How to Get Free Meals for Kids While School’s Out

A little boy recieves food in a bag from a bus driver.

A student picks up food in Fayette, Miss. With the school year ending soon, there are federal programs to help keep kids fed through the summer. Rogelio V. Solis/AP Photo

Millions of families struggle with food insecurity every summer when school is out. Income loss due to the pandemic has only exasperated the situation.

According to the U.S. Department of Agriculture (USDA) up to 12 million children are currently living in households where they may not have enough to eat.

If you’re worried about how to put food on your family’s table, help is out there.

How to Get Free Meals for Kids This Summer: 3 Federal Programs

The American Rescue Plan — the coronavirus relief package President Joe Biden signed into law in March 2021 — provided funding to expand several USDA programs aimed to reduce child hunger.

1. Pandemic EBT

Families with children eligible for free or reduced lunch and those who qualify for SNAP benefits can receive extra money for food via the Pandemic EBT program, which is being extended through the summer to make up for missed school meals.

The USDA standard benefit amount is $375 per eligible child over the course of the summer. Those living in Alaska, Hawaii, Puerto Rico, Guam or the U.S. Virgin Islands have a higher standard benefit.

You’ll need to enroll in the Pandemic EBT program through your individual state, as funds are disbursed at the state level. Currently, 40 states, plus the District of Columbia and Puerto Rico, have been approved to operate Pandemic EBT programs.

Money is generally distributed in two or three disbursements throughout the summer.

2. USDA Summer Meals

All families with children 18 and under can participate in the USDA’s summer meal programs, which partners with local agencies including libraries, community centers, parks, churches and schools to distribute meals.

Program rules have been loosened so that meals can be distributed in bulk packages to cover multiple days and so parents can pick up the food without having their children present.

This interactive map helps you find local meal distribution sites. You can also locate a nearby site by texting “Summer Meals” to 97779 or calling 1-866-348-6479.

3. USDA National Hunger Hotline

The USDA National Hunger Hotline can help families seeking food assistance. Call 1-866-3-HUNGRY (1-866-348-6479) Monday through Friday between 7 a.m. to 10 p.m. E.T. to reach the hotline. If you need assistance in Spanish, call 1-877-8-HAMBRE (1-877-842-6273).

Free Meals Next School Year

Even after summer comes to an end, families will still be able to get a financial break when it comes to feeding their kids.The USDA is extending its National School Lunch Program Seamless Summer Option so that students can receive universal free lunch throughout the 2021-2022 school year. Waivers will also be given to provide free meals for kids in daycare and preschool programs.

If students are still learning virtually, you’ll be able to pick up meals for children to eat at home. Check with your child’s school or child care provider to see if they are participating in this program.

Nicole Dow is a senior writer at The Penny Hoarder.

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Source: thepennyhoarder.com

3 Easy Ways to Get Free Meals for Kids While School’s Out

A little boy recieves food in a bag from a bus driver.

A Jefferson County School District student receives several bags with meals, Wednesday, March 3, 2021 in Fayette, Miss. As one of the most food insecure counties in the United States, many families and their children come to depend on the free meals as the only means of daily sustenance. Rogelio V. Solis/AP Photo

Millions of families struggle with food insecurity every summer when school is out. Income loss due to the pandemic has only exasperated the situation.

According to the U.S. Department of Agriculture (USDA) up to 12 million children are currently living in households where they may not have enough to eat.

If you’re worried about how to put food on your family’s table, help is out there.

How to Get Free Meals for Kids This Summer: 3 Federal Programs

The American Rescue Plan — the coronavirus relief package President Joe Biden signed into law in March 2021 — provided funding to expand several USDA programs aimed to reduce child hunger.

1. Pandemic EBT

Families with children eligible for free or reduced lunch and those who qualify for SNAP benefits can receive extra money for food via the Pandemic EBT program, which is being extended through the summer to make up for missed school meals.

The USDA standard benefit amount is $375 per eligible child over the course of the summer. Those living in Alaska, Hawaii, Puerto Rico, Guam or the U.S. Virgin Islands have a higher standard benefit.

You’ll need to enroll in the Pandemic EBT program through your individual state, as funds are disbursed at the state level. Currently, 40 states, plus the District of Columbia and Puerto Rico, have been approved to operate Pandemic EBT programs.

Money is generally distributed in two or three disbursements throughout the summer.

2. USDA Summer Meals

All families with children 18 and under can participate in the USDA’s summer meal programs, which partners with local agencies including libraries, community centers, parks, churches and schools to distribute meals.

Program rules have been loosened so that meals can be distributed in bulk packages to cover multiple days and so parents can pick up the food without having their children present.

This interactive map helps you find local meal distribution sites. You can also locate a nearby site by texting “Summer Meals” to 97779 or calling 1-866-348-6479.

3. USDA National Hunger Hotline

The USDA National Hunger Hotline can help families seeking food assistance. Call 1-866-3-HUNGRY (1-866-348-6479) Monday through Friday between 7 a.m. to 10 p.m. E.T. to reach the hotline. If you need assistance in Spanish, call 1-877-8-HAMBRE (1-877-842-6273).

Free Meals Next School Year

Even after summer comes to an end, families will still be able to get a financial break when it comes to feeding their kids.The USDA is extending its National School Lunch Program Seamless Summer Option so that students can receive universal free lunch throughout the 2021-2022 school year. Waivers will also be given to provide free meals for kids in daycare and preschool programs.

If students are still learning virtually, you’ll be able to pick up meals for children to eat at home. Check with your child’s school or child care provider to see if they are participating in this program.

Nicole Dow is a senior writer at The Penny Hoarder.

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Source: thepennyhoarder.com

Stock Market Today: Stocks Sag Despite Slew of Earnings Beats

Wall Street finished the week on a down note Friday, ignoring even more sterling first-quarter earnings reports.

John Butters, senior earnings analyst for FactSet, says that 60% of the S&P 500’s components have reported Q1 earnings, and, so far, 86% of those companies have reported a positive earnings-per-share surprise.

“If 86% is the final percentage, it will mark the highest percentage of S&P 500 companies reporting positive EPS surprises since FactSet began tracking this metric in 2008,” he says.

Estimates have been strong, too. “The second quarter marked the second-highest increase in the bottom-up EPS estimate during the first month of a quarter since FactSet began tracking this metric in 2002, trailing only Q1 2018 (+4.9%),” Butters adds.

Amazon.com (AMZN, -0.1%) was the latest to beat expectations, reporting profits of $15.79 per share that clobbered estimates for $9.45 and announcing a 44% surge in sales. Twitter (TWTR, -15.2%) earnings beat the Street as well, but shares plunged on disappointing numbers of “monetizable daily users” and Q2 revenue forecasts.

Sign up for Kiplinger’s FREE Closing Bell e-letter: Our daily look at the stock market’s moves, and what moves investors should make.

The Dow Jones Industrial Average (-0.5% to 33,874), S&P 500 (-0.7% to 4,181) and Nasdaq Composite (-0.9% to 13,962) all finished in the red – and have effectively been flat over the past two weeks.

Ally Invest president Lule Demmissie suggests that investors are increasingly getting anxious. “The mindset has switched from ‘what could go right?’ to ‘what could go wrong?'” she says.

Other action in the stock market today:

  • Chevron (CVX, -3.6%) skidded after reporting first-quarter earnings. While Chevron beat on the bottom line, revenue fell short of expectations.
  • Fellow oil giant Exxon Mobil (XOM, -2.9%) also retreated today, as weakness in the energy sector overshadowed the company’s first profitable quarter in a year on stronger-than-expected revenue.
  • Skyworks Solutions (SWKS, -8.4%) was another post-earnings loser. The semiconductor name reported profit and revenue above estimates for its fiscal second quarter, but a tepid current-quarter outlook was the likely weight on shares.
  • The small-cap Russell 2000 dropped 1.3% to 2,266.
  • U.S. crude oil futures slumped 2.2% to settle at $63.58 per barrel.
  • Gold futures finished fractionally lower at $1,767.70 an ounce.
  • The CBOE Volatility Index (VIX) jumped 5.4% to 18.56.
  • Bitcoin prices plunged 4.5% to $55,470. $52,951. $57,031.60 (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)

And a quick reminder to Warren Buffett faithful that Berkshire Hathaway’s (BRK.B) annual meeting, which we preview here, will take place Saturday.

stock chart for 043021stock chart for 043021

A Boffo 100 Days for Biden

Despite Friday’s losses, President Joe Biden has now presided over one of the best market performances ever during an American president’s first 100 days in office.

For instance, the 8.6% gain for the Dow since inauguration is the best 100-day rally for any president since Lyndon Johnson, who was inaugurated in November 1963 and enjoyed a 9.2% run after 100 days. Many individual-share gains have been far more generous; 25 stocks have popped between 39% and 97% in Biden’s first few months.

And the S&P 500’s performance, on an annualized basis, puts Biden among the best presidents for investors of all time at this early stage.

