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Wednesday, July 28, 2021

Advance Child Tax Credit Payments: What to Do With The Money


Last month, I wrote a blog post for the Military Families Learning Network about “nuts and bolts” of the advance child tax credit (ACTC). To recap, the ACTC is an advance payment of half of the expanded child tax credit (CTC) available under the American Rescue Plan. The remainder of the credit gets settled up on 2021 tax returns. A tax credit is a dollar-for-dollar offset of income tax (e.g., $5,000 tentative tax - $3,000 credit = $2,000 final tax).

The six scheduled payment dates for ACTC benefits payable in 2021 are July 15, August 15, September 15, October 15, November 15, and December 15. Most payments will be made via direct deposit. For 2021 only, the expanded CTC is $3,000 per child age 6 to 17 and $3,600 for children under age 6. The credit is fully refundable. ACTC payment amounts in 2021 are $250 per month (children age 6-17) and $300 per month (age 5 and younger).

Parents will receive the full amount of the expanded CTC if their income is below $75,000 (single tax filers or married filing separately), $112,500 (filing as head of household) and $150,000 (married filing jointly or mfj). A reduced amount is available for incomes up to $400,000 (mfj) and $200,000 for other filing statuses.

Taxpayers can opt out of advance payments and receive any expanded CTC they are due when they file their 2021 tax return. Good candidates for opting-out of ACTC payments and waiting to “settle up” in 2022 are:

¨     Taxpayers who are unsure what their total 2021 income will be and do not want to owe the IRS

¨     Taxpayers whose income increased in 2021 (versus their 2020 or 2019 income)

¨     Taxpayers who prefer one large tax refund to smaller payments

For families that elect to receive ACTC payments, the next decision becomes what to do with the money? The extended CTC is currently slated for this year only so it deserves special consideration and careful use. The amounts received can be significant, too; e.g., $800 per month with a preschooler and two school age children ($300 + $250 +$250). Most experts advise financial catch-up from the pandemic and set-asides for the future.

Advice given in a recent CFPB webinar and from other sources includes the following uses for ACTC payments:

¨     Done Deal: It is Already Spent- Some people have their ACTC payments already earmarked for overdue bills (e.g., rent and utilities) incurred during the pandemic. There is no judgement or shame here. Their financial situation “is what it is.” Period. The money is effectively already spent and provides critical “breathing room.”

¨     Credit Card Payoff- Online credit card payoff calculators can show the estimated payment time and interest savings available by making extra payments on a credit card. Some people pay more on cards with the highest interest rate while others get a psychological boost by “knocking off” debts with the smallest balances first.

¨     Emergency Savings Set-Aside- While financial experts recommend setting aside three to six months of essential expenses as a financial “buffer,” any savings is better than none. ACTC payments can boost set-aside funds that might otherwise take families with limited resources months, or even years, to accumulate.

¨     Future Spending Needs- Expenses noted by the CFPB include credit card minimum payments, children’s school and education expenses, and after-school child care. They recommended adding ACTC payments into a family’s spending plan (budget) as expected income and planned expenses using their Cash Flow Budget tool.

¨     Income Tax Set-Aside- Estimating tax liability is tricky in times of economic turmoil. Thus, many tax experts recommend a “save half, spend half” strategy for ACTC payments. If your calculations are off, money will be set aside to pay taxes due next year. If you don’t owe more to the IRS, you will have an additional windfall.

The CFPB also warned about ACTC fraud. To learn about pandemic-related scams, review this CFPB website.

Wednesday, July 21, 2021

COVID-19: Where Do We Now Stand?


COVID-19 has impacted American families- and indeed the world- for about 18 months. In just the last seven months, we have gone from fierce “Hunger Games” style competitions for a limited number of vaccination slots to “vaccine hesitancy” and the use of various incentives, such as free donuts and million dollar lottery prizes, to get people vaxed.

