Social Security Changes: What You Need To Know

About 46 million retired people and their dependents receive Social Security, and the average benefit is around $1,300. If you’re reading this, odds are good you either know someone who gets this benefit or are someone who does. What you may not know is that this benefit may be subject to change this year. 

Most experts agree that the Social Security program is in long-term trouble. By 2033, the program will only be able to fund about 75% of its current obligations. By 2083, that level drops to 72%. With these breakdowns in funding looming, changes had to happen. Imagine a current retiree on a fixed income being asked to give up 23% of her monthly check. That would mean poverty and destitution for millions of elderly people. 

Significant overhauls of the program are coming but involve a lot of complicated political maneuvering. In legislative circles, Social Security is known as the “third rail.” In subway language, the third rail is the one in the middle that carries all the electricity. If you touch it, you die.

In the mean time, a variety of smaller reforms have been implemented, designed to ensure the short-term survival of the program. In 2015, there are three significant changes to Social Security benefits. Note that most of these changes only apply to future beneficiaries and current recipients will continue to receive a benefit similar to the one they’re currently receiving.

If you’re worried about how your chances of collecting change, take a look at these three upcoming changes:

1.) Mail-in benefit statements

If your age ends in “5” or “0” in 2015, expect a letter from the Social Security Administration this year. The statement will explain how much you’ve paid in and what kind of benefit you can expect to receive. The benefit will be estimated based upon several retirement age options, starting with age 65.

The administration suspended mailed statements last year, but restored them for 2015 to allay fears about the short-term survivability of the program. Obviously, the numbers listed in the statement are estimates, but they should provide a helpful guide for those approaching retirement. They expect to send out 48 million statements in 2015.

If you’re already receiving Social Security, you’ll receive an annual statement unless you’ve already opted to receive online-only statements. That recipient statement will include the cost of living adjustment for the year, the monthly benefit and any survivor benefit your spouse will receive.

2.) Higher Social Security taxes

One of the biggest problems facing Social Security as a program is a shortage of revenue. The way income is taxed for the program is riddled with exceptions and exemptions. The Social Security Administration can’t encourage people to die sooner, but it can collect more revenue to make up for longer life spans.

Previously, employees were taxed on the first $117,000 of income. This year, that amount will be $118,500. To make up for the slightly increased ceiling, the maximum benefit will also increase. For people who wait until age 66 to take Social Security, there will be no maximum to their benefits. Also new this year, people who wait until 66 will receive an additional return on benefits they deferred during their 65th year.

3.) Windfall Elimination Provision

The biggest change facing Social Security is the attempt to correct “double pensioners.” People who work government jobs (as well as some kinds of non-government jobs whose salaries are carefully regulated) are enrolled in separate retirement programs outside Social Security. These individuals did not have FICA (the tax that pays for Social Security) deducted from their paycheck. They instead paid into a different retirement system.

Previously, such employees received the same spousal benefits as those who paid into Social Security. They also received additional Social Security benefits if they held a FICA-paying position at another time in their lives. This windfall elimination is the subject of a 1985 regulation that takes effect this year.

This change doesn’t affect members of the Armed Forces, whose checks have included FICA deductions since 1957. It also doesn’t affect state or federal employees who have FICA deductions from their paychecks. If you’re unsure, check your paycheck stub for a line labeled “FICA taxes.”

Those who didn’t pay in will have their direct benefits reduced by a proportion of their government pension. They will also have any spousal or widower benefits they would have received reduced by a similar amount. These so-called “double-dipping” eliminations will save Social Security $3.4 billion, helping to ensure the program’s longevity.

If you’re concerned about the availability of Social Security for your retirement, it’s never too late to take control of it yourself. Many savings vehicles are available, from savings accounts and certificates to IRAs. To find out what options work best for you, call, click, or stop by Destinations Credit Union today. Our representatives can walk you through all the options and help you get to the retirement of your dreams.


Prior Year Tax Returns

Brought to you by Destinations Credit Union
If you didn’t file your taxes for the last couple of years because you didn’t think you made enough to pay taxes, what should you do?  You might be missing out on some refunds that you should have had!

“Paying” your taxes can be a misnomer for many folks. This year, 8 out of 10 people who filed taxes got a refund. The average refund was nearly $3,000, according to the IRS.

