LIFE PLANNING GUIDE 2022
A supplement of the Lewiston Tribune & Moscow-Pullman Daily News
2 | January 22, 2022 | Lewiston Tribune & Moscow-Pullman Daily News
LIFE PLANNING GUIDE
How to road trip on a budget Metro Editorial
The opportunities for adventure are endless when the car is fueled up with a full tank of gas and the open road awaits. Road trips can be cost-conscious ways to travel, as they save travelers from having to contend with potentially expensive flights. However, there’s even more road trippers can do to save on their next excursions. Explore these money-saving tips before hitting the open road. IMPROVE FUEL ECONOMY There’s no avoiding the gas
station on road trips, but there may be ways to stretch gas mileage. Make sure tires are properly inflated; have the vehicle serviced before leaving to change oil and check that everything is running efficiently; don’t overpack with lots of heavy cargo; and bring bikes along to explore certain areas without having to use the vehicle. ESTABLISH A DAILY BUDGET
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You can’t anticipate every expense, but you can make a plan and estimate what it will cost for the trip. Determine your priorities so you know if you want luxury accommodations or if campgrounds will suffice, and then build a budget around anticipated costs. Keep track of all costs so you’ll know when to cut back, if necessary. CONSIDER A RENTAL
If you’re leasing a car or truck and are dangerously close to going over miles, a rental vehicle may save you money in the long run. Also, if you’ll be traveling with a crowd, renting a van–and splitting the costs–can save everyone money.
PACK FOOD AND DRINKS
Visiting sit-down restaurants and even fastfood establishments can cause expenditures to add up. The financial resource Money Crashers says a typical fast-food meal costs just under $6, but fast casual places, like Chipotle and Panera, can run around $12 per person. Multiply those prices by three meals a day over the course of the trip, and that’s expensive. Instead, save dining out for a treat and pack non-perishable items or even sandwiches in a cooler to satisfy you while on the road BOOK A SUITE OR AIRBNB
When traveling with the family, a suite or Airbnb might provide cheaper alternatives to a standard hotel room, since they likely have fully furnished kitchen facilities, laundry services and other extended-stay perks. The up-front cost may be more, but you’ll save in the long run on all the extras UTILIZE ANY AND ALL COUPONS
Retail coupon providers like Honey.com and RetailMeNot.com can help you find discounts on a variety of items. There also may be coupons for parking garages and area attractions. FIND FREE ENTERTAINMENT
With a little research you can find attractions that don’t require high admission fees or may have no fees at all. Public parks, certain museums and area landmarks may offer free admission. Road trips can be even more affordable when vacationers embrace the many ways to save money.
LIFE PLANNING GUIDE
Lewiston Tribune & Moscow-Pullman Daily News | January 22, 2022 | 3
Budgeting for long vacations abroad flight and may enjoy extra perks like priority boarding or free Seniors typically have more baggage check. time to travel than other groups. CALCULATE PRE-TRIP PRICES That freedom entices many to travel overseas, often for Start shopping destinations to extended periods of time. see which locales align with your The cost comparison site budget. Compare and contrast CostAide indicates that the estimates as to how much each average two-week vacation destination may cost on a daily for two to Amsterdam can basis. Prices can vary widely run around $5,000 to $6,000. depending on the destination, Lengthen that trip to a month, and this is a great way to some and a vacation of one’s dreams pre-trip notion of what your can set a couple back $12,000. dream trip will cost. Change the destination and LOOK INTO LODGING costs could get even higher. There is a lot of wiggle room The last thing any traveler when it comes to lodging and wants is to run out of money price points. You can stay in fiveduring a dream vacation. star hotels and pay a premium This makes figuring out costs and budgeting for such trips or consider hostels if bells and essential. Seniors planning the whistles aren’t your priority. Keep trip of a lifetime can consider in mind that a longer stay could these tips to budget effectively come with a discount. Airbnb, for and maximize their vacation example, lets hosts list weekly or monthly prices, with monthly dollars. Metro Editorial
AIR TRAVEL
Transportation abroad undoubtably will be one of the largest expenses travelers incur. Check prices from multiple airports in your area for the best rates, even if it means having to drive a bit further. If you have only one local airport, book a separate flight to a travel hub, such as Atlanta or New York, so you can comparison shop more affordable flights to your final destination. Plan a year or two out for the trip and shop around for travel rewards credit cards that provide reward earnings in the way of airline miles; start accumulating them with everyday purchases. If you use airline rewards wisely, you won’t need to budget for the
discounts running 40 to 60 percent less than daily rates. FOOD
Food is a priority when traveling. If you can stay in accommodations with a kitchenette, you can reduce dining costs and make meals as desired. Food plans are another consideration. Book destinations that offer an allinclusive or a meal plan option. It may not be the cheapest alternative, but you’ll have peace of mind knowing food costs already are covered. Budgeting for a long trip means understanding average costs, deciding on priorities and utilizing discounts at one’s disposal.
