Long-Term Care Options and How to Plan for the Costs

Think for a minute about all the things you did when you woke up this morning. You probably got out of bed, walked to the bathroom, cleaned yourself up, brushed your teeth, got dressed, made yourself some breakfast, and headed out the door to go to work. These activities of daily living are so routine, you likely did them without even thinking about it.

Now imagine that you couldn’t do these things on your own. It could be because you’ve had an accident, you’re recovering from an operation, or you have an illness that limits your mobility. Whatever the reason, you now need help from another person to do many or even most of your basic daily activities — and you’ll continue to need it for weeks, months, or even years.

This kind of help is called long-term care, and there’s a good chance you or a close loved one will need it at some point in your life. According to the U.S. Department of Health and Human Services (HHS), a person who turned 65 today has almost a 70% chance of needing some form of long-term care in the future.

Needing long-term care isn’t just a physical burden; it’s a financial one too. According to the 2020 Cost of Care Survey by Genworth Financial, professional long-term care can cost anywhere from $1,603 to $8,821 per month. Most employer-sponsored health insurance plans don’t cover these costs, and even Medicare provides only limited coverage.

If you don’t want to risk being bankrupted by long-term care costs in the future, you need to do some planning now. Even if you don’t think you’ll need long-term care for many years to come — or at all — it’s better to think about it ahead of time than to take a chance on having to deal with both a health crisis and a financial crisis at once.

Options for Long-Term Care

When many people hear “long-term care,” they immediately picture a nursing home. However, it’s possible to receive long-term care in a variety of settings, which differ widely in terms of both comfort and cost.

The main forms of long-term care are:

1. In-Home Care From Relatives

Dealing with a long-term injury or illness can be a lot less stressful in your own home with familiar things and people around you. Thus, one common type of long-term care is to have a relative or friend tend to your needs at home.

While unpaid in-home care is easiest on the person receiving care, it can be difficult for the caregiver, both emotionally and financially. A 2018 Genworth study found that more than half of family caregivers had high levels of stress, and roughly one-third said their careers had suffered on account of their caregiving duties.

2. Home Health Aides

If you want to receive care at home without putting a burden on your relatives, you can hire someone to help you. A home health aide doesn’t provide medical care but can help with such daily tasks as bathing, dressing, and eating. The 2020 Genworth survey found that the median cost of a home health aide in 2020 was $24 per hour, or $4,756 per month.

3. Homemaker Services

Some people don’t need help with bathing or dressing, but they still need someone to handle daily chores they can’t manage on their own, such as cooking, cleaning, and running errands. For this, you can hire a homemaker service, which costs a bit less than a home health aide. Genworth put the median cost of homemaker services for 2020 at $23.50 per hour, or $4,481 per month.

4. Adult Day Care

Some older people can still get up and about, but they can’t be on their own for long periods of time. An adult day care program is a place where adults can go during the day and spend time with others, with a caregiver there to keep an eye on them. Adult day care programs can offer structured activities, meals, transportation, and sometimes health services. They’re cheaper than most long-term care options, at around $74 per day or $1,603 per month, according to Genworth.

5. Assisted Living

Home health aides can help with daily activities, but they can’t provide actual medical care. People who need regular medical supervision are better off moving to an assisted living facility. This is a place where people can live on their own in private apartments and have access to both personal care and medical care on site. The median cost for an assisted living facility was $4,300 per month in 2020, according to Genworth.

6. Nursing Home

Nursing homes provide the highest level of supervision and care. These all-inclusive facilities offer room and board, personal care, supervision, activities, medication, rehabilitation, and full-time nursing care. This level of care comes with a high price tag, however. Genworth found that in 2020, a semi-private room in a nursing home cost $7,756 per month, and a private room cost $8,821 per month.


Government Programs

Most Americans can’t afford to pay for professional long-term care out of their own pockets. A 2020 survey by The Ascent found that over half of Americans have less than $5,000 in savings. Roughly one-third have less than $1,000 — not enough to pay for even a single month of long-term care.

Government programs, including Medicare and Medicaid, can help you meet some of the costs. However, these programs offer only limited aid. Each one has specific rules about who qualifies for benefits, what services it covers, how long you can receive aid, and how much you must pay for on your own. If you need long-term care, it’s certainly a good idea to look at these programs first to see what they cover, but it’s a mistake to rely on them to pick up the whole tab.

Medicare

In most cases, Medicare does not include any long-term care benefits. However, there are several specific exceptions:

  • Skilled Nursing Facility (SNF) Care. If you come out of the hospital after a stay of at least three days, Medicare provides partial coverage for up to 100 days’ worth of medically necessary care while you recover. To receive this coverage, you must enter a Medicare-certified SNF or nursing home within 30 days after you leave the hospital. Medicare covers all of your treatment there for the first 20 days of your stay. Beginning on day 21, you must pay a daily copayment, which is set at $185.50 in 2021. Medicare covers any cost beyond this copayment up through day 100. If you still need care after that, you’re on your own.
  • Rehabilitation. If you have a condition that requires ongoing medical care to help you recover, Medicare provides partial coverage for a stay in an inpatient rehabilitation facility. It covers the cost of treatments such as physical therapy, meals, drugs, nursing services, and a semi-private room. However, you must pay an out-of-pocket cost for this care that depends on the length of your stay. For the first 60 days, you pay a $1,364 deductible. This cost is waived if you’ve already paid for a hospital stay for the same condition. For days 61 through 90, you pay $341 per day. After day 90, you start using up your “lifetime reserve days.” You have only 60 of these days over your lifetime, and each one costs you $682. If you still need care after your 60 days are used up, you must pay the full cost. Also, any extra costs during your stay — such as a private room, private duty nursing, or a phone or television in your room — are your own responsibility.
  • Home Health Services. You can also use Medicare to pay for in-home care for a specific illness or injury. This includes part-time or intermittent skilled nursing care, physical or occupational therapy, and speech-language pathology. To qualify as part-time, your care must cover less than eight hours per day, or less than seven days per week, over a total of three weeks or less. If you are receiving this type of in-home care, Medicare also pays for additional, basic care from a home health aide. Medicare does not cover care from a home health aide if that’s the only care you need, and it does not cover homemaker services under any circumstances.
  • Hospice Care. People who are terminally ill sometimes choose to spend their last days in hospice care. Hospice treatment focuses on relieving the patient’s pain, rather than trying to cure them. Medicare covers hospice care for patients who are terminally ill, are not seeking a cure, and do not expect to live more than six months. Patients can receive this kind of care in their own homes, a hospital, or another inpatient care facility.

For more details about what Medicare covers, see the Medicare website.

Medicaid

Unlike Medicare, Medicaid covers all types of long-term care. This includes both in-home care — such as a visiting nurse or a home health aide — and care in facilities such as nursing homes. You can get home health aide services from Medicaid even if you don’t need skilled care as well, and you can get care in a facility even if you aren’t recovering from a hospital visit.

However, Medicaid has strict limits on eligibility. You can’t receive Medicaid benefits if your income is above a certain level, which varies from state to state. Also, in some states, you cannot qualify unless you have dependent children. You can find the limits for your state through your state’s Medicaid website.

Veterans’ Benefits

The Department of Veterans Affairs (VA) covers the full cost of long-term care for veterans who have disabilities resulting from their military service. It also covers costs for veterans who can’t afford to pay for their own care. Other veterans receive some coverage, but they must pay a copayment. According to the VA site, the current copayments for long-term care are:

  • $97 per day for inpatient care, such as nursing home care
  • $15 per day for outpatient care, such as home health care or adult day care
  • $5 per day for domiciliary care in a special facility for homeless veterans

The VA site has more information about the health benefits available to veterans and how to qualify for them.

OAA Programs

Some states have their own separate programs to help provide care for adults over age 60. These programs get funding from the federal government under the OIder Americans Act (OAA). The OAA supports a wide network of state, local, and tribal agencies called the Aging Network. It works with tens of thousands of service providers and volunteers to deliver various types of care, including:

  • Meal delivery
  • Transportation
  • Home health services
  • Home health aide and homemaker services
  • Adult day care
  • “Respite care,” which gives family caregivers some time off from taking care of an older relative
  • Help using other government benefits

You can find programs in your area through Eldercare.gov.


Products to Help You Pay for Long-Term Care

Government programs don’t cover everybody, and the coverage they offer isn’t always enough to pay for the full cost of long-term care. To make up the difference, some people carry long-term care insurance, which provides coverage for this specific type of care. Others rely on other financial products designed for senior citizens, such as annuities and reverse mortgages, to cover their costs.

