Financial Planning

Single Women and Longevity Risk Part 3: Planning for Expenses in Retirement

Planning for Expenses in Retirement

In Part 2 of this three-part blog series on single women and longevity risk, we discussed the importance of investing to supplement your income in retirement and minimize the risk of outliving your financial resources. In Part 3, we’ll explore why planning for expenses in retirement—both expected and unexpected—is essential when it comes to managing longevity risk.  

Estimating Your Expenses in Retirement

Failing to consider and plan for the various costs you’re likely to incur in retirement can lead to a savings shortfall, increasing the risk that you’ll outlive your assets. Thus, creating a retirement budget is necessary to ensure you’re saving enough and investing appropriately.

Of course, there are always uncertainties when it comes to planning for the future. Nevertheless, with the right guidance, it’s possible to project your retirement expenses with a reasonable degree of accuracy.

For example, basic living expenses like food, housing, utilities, and clothing tend to remain relatively steady in retirement and are therefore easier to anticipate. Yet other items like healthcare, travel, and entertainment often rise significantly once you stop working.

In fact, a recent report by the Center for Retirement Research at Boston College found that in 2018, 12% of the median retiree’s total retirement income went toward medical expenses. Moreover, since 2000, the price of medical care has increased at a faster rate than the overall inflation rate.

Meanwhile, with more free time on your hands, you may wish to travel more and take longer, more expensive trips in retirement. Plus, you’re more likely to spend money on other types of entertainment once work no longer demands so much of your time.

No matter your retirement plans, it’s important to consider how your lifestyle goals will impact your budget and plan accordingly. This can help you determine what size nest egg you’ll need to retire successfully and mitigate longevity risk.  

Planning for Unexpected Expenses in Retirement

In addition to the expenses we can reasonably project, others can crop up as we age and our homes, children, and spouses age along with us. Unfortunately, unexpected expenses can mess with the best-laid plans when you’re living off savings and fixed sources of income like Social Security.

Therefore, it’s best to expect the unexpected and prepare for these expenses as best you can. Here’s a list of unexpected expenses you may face in retirement:

Home Repairs & Maintenance Costs

Many Americans own their homes when they reach retirement age. (When I say “own,” I mean they own their homes outright or are still paying down their mortgage as opposed to renting.)

It’s easy to overlook or postpone home maintenance, especially if everything looks fine on the surface. But homes age just like we do, and putting off necessary repairs can become a significant financial expense down the road.

A recent personal experience drove this point home when a routine paint job turned into a major dry rot mitigation project costing tens of thousands of dollars!

When it comes to planning for unexpected expenses in retirement, here’s a best practice to prevent a surprise cost like mine: hire a professional to inspect your home for hidden problems such as dry rot, termites, mold, foundation issues, leaks, and outdated plumbing and electrical systems. Then, develop a multi-year plan to fix the problems and schedule ongoing routine maintenance.

Remodeling Expenses

In addition to the unglamorous fixes a home occasionally needs, it’s not unusual to grow tired of your home decor over time. You may decide to buy new furniture or appliances or update the exterior of your home in retirement, all of which can be costly.

In some cases, you may simply want your home to maintain its value if you plan to eventually sell it. For example, kitchen and bathroom styles tend to change every 10-20 years, prompting homeowners to make major updates.

Or you may need to alter your home so you can age in place comfortably and safely. While no one likes to think about the possibility of losing mobility, it’s one of the realities many of us must face as our bodies age.

Regardless of the impetuous, remodeling costs are common in retirement and can be substantial. Thus, it’s best to expect them and manage your finances accordingly.  

Unexpected HealthCare Costs

The first time many retirees realize Medicare isn’t as cheap as they thought it would be is when they receive a notice from the Social Security Administration about IRMAA. IRMAA, which stands for Income-Related Monthly Adjustment Amount, is an extra charge added to your Medicare Part B and Part D premiums if your income exceeds a certain threshold.

When on Medicare, you pay monthly premiums for Part B, which covers doctor services, outpatient care, and preventive services, and Part D, which covers prescription drugs. But if you’re a high-income earner according to your tax return from two years ago, the government says, “Hey, you can afford to contribute a little more.”

So, they add an extra charge (IRMAA) to your monthly premiums. And the more you earn, the higher your IRMAA charge will be.

Also, Medicare doesn’t cover all healthcare-related expenses in retirement. You’ll still be responsible for co-pays, deductibles, and coinsurance, as well as long-term care, dental, hearing, and eye care. These out-of-pocket costs can add up quickly if you have a significant health issue or need extensive care.

Again, proper planning is essential to mitigate these costs. To avoid IRMAA, you can work with a financial planner to develop a retirement income plan that keeps your taxable income below the threshold.

In addition, you may want to consider buying a Medigap or Medicare Advantage policy to defray the healthcare costs Medicare doesn’t cover.

Medigap policies fill in the gaps in original Medicare coverage, including medical care when traveling outside the U.S. Just keep in mind you’ll still need a separate prescription drug plan (Medicare Part D).

Alternatively, Medicare Advantage (Part C) offers an “all-in-one” alternative to original Medicare. However, these plans are generally in HMOs or PPOs, which may limit your access to certain healthcare professionals or facilities.

Long-Term Care

Another common misconception is that Medicare covers long-term care costs. It doesn’t. This can be problematic, since most older adults will likely need long-term care during their lifetimes.

