Saturday, May 5, 2018

Men often deny their mortality. That's a problem for women

"To the well-organized mind, death is but the next great adventure." - J.K. Rowling, British novelist, screenwriter, producer best known for her Harry Potter fantasy series. (1965 -    )


 BY JULIA ANDERSON

Stories about women, men and money come my way all the time. Here are a few.

A woman lives with a man for most of her adult life – more than 25 years. They never married.


First together in their youth, they broke up for a couple of years before getting back together in their 30s for the long haul.


He dies in his 60s.


The long-time live-in girlfriend knew that while she and her partner were apart in those early years, he briefly lived with another woman. What she didn’t know was that while with this other woman he named her as beneficiary of his pension, if he died. He never got around to changing that beneficiary assignment.


Now, even though that old relationship is long over, the former girlfriend collected a death benefit of more than $120,000 from his pension policy at his death.


His long-time live-in girlfriend of 25 years gets nothing!


Because they never married and because he never changed the beneficiary designation, there is no way to challenge this. The other woman’s name was on the document. The long-suffering girlfriend’s name was not.


Scenario No. 2:
A couple, long married, plans their retirement and decides that they will start collecting the full pension benefit from his 30 years of employment. That’s instead of taking only some of the monthly benefit so that the wife would continue to collect on the pension policy if she survives him.


He was in apparent good health, they wanted to enjoy an active retirement, so why not?


Within six months of retiring with the full pension benefit, he is dead from a massive heart attack.


She is left to pay her bills on her own without any long-term benefit from his lifetime of work and their shared life together. The pension payout dies with him.


Scenario No. 3: A couple had been married since their youth. A successful journalist and marketing guru, he launches a community newsletter in the 1990s during the exciting transition from paper to online news delivery. The newsletter was a money-maker.


Down the road, he is diagnosed with a blood cancer that slowly kills him.
Despite the dire illness, he persists in putting out the newsletter as if nothing is changing. He never talks with her about dying or about the details of the newsletter operation after he’s gone.


While she had been doing the business accounting, he dies without giving her training in news gathering or in technical support for its online delivery.


She struggled to learn on-the-job while grieving his loss. It was a lonely, miserable transition filled with stress and anxiety. She eventually (ala Martha Graham) prevailed and ran the publication for many more years.


There’s more: The newly widowed woman who faced massive debt left by her husband who owned a failing business. Or the woman who discovered unpaid mortgage debt left by a husband with a secret gambling problem. These men were in death denial.


A lot of men are.


In fact, Americans in general don’t talk about death, estate planning, end of life issues or even the details of retirement. Experts say it’s because few of us are ever exposed to death because we don’t live on farms anymore where the cycle of life is always present. We don’t witness death of family members because they are sheltered away in care centers rather than dying at home surrounded by loved ones, young and old.


When the topics of illness and death come up, we cringe. If pressed, men offer the pat answer, “we’ll be fine,” emphasis on the “we.”


Men, I think, more than women do not want to think about getting old or about dying. That leaves many women picking up the financial pieces after they lose their spouses. It means many women “pay” for the mistakes made by the men they live with because they ignore their mortality.


Those mistakes might be:
- Never getting around to updating beneficiaries on a pension plan or a life insurance policy or brokerage account.


- Choosing to take all the payout on a pension plan rather than preserving half for a surviving spouse after they are gone.


Whose fault?
Men are certainly at fault for failing to plan to when they are gone. But women also get blame for not being more assertive about estate planning, for not making sure that they will be financially whole, if their spouse or their live-in boyfriend dies?


Yes, if men don’t want to talk about money, it’s difficult to have the conversation.
Talking about money is stressful, causes anxiety and can create push-back. But let’s say you live with someone in HIS house. How will that shake out if he’s gone and his kids want the real estate?


Are beneficiaries up to date on his accounts and policies? Avoid the ugly surprises.


What about jointly-owned vehicles, RVs and savings accounts? Is everybody clear on what happens if one of your dies? Here’s what you can do, right now:
Make sure beneficiaries on all checking, savings, brokerage accounts are up to date.


If you marry or move in with someone after age 50, get a pre-nuptial agreement that spells out who gets what, when you each die.


On individual bank checking and savings accounts, put a POD (payable on death) name on the account. You can do it by filling out a form at the bank. The money goes to the POD beneficiary without the hassles of probate court or trusts. It can be your kids, live-in boyfriend or spouse.