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4 | January 22, 2022 | Lewiston Tribune & Moscow-Pullman Daily News
LIFE PLANNING GUIDE
Strategies to ease the burden of student loan debt Metro Editorial
Student loan debt in the United States is growing. According to EducationData. org, federal student loan debt has grown at an annual average rate of just under 28 percent since the start of the 21st century. Private student loan debt also is a significant burden, totaling $132 billion by the end of 2020. As student loan debt has risen, managing that debt has become an important component of financial planning. Individuals with student loan debt can look into various strategies to help ease their debt burdens.
RECONSIDER YOUR EMPLOYMENT As student loan debts have risen, employee repayment assistance programs once associated strictly with government jobs have grown in popularity at private companies. The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed around the onset of the pandemic in 2020 included a tax-free provision for employer-sponsored loan assistance programs. The tax benefits helped both employees, who did not have to pay income taxes on loan assistance money provided by their employers, and businesses, who received payroll tax exclusions on funds paid to employers via the program. The CARES Act provision was temporary, but experts at Goldman Sachs have noted that many private companies have gotten creative in regard to helping employees pay down student loan debt. For example, some have allowed employees to redirect PTO and vacation pay toward their student loans. Individuals with sizable student loan debts whose companies do not currently
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offer such benefits can look for new employment opportunities with firms that will help them pay down their debts.
CONSOLIDATE LOANS Consolidation is often viewed through the lens of simplifying loan repayment by combining all loans into one so borrowers with multiple loans only need to make a single payment each month. That impression is correct, but thereÕs more to consolidation than simplifying repayment. The experts at Credit.com note that consolidation typically allows borrowers to change their repayment terms. Longer repayment terms will increase the amount of interest borrowers pay over the life of the loans. But longer repayment terms also allow borrowers to pay less each month, which can free up money to pay bills and build savings for large purchases, including a home.
KNOW YOUR LOANS Many borrowers signed their student loan documents when they were 18, while others might have signed when they were 22 or 23 and about to enter graduate school. ItÕs easy for young borrowers to overlook important details like interest rates, but individuals who have multiple loans must recognize that the interest rates on loans that have not been consolidated almost certainly vary. Learn the interest rates on your loans and make a concerted effort to pay extra principle each month on the loans with the higher interest rates. Doing so can save borrowers a lot of money over time and get them that much closer to eradicating their student loan debt. Student loan debt is a significant burden for millions of individuals. Finding ways to ease that burden can help borrowers secure their financial futures.
