November Personal Finance Newsletter
November 14, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
The November personal finance newsletter is now available. It includes all the updates on 2012 IRA and retirement plan contribution limits, plus the 2012 social security and medicare figures. In addition, we cover the importance of long term care planning for women and information on a free upcoming long term care insurance workshop at the library. The newsletter also includes tips on planning for required minimum distributions, an update on college costs, and a market update. Click here to read it.
Yours, Mine, and Ours: Achieving Financial Goals as Individuals and a Couple
August 28, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
Making sound financial decisions is challenging enough when it’s just you – one person deciding on what’s best for his or her short-term and long-term goals. But add in a spouse, and the choices multiply! You now have two more sets of goals – your spouse’s and your combined goals as a couple. Plus, we all bring our own habits, attitudes, and history with spending, saving, bookkeeping, and planning for the future.
How do you accomplish what’s most important to you together and as individuals?
First, establish shared financial goals – this should be a combination of each of your individual priorities that you have discussed. This process generally works best if each person writes down his and her own goals before sharing them together. You will need to prioritize your financial resources toward meeting the ones that are most important to each of you.
Second, create the action steps and spending plan that support your goals. Depending on your history with spending and saving, you may want to consider setting up automatic savings contributions, shifting spending in certain areas to cash only, getting rid of credit cards, or other techniques that work for you.
Third, manage the day to day. Each person should have some responsibilities for managing your financial lives. Even if one person handles the majority of the financial tasks, the other person should still take the time to understand their overall financial situation, where all accounts are held, how investments are allocated, bills paid each month/year, etc.
Fourth, review your progress monthly and yearly. Set a monthly date to review progress on spending, saving, other action steps, and day-to-day financial management. Once a year, review your net worth statement and take stock of how overall progress is coming towards achieving your goals.
Money is a powerful tool to fund the lives we envision, and it can also be a source of friction and great pain in relationships. Sometimes involving a neutral professional – either a counselor or financial planner depending on the nature of the issue – can support you in moving the relationship and your financial goals forward.
To go more in depth on this topic, plan to attend my free workshop on Couples and Money at the Keller Public Library on Tuesday, September 20 at 6:30 pm. The library requests registration to library@cityofkeller.com or (817)743-4800.
Long Term Care is a Woman’s Issue
August 20, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
I just read a great article in the Journal of Financial Planning about the “Double Jeopardy” women face with long-term care. Written by Mary Quist-Newins with American College, she succinctly describes the increased risks women face as both caregivers and receivers in planning for long-term care.
According to Quist-Newins, the first risk is caregiving. She writes:
For many women, the first exposure to LTC occurs when they provide services or financial support to a loved one. Women are the vast majority of professional or formal caregivers; they’re also the primary deliverers of informal home care. Approximately 75% of those providing home care are female, most often daughters. Women also spend 50% more time giving care than men.
While the high cost of facility care is common knowledge, the costs and consequences associated with giving care in the home are less well known. Consider these stark realities:
- Nationally, more than 6.4 million working women provide direct or indirect caregiving assistance. By 2010, 10.1 million employed women will bear this burden. As boomers age, these numbers could double by 2050.
- According to research from the National Center on Women and Aging, family caregivers lose an average of $659,130 over a lifetime in reduced salary and retirement benefits.
- Forty-four percent of female caregivers report high levels of physical strain or emotional stress, while employed caregivers are more than twice as likely to develop depression.
- Women who become caregivers are nearly three times more likely to end up in poverty and five times more likely to depend exclusively on Social Security.
The second risk is care receiving. In this area, Quist-Newins notes that women’s average consumption of nursing care is 3.7 years vs. 2.2 years for men. “As a result, the average American woman is likely to incur more than double the LTC expense of the average male.”
The last risk Quist-Newins writes about is denial. She cites studies showing that only 18% of women have talked with their spouse about long-term care and only 35% have considered how they will pay for long-term care.
In my practice, long-term care is a frequent topics with my clients 50+. One of the biggest reasons people put off structuring a long-term care plan is competing financial priorities. Because a need for long-term care is not definite and planning for it can involve purchasing costly insurance, it often gets bumped to the bottom of the priority list. And from an immediate financial perspective, that’s sometimes the right decision. This article serves as a good reminder. Even if buying the insurance today doesn’t make sense, creating a plan today that financially prepares us to implement a long-term care plan in the future is a must – especially for women.