With federal government eviction moratoriums sent to expire for renters on July 31 and Delta variant transmission picking up speed, now is a good time to review where we stand with respect to COVID-19 on both the financial front and the health front.

Financial Status Update

¨     Inflationary Pressures- Pandemic-induced shortages have impacted the inflation rate, measured by the CPI, which increased 5.4% in June (4.5%, excluding food and energy). About a third of the increase resulted from price increases for used vehicles. Other items with noteworthy price spikes are food, air fares, gasoline, and housing. Obviously, these prices increases are impacting consumers, resulting in postponed purchases, product substitutions, and other work-arounds.

¨     Advance Child Tax Credit (ACTC)- Initial ACTC payments began on July 15. Just like authors receive an advance against future royalties on a book, the ACTC is an advance of half of the expanded child tax credit (CTC) available under the American Rescue Plan. The remainder of the credit gets settled up on 2021 tax returns due in 2022. At the IRS Child Tax Credit Portal, parents can view their eligibility and unenroll from receiving ACTC payments, if desired. 

¨     End of Eviction Moratoriums- Nearly 6 million U.S. households are behind on about $20 million of rent in arrears and the fifth-and final-national eviction moratorium is set to expire on July 31. What will be left afterward is a patchwork of continued moratoriums in some states and no extensions in others. Clogged courts and delayed eviction case hearings taking months are predicted. States also vary in their processes for distribution of emergency rental assistance funds. The best advice for renters: contact local legislators and/or housing assistance/social services agencies for help and advice.

Health Status Update

¨     Delta Variant- While we all wish the pandemic would just go away, unfortunately it has not. Instead, it is all about the variants now. By many scientific accounts, the widely reported Delta variant is more contagious than, but similarly severe as, the original virus. Some say it is more severe, however, so the jury is still out. Variant unpredictability poses communication challenges for ever-evolving public health guidelines. What is known for certain, however, is that unvaccinated people should definitely wear masks and socially distance until they are fully vaccinated because they are at risk for the virus.

¨     Vaccine Hesitancy- For whatever reason (e.g., fear, religion, politics, mistrust of the government, a belief that you are young and invincible), the U.S. vaccination rate has slowed as the number of new COVID-19 cases is increasing. There have been about 625,000 COVID-19 deaths in the U.S. to date. For perspective, about 675,000 Americans died from the 1918-1920 Spanish Flu. Right now, approved vaccines are holding up well against Delta and other variants. There is a concern, however, that, especially in areas with a high percentage of unvaccinated people, vaccines could be less effective against new variants that may develop. This puts every one of us at risk.

¨     Mask-Wearing Guidelines- Individuals have different levels of “cautiousness” and personal risk tolerance, which is why we now see a mix of people wearing- and not wearing- masks in indoor areas where there are no official mask-wearing mandates by state or local governments or retailers. The most prudent and conservative practice today is to wear a mask and distance from people indoors if you are uncertain about their vaccine status, even if you, yourself, are vaccinated. Since there is typically no way to know if total strangers nearby are vaccinated or not, this means either masking up or simply skipping indoor activities.

For additional information about current COVID-19 issues, visit the Healthline COVID-19 website.

Thursday, July 15, 2021

Expert Tips for Financially Savvy Women

I recently watched the new documentary film, $avvy, that describes a multitude of financial challenges faced by women. The film also repeatedly emphasizes how critical it is for women to understand and take charge of their personal finances. A partner/spouse is not a financial plan and women should never abdicate financial control.


$avvy combines case study profiles of a diverse group of women with different financial “issues” (e.g., student loans and widowhood) and successes (e.g.,  debt repayment and a successful 37-year old investment club) with expert commentary, compelling facts and research findings, and dozens of financial recommendations. 

Below are my key take-aways for strategies to become a financially savvy woman:

¨     Understand the Financial Hurdles- Women live longer than men, are more likely to go in and out of the labor force for care-giving, and earn less, on average, with lower Social Security benefits. Stated another way, women “have more years of retirement to save for with less money.” This is a formidable challenge.


