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Taking care of aging parents is something you may need to plan for, especially if you think one or both of them might need long-term care. One thing you may not know is that some states have filial responsibility laws that require adult children to help financially with the cost of nursing home care. Whether these laws affect you or not depends largely on where you live and what financial resources your parents have to cover long-term care. But itâs important to understand how these laws work to avoid any financial surprises as your parents age.
Filial Responsibility Laws, Definition
Filial responsibility laws are legal rules that hold adult children financially responsible for their parentsâ medical care when parents are unable to pay. More than half of U.S. states have some type of filial support or responsibility law, including:
- New Jersey
- North Carolina
- North Dakota
- Rhode Island
- South Dakota
- West Virginia
Puerto Rico also has laws regarding filial responsibility. Broadly speaking, these laws require adult children to help pay for things like medical care and basic needs when a parent is impoverished. But the way the laws are applied can vary from state to state. For example, some states may include mental health treatment as a situation requiring children to pay while others donât. States can also place time limitations on how long adult children are required to pay.
When Do Filial Responsibility Laws Apply?
If you live in a state that has filial responsibility guidelines on the books, itâs important to understand when those laws can be applied.
Generally, you may have an obligation to pay for your parentsâ medical care if all of the following apply:
- One or both parents are receiving some type of state government-sponsored financial support to help pay for food, housing, utilities or other expenses
- One or both parents has nursing home bills they canât pay
- One or both parents qualifies for indigent status, which means their Social Security benefits donât cover their expenses
- One or both parents are ineligible for Medicaid help to pay for long-term care
- Itâs established that you have the ability to pay outstanding nursing home bills
If you live in a state with filial responsibility laws, itâs possible that the nursing home providing care to one or both of your parents could come after you personally to collect on any outstanding bills owed. This means the nursing home would have to sue you in small claims court.
If the lawsuit is successful, the nursing home would then be able to take additional collection actions against you. That might include garnishing your wages or levying your bank account, depending on what your state allows.
Whether youâre actually subject to any of those actions or a lawsuit depends on whether the nursing home or care provider believes that you have the ability to pay. If youâre sued by a nursing home, you may be able to avoid further collection actions if you can show that because of your income, liabilities or other circumstances, youâre not able to pay any medical bills owed by your parents.
Filial Responsibility Laws and Medicaid
While Medicare does not pay for long-term care expenses, Medicaid can. Medicaid eligibility guidelines vary from state to state but generally, aging seniors need to be income- and asset-eligible to qualify. If your aging parents are able to get Medicaid to help pay for long-term care, then filial responsibility laws donât apply. Instead, Medicaid can paid for long-term care costs.
There is, however, a potential wrinkle to be aware of. Medicaid estate recovery laws allow nursing homes and long-term care providers to seek reimbursement for long-term care costs from the deceased personâs estate. Specifically, if your parents transferred assets to a trust then your stateâs Medicaid program may be able to recover funds from the trust.
You wouldnât have to worry about being sued personally in that case. But if your parents used a trust as part of their estate plan, any Medicaid recovery efforts could shrink the pool of assets you stand to inherit.
Talk to Your Parents About Estate Planning and Long-Term Care
If you live in a state with filial responsibility laws (or even if you donât), itâs important to have an ongoing conversation with your parents about estate planning, end-of-life care and where that fits into your financial plans.
You can start with the basics and discuss what kind of care your parents expect to need and who they want to provide it. For example, they may want or expect you to care for them in your home or be allowed to stay in their own home with the help of a nursing aide. If thatâs the case, itâs important to discuss whether thatâs feasible financially.
If you believe that a nursing home stay is likely then you may want to talk to them about purchasing long-term care insurance or a hybrid life insurance policy that includes long-term care coverage. A hybrid policy can help pay for long-term care if needed and leave a death benefit for you (and your siblings if you have them) if your parents donât require nursing home care.
Speaking of siblings, you may also want to discuss shared responsibility for caregiving, financial or otherwise, if you have brothers and sisters. This can help prevent resentment from arising later if one of you is taking on more of the financial or emotional burdens associated with caring for aging parents.
If your parents took out a reverse mortgage to provide income in retirement, itâs also important to discuss the implications of moving to a nursing home. Reverse mortgages generally must be repaid in full if long-term care means moving out of the home. In that instance, you may have to sell the home to repay a reverse mortgage.
The Bottom Line
Filial responsibility laws could hold you responsible for your parentsâ medical bills if theyâre unable to pay whatâs owed. If you live in a state that has these laws, itâs important to know when you may be subject to them. Helping your parents to plan ahead financially for long-term needs can help reduce the possibility of you being on the hook for nursing care costs unexpectedly.
Tips for Estate Planning
- Consider talking to a financial advisor about what filial responsibility laws could mean for you if you live in a state that enforces them. If you donât have a financial advisor yet, finding one doesnât have to be a complicated process. SmartAssetâs financial advisor matching tool can help you connect, in just minutes, with professional advisors in your local area. If youâre ready, get started now.
- When discussing financial planning with your parents, there are other things you may want to cover in addition to long-term care. For example, you might ask whether theyâve drafted a will yet or if they think they may need a trust for Medicaid planning. Helping them to draft an advance healthcare directive and a power of attorney can ensure that you or another family member has the authority to make medical and financial decisions on your parentsâ behalf if theyâre unable to do so.
Photo credit: Â©iStock.com/Halfpoint, Â©iStock.com/byryo, Â©iStock.com/Halfpoint
The post An Overview of Filial Responsibility Laws appeared first on SmartAsset Blog.
Paying off debt may feel like a never-ending process. With so many potential solutions, you may not know where to start. One of your options may be withdrawing money from your retirement fund. This may make you wonder, âshould I cash out my 401k to pay off debt?â Cashing out your 401k early may cost you in penalties, taxes, and your financial future so it’s usually wise to avoid doing this if possible. When in doubt, consult your financial advisor to help determine whatâs best for you.
Before cashing out your 401k, we suggest weighing the pros and cons, plus the financial habits you could change to reduce debt. The right move may be adjusting your budget to ensure each dollar is being put to good use. Keep reading to determine if and when it makes sense to cash out your 401k.
How to Determine If You Want to Cash Out Your Retirement
Deciding to cash out your 401k depends on your financial position. If debt is causing daily stress, you may consider serious debt payoff plans. Early withdrawal from your 401k could cost you in
Deciding to cash out your 401k depends on your financial position. If debt is causing daily stress, you may consider serious debt payoff plans. Early withdrawal from your 401k could cost you in taxes and fees as your 401k has yet to be taxed. Meaning, the gross amount you withdraw from your 401k will be taxed in full, so assess your financial situation before making a decision.
Check Your Eligibility
Depending on your 401k account, you may not be able to withdraw money without a valid reason. Hefty medical bills and outstanding debts may be valuable reasons, but going on a shopping spree isnât. Below are a few requirements to consider for an early withdrawal:
- Financial hardships may include medical expenses, educational fees, bills to prevent foreclosure or eviction, funeral expenses, or home repairs.
