Challenges for Social Security and Medicare
New Reports Highlight Continuing Challenges for Social Security and Medicare Most Americans will receive Social Security and Medicare benefits at some point in their lives. For this reason, workers and retirees are concerned about potential program shortfalls that could affect future benefits. Each year, the Trustees of the Social...
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Indexed Annuities
If you want to limit potential losses while participating in the potentially attractive returns of a market-driven investment but would also like a guaranteed return, an indexed annuity might be worth checking out. The performance of indexed annuities, also referred to as equity-indexed or fixed-indexed annuities, is tied to...
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Balancing Work and Family
At one time, the typical American family looked like this: a breadwinner father who commuted a short distance to work and earned a very good living, and a stay-at-home mother who took care of the kids and family home with aplomb. Life seemed easy and manageable, with plenty of...
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Getting Help from a Financial Professional
Are you suddenly on your own or forced to assume greater responsibility for your financial future? Unsure about whether you’re on the right track with your savings and investments? Finding yourself with new responsibilities, such as the care of a child or an aging parent? Facing other life events,...
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Social Security Retirement Income Beneficiaries, by Gender
Source: Social Security Administration, Office of the Chief Actuary, Benefits in Current Payment Status, June 2016 ...
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I am behind on my mortgage payments. Will my lender begin foreclosure proceedings?
Answer: When you buy a home using a mortgage loan, your home becomes collateral for the loan. If you do not repay the mortgage loan as agreed, your lender has the right to take your property and sell it to satisfy the debt, also known as foreclosure. Whether or...
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I need money: can I take funds from my IRA?
Answer: Yes, but the taxable portion of your distribution may be subject to a 10 percent penalty for early withdrawal if you’re not yet age 59½. If you are 59½ or older and take money from your traditional IRA, you will not be assessed a penalty, though you may...
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What is the difference between a W-2 form and a W-4 form?
Answer: You probably know that Forms W-2 and W-4 are related to income taxes. And chances are you’ve filled out a W-4 form at least once and have received a W-2 form from your employer every year. But do you really understand the purpose each form serves? Simply put,...
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What is an income-driven repayment plan for student loans?
Answer: The federal government offers several income-driven repayment plans for borrowers with federal student loans. Under these plans, a borrower’s monthly student loan payments are calculated based on his or her discretionary income and family size, which are verified and updated each year. Borrowers must qualify for these plans–enrollment...
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Should I invest my extra cash or use it to pay off debt?
Answer: To answer this question, you must decide how your money can work best for you. Compare the money you might earn on other investments with the money you would pay on your debt. If you would earn less on investments than you would pay on debts, you should...
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Which is better, an HMO or a PPO?
Question: Which is better, an HMO or a PPO? Answer: The question really is, which type is better for you? If you’re able to choose between a health maintenance organization (HMO) and a preferred provider organization (PPO), you’ll need to evaluate the coverage that each offers and determine which...
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How can I protect myself against identity theft?
Answer: The chance that someone will assume your identity to open fraudulent bank or credit accounts is increasing as thieves become more sophisticated. The best way to protect yourself is to try to prevent this from happening in the first place. Here are some ideas: Make a list of...
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Can I refinance my student loans?
Answer: No, you can’t refinance student loans. However, if you have multiple federal student loans, federal consolidation of your loans may make your debt more manageable. To be eligible for federal loan consolidation, you must have at least one federal student loan in grace, repayment, deferment, or default status....
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I get a lot of credit card offers. How can I tell which one is best?
Answer: Start by carefully reading the advertisement or application you’ve seen or received. It may seem like a lot of jargon, but that fine print contains important information about terms and costs. Here are three points to consider when comparing credit card offers: Annual percentage rate (APR): What interest...
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Should I pay cash for a car or finance it?
Answer: The least expensive way to buy a car is to pay cash for it, because with cash, you can buy only what you can afford, and you avoid paying the finance charges associated with a car loan. Nonetheless, the reality is that you may not be able to...
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Will debt consolidation hurt or help my credit rating?
Answer: Debt consolidation can lead to an improvement in your credit rating by making your debt easier to manage. Sometimes, debt consolidation means taking a loan at a lower interest rate to pay off several smaller loans at higher interest rates. Making one payment instead of many may help...
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How can I reduce my spending?
Answer: To reduce your spending, you first need to know where your money goes. Start out by keeping track of all of your expenses for a month. None are too small or insignificant: the daily newspaper, coffee on the way to work, an extra gallon of milk, that burger...
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How much money should I keep in a savings account for emergencies?
Answer: Many financial professionals suggest that you put away three to six months’ worth of living expenses for emergencies. If you lose your job, or become disabled and don’t have adequate disability insurance, you’ll need that money to pay your regular monthly expenses, such as mortgage payments, insurance premiums,...