If you own an account jointly, the surviving co-owner will automatically become the sole owner of the account.


Consider setting up a legal living trust to save time, money and the hassles of settling your estate in probate court when you die.


Here’s a suggestion from Dr. Keith Ablow, a psychiatrist, author and nationally-known mental health expert:


“If you do just three things in the next three weeks that you would do, for sure, if you knew you were going to die, you will improve your life,” he says. By taking this action, you will alter your life’s course, he suggests. You will be on the way to “truly living your life,” Ablow says.


Some women skim along on the surface of life...…. work, kids, grandkids. It’s busy-ness but not taking care of business. They are making assumptions about their financial future and what happens when the man they live with dies. Have the Money Talk!


For more:

“Why Denying Death Means Denying Life,” FoxNews.com, clickhere.

“The Psychology of Death: Facing up to our own mortality,” Psychology Today, click here.

Avoiding Probate with transfer on death accounts and registrations, click here.

Avoiding probate, www.nolo.comLiving trusts, www.nolo.com


Thursday, April 19, 2018

How much can you withdraw from your nest egg without going broke?

"3% is the new safe withdrawal rate," Wade Pfau, professor, American College of Financial Services, Mryn Mawr, Pa.


BY JULIA ANDERSON

There are TWO long-standing rules that financial advisers have been giving people planning for retirement.


 Rule No. 1 --- You can safely withdraw 4 percent of your nest egg retirement savings each year without running out of money in the long-run.


 Rule No. 2 – When investing in retirement move out of riskier assets and into safer bonds as you age.


Here’s the problem for today’s retirees: Both Stocks and Bonds are EXPENSIVE by historical standards. We’ve enjoyed a long run-up in stock values. Meanwhile, bonds are vulnerable to declines because of rising interest rates.


 THE NEW RULE --- 3 percent is the new 4 percent.


In other words, when planning for what your income will be in retirement consider withdrawing only 3 percent of your portfolio a year instead of 4 percent.
"3 percent is a safer withdrawal rate," say the experts at the American College of Financial Services. 

A lower withdrawal rate means more money stays in your portfolio and continues to earn income to be reinvested for the long-term.


 Let’s look at some numbers:
 You have $1 million in retirement savings:
A 4 percent withdrawal rate = $40,000 a year.
A 3 percent withdrawal rate = $30,000 a year.


You have $500,000 in retirement savings:
4 percent = $20,000 a year
3 percent = $15,000 a year.


 Can you live on $30,000 a year, plus your Social Security benefit? Many people are living on less. Can you live on $15,000 or $20,000 a year, plus Social Security?


 Let’s talk, now, about how your nest egg is invested.


Conventional thinking has you starting your retirement with 60 percent of your nest egg in stocks, so your money keeps growing. As you age, you shift out of stocks and into bonds to reduce risk.

But as we said earlier, with both stocks and bonds at expensive levels…with bonds vulnerable to interest rate increases, this formula might not work so well.

 What to do?


According to a report in the Wall Street Journal, the new thinking has retirees reducing stock exposure in the early years of retirement to protect against market declines, which are more likely at the end of this long bull market that we've enjoyed. Then gradually moving back into stocks as they age.


If a BEAR MARKET occurs in the early years of retirement, a stock-heavy portfolio might never recover, if you must sell stock at a depressed price during a downturn. In a bear market, bonds (even at today's higher values) will do better and offer less risk, the experts say.  


 JUST TO REVIEW:


When planning for retirement, make your income calculations based on a 3 percent withdrawal rate rather than the traditional 4 percent to allow more of your portfolio to grow and last longer.


Secondly, consider starting your retirement with more of your portfolio invested in safer bonds, rather than stocks, and gradually move into stocks as you age.
The idea is to stretch your retirement nest egg the estimated 28 years you may live in retirement.


If all of this scares, you to death, talk to a financial adviser about your retirement income options, read up on investment strategies for withdrawing from your nest egg. Make sure you understand the underlying risks of bonds in an environment that has federal-bank regulated interest raising going up.


Remember that if you are in good health at age 65, you will likely live into your mid- to late-80s. And we all know people living into their 90s.


WHAT ABOUT PEOPLE WHO HAVE A LONG WAY TO GO UNTIL RETIREMENT?


