The Case for Women Working Past 65

The Case for Women Working Past 65

Why striving to stay in the workforce a little longer may make financial sense.

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The median retirement age for an American woman is 62. The Federal Reserve says so in its most recent Survey of Household Economics and Decisionmaking (2017). Sixty-two, of course, is the age when seniors first become eligible for Social Security retirement benefits. This factoid seems to convey a message: a fair amount of American women are retiring and claiming Social Security as soon as they can.1

 

What if more women worked into their mid-sixties? Could that benefit them, financially? While health issues and caregiving demands sometimes force women to retire early, it appears many women are willing to stay on the job longer. Fifty-three percent of the women surveyed in a new Transamerica Center for Retirement Studies poll on retirement said that they planned to work past age 65.2

 

Staying in the workforce longer may improve a woman’s retirement prospects. If that seems paradoxical, consider the following positives that could result from working past 65.

 

More years at work leaves fewer years of retirement to fund. Many women are worried about whether they have saved enough for the future. Two or three more years of income from work means two or three years of not having to draw down retirement savings.

 

Retirement accounts have additional time to grow and compound. Tax-deferred compounding is one of the greatest components of wealth building. The longer a tax-deferred retirement account has existed, the more compounding counts.

 

Suppose a woman directs $500 a month into such a tax-favored account for decades, with the investments returning 7% a year. For simplicity’s sake, we will say that she starts with an initial contribution of $1,000 at age 25. Thirty-seven years later, she is 62 years old, and that retirement account contains $974,278.3

 

If she lets it grow and compound for just one more year, she is looking at $1,048,445. Two more years? $1,127,837. If she retires at age 65 after 40 years of contributions and compounded annual growth, the account will contain $1,212,785. By waiting just three years longer, she leaves work with a retirement account that is 24.4% larger than it was when she was 62.3

 

A longer career also offers a chance to improve Social Security benefit calculations. Social Security figures retirement benefits according to a formula. The prime factor in that formula is a worker’s average indexed monthly earnings, or AIME. AIME is calculated based on that worker’s 35 highest-earning years. But what if a woman stays in the workforce for less than 35 years?4

 

Some women interrupt their careers to raise children or care for family members or relatives. This is certainly work, but it does not factor into the AIME calculation. If a woman’s work record shows fewer than 35 years of taxable income, years without taxable income are counted as zeros. So, if a woman has only earned taxable income in 29 years of her life, six zero-income years are included in the AIME calculation, thereby dragging down the AIME. By staying at the office longer, a woman can replace one or more of those zeros with one or more years of taxable income.4

 

In addition, waiting to claim Social Security benefits after age 62 also results in larger monthly Social Security payments. A woman’s monthly Social Security benefit will grow by approximately 8% for each year she delays filing for her own retirement benefits. This applies until age 70.4  

Working longer might help a woman address major retirement concerns. It is an option worth considering, and its potential financial benefits are worth exploring.

Download our Women & Wealth Guide here!

 

Gregg A Hancock Jr.
Vice President SENB Wealth Management
Trust Business Development Officer
SENB Wealth Management
309-757-0700
wealthmanagement@senb.com
www.senb.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – dqydj.com/average-retirement-age-in-the-united-states/ [6/11/18]

2 – thestreet.com/retirement/18-facts-about-womens-retirement-14558073 [4/17/18]

3 – investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator [6/14/18]

4 – fool.com/retirement/social-securitys-aime-what-is-it.aspx [6/9/18]

 

SENB Weekly Economic Update 6-18-18

  

8 Ways to Fight ID Fraud Online

Nearly three decades after the internet was introduced, the web continues to transform the lives of many users, revolutionizing the way consumers shop, pay bills, and transfer money online. As these advancements make common tasks hassle-free, consumers are urged to take extra precautions, allowing them to navigate the web safely and avoid online crime.

“Banks are constantly innovating to make it easier for customers to manage their money online,” said President Daniel P. Daly. “At the same time, we’re always looking for ways to help customers combat cyber threats.”

