Wednesday, January 19, 2022

Financial and Lifestyle Insights- Part 3


In this post, I continue my discussion of tips from webinars, podcasts, and virtual conferences that I heard during the last quarter of 2021. Below are 11 of my key take-aways:

Create Your Own TDF Glide Path- Consider personal factors when choosing a target date fund (TDF) glide path (i.e., the investment mix of TDF assets at various ages). It may be beneficial to have a different glide path than the one designated for your anticipated retirement age. For example, workers with a guaranteed pension and/or a high investment risk tolerance might want to have more stock exposure in a TDF and would chose a target date farther off in the future.

Make Tax-Advantaged Gifts- Consider “bunching” charitable donations with other tax deductions (e.g., state income tax and local property tax) every so often (e.g., high income years) to exceed the standard deduction and benefit from itemizing. Another tax-advantaged way to benefit from charitable gifts is to open a donor advised fund (DAF) with a major brokerage firm. One DAF contribution can support donations (called grants) to multiple charities over time.

Decumulate Carefully- Consider a webinar speaker’s observation that spending down accumulated savings in retirement is more complex and has higher stakes than saving during working years. Many “super savers” hoard their money in retirement because spending and seeing their balances decrease feels like a “loss.” The speaker also noted that savings can be used as a “bridge” to Social Security so that higher future benefits can accrue by claiming them at an older age.

Estimate Future Retirement Income- Consult an online calculator to understand how a sum of money (savings) can turn into a stream of income. Research studies have found that having guaranteed retirement income (e.g., from a pension or annuity) is associated with increased financial satisfaction vs. simply having a lump sum to manage. Many people do not understand how a sum of money turns into a stream of income. It is a common financial blind spot.

Leverage Compound Interest- A webinar speaker offered the following advice to first gen investors who are just starting out: “Put money in the stock market and don’t try to time it. You’ll do well over time. When there is a market downturn, stocks are on sale.” Compound interest is powerful over time and is an investor’s best friend.

Reflect on Your Successes- Think back on 2021 and write down a few things that went well for you, despite all the challenges associated with COVID-19. Feel proud about these accomplishments. As for resolutions to make changes in your life, inch into new habits and do not try to change a lot of things all at once. In addition, make a running list of lingering projects (e.g., repairs, maintenance) left over from 2021 and new projects for 2022 and keep it in one place.

Expect a Different Tax Bill- Think about all the “moving parts” that took place in your financial life in 2021. A new job, or unemployment, perhaps, or advance child tax credits. All of these will impact 2021 taxes that are due in April. Some people will likely get “caught short” and end up owing tax or getting a smaller refund than they are accustomed to. If someone cannot pay their taxes all at once, the IRS has a program to make payments in installments.

Identify Your Financial Stressors- Think about things that stress you out financially. Then you can make plans to address them and will likely find that you are not alone. Some financial stressors vary by age. A webinar speaker noted that older adults are worried about long-term care costs and outliving their money. Gen Zers are concerned by impacts of climate change on their future. People at all ages are concerned about health care costs, housing decisions, and inflation.

Practice “If/When-Then” Planning- Use this technique to anticipate and rehearse responses to financial (and life) decisions. Simply fill in the blanks: “If/When [X] happens, then I will do [Y].”  Life events to consider for “X” can include a job offer, a promotion, unemployment, divorce, widowhood, retirement, an inheritance, and more.

Document Your Impact- Save thank-you notes from people who you help, congratulatory e-mails or texts, online testimonials, and other evidence that the things that you do are making a difference to others. When you feel “imposter syndrome” at work or that nobody cares about your paid or volunteer efforts, pull these items out and read them.

Check Your FSA- Learn the rules for your flexible spending account (FSA). These plans allow workers to contribute pre-tax income annually for out-of-pocket medical expenses and child/elder care. Many people had elective medical procedures canceled in 2021 or their child care needs changed. Find out how unused funds can be carried over from 2021, and for how long, and adjust 2022 FSA contributions as needed.

This post provides general personal finance information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.


Thursday, January 13, 2022

Financial and Lifestyle Insights- Part 2

 In this post, I continue my discussion of tips from webinars, podcasts, and virtual conferences that I heard during the last quarter of 2021. Below are 13 of my key take-aways:

Avoid Complacency- Take proactive steps to stay on top of your finances. One webinar speaker recommended checking your bank balance daily because daily swipes on a debit card add up and many people have no idea how much money they have at a particular point in time or how much they are spending on “small stuff.”