The experts at the College of Financial Services recommend:
If you have 30 years until retirement, you should be saving 16 percent of your annual income in a tax-deferred account. That account should be invested in 60 percent stocks and 40 percent bonds.
 If you have 40 years until retirement, you should be saving at least 8.8 percent a year with the same investment mix.


 BOTTOM LINE:
SAVE A LOT ($1 million at 3 percent equals $30,000 of income) and plan to spend carefully in retirement to avoid running short of money.  Meanwhile there are many strategies for how best to take money out of tax-deferred retirement funds. Study up on those strategies. 

Be sure you understand all the options and their pluses and minuses.  If you don’t understand something, ask questions until you do. Also, remember that the IRS requires that you withdraw from your tax-deferred IRA or 401(k) at age 70 1/2.

The IRS withdrawal rate on your money is about 4 percent, whether you like it or not. 

For MORE:
"Why You Should Hire a Financial Planner, even if You're Not Rich," NY Times, click here.
"Forget the 4 % Rule, WSJ click here.
"How Much Can You Withdraw in Retirement?" - The Balance, click here.
"How can I Make my Savings Last?" - Fidelity, click here. 
"How Much should you withdraw from your Retirement Savings each year? - Motley Fool, click here.





Wednesday, April 4, 2018

Divorce: Often a financial disaster for women


"You never really know a man until you have divorced him," Zsa Zsa Gabor, Actress and socialite. (1917-2016)


BY JULIA ANDERSON

At 54, she has been living apart from her husband for more than two years but has yet to initiate a divorce.


“I’ve got to get this over,” she told me with a look of distress. “It’s just so hard to take the next steps.”


For her there are a lot of next steps: With a divorce can she continue to use his health insurance coverage? How does she negotiate a fair division of retirement savings assets? If he gets the house, what does she get? Does she have enough money saved to pay for a divorce attorney? I ached for her.


Divorce is horrible in so many ways…a personal failure, a loss, an emotional nightmare. For women, it also can be financial disaster. Few women are better off financially after a divorce.


According to a report in The Atlantic, women typically see a 20 percent decline in income when their marriages end. The magazine called it “The Divorce Gap.”


Sadly, one in five women fall into poverty after divorce. Why? They likely will have less income from a job (if they have one) than their ex-spouse and they typically have custody of the children.  Meanwhile, few divorced mothers (only 25 percent) receive full child support as spelled out in their divorce agreements.


Advice for my divorcing friend:

Get off the dime and get it done. The longer you dither the more time he has to find a new girlfriend, to decide he deserves more in a settlement or to hide money and assets.


Put together a post-divorce budget for yourself. Add up your livings costs for food, utilities, mortgage/rent, insurance, transportation, retirement savings, health care. This gives you a negotiating position in a divorce settlement.


Gather all financial documents. Savings and checking accounts, retirement accounts. Get an appraisal on your home to determine how much equity is there.


Cancel joint credit cards, immediately. His debt can be your debt and another negotiating tool in the divorce.


Open accounts in your own name – bank, credit cards, savings.


Determine how you will handle health insurance coverage, get your own or stay with his coverage.


Get short-term court-ordered rehabilitation alimony, if you have been out of the work force. The alimony will help cover retraining and a job search costs. Some jobs in demand require little training. Among them, phlebotomist, paralegal, certified nurses’ assistant.


Horde your money. Do you have enough savings to get you through the cost of a divorce? Do you have money to reestablish yourself afterward? Can your family help you?


Consider hiring a divorce team: therapist/counselor, divorce attorney and a Certified Divorce Financial Analyst who can help you set up a post-divorce budget and help negotiate the divorce.


Stay married, if you’re close to 10 years. How long have you been married? If you are close to 10 years, consider waiting until you cross the 10-year mark, which makes you eligible to claim Social Security benefits on your ex-spouse’s work record with no impact on him.


Alimony and the Tax Reform Act ChangesThe Tax Reform Act passed by Congress in 2017 made big changes to alimony tax rules. 

The OLD RULE: Recipients (98 percent women) had to report alimony payments as income and pay taxes on the money. The payer gets a tax deduction.

THE NEW LAW: The spouse receiving the alimony will NOT have to pay taxes on the income. But neither will the payer get to claim a tax deduction. Result: Tax savings for women, increased expense for men. This tax change doesn’t become effective until 2019.
 If you are at the beginning stages of a divorce, take time to do some research on what critical steps you should take. There’s plenty of info on line – see my list below.

