How the SECURE Act Affects Your Retirement & Estate Planning

In late December 2019, President Donald Trump signed into law the Setting Every Community Up for Retirement Enhancement Act (SECURE Act).

Many of the changes volleyed around Capitol Hill for years, and proponents tout them as the most comprehensive retirement changes since the 2006 Pension Protection Act. Given its bipartisan support, the changes aren’t exactly revolutionary. Most changes are incremental, tweaking the existing retirement account rules.

And being a bipartisan bill, it also includes a clever way to raise tax revenue without raising tax rates. Everyone in Washington gets to clap themselves on the back after such maneuvers.

As you plan your retirement, make sure you understand the new rules and adjust your estate planning based on the new rules on inherited IRAs.

Inherited IRAs: Drain in 10

Before the SECURE Act, people who inherited an individual retirement account (IRA) could spread out the withdrawals over their entire lifetime. They still had to take required minimum distributions (RMDs) based on their age, life expectancy, and the amount available in the account. But heirs could spread their withdrawals out over their entire remaining life expectancy.

The days of these “stretch IRAs” are over. The most significant change of the SECURE Act was to require account owners to empty all inherited retirement accounts within 10 years – a clause quickly labeled the “drain-in-10” rule. It removes annual RMDs, instead merely requiring that nothing remains in the account 10 years after passing to an heir.

Note that the drain-in-10 rule applies to non-Roth retirement accounts like traditional IRAs, 401(k)s, and SIMPLE IRAs. Roth accounts come with their own separate inheritance rules, which have remained unchanged.

The Purpose of the Drain-in-10 Rule

Why did Congress stop allowing heirs to draw on their inheritance at a slower, more responsible pace?

In a word, revenue. The IRS taxes withdrawals from traditional IRA accounts as regular income. By forcing heirs to withdraw all the money relatively quickly, the IRA distributions drive heirs’ taxable income into higher tax brackets.

Imagine you’re a single person earning a modest $40,000 per year. According to the 2021 federal income tax brackets, you pay 10% for roughly the first $10,000 of that and 12% for the next $30,000. Your last remaining parent dies and leaves you $400,000 from their IRA.

No matter what, you have to pay taxes on withdrawals. But previously, you could spread withdrawals over the rest of your life and enjoy much of that inheritance as retirement income. For example, you could take $15,000 per year from it to supplement your income, paying the higher 22% tax rate on it since it drove your income into the next tax bracket.

Because of the SECURE Act, you now must instead take $40,000 per year on it, plus returns. You pay the higher 22% tax rate on $40,000 rather than $15,000. The money also stops compounding, as it had been as untouched pre-tax funds in an IRA.

It amounts to serious tax revenue too. Estimates from the Congressional Budget Office put the additional tax revenue from this new rule at $15.7 billion over the next 10 years.

And if you fail to take the required minimum distributions, you must pay the IRS a 50% penalty on the amount you fail to take. Thus, if you were required to withdraw $10,000 but don’t, you pay a $5,000 penalty to the IRS.

Irs Tax Revenue Form Magnifying Glass

Exceptions to the Drain-in-10 Rule

The SECURE Act took effect on Jan. 1, 2020, and is not retroactively applied. Any taxpayers who inherited an IRA or 401(k) previously are exempt.

Other exceptions include surviving spouses, heirs no more than 10 years younger than their benefactor – such as siblings – and people with disabilities. Spouses can roll the inherited IRA into their own traditional IRA or spousal IRA.

Nonspouses cannot roll over funds from an inherited IRA into their own. Their only option is to withdraw the money at regular income tax rates.

A fourth exception exists for minors. The drain-in-10 rule only kicks in once the minor children turn 18 and reach the age of majority. As such, children who inherit an IRA have until age 28 to empty the account without facing IRS penalties.

Problems Trusts Create for Heirs

Some benefactors put their money into trusts upon their death, with detailed instructions for how to release the funds in their estate plan. In some cases, the trust pays out funds a little at a time or releases them only after a predetermined number of years.

These restrictive trusts can create a problem for designated beneficiaries (heirs). For example, if a trust only allows the beneficiary to take the RMD, that could mean releasing the entire balance all at once after 10 years – and require the beneficiary to pay massive income taxes on it.

Forcing heirs to take the entire balance of trust funds in no more than 10 years can also defeat the whole purpose: to spread the inheritance out over many years to prevent the heir from blowing the money on sports cars and gadgets and designer clothing.

Ideas to Minimize Taxes

If you’re planning your estate, talk to a financial advisor before you do anything else. The tax rules on inheritances are complicated and made even more so by estate planning rules. If you don’t currently have a financial advisor, you can find one in your area through SmartAsset.