- Your withdrawal is lower or exactly the amount of financial assistance you need.
To see what you may be eligible for, look up your 401k documentation or reach out to a trusted professional.
Assess Your Current Financial Situation
Sit down and create a list of your savings, assets, and debts. How much debt do you have? Are you able to allocate different funds towards debts? If you have $2,500 in credit card debt and a steady source of income, you may be able to pay off debt by adjusting your existing habits. Cutting the cord with your TV, cable, or streaming services could be a great money saver.
However, if youâre on the verge of foreclosure or bankruptcy, living with a strict budget may not be enough. When looking into more serious debt payoff options, your 401k may be the best route.
Calculate How Much of Your Retirement Is at Risk
Having a 401k is crucial for your financial future, and the government tries to reinforce that for your best interest. To encourage people to save, anyone who withdraws their 401k early pays a 10 percent penalty fee. When, or if, you go to withdraw your earnings early, you may have to pay taxes on the amount you withdraw. Your tax rates will depend on federal income and state taxes where you reside.
Say youâre in your early twenties and you have 40 years until youâd like to retire. You decide to take out $10,000 to put towards your student loans. Your federal tax rate is 10 percent and your state tax is four percent. With the 10 percent penalty fee, federal tax, and state tax, you would receive $7,600 of your $10,000 withdrawal. The extra $2,400 expense would be paid in taxes and penalties.
The bottom line: No matter how much you withdraw early from your 401k, you will face significant fees. These fees include federal taxes, state taxes, and penalty fees.
What Are the Pros and Cons?
Before withdrawing from your 401k, there are some pros and cons to consider before cashing out early.
- Pay off debt sooner: In some cases, you may pay off debt earlier than expected. By putting your 401k withdrawal toward debt, you may be able to pay off your account in full. Doing so could help you save on monthly interest payments.
- Put more towards savings: If youâre able to pay off your debt with your early withdrawal, you may free up your budget. If you have extra money each month, you could contribute more to your savings. Adding to your savings could earn you interest when placed in a proper account.
- Less financial stress: Debt may cause you daily stress. By increasing your debt payments with a 401k withdrawal, you may save yourself energy. After paying off debt, you may consider building your emergency funds.
- Higher disposable income: If youâre able to pay off your debts, you may have more financial freedom. With this freedom, you could save for a house or invest in side hustles.
- Higher tax bill: You may have to pay a hefty tax payment for your withdrawal. Your 401k is considered gross income thatâs taxed when paid out. Your federal and state taxes are determined by where you reside and your yearly income.
- Pay a penalty fee: To discourage people from cashing out their 401k, thereâs a 10 percent penalty. You may be charged this penalty in full.
- Cut your investment earnings: You gain interest on money you have stored in your 401k. When you withdraw money, you may earn a lower amount of interest.
- Push your retirement date: You may be robbing your future self. With less money in your retirement fund, youâll lower your retirement income. Doing so could push back your desired retirement date.
6 Ways to Pay Off Debt Without Cashing Out Your 401k
There are a few ways to become debt-free without cutting into your 401k. Paying off debt may not be easy, but it could benefit your future self and your current state of mind. Work towards financial freedom with these six tips.
1. Negotiate Your Credit Card Interest Rates
Call your credit card customer service center and ask to lower your rates on high-interest accounts. Look at your current interest rate, account history, and competitor rates. After researching, call your credit card company and share your customer loyalty. Follow up by asking for lower interest rates to match their competitors. Earning lower interest rates may save you interest payments.
2. Halt Your Credit Card Spending
Consider restricting your credit card spending. If credit card debt is your biggest stressor, cut up or hide your cards to avoid shopping temptations. Check in on your financial goals by downloading our app for quick updates on the fly. We send out weekly updates to see where you are with your financial goals.
3. Put Bonuses Towards Your Debt
Any time you get a monetary bonus, consider putting it towards debts. This could be a raise, yearly bonus, tax refund, or monetary gifts from your loved ones. You may have a set budget without this supplemental income, so act as if you never received it. Without budgeting for the extra income, you may feel less tempted to spend it.
4. Evaluate All Your Options for Paying Down Debt
If youâre in dire need to pay off your debts, look into other accounts like your savings or emergency fund. While money saved can help in times of need, your financial situation may be an emergency. To save on early withdrawal taxes and fees, you can borrow from savings accounts. To cover future emergency expenses, avoid draining your savings accounts entirely.
5. Transfer Balances to a Low-Interest Credit Card
If high-interest payments are diminishing your budget, transfer them to a low-interest account. Compare your current debt interest rates to other competitors. Sift through their fine print to spot any red flags. Credit card companies may hide variable interest rates or fees that drive up the cost. Find a transfer card that works for you, contact the company to apply, and transfer over your balances.
6. Consider Taking Out a 401k Loan Rather than Withdrawing
To avoid early withdrawal fees, consider taking out a 401k loan. A 401k loan is money borrowed from your retirement fund. This loan charges interest payments that are essentially paid back to your future self. While some interest payments are put back in your account, your opportunity for compounding interest may slightly decrease. Compounding interest is interest earned on your principal balance and accumulated interest from past periods. While you may pay a small amount in interest fees, this option may help you avoid the 10 percent penalty fee.
As your retirement account grows, so does your interest earned â thatâs why time is so valuable. While taking out a 401k loan may be a better option than withdrawing from your 401k, you may lose out on a small portion of compounding interest. When, or if, you choose to take out a 401k loan, you may start making monthly payments right away. This allows your payments to grow interest and work for you sooner than withdrawing from your 401k.
This type of loan may vary on principle balance, interest rate, term length, and other conditions. In most cases, youâre allowed to borrow up to $50,000 or half of your account balance. Some accounts may also have a minimum loan balance. This means youâll have to take out a certain amount to qualify. Interest rates on these loans generally charge market value rates, similar to commercial banks.
Pulling funds from your retirement account may look appealing when debt is looming over you. While withdrawing money from your 401k to pay off debt may help you now, it could hurt you in taxes and fees. Before withdrawing your retirement savings, see the effect it could have on your future budget. As part of your strategy, determine where youâre able to cut out unnecessary expenses with our app. Still on the fence about whether withdrawing funds is the right move for you? Consult your financial advisor to determine a debt payoff plan that works best for your budgeting goals.
The post Should I Cash Out My 401k to Pay Off Debt? appeared first on MintLife Blog.
After years of building a stellar credit history, you may have decided youâre finally ready to invest in that vacation home, but you donât have quite enough in the bank for that eye-catching property just yet. Maybe you want to begin your investment journey early so you donât have to spend years bulking up your lifeâs savings.
If an aspiring luxury homeowner canât sufficiently invest in a property with a standard mortgage loan, thereâs an alternative form of financing: a jumbo mortgage. This mortgage allows those with a strong financial history who may not necessarily be a billionaire to get in on the luxury property market. But what is a jumbo mortgage (commonly known as a jumbo loan), and how exactly does it work?