Many people think of tax refunds as bonuses, but it’s really an interest-free loan you gave the government. Filing your taxes is how you collect on that loan. If you don’t file, the IRS is only too happy to keep that money.

As a matter of fact, the window is closing on returns from prior years — with a big chunk of money still left unclaimed. About 1 million taxpayers didn’t file 2011 returns and are owed refunds. They have until April 15 to file for 2011 or they lose out on that money for good.

There’s quite a bit of money still unclaimed. About $1 billion in total tax refunds are still owed by the IRS. More than half of the refunds are for more than $698, with most of that money earmarked for seasonal or part-time workers. The reason for this is simple. If you only work for part of the year, your employer still “withholds,” or pre-pays income taxes, as though you were going to work all year.

Other people who are eligible for refunds include students and families. You may be entitled to a refund from so-called refundable credits. Programs like the Earned Income Tax Credit offer you a tax credit you can get even if you don’t owe taxes. The Earned Income Tax Credit provides relief for people with low incomes. Other refundable credits include the Child Tax Credit, which offers refunds of up to $1,000 per child. You might also qualify for the American Opportunity Tax Credit, which offers refunds for tuition and other expenses related to higher education.

Whatever the source, you won’t know for sure until you file. If you owed money, the IRS would not be so laid back about collecting, so there’s not much chance you’ll end up having to pay more. You’ve got nothing to lose and quite a bit to gain.

Ready to start filing your back taxes? Here are three steps you need to take!

1.) Gather your documents

You’ll need all your tax documents from the year for which you’re planning to file. Remember, these refer to year you earned, not the year you were supposed to file. Your 2011 tax return was due in April of 2012, but covers what you earned between Jan. 1 and Dec. 31, 2011.

If you’ve lost these forms, employers are supposed to keep them on file. Few people ever ask for them, so your employer’s HR representative may not be used to finding them. The information may also be available online if your employer uses an electronic workforce management system. It might take a few days for your employer to find the appropriate forms, but since you’ve waited this long, there’s no harm in waiting a few more days.

If you can’t find your documents, don’t guess! Filling in tax forms with incorrect information might be considered tax fraud, especially if you guess low. The IRS might accuse you of fudging the numbers to get more money. Make sure you’re only entering accurate information.

2.) Use the appropriate software

Tax rules and rates change from year-to-year. Always check in the upper left-hand corner of the federal forms for the year of the return. You’ll want to make sure you’re using the forms for the year you’re filing.

Most tax filing software will let you file prior years at a discounted rate, but you’ll still have to pay for e-filing. In some cases, you can deduct this amount from the refund you’d receive, so you won’t have to pay anything upfront. If paying for tax forms is too frustrating, you can always find the forms in the IRS form library.

3.) Plan for the money

It’s tempting to think of a tax refund as free money and spend it on a creature comfort or a silly luxury. In fact, the most common decision people make about their tax refund is to purchase a big-screen TV. For many people, this is the biggest influx of cash you’ll get all year. Spending it foolishly is a big mistake.

If you don’t have a plan for the money, it’ll disappear into a thousand momentary indulgences. Make a plan once you see how much you’ll get back. Just make sure your plan achieves a goal that’s important and impactful to you financially.

A prior year tax return would make a great start to paying down your credit card or other high-interest debts. It would also make a great emergency fund that could keep you out of debt in a crisis situation. This money could also be the start of a retirement nest egg that will get you in the habit of saving.


Eating Out … At Home!

Brought to you by Destinations Credit Union.

There’s something magical in a kid’s mind about going out to eat in a restaurant. They ask for their favorite food and it appears as if summoned by a magic wand. Most of them probably don’t even notice the bill at the end, making for an even more enchanting experience.

Tired of financing these family outings? Believe it or not, it’s even more entertaining to have a restaurant right in your own home. Besides providing oodles of imaginative fun, this activity can be used to teach skills such as setting the table, preparing food, setting prices, paying the bill and getting the right change.

You can tailor the activity to different ages and make it as elaborate or simple as you want. Deciding ahead of time on a special that everyone will choose to order is highly recommended. They can peruse the other menu items to their heart’s content, but the special will be so irresistible, the entire family will choose it that day. Have your child help prepare the special ahead of time so that they will be more invested in ordering it later. You don’t want to have to make two or more different dishes!

