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eXtension Articles,Faqs- personal finance





Updated: 2018-04-02T18:40:04Z

 



IFYF Monthly Investing Messages

2018-04-02T18:29:21Z

  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 oneill@aesop.rutgers.edu April 2018 Choosing a Financial Advisor Being an investor takes some know-how. You can do it yourself using print or online resources or you can reach out to people in the financial services industry to find the information and advice that you need. Generally, consumers pay a fee or commission for financial advice, but it may be much less than costly financial mistakes.   Getting financial help is a little like building a house. Most often, it takes a whole team of people to get the job done: plumber, electrician, carpenter, carpet layer, roofer, and more. To get your financial house in order also takes a team of professionals: banker, tax preparer, attorney, insurance agent, employee benefit counselor at your place of work, stock broker, and/or financial planner.   Are you looking for a financial advisor (e.g., financial planner, counselor, or coach)? Here are some questions to ask according to the Association for Financial Counseling and Planning Education (AFCPE):   What experience do you have? Ask for a brief description of financial professionals’ work experience and how it relates to their current practice.   Is there an oversight body requiring ongoing education and ethics? Ask about the credentials a professional holds and learn how he or she stays up to date with current changes and developments in the personal finance field.   What services do you offer? Asks about credentials, licenses, and areas of expertise that determine the services a financial professional can offer.   What is your approach? Make sure a professional's philosophy and approach aligns with your needs and values. You also may consider your financial professional’s personality and communication style and personal compatibility.    What types of clients do you typically work with? Some financial professionals prefer to work with clients whose assets fall within a particular range or are of a certain age.   How much do you charge?  A financial adviser should provide an estimate of possible costs based on the work to be performed.   How will I pay for your services? Financial professionals can be paid in several ways (e.g., fees and commissions). As part of a written agreement, an adviser should make it clear how they will be paid for the services to be provided.   Do others stand to gain from the financial advice you give me? Ask the professional to provide you with a description of any conflicts of interest in writing. Consider requesting a referral from friends, family members, and other advisers. Also ask whether an adviser has ever been disciplined for any unlawful or unethical actions and double check with your state securities agency to make sure. Once you select a financial advisor, be involved and ask questions. Review your portfolio periodically, at least annually, to be sure your investment strategy will help you reach your financial goals.   Review monthly statements carefully and understand what they say. In addition, monitor economic conditions (e.g., interest rates) to see t[...]



Archived Monthly Investing Messages

2018-04-02T18:27:28Z

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 March 2018 Monthly Investment Message February 2018 Monthly Investment Message January 2018 Monthly Investment Message December 2017 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 [...]



Monthly Investment Message: March 2018

2018-04-02T18:25:25Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu March 2018 Factors That Promote Financial Success During the last year, I had the opportunity to hear several well-known personal finance speakers talk about the characteristics and practices of financially successful people. Audiences are usually very interested in this topic because it provides a motivational roadmap and specific tips to follow.   At the 2017 Financial Planning Association (FPA) conference, the final general session speaker was financial author and television personality, Jean Chatzky. Her topic was “What the World’s Wealthiest, Most Successful People Do Differently.” Below is a description of six key success factors that were described in her presentation:   Optimism/Happiness- People who score “8” on 1 to 10 scale have greater problem-solving ability, longer lifespans, and increased success. Chatzky advised “prioritize doing things instead of acquiring things.” Resilience- People are not born with resilience. Chatzky advised attendees to “Control the things that you can control” and “take action when you feel stuck.” Connectedness- Chatzky advised attendees to build their “social capital” by sharing information, resources, and contacts. In addition, strong relationships with others need to be built in person and not just online. Passion-People with passion view work as a calling, “want things more,” and work hard to achieve them. When people work hard, they often earn a higher income and have more money to achieve their goals. Good Financial Habits- An example is habitual savings. Automatic savings deposits make it easier to delay gratification and save for your “future self”; i.e. the person that you will be 20 to 50 years from now. Our future selves are strangers to us today. Gratitude-Grateful people five back to individuals, organizations, and communities. They are also less likely to be affected by depression. The antidote to materialism is charity inspired by gratitude. At the 2017 annual conference of the American Association of Family and Consumer Sciences (AAFCS), Sarah Newcomb, a behavioral economist at Morningstar, noted that people who are future-minded and think ahead have more savings than those who do not. In addition, two simple areas of inquiry can accurately gauge the status of a person’s financial health: How far in advance do you make plans? How much control do you feel that you have over events that happen in your life? People who focus on the future and feel that they create their own financial destiny tend to save more than others for retirement and other financial goals. When people focus on the future, they tend to be less impulsive (e.g., spending habits), regardless of their level of financial literacy. Newcomb found that the strongest predictor of good financial decisions is not financial literacy but, rather, a focus on the future. High levels of impulsiveness and materialism, on the other hand, were associated with poor financial decision-making.   In addition, Newcomb’s research found that “power is happiness.” Empowered people are financially happier than others. Conversely, people who don’t feel in control of their personal finances have been found to exhibit negative emotions about their financial status even up to those earning a six-figure income.   Newcomb’s research, which is summarized in her book, Loaded, has found that, the farther away something is in the future, the less people care about it. The secret to fostering future-mindedness is to trick your brain to think that “the far away is close.” When this happens, people care more about the future because the “Here and Now” is clear and intense while the “There and Later” is vague, abstract, and unemotional.   Check out our Archived Monthly Investing Messages [...]