Will that hold up throughout his presidency? We simply have no way of knowing. But what we do know is that Biden has clearly telegraphed his various policy proposals, from the stimulus package that cleared Congress in March to his recently proposed American Jobs Plan, and that allows investors to identify potential winners should the votes go the president’s way.

Read on as we take a fresh look at many stocks (and a couple of funds) that should continue to benefit if Biden continues to score policy wins.

Source: kiplinger.com

PODCAST: Estate-Planning Your Stuff with T. Eric Reich

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Transcript

David Muhlbaum: When it comes to estate planning, money is usually front of mind. Makes sense, that’s where decisions about wills, trusts and more can realize real tax savings. But it’s stuff, tangible things like houses, china and collectibles that often generate drama and conflict. We talk with a financial advisor who’s touched a nerve on this front. Also, meet Generation I. All coming up in this episode of your money’s worth—stick around.

David Muhlbaum: Welcome to Your Money’s Worth, I’m kiplinger.com senior editor David Muhlbaum, joined by my co-host, senior editor Sandy Block. How are you doing Sandy?

Sandy Block: I’m doing good.

David Muhlbaum: Well, good. Short of talking politics, there’s probably no quicker way to generate angry feedback than waging intergenerational battles.

Sandy Block: But you’re going to do it anyway?

David Muhlbaum: Sort of? I say that in part because while the study I’m going to discuss sounded like it was going to be kids versus the olds, it turns out there’s more nuance than that. Anyway, I’m going to talk about Generation I, which isn’t really even a generation but rather a handy little term that the Charles Schwab Investment firm cooked up for new investors. By that they mean people who are new to stock market investing.

Sandy Block: And those folks have been the source of some of the market drama we’ve seen this year like the GameStop bubble we talked about earlier this year.

David Muhlbaum: Yes, yes. There is overlap between the whole meme stocks crowd and Generation I. I stands for investor but since it’s a new term, let’s start with the definition. What Charles Schwab means by Generation Investor, Generation I, is people who started stock market investing in 2020—not before. So it doesn’t matter what your actual age is. There are Generation I members who are Boomers, Gen X, Millennials. Obviously, the group skews younger than investors broadly, but what’s striking is that Generation I, according to Schwab, accounts for 15% of all U.S. stock market investors.

Sandy Block: By population, not by dollars invested.

David Muhlbaum: Yes, by population. They don’t have a figure for a Generation I’s sum assets but I see what you’re getting at. And yes, Gen I earns about $20,000 less in annual income, at $76,000 a year, than those who began investing before 2020. And here’s another interesting number, half of Generation I says they live paycheck to paycheck.

Sandy Block: Okay. That sounds worrisome.

David Muhlbaum: Yeah, but here’s the thing. Some of the so-called Generation I are people who downloaded Robinhood and are watching a handful of stocks for big moves, short term trading. And if they’re doing that while missing payments on their car note, okay, that’s bad. But at least according to the study, they say they’re learning that investing is more about longer-term gains versus shorter-term wins. About learning to do research, diversification, capital market gains, taxes, risk tolerance, all that—the knowledge if you will.

Sandy Block: I’m hearing echoes of what Kyle Woodley was talking about when he joined us for the GameStop discussion about how it’s possible for people who came in for this excitement might be convinced to stay around for the long term, grow your wealth, not double your money, kids.

David Muhlbaum: Yeah, I totally agree. However, the big factor here is that the sum of Generation I’s market experience is this strong bull market. Will they stick around when things go south, which someday, sometime we’ll have a bear market. Markets go up, markets go down.

Sandy Block: That’s right, and I’m constantly reminded what our editor Anne Smith reminds us all the time, is that we’ve been here before, maybe not at these numbers. But in the 90s, when tech stocks were taking off, all kinds of people got in the market for the first time. And while you couldn’t make trades for nothing on an app, it was cheaper to buy and sell stocks than it had been in the past. And a lot of these people piled in because they had heard that tech stocks would never go down and they didn’t think they would ever lose money and they learned the hard way that they could.

David Muhlbaum: When we return for our main segment, we’ll talk with a financial advisor with some insights about the estate planning for stuff. Not just the money, the stuff.

David Muhlbaum: Welcome back to Your Money’s Worth. Joining us today is T. Eric Reich, the president and founder of Reich Asset Management in Southern New Jersey. Eric has a whole slew of professional certification acronyms after his name, including CFP. And the way we found him is that he’s a contributor to Kiplinger’s Wealth Creation Channel. That is an area of our website that has content from a range of financial professionals, CFPs, CPAs, tax lawyers and more. They’re qualified and they’re good writers. Plus, since they’re dealing directly with clients, I’d venture to say that they often have a closer sense of what personal finance guidance people actually need than personal finance writers. So Eric wrote a piece for us called, Time to Face Reality, Your Kids Don’t Want Your Stuff. And well, it was a hit. Welcome, Eric. We will get into what stuff and why, but since we’ve brought up how you professionals get to hear it directly from the clients, why don’t you tell us a little bit about the reaction you’ve been getting? Because, I understand from your assistant that you’ve gotten a lot of feedback.

T. Eric Reich: We have. We got probably a few dozen emails across the country from different readers of Kiplinger’s that saw it and then of course our own clients, of course, were calling us. They were writing or calling and letting us know their thoughts on it. And it’s funny, I wrote it because it’s such a recurring theme with a lot of people. They’re always convinced that people want all of your stuff and they just don’t. So I wanted to touch on why, but I knew it was going to get a strong reaction because I hear the same thing all the time from people. So if I hear locally on the ground, then I’m sure to a bigger audience, we were going to even get more opinion on that.

Sandy Block: Well, Eric, I immediately latched onto your piece because I am in the process of… My father passed away a couple of months ago and I’m in the process of distributing and cleaning out his house and it’s a mammoth job. So many of the things that you talked about really resonated with me. Obviously, we’re going to link to your piece so that people can follow up and read it in its entirety but we’re going to hit on some highlights and my question is, what’s the number one item people planning their estate think their kids want but the kids don’t actually want?

T. Eric Reich: By far the biggest one is the house. And it’s not that the kids don’t want the house, it’s that logistically it just doesn’t work. My example: I have three children, I have a nice house and I have three young kids. Let’s say my kids were in their twenties and something happened to me. My kids might want the house, but how’s that going to work? None of them can afford it because they’re just starting out in their careers. There’s three of them, they’re certainly not going to share it. And then one of them invariably wants to buy it, but they think they’re entitled to a discount because they’re my kid. But then the other two would be offended if they got a discount because they’re my kids, so why should they get shortchanged in favor of another one? So everybody thinks that their kids want the house, but the reality is most often that the biggest misconception is that your kids just really don’t want your house.

Sandy Block: So a follow-up question, Eric, if you aren’t going to leave the kids your house, how should you plan your estate so that doesn’t happen?

T. Eric Reich: So if you’re not going to leave the house to the kids, I mean, you can leave it to them, but you can reference in there, “Hey, these are the parameters in which someone’s going to keep it.” So if you want to keep it, it has to be appraised by two different independent people or three different and you take the average of the three it’s bought at fair market value. You have to specify the rules to which someone can keep it because if not, that’s where all the fights start, is the more ambiguity you leave in it the bigger the fight. So all of those things should be spelled out ahead of time. If you want it to be sold, say you want it to be sold. If somebody wants to keep it, fine, but here are the rules under which someone gets to keep it.

David Muhlbaum: What about setting up a trust? Couldn’t that help establish the rules you’re talking about?

T. Eric Reich: It can, I mean, I think a trust in general can help with a lot of things. Again, this is for an estate planning attorney more but to me, I like using trusts in general. Simply because it’s a way to control things and I hate to use this phrase, control from the grave, but that’s exactly what it is. And sometimes that comes off as sounding like a control freak or overbearing, but sometimes it’s for, honestly, just the protection of the beneficiaries themselves. If one’s a spendthrift, if one’s in a bad marriage, if one has a lot of creditors, you could be doing them a disservice by giving it to them outright instead of via trust.

Sandy Block: So, Eric, isn’t the other advantage of putting your house and other items in a trust that it keeps it out of probate?

T. Eric Reich: It keeps it out of probate and the biggest part of that too, is, that’s public record. I mean, I remember when a client had a family member pass away, they got a phone call a few months later from a guy wanting to buy the antique car that they just inherited. To which their response was, “Wait, who are you again?” Well, here they looked up in public records that one of the assets was this old antique Chevy and the guy wanted to buy it off him. And I always say, you see it in real life, you know,. Princess Diana’s will was published in a magazine. Whereas I always say, “Well, what about, Frank Sinatra?” And they go, “Well, I never heard anything about that.” Exactly, because everything was in a trust. So privacy is a big component of that as well. So avoiding probate and also what goes along with that is the privacy factor.