Long-Term Care Insurance

Long-term care insurance, or LTC insurance, works like other types of insurance. You pay a premium each month to the insurer, and if you ever need long-term care, it covers the cost. However, one big difference between this and most other types of insurance is that you have to qualify to buy a policy. If you’re already in poor health, there’s a chance you won’t be able to get a policy — and if you do, you’ll have to pay a steep price for it.

There are several ways to buy a long-term care insurance policy. The most common sources for policies are:

  • Insurance Specialists. You can buy LTC insurance through financial professionals such as insurance agents, brokers, and financial planners. To find insurance companies that offer LTC insurance, visit your state insurance department or do an Internet search for “long-term care insurance” plus the name of your state.
  • Employers. Although standard employer-sponsored health care plans don’t cover long-term care, many employers — including the federal government, many state governments, and some private companies — offer LTC insurance as an add-on that employees can purchase separately. To find out whether your employer offers this coverage, check with your pensions or benefits office.
  • Organizations. Some labor unions and other professional or trade organizations, such as the National Education Association, offer LTC insurance as a benefit to their workers. Membership organizations such as alumni associations or service clubs like the Lions and Elks can also take part in group plans.
  • State Partnerships. In some states, you can purchase LTC coverage through a State Partnership Program. These programs provide benefits partly through private long-term care insurers and partly through Medicaid. You can learn more details about these programs from the Department of Health and Human Services (HHS).

Although long-term care coverage can protect you from devastating long-term care costs, most Americans don’t carry it because of its high cost. According to the American Association for Long-Term Care Insurance (AALTCI), the typical annual premium for an LTC policy ranges from $1,400 to $3,100. This annual cost varies based on factors such as age, health, gender, location, and amount of coverage.

Financial planner David Demming, speaking with Policygenius, says LTC insurance is most likely to be a good deal for people aged 50 to 55 with a net worth between $1 million and $3 million. That’s enough money to afford the premiums, but not enough to cover the full cost of long-term care. To get a clearer idea of what LTC policy pricing could be for you, check out online calculators like this one from Genworth.

Annuities

Some people choose to fund their long-term care through an annuity, a financial product that pays out a fixed sum every year over a specific period. There are three kinds of annuities you can use for this purpose:

  • Immediate Annuities. With an immediate annuity, you pay a one-time premium, and in exchange the company pays you a fixed monthly benefit. This benefit can last for a specific period of time or the rest of your life. One advantage of an immediate annuity is that anyone can buy one, regardless of health status. This makes it a good option for people who no longer qualify for LTC insurance due to poor health. However, the fixed monthly sum you get might not be enough to meet your long-term care costs, and inflation can eat into its value.
  • Deferred Annuities. You can buy a deferred annuity with either a one-time payment, like an immediate annuity, or a series of regular payments. The money you pay into the annuity earns interest and grows tax-free. It doesn’t start paying out a monthly benefit until a specific date, such as your 65th birthday.
  • Long-Term Care Annuities. A long-term care annuity is a deferred annuity with a long-term care rider. This type of annuity doesn’t pay out until you need the money for long-term care costs. To collect the monthly payment, you must be diagnosed with a medical condition that requires long-term care, such as Alzheimer’s disease. According to HHS, this type of annuity is usually available only to people age 85 or younger who meet certain health requirements. However, according to SmartAsset, it’s sometimes easier to get approved for a long-term care annuity than for LTC insurance.

Depending on your situation, an annuity can be a cheaper way to cover long-term care costs than LTC insurance. However, it typically requires a large up-front payment, which is even higher if you already have health issues. Also, annuities can have a complicated effect on your taxes — HHS recommends consulting a tax professional before you buy one.

Reverse Mortgages

Another way to pay for long-term care services is with a reverse mortgage through LendingTree. This is a special type of home equity loan available only to homeowners age 62 and up, which allows you to get cash out of your home without giving up your title to it.

The house remains your property until you die. At that time, it goes to the bank unless your heirs choose to pay off the amount you’ve borrowed and keep the house. Otherwise, the bank sells the house and keeps the amount you owed at the time of your death. Any cash beyond that balance goes to your heirs.

There are several ways to get cash from a reverse mortgage. You can get one large lump-sum payment, a regular monthly payment, or a line of credit you can draw on as needed. The second two options are most useful for paying long-term care expenses. As long as you spend the payments in the same month you receive them, the money is not taxable income and doesn’t affect any government benefits, such as Social Security, Medicare, or Medicaid.


Long-Term Care Planning

Dealing with long-term care can be an emotional and financial burden, both for you and for your family. The best way to lighten that load is to plan ahead. By making your plans early, you’ll have plenty of time to do research, make decisions, and buy traditional long-term care insurance or any other products you need to cover the costs.

1. Research Your Options

Start by looking into the options for advanced care in your area. Check the phone book or do an online search to find out what choices you’re likely to have for assisted living and nursing homes, as well as home health aide and homemaking services. The Genworth Cost of Care Survey tool can help you estimate what these services cost now and what they’re likely to cost in the future. You can also check the costs for services in other areas to figure out whether relocating would save you money.

2. Talk to Your Family

Once you have some idea of available options, talk to your family members and get their input. Set aside a time when you can talk everything over in person without having to rush. Here are some points to discuss:

  • Your Lifestyle. Discuss the way you live now and how you expect to live in the future. For instance, if it’s important to you to stay at home and live independently, let your family know that. Tell them about your priorities, and find out what’s important to them, as well.
  • Your Care Options. Show your family the research you’ve done on care options in your area. Tell them how you’d prefer to receive care and whether you have a specific provider in mind. Also, find out how much of your care your loved ones are able and willing to take on themselves. If you have several relatives who could help you, talk about which specific responsibilities each of them could handle.
  • Your Finances. Once you’ve considered what kind of care you want, talk about what it’s likely to cost. Let your family know how much money you can set aside now toward your future care needs, and find out if any of them are willing to contribute.
  • Medical Care. Make sure your family knows your health history in detail so they can supply it to a doctor if they need to. Also, make sure they know how to contact all of your current medical providers.
  • Legal Issues. Decide who should be responsible for making medical decisions for you if you can’t make them yourself. Use this information to set up a durable power of attorney for the future. Also, talk to your loved ones about your wishes for end-of-life care. If you already have a living will, tell them what it says and where to find it; if you don’t have one, make plans to set one up.

3. Calculate the Cost

Now that you have some idea who will provide care for you when you need it, the next step is to figure out how much it will cost. Even if your family has offered to provide unpaid care for you when you need it, there could still be some cost involved. For instance, you could choose to hire a house cleaning service so your loved ones won’t be responsible for all the housekeeping chores in addition to your care.

If you’re planning to pay for professional long-term care services, think about how long you’re likely to need them. According to the HHS, people who require long-term care use it for an average of three years. This includes an average of two years of in-home care and one year in a long-term care facility. About one in five people need care for more than five years.

To figure out the total amount you’ll need for long-term care costs, multiply the cost by the expected length of care. For instance, suppose a home health aide costs $60,000 per year and assisted living costs $90,000 per year. If you expect to need two years of home health care and one year in assisted living, you must save up a total of $250,000.

If the total cost looks like more than you can possibly afford, look for ways to save on long-term care. This could include relying on family care, negotiating prices, getting help from government programs, or relocating to a cheaper area.

4. Make a Plan to Cover the Costs

Once you have an idea of how much money you’ll need for long-term care, you can start figuring out how to pay for it. If your income and assets are low enough, you can look to Medicaid for help when you need care. State government programs could also provide some help.

By contrast, if you have a lot of liquid assets — that is, cash, retirement savings, and other assets you can easily convert to cash — you might be able to pay for your care out of pocket. Financial planners interviewed by Policygenius say this is most practical for people with a net worth of at least $3 million.

If you’re somewhere in between those two extremes, you’ll need some other way to meet the costs of long-term care. That could mean buying long-term care insurance, investing in an annuity, or taking out a reverse mortgage. A financial planner can help you compare these options and decide which one is best for you.

5. Put Your Plan in Writing

After you’ve come up with a plan to meet your long-term care needs, the final step is to put it in writing. Having a written plan gives your family something to consult if there’s ever any confusion or uncertainty about your wishes.

