Why & How to Plan Ahead for Health Care Expenses

Health care is something that most Americans overlook when budgeting. Medical debt child with nursecan get out of control if you don’t have health insurance or you don’t plan ahead for unexpected health care expenses.

But how do you plan ahead for health care expenses?

Here are a few tips that can help you start the planning process:

  1. Research health insurance plans and medical costs. To plan ahead for your health care expenses, you will need to understand what type of health insurance plan you have and the medical costs that you may incur in the upcoming year.
    • Determine how much to save based on your deductible, co-payments/co-insurance and/or out-of-pocket maximums. You can contact your health insurance provider to find out the amount of your deductible.
    • Estimate how much to save based on any medical bills you received in the previous year.
    • Calculate how much to save based on any prescriptions you had to pay for in the previous year.
    • Attend workshops and seminars presented by your employer or health insurance organization to get a better understanding of how to get the most out of your health insurance plan (and spend the least amount of money out of your own pocket).

Everyone’s situation will be different. Use what you think will be best for you to determine how to save money on your health care costs.

  1. Start the planning and budgeting process. A best practice is to use a budgeting tool to outline all of your monthly expenses, including any estimated health care costs. A visual map of your financial plan will give you something to follow to ensure you are meeting your savings targets every month.
  2. Consider Opening a Health Savings Account (HSA) or Flexible Spending Account (FSA). These enable you to save for health care expenses in advance (on a pre-tax basis). Not only are the funds untaxed, they can also be used to cover the cost of co-payments, co-insurance, out-of-pocket maximums, and prescriptions.

The Bottom Line: You’ll Save Money in the Long Run

Ultimately, planning ahead for health care expenses is like planning ahead for retirement. With retirement, you plan ahead to cover all of your bills in the future. The same concept applies for health care expenses. The money you save will enable you to cover the costs of any medical expenses you incur in the future.

Courtesy of Accel Members Financial Counseling, Destinations Credit Union’s partner to provide its members free unlimited financial counseling.

President Trump And The New Tax Code


Whatever your stance on our new president, he’s certainly promised to shake things up. One of his major points on the campaign trail was an overhaul of the tax code. What will this look like for individual taxpayers? 

1.) Nothing this year 

If you’re hoping to see changes to your tax burden this year, don’t hold your breath. The taxes you’re required to file before April are for 2016. That means the rules and regulations that govern them are already established. It’s possible there may be some clarifications and minor modifications at the periphery of the tax code issued this year, but the bulk of the tax law for your upcoming return is pretty well set.

This includes the individual mandate of the Affordable Care Act (ACA). You will need to provide documentation of your health insurance for all 12 months of 2016, unless you’re otherwise exempt from the mandate. Regardless of what the future holds for the ACA, it’s the law of the land for 2016.

One of the issues to keep an eye on is the extension of tax deductions for mortgage insurance premiums. They were tax deductible for 2015, but Congress has not yet renewed the break for 2016. If you pay mortgage insurance, it’s worth keeping an eye on what could be a significant change to your taxes. 

2.) Simplified brackets for 2017 

The tax code works by establishing a percentage of each threshold of money to be taxed. So, if you make $20,000 a year as a single person, under the current tax plan the first $9,750 is taxed at 10%, then the remaining $10,250 is taxed at 15%. Of course, thanks to deductions, it’s slightly more complicated than that, but this is how the system works at its core. Trump plans to keep the basis of this system in place, but make significant revisions to it.

One of the pillars of the Trump tax plan is a reduction in the number of tax brackets. Under the current tax code, there are seven different tax rates for different income levels. Under the proposed Trump policy, there will be only three. For both couples and individuals with incomes over $415,000, this will reflect a significant reduction in their tax burden.

To make up for this loss of revenue, two brackets will see an increase. The first $9,750 ($18,550 for married couples) will be taxed at 12% instead of 10%, and amounts between $112,500 and $190,150 ($225,000 and $231,450 for married couples) will be taxed at 33% instead of 28%. This may result in a higher tax liability for middle-income Americans. 

3.) Deduction changes 

To make up for this greater tax liability, the Trump plan makes significant changes to the way deductions work. For starters, the standard deduction, the one most people take, will increase to $15,000 for individuals and $30,000 for couples filing jointly. That means that, for most people, the first $15,000 you earn will be tax-free.

For those who itemize their deductions, life gets a little more complicated. First, deductions are capped at $100,000, which may be a blow to small business owners with lots of deductible business expenses. Second, deductions will phase out for high income earners. If your income is over $261,000 as an individual ($313,800 for couples), you’ll only be allowed to deduct a percentage of your itemized deductions from your income.

