How To Be Proactive About Protecting Your Savings Account

Banking 2023: How To Be Proactive About Protecting Your Savings Account

Heather Taylor  Wed, March 29, 2023

With recent bank failures headlining the news cycle, many customers might be worried about their funds.  The good news is there is a lot of protection provided to banking customers, no matter the dollar amount of your financial assets. Here are a few proactive steps you can take to protect your savings account and insure your deposits.

Review FDIC Coverage and Resources

You might have noticed the fine print for your bank states it is FDIC insured. What does this mean?

Glen Goland, CFP and senior wealth strategist at Arnerich Massena, said FDIC (Federal Deposit Insurance Corporation) coverage has ensured depositors for 90 years that their funds would be available. This is regardless of what is happening in the financial world or to one’s bank.

FDIC coverage applies to up to $250,000 in deposits. This is per depositor, per insured bank. Different coverage amounts are afforded to trusts and other legal entities.

For those who want to insure their deposits, Goland recommends visiting FDIC: Resources. The resources page provides a listing of ownership categories and applicable coverage amounts. Goland said this should give banking customers a sense of how much coverage they have and how much may be outside this coverage and at risk.

Open Accounts With More Institutions or Put Assets in an Investment Portfolio

There are a few moves banking customers can make if they are holding more than $250,000 in bank deposits.

Goland recommends opening accounts with multiple institutions. This can help keep deposits under the $250,000 threshold. Banking customers also can look into using a Cash Management Account (CMA), which functions like a traditional bank account but spreads your deposits across several partner banks for additional protection.

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/banking-2023-proactive-protecting-savings-190439034.html

I Love How Everyone Pretends The Bank Crisis Is Over...

I Love How Everyone Pretends The Bank Crisis Is Over...

March 29, 2023  Simon Black  Sovereign Man

Practically on cue, politicians began their public hearings yesterday about the recent banking crisis.

This was so predictable; every time there’s a major crisis, Congressmen book a committee meeting to express their shock and outrage. They pass new laws to prevent a future crisis. Then their new laws fail to work properly, so they hold another public hearing to express more outrage.

This is the cycle of political problem solving, and yesterday was no exception.

The Senate Banking Committee summoned key officials from the Federal Reserve, FDIC, and US Treasury Department. And the tone was quite angry.

Senators were flummoxed that their thousands of pages of banking legislation had once again failed to provide adequate protection to the US financial system. And they were looking for someone to blame.

This, too, quite predictably, fell along partisan lines. The people on the left somehow found reason to blame everything on Orange Man, while describing bank regulators as “gutsy” and “courageous”. It was bewildering.

Most absurd was how the officials in the hot seat (who, again, represent the primary bank supervisors in the United States) managed to avoid any culpability whatsoever.

The Fed’s Vice-Chairman for Banking Supervision admitted that his agency’s supervisors had rated SVB as a poorly managed bank. And the Fed was further aware of several material weaknesses in SVB’s risk compliance.

They acknowledged that they had advanced knowledge of the banks’ problems.

They acknowledged they should have done something about it. They acknowledged they had the tools and authority to do something about it.

Yet they did absolutely nothing… and somehow ended up being praised as gutsy and courageous.

It’s natural to blame the bank executives for making such idiotic decisions with their customers’ money. But culpability is not mutually exclusive. It’s not either/or. And the regulators had a major role to play in this crisis.

Not only did they escape culpability at yesterday’s hearing, but the regulators even managed to pat themselves on the back for their swift and decisive response to the crisis.

After SVB’s failure a few weeks ago, government officials invoked what’s known as the “systemic risk exception”. This exception essentially gives them sweeping power to deal with a crisis by whatever means necessary.

And all the key officials unanimously agreed that SVB, First Republic Bank, etc. posed systemic risk, and that justifies the massive bailout response.

Isn’t it interesting, though, that “systemic risk” only seems to apply to banks?

You never heard these officials say that baby formula shortages pose systemic risk. Or that inflation itself is a systemic risk. Or that dwindling US oil production is a system risk.

Yet whenever the banks and their somnambulant regulators fail, they call it “systemic risk” and pull out all the stops to save them.

Energy companies, on the other hand, which produce the very thing that all economic activity requires, are tossed out in the cold and demonized at every available opportunity by the President of the United States. It’s bizarre logic.

