"Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay." - Milton Friedman (1912-2006) American Nobel Prize-winning economist.
BY JULIA ANDERSON
If there ever was a year when consulting with a tax accountant is a good idea, this is the year!
With the Covid-19 crisis and resulting economic turmoil, taxpayers of all ages may need help in navigating 2020 tax strategies by Dec. 31. Seniors, especially, might benefit. The goal: Make sure you are paying just your fair share, no more, no less.
Remember, you will pay taxes in April 2021 on income you earned in 2020. While there are no major changes in tax law for 2020, there have been smaller adjustments. However, “emergency” provisions intended to stimulate the economy also may be a factor in your yearend planning.
Now is the time to figure out where you stand tax-wise and where you are going in 2021 and beyond with taxable income, deductions, retirement, and estate planning and (maybe) business losses.
Tax regulations worth mentioning:
In 2020, The federal CARES Act allows eligible individuals to withdraw up to $100,000 from qualified retirement plans during 2020 without incurring the 10 percent early distribution penalty. Income taxes on the distribution can be spread over three years.
Those who received stimulus checks do NOT have to pay income tax on the money.
Seniors, over 72 are NOT required to take taxable withdrawals (RMDs) from their Individual Retirement Accounts this year.
Seniors can sell their primary residence and avoid capital gains taxes on the net gain up to $500,000 for a married couple. (Check the details)
Income tax brackets changed this year with a higher standard deduction: $12,200 for singles, $24,400 for married couples filing jointly.
After age 50, people can contribute up to $26,000 a year to a qualified retirement account to catch-up on retirement savings. If you have a job and can make the contributions, do it.
What about tax credits (and refunds)? You may qualify for a child tax credit or credit for other dependents. You may qualify for an earned income tax credit or a retirement contribution savings credit, or a lifetime learning tax credit. Ask a tax expert about these options.
Should you itemize? This may be the year to itemize your tax deductions. That means NOT taking the standard deduction but instead adding up various deductibles and then subtracting them from your gross income. For instance:
Those working from a home office can deduct the related costs.
You can deduct the mortgage interest you have paid a lender.
You can deduct charitable donations made to qualified charities, just make sure you have the documentation.
If you own stock, dividends that certain stocks pay qualify for a lower tax rate. You also can deduct a loss on a stock sold at less than what you paid for it if you have owned it more than a year.
You can deduct your estimated state and local sales taxes you paid this year as well as property taxes.
Seniors can gift up to $15,000 without reporting or paying tax.
Do you have a will? Is this the year you write a will spelling out how you want your assets distributed at your death. With the threat of Covid-19 hanging over us, having a will seems essential.
When you meet with a tax consultant here are the QUESTIONS TO ASK:
Many of us don’t think about federal income taxes until about April 15 when we have to pay them, but now (before the end of December) is the best time to develop a “tax strategy” that could save you hundreds, if not thousands of dollars in taxes, over the next several years. There is plenty of tax information on the internet. Study up on tax basics, then get outside help. One hour with a tax consultant likely will pay for itself in the tax savings you will earn.
BY JULIA ANDERSON
It’s raining outside.
That’s a good thing after going through a week of wild fire threat, fire anxiety (even a bit of panic) and a rapid learning curve when it comes to fire preparation. Lots of questions, few answers.
What fire insurance coverages did we have? What should we pack in a getaway bag? How much might we save out of our house if we had time to save it?
These questions could have been asked and answered 20 years ago when I built and moved to my house in the woods. Like many long-term to-dos, I did nothing until the Big Hollow Fire was burning in heavy timber 16 miles east of my house and growing by the hour.
The fire had roared to life in the Gifford Pinchot National Forest National Forest a few days earlier, fueled by dry timber and a weird East wind. Typically, winds in the Pacific Northwest come from the West bringing rain with them off the Pacific Ocean. But August was a strange weather month with days of record high temperatures over 100 F. combined with weeks of drought that began in mid-July.