If you’d like to read the full article in the Journal of Financial Planning, click here. For other resources on long-term care planning, visit www.medicare.gov/LTCPlanning.
Women & Money Seminar
July 30, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
I’ll be speaking to the Southlake Chamber of Commerce WIN (Women in Networking) meeting at 11:30 am on Wednesday, August 26.
Women have unique opportunities and challenges with money! Women tend to live longer and earn less than men, but according to some recent studies may actually be better investors.
This interactive quiz will engage you in thinking about some of the biggest financial opportunities in your life and raise your antennae on some of the pitfalls to avoid. We’ll also discuss one of the biggest challenge Moms face – balancing saving for retirement and college.
Come prepared to have fun and participate — guessing at answers even if you don’t them will be encouraged! And after we throw out all the crazy answers, we’ll make sure everyone knows the right answer so you walk out the door with solid information to make smart financial decisions.
Where: Southlake Chamber of Commerce (1501 Corporate Circle, Suite 100, Southlake, TX)
When: Wednesday, August 26, 11:30 am
Limited Space. Reservations Recommended. Visit www.SouthlakeChamber.com to reserve your seat.
2nd income analysis
July 27, 2009 by Jean Keener, CFP, CRPC, CFDS · 1 Comment
If you’re like many folks right now, you may be trying to determine if having a stay-at-home spouse go back to work would be beneficial to your financial situation. The answer is not always clear-cut, so you want to make sure you do the math.
A second-income analysis involves an evaluation of the net after-tax benefit derived from a second income. For some couples, a second income is a financial necessity. For others, it is simply a means of achieving specific financial goals, such as ensuring a comfortable retirement.
There are two situations in particular that warrant a second-income analysis: (1) when a nonworking spouse considers entering the workforce, and (2) when a retired person considers full- or part-time employment to supplement Social Security and other retirement income.
If you wish to determine whether a second household income is advisable, you need to consider personal ramifications as well as the financial and tax aspects of your decision.
Personal ramifications
How will time spent away from the home impact you, your relationship with your spouse, and your children (if any)? For instance, if an at-home spouse with children is thinking about entering the workforce, the impact of such a move on the children may be a primary concern. In some cases, the economic benefit provided by a second income may not justify the loss in family or personal time. In other cases, of course, personal preference must take a back seat to financial necessity.
Financial aspects
Clearly, a second income can offer financial benefits. These advantages include: additional wages, salary, or self-employment income brought into the household, as well as additional fringe benefits (if any). You’ll want to look closely at the potential for saving additional income toward retirement and whether one spouse’s employer-provided health plan is more comprehensive than another.
There is also a financial downside to a second household income. Financial costs include possible extra expenses for commuting, parking, meals, clothing, child care, housecleaning, and dry cleaning.
Tax aspects
A second income could trigger certain unanticipated tax consequences, resulting in more or less after-tax income than you may have expected. Therefore, you must evaluate the overall tax impact of the second income, particularly if you’re collecting Social Security benefits.
What information must you gather to perform an analysis? You’ll need to obtain information about your current and projected financial and tax position. Regarding your current situation, you can review last year’s tax return and a recent pay stub for tax and salary information. You should also gather details about the second income, including estimated hours to be worked, wage rates, and benefits. Then, you’ll want to estimate expenses associated with the second income. Finally, you can fill out a worksheet to determine the net economic benefit of a second income. For information about how the net economic benefit of a second income affects your overall financial picture (as a couple), you might want to construct a cash flow analysis. This cash flow worksheet can get you started.
Which tax considerations are especially important? Generally, each additional dollar of income is subject to regular income tax, the 1.45 percent Medicare portion of the FICA tax (or 2.9 percent for self-employment tax), and the 6.2 percent Social Security portion of the FICA tax (12.4 percent for self-employment tax).