The biggest falsehood of yesterday’s hearing, however, was the continued insistence by all that “our banking system is strong and resilient”. Coincidentally they presented zero evidence to support that assertion.

In fact most evidence would support the opposite conclusion-- that there are still a number of major problems in the banking system.

The FDIC itself reported that banks across the US have a total of $620 billion in unrealized losses; this is due primarily to the steep decline in bond prices, which are a result of the Federal Reserve’s aggressive interest rate increases.

And bear in mind that the FDIC’s estimate was before the most recent rate hikes. So the updated estimate on unrealized losses right now is most likely higher than $620 billion.

But risks in the banking system go way beyond these unrealized bond losses.

Commercial real estate is an obvious one; Fed data show that banks across the US have loaned out nearly $3 trillion of their customers’ money against commercial property, including office space. Other estimates go up to $5.5 trillion including commercial mortgage-backed securities.

But thanks to new, pandemic-related remote work policies, companies across the US are using less space.

Moody’s Analytics recently reported office utilization rates at roughly 50% of pre-pandemic levels based on security-badge swipe data at office buildings.

Workers simply aren’t showing up to the office like in the past, and office occupancy rates have been steadily deteriorating as a result.

Office vacancy now stands at 12.5% nationwide according to the National Association of Realtors. That’s about a third worse than in 2019.

To make matters worse, the economy is slowing, which will likely trigger additional cuts in office space.

All of this is bad news for banks. They have trillions of dollars of exposure to a rapidly declining commercial real estate market, so even a small increase in loan defaults could spark another panic.

The Wall Street Journal recently reported that estimates of total unrealized bank losses right now, including commercial loans, is a whopping $1.7 TRILLION. That’s the vast majority of all bank capital in the United States… so this is still an enormous problem.

But everyone keeps playing the same chorus again and again: “the banking system is strong, the banking system is strong.”

Even sophisticated Wall Street investors have joined the sing-along, given that bank stocks are once again on the rise.

As of this morning, shares of financially uncertain banks with enormous unrealized losses are now trading at fairly rich, double-digit valuations as measured by Price/Earnings and Price/Free Cash Flow metrics.

(Meanwhile, valuations of high quality, well-managed real asset businesses in the energy, mining, agriculture, and productive technology sectors are tiny by comparison.)

Everyone seems happy to close their eyes and pretend that the crisis is over despite so much evidence to the contrary.

To your freedom, Simon Black, Founder  Sovereign Man

https://www.sovereignman.com/trends/i-love-how-everyone-pretends-the-bank-crisis-is-over-146615/

How The Glorification Of Struggle Is Both A Symptom And Cause Of Financial Trauma

How The Glorification Of Struggle Is Both A Symptom And Cause Of Financial Trauma

Addressing the "Got It Out The Mud" Mindset  Rahkim Sabree  Mar 17

Recently I was asked for feedback on the ‘got it out the mud’ mindset and how that ties into financial trauma.

See nepotism: - nep·o·tism - the practice among those with power or influence of favoring relatives, friends, or associates, especially by giving them jobs.

Somehow the devaluing of credibility, experience, and expertise of others is easier when we know that they had help. We hear the stories of those who received a loan, an inheritance, or were put in a position to be successful via education or some role at a company.

My story is not unique. The odds in so many instances have been statistically against me.

I’m the product of two teenage parents

I grew up experiencing poverty

My parents didn’t have a college education

I was less than one degree of separation from gang violence

So when *I* discuss poverty and overcoming, I’m telling the story of my life not to glorify it, but to demonstrate what’s possible for someone to beat those odds. But my success is also tied into a lot of sacrifice, pain, sometimes resentment, and a pressure to perform for myself, my family, and my greater community at large. It’s also the result of an intangible or spiritual form of nepotism where relatives, friends, associates, teachers, coaches, etc. have breathed life into me, my potential, and my dreams.

Although I may joke with a line from the famous Drake song “I started from the bottom now I’m here,” there never truly was a bottom for me to start from as I stand on the shoulders of those who sacrificed and came before me. I don’t believe anyone is truly self made, some just apply what is it they were given in different ways.

Status Does Not Equal Wealth

When we look at this fascination with achieving status we tend to automatically assume that someone is doing well financially. They make an effort to be seen—in designer, in the foreign cars, on vacation to exotic locations, drinking expensive alcohol, etc. The portrayal of success via these elaborate demonstrations become exponentially more impressive when tied into this narrative of having started from nothing or ‘getting it out of the mud’, which can entice onlookers to wonder what did they do to get all of that?

