How Much Retirement Savings Is Enough? Why Couples May Disagree

As couples combine their finances and start to think about savings, it’s common to go back and forth when discussing retirement and long term goals. While one party may be worried that their expenses will be larger than they think, the other may have a different perspective. The most important piece to know is that it’s okay. It’s normal to have a different perspective on your finances and financial future than others, even your spouse. Nobody has the exact same financial situation, so it’s important to figure out what’s best for you and your family. 

The first step is communication. When discussing your finances, it’s important to communicate and feel open about discussing an often uncomfortable topic such as money. To establish short-term and long-term goals that are successful and reasonable, both you and your significant other must feel comfortable to discuss what they believe is fair. 

The Wall Street Journal highlighted an issue that can get overlooked in retirement planning: the financial burdens that women, in particular, face late in life.

Consider: A survey last year by the National Council on Aging and Ipsos, a polling and data firm, found that fully half (51%) of women age 60 and older are worried about outliving their savings. In the same survey, almost six in 10 women (59%) said they are worried about losing their independence.

Why these fears? The answers, in large part, are tied to longevity and health care.

Women, of course, typically live longer than men—about five years, on average—and are more likely to live their final years alone. In 2019, almost half (44%) of women age 75 and older in the U.S. lived alone, according to the Administration on Aging. Living longer and living alone typically give rise to more health problems. And more health problems equate to more medical bills and, potentially, the need for long-term care. In short, women can face expenses late in retirement that are larger and more painful than many couples might anticipate.

In a 2017 report, HealthView Services Inc., a provider of software for retirement health-care costs in Danvers, Mass., calculated that a healthy 65-year-old woman retiring in that year and living to age 89 could expect to pay $306,426 for health care, including premiums for Medicare Parts B and D, a supplemental insurance policy, and all out-of-pocket costs, as well as dental and vision care. A man at the same starting age and living to 87 could expect to pay $260,422. (And those projections don’t include the potential cost of long-term care.)

The good news: There are strategies and tools that can help couples prepare for these outcomes, such as long-term-care insurance, life insurance, deferred annuities and reverse mortgages.

Several calculators can provide ballpark figures about medical expenses in retirement, including those from Fidelity Investments, Optum Bank and ICMA-RC, a Washington-based nonprofit that provides retirement plans and services. In addition, MoneyHabitudes.com has activities designed to get people comfortable talking about their finances.

As you can see from the survey data reference above, both men and women often have different expectations on how much money they need for their future, which is normal. Again, make sure to communicate and research with your partner to insure both individuals are comfortable with their finances and savings. Of course, a good financial adviser also can make a difference. But the most important step is to talk about retirement and how your finances might play out before you get there. If you have any questions, or want to discuss retirement with us, please schedule a complimentary 30-minute consultation.

 

Financial Advice For Parents

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Raising a child in today’s world can cost hundreds of thousands of dollars. As a parent of four children ranging from ages 5 to 16, I can attest to just how expensive kids can be. Besides just the essentials like food and clothes, there are club teams, tutors, dance lessons and so much more. With each additional family member comes new financial considerations and expenses. The importance of planning for these costs before they arise is a key reason why many financial advisors are targeting young families and helping them successfully navigate how to cover their children’s expenses without compromising their own financial security. Here are a few top takeaways from some of these advisors:

SAVING FOR COLLEGE

With a high school junior in our house, it won’t be long before we are paying that dreaded college tuition bill. And, due to the ballooning costs of higher education, this bill is not likely to be a small one! If possible, new parents should try to start saving as soon as they can for their child’s college tuition.The earlier you start saving, the better prepared you’ll be. If you save $500 a month at birth, you should have around $190,000 saved by the time that child reaches 18 (assuming an annual return of 6%). However, if you don’t start until your son or daughter is 10, you’ll only have around $60,000 by the time they graduate high school. Setting up a state-sponsored 529 college savings plan, allows parents to invest money and then withdraw it tax-free, so long as the funds are used for certain education expenses. However, as you prepare for your children’s future, make sure that you remain focused on your retirement saving as well. There are lots of ways to pay for college, but you can only use the resources you’ve accumulated for your own retirement.   