Jumbo Loan Definition
A jumbo loan is a mortgage loanÂ whose value is greater than the maximum amount of a traditional conforming loan. This threshold is determined by government-sponsored enterprises (GSE), such as Fannie Mae (FHMA) and Freddie Mac (FHLMC). Jumbo loans are for high-valued properties, like mansions, luxury housing, and homes in high-income areas. Since jumbo loan limits fall above GSE standards, they arenât guaranteed or secured by the government. As a result, jumbo loans are riskier for borrowers than conforming mortgage loans.
Jumbo loans are meant for those who may earn a high salary but arenât necessarily âwealthyâ yet. Lenders typically appreciate this specific group because they tend to have solid wealth management histories and make better use of financial services, ensuring less of a risk for the private investor.
Due to the uncertain nature of a jumbo loan, borrowers need to present an extensive, secure credit history, as well as undergo a more meticulous vetting process if theyâre considering taking out a jumbo loan. Also, while jumbo loans can come in handy for those without millions in savings, potential borrowers must still present adequate income documentation and an up-front payment from their cash assets.
Like conforming loans, jumbo loans are available at fixed or adjustable rates. Interest rates on jumbo loans are traditionally much higher than those on conforming mortgage loans. This has slowly started shifting over the last few years, with some jumbo loan rates even leveling out with or falling below conforming loan rates. For example, Bank of Americaâs 2021 estimates for a 5/1 adjustable-rate jumbo loan were equivalent to the same rate for a 5/1 adjustable conforming loan.
The Federal Housing Finance Agency (FHFA) has set the new baseline limit for a conforming loan to $548,250 for 2021, which is an increase of nearly $40,000 since 2020. This new conforming loan limit provides the new minimum jumbo loan limits for 2021 for the majority of the United States. As the FHFA adjusts its estimates for median home values in the U.S., these limits adjust proportionally and apply to most counties in the U.S.
Certain U.S. counties and territories maintain jumbo loan limits that are even higher than the FHFA baseline, due to median home values that are higher than the baseline conforming loan limits. In states like Alaska and Hawaii, territories like Guam and the U.S. Virgin Islands, and counties in select states, the minimum jumbo loan limit is $822,375, which is 150 percent of the rest of the countryâs loan limit.
Ultimately, your jumbo loan limits and rates will depend on home values and how competitive the housing market is in the area where youâre looking to invest.
Jumbo Loan vs. Conforming Loan: Pros and Cons
The biggest question you might be asking yourself is âdo the risks of a jumbo loan outweigh the benefits?â While jumbo loans can be a useful home financing resource, sometimes it makes more sense to aim for a property that a conforming loan would cover instead. Here are some pros and cons of jumbo loans that might make your decision easier.
- Solid investment strategy: Jumbo loans allow the investor to get a solid jump-start in the luxury real estate market, which can serve as a beneficial long-term asset.
- Escape GSE restrictions: Jumbo loan limits are set to exceed those decided by Freddie Mac and Fannie Mae, so borrowers have more flexibility regarding constraints they would deal with under a conforming loan.
- Variety in rates (fixed, adjustable, etc.): Though jumbo loan rates differ from conforming loan rates in many ways, they still offer similar options for what kinds of rates you want. Both offer 30-year fixed, 15-year fixed, 5/1 adjustable, and numerous other options for rates.
- Usually higher interest rates: Though jumbo loans are known for their higher interest rates, the discrepancies between those and conforming loan rates are starting to lessen each year.
- More meticulous approval process: To secure a jumbo loan, you must have a near air-tight financial history, including a good credit score and debt-to-income ratio.
- Higher initial deposit: Even though jumbo loans exist for those who are not able to finance a luxury property from savings alone, they still require a higher cash advance than a conforming loan.
How To Qualify for a Jumbo Loan
As we mentioned before, jumbo loans require quite a bit more from you in the application process than a conforming loan would.
First and foremost, most jumbo lenders require a FICO credit score of somewhere around 700 or higher, depending on the lender. This ensures your lender that your financial track record is stable and trustworthy and that you donât have any history of late or missed payments.
In addition to the amount of cash you have sitting in the bank, jumbo lenders will also look for ample documentation of your income source(s). This could include tax returns, pay stubs, bank statements, and any documentation of secondary income. By requiring extensive documentation, lenders can determine your ability to make a sufficient down payment on your mortgage, as well as the likelihood that you will be able to make your payments on time. Usually lenders require enough cash assets to make around a 20 percent down payment.
Finally, and perhaps most importantly, lenders will also require that you have maintained a low level of debt compared to your gross monthly income. A low debt-to-income ratio, combined with a high credit score and sufficient assets, will have you on your way to securing that jumbo loan in no time.
Furthermore, you will also likely need to get an appraisal to verify the value of the desired property, in order to ensure that the property is valued highly enough that you will actually qualify for a jumbo loan.
- Jumbo loans provide a solid alternative to those with a steady financial history who want to invest in luxury properties but donât have enough in the bank yet.
- A jumbo loan qualifies as any amount exceeding the FHFAâs baseline conforming loan limit: $548,250 in 2021.
- Jumbo loan rates are typically higher than those of conforming loans, although the gap between the two has begun to close within the last decade.
- To secure a jumbo loan, one must meet stringent financial criteria, including a high credit score, a low DTI, and the ability to make a sizable down payment.
For any financially responsible individual, itâs important to always maintain that responsibility in any investment. Each decision made should be carefully thought out, and you should keep in mind any future implications.
While jumbo loans can be a valuable stepping stone to success in competitive real estate, always make sure your income and budget are in a secure position before deciding to invest. You always want to stay realistic, and if you arenât interested in spending a few more years saving or financing through a conforming loan, then a jumbo loan may be for you!
Sources: Investopedia | Bank of America | Federal Housing Finance Agency
The post What Is a Jumbo Loan? Finance Your Property in a Competitive Market appeared first on MintLife Blog.
Investing in your retirement early is the best way to ensure financial stability as you age, especially when it comes to understanding various retirement options. Getting started may feel overwhelming â luckily weâre here to help. We help break down the difference between 401(k) and 403(b) accounts, and how they can impact your financial life.
You may already know the value in adjusting your budget to make saving for a rainy day a priority. But are you also prioritizing your retirement savings? If youâre just getting started in the workforce and looking for ways to invest in yourself, 401(k) and 403(b) plans are great options to know about. And, the main difference between a 401(k) and a 403(b) is the company whoâs offering them.
401(k) accounts are offered by for-profit companies and 403(b) accounts are offered by nonprofit, scientific, religious, research, or university companies. To understand the similarities and differences between plans in depth, skip to the sections below or keep reading for an in-depth explanation.
How a 401(k) Works
How a 403(b) Works
The Difference Between 401(k) and 403(b)
The Similarities Between 401(k) and 403(b)
5 Ways to Grow Your Retirement Savings
$19,500 with your employer matches. Plus, most retirement funds have required minimum distributions (RMDs) by the time you turn 70. This essentially means you have to take a minimum amount of money out each month whether you want to or not.