If you’ve decided to make a living will or set up a durable power of attorney, these documents should be part of your written care plan. Consult a lawyer to help you set these up. Give a copy of the entire plan, including the legal documents, to any relatives it could affect.

Putting your plan in writing doesn’t mean it’s set in stone. If your health or financial situation changes in the future, your long-term plans might need to change too. Update your plan as needed, and make sure your relatives always have the latest version.


Final Word

If you’re young and healthy, you may feel like it’s too soon to start thinking about long-term care. Since you probably won’t need it for many years, you figure you can just wait and deal with it when the time comes.

However, there are several good reasons why now is exactly the right time to think about it. First of all, the future is unpredictable. Even young people can suffer injuries or develop illnesses that keep them off their feet for months.

Also, LTC insurance gets more expensive and harder to obtain as you age. If you decide to wait until you’re 65 before buying a policy, it could already be too late to qualify. And even if you can get one, you’ll pay a much steeper rate for it than you would if you’d bought it 10 years earlier. So it makes sense to start thinking about this type of insurance and decide whether it’s for you before you hit age 55.

Finally, if you put off thinking about long-term care until you actually need it, you’ll have to make a whole lot of important decisions in a hurry. You could end up making choices that aren’t best for you because you don’t have time to weigh the options. By avoiding procrastination and thinking it through now, you can ensure that when — or if — you finally need long-term care, it will be as easy as possible for you and your family.

Source: moneycrashers.com

15 Cities With the Oldest Populations

Happy seniors exercising with hula hoops
Rawpixel.com / Shutterstock.com

This story originally appeared on Filterbuy.

One of the most impactful demographic trends across the United States in the coming decades will be the growth in the population aged 65 and older.

Much of the country is graying as more baby boomers, who were until 2019 the U.S.’s largest generational cohort, reach retirement age. The boomers — more than 73 million Americans born between 1946 and 1964 — began hitting retirement age more than a decade ago and will continue to age into the 65-and-up bracket until the end of the 2020s.

Thanks to advances in health care and medicine, these older Americans are projected to live longer on average than their predecessors. According to the U.S. Census Bureau, by 2030 those aged 65 and older will constitute more than 20 percent of the U.S. population, and they are projected to remain between one-fifth and one-quarter of the U.S. population through at least 2060.

The U.S. is already seeing signs of these effects. A wave of retirements will leave labor shortages in some industries, while many of the occupations with the greatest growth potential are in health and social services, driven by the elderly’s greater need for care.

Experts believe that GDP growth is likely to slow as a result of lost productivity and increasing costs of care. Government social insurance programs like Medicare and Social Security have seen their expenditures balloon as more retirees shift from paying into the system to receiving benefits from it. Nationally, within states, and at the community level, the U.S. will continue to experience the socioeconomic implications of an increasingly older population.

To find the cities where these trends will be most apparent, researchers at Filterbuy used 2019 Census data to identify which metro areas have the largest share of residents over 65. The researchers also found the city-level old-age dependency ratios as well as the percentage of the senior population with a disability to understand where the burdens of care might be even higher.

Here are the large cities (those with 350,000 residents or more) with the largest percentage of the population 65 and older.

15. Wichita, KS

Wichita, Kansas
Gary L. Brewer / Shutterstock.com

Percentage of population 65 and older: 14.4%

Total population 65 and older: 55,352

Percentage of population 65 and older with a disability: 37.7%

Old-age dependency ratio: 24.0%

14. Jacksonville, FL

Jacksonville, Florida
Sean Pavone / Shutterstock.com

Percentage of population 65 and older: 14.4%

Total population 65 and older: 127,758

Percentage of population 65 and older with a disability: 35.9%

Old-age dependency ratio: 22.8%

13. Baltimore, MD

Baltimore
f11photo / Shutterstock.com

Percentage of population 65 and older: 14.4%

Total population 65 and older: 84,165

Percentage of population 65 and older with a disability: 38.5%

Old-age dependency ratio: 22.3%

12. Tulsa, OK

Tulsa Oklahoma
Valiik30 / Shutterstock.com

Percentage of population 65 and older: 14.7%

Total population 65 and older: 58,686

Percentage of population 65 and older with a disability: 33.4%

Old-age dependency ratio: 24.8%

11. Las Vegas, NV

Las Vegas neighborhood with desert hills beyond.
Christopher Boswell / Shutterstock.com

Percentage of population 65 and older: 14.8%

Total population 65 and older: 95,394

Percentage of population 65 and older with a disability: 34.9%

Old-age dependency ratio: 24.4%

10. New York, NY

New York City coastline
IM_photo / Shutterstock.com

Percentage of population 65 and older: 15.0%

Total population 65 and older: 1,242,566

Percentage of population 65 and older with a disability: 34.6%

Old-age dependency ratio: 24.0%

9. Colorado Springs, CO

Colorado Springs, Colorado
photo.ua / Shutterstock.com

Percentage of population 65 and older: 15.1%

Total population 65 and older: 70,512

Percentage of population 65 and older with a disability: 31.3%

Old-age dependency ratio: 23.6%

8. New Orleans, LA

New Orleans, Louisiana at night
f11 photography / Shutterstock.com

Percentage of population 65 and older: 15.3%

Total population 65 and older: 59,203

Percentage of population 65 and older with a disability: 35.9%

Old-age dependency ratio: 24.0%

7. Virginia Beach, VA

Ritu Manoj Jethani / Shutterstock.com

Percentage of population 65 and older: 15.4%

Total population 65 and older: 65,405

Percentage of population 65 and older with a disability: 31.2%

Old-age dependency ratio: 23.3%

6. Tucson, AZ

Tucson
Chris Rubino / Shutterstock.com

Percentage of population 65 and older: 15.5%

Total population 65 and older: 82,197

Percentage of population 65 and older with a disability: 38.8%

Old-age dependency ratio: 23.7%

5. Louisville, KY

Louisville, Kentucky
f11photo / Shutterstock.com

Percentage of population 65 and older: 15.6%

Total population 65 and older: 95,530

Percentage of population 65 and older with a disability: 34.8%

Old-age dependency ratio: 25.5%

4. San Francisco, CA

San Francisco, California
IM_photo / Shutterstock.com

Percentage of population 65 and older: 15.9%

Total population 65 and older: 139,273

Percentage of population 65 and older with a disability: 34.2%

Old-age dependency ratio: 22.7%

3. Albuquerque, NM

Albuquerque, New Mexico
BrigitteT / Shutterstock.com

Percentage of population 65 and older: 16.2%

Total population 65 and older: 90,429

Percentage of population 65 and older with a disability: 33.4%

Old-age dependency ratio: 26.5%

2. Mesa, AZ

Mesa, Arizona
Tim Roberts Photography / Shutterstock.com

Percentage of population 65 and older: 16.5%

Total population 65 and older: 85,337

Percentage of population 65 and older with a disability: 31.9%

Old-age dependency ratio: 28.5%

1. Miami, FL

Miami
Kamira / Shutterstock.com

Percentage of population 65 and older: 17.5%

Total population 65 and older: 81,251

Percentage of population 65 and older with a disability: 34.6%

Old-age dependency ratio: 27.1%

Methodology & Detailed Findings

Working on computer data analysis on a laptop
Gorodenkoff / Shutterstock.com

Researchers used the most recent population data from the U.S. Census Bureau’s 2019 American Community Survey 1-Year Estimates. Cities were ranked according to the percentage of the population 65 and older. Researchers also calculated the total population 65 and older, the percentage of the population 65 and older with a disability, and the old-age dependency ratio for each city.

For relevance, only cities with at least 100,000 residents were included in the report, which grouped them into cohorts of small, midsize, and large metros.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

5 Strategies for Tax Planning Now and in Retirement

Long-term tax planning is one of the best things you can do to boost your income in retirement, however, it’s often overlooked. To change that, when thinking about tax planning, choose to think of it as tax saving instead.

Here are some moves you can make now and in retirement to better control how much money you owe come tax time.

1 of 5

To Save on Taxes Now, Lower Your Taxable Income

Money in a jeans pocket.Money in a jeans pocket.

When you contribute to a 401(k) or traditional IRA, you are reducing your taxable income for the year. The money you put into these accounts also grows tax deferred until you withdraw it in retirement. It’s not too late to reduce your tax bill for 2020; IRAs are unique in that you have until April 15 of this year to contribute and reduce your taxable income for 2020.

Besides the tax benefits you receive now, maxing out your contributions is an important part of increasing your retirement security. You can put away up to $19,500 in your 401(k) in 2020 and up to $6,000 in your IRA (and those limits are the same for 2021 as well).

