Thursday, February 18, 2021

Still More Interesting Insights and Timely Tips


As I noted in two previous posts, I access many webinars (and podcasts) these days to learn new information and connect with others while staying safe at home. I also find it useful to prepare summaries of my key take-aways, both as a reference for myself with future financial education projects and to pass along to Money Talk readers.

Below is an eclectic summary of seven key take-aways that I recently wrote down in my personal learning journal:

¨      Older Adult Spending- Four categories were identified in research: Home Spenders (60% or more of budget on housing), Health Spenders (20% or more on health care), Discretionary Spenders (25% or more on gifts, entertainment, and contributions), and Typical Spenders (everyone else). 

    The percentage of Health Spenders increases with age and couples are more likely to be discretionary spenders than singles. Discretionary spenders also have the highest median incomes and are more likely to delay Social Security benefits. Spending patterns evolve over time and are more diverse than what is typically reported in stories about older adults.

¨      Income Tax Filing Tips- People generally cannot itemize tax deductions anymore unless they have some type of tax planning strategy such as “bunching” deductions or making large charitable gifts. On 2020 tax returns, non-itemizing single filers or married couples filing jointly can take an “above the line” (before adjusted gross income) tax deduction for up to $300 in cash donations to qualified charities. In addition, more Americans may qualify to claim the earned income tax credit (EITC) due to income losses in 2020. As always, unemployment benefits, which many Americans received in 2020, are fully taxable on federal tax returns.

¨      “Settling Up” Recovery Rebates (Stimulus)- To make this calculation, taxpayers need their 1444 notice; i.e., the letter signed by President Trump with the amount of their economic impact payment. Unfortunately, people were not told to save this notice and many probably lost or destroyed it. In this case, review bank statements to look for evidence of a deposit from one or two rounds of stimulus payments. There is no look-up tool. Taxpayers with a child born in 2020 will receive an additional $500 for the child. If the calculated amount for a recovery rebate is less than the stimulus payment(s) previously received, taxpayers get to keep the difference.

¨      Healthy Living Decisions- Studies indicate that about 80% of heart disease, stroke, and diabetes cases and 40% of cancers can be prevented with lifestyle changes. After age 50, almost all of the aging process is a result of personal choices that people make where, before age 50, genetics is a key factor. Routines help make positive changes stick. 

      One of the best things that people can do to increase their well-being is to get outside more. Before COVID-19, people spent 93% of their time indoors: 86% at home and 7% in cars. There is “awe” in nature and a specialty field known as eco-medicine (a.k.a., eco-therapy). Studies have shown that outdoor activities (e.g., walking and gardening) have theraputic effects by reducing anxiety and boosting immunity.

¨      Definitions of Success- Two prominent financial planners, Dave Yeske and Michael Kitces, exchanged thoughts about what constitutes “success” for financial planning practitioners. Their insights can also apply to people from all walks of life. One definition of success is that people say to you, for any number of reasons, “My life is better because you are in it.” Another is when people create some type of legacy (e.g., a business, creative works, family traditions, charitable endowments) that can carry on without them.

¨      Smart Assistant Devices- “Assistants” such as Amazon Alexa, Apple Siri, Google Assistant, Microsoft Cortana, and Samsung Bixby do not understand a word that people say. Rather, words are converted to text and analyzed, using artificial intelligence, which enables them to perform tasks and answer questions. Before buying a virtual assistant, think about what you will use it for.

    Commonly-performed tasks are answering questions, playing music, getting personally tailored recommendations, placing phone calls, telling jokes, turning lights on and off, shopping, playing podcasts, health status monitoring, and setting reminders.

¨      Small Steps Matter- Do what you can do right now to move yourself toward your goals. Actions that you take today with respect to your finances can help you live the lifestyle that you want in the future. Living a lavish lifestyle that you can’t afford will leave you broke. Look for examples of people who made smart financial decisions and learn from their success stories. People want to see people who look like them do great things.

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