In fact, the U.S. Department of Health and Human Services estimates that 70% of those turning 65 this year will eventually need long-term care. Meanwhile, women are more likely to need long-term care than men and for a longer duration, according to data from Morningstar.

These services can be costly—typically thousands of dollars a month in expenses. Unfortunately, long-term care insurance is also expensive, and the rigorous eligibility requirements put it out of reach for many.

If you qualify for long-term care insurance and can afford it, you may want to consider your available options, including hybrid policies that include a life insurance component. Otherwise, self-funding long-term care by saving and investing enough money during your working years is likely your best option.

Family Obligations

It’s not uncommon for adult children or other relatives to need financial help occasionally. These requests can be tough to negotiate, especially if your loved ones don’t understand the strain an unexpected loan or gift can have on your finances in retirement.

Although discussing money is taboo in many families, it’s wise to be transparent about your financial circumstances and create boundaries around financial requests. If this isn’t a viable option, be sure to include potential loans and gifts when planning for expenses in retirement.

Losing a Spouse

Morningstar estimates that 90% of women will manage assets on their own at some point during their lifetimes. Many women experience this for the first time in retirement due to the death of a spouse.

Losing a spouse can be emotionally devastating, no matter your stage of life. Yet failing to prepare financially for this possibility can make an already challenging situation even worse.

If you depend on your partner financially, there are steps you can take now to safeguard your financial independence if you unexpectedly lose them. For example:

  • Consider purchasing a life insurance policy to replace lost income or cover funeral costs and other outstanding expenses.
  • If your spouse has a pension, explore your survivorship options before retirement to ensure continued payments.
  • Understand Social Security survivors benefits, especially if your spouse has the higher earnings record.
  • Consult an estate-planning attorney to ensure your estate plan is current and organized for a seamless transition of assets.

With Proper Planning, Single Women Can Minimize Longevity Risk and Thrive Financially in Retirement

Planning for expected and unexpected expenses in retirement is crucial for maintaining financial stability and peace of mind. Yet minimizing longevity risk requires more than managing your expenses. Meeting your savings targets and investing for your long-term goals is also essential.

Remember, the earlier you start preparing financially for retirement, the better off you’ll be long-term. Moreover, you don’t have to go it alone. A fiduciary financial planner like Curtis Financial Planning can provide expert guidance and help you implement the right strategies to secure your financial future. To learn more, please explore our services and free financial planning resources.

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Single Women and Longevity Risk Part 2: The Importance of Investing

Single Women and Investing

Saving and investing are both crucial for financial health. Yet investing is particularly important when it comes to mitigating longevity risk.  In Part 2 of this three-part series about single women and longevity risk, we’ll delve into the significance of investing and explore how understanding risk and reward can empower women to become better investors.

Differentiating Saving and Investing

When it comes to personal finance, many conflate saving and investing. While both are crucial for financial stability, they serve different purposes.

Saving entails setting aside a portion of your income for near-term expenses or potential emergencies. In other words, your savings should be a safety net that’s liquid and risk-free.

Investing, however, implies allocating money to stocks, bonds, and other assets in anticipation of a potential return in the future. Despite the inherent risks, investing is an essential strategy for single women to increase wealth over time, so you don’t outlive your financial resources.  

Understanding the Risk-Reward Relationship

While investing offers the potential for a higher return on your money, it’s also inherently riskier than saving. That’s why many women hold too much cash relative to their financial goals.

If you tend to be risk averse, you’re not alone. In fact, one Northwestern Mutual study found that in general, U.S. adults prefer to play it safe with their money than take risks.

However, understanding the risk-reward relationship is crucial for overcoming the confidence gap that many women experience as investors. Each investment carries a different level of risk, and effectively managing these risks is essential to achieve your financial goals.

Typically, investments with the potential for higher returns carry a higher degree of risk (although high risk doesn’t guarantee high returns). For example, higher-risk investments like individual stocks and equity funds generally offer the potential for higher returns over time. Conversely, lower-risk assets like savings accounts and short-term Treasury bonds tend to yield more modest returns.

Navigating the Risk vs. Reward Dilemma

Many women face the dilemma of whether to keep their money safe in a bank account or invest it for potential growth. Indeed, research suggests that men are generally more willing to take risks with their finances than women.

However, studies also indicate that as women gain confidence through education and experience, they become better investors. Moreover, women investors are more likely to exhibit traits such as reduced trading, increased patience, openness to advice, more diversified portfolios, and a healthy skepticism towards “hot” investments.

Ultimately, your financial goals determine the level of returns you need from your investments. Saving for a house down payment in the next few years, for example, might require safer investments with less risk. In contrast, saving for retirement that’s several decades away allows for higher-risk investments with the potential for more significant returns.

But you also need to weigh your return objectives against your comfort level with taking on risk. In this case, risk generally refers to the possibility of losing your money. Taking on more risk than you can tolerate can lead you to make rash investment decisions that impede your progress toward your financial goals.

Single Women and Investing: Mitigating Longevity Risk

To mitigate the risk of running out of money prematurely, women must embrace some investment risk. By profiling four different investors, we can illustrate the outcomes along the risk spectrum.

Assume the following savers/investors invest $50,000 for ten years and reinvest all interest and dividends.