If you are 50 and older, take advantage of catch-up contributions. You can save an additional $6,500 in your 401(k) and an extra $1,000 in an IRA. You should be taking a close look at your retirement accounts when you’re 50 years old to determine if you’re on track to meet your savings goals.

2 of 5

To Save on Taxes in the Future, Diversify Your Tax Liability

A selection of many piggy banks in different sizes, shapes and colors.A selection of many piggy banks in different sizes, shapes and colors.

When looking at your retirement savings, it’s important to consider the types of accounts you’re saving and investing in. Tax-deferred accounts, like your 401(k) and traditional IRA, offer tax advantages now. You contribute money before taxes, but you will owe the IRS when you take money out in retirement.

Tax-exempt accounts, like a Roth IRA or Roth 401(k), offer tax advantages in the future. Your money is taxed before you contribute to the account, but you can withdraw it tax-free in retirement. Thanks to our historically low tax environment right now, we are focusing on converting clients’ traditional IRAs to Roth IRAs. You’ll pay taxes when converting to a Roth, which is why some people like to do a partial conversion. This means they are only moving as much money as they’re able to pay taxes on this year and moving more money next year.

Taxable accounts include your brokerage and savings accounts. You are taxed on the interest you earn and on any dividends or gains. Investment accounts are an important part of your overall financial plan, especially during your working years as you grow and accumulate your savings for retirement.

How much you contribute to your retirement accounts during your working years and the types of accounts you contribute to will impact how much you pay in taxes both now and in retirement. Diversifying your savings and investment accounts will help you better control your tax situation in retirement; you gain more flexibility on how much you withdraw and from which account.

3 of 5

Give to Charity

Cash is arranged to form a heart shape.Cash is arranged to form a heart shape.

The Tax Cuts and Jobs Act nearly doubled the standard deduction. As a result, fewer people are itemizing their taxes. With proper tax planning, there are new ways to donate to charity and still reap a reward. One strategy to consider is giving to donor-advised funds. Your contributions are invested and grow tax-free until you choose to donate to a qualified charity. Depending on your situation, contributing to a donor-advised fund could help you exceed the standard deduction, allowing you to itemize your deductions at tax time.

You may also consider using the bunching strategy. Instead of giving to charity every year, you can save your donations and give twice as much every other year. Let’s say you donate $10,000 to charity every year. If you started bunching this year, you will wait to make that donation and take the standard deduction on your taxes. Next year, you’ll donate $20,000 ($10,000 for 2021 and the $10,000 for 2022) and itemize your taxes that year. Bunching may or may not work for your personal situation, depending on how much you plan to donate and how close you are to having enough deductions to exceed the threshold for the standard deduction.

Bunching may also play in your favor if you’re donating to a donor-advised fund. Consider front-loading two years’ worth of donations and contributing to a donor-advised fund this year. Take as many itemized deductions as you can this year, and take the standard deduction next year. Talk with your financial adviser and your tax professional to find a strategy that works best for you.

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Plan for RMDs

A woman gives two thumbs upA woman gives two thumbs up

Retirees need to take required minimum distributions (or RMDs) and pay taxes on that money starting at age 72. Some retirees don’t need the money from their RMDs and others don’t want to count the withdrawals toward their earned income for the year as it may bump them into a higher tax bracket. Qualified charitable distributions allow you to deduct your RMDs on your tax return if you give that money to charity. The money is transferred untaxed straight from your IRA to a qualifying charity, including non-profits and religious organizations. You must transfer the money directly to avoid paying taxes on the withdrawal; if you withdraw the money first and then write a check to a charity, you will owe the IRS.

Many retirees are unsure how much money they need to withdraw and when they need to withdraw it. It’s important to have a strategy for your RMDs well before your 72nd birthday. A financial adviser can help you plan for your RMDs so you don’t miss the deadline and pay a penalty.

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Meet with a Financial Adviser

A woman talks with her financial planner via Zoom.A woman talks with her financial planner via Zoom.

It’s never too early to meet with a financial adviser. He or she will help you decide which types  of accounts to save and invest in and can help set savings goals to keep you on track. If you’re five to 10 years away from retirement and haven’t met with a financial adviser, this is the time to get serious about planning. A comprehensive plan will take into account taxes, Social Security, health care and estate planning.

Founder & CEO, Drake and Associates

Tony Drake is a CERTIFIED FINANCIAL PLANNER™and the founder and CEO of Drake & Associates in Waukesha, Wis. Tony is an Investment Adviser Representative and has helped clients prepare for retirement for more than a decade. He hosts The Retirement Ready Radio Show on WTMJ Radio each week and is featured regularly on TV stations in Milwaukee. Tony is passionate about building strong relationships with his clients so he can help them build a strong plan for their retirement.

Source: kiplinger.com

COVID accelerated migration trends, but is it sustainable?

Even Norman Rockwell couldn’t put a rosier cast to New Hartford, Connecticut, in mid-autumn. On the far western outskirts of the Hartford metropolitan area, the town’s converted brick mill buildings are now occupied by restaurants that sell and serve locally grown produce and locally made artisanal cheese. A river – the Farmington – really does run through the town, shallow and sparkling, punctuated by occasional fly-fisherman. Bridges arch over the river from stands of yellow-leafed birches to groves of flaming maples.

It’s exactly the kind of place that’s attracting pandemic-panicked New Yorkers who, drawing a circle of two hours’ train travel from Manhattan, figure they can set up parallel lives in the country and city. 

The COVID-19 crowds that are now seeking fresh air and socially distanced living are looking beyond what is considered more traditional second-home destinations to small towns that have struggled to catch the updraft of the broadband revolution. As city dwellers scatter, enough of them are landing in the semi-rural spots to potentially realign the very definition of economic development, land use and the consequent cascade of broad band investment, municipal services, taxation and local spending priorities. 

“The economy is moving faster than the population,” said Mark Lautman, an economic development consultant who has helped local organizations in New Mexico and elsewhere forge partnerships that serve residents and employers.

In the past, economic development was defined by incentives for buildings and infrastructure with the aim of winning and keeping employers with substantial numbers of workers. 

The COVID-19 pandemic has accelerated a longer-term trend of separating talent from location. Economic development leaders are just starting to realize the profound implications of a distributed workforce on their local economies, workforce development, housing and real estate markets, he said. 

“If you don’t have qualified workers, you can’t grow your economy,” Lautman said. “And all of a sudden, the cost of place of operation is zero. States throw massive resources at site-based economic development but remote economic development needs a fraction of that.”  

Investors are already moving money into place to catch the coattails of COVID-catalyzed change. 

Collin Gutman, managing partner of SaaS Ventures, a Washington, DC-based venture capital firm that works specifically with young companies in smaller metropolitan areas far from Silicon Valley, said that the pandemic has propelled high tech companies to redefine where and how they look for talent.

“Previously there had been a perception that these types of businesses could only get critical mass of talent in San Francisco or Boston,” he said. “That perception has changed very quickly in the past 12 months. We’ve seen an outflow to places like Louisville, Lexington, Nashville and people buying second homes in rural counties.”

Daniel Jeram is New Hartford’s First Selectman, the top official of the 7,000- resident town. He said he hasn’t seen anything quite like this year’s real estate sales burst.  

“The game is on and it has been for months,” Jeram said. “You can tell from the license plates driving around town.” 

He isn’t kidding. Regional market reports from the Greater Hartford Association of Realtors released at the end of 2020 show that year-over-year, pending single-family home sales rose 49.9%, days on market dropped by 32.1% and the median home sale price rose 13.3% to $280,500. 

Maintaining the growth

With young families pouring in, New Hartford’s challenge is how to keep them, especially as support for enhanced broadband has been under discussion for years, with little progress, Jeram said. New Hartford is on the eastern edge of a subregion of northwestern Connecticut and southwestern Massachusetts that suffers from weak cell coverage and tepid broadband. 

“We’re okay,” said Jeram, of New Hartford’s cable service, “but that is an ongoing debate that state and local leaders are struggling with, because cost to get broadband in is extremely high. Everyone knows it’s the wave of the future, but how will we pay for it?”

Rista Malanca is trying to figure that out. She is director of economic development for neighboring Torrington, where broadband somewhat peters out. 

“We’re attractive and affordable for a lot of people, but how do we keep them engaged, so they center their lives here, and spend their money here?” Malanca said. 