Consider “UnRetirement”- Think about what you want to do in later life. A long retirement is a terrible thing to waste! Some older adults are choosing to continue working by “job crafting” work that provides flexible schedules and freedom from administrative tasks. Benefits include meaning and purpose, social engagement, mental activity, and creativity.

Mitigate Investment Risk- Create a diversified investment portfolio through all types of market cycles to buffer market volatility and mitigate various types of investment risk. Continue to expect market volatility related to the pandemic as different COVID variants (e.g., Delta, Omicron) emerge and weigh against a global economic recovery.

Schedule Structured Time- Create a framework for yourself and put regular activities (e.g., exercise) on a calendar. This is especially true for people who have had their time use change as a result of COVID-19 or retirement. Schedule activities to create daily time structure. It can help reduce the anxiety associated with feeling adrift and “unmoored.”

Beware Online Investment Advice- Ask questions about “influencers” who provide financial advice on social media. Do they have any credentials? Is the content creator trying to sell something (e.g., some influencers sell online courses)? Does something sound too good to be true? and Can you verify the information presented from reputable sources?

Rethink Your View of AFS- Reconsider how you view alternative financial services (AFS). It is a myth that people use AFS because they don’t know any better. Many Americans live with income volatility, especially from second jobs. Some people use AFS because they live “on the edge” and bills can be paid immediately vs. waiting for a check to clear.

Plan Around Inflation- Consider the impact of inflation on purchasing decisions made in 2022. The U.S. economy recovered faster than many producers expected last year and inflation is expected to remain elevated before moderating. Used car prices had one of the biggest price increases in the core inflation rate, which strips out food and energy. Consumers might consider postponing a car purchase, if they are able to, and “sit out” the current inflationary period.

Think Tax Efficiency- Plan ahead to pay the least amount of taxes legally due on retirement savings. Tax efficiency can have a significant impact on portfolio longevity. The aim is to pay taxes at the lowest possible tax rate and avoid being pushed into higher tax brackets with required minimum distributions (RMDs). Roth IRA conversions can help do this if someone can pay taxes at a lower tax rate today and avoid taxes at a higher tax rate on multiple streams of income later.  

Be or Find a Financial Role Model- Share your financial successes with others and look for role models that look like you. Otherwise, the concept of “building wealth” feels unattainable and people develop a “That is something for rich people” attitude. Authentic role models show others that success is possible. Examples really matter!

Make Plans for Long-Term Care- Consider your “default option.” Do family members accept the obligation to provide care? If not, then what?  Fear of long-term care  expenses often holds older adults back from spending their retirement savings “in case they need it.” A proactive plan (e.g., LTC insurance or self-insurance) can help alleviate this fear.

Consider Your Computer- Windows 11 arrived during 2021 and Windows 10 support will end on October 14, 2025. That gives computer users almost four years to prepare. Most likely, if your computer is 3+ years old, it cannot be updated to Windows 11. There is a PC Health Check app from Microsoft that can tell you if your computer can run Windows 11.

Juice Your Credit Score- Consistently pay bills on time and keep your credit utilization ratio (i.e. credit used divided by total amount of credit available) low. Closing accounts will reduce the amount of credit available and could increase your utilization ratio. Young people cannot get “perfect” scores because they have not used credit for a long enough time.

Reframe “Retirement”-  Young workers will likely respond better to the words “financial freedom” or FI (financial independence) than “retirement.”  One webinar speaker noted that it is time to “retire the word retirement” and instead uses the phrase “F U Money” with young adults, an acronym for “Future You Money” and saving for your future self.

Thursday, January 6, 2022

Financial and Lifestyle Insights - Part 1

 As long-time Money Talk blog readers know, I love to learn by attending webinars and conferences and listening to podcasts.

Then, to make sure that key points stick in my mind, I review my notes and summarize them for readers.

As you set goals for 2022, below are twelve tips from presentations that I heard during the past few months:

Deal With Debt- Do not be ashamed of how you got into debt. Make a plan to dig out from under. Two good options include adding extra money to payments using the snowball (paying extra on smallest debts first) or avalanche (paying extra on highest interest rate debt first) methods. Non-profit credit counseling agency services may also be useful.

Name Your Savings- Identify a purpose for savings/investment dollars such as “new car down payment fund” and “vacation fund” and “financial freedom account.” People who have an emotional attachment to their savings (versus just saving for savings sake) are more likely to delay gratification, set aside savings, and keep their savings intact.

Think 10 Percent- Act upon this verbatim comment from a webinar speaker: “You can generate a lot of wealth by investing ten cents of every dollar you make (i.e., 10% of gross income) over your entire working life.” Example: $5,000 of savings if you earn $50,000. Be the CFO (chief financial officer) of your financial life starting today!