This doesn’t mean you can’t come up with a menu with all the options. Have your child help design it using a free online template. An older child can help with pricing. If you have time, it can be especially useful to look up the actual cost of making your menu items at home. If you have less time, look up the costs of making your special. Then, explain how restaurants charge diners a lot more for the same dish.

You can teach your child that menu items can typically have a 300%-500% markup of the dish’s actual cost. This is easiest to explain with the example of a $5 glass of soda. Point out that, because they need to pay for delivery of the food, preparation, serving and cleanup, restaurants need to charge customers a lot more than the food is worth to make a profit. Keeping that in mind, figure out the cost of your dinner special.

Provide your child with real or play money. They might want to take the role of waiter and actually set and wait on the table. Of course, in your restaurant, waiters will also have a chance to eat. The waiter will tally up the bill at the end for all the restaurant guests, take payment, and calculate the change that is due.

Alternatively, you can play server. Bill your child at the end of the meal and have him or her pay the bill with the fake/real money you provided them. An older child can be taught to calculate the tip as well.

At the end of the day, everyone will be fed, entertained and hopefully a bit wiser. After all, there’s nothing like eating out, especially when you can do it at home.

"ISIS" Hacks Credit Unions – What You Need To Know

ISIS is the new face of terrorism and the Internet is the next front. Terror organizations use social media to recruit members, spread their messages and plan attacks. That they would also use hacking to evoke fear should come as no surprise.

That appears to be what happened on March 9 this year when visitors to the websites of several credit unions did not see the front page they were expecting. Instead, they saw a black screen with the logo for the Islamic State. Under the image were the words “Hacked by Islamic State (ISIS) We Are Everywhere :)” along with a link to a now-defunct Facebook page.

A closer examination of the defacement suggested to the FBI that this was not the work of the international terrorist group. First, the smiley face at the end of the message does not fit the tone of other messages the group has sent. Second, the targets, which included several small businesses and credit unions, seem out of character for the group. Most of the group’s rage tends to focus on agents and governments it views as occupying territory in the Middle East. Third, the level of damage was relatively low. A sophisticated hacking operation would aim to debilitate or destroy economically or politically important assets. While taking down a credit union’s website for a few hours is certainly disconcerting, the dollar amount of that can be applied to the damage is relatively low.

Rather, the FBI suspects this is the work of fairly unsophisticated domestic hackers. The target selection fits more with an attention-seeking group of malcontents. The strategy of website defacement is popular among amateur computer security students seeking to prove their skills or leave a “calling card.” No member data, accounts, or contact information was compromised in the hack and the defacement of the websites has already been reversed.

As with every other security compromise, the possibility that a more serious data breach occurred is not out of the question. In most cases, this breach would involve rigging the website to install malicious software on users’ computers. While it is unlikely, precautions are free and an ounce of prevention is worth a pound of cure when it comes to information security. If you’re concerned about your computer integrity, take the following four steps.

1.) Install, update, and run security software

Using the Internet without antivirus software is like reaching your hand into a medical sharps disposal bin. You’re going to get something and the results won’t be pretty. Several free antivirus programs exist. Popular choices include Panda Security, AVG and Avast.

If you already have antivirus software, you might think you’re covered. Yet, antivirus programs only protect against specific kinds of malicious programming. While they’re certainly the worst of the worst, viruses are only one kind of threat you face on the Internet. You also need an anti-malware program, like MalwareBytes or Spybot. These programs find and remove security threats that, while not quite to the level of viruses, can still compromise your computer.

These programs are still serious threats. Data breaches at Home Depot, Target and others were caused by malware on company computers. Even professional security experts occasionally forget about defending their systems this way.

Once you get the software installed, make sure to keep it updated and run it regularly. The scans usually take between 20 minutes and an hour. That’s all it takes to stay safe from the worst threats.

2.) Change your passwords

It appears unlikely that any user data was compromised in this most recent round of hacks. Still, there’s no reason not to be cautious. Change the passwords you use to log on to major financial websites and any website where you use those same passwords. If you use your Destinations Credit Union password to access your email, change your email password, too.

It’s a good idea to cycle passwords every six months or so anyway. Doing so helps to keep your accounts safe. If you have trouble remembering to do so, consider using a password management service to keep track of your security.

