Insights From a Virtual Financial Education Conference

Last month (Financial Literacy Month), I attended a virtual conference for financial educators sponsored by Next Gen Personal Finance. Below are some key take-aways:

The Power of Story-Telling- Personal stories make financial education successful. There were conversations in the meeting chat about teachers sharing their paychecks with students (it is public information anyway!) for transparency and as a “real world” example. Ditto for sharing credit scores.

 

Your Future Self- “Future Me” and “Current Me” are the same exact person. If you are not prioritizing something for “Future Me” today, chances are you are not going to magically change and act on it later. Take action in small steps so you don’t have to make a big change all at once.

 

Binding Contracts- Enter into “binding contracts” that give “Current Me” no choice but to accept better financial decisions that provide for “Future Me.” Examples include automated retirement plan savings and auto-escalation that increases savings contributions when employees receive a raise.

 

Lack of Affordability- Young people, in particular, feel that they are priced out of the economy. As a potential path forward, some try sports betting and prediction markets, where people enter into contracts based on the outcome of future events such as elections and sports.

 

Financial Nihilism- This is the belief that some people hold that traditional investments like stocks are futile and “the system is rigged,” driving them to choose risky strategies in an effort to find a shortcut to prosperity. Think cryptocurrency, sports betting, and online gambling.

 

Public Policy Influences- People make money management decisions as a result of laws passed by legislators and other government policies. Think retirement savings plan contributions, charitable gifting, tax-free investments (including Roth accounts), required minimum distributions, and more.

 

Financial Stressors- Causes of financial stress include increased prices for essentials (food, gas, etc.) and AI taking away jobs. Many Americans also feel that the economy is stacked against them. Financial educators and advisors can help people focus on factors that they can control as an antidote to anxiety.

 

Medicare Advantage Plans- People in Medicare Advantage (Part C) plans who experience problems with covered expenses and participating providers may not be able to purchase a Medigap (supplement) policy if they want to switch back to Original Medicare. Only four guaranteed issue states (CT, MA, NY, ME) allow people to purchase or switch plans without medical underwriting.

 

More About Medicare Advantage- Leading cancer centers like Sloan Kettering and Moffit do not take it. If Medicare Advantage is the only choice for retiree health insurance benefits, people might consider walking away from a flawed earned benefit. Instead, choose a G plan and keep it for the rest of your life. Quote: “Healthy people swear by Medicare Advantage and sick people swear at it.”

This post provides general personal finance or consumer decision-making 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.

 

 

Estate Planning Insights From a Webinar

 

I recently attended a webinar about estate planning that was sponsored by Fidelity Investments. Below are nine key takeaways:

Define Your Goals- Think about your values, the legacy you want to leave for your family or society, and the needs of your heirs. Estate planning is about creating a legacy and making end-of-life health and financial decisions easy for loved ones.

 

Prepare Four Key Documents- Confirm that you have a will, power of attorney, health care proxy, and living will. Everyone has an estate plan because, if you don’t make decisions, you state may make them for you (e.g., dying intestate without a will).

 

Identify Surrogates- Key people named in legal documents are the executor and a guardian for minor children in a will, a power of attorney to make financial decisions on your behalf, a health care proxy to make health care decisions on your behalf, and a trustee, if applicable. Also name back-up (Plan B) contingent surrogates.

 

Avoid Conflicting Documents- Make sure that legal documents are in synch with documents that name beneficiaries or survivors. Beneficiary designations and joint tenancy with right of survivorship will override what is stated in a will.

 

Don’t Tamper with Legal Documents- A speaker noted that even something like un-stapling the pages in a will could be taken as an indication that it was tempered with and slow down the process of settling an estate.

 

Decide What Is Fair- There is no law requiring that assets be divided equally among adult children. People who make wills should consider income disparities and beneficiaries’ use of public funds (e.g., SSI), so as not to disqualify them from receiving benefits.

 

Consider Personal Characteristics- Factors to consider in the selection of surrogates are their age, where they live, how responsible they are, their financial knowledge, and their skill set (e.g., using Excel spreadsheets). Also name “Plan B” contingent surrogates for key roles.