Plan for Later Life- A podcast speaker noted “when you plan for retirement, it is easy to forget that you also need to plan for getting older.” Middle-aged adults and recent retirees have a hard time picturing themselves at age 80 or 90. Topics to consider include housing, solo aging, sources of long-term care (if needed), and the cost of long-term care.

Be Joyful- Spark more joy in your life. A webinar speaker noted that joy “is a feeling of grinning inside.” Speaking specifically about finding happiness in later life, she advised viewers to experiment with what makes them joyful, take risks, and do more joyful activities.

Reduce COVID-19 Risk- “Wear a mask indoors and keep a distance away from others when you do not know their vaccination status,” advised a webinar speaker. This includes many public events where you are near strangers. Even if people are vaccinated, they can still get COVID and be asymptomatic. The virus thrives in cold and dry environments. This speaker also advised reducing COVID risk by staying away from indoor dining and “happy hour” situations.

Learn Key Economic Concepts- Review these four key concepts shared by a webinar speaker: 1. “There is no such thing as a free lunch” (TNSTAAFL), 2. Opportunity cost (the cost of foregone alternative decisions and actions), 3. Supply and demand, and 4. Behavioral finance (people do not always make rational choices).

Think Positively- Remember that “what people think about, they bring about.” Mindset is such a critical component of success with finances and in life. Small actions can lead to big results over time. One of the most important financial concepts that young adults can learn is the awesome power of compound interest and long-term investing.

Live a Healthy Lifestyle- Practice healthy habits (e.g., nutritious diet) that affect how long and how well you age. It is never too late to start living a healthy lifestyle. Try to stave off diabetes, which increases the risk of Alzheimer’s disease. Obesity also increases the risk of dementia. Mental exercise (e.g., games and socializing) help protect aging brains.

Practice Powerful Habits- Adopt habits with the power to improve your life. There are three components of habits: 1. Cues (triggers for habits to start), Routines (habitual behaviors themselves), and Rewards (outcomes that increase motivation). Habits are like compound interest: they don’t feel like much day-to-day but their outcomes add up over time.

Be an Organized Entrepreneur- Follow these four tips shared by a webinar presenter: 1. Do market research, 2. Track business costs, 3. Use a separate bank account, and 4. Set aside 25% to 30% of earnings for Social Security and income taxes. Income taxes need to be paid to the IRS on a “pay as you go” basis in four quarterly installments.

Plan Proactively for Later Life- Beware of future costs for four areas of spending that retirees often underestimate: 1. longevity (you could live to 100!), 2. health care (becomes more expensive with age), 3. home repairs (especially for people who “age in place” and need a new roof, etc.), and 4. income taxes (when required minimum distributions or RMDs start and when a spouse dies and the surviving spouse must file as a single taxpayer).

In my next blog post, I’ll recap some additional tips and insights from presentations that I heard late last year.

This post provides general personal finance information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.


Wednesday, December 29, 2021

21 Financial Events and Trends During 2021

 Between December 11 and 31, I have been tweeting about 21 key financial events that took place during 2021 using the hashtag #21MoneyTrends2021.  

Below is a written summary of these financial milestones and their impact on family finances.

1.     Income and Jobs- An unprecedented 1 in 4 American workers quit jobs in 2021 as people re-evaluated work requirements, personal values, career options, and work-life balance. There were many unfilled jobs and higher labor costs were passed on to consumers.


2.     Supply Chain Shortages- 2021 saw shipping delays for imported merchandise, retailers having difficulty getting inventory, unfinished products waiting for computer chips, and a truck driver shortage which delayed freight deliveries.


3.     Inflation- The U.S. inflation rate from November 2020 to November 2021 was 6.8%, the sharpest increase in the Consumer Price Index in 39 years (since 1982). Energy costs and used cars experienced some of the largest price increases.


4.     Car Prices- Average new vehicle prices reached $41,378 in August and used car prices rose around 40%. There was also reduced availability and limited selection of car features due to limited supply and high demand, the chip shortage, and factory shutdowns.


5.     Homeownership- Record low housing inventory led to a large increase in prices for new and existing homes. Demand for houses was strong due to low interest rates and adjusted housing priorities. Widespread bidding wars were reported nationwide.


6.     Rental Housing- Rental relief funds were distributed slowly at the local level and there were multiple eviction moratoriums. The final moratorium ended on 8/26/21 with a Supreme Court ruling. Some states/cities have moratoriums through dates in 2022.