The stage was set.
Fires in Oregon (and California) already had fouled the air with smoke – choking smoke. As we returned from a trip out of town, we began checking for Big Hollow fire updates. We called neighbors along our road and researched online Fire Preparation Guides. Our area was at Level 1 evacuation status – be on alert for fire updates.
Once home, we assembled Emergency Supply Kits (suitcases) so that if we had to leave in minutes and be away for an extended period we would have the basics – toothbrush, underwear, extra pair of shoes, tops and a jacket. We put our bags by the front door. It felt ominous.
Watching television coverage of towns in Oregon already destroyed by fire with images of homes in ashes and people in shock contributed to our anxiety. We were on edge after a summer of being on edge from the pandemic, street riots and political turmoil.
After packing our to-go bags, we called our insurance agent and had him make some changes.
We made a list of what we would (or could) save from the house, if we went to a Level 2 evacuation notice, which means be prepared to leave on a moment’s notice. What could we load in our pickup, garden trailer and 4Runner? What was the most important, the necessary?
Let me pause here. Be prepared for your husband to see things differently about what to save. My list was twice the length of his. Mine included original watercolors painted by my grandmother, several antique family quilts, my computer hard-drive, genealogy material and family photos, my dad’s branding iron, art pottery pieces and my collection of tin toy motorcycles. His list was about the contents of our safe – important papers, a jewelry box. His raft and real motorcycle went to a metal shed surrounded by pasture. The rest, he said, was “just stuff.”
I explained that I had huge emotional ties to the things on my list. Losing my grandmother’s watercolors would break my heart and photos of my children, great-grandparents would be devastating. We agreed that we could replace beds and refrigerators, TVs and kitchenware. How would it feel to lose EVERYTHING? I tried to answer that question all week.
We parked our garden trailer by the front door so we could load it quickly. The smoke from all the fires continued to choke us. Dismal, anxious. I could not image what people who had lost everything were feeling.
We took photos every space our house, room by room, top to bottom. We opened closets and drawers, kitchen cabinets. We photographed the downstairs shop, my desk, Ken’s desk, safe contents.
By the end of the week, winds had shifted. Big Hollow was no longer pushing West toward us. Live updates on Facebook from Gifford Pinchot fire people let us know about weather forecasts and that crews were working to contain the 22,000-acre blaze. We began to calm down.
Last night it rained. The forecast calls for more rain. The Level 1 evac notice was lifted.
Only now can I tell myself, RELAX!!! But I sure know a lot more about fire, fire preparation and fire prevention than I did just a few days ago.
INSURANCE: Take photos of everything inside your house. Open all the drawers, photograph the contents. Then take pictures outside – garage, garden shed, whatever. Insurance coverage typically has two parts: Coverage for your house/garage structure and separate coverage for the contents, capped at a certain amount.
Don’t assume the insurance company will write you a check for the dollar amount listed for contents. YOU HAVE TO PROVE what the contents were. A photo record is essential. We now have those photos stored on 2 memory sticks stored in safe places.
Talk to your insurance agent. Ask questions. Make sure you know how the “cap” on contents coverage works. We learned that our coverages for our rafts and camping equipment were too low. There may be something like that that could be scheduled separately by your insurer.
ESCAPE PLAN: Sign up for emergency (text, email or phone) notifications from your 911 agency. Fill out a one-page FIRE ACTION PLAN: If you had to leave in minutes how would you leave and where would you meet up in case you were separated? Name an out-of-area contact person. List numbers for Sheriff, State Patrol and Fire District. Put a copy of this sheet in your kitchen and in your Emergency Supply Kit.
List what you would have at your front door if you had to leave in minutes: Important papers (birth certificates, marriage licenses, insurance documents) for sure. Credit cards, money. Your Emergency GO BAGS. We will keep ours packed and stored in a handy place.