Personal Finance Webinars

2018-03-29T23:45:01Z

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 April 17, 2018 11:00 am - 12:30 pm EDT Entrepreneurial Opportunities for Military Families Jaime Wood 1.5 CEUs May 1, 2018   11:00 am - 12:30 pm EDT Gender and Finance Martie Gillen, Barbara O'Neill 1.5 CEUs June 5, 2018 11:00 am - 12:30 pm EDT Understanding Your Client’s Relationship With Money Barbara O'Neill   June 6, 2018 11:00 am - 1:00 pm EDT Empathy & Ethics in Personal Finance Michael Gutter   June 7, 2018 11:00 am - 12:30 pm EDT Communication Essentials for Financial Professionals John Grable, Joe Goetz   June 7, 2018 1:00 pm - 1:30 pm EDT Capnote Discussion: 2018 Personal Finance Virtual Learning Event Jerry Buchko   July 24, 2018 11:00 am - 12:30 pm EDT Family Finances Series: Separation & Single Parenting in the Military Kacy Mixon   August 28, 2018 11:00 am - 12:30 pm EDT Family Finances Series: Financial Planning for Life Events Barbara O'Neill     Archived personal finance webinars: Webinar Date Title (Link to Webinar) Presenter(s) March 28, 2018 BIAS - Behavioral Interventions to Advance Self-Sufficiency Amanda Benton, Kim Clum,Barbara O'Neill, Toija Riggins March 27, 2018 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 February 13, 2018 Income Tax Tips for Financial Practitioners and Military Families Martie Gillen, Barbara O'Neill,  Taylor Spangler January 16, 2018 The Blended Retirement System Launch: Questions & Answers Andy Corso December 6, 2017 America Saves Lindsay Ferguson December 5, 2017 2017 Personal Finance Year in Review Barbara O'Neill 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 f[...]



Monthly Investment Message: February 2018

2018-03-01T12:35:32Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu February 2018 A Hierarchy of Financial Decisions Health Savings Accounts (HSAs) are an account that people can set up to 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). HSA money gets deposited tax-free, grows tax-free, and comes out tax-free, if used according to IRS regulations. 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 so that all contributions made by an employer belong to the account holder. A study published in the Journal of Financial Planning in 2016 found that the tax savings on many employees’ contributions to an HSA increased wealth by more than an employer match on the same employees’ 401(k) contributions. In such cases, perhaps surprisingly, the maximum allowable HSA contribution should be made prior to the employee contributing any amount to his or her 401(k). The higher an employee’s combined tax rate, the larger an employer’s 401(k) match had to be to beat contributing to an HSA first. At the 2017 Financial Planning Association (FPA) meeting, the author of the study, Dr. Greg Geisler from the University of Missouri-St. Louis, presented research on a hierarchy of steps to maximize wealth. In other words, if people have discretionary income to save or reduce debt, what should they do first? According to Geisler, Step #1 is to contribute to a matched employer 401(k) retirement savings plan and/or a health savings account (HSA), depending on an individual’s situation. If the tax savings on contributions to an HSA increases wealth by more than an employer match on the same employees’ 401(k), the maximum allowable HSA contribution should be made prior to the employee contributing to a 401(k). After deposits to a matched 401(k) and HSA, which were called Steps 1a and 1b, Dr. Geisler suggests the following hierarchy as a suggested order of wealth-maximizing actions: Step #2: Pay off high-interest debts in order of their after-tax interest rate. For example, various credit cards that charge interest rates in the mid-teens or higher.   Step #3: Put savings into a 529 higher education savings account if an individual is a resident of a state that offers tax savings for contributions.   Step #4: Make unmatched contributions to an employer retirement savings account.   Step #5: Pay off moderate after-tax interest rate debts in order of their after-tax interest rate. For example, low-interest rate credit cards and an auto loan, home equity loan, and student loans.   Step #6: Make deposits to taxable (non-retirement) accounts.   This hierarchy of financial behaviors is not “set in stone,” however. There may be excellent non-tax related reasons for not following these financial decision-making steps in exact order, such as saving for a house down payment and building an adequate emergency fund.   However, if you have a high deductible health plan and qualify to participate in a HSA, consider it as part of your “financial planning toolkit.” HSAs can be used as both a savings account for out-of-pocket health care expenses and as an investment.   Check out our Archived Monthly Investing Messages [...]