David Muhlbaum: The main family house is one thing but a vacation house can be even more emotionally loaded, no? I imagine someone working on their will thinking, wouldn’t be great for everyone to get together at the lake house every summer, roast marshmallows and remember grandma and grandpa for having found this place. And actually the kids are like, “Eh, we like going to Europe.”

T. Eric Reich: You’re absolutely right. It’s definitely bigger for the creator of the estate. It’s not that the beneficiaries don’t love the idea of the vacation home and everything else. The problem is, and again, I always go back to my example, I have three kids. Who gets to use it when? It’s only fit to be used in the summer months. I live at the Jersey shore, so, super-popular here June through the end of August. So, who gets to use it during that time period and what weeks and what holidays? And as I get older and my kids get older, their kids get older,

If one family has five kids and the other has one, are they getting more usage out of it? How are the expenses being paid? Is everyone sharing in that equally? So it really starts to create a problem. One of the ways around that maybe is that if that were in a trust, then I could also put money into that trust for the maintenance of the house, to pay the taxes, it’s going to pay everything it needs at least for the next decade. And then after 10 years, you guys have to come up with a solution based on x, y, and z of how we should deal with it going forward.

Sandy Block: Yeah. Eric, my experience with people who have inherited vacation homes, it sounds like a great idea at the time but very often they/ve moved and live many, many miles away. They don’t live near the Jersey Shore, they live in California, so it becomes a huge hassle. And I think that’s something probably you mentioned that people also need to think about, how close are your heirs to the actual vacation home that they could use it.

T. Eric Reich: Yeah, we actually just had a situation not too long ago. We had someone who owned a house on the beach, a very valuable house. They were kind of house poor; they had a phenomenal house, but not tons of money other than that. But the client really wanted to preserve that asset for a grandchild, the only grandchild, who lived hours and hours away. And I actually suggested, we call the grandchild and ask point blank, “Do you want this house?” The client was floored, like, “Well, of course they want the house, who doesn’t want a house on the beach in Ocean City in New Jersey.” Well, we called and it turned out the kid said, “That’s wonderful but I’m in my 20s, I work 80 hours a week. It’s three and a half hours away. I will absolutely never use that house. I’d much rather you sold it and got to use the money and enjoyed it. And if there’s something left over, wonderful, leave it to me but otherwise, I really don’t care.”

David Muhlbaum: Well, sounds like conversations really come down to the core of doing estate planning, especially around stuff. But those could be pretty fraught conversations. It sounds like this one went okay, but I assume they don’t always.

T. Eric Reich: Well, yeah, that’s true. I mean, the reason we had to make that phone call was because they were adamant that, of course, they would want this. Who wouldn’t want it? And the reality is there’s a lot of people that wouldn’t want it. The beauty of that is in the eye of the beholder, not so much somebody on the other end, but these are real world scenarios that people have to deal with. And of course the house being the biggest, but it’s not always just the house.

Sandy Block: Now that leads me to my next question, Eric, because you also talk in the slideshow about your stuff, your collectibles. They may have great sentimental value to you but maybe not to your children. Should you start getting rid of them while you’re still around?

T. Eric Reich: We do suggest that sometimes or at least explore it. Or, if not, educate the children on the value of it. A lot of times what we’ll see is someone has a collection of stuff, whatever it might be, the owner, of course, knows how valuable it is. They’ve been collecting it for 20, 30, 40 years, but an heir doesn’t necessarily have an idea of what that would be worth. And we ran into a scenario like that: We had someone that was going to basically just sell a bunch of stuff. And I think it was for like $1,000. And then we actually brought a specialist in to review it and turns out it was worth $45 to $50,000. So this poor guy was going to get ripped off because he didn’t understand the value of what it was, and that’s not uncommon at all.

Sandy Block: That’s my Antiques Road Show nightmare, Eric, is that I will give something to Goodwill and be watching Antiques Road Show and it’ll show up being worth $50,000 and I’ll realize that I gave it away. So I think you’re suggesting that you get that stuff valued and appraised while you’re still around to help your kids is a really good one.

T. Eric Reich: If you’re not a collector, you don’t know. Either sell it and let it go ahead of time, or at least communicate that value—and an actual value, because sometimes we also think collectibles are worth a lot more than they really are. We think it’s worth $50,000 and it’s worth $1, that’s more often the case. But nonetheless, an appraisal from an independent person will help.

David Muhlbaum: I’m glad you brought up the point about actual valuation, because my cats eat from some pretty fancy china bowls that someone thought had a lot more value than they did. And I think that sometimes these items that people have had for a long time or inherited from their predecessors, they really don’t fetch that much today.

T. Eric Reich: No, because unfortunately some of the things and it’s just a generational thing and I use china, actually as the example a lot of times. Because 50 years ago, 75 years ago, china was prized. I mean, for everybody, fine china was a real hallmark of things. Today, I probably have six or seven sets of fine china. Some of them apparently, extremely old, from great-great-great-grandmothers. But the reality is the generation today doesn’t use it at all. If they do, they can’t use five, six, seven sets of it. But the reality is that value from a long time ago doesn’t necessarily translate today for those reasons. So a lot of times things you think are very valuable maybe aren’t.

Sandy Block: Yeah. David Muhlbaum: and I have discussed this, and both of us are awash in china. And, I also have at least two sets of silver that again have been handed down from generations. As you said, young people—and this goes for even furniture—young people just don’t use that stuff. So I guess, the best thing you can do is either get rid of it or have some instructions for what you’d like to have done with it.

T. Eric Reich: Yeah. And valuation is key for that as long as you have a good value placed on it and you have a sense of what it might be worth? My wife’s family, they have a much, much larger family than I do. They’ll go to everybody in the family, two and three removed and say, “Hey, does anybody want this piece?” Because it is a family piece. But if not, then what do they ultimately do with it? It sounds sad to have to part with it, if really nobody wants it, and you know you mentioned yourself and you’re going through it personally, it’s only adding to the problem, we’ll call it, of settling an estate. And the less planning involved, the bigger the problem becomes.

David Muhlbaum: I imagine that in your line of work, Eric, you refer people out for valuations pretty often. How can our listeners get good qualified valuations for their stuff?

T. Eric Reich: So there are evaluation organizations. So you basically would want to find certified valuation type of people for that.

David Muhlbaum: Do they have acronyms like CFP?

T. Eric Reich: They probably do. I think I’ve seen one or two out there, definitely not an expert on it, but it is funny because from the article, I did have two different companies reach out to me and say, “Hey, this is what we do for a living. Feel free to pass our information along.” So these companies are out there, they do understand what things are worth. I got lucky in the one example of the $1000 offer for $50,000 worth of stuff. I happened to know a person who had some expertise in that area. But we frequently do refer out to an appraiser, to an estate-planning attorney, to a CPA. And all of them can have pretty good contacts in that world as well.

Sandy Block: Eric, this wasn’t in your slideshow, but you mentioned cars. Do you want to talk about cars?

T. Eric Reich: Cars are a big issue for a lot of people. My example: I have an old classic Corvette. I have a 1963 split-window coupe. So among the rarest of the rare. I have one of them and I have three kids. They all are convinced they’re getting the, “Vette.” Or the yellow car, as I like to call it, when I’m gone someday. Well, they can’t all get it. They also probably have no idea what it’s really worth. So for that reason just like the house or anything else, get a valuation. Get an appraisal of what is this thing really worth. And then again, if somebody wants to buy it at fair market value, that’s fine.

T. Eric Reich: But if not, it has to be sold. So otherwise it’s going to be unfair. Now, you can swap assets. You might say, if that car was worth $150,000, okay, well then if you’re getting that, then you have to give up a $100,000 of something else. And so that 50 and 50 go to the other two siblings. That’s fine you’re welcome to do that but my trust would stipulate that. Would lay out the terms at which someone could buy something.

David Muhlbaum: Could people set up a corporation to manage it for them?

T. Eric Reich: They could, that’s more of an estate lawyer question from that perspective. But you could, or you could probably do it all through a trust. It might just be too onerous to set up a corporation for that purpose. The logistics and maintenance of it might be a little too much.

David Muhlbaum: One interesting word you used in your article, Eric is “fun.” It’s a little surprising. Where’s the fun?

T. Eric Reich: Well, that’s just it, estate planning is never fun. Settling an estate is flat-out awful but the estate planning process and planning for your demise is never something that’s fun. But If you don’t deal with it, it is going to be a nightmare for the people behind you. So, why not deal with it today, when you’re of sound mind and body, as the phrase goes, to make those decisions. And again, try to make it fun, try to involve the kids from day one. It’s not like they’re fighting over your stuff. If everything’s out in the open and it’s shared freely, you really can have fun with… You know, I have one kid who’s clearly closest to my old Corvette than the other two.

T. Eric Reich: So the other two say, “We want it.” But as soon as they leave the room, he says, “Well, of course you know I’m getting it.” You can joke around with it that way but sometimes in those conversations, you will find that there are things of greater value to different family members. And it doesn’t have to be monetary value, they just really want something special to them. And if that’s what they really want, then maybe they get that and somebody else gets the car or the whatever, to be even.

