For most of us, we live the first 18-21 years of our lives without worrying about where things come from. From the moment we are born we are provided food, shelter, and love. Soon thereafter, we realize we must work really hard and long hours to cover the basic necessities and to buy the things we really want.
Most people spend 20-30 years working before considering retirement. If we are lucky and smart, we’d have listened to the wise advice of saving for retirement by investing some of that hard-earned money. This article touches on some of the options available to saving for retirement.
Here are some options:
Contributions to a retirement account if you are still working after age 70 can enable a senior to access tax benefits and possibly reduce tax burdens. If still earning income, contributing to a ROTH IRA, 401(k) or 403(b) plan, SEP-IRA or a (HSA) health savings account (if not enrolled in Medicare) are tax-advantaged opportunities.
ROTH IRA: Federal tax law allows you to contribute to a Roth IRA when income limits are met and you have earned compensation whether in a regular paycheck or contract work via a 1099. In 2018, working persons over age 50 can contribute up to $6,500 (this includes a 1,000 catch-up contribution) to a ROTH IRA. You may be able to contribute an additional $6,500 for a non-working spouse if your earned income is greater than $13,000. You can’t contribute more than you earn!
Because ROTH IRA contributions are made with after-tax dollars, the money can be withdrawn tax-free without penalties. Any growth or earnings in the account and distributions made in retirement is free from federal taxes. ROTH IRA’s are not subject to RMD’S (Required Minimum Distributions) after age 70 and a half which means the money can continue to grow in the account, generating tax-free earnings.
Another benefit is tax-free ROTH IRA money for your beneficiaries after you die. Please discuss with an estate-planning professional before making the ROTH IRA part of an estate plan.
401(k) and 403(b): You can continue contributing annually to your employer’s 401(k) plan or 403(b) for as long as you’re employed regardless of your age. For employees over 50, the 2018 contribution limit is $18,500 plus $6,000 in catch-up contributions for a grand total of $24,500. Be mindful that your employer may offer both a traditional and a Roth 401(k), however, a traditional 401(k) offer tax deferral and a Roth 401(k) is similar to a ROTH IRA, in that you contribute after-tax income and won’t owe taxes when making withdrawals from the Roth 401(k).
A ROTH 401(k) is subject to RMD’s (Required Minimum Distributions)! Required Minimum Distributions (RMD’s) on both the traditional and Roth 401(k)s kick in after leaving your employer.
A few things to consider when debating whether to contribute to a Roth 401(k) or a Roth IRA:
SEP IRA (Simplified Employer Pension): A tax-advantaged retirement savings plan for self-employed people and small businesses. You are allowed to contribute after age 70 but must begin taking RMD’s once you attain age 70 and a half. In 2018, the annual contribution limit for a SEP IRA is $55,000 or 25% of eligible income, whichever is less.
HSA (Health Savings Account): Annual pre-tax contributions for qualified medical expenses. However, if you are enrolled in Medicare, you are not eligible to contribute to an HSA. The 2018, you can contribute a maximum of $10,900 to an HSA if age 55 or older unless enrolled in a family plan. If over age 65, all withdrawals from your HSA are penalty free and federally tax-free when used to pay for qualified medical expenses.
Becoming debt-free is a noble financial goal!
There are many options for achieving this financial milestone. There’s the good, the bad and the ugly. You may devise a long-term strategy to eliminate debt by paying cash for all future purchases while making on-time, minimum monthly payments until the debts are paid off.
Here are some actions steps you can take:
A DEBT SETTLEMENT PLAN IS NOT A DEBT MANAGEMENT PLAN!
These plans are usually offered by for-profit companies to people with large amounts of credit card and student loan debts. Here’s the plan: The debt settlement company promises to negotiate with their client’s creditors to pay a “settlement” or a portion of the money owed to the creditors to settle the outstanding balances. This is Part 1 of the plan. Part 2 of the plan states that the client must pay a specific amount monthly into a designated account for paying off the settlement amount. This process is usually lengthy and carries a fair amount of risk.
Should your debt settlement company be unsuccessful in convincing the client’s creditors to accept the settlement, your balances may grow even higher with late fees and finance charges because these programs may encourage you to cease direct payments to your creditors while the negotiations are being worked out. Be aware also that there are dishonest debt settlement companies who make promises they are unable to keep, charge large sums of money and in the end you may be worse off than when you started on the debt settlement path.