  • Investor #1 places her $50,000 in a savings account earning an average annual return of 1.5%. Her account grows to $57.815 in 10 years.
  • Investor #2 places her $50,000 into a certificate of deposit (CD) with an annual yield of 3%. Her account grows to $67,196 in 10 years.
  • Investor #3 places her $50,000 into a diversified portfolio* of 60% stocks and 40% bonds earning a 6% average annualized return. As a result, her account grows to $89,542 in 10 years.
  • Investor #4 places her $50,000 into a diversified portfolio* of 100% stocks, and it earns a 9% average annualized return. As a result, her account grows to $129,687 in 10 years.

A Note on Volatility

While the 100% stock portfolio generates the highest outcome, it also experiences substantial fluctuations over the 10-year period. Meanwhile, the 60% stock/40% bond portfolio exhibits less volatility due to the lower risk associated with bonds. 

Consider the following hypothetical annual return patterns for these two portfolios:

The graphs above illustrate how Investor #4 experiences larger swings in performance over the 10-year period by investing exclusively in stocks than Investor #3. In other words, the price of higher returns is generally increased volatility.

Thus, investors who are unable to weather the ups and downs of the stock market may need to sacrifice return potential to stay the course over time.  

*Diversified portfolio returns were generated using Vanguard Total Market Funds, both U.S. and international.

Striking the Right Balance to Reach Your Financial Goals

The challenge for many independent women investors is understanding their risk tolerance in relation to their need for return.

For example, if Investor #1 doesn’t invest in stocks, will she reach her financial goals and manage longevity risk, or will she run out of money before the end of her life? On the other hand, does Investor #4 need to take quite so much risk, or can she beat longevity risk by investing in a less volatile portfolio?

These are the answers I seek when working with my female clients. Ultimately, my aim is to keep my clients invested for the long term to experience the magic of compounding returns and reach their financial goals.

In the third and final article in this blog series, we’ll look at the other side of the equation: minimizing longevity risk by managing your expenses in retirement.

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Single Women and Longevity Risk Part 1: Why Independent Women Are Most at Risk

Single Women and Longevity Risk Part 1

This is the first blog post in a three-part series about single women and longevity risk. In this article, we’ll explore why independent women are most at risk of outliving their financial resources.

One of the reasons long-term financial planning is important is to minimize longevity risk, or the risk of outliving your financial resources. Longevity risk is generally brought up in connection with retirement, since the risk of depleting your savings increases once you stop working.

With advances in healthcare and increasing life expectancies, longevity risk is becoming an increasingly relevant concern for many retirees. Unfortunately, single women are among those most at risk of outliving their resources due to a variety of factors.

#1: Women Live Longer Than Men

First, women tend to live longer than men on average, which means they may need to support themselves financially for a longer period during retirement. According to a 2021 CDC study, the average life expectancy for women in the United States is 79.1, while for men, it’s 73.2.

However, using an average statistic to determine life expectancy and longevity risk can be problematic as each person’s family, health history, and lifestyle differ. Fortunately, the Social Security Administration (SSA) has a life expectancy calculator that can help you better understand your likelihood of living past a certain age.

For example, a 45-year-old woman’s life expectancy today is 85.4 years. But if she lives until age 70, her life expectancy increases to 88.9.

#2: Single Women Face Unique Financial Challenges

Second, single women often face unique financial challenges, such as lower average incomes. According to the U.S. Department of Labor, women working full-time and year-round make 83.7% of what men earn in similar jobs.

In addition, women are more likely than men to experience a gap in employment due to caregiving responsibilities, which can interrupt their earning and saving potential. The Covid-19 pandemic exacerbated this disparity, as women’s participation in the workforce tumbled disproportionately in part due to increased childcare responsibilities as schools and daycares closed.

Given these challenges, women tend to save less than men on average, further contributing to longevity risk. In fact, a recent T. Rowe Price report found that women tend to contribute less annually to workplace retirement accounts than men and have meaningfully lower account balances.

#3: Women Tend to Invest Less Often and More Conservatively Than Men

According to data from Morningstar, women tend to invest less and hold a larger percentage of cash than their male counterparts.

Studies show that this is largely due to a lack of confidence. For example, Fidelity’s 2021 Women and Investing Study revealed that only 19% of women feel confident in their ability to choose investments that align with their financial goals.

Unfortunately, this lack of confidence often translates to smaller nest eggs in retirement, increasing longevity risk. Consider the following example.

Suppose you invested $1,000 in the U.S. stock market 30 years ago, at the beginning of 1993. Over the next 30 years, the S&P 500 generated an annualized return of 9.7% before accounting for inflation.

That means at the end of 2022, you would have had $16,074 if you reinvested all dividends. Had you kept this money in a savings account that yielded an average of 1% over the last 30 years, you’d have about $1,347 at the end of the same period.

Thus, investing is necessary for single women to minimize longevity risk and outpace inflation, so your dollars don’t lose value in retirement.