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LIFE PLANNING GUIDE
Lewiston Tribune & Moscow-Pullman Daily News | January 22, 2022 | 5
Explore these college savings strategies Metro Editorial
Enrolling in a trade school or college is widely considered the next step after a student graduates from high school. College is especially popular, as the U.S. Bureau of Labor Statistics reports that 62.7 percent of high school graduates went on to colleges and universities in 2020. Finding ways to pay for higher education has long been a goal for students and their families. PrepScholar, a college testing preparation resource, calculates that, by 2033, students can expect to pay around $237,000 at in-state public universities and $464,000 at private colleges or universities for four-year degrees. That high cost is why so many families take proactive steps to set aside funds for college soon after their children are born. No matter the situation, taking the steps to plan and save helps to make schooling more affordable. 529 COLLEGE SAVINGS PLAN A 529 is a specialized savings
account for college and university costs. Most plans can be opened by a U.S. citizen or resident alien age 18 and older. The individual opening the account can be a parent, grandparent, cousin, or even a friend. The student is the beneficiary of the account. Fouryear schools, community colleges and vocational/trade schools accept 529 accounts as payment sources. The only requirement is that the school must participate in the U.S. Department of Education student financial aid programs. EDUCATION SAVINGS ACCOUNT, OR EDUCATION IRA
The financial experts at Ramsey Solutions say an ESA works like
a Roth IRA but it is designed specifically for education expenses. Individuals can invest up to $2,000 (after tax) per year, per child. The account grows tax-free. The rate of growth varies based on investments in the account. Ramsey estimates that at an average return rate of 12 percent on a $36,000 investment ($2,000 per year for 18 years) would grow to around $126,000 by the time the child starts college. An ESA also can be used to pay for K-12 private school tuition, school supplies, tutoring, or textbooks. It also can be transferred to a sibling if the money is not needed for a particular student. UTMA/UGMA PLAN
This plan is different from ESAs and 529s because it is not specifically designed for college savings. The Uniform Transfer/Gift to Minors Act is in the childÕs name but is controlled by a guardian until the child reaches age 18 or 21. This mutual fund account can be used to save for college with reduced taxes, or funds can be used for other expenses, such as a car or housing. ADVANCED PLACEMENT CLASSES
AP classes allow high school students to take college-level courses that can be converted into college credits. Each AP class reduces the need to pay for a class in college. This can add up to some significant savings. In addition, performing well in AP classes may make students more attractive to colleges and universities, helping students to earn academic scholarships. Saving for college can start early and there are various vehicles for families to explore.
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6 | January 22, 2022 | Lewiston Tribune & Moscow-Pullman Daily News
LIFE PLANNING GUIDE
How to account for a rising cost of living
Metro Editorial
Cost of living is a significant component of financial planning. The cost of living may dictate where people live and work, and a high cost of living can influence how individuals spend their free time.
Data from Statistics Canada indicates that consumer prices rose 4.1 percent and 5.3 percent in August 2021 in Canada and the United States, respectively. As Canadians headed to the polls in late September, a survey from Abacus Data found that 38 percent felt reducing their
cost of living was a key factor affecting their vote. Similarly, a 2020 survey from TD Ameritrade found that 47 percent of Americans feel that cost of living is the biggest threat to their financial security and long-term investments. It’s worth noting that the survey was conducted prior to the pandemic. Since the onset of the pandemic, cost of living has increased considerably. Though the fight against a rising cost of living can feel like an uphill battle, individuals can take steps to prepare for such increases.
APPLY LESSONS LEARNED DURING THE PANDEMIC
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A recent Pew Research Center analysis of U.S. government and Eurostat data found that roughly 9.6 million workers in the United States lost their jobs in the first three quarters of 2020. That period coincides with the onset of the COVID-19 pandemic. When forced to confront sudden and unexpected job losses, millions of individuals learned how to get by on less income. Cost-saving measures adopted during the pandemic can be continued or reimplemented, helping individuals to combat higher energy costs and other rising expenses.
LOOK FOR A NEW JOB OR FRESH INCOME STREAMS A rising cost of living is a concern for people from all walks of life, but it may be especially concerning for retirees or individuals with costs like childcare that can be hard to pare back. In such
instances, individuals can look for new a job or fresh income streams. According to the Q3 2021 CNBC | Momentive Small Business Survey, 50 percent of small business owners say it’s gotten harder to find qualified people to hire compared to a year ago. And nearly one-third of survey respondents indicate they have open roles they have not been able to fill for at least three months. Individuals can explore local employment opportunities in an effort to find a new, more lucrative job that can help them combat a rising cost of living. Others who want to remain in their jobs can look for part-time work to supplement their existing income.
CONSIDER RELOCATING The pandemic forced many companies to transition from in office working to remote working overnight. That trial by fire could have lasting results. A 2020 survey of 317 Chief Financial Officers and leaders in the finance industry found that 74 percent will move at least 5 percent of their previously on-site workforce to permanently remote positions after the pandemic ends. The survey, conducted by Gartner, Inc., also found that nearly one-quarter of respondents will move at least 20 percent of their on-site workers to permanently remote positions. That could make it possible for millions of working professionals to relocate to regions with a lower cost of living than their current towns or cities. The cost of living might be on the rise. But individuals can combat that increase in various ways.