There’s also no more “head of household” filing status, so individuals with more than two dependents will need to reconsider their filing status. Couples with more than two children will no longer be able to claim exemptions for them, but will be able to deduct a greater portion of their child care expenses from their income.

There are other parts of the Trump plan, including a repeal of the estate tax and an end to the so-called marriage penalty that affects high-income married couples. Of course, all of these changes will have to pass Congress before they take effect, and Speaker of the House Paul Ryan has other ideas about how to reform the tax code. It’s likely that some, but not all, of these changes will be made for 2017, as the democratic process forces leaders to compromise for the greater good. Keep an eye on the goings-on in Washington as you file your taxes this year! 

Your Turn: Be king for a day. What changes do you want to see happen in the tax code? Let us know how to fix the system in the comments, and check out what other people are saying!


Rising Interest Rates: What Do They Mean For You?


If you read financial headlines, you’ve no doubt seen the news that the Federal Reserve is raising interest rates. These headlines can be accompanied with all sorts of hyperbole about the end of the stock market, the boom of bonds or any of a dozen other possible predictions. It’s easy to get overwhelmed when there’s this much information and so much of it is conflicting. Let’s set the record straight on what rising prime interest rates mean for you.
The prime interest rate is the rate that the Federal Reserve charges financial institutions to borrow from it. It influences a lot of other financial prices. Many of these are only of concern to investment bankers, professional investors and other economic enthusiasts. Here are some key ways the prime rate hikes can affect you!
1.) Think about your ARM
Many people opted for adjustable-rate mortgages (ARMs) when interest rates were historically low. These mortgages often have much better rates for an introductory period, usually five years (please note – a Destinations Credit Union ARM holds the rate for 10 years), before they adjust to a new rate. That new rate is determined in large part by the rate the Federal Reserve charges.
The Federal Reserve is planning to continue to increase interest rates as the economy continues to improve. This means the rate on your ARM may go up as well. Worse yet, the rising rates could make your monthly mortgage payment unpredictable, putting you in a bit of a budget bind. Fortunately, you can refinance your mortgage into a fixed-rate loan and take advantage of still-low interest rates. You may still be able to secure a low rate on a 10-, 15- or 30-year fixed-rate mortgage. As interest rates continue to rise, your fixed-rate mortgage will stay the same, meaning your savings will increase as time goes on.
2.) Balance your portfolio
The historically low interest rates over the past six years have done wonders for the stock market. Because companies could borrow at affordable rates, they could expand rapidly. That expansion fuels growth in stock prices.
As interest rates rise, that credit availability will decrease. Companies will find it more difficult to expand, and their growth will slow. This slowing of growth may lead to a decline in stock prices.
However, as interest rates rise, bond rates will also increase. That will lead to an increase in their price as more investors chase those rates. Individual investors need to ensure their portfolios are properly balanced to take advantage of changing market conditions. Speaking to a financial adviser to ensure your assets are where they need to be will help keep your investments growing at a healthy rate.
3.) Save more
The Federal Reserve interest rate also affects the rates that financial institutions are able to offer account holders. As it becomes more expensive to borrow from other institutions, it’s more profitable for those institutions to “borrow” from their members in the form of certificates and savings accounts. As interest rates continue to rise, it’ll be increasingly more profitable to sock your money away in an interest-bearing account.
If you’ve been putting off opening a certificate or increasing the deposits in your share account, now is an excellent time to consider it. With a 12- or 24-month certificate, you can take advantage of rising interest rates while still leaving yourself the flexibility to re-invest once interest rates rise again.
4.) Refinance your debt
The service charges on several kinds of debt are tied to the prime rate. Notably, credit cards and private student loan rates may increase as the prime rate continues to climb. That makes now a great time to think about refinancing.
Take advantage of currently low interest rates with several strategies. A home equity line of credit can help bundle your high-interest, unsecured debt with your low-interest mortgage. A personal loan for refinancing can also help secure a better interest rate. Other options exist, and the sooner you speak with a debt counselor or other financial professional, the better off you’ll be.
It’s easy to get overwhelmed by all the financial terminology surrounding news events like rate hikes. That’s why it’s best to have an advocate in your corner to help you figure out what to make of a changing economic landscape.  Destinations Credit Union can do just that. Call, click or stop by to speak to a member services representative about how you can take advantage of this opportunity and put yourself on the path to financial wellness.

Your Turn: Got questions about rising interest rates? Leave your questions in the comments. Or, if you’ve got a handle on all things economic, share your wisdom with others!