It feeds a fantasy lifestyle that also makes those onlookers prime targets for being taken advantage of through the lifestyle marketing into doing whatever needs to be done to make that fantasy a reality.

Behind the scenes however, that status may not be tied into real wealth—that is, wealth already present. The wealth comes from those who will willingly hand over their own money to fund these lavish lifestyles in an attempt to emulate or achieve them for themselves.

The Nepotism Baby

Curiously, those who didn’t necessarily start from the bottom are met with a sort of disdain. They are deemed “unrelatable” and terms like “trust fund baby” or “born with a silver spoon” are used as insults rather than celebratory feats.

To continue reading, please go to the original article here:

https://rahkimsabree.substack.com/p/how-the-glorification-of-struggle?fbclid=IwAR1GnAyq7JUnwKtzFDc11R9S2Xh-Xcc-6kltyW-zKn57YESPmOtjfVlxSy4

New IRS Report Provides Fascinating Glimpse Into Your “Fair Share”

New IRS Report Provides Fascinating Glimpse Into Your “Fair Share”

March 28, 2023  Simon Black, Founder  Sovereign Man

Every year the IRS publishes a detailed report on the taxes it collects. And the statistics are REALLY interesting.  A few weeks ago the agency released its most recent report. So this is the most objective, up-to-date information that exists about taxes in America..

This is important, because, these days, it’s common to hear progressive politicians and woke mobsters calling for higher income earners and wealthier Americans to pay their “fair share” of taxes. But this report, directly from the US agency whose job it is to tax Americans, shows the truth:

The top 1% of US taxpayers paid 48% of total US income taxes.

And that’s just at the federal level, not even counting how much of the the local and state taxes the wealthy paid.

Further, the top 10% paid nearly 72% of total income taxes.

Meanwhile, the bottom 40% of US income tax filers paid no net income tax at all. And the next group, those making between $30-$50,000 per year, paid an effective rate of just 1.9%.

(Again, this is not some wild conspiracy theory; these numbers are directly from IRS data.)

But the fact that 10% of the taxpayers foot nearly three-fourths of the tax bill still isn’t enough for the progressive mob. They want even more.

The guy who shakes hands with thin air, for example, recently announced that he wants to introduce a new law that would create a minimum tax of 25% on the highest income earners.

But the government’s own statistics show that the highest income earners in America— those earning more than $10 million annually— paid an average tax rate of 25.5%. That’s higher than Mr. Biden’s 25% minimum.

So he is essentially proposing an unnecessary solution in search of a problem.

I bring this up because whenever you hear the leftist Bolsheviks in government and media talking about “fair share”, they always leave out what exactly the “fair share” is.

The top 1% already pay nearly half the taxes. Exactly how much more will be enough?

Should the top 1% pay 60% of all taxes? 80%? At what point will it be enough?

They never say. They’ll never commit to a number. They just keep expanding their scope.

Elizabeth Warren, for example, quite famously stopped talking about the “top 1%” and started whining about the “top 5%”. And then the “top 10%”.

She has already decided that the top 5% of wealthy households should not be eligible for student loan forgiveness or Medicare.

And when she talks about “accountable capitalism” on her website, Warren calls out the top 10% for having too much wealth, compared to the rest of households.

Soon enough it will be the “top 25%” who are the real problem...

Honestly this whole way of thinking reminds me of Anthony “the Science” Fauci’s pandemic logic on lockdowns and mask mandates.

You probably remember how reporters always asked “the Science” when life could go back to normal... and he always replied that it was a function of vaccine uptake, i.e. whenever enough Americans were vaccinated.

But then he kept moving the goal posts. 50%. 60%. 70%. It was never enough. And there was never a concrete answer.

This same logic applies to what the “experts” believe is the “fair share” of taxes which the top whatever percent should pay.

They’ll never actually say what the fair share is. But my guess is that they won’t stop until 100% of taxes are paid by the top 10% ... and the other 100% of taxes are paid by the other 90%.

To your freedom,   Simon Black, Founder  Sovereign Man

https://www.sovereignman.com/tax/new-irs-report-provides-fascinating-glimpse-into-your-fair-share-146597/

Nearly Half of Americans Haven’t Written a Check in the Past Year

Nearly Half of Americans Haven’t Written a Check in the Past Year — Why More Should Follow Their Lead

March 28, 2023  GoBankingRates

When was the last time you wrote a check?