How Single Women Can Address Longevity Risk

To address longevity risk, engaging in proactive financial planning is essential. This includes:

  • Saving and investing. It’s crucial to start saving early and regularly contribute to retirement accounts, such as 401(k)s or IRAs, to accumulate a sufficient nest egg for retirement. Within investment accounts, include stocks for their above-average growth potential and diversify your investments to mitigate market volatility risks.
  • Estimating retirement expenses. Assess your expected expenses during retirement, including healthcare costs, housing, and daily living expenses. This evaluation can help determine how much you need to save to ensure a comfortable retirement and reduce longevity risk.
  • Social Security planning. Understand how the Social Security system works and develop a strategy to maximize your benefits. Consider when to start claiming benefits and spousal or survivor benefits if applicable.
  • Long-term care insurance. Evaluate the potential need for long-term care insurance to protect against the high costs associated with extended care services. Research different policies and assess your options based on your health, family history, and financial situation.
  • Health and wellness. Prioritize maintaining good health and adopting a healthy lifestyle. Being healthy can contribute to a longer and more active retirement, reducing potential healthcare expenses and increasing overall financial security.

By being proactive and mindful of longevity risk, single women can take steps to secure their ongoing financial well-being.

Part 2: The Importance of Investing for Single Women to Offset Longevity Risk

Although single women face a variety of unique challenges and risks when it comes to financial planning, there are steps you can take to manage these risks and achieve your financial goals. In Part 2 of this blog series, we’ll dive deeper into why it’s so important for single women to invest when it comes to minimizing longevity risk.

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How Will Student Loan Forgiveness Affect You?

Student Loan Forgiveness

After months of discussion and debate, President Biden announced on August 24, 2022 that many federal student loan borrowers will be eligible for some type of debt forgiveness. Those who didn’t receive a Pell Grant may be eligible for up to $10,000 in forgiveness. Meanwhile, Pell Grant recipients may see as much as $20,000 of debt forgiven.

President Biden’s student loan forgiveness plan comes as welcome news to many Americans drowning in debt. Yet many—voters and politicians alike—oppose the program.

In fact, many Republican leaders are threatening legal challenges in an effort to block the bill. If this happens, the plan’s future may be in jeopardy.

Nevertheless, borrowers who are eligible for student loan forgiveness should be prepared to take advantage of the program if and when it begins. Here’s what you need to know about Biden’s student loan forgiveness program, including how it works and how it may benefit you.

What’s Included in Biden’s Student Loan Debt Relief Plan?

The Student Loan Debt Relieve plan forgives $10,000 of student loan debt for federal student loan borrowers. In addition, borrows who received a Pell Grant may be eligible for up to $20,000 in student loan forgiveness.

The plan also includes:

  • An additional (and possibly final) extension on federal student loan payments until December 31, 2022
  • A push for borrowers who may be eligible for the Public Service Loan Forgiveness Waiver (PSLF) to apply for the waiver before it expires on October 31, 2022
  • The creation of a new income-driven repayment plan (IDR) that would lower monthly payments and potentially reduce the time period required for loan forgiveness for eligible borrowers.

Who’s Eligible for Student Loan Forgiveness?

To be eligible for forgiveness, borrowers’ income levels must be under $125,000 for single borrowers and $250,000 for married couples and head of household filers. Borrowers may use their 2020 and 2021 tax returns to determine their income. They only need to meet the income requirements in one of these tax years.

In addition, only Federal loans funded by June 30, 2002 are eligible for forgiveness. This includes consolidated debt.

Federal loans for graduate school are also eligible for forgiveness, as are Parent Plus Loans. However, if a parent has more than one Parent Plus Loan for multiple children, they’re only eligible for total forgiveness up to $10,000.

Current students are also eligible for student loan forgiveness if they have debt. But if the student is a dependent of their parents, the parents’ income will determine eligibility for forgiveness.

Lastly, it’s important to emphasize that student loan forgiveness only applies to federal loans. Borrowers who refinanced their student loans with a private lender cannot take advantage of the program.

What Do Borrowers Need to Do?

Some parts of the student loan forgiveness plan will go into effect automatically. For example, many borrowers with IDR plans who have already recertified their income with the US Education Department will be eligible for loan forgiveness automatically.

Meanwhile, other aspects of the plan may require borrowers to take more action. One example applies to borrowers who made payments on their student loans since the start of the Covid-19 pandemic.

Since the government paused federal student loan payments in March 2020, borrowers can request a refund of any payments they made after that date. This makes most sense if a borrower’s loan balance is less than $10,000, and a refund would allow those payments to be forgiven instead.

Is Student Loan Forgiveness Taxable?

Thanks to the American Rescue Plan Act of 2021, most student debt discharged through 2025 will be tax-free—at least at the federal level. At the state level, income tax consequences will vary by state.

Currently, 13 states may treat forgiven student loan debt as taxable income. These states include Arkansas, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, New York, Pennsylvania, South Carolina, Virginia, West Virginia, and Wisconsin.

The Tax Foundation estimates that borrowers could incur anywhere from $300 to over $1,000 in state taxes, depending on where they live, if they receive the full $10,000 in student loan forgiveness. These figures could double for Pell Grant recipients, since they’re eligible to receive up to $20,000 in student loan forgiveness.

Planning Considerations for Those Who Haven’t Filed a 2021 Tax Return Yet

Indeed, most taxpayers have already filed their 2020 and 2021 tax returns. However, if you filed an extension for your 2021 return, there are a few strategies you may be able to leverage to help you qualify for student loan forgiveness.

  • First, consider contributing to an eligible retirement plan if you haven’t reached your contribution limit yet. This strategy makes sense is the contribution is enough to reduce your AGI to a level that’s eligible for forgiveness.
  • Income thresholds for married couples filing separately are still unclear. However, if the thresholds for single filers apply to married couples filing separately, you may want to see if changing your filing status will help you qualify for forgiveness.