Fitness For Your Body And Wallet: Shedding Pounds Without A Gym Membership


New Year’s resolutions can be fantastic motivating tools, and many of us use that motivation to improve our health. Thirty-seven percent of Americans resolved to lose weight, while another 32% resolved to stay fit and healthy in the New Year. No one knows that better than the weight loss industry, which ramps up its marketing this time of year. You’ve no doubt seen offers for free months and other discounts at local and national gym chains. 

What these advertisements leave out is that gym memberships are still very expensive. Nationally, gym memberships average $58 per month. That’s bad enough before you start adding in contract initiation fees and other upfront charges. If you want to get fit, but don’t want to pay those exorbitant fees, there are a few strategies you can try. Give these budget- and body- friendly ideas a chance. It might help you along the path toward a happier, healthier 2017! 

1.) Diet

Honestly, it doesn’t matter how much you work out if you’re not eating well. You won’t lose weight. You’ll still also suffer the side effects of a poor diet, like low energy and high blood pressure. Trying to get healthy with just exercise is like trying to fix a heater by changing the thermostat. 

According to nutritionist Shawn Talbott, weight loss is 75% diet and 25% exercise. The biggest factor in losing weight is your basal metabolic rate (BMR), which is how much energy your body burns throughout the day. This is usually in the vicinity of 2,000 calories. Running a mile burns about 100 calories, or 5% of your BMR. Worse yet, exercise can have a paradoxical effect with a bad diet. After a vigorous workout, you’re more likely to snack. It’s easy to fall into the trap of thinking you’ve “earned” an indulgent reward after a run or bike ride. You can easily wipe out all the good you’ve done with a bowl of ice cream.
Use a calorie tracking app like Myfitnesspal to get a sense of where your calories are going now. You might be surprised at how much you can save with a few easy cuts! Diets don’t have to be extreme or restrictive to result in real, lasting changes to your body.

2.) Body weight exercise

One of the biggest reasons people give for joining a gym is access to strength training equipment. It’s true that cardio alone won’t help as much as strength training. It’s not true, though, that you need expensive machines for it!

Three simple exercises can help tone trouble spots and reshape your body. Planks work your core, arms and shoulders. Squats work your glutes and legs. Toe raises work your calves. You can find tutorials for these and countless variations online. The challenge is to pick a routine and stick with it.

Another direction for body weight exercise is yoga. You can find tutorials online for strength-building yoga you can do in your home at your own pace. This can be a lot less intimidating than a class because no one can see if you mess up. Lots of yoga poses work on muscle building and flexibility. These can help tone and shape your body, ensuring your weight loss focuses on fat, not muscle.

3.) Make your own groups

One appeal of a gym membership is the camaraderie formed by group exercise classes. The scheduling of a class forces accountability, and working together can make the exercise seem less taxing. You can get these benefits outside the gym as well!

If you have several friends also interested in fitness, start building fitness activities, like hiking, bike riding or running, into your regular social time. Instead of going out for coffee, go for a run together!

If you’re on your own, you can still find others who share your fitness goals. Use sites like Meetup to look for exercise groups that work at your skill level. If you’re completely new, now’s a great time, as there will be plenty of other people also starting a new fitness journey. If you’re looking to take your fitness to the next level, challenge yourself by joining an advanced running or biking group. You can get fit and make new friends at the same time, without spending a big chunk of change on a gym membership.

Your Turn: How are you going to meet your fitness goals in 2017? Share your best tips on how to beat the gym and get fit!

What To Do After Getting A Raise


This is the year you finally got that raise! What should you do with the extra money?

Beyond the money, getting a raise is a rewarding recognition that the work you’re doing for your employer is valued. It means you’re on the right path in your career. This should be one of many such events in your life where your hard work and dedication finally pay off.
 

Let’s not overlook the money, though. This can be a real boon to your financial stability. You could look back a year from now and see how much better off you are with a little more budgetary breathing room. It’s also possible that the money can blow right through your checking account, leaving you worse off than you were before you got the raise.

The difference between these two outcomes is planning. If you don’t have a plan for your new income, it can be difficult to resist the impulse to spend lavishly because you “deserve” it. Making a plan to invest your new bounty responsibly will keep you honest and ensure you spend in ways that match your values. Here are three steps to making a plan for your post-raise finances.

1.) Stay off the treadmill

If you started from the bottom, you probably remember a time when you had little in the way of luxuries. You went to work, came home, ate whatever was cheap and went to bed. As you started to pull yourself up, you might have added the occasional luxury: better food, a nicer car, some entertainment or comfortable furniture. While the added luxury might have been a thrill at first, it probably soon became nothing more than the new normal.