CHILDCARE AND HEALTH CARE

When our first child was born, my husband and I were both working, and trying to find affordable childcare was not easy. Childcare is one of the biggest expenses new parents will face, especially if both parents work. In some cases, one parent will decide to leave their job and take care of the child themselves, especially if the cost of childcare is more than one parent is making. This is exactly what happened when our second child was born, since it was no longer cost effective to pay for childcare for two children with my salary.   

Meanwhile, childbirth and adoption count as qualifying events that allow parents to make changes to their employee benefits outside of the open enrollment period at work. For example, new parents can expect to see their medical expenses rise and those who have access to a flexible savings account and health savings account at work should use them since the money put into an FSA or HSA avoids federal taxation. In some cases, employers offer a Dependent Care FSA, which can be used for costs picked up from a nanny, babysitter or childcare center.

When it comes to health insurance, if both parents work, you should examine which plan will cost less to add the child to. Most doctor visits in the first couple of years are considered wellness visits, which are typically free or very low-cost in most health-care plans today. But, you should look into which plan is most cost-effective in the event of a trip to the emergency room or having to see a specialist – even with good insurance, the price tag of a broken bone is a lot more than you might think!

LIFE INSURANCE

Even though it’s not something most people like to think about, preparing for death is of utmost importance when becoming a parent. Your financial advisor should be able to run various calculations to figure out the amount of protection you would need. Many families make the mistake of only getting life insurance for the main earner, experts say, but both parents should be covered. Many people think that since stay-at-home parent isn’t actually earning anything, they don’t need insurance. However, when it comes to life insurance, you need to evaluate what it would cost to have someone else take care of your children if something were to happen to that parent.  

It is also extremely important to put together estate planning documents, including a will and health-care directives, as well as discussing appointing a guardian in the event of an unexpected life event. When we found out we were expecting our first child, it forced us to have some difficult conversations about who we would want to take of our child and how our assets would be distributed if something happened to us. It’s also important to revisit those questions each time you add another child to your family or if there is another major change to your assets. The guardians you might have written in your will when you were 25 might not be the same guardians you would choose when you are 45. None of these decisions are easy ones, but they are vital to preparing for your life as a parent.

EMERGENCY SAVINGS

With all the additional expenses new parents can face, from diapers to a larger home and mortgage, it’s more important than ever to have a safety net for those unexpected costs. Having children is a good reason to have a bigger emergency fund, simply because there are now more people who are dependent on you financially. Aside from the random home and car repairs that always seem to pop up when you least expect them, now add braces, sports equipment and teenage social lives to the mix. Having some money from each paycheck deposited directly into an account that you don’t touch is an easy way to make sure you are creating an ample emergency fund should you need it.  

There are so many wonderful aspects of being a parent, but it is definitely a costly undertaking. Seeking some financial guidance before you become a parent is always a good idea, but it’s never too late to start planning for your future with a family. If you have any questions about saving for college, choosing the right health plan, putting together your estate documents or anything else related to your financial goals or plans, please contact us.  We offer a free 30-minute introductory consultation and would love to hear from you!  Check out our other blogs for more financial advice and tips.

 

How to Maximize Tax Savings From Workplace Benefits

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When preparing your finances for 2021, make sure to review your workplace benefits for next year before the open enrollment period comes to a close. Your household finances for next year could depend on it. An interesting CNBC article discussed the benefits you can unravel within your workplace health-care and ways to maximize it. 

After one of the most difficult and financially stressful years for many Americans, digging back into the details of workplace benefits like health savings accounts, or HSAs, and flexible spending accounts (FSAs) is probably the last thing you want to do.

Overcome that fatigue and get to it.

Every year, we take a brief look at these options and plans, but COVID-19 has greatly changed the optics of these plans. For some, the coronavirus pandemic had led to much higher medical expenses than expected this year. For others, it has prevented them from accessing health care they expected to use, due to community lockdowns and overburdened health-care facilities. 

