Category Archives: Opinion
Resetting Your Retirement After Divorce
Retirement planning can face derailment after a divorce. Married, two-income couples have the advantage of splitting living expenses and pooling all their investment assets, including retirement accounts. Once the marriage is over, costs for separate households may limit the ability of ex-spouses to keep their retirement on track.
After a divorce, individuals generally walk away with a share of joint retirement assets based on how they negotiate that split. However, returning to singlehood means the end of shared expenses with housing, food, transportation and related expenses now being paid out of one wallet, not two. This can mean considerably less money to direct toward retirement and other savings and investments.
To assure a comfortable retirement, many experts advise individuals to save and invest over time so they can live annually on at least 70 percent of their pre-retirement income. Divorcing couples should retain separate qualified financial experts to assure an equitable split of assets and a continuing plan to build a solid retirement in single life.
Here are a few steps to reset one’s retirement goals after divorce.
Gather a personal finance team. It’s a good idea to hire a financial professional to offer advice on all relevant financial, investment, tax, estate and retirement details of a divorce negotiation. Afterward, individuals may continue with these advisors or interview new ones. Personal referrals are best, but the following resources may help:
The Certified Planner Board of Standards
The Association for Financial Counseling and Planning Education
The Financial Planning Association
Your state CPA society
Budget. Spending priorities can change after a divorce. Newly divorced spouses should track all new spending diligently so they can reset their budget for retirement. (http://www.practicalmoneyskills.com/retirementcalc) Qualified financial advisors can help review a divorcing individual’s budgeting strategy to make sure as much money goes to savings as possible.
Evaluate all retirement assets. When divorce is finalized, it is a wise idea to take inventory of all retirement assets to determine whether they still fit investment goals. If one’s 401(k) or employer plan administrator does not have a calculator to help estimate how accounts will grow under certain investment scenarios, refer to Bankrate.com’s various retirement calculators for help.
Review Social Security benefits. Most experts urge individuals to wait as close to age 70 as possible to start drawing their Social Security benefits. Check the Social Security Administration’s Delayed Retirement Benefits page (www.ssa.gov/retire2/delayret.htm) for a discussion of how and when to start taking payments. Also keep in mind that retirees married 10 years or longer who have stayed single may be entitled to Social Security benefits on their ex-spouse’s record if they meet certain requirements.
Be honest about new financial limitations. If a serious retirement shortfall emerges after divorce, it’s important to reset financial priorities. That may mean speaking with family members about necessary cutbacks in certain expenses. It is important to have retirement in the best shape possible to avoid stress on family finances later.
Bottom line: The personal and financial disruption caused by divorce can make it easy for newly single individuals to neglect their retirement planning. It is important to seek advice and take all necessary steps to keep one’s retirement on track.
By Jason Alderman
Affording Fido: A Cost Checklist for a New Pet
Premium food, state-of-the-art veterinary care and creature comforts most humans would envy are now a regular part of life for many American pets. That’s why prospective pet owners should consider financial planning before bringing home a dog, cat or other breed of animal.
For those considering purchasing or adopting a pet, do thorough research first about what owning that animal will cost. The wide range of products, services and advanced medical options for American pets have pushed U.S. pet industry expenditures to almost $60 billion in 2014, nearly double the amount in 2004. With pet ownership tripling since the 1970s according to The Humane Society of the United States, it is no surprise that advanced pet products and services at high price points are making it very easy for many pet owners to overspend.
Prospective pet owners should begin their research with an idea of first-year costs. The ASPCA (www.aspca.org) publishes an annual estimate for a variety of pets. Purchase and adoption costs may vary based on breed, so read as much as you can about a specific pet choice. Fortunately, virtually every kind of pet has an online presence, including sites for adoption and rescue. It’s particularly important to research the pet’s behavioral, care and health history and it might also be worthwhile to find a veterinarian who can offer additional insight about home and medical care.
Keep in mind that average pet costs, not counting additional spending for toys, treats or non-routine veterinary care, can be daunting. For example, the ASPCA currently estimates that a large dog may cost roughly $1,800 in his or her first year and $780 a year afterward. That doesn’t include potential bills for major illness or accident care that might run into the thousands. If that dog lives eight to 10 years, that means spending a minimum of between $7,260 and $8,820 over a lifetime. Many experts and pet owners are still debating whether it makes sense to buy pet insurance, (www.practicalmoneyskills.com/petinsurance) and that is an option worth researching as well before a pet is purchased or adopted.