This is what psychologists call the hedonic treadmill. With greater salary comes greater lifestyle expectations. It’s impossible to get ahead if you’re always chasing the life you think you “ought” to have.

In a sense, all you’re doing by getting a raise is turning up the speed on the treadmill. You’re not actually making more progress toward your goals. To do that, at any level of income, you need to spend prudently, not emotionally.

So, when your first paycheck comes in, avoid thinking about things you “deserve.” Try to keep your non-discretionary spending, or the amount of money you have to pay for basic goods and services, the same. If you want to take your family out to dinner to celebrate, that’s fine. If you want to buy a new luxury car to reflect your new status, that’s just running faster on the treadmill.

2.) Fix the basics

There are three very obvious places to put your newfound money: paying down debt, building an emergency fund and saving for retirement. If you don’t have an immediate plan for your new income, you could do much worse than putting your money in one of these three places. This isn’t a flashy way to spend your money, and it won’t make you happier in the short term. However, it will make your life easier in the long run.

Depending on the timing of your raise, you may need to make some paycheck adjustments. While you’re increasing your 401(k) contributions, you might also want to withhold a little extra in taxes. Your old withholding was done assuming you would earn your old salary all year. If you don’t bump up your withholding a little, you might end up with a nasty surprise at tax time. That’s another reason to make tax-deductible investments in your retirement accounts. You’ll get to keep more of your hard-earned raise!

3.) Save for your values

Getting a raise is a great time to pull out your dream list. What would you do if money was no object? Would you take a trip to Tahiti? Start a small business? Whatever your dream is, you probably need some capital to get it started.

Fortunately, you’re about to get some more capital each month thanks to your hard work. The best way to get to your “money’s no object” goals is to save a little bit each month. You can do that with the nice bonus offered by your raise. In the long run, you’ll be happier with the investment in your future than you will with the little luxuries you might be tempted to splurge on today.

Your Turn: We all want to make more money. What would you do with a little extra money each month? Let us know in the comments!


7 New Year’s Resolutions For A Richer 2017


The New Year is a great time of renewal. That makes it a good time to make bold, decisive changes in your life. Leave behind the baggage that was 2016 and start fresh with a blank slate in 2017. If you’re looking for some resolutions to improve your personal finances, we’re pleased to offer seven ways to make 2017 the year of the dollar!

1.) Track your spending

If you’re looking to take your first steps toward financial literacy, figuring out where your money goes should be at the top of your list. If you don’t know where your money goes, it’s going to be tough to follow through with any other money plans. You may have a general sense of how much you spend, but after a month where you’ve recorded every dollar, you’ll have a much better picture. Using apps like Mint or Personal Capital can automate the process. You might even find that keeping track of what you do with your money encourages you to spend a little more judiciously.

2.) Make a budget

About 70% of Americans live financially spontaneous lives. They don’t make a plan for spending or saving. When asked why they chose not to do so, the most common response was that the family spent all the money anyway. This is a circular problem. If you don’t have a budget that includes setting aside money for long-term expenses and savings, you’ll end up spending all your money on unplanned things and events. The best way to stop the cycle is to sit down and make a budget that modifies your spending to be more in line with your priorities.

3.) Get out of debt

Easier said than done, right? However, there’s no bigger stumbling block to financial security and wealth building than debt. It’s hard to save for long-term goals when so much of your monthly income gets eaten up by interest and fees. There are a variety of methods you can use to help accelerate your payoffs. For instance, you can add an extra $50 or $100 to your credit card payments. Or, you can focus all your payment resources on the highest interest debt until it’s paid off and then move it all to the next highest for snowballing your way to freedom from debt.

4.) Start an emergency fund

The best way to avoid going into debt is to have some money on hand to handle the occasional, yet inevitable, emergency. Most Americans, though, can’t come up with $500 in such instances. Set a specific goal, like adding $10 per month to a savings account. At the end of the year, you’ll have more than $100 available in case something goes wrong.

5.) Start a retirement account

You can’t save for what you don’t think about. When retirement is years or decades away, it’s difficult to incorporate thinking about it into your daily routine. If you have a retirement account open, you’ll get monthly statements, which serve as reminders. The challenge, though, is taking that first step. Don’t let perfect be the enemy of good. While there are important differences between Roth and Traditional accounts, either one is better than no retirement savings at all. If your job offers a 401(k) matching program, sign up to get at least the full matching funds amount – it’s free money. Do a little bit of research, then open the account that seems like the best idea.