David Muhlbaum: I see an opportunity for the younger generations to help here. As documentarians of a sort. They can take pictures, record, video, ask questions, discuss the things. What are the stories associated with the thing? And then you can decide, okay, we have a record of everything, now, these we’re going to keep and these we’re going to want to let go.

T. Eric Reich: That’s a really good point. I mean, recording it that way. Someone had reached out to me after reading the article and said, what they did, was they took pictures and many, many pictures of all the different things that they had collection wise. Wrote about them and then sold them. So they still have the pictures, they still have the story, they still have the context and everything else. They just don’t have the asset by itself, but they still have all the memories of it. They have the pictures, they have everything. So you did keep that meaning alive behind it, without actually worrying about who’s going to maintain this asset.

Sandy Block: Eric, it sounds like bottom-line here, a lot of people might be very conscientious about having their beneficiary designations correct for all of their finances, but they really don’t think about the solid items that they’re going to leave behind. And I suspect this often comes with people—and this is the case in my situation—people who have been in the same home for many years. If you move into a retirement community, you are forced to downsize but a lot of people die in the homes that they lived in. And I can tell you from personal experience, that clean-out can be a real job, especially if you don’t know what was the intention for some of these things.

T. Eric Reich: Yeah, it’s really the case. You live in the same house, 40, 50, 60 years, you accumulate a lot of stuff. Some of that stuff probably is fairly valuable. And really it is key because, the longer you’ve been in that house, your reference point is also of that house, and you have special memories of things in that house, because you’ve been going even yourself to that same place all that time. And that’s where a lot of that interest from heirs comes in, is there is a special piece or a special thing that reminds me of mom and dad or grandparents or whoever. And that sentimental value to that item is worth more than the financial value, and that’s why that honest, open communication is really key. Have this conversation while you’re alive and you’re healthy. When you’re in more advanced decline is where we see problems come in—or I promised that Corvette to all three kids at some point, because I forgot I promised it to the other two.

T. Eric Reich: Because I might be starting to slip a little bit or I’ve let things go or I let people take things out of the house over the years, things like that. So it really is important to not just focus on the, “yes, I’ve done estate planning, I set up a will or I set up a power of attorney.” That’s the bare minimum but even just writing out things like an ethical will, here’s the things I want to happen. This is what I want to see you do with stuff. Or here’s what I would love to see happen to the car, if you can’t, fine, then do this. A lot of times heirs will try to honor those wishes, if you really put it down in paper. It’s not something that would necessarily be part of a will. That’s more just the direct transfer of the property but more what I would like to see happen with something.

David Muhlbaum: Write it down on paper, tell people what you want to happen, have honest open conversation, always good advice. And I think we’ve had a good conversation here today ourselves. Thank you so much for joining us, Eric. We’re going to link up to your piece for people who want to dig a little bit deeper into what to do and not to do with your stuff. Thanks again.

T. Eric Reich: Thanks so much for having me.

David Muhlbaum: And that will just about do it for this episode of Your Money’s Worth. If you like what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and a review. If you’ve already subscribed, thanks. Please, go back and add a rating or a review if you haven’t already, it matters. To see the links we’ve mentioned in our show, along with other great Kiplinger content on the topics we’ve discussed, go to kiplinger.com/podcast. The episodes, transcripts and links are all in there by date. And if you’re still here, because you wanted to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram or by emailing us directly at podcast@kiplinger.com. Thanks for listening.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS

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Source: kiplinger.com

7 Ways Biden Plans to Tax the Rich (And Maybe Some Not-So-Rich People)

President Biden’s latest economic “Build Back Better” package – the $1.8 trillion American Families Plan – isn’t kind to America’s upper crust. It would provide a host of perks and freebies for low- and middle-income Americans, such as guaranteed family and medical leave, free preschool and community college, limits on child-care costs, extended tax breaks, and more. But to pay for all these goodies, the Biden plan also includes a long list of tax increases for the wealthiest Americans (and, perhaps, some people who aren’t rich).

Whether any of the president’s proposed tax increases ever make it into the tax code remains to be seen. Republicans in Congress will push back hard on the tax increases. And a handful of moderate Democrats will probably join them, too. So, don’t be surprised if a fair number of the plan’s revenue raisers are dropped or amended during the congressional sausage-making process…or even if some new tax boosts are added.

While we don’t know yet which – if any – of the proposed tax increases will survive and be enacted into law, wise taxpayers will start studying the plan now so that they’re prepared for the final results (any changes probably won’t take effect until next year). To get you going in that direction, here’s a list of the 7 ways the American Families Plan could raise taxes on the rich. But even if you’re not particularly wealthy, make sure you read closely to see if you might be caught up in any of the proposed tax hikes, since a few of them could snare some not-so-rich people in addition to the one-percenters.

1 of 7

Increase the Top Income Tax Rate

picture of a calculator with buttons for adding or subtracting taxespicture of a calculator with buttons for adding or subtracting taxes

The 2017 tax reform law signed by former President Trump lowered the highest federal personal income tax rate from 39.6% to 37%. According to the White House, this rate reduction gave a married couple with $2 million of taxable income a tax cut of more than $36,400. President Biden wants to reverse the rate change and bring the top rate back up to 39.6%.

For 2021, the following taxpayers will fall within the current 37% tax bracket:

  • Single filers with taxable income over $523,600;
  • Married couples filing a joint return with taxable income over $628,300;
  • Married couples filing separate returns with taxable income over $314,150; and
  • Head-of-household filers with taxable income over $523,600.

(For the complete 2021 tax brackets, see What Are the Income Tax Brackets for 2021 vs. 2020?)

President Biden has said many times that he won’t raise taxes on anyone making less than $400,000 per year. But there have always been questions and a lack of clarity as to what this exactly means. For instance, does it apply to each individual or to each tax family? We still haven’t received a crystal-clear answer to that question. As a result, we’re not entirely sure if the president wants to adjust the starting point for the top-rate bracket to account for his $400,000 threshold. According to a report from Axios, an unnamed White House official said the 39.6% rate would only apply to single filers with taxable income over $452,700 and joint filers with taxable income exceeding $509,300. That would satisfy the president’s promise for single people, but it’s a bit trickier for married couples filing a joint return.

If the 39.6% rate kicks in on a joint return when taxable income surpasses $509,300, a married couple could end up being taxed at that rate even if both spouses earn well under $400,000 per year. For example, if Spouse A makes $270,000 and Spouse B makes $260,000, their combined income ($530,000) is over the $509,300 threshold. Using the 2021 tax brackets, they wouldn’t even make it into the 37% bracket (they’d be in the 35% bracket). So, each spouse would face a tax increase under the Biden plan, even though neither one of them earn over $400,000 per year.

To be fair, this type of “marriage penalty” exists for the current 37% tax bracket, since the minimum taxable income for joint filers is less than twice the minimum amount for single filers. However, the current brackets weren’t set up with a pledge not to raise taxes on anyone making less than $400,000 per year in the background. Perhaps the Biden administration will recognize this and eventually adjust the brackets to fix the marriage penalty issue.

2 of 7

Raise the Capital Gains Tax

picture of computer screen with stock market charts showing market increasespicture of computer screen with stock market charts showing market increases

The American Families Plan also calls for an increase in the capital gains tax rate for people earning $1 million or more.

Currently, gains from the sale of stocks, mutual funds, and other capital assets that are held for at least one year (i.e., long-term capital gains) are taxed at either a 0%, 15%, or 20% rate. The highest rate (20%) is paid by wealthier taxpayers – i.e., single filers with taxable income over $445,850, head-of-household filers with taxable income over $473,750, and married couples filing a joint return with taxable income over $501,600. Gains from the sale of capital assets held for less than one year (i.e., short-term capital gains) are taxed at the ordinary income tax rates.

Under the Biden plan, anyone making more than $1 million per year would have to pay a 39.6% tax on long-term capital gains – which is almost double the current top rate. As noted above, that’s also the proposed top tax rate for ordinary income (e.g., wages). So, in effect, millionaires would completely lose the tax benefits of holding capital assets for more than one year. Plus, there’s the existing 3.8% surtax on net investment income, which would bump the overall tax rate up to 43.4% for people with income exceeding $1 million.

[Note: A summary of the American Families Plan states that application of the 3.8% surtax is “inconsistent across taxpayers due to holes in the law.” It then states that the president’s plan would apply the surtax “consistently to those making over $400,000, ensuring that all high-income Americans pay the same Medicare taxes.” No further details are provided, but this could mean expanding the surtax to cover certain income from the active participation in S corporations and limited partnerships.]