Before signing with a debt settlement company, you must have some important facts upfront:
Please get answers to these questions in writing and thoroughly review for understanding before signing!
To know whether you are dealing with a debt settlement scam, here are some red flags:
Check out any debt settlement company you may be considering by contacting your state’s Attorney General’s Office or the local Consumer Protection Agency (in New York, DCA/Department of Consumer Affairs). Also check out what people are saying online about the debt settlement company you may be considering by entering the name of the company into a search engine using the word “complaints”.
As stated at the beginning, debt freedom can be liberating, giving a sense of control over one’s finances and imparting financial confidence. However, due diligence is necessary before choosing this strategy for becoming DEBT-FREE!
NYC Department of Consumer Affairs
Bureau of Consumer Frauds & Protection
In this month's blog, I want to introduce you to the FDIC and its importance for you as a consumer. You've probably seen the initials FDIC at your local financial institutions and on your bank statements. But what does it mean and what is its purpose?
THE FDIC (Federal Deposit Insurance Corporation)
The FDIC is an independent agency of the U.S. government that protects a depositor against the loss of insured deposits if an FDIC-insured bank or savings association fails.
FDIC insurance covers all types of deposits in an insured bank, including checking accounts, NOW (Negotiable Order of Withdrawal) accounts, savings, Money Market Deposit Account (MMDA), Certificate of Deposit (CD) aka Time Deposit and other official items issued by a bank (e.g) bank check (Cashier’s check) or money orders.
FDIC insurance covers depositor’s accounts at each insured bank, dollar-for-dollar, including principal and any accrued interest through the date of the bank’s failure, up to the insurance limit, currently $250,000 per person, per bank, per ownership category. Money not insured by FDIC are non-deposit investment products like stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, U.S. Treasury securities and other government securities even if these investments are purchased at an insured bank.
These non-deposit investment products may be offered to you at your bank, through the mail, over the phone or the internet and often, the people selling these products are not financial institution employees but employees of a third-party securities broker/dealers or insurance companies. When speaking with a sales representative about non-deposit investment products, you should be informed that the product is NOT insured by the FDIC and subject to investment risk.
To verify whether a bank is FDIC-insured, ask a bank representative, look for the FDIC sign at your bank, call the FDIC at 877-275-3342 or use the FDIC’s BankFind tool.
BankFind allows you to access detailed information about all FDIC-insured institutions, including branch locations, the bank’s official website, current operating status of the bank and the regulator to contact for additional information and help. You can get detailed information about your specific deposit insurance coverage by accessing the FDIC’s Electronic Deposit Insurance Estimator (EDIE) and entering information about your accounts. By calling the FDIC at 877-ASK-FDIC (877-275-3342) to speak with an FDIC deposit insurance specialist, you can get additional information about your FDIC- insured deposit accounts.
OTHER ITEMS NOT INSURED BY THE FDIC:
Safe Deposit Boxes: The contents of a safe deposit box are NOT insured by the FDIC. If you are concerned about the safety of items in your safe deposit box, consider purchasing fire and theft insurance which is usually part of a homeowner’s or tenant’s insurance policy. Consult your insurance agent for details.
Robberies and other Thefts: Stolen funds may be covered by the bank’s blanket bond, which is a multi-purpose insurance policy banks purchase to protect themselves from fire, flood, earthquake, robbery, defalcation, embezzlement and other cases of lost funds. However, unauthorized access to your deposits may be covered by the Electronic Funds Transfer Act and other customer protections.
HOW TO FILE A COMPLAINT:
Should you have a problem or concern with a deposit or investment, seek resolution directly with a bank officer or firm before involving an outside agency. Financial institutions value their customers and will try very hard to be helpful, however, if you’re unable to resolve the issue with the bank or firm, use these guidelines to direct your complaint to the right agency.
For questions, call the FDIC Central Call Center at 877-275-3342. For the hearing impaired, call 800-925-4618 or 703-562-2289.
An eye-popping journey into financial fraud and scams of all kinds!