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Test Your Knowledge of Financial Basics
How well do you understand personal finance? The following brief quiz can help you gauge your knowledge of a few basics. In the answer section, you’ll find details to help you learn more. Questions 1. How much should you set aside in liquid, low-risk savings in case of emergencies?...
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I teach at a school that offers a 403(b) plan. Is this type of plan a good way to save for retirement?
Answer: In general, yes. Also known as a tax-sheltered annuity, a 403(b) plan is an employer-sponsored plan designed for employees of certain tax-exempt organizations (e.g., hospitals, churches, charities, and public schools) to invest for their retirement. Typically, the employer purchases annuity contracts or sets up custodial accounts for eligible...
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Should my spouse and I integrate our health insurance benefits?
Answer: When you and your spouse are making this decision, it may be useful for you to focus on three key areas: (1) the out-of-pocket cost of each plan, (2) the levels of service and coverage offered, and (3) the coverage offered to any dependent children, if applicable. Employers...
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Does the federal government insure pension benefits?
Answer: The federal government insures certain pension benefits. Specifically, it insures defined benefit plans (but not other types of retirement plans) through the Pension Benefit Guaranty Corporation (PBGC), a federal agency created by ERISA. A defined benefit plan is a qualified employer pension plan that promises to pay a...
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I’ll be changing jobs next month, and I’m pregnant. Will I qualify for health insurance coverage with my new employer?
Answer: That depends on several factors. If your new employer offers a group health insurance plan, the federal Health Insurance Portability and Accountability Act (HIPAA) may apply. This act prevents your new group health plan from treating your pregnancy as a pre-existing condition if you were covered by group...
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My company has a profit-sharing plan. How do these plans work?
Answer: A profit-sharing plan is a defined contribution plan in which your employer has discretion to determine when and how much the company pays into the plan. The amount allocated to each individual account is usually based on the salary level of the participant (employee). Your employer’s contributions to...
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Roth Rollover Guide
Required distributions and non-spousal death benefits can’t be rolled over. Required distributions, certain periodic payments, hardship distributions, corrective distributions, and certain other payments can’t be rolled over. Spouse beneficiaries generally have the same rollover rights as the plan participant, and in addition may roll over Roth 401(k) and 403(b)...
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I think it’s time to start planning for retirement. Where do I begin?
Answer: Although most of us recognize the importance of sound retirement planning, few of us embrace the nitty-gritty work involved. With thousands of investment possibilities, complex rules governing retirement plans, and so on, most people don’t even know where to begin. Here are some suggestions to help you get...
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Can I set up a traditional IRA?
Answer: Almost anyone can set up a traditional IRA. The only requirements are that you generally must have taxable compensation (typically, salary or wages from your job) and be under age 70½ in order to put money into an IRA. Beyond that, the basic mechanics of setting up an...
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How late is too late to start saving for retirement?
Answer: This question is difficult because the answer depends on your income and assets, your goals for retirement, and many other factors. Ideally, you should begin saving for retirement in your 20s. More time to save enhances your chances of having the kind of retirement lifestyle you want. If...
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How can we possibly save for retirement and our child’s college education at the same time?
Answer: It’s seldom easy to achieve a balance between saving for your retirement and saving for the ever-increasing costs of a college education within your present income. Yet it’s imperative that you save for both at the same time. To postpone saving for your retirement means missing out on...
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I know I can borrow against my 401(k), but can I borrow against the value of my 529 account?
I know I can borrow against my 401(k), but can I borrow against the value of my 529 account? Answer: No. Section 529 plans do not allow loans against an account’s assets. You can, however, make withdrawals from the plan to pay for qualified educational expenses. Keep in mind,...
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Can I invest in any state’s 529 plan, or am I limited to my own state’s plan?
Can I invest in any state’s 529 plan, or am I limited to my own state’s plan? Answer: 529 college savings plans are typically open to residents of any state, while 529 prepaid tuition plans are typically limited to state residents. States that let nonresidents join their 529 college...
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Should I use my 401(k) to fund my child’s college education?
Should I use my 401(k) to fund my child’s college education? Answer: You can, but it isn’t your best option. Your 401(k) plan should be dedicated primarily to your retirement. There are two primary drawbacks to using your 401(k) for college funding. First, if you withdraw funds from your...
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What is the college inflation rate?
What is the college inflation rate? Answer: The college inflation rate refers to the annual increase in college tuition and fees, similar to the way the general inflation rate refers to the annual increase in the cost of living. The college inflation rate is typically in the range of...
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My husband just died. Do I have access to his accounts?
My husband just died. Do I have access to his accounts? Answer: Generally, if your name does not appear on the account, either as a joint owner with rights of survivorship, trustee (if the account is held in trust), or a beneficiary, you probably can’t access the account unless...