7.     Insurance- COBRA premium assistance for health insurance was provided under the American Rescue Plan Act and Medicaid enrollment surpassed 80 million. There were also large premium increases nationwide for homeowners and flood insurance.


8.     Credit- Demand for credit returned to pre-pandemic levels. Applications for credit cards rose throughout 2021 and 26.5% of U.S. consumers reported (in October) applying for a credit card in the prior 12 months. There were also increased home equity loans.


9.     Loans- Student loan interest and collection was suspended through 1/31/22 and relief provisions were added for Public Service Loan Forgiveness. Average monthly payments in 2021 were $563, $397, and $450, respectively, for new, used, and leased vehicles.


10. Fraud- Top fraud categories reported by the Federal Trade Commission in a 2021 report were imposter, online, and internet services scams. There were also COVID-19 related scams including those for fake tests, vaccines, charities, and government benefits.


11. Income Taxes- Tax filing was pushed back to May 17 and advance child tax credits were sent to income-eligible families with children from July to December. There was also late notice of tax exemption for up to $10,200 of 2020 unemployment benefits.


12. Investing- 2021 saw increased Treasury Inflation-Protected Securities and Series I U.S. savings bond purchases due to inflation fears, meme stock (e.g., GME) and cryptocurrency trading, and increased environmental, social, and governance (ESG) investing.


13. Stock Market Events- The Dow Jones Industrial Average rose from $30,409 on 12/31/20 through 32kl, 33k, 34k, 35k, and 36k during 2021. There was also increased use of the Robinhood stock trading app and special purpose acquisition companies (SPACS).


14. Cryptocurrencies- Bitcoin traded above 50,000 for the first time in February and its total market value passed $1 trillion. Pipeline hackers were paid in crypto and funds were recovered. New products included non-fungible tokens (NFTs) and Bitcoin IRAs.


15. Retirement Planning- A new “life is short” mindset, especially among the affluent, prompted many workers to retire and required minimum distributions returned for taxpayers age 72+ with tax-deferred plans. More mandatory state run auto-IRAs were set up.


16. Social Security- A 2021 report from Social Security Trustees projected that Social Security can only pay full scheduled benefits until 2033, one year earlier than 2020 projections. Both Social Security and Medicare face long-term financing shortfalls.


17. American Rescue Plan Act- ARPA provided a third round of stimulus for many Americans and expanded child tax credits to be settled up on 2021 tax returns due in 2022. An extra $300 per week of unemployment benefits was extended for 25 weeks.


18. Vaccination Finances- Economic consequences of not being vaccinated emerged throughout the year and include loss of a job, no “sick days” for work absences due to COVID, higher insurance premiums, and lack of access to events requiring vaccination.


19. U.S. Savings Rate- The U.S. savings rate dropped from 19.9% in January 2021 to 6.9% by November 2021. As many Americans got vaccinated, spending on travel and experiences increased and savings declining, putting pressure on supply chain shortages.


20. Financial Literacy Mandates- 26 states and Washington, DC introduced personal finance education mandate bills in 2021 and Ohio became the 10th state in the U.S. to require personal finance education. Advocacy efforts at the state level also increased.


21. Financial Anniversaries- 2021 was the 125th anniversary of the Dow Jones Industrial Average (started in 1896 with 12 companies) the 50th anniversary of the NASDAQ stock exchange, and 20th and 40th anniversaries of major tax laws passed in 2001 and 1981.

For additional information about these financial events and trends, a resource list is available at

This post provides general personal finance information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.


Wednesday, December 22, 2021

The Impact of Indexing: 13 Real World Examples

As we close out 2021 and get ready to welcome 2022, it is a good time to consider the impact of indexes (a.k.a., indices) on our financial lives. Many take effect upon the start of a new year. 

Some indexes adjust annual limits related to financial planning for inflation, some adjust interest earned or paid by consumers, and others measure the performance of something relative to a benchmark indicator.


So what, exactly, is an index? It is a number, either a flat dollar amount or a percentage, that is used to indicate a change in something (e.g., stock market performance) over time. 

Indexes typically reflect changes from a previous year or some other benchmark number. For example, the Consumer Price Index (CPI) measures changes paid by consumers for frequently-purchased retail goods and services.


There are many indexes that affect the financial lives of Americans on a regular basis. Below is a description of 13 common situations:

1.     Social Security Inflation Adjustments- Each year, the Social Security Administration announces inflation-adjusted percentages and numbers. In 2022, beneficiaries will receive a 5.9% cost of living adjustment (COLA). In addition, maximum taxable earnings will increase to $147,000, a quarter of coverage to $1,510, and the earnings limit under full retirement age to $19,560.