Workplace health-care plans require a fresh look going forward, especially after COVID-19. Talk to your HR rep and discuss the details of options open to you. Below we will touch on a few potential options and benefits you should consider. 

The Tax Benefits of HSA’s

First part of your workplace benefits to analyze is HSAs. HSAs, available to savers with a high-deductible plan — that is, one with a deductible of at least $1,400 for self-only health coverage — have three key tax benefits.

First, they allow participants to contribute money to the account either pre-tax or on a tax-deductible basis.

Second, the investable funds accumulate free of taxes. Finally, you can withdraw the money tax-free if it’s used for eligible health-care expenses. You don’t need to spend the balance down each year, as unused funds in the account roll forward, regardless of how much you spend. Employers can also boost your savings with a matching contribution.

The Ins and Outs of Medical FSAs

Medical FSAs share some commonalities with HSAs.Both allow for pre-tax contributions. Balances can also be used on tax-free basis if it’s for qualified medical expenses. In 2020 and 2021, you can contribute up to $2,750 to a medical FSA.

You generally can’t contribute to both an HSA and a medical FSA at the same time.

The major difference between the two accounts is that FSAs have a  “use it or lose it” stipulation that requires participants either spend the money they save or forfeit the funds to their employer at year-end. Firms may choose to let employees roll over some of the money — that is, up to $550 for funds from the 2020 plan year — or they may give them a grace period up until March 15 of the following year to use the funding.

Dependent care FSAs

Another area to analyze within your workplace benefits are Dependent Care FSAs. Dependent care FSAs, which help employees offset dependent and childcare costs, have been dramatically affected by the pandemic and resulting community shutdowns. Generally, a worker can save up to $5,000 in one of these accounts on a pre-tax basis, but again, the funds must be used up by the end of the year or they’re forfeited.

Due to Covid-19, daycare centers in many parts of the country have been closed for much of the year. What’s more, many employees found themselves working from home and taking care of their children themselves, which means they could have hefty balances in these dependent care FSAs.

The IRS addressed this situation by allowing employers to give workers the option of changing the amount they’d normally defer in the middle of the year.

That option may not be available next year, so be thoughtful about the money you commit to these dependent care FSAs as you decide how to proceed in 2021.

Given the crazy year we’ve had, it’s important to take a deeper look at all your options when it comes to your workplace benefits. The coronavirus pandemic has shown us what unprecedented circumstances can cause and the importance of taking advantage of all the benefits that are available to you. If you have any questions, please reach out at info@shermanwealth.com and make sure to also take a look at other tips and advice written in our blogs.  

IRS Finalizes ABLE Account Regulations: Here’s What to Know

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The IRS recently published final regulations for Achieving a Better Life Experience, or ABLE, accounts for disabled Americans. ABLE accounts aim to help people with disabilities and their families save and pay for disability-related expenses. Even though the contributions aren’t deductible, distributions such as earnings are tax-free to the designated beneficiary if they’re used to pay for qualified disability expenses. These expenses can include housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology and personal support services, along with other disability-related expenses.

The regulations come in response to and finalize two previously issued proposed regulations from the IRS. The first proposed regulation was published in 2015 after enactment of the ABLE Act under the Obama administration. The second proposed regulation was published in 2019 in response to the Tax Cuts and Jobs Act, which made some major changes to ABLE. 

Eligible individuals can now put more money into their ABLE account and roll money from their qualified tuition programs (529 plans) into their ABLE accounts. In addition, some contributions made to ABLE accounts by low- and moderate-income workers can now qualify for the Saver’s Credit.

The new regulations also offer guidance on the gift and generation-skipping transfer tax consequences of contributions to an ABLE account, as well as on the federal income, gift, and estate tax consequences of distributions from, and changes in the designated beneficiary of, an ABLE account.