Fraud is “a representation or concealment of some fact material to a transaction of goods, services or other benefit that is made with knowledge of its falsity, non-existence, or misrepresentation and with the intent to deceive another and that is reasonably relied upon by the other who is injured thereby.”(Excerpted from “Scams, Schemes and Swindles”, a research paper, Financial Fraud Research Center, 2012)
Financial fraud seem to be everywhere in many varieties and across different industries: Cars, Education, Funerals, Money Transfers, Online Dating, Work-at-Home, you name it!
According to the Federal Trade Commission (FTC), “Crooks use clever schemes to defraud millions of people every year. They often combine new technology with old tricks to get people to send money or give out personal information.”
Here are a few known scams:
A scam that seems to be on the rise is Cryptojacking because of scammers promoting quick rich schemes. Let’s explore what this means to you as a consumer.
CRYPTOJACKING: As defined by the FTC, “Scammers use your device’s processing power to “mine” cryptocurrency, which they can convert into cash. They can use malicious code embedded in a website or an ad to infect your device, then help themselves to your device’s processor without your knowledge. Should you make an unlucky visit to a website that uses cryptojacking code, click a link in a phishing e-mail or mistype a web address, any of these can lead to cryptojacking. And while the scammer cashes out, your device may slow down, burn through battery power or crash. To combat this, use antivirus software, set software and apps to update automatically, never install software or apps you don’t trust, don’t click links without knowing where they lead and be careful about visiting unfamiliar sites. It can be difficult to diagnose cryptojacking but one common symptom is poor device performance. So consider closing sites or apps that slow your device or drain your battery.
Some browser extensions and ad blocker tools promise they can help defend against cryptojacking by blocking mining code. Although these may be worth considering, always do the homework by reading reviews and checking trusted sources before installing any online tools. However, some websites may keep you from using their site if you have blocking software installed.”
The New York City Department of Consumer Affairs weighed in on the fraud/scams conversation with some advice to stay one step ahead of the scammers. In its Internet Scam Guide, Web of Lies: How to protect yourself on the Infohighway:
According to the NYC Department of Consumer Affairs, “the Internet is becoming a big part of our everyday lives but there are no gatekeepers on the information superhighway.” New, unregulated technology means new opportunities for consumers, investors, businesses and SCAM ARTISTS. The rise of Internet use brings more deceptive and misleading promotions, bogus travel offers, contests, lotteries and other illegal practices on the Web. The scams are not new, but on the Internet, scams can be more dangerous. Unlike print advertising, impressive-looking Web sites can be designed relatively easily and cheaply. Just because an advertisement on the Internet appears to be professional does not mean it’s legitimate.
The bottom line: don’t believe internet ads. Consumers are just as likely to be scammed online as through more traditional types of advertising.
If you spot a scam, report it at https://ftc.gov/complaint. Your reports help the FTC and other law enforcement agencies to investigate scams and bring crooks to justice.
Because discrimination have created a barrier to safe, affordable housing choices for everyone, people have struggled in finding the type and location of housing they desire. The fight for affordable housing have been long and contentious. However, Dr. Martin Luther King Jr. retains the title of “Father of Fair Housing.” In Dr. King’s words:
“We are here today because we are tired. We are tired of paying more for less. We are tired of living in rat-infested slums…Segregation not only harms one physically but injures one spiritually. It scars the soul. It is a system that forever stares the segregated in the face, saying you are less than. You’re not equal to.”
The Fair Housing Act was signed into law on April 4th, 1968 one week after Dr. King’s assassination.
Let’s take a look at current Fair Housing Laws.
The Federal Fair Housing Act and Fair Housing Amendments Act makes it illegal to discriminate based on the following seven protected characteristics:
The law also includes prohibited actions in the (a) sale of housing; (b) mortgage lending; and (c) in general. Let's look at these prohibitions.
In the sale of housing:
In mortgage lending:
If you've experienced discrimination in any of these PROHIBITIONS, please contact us. We might be able to assist you. For general questions about purchasing a home and how to prepare financially, contact Denise Garrett via email at firstname.lastname@example.org or by phone at (718) 385-6700 ext. 15.
This month's blog is dedicated to homeownership.
Primary Question: Can I afford to buy a home? Let’s find out!
Step One: Budget. Analyze your current expenses by keeping a record of your daily expenses for at least one to two months to get a realistic picture of the cost of your current lifestyle and consider what you are willing to “give up” temporarily to financially prepare for home ownership.