SENB Bank is offering these tips to help users safeguard their personal information and navigate the web safely:

  1. Keep your computers and mobile devices up to date. Having the latest security software, web browser, and operating system are the best defenses against viruses, malware, and other online threats. Turn on automatic updates so you receive the newest fixes as they become available.
  2. Set strong passwords. A strong password is at least eight characters in length and includes a mix of upper and lowercase letters, numbers, and special characters.
  3. Watch out for phishing scams. Phishing scams use fraudulent emails and websites to trick users into disclosing private account or login information. Do not click on links or open any attachments or pop-up screens from unfamiliar sources. Forward phishing emails to the Federal Trade Commission (FTC) at spam@uce.gov – and to the company, bank or organization impersonated in the email.
  4. Keep personal information personal. Hackers can use social media profiles to figure out your passwords and answer those security questions in the password reset tools. Lock down your privacy settings and avoid posting things like birthdays, addresses, mother’s maiden name, etc. Be wary of requests to connect from people you do not know.
  5. Secure your internet connection. Always protect your home wireless network with a password. When connecting to public Wi-Fi networks, be cautious about what information you are sending over it. Consider using a Virtual Private Network (VPN) app to secure and encrypt your communications when connecting to a public Wi-Fi network. (See the Federal Trade Commission’s tips for selecting a VPN app.)
  6. Be careful in the cloud. While using the cloud makes it easier to store and share large amounts of files, understand that it also opens other avenues for attack.
  7. Shop safely. Before shopping online, make sure the website uses secure technology. When you are at the checkout screen, verify that the web address begins with https. Also, check to see if a tiny locked padlock symbol appears on the page.  Report any suspected fraud to your bank immediately.
  8. Read the site’s privacy policies. Though long and complex, privacy policies tell you how the site protects the personal information it collects

College Funding Options

You can plan to meet the costs through a variety of methods.

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How can you cover your child’s future college costs? Saving early (and often) may be the key for most families. Here are some college savings vehicles to consider.

529 college savings plans. Offered by states and some educational institutions, these plans let you save up to $15,000 per year for your child’s college costs without having to file an I.R.S. gift tax return. A married couple can contribute up to $30,000 per year. (An individual or couple’s annual contribution to a 529 plan cannot exceed the yearly gift tax exclusion set by the Internal Revenue Service.) You can even frontload a 529 plan with up to $75,000 in initial contributions per plan beneficiary – up to five years of gifts in one year – without triggering gift taxes.1,2

529 plans commonly feature equity investment options that you may use to try and grow your college savings. You can even participate in 529 plans offered by other states, which may be advantageous if your student wants to go to college in another part of the country. (More than 30 states offer some form of tax deduction for 529 plan contributions.)1,2

Earnings of 529 plans are exempt from federal tax and generally exempt from state tax when withdrawn, so long as they are used to pay for qualified education expenses of the plan beneficiary. If your child doesn’t want to go to college, you can change the beneficiary to another child in your family. You can even roll over distributions from a 529 plan into another 529 plan established for the same beneficiary (or another family member) without tax consequences.1

Grandparents can start a 529 plan (or other college savings vehicle) just like parents can. In fact, anyone can set up a 529 plan on behalf of anyone. You can even establish one for yourself.1

These plans now have greater flexibility. Thanks to the federal tax reforms passed in 2017, up to $10,000 of 529 plan funds per year may now be used to pay qualified K-12 tuition costs.2,3

Coverdell ESAs. Single filers with modified adjusted gross income (MAGI) of $95,000 or less and joint filers with MAGI of $190,000 or less can pour up to $2,000 annually into these accounts, which typically offer more investment options than 529 plans. (Phase-outs apply above those MAGI levels.) Money saved and invested in a Coverdell ESA can be used for college or K-12 education expenses.3

Contributions to Coverdell ESAs aren’t tax deductible, but the accounts enjoy tax-deferred growth, and withdrawals are tax free, so long as they are used for qualified education expenses. Contributions may be made until the account beneficiary turns 18. The money must be withdrawn when the beneficiary turns 30, or taxes and penalties will occur. Money from a Coverdell ESA may even be rolled over into a 529 plan.3,4