Monthly Investment Message: January 2018

2018-02-06T02:40:27Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu January 2018 Two Tools to Assess Your Investment Risk Tolerance Investment risk tolerance can be defined as the amount of volatility (i.e., change in the value of an investment) that an individual is willing to withstand, particularly on the downside (i.e., loss of money). It has sometimes been referred to as an individual’s “sleep at night factor” as in how much investment risk are people willing to take before they are awake at night worrying about the status of their investments? Like values and goals, investment risk tolerance varies among individuals and there is no “right” or “wrong” risk tolerance level.   Various quizzes and tools are available to assess investment risk tolerance. Some ask people about investment decisions that they have made in the past, some ask them to respond to hypothetical scenarios that involve investment risk, and some do both.  Quiz providers include universities, government agencies, banks, mutual fund investment companies, and brokerage firms.   What factors determine investment risk tolerance?  This question is the subject of much research so there is no definitive answer.  Not all factors related to investment risk tolerance are financial ones, however, such as income and net worth.  An investor’s knowledge about investing, previous investment experience, age, income, assets, gender, ethnicity, and attitudes about risk-taking in general can also influence risk tolerance.  In addition, risk tolerance levels associated with investments may be associated with other types of risk-taking behaviors in life such as fast driving and participation in extreme sports.   Rutgers Cooperative Extension has a simple online Investment Risk Tolerance Quiz available at http://njaes.rutgers.edu/money/riskquiz/. The quiz, developed by Dr. John Grable at the University of Georgia and Dr. Ruth Lytton at Virginia Tech, includes 13 questions and provides users with feedback about their capacity to handle investment risk.  Data collected from users is also used for investment risk tolerance research.  The higher the total score, the higher someone’s investment risk tolerance.   Quiz questions are based on both thoughts about risk in hypothetical situations and current investing behavior.   Want to test your investment risk tolerance level in a fun and creative way? Go to The Balloon Test web site developed by Barclays at https://privatebank.barclays.com/private-bank/en_ch/home/thought-leadership/helping-you/to-risk-or-not.html. Click “Start” to begin a series of decisions that link the process of pumping up a balloon to the holding period on investments.   Decide when (i.e., for how long?) to keep pumping a balloon to earn 50 points for each pump. This is like earning money on an investment. Decide when to stop pumping to collect your points, ideally before the balloons burst. This is like selling an investment for a profit. At any time your balloons can burst, however, and make a loud popping noise (if sound is turned up on your computer). This is like losing money on an investment. Play the game for five rounds. This is like investing for the long term where investment results can vary. Compare your total points to the baseline data and answer the following questions: What was the highest and lowest number of points that you received on the five rounds of play? How did you feel when your first balloon burst? Did having a bubble burst change your behavior on subsequent rounds of play (i.e., future decisions)? Did having a “good run” without balloons popping change your behavior on subsequent rounds of play? How would you assess your risk tolerance as an investor? What did The Balloon Test activity teach you about investing in stocks or stock mutual funds?[...]



Investing for Your Future

2018-01-17T14:34:44Z

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 A Cooperative Extension System Basic Investing Home Study Course Sponsored by Rutgers Cooperative Extension in cooperation with the U.S. Department of Agriculture, the Financial Security for All community of eXtension, and the U.S. Securities and Exchange Commission. Dear Home Study Course Reader, Welcome to the home study course Investing For Your Future. This 11-unit home study course was developed by the Cooperative Extension System for beginning investors with small dollar amounts to invest at any one time. It is updated annually to keep it current. We assumed that many readers will be investing for the first time or selecting investment products, such as a stock index fund or unit investment trust, that they have not purchased previously. The course units were developed in a logical order. "Basic" topics such as setting goals, investment terms (e.g., diversification, dollar-cost averaging, asset allocation), and finding money to invest lay a foundation to help readers understand how and why they’re investing. You’ll also begin to understand that there’s generally a trade off between risk and reward. The more risk an investor assumes, the greater the chance of a high long-term return, as well as the greater chance of short-term losses along the way. After exploring "the basics," the course describes specific types of investments (e.g., stocks and bonds) in detail. You’ll begin to understand their characteristics, how they are purchased, and what it costs to purchase each investment. There are also units that focus specifically on tax-advantaged investments and investments that can be purchased with $1,000 or less. Finally, Investing For Your Future concludes with additional topics of use to investors: available resources, how to select professional financial advisors, and information to help you avoid becoming a victim of investment fraud. You can choose to read the entire course, in any order that makes sense to you, or select only those topics that are of most interest. The choice is yours. Simply reading Investing For Your Future will not turn you into a successful investor, however. A printed page simply can never replace the personal motivation that is required to take action to achieve financial goals. That is why there are "action steps" listed at the end of each unit. These are specific steps that readers can take to apply the course material to their lives. We urge you to consider each action step carefully and take action that is appropriate for your individual financial situation. The course also contains a number of worksheets, which, again, are tools to help readers apply the information contained within each unit. We encouage you to use them to make your experience with Investing For Your Future a personal one. Another resource to help you achieve your financial goals is your local Cooperative Extension office. Look in the "county government" section of your phone book to find the nearest office. Free or low-cost publications are available, as well as classes, Web sites, computerized financial analyses, newsletters, and other program delivery methods. Thank you for participating in Investing For Your Future. We hope that you find it helpful and that all of your future financial goal[...]



Erik Anderson

2018-01-11T00:55:45Z

(image)

Dr. Erik Anderson is Extension Professor in the Department of Agricultural and Extension Education at the University of Idaho. Erik develops web content for the Financial Security for All Community of Practice. He has been actively involved with the national eXtension initiative since 2005.

Dr. Anderson holds a Ph.D. in Adult Education from the University of Idaho. He also has a master’s degree in Communication Arts from the University of Wisconsin-Madison. During his 30-year career at the University of Idaho, Erik has served as an Electronic Media Specialist, Distance Learning Specialist, and Director of the Educational Communications department. Previously, Erik worked as an instructional video producer at South Dakota State University and as a telecommunications researcher at the University of Wisconsin-Madison.

Dr. Anderson’s expertise is in distance education and instructional design. He has developed numerous online and video-based courses and educational programs. Erik also has secured more than $2 million in external grant funding during the past 20 years.

Erik has held various leadership roles in professional associations including the Association for Communications Excellence. He also has served as a manuscript reviewer for the Journal of Applied Communications and the Journal of Agricultural Education and Extension.

Erik is a strong advocate for financial literacy and he serves on the Board of Directors of his local credit union.