3 of 7

Eliminate Stepped-Up Basis on Inherited Property

picture of a last will and testamentpicture of a last will and testament

There’s another capital gains-related tax increase in the American Families Plan – eliminating the step up in basis allowed for inherited property. Under current law, if you inherit stock, real estate, or some other capital asset, your basis in the property is increased (“stepped up”) to its fair market value on the date that the person who previously owned it died. This increase in basis also means you can immediately sell the inherited property and avoid paying capital gains tax, because there’s technically no gain to tax. Why? Because gain is generally equal to the amount you receive from the sale minus your basis in the property. Assuming you sell the property for fair market value, the sales price will equal your basis…which results in zero gain (e.g., $1,000 – $1,000 = $0).

President Biden wants to change this result. Although details are scarce at this point, the president’s plan would nullify the effects of stepped-up basis for gains of $1 million or more ($2 million or more for a married couple) – perhaps by taxing the property as if it were sold upon death. There would be exceptions to the new rules for property donated to charity and family-owned businesses and farms that the heirs continue to operate. Other yet-to-be-determined exceptions could also be added, such as for property inherited by a spouse or transferred through a trust.

This is one of the tax changes that could impact Americans making less than $400,000 per year – perhaps only indirectly. Anyone, regardless of their own income level, can inherit property. If the heir’s basis is not adjusted upward any longer, that in essence is a tax increase on him or her. If the capital gains tax is levied before the property is transfer, that could mean there’s less to inherit – which could be considered an indirect tax on the person receiving the property. It can be a bit tricky, but there’s certainly the potential for someone inheriting property who makes less than $400,000 per year getting the short end of the stick because of this Biden proposal.

4 of 7

Tax Carried Interest as Ordinary Income

picture of investment fund manager looking at several computer screenspicture of investment fund manager looking at several computer screens

In certain case, an investment fund manager can treat earned income as long-term capital gain. Known as the “carried interest” loophole, this lets the fund manager take advantage of the long-term capital gains tax rates, which are usually lower than the ordinary income tax rates he or she would otherwise have to pay on the income.

The American Families Plan calls for the elimination of the carried interest rules. The Biden administration sees this change as “an important structural change that is necessary to ensure that we have a tax code that treats all workers fairly.”

For a fund manager, this change would result in a potential tax increase on the affected income of up to 19.6%. For example, assuming the income is high enough, he or she could go from a rate of 23.8% (20% capital gain rate + 3.8% surtax on net investment income) to 43.4% (39.6% ordinary tax rate + 3.8% surtax on NII).

One would think that most, if not all, fund managers earn at least $400,000 per year. But if there are any of them out there making less than that amount, then this change could raise taxes on someone making less than Biden’s $400,000 per year threshold. Yeah, it’s not likely…but it’s theoretical possible.

5 of 7

Curtail Like-Kind Exchanges

picture of several office buildings with a for sale sign in front of thempicture of several office buildings with a for sale sign in front of them

If you sell real property used for business or held as an investment and then turn around and buy other business or investment property that is the same type, you’re generally not required to recognize gain or loss for tax purposes under the “like-kind” exchange rules. Properties are of “like-kind” if they’re of the same nature or character. For example, an apartment building would generally be like-kind to another apartment building. This is true even if they differ in grade or quality.

The Biden plan would end this special real estate tax break for gains greater than $500,000. Since there are no income thresholds for the taxpayer, this change could potentially prevent someone making less than $400,000 per year (the $500,000 gain could be offset by other tax deductions, exemptions, or credits). Again, in most cases, wealthier people would be impacted by this change, but it’s possible that someone making less than $400,000 could also end up with a higher tax bill if this proposal became law.

6 of 7

Extend Business Loss Limitation Rule

picture of worried businessman looking at bad financial statementspicture of worried businessman looking at bad financial statements

Under the 2017 tax reform law, individuals operating a trade or business can’t deduct losses exceeding $250,000 ($500,000 for joint filers) on Schedule C. The excess losses may, however, be carried forward to later tax years. This rule is currently set to expire in 2027 (it was also generally suspended by the CARES Act for the 2018 to 2020 tax years).

President Biden’s American Families Plan calls for this business loss limitation rule to be made permanent. According to the plan summary, 80% of the affected business loss deductions would go to people making over $1 million. But, once again, someone making less than $400,000 could also incur a large business loss that wouldn’t be deductible after 2026 if the Biden proposal is adopted.

7 of 7

Increase Enforcement Activities

picture of yellow road sign saying &quot;IRS Audit Ahead&quot;picture of yellow road sign saying &quot;IRS Audit Ahead&quot;

Biden wants to increase tax enforcement activities aimed at high-income Americans – and give the IRS an extra $80 billion over a 10-year period to do it. While this really isn’t a tax increase, it certainly could result in wealthier Americans pay more in taxes. The idea is to “increase investment in the IRS, while ensuring that the additional resources go toward enforcement against those with the highest incomes, rather than Americans with actual income less than $400,000.” The IRS would also focus resources on large corporations, other businesses, and estates. The audit rate for Americans making less than $400,000 per year wouldn’t increase under the president’s plan.

The American Families Plan summary also states that financial institutions would be required to “report information on account flows so that earnings from investments and business activity are subject to reporting more like wages already are.” The income of wealthier Americans disproportionately comes from investments and small businesses, which are harder for the IRS to verify than other sources of income like wages. As a result, the Treasury Department estimates that up to 55% of taxes owed on some of these less visible income streams goes unpaid. And more of that unpaid tax is owed by people with higher incomes. The proposal would funnel additional information to the IRS about the hard-to-verify income without burdening taxpayers.

All-in-all, the White House claims that the increased tax enforcement efforts would raise $700 billion in revenue over a 10-year period.

Source: kiplinger.com

The Benefits of Working Longer

Financial planners and analysts have long advised workers who haven’t saved enough for retirement to work longer. But even if you’ve done everything right—saved the maximum in your retirement plans, lived within your means and stayed out of debt—working a few extra years, even at a reduced salary, could make an enormous difference in the quality of your life in your later years. And given the potential payoff, it’s worth starting to think about how long you plan to continue working—and what you’d like to do—even if you’re a decade or more away from traditional retirement age.

Larry Shagawat, 63, is thinking about retiring from his full-time job, but he’s not ready to stop working. Fortunately, he has a few tricks up his sleeve. Shagawat, who lives in Clifton, N.J., began his career as an actor and a magician. But marriage (to his former magician’s assistant), two children and a mortgage demanded income that was more consistent than the checks he earned as an extra on Law & Order, so he landed a job selling architectural and design products. The position provided his family with a comfortable living.

Now, though, Shagawat is con­sidering stepping back from his high-pressure job so he can pursue roles as a character actor (he’s still a member of the Screen Actors Guild) and perform magic tricks at corporate events. He also has a side gig selling golf products, including a golf cart cigar holder and a vanishing golf ball magic trick, through his website, golfworldnow.com. “I’ll be busier in retirement than I am in my current career,” he says.

Shagawat’s second career offers an opportunity for him to return to his first love, but he’s also motivated by a powerful financial incentive. His brother, Jim Shagawat, a certified financial planner with AdvicePeriod in Paramus, N.J., estimates that if Larry earns just $25,000 a year over the next decade, he’ll increase his retirement savings by $750,000, assuming a 5% annual withdrawal rate and an average 7% annual return on his investments.

Do the math

For every additional year (or even month) you work, you’ll shrink the amount of time in retirement you’ll need to finance with your savings. Meanwhile, you’ll be able to continue to contribute to your nest egg (see below) while giving that money more time to grow. In addition, working longer will allow you to postpone filing for Social Security benefits, which will increase the amount of your payouts.

For every year past your full retirement age (between 66 and 67 for most baby boomers) that you postpone retiring, Social Security will add 8% in delayed-retirement credits, until you reach age 70. Even if you think you won’t live long enough to benefit from the higher payouts, delaying your benefits could provide larger survivor benefits for your spouse. If you file for Social Security at age 70, your spouse’s survivor benefits will be 60% greater than if you file at age 62, according to the Center for Retirement Research at Boston College.

Liz Windisch, a CFP with Aspen Wealth Management in Denver, says working longer is particularly critical for women, who tend to earn less than men over their lifetimes but live longer. The average woman retires at age 63, compared with 65 for the average man, according to the Center for Retirement Research. That may be because many women are younger than their husbands and are encouraged to retire when their husbands stop working. But a woman who retires early could find herself in financial jeopardy if she outlives her husband, because the household’s Social Security benefits will be reduced—and she could lose her husband’s pension income, too, says Andy Baxley, a CFP with The Planning Center in Chicago.

Calculate the cost of health care

Many retirees believe, sometimes erroneously, that they’ll spend less when they stop working. But even if you succeed in cutting costs, health care expenses can throw you a costly curve. Working longer is one way to prevent those costs from decimating your nest egg.