In most cases, employers will offer 401(k) matching to encourage consistent contributions. For example, your employer match may be 50 cents of every dollar you contribute up to six percent of your salary. For example, with this employer match on a $40,000 salary, you would contribute $200 and your employer would contribute an additional $100 each month. This pattern would continue until your annual contributions hit $2,400 and your employer contributes $1,200.
Employee matching is essentially free money. Youâre monetarily rewarded for your retirement payments. Be sure to pay attention to vesting periods when setting up your employer match. Vesting periods are an agreed amount of time you need to work at a company before you receive your 401(k) benefits. For example, some companies may require you to work for their team for a year before earning retirement benefits. Other employers may offer retirement benefits starting the day you start working with them.
403(b) accounts include school boards, public schools, churches, hospitals, and more. This type of account is also known as a tax-sheltered annuity plan â they allow pre-tax income to be invested until taken out.
Employers that offer 403(b) retirement plans may offer a pool of provider options that undergo nondiscrimination testing. This allows employers that qualify for this account to shop around for plans that offer the best benefits and donât discriminate in favor of highly compensated employees (HCEs). For instance, some 403(b) accounts may charge more administrative fees than others.
Employers are able to offer employee matching on 403(b) accounts if they decide to. To cut costs for nonprofit companies, 403(b) retirement plans generally cost less than 401(k) accounts. Costs associated with starting up these accounts may not affect you, but it may affect your employer.
|Yearly Contribution Limit||$19,500||$19,500|
|Employer-Issued Packages||For-profit employers:
Corporations, private establishments, etc. and sole proprietors
|Non-profit, scientific, religious, research, or university employers:
School boards, public schools, hospitals, etc.
|Minimum Withdrawal Age||59.5 years old||59.5 years old|
|Early Withdrawal Fees||10% penalty, tax, and additional fees may vary||10% penalty, tax, and additional fees may vary|
The Differences Between 401(k) and 403(b)
Both a 401(k) and 403(b) are similar in the way they operate, but they do have a few differences. Here are the biggest contrasts to be aware of:
- Eligibility: 401(k) retirement plans are issued by for-profit employers and the self employed, 403(b) retirement plans are for tax-exempt, non-profit, scientific, religious, research, or university employees. As well as Hospitals and Charities.
- Investment options: 401(k)s offer more investment opportunities than 403(b)s. 401(k) accounts may include mutual funds, annuities, stocks, and bonds, while 403(b) accounts only offer annuities and mutual funds. Each employer varies in retirement benefits â reach out to a trusted financial advisor if you have questions about your account.
- Employer expenses: 401(k) accounts are generally more expensive than 403(b) accounts. For-profit 401(k) accounts may pay sales charges, management fees, recordkeeping, and other additional expenses. 403(b) plans may have lower administrative costs to avoid adding a burden for non-profit establishments. These costs vary depending on the employer.
- Nondiscrimination testing: This form of testing ensures that 403(b) retirement plans are not offered in favor of highly compensated employees (HCEs). However, 401(k) plans do not require this test.
The Similarities Between 401(k) and 403(b)
Aside from their differences, both accounts are set up to aid employees in retirement savings. Hereâs how:
- Contribution limits: Both accounts cap your annual contributions at $19,500. In the event you contribute over this limit, your earnings will be distributed back to you by April 15th. If youâre under your retirement contributions by the time youâre 50 years old, youâre allowed to make catch-up contributions. This means that, if youâre eligible, you can contribute $6,500 more than the yearly contribution limit.
- Withdrawal eligibility: You must be at least 59.5 years old before withdrawing your retirement savings. In the case of an emergency, you may be eligible for early withdrawal. However, you may be charged penalties, taxes, and fees for doing so.
- Employer matching: Both retirement account options allow employers to match your contributions, but are not required to. When starting your retirement fund, ask your HR representative about potential benefits and employer matching.
- Early withdrawal penalties: If you choose to withdraw your retirement savings early, you may be penalized. In most cases, you need a valid reason to withdraw your funds early. Eligible reasons may include outstanding debt, bankruptcy, foreclosure, or medical bills. In addition, you may be charged a 10 percent penalty fee, taxes, and other fees. During a downturned economy, as weâve seen with the COVID-19 pandemic, fees may be waived.
retirement plan options and their benefits. When employers offer retirement matches, consider contributing as much as you can to meet their match.
2. Set up Monthly Automatic Contributions
Save time and energy by setting up automatic contributions. You may feel less interested in contributing to your retirement as your payday approaches. Taking time to set up a retirement fund and budgeting for this change may be holding you back. To meet your retirement goals, consider setting up automatic payments through your employer. After a while, you may not even notice the slight budget adjustment.
3. Leverage Employer Matching
Employer matching is essentially free money. Employers may put money towards your future for nothing but your own contribution. This encourages employees to consistently put money towards their retirement savings. Not only are you able to earn extra money each month, but this âfree moneyâ will grow with interest over time. If you can, match your employerâs contribution percentage, if not more.
4. Avoid Early Withdrawal
Credit card balances, student loans, and mortgages can be stressful. Instead of withdrawing early from your retirement fund to pay for these, consider other debt payoff methods. If youâre eligible to withdraw from your retirement early, you may face penalty fees, taxes, and administrative expenses. This may hinder your savings potential or push back your desired retirement date.
5. Contribute Your Future Raises and Bonuses
If youâre saving less than $19,500 to your retirement fund this year, consider contributing more. If you earn a bonus or a raise, stick to your current budget and consider increasing your contributions. Ask your employer to increase your retirement payments right before you receive a bonus or raise. The more you contribute, the more interest youâll accrue over time.
Whether your retirement funds are established through a 401(k) or a 403(b), these accounts offer you the chance to build your financial portfolio. Consistently funding your retirement account may better your financial plan and set you at ease. As your contributions age, so do your interest earnings. Youâll be able to make money on your pre-taxed income and set your future self up for success. Get started by checking in on your budget and carving out a specific amount to put towards your retirement each month.
The post Whatâs the Difference Between 401(k) and 403(b) Retirement Plans? appeared first on MintLife Blog.
In March I offered some financial advice to Michelle, a Mint user who was struggling with debt, a lack of retirement savings and a bit of family financial drama amongst her siblings.
Michelle was anticipating a cash bonus from her company and wasnât sure if she should save the money or use it to relieve her debt.
I recommended a two-prong approach where she uses the cash to play savings catch-up in her retirement account and knock down some of her debt, which, at the time, included a $3,000 credit card balance and $52,000 in student loans.
Six months later, Iâve checked in with the 38-year-old real estate developer, to see if any of my advice was helpful and if sheâs experienced any shifts in her financial life.
We spoke via email:
Farnoosh: Have your finances have improved over the last 6 months since we last spoke? If so, what has been the biggest improvement?
Michelle: Yes. I’veÂ aggressively been contributing to my 401(k) â about 50% of my pay – and had hoped to reach the annual maximum of $18,000 by June, but looks like it will be more like October. I also received a $40,000 distribution from a project that I closed.