As you consider these strategies, keep in mind that the extension deadline is October 17, 2022.

Student Loan Forgiveness: Next Steps

The forgiveness process will be relatively easy for most borrowers. For example, federal student loan borrowers already have income information on file with the US Department of Education. Thus, those who are eligible are likely to receive forgiveness automatically.

Of course, there are still many unknowns, including how a potential challenge by Republicans will affect student loan forgiveness. In any event, the official application should be available soon. The U.S. Department of Education sent out a notice recently that it could be available as soon as early October, 2022.  In the meantime, eligible borrowers can receive updates from the Department of Education by signing up here.

Lastly, a trusted financial advisor can help you better understand how student loan forgiveness may impact your financial plan. They can also help you identify other strategies to pay down your debt and reach your financial goals.

To learn more about how Curtis Financial Planning helps our clients take control of their finances, please explore our services and client onboarding process.

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A Quick Guide to Protecting Your Privacy Online

Protect Your Privacy Online

The internet has changed the way we connect and transact—in many ways, for the better. However, as we become increasingly dependent on digital platforms, it’s important to be aware of the associated threats to our personal privacy and security.

Indeed, identity theft reports in 2020 were more than triple the number from 2018, according to the Federal Trade Commission. As hackers and identity thieves proliferate, knowing how to protect your privacy online is critical. Fortunately, there are steps you can take to secure your personal information, so you don’t become a victim of identity theft.

Consider these four steps to protect your privacy online:

Step #1: Secure Your Network and Devices

A good first step to protect your privacy online is to secure your home network and any devices connected to the internet.

Secure Your Home Wi-Fi

If left unsecured, your home wifi network can be a major threat to your personal privacy. Internet users nearby may be able to monitor your online activity, including sensitive information you share over the network. Not to mention, someone could use your network to conduct illegal activities. 

To avoid these risks, be sure to encrypt your home network. Encrypting scrambles information sent through the network, reducing the risk that others will be able to breach your privacy. You can encrypt your home network by updating your router settings to either WPA3 Personal or WPA2 Personal.

Avoid Public Wi-Fi Networks

When you access the internet through a public wifi network, your privacy and security are at risk–even when the network is password protected. The easiest way to protect your privacy online in a public area is to simply not connect to the wifi network. However, if doing so is unavoidable, consider using a virtual private network (VPN).  

A VPN allows you to securely connect to public wifi by encrypting any data you send over the network. Though there are free VPN options available, it’s worth investing in a VPN service to protect sensitive information—especially if you travel frequently or work remotely full-time.

Update Your Operating System and Browser

If your operating system, browser, or antivirus software is outdated, hackers can compromise your devices more easily. To protect your privacy online, it’s important to routinely check for updates and install them when available. In addition, make sure your firewall is recent, as some versions no longer protect against today’s malware.

Use Strong Passwords

More than half of Americans surveyed admit they use the same password across multiple accounts, according to a recent report by SecureAuth. Unfortunately, if there’s a data breach on one of your accounts, any other account that shares that password is also vulnerable. 

You can organize your passwords and protect your privacy online with a password manager. In addition, consider turning on two-factor authentication wherever possible, as it requires a second check to log into your accounts.

Step #2: Avoid Email Scams

About 200,000 new phishing sites crop up each month, according to the Anti-Phishing Working Group. To avoid these scams, a good rule of thumb is to never click on any suspicious links in an email, especially if you don’t recognize the sender. In addition, never share sensitive information like passwords, account numbers, or your social security number over email.

Step #3: Keep an Eye on Your Digital Footprint

Social media can make it very easy for people to access your personal information these days. If you’re active on social platforms, be mindful of what you share online. Certain details that may seem innocuous—like your birthday or phone number—can be useful to identity thieves and allow them to access more sensitive information.

In addition, it’s a good idea to keep an eye on what others post about you online in case they’re sharing information on your behalf. You can also set up a Google alert for your name and other people or organizations you’re closely associated with, such as your employer, so you’re notified when your digital footprint is updated.

Step #4: Monitor Your Credit 

An effective way to protect your privacy online and catch potential data breaches early is to monitor your credit score and report. Unexpected changes can be a good indication that someone else is using your identity.

At a minimum, you should request a free copy of your credit report annually. There are also a variety of apps and services that alert you when there’s a change to your credit report. In addition, they allow you to monitor your credit more frequently. For example, many credit card companies include this service as a benefit for their customers.

If you believe your personal information has been compromised, you may want to freeze your credit temporarily. This prevents anyone from accessing your accounts without your specific consent.

Protect Your Privacy Online and Secure Your Financial Future

Identity theft can be emotionally and financially devastating. In some cases, it can damage your reputation and credit and impede your progress towards financial goals. As online scams and data breaches become the norm, it’s more important than ever to protect your privacy online.

A trusted financial advisor can help you safeguard your personal information and protect your assets. If Curtis Financial Planning can help you sleep better at night knowing your financial future is secure, please contact us.

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Happy Holidays: The Gift of Financial Self-Care

Financial Self Care

We originally published Happy Holidays: The Gift of Financial Self-Care in December 2016 and decided to give it a refresh for 2021. 

