According to a recent UBS poll, 60% of women surveyed let their spouses and partners handle their finances. This is not uncommon, even among wealthy couples. The gradual shifting of financial responsibility and knowledge to one person often begins early in the relationship. But if the couple goes through divorce or the family financial manager dies or becomes physically or mentally incapacitated, their spouse or partner will have to scramble to figure out where their money is, how it’s being invested, and how debts are being paid while they’re also dealing with a legal or healthcare crisis. That’s why it’s important for couples to discuss these issues candidly and transparently, especially before retirement, so that either spouse or partner gains the knowledge they need to step in and manage their finances should a crisis occur. If this task is too challenging or contentious for a couple to do on their own, they should consider hiring a fee-only fiduciary financial planner to help organize and document their income, debts, savings and investments and serve as their impartial educator and mediator. 

For further information: 

• Next Avenue, Money and Your Honey: How to Schedule Personal Finance Dates 
• Terrysavage.com, Personal Financial Organizer

Right now, millions of high school seniors are receiving acceptance letters and financial aid offers from colleges and universities. These offers usually include a combination of merit-based scholarships and grants, student loans, work study grants, and private parent loans. In past years, it was challenging to convince many schools to increase this aid. But according to author and college planning expert Ron Lieber, with the COVID-19 crisis reducing the number of applicants to most schools, parents are now in a better position to diplomatically ask for better offers. But this can be a confusing process. Parents need to negotiate scholarships and grants with the Admissions office, and loans and work study grants with the Financial Aid office. When meeting with these officials, parents should feel free to ask them to match or exceed the more generous financial aid offers their children have received from other schools. Even after students have accepted an offer, they should seek additional money by applying online for a share of the billions of dollars available through thousands of private grants and scholarships. Even with all this aid, parents’ share of their children’s annual college costs will still be significant. They should try to borrow as little as possible, particularly through private parent loans whose payback periods could last a decade or more. This is particularly important for parents who are approaching retirement age, since some of their Social Security benefits may be garnished if they’re unable to make monthly payments on their own. For parents with younger children, contributing to a 529 College Savings Plan as early as possible can give them a head start on building a reserve to help pay for future educational costs. Grandparents, too, can help by contributing to these plans or giving up to $15,000 a year per child without gift tax implications. The most important thing is to not let your fear about your children’s future or your guilt about what you’re able to afford keep you from making the right financial decisions.

For further research: 

• Terrysavage.com, College Money Negotiations
• Next Avenue, How Grandparents Can Help Pay for College
• Scholarships.com: Search over three million scholarship and grants.
• Scholarsnapp.org: This free service makes it easy for students to populate scholarship applications with information from their College Board account.
• Payingforcollegeresources.com: Use this worksheet to enter, track and compare financial offers from different schools.
• SwiftStudent: This free online service can help you write a financial aid appeal letter.
• Ron Lieber, The Price You Pay for College

As Richard says, “It’s a doozy of a tax year.” The IRS will be way behind in issuing refunds, yet the deadline for filing your 2020 federal tax returns is still April 15. For most people, it will be filing as usual, but there are situations where special attention may be required. If you earned $75,000 or less ($150,000 as a couple) in 2020 and should have received a $1,200 government stimulus payment last year and a $600 payment in January but didn’t, you can claim these missing payments when you file your 2020 federal tax return. Even if you made no income last year, you still need to file if you want to claim these missing payments. If you donated to charity last year, you can deduct up to $300 in cash contributions even if you can’t normally itemize deductions. If you’re under age 59½ and took advantage of the CARES Act provision to take up to $100,000 out of your Traditional IRA or 401(k) account without early withdrawal penalties, you’ll still have to pay taxes on this withdrawal. But if you fully reinvest the amount you withdrew within the next three years, you’ll be able to request a refund for the taxes you paid. If you were one of the millions of Americans who received state unemployment benefits last year, you’ll have to pay taxes on those benefits. Unfortunately, if you were working for your employer at home last year, you won’t be able to deduct any money you paid for furniture, equipment or other job-related expenses. However, if your income declined significantly from previous years, you may qualify for tax relief. And if you’re expecting a refund or your missing stimulus payments, make sure you file electronically and allow the IRS to deposit this money into your bank account. Otherwise, you may have to wait months to receive the money you’re owed.