In a new survey from GOBankingRates polling 1,000 Americans, 44.5% of respondents revealed they have not written a physical check in the past year. While this percentage may seem quite high, many are still using their checkbooks on an active basis. For instance, 15% said they write a few checks a month and 22% write a check once a month.

In an increasingly digital world where we rely on automatic payments, we may wonder if writing checks will become obsolete. For those who still need them, though, checks are a vital part of their financial lives.

Still, writing checks comes with a number of issues that suggest doing away with the process could be a good thing. Consider some of these risks associated with check-writing — courtesy of Todd Christensen, education manager at Debt Reduction Services.

Checks Can Reveal Too Much Information

For the most part, people who write a physical check and give it to a recipient — like a contractor or their landlord — are trusting this individual with the payment amount and personal information printed on the check. What many often do not consider is how much confidential information is also on there.

“Every check they’ve ever written has their checking account number and their financial institution’s routing number out in the open for anyone to see,” said Christensen.

In the wrong hands, or in situations where the check is not cashed quickly enough, this could lead to identity theft.

Checks Can Get Lost

To continue reading, please go to the original article here:

https://www.gobankingrates.com/banking/checking-account/nearly-half-of-americans-havent-written-check-in-past-year-risks/?utm_term=related_link_3&utm_campaign=1216886&utm_source=yahoo.com&utm_content=4&utm_medium=rss

5 Reasons You Still Need Checks

5 Reasons You Still Need Checks

Heather Taylor   Mon, March 27, 2023

Is there still room for paper checks in a world where financial transactions are increasingly digital in nature? Survey says … yes.

In GOBankingRates’ Best Banks 2023 survey of 1,000 Americans, 22% of respondents said they still write checks at least once a month. And surprisingly, of these respondents, the largest percentage belonged to those between the ages of 18 to 24 (28%). Paper checks might sound like a mildly antiquated concept, but they can still be used to fulfill specific needs now and into the near future.

Here are some of the key reasons you still need checks.

Valid Form of Payment

If you don’t have cash or a credit or debit card available to pay for essential goods or services, many people and places will accept a check. Desiree Kaul, CFP and associate advisor at MainStreet Financial Planning, said you can still use a physical check to make a payment for the following:

Hiring contractors. Kaul said contractors who work on your home generally accept only cash or physical checks for their services. Paying with a credit card, should you choose to do it, may mean paying additional convenience fees.

School fees. Families with school-aged children often need to pay for various activities throughout the course of the school year. Rather than send your child to school with cash that could be lost, Kaul said it may be easier to write a physical check for fees payable to the school.

Physical magazine subscriptions. If you still subscribe to physical magazines, Kaul said you may want to pay for these subscriptions via physical check. “If you use a credit card, some companies will autobill a credit card upon renewal whether you intended to renew or not,” said Kaul.

Groceries. Yes, many grocery stores and retailers like Walmart will accept a physical check at checkout. Kaul said this can be especially helpful in circumstances where your debit or credit card has been lost or stolen. A physical check may act as its replacement for making payments until then.

To continue reading, please go to the original article here:

https://www.yahoo.com/finance/news/5-reasons-still-checks-120018977.html

How Much Money Can I Gift Without Owing Taxes?

How Much Money Can I Gift Without Owing Taxes?

Liz Smith   Mon, March 27, 2023

For 2023, the annual gift tax exemption is $17,000, up from $16,000 in 2022. This means you can give up to $17,000 to as many people as you want in 2023 without any of it being subject to the federal gift tax. The gift tax is imposed by the IRS if you transfer money or property – worth more than an exempted amount – to another person without receiving at least equal value in return. This could apply to parents giving money to their children, the gifting of property such as a house or a car, or any other transfer. There is also a lifetime exclusion of $12.92 million in 2023. For help with the gift tax or any other personal finance issues you may have, consider working with a financial advisor.

Annual Gift Tax Limits

The annual gift tax exclusion of $17,000 for 2023 is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax. You never have to pay taxes on gifts that are equal to or less than the annual exclusion limit. So you don't need to worry about paying the gift tax on, say, a sweater you bought your nephew for Christmas.