In addition, before Jan. 1, 2026, funds can be rolled over from a designated beneficiary’s section 529 plan to an ABLE account for the same beneficiary or a family member. The regulations provide that rollovers from 529 plans, along with any contributions made to the designated beneficiary’s ABLE account (other than certain permitted contributions of the designated beneficiary’s compensation) can’t exceed the annual ABLE contribution limit.

Lastly, the final regulations offer guidance on the record-keeping and reporting requirements of a qualified ABLE program. A qualified ABLE program must maintain records that enable the program to account to the Secretary with respect to all contributions, distributions, returns of excess contributions or additional accounts, income earned, and account balances for any designated beneficiary’s ABLE account. In addition, a qualified ABLE program must report to the Secretary the establishment of each ABLE account, including the name, address, and TIN of the designated beneficiary, information regarding the disability certification or other basis for eligibility of the designated beneficiary, and other relevant information regarding each account. 

For more information about ABLE accounts or if you have any questions regarding these regulatory changes, please contact us at info@shermanwealth.com or check out our other relevant blogs. 

Top 6 Tax Tips To Know

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2020 has certainly been an eventful year so far and one that will be remembered for decades to come. Despite the negative impacts of the coronavirus globally, in the world of tax and retirement planning, 2020 has brought opportunities that should be taken advantage of before year’s end. Here are some tax planning ideas to consider before 2020 comes to a close.  

1) ROTH CONVERSIONS

As 2020 winds down, this is the optimum time to project the tax cost of a Roth conversion because most people by this time will have a reliable estimate of their 2020 income and this year’s tax benefits may be the highest ever because of historically low tax rates and possibly lower income due to the pandemic.

Once funds are converted, today’s low tax rates are locked in, plus the funds in the Roth grow income tax free forever and Roth IRAs have no lifetime required minimum distributions (RMDs). Any IRA funds converted will lower these tax-deferred IRA balances and in turn lower the amount of future RMDs that could be exposed to higher taxes.

Some may think they will be in a lower tax bracket in retirement, but that doesn’t often happen, especially after a spouse dies and the surviving spouse sees their tax bills increase when they begin to file as single.

The bottom line here is that a Roth conversion removes the risk and uncertainty of what future higher tax rates can do to your retirement income. Though Roth conversions will still be available in the future, you should still consider doing them in 2020.

2) IRA DISTRIBUTIONS

In 2020, you aren’t even required to take money from your IRA distributions. The Coronavirus Aid, Relief, and Economic Security Act waived required minimum distributions for the year. But even though they aren’t required, you should look into making voluntary IRA distributions anyway because those taking money out of these tax-deferred vehicles in 2020 might be able to do so at lower tax rates.

Since the required minimum distributions are waived for 2020, this presents a one-time opportunity for those subject to the minimums to convert RMDs instead to Roth IRAs (something you can’t normally do). 

Even if you aren’t subject to required minimum distributions, it might pay for you to begin taking taxable distributions to get into the lower tax brackets and begin reducing the future IRA debt that’s building for Uncle Sam. The funds could be used either to convert to Roth IRAs or for gifting or estate planning. For example, the IRA funds withdrawn can be used to purchase permanent cash value life insurance, which after the SECURE Act will prove to be a better estate planning vehicle than inherited IRAs. Like Roth IRAs, life insurance will grow tax free and the eventual proceeds to beneficiaries will be tax free as well which is a good use of IRA funds now. IRA or plan withdrawals taken this year can also be used for gifting to family members.

3) QUALIFIED CHARITABLE DISTRIBUTIONS

Qualified charitable distributions are the most tax-efficient way to make charitable gifts because they reduce taxable IRA balances at no tax cost. The name refers to a direct transfer of IRA funds to a qualifying charity.

The only downside here is that the QCD is only available to IRA owners and beneficiaries age 70½ or older. The distribution is not available from company plans and not permitted to go to donor-advised funds or private foundations. Qualified charitable distributions are limited to $100,000 per year for each IRA owner, not per IRA account. 