The holiday season is a once-a-year mash-up of magic and madness. Indeed, it can be a challenge to find balance between the two. The moments of wonder with family and friends go hand-in-hand with the chaos of shopping, rushing, eating, and drinking–sometimes to excess. ’Tis the season to be jolly, and the season only comes once a year – so enjoy!

And as you make your Gift List, be sure to treat yourself to something special: the gift of financial self-care. The enjoyment and reward will last longer than anything you can buy in a store.

Get a head start on New Year’s resolutions by setting fresh financial goals for the new year now. Then, you can truly embrace the eat-drink-and-be-merry holiday philosophy, knowing you have set yourself on a path towards financial freedom.

Financial Self-Care: Three Easy Steps to Begin

1. Automate your savings program.

Avoid the anxiety of wondering if you are saving enough by automatically setting aside money from your income each month. Either set up a transfer from your checking account to your investment account, or contact your payroll department to have dollars sent directly from your paycheck to your investment account.

  • You can direct your savings to either a taxable brokerage account (unlimited amount), or to an IRA or Roth IRA if you’re eligible.
  • This automated savings program will supplement your monthly contribution to a 401(k) or 403(b) and, if the funds are invested, will have the added benefit of dollar-cost averaging, which tends to boost returns over the long haul.

2. Open your investment account statements – both retirement and taxable – at least quarterly, and review the contents.

Financial self-care involves giving yourself the gift of knowledge. Knowledge is power, and the more you learn, the more in control you will feel. “Clueless” is a 1990s coming-of-age comedy, not a way to feel about investments! Things to look for:

  • Familiarize yourself with your financial statements, and call your custodian or advisor to ask about anything you don’t understand.
  • Is all your money invested, or have you unintentionally left cash in the account that isn’t working for you?
  • What is your Big Picture – otherwise referred to as your asset allocation? How much is invested in stocks, and how much in bonds? Are you comfortable with the allocation knowing that a higher percentage of stocks means greater volatility? Conversely, are you content with the level of bonds, knowing the returns may be lower than what you need to reach your goals?
  • What is your year-to-date rate of return? How does this measure of investment performance compare with your financial objectives?

3. And finally, do something about those old 401(k)’s you’ve almost forgotten about.

Like the reliable jacket that’s been languishing in the back of a closet, those forgotten accounts are an easy refresh to your financial “wardrobe.” Roll over an old 401(k) into your current 401(k) if your plan allows, or into an IRA account. (It’s likely you already have an IRA, so it means receiving one less statement each month/quarter!) If you don’t like to invest, the easiest approach is to roll the old account(s) into your current 401(k) and invest it in your existing choices.

Financial Self-Care = Satisfaction, Empowerment, and Confidence

You know the feelings you get when you finally purge your closet (or even clean just one messy drawer)? Multiply the accomplishment factor by about one hundred, and those are the feelings that result from completing something on your financial self-care check list. Pat yourself on the back – this is a gift that will keep on giving, long into the future.

Now, go out and Eat, Drink, and Be Merry… Happy Holidays!

Do you want to manage your money (and life!) better?

If you want to think differently about the relationship between your spending, your values and your happiness, then get your FREE copy of The Happiness Spreadsheet.

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How to Prioritize Your Financial Goals

How to Prioritize Your Financial Goals

As a financial advisor, one of my most important responsibilities is to help my clients identify and reach their financial goals. And for many of us, setting financial goals is relatively straightforward. For example, we know we want to retire by a certain age, buy a long-term care insurance policy, or upgrade our home.  However, knowing how to prioritize your financial goals isn’t always so clear-cut. For example, should you pay down debt first or contribute to retirement savings? If you’re not sure where your next dollar should go, here are a few rules of thumb I like to follow.

#1: Pay Off Debt Prudently

Debt, if used wisely, can enhance your financial plan. After all, few people can afford to pay cash for a home! If you have a low mortgage rate, there is no harm in paying it down over time; plus, there are tax benefits if you itemize.

On the other hand, paying off high-interest debt should be your top priority since compound interest can work against you. If you have credit card debt, for instance, try paying it off as quickly as possible so you can focus on other financial goals.

#2: Build an Emergency Fund

Everyone should strive to have a cash reserve in case of unexpected expenses or financial setbacks. We all experience those surprise home or auto repairs and medical bills. Unfortunately, some of us may also experience a sudden job loss.  In these instances, it’s better to have cash on hand than rack up debt.

If you have a secure job, a good rule of thumb is to save enough money to cover six months’ worth of living expenses. However, if you’re self-employed or work in an economically sensitive industry, you may want to save a year’s worth of expenses. Although interest rates are low currently, keeping your cash reserve in a high-yield savings account can offer a boost over traditional checking and savings accounts.

#3: Max Out Qualified Retirement Plan Contributions

If you have an employer-sponsored retirement plan like a 401(k) or 403(b) available to you, contribute as much as you can based on your income and other expenses—assuming you have no high-interest debt and you’re also contributing to your emergency fund. Furthermore, if one of your benefits is an employer match, be sure to contribute at least enough to take advantage of it. Otherwise, you’re leaving money on the table.

Once you max out your retirement plan contributions, consider contributing to an individual retirement account (IRA). If you meet the income qualifications to contribute to a Roth IRA, you can always withdraw your contributions tax- and penalty-free if you need the money.

#4: Consider a Health Savings Account (HSA) If You Qualify

Lastly, take advantage of an HSA if you have a qualifying high-deductible health plan. HSAs offer triple tax savings since contributions, growth, and withdrawals are tax-free if you use the proceeds for qualifying healthcare expenses.