UGMA & UTMA accounts. These all-purpose savings and investment accounts are often used to save for college. They take the form of a trust. When you put money in the trust, you are making an irrevocable gift to your child. You manage the trust assets until your child reaches the age when the trust terminates (i.e., adulthood). At that point, your child can use the UGMA or UTMA funds to pay for college; however, once that age is reached, your child can also use the money to pay for anything else.5

Whole life insurance. If you have a permanent life insurance policy with cash value, you can take a loan from (or even cash out) the policy to meet college costs. Should you fail to repay the loan balance, obviously, the policy’s death benefit will be lower.6,7

Did you know that the value of a life insurance policy is not factored into a student’s financial aid calculation? If only that were true for college savings funds.6

Imagine your child graduating from college, debt free. With the right kind of college planning, that may happen. Talk to a financial professional today about these savings methods and others.

 

Gregg A Hancock Jr.
Vice President SENB Wealth Management
Trust Business Development Officer
SENB Wealth Management
309-757-0700
wealthmanagement@senb.com
www.senb.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – irs.gov/newsroom/529-plans-questions-and-answers [2/20/18]

2 – cnbc.com/2017/12/29/tax-bill-529-plan-provision-helps-families-save-on-school-costs-taxes.html [12/29/17]

3 – forbes.com/sites/katiepf/2018/04/13/yes-the-coverdell-esa-still-exists-and-heres-why-you-should-care [4/13/18]

4 – irs.gov/taxtopics/tc310 [3/1/18]

5 – finaid.org/savings/ugma.phtml [5/8/18]

6 – collegemadesimple.com/whole-life-insurance-vs-529-college-savings-plans/ [5/9/18]

7 – marketwatch.com/story/a-529-roth-ira-insurance-whats-best-for-college-savings-2017-03-22 [5/13/17]

 

 

6 Smart Money Moves for College Graduates

 

 

 

More than 70 percent of college graduates began their career owing more than $37,000 in student loans in 2017. Considering the additional living expenses they’ll soon face, new college graduates would be wise to focus on their financial future right now, says SENB Bank. SENB Bank has highlighted six smart financial decisions college graduates should consider to position themselves for financial success as they embark on their next phase of life.

“The habits new graduates develop right now will have a big effect on their financial future,” said Daniel P. Daly, President. “Living expenses add up quickly once you’re out on your own, and many young adults who didn’t plan ahead are delaying major milestones like getting married or buying a home because of their financial situation. The good news is that you can have a bright financial future if you think strategically about money right out of the gate.”

SENB Bank recommends the following financial tips for new college graduates:

  •  Live within your means. Supporting yourself can be expensive, and you can quickly find yourself struggling financially if you don’t take time to create a budget. Calculate the amount of money you’re taking home after taxes, then figure out how much money you can afford to spend each month while contributing to your savings. Be sure to factor in recurring expenses such as student loans, monthly rent, utilities, groceries, transportation expenses and car loans.
  •  Pay bills on time. Missed payments can hurt your credit history for up to seven years and can affect your ability to get loans, the interest rates you pay and your ability to get a job or rent an apartment. Consider setting up automatic payments for regular expenses like student loans, car payments and phone bills. Take advantage of any reminders or notification features. You can also contact creditors and lenders to request a different monthly due date from the one provided by default (e.g., switching from the 1st of the month to the 15th)
  • Avoid racking up too much debt. Understand the responsibilities and benefits of credit. Shop around for a card that best suits your needs and spend only what you can afford to pay back. Credit is a great tool, but only if you use it responsibly.
  • Plan for retirement.  It may seem odd since you’re just beginning your career, but now is the best time to start planning for your retirement. Contribute to retirement accounts like a Roth IRA or your employer’s 401(k), especially if there is a company match. Invest enough to qualify for your company’s full match – it’s free money that adds up to a significant chunk of change over the years. Automatic retirement contributions quickly become part of your financial lifestyle without having to think about it. 
  • Prepare for emergencies. Hardships can happen in a split second. Start an emergency fund and do your best to set aside the equivalent of three to six months’ worth of living expenses. Start saving immediately, no matter how small the amount. Make saving a part of your lifestyle with automatic payroll deductions or automatic transfers from checking to savings. Put your tax refund toward saving instead of an impulse buy.
  • Get free help from your bank. Many banks offer personalized financial checkups to help you identify and meet your financial goals. You can also take advantage of their free digital banking tools that let you check balances, pay bills, deposit checks, monitor transaction history and track your budget.