Always choose strong passwords. Four random words with a number on the end is a great way to randomize passwords but keep them somewhat memorable. Just look around your computer area and use the names of the first four objects you see, followed by your birth month. Doing so creates a password that humans can easily commit to memory, but the most powerful computers would take years to crack.

3.) Get a credit score report

You can get a free credit report every year, and it’s a good idea to do so. If you’re planning to buy a house or a car this year, you might want to hold off and use your free report closer to your purchase date. If you don’t have major purchases planned for this year, you can use your free credit score report to check if you’ve been hacked.

Look for accounts you don’t remember opening or large, sudden upswings in debt utilization. These could be signals that someone’s compromised your identity. Call the credit reporting bureau immediately to report suspicious activity.

This alleged ISIS hack is nothing to fear, but it’s worth being cautious all the same. It’s much easier to take preventative action than to regret not having done so. Taking these steps can help ensure you stay safe, no matter what happens.


Five Reasons To Use A Credit Union Instead Of A Big Bank

Many people go to a big bank because they’re easy to find.  Those banks spend billions on advertising and building branches on every corner.  Becoming a member of a credit union takes a little more work – finding one that you can join takes a little bit of research.  But, it’s easier than you think.  Most people in the United States are eligible to join a credit union.  You can find one through work, or where you live, or through organizations you belong to.

Last year, 2 million people between the ages of 18 and 35 joined a credit union. 28% of credit union members are under 35 while 54% of them are under age 50. The tools of technology are making it easier to see the value that credit unions offer.

Don’t just take our word for it. Do your research and see for yourself how credit unions compare to for-profit banks. Consider these five categories:

1.) Ease of service

Here’s a fun game. Call a corporate bank with a simple request, like checking the balance of a savings account. Count the number of irritating phone tree menus you have to sift through before you could talk to a real person who could answer your question. You win when you get frustrated and slam the phone down in anger!

For-profit banks have earned a reputation for cumbersome customer service and out-of-touch policies. Getting information on financial services, like credit repair or auto loans, means sitting on hold for hours. Credit unions, on the other hand, provide easy-to-use services and real, live human beings who can answer questions, make recommendations and help you understand the complicated world of finance.

2.) Lending practices

For-profit banks answer to corporate owners. They expect a predictable, stable rate of return on their investments. This demand puts a straitjacket on lending and ensures those practices never deviate from a pre-determined formula. Take income, multiply by credit score, divide by 2, that’s the interest rate they’ll charge.

However, let’s pretend you just got a new job, so last year’s tax returns aren’t a good indicator of how much you are earning. That’s not in the formula, so it doesn’t matter. Credit history ruined by an old medical bill? Corporate banks stop reading after the first three words of that sentence. In short, there’s no room for flexibility and interest rates tend to be much higher.

Credit unions are community institutions, so helping people out is part of what they do. Their rates tend to be lower than those of corporate banks. They also tend to be more willing to make exceptions for details that may not be reflected in the conventional lending formula.

3.) Online banking is everywhere

In the wild west days of the Internet, only corporate banks could afford online banking. Now, your pet gerbil can have his own website. The Internet is everywhere and credit unions are on board. The services you use every day, like online bill pay, direct deposit and checking on account balances are just a click away. Credit unions are increasingly integrated with e-commerce services like Paypal and Square, making it easier than ever to send and receive money electronically.

Mobile services, such as transfers and remote deposit are increasingly more common at credit unions.

4.) Educational resources

Corporate banks have historically made a killing by keeping people in the dark about their practices. Credit card companies made it hard to tell exactly how much interest you were being charged. Banks charged overdraft fees without ever telling you they were doing it. These things got so bad, Congress took action. Consumer ignorance was built into the profit model of big financial institutions. Educating consumers was not just a waste of money to them, it was actually costing them business.

Credit unions are not-for-profits that want to make their communities a better place. Part of that mission includes financial education. If you need advice about home-buying, making a budget or using credit responsibly, your credit union will be happy to help.

5.) Savings

Credit unions work for their members. They pay back the money they make to their members in the form of dividends. Since their members are also the people paying for their services, they don’t have much of an incentive to charge an arm and a leg in interest and fees.