Benefactors who have set up trusts for their heirs to receive an IRA must consider their structure carefully and make sure they don’t force their heirs to take the entire amount all at once.

One option is to use part of the IRA funds to create a life insurance policy through Bestow with your heir as the named beneficiary. You do pay taxes on premium costs, but your heir doesn’t pay taxes on the payout.

You can also look into trustee-to-trustee transfers for IRA inheritances. But these get complicated quickly, so talk to an estate planning attorney or tax specialist through H&R Block.

If you’re on the receiving end of an IRA inheritance, common sense suggests spreading the withdrawals evenly over the 10 years to minimize your tax burden. You can put the money into your own tax-sheltered retirement accounts, whether an employer-sponsored account, like a 401(k) or 403(b), or an IRA.

Alternatively, if you’re near retirement age, you can wait until you retire before taking withdrawals. You avoid pulling money from the inherited IRA while also collecting earned income, so the combination doesn’t drive up your income tax bracket. Even better, you can delay pulling any money from your own retirement accounts, leaving them to compound and minimizing your sequence of returns risk.

Pro tip: If you haven’t set up your will, consider doing so through a company like Trust & Will. They make the whole process simple and are available to answer any questions you might have along the way.


Additional Retirement Account Changes

While the new drain-in-10 change to inherited IRAs stirred up the most controversy and angst among investors, it’s far from the only change created by the SECURE Act.

Make sure you understand all the rule changes, whether you’re planning out your own retirement investments or you’re a small-business owner considering a retirement plan for your employees.

1. No More Age Restriction on Traditional IRA Contributions

Before the SECURE Act, Americans over age 70 1/2 couldn’t contribute to their traditional IRA accounts.

But Americans are living longer, which usually means they need to work longer and save more to afford retirement. The SECURE Act allows Americans of any age to continue adding money to their traditional IRA.

And why not? From the perspective of the IRS, they can allow older Americans to keep contributing, safe in the knowledge the funds can only remain untaxed for a maximum of 10 years after the contributor’s death.

Particularly savvy planners can take advantage of the ceiling removal with backdoor Roth contributions, allowing them more flexibility to shuffle money based on that year’s income. But talk to a financial planner about such complex maneuvering before trying it at home.

2. Higher Age for Required Minimum Distributions

Under the previous rules, IRA owners had to start taking RMDs at age 70 1/2. The SECURE Act raised the minimum starting age for RMDs to age 72. Again, it only makes sense, with Americans living and working longer.

The exception to the RMD age remains in place: Americans who continue working and don’t own more than 5% of the company where they work don’t have to take RMDs. After retiring, they must start taking RMDs if they’re over age 72.

Retirement Planning Old Couple Walking Up Stacks Of Coins

3. Annuities in 401(k) Plans

Almost no employers included annuities as an option in their 401(k) plans before the SECURE Act. The reason was simple: the old laws held employers liable as having fiduciary responsibility for annuities included in their 401(k) plans.

But the insurance industry lobbied hard to change that rule, and their lobbying dollars paid off in the SECURE Act. The onus of responsibility now falls to insurance providers, not employers, which opens the doors for employers to start considering annuities as options in their retirement plans.

Annuities are complex investments that pay out income over time. Before choosing one in your employer-sponsored plan, speak with a financial advisor about the exact implications, risks, and rewards.

4. More Options for Part-Time Employees

Under the previous laws, employers only had to offer participation in their retirement plans to employees who worked at least 1,000 hours per year for them.

The SECURE Act requires employers to allow more part-time employees to opt in. While the previous rule still applies, employers must also allow access to all employees who work at least 500 hours per year for three consecutive years or more.

The requirement protects part-time employees increasingly piecemealing their income and participating in the gig economy. Saving for retirement is hard enough, even with an employer-sponsored plan. Surviving in a job without benefits makes it dramatically harder.

5. Penalty-Free Withdrawals for New Children

Having children is expensive. Really, really expensive.

The SECURE Act allows account holders to withdraw up to $5,000 from their retirement account when they give birth or adopt a child. The withdrawal is subject to regular income taxes, but it is not subject to the standard 10% penalty.

While not an earth-shaking change, it does make retirement accounts more flexible and encourages Americans to contribute money toward them. The new-child exception works similarly to the down payment exception, which allows account holders to withdraw up to $10,000 from their IRA penalty-free to buy a home.

6. Multiple-Employer Retirement Plans

In a bid to help more employers offer retirement plans, the SECURE Act makes it easier for multiple employers to band together to negotiate affordable plans.

The law removes tax penalties previously faced by multiple-employer plans if one employer failed to meet the requirements. The old law penalized all participating employers. The SECURE Act removed this so-called one-bad-apple rule.

