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.

 

 

Highlights of Recent Webinars: First Quarter 2024

 

Every quarter, I like to review and summarize my notes from webinars I attended during the last three months. Below are some interesting tidbits from recent programs that I attended:

Future Self Thinking- Many people often think of their “future self” (who they will be decades in the future) as a stranger. As a result, they don’t think about the consequences of doing something now because their actions are affecting another person rather than themselves personally.

 

Required Minimum Distributions (RMDs)- Only IRAs and 403(b) plans (for school and non-profit sector employees) can be aggregated to calculate RMDs. All other tax-deferred plans, like 401(k)s and the thrift savings plan (TSP), must have RMDs calculated separately.

 

Saving Money on College Expenses- Suggested strategies include going to community college first, living at home with parents, going to a public college in your home state, applying for scholarships, buying used textbooks or renting textbooks, and getting a job at a college.

 

“Loud Budgeting”- This is where people (mostly young adults) post videos, primarily on TikTok, about ways they are reducing expenses and saving money. In many cases, they are repackaging “tried and true” strategies from the past but are doing so to appeal to a new generation.

 

ChatGPT- This program, developed by Open AI, is the most popular large learning model (LLM). It is trained on a massive data set of text, pulls information from multiple sources, and consolidates it to create brand new content in response to prompts by users.

 

Financial Trauma- The textbook definition is any negative experience that affects how people handle money (e.g., saving and credit). The trauma can be “little t” (relatively minor) or “Big T” (a major event). Financial advisors should always remember that people are the expert of their life.

 

Roth Conversions- It is best to move money from a pre-tax account to a Roth account in low-taxable income years, during stock market downturns, and/or in small increments over time. When you do a Roth conversion, you are front-loading taxes to avoid taxes at higher rates later.

 

A Dollar Too Much- RMDs often push older taxpayers into a higher marginal tax bracket. Just one extra dollar in income can trigger tax on Social Security benefits, higher Medicare premiums, and the 3.8% net investment income tax.

 

IRMAA Medicare Surcharge- The income-related monthly adjustment amount (IRMAA) is an extra amount that high-earning retirees pay for Medicare coverage. Currently about 7% of retirees pay IRMAA and there are five IRMAA income thresholds beyond the standard Medicare premium. IRMAA is based on income earned two years earlier (e.g., 2022 for 2024) and can be avoided by lowering adjusted gross income or making an appeal to Medicare based on life events.

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.