax year. For example, a contribution made after the 2017 tax filing deadline will be considered a 2018 IRA account contribution.

Also, when you make an IRA contribution on or before April 15th, be sure to advise the custodian that it is a contribution for the prior tax year if this is your intent.

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What is FICA Tax and How is it Calculated?


FICA is an acronym for "Federal Insurance Contributions Act." FICA tax is the money that is taken out of workers' paychecks to pay older Americans their Social Security retirement and Medicare (Hospital Insurance) benefits. It is a mandatory payroll deduction. Two separate taxes are added together and treated as one amount that is referred to as "payroll taxes" or FICA. These two taxes, individually, pay for both Social Security retirement benefits and Medicare health insurance.

FICA tax deductions also provide benefits to widows and widowers, children who have lost working parents, and disabled workers who qualify for benefits. The amount paid in payroll taxes throughout one's working career is linked to the Social Security benefit that one receives as a retiree or one's family receives if a covered worker dies. FICA tax is paid by both workers and their employers.

 FICA tax is typically 7.65% of earnings up to $127,200 (2017 figure). Employees pay 6.2% of their earnings for Social Security retirement benefits and their employer pays 6.2% for a total of 12.4% of a worker's income. An additional 1.45% tax is also collected to fund Medicare benefits and this, too, is matched by employers.

Self-employed persons pay both halves of both taxes for a total of 15.3% of their net business earnings. These taxes are reported on Schedule SE with their income tax returns.Self-employed persons can deduct the employer-equivalent portion of self-employment tax in figuring their adjusted gross income (AGI).

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How is the Five-Year Look-Back Period for Medicaid for Long-Term Care Calculated?


Regulations exist to prevent people from transferring assets that could be used to pay their long-term care expenses. This eliminates, or at least postpones, the possibility of the government having to finance their long-term care through the Medicaid program. The look-back period for asset transfers with respect to an application for Medicaid is currently five years. Government officials can look at any gifts made as long as five years before the date that an application for assistance is made.

If someone who is applying for assistance has made gifts within the look-back period, a penalty period is triggered during which that individual is ineligible for government aid. The penalty period is calculated by dividing the average cost of nursing home care in the area where the individual lives into the amount given away. For example, if someone gave away $75,000 within five years of the date of application and area nursing homes cost $7,500 a month, he or she can't qualify for Medicaid for 10 months.

One strategy that is often used in Medicaid planning is to purchase long-term care insurance to cover long-term care expenses for at least the duration of the look-back period. With insurance benefits paying for at least part of the cost of care, someone may be able to postpone the date of Medicaid application beyond the look-back period and not trigger a penalty period.

Professional assistance by an elder law attorney who specializes in Medicaid planning is recommended for estate planning strategies related to the look-back period. Specific Medicaid regulations vary somewhat from state to state, so it is important to be aware of the rules that apply in the area where the elderly person who might require care lives.

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Can Workers' Income Reduce Their Spouse's Social Security?


No. The earnings limit ($16,920 in 2017 for beneficiaries who are age 62 through full retirement age) applies only to the income of the person who is collecting a monthly Social Security benefit check. It is that person's income that determines whether benefits are reduced. One dollar in benefits is withheld for every $2 in earnings above the earnings limit amount.

Where a working spouse's income will have an effect, however, is in the taxation of Social Security benefits if a joint federal income tax return is filed. Therefore, it might be wise to calculate your taxes as both a married couple filing jointly and two spouses filing separately. An individual or couple’s marginal tax bracket affects the amount of Social Security benefits received on an after-tax basis.

Before 1984, Social Security benefits were not taxed on federal income tax returns. Since then, if the total of taxable pensions, wages, interest, dividends, and other taxable income, tax-exempt interest income, plus one-half of Social Security benefits (referred to collectively as “provisional income”) are more than $25,000 for singles and $32,000 for married couples filing jointly, up to 50% of Social Security benefits are taxed.

If income exceeds $34,000 for singles and $44,000 for joint filers, up to 85% of benefits are taxed. Unlike Social Security benefits themselves, these dollar amounts are not indexed for inflation and thus affect increasing numbers of beneficiaries over time.

Taxes on Social Security benefits are especially problematic for married couples when one spouse collects benefits while the other remains employed with a good salary, thereby pushing household income over the taxable limits. In this case, it will be necessary to withhold money for taxable Social Security benefits either by overwithholding through the working spouse's employer or by making quarterly estimated tax payment for the Social Security beneficiary.

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How Do You Purchase Stock From a Company That is Going Public?


You are talking about an IPO (initial public offering). You should be able to get information (e.g., company research) from a stockbroker. Also, visit an online search engine (e.g., Bing or Google), type in the company name, and see what information you get. If there is an address or toll-free telephone number for the company's "shareholder relations" department, call it. As for purchasing an IPO stock, you may or may not be able to buy shares directly from the company. You will need to ask. You might need a broker to purchase shares.