The act also removes another restrictive rule: the requirement that employers must share a “common characteristic” to come together to offer their workers a multiple-employer plan. In practice, that typically meant only companies in the same industry formed multiemployer plans. Now, any group of employers can come together to negotiate with plan administrators and provide the best possible plans for employees.

7. Incentives for Auto-Enrollment

A 2019 study by T. Rowe Price found a startling fact. When employees had to opt into employer-sponsored plans voluntarily, only 44% of them did so. When the employer auto-enrolled them, requiring them to opt out rather than in, the participation rate nearly doubled to 86%.

It makes sense. People tend to take the path of least resistance. But it also means one of the easiest ways to increase employee participation is simply to encourage employers to auto-enroll them.

The SECURE Act creates a new tax credit for employers who start auto-enrolling their employees in a company retirement plan. Though it’s only $500, the tax credit applies not only to employers who start a new retirement plan but also to those who start auto-enrollment for their existing plan. Employers can take it for up to three years after they start auto-enrolling employees for a maximum total tax credit of $1,500.

Finally, it raises the ceiling on what percentage of income employers can set as a default employee contribution. The previous default limit was 10%, and the SECURE Act raises it to 15%.

8. Increase in Tax Credit for New Employer-Sponsored Retirement Plans

Under the previous law, employers could take a maximum tax credit of $500 for up to three years when they started offering a retirement plan for employees.

The SECURE Act expands the tax credit. Employers can claim a tax credit of $250 per eligible employee covered, with a maximum tax credit of $5,000. Sweetening the pot, employers can also take the $500 tax credit for auto-enrolling employees on top of the tax credit for creating a new employer-sponsored retirement plan.

While these numbers seem small, they help offset the costs for small businesses who want to offer retirement plans but have little spare money to spend on them.


Final Word

The SECURE Act is 125 pages long and includes additional provisions not listed above. For example, it requires 401(k) plan administrators to offer “lifetime income disclosure statements,” breaking down the income potential of various investments. Insurance companies can use these income potential breakdowns as a marketing device to pitch their annuities by demonstrating with convenient examples just how much better off they think employees will be if they opt for an annuity over “high-risk” equity funds.

For a full explanation of how the SECURE Act impacts your retirement planning, estate planning, and tax planning, speak to your financial advisor. While many of the changes in the act involve simple tweaks, the change in rules for inherited IRA funds, in particular, has complex implications for your estate planning.

When in doubt, invest more money in your tax-sheltered retirement accounts. After all, it’s better to build too much wealth for retirement than not enough.

Source: moneycrashers.com

9 Shopping Mistakes to Avoid at Costco

A full Costco parking lot
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Once a month, I fold down the seats of my minivan and head to that most magical of shopping meccas, Costco.

The warehouse club has everything my family of seven needs and at prices that can almost never be beat. Giant bags of chips for the same price as a small bag at the supermarket? Yes, please.

After years of shopping at Costco, I’ve fine-tuned my shopping strategies, but not before making a few mistakes first. Here are nine gaffes you’ll want to avoid yourself.

1. Sticking with Kirkland Signature products

Costco's Kirkland Signature toilet paper
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Don’t get me wrong. There are plenty of Kirkland Signature products that offer great value and quality. However, Costco’s house brand isn’t always the best deal. Some items rate as only mediocre in product rankings. For help sorting the wheat from the chaff, check out:

2. Assuming you need a membership

Costco membership desk
David Tonelson / Shutterstock.com

While a membership gets you all the deals, there are actually a number of ways to shop at Costco without paying a fee. These include shopping online, filling prescriptions and, in some states, buying alcohol.

3. Only buying goods

Couple shopping at Costco
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Sure, your local Costco location can rotate your tires, but there are so many more discounted services available that you may be missing. These include insurance products, identity theft monitoring and your next dream vacation, as we detail in “18 Surprising Things You Can Buy at Costco.”

Next time you’re in the store, pay attention to the display by the customer service desk to see more of what’s available.

4. Sticking with the cheaper membership

Costco Executive membership card
melissamn / Shutterstock.com

You may already be a little iffy about paying to shop somewhere, but you could be making a mistake if you stick with the regular membership. While the executive membership costs twice as much — $120 per year — it comes with 2% cash back on all your purchases, up to $1,000 a year. That means if you spend at least $500 a month at Costco, the more expensive membership pays for itself.

5. Missing out on sales

Costco deals
Tooykrub / Shutterstock.com

Costco offers monthly member-only savings on a variety of items both online and in their warehouses. While the retailer sends member-only savings booklets in the mail, you can easily see those discounted products online as well. It pays to check these out before heading to the store because some sale items can be tucked away in the aisles and aren’t prominently displayed.