F: What aspects of your financial life still challenge you?
M: Investing for sure. I never know if I’m hoarding too much cash. I am truly traumatized from the financial downturn.Â I just joined an online investment platform, but it wasÂ also overwhelming. Currently I have $45,000 in a regular savings account that earns 1.5%.
Another challenge is not knowing whether to just bite the bullet and pay off my student loans or to continue to pay them monthly. Â I hate that I’m still paying loans 16 years after I graduated and it’s a source of frustration [andÂ embarrassment] for me. Â I owe $36,000. Often times I have an inner monologue about the pros and cons of just paying them off but then my trauma from 2008 kicks inâ¦and IÂ decide to keep my $45,000 nest egg safely where I can check the balance daily.
F: I recommended allocating $45,000 towards retirement. Was that helpful? What are some ways you’ve managed to save?
M: Yes, I recall you saying you recommended having a total of $100,000 towards retirement for a person my age. Currently, I have $51,000 in my 401(k), $35,000 in a traditional IRA and $17,000 in my Ellevest brokerageÂ account, so I’ve broken the $100,000 goal.
I did add a car note to my balance sheet. My old car suffered a total loss (major electrical failure due to a sunroof leak!) and the insurance gave me a check for $9,000.Â I used it all towards the new vehicle (aÂ certified used 2014 Acura) and I’m financing $18,000.
F: Your dad’s home was a source of financial stress, it seemed. Were you able to talk with your siblings and arrive at a better place with that?
M: My dad actually has passed since we last spoke. He passed in February and so his will went to probate. My siblings and I have decided not to make any decisions about the house for at least one year. Yes, this is kicking the can further down the street however, they recognize that I maintain the house and pay the real estate taxes and so they are not pressuring me to move or to sell.
The new deed has been recorded and the property is under all our names and so everyone seems ok with knowing that I can’t do anything regarding a sale or refinance unilaterally.
So, for now, I live rent free other than payingÂ utilities, miscellaneous maintenance on the houseÂ and real estate taxes quarterly. This, too, is helping me saveÂ aggressively.
Also, the new car note has replaced the hospice nurse contribution so I’m not feeling that my budget is overburdened with the new car.
I think ultimately I will buy out at least two of my siblings and stay in the house. Verbally they have expressed being okay with this.
Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at email@example.com (please note âMint Blogâ in the subject line).
Farnoosh Torabi is Americaâs leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, sheâs become our favorite go-to money expert and friend.
The post Mint Money Audit 6-Month Check-In: How Did Michelle Allocate Her Windfall? appeared first on MintLife Blog.
Inheriting property or other assets typically involves filing the appropriate tax forms with the IRS. Schedule K-1 (Form 1041) is used to report a beneficiaryâs share of an estate or trust, including income as well as credits, deductions and profits. A K-1 tax form inheritance statement must be sent out to beneficiaries at the end of the year. If youâre the beneficiary of an estate or trust, itâs important to understand what to do with this form if you receive one and what it can mean for your tax filing.
Schedule K-1 (Form 1041), Explained
Schedule K-1 (Form 1041) is an official IRS form thatâs used to report a beneficiaryâs share of income, deductions and credits from an estate or trust. Itâs full name is âBeneficiaryâs Share of Income, Deductions, Credits, etc.â The estate or trust is responsible for filing Schedule K-1 for each listed beneficiary with the IRS. And if youâre a beneficiary, you also have to receive a copy of this form.
This form is required when an estate or trust is passing tax obligations on to one or more beneficiaries. For example, if a trust holds income-producing assets such as real estate, then it may be necessary for the trustee to file Schedule K-1 for each listed beneficiary.
Whether itâs necessary to do so or not depends on the amount of income the estate generates and the residency status of the estateâs beneficiaries. If the annual gross income from the estate is less than $600, then the estate isnât required to file Schedule K-1 tax forms for beneficiaries. On the other hand, this form has to be filed if the beneficiary is a nonresident alien, regardless of how much or how little income is reported.
Contents of Schedule K-1 Tax Form Inheritance Statements
The form itself is fairly simple, consisting of a single page with three parts. Part one records information about the estate or trust, including its name, employer identification number and the name and address of the fiduciary in charge of handling the disposition of the estate. Part Two includes the beneficiaryâs name and address, along with a box to designate them as a domestic or foreign resident.
Part Three covers the beneficiaryâs share of current year income, deductions and credits. That includes all of the following:
- Interest income
- Ordinary dividends
- Qualified dividends
- Net short-term capital gains
- Net long-term capital gains
- Unrecaptured Section 1250 gains
- Other portfolio and nonbusiness income
- Ordinary business income
- Net rental real estate income
- Other rental income
- Directly apportioned deductions
- Estate tax deductions
- Final year deductions
- Alternative minimum tax deductions
- Credits and credit recapture
If you receive a completed Schedule K-1 (Form 1041) you can then use it to complete your Form 1040 Individual Tax Return to report any income, deductions or credits associated with inheriting assets from the estate or trust.
You wouldnât, however, have to include a copy of this form when you file your tax return unless backup withholding was reported in Box 13, Code B. The fiduciary will send a copy to the IRS on your behalf. But you would want to keep a copy of your Schedule K-1 on hand in case there are any questions raised later about the accuracy of income, deductions or credits being reported.
Estate Income and Beneficiary Taxation
If you received a Schedule K-1 tax form, inheritance tax rules determine how much tax youâll owe on the income from the estate. Since the estate is a pass-through entity, youâre responsible for paying income tax on the income thatâs generated. The upside is that when you report amounts from Schedule K-1 on your individual tax return, you can benefit from lower tax rates for qualified dividends. And if thereâs income from the estate that hasnât been distributed or reported on Schedule K-1, then the trust or estate would be responsible for paying income tax on it instead of you.
In terms of deductions or credits that can help reduce your tax liability for income inherited from an estate, those can include things like:
- Depletion allocations
- Estate tax deduction
- Short-term capital losses
- Long-term capital losses
- Net operating losses
- Credit for estimated taxes
Again, the fiduciary whoâs completing the Schedule K-1 for each trust beneficiary should complete all of this information. But itâs important to check the information thatâs included against what you have in your own records to make sure that itâs correct. If thereâs an error in reporting income, deductions or credits and you use that inaccurate information to complete your tax return, you could end up paying too much or too little in taxes as a result.
If you think the information in your Schedule K-1 (Form 1041) is incorrect, you can contact the fiduciary to request an amended form. If youâve already filed your taxes using the original form, youâd then have to file an amended return with the updated information.
Schedule K-1 Tax Form for Inheritance vs. Schedule K-1 (Form 1065)
Schedule K-1 can refer to more than one type of tax form and itâs important to understand how they differ. While Schedule K-1 (Form 1041) is used to report information related to an estate or trustâs beneficiaries, you may also receive a Schedule K-1 (Form 1065) if you run a business thatâs set up as a pass-through entity.