Although the SECURE Act raised the required minimum distribution age to 72, the QCD age remains at 70½. This gap means the charitable distributions can begin before RMDs kick in. Even though RMDs were waived for 2020, you can still make these QCDs nonetheless since the charitable distribution still allows you to remove IRA funds at a zero tax cost. If you are giving to charity anyway, and qualify for QCDs, then this is the way you should be doing your giving.

With qualified charitable distributions,  you receive both the standard deduction and the tax benefit in the form of an exclusion from income. An exclusion is better than a tax deduction because it reduces your adjusted gross income, a key figure on the tax return. QCDs are the most tax-efficient way to reduce taxable IRA balances, because they reduce the balances to a zero tax cost.

In addition, there is a provision in the CARES Act that allows for a $300 additional charitable gifting exclusion from income for non-itemizers (for cash gifts).

4) GIFTING

With the exploding deficits and expanding national debt, there is a new urgency for clients to make gifts now, before year’s end, because it may not be an option much longer. Gifts are lifetime transfers as opposed to inheritances received after death.

The 2020 estate and gift tax exemption is $11,580,000 per person ($23,160,000 for a married couple). These figures are scheduled to go back to $5 million and $10 million, respectively, after 2025 (there will also be inflation increases). It pays to use them now or possibly lose them later. These limits apply to lifetime gifts as well as inheritances.

For those who will be subject to a federal estate tax, gifting is less expensive because gifts are tax-exclusive, as opposed to inheritances, which are tax-inclusive. If the funds are left in the estate, the full value of the transfer at death is subject to the estate tax, so the funds used to pay the estate tax are taxed themselves, whereas gift taxes on lifetime transfers are only based on the gift amount received.

There are three tiers of tax-exempt gifting:

  1. The first is $15,000 annual exclusion gifts. These gifts can be made to anyone each year and they do not reduce the gift/estate exemption. These annual exclusion gifts are always tax free—even if the exemption is used up.
  2. Unlimited gifts for direct payments for tuition and medical expenses. These gifts can be made for anyone, the amounts are unlimited, and they do not reduce the gift/estate exemption. These gifts are also always tax free—even if the exemption is used up.
  3. The $11,580,000 lifetime gift/estate exemption in 2020. The IRS has stated that there will be no clawback if these exemptions are used now, even if the exemption is later reduced, so you must use it or possibly lose it.

Gifts made now in 2020 lock in today’s gifting limits. There is no guarantee that these limits will hold up in the future.

5) UPDATING ESTATE PLANS AFTER THE SECURE ACT

The SECURE Act eliminated the stretch IRA for most non-spouse beneficiaries. This is effective beginning with deaths in 2020, so it is imperative to check your IRA and company plan beneficiary forms to reveal what may be the largest single asset in your estate plan.

Most non-spouse beneficiaries will be subject to the new 10-year payout rule, meaning that the entire inherited IRA will have to be withdrawn by the end of the 10th year after the IRA holder dies.

This includes most trusts named as IRA beneficiaries, and you might need to make changes; for example, most conduit trusts will not work as originally planned since the entire inherited IRA will be left unprotected in trust after the 10 years. Many of these trusts will have to be upgraded to discretionary trusts to maintain the trust protection beyond the 10 years. But even then, the inherited IRA funds will still be taxed when that decade has passed, and that tax will be at high trust tax rates for any funds remaining in the trust and not distributed to the trust beneficiaries.

One solution here is to convert these IRAs to Roths to eliminate the post-death trust tax exposure or withdraw IRA funds now and purchase life insurance, which is a better and more flexible asset to leave to a trust.

You should review any IRA estate plans, which begins with a beneficiary form review. Check to make sure that contingent beneficiaries are named and up to date. Make sure that the estate plans will still accomplish your goals after the changes brought about by the SECURE Act.

6) W-4 UPDATES AND WITHHOLDINGS CHECK

The federal income tax is a pay-as-you-go tax. Taxpayers pay the tax as they earn or receive income during the year. Taxpayers can avoid a surprise at tax time by checking their withholding amount. The IRS urges everyone to do a Paycheck Checkup in 2020, even if they did one in 2019. This includes anyone who receives a pension or annuity. 