You’ll want to consider whether extra earnings will push your household into a higher marginal tax bracket (e.g., from the 15 percent bracket to the 25 percent bracket). But you’ll also need to consider how your increased adjusted gross income (AGI) affects the amount allowed for certain types of tax deductions. (Your AGI may be defined as your gross or total income minus certain deductions.) Common deductions that are subject to AGI limitations include the following:
- Phaseout of overall itemized deductions based on AGI (deductions reduced by 3 percent of AGI in excess of threshold amount)
- Miscellaneous itemized deductions subject to 2 percent AGI floor
- Medical expenses subject to 7.5 percent of AGI floor
- Phaseout of personal exemptions based on AGI (exemptions reduced by 2 percent of each $2,500 of AGI in excess of threshold amount)
- Phaseout of the child tax credit based on modified AGI
- Phaseout of deductible IRA contributions for certain qualified plan participants based on modified AGI
- Phaseout of exclusion of Social Security benefits based on modified AGI
- Phaseout of Roth IRA and Coverdell education savings account contributions based on modified AGI
Tax impact of second income on earned income credit
The earned income credit (EIC) is a refundable credit available to certain low-income individuals who have some earned income and meet certain other requirements. Because the EIC phases out as modified adjusted gross income increases, a second income may reduce or even eliminate your eligibility for the EIC, resulting in an after-tax benefit from the second income that is substantially less than you had anticipated.
Tax impact on retirees who receive Social Security benefits
Retirees receiving Social Security should consider the impact that supplemental earned income may have on those benefits before making the decision to work. In certain cases, taxpayers may have to include 50 percent to 85 percent of Social Security benefits in taxable income. In addition, Social Security recipients under full retirement age who have earnings in excess of an annual exemption amount are subject to a reduction in Social Security benefits.
Women & Money Seminar August 26
January 6, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
I’ll be speaking to the Southlake Chamber of Commerce WIN (Women in Networking) meeting at noon on Wednesday, August 26.
Women have unique opportunities and challenges with money! Women tend to live longer and earn less than men, but according to some recent studies may actually be better investors.
This interactive quiz will engage you in thinking about some of the biggest financial opportunities in your life and raise your antennae on some of the pitfalls to avoid. We’ll also discuss one of the biggest challenge Moms face – balancing saving for retirement and college.
Come prepared to have fun and participate — guessing at answers even if you don’t them will be encouraged! And after we throw out all the crazy answers, we’ll make sure everyone knows the right answer so you walk out the door with solid information to make smart financial decisions.
Where: Southlake Chamber of Commerce (1501 Corporate Circle, Suite 100, Southlake, TX)
When: Wednesday, August 26, noon
Limited Space. Reservations Recommended. Visit www.SouthlakeChamber.com to reserve your seat.
Women & Money: Seminar at GKWC Luncheon
January 6, 2009 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
I’ll be speaking at the January Greater Keller Women’s Club luncheon on Women & Money. As women, we have unique challenges and opportunities when it comes to relating to and managing money. Among the challenges, we tend to live longer and earn less than men and are sometimes hesitant to take ownership of our financial situation. Among the opportunities, we tend to stick to a plan once we have it and get better long-term investment results than men (this isn’t just me saying this — there’s data! But don’t worry, men, you can use the same time-proven techniques to avoid the pitfalls that caused the statistical variance). Once we’re aware of these trends, it can help us avoid pitfalls and plan to fund the life we want.
Guests are welcome at the luncheon. An RSVP by noon on January 16 is required to rsvp@gkwc.org.
Wednesday, January 21, 2009 Social: 11:00 a.m. Lunch: 11:30 p.m. Cost: $14 Timarron Country Club 1400 Byron Nelson Parkway Southlake, TX 76345 I’d love to see you there!Effects of Divorce
December 19, 2008 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
I just read a really interesting article in the Journal of Financial Planning. After divorce, the income of each spouse falls. On average, the income of the woman declines by 27%. The average income of the man declines by about 10%. The stats for both parties are positively affected by the presence of a significant other (parents, close friend, boyfriend/girlfriend) and by increased education. Children in the home affect women more than men, but the income effect of children is not as great as you might expect.
No one wants to have divorce happen. But this article really underscores the importance of having detailed analysis of the financial aspects of a divorce to ensure that the separation is equitable. And especially for women, the importance of taking charge of your financial situation whether single, married or divorced.