Contact Information:

Email: eanderso@uidaho.edu




Financial Security for All Contents

2018-01-11T00:16:48Z

Hot Topics: Tax Cuts and Jobs Act Resources 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 [...]



Tax Cuts and Jobs Act Resources

2018-01-11T00:12:46Z

The Financial Security for All Community of Practice has compiled the following list of informational resources related to the Tax Cuts and Jobs Act:  Tax Cuts and Jobs Act Legislation Tax Cuts and Jobs Act Bill: The complete text of the bill (503 pages) can be found at http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-%20466.pdf The large document also includes a summary of the agreement (560 pages). Background Information: Land-Grant Universities Congress Passes Sweeping New Tax Legislation (Iowa State University): https://www.calt.iastate.edu/blogpost/congress-passes-sweeping-new-tax-legislation  Background Information: Other  Here are the Winners and Losers of the Final Version of the Republican Tax Bill (Marketwatch): https://www.marketwatch.com/story/here-are-the-winners-and-losers-of-the-final-version-of-the-republican-tax-bill-2017-12-18    Highlights of the Final Tax Cuts and Jobs Act (Advisor Perspectives): https://www.advisorperspectives.com/articles/2017/12/19/highlights-of-the-final-tax-cuts-and-jobs-act    How the Tax Cuts and Jobs Act Impacts U.S. Tax Returns (H & R Block Tax Information Center): https://www.hrblock.com/tax-center/irs/tax-reform/tax-cuts-and-jobs-act/    Individual Tax Planning Under the Tax Cuts and Jobs Act Of 2017 (Michael Kitces, Nerd’s Eye View): https://www.kitces.com/blog/final-gop-tax-plan-summary-tcja-2017-individual-tax-brackets-pass-through-strategies/   Preliminary Details and Analysis of the Tax Cuts and Jobs Act (Tax Foundation): https://taxfoundation.org/final-tax-cuts-and-jobs-act-details-analysis/    Tax Cuts and Jobs Act Summary (CCH Incorporated and Wolters Kluwer): https://goo.gl/CtJMAq   Tax Cuts and Jobs Act-Changes (Thomson Reuters Tax and Accounting): https://tax.thomsonreuters.com/blog/tax-cuts-and-jobs-act-changes    What Do the Tax Cuts Mean for Farmers and Ranchers? (American Farm Bureau): https://www.fb.org/market-intel/hr1andag    Who Gets a Tax Cut Under the Tax Cuts and Jobs Act? (Tax Foundation): https://taxfoundation.org/final-tax-cuts-and-jobs-act-taxpayer-impacts/  Tax Law Calculators GOP Tax Plan Calculator (The Wall Street Journal): http://www.wsj.com/graphics/republican-tax-plan-calculator/?reflink=e2twmkts (subscription required)   Tax Bill Calculator: Will Your Taxes Go Up or Down? (The New York Times): https://www.nytimes.com/interactive/2017/12/17/upshot/tax-calculator.html?em_pos=small&emc=edit_up_20171218&nl=upshot&nl_art=0&nlid=77794120&ref=headline&te=1    Tax Calculator: What Tax Reform Means For You (Fox Business): http://www.foxbusiness.com/politics/2017/12/19/tax-calculator-what-tax-reform-means-for.html    Tax Proposal Calculator (Tax Policy Center, Urban Institute and Brookings Institution): http://tpc-tax-calculator.urban.org/ Image credit: Personal Income Taxes Ver3 by ccPixs.com Original image was cropped and resized Available under a Creative Commons Attribution License 2.0 [...]



Investing Unit 7: Advantages of Retirement Accounts

2018-01-10T16:59:21Z

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 Advantages of Retirement Accounts Retirement Plans Tax-Advantaged College Savings Plans Annuities Summary Action Steps About the Author 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 Advantages of Retirement Accounts A major advantage of tax-deferred investing is making contributions to a retirement account with pre-tax dollars. In many instances [e.g., 401(k) plans], the government allows taxable income to be reduced by the amount of the contribution to a tax-deferred retirement plan. As a result, you can have the same amount of money in your pocket and invest what you would have paid the government. For instance, if you are in the 22% marginal income tax bracket and you contribute $1,000 to a tax-deferred retirement plan, you would lower your federal income taxes by $220 (0.22 times $1,000). The savings is based on your marginal tax rate, i.e., the rate you pay on the highest dollar of earnings. There are seven different tax rates in 2018-- 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The higher your marginal tax rate, the more you, as an investor, benefit from pre-tax dollar contributions to retirement savings plans and tax-deferred earnings. Figure 1 shows the 2018 tax rate schedules for your reference in determining marginal tax rates. These figures are adjusted annually for inflation. Figure 1. 2018 Tax Rate Schedules Single-Schedule X Taxable Income Over But Not Over Marginal Tax Rate $0    $9,525  10%      9,525    38,700  12%    38,700    82,500  22%    82,500  157,500  24%  157,500  200,000  32%  200,000  500,000  35% 500.000 ---  37% Head of household-Schedule Z Taxable Income Over But Not Over Marginal Tax Rate $0  $13,600  10%    13,600    51,800  12%    51,800  82,500  22%    82,500  157,500  24%  157,500  200,000  32%  200,000 500,000  35% 500,000 ---  37% Married filing jointly or Qualifying widow(er) - Schedule Y-1 Taxable Income Over But Not Over Marginal Tax Rate $0  $19,050  10%    19,050    77,400  12%    77,400  165,000  22%  165,000  315,000  24%  315,000  400,000  32%  400,000 600,000  35% 600,000 ---  37% Married filing separately - Schedule Y-2 Taxable Income Over But Not Over Marginal Tax Rate $0    $9,525  10%    9,525    38,700  15%   38,700    82,500  22%   82,500  157,500  24%  157,500  200,000  32%  200,000 300,000  35% 300,000 ---  37%   A s[...]