Many homeowners and renters should also check with their insurers for potential pet restrictions that may raise their premiums or risk voiding their coverage. In 2013, the Insurance Information Institute claimed that one-third of all homeowners insurance liability claims came from dog bites alone. Certain types of breeds may be considered higher-risk among some insurers, so before a pet purchase or adoption, prospective pet owners should check their home or rental policies to see how the animal will affect the pricing or availability of coverage.
Finally, certain kinds of pet ownership situations may call for estate planning. Some pet breeds, birds and tortoises among them, may live well in excess of 20 years. If a pet owner becomes disabled or dies, pets at any age may have an uncertain future if there’s no plan in place for guardianship, care and ongoing financial support. Estate planners have recognized pet trusts as a potential legal solution for this purpose. Pet owners of advanced age, with disabling illness or living alone might consider leaving such specific instructions for their animals in their will or advance directives.
Bottom line: With the potential costs of veterinary and other forms of care, pet ownership requires its own form of financial planning. It’s important to do thorough research on costs related to specific species and breeds before you buy or adopt.
By Jason Alderman
Crowdfunding and Taxes: What You Should Know
Crowdfunding – the online method of raising money from people around the world – is less than a decade old, allowing artists, activists and a growing number of entrepreneurs to connect with financial support far outside the conventional lending system.
Here’s how crowdfunding works. Through sites like Kickstarter, Indiegogo or RocketHub, campaigners seeking funding create a pitch that educates potential funders – or “backers,” as they’re often called – on their project. Campaigns share their funding goal and the various rewards backers will receive for taking part; backers respond with pledges made via credit card. If the campaign meets its goal and deadline, the crowdfunding site activates all the card-based pledges and the campaign is funded.
While estimates vary widely, research organization Massolution (www.crowdsourcing.org/editorial/2013cf-the-crowdfunding-industry-report/25107) put 2013 crowdfunding revenue at $5.1 billion globally. Many crowdfunding efforts today are artistic or cause-based, but that is expected to change in the near future.
Implementing the crowdfunding provisions of the 2012’s Jumpstart Our Business Startups (JOBS) Act, (https://www.sec.gov/spotlight/jobs-act.shtml) the U.S. Securities and Exchange Commission is putting final touches on regulations allowing ordinary investors to participate in equity crowdfunding for the first time. This would mean that business owners could raise money via the web in exchange for a piece of ownership in their company.
Because the process of crowdfunding is relatively easy compared to other means of obtaining capital, some might neglect to research potentially unfavorable tax, financial or legal implications from their campaign. Potential crowdfunding campaigners might want to make a preliminary call to a qualified tax adviser, financial planner or an attorney before launching any online fundraising effort. Individuals, companies and nonprofits have different tax issues and financial precedents that could blunt the effectiveness of any fundraising campaign.
Depending on the fundraising goal and how that money will be handled in the aftermath of the campaign, experts say some situations may call for a particular legal entity to be formed in advance. If appropriate, participants could seek guidance to form an actual business (https://www.sba.gov/writing-business-plan) or nonprofit (https://www.councilofnonprofits.org/tools-resources/business-planning-nonprofits) entity. Discussing structural issues in advance will not only help with tax issues, but also lead to better strategies for fundraising and long-term mission.
Beneficiaries should also consider any potential tax issues they could face as recipients of money from crowdfunding campaign. Depending on individual circumstances, crowdfunding a person’s unpaid medical bills may have significantly different tax ramifications than crowdfunding one’s independent film project. It is not enough to consider the tax issues for the campaign and campaigners. Beneficiaries require their own due diligence to make sure crowdfunding provides the most efficient solution for their needs.
Finally, backers should consider whether they have any tax questions about their support. To date, most crowdfunding supporters give such small amounts tax issues don’t really surface. That may change in the future as crowdfunding moves into the commercial arena. No matter what the circumstance, any potential crowdfunding backer who works with a qualified tax, financial or legal professional should consider asking if there are more efficient ways to offer support.
Bottom line: If you are interested in crowdfunding either as a campaigner, a beneficiary or a backer, research a potential project thoroughly and consider getting individualized tax, financial or legal advice before you proceed.
By Mike Whittlesey
RIDE LPC 7-23
At a meeting with RAGBRAI officials last week, much attention was focused on the services and activities that get riders to dismount from their bikes to spend their time and money in the communities along the route. There can be no denying that RAGBRAI offers tremendous economic opportunities for each city and town the riders visit. And with at least ten miles separating La Porte City from the nearest communities on the route, many cyclists will certainly be ready for a break when the trail leads them to La Porte City.
RAGBRAI’s last visit to La Porte City came in 1983. Since that time, the event has grown more than 30%, if measured solely by the number of riders participating. Fortunately, our community has some experience with planning a summer party, though six hours of RAGBRAI in LPC has the potential to make the two day Festival of Trails Celebration look almost pedestrian.