Online purchasing may be cheaper than a broker, but you will get no personal advice beyond what is on an online brokerage firm's Web site. Beware of IPOs in their initial "hype" phase. Often, prices cool dramatically by the time small investors are able to buy shares. You may want to wait until the initial buying frenzy cools down.

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What Types of Records Should You Keep for Tax-Deductible Mileage?


Some people record all their mileage on a calendar, planner, or business diary that they keep in their car. Be sure to jot down the date, the purpose of the trip, the starting and ending odometer readings, and the total number of miles driven. Another good source of documentation is a copy of the forms that you provide to your employer for expense reimbursement.

Remember, you are entitled to deduct the difference between the IRS business mileage reimbursement rate (54 cents in 2017) and the mileage reimbursement rate provided by your employer. Mileage expenses are also deductible for charitable, moving, or medical purposes. In 2017, the mileage rate for medical or moving purposes is 19 cents per mile driven. The mileage rate for driving related to service to a charitable organization is 14 cents per mile. As in the case of business mileage, written documentation should be kept of length and purpose of each trip.

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Can You Direct Deposit a Refund From an Amended Tax Return?


You cannot even have the refund amount direct deposited into any financial account. At the present time (2017), the IRS does not offer a direct deposit option for refunds on amended returns. In fact, there is no place on the form to designate a place for direct deposit.

In addition, only an original tax return can be electronically filed. You must file Form 1040X for an amended return on paper and mail it to the IRS.

The IRS will mail a check for the amount of your additional refund to the address shown on your amended tax return. If you are due an additional refund, expect a check to arrive in approximately 8 to 12 weeks.

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Can You Split a Federal Income Tax Refund Between a Direct Deposit and a Paper Check?


No. You cannot split your refund between a direct deposit and a paper check. According to IRS tax refund procedures, you can either opt for the safety, security, and speed of direct deposit to one, two, or three different accounts, or you can request your refund via a paper check, but you cannot combine the two refund methods.

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Am I Locked Into an Investment Option for My 529 Plan?


In the early days of 529 plans, once you selected an investment option within a college savings plan, you could not change that option. Only new contributions could be invested in different investment options.

Under current rules, however, the IRS allows you to change your investment options in a college savings plan once every calendar year.

For more information, see

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How Long Do You Need to Work to Receive Social Security Retirement Benefits?


To qualify for Social Security retirement benefits, you must generally have "40 quarters of coverage." This means that you must have been working for 10 years and earning at least the minimum income (adjusted annually for inflation) required to receive a quarter of coverage.

For example, in 2017, you can receive one quarter of coverage for each $1,300 of earnings, up to the maximum of four quarters of credit per year. Thus, the maximum amount of income needed to earn four quarters of coverage in 2013 is $5,200 ($1,300 x 4).

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What is the Capital Gains Exclusion for the Sale of a House?


Single taxpayers can exclude up to $250,000 of capital gains on the sale of a home, and married taxpayers filing jointly can exclude $500,000.

Taxpayers are eligible for the exclusion if they have owned and used a home as their main home for a period aggregating at least two years out of the five years prior to its date of sale. The exclusion is allowed each time that you sell a primary residence but no more than once every two years.

For more information, see

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How Much of Someone's Social Security Benefit is Taxed?


First, individual taxpayers or taxpaying married couples must add up their "modified adjusted gross income." This is their taxable income, plus their tax-exempt income, plus half of their Social Security benefits. If this figure exceeds certain income levels, a portion of Social Security benefits is taxed.

Next, a worksheet is completed to determine the amount of Social Security benefits that is taxable. This worksheet can be found in the annual instructions package for tax forms available online in the "Forms and Publications" section of Under current law, in 2017, the income levels where income taxes on Social Security benefits apply are as follows:

• 50% of Social Security Benefits Taxed - $25,000 to $34,000: Single and Head of Household and $32,000 to $44,000: Married filing jointly

• 85% of Social Security Benefits Taxed - Over $34,000: Single and Head of Household  and over $44,000: Married filing jointly

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How Do I Take a Charitable Income Tax Deduction??


While a specific charity may qualify with the IRS as a charitable organization for tax purposes, a taxpayer still needs to be able to itemize his or her tax deductions to deduct a charitable contribution. Charitable contributions are an itemized deduction.

Schedule A is the tax form used to tally itemized deductions. These deductions include out-of-pocket health-related expenses, mortgage interest, property taxes, charitable contributions, and other qualified expenses.

In order to use Schedule A, you would need to use IRS tax form 1040 and not 1040 EZ. Using the Schedule A form will let you determine whether your total itemized deductions are greater than the standard deduction in effect for that tax year. If they are not, you cannot subtract the charitable contribution.

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