Investing Unit 8: Investing Tax-Deferred

2018-01-08T16:02:51Z

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 Investing Tax-Deferred Buying Stocks Buying Fixed Income Investments Unit Investment Trusts Mutual Funds Summary Action Steps About the Author Unit 9: Getting Help: Investing Resources Unit 10: Selecting Financial Professionals Unit 11: Investment Fraud     Study Guide Action Steps Monthly Investment Messages Glossary Getting Started: Investing Tax-Deferred If saving for retirement is one of your financial goals, a good place to start investing is a tax-deferred employer retirement plan [e.g., 401(k)s and 403(b)s]. (See Unit 7, Tax-Deferred Investments, for more information.) Many employers require only a minimum deposit amount (e.g., $10) per paycheck or a low percentage (e.g., 1% or 2%) of pay to enroll.   Three advantages of employer savings plans are: A federal tax write-off for the amount contributed (e.g., if you contribute $1,000, you do not pay tax on this income) Tax-deferred growth of principal and investment earnings Automatic payroll deduction In addition, almost 80% of 401(k) plans and about 30% of 403(b)s provide employer matching. For every dollar a worker contributes, an employer might contribute a quarter, fifty cents, or even a dollar. This is "free money" that should not be passed up, if at all possible. If you’re already investing in an employer plan, consider increasing the amount contributed by 1% (or more) of pay. The most painless time to do this is when you receive a promotion or raise because you’re already accustomed to living on less and won’t miss the extra contribution. The extra savings (e.g., 2% of pay), combined with a pay raise, should be more or less "a wash." As chef Emeril Lagasse of the Food Network would say, "Kick it up a notch!" Over time, the extra amount of savings that will accumulate is impressive, especially for younger workers and workers at higher salary levels. According to Boston-based Advantage Publications, a company that produces financial education materials including a slide rule-type chart called the 401(k) Booster Calculator, investing just 1% more of your pay can translate into tens of thousands of extra dollars by retirement age. As an example, 1% of a $30,000 salary is $300 ($5.77 weekly). According to Advantage Publications, if a 35-year-old worker earning a $30,000 salary increases his/her contribution to an employer plan by 1%, he/she would have an additional $55,680 at age 65. This example assumes an 8% average annual investment return and 4% average annual pay increases. If the extra 1% increase also triggers an additional 1% match by their employer, this figure can be doubled to $111,360. The beauty of investing in employer plans is that you are using pre-tax dollars. For every dollar you invest, Uncle Sam subsidizes this investment by that amount multiplied by your tax bracket. For example, if you contribute $1,000 to an employer plan and are in the 15% marginal tax bracket, your after-tax cost is only $850 [$1,000 - ($1,000 x 0.15)]. In the 25% marginal tax bracket, the out-of-pocket cost is even less: $750 [$1,000 - ($1,000 x 0.25)]. Most employers adjust workers’ withholding to reflect this tax savings, thereby freeing up more money in each paycheck to invest. In addit[...]



Investing Unit 7: Retirement Plans

2018-01-08T15:59:05Z

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 Advantages of Retirement Accounts Retirement Plans Tax-Advantaged College Savings Plans Annuities Summary Action Steps About the Author 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 Penalties for Early Withdrawal All tax-deferred accounts carry a penalty for withdrawing the money before age 59 1/2. However, some types of accounts have exceptions, such as money withdrawn to be used to buy a first home, or if the owner of the account becomes disabled or dies. In addition, for some accounts, the penalty may not apply if the individual is taking equal periodic payments over his or her life expectancy for at least five years or until age 59 1/2, whichever comes later, or for college expenses, and certain medical expenses. The penalty is usually 10% of the amount withdrawn and then, of course, federal and state income taxes also have to be paid on the withdrawal. Types of Retirement Plans The government allows several different types of tax-deferred retirement programs. Among these are employer-sponsored plans, plans for self-employed persons, and individual retirement accounts (IRAs). Many of the plans are named for sections of the tax code that establish these plans, [e.g., 401(k) and 403(b)]. These plans differ in who is eligible to participate, administrative responsibilities, allowable contribution limits, the types of investments available in the plan, and tax consequences and penalties for early withdrawal (a 10% penalty, plus ordinary income tax, is charged for withdrawals made prior to age 59 1/2; certain exceptions apply). Employer-Sponsored Retirement Plans Salary-reduction plans allow employees to deposit, through payroll deduction, part of their salary into a retirement account. There are a number of ways you, as an employee, can invest on a tax-deferred basis so that your investment will grow free of taxes and will not be taxed until you start making withdrawals. Types of employer-sponsored retirement plans include:   401(k) A retirement plan for employees in private corporations which defers the taxes on employee contributions and earnings on these contributions until retirement withdrawals are made. The 2018 limit on the amount that can be contributed from income before taxes is $18,500 ($24,500 for workers age 50 and over with the additional $6,000 catch-up contribution). Contributions are deducted directly from your paycheck (e.g., 5% of your salary). Some employers contribute a match or a percentage of your contribution. Many companies also allow their employees to borrow up to one-half of the funds from their 401(k) plan for any reason. Interest paid by the employee on the money that is borrowed from his 401(k) is paid into the employee's own account. 403(b) A tax-deferred retirement plan that is similar to corporate 401(k) plans. A big difference is fewer employers match contributions because participants are often public (read: taxpayer-funded) employees. 403(b) plans are available to employees of schools and non-profit organizations. The 2018 limit for contributions is $18,500 ($24,500 for workers [...]