The best way to make sure you are withholding the right amount is to use the Tax Withholding Estimator on IRS.gov. The Tax Withholding Estimator works for most employees by helping them determine whether they need to give their employer a new Form W-4. They can use their results from the estimator to help fill out the form and adjust their income tax withholding. If they receive pension income, they can use the results from the estimator to complete a Form W-4P, Withholding Certificate for Pension and Annuity Payments PDF. To change their tax withholding, employees can use the results from the Tax Withholding Estimator to determine if they should complete a new Form W-4 and submit to their employer. Don’t file with the IRS.

These 2020 year-end retirement, tax and estate planning moves will enhance your retirement savings that will soon be exposed to potential tax increases after 2020. Given the current state of our economy, it is best for you to consider these options now, since it’s likely many of these things will be changing in the near future. These tips have been prepared for informational purposes only and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Check out our website for more information! 

What to Do If You Don’t Have a 401(k)

Piggybank on wooden table with stacks of coins beside it. A hand putting a coin into the piggy bank.

As the coronavirus sweeps the world and people take a step back to look at their finances for the long term, we are seeing that about half of workers don’t have access to a retirement plan at work.  That means that even as 50% of workers can take advantage of automatic payroll deductions and contribute $19,500 or more to a tax-advantaged company retirement plan, about the same percentage is on the outside looking in.

Some of these people may work for companies that offer plans, but are not eligible to contribute because they either don’t meet the criteria or they are part-time employees. Some may be self-employed, which leads to other retirement savings options and others may simply work for a firm that doesn’t offer a plan at all.

So, as people start putting a tighter rein on their finances during this economic recession, it’s important to discuss retirement saving options for those who do not have access to one through their company.  Below we will share several options for people in this situation according to an article by MorningStar.

1) Invest in an IRA.

A good first stop for any worker who has earned income is to simply fund an IRA to the maximum–$6,000 for investors under age 50 and $7,000 for those over 50. Such accounts are very easy to set up, and the money can be invested in a huge array of options. Contributing to an IRA can provide a terrific building block for retirement security. A person assiduously investing $6,000 a year in an IRA for 40 years who enjoyed 6% growth on her money would have a little over $920,000 at the end of the period.

2) Assess whether self-employment accounts are an option.

For people who are self-employed, there are a host of options for tax-advantaged retirement savings. Some of them are quite similar to what 401(k) investors have, except that there can be setup costs and oversight responsibilities. An investment in a conventional IRA, an individual 401(k), a SEP or SIMPLE IRA’s are all good investment ideas.

3) Assess whether an HSA is an option.

While by no means a first line of defense for people without a 401(k), a health savings account is a decent ancillary retirement account option for people covered by a high-deductible healthcare plan.

4) Invest in a tax-efficient way in a taxable brokerage account.

While it’s ideal to invest in vehicles that provide some type of a tax benefit, people without a company retirement plan can also invest tax-efficiently inside of a taxable account. The key is to select investments that incur few taxes on an ongoing basis.

5) Be part of the solution.

Finally, if you work for a small employer that lacks a company retirement plan, consider offering to assist your employer in figuring out how to get one off the ground. Setting up such a plan has gotten cheaper and less complicated in recent years, and your employer may welcome a financially savvy partner to help with some of the research and vetting.

As always, if you have any questions about your current 401(k) or need help investing money in order to supplement a lack of one, please reach out to us and we would be happy to discuss your future financial goals.  

The Biggest Money Mistakes People Make in a Recession

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During an economic recession, it’s easy to make mistakes when it comes to your finances and managing your money. Many people are facing decisions and situations that they have never had to deal with before. They need help navigating this new territory and recognizing their mistakes. We read a Wall Street Journal article discussing the biggest money mistakes people tend to make during an economic downturn and we want to bring light to a few of them and talk about ways to avoid them.