Specifically, this type of Schedule K-1 form is used to record income, losses, credits and deductions related to the activities of an S-corporation, partnership or limited liability company (LLC). A Schedule K-1 (Form 1065) shows your share of business income and losses.
Itâs possible that you could receive both types of Schedule K-1 forms in the same tax year if you run a pass-through business and youâre the beneficiary of an estate. If youâre confused about how to report the income, deductions, credits and other information from either one on your tax return, it may be helpful to get guidance from a tax professional.
The Bottom Line
Receiving a Schedule K-1 tax form is something you should be prepared for if youâre the beneficiary of an estate or trust. Again, whether you will receive one of these forms depends on whether youâre a resident or nonresident alien and the amount of income the trust or estate generates. Talking to an estate planning attorney can offer more insight into how estate income is taxed as you plan a strategy for managing an inheritance.
Tips for Estate Planning
- Consider talking to a financial advisor about the financial implications of inheriting assets. If you donât have a financial advisor yet, finding one doesnât have to be complicated. SmartAssetâs financial advisor matching tool can help you connect with professional advisors in your local area in minutes. If youâre ready, get started now.
- One way to make the job of filing taxes easier is with a free, easy-to-use tax return calculator. Also, creating a trust is something you might consider as part of your own estate plan if you have significant assets you want to pass on.
Photo credit: Â©iStock.com/fizkes, Â©iStock.com/urbazon, Â©iStock.com/dragana991
The post A Guide to Schedule K-1 (Form 1041) appeared first on SmartAsset Blog.
Whether youâre trying to buy a home or looking to get a college degree, you may need to take out a loan to finance your goals. If youâre seeking out your first loan, know that borrowing money is a common practice and you donât need a degree in economics to understand it! Learning more about loans and the different types can help you make informed decisions and take control of your finances.
Loans take many forms but they all fall within two common categories: secured vs. unsecured loans. Whether youâre approved for either type of loan depends on your creditworthiness. Creditworthiness refers to how responsible you are at repaying debt and if it’s worthwhile or risky to grant you new credit. Itâs helpful to be aware of your credit prior to seeking out a loan so you know where you stand.
Now that youâre familiar with the role creditworthiness plays in getting a loan, letâs discuss the differences between secured and unsecured loans, the advantages and disadvantages of each, and which one may be right for you.
Whatâs the Difference Between Secured vs. Unsecured Loans?
The main difference between secured and unsecured loans is how they use collateral. Collateral is when something of economic value is used as security for a debt, in the event that the debt is not repaid. Usually collateral comes in the form of material property, such as a car, house, or other real estate. If the debt is not repaid, the collateral is seized and sold to repay all or a portion of the debt.
Key Difference: A secured loan requires collateral, while an unsecured loan doesnât require collateral.
What Is a Secured Loan?
A secured loan requires collateral as security in case you fail to repay your debt. If secured debt is not repaid, the collateral is taken. In addition to seizing collateral, lenders can start debt collection, file negative credit information on your report, and sue you for outstanding debt. This generally makes secured loans more risky for the borrower.
Conversely, collateral decreases the risk for lenders, especially when loaning money to those with little to no credit history or low creditworthiness. Less risk means that lenders may offer some leeway regarding interest rates and borrowing limits. See the list below to review other typical secured loan characteristics.
Characteristics of a Secured Loan:
- Presence of collateral
- Typically more risky
- May require a down payment
- May sell property to repay loan
- Generally lower interest rates
- Longer repayment period
- Higher borrowing limits
- Easier to obtain for those with poor or little credit history
- Typically less risky
- Lender can take your collateral
- Lender can hold the title to your property until loan is repaid
Secured Loan Examples
The most common uses of a secured loan are to finance large purchases such as a mortgage. Usually, these loans can only be used for a specific, intended purchase like a house, car, or boat. A home equity loan is another example of a secure loan. Some loans like business loans or debt consolidation can be secured or unsecured.
What Is an Unsecured Loan?
An unsecured loan doesnât require collateral to secure the amount borrowed. This type of loan is granted based on creditworthiness and income. High creditworthiness makes an unsecured loan more accessible.
The absence of collateral makes this type of loan less risky for borrowers and much riskier for lenders. If unsecured debt is not repaid, the lender cannot seize property automatically. They must engage in debt collection, report negative credit information, or sue. As a result of the increased risk, unsecured loans have characteristics that attempt to reduce the risk. These may include higher interest rates or lower borrowing limits, and you can see more in the list below.
Characteristics of an Unsecured Loan:
- No collateral required
- Typically less risky
- Qualify based on credit and income
- Stricter conditions to qualify
- Generally higher interest rates
- Lower borrowing limits
- Typically more risky
- Lender canât take property right away if you default
Unsecured Loan Examples
Common unsecured loans include credit cards, personal loans, student loans, and medical debt. Debt consolidation and business loans can also be unsecured. In each of these instances, collateral is not required and you are trusted to repay your unsecured debt.
Advantages and Disadvantages to Consider
When it comes to deciding on the type of loan you need, itâs important to consider the advantages and disadvantages of each.
Secured loans present advantages for repayment, interest, and borrowing amount, but have disadvantages regarding a borrowerâs risk and limitations of use.
- Bigger borrowing limits
- Less risk for lenders usually means lower interest rates for borrowers
- Longer repayment period
- Available tax deductions for interest paid on certain loans (e.g., a mortgage)
- Risky for borrower (potential for loss of collateral like home, car, stocks, or bonds)
- Specifically for intended purpose (e.g., a home, but home equity loans are an exception)
Unsecured loans can be advantageous for borrowers regarding risk and time, but they pose a disadvantage when it comes to interest rates and stricter qualifications.
- Less risky for borrower
- Useful loan if you donât own property to use as collateral
- Quicker application process than for a secured loan (e.g., a credit card)
- More risky for lenders usually means higher interest rates for borrowers
- Hard to qualify for if you have low creditworthiness or inconsistent income (can qualify with a cosigner)
Take a look at the chart below to compare the key advantages and disadvantages between secured and unsecured loans.
|â¢ Lower interest rates
â¢ Higher borrowing limits
â¢ Easier to qualify
|â¢ No risk of losing collateral
â¢ Less risky for borrower
|â¢ Risk losing collateral
â¢ More risky for borrower
|â¢ Higher interest rates
â¢ Lower borrowing limits
â¢ Harder to qualify
Which Loan Type Is Best for You?
After considering the advantages and disadvantages of both loan types, it’s helpful to know which one is the best for certain circumstances. Here are some common contexts in which one may be better than the other.
- A secured loan may be best if youâre trying to make a large property purchase or donât have the best credit. The piece of property that you are purchasing can be used as collateral if you donât already own other property. Additionally, this loan is more accessible for you if you have low creditworthiness and may be more advantageous with lower interest rates.
- An unsecured loan may be best if you have high creditworthiness and a steady income. High creditworthiness helps you meet strict qualification criteria and can also help you obtain better interest rates (given that this type is characterized by higher interest).