MAKE A LEVEL 2 LIST: Get the arguing out of the way about what would go in the back of a pickup If you receive a Level 2 (prepare to evacuate) notice. There won’t be time to thresh over what to take with you. So have the discussion now. Make a list now.
DEFENDING YOUR HOUSE (in advance): Is the outside of your house fire defensible? Ours isn’t.
My fourth-generation logger neighbors up the road live in a house surrounded by several acres of green pasture and not much else. Their barn and machine shed are a good distance away. Even if a wildfire reached the pasture perimeter their house would be safe. Our house would likely burn in minutes even though we logged our big trees out a few years ago. That’s because we still have too many trees and shrubs and too much dry grass close to the front door. It all easily could ignite our cedar siding and shingle roof.
WHAT’s NEXT on MY TO DO LIST:
Complete our Level 2 Fire Action Plan with a “save what we can” list. Post it on the kitchen bulletin board.
Contact our local fire district and request a Defending Against Fire evaluation of the area around our house – 30 feet out and 100 feet out.
Consider replacing our 20-year-old shingle roof with a metal roof and maybe re-side the house with fire-resistant material. Redesign our nearby landscaping with fire prevention in mind. Trees are nice but not too close to the front door.
Readyforwildfire.org recommends that any flammable material be at least 30-foot away. You can read all about it at the web site under its Defensible Space heading.
I won’t repeat all the useful fire advice we found at CalFire’s ReadyForWildfire.org. But found it to have great information.
After our fire scare this week and after watching the fire destruction in Oregon and California, I have a much greater awareness of how a fast-moving wildfire might destroy my house and my life. I wouldn’t have time to think about saving stuff. Getting out alive would be all that counts. It would be difficult to recover a loss.
The wildfire scare kicked my butt this week. Now, we have a Fire Action Plan, a Get Out Now bag. There is more to do.
FOR MORE: readyforwildifre.org
BY JULIA ANDERSON
My public television co-host Pat Boyle (right in photo) and I were talking today about how new topics continually pop up for our show, Smart Money.
Today, we taped three new shows on three great topics: When retirement comes earlier than expected, why getting your Social Security payment electronically is a good idea and how to keep your divorce costs down.
Three diverse subjects added to a long list of diverse topics at Smart Money in the past four years. Our interviews are online, set up by the crew at MACC TVCTV public television in Beaverton, Ore. We sign on and bingo, we look as good as the talking heads on national television.
In the past six months, we have done a lot of coverage related to the virus shutdown – How to ace an online interview, email scams aimed a lonely women stuck at home and temporary changes in mandated withdrawals from tax-deferred savings accounts. (These shows have not yet aired on YouTube.)
Last month, we taped a show trashing Tom Selleck and his TV pitch for reverse mortgages. Our view is that the negatives of a reserve mortgage far outweigh the pluses.
Even though you may not live in the Portland, Oregon metro area, you still can check out Smart Money shows by going to YouTube.
Here are a few links.
Do's and don'ts of raising cash in a hurry: click here
Managing your money in a pandemic: click here
Business turnaround tips: click here
Seniors, taxes and RMDs: click here
Reverse mortgages: click here
Stimulus money in the pandemic: click here
BY JULIA ANDERSON
The financial advice industry is licking its chops over a Bloomberg forecast that American women could see their household financial assets triple in value over the next decade!
Baby Boomer women will be outliving their spouses at an increasing rate as they age into their late 70s and 80s, which means they inherit his tax-deferred retirement savings (401k and IRAs), the equity they may have accumulated in the house and other real estate they own and any other long-term assets.
Meanwhile, younger women, Bloomberg says, are becoming “more financially savvy.” Their net worth is increasing as they put more income into long-term retirement savings. Generally, younger women are smarter about saving, investing, and spending money, the report said.
We are talking about a huge wealth gain, which at first glance may seem over-the-top. Today, Bloomberg estimated that women control about $10 trillion in U.S. household financial assets – savings, investments, real estate etc. By 2030 that total will jump to $30 trillion. That’s trillion with a T!!
