It’s Time to Re-Visit Your Life Insurance Options

As the new year is quickly approaching, end of the year planning is ramping up. While many are getting their finances in order for 2021, I want to bring light to a topic that you may have given little attention to: life insurance.  If you haven’t already, now is the time to reach out to a trusted professional to find out what your options are when it comes to life insurance. 

Each year, you should get an annual health checkup with your doctor to make sure you’re in good shape. The same thinking applies to your life insurance policies. Generally it’s a good habit to review your policy every 12 months.  This can help you identify where you are today versus what you may need in the future. You can also ensure nothing has changed in the market to affect your coverage. You may find you have adequate coverage and don’t need to change any details, or that you need to make more adjustments than you initially anticipated. Your financial advisor or insurance provider can help you decide what type of strategy you should pursue when it comes to your life insurance policy. 

I recently revisited my life insurance policy and realized some things had changed since I had purchased it. Life insurance rates had gone down, there were better options, and my health had remained the same, if not better. By revisiting my policy, I was able to save money, as well as add on more life insurance. 

Keep in mind the importance of life insurance and remember to check in with your agent or other trusted professional at least once a year to see if you can benefit from a reassessment. In some instances, you may be able to pay less for a similar policy or obtain a policy with a higher value for the same cost or less based on the current rates. If you have any questions, please reach out to us at info@shermanwealth.com or sign up for a complimentary 30-minute consultation here.

Do you Need Financial Therapy to Deal with Money Stress and Budget Fights with a Spouse?

Do you fight about money with your spouse or significant other? Do you have trouble following a budget – assuming you even have one? If so, you might want to consider seeking financial therapy, coaching, or a financial advisor.  

What is financial therapy?

Think of it like psychotherapy. But instead of improving your state of mind it seeks to improve the state of your money. In essence, it’s supposed to help you behave differently, and for the better, when it comes to how you handle your money.

Do you need coaching, not therapy?

Given the year we’ve had with the coronavirus pandemic, which has led to massive layoffs and economic turmoil, it’s not a surprise that money issues may have caused fights between you and your significant other. In some of these scenarios, financial coaching is the way to go. In times that are economically tough, it’s important to tighten up your budget and learn ways to strategically stabilize your financial life. 

Consider meeting with a financial advisor. Here at Sherman Wealth, we challenge our clients to think differently about their money and coach them towards positive financial outcomes. We help our clients avoid making decisions persuaded by behavioral and investment biases, such as selling and buying mutual funds and stocks at the wrong times. Financial coaching will help you learn bucket strategies for savings, the importance of budgeting and ways to strategically build your wealth. If your finances are having a negative impact on your health and relationships, it is key to seek help from a professional in the field. Talking with a financial advisor can help you work through some of those miscommunications and misconceptions towards a positive outcome. 

Where to find help

If you believe a financial coach is best for your situation, please reach out to us at info@shermanwealth.com or sign up for a free 30-minute consultation on our site. Our team is happy to help you get your finances on track and get you to a place where you are feeling positive about your financial life. 

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.

 

Top 5 Pieces of Financial Advice

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As we are all adjusting to the new norm that the coronavirus pandemic has created in our world, we are also learning pieces of advice that we could share from this experience. When going through an economic crisis, it’s important to keep some tips at top-of-mind to help you navigate the bumpy waters. In a CNBC Select Article, we found 5 great pieces of financial advice that we want to share with you to put in your financial repertoire.

First and foremost, try not to accumulate credit card debt. Racking up credit card debt can have very negative long term consequences, so it’s important that you pay the full balance on time. When you do not pay the full balance on time, your card will quickly accumulate interest, which often can get so high that it’s hard to pay off. 

According to recent Federal Reserve data released in September, the average interest rate for all credit card accounts is 14.87%. Among accounts assessed interest, or accounts with outstanding finance charges, the average interest rate rises to 16.88%. But for consumers with credit scores below 670, interest rates can near 30%, CNBC Select reports.

Next, make sure you don’t buy things you can’t afford. Although this one seems obvious, it’s much more common than you think. Avoid overspending and spending on things you can live without. Start putting that extra money into savings accounts where you can be accruing interest and earning money. 

Third, invest the year’s expenses or anything saved after you have the year’s expenses saved? Before the pandemic, many people were saying how you should have several months of rent and expenses in a savings account for a rainy day, but as we have seen the economic hardships the coronavirus has inflicted upon our society, we are suggesting to save about a year’s worth of expenses before investing it elsewhere. 

Fourth, start to think like a savvy businessman or woman. Learn to negotiate. Especially in the world we are living in today, make sure you are constantly looking for deals and inquiring about credit card versus cash options. Oftentimes, places will charge you less if you pay in cash. So, before swiping that card, make sure you think about all your options. 

Lastly, buy in bulk. With Amazon becoming increasingly popular and making it possible to get what you need in a matter of hours, take advantage of deals and places you can buy in bulk. If you can save a few dollars here and there, take advantage of it. It’s important to be a smart shopper, especially when buying something pricey, such as groceries for a large family. 

By implementing some of these basic money management tips into your daily routine, you will find yourself becoming a more savvy shopper and saving more money. It is especially important during an economic recession to take these concepts into consideration and make the most of your finances. If you have any questions on other ways you can maximize your financial portfolio and find places in your budget where you can save money, please reach out to us at info@shermanwealth.com or visit our site at www.shermanwealth.com. Check out our other blog posts for more financial advice and tips! 