Overall, secured and unsecured loans are each useful in different situations. Remember that the key difference is that unsecured loans donât need collateral, while secured loans do. Secured loans are less risky for the lender and may allow for some advantageous repayment conditions. On the other hand, unsecured loans are risky for the lender, and they often come with stricter conditions that try to lessen that risk.
It is important to make smart financial decisions such as repaying debt on time and maintaining a good credit history. High creditworthiness is the key to getting the best conditions on any loan. No matter your circumstances, identifying which loan type is best for you depends on your specific credit and goals. Visit our loan center for help in deciding which loan is right for you.
Sources: Consumer Financial Protection Bureau
The post Secured vs. Unsecured Loans: Hereâs the Difference appeared first on MintLife Blog.
If youâre someone who struggles with financial anxiety and stress, practicing a financial self-care routine could help. Just like other areas of your life, the more consistent you are about financial self-care, the better. This is why I am emphasizing the idea of building habits. The reality is that anxiety and stress are lifeâs constants. We ourselves donât have the luxury of removing those factors from our environment, but what we do have are tools to help manage and reduce them.Â
Before I get into it, I want to note that thereâs a pretty extensive list of financial-self care options available, but what Iâve realized is that when we are struggling, we often overcommit ourselves to perfectionism instead of trying to be a little less imperfect. Iâm the first to admit that itâs really tough not to go all-in when reading advice that sounds life-changing. Often, we find ourselves trying out anything and everything to feel in control, and it is for this reason that I wonât offer you the extensive list today. Instead, I hope to help you focus on taking things slow for once so that you donât set yourself up for failure (and ultimately right back in the anxiety-ridden state you first found yourself in). You can view these three foundational habits as a starting point for a long-term financial self-care routine that you will work to enhance over the course of your life. With this in mind, letâs dive in.
HABIT # 1: REVIEW & CATEGORIZE YOUR TRANSACTIONS DAILY
Building awareness of what and how much youâve spent can be a game-changer. This habit not only takes the dreaded guessing game out of your end-of-month leftover income and total spending, but it can help you course-correct throughout the month to ensure you hit budgeting goals, cut back in areas you may find yourself regretting, or even upping your spend in areas that bring you joy. A few added bonuses of this habit include saving time at the end of the month if youâre someone that typically sits down for 4-5 hours to get yourself organized, in addition to helping you catch fraudulent transactions faster!Â
Pro tips for building this habit:Â
- Make it easy: If you donât already use Mint, download the app today to have all of your transactions organized and easily viewable in one place.Â
- Make it obvious: Set a calendar reminder on your phone to check Mint each day at the same time. Iâd recommend early morning before your day gets busy.
- Make it attractive: Check your spending after a ritual or habit you enjoy doing. For example, after you sit down to drink your coffee, open up Mint to review your transactions.Â Â Â
- Make it satisfying: After reviewing your transactions, do something rewarding. For example, after categorizing and reviewing, consider checking it off your to-do list for the day to feel progress.
HABIT # 2: CHECK YOUR SAVINGS ACCOUNT(S) DAILY
Checking your savings accounts is a great way to flood your brain with positivity about your financial situation. Having savings is a rewarding feeling, and even more rewarding, is seeing your savings progress over time. Getting in this habit will also be a good reminder to actively save for each of your financial goals.Â
Pro tips for building this habit:Â
- Make it easy: Connect your savings accounts to Mint and use the goal-setting feature that allows you to customize your savings goals and connect your savings account to easily track your progress.Â
- Make it obvious: Consider setting your phoneâs background to a photo of something youâre saving for so that everytime you check your phone, youâll be reminded of saving. Mint also allows you to add photos of your goals in the web version and in the app.Â
- Make it attractive: In addition to checking your savings right after reviewing your transactions in Mint, consider starting a savings group with your friends and family. No need to talk about how much youâve saved, but you can talk about your goals and turn to the group for motivation when youâre tempted to spend what you would normally save.Â
- Make it satisfying: Make sure to give yourself credit for doing this habit by also crossing it off as a separate to-do list item. Try to also make it a rule to never miss checking your savings twice in a row. Skipping a day here and there because life gets in the way is totally normal, just make sure to commit yourself to doing it the next day.Â
HABIT # 3: REWARD YOURSELF 1X PER WEEK
I saved the best for last. Rewarding yourself is a critical step that most skip when trying to become more disciplined. Self-control can be a draining experience, especially at first. Make sure to set aside âfree timeâ each week to do something for yourself. It doesnât have to be big, and it doesnât have to require a lot of money. Think of it as a way of telling yourself good job for working hard and trying to improve.Â
Pro tips for building this habit*:Â
- Make it easy: Consider making your reward something that takes less than 2 minutes to start doing. Perhaps itâs turning on a Netflix show, making an easy dessert, grabbing a coffee at the Starbucks you just walked by, or even dancing in your living room to your favorite song.Â
- Make it obvious: As I write this, it sounds weird, but for some of us, setting aside time for ourselves isnât something weâre good at, so commit yourself to a consistent day and time thatâs for you to do what you want.
*Making it attractive and satisfying isnât necessary here because the reward in and of itself will reinforce the habit.Â
With that, you now have 3 habits to start building a financial self-care routine. Give this a shot, and let me know how it goes in the comments below.Â
The post 3 Financial Self-Care Habits You Can Start Today appeared first on MintLife Blog.
A fiduciary deposit account is an account thatâs owned by one or more persons but managed by another. The owner is known as the principal, while the manager is known as the fiduciary. These accounts are sometimes used to handle estate or trust assets, among other purposes. Their legal status and their insurance coverage are determined by the Federal Deposit Insurance Corporation (FDIC). Hereâs what you need to know about this type of account.
Fiduciary Deposit Account, Defined
A fiduciary deposit account, also known as a principal account, is a deposit account that a person or other entity, acting as a fiduciary, establishes to benefit one or more persons who own the assets in the account, according to FDIC rules. The individual who opens the account doesnât have ownership of it nor any ownership interest.
Some examples of fiduciaries of these accounts are trustees, agents, nominees, custodians and guardians. Fiduciary accounts are used in various ways:
- Uniform Transfers to Minors Act (UTMA) accounts
- Uniform Gifts to Minors Act (UGMA) accounts
- Decedent estate accounts
- Real estate and other escrow accounts
- Brokerage deposits
- Accounts with a power of attorney
When FDIC Pass-Through Insurance Coverage Applies
All deposits managed by a fiduciary on behalf of the accountâs owner or owners are insured by the FDIC for the full $250,000 on a pass-through basis. This means that all the deposits are considered to be deposits made directly from the principal as long as three requirements are met:
- The owner of the funds must be the principal and not the fiduciary who set up the account. The FDIC may review the fiduciary and ownerâs agreement on the account as well as state laws to confirm this.
- The record of the insured depository institution (IDI) account must indicate the agency nature of the account. For example, the ownership of the account may read ABC Company as custodian, ABC for the benefit of (FBO) or Sally Rowe UTMA John Rowe, Jr.