For more information: 

• Terrysavage.com: Free Tax Filing Help 
• IRS.gov/freefile: Provides links to IRS partner sites that let you prepare and file your 2020 returns for free (if you qualify) 
• The IRS VITA program: Offers free tax return preparation for qualified individuals

In January, news from Wall Street was dominated by the GameStop saga. To put it simply, a group of individual investors belonging to a social media forum called WallStreetBets started buying shares of GameStop, a moribund online videogame retailer. This speculation drove the price up from $20 to nearly $500 in three weeks. The WallStreetBets clique pitched a Main Street versus Wall Street story, claiming that they were trying to punish hedge funds, which were making huge bets that the price of GameStop would go down. For a time this worked. Early investors became stock multimillionaires, and some hedge funds were on the verge of bankruptcy before the madness petered out and GameStop lost more half of its value by the first week of February. While the hedge funds ended up okay, individual investors who bought shares right before the bottom fell out were the biggest losers. This saga created a clamoring for regulators to step in and stop this kind of market manipulation, and focused industry ire on Robinhood, a popular, no-cost trading app that many of the WallStreetBets crowd used to buy GameStop shares. While this story is fun to read about, there’s no need for most retirement investors to lose sleep over it. The market is heavily regulated. Over the long term prices reflect what’s going on in the economy, and are rarely impacted by price gyrations among a few small companies. Investors who own a diversified portfolio of stock and bond mutual funds in their retirement accounts have even less to worry about, since these funds hold many different kinds of securities, so if the price of one goes down it will be offset by the rising price of another. If you do want to dabble in individual stocks, research each stock first to see if its current price reflects the company’s real value. If you buy shares, set a target price at which you’ll sell out and stick with it. That way, you won’t get stung when the bubble bursts.

For further information: 

• Next Avenue: What Does the GameStop Madness Mean for Your Retirement Funds?
• Terrysavage.com: GameStop—Revenge of the Nerds

Note: The shownotes for this episode update and clarify some of the statements originally made in the podcast.  

According to the Social Security Administration, the number of retirees who drew Social Security outside the U.S. jumped 40% from 2007 to 2017. While the COVID-19 pandemic has put the brakes on Americans’ plans to more aboard, once the crisis is over there’s likely to be an explosion of retirees choosing to live outside the U.S. part of the year or permanently.

While it’s fun to dream about spending your retirement years in Europe or in a tropical paradise, there are many issues you need to think about before making such a life-changing decision. Your Medicare plan may or may not provide coverage in foreign countries, so it might be necessary to purchase supplementary medical insurance. Even if the nation you’re considering offers free or low-cost government-subsidized healthcare, you may not be eligible for it as a non-citizen. And the quality of physicians and facilities in that country may be inferior to those in the U.S.

If you plan to earn income while living aboard, you may have to pay taxes to both your adopted country and to the U.S. Banks and financial institutions in developing nations may charge higher fees and have lax standards for protecting against fraud.

In terms of protecting your financial interests in the U.S., most countries now allow ex-pats to have dual citizenship, although it could take several years for you to become a citizen in your adopted home. And, if the nation you’re emigrating to requires you to give up your U.S. citizenship, you’ll be taxed on the value of the remaining assets in your estate.

That’s why if you’re still committed to retiring abroad after the pandemic subsides, it’s critical to thoroughly research the financial, healthcare, and lifestyle pros and cons of the countries you’re considering. And even if you find what seems to be the perfect location, consider renting first before you make a permanent investment in your new home.

For further research:

• Next Avenue,  How to Choose Your Ideal Place to Retire Abroad
• Internationaliving.com: Provides rankings of the best places in the world to retire.
• Numbeo.com: A crowdsourcing site providing cost-of-living information for most countries.
• Taxesforexpats.com: Tax preparation services and advice for those living aboard.

According to research from Fidelity Investments, retirees should expect to pay $295,000 for healthcare during their retirement years, and this doesn’t include the costs of long-term care. Guest speaker and author Philip Moeller says that while retirees can find many ways to lower their healthcare costs, it takes a lot of time and effort.

A major decision facing those turning 65 is whether to choose Traditional Medicare plus optional prescription drug and supplemental insurance or sign up for an all-inclusive Medicare Advantage plan. While premiums for Medicare Advantage may be lower, your choice of doctors, facilities and prescription drugs may be limited and out-of- pocket expenses could be higher.

People who aren’t committed to seeing specific physicians in person may save money by using telemedicine providers. If your physician is recommending medical procedures, get a cost estimate from your healthcare insurance provider, or use web sites that offer comparison pricing for these procedures.

For prescription drugs, don’t automatically have your physician send your prescription to a local pharmacy. Bring it there yourself and ask the pharmacist if lower-cost generic alternatives or discounts are available. Prescription drug price comparison web sites can help you find lower prices at local pharmacies and national buying clubs. You may also want to ask your physician to help you legally purchase prescription drugs from Canada, where prices are often significantly lower.