LIFE PLANNING GUIDE
Lewiston Tribune & Moscow-Pullman Daily News | January 22, 2022 | 7
Pitfalls to avoid falling into debt Metro Editorial
High consumer debt can compromise individuals’ financial futures and have an adverse effect on their overall health. Debt has long been an issue that threatens individuals’ well-being, but the good news is that certain debts seem to be on the decline. According to the “Quarterly Report on Household Debt and Credit” that was released in May 2021 by the Federal Reserve Bank of New York, credit card balances were $157 billion lower by the end of the first quarter of 2021 than they had been at the end of 2019. Authors of the report credit that decline to paydowns by buyers and reduced consumption opportunities related to the pandemic. Individuals who want to avoid debt can keep an eye open for these pitfalls. RETAIL CREDIT CARDS Many retailers offer their own credit cards. Consumers may be enticed to sign up for such cards by the opportunity for instant, and often significant, savings. For example, a home improvement store may offer an immediate 25 percent discount to customers who sign up for a store credit card and use the card to make a purchase. As enticing as such savings can be, consumers should recognize that a recent study by CreditCards.com found that the average retail credit card APR is 25.9 percent. That’s more than 6 percent higher than a general purpose credit card. Consumers who cannot pay balances in full each month could end up paying much more in interest if they use retail credit cards instead of general purpose cards.
TOO MANY ACCOUNTS A 2019 study from the credit reporting agency Experian found that the average American has four credit cards. Though many consumers can effectively manage that many cards, the more cards an individual has, the easier it can be to lose track of spending. More cards also means a greater potential for more debt, as each card has its own limit that is unrelated to the limits on other cards. BONUS HUNTING
Another pitfall to avoid is the temptation to use credit cards instead of cash in an effort to accumulate more travel miles or cash back bonuses. Consumers should aspire to use cash over credit whenever possible. Doing so ensures consumers are not spending money they don’t have, which is one of the most common ways that individuals build significant consumer debt. FAILURE TO BUDGET
A budget is the most effective way for individuals to gain control of their spending. That lesson seems to resonate more with young people than older men and women. A 2019 poll from Debt.com found that 74 percent of consumers between the ages of 23 and 38 use a budget to govern their spending, while only 67 percent of consumers between the ages of 39 and 54 use a budget. A failure to budget can increase the risk of spending impulsively and make it hard for consumers to see what’s coming in and what’s going out. That’s a recipe for accumulating debt. Avoiding certain pitfalls can help consumers avoid accumulating debt that can adversely affect their financial futures.
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8 | January 22, 2022 | Lewiston Tribune & Moscow-Pullman Daily News
LIFE PLANNING GUIDE
Real estate financing options Metro Editorial
The decision to buy a home is significant. Real estate is the biggest investment the average person will make in his or her lifetime, which underscores just how significant the home buying decision can be. The real estate experts at Zillow recently reported that the national median price of a home in the United States is $272,446. However, since the National Association of Realtors reported a record low housing inventory late in 2020, the average house price has been rising rapidly nationwide. The Federal Reserve Bank of St. Louis estimates the median home sales price at $374,900, and certain states have much higher prices. WOWA, a real estate and finance technology company, says the average sale price of a home in Canada was $679,051 in July 2021. Most people do not have $300,000 to $600,000 in savings on hand to purchase a home in cash. That means theyÕll need to rely on financing to pay for their
dream homes.
CONVENTIONAL LENDING Conventional lending refers to when a bank or another financial institution loans a home buyer money to buy a home. This is one of the most common ways to fund a home purchase. Personal credit score as well as credit history help determine eligibility and interest rates for conventional loans. Availability of assets as well as income level are some additional determining factors. Conventional loans are traditionally 10-, 15- or 30-year notes and will require a certain percentage as the down payment to secure the loan. The bank will determine the down payment requirement, which is typically somewhere between 3 and 20 percent.
Investopedia. FHA loans require lower minimum down payments and lower credit scores than many conventional loans. FHA loans also require mortage insurance up front, plus annually for 11 years or the life of the loan depending on the length of the loan.