Employer-provided health insurance is almost always less expensive than anything you can buy on your own, and if you’re 65 or older, it may also be cheaper than Medicare. If you work full-time for a company with 20 or more employees, the company is required to offer you the same health insurance provided to all employees, even if you’re older than 65 and eligible for Medicare. Delaying Medicare Part B, which covers doctor and outpatient services, while you’re enrolled in an employer-provided plan can save you a lot of money, particularly if you’re vulnerable to the Medicare high-income surcharge, says Kari Vogt, a CFP and Medicare insurance broker in Columbia, Mo. In 2021, the standard premium for Medicare Part B is $148.50, but seniors subject to the high-income Medicare surcharge will pay $208 to $505 for Medicare Part B, depending on their 2019 modified adjusted gross income. Medicare Part A, which covers hospitalization, generally doesn’t cost anything and can pay for costs that aren’t covered by your company-provided plan.

Vogt recalls working with an older couple whose premiums for an employer-provided plan were just $142 a month, and the deductible was fairly modest. Because of their income levels, they would have paid $1,150 per month for Medicare premiums, a Medicare supplement plan and a prescription drug plan, she says. With that in mind, they decided to stay on the job a few more years.

The math gets trickier if your employer’s plan has a high deductible. But even then, Vogt says, by staying on an employer plan, older workers with high ongoing drug costs could end up paying less than they’d pay for Medicare Part D. “If someone is taking several brand-name drugs, an employer plan is going to cover those drugs at a much better price than Medicare.”

Even if you don’t qualify for group coverage—you’re a part-timer, freelancer or a contract worker, for example—the additional income will help defray the cost of Medicare premiums and other expenses Medicare doesn’t cover. The Fidelity Investments annual Retiree Health Care Cost Estimate projects that the average 65-year-old couple will spend $295,000 on health care costs in retirement.

Long-term care is another threat to your retirement security, even if you have a well-funded nest egg. In 2020, the median cost of a semiprivate room in a nursing home was more than $8,800 a month, according to long-term-care provider Genworth’s annual survey.

If you’re in your fifties or sixties and in good health, it’s difficult to predict whether you’ll need long-term care, but earmarking some of your income from a job for long-term-care insurance or a fund designated for long-term care will give you peace of mind, Baxley says.

And working longer could not only help cover the cost of long-term care but also reduce the risk that you’ll need it in the first place. A long-term study of civil servants in the United Kingdom found that verbal memory, which declines naturally with age, deteriorated 38% faster after individuals retired. Other research suggests that people who continue to work are less likely to experience social isolation, which can contribute to cognitive decline. Research by the Age Friendly Foundation and RetirementJobs.com, a website for job seekers 50 and older, found that more than 60% of older adults surveyed who were still working interacted with at least 10 different people every day, while only 15% of retirees said they spoke to that many people on a daily basis (the study was conducted before the pandemic). Even unpleasant colleagues and a bad boss “are better than social isolation because they provide cognitive challenges that keep the mind active and healthy,” economists Axel Börsch-Supan and Morten Schuth contended in a 2014 article for the National Bureau of Economic Research.

A changing workforce

Many job seekers in their fifties or sixties worry about age discrimination—and the pandemic has exacerbated those concerns. A recent AARP survey found that 61% of older workers who fear losing their job this year believe age is a contributing factor.  But that could change as the economy recovers, and trends that emerged during the pandemic could end up benefiting older workers, says Tim Driver, founder of RetirementJobs.com. Some companies plan to allow employees to work remotely indefinitely, a shift that could make staying on the job more attractive for older workers—and make employers more amenable to accommodating their desire for more flexibility. “People who are working longer already wanted to work from home, and this has helped them do that more easily,” Driver says. To make that work, though, older workers need to stay on top of technology, which means they need to be comfortable using Zoom, LinkedIn and other online platforms, he says.  

More-flexible arrangements—including remote work—could also benefit older adults who want to continue to earn income but don’t want to work 50 hours a week. Baxley says some of his clients have gradually reduced their hours, from four days a week while they’re in their fifties to three or two days a week as they reach their sixties and seventies.

That assumes, of course, that your employer doesn’t lay you off or waltz you out the door with a buyout offer you don’t think you can refuse. But even then, you don’t necessarily have to stop working. The gig economy offers opportunities for older workers, and you don’t have to drive for Uber to take advantage of this emerging trend. There are numerous companies that will hire professionals in law, accounting, technology and other fields as consultants, says Kathy Kristof, a former Kiplinger columnist and founder of SideHusl.com, a website that reviews and rates online job platforms. Examples include FlexProfessionals, which finds part-time jobs for accountants, sales representatives and others for $25 to $40 an hour, and Wahve, which finds remote jobs for experienced workers in accounting, insurance and human resources (pay varies by experience).

Job seekers in their fifties (or even younger) who want to work into their sixties or later may want to consider an employer’s track record of hiring and retaining older workers when comparing job offers. Companies designated as Certified Age Friendly Employers by the Age Friendly Foundation have been steadily increasing and range from Home Depot to the Boston Red Sox. Driver says age-friendly employers are motivated by a desire for a more diverse workforce—which includes workers of all ages—and the realization that older workers are less likely to leave. Contrary to the assumption that older workers have one foot out the door toward retirement, their turnover rate is one-third of that for younger workers, Driver says.

At the Aquarium of the Pacific, an age-friendly employer based in Long Beach, Calif., employees older than 60 work in a variety of jobs, from guest service ambassadors to positions in the aquarium’s retail operations, says Kathie Nirschl, vice president of human resources (who, at 59, has no plans to retire anytime soon). Many of the aquarium’s visitors are seniors, and having older workers on staff helps the organization connect with them, Nirschl says.

John Rouse, 61, is the aquarium’s vice president of operations, a job that involves everything from facility maintenance to animal husbandry. He estimates that he walks between 12,000 and 13,000 steps a day to monitor the aquarium’s operations.

Rouse says he had originally planned to retire in his early sixties, but he has since revised those plans and now hopes to work until at least 68. He has a daughter in college, which is expensive, and he would like to delay filing for Social Security. Plus, he enjoys spending time at the aquarium with the fish, animals and coworkers. “It’s a great team atmosphere,” he says. “It has kept me young.”

New rules help seniors save

If you’re planning to keep working into your seventies—which is no longer unusual—provisions in the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act will make it easier to increase the size of your retirement savings or shield what you’ve saved from taxes.

Among other things, the law eliminated age limits on contributions to an IRA. Previously, you couldn’t contribute to a traditional IRA after age 70½. Now, if you have earned income, you can contribute to a traditional IRA at any age and, if you’re eligible, deduct those contributions. (Roth IRAs, which may be preferable for some savers because qualified withdrawals are tax-free, have never had an age cut-off as long as the contributor has earned income.)

The law also allows part-time workers to contribute to their employer’s 401(k) or other employer-provided retirement plan, which will benefit older workers who want to stay on the job but cut back their hours. The SECURE Act guarantees that workers can contribute to their employer’s 401(k) plan, as long as they’ve worked at least 500 hours a year for the past three years. Previously, employees who had worked less than 1,000 hours the year before were ineligible to participate in their employer’s 401(k) plan.

Delayed RMDs. If you have money in traditional IRAs or other tax-deferred accounts, you can’t leave it there forever. The IRS requires that you take minimum distributions and pay taxes on the money. If you’re still working, that income, combined with required minimum distributions, could push you into a higher tax bracket.

Congress waived RMDs in 2020, but that’s unlikely to happen again this year. Thanks to the SECURE Act, however, you don’t have to start taking them until you’re 72, up from the previous age of 70½. Keep in mind that if you’re still working at age 72, you’re not required to take RMDs from your current employer’s 401(k) plan until you stop working (unless you own at least 5% of the company).

One other note: If you work for yourself, whether as a self-employed business owner, freelancer or contractor, you can significantly increase the size of your savings stash. In 2021, you can contribute up to $58,000 to a solo 401(k), or $64,500 if you’re 50 or older. The actual amount you can contribute will be determined by your self-employment income.

chart that shows payoff from putting off retirement for a few yearschart that shows payoff from putting off retirement for a few years

Source: kiplinger.com

The Benefits of Working Longer

Financial planners and analysts have long advised workers who haven’t saved enough for retirement to work longer. But even if you’ve done everything right—saved the maximum in your retirement plans, lived within your means and stayed out of debt—working a few extra years, even at a reduced salary, could make an enormous difference in the quality of your life in your later years. And given the potential payoff, it’s worth starting to think about how long you plan to continue working—and what you’d like to do—even if you’re a decade or more away from traditional retirement age.

Larry Shagawat, 63, is thinking about retiring from his full-time job, but he’s not ready to stop working. Fortunately, he has a few tricks up his sleeve. Shagawat, who lives in Clifton, N.J., began his career as an actor and a magician. But marriage (to his former magician’s assistant), two children and a mortgage demanded income that was more consistent than the checks he earned as an extra on Law & Order, so he landed a job selling architectural and design products. The position provided his family with a comfortable living.