2.     Pension COLAs- Pension benefits for some retirees are also indexed for inflation. An example is pensions for federal government workers and military retirees and disabled veterans. Their COLA, like Social Security, is 5.9% (i.e., a $59 increase for every $1,000 of benefits) in 2022. Other pensions have frozen or suspended COLAs for their retirees (e.g., the New Jersey state pension plan).


3.     Income Tax Changes- Each year, income ranges for federal marginal tax brackets are indexed for inflation. The IRS publishes tables with the income ranges for four filing status categories and seven tax rates that currently range from 10% to 37%. Other tax numbers that get indexed are the standard deduction, certain tax credits, and the deduction for business-related and medical mileage.


4.     IRMAA Amounts- Income related monthly adjustment amounts (IRMAA) are extra charges that higher-income households pay for Medicare Part B and Part D premiums. The amount of income that triggers IRMAA is indexed annually for inflation. In 2022, IRMAA will be charged with a modified adjusted gross income above $91,000 (single) and $182,000 (married filing jointly).


5.     Estate and Gift Tax Exemption- The exemption amount in 2022 will be $12.06 million ($12,060,000), up from $11.7 million in 2021, for gifts and deaths that occur in 2022. In addition, the annual exclusion for gifts will increase to $16,000, up from $15,000.


6.     IRA Contribution Limits- The contribution limit changes occasionally based on an inflation-adjusted index formula. In 2022, however, limits remain the same as 2021: $6,000 for savers under age 50 and $7,000 (with a $1,000 catch-up) for those age 50+.


7.     Tax-Deferred Retirement Plan Limits- Like IRAs, maximum plan contributions are indexed for inflation. In 2022, retirement savers in 401(k)/403(b)/457 plans and the federal Thrift Savings Plan (TSP) who are under age 50 can contribute up to $20,500, a $1,000 increase from $19,500 in 2021. Older workers age 50+ can contribute up to $27,000 with a $6,500 catch-up contribution.


8.     Stock Market Performance- Every market trading day, indexes are used to measure the performance of different types of securities such as stocks. Examples include the Standard & Poor’s 500, Wilshire 5000, and Dow Jones Industrial Average (DJIA). The DJIA index closed on 12/31/20 at 30,409.56. During 2021, it rose through 31,000, 32,000, 33,000, 34,000, 35,000, and 36,000.


9.     Index Funds- Index funds are mutual funds that track a stock or bond index. They buy all the securities in an index, or a representative sample of it and provide about the same performance as the index they are tracking, fund expenses. Index funds have been in existence since 1976 when the fund known today as the Vanguard 500 Index Fund was launched. They maintain a significant cost advantage with many expense ratios less than two-tenths of one percent, compared to about 1.5% for average actively managed stock funds. Index funds also have low turnover (how often a fund buys and sells securities), which reduces transaction costs.


10. Pay Increases- It was widely reported that pay increased for many U.S. workers in 2021 as companies struggled to attract and retain workers. Many employers use a percentage of workers’ pay as a base to set raises or an index like the CPI. When pay for new hires increases, there is pressure to boost pay for experienced workers. During “The Great Resignation,” many workers quit jobs for better pay elsewhere.


11. Series I Bonds- With higher inflation in 2021, inflation-indexed I bonds received increased attention from investors. Twice a year- on the anniversary and semi-annual anniversary of a bond’s issue date- an investor’s I Bond is adjusted for inflation based on current inflation rates. From May 1 to October 31, 2021, I bonds earned 3.54%. From November 1 through April 30, 2022, the rate of return is 7.12%. Up to $10,000 of Series I bonds can be purchased electronically and bonds must be held at least 12 months. Another popular inflation-indexed federal government security in 2021 was Treasury Inflation-Indexed Securities (TIPS).


12. Variable-Interest Loans and Credit Cards- Compared with fixed-rate loans that have an interest rate (APR) that does not change, the interest rate on variable rate credit fluctuates according to changes in an underlying index such as the prime rate. The APR is often the designated index rate plus x%. Details about how APRs are set can be found in loan/credit card disclosure documents.


13. P-Fin Index- The TIAA Institute-GFLEC Personal Finance (P-Fin) Index, begun is 2017, measures multiple dimensions of U.S. household financial well-being and result changes over time. A comprehensive report based on survey data is issued annually.


In summary, indexes enable comparisons between, and adjustments to, various key numbers. What indexes will affect you in 2022?

This post provides general personal finance information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

Financial and Lifestyle Insights- Part 3

  In this post, I continue my discussion of tips from webinars, podcasts, and virtual conferences that I heard during the last quarter of 20...