6. Shopping on the wrong days

Long checkout lines at a Costco warehouse
Jillian Cain Photography / Shutterstock.com

Weekends are notoriously busy, and you could find yourself in a sea of people all jostling to buy the same items that are on your list. I’ve also been told by employees that the start of each sale cycle is when crowds swell to their largest. Shopping on weekdays or later in the sale cycle is your best bet for enjoying a quiet store. There is also often a week between sales periods and that can be a good time to stock up on purchases that don’t go on sale.

To find out Costco’s current sale cycle, check the member-only savings book that Costco mails out or visit the retailer’s member-only savings webpage. The current sale, for example, started Feb. 3 and ends Feb. 28.

7. Never shopping online

Costco website
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If you’d rather not fight the crowds, many warehouse sale items can be bought online for a slightly higher price. Plus, Costco has many online-only deals for members. I tend to shop Costco’s website most often during the holidays. The website offers affordable gifts, and, as an executive member, I get 2% back on all my purchases.

8. Not buying gift cards

Discounted gift cards on display at a Costco
melissamn / Shutterstock.com

Costco offers significant savings on gift cards. For example, my local warehouse sells $100 worth of gift cards to a local theater for $75. There are also restaurant, retail, gaming and travel gift cards to be found in stores and online.

9. Forgetting the return policy

Costco membership desk
dennizn / Shutterstock.com

Fortunately, if you do buy an item that leaves you less than impressed, you can generally return it for a full refund. That’s thanks to Costco’s Risk-Free 100% Satisfaction Guarantee. Don’t make the mistake of overlooking this money-saving perk.

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

Source: moneytalksnews.com

Zillow Turns Price Estimates Into Cash Offers

Fix-and-flip investors have a deep-pocketed new rival: Zillow Group, which has begun taking its hotly discussed “Zestimates” and making them into cash offers. So reports Bloomberg.

Zillow now allows owners of more 500,000 properties across 20 U.S. markets in the U.S. to sell to the company for the value estimated on the site.

Like competitor Opendoor Technologies, Zillow is making a volume play with small margins, as well as hoping to cross-sell mortgages, title insurance and other products.

Read the full article from Bloomberg.

Source: themortgageleader.com

Using a Personal Cash Flow Statement

If you’re often surprised when you open up your credit card and bank statements and see how much money you spent, or you worry that your cash outflow may be exceeding your cash inflow, there could be a simple solution: A personal cash flow statement.

Creating a personal cash flow statement can give you a clear picture of your monthly cash inflow (money you earn) and your monthly cash outflow (money you spend) to determine if you have a positive or negative net cash flow.

And while it may sound intimidating, creating a personal cash flow statement is relatively simple. All you need to get started is to gather up your bank statements and bills for one month (or more). Then, it’s a matter of some basic calculations.

Once you have your personal financial statement, you’ll know where you currently stand. You’ll also be able to use your personal financial statement to help you create a budget and goals for increasing your net worth.

Here’s how to start getting your financial life back into balance.

What Is a Personal Cash Flow Statement?

“Cash flow” is a term commonly used by businesses to detail the amount of money flowing in and out of a company.

Companies can use cash flow statements to determine how well the company is generating cash to pay its debts and operating expenses.

Just like the ones used by companies, tracking your own cash flow can provide you with a snapshot of your financial condition.

You might learn, for example, that you have less leftover at the end of each month than you thought, or that you are indeed going backwards.

Once you have the numbers down in black and white, you can then make any needed changes, such as reducing costs and expenditures, increasing income, and making sure that your spending is in line with your goals.

So, how do you set up a personal finance cash flow statement?

It might seem overwhelming to get started, but these steps can simplify the process.

Listing all Your Sources of Income

A good first step when creating a personal cash flow statement is to get out all of your pay stubs, bank statements, credit card statements, and bills.

Next, you’ll want to start listing any and all sources of income–the inflow.

Cash inflows generally include: salaries, anything you make from side hustles, interest from savings accounts, income from a rental property, dividends from investments, and capital gains from the sale of financial securities like stocks and bonds.

Since a cash flow statement is designed to give a snapshot into the overall flow of where your money is coming from and where it is going, you might want to avoid listing money in accounts that aren’t available for spending.

For example, you may not want to list dividends and capital gains from investment accounts if they are being automatically reinvested, or are part of a retirement account from which you aren’t actively taking withdrawals.

Since income can vary from one month to the next, you might choose to tally inflow for the last three or six in order to come up with an average.

Once you’ve collected and listed all of your income for the month, you can then calculate the total inflow.

Listing all of Your Expenses

Now that you know how much money is coming in each month, you’ll want to use those same statements and bills, as well as any statements for any debts (such as mortgage, auto loan, or student loans) to list how much was spent during the month.

Again, if your spending tends to fluctuate quite a bit from month to month you may want to track it for several months and come up with an average.