Powerful broadband paves the digital way for not just telecommuting and remote collaboration, but also for telehealth, remote education for children and adults and a host of other services that frame the new hybrid of a sophisticated information economy invisibly driving growth.  

Consultants with McKinsey project that 22% of companies expect to hire more remote freelance workers in the foreseeable future. Before the COVID-19 pandemic reordered the American workforce in March 2020, only 4.9% of full-time U.S. workers telecommuted from their homes. By the end of June, 42% of the workforce was home-based, and workforce researchers expect that the dramatic shift is largely permanent. FlexJobs, a Boulder, Colorado-based employment site that serves both individuals and employers, projects that capturing work-life balance and reducing commuting stress are top priorities for people who want to move and either bring their jobs with them or find remote work.

Changing lifestyle

Professionals who bring high-paying jobs with them also transplant demand for higher-end dining, grocery, local entertainment and home renovation and maintenance services, said Shaun Greer, vice president of sales and marketing at Vacasa, a Portland, Oregon, company that provides property management services to more than 21,000 vacation homes in North America. 

Unlike short-term renters, professionals relocating for a full-fledged second hub where they can work and attend school remotely, need functional and municipal services largely different from tourist demands. 

“If this trend continues, it will affect municipal budgets,” Greer said. “Most of these communities are restricted in some way, such as [their level of] power or utilities. If this growth continues they’ll have to put in a lot more infrastructure to keep up.”

New Hartford could take a cue from The Peoples Rural Telephone Cooperative in McKee, Kentucky, population 800. 

In 2007, the cooperative, formed in 1950 and serving two rural Kentucky counties, decided to go all in on broadband, related Keith Gabbard, who has been the cooperative’s CEO for the past 25 years. Patching together about $50 million from federal, state and local sources, the service committed to bringing broadband to every home in its service area. 

“Since 2014, we’ve had gigabit service to every home and business,” Gabbard said. “Once we got it built, we realized, ‘what do we do with it?’ We had to become more economic-development minded.”

Gabbard took on the role of one-man employment liaison, workforce training advocate, lobbyist to state legislators and public relations cheerleader, relentlessly promoting the cooperative’s ready, willing and connected workforce at conferences. Working relationships with national workforce development agencies and platforms – including FlexJobs – produced a stream of inquiries from American companies seeking to bring operations back to the U.S. from overseas, and looking to expand domestically. 

“It’s been amazing,” Gabbard said. “In the last five years we’ve had 1,100 teleworks jobs created. People move here because of the internet and we’re seeing even more of that because of the pandemic.” 

McKee still lacks a Starbucks, but it is making inroads with establishing a healthcare clinic that will pivot on telemedicine. And, Gabbard has even drawn local Amish into the high-speed loop as the cooperative hires their construction crews to expand into neighboring counties. 

Communities that were a step ahead are both riding the first crest of post-COVID change while demonstrating the importance of close collaboration among regional economic, workforce and housing development authorities, investors and the private sector.

Broadband brought jobs to northwest New Mexico in 2017 and has anchored the local economy even as the COVID-19 pandemic has rolled from crisis to chronic. Shelly Fausett runs the SoloWorks program in the area, which advocates for workforce development and related supports, and which helps employers find and hire connected workers. SoloWorks had just moved to a new a co-working space to build capacity for distributed teams but the health care crisis kept workers home…and working. 

“Right now in customer service, there are more jobs than people,” Fausett said. 

The 2020 COVID-19 pandemic simply accelerated long-term trends toward remote work, annihilating embedded cultural resistance and rapidly realigning work processes to support sustained collaboration and productivity from any location, said Brie Weiler Reynolds, the in-house career development coach for FlexJobs. 

Remote work surged for both staffers who have always had the capability to work from home and among the current and aspiring self-employed who immediately seized the opportunity to redesign their careers around the location and lifestyle they had always craved. In March, the FlexJobs platform received a 50% increase of inquiries and applications from workers, she said. 

Companies and employment agencies – private and government-run – that already collaborated with local economic development and workforce training programs had a big head start on those that had in place only traditional programs, Weiler Reynolds said. Cross-functional workforce development programs that “combine broadband outreach with remote work training and company partnerships and that partner with FlexJobs to find the actual jobs, are serving people who already live in their areas and are hiring specifically from economic groups hard-hit by the tourism and hospitality industries.”

Workforce housing that is designed around and for home-based work will ensure lower paying, broadband-dependent jobs, such as customer service, highly skilled software developers and managers cut a very different profile, SaaS Ventures’ Gutman said. They are “six-figure Millennials” who expect, if not big-city culture and amenities, at the very least, transportation services that can quickly deliver the big city to the rural doorsteps of spacious houses with dedicated home offices. 

And, the ability to quickly get to major cities will be a key plank of rural economic development, especially as patterns of post-pandemic life emerge, he said. High-tech transplants want lots of fresh-air recreational amenities but also want to take just one connector flight to a major air hub. 

“It could be that saving the regional airport is your key to economic prosperity,” Gutman said. 

COVID redefines tourism economies

The return on remote work-equipped workforce housing is short and sweet for communities long tied to cyclical tourism economies. A solid base of long-term second-home owners is already redefining tourism economies, Greer said, extending the 2020 season well into autumn, and thus continuing demand for cleaning, maintenance, renovation and some municipal services and activities. 

“What we’re excited about is that this change means we keep more of our seasonal employees, hopefully longer,” he said, adding that a greater number of staycation homeowners could permanently stabilize tourist-town employment, municipal and local business cash flow and demand for broadband and other services.

The pandemic has proven the possibilities and powerful potential of a distributed workforce and, by extension, distributed economic development, said one longtime broadband researcher and advocate. 

“The pandemic could yield a lasting legacy if municipalities, counties and states forge regional alliances for economic development, and use their combined power to rapidly build universal broadband, align tax policies and regulatory incentives to encourage private and public expansion of broadband to connect all American citizens,” said Rouzbeh Yassini, executive director of the Broadband Center of Excellence at the University of New Hampshire in Durham, New Hampshire. “States need to relinquish counterproductive strategies focusing on stealing businesses from each other and combine forces. That’s the only way that many small towns and rural areas will gain critical mass to justify private investment in 5G, both through wired (cable and phone) and wireless services. 

“If you get five or six state governments together, and get regional connectivity vision established, they’ll improve the economic value of that entire region for web-based daily services and for mapping, driverless cars and gain scale for recruiting residents, farmers and business,” Yassini said, citing the cascade of connected services that could support remote working, aging in place and other life-enhancing functions. 

Lautman, the economic development consultant, detects a rapid realignment of the definition of economic development with state and local resources to support distributed workforces. Hybrid strategies that blend satellite nodes for regional managers and occasional team meetings are a natural evolution of the urban model of co-working spaces, he said. The pandemic has also elevated the importance of health care, childcare and related services as essential to workforce stability and productivity. 

As professionals and corporate leaders become acclimated to working from their second homes, they might become influential advocates for their industries to pivot to distributed workforce development, potentially bringing economic development authorities and broadband providers with them.  

“To create an environment that incentivizes and supports remote work, if I were a local economic development executive, I’d be at my state legislature asking for the same incentives to build houses with home offices that they give to industrial developers,” Lautman said. “Now we have a residential real estate platform for economic development.” 

Source: housingwire.com

How to Decide Where to Live If You Work Remotely From Home

When you no longer need to physically report to work, it detaches where you live from where you work. Suddenly you can live anywhere in the world, rather than being restricted to a single city.

It’s an incredibly freeing feeling. But it also leaves remote workers, freelancers, and other digital nomads with an overwhelming abundance of options. How do you choose a place to live when you can live anywhere on the planet?

As you review the following checklist, sort it by your priorities. For some, living near their parents or children is nonnegotiable. Others feel perfectly happy living in another state or even another country.

Most of all, look to design your perfect life starting from the ground up, in the most literal sense.

Choosing a Country & State

It never occurs to most Americans that they might enjoy living in another country. Most never even move to another state; North American Moving Services reports that 72% of Americans live in or near the town where they grew up.

Yet as an expat myself, I can tell you firsthand how many advantages you can find living in another country. I’ve also lived in multiple U.S. states, some of which I liked far more than my home state.

Consider the following as you choose a country and state to live in, and don’t get caught up in the details of “how” when you first consider places to live. Focus on the “why” first, and when you’ve chosen a country or state based on your ideal lifestyle, you can then figure out the “how.”