- The IDI, fiduciary and third-party records must show the ownersâ identities and the ownership interest(s) in the deposit account.
For example, letâs say XYZ Brokerage firm establishes an account for Sally Rowe at ABC Bank. In this example, Sally Rowe is the owner, or the principal, of the money in the account. This account would then be added with any other single accounts she owns at ABC Bank, which would be insured as a single account for up to $250,000.
If we assume Sally has more single ownership accounts at ABC Bank, she will not receive additional coverage because XYZ Brokerage firm opened the account for her. With a fiduciary account, coverage is provided as though the actual owner opened the account at the IDI, assuming all responsibilities are met.
Pass-through coverage is also possible if a guardian retains part of the interest paid by the IDI as a guardian fee.
When FDIC Pass-Through Insurance Coverage Doesnât Apply
If requirements of a fiduciary account are not met, the account will be insured under the fiduciary, not the intended principal. In this case, the fiduciary will own the deposits and the account will be categorized as a single account or corporate account. These deposits will then be combined with other deposits the fiduciary holds in the same ownership at the IDI where funds are held. The total sum will be insured up to $250,000.
For example, letâs say a customer of a deposit broker is assured by the guardian (fiduciary) that he or she will earn 5% on a deposit when the IDI is paying only 3%. The guardian would not be a guardian then; he or she would be a borrower with an independent responsibility to pay 5%. In this case, the deposits are no longer eligible for pass-through coverage for the principal. Instead, the deposits are now considered corporate deposits belonging to the guardian.
A fiduciary deposit account is an account set up by someone for another person, who actually owns the money. The one who sets up the account and manages it is known as the fiduciary, while the owner of the money is known as a principal. This kind of arrangement is used to handle assets in trusts, escrow accounts, brokerage accounts and decedent estates, among other uses. Itâs important that these arrangements carefully follow all the FDICâs legal requirements, as well as applicable state regulations, to qualify as a fiduciary deposit account.
Estate Planning Tips
- Consider talking to a financial advisor about your estate plans. Finding a financial advisor doesnât have to be hard. SmartAssetâs free financial advisor matching service can connect you with several in your area in minutes. If youâre ready, get started now.
- If you have an agent, they may make decisions about your 401(k) account. Find out how much money youâll have in your account by the time you retire with our free 401(k) calculator.
Photo credit: Â©iStock.com/filadendron, Â©iStock.com/Inside Creative House, Â©iStock.com/Tuned_In
The post What Is a Fiduciary Deposit Account? appeared first on SmartAsset Blog.
As the dust slowly begins to settle and we observe businesses putting their action plans in place to recover, we all sit and wonder what this may look like for us. How will I recover from this? How am I going to cover these unexpected expenses? How will I increase my earning potential? Whether youâre navigating the muddy waters of being unemployed, furloughed, return to office plans or continue working remotely â we have many things to consider as time continues to quickly progress. How should we handle debt? Are there any more relief programs or funding? How can we pick up the pieces and properly recuperate what may have been lost? Use the tips below to jumpstart your journey of reclaiming your finances.
Identify your financial focuses
Over the course of this year, many financial goals that were initially set needed to be tweaked or came to a screeching halt altogether. While it would be nice if we could rectify the many financial aspirations we have for ourselves and our families all at once, itâs simply not realistic. To alleviate the impounding pressure many have had to experience for a good chunk of time this year, itâs best to identify two to three key areas of focus. Not only does narrowing your focus help direct where your efforts should lie, it removes unnecessary stress so that a plan of attack can be created and executed upon. For example, if you would like to begin rebuilding your emergency fund, savings or simply get caught up on bills and other overhead expenses â make sure the actionable steps you take align with the overarching goal. This helps create tunnel vision to execute on the goal while quieting the noise of things that can be tackled at a later time. You owe it to yourself and your finances to see these goals through to the finish line.
Revisit your budget and make adjustments as necessary
Many think of budgeting like that pesky chore you put off every single week. Itâs that âthingâ you know needs to be done, but you always find something else to do instead. However, once itâs done â youâre always glad that you did it. Even if you have to have an adult temper tantrum, pull out the pen and paper (once again) to compare your income with expenses. Has your income increased or decreased? Are there expenses that are no longer on the list? Are there certain wants or luxuries that can be temporarily put on hold until things settle down? Take all of these factors into consideration when recalibrating your budget. Since thereâs an increased amount of time indoors, are there any spending habits youâve noticed that have been on the rise? If these questions are not easily answered, commit to reviewing the last few months of your bank statements. Do you notice more to-go food orders? An increased amount of emotional or impulsive purchases? Be honest with yourself and your habits so that you can address and make changes to healthily rebuild your finances.
Adjust debt payoff plan
If you havenât taken the opportunity to contact your creditors â consider this as a reminder! Itâs imperative you maintain an open line of communication with all lenders. These conversations can potentially lead to various options being available to assist you in your debt payoff process. Remember to keep in mind that you are not the only person experiencing financial hardship, so let pride become a thing of the past and be candid. Are there relief options during the pandemic? Are interest rates being lowered because of the current climate? If I were to miss a payment, what are the consequences? Are negative remarks being reported to the credit bureaus? Be very clear in your delivery. There are thousands and thousands of people attempting to pick up the pieces on their money journey. Take some time to check all creditor accounts for the most recent balances. From there, create (or readjust) your plan based on your personal circumstances. If itâs easier to tackle the smallest debt, shift your attention to those accounts. If catching up and restoring good standing with utilities and other overhead expenses need to be addressed first, do that. There is no right or wrong way to approach your plan; just donât adopt the spirit of avoidance.
Monitor your credit score regularly
Thereâs been a huge surge in personal data being compromised due to the pandemic. To protect yourself and your credit score, be sure to obtain a copy of your credit report from at least one of the bureaus (Experian, TransUnion and Equifax) and review regularly. Normally, you are allotted one free credit report every year â however, because of the pandemic you can now request your report weekly at no cost to you until April 2021. We all know thereâs a lot on all of our plates, but this can be incorporated in your weekly routine to make sure information stays accurate. During your review if thereâs anything thatâs false, submit a dispute and be sure to have any supporting documentation that can serve as evidence to support your claim.
Even though we donât like to admit it, life can present a lot of challenges that we may not be fully prepared for in our ever-changing adulthood journey. This pandemic has shined a light on the areas in our lives that can use some more time, intention and attention. Instead of beating ourselves up about the lack of preparedness, letâs be sure to make adjustments now so no matter what happens with the economy or the state of this country it does not have such a huge, negative impact to our financial goals. Letâs face it â even in the midst of tragedy, this year equipped us with a different level of endurance and resilience. It reminded us what really matters and where our energy should really be dedicated to. Start where you are and do what you can. Refrain from comparing your personal money story to someone elseâs. We all have unique situations and obligations that influence our saving and spending plans. Dust yourself off, grant yourself grace and begin a new chapter in your financial journey.
The post How to Financially Prepare for Post-Pandemic Life appeared first on MintLife Blog.