Step Two: What kind of property do you want? There are several options: Co-Op, Condo, Single Family home, Multi Family (rental income potential).
Step Three: What are the costs associated with purchasing a home? Think about the Down Payment, Closing Costs, Moving-in Costs, On-going Costs (i.e., utilities, maintenance fees/carrying charges, etc.)
Step Four: Affordability/ how much can you borrow? Take into account your current income, your monthly consumer debt payments; for example: car loans, student loans, personal loans, credit card payments, court-mandated child support, alimony etc.
Step Five: Where do you want to buy? Location, location, location should always go with affordability, affordability, affordability. Will it be in Brooklyn or in Garden City? The location will determine the purchase price.
Step Six: How’s your credit, FICO score? Do you have to establish credit, repair credit, reduce credit utilization? What’s non-traditional credit? Your credit score (FICO) determines your financing (interest rates) options. This is very important!
Step Seven: To increase your borrowing power, consider additional income, like working over time, getting a second job, a co-borrower, rental income if purchasing a multi - family home, or ultimately a better paying job. Reduce or eliminate some consumer debts or consider a mortgage product that will result in lower monthly payments and NO PMI (Private Mortgage Insurance).
Step Eight: Which Mortgage product is best for you? There are several options, like a Conventional mortgage, FHA, VA, or a SONYMA (State of New York Mortgage Agency).
Step Nine: Do you want to avoid paying Private Mortgage Insurance (PMI)? Make a 20% down payment or more and you’ll have the benefits of NO PMI, a smaller mortgage and the possibility of a more attractive interest rate.
Step Ten: The Pre-qualification/Pre-approval process will tell you how much you can borrow based on your income, current debts. The quality of your credit is also considered. Keep in mind, just because you get pre-approved for a million dollars doesn't mean you have to borrow a million dollars.
Step Eleven: Do I need Homeownership Education/Counseling? The quickest answer is YES. This will cover the mortgage application process, budgeting, shopping for the home, Home inspection, role of Real Estate Agent, Real Estate Attorney Appraisal, possibly Landlord counseling and Foreclosure prevention.
The $ M A R T Approach to Effective $aving
“A goal without a plan is just a wish.” Antoine de Saint-Exupery
March is Women’s History Month. This month’s blog is about being SMART with your finances.
Did you know that a study in 2015 by Catalyst (“Buying Power: Global Women”) reported that women account for nearly 65% of all household spending, or more than $29 trillion in global purchasing power? According to the US Department of Labor (2017), 51.5% of workers in management (professional and related occupations) are women. And the CPA Institute concluded in 2015 that by 2020, women will likely control two-thirds of the private wealth in the US.
Women are the new entrepreneurs! According to the American Express OPEN report (2016), women-owned businesses generated nearly $1.6 trillion in revenue, increased 45% between 1997 and 2016 and represent 38% of all enterprises. This is not only an outstanding achievement, but a trend that will continue to establish the role, presence and power of women in our economy as one of significant value and empowerment.
So, let’s look at how women can be SMART about their finances now and going forward.
S=Specific M=Measurable A=Achievable R=Realistic T=Timeline
Specific - Make your savings plan specific; answer crucial questions like, how much do I want to save? How often? For what purpose? By when? These questions will help give you direction. Say, “I will save $1,000 this year to build an emergency fund, instead of I will save some money this year.” You have just become specific about how much you want to save, for what purpose and a deadline.
Measurable - You can easily evaluate whether you have achieved your goal. The steps you’ve taken in making the financial goal specific makes it easier to measure. Calculate how often to save, how much per month or week to achieve that goal (1,000 saved in 12 months= 83.33 per month).
Achievable - Know what steps have to be taken. Take action! Think about setting up with your employer’s Human Resources department automatic deposits weekly, bi-weekly or monthly from your wages into a dedicated savings account. Or, contact your bank to set up transfers from your checking account into your savings with a similar frequency. These two are most effective.
Realistic - The plan requires ease of execution, using the best tools most suitable for you. Consider your present responsibilities and lifestyle, income and expenses (budget) to assess your cash flow for implementing the savings plan. After careful consideration, you may need to increase your income or reduce some household expenses. Be courageous, you’ll feel very happy when you achieve your goal.
Timeline - Set a time for achieving the Savings goal. Establishing deadlines will help to keep the goal from getting lost or overshadowed by daily responsibilities.