6.) Automate your savings

Saving money takes willpower. Because it’s hard to practice self-denial on a constant basis, that extra $5 you’ve earmarked for savings can very easily turn into a mid-morning coffee. Fighting that impulse is a constant struggle. That’s why it’s easiest to avoid the decision altogether. Change your direct deposit to put some of your paycheck directly into a savings account, where you won’t even think of spending it impulsively.

7.) Get educated

Knowledge is power, and that’s especially true in the world of personal finance. What you know about your money goes a long way toward determining how much of it you get to keep. There’s a lot to learn, but you’ve got a wealth of information at your fingertips. Resolve to read one personal finance article a week (subscribing to this Blog can be a great start). Not only will this give you good ideas for improving your personal financial situation; you’ll also spend more time thinking about your money. That will lead to positive results down the line!

Happy New Year from all of us at Destinations Credit Union. We hope you have a safe, happy, and prosperous 2017!

Your Turn: What resolutions are you making this year? Will 2017 be the year you join a book club, quit smoking or spend more time with your family? Let us know in the comments!.


Make The Nice List With Your Credit Card Use


It’s that time of year again. He’s making a list, and he’s checking it twice. Of course, we’re talking about the major credit bureaus! With holiday spending season upon us, it’s time to broach an uncomfortable subject: how to pay for all that joy and goodwill.
The holidays can be an expensive time of year, and it’s tempting to turn to plastic to finance the whole thing. Consumers are planning to spend more this year than last year, with only 24% of Americans planning to reduce their holiday spending. Regardless, the average American plans to spend $812 on the holidays this year, and that’s more than most people have just sitting around or in their savings.
In the spirit of the holidays, let’s look at some “naughty” and “nice” ways to use your credit cards. Be sure to stay on the right list, or there may be coal in your stocking – and smudges on your credit report!
Naughty: Financing gift-giving with credit
If you don’t have the money sitting around to finance your gift-giving, it can be tempting to pull out a credit card at every store and shop ’til you drop. That’s exactly what most people do when spending with credit. A recent study of consumer behavior found that people spend nearly 20% more when shopping with a credit card. The dissociation between plastic and money can erode our ordinarily thrifty impulses, causing us to overspend.
There’s also interest to contend with. That $812 could easily turn into $1,000 or more thanks to the power of compound interest. Even deferring payment for a month can cost you quite a bit! Less than a third of Americans pay off their holiday credit card bills immediately. Most will end up carrying a balance that can make it hard to start the new year right. In fact, consumer counseling agencies see a 25% increase in requests for help in January and February. Holiday spending can be the last straw for people barely getting by while making minimum payments.
Oh, and by the way, you might end up ruining the surprise on Christmas morning! If you put something special for your someone special on a joint credit card, they might see it on the credit card statement. Nothing ruins a perfect gift like a spoiled surprise.
Nice: Paying for holiday travel
If you’re traveling for the holidays, it can make sense to use credit cards. Most major credit cards offer insurance for rental cars and extra cancellation policies for flights in case things change at the last minute. Using a credit card to make reservations at hotels, rental agencies and other book-ahead services can also prevent the company from placing a hold on your account as a deposit.
Remember to make a clear budget for your travel plans and stick to it! Resist the impulse to take frivolous upgrades. Holiday travel is a chance to bond with family, and fancier hotel sheets won’t help with that! Keeping a clear budget will make sure you can pay off that credit card bill next month and avoid costly financing charges.
Naughty: Guilt spending
The holidays are full of messages that connect spending to caring. These messages would have us believe that, if you love someone, you’ll get them jewelry or another extravagant item. Advertisers encourage consumers to make emotional decisions about spending, rather than looking at what they can afford. Credit cards make this even easier by letting you postpone paying for the gift.
Instead of telling someone you care with borrowed money, show them you care with a thoughtful message and a reasonable gift that’s based on what they want. Don’t buy into the myth that dollars are a meaningful quantification of your feelings. Give sensible gifts with money you have.
Nice: Spending rewards on holiday purchases
If you use a rewards card throughout the year, now’s a good time to cash those points in. Most companies offer discounts on two commodities everyone needs this time of year: travel and gift cards. You can use your rewards money to help absorb some of the impact of gift-giving. Picking up gift cards this way can make last-minute gift-giving easier.
It might also be worth investigating the possibility of giving travel points or miles directly to others. This can make a difference for relatives who travel frequently, or make a trip home feasible for people who live far away. Look into using your rewards generously this year!
Your Turn: How do you manage your holiday spending? Are there secret tricks to keep those costs down, or are there techniques you use to keep you within budget? Let us know in the comments!