HELOC
FHA LOAN
A Home Equity Line of Credit, commonly called a HELOC loan, borrows against the available equity in your home to create a line of credit, much like a credit card. These funds can be used for large expenses or to consolidate higher-interest rate debt on other loans, according to Bank of America. It may be possible to use a HELOC to secure funding to make improvements to a home for those who want to flip it as an investment property.
A Federal Housing Administration loan is issued by an FHA-approved lender. These loans are designed for low-to-moderate-income borrowers, according to the financial guide
Individuals investing in real estate who do not intend to use a property as a primary residence may turn to private money lenders. These investors can tap
PRIVATE MONEY LENDERS
into capital from personal connections and lend at specified interest rates and payback periods, according to Fortune Builders, a real estate investing resource. Keep in mind the interest rate will likely be higher with a private lender than through a conventional lender. The repayment term also will be shorter.
VA-BACKED LOAN The U.S. Department of Veterans Affairs has a program for acquiring loans through conventional lenders that will be partially guaranteed against loss through the VA. This enables a lender to give better loan terms, such as the option to pay no down payment. Interested parties need to qualify for a Certificate of Eligibility and then work with qualified lenders. People have several options to finance the purchase of a home. These loans can help make the dream of home ownership a reality. Potential buyers are urged to speak with mortgage professionals or financial planners to consider their options.
LIFE PLANNING GUIDE
Lewiston Tribune & Moscow-Pullman Daily News | January 22, 2022 | 9
What to know about refinancing a mortgage Historically low interest rates have made now a good time to be a homeowner. According to the Federal Home Loan Mortgage Corporation, also known as Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage in midSeptember 2021 was 2.86. Just ten years earlier, the average rate was 4.09. That’s a significant dip, and one that’s saving today’s homeowners tens of thousands of dollars over the life of their mortgages. Interest rates dipped during the pandemic and have remained low ever since. That’s unlikely to last forever, which has given many homeowners a sense of urgency regarding refinancing. Refinancing can be financially advantageous, but there are some things homeowners should know prior to contacting their lenders.
REFINANCING DOES NOT ALWAYS SAVE MONEY OVER THE LONG HAUL It’s
hard
to
blame
homeowners
who jump at the chance to refinance their mortgages. Refinancing is often associated with significantly lower monthly payments, and such savings can be used to finance home improvements, pay for tuition or build retirement nest eggs. However, homeowners won’t necessarily save money over the long haul if they’re refinancing an existing 30-year mortgage with another 30-year mortgage. The mortage experts at Mortgage Calculator note that a Change Terms mortgage refinance is characterized by a shift to a loan charging a lower interest rate. The initial savings with such a refinance are undeniable, but changing from one 30-year to another 30-year restarts the mortgage clock, which can add years to the time homeowners will be repaying their debt. As a result, homeowners may end up paying more interest over time than they might have had they just kept their initial mortgage. Homeowners interested in a Change Terms refinance may want to look into switching from a 30-year to a 15-
year mortgage. A shorter term mortgage will increase the monthly payment, but the loan will reach maturity much faster, greatly reducing the amount of interest homeowners will pay over the life of the mortgage.
REFINANCING CAN BE COSTLY Lower monthly payments might be the number that catches homeowners’ eyes as they look to refinance, but it’s important that homeowners recognize that refinancing is not free. In fact, the personal finance experts at Kiplinger note that refinancing incurs many of the same costs that homeowners had to pay when they signed their initial mortgage papers. That includes fees, taxes and appraisal
costs. These costs are sometimes paid up front, but they also might be rolled into the loan balance. In the latter instance, homeowners could be paying interest on their refinancing costs. Homeowners who are refinancing solely because of lower interest rates should know that some lenders raise interest rates to compensate for refinancing costs. That can negate the savings and end up costing homeowners more money than the original mortgage. Refinancing is an option for homeowners who want to save money. Homeowners can speak with a financial advisor to determine if this is the best way to save money over the long haul or if refinancing will ultimately cost them more over the life of the mortgage.