Investing Unit 4: Common Stocks

2018-01-08T14:47:58Z

Introduction Unit 1: Basic Building Blocks of Successful Financial Management Unit 2: Investing Basics Unit 3: Finding Money to Invest Unit 4: Ownership Investments Common Stocks Real Estate Equity Unit Investment Trusts Equity Mutual Funds Exchange-Traded Funds Collectibles, Business, Commodities Equity Investments Diversification Summary Action Steps About the Author 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 When a company wants to raise money, it offers investors a share of ownership in the company in the form of stock in exchange for that money. As a partial owner of the company, each investor shares in the success or failure of the business. There is no guarantee of return on the investment. Investors become part owners of a business and have no guarantee that they will receive any income for the use of their money or that they will get back any or all of their money in the future. However, historically, common stocks have outperformed all other investments. According to Morningstar Inc.'s Ibbotson Stocks, Bonds, Bills, and Inflation (SSBI) data, the average annual return on U.S. large company stocks from 1926 to through 2016 was 10.0% versus 12.1% for small company stocks, 5.5% for long-term government bonds, and 3.4% for U.S. Treasury bills. The inflation rate during this period was 2.9%. If a company makes money in a given time period, its board of directors may decide to reward its owners by distributing dividends or may choose to reinvest the money in the company. If you own a stock that pays dividends, you may have the option of reinvesting them in more stock instead of receiving a cash dividend. The dividends are still taxable but dividend reinvestment plans (also known as DRIPs) are an easy way to increase your investment holdings. As owners of the business, stockholders elect directors who select the people who manage the company on a day-to-day basis. Depending upon the business and the way in which it is set up to operate, stockholders may have the opportunity to influence other decisions as well. Typically, this happens at an annual business meeting and stockholders can cast proxy votes if they are unable to attend the meeting in person. There are many companies that offer stock investments. If you are interested in purchasing stock, you should learn about the industry and the particular business in which you are considering investing. There are many ways to learn. Magazines such as Kiplinger’s and Money are one. Newspapers, especially those that focus on economic topics, like the Wall Street Journal, and those in large cities, such as the New York Times are good sources. Companies such as Value Line produce materials to specifically rate stocks. These are typically carried in the reference section of larger libraries. The Internet is full of Web sites that offer information. Scrutinize each site to determine the source and note whether written material is produced by a person or business that may gain profit from the information provided. One place to look for such Web sites is in the money section of the site at http://www.consumerworld.org/. There, you will find a link to the American Association of Individual Investors at http://w[...]



Investing Unit 2: Saving and Investing

2018-01-08T14:40:07Z

Introduction Unit 1: Basic Building Blocks of Successful Financial Management Unit 2: Investing Basics Saving and Investing Risk Diversification Dollar-Cost Averaging Time-Value of Money Asset Allocation Investment Preferences Summary Action Steps About the Author 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 with $mall Dollar Amount$ Unit 9: Getting Help: Investing Resources Unit 10: Selecting Your Team of Financial Professionals Unit 11: Investment Fraud     Study Guide Action Steps Monthly Investment Messages Glossary The Difference Between Saving and Investing Even though the words "saving" and "investing" are often used interchangeably, there are differences between the two. Saving provides funds for emergencies and for making specific purchases in the relatively near future (usually three years or less). Safety of the principal and liquidity of the funds (ease of converting to cash) are important aspects of savings dollars. Because of these characteristics, savings dollars generally yield a low rate of return and do not maintain purchasing power. Investing, on the other hand, focuses on increasing net worth and achieving long-term financial goals. Investing involves risk (of loss of principal) and is to be considered only after you have adequate savings. Savings vs. Investment Dollars Savings $$ Investing $$ Safe Easily accessible Low return Used for short-term goals Involve Risk Volatile in short time periods Offer potential appreciation For mid- & long-term goals   Investment Return Total return is the profit (or loss) on an investment. It is a combination of current income (cash received from interest, dividends, etc.) and capital gains or losses (the change in value of the investment between the time you bought and sold it). The published rate of return for a selected investment is usually expressed as a percentage of the current price on an annual basis. However, the real rate of return is the rate of return earned after inflation, which is further reduced by income taxes and transaction costs. Illustration of "Total Return" and "Rate of Return"   Current Income + Capital Gain (or Loss) = Total Return Ex: $2 + $1 = $3   Annual Return ÷ Current Price of Security = Rate of Return Ex: $3 ÷ $24 (per share) = .125 or 12.5%   Historically, stocks have had the highest average annual investment return of all types of investments, especially over long time periods of 10 years or more. The average annual rates of return for major investment asset classes from 1926-2016, according Morningstar, Inc.'s Ibbotson Stocks, Bonds, Bills, and Inflation (SSBI) data , were: 10.0% large company stocks, 12.1% small company stocks, 5.5% government bonds, 3.4% Treasury Bills, and 2.9% inflation.   [...]