Check out WIFE.org web site where founders Ginita Wall and Candace Bahr provide financial planning resources for women, particularly those divorcing or widowed.


They also support Second Saturday workshops throughout the U.S. aimed at helping women through divorce and/or widowhood. Check for a workshop in your area by going to WIFE.org.


WIFE.org home page topics include How to Choose a Divorce Attorney, the Benefits of Being Married 10 Years, A Step-by-Step Guide to Preparing for Divorce and Life Events and Your Finances: Are You in the Know?


They also support Money Clubs for women throughout the country.


Bumper sticker at WIFE.org – “A Man is NOT a Financial Plan.”


For more:

“How to Get Through Your Breakup and Create a New Life you Love,” by Suzanne Riss and Jill Sockwell.
“Divorce: Think Financially, not Emotionally. What Women need to know about security their financial future, before, during and after a divorce,” by Jeff Landers.
Divorce advice for women at WIFE.org.
Second Saturday Divorce Workshops, find a workshop through WIFE.org.


Tuesday, March 6, 2018

Leaving a Legacy? Try a donor-advised charitable fund


“It is up to us to live up to the legacy that was left for us, and to leave a legacy that is worthy of our children and of future generations.” Christine Gregoire, former Washington state governor. (1947 -    )

By Julia Anderson
Leaving a legacy may recall images of wealthy people donating big bucks to build a new cancer wing at the hospital or fund construction of a homeless shelter.

Headline-producing check writing is part of the American way. Bill and Melinda Gates are giving away billions. So are Warren Buffett and Mark Zuckerberg. For the wealthy, charitable giving is about do-gooder big heartedness and also part of a long-term estate-planning and tax strategy.

News Flash: Charitable giving is not just for the rich. You, too, can leave a legacy.

The simplest way to be remembered is to put instructions in your will to provide an inheritance for your heirs or  to fund a favorite charity after you die.

But if you want to do good works before you fall off the tree branch, consider a donor-advised charitable fund.  

What is a DAF? These funds, offered by brokerage firms, banks and other entities, allow donors to make a charitable contribution, receive an immediate tax benefit and then recommend grants from the fund over time. In other words, you can put money inside your DAF but still control the money, let it earn more tax-free until you decide when and how to give it out.

Recent tax reform legislation passed by Congress in late 2017 has reduced the tax incentive for charitable giving by raising the standard federal income tax deduction to $12,000 for singles and $24,000 for couples. Those 65 and over can claim a $25,300 standard deduction.

Before these tax law changes, charitable contributions were part of the itemized deductions many of us used to lower our gross taxable income, along with other deductions such as mortgage payments and state and local taxes. With the increased standard deduction, fewer of us will bother to add it all up to get a deduction.

Why would a donor-advised charitable fund still make sense?

You can accumulate money inside a donor-advised fund and let it grow tax-free.
You decide when and how much money to donate to your favorite qualified charities. There could still tax benefits if you “bunch” your planned giving into a single year instead of spreading it over several years. The greater single amount could then be higher than the standard deduction in that year.

You get privacy with a donor-advised fund if you choose to anonymously have your fund manager send out your donations.

DAF managers typically offer you a menu of managed mutual funds where you can invest your money until it is distributed. These funds should match your risk tolerance and investment goals.

Checking out recipients

Fund managers will automatically vet potential recipients as IRS qualified public charities.
The idea is to make charitable giving effective and simple. Contributions can be made when they most benefit the donor while disbursements can occur on a separate timetable – next year, in five years or even later.

What to watch out for

According to an IRS warning, there are organizations out there that promote themselves as donor-advised fund managers but who are fraudulent. They are abusing the basic concepts underlying donor-advised funds by encouraging “questionable charitable deductions,” the IRS said.

They also may offer what are illegal economic benefits to donors and their families (including tax-sheltered investment income for the donors) and management fees for promoters.

If these violations are caught by the IRS, donors will have the charitable tax deduction disallowed and face fines and penalties.
Make sure you are dealing with a reputable fund manager with a long and well-documented track record.

Leaving a legacy is important to many of us. There are many ways to do it.

Certainly, how we are remembered by those whose lives we touched is part of that legacy. You can give away assets by gifting your investments, retirement savings and real estate holdings to your heirs in a well-crafted will. Or you can assign them to a trust for a bank or other trust management service to supervise.