 

Communicate With Surrogates- Discuss your feelings about issues such as end-of-life care. A lot of people never have these discussions. An example was given of someone who does not want feeding tubes while their surrogate was thinking “I’ll leave you on feeding tubes forever.”

 

Learn About Probate- Serving as an executor is a job! Key duties are filing court papers, paying taxes, paying debts, and distributing remaining assets via the terms of a will. The average time that probate takes for an estate between $1million and $5 million is 15.9 months.

 

Review Your Documents- Review estate planning documents every 3-5 years or more frequently as a result of life events (e.g., divorce and widowhood), major tax law changes, moving to a new state, or receiving a large sum of money.

This post provides general personal finance or consumer decision-making 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.

Investment Basics

I recently taught a basic investing class for an audience of older adults. Below are some of the key take-aways related to investment principles, investment characteristics, and later life investing:

Common Investment Concerns- In later life, investment concerns include income generation from investments, decumulation (spending down assets), sequence of return risk (negative returns early in retirement), inheriting unfamiliar investments from others, market volatility, tax implications such as required minimum distributions, possible cognitive decline, and passing securities on to heirs.

 

Saving and Investing- Savings is money held in cash assets such as online bank accounts, money market funds, and CDs. It is generally used for short-term goals and emergencies and also useful for older adults as a “buffer account” for older adults to hedge sequence of returns risk. Investments are used to increase net worth over time and achieve long-term financial goals (generally 5+ years away).

 

Investment Risk- Risk in investing is uncertainty about future investment returns and whether you will lose investment principal or see it grow over time. There are many sources of investment risk including business failure, inflation rates, jobs reports, politics, interest rate changes, currency value changes (international investments), and a “herd mentality” in response to market trends.

 

Risk Reduction Strategies- Investment risk cannot be eliminated but it can be reduced. Three common strategies are diversification (holding a mix of different types of investments), buy and hold (not panicking and selling investments during market downturns), and dollar-cost averaging (investing regular amounts of money or making withdrawals at regular time intervals (e.g., $500 monthly).

 

Asset Allocation- This is the ratio of stocks, bonds, cash, and other asset types in your portfolio and is a primary determinant of investment success according to numerous research studies. Factors that affect asset allocation include investment goals, time horizon, investment risk tolerance, time and skill to manage investments, taxes, and, for older adults, availability of guaranteed income sources.

 

Investment Categories- There are two types of investments: ownership (where you own a piece of something) and loanership (where you lend money to a government entity or corporation). Ownership assets include stock, stock mutual funds and exchange-traded funds (ETFs), real estate, and collectibles. Loanership assets include bonds and bond mutual funds and ETFs.

 

Hybrid Investment- ETFs are a cross between stock (where you are part owner of a company through your shares that trade on a stock exchange) and index mutual funds (mutual funds that track a market index like the S&P 500). ETFs are similar in composition to index-tracking mutual funds but trade like stock on a stock exchange.

 

Older Investors’ Mutual Fund Dilemma- Mutual funds are required by law to pass their earnings on to investors. This can cause a big tax problem for older adults with accounts that have grown for decades. If they sell shares, they face capital gains tax and if they stand pat, they face increasingly larger taxable distributions. There is one escape hatch: donate appreciated securities to charity.

This post provides general personal finance or consumer decision-making 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.

 

America 250- Income Taxes Future

 As I noted in my two previous posts, I taught a new class called Income Taxes: Past, Present, and Future on April 15 as a small part of the nationwide America 250 effort. Previously, I described the past history of income taxes in America and current tax regulations in effect.

 

This post discusses future plans and predictions for income taxes in the future:

 

What We Know for Sure

 

2028- Temporary tax deductions put into effect under the 2025 OBBBA law are scheduled to expire at the end of 2028. This includes the “no tax ons” (for tips and overtime pay), the auto loan interest deduction, the $1,000 government “seed money” for newborn (in 2025-2028) children, and the bonus senior deduction for income-qualified older adults.