Single At Retirement


Most of the retirement advice out there is for people “growing old together.” What does a person need to do to plan for a fabulously single life after work?
Take a look at nearly any retirement guide, and there’ll be a section on what to do with your spouse’s income and savings. If you don’t have a spouse, there are several benefits you won’t have: spousal Social Security benefits, life insurance payouts and equity, and preferential tax treatment for married couples. It can seem like the deck is stacked against you.
Regardless of why you find yourself planning for a single retirement, whether it’s death, divorce or just not meeting the right person, you’re not alone. According to the US census, 54% of men and 27% of women over age 65 are single. They’ll face a much more difficult retirement landscape than their married counterparts.
That doesn’t mean you need to find the first available partner to get hitched, though. There are many strategies that are easier for single people to execute than their married counterparts. Here are three steps you can take to make your retirement years safe and secure.
1.) Start saving now
One area where single people lag behind married couples is in retirement savings. More than 40% of unmarried women and 34% of unmarried men have saved less than $1,000 for retirement. There may be any number of reasons for this, but the bottom line remains the same: Start saving more.
It may be helpful to start small. Try a dollar-a-day saving challenge by saving one dollar every day for 30 days. Use that money to start or add to a tax-advantaged retirement account like an IRA. After 30 days, one dollar every day will start to feel like a habit and it’ll be easier to add more to it.
Beyond putting more money away, single retirement may require a more cautious retirement plan. You may need to work longer to achieve the same level of security in retirement. For most people, the years they work just prior to retirement are their peak earning years. A few more years at your max salary (and max savings rate) can add up quickly!
2.) Choose your accounts wisely
There are a few common retirement situations that put single people at greater risk. These risks mean that you’ll want to prepare a little differently than married couples. Most notably, single people have less support and flexibility if they start outliving their savings. For married couples, the larger pool of assets and supplemental income streams help to keep this from being a serious worry. Singles don’t have access to these benefits, so they need to be more careful in their selection of retirement vehicles. Looking to guaranteed sources of income, such as lifetime annuities and defined benefit plans, can help alleviate these concerns. While these investments may have a place in every portfolio, the additional security they provide to single people makes them especially useful.
Also, major medical problems pose a more significant challenge. Instead of having to depend on a partner to take care of you if you require long-term care, you may need professional assistance. This might come in the form of either in-home care or a residential facility. Long-term care insurance, though expensive, can be an excellent way to protect yourself against these costs. Similarly, keeping a robust Health Savings Account (HSA) can help save on taxes now and pay for medical expenses later.
3.) Take advantage of the opportunities
While being single in retirement does pose a number of challenges, it also opens up a number of exciting opportunities. For example, there’s no reason why your retirement years have to be in the same community where you worked. You can take advantage of your new lifestyle to move to a place with a lower cost of living, thus extending your retirement savings.
There are also many bridges to retirement that are available to singles that may not be as desirable for married couples. Starting a small business using your workforce skills can put you in a position to maximize your tax benefits while also bolstering your income over those early retirement years. Whether it’s in consulting, freelancing, or something unrelated to your career, you can put your skills to work pursuing your passions.
Since there’s no guaranteed inheritance outside a marriage, your estate planning has many more options. You don’t have a partner depending on your assets when you’re gone, so you can dedicate your remaining savings to a cause that’s important to you. You’ll want to set up an estate plan that reflects your values and commitments, and you have the opportunity to do just that.
If you’re ready to take the next step in your retirement planning, you owe it to yourself to see what benefits are available to credit union members. Call, click, or stop by Destinations Credit Union today!
YOUR TURN: What are you most looking forward to in retirement? How do you plan to make that dream a reality? If you’ve already retired, what tips do you have for the next generation?


When A Savings Account Isn’t A Savings Account


For many credit union members, a savings account is a formality. They know, in theory, that saving is important. Maybe they got a bonus at work and stuck $50 in a savings account. Other savings options  that come with higher rates, such as IRAs or 401(k) accounts, took priority and that initial deposit was quickly forgotten.


Tax-advantaged retirement accounts are fantastic, but it’s unlikely that retirement is your only savings goal. When it comes time to put a down payment on a house, buy your next car or plan an exciting vacation, the money in those retirement accounts will be locked up tight. There’s no way to get to it without taking on massive penalties and paying a lot in taxes.

If you want your money to be there when you need it, no matter when “it” is, now might be the time to take another look at the humble savings account. Even if it’s not your primary savings vehicle, a savings account can offer tremendous benefits. Let’s look at some ways to get the most out of it!