Investing Unit 9: Resources

2018-01-08T14:06:49Z

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 Investment Clubs Investing Resources Investing on the Internet Summary Resources Action Steps About the Author Unit 10: Selecting Financial Professionals Unit 11: Investment Fraud     Study Guide Action Steps Monthly Investment Messages Glossary The following lists are some additional resources to assist you with investment decisions. Newsletters and Home Study Investment Home Study American Association of Individual Investors 625 North Michigan Avenue, Suite 1900 Chicago, IL 60611 Toll-free: 1-800-428-2244http://www.aaii.com DRIP Investor (monthly newsletter about Dividend Reinvestment Plans) North Star Financial, Inc. 7412 Calumet Ave. Hammond, IN 46324-2692 Phone: http://www.dripinvestor.com Magazines Better Investing Kiplinger’s Personal Finance Consumer Reports Money Web Resources Daily Financial Updates Business Week Online http://www.businessweek.com/investor/index.html CNN Money http://money.cnn.com MSN Money http://moneycentral.msn.com USA Today Money Section http://www.usatoday.com/money The Wall Street Journal http://www.wsj.com Investing—General Alliance for Investor Education (The Investor's Clearinghouse) www.investoreducation.org American Association of Individual Investors www.aaii.com American Stock Exchange www.amex.com BetterInvesting www.better-investing.org Briefing offers in-depth analyses of individual stock sectors www.briefing.com Daily Stocks www.dailystocks.com Dow Jones Industrial Average www.djindexes.com FINRA (Financial Industry Regulatory Authority) www.finra.org GreenMoney Online Guide for socially responsible investing and green consumer options www.greenmoney.com Investor Protection Trust www.investorprotection.org Investor Web www.investorweb.com The Motley Fool, Online financial forum www.fool.com NASAA (State Securities Regulators) www.nasaa.org NASDAQ Atock Exchange www.nasdaq.com New York Stock Exchange www.nyse.com PC Quote www.pcquote.com/ Research magazine InvestorNet section www.researchmag.com SEC’s EDGAR Database for company annual reports and other documents www.sec.gov/edgarhp.htm SEC’s Enforcement Complaint Center www.sec.gov/enforce/comctr.htm Security Dealers’ Public Disclosure site (FINRA) to check if your broker has had any disciplinary action filed www.nasdr.com/2000.asp Stock Smart www.stocksmart.com StockScreener (Hoovers) www.stockscreener.com The Stock Room www.stockroom.org U.S. Securities and Exchange Commission (SEC) maintains database on mutual fund prospectuses and annual reports www.sec.gov Investing—Mutual Funds Investment Company Institute www.ici.org Lipper Analytical Services www.lipperweb.com Mututal Funds Investor Center www.mfea.com Online Brokers American Express www.ameriprise.com TD Ameritrade www.tdameritrade.com E*Trade www.etrade.com [...]



Investing Unit 1: Wealth Accumulation

2018-01-08T14:03:27Z

Introduction Unit 1: Basic Building Blocks of Successful Financial Management Building Blocks Wealth Protection Wealth Accumulation Wealth Distribution Summary SMART Financial Goal-Setting Action Steps About the Author 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 Financial Goals To get where you want to go in life, it is important to decide in advance how you will get there. Goals are signposts on the highway to the future. They serve as your guide to personal, career, and financial success. By keeping specific goals in view, you can direct your energies toward achieving your goals. Financial goals are important because they help us to organize and direct our financial lives, providing a framework for decision-making. They can help us cope, provide some control in an environment where many things seem out of control, and help us visualize our financial future. How can you establish financial goals and utilize the building blocks you need to achieve your dreams? First, you can learn how to create SMART goals. SMART financial goals have several important criteria: S Must be SPECIFIC with dollar amounts, dates, and resources to be used in accomplishing the goals. M Must be MEASURABLE; determine regular amounts weekly, bimonthly, or monthly to set aside to accomplish goals. Another good "M" word to consider is MUTUAL. Goals that are mutual or shared with other family members will be easier to achieve. It also is important to think about how you will keep yourself and other family members MOTIVATED to achieve goals, especially long-term goals. A Your goals need to be ATTAINABLE given your financial situation. R It is important that your goals are RELEVANT and REALISTIC. What RESOURCES are available for you to use in achieving your goals? It is also important that you REVIEW and REVISE your goals periodically as necessary. T You need a specific TIME-LINE for accomplishing your goals. To achieve those goals, you must also be willing to make TRADE-OFFS in your financial life. Know the difference between needs and wants. Because there is never enough money to fund all of your financial goals at one time, you need to prioritize your goals. Take the time to put your goals in writing. Putting them on paper will reinforce their significance. Use the worksheet "SMART Financial Goal-Setting" to help you list short-term (less than 3 months), intermediate-term (3 to 6 months), and long-term (one year or longer) financial goals. Then, to stay motivated, visualize how you will feel when you accomplish your goals. Lastly, it is very important that you periodically set aside a pre-determined sum of money for each specific financial goal. Credit Management When is the best time to stop a growing debt burden? Before it gets out of hand, of course. You can spot a debt problem early by looking at indicators, such as the number of bills coming in each month. Is the number increasing steadily? This could signal an increasing reliance on the use[...]