If you’re still working and your employer offers a Health Savings Account (HSA), try to take full advantage of this option. Contributions are pre-tax, and all withdrawals you make for qualified healthcare purposes are tax-free. While you can’t contribute to your HSA once you’re enrolled in Medicare, you can use the balance in your account to pay for most Medicare premiums, co-pays and other out-of-pocket expenses.

Finally, if these decisions seem overwhelming, look for help. Your state offers free counseling services to help evaluate your various Medicare options. If you’re friends with a retired nurse or doctor, see if they’re willing to serve as your healthcare advocate—and pay them for their time. And make sure you fill out a healthcare proxy form that gives someone you trust the legal authority to make healthcare decisions for you should you become physically or mentally capacitated.

For further research: 

• State Health Insurance Assistance Programs (SHIP) National Network: Find free Medicare counselors in your state
• Doctor on Demand and Teladoc: Online telemedicine sites and apps
• Rally and Healthcare Bluebook: These sites provide comparison pricing information for healthcare providers and medical procedures in your area
• GoodRx.com: Find the lowest local prices for prescription drugs
• Philip Moeller, Get What's Yours for Health Care: How to Get the Best Care at the Right Price

The start of a new year is always a good time to take a closer look at where you are financially and figure out whether certain changes may help you boost your retirement readiness. While there are many things you can do, here are four steps you might want to move to the top of your "to consider" list.

First, look over your year end investment statements to see if your portfolio needs rebalancing. Even with the economic havoc wreaked by the COVID-19 pandemic, the stock market generated double-digit returns last year. This may have boosted the stock allocation in your retirement portfolio higher than you originally intended. To restore your targeted asset allocation, consider selling some stocks and reinvesting the proceeds into bonds or cash to get your portfolio back in balance. This is something you should do at least once a year, and even more often if you can.

Second, think about converting some or all of your Traditional IRA assets to a Roth IRA. Even though you’ll have to pay taxes on the converted amount, once this money is in your Roth IRA and you’ve held the account for five years, you’ll never have to pay taxes on any withdrawals you make after age 59½. And, unlike with Traditional IRA and 401(k) plans, you’ll never have to take required minimum distributions. The earlier you complete the conversion, the longer you’ll benefit from the Roth’s tax-free compounding.

Third, if you have dividend-paying stocks in your taxable investment accounts, consider using some of this dividend income to help pay for everyday expenses. Since most dividends are taxed as ordinary income whether you spend them or reinvest them, thinking of them as an additional source of annual income may make it easier to rationalize spending them. More importantly, if spending dividends in the years leading to your retirement can help you delay taking Social Security or tapping into the principal of your investments, then you’ll boost the odds of having more money to live on when you’re ready to retire.

Finally, if you’re approaching retirement and are having trouble figuring out these complex financial issues on your own, now may be an ideal time to seek out a fee-only fiduciary financial planner. These professionals can conduct a comprehensive analysis of your investments, projected Social Security and pension payments and your estimated income needs to help you determine if it makes sense to implement any of these new year’s financial resolutions or other strategies to help smooth your path toward a more comfortable retirement.

For further research:

Next Avenue, 3 Smart Money Resolutions for 2021

If you and your spouse or partner make less than $150,000 (if filing jointly) or $75,000 (if filing as individuals), you should have received an economic stimulus payment ($2,400 for couples, $1,200 for individuals) that was part of last year’s COVID-19 relief legislation. In January of 2021, you should also have received an additional payment ($600 for individuals/$1,200 for couples) as part of the new relief legislation passed in December.

If you didn’t receive your payment, you have several options. The IRS Get My Payment tool will tell you whether the IRS sent you these payments and in what form–a check, a debit card, or a direct deposit to your bank. If the IRS says it’s sending your second payment as a check, you can see when it’s being sent using the U.S. Post Office’s Informed Delivery service, which will provide you with digital images of the exterior, address side of all mail sent to you.

If you never received your payments, there may be several reasons. A check or debit card may have been set to an outdated or wrong address. Or, if in the past you filed your tax return electronically and used a now-closed bank account for online payment or refund transactions, the IRS may have tried to deposit your checks to that account and failed.

If these or other situations left you without stimulus payments or the full amount you were entitled to, hope is not lost. You can claim a tax credit for these amounts on your 2020 Form 1040 or 1040-SR. These tax forms will include a Recovery Rebate worksheet you can use to determine how much of a tax credit you’re eligible for. You’ll enter the amount on line 30. Even if your income level doesn’t require you to fill a 2020 federal tax return, file it anyway if only to claim the stimulus amount you deserve.