Time Zone

As an international school counselor, my wife gets job offers all the time in Asia and the Middle East. But my business is located in the U.S., and I refuse to do any more 3am conference calls.

Just because you can work remotely doesn’t mean you can necessarily set your own hours. And even when you can set your own hours, you still have to communicate and collaborate with others. That could mean coworkers and supervisors, or it could mean partners, suppliers, or clients. Sometimes you need to hop on a phone call with people in real time, and if they work in a time zone on the opposite side of the world, that means working inconvenient hours.

Know your work, and set your own limits on time zones.

Proximity to Family

If you can’t stand the idea of living more than an hour away from your family members, you have a clear radius you must live within. It makes your decision easier, if more limited.

But if you have a little more leeway, such as a living “within a few hours from family, it frees you up to explore travel by air and rail rather than just road travel.

For example, if you want to be able to reach your family within three hours, that gives you 150 to 200 miles of driving radius but over a thousand miles of flying radius. You can then start looking at cities with cheap direct flight routes (more on that shortly), rather than simply drawing a circle around the town where your family lives and shackling yourself to it.

Tax Policies

Different countries tax in vastly different ways. As a remote worker, you have the luxury of choosing a low-tax country or state.

My wife and I spent four years living in the United Arab Emirates, where they don’t charge income tax at all. That saved us tens of thousands of dollars in taxes every year, allowing us to save and invest that money to build wealth faster.

Even within the U.S., some states charge vastly higher taxes than others. Look at total tax burden, combining income tax, property taxes, and sales and excise taxes to compare states and countries, and start with these states with the lowest tax burden.

The difference can easily amount to thousands of dollars a year — a sum that can dramatically change your quality of life and wealth over time.

Connectivity & Communication Infrastructure

Becoming a digital nomad requires a strong digital Wi-Fi connection. In today’s world, most cities around the globe offer reliable, fast Internet connectivity. But smaller towns in developing countries may not meet your needs.

Ask around among residents, especially knowledge workers and expats, before moving to a smaller city in a developing country. If the connectivity and communication infrastructure can’t meet your needs, look elsewhere.

Climate

Not everyone wants to spend half the year bundled up in coats and scarves to weather the frozen tundra. I certainly don’t.

Consider climate as you choose a country and state to live in. Whether you enjoy having four distinct seasons or would just as soon hike and swim all year round, find a place where you actually enjoy the weather most of the year.


Choosing a City

Many countries and even states are sprawling, with an enormous diversity of big cities, small towns, and everything in between.

As you consider the best cities for remote workers, keep the following factors in mind to choose the right fit.

Airport Routes

Not all airports are created equal. Depending on your penchant for travel, you may want easy access to a major international airport with hundreds of flight routes.

Smaller regional airports often only offer a few routes to nearby hubs. It adds hours to each trip, and usually costs more to boot.

If proximity to family matters to you, then air routes can play a major role in where you feel comfortable living. You can cross a thousand miles in two hours of direct flight time, or you can waste 10 hours on multiple flight legs, layovers, and driving gaps.

Natural Amenities

There’s an old trope that all people fall into one of two camps: seaside people or mountain people. Whether you buy into it or not, the fact remains that you can’t have every natural amenity you want, so you have to choose based on your priorities.

Few cities sit nestled between tropical beaches and mountains with pristine skiing. You can find cities with beautiful shorelines and beaches, cities up in the mountains near great hiking and skiing, cities near wine country, and everything in between, but it’s hard to find cities with everything. Prioritize what you want because it’s hard to get it all.

The few cities with easy access to many natural amenities — such as San Francisco and Santa Barbara — tend to come with outrageously high living expenses.

Cost of Living

The median home in San Francisco ($1,405,199) costs nearly 20 times the price of a median home in Cleveland ($73,686), according to Zillow. Twenty times!

Put another way, you could buy your own home in Cleveland plus 19 rental properties, all generating passive income, for the same price you’d spend on only your residence in San Francisco. The rental income from those 19 properties would likely cover your living expenses, allowing you to reach your financial goals faster.

Cost of living matters. It doesn’t just mean the difference between affording a three-bedroom and a four-bedroom house — it often means the difference between becoming wealthy and living a middle-class lifestyle. Between being able to pay for your kids’ college education or not. Between retiring at 45 and retiring at 70. Between an acceptable quality of life and a great one.

If you can earn a New York City salary without paying New York City rents, find somewhere fun and affordable to laugh all the way to the bank.

Keep in mind that cost of living doesn’t just include lower housing costs. Low cost of living can include low food and grocery costs, cheap restaurants and nightlife, low utility costs, affordable health care, and other discounts that help you save money across the board.

As a final thought, take a second look at living overseas. Start with these countries where you can live a luxurious lifestyle for $2,000 a month.

Cultural Amenities & Local Culture

For many people, the local culture matters, both in terms of amenities and the people themselves.

That could mean access to museums, sports teams, art galleries, and performing arts. Most smaller towns only offer these cultural amenities sparsely, although exceptions certainly exist. Larger cities tend to offer more of these amenities, though they still vary greatly.

Beyond amenities, most people also prefer to surround themselves with those culturally similar to them — politically, socioeconomically, and linguistically. If this kind of similarity is important to you, consider moving somewhere where you feel you’d fit right in and where the local values reflect your own.


Choosing a Neighborhood

As someone who hails from Baltimore, I can assure you that different neighborhoods within a city can feel like completely different cities. So choose your neighborhood with care.

Safety

When you can live anywhere, there’s no reason to live somewhere unsafe.

People feel comfortable with what they know, but you don’t have to play that game anymore. Choose a city and neighborhood with extremely low crime rates. With the world at your fingertips, you have infinite options.

And bear in mind that your impressions of a place might not match the reality. I still laugh when I think of my friends’ and family’s reactions when I told them I was moving to Abu Dhabi: “What?! Is it safe?!” Not only is it one of the safest cities in the world, but I was moving there from one of the most dangerous of the U.S. cities. Yet my family in Baltimore couldn’t wrap their heads around that notion.

Try NeighborhoodScout or AreaVibes to research any city’s, zip code’s, or neighborhood’s crime statistics.

Quality of Public Schools

In some cities and neighborhoods, the public schools are so bad that middle-class parents are forced to budget the money to send their children to private schools. It severely restricts their budget and savings rate.

Again, when you can telecommute, you don’t have to play by those rules anymore. You can pick a school district with outstanding public schools and actually cash in on those tax dollars you have to pay regardless.

Alternatively, you could home-school your children. But that requires far more effort and time on your part, both in educating them and in making sure they get plenty of social interaction with other kids.

Try GreatSchools.org to look up school quality measures for any given district.

Walkability

When my wife and I lived in the U.S., we each had a car, as many Americans do. Then we moved overseas, and our home sat in a somewhat walkable neighborhood. We shared one car there, which worked out well.

The next time we moved, we intentionally chose a city and neighborhood that was extremely walkable. It lay within walking distance of my wife’s work, a coworking space for me to work from, and dozens of restaurants, bars, retail stores, and other amenities. We no longer own a car at all, and I don’t miss it in the slightest.

When you can walk, bike, or Uber everywhere, it forces you to be more active. Physical activity aside, living without a car also saves you a phenomenal amount of money. The average American spends $9,282 per car every single year, according to AAA, between maintenance, repairs, gas, parking, insurance, and car payments.

Public Transportation

Similarly, an extensive public transportation system can also help you ditch your car while still letting you reach every amenity you need.

A city with excellent public transportation can reduce your transportation costs and save money far faster.


Choosing a Home

Found the perfect corner of the world to live in?

With the hard part behind you, you can focus on the easier business of finding a hospitable home.

Before even deciding whether to rent or buy a home, start by deciding how long you plan to live there. When you buy a home, you take an initial loss based on the closing costs, both those incurred to buy the home and the second round of closing costs you owe when selling it. It takes time to recover these expenses by building equity.

If you don’t know how long you plan to stay or plan on just a year or two, renting is definitely your best option. Beyond two years, sometimes it makes sense to buy. You have to calculate the costs both ways. Be sure to include all ownership costs, including maintenance, repairs, insurance, property taxes, and both rounds of closing costs. Far too many people just assume they should buy without actually running these numbers.

Bear in mind your changing needs in the years to come. For example, if you plan to have a family, you may need another bedroom or two soon. You may want to rent rather than buy if your needs may change shortly.