¨     Bite the Bullet- Several case study stories showed women who simply “had enough” of living subpar financial lives with high debt, low savings, and lack of certainty about their future. They all made major life changes in their lifestyle and finances to turn things around. One woman noted that “It starts with me.”


¨     Be a Financial Role Model- One woman in the film talked about being the first one in her immigrant family to invest and repay debt. Another made difficult adjustments as a widowed single parent. Children and other family members are watching can learn from, and be inspired by, financially savvy women.


¨     Frame Debt in Dollar Terms- People tune out when they see percentages, such as a 27% APR (interest) on a credit card. To appreciate fully what this means, turn percentages into dollar amounts. For every $100 that you spend on that credit card, you have to pay back $27. Dollar amounts get people’s attention.


¨     Negotiate Interest Rates on Debt- One speaker encouraged “bullying back” your creditors by politely requesting a lower interest rate on your credit card and subtly stating that there are other credit cards out there with better terms that you can transfer your balance to. Clearly state the terms that you are requesting.


¨     Have a Personal Emergency Fund- Even if it takes months or years, save 3 to 6 months of essential household expenses. Earmark this as “no touch” money in a special savings account. A lack of savings makes it difficult to pay for unexpected expenses, cope with income loss, or leave an abusive relationship.


¨     Maintain A Good Credit Score- Bad credit can cost hundreds or thousands of dollars per year. The two best ways to improve a credit score are to pay at least the minimum due (preferably pay in full) before the due date and to keep balances low. Some credit scores now factor in on-time rent and utility payments.


¨     Savings = Freedom and Options- One speaker called savings “take this job and shove it money” and “living your fullest life money.” Another noted that financially secure women “don’t have to stay in scenarios that don’t serve them” (e.g., bad relationships or jobs). Investing is key to growing your money.


¨     Shame Can Be Overcome- Talking about money can have shame associated with it (e.g., overspending debt, abuse). Speakers advised women not to be ashamed of what they went through and, instead, focus on how they can change their story. Taking financial control can provide a huge boost to your self-esteem.


¨     Have Your Own Accounts- Married women should hold some money in their own name and spouses should be transparent about each other’s finances (e.g., income, assets, expenses, debt (e.g., student loans), and credit scores. Avoid co-mingling assets and debts and strongly consider a pre-nuptial agreement.


¨     Name Savings/Investment Accounts- Naming an account (e.g., “[child’s name] college account” or “[your name] financial freedom account”) is a powerful emotional act and makes it less likely that earmarked money will be spent and more likely that you will delay gratification and set money aside.


To learn more about women and money, download my free book, Money Talk: A Financial Guide for Women.

Wednesday, July 7, 2021

Financial Concerns of Older Adults


I recently taught a 90-minute webinar, 25 Financial Planning Strategies for Older Adults, for the New York Public Library. In preparation for the program, 75 questions were submitted in advance by registered participants. The questions provide unique insights into the top financial concerns of older adults.


While not a representative sample or empirical data, by any stretch of the imagination, the participants’ questions are instructive for financial educators and other older adults who can relate to having the same concerns.


Below is a list of  participants’ six most frequently mentioned concerns and suggested action steps from my class:


Taxes in Retirement

¨     Hold assets (e.g., stocks or mutual fund shares) for more than a year for favorable long-term capital gains rates

¨     “Bunch” larger-than-normal tax deductions into one tax year to exceed the standard deduction and itemize

¨     As part of  bunching, consider setting up a donor advised fund to make it beneficial to itemize deductions

¨     Consider a qualified charitable distribution (QCD) from a traditional IRA for a RMD withdrawal

¨     Consider tax-free bonds, instead of taxable fixed-income securities, if appropriate for your income tax bracket

¨     Meet with a certified financial planner® (CFP®) to explore additional tax minimization strategies