If you want to give something back before you die, consider a donor-advised charitable fund. You don’t have to be rich.  Or you can live a life of service, love your neighbor and be generous and forgiving.

For more::
5 Ways to Leave a Great Legacy by Joan Moran at HuffPost
4 Ways to Leave a Legacy by Bart Astor at Forbes.
“This is how you leave a legacy,” by Jim Rohn at Success.com.

Tuesday, February 6, 2018

Health care directives -- taking charge in our later years

"What is a fear of living? It's being preeminently afraid of dying." - Maya Angelou, (1928-2014), American poet, memoirist and activist.


 BY JULIA ANDERSON
Those of us who have watched our parents slip into old age, face multiple health challenges and then pass through death’s door, know that the end-of-life journey can be tricky.

Modern medicine has made old age more possible, even more tolerable than in generations past. The tricky part is how we plan for these last years. We can steps to make it easier for ourselves and our family.


 Legal documents called advanced health care directives -- a living will, do-not-resuscitate instructions and designation of (health care) power of attorney – can smooth the way for ourselves and our families.


 Lately, new questions have arisen about how well patients, their families, doctors and other caregivers understand advanced health care directives. The Institute of Medicine and the National Academy ofSciences are calling for improvements in both medical and social services end-of-life care.


 A massive report, “Dying in America,” cites these issues --- A lack of awareness or interest by both patients and their families in completing advance directive forms; Lack of institutional support for completing advance directives; Clinicians’ unwillingness to adhere to patients’ wishes, resistance within the medical culture and differences in families’ culture traditions for completing health care directives.
 

Despite these challenges, we can do a lot to ensure that our own end of life care is as comfortable and meaningful as possible. Here’s how:

 1. Accept that fully 70 percent of us who become critically ill at the end of our lives will be incapable of participating in decisions about our health care. Without advance health care directives, we might find ourselves in a hospital intensive care unit under the eye of an “intensivist physician” whose only job is to keep us alive at whatever cost -- physical, emotional and financial.


 2.  Write a will and create a “living will” outlining the kind of care you wish to receive if you are no longer competent or in a vegetative state. Appoint a legal health care representative to carry out your wishes.


 3. Write a Do-Not-Resuscitate directive, which tells any caregivers – doctors, emergency personnel – to not intervene if you have no pulse or are not breathing. You can wear a DNR bracelet or get a tattoo. (Even a tattoo didn’t work in one recent emergency room case.)


 4. Make it clear to all family members that there will be no heroics. Get your legal directives filed with your doctor, the fire department and all family members. If you go into a care facility, have the DNR posted in BIG TYPE in plain sight in your room. (Even that measure didn’t prevent a trip to the ER in the year before my mother died at age 98). Only post contact information for your legal health care representative at your care center door. Keep other family member numbers elsewhere, so there is no confusion over who staff should call in an emergency.


 5. Tell your "friends" at the care center to not call 911 if you have a health crisis. Remember that if 911 gets involved, all the legally signed requests go out the window. The emergency folks are bound to preserve life...no matter what. The same goes for doctors in emergency rooms. (A huge brouhaha in California not long ago created industry turmoil when a bystander called 911 after a fellow care center resident had a stroke but the nursing staff refused to provide aid).


6. Legally assign someone with durable power of attorney to manage your financial affairs when or if you become incompetent or incapacitated. Or set up a bank trust that designates you as co-trustee until you hand over management of your financial affairs to the bank.


 Make sure that the forms you use for these legal documents are state-specific. You can find them at www.smartlegalforms.com. Or for free printable advance directive forms by state, try AARP at www.aarp.org.


 Most of us wish for a peaceful death in bed at home. The reality is seven out of 10 of us will spend our last years in a care facility. My mother moved to a care facility after breaking her hip at age 95. She wanted to return home but needed 24/7 care at a cost of $12,000 a month. She chose the care facility in her home town at $4,500 a month. She met with her attorney to update her health care directives and get them in place. Her strategy mostly worked except for the time the night nurse called 911 after she tipped over and bumped her head. That turned into a three-day hospital stay, which she did not want. 


So even with good planning we likely will find weaknesses in our end-of-life initiatives. Some are outlined in “The Good Death,” by Ann Neumann where she writes about the experience of her father’s dying. 