Credit unions also offer competitive rates on savings accounts and Certificates. Because they don’t have to siphon off money to pay shareholders, they can return that money to their investors: you know, the people who do their banking with the credit union. Compare the earned interest on a credit union checking or savings account to those offered by a for-profit bank. Then, go open an account at a credit union. You’ll thank yourself later.
Destinations Credit Union offers many of the same services you’ll find at the big banks, but can save you money on your everyday banking needs.  Want to get started?  Join Destinations Credit Union today!

Borrowing Against Your 401(k) – Is It Ever A Good Idea?

One of the many perks available to working folk is a company-matched retirement plan, named after the part of the tax code authorizing it. These tax-deferred retirement packages are the principal retirement vehicle for just over half of all people in the United States. Americans sock away about 6% of their pay in 401(k) plans to receive employee matching and tax breaks.
One feature many people don’t realize about 401(k) funds is that the account holder can borrow against the balance of the account. About 87% of funds offer this feature. The account holder can borrow up to 50% of the balance or $50,000, whichever is lower, but the whole amount must be repaid within 5 years. There’s no approval process and there’s no interest. It’s basically a loan you give yourself, and is a popular enough option that 17% of millennial workers, 13% of Gen Xers and 10% of baby boomers have made loans against their 401(k) accounts.
Despite these benefits, borrowing against a 401(k) is a risky proposition. There are harsh penalties for failure to repay and taking money away from retirement savings is always risky. Borrowing from a 401(k) account should not be a decision that is made lightly.
As with most financial moves, there are benefits and disadvantages to borrowing from a 401(k). It can be difficult to sort through them, particularly if your need for money is acute and immediate. Before you borrow from a 401(k), though, ask yourself these four questions:
1.) Will the money fix the problem?
Many borrowers use money from their 401(k) to pay off credit cards, car loans and other high-interest consumer loans. On paper, this is a good decision. The 401(k) loan has no interest, while the consumer loan has a relatively high one. Paying them off with a lump sum saves interest and financing charges.
But the question of whether repaying that loan will fix the underlying problem remains. Take a look at your last six months of purchases. If you had made a 401(k) loan six months ago and paid off revolving debt, would your debt load still be a problem? Perhaps not – your current situation may reflect an emergency or an unplanned expense. On the other hand, if your credit cards are financing a lifestyle that is above your means, you may find yourself back in the same position a year down the road – and with no money in your 401(k).
Borrowing against a 401(k) to deal with a medical bill, a first-time home purchase or an emergency car repair can be a smart move. Using a 401(k) loan to put off a serious change in spending habits is, as one financial expert put it, “like cutting off your arm to lose weight.” Before you borrow against your future, make sure it will really fix your present.
2.) Will the investment offer a better return?
Your 401(k) is earning money for you. It’s invested in stocks, bonds, and mutual funds that are appreciating, usually at a fairly conservative pace. If you pull money out in the form of a 401(k) loan, that stops.
The statement that a 401(k) loan is interest-free is only technically true. You have to pay back what you pull out, but before you do, it doesn’t earn any interest. Therefore, the “interest” you pay on your 401(k) loan really comes in the form of the gains you never produced on the money you borrowed since you were not investing it during that time.
If you’re borrowing from your 401(k) to invest in a business, ask yourself if your new venture will beat the return you’re currently getting. If you’re planning to pay off your mortgage, compare the interest rate you’re paying to that return. Don’t worry about trying to time or forecast the market. Assuming a 4% return (a safe average) is the most prudent course of action.
3.) Is your job secure?
If you’ve recently been promoted or gotten new training on an important job duty, you can be pretty confident you aren’t going to be let go from your job any time soon. If your recent performance reviews haven’t been stellar, or if your company has some layoffs pending, you might want to beware. If you’re at all hesitant about your future at the company, hold off on borrowing from a 401(k).
If you lose your job or retire with a loan outstanding, you have 60 days to repay the loan in its entirety. Otherwise, it counts as a “disbursement.” You’re responsible for taxes on the entire amount and you’ll have to pay a 10% early withdrawal penalty. Staring down big bills like that after you’ve just lost your job is not a fun predicament.
While job loss can happen at any time, you want to make sure you’ll be happy and welcome at your current employer for the next five years before you pull money out of your 401(k). You may also want to consider accelerating your repayment plan to get your 401(k) refunded as quickly as you can. Unlike some loans, there’s no penalty for early repayment. Plus, the sooner the money is back in your account, the sooner it can start earning for you again.
4.) Do you have other options?
If you’ve identified your need for money as immediate, consider what other options you may have available before you dig into your retirement savings. For home repairs, using your home equity line of credit can be a smarter choice. For an outstanding car loan, refinancing may make more sense. For a medical bill, it may be wiser to negotiate a repayment plan with the hospital.
If you’re purchasing a first home, consider the tax implications of mortgage interest. In many cases, you’ll receive preferential tax treatment for interest paid on a home loan. You won’t receive that same benefit from a 401(k) loan.
Borrowing from a 401(k) can be a good way to solve a short-term, specific problem. It does have risks, however, and the consequences to your future can be severe. If you’ve got another option, that’ll be better option for you more often than not.