Below are some inspirational Saver Stories from America Saves.
Mary Brown from Wisconsin, “Learned many skills including creating and tackling a household spending plan and the importance of an emergency fund. Learning to budget and being mindful of my spending habits helped me save and more importantly, see the benefits of savings.”
Marchale Burton from Alabama, “Saving lets you see what you can accomplish when you put your mind to it. It’s empowerment! The key to building savings is making it a routine.”
Kisha Barns from Charlotte, North Carolina: “It’s liberating to know I have a safety net if anything were to happen and that I built that safety net with my own savings.”
Kiara Hardin from Chicago: “Having an actual savings goal to save for not only teaches the savings habit, but it teaches that there are rewards to saving. Learning how to save efficiently impacted my life enormously because I am constantly saving for something.”
Nicky Vasquez from Virginia: She learned to track her daily spending, saves monthly in a savings account through automatic deposits and doesn’t rely on credit cards in a pinch. “Establishing a written goal and taking steps to make it become a reality helped me and I know it can help others too.”
Tax season is here again! You may be tempted to spend your REFUND on things you do not need, like wide-screen TV’s, expensive sneakers and clothes or other non-necessities. Making wise decisions to strategically plan how you will spend your tax refund now will save you from future financial headaches.
These steps taken before the tax season arrives, will be the beginning of smart financial practices that will help you during tax time and throughout the year. Be strategic. Create a monthly spending plan and write down how you’ll spend your tax refund in the coming year.
Begin with Direct Deposit. It’s easy, secure, convenient and fast. In the Refund section (Form 8888) of your 1040 income-tax return, write in your bank’s routing number, your checking or savings account number and your refund will be automatically sent to up to three different accounts indicated in Form 8888. You can also purchase US Series I Savings Bonds on Form 8888. Choosing this option will ensure no
lost, stolen or undeliverable paper checks!
I recommend using the 30-30-40 plan to pay for your past, present and future.
You may also want to consider charitable contributions to a food pantry or a homeless shelter. You’ll be helping your community and giving yourself a tax write-off when you file your taxes next year. Other ways to make the most of your tax refund: Save for the purchase of a major appliance, start a holiday fund, your child’s braces, summer camp, your anniversary etc.
2017 proved to be a hard-working year for most Americans with many working more than one jobs. Although the numbers are not out yet and will not be disclosed by the U.S. Census until September 2018, we can expect income growth in all categories (per capita, family and household), as it has been the trend for the past three years.
As we gaze in this realization, we are forced to do a quick reality check to make sense of how we spent our money, how much of it we put aside for savings, and how much we owe Uncle Sam. Keep in mind that no matter what the outcome is, we have to be aware of tax season scams. Predators and unscrupulous individuals are out there looking to entice you for your hard-earned money as you try to figure out how to keep more of it and pay less taxes.
Here are some unfortunate scams used to get your money:
1. The Early Refund Promise Scam: Phishing
Phishing is the most common tactic scammers use to con taxpayers. Phishing uses e-mail or text messages to trick you into providing your Social Security number, bank account numbers and passwords. A phishing e-mail or text may provide a link to a website that looks official but isn’t. It may offer a larger refund for a quick reply, or claim that your tax return is missing important information, such as your W2 wage and tax statement from your employer. These scams may even threaten penalties or criminal prosecution if you don’t act quickly.
Don’t fall for this con! Don’t click any attachments or links from any suspicious e-mail or texts!
The IRS will never send unsolicited messages to taxpayers and it doesn’t ask for passwords, PINs or other personal information. Forward messages of this kind to email@example.com , then delete them immediately. Through phishing, these scammers get your personal information and passwords, which will allow them to steal your identity and take over your account because a lot of confidential data is gathered during the tax filing process which can pose a great risk to your finances.
2. The Unscrupulous Tax Preparer
Before you contact someone to prepare your tax return, do your homework and choose wisely. You’ll be sharing your personal information with the tax preparer, so make the choice after much research. A bad tax preparer may take some of your refund, overcharge you or find other underhanded ways to steal your cash.
Consider trusted resources, like friends, family members and the Better Business Bureau, DCA (Department of Consumer Affairs) and other consumer-oriented websites can help you find a reputable tax preparer. Also check the IRS website’s “tips for choosing a trustworthy tax preparer”.