“Part of the reason we don’t know how people die is because we no longer see it up close,” she writes. “Death has been put off and professionalized to the point where we no longer have to dirty our hands with it.”


But we should. We can help ourselves and our loved ones do better by getting our instructions on paper and by talking at length about these issues with our family and our caregivers.


FOR MORE: 

The Good Death, click here. 

Dying in America, click here.









Wednesday, January 10, 2018

11 things I'd tell my younger self about money

"Only 47 percent of women are confident talking about money and investments with a professional," - Fidelity Investments research, "How to take charge."  


BY JULIA ANDERSON

Here is what I wish I had known at age 20 about my financial future and how best to manage it.


 No. 1 Invest early. Sign up for your employer’s 401(k) retirement savings program at the first opportunity. Put enough money into that account every year to at least get the employer’s matching money. Don’t be cautious. Invest this money in aggressive growth funds. Reinvest the dividends and let those investments ride. Never borrow from your 401(k).


 No. 2. Start you own Individual Retirement Account. You can do this with as little as $2,000 or in some online accounts, even less. Again, either invest in low-cost index stock funds or buy a few individual blue-chip stocks that have a good track record and a good dividend. Reinvestment the dividends. Don’t panic when stock prices or markets go into a downturn. The downturn is a buying opportunity at a cheaper price. Keep adding to these accounts. Learn the difference between a traditional IRA and a Roth IRA. Both have advantages.


 No. 3 Understand management fees. Some experts say fees are more important than even what you are invested in because fees cut into earnings. Over 30 years of retirement saving and investment, fees can mean hundreds of thousands of dollars less in results. Ask particularly about management fees related to your 401(k) funds since this is where you likely will save the most for retirement.
“Everyone talks about the benefits of compounding interest, but few mention the danger of compounding fees,” says Kyle Ramsay, NerdWallet’s head of investing and retirement.
 
No. 4 Avoid debt. Don’t become house-poor. Taking on a big mortgage payment or letting credit card debt eat into your income means limited financial flexibility. Don’t spend money you don’t have on stuff you don’t need.  Debt is borrowing against your future income.


 No. 5. Bad things can happen to good people. Divorce, for instance. While you don’t want or expect a divorce or the death of a spouse, it can happen. Women usually come out the losers in either a divorce or the death of a spouse since they may have a lesser-paying job than their spouse and going forward, they work fewer hours to manage the kids. That’s why having an emergency fund is essential in long-range planning. Buy term life insurance on each other. Term insurance is cheap and worth it.


If you divorce, be tough in negotiating your best possible financial future. Every decision a woman makes after divorce, from where to live to how to increase her income, is an important part of this process. – at LiveStrong.com. 


No. 6. Write a will, even though you are young and in good health. A will spells out how you want your stuff dispersed and who you want to take care of your young children, if something happens.
 
No. 7. Don’t be shy about asking for pay increases. If you are doing a good job and are a valued employee, your employer should be rewarding you with more money. More money, means more goes into your 401(k) and you have more money to support your family. Women in particular must make sure they are receiving the same pay for the same job as their male counterparts.


 No. 8. Make investing enjoyable and rewarding. Read business and economic news. Follow markets. There are no mysteries here. The American free-enterprise system has created unbelievable wealth for average investors. Good publicly held companies report every quarter to their shareholders about how they are performing, they pay dividends every quarter. You don’t need to be a genius when it comes to investing.


 No. 9. Do not discount money. Do not sneer at the importance of making money. It’s fashionable to say that money doesn’t matter, that following your dreams is what is important. Make sure your dreams are financially reasonable. If you start your own business, make sure you have the financial resources to stick it out. Will your parents bank-roll you? Is it a loan or a gift?


 No. 10 Understand Social Security. Don’t take benefits too soon because it will cost you thousands of dollars in retirement income. That means planning carefully in your 50s and early 60s so that you can continue to work as long as you want and determine how and when to take Social Security benefits.


 No. 11. Understand the difference between saving and investing.

 Saving is for hand-wringing people who are afraid to lose a penny. Investing is for people who understand the value of owning stock in good companies that offer share price growth AND pay a dividend. A CD paying 2 percent is only breaking even against inflation. Start investing early. Learn from your mistakes. Glory in your successes.


By investing $2,000 a year starting at age 19, you can end up with a whopping $2 million or more at age 65, thanks to reinvesting dividends and average a 12 percent return on the investments. Get serious about investing now, at age 20. Don’t wait until you’re 30 or 40. Time is money!!!