Getting Extension on the Map: Common Indicators, Common Reporting

2017-12-13T02:26:46Z

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

2017-12-13T02:08:56Z

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

2017-12-12T21:19:45Z

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):      http://blogs.ifas.ufl.edu/hillsboroughco/2017/09/15/equifax-security-breach-steps-protect/ To Freeze or Not Freeze My Credit Report (Kathy Sweedler, University of Illinois Extension):      http://web.extension.illinois.edu/cfiv/eb141/entry_12860/ Credit Freeze Information in the Wake of the Equifax Hack (Barbara O’Neill, Rutgers Cooperative Extension):      http://moneytalk1.blogspot.com/2017/09/credit-freeze-information-in-wake-of.html Coping With the Aftermath of the Equifax Hack (Barbara O’Neill, Rutgers Cooperative Extension):       http://moneytalk1.blogspot.com/2017/09/coping-with-aftermath-of-equifax-hack.html  Credit Freeze Contact Information (Barbara O’Neill, Rutgers Cooperative Extension):      http://njaes.rutgers.edu/money/pdfs/Credit-Freeze-Contact-Information.pdf How to be Vigilant in the Aftermath of the Equifax Hack: Part 1 (Securing Bank Accounts and Credit) (Barbara O’Neill, Rutgers Cooperative Extension):      http://moneytalk1.blogspot.com/2017/09/how-to-be-vigilant-in-aftermath-of.html How to be Vigilant in the Aftermath of the Equifax Hack: Part 2 (Insurance and Income Taxes) (Barbara O’Neill, Rutgers Cooperative Extension):      http://moneytalk1.blogspot.com/2017/10/how-to-be-vigilant-in-aftermath-of.html Protecting Yourself in the Face of a Data Breach (Amanda Woods, Ohio State University Extension):      http://livesmartohio.osu.edu/money/woods-485osu-edu/protecting-yourself-in-the-face-of-a-data-breach/ Three Easy Steps to Protect Your Online Identity (National Endowment for Financial Education):      https://www.hsfpp.org/blog/article/130/3-easy-steps-to-protect-your-online-identity.aspx Equifax Data Breach -- Steps to Protect (Money Tip$, Iowa State University Extension and Outreach):      https://blogs.extension.iastate.edu/moneytips/security-breach Equifax Data Breach, What Now? (Karen Lynn Poff, Virginia Cooperative Extension):      https://warren.ext.vt.edu/content/dam/warren_ext_vt_edu/karen/files/fina...               [...]



Monthly Investment Message: November 2017

2017-12-01T13:06:51Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu November 2017 The Benefits of Financial Health This article is adapted from a previously written blog post for the eXtension Military Families Learning Network: https://militaryfamilies.extension.org/2017/06/27/what-financial-health-means-to-me-ned/ 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 https://www.consumerfinance.gov/data-research/research-reports/financial-well-being/.   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: http://njaes.rutgers.edu/money/ffquiz/.    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 redu[...]



Financial Security for All Research

2017-10-11T16:22:17Z

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 Fina[...]



Monthly Investment Message: September 2017

2017-10-03T04:16:48Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu 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[...]



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

2017-09-11T19:40:21Z

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 (www.mvelopes.com). 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 s[...]



Monthly Investment Message: August 2017

2017-09-04T13:51:55Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu 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): http://www.choosetosave.org/ballpark/  Provides a rough estimate of the amount of money that someone nee[...]



Monthly Investment Message: June 2017

2017-07-04T15:03:12Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu 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. I[...]



Monthly Investment Message: May 2017

2017-06-01T13:50:44Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu 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 Edu[...]



Monthly Investment Message: April 2017

2017-05-01T12:04:43Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu 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 http://www.moneychimp.com/features/rule72.htm[...]



Monthly Investment Message: March 2017

2017-04-02T22:13:48Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu 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 fi[...]



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

2017-03-03T17:53:26Z

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

2017-03-01T13:30:05Z

Barbara O’Neill, Extension Specialist in Financial Resource Management Rutgers Cooperative Extension oneill@aesop.rutgers.edu 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 www.rce.rutgers.edu/money/riskquiz  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 i[...]



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

2017-02-08T01:43:56Z

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.

We would like your feedback on this Personal Finance Frequently Asked Question.




Are Accounts at a Bank Combined for FDIC Insurance?

2017-02-08T01:38:47Z

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: http://www.fdic.gov/deposit/deposits/dis/

We would like your feedback on this Personal Finance Frequently Asked Question.




How Long Can Negative Information Remain in a Credit Report?

2017-02-08T01:30:21Z

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.

We would like your feedback on this Personal Finance Frequently Asked Question.




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

2017-02-08T01:27:55Z

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?

2017-02-08T01:20:57Z

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 http://www.irs.gov/Retirement-Plans/Roth-IRAs.

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

2017-02-08T01:18:21Z

“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  http://njaes.rutgers.edu/money/ira-table.asp 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 fin[...]



What Are the Tax Laws About Giving Gifts?

2017-02-08T00:48:20Z

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 www.irs.gov 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?

2017-02-07T21:46:30Z

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 http://www.cffpinfo.com/annual-limits/.

 

 




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

2017-02-07T21:27:37Z

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?

2017-02-07T21:22:44Z

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?

2017-02-07T21:16:31Z

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?

2017-02-07T21:08:21Z

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?

2017-02-07T21:03:34Z

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?

2017-02-07T20:58:44Z

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?

2017-02-07T20:55:01Z

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?

2017-02-07T20:44:51Z

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?

2017-02-07T20:36:28Z

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?

2017-02-07T20:22:37Z

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 www.irs.gov.

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How Does Losing a Job Affect Your Income Taxes?

2017-02-07T20:18:19Z

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 www.irs.gov.

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