 

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.

 

How Much Longer Until The US Economy Is Back To Normal? This New Index Shows We Have A Long Way To Go

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As we approach the six month mark from when COVID-19 turned our world upside down, we are beginning to adjust our lives to this new “normal”. As we continue to adapt to this different way of life, some things are seeming back to the way they were before, but much remains new and strange. We are going about our days wearing masks and social distancing, watching our favorite sports teams play in “bubbles”, empty stadiums and arenas, and spending our work day in sweats and from the comfort of our homes. 

As we begin to normalize some of these news ways of living, it raises the question of how far we really are from our old way of life? How much progress are we making towards this new “normal” that will be our future? As of right now, we’re seeing what’s called a “K” shape recovery, which is that the stock market is recovered, but the economy and mainstreet remains suffering. People are wondering if there will be a double dip recession potentially in the fall and winter months if the virus comes back. 

We’ve been thinking about how to tackle these difficult and unknown questions and found an interesting article by CNN Business and Moody’s Analytics, which raises some of these questions as they relate to the economy.

According to their analytics team, the U.S. economy remains far from normal. Based on the back-to-normal Index that they constructed, which takes into account 37 indicators, including traditional government stats and metrics from a host of private firms to capture economic trends in real time, the U.S. economy was operating at only 78% of normal as of August 19th. They are using the economic data from prior to when the pandemic struck in early March as a baseline as “normal”. They are saying that the “economic activity nationwide is down by almost one-fourth from its pre-pandemic level-far from normal”. 

Even though that data is not so promising, it’s important to note that it is substantially better than the darkest days of the pandemic in mid-April, when we were unsure of how dangerous this virus could be. As business re-opened between mid-April and mid-June, according to their back-to-normal index, the economy opened too quickly, with many surges in coronavirus cases throughout the summer leading to states halting their reopening plans. The back-to-normal index also calculated that states who locked down harder early on are now enjoying lower infection rates and stronger economies and “states that were quicker to end shelter-in-place rules and to reopen in the spring have paid an economic price.”

While our country is recovering slowly but surely from this deadly pandemic that has swept our world, we still have ways to go to reach our pre-pandemic “normal”. While the economy still needs time to recover, it’s the best time to think about your finances and how to manage your money to make sure you come out of these unprecedented times strong. Find out how much risk you are taking on, what investments you have and where you want to be given the circumstances and with the all time highs in the markets. If you have any questions about your portfolio or ways you can manage your money during these rocky times, please reach out to us and we’d be happy to help. 

What’s Ahead For Your Taxes If Biden Takes The Presidency

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With the election around the corner and recent news of Joe Biden’s running mate, Kamala Harris, we wanted to take a look at his proposed tax plan and what impact it may have on the finances and current tax plans of Americans.

As Biden accepts his party’s nomination for president this week at the Democratic National Convention, high-income earners are beginning to wonder if it’s time to revisit their tax plans. Indeed, taxpayers with taxable income over $400,000 could see their individual income taxes tick up under a Biden presidency. The former vice president has also called for raising taxes on wealth transfer.

Below we will outline Biden’s proposed tax plan, which CNBC has sliced into two categories, income taxes and estate planning. 

Income Tax 

On the income tax side, Biden calls for raising the top individual income tax rate to 39.6% from 37%, and applying it to taxpayers with taxable income over $400,000, according to an analysis from the Tax Policy Center.

He’s also talking about an increase to payroll taxes. Biden would apply the 12.4% portion of the Social Security tax — which is normally shared by both the employee and employer — to earnings over $400,000, the Tax Policy Center found. Currently, the Social Security tax is subject to a wage cap of $137,700 and is adjusted annually.

Finally, Biden would also boost rates on long-term capital gains and qualified dividends to 39.6% — the same top rate as ordinary income — for those with income over $1 million, according to theTax Foundation.  The long-term capital gains tax rate in 2020 is 20% for single households with more than $441,451 in taxable income ($496,601 for married-filing-jointly).

Estate Planning 

Last month, the Democratic presidential contender collaborated with Sen. Bernie Sanders, I-Vt., and the two formed six task forces to release a 110-page policy document. The document gives some insight on what we might expect from a Biden administration. “Estate taxes should also be raised back to the historical norm,” the task force wrote in the policy plan.         

Indeed, the Tax Cuts and Jobs Act roughly doubled the amount that you can transfer to other people — either at death or as a gift during life — without facing the 40% estate and gift tax. The gift-and-estate tax exemption is $11.58 million per individual in 2020.

Biden has set his sights on the “step-up in basis,” a provision in the tax code that allows an individual to hold onto an asset for years, watch it appreciate and then bequeath it to an heir at death. The owner’s basis — the original investment in the asset — steps up to market value at death, which means the heir is subject to little to no capital gains taxes if he sells it. Biden proposes taxing the unrealized capital gains in the asset at death, which essentially does away with the step-up. Wealthy households are likely to use gifting strategies to head off this change, said Bertles of Tiedemann Advisors. “This can be as simple as giving assets to a trust or outright to kids or grandkids while using the exemption,” he said.

Make sure to take a look at Biden’s proposal and think about how that may impact your situation. In just a few short months, this plan could be put into effect, so start thinking about any changes you could make to your tax plan and talk to an advisor for some guidance. As always, we are here to help if you have any questions regarding what these changes could mean for you. 

 

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!