Investment Decision-Making

¨     Don’t invest in anything that you don’t fully understand and could explain simply to someone

¨     Diversify asset classes (e.g., stocks, bonds, cash equivalents) and securities within each asset class

¨     Purchase stocks, growth mutual funds, and other equity investments for goals 5+ years away in the future

¨     Have reasonable expectations: average returns on stocks are about 10% with lower returns on bonds and cash

¨     Buy low-cost investments such as index funds, exchange-traded funds, and other funds with low expense ratios

¨     Don’t over-react to daily market “noise” on news shows and stay focused on long-term investment goals


Investment Withdrawals and Outliving Assets

¨     Create a retirement “paycheck” with regular withdrawals from savings and/or managed payout mutual funds

¨     Consider the purchase of low-expense annuities to generate a regular monthly income (single life or couple)

¨     Establish a “ladder” of bonds or CDs by purchasing them in a series that pays a regular stream of interest

¨     Begin required minimum distributions (RMDs) from tax-deferred retirement savings starting at age 72

¨     Get help with RMDs from account custodians for questions about making withdrawals and tax withholding

¨     Try some online Monte Carlo calculators or meet with a CFP® to analyze how long your savings will last


Social Security Decision-Making

¨     Pick a starting age from 62 to 70; the longer you wait to claim, the higher your monthly benefit will be

¨     Be aware of the Social Security earnings limit before full retirement age ($18,960 in 2021) if you work

¨     Arrange tax withholding or make quarterly estimated payments to the IRS if your benefits are taxable

¨     Take care of your spouse (e.g., higher earners work longer to assure a larger spousal benefit)

¨     Read all correspondence from Social Security including COLA adjustments and annual benefit amounts


Medicare and Health Insurance

¨     Refer to the Medicare and You publication for specific details about coverage and inflation-adjusted numbers

¨     Contact your local SHIP office for information about Medigap policies provided by trained volunteers

¨     Stay abreast of changes in retiree health insurance (e.g., changes in insurers), if provided by a former employer

¨     Budget for health care costs in retirement (e.g., Medicare Part B and D, copays, deductibles, co-insurance)

¨     Consider strategies to reduce taxable income if you are close to income breakpoints for IRMMA surcharges

Long-Term Care (LTC) Expenses

¨     Develop a LTC plan which may include self-insurance, a CCRC, or the purchase of LTC insurance (LTCI)

¨     Consider LTCI alternatives such as a life insurance policy with a chronic illness rider or a LTC rider

¨     Consider low-expense annuities with accelerated payouts for a chronic illness or LTC expenses

¨     Consider how much income is guaranteed for life to pay LTC bills (e.g., pension, Social Security, annuities)

¨     Consider the feasibility of self-insurance by multiplying the annual cost of local LTC services by 3 to 5 years

¨     Consider a highly-rated continuing care retirement community (CCRC) that will provide lifetime care

¨     Get help, when needed, from SHIP counselors, a CFP®, and/or an elder-care attorney


More Insights “Undercover” at a “Free Lunch” Seminar


In an effort to further understand what is on the minds of older adults regarding personal finance, I decided to attend a “free lunch” seminar held at my 55+ community. I was hoping to hear questions and comments from attendees that would confirm or expand upon the concerns expressed by the NYPL webinar participants.


I used to get invites to free meal seminars when I lived in New Jersey (after I turned 50) but they all say “No brokers, agents, or advisors.” Too many people knew me from my newspaper column and Cooperative Extension programs so I was always afraid of being inadvertently “outed” and publicly asked to leave.


Since few people in Florida know that I am a financial educator, I decided to go “undercover” to observe the seminar content, presentation style, and participants. Here are five “Barbservations”:


There Were No Questions- The presenter never asked any questions of the participants and did not make time for participants to ask any of him. I’m thinking that this was done to create an incentive for people to meet with him.


Door Prizes Required a Contact Form- Raffle tickets would have been sufficient. The form wanted a birthdate, e-mail, phone number, and more. I left birth date blank, used a third tier e-mail, and my old phone number in NJ.