The annual gift exclusion limit applies on a per-recipient basis. This gift tax limit isn't a cap on the total sum of all your gifts for the year. You can make individual $17,000 gifts to as many people as you want.

You just cannot gift any one recipient more than $17,000 within one year without deducting from your lifetime exemption. If you're married, you and your spouse can each gift up to $167,000 to any one recipient.

If you gift more than the exclusion to a recipient, you will need to file tax forms to disclose those gifts to the IRS. You may also have to pay taxes on it. If that's the case, the tax rates range from 18% up to 40%. However, you won't have to pay any taxes as long as you haven't hit the lifetime gift tax exemption.

Lifetime Gift Tax Limits

Most taxpayers won't ever pay gift tax because the IRS allows you to gift up to $12.92 million (as of 2023) over your lifetime without having to pay gift tax. This is the lifetime gift tax exemption, and it's up from $12.06 million in 2021.

So let's say that in 2023 you gift $217,000 to a family member. This gift is $200,000 over the annual gift exclusion, meaning you'll need to report it to the IRS. However, you won't immediately have to pay tax on that gift. Instead, the IRS deducts that $200,000 from your lifetime gift tax exemption.

So assuming you never made any other gifts over the annual exemption, your remaining lifetime exemption is now $12.72 million ($12.92 million minus $200,000). The table below breaks down this example:

Example of Lifetime Exemption Limits Gift Value $217,000 2022 Gift Tax Exemption Limit $17,000 Taxable Amount $200,000 Lifetime Gift Tax Exemption Limit $12,920,000 Remaining Lifetime Exemption Limit $12,720,000

Most taxpayers will not reach the gift tax limit of $12.92 million over their lifetimes. However, the lifetime gift tax exemption becomes important again when you die and pass on an estate.

How the Gift Tax Works

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/much-money-gift-without-owing-130026955.html

I Won the Lottery! How Hefty Are Taxes on My Winnings Going to Be?

I Won the Lottery! How Hefty Are Taxes on My Winnings Going to Be?

Javier Simon, CEPF®   Sun, March 26, 2023

Before you see a dollar of lottery winnings, the IRS will take 25%. Up to an additional 13% could be withheld in state and local taxes, depending on where you live. Still, you'll probably owe more when taxes are due, since the top federal tax rate is 37%. So a good first step a lottery winner could take is to hire a financial advisor who can help with tax and investment strategies. Read on for more about how taxes on lottery winnings work and what the smart money would do.

How Are Lottery Winnings Taxed?

The IRS considers net lottery winnings ordinary taxable income. So after subtracting the cost of your ticket, you will owe federal income taxes on what remains. How much exactly depends on your tax bracket, which is based on your winnings and other sources of income, so the IRS withholds only 25%. You'll owe the rest when you file your taxes in April.

You can find your bracket on the table below:

Federal Income Tax Bracket for 2022 Single Married Filing Jointly Married Filing Separately Head of Household 10% $0 – $10,275 $0 – $20,550 $0 – $10,275 $0 – $14,650

12% $10,276 – $41,775 $20,551 – $83,550 $10,276 – $41,775 $14,651 – $55,900

22% $41,776 – $89,075 $83,551 – $178,150 $41,776 – $89,075 $55,901 – $89,050

24% $89,076 – $170,050 $178,151 – $340,100 $89,076 – $170,050 $89,051 – $170,050

32% $170,051 – $215,950 $340,101 – $431,900 $170,051 – $215,950 $170,051 – $215,950

35% $215,951 – $539,900 $431,901 – $647,850 $215,951 – $539,900 $215,951 – $539,900

37% $539,901+ $647,851+ $539,901+ $539,901+

Here are the tax brackets for tax year 2023 (filed in April 2024)

Federal Income Tax Brackets for 2023  Rate Single Married Filing Jointly Married Filing Separately Head of Household 10% $0 – $11,000 $0 – $22,000 $0 – $11,000 $0 – $15,700

12% $11,001 – $44,725 $22,001 – $89,450 $11,001 – $44,725 $15,701 – $59,850

22% $44,726 – $95,375 $89,451 – $190,750 $44,726 – $95,375 $59,851 – $95,350

24% $95,376- $182,100 $190,751 – $364,200 $95,376- $182,100 $95,351 – $182,100

32% $182,101 – $231,250 $364,201 – $462,500 $182,101 – $231,250 $182,101 – $231,250