For further research:

Terrysavage.com, Get the Original Stimulus AND the New One!

Many people who are approaching or in retirement are asking similar questions: What value do I offer if I no longer have a full-time job? What will I do all day? Can I afford to live the way I want do? In his new book, Shifting Gears: 50 Baby Boomers Share Their Meaningful Journeys in Retirement, author and retiree Richard Haiduck offers valuable insights into the aspirations and concerns of those who are experiencing the joys and challenges of their golden years. Most don’t plan on kicking back and doing nothing. By desire or financial necessity, many are working part-time or joining the gig economy. They continue to support the causes they believe in, through direct action and charitable giving. They’re starting new hobbies, speaking their minds, and pushing back against society’s outdated attitudes about older Americans. For many, the pandemic has not changed their retirement lifestyle at all.

The biggest worry among most of Haiduck’s interviewees is whether they’ll have enough money to live the way they want to during a retirement that could last decades. Those who are approaching retirement facing this financial uncertainty should consider working longer, delaying taking Social Security until age 70, boosting contributions to their retirement plans, and envisioning how they want to live when they retire. Many could also benefit by meeting with a fee-only fiduciary financial planner who can help them gain a full understanding of their projected income and expenses during retirement and what they may need to do now to shift as smoothly as possible into their life after work.

For further research:

Next Avenue, Shifting Gears to Retirement: The Joys and the Challenges

When you’re reviewing quarterly and year-end performance in your 401(k) and brokerage account statements, it’s important to consider how much you may be paying in annual fees (expense ratios) to mutual funds and commissions to brokers. These combined costs could be as high as 2% per year. While this may seem small, over several decades of investing, these costs could potentially reduce the value of your retirement nest egg by tens of thousands of dollars. And if you’re retired and now invest mostly in low-yielding bond funds, these costs may actually wipe out the small amount of income these funds generate each year.  

It’s up to you to research how much you’re paying in investment costs, and whether less expensive options are available. For example, most mutual funds come in various share classes, each of which have different expense ratios. Shares of funds you purchase on your own may have significantly lower expense ratios than different share classes of the same funds you purchase through a broker, which may add on as much as 1% in additional “marketing” fees to pay brokerage commissions. Not to mention added “back-end” sales charges if you sell shares before a certain time period has elapsed.  

If you invest on your own and you’re not a strong believer in the ability of mutual fund managers to make the best investing decisions, consider investing in index funds and ETFs that offer broadly diversified exposure to different segments of the market at a fraction of the cost of actively managed funds.  

If you’re working with a broker, ask them to disclose the total annual costs of the funds they’ve sold you. If these costs seem too high, ask them to recommend cheaper alternatives that have similar characteristics and track records—but make sure you won’t have to pay back-end sales charges if you make the switch. If your broker doesn’t take your cost concerns seriously, consider firing them and hiring a fee-only fiduciary investment adviser to manage your portfolio. These professionals charge you an annual fee (which they will fully disclose) and never accept commissions from fund companies. In exchange, they’ll be able to tell you exactly how much you’re currently paying in mutual fund fees and recommend lower-cost options that align with your investment objectives and risk tolerance.   

For further research:  

• NextAvenue, How Did Your Investments Really Do in 2020? 
• TerrySavage.com, Fund Fees Cost Your Fortune

The COVID-19 pandemic has highlighted the importance of making decisions that will make it easier for others to carry out your wishes should you become physically or mentally capacitated or when you pass on. At the very least, you should assign someone you trust to serve as your health care proxy should you no longer be able to make healthcare decisions on your own. You should also formalize a living will that documents whether you want or don’t want life-prolonging treatments at the end of your life. Also consider assigning durable financial power of attorney to someone you trust to manage your finances if you’re no longer able to.

To help ensure that you, rather than a court, determines how your assets in your estate will be distributed to your heirs, make sure that you’ve completed a will that states your wishes and names an executor. Review and update your will if circumstances change. To avoid probate, consider setting up a revocable living trust and funding it with high-value assets such as your home and taxable investment accounts. You’ll need to retitle these assets in the name of the Trust. You won’t, however, need to retitle your IRA accounts and life insurance policies, since these assets will go directly to your assigned beneficiaries.

It’s highly recommended that you hire an experienced attorney to legally formalize these decisions. Since attorneys are expensive, consider working with a fee-only financial planner who can turn your decisions into an estate planning action plan at a relatively lower cost. You can then give this plan to your attorney to execute the legal requirements.