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My spouse just died. Who do I need to notify?
My spouse just died. Who do I need to notify? Answer: As a recent widow or widower, you’ll face many personal and financial challenges in the following months. You should contact a number of people and agencies to help secure the financial future of you and your family. If...
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How can I find out whether my deceased husband owned any life insurance?
How can I find out whether my deceased husband owned any life insurance? Answer: If your husband left a letter of instruction, read it carefully. It may help you determine whether he had life insurance. A letter of instruction is simply a letter written by or on behalf of...
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My spouse just died. Should I accept my daughter’s offer to move in with her?
My spouse just died. Should I accept my daughter’s offer to move in with her? Answer: Maybe. The death of a spouse is a traumatic life event. Perhaps you’ve never lived alone before and the idea frightens you. Or maybe your spouse’s salary paid the mortgage and you’re concerned...
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Am I liable for my spouse’s debts?
Am I liable for my spouse’s debts? Answer: The general rule is that spouses are not responsible for each other’s debts, but there are exceptions. Many states will hold both spouses responsible for a debt incurred by one spouse if the debt constituted a family expense (e.g., child care...
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I’m getting remarried. How will this affect my Social Security benefits?
I’m getting remarried. How will this affect my Social Security benefits? Answer: If you’re receiving benefits based on your own work record, your benefits will continue. If you’re receiving spousal benefits based on your former spouse’s work record, those benefits will generally end upon your getting remarried, but you...
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My husband is about to receive his pension. We’ve heard of “pension maximization.” What is it?
My husband is about to receive his pension. We’ve heard of “pension maximization.” What is it? Answer: If your husband is participating in a traditional pension plan (also known as a defined benefit plan), his benefits must normally be paid in the form of a “qualified joint and survivor...
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What are required minimum distributions and how are they calculated?
Answer: Required minimum distributions are the amounts that you must withdraw each year from your traditional IRA, employer-sponsored retirement plan, or tax-sheltered annuity. (Lifetime minimum distributions are not required from Roth IRAs, but your beneficiaries generally must begin taking distributions following your death.) You must begin to take the...
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What should I do if I determine that my income during retirement won’t be enough to meet my retirement expenses?
Answer: Fortunately, you may have no need to despair. The further you are from retirement, the more time you have to resolve the expected shortfall. Even if you are closing in on retirement, there may be steps you can take to bridge the gap. In some cases, the best...
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What is Medigap?
Answer: Medigap is health insurance that supplements the benefits covered under Medicare. It also fills in some of the gaps left by Medicare, such as your deductible and coinsurance contributions. Medigap policies are sold by private insurance companies, and must be clearly identified as “Medicare Supplemental Insurance.” Currently, 10...
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What is an annuity?
Answer: An annuity is a contract between you (the purchaser or owner) and an insurance company. In its simplest form, you pay money to an annuity issuer, and the issuer then pays an income stream back to you or to a named beneficiary. Annuities are generally used to provide...
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What happens if my Medicare HMO goes out of business?
What happens if my Medicare HMO goes out of business? Question: What happens if my Medicare HMO goes out of business? Answer: You have several choices: Return to the original fee-for-service Medicare plan Supplement your fee-for-service Medicare plan with a Medigap policy Enroll in another Medicare Advantage managed care...
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I can choose a single life annuity for my pension or a joint and survivor annuity that makes payments to my spouse when I die. Which is better?
I can choose a single life annuity for my pension or a joint and survivor annuity that makes payments to my spouse when I die. Which is better? Answer: It depends on your circumstances. If you’re not married, the single life annuity is clearly the best choice (and may...
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I’m confused: is an annuity an investment vehicle or an insurance policy?
I’m confused: is an annuity an investment vehicle or an insurance policy? Answer: An annuity is a distinctive financial product. Although it’s not an insurance policy per se, it is a contract with an insurance company. Many different types of annuities exist, with many different features. A deferred annuity...
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If I’m covered by Medicare, should I have additional health insurance?
If I’m covered by Medicare, should I have additional health insurance? Answer: It’s often wise to purchase health insurance to supplement your Original Medicare coverage, because Medicare generally won’t cover all of your medical expenses. Usually, you’ll have to satisfy a deductible before Medicare pays anything, and you’ll also...
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How do I enroll in Medicare?
How do I enroll in Medicare? Answer: You’ll be automatically enrolled in Medicare when you turn 65 if you’re already receiving Social Security benefits, or when you apply for Social Security benefits at age 65. In either case, the Social Security Administration will notify you that you’re being enrolled....
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What happens if I start collecting Social Security after full retirement age?
What happens if I start collecting Social Security after full retirement age? Answer: You’ll get a bigger check every month. However, how much bigger depends upon what year you reach full retirement age, and how long you postpone collecting benefits. If you were born in 1943 or later, you’ll...
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