1.) Dividend rate isn’t the only consideration

Many experts shun savings accounts, citing low interest/dividend rates as their chief concern. If you’re looking to maximize your returns, putting all your money in a savings account isn’t the smartest plan. It’s unlikely that your financial plans call for maximizing returns on all your investments, though. While it’s true that higher return investments do exist, savings accounts offer unique benefits.

First, savings accounts are NCUA insured up to $250,000. If something unthinkable happens, you’re promised to be reimbursed for your losses. That’s quite a lot of security for your hard-earned cash.

Another benefit of savings accounts is their liquidity. If you need the money in your savings account tomorrow, you could get it. You can withdraw cash in person, at a branch or from an ATM. You also have access by using our online banking or mobile banking to transfer funds to another account to make payments on a loan. You can also transfer funds to your checking account to conveniently use your debit card without worries of overdrafting.

2.) Automate, automate, automate!

You know that exhausted feeling you get after you’ve been shopping? It never seems fair. Sure, there was some walking involved in your day, but the total amount of physical activity was fairly limited. All you did was make a ton of decisions.

That feeling has a name. It’s called decision fatigue. Making a commitment to something takes willpower and energy, and you’ve only got so much in your tank. Waiting until the end of the month to decide what to do with your household surplus can encourage splurging. Thinking about sensible decisions takes willpower, and you’ve already used your allotment for the month.

That’s why it’s great to know your savings account can be automated. You can set up automatic transfers between your checking account and your savings account or even make it part of your employer direct deposit. Make that decision once and then never have to think about it again. You can save your willpower for more important decisions, and let your cash reserve grow.

3.) You need an emergency fund

Even if you have a high-paying job, you’ve only got as much security as the economy allows. Your company could succumb to competition.Your job could be eliminated. You or a loved one could get sick, requiring you to leave your job or cut back to fewer hours.

Other emergencies could happen. Your car could break down. You could face a big medical bill or fall victim to a scam. What would you do to cover your costs in these situations?

Situations like these are among the leading causes of bankruptcy. People find themselves forced to rely on credit to get through such circumstances. With no way to repay those charges, people are stuck in a constant cycle of debt repayment that ruins financial plans for years.

The best way to avoid this calamity is with a strong emergency fund. How much should you have saved? Most experts agree that 6 months of living expenses is a good target, though that number may need to be higher if you work in an industry with a tight labor market. What’s a living expense? Count anything that you couldn’t cut if you absolutely had to do so. For example, your housing, utilities, insurance, debt maintenance and food. Don’t include luxuries like dinners out or monthly subscription costs that you could stop paying if money got tight.

It’s important to keep that emergency fund accessible. If it’s in a brokerage account, you risk needing to access that money when the market is down. A savings account provides the security and flexibility that you need for your rainy day fund.

4.) Keep your funds separate

If you already have an emergency fund, you may have some other savings goals. Suppose you plan to start a business, but need start-up funding to do so. You might want to put away money gradually over time to make your dreams a reality.

If you keep that money in your checking account with the rest of your funds, there can be a real temptation to spend it. Resisting that urge depletes some of that willpower, which makes it easier to make impulsive choices in other areas. Instead of relying on your self-control to keep those savings safe, you can build separate accounts for each specific savings goal. This will let you track your progress while also keeping the money safe from an Amazon splurge.

Look for ways to increase your dividends

At Destinations Credit Union, we have an easy way to increase your dividend rate – it’s our Kasasa® Cash Rewards Checking Account.  By doing easy things that you probably already do, you can earn a really high rate on your checking account and attach a high rate Kasasa Saver to that account.  Then, at the end of the month, your rewards are automatically swept into the savings account.


Steps You Can Take For Filling Your Pension Gaps


After a lifetime of hard work, many people expect to retire in some comfort and enjoy their remaining years. In some lines of work, especially public service professions like police and firefighting, the retirement package is a big part of the recruitment process. Yes, the hours are long and the work is dangerous, but the community values the services these individuals provide and the professionals appreciate the assurances that they will be taken care of after their working years have ended.

