The Best Cities To Live With Allergies in 2022
You won’t need your tissues and nose spray in these spots.
The post The Best Cities To Live With Allergies in 2022 appeared first on The Rent.com Blog : A Renterâs Guide for Tips & Advice.
You won’t need your tissues and nose spray in these spots.
The post The Best Cities To Live With Allergies in 2022 appeared first on The Rent.com Blog : A Renterâs Guide for Tips & Advice.
Tax season is here. And if you’re one of the millions of Americans who received unemployment benefits last year, you’re probably wondering if you have to pay taxes on those payments. When it comes to federal income taxes, the general answer is yes. Uncle Sam taxes unemployment benefits as if they were wages.
But when it comes to state income taxes, it depends on where you live. Most states fully tax unemployment benefits. However, some states don’t tax them at all (sometimes because the state doesn’t have an income tax), and a handful of states will only tax part of your benefits. Plus, a few states made temporary special exceptions to their general rules to help people who lost their job during the COVID-19 pandemic.
Where does your state stand when it comes to taxing unemployment benefits? Read on to find out. Then, as a bonus, we outline each state’s income, sales, and property tax levels â and provide a link to the state’s page in our State-by-State Guide to Taxes on Middle-Class Families â so you can get a sense of the overall tax burden where you live.
If you are in your 30s or 40s, does this describe your financial situation?
After years of working your way up the corporate ladder, endless long nights as an associate in your firm, or completing your residency or fellowship, your career is finally well established. New financial rewards are coming your way from a new job or promotion, hefty bonuses and other compensation that often didnât seem possible.
For the first time, there is a flood of financial opportunities and you have the resources to consider them. You can buy your first house â or move into a larger one; take a European vacation or get a new car.
You may also be deciding between whether to aggressively pay down debt or save more money for retirement, but which strategy is the right choice?
Most people are naturally debt averse. No one likes a large credit card balance or the seemingly endless payments to cover student loans. But allowing our natural aversion to debt to control our decisions isnât always optimal as part of a long-term financial plan.
Deciphering the best option is largely based on a few important factors. How to decide? Â Here is a process I recommend:
First, understand what I like to call the financial order of operations. Think of this concept as a financial version of Maslowâs Hierarchy of Needs, which depicts peopleâs basic needs as a five-level pyramid with physical needs on the bottom and self-actualization on the top.
Before deciding whether to pay down debt or invest â items that are near the top of your financial pyramid â make sure your foundation is in order. Start by answering the following questions:
If you havenât checked all the items above, using excess funds to accelerate debt paydown or further invest in your retirement should take a backseat for now. Remember, you canât construct a strong building on a weak foundation.
While the term âhighâ is purely subjective, a good rule to follow is to prioritize paying down debts with interest rates over 6%-8%. For example, a credit card with a 16% annual interest rate should be prioritized over maximizing your 401(k) contributions. However, debts with interest rates below the threshold above require a little comparative analysis to determine the optimal financial strategy.Â
Compare the benefits of paying down debt versus investing excess cash.
For example, if you have $5,000 of additional income available, does it make sense to pay down student loan debt with a 9% annual interest rate or invest in a portfolio with an expected return of 6%? By investing all of the money, and not paying down debt, you would effectively have lost 3%, or $150, at year end. In this case, pay down the debt.
However, if there is a car loan with a 3% interest rate, the script is flipped â you would gain $150 from investing your excess income.
On the surface, this break-even equation seems like it provides the final solution to our question. However, using this logic in our decision-making may not create the most optimal strategy. One shortfall of the equation above is that itâs nearly impossible to predict investment performance. So, would it be prudent to base our financial decisions solely on mathematical equations that derive their solutions based on unpredictable assumptions? In simpler terms, shouldnât we avoid making decisions based solely on unforeseeable outcomes?Â
Most people donât like taking unnecessary risks. You may be wondering: âShouldnât I always make the best financial decision regardless of my attitude toward risk since it will result in the best outcome?â
The answer: It depends. The best financial plan is one that you can stick with. If having student debt or a car loan keeps you from sleeping at night, it may be a better decision be to pay down those obligations rather than invest the excess money in your budget.