Now, though, Shagawat is con­sidering stepping back from his high-pressure job so he can pursue roles as a character actor (he’s still a member of the Screen Actors Guild) and perform magic tricks at corporate events. He also has a side gig selling golf products, including a golf cart cigar holder and a vanishing golf ball magic trick, through his website, golfworldnow.com. “I’ll be busier in retirement than I am in my current career,” he says.

Shagawat’s second career offers an opportunity for him to return to his first love, but he’s also motivated by a powerful financial incentive. His brother, Jim Shagawat, a certified financial planner with AdvicePeriod in Paramus, N.J., estimates that if Larry earns just $25,000 a year over the next decade, he’ll increase his retirement savings by $750,000, assuming a 5% annual withdrawal rate and an average 7% annual return on his investments.

Do the math

For every additional year (or even month) you work, you’ll shrink the amount of time in retirement you’ll need to finance with your savings. Meanwhile, you’ll be able to continue to contribute to your nest egg (see below) while giving that money more time to grow. In addition, working longer will allow you to postpone filing for Social Security benefits, which will increase the amount of your payouts.

For every year past your full retirement age (between 66 and 67 for most baby boomers) that you postpone retiring, Social Security will add 8% in delayed-retirement credits, until you reach age 70. Even if you think you won’t live long enough to benefit from the higher payouts, delaying your benefits could provide larger survivor benefits for your spouse. If you file for Social Security at age 70, your spouse’s survivor benefits will be 60% greater than if you file at age 62, according to the Center for Retirement Research at Boston College.

Liz Windisch, a CFP with Aspen Wealth Management in Denver, says working longer is particularly critical for women, who tend to earn less than men over their lifetimes but live longer. The average woman retires at age 63, compared with 65 for the average man, according to the Center for Retirement Research. That may be because many women are younger than their husbands and are encouraged to retire when their husbands stop working. But a woman who retires early could find herself in financial jeopardy if she outlives her husband, because the household’s Social Security benefits will be reduced—and she could lose her husband’s pension income, too, says Andy Baxley, a CFP with The Planning Center in Chicago.

Calculate the cost of health care

Many retirees believe, sometimes erroneously, that they’ll spend less when they stop working. But even if you succeed in cutting costs, health care expenses can throw you a costly curve. Working longer is one way to prevent those costs from decimating your nest egg.

Employer-provided health insurance is almost always less expensive than anything you can buy on your own, and if you’re 65 or older, it may also be cheaper than Medicare. If you work full-time for a company with 20 or more employees, the company is required to offer you the same health insurance provided to all employees, even if you’re older than 65 and eligible for Medicare. Delaying Medicare Part B, which covers doctor and outpatient services, while you’re enrolled in an employer-provided plan can save you a lot of money, particularly if you’re vulnerable to the Medicare high-income surcharge, says Kari Vogt, a CFP and Medicare insurance broker in Columbia, Mo. In 2021, the standard premium for Medicare Part B is $148.50, but seniors subject to the high-income Medicare surcharge will pay $208 to $505 for Medicare Part B, depending on their 2019 modified adjusted gross income. Medicare Part A, which covers hospitalization, generally doesn’t cost anything and can pay for costs that aren’t covered by your company-provided plan.

Vogt recalls working with an older couple whose premiums for an employer-provided plan were just $142 a month, and the deductible was fairly modest. Because of their income levels, they would have paid $1,150 per month for Medicare premiums, a Medicare supplement plan and a prescription drug plan, she says. With that in mind, they decided to stay on the job a few more years.

The math gets trickier if your employer’s plan has a high deductible. But even then, Vogt says, by staying on an employer plan, older workers with high ongoing drug costs could end up paying less than they’d pay for Medicare Part D. “If someone is taking several brand-name drugs, an employer plan is going to cover those drugs at a much better price than Medicare.”

Even if you don’t qualify for group coverage—you’re a part-timer, freelancer or a contract worker, for example—the additional income will help defray the cost of Medicare premiums and other expenses Medicare doesn’t cover. The Fidelity Investments annual Retiree Health Care Cost Estimate projects that the average 65-year-old couple will spend $295,000 on health care costs in retirement.

Long-term care is another threat to your retirement security, even if you have a well-funded nest egg. In 2020, the median cost of a semiprivate room in a nursing home was more than $8,800 a month, according to long-term-care provider Genworth’s annual survey.

If you’re in your fifties or sixties and in good health, it’s difficult to predict whether you’ll need long-term care, but earmarking some of your income from a job for long-term-care insurance or a fund designated for long-term care will give you peace of mind, Baxley says.

And working longer could not only help cover the cost of long-term care but also reduce the risk that you’ll need it in the first place. A long-term study of civil servants in the United Kingdom found that verbal memory, which declines naturally with age, deteriorated 38% faster after individuals retired. Other research suggests that people who continue to work are less likely to experience social isolation, which can contribute to cognitive decline. Research by the Age Friendly Foundation and RetirementJobs.com, a website for job seekers 50 and older, found that more than 60% of older adults surveyed who were still working interacted with at least 10 different people every day, while only 15% of retirees said they spoke to that many people on a daily basis (the study was conducted before the pandemic). Even unpleasant colleagues and a bad boss “are better than social isolation because they provide cognitive challenges that keep the mind active and healthy,” economists Axel Börsch-Supan and Morten Schuth contended in a 2014 article for the National Bureau of Economic Research.

A changing workforce

Many job seekers in their fifties or sixties worry about age discrimination—and the pandemic has exacerbated those concerns. A recent AARP survey found that 61% of older workers who fear losing their job this year believe age is a contributing factor.  But that could change as the economy recovers, and trends that emerged during the pandemic could end up benefiting older workers, says Tim Driver, founder of RetirementJobs.com. Some companies plan to allow employees to work remotely indefinitely, a shift that could make staying on the job more attractive for older workers—and make employers more amenable to accommodating their desire for more flexibility. “People who are working longer already wanted to work from home, and this has helped them do that more easily,” Driver says. To make that work, though, older workers need to stay on top of technology, which means they need to be comfortable using Zoom, LinkedIn and other online platforms, he says.  

More-flexible arrangements—including remote work—could also benefit older adults who want to continue to earn income but don’t want to work 50 hours a week. Baxley says some of his clients have gradually reduced their hours, from four days a week while they’re in their fifties to three or two days a week as they reach their sixties and seventies.

That assumes, of course, that your employer doesn’t lay you off or waltz you out the door with a buyout offer you don’t think you can refuse. But even then, you don’t necessarily have to stop working. The gig economy offers opportunities for older workers, and you don’t have to drive for Uber to take advantage of this emerging trend. There are numerous companies that will hire professionals in law, accounting, technology and other fields as consultants, says Kathy Kristof, a former Kiplinger columnist and founder of SideHusl.com, a website that reviews and rates online job platforms. Examples include FlexProfessionals, which finds part-time jobs for accountants, sales representatives and others for $25 to $40 an hour, and Wahve, which finds remote jobs for experienced workers in accounting, insurance and human resources (pay varies by experience).

Job seekers in their fifties (or even younger) who want to work into their sixties or later may want to consider an employer’s track record of hiring and retaining older workers when comparing job offers. Companies designated as Certified Age Friendly Employers by the Age Friendly Foundation have been steadily increasing and range from Home Depot to the Boston Red Sox. Driver says age-friendly employers are motivated by a desire for a more diverse workforce—which includes workers of all ages—and the realization that older workers are less likely to leave. Contrary to the assumption that older workers have one foot out the door toward retirement, their turnover rate is one-third of that for younger workers, Driver says.

At the Aquarium of the Pacific, an age-friendly employer based in Long Beach, Calif., employees older than 60 work in a variety of jobs, from guest service ambassadors to positions in the aquarium’s retail operations, says Kathie Nirschl, vice president of human resources (who, at 59, has no plans to retire anytime soon). Many of the aquarium’s visitors are seniors, and having older workers on staff helps the organization connect with them, Nirschl says.

John Rouse, 61, is the aquarium’s vice president of operations, a job that involves everything from facility maintenance to animal husbandry. He estimates that he walks between 12,000 and 13,000 steps a day to monitor the aquarium’s operations.

Rouse says he had originally planned to retire in his early sixties, but he has since revised those plans and now hopes to work until at least 68. He has a daughter in college, which is expensive, and he would like to delay filing for Social Security. Plus, he enjoys spending time at the aquarium with the fish, animals and coworkers. “It’s a great team atmosphere,” he says. “It has kept me young.”

New rules help seniors save

If you’re planning to keep working into your seventies—which is no longer unusual—provisions in the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act will make it easier to increase the size of your retirement savings or shield what you’ve saved from taxes.

Among other things, the law eliminated age limits on contributions to an IRA. Previously, you couldn’t contribute to a traditional IRA after age 70½. Now, if you have earned income, you can contribute to a traditional IRA at any age and, if you’re eligible, deduct those contributions. (Roth IRAs, which may be preferable for some savers because qualified withdrawals are tax-free, have never had an age cut-off as long as the contributor has earned income.)