As you’ll see, the mistakes cover a wide array of practices and situations and not everyone has the luxury of making some of these mistakes. Hopefully, being aware of these errors will make you think as you find your path through the coming months. And ideally, avoiding any of these mistakes will make your economic troubles a little less painful and the eventual recovery a little more robust.

Refusing to Tap the Emergency Fund

Some people experiencing economic hardship choose to live uncomfortably rather than access their savings. This happens when their saver’s mentality—the same one that helped in building an emergency fund—makes the emergency fund seem sacred and unavailable for use. A better framework for thinking about the use of such funds is viewing it as a reward for disciplined saving in good times. Isn’t this why you had the emergency fund in the first place?

No Re-Entry Plan

Investors often sell out of equities during a downturn without a plan of when to buy back in. It’s impossible to tell when exactly the markets are going to recover—witness the rapid bull market since late March—but you need a plan. While everyone’s situation is different, a phased approach could be the way to go, slowly moving back into equities.

Ignoring Your Credit Score

One mistake we make during a downturn is not paying enough attention to our credit score. But this is what affects the interest rate we get on our mortgage and credit cards, as well as whether we’ll be able to get insurance or even rent an apartment. So it is important, even during difficult times, to try to pay bills on time, not max out on credit cards, not open several new credit accounts in a short period of time, and keep a good financial history as much as possible.

No Retirement Funding

During an economic downturn, people often get scared and halt contributions to their 401(k) and/or individual retirement accounts. It’s still important to maintain your pace on contributions and to not jump the gun on withdrawals. You should continue to look at the big picture and avoid taking a loan from your retirement. People often miss the opportunity of buying low and accumulating more shares – a recession is actually a great time to actively look for bargains in the market. Make sure to keep your risk capacity in sight and gauge your cash needs wisely in times like these.

Not Talking About Money

With the pandemic forcing millions of people world-wide into financial distress, a natural response may be to avoid conversations about money at all costs. However, our research suggests that discussing money with your partner in hard times can help your relationship and finances if you approach these discussions the right way.

As mentioned above, an economic recession is the perfect opportunity to take a step back and discuss and organize your finances. Saving for the future, talking to someone about your investments, and organizing your portfolio are all smart moves when setting yourself up for financial success and the ability to navigate an economic recession. If you have any questions or want to talk about your personal finances, please reach out to us at info@shermanwealth.com. To read some of our other blogs, check it out here! 

The Best Credit Cards For Grocery Shopping In 2020

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As the corona-virus pandemic has put a halt on restaurant dining, Americans have found themselves cooking at home more and in turn, spending more money on grocery shopping. When increasing your spend in a certain category, it’s important to think about how you can maximize these purchases and your budget by building rewards. You may want to consider a rewards credit card that can help you earn over $100 a year on your groceries. 

We read an interesting article from CNBC select that discussed the best credit cards to apply for if your grocery spending has increased or is a large chunk of your monthly budget. The average American spends about $5,174 a year, or roughly $431 a month, on groceries, according to a sample budget based on the latest spending data available from the location intelligence firm Esri. That’s more than Americans spend on dining out, which comes to about $3,675 annually. 

The best grocery rewards cards offer up to 6% cash back at supermarkets. While they usually exclude wholesale clubs such as Costco and BJ’s, and big box stores like Target and Walmart, you can still take advantage of these rates at Whole Foods, Krogers and other big name grocers.

CNBC Select analyzed 26 popular rewards cards using an average American’s annual budget and digging into each card’s perks and drawbacks to find the best grocery store rewards cards based on your spending habits. 

Here are CNBC Select’s top picks for credit cards offering supermarket rewards

If you find that your grocery bill takes up a large portion of your monthly budget, take a look at these credit cards, to see if you could capitalize on your spending. Additionally, no matter where you spend the majority of your money, whether it’s travel or dining, make sure you look into credit cards that are the best fit for you. If you have any questions on your portfolio or credit cards to maximize your spending, please reach out to us at info@shermanwealth.com. 