Or if you want to retire early at 50 and need to save as much as possible, it may make more sense to allocate more toward saving and less toward debt paydown to align more with your goals. We all have own preferences, attitudes, risk tolerance and goals. In effect, what matters most to you is often the right answer.
When determining whether to invest excess income or use it to accelerate debt paydown, consider talking to your financial adviser to come up with a gameplan that incorporates both the financial and non-financial factors this decision entails. This will allow you to achieve your goals while further enabling you to focus on what matters most.
A mobile home, also referred to as a manufactured home, is a style of home built in a factory. This factory-made home is then placed on a trailer chassis, a set-up that allows the owner to move the home if need be. In many cases, the owner rents or leases the land their mobile home […]
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Why do annuity payments belong in a plan for retirement income?
There is a very simple answer: Retirees who have annuity payments feel more confident about their long-term finances in retirement.
It seems obvious to someone like me, who is an actuary by training and spent most of my later career in the retirement business. That confidence comes because an annuity payment is similar to Social Security or a pension in one important respect: They all provide a lifetime of guaranteed income.Â
Since annuity payments are guaranteed under contracts issued typically by highly rated insurance companies, in my view retirees or near-retirees with a reasonable life expectancy should at least consider them as an important source of retirement income. However, according to one survey, a relatively low percentage of retirees â fewer than 15% â make annuity payments part of their retirement income plans.
So, letâs discuss the objections and questions that consumers often have about annuity payments, the contracts that guarantee those payments, and the reasons annuity payments belong in a plan.
Today, the annuity landscape is quite competitive and often confusing to average investors. There are many types of annuities. They can be grouped in various ways:
I take some responsibility for changing the annuity landscape, having invented the first annuity that could be categorized as accumulation/variable/downside protection/future annuitized income.
Unfortunately, contracts providing guaranteed annuity payments often get lumped together with other annuities, and thatâs where the confusion creeps in. Itâs just like with insurance: Car insurance is not the same as life insurance, health insurance or dental insurance. So, you should look at each annuity based on its stated purpose and not whether it shares a name with another product. One type of annuity might be just right for you, while others might not be a good fit.
The rest of this article is about annuity contracts whose sole purpose is to provide lifetime annuity payments â starting now or at a date in the future you select. Letâs start with a few questions Iâve gotten from readers like you.
A: In some contracts, annuity payments increase over time, but most do not. Those contracts that do provide payments that grow with inflation tend to have a starting annuity payment that is 20% to 30% lower than a contract with fixed, level payments. Inflation protection is not cheap.
Of course, the question about purchasing power and inflation is timely with whatâs going on in the U.S. and elsewhere. The Labor Department announced in early February that inflation hit a 40-year high, with consumer prices jumping 7.5% compared with last year. If you relied on annuity payments for all your income, the value lost to inflation would be a major problem. But your retirement income plan shouldnât look like that.
First, you have Social Security and possibly a pension, which grow with inflation. Second, when the income from these sources is not sufficient to cover inflation, you will want income from your savings to increase over time, and you should plan accordingly.  In creating that plan, you should consider annuity payments that start immediately, and a second set of annuity payments that start when you reach a certain age (or ages) in the future. The first can provide a foundation of lifetime income, and the second can be deployed in a laddered purchase of annuity payments to achieve growing income. Â
Hereâs an illustration of a plan that provides increasing income over the years and that shows how annuity payments are deployed:
Courtesy of Jerry Golden
A: The answer is no for most contracts â due to the actuarial approach annuities are founded upon.