Many telecommuters prefer to work from home rather than from a coworking space or coffee shop. You can avoid distractions and boost productivity by choosing a home with a dedicated home office, rather than working from the sofa or dining room table.

Whether you have children or not, many people love having their own outdoor space. It proved a consistent trend during the COVID-19 pandemic. Suburban and rural areas saw a spike in demand as people clambered for outdoor space to call their own.

When you move to a new city, rent for a few months or a year before buying. It takes time to get to know a new city, and giving yourself the luxury of time helps you discover exactly what you want for the long term before you commit.


Visit Before Moving

Word to the wise: Don’t uproot yourself and move across the country or world without visiting your destination first.

It’s all too easy to fall in love with the idea of a place. But your vision of a city and the reality of living there will inevitably clash, so take the time to discover those differences firsthand before you move.

A long weekend spent visiting is better than nothing. A week gives you a better sense, and a month better still.

Walk the streets, talk to the locals, test the Internet speed. Get a sense of the local culture, eat the local food, attend the kind of social and cultural events you would if you lived there. You may find you love it just like you imagined — or you might discover it’s nothing like you envisioned.


Final Word

No one says you have to stay in the first place you move.

Remote work offers endless possibilities and lets you live anywhere in the world. I’ve lived in six U.S. states and five countries, some of which I enjoyed far more than others.

As you design your perfect life, bear in mind it will always be a work in progress. You don’t have to get it exactly right the first time around, and even if you do, your needs and wants will continue to evolve.

Stretch yourself and your comfort zone as you explore ideas for the ideal place to live. Otherwise, you’ll limit yourself to what you already know and remain one of the 72% of Americans who live where they grew up rather than choosing a home that fits the life they truly want.

Source: moneycrashers.com

6 Silly Tidbits of Money Advice That Will Make You Poorer

Woman with money
Krakenimages.com / Shutterstock.com

We’ve all received financial advice that later left us scratching our heads in disappointment or confusion.

Self-proclaimed financial experts abound. Unfortunately, it’s tough to weed out the bad information found in books or on the internet.

But we can help you separate the gold from the dross. Here are some common tidbits of financial advice you may want to ignore.

1. Credit cards are evil

Man calling his credit card company about a charge
GaudiLab / Shutterstock.com

Credit cards do not have any inherent qualities, good or bad. Human behavior determines whether they are beneficial or problematic. If you are unable to resist swiping the magic plastic, your issues go deeper than a credit card.

Used responsibly, credit cards offer great rewards and eliminate the need to have a wad of cash in hand. They also provide buyer protections. You just need to be disciplined enough to pay off the balance each month.

If you are looking for the perfect credit card, stop by our Solutions Center. Once there, search for the perfect card for you, whether you prefer cash-back rewards, a low interest rate or some other perk.

For more on the advantages of plastic, see “10 Forgotten Benefits of Your Credit Card.”

2. Following a rigid spending plan will set you free

cash
Nomad_Soul / Shutterstock.com

What happens to avid dieters who have cravings but continue to suppress those urges until they can’t take it anymore? They give up and resort to comfort foods. Lots of them.

That’s why incorporating mad money into your spending plan is OK. If you never have any fun with your money, deprivation will usually backfire, causing you to break down and go on spending benders.

If you are trying to curb purchases, be realistic. Take small steps and modestly reward yourself from time to time. Also, begin with the end in mind and incorporate plenty of visual reminders so you will focus on the financial goal you are working toward.

Need help getting started? Check out “The Secret to Achieving Your Dreams Without Making a Budget.”

3. Sign up for life insurance — or else

Man holding paper umbrella over paper cutout family
thodonal88 / Shutterstock.com

If you are 25 with no dependents and minimal assets, how much life insurance do you really need? The answer is likely “none.”

As we write in “7 Questions You Should Ask Before Buying Life Insurance“:

“A parent of young children typically has a high need for life coverage, especially if he or she is the family’s primary wage earner. However, if you have no spouse or dependents, a life policy might not be necessary.”

4. 10% is the sweet spot for retirement contributions

Nest Egg
karenfoleyphotography / Shutterstock.com

Saving 10% of your income used to be the standard advice, but not anymore — particularly if you didn’t start setting aside money early in your working years.

If you did not get an early start, you will need to save a higher percentage of your income to reach retirement goals.

For example, people in their 40s who have not saved much for their golden years likely will find that 10% is not nearly enough.

How much will you need? Figure out what you will spend on health care, food, shelter and other necessities. Then, consider what you will get from Social Security and other sources. Filling in the gap will be your responsibility.

If you need help zeroing in on a specific amount, consider sitting down with a fee-only financial adviser.

5. You should buy a house because it is a good investment

Sean Locke Photograph / Shutterstock.com

Were you around for the last housing crisis? Being a homeowner for several years, I can definitely attest that homes do not always appreciate in value as rapidly as you would like them to and that they do lose value.

That does not mean buying a home is a bad idea. One of the beauties of owning a home is that a fixed-rate mortgage locks you into a set cost each month. You will make the same monthly payment for years while the price of rent goes up.

Eventually, you will own that home free and clear. That is an investment in your future financial security.

But remember that buying a home is not a surefire path to riches. Take it from me, being underwater — where your outstanding mortgage exceeds the value of your house — is not a pleasant place to be.

6. Home equity loans are a great way to get out of a hole

Marcos Mesa Sam Wordley / Shutterstock.com

Under a mountain of credit card debt and looking for a way out? Home equity loans may seem like the perfect solution because of the competitive interest rate.

But if you fall on hard times and default on the loan, everything goes downhill. In a worst-case scenario, an inability to pay back the loan could end up with you losing your home.

If credit card debt has left you feeling overwhelmed, stop by our Solutions Center and find an expert who can help create a plan to turn things around.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

NASDAQ Listing Requirements Explained

Before a stock can be traded by investors, it must first be listed on an exchange. Different stock exchanges can have physical locations with in-person trading or be entirely electronic. After the New York Stock Exchange (NYSE), the Nasdaq is the second largest stock exchange in the world.

Not just any company can be listed for trading on the Nasdaq, however. There are specific Nasdaq listing requirements that must be met as a condition of inclusion. These rules are designed to ensure that only reputable companies can trade on the exchange.

Understanding Nasdaq listing rules and how a stock exchange works can be helpful when mapping out an investing strategy and determining which stocks to purchase. Because exchanges play such an important role in stock listings, these requirements can also serve as a tech IPO guide for investors.

Here’s a closer look at how the Nasdaq works and what’s required for a company to be listed on the exchange.

What is the Nasdaq?

The Nasdaq play an important role in the history of the stock market. It’s an electronic stock exchange founded in 1971 by the National Association of Securities Dealers. Nasdaq is an acronym for National Association of Securities Dealers Automatic Quotations.

In terms of how many companies are on Nasdaq, the exchange lists approximately 5,000 common stocks. Those stocks represent a diverse range of industries, including financial services, health care, retail and tech stocks.

In addition to identifying the stock exchange itself, the term “Nasdaq” can also be used as shorthand when referencing the Nasdaq Composite Index. This stock market index tracks the performance of approximately 3,000 stocks listed on the Nasdaq exchange.

The Nasdaq Composite is a capitalization-weighted index, meaning its makeup is determined by market capitalization. Market cap is a measure of a company’s value as determined by its share price multiplied by the total number of outstanding shares. The Nasdaq Composite includes some of the largest U.S. companies by market cap.

Nasdaq Listing Requirements

The Nasdaq doesn’t include every publicly traded company in the U.S. In order to be included on the exchange, companies must first meet Nasdaq listing rules. These rules apply to companies that are seeking to have common stocks on the exchange.

Nasdaq listing requirements span a number of criteria:

•  Earnings
•  Cash flow
•  Market capitalization
•  Revenue
•  Total assets
•  Stockholders’ equity
•  Bid price

The Nasdaq listing rules allow companies to qualify under one of four sets of standards, based on the criteria listed above.

Standard 1: Earnings

A company’s earnings are a reflection of its profitability. To qualify for listing on the Nasdaq based on earnings alone, a company must be able to show:

•  Aggregate pre-tax earnings of $11 million or more for the three prior fiscal years
•  Earnings of $2.2 million or more for the two most recent fiscal years
•  Zero net losses for each of the three prior fiscal years

For a company to be included under this standard, they have to be able to check off all three of these boxes. If they can meet two criteria but not a third, they won’t be able to qualify for listing.