Car Buying Tips

If you have great credit, getting a car loan at a great rate is no problem. In tight credit markets, some buyers with less than stellar credit may have trouble getting a loan at a reasonable rate.

There are lots of ways to finance your car, even without the best credit, but be careful — these may cost you a lot of money in the long run.

Check your Credit Union’s rates first!

No matter what your credit score, chances are we can offer you a better rate because we are not-for-profit and owned by you, our members.

Do your research

You will most likely pay more for your vehicle if you go into a dealer not armed with information about the vehicle you are interested in purchasing. Make sure you do the research and know how much you should be paying for your new or used vehicle. The internet has made it easy to get this information — just go to the AutoSmart section of our website to get started.

Get Pre-Approved

Apply for your loan to see exactly how much you can afford before you go shopping for your car.  You’ll know exactly what your credit score is and what rate you qualify for through this process. You can then make your best cash deal. Apply online and simply leave the make and model information
blank or write in “pre-approval.”  If you already have your financing in place, beware of a dealer scam involving getting you to fill out a credit application, even though you are not applying for credit. They claim it is required by the “Patriot Act,” but it is not. This is an attempt to run your credit to try and get you into the dealer financing.

Beware of “Choose Your Payment”

Many dealers are now offering to let you choose your payment. While this may seem like a good idea on the surface, all it really does is extend the term of your loan, costing you thousands in extra interest and leaving you with a car that is worth far less than you owe on the loan. As an example, a $20,000 car financed at 7% APR for 5 years will run you $396 per month and you will have paid at total of $3,763 in interest by the time it is paid off. Taking that same loan, and choosing a payment of $250, you will be paying the loan for 9 years and will have paid over $7,000 in interest! If you can only afford a payment of $250, choose a car that fits your budget, instead of choosing a payment on a more expensive car.

Low Rate Financing vs. Taking a Rebate

It is generally better to negotiate the best cash price, take the rebate, apply it to the principal balance of your loan and finance at the best possible rate outside of the dealer. If you run the numbers, you’ll usually find you save money this way.

Purchasing GAP Insurance

If you put less than 20% down on your new vehicle, you may want to consider GAP insurance. The minute you drive a new car off of the lot, the value depreciates significantly. If your car is stolen or totaled in an accident, you may find you owe more on the car than the insurance is willing to pay you.
Guaranteed Asset Protection (GAP) insurance makes up the difference.  Don’t just take what the dealer offers you though! Check around because you can usually get the policy less expensively elsewhere (such as your credit union).

Extended Warranties

You may want an extended warranty on your vehicle, especially if you have trouble coming up with the funds to repair it on your own. However, beware of the dealer “requiring” the warranty in order to get the loan. Some unscrupulous dealers will tell you that in order to sell the product. Most likely, you will pay less for a warranty if you purchase it through the Credit Union. It’s a choice, not a requirement!

If you have questions throughout the car buying process, call Destinations Credit Union.  We’re here to help you get the best possible deal.

Financial Experts Share Ideas on How to Use Your Tax Refund

 Blog entry courtesy of Consumer Credit Counseling Services.  Editors Note: Although this may be a bit late in the tax season, many of us last minute filers are still waiting for our returns.  And, with a little luck, those of you who already have your returns haven’t spent it! 

Are you expecting a tax refund this year (or maybe you’ve just gotten it back)? Based on IRS figures from mid-March, refunds are averaging about $3,000 each. With an adjustment for inflation, that’s up almost $600 over five years ago. And there are more options for using your refund to promote your family’s financial security than ever before. According to Jim Godfrey, President and CEO of local nonprofit Consumer Credit Counseling Service of MD & DE (CCCS), “It makes sense to have a tax refund game plan. If you know you’re going to receive a one, think about how to use it wisely. That way, you won’t be tempted to go on a spending binge and buy items you don’t really need.”