In addition, HSAs have no withdrawal requirements. That means you can let your contributions grow tax-free for medical expenses in retirement if you don’t need them in the meantime.

A Trusted Advisor Can Help You Prioritize Your Financial Goals

While these rules of thumb apply in most situations, everyone’s financial circumstances are unique. A trusted financial advisor can help you set and prioritize your financial goals, so you can feel confident your next dollar is going to the right place.

If Curtis Financial Planning can help you develop a financial plan that enables you to achieve your financial goals, please get in touch. We’d be happy to hear from you.

CNBC recently interviewed Cathy Curtis about her tips for prioritizing financial goals. If you’re interested in learning more, you can read the full article here.

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Why Do We Procrastinate about Finances?

personal finance

This article was originally published January 25, 2018.

Personal finance is something that’s easy to put on the back burner. I hear it from clients all the time:

I only have $200,000 saved for retirement and I’m already 62 years old!

I’m co-signing all of my child’s student loans, and I realized I’m nowhere near as close to paying off my existing debt as I thought I was!

Let’s face it: life gets busy. Between our professional and personal lives, we often have very little time left over to work toward big-picture goals. Inevitably, some important things end up getting neglected.

Many people think about working with a financial planner for years before they take the leap. In reality, it often takes a crisis or a large life change to shift them to a place where they’re ready to set up a consultation.

Why Do We Procrastinate?

If the above description sounds like you, don’t worry! You’re in good company. It turns out procrastination is a big part of most people’s lives. When it comes to personal finances, there are a few main reasons we put off planning:

  • The task is unpleasant.
  • Our finances cause us anxiety.
  • We’re not sure where to start.

Let’s take a look at these procrastination-causes, and how we can work through them to get a jump on your financial planning.

Viewing Finances as Unpleasant

It’s no secret there’s a taboo that exists around money. In general, people don’t love talking about it—or even thinking about it. Oddly enough, though, this taboo primarily exists in the United States. Elsewhere in the world, discussing money is seen as anything but gauche. It’s a part of life!

To change this view of money and motivate yourself to start working on your finances, it’s smart to purposefully alter your perception. When you view money as an entity that shouldn’t be discussed, you give it power.

Instead, try viewing money as a tool to help you live the life you want—whether that’s traveling more, giving more to your favorite charity, or retiring comfortably around family. As soon as you take the power away from money, you realize it’s not unpleasant to try and create a financial plan. It’s actually kind of exciting!

Money Causes Anxiety

If you’re like most people I speak to, you know the value of financial planning. But too often it takes a personal crisis to move you toward dealing with your finances. This is often because, to put it simply, money stresses us out.

The idea that there isn’t enough money—or that we aren’t moving closer to our money-related goals—is enough to send most people into an anxiety spiral. To avoid these negative feelings, we avoid financial planning altogether.

The crazy thing is that if we were to face our fears and create a financial plan that helped us get on track, our money anxiety would dissipate significantly. But because we continue to avoid it, we continue to feel anxious, and the guilt cycle goes on and on.

If money anxiety is what’s stopping you from starting your financial planning journey, there are several things you can do to ease the stress:

  • Try making a to-do list with bite-sized tasks (like calling a financial advisor for a consultation, checking your account balances, or writing down upcoming financial goals).
  • Set a spending budget.
  • Focus on what you’re doing right. Not everything’s bad news! Rather than always beating yourself up about financial mistakes, focus on the big and little financial wins you experience, too!

Not Knowing Where to Start

Often times, it’s a lack of confidence that prevents us from getting started with financial planning. We’re not sure where to begin, and the information that’s available online is daunting—to say the least!

Luckily, this financial hang-up is the easiest to fix. Working with a fiduciary CERTIFIED FINANCIAL PLANNER™ can help. As a fiduciary advisor, I have a duty to my clients to provide financial advice that’s always in their best interest. Years of practice and education make a financial planner your best ally when it comes to financial planning.

At the end of the day, you are busy. Carving out time to handle your financial planning alone can be incredibly intimidating. I’d like to help. We’ll work together to get you started on the right financial path, set meaningful goals together, and strive for success. Contact me today to set up an introductory phone call. I’m excited to hear from you!

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Estate Planning Documents Every Single Woman Needs

Estate planning documents for single women

Estate planning is an essential part of anyone’s financial plan. I’ll explain in this article why it’s critical for single women.

If you don’t have a proper plan in place, your state’s laws will dictate who receives the assets under your estate. State laws usually designate beneficiaries in this order: spouse, children, grandchildren, parents, grandparents, siblings, aunts, uncles, nieces, nephews, and cousins. If you have children and die without a will, the state will decide who the guardian will be. This is all true even if you’re in a relationship without being legally married. 

Suppose you’re hoping to designate your possessions to a significant other, extended relatives, close friends, or charitable organizations. In that case, it’s critical to put together an estate plan. And more importantly, to appoint a person for your children’s guardianship, creating a will is a crucial step. Thankfully, this is easier than it sounds. The following is a list of primary estate planning documents and their purpose: 

Will or living revocable trust

Although these titles are often used interchangeably, wills and living trusts are two different documents. The most significant difference: both transfer an estate to designated heirs, but only trusts skip over the probate court. Plus, a will lays out your wishes for after you die while a living revocable trust becomes effective immediately and can be revised anytime while you are living. 