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P1FCU Terry Groom, CFP, ChFC, CLU Financial Advisor (208) 848-2152 terry.groom@cunamutual.com
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10 | January 22, 2022 | Lewiston Tribune & Moscow-Pullman Daily News
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How to create structure after retirement but researchers with the Sloan Center on Aging and Work at Boston College have found that only those individuals who are truly engaged in their postretirement volunteering enjoy the psychological benefits of such pursuits. So before retirees dive right in to volunteering as a means to creating structure, they should first exercise due diligence and find an opportunity they’ll find genuinely engaging.
EMBRACE THE IDEA OF “BRIDGE EMPLOYMENT” “Bridge employment” is the name given to the trend that has seen retired individuals take on part-time or temporary employment after they have retired from full-time working. COVID-19 has no doubt skewed post-retirement working statistics since the World Health Organization first declared a pandemic in March 2020, but a 2019 survey from the LIMRA Secure Retirement Institute found that 27 percent of pre-retirees with at least $100,000 in assets planned to work part-time in retirement. Even part-time work can provide enough daily structure to help retirees feel as though each day is not just a free-for-all.
MAKE A CONCERTED EFFORT TO BE MORE SOCIAL
Metro Editorial
Professionals typically look forward to retirement and the freedom that comes with it. The notion that commuting and deadlines will one day be a distant memory is enough to make
anyone excited for retirement. But when the day to leave the daily grind behind arrives, many retirees admit to feeling a little anxiety about how they’re going to find structure. Retirement is a big transition, and Robert Delamontagne, PhD, author of
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the 2011 book “The Retiring Mind: How to Make the Psychological Transition to Retirement,” notes that some retirees experience anxiety, depression and even a sense of loss upon calling it a career. Some of those feelings can undoubtedly be traced to the perceived lack of purpose some individuals feel after retiring. Without a job to do each day, people can begin to feel useless. Overcoming such feelings can be difficult, but finding ways to build daily structure can make the transition to retirement go smoothly.
FIND SOMETHING TO TRULY ENGAGE IN Professionals who truly enjoy their work tend to be fully engaged, so it’s no surprise if such individuals have a hard time adjusting to retirement. Some may suggest volunteering can help fill the void created by retirement,
Volunteering and working are not the only ways to create structure in retirement. A concerted effort to be more social can help retirees fill their days with interactions with like-minded individuals who may be experiencing the same feelings. Join a book club, a local nature group that goes on daily or semi-daily morning hikes or another local community organization. These are great ways to build structure and meet new people. Retirees can create social media accounts to find local community groups that cater to their interests. Even if it seems hard to believe, plenty of retirees are seeking to create structure in retirement life, and social media can make it easier to find such individuals in your community. Structure and retirement may seem like strange bedfellows. But many retirees seek structure after calling it a career, and there are many fun ways for seniors to create more organization in their lives.
Lewiston Tribune & Moscow-Pullman Daily News | January 22, 2022 | 11
LIFE PLANNING GUIDE
Types of retirement accounts
Metro Editorial
The ability to retire with financial security is a goal for millions of people across the globe. Though people may stop working in retirement, many of their existing bills, and even some new ones, will still need to be paid. Retirement is often imagined as a time of unbridled financial freedom, but that’s only possible when individuals, including young professionals, prioritize planning for the day when they call it quits. Retirement accounts and plans are a popular way to save for life after working. Individuals have various retirement plan options at their disposal, and each is unique in its own way.
INDIVIDUAL RETIREMENT ACCOUNT (IRA) An IRA is a tax-advantaged way to save for retirement. Anyone with earned income can open an IRA. Money deposited into an IRA cannot be withdrawn prior to account holders reaching 59.5 years of age without incurring a steep tax penalty of 10 percent. There are limits to how much individuals can deposit into an IRA. The Internal Revenue Service notes that the deposit limit for all IRA accounts in 2021 was $6,000 ($7,000 for account holders age 50 and over). In addition, there are different types of IRAs, including traditional IRAs, Roth IRAs, Payroll Deduction IRAs, and SIMPLE IRAs. Each has its rules regarding taxes, eligibility and withdrawals, and individuals are
urged to discuss which type of IRA is best for them with a financial professional.