Many Americans have already taken this advice to heart. In a recent Harris Poll conducted with 2,469 adults, nearly half of those expecting a refund said they plan to use it to reduce their debt, and 44 percent plan to save the money.

Spending Strategies

Baltimore CASH Campaign Director Sara Johnson supports this approach, noting, “When asked, we usually recommend that local residents spend some and save some. This year, many of our clients say they plan to use their refund to cover current or past due bills. If you’re living on the edge, like many of us are, paying down credit cards or other debts can help you gain increased financial stability.”
Godfrey agrees. He recommends that consumers use a portion of their tax refund to pay the balance on whichever credit card has the highest interest rate. “If you can’t completely pay off all your credit cards, at least make a sizeable payment on one with a high rate. That way, you’ll still reduce your interest costs. Using your refund to pay off a balance on a credit card with an 18% interest rate is like earning 18% on your investments. It represents an extremely good value.”

Saving Strategies

Maryland CASH Campaign Director Robin McKinney says, “When it comes to tax refunds, we recommend that you pay yourself first. If you haven’t already set up an emergency fund, this is your chance. By using a portion of your refund to open a savings account, you help insure that you’ll have a nest egg if the car breaks down, you run into medical bills, or experience job loss. It can make a big difference when unexpected expenses or life situations arise.”
McKinney notes that a traditional savings account is just one of the ways that a tax refund can be used to save. “You can also use your refund to buy savings bonds or open a CD.” 
This year, the IRS is making it easier than ever for consumers to use their tax refunds to save. Through Form 8888, they can buy savings bonds for themselves or their children or grandchildren right when they file their taxes. They also can designate that their Federal tax refund be deposited in multiple accounts (savings, IRA, CD, etc.) “To do this, you need to know your bank’s routing number and the number for each of the accounts,” McKinney explains. “Then it’s really simple. You or your preparer just fill out the Form 8888, and it is submitted as part of your tax return.” Using Form 588, Maryland residents can also request that their State tax refund be deposited into multiple accounts. Delaware residents are able to direct deposit their State refunds into a single account.
In closing, Godfrey notes, “Tax time is never fun, but it offers consumers a golden opportunity to examine their financial habits and make positive changes. Those who plan and use their tax refunds well are likely to be in a financially stronger position when tax time rolls around again next year.”

Consumer Credit Counseling Service of MD & DE, Inc. (CCCS) is an accredited nonprofit agency that has served the local community since 1966. CCCS is dedicated to helping individuals and families resolve their financial problems. We promote the wise use of credit through education and confidential budget, money management counseling, and housing counseling. MD State License #14-01.

Involvement In Finances

In many relationships, one partner handles all of the financial arrangements.  If your partner is the one who handles everything, but you want to be more involved, how can you start that conversation?

You’re not alone. A recent study by Fidelity Investments showed many people want to be more involved with their finances. Among women, 92% wanted to learn more about their finances, while 86% wanted to take a more active role in managing them. It’s very easy to get caught in a routine with bill paying, checking and spending. The person who was doing so when you started cohabiting just continues to do so exactly the same way they always have.

What’s more, those conversations are really difficult to initiate. Even with close friends, 56% of survey respondents say finances are “too personal” to discuss. Of those survey respondents, 43% were willing to talk about their health issues, but only 17% would talk about investments. About half of respondents would willingly talk about the strange things their bodies are doing, but talking about where they save their money is considered “too personal.”

Intimate partner relationships aren’t a safer space for conversations about money, either. Only 66% of respondents talk about investments or salary with their spouses or partners. In one out of every three relationships, finances are not a common topic of conversation between people who likely share a checking account!

If you’d like to change that dynamic in your relationship, there are a couple of approaches you might consider. No matter what you do, make sure you’re approaching this sensitive topic from a place of love. Fights over money occur when one partner feels put on the defensive about budgeting or spending. Take care and try these three techniques!

1.) Talk about a common goal

If you and your partner have been trying to plan a summer getaway, save for a new car or put a down payment on a house, this can be an excellent place to start a conversation. It’s best to begin on broad notes. Ask about hotel choice or means of transportation. From there, it can be easy to talk about making a budget for the occasion. Once you and your partner are talking about dollar amounts, it can spill over into a more general conversation about finance.