To create a complete picture of how much of your money is flowing out each month, you’ll want to include necessities like food and gas, and also discretionary expenses, such as trips to the nail salon or your monthly streaming services.

Small expenses can add up quickly, so it’s wise to be precise.

Once you’ve compiled all of your expenses, you can calculate the total and come up with your total outflow for the month.

Determining Your Net Cash Flow

To calculate your net cash flow, all you need to do is subtract your monthly outflow from your monthly inflow. The result is your net cash flow.

A positive number means you have a surplus, while a negative means you have a deficit in your budget.

A positive cash flow is desirable, of course, since it can provide more flexibility, and can allow you to decide how to best use the surplus.

There are a variety of options. You could choose to save for an upcoming expense, make additional contributions to your retirement fund, create or add to an emergency fund, or, if your savings are in good shape, consider a splurging on something fun.

A negative cash flow can signal that you are living a more expensive life than your income can support. In the future, maintaining this habit could lead to additional debt.

It’s also possible to have net neutral cash flow (all money coming in and going out is fairly equal).

In that case, you may still want to jigger things around if you are not already putting the annual maximum into your retirement fund and/or you don’t have a comfortable emergency cushion.

The Difference Between a Personal Cash Flow Statement and a Budget

A personal cash flow statement provides a comprehensive look at what is currently coming in and going out of your bank accounts each month.

A cash flow statement tells you where you are.

A personal budget, on the other hand, helps you to get where you want to go by giving you a spending plan that is based on your income.

A budget can provide you with some general spending guidelines, such as how much you should spend on groceries, entertainment and clothing each month so that you don’t exceed your income–and end up with a negative net flow.

Creating a budget can also be a good opportunity to check in with your financial goals.

For example, are you on track for saving for retirement? Do you want to amp up your emergency fund?

Are you interested in tackling the credit card debt that has been spiraling due to high interest rates?

Perhaps you want to work toward paying off your student loans.

Whatever your goal, a well-crafted budget could serve as a roadmap to help you get there.

Using Your Personal Financial Statement to Create a Simple Budget

Because a cash flow statement provides a comprehensive look at your overall spending habits, it can be a great jumping off point to set up a simple budget.

When you’re ready to create a budget, there are a variety of resources online, from apps, like SoFi Relay®, to spreadsheet templates and printable worksheets .

A good first step in creating a budget is to organize all of your monthly expenses into categories.

Spending categories typically include necessities, such as rent or mortgage, transportation (like car expenses or public transportation costs), food, cell phone, healthcare/insurance, life insurance, childcare, and any debts (credit cards/ loans).

You’ll also need to list nonessential spending, such as cable television, streaming services, concert and movie tickets, restaurants, clothing, etc.

You may also want to include monthly contributions to a retirement plan and personal savings into the expense category as well.

And, if you don’t have emergency savings in place that could cover at least three to six months of living expenses, consider putting that on the spending list as well, so you can start putting some money towards it each month.

Once you have a sense of your monthly earnings and spending, you may want to see how your numbers line up with general budgeting guidelines. Financial counselors sometimes recommend the 50/30/20 model, which looks like this:

•  50% of money goes towards necessities such as a home, car, cell phone, or utility bills.
•  30% goes towards your wants, such as entertainment and dining out.
•  20% goes towards your savings goals, such as a retirement plan, a downpayment on a home, emergency fund, or investments.

Improving Your Net Cash Flow

If your net cash flow is not where you want it or, worse, dipping into negative territory, a budget can help bring these numbers into balance.

The key is to look closely at each one of your spending categories and see if you can find some ways to trim back.

The easiest way to change your spending habits is to trim some of your nonessential expenditures. If you’re paying for cable but mostly watch streaming services, for example, you could score some real savings by getting rid of that cable bill.

Not taking as many trips to the mall or cooking (instead of getting takeout) more often could start adding up to a big difference.

Living on a budget may also require looking at the bigger picture and finding places for more significant savings.

For example, maybe rent eats up 50% of your income and it’d be better to move to a less costly apartment. Or, you might want to consider trading in an expensive car lease for a less pricey or pre-owned model.

There may also be opportunities to lower some of your recurring expenses by finding a better deal or negotiating with your service providers.

You may also want to look into any ways you might be able to change the other side of the equation–the inflow.

Some options might include asking for a raise, or finding an additional income stream through some sort of side hustle.

The Takeaway

One of the most important steps towards achieving financial wellness is cash flow management–i.e., making sure that your cash outflow is not exceeding your cash inflow.

Creating a simple cash flow statement for yourself can be an extremely useful tool.

For one reason, it can show you exactly where you stand. For another, a personal cash flow statement can help you create a budget that can bring the inflow and outflow of money into a healthier balance.