For further research:

• Next Avenue, Estate Planning 101
• TerrySavage.com, Preparing for Your Own Mortality

With the U.S. presidential election results finally settled, many investors are wondering how a Biden presidency may affect their portfolios next year and beyond. If the special elections in Georgia in January restore control of the Senate to the Democrats, there is a possibility that President Biden may fulfill his campaign promise to raise capital gains taxes and income and estate taxes on wealthy Americans. But the chances of all Democrats falling in line to support these hikes is unlikely while the economy is still struggling. Of far greater importance is the timing and extent of the next round of economic stimulus. Congress and the new president will need to quickly agree on a package that provides relief for the millions of Americans still out of work and for small businesses that are struggling to survive. Wall Street is already betting that the widespread availability of COVID-19 vaccinations by spring, in combination with stimulus and low interest rates, will accelerate economic growth and job creation in the second half of 2021, which is why the stock market has hit record highs recently. Yet, with so much uncertainty in the air, you should think carefully before making any major end-of-year investment decisions or discuss your concerns with an experienced fiduciary financial advisor before you act. 

For years, many financial professionals have suggested that most retirees can afford to withdraw up to 4% of their retirement assets each year with very low risk of their money running out in less than 25-30 years. But this “4% rule” was created at a time when interest rates were much higher than they are today. Back then, many investors with conservative portfolios could depend more on bond income to replenish these withdrawals. Now, retirees have to allocate more money to stocks to help make up for today’s historically low bond yields. In any case, there is no “hard and fast” rule on how much money you can or should withdraw. The actual amount needs to be based on your retirement age, life expectancy, lifestyle and other sources of income. Other factors, such as whether you have long-term care insurance or whether you’re hoping to leave some of your retirement money to your heirs or favorite charities also need to be considered. If you’re struggling to deal with these complex issues, consider seeking the advice of a fee-only fiduciary financial planner, who can help you understand different retirement cashflow scenarios and recommend a strategy that may increase the chances of your retirement nest egg lasting as long as you want it to.

It’s important for your grandchildren to start building their “money-awareness” at an early age. Since schools generally don’t teach financial literacy and parents often don’t have the time or energy to discuss these matters with their kids, you can play a key role in helping your grandchildren become smarter about money. With younger children, help them understand how much of their parents’ paychecks are spent on food, clothes, mortgage payments and home repairs and taxes. Visit online retailers with them so they can see the costs of the clothes, books and toys they own or want for the holidays. Give them odd jobs that put extra money in their pockets and help them figure out how much of their earnings to reserve for saving, spending, investing and charity. For teenagers and college students, help them learn how to keep debit card spending from spiraling out of control and avoid getting trapped in credit card debt. This is also a good time to teach them the basics of investing by offering inexpensive ways for them to enter the stock market.

A variety of online tools are available to help your grandchildren become smarter money managers. They include:

• Acorns.com lets you set up investment accounts for your grandchildren that can be partially funded with spare change from family purchases.
• Stockpile.com offers an inexpensive way for your grandchildren to learn about investing by letting them purchase fractional shares of stocks and ETFs.
• Visa Buxx debit cards allow parents and grandparents to load money onto prepaid debit cards for their high school and college kids and monitor their spending activities.
• Moneysavvy.com offers a variety of piggy banks with separate “save,” “invest,” “spend” and “donate” chambers.

Why are you seeing an endless stream of commercials for Medicare providers? Because right now it’s the annual Medicare enrollment period, which ends on December 7. If you haven’t signed up for Medicare yet, you can do so several months before you turn 65 so your coverage starts on your birthday. If you’re 65 or older and have been laid off from your job and no longer have healthcare coverage, you can sign up for Medicare right away. Once you’ve enrolled, you can change your coverage during this annual fall enrollment period. The most common and puzzling decision Medicare enrollees face is what kind of coverage to get. They can enroll in standard Medicare (Part A and B) and add prescription drug (Part D) and supplemental coverage (known as Medigap). Or they can choose a comprehensive Medicare Advantage plan offered by private insurers that covers Medicare services and prescriptions. While Medicare Advantage plans often have cheaper monthly premiums, they can incur higher out-of-pocket costs and limit your choice of physicians and hospitals. Confused? Fortunately, there are resources you can use to use to compare your options and get human assistance. These include:

• Shiptacenter.org can help you find a local, free State Health Insurance Program (SHIP) representative who can guide you through the Medicare decision-making process.
• Medicare.gov, the official Medicare web site, lets you compare costs and coverage for standard Medicare, Medigap and Medicare Advantage options.
• Ehealth.medicare.com can provide a list of Medicare Advantage providers in your area.
• Askclaire.com, is a popular a free, unbiased Medicare education resource.