SENB Weekly Economic Update 6-11-18

Should Couples Combine Their Finances?

To consolidate or not: that is the question.

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Some couples elect to consolidate their personal finances, while others largely keep their financial lives separate. What choice might suit your household?

The first question is: how do you and your partner view money matters? If you feel it will be best to handle your bills and plan for your goals as a team, then combining your finances may naturally follow.

A team approach has its merits. A joint checking account is one potential first step: a decision representing a commitment to a unified financial life. When you go “all in” on this team approach, most of your incomes go into this joint account, and the money within the account pays all (or nearly all) of your shared or individual bills. This is a simple and clear approach to adopt, especially if your salaries are similar.

You need not merge your finances entirely. That individual checking or savings account you have had all these years? You can retain it – you will want to, for there are some things you will want to spend money on that your spouse or partner will not. Sustaining these accounts is relatively easy: month after month, a set amount can be transferred from the joint account to the older, individual accounts.

A financial plan may focus the two of you on the goal of building wealth. Investment and retirement plan accounts are individual by design, but a plan can serve as a framework to unite your individual efforts.

You may want separate financial accounts. Some couples want to pay household bills 50/50 per partner or spouse, and some partners and spouses agree to pay bills in proportion to their individual earnings. That can also work.

This may have to change over time. Eventually, one spouse or partner may begin to earn much more than the other. Or, maybe only one spouse or partner works for a while. In such circumstances, splitting expenses pro rata may feel unfair to one party. It may also impact decision making – one spouse or partner might think they have more “clout” in a financial decision than the other.

Even if you staunchly maintain separate finances throughout your relationship, you may still want to have some type of joint account to address basic monthly household costs.

What else might you consider doing financially? Well, one good move might be to consult and retain a qualified financial professional to provide insight and guidance as you invest and save toward your goals.

Think about how your tax situation might change if you marry. Some people marry and correspondingly change their withholding designation from single to married on their W-4 form. In return, they are shocked to find their income taxes are much more than they ever expected – or they discover they have an enormous refund coming their way. Adjusting your withholding earlier in a calendar year makes more of a difference than if you do so later.1

If marriage means a name change, be sure to update bank account, investment account, Social Security account, and insurance policy data with time to spare. Marrying couples will probably want to redo beneficiary forms on accounts and policies and make various accounts joint tenants with right of survivorship (JTWROS) accounts or Totten trusts (also known as payable-on-death accounts). A JTWROS or POD account allows the assets involved to pass to a surviving spouse without probate.2,3

Take a look at the auto and health insurance coverage each of you have. You might notice some overlap, and you may want to address that.

The Knot, the wedding planning website, says that the number one priority for 55% of marrying couples is uniting personal finances. Agreeing how to handle your household finances can be a goal whether you marry or not.4

Gregg A Hancock Jr.
Vice President SENB Wealth Management
Trust Business Development Officer
SENB Wealth Management
309-757-0700
wealthmanagement@senb.com
www.senb.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

 

Citations.