Creating–and sticking with–a budget that creates a positive net cash flow, and also allows for monthly saving (for retirement, a future purchase, or a rainy day) can help you build financial security and future wealth.

If you need help with tracking your spending, a SoFi Money® cash management account may be a good option for you.

With SoFi Money, you can see your weekly spending on your dashboard, which can help you stay on top of your spending and make sure you are on track with your budget.

Check out everything a SoFi Money cash management account has to offer today!



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Source: sofi.com

The Pros and Cons of Working in Retirement

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Not long ago, the phrase “working in retirement” was an oxymoron, much like “bittersweet” or “act naturally.” After all, if you’re working, you’re by definition not retired.

But that was then. These days, working at least part-time while retired is increasingly common. According to one survey, 27% of pre-retirees said they planned to work part-time in retirement and among recent retirees, 19% work part-time.

Why so much working during retirement? More likely than not, because of money. As we explain in articles like “8 Reasons Your Parents Had an Easier Retirement Than You Will,” pensions are rapidly disappearing, replaced by much less reliable accounts like IRAs and 401(k)s. And as retiree income is falling, costs are rising.

On the plus side, however, while more retirees may be forced back into the workplace to make ends meet, there are more ways than ever to bring in a bit of extra bacon.

In short, in my parent’s generation, retirement meant not working at all. But for us boomers, retirement is morphing into something different. It’s not about doing nothing. Hopefully, it’s about being productive and making money, but by doing what you want to do, rather than what you have to do.

What kind of work will today’s (or tomorrow’s) retiree look forward to doing? Will it be easy to find pleasant, lucrative work? Should we start long before we retire?

In this week’s “Money” podcast, we’re going to find answers to these questions, as well as many more. Our guest is author and super-popular podcaster Paula Pant from Afford Anything. She’s smart, funny and knowledgeable — you’ll have a good time listening to her.

As usual, my co-host will be financial journalist Miranda Marquit, and we’re joined by our producer and sound effects guy, Aaron Freeman.

Sit back, relax and listen to this week’s “Money” podcast!

Not familiar with podcasts?

A podcast is basically a radio show you can listen to anytime, either by downloading it to your smartphone or other device, or by listening online.

They’re totally free. They can be any length (ours are typically about a half-hour), feature any number of people and cover any topic you can possibly think of. You can listen at home, in the car, while jogging or, if you’re like me, when riding your bike.

You can listen to our latest podcasts here or download them to your phone from any number of places, including Apple, Spotify, RadioPublic, Stitcher and RSS.

If you haven’t listened to a podcast yet, give it a try, then subscribe to ours. You’ll be glad you did!

Show notes

Want more information? Check out these resources:

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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

Source: moneytalksnews.com

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

A happy woman who struck it rich throws cash around
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If you’ve looked over your budget and think you can’t cut it down anymore, maybe you need to look a little harder.

There are probably some expenses you still could reduce — or drop altogether — to save thousands of dollars a year.

We found some examples of these costs. Here’s how to slash them if you are really determined. If you eliminated all of these expenses, you’d save a whopping amount — around $31,665 per year, based on averages.

But even by shaving off just 10% of these expenditures, you’d be around $3,167 richer by this time next year.

1. Rent

Nikodash / Shutterstock.com

The national average rent was $1,392 per month as of January, according to real estate research company Yardi Matrix. That’s $16,704 per year.

If you were to move somewhere the cost of living is lower, or bring in a roommate, you could cut your housing costs significantly.

And if you moved in with accommodating family members, you might be able to go rent-free, at least for a time.

If your home has an extra room, another option to offset housing costs is to rent that room to travelers. Try listing your spare space — or the entire home — on a vacation rental website like Airbnb, Homestay or Vrbo (short for “Vacation Rentals by Owner”). Read more in “Do This a Few Days Each Month and Watch Your Mortgage Disappear.”

Total annual savings if you could:

  • Give up the expense: $16,704 (based on the national average rent)
  • Reduce the expense by 10%: $1,670

2. Car payment

szefei / Shutterstock.com

The average monthly new-car loan payment was $568 as of last year, according to Edmunds. That’s $6,816 per year.

If you can, don’t buy a new car. Instead, opt for used vehicles. Cars are one of the first things cited in “You Should Never Buy These 12 Things New.”

Ideally, you would save enough money to buy a car outright instead of financing it, to avoid paying interest on the loan. If that’s not possible, at least try making a bigger down payment to lower your monthly car payment.

Getting rid of a personal vehicle and taking public transportation, walking or biking instead would be a major money-saving shift.

Or, depending on how much you drive, a ride-share service like Lyft or Uber might help you save money. You’d stand to also save on a car payment, insurance, gas and on the biggest auto expense of all, depreciation.