However, with states facing increasingly harsh economic times, many in government have been rethinking this arrangement. More people are living longer, which would otherwise be good news. In this context, though, the additional payouts are part of what’s creating a budget crunch. Many states, notably Illinois and Michigan, have been embroiled in efforts to cut benefits to retired workers.
According to economist Andrew Biggs, these difficulties stem from a chronic underfunding of benefits programs by state and local governments over the past decade. Faced with losses in tax revenue caused by recession, states and localities saved money for the present by not paying for the future. After years of this conduct, these programs are now running out of money.
Private sector pensions aren’t safe either. Several large, multi-employer firms have been attempting to renegotiate their benefits structure. It’s a move, according to Central States Pension Plan, designed to prevent them from running out of money. Labor unions, faced with decreasing employment and stagnant wages, are simply running out of money to pay existing beneficiaries. They may see even greater struggles as the pool of retirees expands.
The good news is that attempts to decrease current pension benefits have consistently met with resistance. This week, the Treasury Department rejected Central States’ petition to reduce benefits in a ruling that is consistent with other attempts to reduce existing benefits. If you’re currently on a pension, you may see a reduction in cost of living adjustments (COLA), but your benefits will likely continue as-is. If you’re counting on a pension to cover some or all of your retirement needs, though, you may be in trouble. Whether or not the reforms go through, pension-providing agencies are facing a funding problem that’s in need of resolution.
If you’re fairly new in your career, you’ve got plenty of time to adjust. You’ll need to re-evaluate your retirement planning strategies, but there’s still time to ensure you can retire safely and comfortably. If you’re closer to retirement, you’ll need to take action sooner to address this shortfall. Either way, try these steps:
1.) Re-evaluate risk
If you have private retirement funds, you may have been investing them fairly aggressively. You could afford to lose that money since your retirement income was guaranteed. Pursuing higher returns offered by a slightly riskier strategy makes sense in that instance.  
Without a safety net, though, those private retirement funds have got to last. Switching to a more conservative investment strategy will help you protect your nest egg in the event that your pension program falls through. You’ll see smaller returns, which may mean staying at work a little longer to fill the retirement bucket, but you’ll protect the retirement funds you do have.
2.) Cut your expenses
If you can’t increase your retirement income, the next best bet is to reduce your retirement expenses. For some of these, like utilities and other necessities, there’s little you can do. Many other expenses, though, are well within your means.
If you were planning to “downsize” when you retire, it might make sense to do so sooner than planned. If you can sell your house and move to a smaller location, doing so a little early might give you more investment capital. It’ll also lower your month-to-month expenses now, enabling you to put more money away for retirement. If you have adult children who are still living at home, it may make sense to help them get into a rental of their own. The increased cost of paying their rent may be offset by the decreased monthly expenses of a smaller home.
Another expense you can control is taxes. If you’re over 55, you can make “catchup” contributions of $6,500 to a Roth IRA, which will provide you with tax-free growth. Similar additional deposits in a 401(k) plan can also help make up for a lack of investment earlier. You can also make a conversion of funds from a traditional 401(k) or IRA to a Roth account, provided you pay taxes on them when you make the withdrawal. It might make sense to absorb these taxes now while you have the income to cover them rather than to wait until you’re depending on your assets for all your income.
Yet another way to minimize your tax burden is to contribute to a Health Savings Account (HSA). These plans allow for tax-deferred deposits and tax-free withdrawals to pay for medical expenses. You’re almost certainly going to have medical expenses in your golden years, so making the most out of these accounts while you’re working can be a big help.
3.) Save As Much As You Can

While you are working, sock away as much as you can into a Roth IRA, 401K or any other way you can, to supplement any pension plan offered by your employer.  Roth IRAs provide withdrawals that are tax-free at retirement, since they are after-tax retirement plans.  Ask Destinations Credit Union about opening your Roth IRA.

4.) Adjust your plans
It’s easy to catastrophize the decline of pension benefits. The immediate response might be despair and hopelessness. While it’s justifiable, it’s not a useful response. This bit of information requires you to change your plans. That’s all.
If you were planning to quit work as soon as you turn 65, you may have to change that plan and work a little longer. These are your peak income years, so it won’t be as much time as you think, especially with an intentional savings plan that’s designed to get you to your goal as soon as possible. Staying on a few more years is frustrating, but survivable.
You might also have to change what retirement looks like. It might mean getting a part-time or freelance job for the first few years to keep from cutting too much into savings. It might mean more limited opportunities to travel. Perhaps retirement involves a side hobby like furniture restoration or automotive repair that can generate a little income. These plan changes don’t mean you’re not going to retire, only that retirement means something slightly different now.
Your turn: What are your plans to close the gap between your retirement dreams and your work reality? Any tips to share with your fellow savers?
SOURCES:

http://www.forbes.com/sites/andrewbiggs/2016/05/06/are-state-and-local-governments-really-underfunding-their-pensions-yes-really/#521fa63865c3