No Financial Designations- Certifications have ethics requirements and fiduciary standards. The presenter was not a J.D. (lawyer), nor did he hold a CFP®, CRPC®, ChFC®, CPA/PFS®, or any other financial designation.


Government and Bank Bashing- There was fear-mongering about future tax increases and cuts to Medicare and Social Security. Also, negative comments about low bank interest rates and promises of “secrets” and “strategies.”


Positive Aspects- The content was correct and much of it was useful. However, it was presented briskly in a series of “teasers” with no opportunity for questions or clarification. The presentation lasted only 40 minutes and then we ate lunch. The lunch from Sonny's BBQ was delicious and relaxed. Interestingly, the speaker did not stay very long to mingle.


In summary, the last third of most people’s lives is the most financially complicated. In addition, many major and/or unexpected events can occur including steep market declines, higher income taxes and fewer tax write-offs, loss of spousal income upon death, needs of grown children and grand-children, rising costs of health care, and long-term care. In addition, many “young-old” people age 65 to 74 have a blind spot and think that their lifestyle will stay the same when they are “old” (age 75 to 84) and “old-old” (age 85+).


Here is the  ZOOM LINK  for my NYPL webinar, which includes which includes a closed captioning transcript. It will work until July 29 (30 days from my June 29 webinar).

For additional information about financial transitions in later life, consider ordering my book Flipping a Switch: Your Guide to Happiness and Financial Security in Later Life.

Wednesday, June 30, 2021

“Flipped Switches” in Later Life


Today is Day #35 of a 35-day sequence of tweets about the content of my book, Flipping a Switch. The words “flipped switch” are a metaphor for transitions that people face in the last third of life and the book describes 35 of them. Examples include spending down savings, taking required minimum distributions, and keeping busy.


The target reader for Flipping a Switch is a wide swath of Americans: older adults in the last third of their life and younger adults who are planning ahead and/or assisting older family members. Specifically, the book can help Gen Xers and millennials better understand their parents’ financial and lifestyle transitions and changing mindsets.


There are 15 financial, 5 social, and 15 lifestyle-related “flipped switches” described in the book and the #35DaysofFlippedSwitches tweets described each one, along with a suggested action step to address that issue.


Below is a table that summarizes the 35 “flipped switches” in my book and key action steps for each life transition:


Description of “Flipped Switch”

Key Action Step


1.       If You Don’t Spend Your Money, Someone Else Will

Automate savings withdrawals (e.g., annuities, managed payout mutual funds, bond and CD laddering, automatic withdrawals).


2.       Deciding When You Have Enough

Try some online savings calculators to determine how much money you need to save to live comfortably.


3.       Creating a “Paycheck”

Consider purchasing low-expense annuities for guaranteed income and as a longevity hedge.


4.       RMDs: The Mandatory Flipped Switch

Consult with a CPA® or financial advisor if you need help taking RMDs or investing or gifting money that is withdrawn.


5.       Later Life Investing

Beware of “free meal seminars” that target older adults and have been linked to fraudulent or inappropriate investments.


6.       Adjusting to Changes in Income and Expenses

Consider working 1 to 2 years longer if you are a “late saver” to save more money and earn a higher Social Security benefit.


7.       Taxes: It’s Not What You Earn, But What You Keep

Consult with a CPA® or financial advisor the first tax season after leaving work to get a professionally prepared template tax return.


8.       Becoming a Social Security Beneficiary

Beware of the earnings limit ($18,960 in 2021) and consider your employment plans before applying for Social Security.


9.       Health Care Transitions

Take care of yourself (e.g., dietary changes) to stave off chronic diseases and maintain quality of life so aging is not painful and costly.


10.    Transitioning to Medicare

Review the annually updated publication Medicare and You and reach out to your local SHIP office for Medigap policy assistance.