Total annual savings if you could:

  • Give up the expense: $6,816 (based on the average new-car loan payment)
  • Reduce the expense by 10%: $682

3. Cellphone

Man stares at cellphone
chainarong06 / Shutterstock.com

American households spent an average of $1,218 per year on cellular phone services as of 2019, the latest calendar year for which the Bureau of Labor Statistics has released consumer expenditure data.

You could cut costs by adding a few friends or family members to your plan, or by changing your plan.

Also see what you can save by comparison shopping among carriers using Money Talks News’ cellphone plan comparison tool.

If you don’t use your mobile phone a lot or are home enough to justify a landline, consider ditching your mobile service, or get a prepaid plan.

Total annual savings if you could:

  • Give up the expense: $1,218 (based on average household spending)
  • Reduce the expense by 10%: $122

4. Dining out

grocery shopper
mavo / Shutterstock.com

Sometimes you don’t feel like cooking, and that’s allowed. But let it be a habit, and it can cost a couple hundred bucks a month.

The average household in the U.S. spends $3,526 per year dining out, according to the Bureau of Labor Statistics. Cooking at home is much cheaper.

Reducing your restaurant spending can make a noticeable difference to your budget. Here are tips and tricks to help you shave costs: “12 Ways to Slice Your Next Restaurant Check in Half.”

Total annual savings if you could:

  • Give up the expense: $3,526 (based on average household spending)
  • Reduce the expense by 10%: $353

5. Cable

Minerva Studio / Shutterstock.com

If you haven’t cut the cord yet, you might want to consider it. The average household cable package costs about $217 per month as of 2020, according to DecisionData.org. That’s $2,604 per year.

Cutting the cord could cut that cost dramatically, with the many free and affordable alternatives to cable and satellite TV. “The 8 Best Money-Saving Cable Alternatives” gives pricing for some of the best TV alternatives.

Lowering your costs is great. Free is even better. For no-cost options, read about “15 Free Streaming Services to Watch While Stuck at Home.”

Total annual savings if you could:

  • Give up the expense: $2,604 (based on the average cable package)
  • Reduce the expense by 10%: $260

6. Gym membership

Daxiao Productions / Shutterstock.com

If you’re a committed gym rat who gets your money’s worth from a monthly gym membership, more power to you.

But many of us sign gym contracts in a burst of enthusiasm and quit after a few months. The gym membership contract, however, can keep you making monthly payments, whether you use the facility or not.

While membership programs and costs vary, Healthline says memberships average $58 per month, or $696 per year.

Maybe the COVID-19 pandemic already has got you exercising on your own for free. If not, give it a try. Running or walking regularly and doing a strength-training program at home, for example, lets you eliminate gym fees entirely.

We have other ways to trim costs in “8 Smart Ways to Save on a Gym Membership.”

Total annual savings if you could:

  • Give up the expense: $696 (based on the average monthly gym fee)
  • Reduce the expense by 10%: $70

7. Movie tickets

Multiethnic movie happy audience clapping
Dean Drobot / Shutterstock.com

The cost of a movie ticket averaged $9.16 in 2019, according to the latest data from the National Association of Theater Owners. Prices have been creeping steadily up at least since 1969, when a movie ticket cost $1.42, on average.

Hoping to treat the family when the pandemic has passed? Ka-ching.

If you won’t give up the movie theater entirely, there are cheaper options. For example:

  • Attend matinees.
  • Take advantage of senior discounts.
  • Look into independent cinemas that charge less for films that were released earlier in the year.

Total annual savings if you could:

  • Give up the expense: $109.92 (based on the average movie ticket cost and assuming you’re seeing one movie in theaters per month)
  • Reduce the expense by 10%: $11

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

Source: moneytalksnews.com

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

A happy woman who struck it rich throws cash around
ViDI Studio / Shutterstock.com

If you’ve looked over your budget and think you can’t cut it down anymore, maybe you need to look a little harder.

There are probably some expenses you still could reduce — or drop altogether — to save thousands of dollars a year.

We found some examples of these costs. Here’s how to slash them if you are really determined. If you eliminated all of these expenses, you’d save a whopping amount — around $31,665 per year, based on averages.

But even by shaving off just 10% of these expenditures, you’d be around $3,167 richer by this time next year.

1. Rent

Nikodash / Shutterstock.com

The national average rent was $1,392 per month as of January, according to real estate research company Yardi Matrix. That’s $16,704 per year.

If you were to move somewhere the cost of living is lower, or bring in a roommate, you could cut your housing costs significantly.

And if you moved in with accommodating family members, you might be able to go rent-free, at least for a time.

If your home has an extra room, another option to offset housing costs is to rent that room to travelers. Try listing your spare space — or the entire home — on a vacation rental website like Airbnb, Homestay or Vrbo (short for “Vacation Rentals by Owner”). Read more in “Do This a Few Days Each Month and Watch Your Mortgage Disappear.”