35% $231,251 – $578,125 $462,501 – $693,750 $231,251 – $346,875 $231,251 – $578,100

37% $578,126+ $693,751+ $346,876+ $578,101+

On the bright side, if you're in the top bracket, you don't actually pay 37% on all your income. Federal income tax is progressive. As a single filer in 2022, and after deductions, you pay:

10% on the first $10,275 you earn

12% on the next $31,500

22% on the next $47,300

24% on the next $80,975

32% on the next $45,900

35% on the next $323,950

37% on any amount more than $539,900

An Example

Say you're a single filer making $45,000 a year and in 2022 you won $100,000 in the lottery. That raises your total ordinary taxable income to $145,000, with $25,000 withheld from your winnings for federal taxes. As you can see from the table above, your winning lottery ticket bumped you up from the 22% marginal tax rate to the 24% rate (assuming you are a single filer and, for simplicity's sake here, had no deductions).

 To continue reading, please go to the original article here:

https://finance.yahoo.com/news/won-lottery-hefty-taxes-winnings-130031558.html

7 Boring Habits That Can Make You Wealthy

7 Boring Habits That Can Make You Wealthy

Jenny Rose Spaudo  Thu, March 23, 2023

Despite what social media or TV shows may depict, building wealth typically happens slowly as you stick to smart money habits month in and month out. GOBankingRates interviewed several financial experts to uncover the boring habits that can make you wealthy.

Set a Budget and Stick To It

Whether you use a budget app on your smartphone or the old-fashioned envelope method, make sure to plan how you’ll spend your monthly income.

“Set aside a set amount at the beginning of the month and live within that budget,” said Jay Zigmont, CFP and founder of Childfree Wealth. “Envelopes of cash may have been replaced by prepaid debit cards, but the basics are the same and still work.”

How much should you set aside for each line item? That depends on your specific living expenses. Just make sure to leave room for paying off debts and saving if possible.

Pay Off Your Debts One by One

Whittling down your debts can help free up extra cash to go toward saving. Zigmont recommends starting with the loans with the highest interest rates, which usually include consumer debt like credit cards.

“Paying off your debt gives you a tax-free, risk-free return of the interest,” he said. “With credit card interest rates over 20% in many cases, paying off a credit card provides a return that will exceed most investments.”

Put Money in a High-Yield Savings Account

To continue reading, please go to the original article here:

https://www.yahoo.com/finance/news/7-boring-habits-wealthy-110027649.html

What’s in It for Me? The Secure Act

What’s in It for Me? The Secure Act

Adam M. Grossman  |  Feb 12, 2023  HumbleDollar

IN THE WANING DAYS of 2019, Congress passed the SECURE Act, a law that delivered a mixed bag of changes for retirement savers. Well, Congress has been busy again. At the tail end of 2022, a follow-up law—known as SECURE 2.0—was signed into law.

The good news: There’s a whole lot included in this new law. The bad news? There’s a whole lot included in this new law. SECURE 2.0 presents a number of new planning opportunities but, with hundreds of provisions, it’s also a lot to digest. Below are the provisions that, in my view, provide the most meaningful planning opportunities for folks at various ages and stages:

For younger workers. Young people, in many cases, are forced to contend with the twin challenges of relatively low salaries and relatively high student loan burdens. SECURE 2.0 provides some relief.

In the past, when an employer matched an employee’s 401(k) or 403(b) contribution, that match could be made only with pretax dollars. That was the case even when the employee’s own contributions were to the Roth side of the plan. SECURE 2.0 lifts that restriction. 

Now, an employee can opt to receive his or her employer’s match in Roth form. The match will be reported as income, but that’s okay. Folks earlier in their careers tend to be in lower tax brackets, making it advantageous to opt for Roth contributions.

The second provision for young people recognizes that they often face a tradeoff between saving for retirement and making student loan payments. SECURE 2.0 provides a clever solution. Now, an employer can make a 401(k) matching contribution, but the match will apply to student loan payments made by the employee. 

Research has shown that the unreasonable price of private college burdens young people in ways that go beyond the financial cost. This provision offers a bit of an offset.

For the self-employed. If you’re self-employed and want to save for retirement, there have typically been three choices, each of which was imperfect:

Standard IRA contributions are easy but carry relatively low contribution limits ($6,500 this year, or $7,500 for those 50 or older).

SEP IRAs offer higher contribution limits, but Roth contributions weren’t permitted.