Here at sixtyandsingle.com, we have preached that women must prepare for a time when they will be financially on their own. Even if you turn to an outside consultant to manage your money, your own financially literacy is key to doing it successfully.
Steps you can take now:
1. Talk with your spouse about your financial future without him. What will it look like?
2. Determine your net worth by subtracting your total assets from your debt.
3. Make sure you both understand the long-term estate planning strategy.
4. What income can you count on your later years? The answers are there.
5. Will there be estate taxes at his death. How do you transfer his IRA account without paying taxes? Should you pay off the mortgage? All questions worth asking.
6. How do you know if you have a good (honest) investment adviser?
Tips for hiring a financial adviser (if you need one):
As we said, the financial industry wants to manage your money and charge you a fee for doing that management. Just make sure you are earning more from your investment savings than they are. Here are questions to ask:
- How are you paid? A flat fee for service based on total assets, a commission on investment product sales, or all of the above?
- Can you manage my assets for 1 percent or less in fees? If not, why not?
- What is the strength of the company you work for?
- Will you put your proposals in writing?
These basic questions will get you on the right track with the person you are entrusting with your financial well-being. Do not hire or continue to use a financial adviser just because they are nice!!!
Regrettably, only 15 to 20 percent of America’s financial advisers are women, Barron's said in its report. The industry would do well to make itself more attractive to women, especially since women tend to outperform men as money managers, Barron’s said.
Meanwhile, talking to a spouse about your financial future without them is a difficult conversation to have but worth the peace of mind for both of you. According to Bloomberg, a lot of money is at stake. You may be worth more in your later years than you think.
"I get angry about things, then go on and work." - Toni Morrison, author, (1931-2019)
By JULIA ANDERSON
Women have lost more jobs than men during the coronavirus pandemic. This is a serious financial setback for women, for household income and for the U.S economy.
The reasons are clear -- women work in female dominated sectors -- retailing, education and health care. Many more own their own businesses that have been closed for months.
Self-employment at beauty salons, spas, restaurants, bakeries, daycare centers and retail shops has given women the flexibility to make money and manage the kids. Work at schools, clinics and hospitals offered the same home-work dynamics.
But pandemic schools closures meant the kids came home. Someone had to be there for them, helping with online school, social distancing "play-dates" and meals. A double-whammy for women.
More of the same. The Wall Street Journal reports that many women won’t be back working at 100 percent for a long time – a year or two. Continued virus infections, layoffs and workplace closures coupled with school closures that have kids at home have created big challenges for women, especially single moms.
This has implications for the economy: High unemployment, reduced family income, less consumer spending. When will many of these jobs come back? We don’t know.
Federal stimulus programs have helped, extending unemployment benefits for self-employed workers has helped. But this aid expires in July and there are doubts about what programs should be continued and how they should be continued.
Meanwhile, the longer women remain out of the workforce the harder it could be to return. Skills atrophy or at least some employers may think that, said the Journal report.
What can women do?
Advocate for yourself with your employer if you are off the job or working from home. Stay in touch, either way. Ask for a schedule that works for you from home. Negotiate to set work-from-home expectations --- kids, hours, job performance. . Advocate for returning to the workplace even part-time.
Reset your personal and professional success goals. What one small step can you take to reach a work goal, today? What tiny victory have you achieved in the past week? What ways can you go easy on yourself during this difficult time?
Learn to live on a single-income: Cut expenses, develop an expense budget, avoid high-cost debt, talk about the stress and look for new options.
click here for the WSJ story.
Conclusion: Women have lost a lot of jobs in the pandemic. Getting back to those jobs will take time…. Maybe a year or two. It is going to be a marathon, not a 6k race.
Pacing is everything. But women will come out of this stronger, smarter and determined to move ahead personally, and financially.
I meet women all the time who face job and money transitions and who want to do them right. It’s about building confidence and taking charge of the future. This is your money. No one cares more than you do!
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