Ask the tax preparer to disclose all fees up front, preferably in writing. A tactic employed by a shady tax preparer is the charge of a high fee, then withhold your tax return until this fee is paid. Before paying fees or signing documents, be sure you read and understand all forms from the tax preparer. Be sure to check the preparer tax ID number since all preparers are required to have one to can file your tax return electronically.
The taxpayer is legally responsible for his/her tax return even if it was prepared by another person!
3. Quick Debt Cancellation Scams
The possibility of a cheap, quick fix without financial consequences sounds very attractive but very unlikely. Scammers prey on financially stressed taxpayers, like homeowners, affected by the housing crisis and may be facing foreclosure are usually targeted via phishing. Some tricks are: “Remove IRS Tax Penalties or Cut Your Debt Today or Pay Only 1% of Your Tax Bill”, among others. Sounds attractive. All frauds!
Ignore these scams. If taxes are specifically mentioned in the scam, there are legal ramifications for the perpetrators. No matter what the offer, don’t give up your personal information.
If it sounds too good to be true, it probably is!
4. The Phony Charity
The current reality is that scammers will use natural disasters (Hurricanes, floods, earthquakes etc.) and national tragedies to collect fast cash for phony charities. During tax season, scammers will claim that a donation you make now will allow you to get a tax deduction for the previous year. Not true!
Charitable contributions are taken in the tax year they are made! Do not donate to door-to-door collectors or over the phone, unless you initiated the transaction.
5. Offshore Tax Shelters That are Non-existent
Beware of scammers who are trying to convince Americans into transferring money or making investments to offshore accounts as tax shelters to avoid paying taxes. Offshore accounts are legal but must be disclosed to the IRS during tax time and failing to do so can lead to criminal prosecution.
Don’t respond to e-mail requests to open an offshore account, however, if you already have one, make sure it’s properly declared, and all related taxes are paid.
The IRS’ Offshore Voluntary Disclosure Program offers taxpayers who admit to maintaining offshore accounts the opportunity to become current with their tax returns.
Can you believe 2017 is almost gone? In a few days we will be shouting “Happy New Year!” welcoming 2018. As our yearly routine, many of us will start planning New Year’s resolutions, like getting back in shape by joining a gym; taking care of our health by buying into the latest detoxification trend; adding new items to our bucket list; traveling more and so on.
One important resolution often overlooked by many is the resolution to be more financially responsible and to take charge of our financial health. Somehow, the thought of financial fitness is a topic many people avoid in part because we tend to think in terms of the “here and now” and planning for the future seems, well, so far away. The good thing is, you don’t have to wait until the new year to think about ways to improve your financial health. Here are some strategies you can implement right now, before the year ends.
1. Review your retirement plan (401K, 403b, 457) or other retirement savings such as a traditional IRA.[i] If possible, max-out your contributions, especially if your employer is matching your contributions.
2. Make contributions to NYS 529 College Savings Plan. You can contribute up to a maximum of $13,000 in annual contributions. All contributions are tax deferred and withdrawals are tax-free when used for qualified education expenses.
3. Increase your charitable contributions to decrease taxes and increase refunds. You may want to consider making a charitable contribution or donation to the LDC. The LDC is a 501(c) 3 tax-exempt, not-for-profit organization and can give you a tax deduction letter for the amount you donate.
4. Make an additional payment to your student loan. The interest is tax-deductible.
5. Make additional payments to your mortgage. This will get you double benefits. The portion of the payment that is interest is tax-deductible. The difference will pay down the principal to pay off your mortgage faster.
6. Make energy improvements to your home. The cost of energy saving devices such as solar panels is deductible.
7. Trade in your clunker for an electric car. You will receive a tax deduction and save on gasoline too.
8. Consider deferring end-of-year income such as bonuses to 2018 to minimize 2017 taxable income. This will help if you expect a decrease in your 2018 income or you plan to make a larger contribution to your 401K or retirement account.
[i] You have until April 15, 2018 to contribute to your traditional IRA for tax year 2017. The maximum annual contribution for 2017 is $5,500 for individuals under 50 years old and $6,500 for persons 50 years or older.
Denise Garrett is a financial counselor at the LDCENY and has more than 25 years experience in financial counseling and retail banking.