This year, there are nearly 50 cities and towns along the RAGBRAI route, including a half dozen or so even smaller, unincorporated communities. More than half of them are populated by fewer than 1,000 people. Preparing your community to greet and serve a group more than ten times its size is a monumental undertaking. Yet each year, hundreds of small towns throughout the state lobby to bring RAGBRAI to their communities. Why? In addition to the millions of dollars riders from each of the 50 states pour into local economies, RAGBRAI offers the cities and towns along the route an unprecedented opportunity for self-promotion.
On July 23rd, what will the visitors who pass through La Porte City remember most about our city? Do you have an idea for a theme and/or activities that will make the day especially memorable? If so, the city’s RAGBRAI Steering Committee wants to hear it. As our community begins the process of preparing for the event, the level of enthusiasm already being expressed by local citizens is an indication that riders who stop in La Porte City will leave better for the experience.
For the latest information about RAGBRAI’s visit to La Porte City, visit the La Porte City Facebook page devoted to RAGBRAI at facebook.com/ridelpc723 or www.theprogressreview.co/ragbrai. You can also use these sites to share your ideas for making La Porte City an unforgettable stop on the RAGBRAI tour. In anticipation of the events that will take place in La Porte City on July 23rd, many, many volunteers will also be needed in the days before, during and after RAGBRAI’s visit. Want to help? Logon today to complete a volunteer form or call City Hall at 342-3396 to express your desire to share your time and talents with what promises to be the biggest community event of the year. Volunteer forms are also available at City Hall (202 Main Street) and The Progress Review (213 Main Street).
Additional information about the ride, including RAGBRAI’s rules and regulations for vendors, will be published in The Progress Review and posted online as it becomes available.
By Jason Alderman
Debt and the Deceased: How Should Spouses and Heirs Proceed?
If your loved one died leaving significant debt behind, would you know what to do?
It’s a worrisome question for everyone. Young or old, based on particular debt circumstances or geographic location, death with debt can provide significant problems for surviving family members. Depending on state law and the specific credit relationships involved, they might be shocked to learn that they could be legally liable for a deceased relative’s outstanding debt – anything from unpaid mortgage balances and medical debt to unpaid credit card balances.
Spouses (www.practicalmoneyskills.com/unexpecteddeath) who may share any kind of debt jointly, particularly credit cards in dual name, could face greater challenges. It also may spell problems for co-signers of any kind of loan.
As with all financial planning, the best time to act is before an issue arises. Watching any family deal with extensive debt problems after a spouse or relative passes on illustrates the need for financial transparency while all parties are alive. No matter how difficult a family member’s credit circumstances are, spouses and adult children should face those circumstances while options are available to deal with any problems.
Spouses can begin by requesting and sharing their three free annual credit reports (https://www.annualcreditreport.com/index.action) from TransUnion, Experian and Equifax to confirm debt status. Once that information is out in the open, it’s time for the couple or family members to deal with specific circumstances related to that debt. For example, a young couple may have different debt issues than an older, retired couple, but both should consider how they would handle the debts of a spouse or legal partner after death. It can be helpful to meet with a qualified financial or estate expert about ways to extinguish or manage debt issues as part of current financial and estate planning.
It is particularly important for borrowers and their executors to know what categories of the deceased’s debts will likely need to be repaid after their death and other debts that might be canceled or forgiven. Generally, certain forms of unsecured debt held in the deceased’s name alone – like credit cards or federal student loans – may likely be discharged, but check with qualified experts first.
Any kind of debt held in joint name should be evaluated. Spouses, legal partners and family members who have co-signed loans or joint credit accounts of any kind risk payoff responsibility for that debt if their co-borrower dies. Experts can advise how to deal with individual situations.
Experts also may suggest that co-borrowers without credit in their own names apply for a credit card in separate names while their spouse is still alive. A separate credit account, if responsibly managed, can help the survivor qualify for additional credit in their name after a spouse or legal partner dies.
Keep in mind that all debt situations are unique to the individual. For example, a senior who qualifies for nursing home care under Medicaid (public aid) may have family members who will need to sell the senior’s home to address certain expenses after he or she has died. It is best to prepare relatives for that possibility in advance. Separately, a healthy senior relative may leave a home to heirs still under mortgage, or there could be a significant tax debt.
Airing and reviewing these issues in advance can either prepare relatives for certain realities or enable them to solve problems while the relative is still alive.
Bottom line: Dealing with a deceased relative’s debt can add stress at a particularly worrisome time for spouses and relatives. The best option is transparency while relatives are alive so debt issues can be addressed as part of overall estate planning.