Suppose you are a woman with significant assets. In that case, a revocable living trust will keep your assets away from court-supervised distribution. If you have a more modest estate, a will may suffice.

A living revocable trust also helps your beneficiaries avoid the hassle and expense of a lengthy probate process. Living revocable trusts have benefits, but they cost more to create and require management. The choice between a will and a living trust is a personal one. Whichever path you take, it’s always a good idea to seek the advice of professional advisors. 

Healthcare proxy/durable medical power of attorney

As the name suggests, this type of power of attorney deals strictly with your health care decisions and medical treatments. With your healthcare proxy document, you’ll appoint an agent to make healthcare decisions on your behalf if you’re incapable of making them on your own. This is an important responsibility, and it’s essential to choose someone you trust and be transparent with them on the specifics of your wishes. 

The financial power of attorney

While the medical power of attorney or healthcare proxy deals with health specifics, the financial power of attorney deals with financial matters. Your financial power of attorney document grants another individual the power to make financial decisions for you while you are alive but not capable of handling things yourself.

Your power of attorney is your legal representative for financial matters. Should you be hospitalized or incapacitated, they’ll handle financial tasks, like managing your bank accounts and paying your bills from a designated account. You can choose to designate a power of attorney that is effective immediately or kicks in after a specific event occurs (ex. coma, Alzheimer’s, mental disability, or an inability to communicate your wishes directly). 

The Challenge Of Naming Representatives

It is one thing to get the will, living trust, financial and healthcare powers of attorney created. The other challenge is to decide who will be your legal representatives. Married couples usually name each other, but being single, you need to decide who will handle your affairs and find out if they are willing to do it. If you have a will, you will need an executor, and if you have a living trust, you will need a successor trustee. Then you will need to choose your powers of attorney for health and finances. Most people choose from personal relationships, but it’s also possible to hire professionals for these roles. As you are preparing to start your estate planning, besides organizing your financial assets, it’s just as important to decide who will represent you.

If you’re a single woman and want to talk about your estate plan with a trusted financial planner, please connect with us. We are here to help.

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Single and Thinking About Retirement? Five Tips to Help You Get There

Single Women Retirement Planning
Single Women Retirement Planning

Most of us dream about the day that we can take a break. We envision a full, long-lasting retirement that is free of financial worries and packed with more of the things we enjoy spending our time on. Whether you’re planning to retire at the traditional age of 65 or you’re aiming to get there earlier, being single doesn’t have to slow you down.

Use your unique strengths to your advantage, and plan for a retirement filled with time spent with friends and family, giving back, reading books, traveling, and everything else you enjoy. If you’re thinking ahead to your retirement, but you’re not sure where to start, here are a few tips that will help you get there:

Revisit your spending and saving

The start of your retirement planning is a great time to check in with your spending or looking at it in reverse, at your savings rate. Could you be saving more money? Are you spending on things that aren’t important to you? Are you wasting money anywhere, such as trial subscriptions you forgot to cancel that are now costing you money annually? Paying for a high-priced gym that you rarely use? Highlight anything you think can be cut out or reduced. Savings gives you freedom and it’s something you have control over, more than your investment returns or even your income.  Then, use Vanguard’s handy retirement calculator to compare your current monthly income to what you’ll need in retirement. 

Make small changes

Now that you’ve revisited your spending vs savings rate and identified areas that could use improvement, start making small, incremental changes. Save takeout or restaurant meals for weekends; make coffee at home instead of suffering through long drive-thru lines; cancel unused services or subscriptions. Discretionary items like these add up quickly to cost us thousands each year. Aim for improvement, not deprivation and watch your savings grow. Cutting out all discretionary spending isn’t sustainable long-term. Choose the changes and budget cuts that make the most sense to you and your goals.

Max out your savings

Reallocate the funds from your discretionary budget cuts to your retirement accounts or investment accounts. While opting for easy alternatives may have been eating up all of your extra cash, maxing out your savings opportunities will make you extra cash. When it comes to saving for retirement, compound interest is your best friend. Start spending time with her as soon as you can.

Diversify

Any personal finance expert will tell you that it’s not enough to match your employer’s contributions (or fully fund your Solo 401(k) if you’re self-employed). Investing outside of your retirement account in mutual funds, ETFs, or individual stocks can help you create additional streams of income when you’re settling comfortably into your retirement.

Work a little longer than you think you can stand

While you are working your salary funds your expenses. When you stop working you are going to rely on other income sources: social security, maybe a pension, and withdrawals from your retirement and investment accounts. If your retirement projections are at all iffy – meaning, it seems your money may not last through your retirement years, it pays to stay employed. Most people want to maintain their standard of living in retirement not have to reduce it. Staying employed and savings as much as you can in those last years of working is one way to get you closer to your goal.

No one-size-fits-all plan for retirement

There’s no one-size-fits-all plan for retirement. But if your end goal is a retirement free of financial worries, there are plenty of actionable steps you can take now to set your future self up for success. A lack of financial stress helps us better connect with the people we love, sleep better, stay healthy, and enjoy both the destination and the journey. Employ financial strategies that will help you move consistently toward your goals.  

If you need a retirement plan and want to work with a trusted financial partner, we encourage you to explore our services and schedule an introductory phone call.

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