 Joe Smith and I discuss this topic in a Smart Money video produced by TVCTV in Beaverton, Ore. You can find our shows on YouTube, click here. 

ADDITIONAL SMART MONEY VIDEO TOPICS:
Evaluating an employment early buyout.

How to Hold a Family Money meeting.

What is a reverse mortgage.

Preventing elder financial abuse.

Social Security myths.

Charitable giving in retirement.

Social Security. How to maximize retirement income.

Why have a will.

Traveling with grandchildren.

Talking to kids about money.

Buying a franchise business in retirement, do’s and don’ts.

Getting married after 60.

How to downsize.

What’s ransomware? What to do, if you’re held hostage.

How to choose a financial adviser, if you need one.

Getting in and getting out of a timeshare property.  

ADDITIONAL SMART MONEY VIDEO TOPICS:  click here to access on YouTube.

Tuesday, January 2, 2018

Owe back taxes? Deal with it, you may get a discount

"It's a privilege to pay taxes. Yeah! It's not a political question folks. We have to pay for stuff." - Lewis Black. Stand-up comedian. (1948 -    )


BY JULIA ANDERSON
There are many situations that can put you behind in paying your federal U.S. income taxes.
An unexpected major health issue could suck up all your savings and put you on the verge of bankruptcy. Maybe you lost a job and are not back on your feet.

Or you are self-employed, business has been slow, and you are behind in sending quarterly estimated federal tax payments to the Internal Revenue Service.

You may have children or grandchildren who are facing a federal tax issue. 
Whatever the circumstances of “getting in trouble” with the IRS, you need to deal with it. These circumstances all require a tax return.

If you ignore the issue, it only gets worse because “back taxes” and late payment penalties pile up.

“People need to start the dialogue as soon as possible,” David Tucker, IRS spokesman in Seattle, told me. “Let the IRS know that you have an intent to pay. We will work with that individual to resolve the situation. When there’s no communication…that’s the problem,” Tucker said.

He recommends that if you face a complex tax situation, hire a tax professional who can walk you through the process of sorting out and catching-up.  A tax pro can tell you what documentation you will need before meeting with the IRS, what you will need to claim certain tax-deductible expenses.

“From the standpoint of the IRS, we want the (tax-paying) process to be as easy as possible,” Tucker said. “If you haven’t paid taxes for a number of years, we want to work with you. Think of it as a collaboration rather than an adversarial situation. But don’t ignore IRS notices that may be coming in the mail. Call us,” he said.

Doing the research

If you think you are in tax trouble, make an online visit to IRS.gov. Read up on the IRS “Offer in Compromise” tax debt program that may allow you to settle your tax debt for less than the full amount you owe. This is about as painless as it can get if you owe back taxes.

Low-income? Still file.
Meanwhile, if you are in a low-income bracket, you may think you don’t need to file a federal tax return. Reconsider because you might be leaving money on the table.

“People should look at filing a return regardless of whether they owe any taxes,” Tucker said. “They should go through the process to see if they qualify for a refundable credit or other tax credits.”
For example, the Earned Income Tax Credit, applies to individuals (and couples) who work but don’t earn much. The average EITC “refund” is $2,400.

As well, you may qualify for a Child Tax Credit or the American Opportunity Tax Credit, which provides incentives for going to college.

Who must file? Just about everyone. Tucker explained that as a single taxpayer under age 65, you must file a return if your gross income (in 2017) is at least $10,350. If you are 65 or older, you must file if your gross income is $11,900 or more.

GETTING HELP:
If you owe back taxes contact the IRS: click here.

For more about the Offer to Compromise program, click here. 

Owe Taxes? These Tips can Help. click here

In Portland, contact the IRS Tax and Business Center at 1220 SW Third Ave. in the Federal Building in downtown Portland. Make an appointment in advance for a face-to-face meeting by calling 844-545-5640. Be prepared to explain your situation. Ask what documentation you should bring to the meeting.

If you qualify for low-income tax credits: You can get FREE help during the tax filing season by contacting a volunteer with the Income Tax Assistance Program sponsored by the AARP Foundation. Search online for AARP tax-aide locations near you.

FOR MORE:
For my original column for the Portland Tribune, click here. 
To view my Smart Money YouTube video, click here.
5 Tips for People who Owe Taxes, click here.