Standard 2: Capitalization with Cash Flow

Capitalization is a measure of a company’s size in relation to the rest of the market. Cash flow tracks the movement of cash in and out of a company. To qualify for Nasdaq listing under the capitalization with cash flow standard, the following rules apply:

•  Aggregate cash flow of $27.5 million or more in the prior three fiscal years
•  Zero negative cash flow for the prior three fiscal years
•  Average market capitalization of $550 million or more over the prior 12 months
•  Revenue of $110 million or more for the previous fiscal year

Again, all four of those conditions have to be met to qualify for Nasdaq listing using this standard.

Standard 3: Capitalization with Revenue

The third Nasdaq listing standard focuses on company size and revenue, which is a measure of income. The minimum requirements for both are as follows:

•  Average market capitalization of $850 million or more over the prior 12 months
•  Revenue of $90 million or more for the previous fiscal year

Larger companies may opt to take this route if they can’t meet the cash flow requirements under Standard 2.

Standard 4: Assets with Equity

In lieu of earnings or market capitalization, companies can use their assets and the value of shareholders’ equity to qualify for listing on the Nasdaq. There are three specific thresholds companies have to meet:

•  Market capitalization of $160 million
•  Total assets of $80 million
•  Stockholders’ equity of $55 million

Regardless of which standard a company uses to qualify for listing, they have to maintain them continually. Otherwise, the company could be delisted from the Nasdaq exchange.

General Nasdaq Listing Rules

Aside from meeting the listing requirements set forth for each standard, there are some general Nasdaq listing requirements companies have to observe.

For example, the Nasdaq minimum share price or bid price for inclusion is $4. It’s possible to qualify with a bid price below that amount but that may entail meeting additional requirements.

Companies must also have at least 1.25 million publicly traded shares outstanding. That threshold applies to both seasoned companies and those seeking their initial public offering (IPO). Additionally, IPO requirements specify that the market value of those shares must be at least $45 million. For seasoned companies, the market value requirement increases to $110 million.

Nasdaq listing rules also cover criteria related to corporate governance. Under those requirements, companies must:

•  Make annual and interim reports available to shareholders
•  Have a majority of independent directors on the board of directors
•  Adopt a code of conduct that applies to all employees
•  Hold annual meetings of shareholders
•  Avoid potential or actual conflicts of interest

Companies must also pay a listing fee to gain entry to the Nasdaq. Entry fees can range from $150,000 to $295,000, depending on the total number of shares outstanding. Those amounts include a non-refundable $25,000 application fee. Paying the fee doesn’t guarantee that a company will be listed on the Nasdaq.

How to Choose NASDAQ Stocks

Knowing how stocks are chosen for the Nasdaq and other exchanges can be helpful in conducting your own research when deciding what to buy or sell. Listing on the Nasdaq or NYSE can also be important for a company in terms of which exchange-traded fund it gets added into. Broadly speaking, there are two ways to approach stock research: technical analysis and fundamental analysis.

Technical analysis focuses on market trends, momentum and day-to-day movements in stock pricing. You may use a technical analysis approach for choosing stocks if you’re an active day trader who’s interested in capitalizing on market trends to make short-term gains.

Using fundamental analysis on stocks, on the other hand, focuses on a company’s financial health. That includes things like earnings, profitability and how much debt the company has. Using a fundamental approach may be preferable if you favor a long-term, buy-and-hold strategy. And fundamental analysis echoes how the Nasdaq and other stock exchanges determine which stocks to include.

The Takeaway

Becoming a savvy investor starts with learning the basics of how the stock market and stock exchanges such as the Nasdaq work. Understanding Nasdaq listing requirements can offer insight into how stock exchanges select which companies to offer for trading.

When you’re ready to invest, you can use an online platform like SoFi Invest® to begin. It’s possible to start investing with as little as $1 and build a diversified portfolio that includes individual stocks and low-cost exchange-traded funds (ETFs) from the Nasdaq as well as other exchanges.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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Source: sofi.com

About: Kiplinger’s Economic Outlooks

Gross Domestic Product

Gross domestic product is the broadest indicator of the economy, measuring the value of final goods and services produced in the U.S. in a given time period. It is perhaps the most closely watched indicator as well, serving as a guidepost for Federal Reserve interest rate policy and for budgeting in both government and private industry.

At Kiplinger, we examine what trends are driving GDP up (or down) and forecast its future direction quarter by quarter. Read our current forecast »

Employment

If gross domestic product is the broadest indicator of the economy, employment is the one most personally felt. These are people’s jobs we’re talking about.

Two distinct metrics make up the employment forecast. The more important one is the “payroll report,” a summation by the Department of Labor of how many jobs the economy has created (or lost) each month. This data is broken out by sector, such as manufacturing, mining and health care. Note that simply to keep up with population growth, the economy needs to add more than 100,000 jobs every month; otherwise the unemployment rate will rise.

That rate is the other closely watched figure. It’s a simple division of the number of people who have looked for work in the prior four weeks but who do not have a job by how many people are currently in the labor force. That simplicity belies some underlying concerns about the unemployment rate. One key one: Potential workers who aren’t actively looking for work aren’t included in the calculation. Read our current forecast »

Interest Rates

Interest rates are of tremendous interest to borrowers (for whom they are a cost) and lenders (a category that includes individuals trying to get some return on their bank savings). Almost everyone is in one or both categories.

The level of short-term rates, such as those used by banks when loaning each other money overnight, is set by the Federal Reserve through its Open Market Committee, usually at regularly scheduled meetings.

Market interest rates, including those in money markets and offered on consumer products such as certificates of deposit, follow the Fed’s lead but are also subject to other influences — for example, risk, transaction costs and expectations of inflation. Generally, the longer the period of the loan, such as with 10-year Treasury Bonds or mortgages, the more important market factors become compared with the Federal Reserve’s actions. We forecast both what we expect the Federal Reserve to do in the near term and to what extent that will affect the direction of long-term interest rates. Read our current forecast »

Inflation Rate

Inflation is the generally rising price of goods and services, or why things cost more. It’s measured by the Department of Labor using a sample, dubbed a “market basket,” of what people in urban areas in the U.S. actually buy each month. Then each month, data collectors check on the prices of those items. From that research we get the Consumer Price Index (CPI).

A component of that index, the core inflation rate, which excludes the more volatile prices of food and energy, is also closely watched. At Kiplinger, we forecast changes in both.

Economists generally believe that moderate inflation of about 2% is best for an economy. Prices that are rising too quickly cause consumers heartburn, of course, but prices that are flat or falling are a problem, too. This condition, known as deflation, makes debts more expensive to pay back and can lead to declining business investment. Read our current forecast »

Business Equipment Spending

How much businesses are laying out in investment is critical to other businesses in guiding their own spending. In making our forecasts for the direction of business spending in the quarters and years ahead, we follow two indexes from the Census Bureau: Durable Goods Shipments and Orders and Business Inventories reports. Read our current forecast »

Energy

Like it or not, petroleum and natural gas remain incredibly important to the U.S. economy. Knowing where oil prices are headed is critical to businesses of all stripes, from airlines to plumbing companies. Consumers planning their family budgets and vacations care, too. Not only do we monitor Department of Energy reports, but we also talk to commodities traders and petroleum engineers to forecast price trends, changes in production technologies and consumer habits. Read our current forecast »

Housing

In addition to being the roof over our heads, housing is an important sector in the economy. Three statistics form the core of our coverage: sales of existing homes (and the prices those sales fetch); sales of new homes; and housing starts, which reflect new construction that is counted in GDP.

Because housing is a diversified and highly regional industry, our reporting and forecasting are informed by other research as well as conversations with industry experts as well. Read our current forecast »

Retail

Consumers are the engine of our economy, and when their spending flags, business feels it. We examine trends that are influencing their habits, such as falling gas prices, to forecast what they’ll be buying in the future and how much they’ll be willing to shell out both on everyday items and on big-ticket purchases such as cars and trucks. Read our current forecast »

Trade

All nations of consequence trade with others. Those that buy more from other countries than they sell in turn have a trade deficit, and that’s been the story for the United States since the mid-1970s.

How big that deficit will be, and whether the changes will result from more (or fewer) imports or more (or fewer) exports, is the crux of our forecasting. We look at specific sectors (such as agriculture) where the United States is doing well selling abroad, as well as what items (such as smartphones) we buy from overseas. We also discuss the strength of the dollar versus foreign currencies and how that affects trade trends. Read our current forecast »

Source: kiplinger.com