If you ask about saving for this project, it’s important to have suggestions or ideas. Come to the conversation prepared to make a small sacrifice to contribute to saving for the project or have some cost-saving strategy to make the process easier. This encourages a feeling of joint struggle as opposed to you “checking up on” or “managing” your partner.

2.) Set guidelines for spending

Spending is the biggest cause of fights between couples. In general, people tend to see their decisions as rational and the choices they disagree with as irrational or impulsive. In relationships, it’s tempting and gratifying to think of yourself as the sensible one and your partner as the reckless one.

Your partner likely feels the same way. For instance, you may enjoy a daily coffee drink while your partner might consider that to be frivolous spending because they don’t know the joy and satisfaction you derive from that little indulgence. Conversely, your partner’s enthusiasm for home electronics might make you see a top-of-the-line stereo system as an extravagance, while your partner sees it as a way for the two of you to spend more time together at home.

The best way to avoid resentment while still keeping your spending under control is to set personal allowances for you and your partner. You can spend so much each week or month without consulting your partner. Major purchases that go over that limit require consultation. Try to avoid bringing up recent or specific purchases and focus on planning for the future rather than placing blame for the past. This will keep the conversation from feeling accusatory.

3.) Dream about the future

Retirement planning is a difficult subject to broach. Many people don’t want to do it on their own because the prospect of saving that much money is frightening. Add in the stress of talking about money in a relationship and this can be a conversation filled with dread.

It doesn’t have to be that way. Many couples find retirement to be a time of great relationship strength and bonding. If you and your partner didn’t have to work, you could spend a lot more time together, enjoying your mutual interests and each others’ company. Instead of beginning a retirement planning conversation with a dollar amount, begin it with a dream.

Maybe you’d like to travel the world together and see exotic sights. Maybe you want to build furniture out of your home. Maybe you want to become active in the leadership of your church. Beginning with such dreams in mind, as opposed to how much they’re going to cost, can help you and your partner better share the stress involved in saving and planning.

However you broach the conversation about money, it’s important to do so. Secrets about finances in a relationship can lead to stress, interfere with honest communication and produce relationship-ending fights. On the other hand, couples who talk openly and honestly about their financial situation can use that transparency to build stronger, more straightforward communication strategies about other topics. As many people have found, the couple who saves together, stays together!

Don’t Be Scared Of Retirement: Refire And Get Ready For The Best Years Of Your Life

More than half of our nation’s current workers have done nothing or next to nothing to save for retirement. Some might call them lazy, but it might be more realistic to call them terrified. They’re not scared about not having enough saved for retirement; they’re scared about retirement itself.

For a life-long worker, retirement may be a tough pill to swallow. Work is the anchor for your day. It’s why you get up when you do. It’s why you go to bed when you do. You divide your conscious hours between “work” and “not work.” There’s also a sense of identity in a job. Providing a simple answer to “What do you do?” can help you connect with others and yourself.

What’s retirement anyway? One might say it is just sitting around, doing nothing and waiting for death. In that mindset, continuing to work provides a meaning to your remaining years that can’t be found in a rocker, on a couch or in front of a TV.

It’s no wonder people aren’t saving for retirement. It’s a whole lot of extra work and sacrifice for something you may not even want. If this resounds with you, take a look at Refire! Don’t Retire: Making the rest of your life the best of your life.

Coauthors Ken Blanchard and Morton Shaevitz bring their entrepreneurial experience to life with the story of Larry and Janice Sparks. The Sparks begin their retirement unsure of what to do, but quickly discover ways to grow in their relationships, engage their minds, broaden their spiritual horizons and strengthen their bodies. They re-fire the flames of all their interests and take bold steps toward leadership in their communities.

Refire is an easy and engaging read that’s more motivation than practical guidance. In fact, critics have noted the lack of practical advice. Yet It’s received glowing reviews from other authors, industry leaders and even NCAA legend John Calipari.

If you’re thinking about retirement, Refire is a worthwhile investment. If you’re NOT thinking about retirement, it’s a must-have. Blanchard and Shaevitz will put you on the path to financial independence and security with imaginative ways for encouraging a generation that’s about to retire to make the most out of its retirement.