1 – turbotax.intuit.com/tax-tips/tax-refund/top-5-reasons-to-adjust-your-w-4-withholding/L8Gqrgm0V [5/31/18]

2 – legalzoom.com/knowledge/last-will/topic/totten-trust [5/31/18]

3 – legalzoom.com/knowledge/last-will/topic/joint-tenancy [5/31/18]

4 – forbes.com/sites/investor/2018/05/08/the-most-important-conversation-newlyweds-need-to-have/ [5/8/18]

 

Weekly Economic Update 06-04-2018

Including Digital Assets in Your Estate Plan

When people think about estate planning, they may think in terms of personal property, real estate, and investments. Digital assets might seem like a lesser concern, perhaps no concern at all. But it is something that many are now considering.1

Your digital assets should not disappear into a void when you die. You can direct that they be transferred, preserved, or destroyed per your instructions. Your digital assets may include information on your phone and computer, content that you uploaded to Facebook, Instagram, or other websites, your intellectual/creative stake in certain digital property, and records stemming from online communications. (That last category includes your emails and text messages.)1

You can control what happens to these things after you are gone. Your executor – the person you appoint to legally distribute or manage the assets of your estate – will be assigned to carry out your wishes in this matter, provided you articulate them.1

In most states, you can legally give your executor the right to access your email and social media accounts. That reflects the widespread adoption by many states of the Uniform Fiduciary Access to Digital Assets Act, a federal law passed in 2015. (Some states have passed laws that emulate UFADAA.)1,2

Your executor must contact the custodians of your digital assets. In other words, the websites hosting your accounts. In states without the above laws in place, your executor or other loved ones may have a tough time because, in theory (despite recent legal challenges), the custodians still have outright power to bar access to accounts of deceased users. Yahoo! takes this a step further by abruptly terminating email accounts when a user dies.1,2

The uniform law (UFADAA) established a hierarchy governing digital account access. The instructions you have left online with the account custodian come first. Instructions left in your will rank second. Absent any of that, the custodian’s terms-of-service agreement applies.3

So, in states that have adopted the uniform law, the fate of your digital assets at a website will be governed by that website’s TOS agreement if you die without a will or fail to leave any instructions with the website. If you state your preferences in a will, but also leave instructions with the website, the instructions you leave the website overrule the will.3

Facebook, Snapchat, and Instagram have famously declared in their TOS agreements that all content uploaded by the user becomes their property. While claims like these have been scoffed at, the websites are not hesitant to stand by such assertions and may cite user account preferences to back them up – which, in some states, could mean a legal struggle for heirs.1

Do you need privacy protection once you die? Before the onset of digital media, the prevalent legal view on that issue was “no.” Now, things are different. You should not include online passwords in your will, for example, since a will can be made public. You must give your executor permission in writing to access your online accounts – if you do not have such a document in place, the bar is set very low for an unscrupulous heir, friend, or business partner to claim to be your executor and get away with it.2

Did you know that you need to specifically grant access to your email accounts in your estate plan, or alternately, through the email software’s tools? If you fail to do this, your executor may only review the log of your email communications rather than the actual messages.3

Similarly, think about the risk of your digital assets being drained or manipulated if you can no longer care for yourself. You may want to appoint someone as a fiduciary for your digital assets through a Power of Attorney form, so that this responsible person can make decisions about them in your best interest should you lose the capacity to do so while living.1

What other steps should you take? Leave a digital access map for your executor – your accounts, your passwords. This need not be seen until you pass away or are unable to maintain your digital profiles and accounts. It can be a file stored on a flash drive or similar backup media – and it can also exist on paper.

Check with websites to see what their policies are for transferring or maintaining digital assets when a user passes away. See how reward points and credits are transferred and how pending financial or investment transactions are handled.

Is the executor of your estate plan a technophobe? If so, then think about appointing a second executor just to handle your digital assets. It may be worthwhile.

 

 

Gregg A Hancock Jr.
Vice President SENB Wealth Management
Trust Business Development Officer
SENB Wealth Management
309-757-0700
wealthmanagement@senb.com

www.senb.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations:

1 – nj.com/times-opinion/index.ssf/2018/05/safeguarding_digital_assets_sz.html [5/13/18]

2 – scientificamerican.com/article/estate-planning-for-your-digital-assets/ [2/7/18]

3 – kiplinger.com/article/retirement/T021-C000-S004-devise-a-plan-for-your-digital-assets.html [4/3/18]

Weekly Economic Update -05-28-2018

SENB Bank will be closed on Wednesday, July 4th, 2018 in observance of Independence Day. We will resume normal hours on Thursday, July 5th, 2018.