The law also allows part-time workers to contribute to their employer’s 401(k) or other employer-provided retirement plan, which will benefit older workers who want to stay on the job but cut back their hours. The SECURE Act guarantees that workers can contribute to their employer’s 401(k) plan, as long as they’ve worked at least 500 hours a year for the past three years. Previously, employees who had worked less than 1,000 hours the year before were ineligible to participate in their employer’s 401(k) plan.

Delayed RMDs. If you have money in traditional IRAs or other tax-deferred accounts, you can’t leave it there forever. The IRS requires that you take minimum distributions and pay taxes on the money. If you’re still working, that income, combined with required minimum distributions, could push you into a higher tax bracket.

Congress waived RMDs in 2020, but that’s unlikely to happen again this year. Thanks to the SECURE Act, however, you don’t have to start taking them until you’re 72, up from the previous age of 70½. Keep in mind that if you’re still working at age 72, you’re not required to take RMDs from your current employer’s 401(k) plan until you stop working (unless you own at least 5% of the company).

One other note: If you work for yourself, whether as a self-employed business owner, freelancer or contractor, you can significantly increase the size of your savings stash. In 2021, you can contribute up to $58,000 to a solo 401(k), or $64,500 if you’re 50 or older. The actual amount you can contribute will be determined by your self-employment income.

chart that shows payoff from putting off retirement for a few yearschart that shows payoff from putting off retirement for a few years

Source: kiplinger.com

More Monthly Child Credit Payments, Higher Child Care Credit, and Other Tax Breaks in Biden’s Latest Plan

In March, the American Rescue Plan Act made several tax credits better. And, in one case, it requires the IRS to send monthly payments to families with children. However, the enhancements are only temporary – they only apply for the 2021 tax year.

The Biden administration sees those temporary improvements as simply a first step. So now President Biden wants to extend the expanded tax credits and continue supporting low- and middle-income families, as well as low-income workers without children, with tax reductions beyond this year.

That’s the goal of the tax-cutting provisions in the president’s American Families Plan. The $1.8 trillion package would also do many other things for ordinary Americans, such as providing universal pre-school, free community college, guaranteed family and medical leave, caps on child-care costs, and much more. All these – along with the extended tax credit enhancements – are designed to “build a stronger economy that does not leave anyone behind.”

It’s way too soon to tell if any of the tax credit extensions – or any other part of the American Families Plan – will make it through Congress and be signed into law. There will be stiff resistance from Republicans in Congress, and a few Democrats are likely to push back on some of the more costly items, too. Biden’s plan is just the starting point for further negotiations, so we’ll just have to wait and see how things progress from here. But in the meantime, we can take a look at the 4 tax credit enhancements that President Biden wants to extend. If you qualify, you’re already going to save a lot of money in 2021. If the extensions become law, you could pocket even more cash in 2022 and for years to come.

1 of 4

Child Tax Credit

picture of a happy family at home on their sofapicture of a happy family at home on their sofa

For tax years before 2021, the child tax credit is worth $2,000 per dependent child 16 years old or younger. It begins to phase out if your adjusted gross income (AGI) is above $400,000 on a joint return, or over $200,000 on a single or head-of-household return. Once your AGI surpasses $400,000 or $200,000, the credit amount is reduced by $50 for each $1,000 (or fraction thereof) of AGI over the applicable threshold amount. Up to $1,400 of the child credit is refundable for some lower-income individuals with children. But you must also have at least $2,500 of earned income to get a refund.

Thanks to the American Rescue Plan, the 2021 credit amount is increased to $3,000 per child ($3,600 per child under age 6) for many families. Children who are 17 years old qualify for the credit, too. The credit is also fully refundable for 2021, and the $2,500 earnings floor is eliminated. In addition, the IRS will pay half of this year’s credit in advance by sending monthly payments to families from July to December 2021. (To see how much you’ll get, use Kiplinger’s 2021 Child Tax Credit Calculator.)

The new American Families Plan, if enacted, would generally extend the 2021 child tax credit enhancements through 2025 (including, presumably, the monthly payments). There would be one important difference, though. The new plan would make the credit full refundable on a permanent basis.

For more on the 2021 credit, see Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs.

2 of 4

Child and Dependent Care Credit

picture of young children gathered around a preschool teacher who is reading a bookpicture of young children gathered around a preschool teacher who is reading a book

The American Rescue Plan also expanded the child and dependent care tax credit for 2021. This will boost tax refunds for many parents when they file their tax return next year.

For the 2020 tax year, if your children were younger than 13, you were eligible for a 20% to 35% non-refundable credit for up to $3,000 in childcare expenses for one kid or $6,000 for two or more. The percentage dropped as income exceeded $15,000.

The American Rescue Plan made several enhancements to the credit for the 2021 tax year. First, it made the credit refundable for the year. It also bumped the maximum credit percentage up from 35% to 50%. More childcare expenses are subject to the credit, too. Instead of up to $3,000 in childcare expenses for one child and $6,000 for two or more, the 2021 credit is allowed for up to $8,000 in expenses for one child and $16,000 for multiple children. When combined with the 50% maximum credit percentage, that puts the top credit for the 2021 tax year at $4,000 for families with just one child and $8,000 for families with more kids. The full credit will also be allowed for families making less than $125,000 a year (instead of $15,000 per year). After that, the credit starts to phase-out. However, all families making between $125,000 and $440,000 will receive at least a partial credit for 2021. (For more information, see Child Care Tax Credit Expanded for 2021.)

The American Families Plan would make these enhancements permanent. If it becomes law, parents paying for childcare will continue to see lower tax bills and/or higher refunds until their youngest kid turns 13.

3 of 4

Earned Income Tax Credit

picture of a fry cook standing with arms folded in front of a grillpicture of a fry cook standing with arms folded in front of a grill

The earned income tax credit (EITC) provides an incentive for people to work. And, under the American Rescue Plan, more workers without qualifying children will qualify for the credit on their 2021 tax return and the “childless EITC” amounts will be higher.

For 2020 tax returns, the maximum EITC ranges from $538 to $6,660 depending on your income and how many children you have. However, there are income limits for the credit. For example, if you have no children, your 2020 earned income and adjusted gross income (AGI) must each be less than $15,820 for singles and $21,710 for joint filers. If you have three or more children and are married, though, your 2020 earned income and AGI can be as high as $56,844. If you don’t have a qualifying child, you must be between 25 and 64 years old at the end of the tax year to claim the EITC.

The American Rescue Plan expanded the 2021 EITC for childless workers in a few ways. First, it generally lowers the minimum age from 25 to 19 (except for certain full-time students). It also eliminates the maximum age limit (65), so older people without qualifying children can claim the 2021 credit, too. The maximum credit available for childless workers is also increased from $543 to $1,502 for the 2021 tax year. Expanded eligibility rules for former foster youth and homeless youth apply as well.

Under the just-released American Families Plan, the credit enhancements for childless workers will be made permanent. If enacted, the enhancements for workers without children would join other changes made by the American Rescue Plan that continue past 2021 to:

  • Allow workers to claim the EITC even if their children can’t satisfy the identification requirements;
  • Permit certain married but separated couples to claim the EITC on separate tax returns; and
  • Increase the limit on a worker’s investment income from $3,650 (for 2020) to $10,000 (adjusted for inflation after 2021).

4 of 4

Premium Tax Credit

picture of a stethoscope laying on several one-hundred dollar bills picture of a stethoscope laying on several one-hundred dollar bills

The premium tax credit helps eligible Americans cover the premiums for health insurance purchased through an Obamacare exchange (e.g., HealthCare.gov). The American Rescue Plan enhanced the credit for 2021 and 2022 to lower premiums for people who buy coverage on their own. First, it increases the credit amount for eligible taxpayers by reducing the percentage of annual income that households are required to contribute toward the premium. It also allows the credit to be claimed by people with an income above 400% of the federal poverty line. According to the White House, these changes will save about 9 million families an average of $50 per person per month.

The American Families Plan would make these changes permanent to lower health insurance costs beyond 2022.

However, it’s not clear if the American Families Plan would extend the suspension of advance payment repayments. When you purchase insurance through the exchange, you can choose to have an estimated credit amount paid in advance to your insurance company so that less money comes out of your own pocket to pay your monthly premiums. Then, when you complete your tax return, you’ll calculate your credit and compare it to the advance payments. If the advance payments are greater than your actual allowable credit, the difference (subject to certain repayment caps) is subtracted from your refund or added to the tax you owe. If your allowable credit is more than the advance payments, you’ll get the difference back in the form of a larger refund or smaller tax bill. The American Rescue Plan suspended the repayment of excess advanced payments for the 2020 tax year. (If you already filed your 2020 tax return and repaid any excess advance payments, the IRS will automatically adjust your return and send you a refund if necessary.)

We suspect that the American Families Plan wouldn’t extend the repayment suspension. This, we believe, was and is intended to be a one-year-only rule to help people struggling during the COVID-19 pandemic.

Source: kiplinger.com