Total annual savings if you could:

  • Give up the expense: $16,704 (based on the national average rent)
  • Reduce the expense by 10%: $1,670

2. Car payment

szefei / Shutterstock.com

The average monthly new-car loan payment was $568 as of last year, according to Edmunds. That’s $6,816 per year.

If you can, don’t buy a new car. Instead, opt for used vehicles. Cars are one of the first things cited in “You Should Never Buy These 12 Things New.”

Ideally, you would save enough money to buy a car outright instead of financing it, to avoid paying interest on the loan. If that’s not possible, at least try making a bigger down payment to lower your monthly car payment.

Getting rid of a personal vehicle and taking public transportation, walking or biking instead would be a major money-saving shift.

Or, depending on how much you drive, a ride-share service like Lyft or Uber might help you save money. You’d stand to also save on a car payment, insurance, gas and on the biggest auto expense of all, depreciation.

Total annual savings if you could:

  • Give up the expense: $6,816 (based on the average new-car loan payment)
  • Reduce the expense by 10%: $682

3. Cellphone

Man stares at cellphone
chainarong06 / Shutterstock.com

American households spent an average of $1,218 per year on cellular phone services as of 2019, the latest calendar year for which the Bureau of Labor Statistics has released consumer expenditure data.

You could cut costs by adding a few friends or family members to your plan, or by changing your plan.

Also see what you can save by comparison shopping among carriers using Money Talks News’ cellphone plan comparison tool.

If you don’t use your mobile phone a lot or are home enough to justify a landline, consider ditching your mobile service, or get a prepaid plan.

Total annual savings if you could:

  • Give up the expense: $1,218 (based on average household spending)
  • Reduce the expense by 10%: $122

4. Dining out

grocery shopper
mavo / Shutterstock.com

Sometimes you don’t feel like cooking, and that’s allowed. But let it be a habit, and it can cost a couple hundred bucks a month.

The average household in the U.S. spends $3,526 per year dining out, according to the Bureau of Labor Statistics. Cooking at home is much cheaper.

Reducing your restaurant spending can make a noticeable difference to your budget. Here are tips and tricks to help you shave costs: “12 Ways to Slice Your Next Restaurant Check in Half.”

Total annual savings if you could:

  • Give up the expense: $3,526 (based on average household spending)
  • Reduce the expense by 10%: $353

5. Cable

Minerva Studio / Shutterstock.com

If you haven’t cut the cord yet, you might want to consider it. The average household cable package costs about $217 per month as of 2020, according to DecisionData.org. That’s $2,604 per year.

Cutting the cord could cut that cost dramatically, with the many free and affordable alternatives to cable and satellite TV. “The 8 Best Money-Saving Cable Alternatives” gives pricing for some of the best TV alternatives.

Lowering your costs is great. Free is even better. For no-cost options, read about “15 Free Streaming Services to Watch While Stuck at Home.”

Total annual savings if you could:

  • Give up the expense: $2,604 (based on the average cable package)
  • Reduce the expense by 10%: $260

6. Gym membership

Daxiao Productions / Shutterstock.com

If you’re a committed gym rat who gets your money’s worth from a monthly gym membership, more power to you.

But many of us sign gym contracts in a burst of enthusiasm and quit after a few months. The gym membership contract, however, can keep you making monthly payments, whether you use the facility or not.

While membership programs and costs vary, Healthline says memberships average $58 per month, or $696 per year.

Maybe the COVID-19 pandemic already has got you exercising on your own for free. If not, give it a try. Running or walking regularly and doing a strength-training program at home, for example, lets you eliminate gym fees entirely.

We have other ways to trim costs in “8 Smart Ways to Save on a Gym Membership.”

Total annual savings if you could:

  • Give up the expense: $696 (based on the average monthly gym fee)
  • Reduce the expense by 10%: $70

7. Movie tickets

Multiethnic movie happy audience clapping
Dean Drobot / Shutterstock.com

The cost of a movie ticket averaged $9.16 in 2019, according to the latest data from the National Association of Theater Owners. Prices have been creeping steadily up at least since 1969, when a movie ticket cost $1.42, on average.

Hoping to treat the family when the pandemic has passed? Ka-ching.

If you won’t give up the movie theater entirely, there are cheaper options. For example:

  • Attend matinees.
  • Take advantage of senior discounts.
  • Look into independent cinemas that charge less for films that were released earlier in the year.

Total annual savings if you could:

  • Give up the expense: $109.92 (based on the average movie ticket cost and assuming you’re seeing one movie in theaters per month)
  • Reduce the expense by 10%: $11

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

Source: moneytalksnews.com