The reason for no liquidity is that when you receive annuity payments, a portion of the higher payment is enabled by a survivor credit, which represents the benefit of pooling your longevity risk. Unlike life insurance, where the benefit is paid at your passing, under these annuity contracts the benefit is paid at your surviving. If you could cash in annuity payments during your lifetime, youâd undermine the pooling concept â and the lifetime income advantage.
Our typical female retiree aged 70 who wants to increase the cash flow from her $500,000 in low-yielding savings could purchase annuity payments at an annual rate of around 6.75% today, or $33,750 per year. Thatâs the survivor credit benefit. Â If she wanted to ensure her beneficiary a return of the balance of the annuity premium at her passing, the annuity payout rate would be around 6.00%, or $30,000 per year.
 How do you overcome the liquidity issue? Here are a few short answers:
A: These annuity contracts are similar to the pension your parents had. Just like a pension, they provide a lifetime of guaranteed income. When incorporated into a plan for retirement income, annuity payments address the most common fear of retirees: Will I outlive my savings?
Recognizing the benefits of annuity payments, recent revisions to federal law governing qualified retirement plans, like 401(k)s and 403(b)s, made it easier for participants to convert part of their savings to these annuity contracts.
Set out below are some of the other benefits of annuity payments.
Annuity payments allow you to adjust parts of your retirement income plan without giving up on your goal to live comfortably for the rest of your life. In fact, they can be one of several steps you can take to build a safer income plan.
You should not put all of your savings into purchasing annuity payments. A good portion should remain in your portfolio of stocks and bonds, with a concentration in income- and dividend-producing ETFs. In fact, retirees who are not receiving annuity payments will be very unlikely to invest a higher percentage of their equity portfolios in stocks that might generate more robust returns.
I write frequently about the value of staying the course during volatile economic times, which cause some people to abandon sound plans. In fact, statistics show that individual investors underperform the market by 1% to 3% per year on average because they jump out of the market during alarming plunges. This is even more likely for retirees who have no annuity payments. The protection of annuity payments increases your ability to work the market to your best advantage.
Recognizing that your plan is built on several pillars of guaranteed lifetime income allows you to âstay the courseâ during a turbulent market.
Tax legislation and regulation encourage the use of these annuity contracts by offering favorable tax treatment. I believe this treatment granted by the IRS over the years is to encourage retirees to be more self-reliant in their retirement plans.
As I have explained before, the IRS makes you pay taxes only once on money you earn. Here is how that translates into favorable tax treatment for annuity payments.
As we discussed, one convenient benefit of annuity payments is that these guaranteed payments are deposited monthly into your savings or checking account while you are alive, and, if elected, while your spouse is alive. Your beneficiary can also receive a lump sum if you pass before the premium is paid out in annuity payments. Important secondary benefits of those monthly payments include the convenience of using that money to pay your recurring bills (independent of investment returns).
Also, while annuity payments provide income, the resulting higher income can enable a more generous legacy for your heirs, and peace of mind that comes from knowing you wonât outlive your income.
If you are ready to start building a Retirement Income Plan for your specific circumstances, visit Income Allocation Planning at Go2Income. We will ask a few easy questions so you can design a plan that meets your objectives. Whether I have fully convinced you about the value of annuity payments or not, why not research on your own. Click annuity info to compare your annuity payment and tax benefits with our investorâs results in the article.
Tiny home, house boat, RV residents: beware! Know the legal status of your home.
Thereâs a common misconception about what moves stock prices. Flip on the cable news and the vibe might have you believe that political statements, economic data points, natural disasters, or global unrest have some sort of predictable or unilateral effect on the stock market. And they might! But in a slightly more roundabout way. These […]
The post Understanding Market Sentiment appeared first on SoFi.
Medicine is one of those expenses you usually canât put off. But the cost of prescriptions can make you feel sicker than when you first walked into the pharmacy. According to a recent poll from the Kaiser Family Foundation, about 26% of Americans say they have difficulty paying for their prescriptions. The cost keeps some [â¦]
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.