 

2029- The $40,000 state and local tax (SALT) deduction cap, enacted under OBBBA, applies to the 2025 through 2029 tax years. It will expire at the end of 2029 with the cap reverting to $10,000 for the 2030 tax year.

 

Big Concern

 

Wars have impacted income taxes throughout U.S. history. The first income tax (later repealed) began in 1862 as the Civil War was underway. Income taxes rose significantly in 1918 to pay for expenses incurred during World War I (top tax rate of 73%) and in 1944 to fund World War II (top rate of 94%). 

Since the U.S. is now involved in heavy warfare in the Middle East, many are wondering if a tax increase to pay for it will soon be implemented as was done previously. Mounting national debt and income inequality are other key factors that could impact future income taxes.

 

Future Predictions

 

What could happen in the future? Nobody knows for sure but the following ideas have been floated:

 

§  New tax laws (almost a given)

§  Higher taxes on wealthy taxpayers

§  Higher taxes on capital gains which were once taxed at ordinary income tax rates

§  Changes to the “stepped up basis” for inherited securities upon an account owners death

§  Tax on unrealized capital gains

§  Increased IRS reporting and enforcement

§  Closing tax loopholes (e.g., backdoor Roth IRAs)

§  Expanded retirement savings incentives

 

Only time will tell how income taxes will evolve. Stay up to date with blogs, podcasts, and other reputable information sources to learn about future tax law changes and how they will affect you.

This post provides general personal finance or consumer decision-making 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.

 

America 250- Income Taxes Present

 

As I noted in last week’s post, we are in the final stretch of 2025 income tax season and I am teaching a new class called Income Taxes: Past, Present, and Future on April 15 as a small part of the nationwide America 250 effort. Previously, I described past history of income taxes in America.

This post discusses class highlights relating to current income tax laws and policies.

 

Gross and Adjusted Gross Income (AGI)- Under current law, taxpayers start out with their gross (total) income from sources such as wages, dividends, taxable interest, business income, alimony received, and required minimum distributions from retirement plans. Adjustments to income, often referred to as “above the line deductions,” include educator expenses, student loan interest, 50% of self-employment tax, health insurance for self-employed workers, and retirement plan contributions.

 

Individual Income Tax Rates- The U.S. federal income tax system uses progressive tax rates, meaning higher levels of income are taxed at higher percentages. As of 2026, the tax brackets range from 10% to 37%. Each rate applies only to income within its bracket, so taxpayers pay gradually higher rates as their taxable income increases.

 

Long-Term Capital Gains- Long-term capital gains are taxed at preferential rates of 0%, 15%, or 20%, depending on taxable income and tax filing status. Long-term capital gains are calculated by subtracting the cost basis (usually the initial purchase price plus additional deposits such as reinvested dividends) from the selling price of an asset held longer than one year.

 

Standard Deduction- The standard deduction is a fixed amount that taxpayers can subtract from their AGI before calculating federal income tax. It reduces taxable income without requiring taxpayers to itemize individual deductions. For 2025 returns filed in 2026, the standard deduction is $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household. Taxpayers age 65 or older or blind may claim an additional standard deduction amount.

 

Senior Tax Deductions- There is an additional standard deduction available to taxpayers age 65 or older that reduces taxable income beyond the regular standard deduction. For 2025 tax returns, the extra deduction is $2,000 for single filers and $1,600 per eligible spouse in married couples filing jointly. The bonus senior deduction under the OBBBA tax bill is an additional temporary increase to the standard deduction designed to reduce taxable income for income-eligible older adults.

 

Required Minimum Distributions (RMDs)- RMDs originated with the creation of individual retirement accounts in 1974. They are the minimum amounts that retirees must withdraw each year from most tax-deferred retirement accounts, such as traditional IRAs and employer savings plans. Under the SECURE 2.0 Act, RMDs generally begin at age 73. The required withdrawal is calculated using IRS life-expectancy tables based on age and account balance at the end of the previous year.