401(K) A 401(k) is another tax-advantaged retirement account typically offered through an employer, though selfemployed individuals can enroll in a Solo 401(k) plan. When enrolled in a 401(k) plan, employees will have a portion of each paycheck direct deposited into a long-term investment account. Contributions to a 401(k) are made pre-tax, which saves account holders a considerable sum of money so long as they continue to make contributions. One significant advantage to 401(k) plans is that many employers will match contributions up to a certain percentage. For example, some may match up to 2 percent, so employees who contribute 2 percent or more will actually be depositing no less than 4 percent of their income each week into their 401(k) accounts. Perhaps most beneficial is that employer matches do not count toward the annual 401(k) contribution limits, which the IRS notes were $19,500 in 2021.
SIMPLIFIED EMPLOYEE PENSION (SEP) PLAN An SEP plan is typically established by a small business owner or selfemployed individual. However, small business owners can set them up for their employees as well. Contributions to an SEP will reduce taxable income, and the money will grow tax-deferred.
Individuals enrolled in an SEP will only pay taxes on the money upon withdrawal. One of the advantages to an SEP is it has significantly higher contribution limits, which the IRS notes were $58,000 or 25 percent of the employee’s compensation, whichever
was lower, in 2021. However, SEPs are employer contribution only, so they rely a lot on employers’ available cash. No retirement accounts are the same. Individuals are urged to conduct their own research and choose the plan that best suits their needs.
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12 | January 22, 2022 | Lewiston Tribune & Moscow-Pullman Daily News
LIFE PLANNING GUIDE
Simple strategies to stretch retirement savings Running out of money is a common concern among retirees. And that anxiety is not necessarily unfounded, as a recent study from the Society of Actuaries found that people routinely underestimate just how much money they will need in retirement. Similarly, a 2019 model created by the employee benefit experts at EBRI found that nearly 41 percent of households in which the head of household is between the ages of 35 and 64 are projected to run short of money in retirement. Such figures underscore how important it is for younger professionals to save for retirement, but what about current retirees or those on the cusp of retiring? Individuals who fit those descriptions may need to embrace these strategies designed to stretch their retirement savings.
DOWNSIZE YOUR HOME Homes are many individuals’ greatest expense, and that does not necessarily change in retirement.
Downsizing to a smaller residence allows homeowners to pad their savings with money earned in the sale of their homes and also reduce their monthly overhead, as utilities, property taxes and maintenance expenditures are typically much lower in smaller homes than larger homes.
LOOK FOR OTHER WAYS TO DOWNSIZE Individuals also can stretch their retirement savings by downsizing in other areas. Lower monthly expenses by shopping around for less expensive auto insurance policies, downgrading cable television packages or cutting the cord entirely. And though individual streaming services may not be too costly, these expenses can add up for individuals who have five or more subscriptions. Downsizing streaming services to one or two packages at a time can help individuals keep more money in their retirement savings accounts each month.
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BE FLEXIBLE WITH YOUR WITHDRAWALS The “set it and forget it” model of retirement investing helps professionals avoid the tricky process of trying to predict the markets. Retirees may take the same approach when it comes to withdrawing their money, following the industry standard and automatically withdrawing 4 percent from their accounts each year. But individuals who want to stretch their savings should remain flexible with their annual withdrawals and routinely examine their spending habits. An individualized approach to retirement withdrawals can help retirees avoid taking more than they need out of their accounts each year.
The 4 percent rule has its merits, but retirees should recognize that they may not need to take that much out every year.
WORK WITH A FINANCIAL ADVISOR Ensuring you don’t outlive your retirement savings can be complicated, as it often involves navigating fluid concepts such as inflation. A certified financial professional can help retirees plan for changes that are beyond their control and even recommend when certain risks might be worth taking. Many individuals will need to stretch their retirement savings in the years ahead, and various strategies can help individuals do so.
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Lewiston Tribune & Moscow-Pullman Daily News | January 22, 2022 | 13
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14 | January 22, 2022 | Lewiston Tribune & Moscow-Pullman Daily News
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5 tax preparation tips
Metro Editorial
Tax season isn’t something most people look forward to, particularly if they suspect they owe money. However, a few tax prep tips can make the process of filing a return and, if necessary, paying back taxes as pain-free as possible.