11.    Setting New Financial Goals

Automate spending and gifting goals so withdrawing money from investments does not feel like a “loss.”


12.    You Can’t Take It With You: Philanthropy/Estate Plans

Investigate a charity’s administrative expense ratio and make gifts to charities that spend the bulk of their funds on their charitable mission.


13.    Financial Organization and Simplification

Make a list of digital assets with a list of user names, passwords, PINs, and other details related to your digital life.


14.    Becoming Fraud Bait

Recognize “red flag language” (e.g., pressure to act immediately and tell nobody and requests to “verify” your account and delete/hang up.


15.    Achieving Financial Peace of Mind

Run a Monte Carlo analysis or consult a financial advisor to see if you’ve saved enough money to not have to worry about money.


16.    Answering the “What Do You Do?” Question

Introduce yourself to others with a new business card that says what you want it to say about your current pursuits.


17.    Changed Relationships With Family and Friends

Define your boundaries and have honest discussions with family members about your lifestyle and care-giving preferences.


18.    Becoming the Family Storyteller

Impart values (e.g., hard work and honesty) into family stories so they have a greater impact beyond simply telling the story itself.


19.    Successful Solo Aging

Consider a continuing care retirement community (CCRC) to receive a continuum of lifetime care as you get older.


20.    Finding Meaning and Purpose with Others

Give yourself time to develop a new post-career lifestyle. For many people, it is not “on-off,” but a series of gradual transitions.


21.    FINDing Fulfillment After Full-Time Work

Don’t disappear from the workforce for long if you get bored after a primary career. Within two years, you are likely to be deemed “rusty.”


22.    Downsizing and Divesting

Sort possessions into two piles- keep and discard- when you are downsizing. Take discarded items to thrift shops to “recycle” them.


23.    Get Help When Needed

Place checkbooks, financial records, and valuables in a safe, locked file cabinet or other secure place when household workers are present.


24.    Disengaging the Past and Engaging the Future

Mentor others to carry on your work. Talk them through process steps, train them, and share document files.


25.    A New Definition of Busy

Identify one or more high-priority “big rocks”; i.e., activities that take a big chunk of time. Doing this will provide daily time structure.


26.    Increased Interest in Accessibility

“Layer” lighting to reduce safety risks (e.g., falls) by combining ambient lighting, task lighting, and accent lighting.


27.    Should I Stay (Put) or Should I Go?

Do pre-move research. Visit potential relocation sites during different seasons and follow their local news online via social media.


28.    No More Excuses

Develop a new “go to” response to replace “Sorry, I have to work” and strategies to filter requests to do things.


29.    Pleasing Yourself Instead of Others

Make a list of things that you do to please others. Next, consider whether those activities really have an element of choice.


30.    Seeking Happiness in Later life

Focus on PERMA: Positive emotions, Engagement in activities, Relationships, Meaning, and Achievement.


31.    Green Bananas, ROLE Calculations, and Lasts

Think about upcoming major purchases and whether items you plan to buy can be expected to last the remainder of your lifetime.


32.    Self-Regulation and Time-Shifting

Anticipate possible losses in visual, cognitive, and/or motor skills as you get older and adapt personal behaviors accordingly.


33.    Invincible to Vulnerable

Do all that you can to avoid injury (e.g., falls) and push back the start of age-related chronic diseases such as diabetes.


34.    Handling “Wildcard” Events (Widowhood, Gray Divorce, and Diminished Capacity)

Provide financial advisors and institutions with the name of a trusted person to contact if unusual account activity or fraud is suspected.


35.    Planning a Good Ending

Do what you need to do to plan for an uncertain future (e.g., prepare or update legal documents and communicate final wishes to others).



For more information about the content of Flipping a Switch, check out this webinar that I recently presented.


Advance Child Tax Credit Payments: What to Do With The Money

  Last month, I wrote a blog post for the Military Families Learning Network about “nuts and bolts” of the advance child tax credit (ACTC)....