Here’s How The Pandemic Has Upended The Financial Lives Of Average Americans: CNBC + Acorns Survey

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From jobs to savings to retirement plans, the coronavirus pandemic has upended many Americans’ financial lives. While millions are still unemployed, many have seen their emergency savings run dry and others are figuring out ways to cope with the financial burden of the economic recession. However, not all aspects of the financial impact of the pandemic are necessarily negative.

According to CNBC and an Acorns Survey, many are saving more and spending less. In fact, 46% of the respondents said they are “more of a saver now” compared to before the pandemic. Additionally, 60% consider themselves “savers,” up from 54% last year. The poll, conducted by SurveyMonkey Aug. 13-20, surveyed 5,401 U.S. adults and has a margin of error of +/-2%.

 

About half, or 49%, said their monthly spending has decreased, compared to 33% last year. Some of those savings can be attributed to the fact that people stayed home and didn’t do things like dining out, said personal finance expert Jean Chatzky, co-founder of HerMoney.

While many have been struggling to get by these last few months, many have learned how to manage their money better despite the economic recession. People have learned how to go to the grocery store less and have utilized meal planning and money saving-skills, such as coupon-clipping and deal searching. They also have begun to really take a look at their monthly or annual subscriptions, removing themselves from services they don’t really use or need. By prioritizing wants versus needs and taking a look at how much money is going out each month, people have picked up better spending habits that will help them navigate these bumpy waters ahead. 

With extra cash and savings in the bank, it’s important to talk with an advisor about options and investing that makes the most sense for you, whether it be saving for retirement, college tuition, or something else. If you have any questions for us, please reach out at info@shermanwealth.com and we would be happy to set up a time to discuss a financial plan for your future.

 

3 In 5 Parents Say Remote Learning Will Negatively Impact Their Finances

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It’s hard to believe, but summer is almost over and another new school year is only a few weeks away. However, due to the ongoing coronavirus pandemic, distance and hybrid learning will become the new normal this fall. Those with school age children will need to adjust in order to make this situation as successful as possible and many parents are in the process of converting their homes into a virtual learning space for their children.

This change in schooling is not only disrupting the educational system as we’ve known it, but a new survey conducted by Bankrate revealed that “61% of parents with school-aged children are forced to re-evaluate their finances and careers as they prepare for a unique school situation”. Parents also revealed that “they are not feeling particularly optimistic about the educational side of remote learning” with 42% of respondents anticipating negative impacts on their child’s education. 

One of the huge tangible expenses that goes along with remote virtual learning is technology. In the past, most pre-school children and even middle/high-school children did not have access to their own laptops, as it was not necessary for their educational success. However, remote learning is forcing all students, regardless of age or grade, to have undivided access to their own digital device to access their teachers, homework, and resources. And those families who had shared technological devices amongst a few family members are now forced to purchase a device for each person, which is a huge added expense. However, before purchasing your child a new computer, please check with your school to find out whether they are providing laptops for each student for the upcoming year since many districts will be offering them.

Another factor that will negatively impact parents as children begin remote schooling is time. In the pre-coronavirus world, parents had the ability to drop their children in school, enroll them in after-school activities, while also fully engaging in their personal careers. With students learning from home, needing supervision and assistance in their learning, parents are worried it will negatively impact their careers and work/life balance. Some parents will find they have to cut work hours to help their children learn or incur additional expenses such as tutors/babysitters so that they can continue to work. And on top of that, some parents may need to quit their jobs completely. 

While this transition will be difficult for many, it is crucial to remember the importance of utilizing all your resources, which we have spoken about in previous blogs. Reach out to family members for help, scan the web for good deals before making a big purchase and remember that we are all in this together. Lastly, as we adjust to our new complicated normal, remember to keep track of your finances and manage your money. You may find it useful to create a new budget for the upcoming school year since it is likely to look different than it did in the past. As always, if you have any questions about your portfolio or finances, please reach out to us and we are happy to help!