CALL YOUR TAX PREPARER EARLY If you use an accountant or another tax preparer, be sure to book the appointment as soon as possible because slots fill up quickly. You don’t want to wait until the last minute and find there are no remaining appointments.
ESTABLISH A TAX PREPARATION FOLDER Beginning in January, certain documents will arrive in the mail that will be needed to file your taxes. Documents include earnings statements, banking interest statements and documents indicating investment profits. When items arrive, stash them in your tax folder so you’ll have all necessary paperwork at the ready.
AVOID TAX SCAMS As tax season draws near, tax scammers target unsuspecting individuals. You may find that you receive calls or texts from those purporting to be with the Internal Revenue Service. However, financial experts say that the IRS or the U.S.
Treasury will never call you on the phone; their mode of contact is via the U.S. mail. Another scam is individuals advertising a bigger refund when you use their services. This is not how tax laws work nor is it possible to get a return larger than what is owed. Avoid anyone promising a bigger return, advises Bankrate.
CONSIDER INCREASING HEALTH SPENDING ACCOUNT CONTRIBUTIONS Lisa Greene-Lewis, a blog editor at TurboTax, says HSAs are triple taxadvantaged, meaning you get an “above-the-line” deduction for contributing, and the growth in these accounts as well as withdrawals are tax-free if used for qualified health expenses. If you need to lower your tax burden, HSAs may be a safe and legal way to do so.
UTILIZE TAX SOFTWARE If you’re not using an accountant and have a relatively cut-and-dry financial situation, modern tax software can be an easy and inexpensive way to do your taxes. These sophisticated programs ask a series of detailed questions and the entire process can be completed in relatively little time. It’s almost time to get income taxes in order. Certain tips can make the process go more smoothly.
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Lewiston Tribune & Moscow-Pullman Daily News | January 22, 2022 | 15
How to be a smart credit consumer Metro Editorial
Financial planning encompasses a host of strategies designed to help people enjoy the fruits of their labors. Financial planning is often associated with saving for retirement. However, smart credit management is an integral component of financial planning that can begin paying dividends long before adults are ready to retire. Capital One notes that the benefits of a good credit score include lower credit card and mortgage interest rates, which can save individuals tens of thousands of dollars over the life of their home loans. In addition, the Federal Trade Commission reports that the better an individual’s credit history, the easier it is for that person to establish utility services, including electricity and internet service. With so much to gain, individuals should do everything they can to be smart credit consumers. These strategies can help consumers use credit to their advantage as they look to gain from this vital component of financial planning.
RECOGNIZE THE FACTORS THAT AFFECT YOUR SCORE. A credit score is generated using a formula that takes various factors into consideration. These factors include payment history, credit utilization rate, length of credit history, and credit inquiries, among others. Each variable is important, but paying balances in full and on time each month is a great way to build a strong financial reputation in the eyes of creditors. In addition, avoid overutilization of credit, especially if you can’t pay balances in full each month.
CHECK CREDIT BEFORE LOOKING FOR A JOB One easily overlooked benefit of being a smart credit consumer is its impact on individuals’ ability to find a good job. The Consumer Financial Protection Bureau urges individuals to check their credit reports before they begin looking for a job so they can correct any mistakes that
may be on their reports. That’s because some employers look at applicants’ credit reports as part of their background checks. Smart credit consumers recognize that monitoring their credit is just as important as utilizing it wisely. Consumers can access reports from each of the three main credit reporting agencies (Equifax, Experian and TransUnion) for free once every 12 months.
DON’T WING IT Much like successful retirement planning is often the culmination of decades of hard work, strategizing and saving, becoming a smart credit consumer involves commitment to a well-developed plan to utilize credit. Impulsive use of credit can quickly compromise individuals’ credit histories and financial reputations, so develop a plan to use credit wisely and stick to that plan. A successful credit utilization strategy should be rooted in paying bills on time, and ideally in full, each month to avoid potentially costly interest charges. Identify any bad credit utilization habits and do your best to eliminate them. If necessary, work with a financial planner to develop your credit utilization strategy. Various strategies can help individuals become smart credit consumers and reap the rewards that a strong financial reputation has to offer.
REGENCY PULLMAN
16 | January 22, 2022 | Lewiston Tribune & Moscow-Pullman Daily News
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