Solo 401(k)s do permit Roth contributions, but they’re more complex to set up and carry a tricky reporting requirement for larger accounts.

SECURE 2.0 addresses this by allowing for Roth contributions to SEP IRAs. It won’t be appropriate for all self-employed workers. But for those in particular tax situations, it may be the perfect antidote to an imperfect set of options.

For folks in their early 60s. SECURE 2.0 is unusual in that it contains a variety of provisions targeted at narrow subsegments of the population. Case in point are the new rules on retirement “catch-up” contributions, which are the additional amounts workers age 50 and older can contribute to their company plan each year. 

This year, the catch-up is $7,500. Starting in 2025, this will be increased to at least $10,000, but only for those ages 60, 61, 62 and 63. This provision won’t help everyone, but it’ll be a useful addition to the playbook for those in their peak earning years.

For those in retirement. The original SECURE Act bumped up the age at which retirees must begin required minimum distributions (RMDs) from tax-deferred retirement accounts—from the endlessly confusing age of 70½ to age 72. Now, Congress has extended that timeline further. Beginning this year, RMDs don’t need to start until age 73. So, if you’re currently younger than 72 or turn 72 this year, you can wait one more year.

The new rule has a twist, though. Beginning in 2033, the starting age will rise again, from 73 to 75. This is a little confusing, so a simple way to think about it is as follows: For those born between 1951 and 1959, the starting age will be 73. For anyone born after 1959, it will be 75.

To continue reading, please go to the original article here:

https://humbledollar.com/2023/02/whats-in-it-for-me/

Learning from Failure

Learning from Failure

Adam M. Grossman  |  Mar 19, 2023  HumbleDollar

IN THE WEEK SINCE Silicon Valley Bank (SVB) failed, a debate has raged: Did the government do the right thing when it decided to guarantee all of SVB’s depositors, including those that exceeded FDIC limits?

On one side of this debate are those who view the government’s action as an inappropriate and undeserved bailout. In an article titled “You Should Be Outraged About Silicon Valley Bank,” The Atlantic argued that the bank’s failure was the predictable result of incompetent risk management. Critics further cite a reality of human nature: If bank executives are confident the government will step in to pick up the pieces every time something goes wrong, they won’t be as careful in managing risk. Economists call this “moral hazard.”

On the other side are those who think the government did the right thing. They point to the fact that the crisis was quickly contained, and at a cost that will likely be insignificant. Not surprisingly, the loudest voices in this camp came from Silicon Valley. Before the government stepped in, one venture capitalist warned of a “startup extinction event” if SVB were to fail. He urged the Federal Reserve to, as he put it, “bearhug the situation,” but also argued that this should not be characterized as a bailout and would not create moral hazard.

For better or worse, the crisis was contained, and everyone is now breathing a little easier. But it’s worth asking what we can learn from this incident. I see five lessons:

Rule No. 1 of investing. In a letter to my clients last weekend, I commented that, when it comes to our finances, there’s always something to worry about. Beyond the stock market, which everyone understands to be volatile, investors have lost sleep over investments which are usually perceived to be far safer.

For instance, three years ago, at the start of the pandemic, there was widespread worry about municipal bonds. Earlier this year, with another government shutdown on the radar, investors began discussing the unlikely possibility of a default on Treasury bonds. And despite their infrequency, the failure of SVB, along with that of Signature Bank, serves as a reminder that even the safest instrument available—a bank account—can carry risk.

Fortunately, there is a solution, and it’s an easy one: diversification. It’s not only the simplest tool in an investor’s toolbox, but I believe it’s also the most effective. Back in 2018, I suggested several ways to diversify so as to protect against so-called unknown unknowns. As an example, I cited the 2003 blackout that hit New York City. Among the effects, ATM and credit card networks went offline.

For those without cash to purchase groceries, it was a difficult situation. While it was temporary, these are the sorts of black swan events that can occur. That’s why I recommend diversifying along as many dimensions as possible to guard against whatever the next financial curveball turns out to be.

Rule No. 2 of investing. When it comes to managing our finances, many things are outside our control. That’s why it’s even more important to control what we can. SVB customers whose balances exceeded FDIC limits are lucky the government came to their rescue, but they wouldn’t have needed that support if they’d taken even the simplest of steps.

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https://humbledollar.com/2023/03/learning-from-failure/