Money Matters 01.24.2020

JANUARY 24, 2020

Money Matter$ THE PRESS

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MONEY MATTERS

JANUARY 24, 2020

Credit scores and their effect on finances

M

onthly budgets help people make the

most of their money. While a person’s income will affect how much they can

spend on housing, food and clothing each month, another, more abstract factor can have a big impact on monthly budgets.

Nearly every adult has a credit score, which can fluctuate daily. Various factors, including a person’s age and track record in regard to paying bills, combine to produce a credit score.

According to the credit-reporting agency Experian, credit scores range from 300 to 850, though most consumers’ scores fall somewhere between 600 and 750.

The Fair Isaac Corporation created what’s known as a FICO Score, which is used by many lenders to determine prospective borrowers’ creditworthiness. FICO scores are often characterized using five terms: ♦♦ Very poor: Scores between 300 and 579 ♦♦ Fair: Scores between 580 and 669 ♦♦ Good: Scores between 670 and 739 ♦♦ Very good: Scores between 740 and 799 ♦♦ Exceptional: Scores between 800 and 850 Some consumers may feel these are just numbers on a page, but in certain instances, such as when consumers attempt to buy a home, a credit score can have a dramatic effect on a person’s monthly budget. When borrowing to buy a home, borrowers with desirable credit scores may be eligible for considerably lower interest rates than borrowers whose scores fall into the “very poor” or “fair” range. Over the length of a standard, 30-year, fixed-rate mortgage, a low interest rate can save borrowers tens of

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Various factors, including a person’s age and track record in regard to paying bills, combine to produce a credit score. thousands of dollars in interest fees.

In addition to paying more in interest fees, Experian notes borrowers with subpar credit scores may have to do even more to earn the trust of lenders. Borrowers whose scores fall into the “very poor” range may be required to pay a fee or make a deposit when opening a new credit account, and some might not be approved at all.

Borrowers whose scores fall into the “fair” range may

be classified by lenders as subprime borrowers, making it hard for them to open new credit accounts or secure loans without a cosigner.

Consumers can benefit from knowing their credit scores and how to improve them. Taking measures to improve low or subpar credit scores can put more money in consumers’ pockets, both in the immediate and distant future.

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MONEY MATTERS

JANUARY 24, 2020

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Legislation changes to consider this tax season A LY B R O W N

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ax season is naturally a busy time of year for payroll professionals, and those in

California may notice this year’s tax

The team of professionals at California Payroll specializes in payroll, taxes, timekeeping and human capital management.

form has undergone some significant changes.

On the heels of the 2017 Tax Cuts and Jobs Act (TCJA), a new W-4 form — the form all employers issue to new employees — was released Dec. 5 last year, effective for use Jan. 1.

“The new draft Form W-4 reflects important feedback from the payroll community and others in the tax community,” said the IRS in a statement.

“The primary goals of the new design are to provide simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors.”

While the form was created with the intent to simplify the process, it hasn’t changed since the late ‘80s, leaving many ON THE COVER: The team at California Payroll in Brentwood works to ensure each client’s individual needs are met through their expert guidance and experience. Photo by Tony Kukulich.

Photo by Tony Kukulich

business owners with questions on how to properly fill them out. That’s where the Brentwood-based team of California Payroll comes in.

“We don’t do personal tax returns, but people make their choice of how much federal income tax to be withheld, and it’s different this year,” according to

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California Payroll. “But it obviously creates questions because it’s different.”

Filling out this new form correctly is important, as significant changes stemming from the TJCA might result in taxpayers owing taxes, the General Accounting Office (GAO) has warned.

“Overwithholding fosters tax

compliance: If an employee’s withholding is less than tax liability, the employee may owe additional taxes.” wrote the GAO in a report to congressional requesters.

“However, Treasury officials noted that while overwithholding fosters tax see Tax page 7B

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JANUARY 24, 2020

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When it comes to paying for college, there are a variety of ways families can plan and prepare for the expense.

The best ways to build a college fund

C

ollege is the next logical step for many newly minted high school graduates.

The National Center for Education Statistics indicated in fall 2019, roughly 19.9 million students were slated to attend colleges and universities in the U.S. Statistics Canada stated that, for the 201516 school year, the most recent for school statistics, just over two million students were enrolled in Canadian universities and colleges.

Families need to begin thinking about how to pay for college as early as possible.

According to the Wall Street Journal, the average college graduate’s student loan debt is $37,172. The most recent data from the Federal Reserve Bank of New York indicates the overall student loan debt in America alone is roughly $1.3 trillion.

The average expense of sending a child to college has been rising at double the rate of inflation for more than a decade.

A robust college savings account can help future students avoid considerable debt. The following are some ways to save for college. ♦♦ Open a tax-advantaged 529 college savings plan. The U.S. Securities and Exchange Commission says a 529 is a savings plan designed to encourage saving for future education costs. The person funding the account pays taxes on the money before it’s contributed to the 529 plan. Funds can be used for education expenses. There are two types of 529 plans: prepaid tuition plans and education savings plans. The prepaid plans allow account holders to purchase units or credits at participating colleges and universities. With education savings plans, account holders

According to the Wall Street Journal, the average college graduate’s student loan debt is $37,172. open investment accounts to save for qualified future higher education expenses, including room and board. ♦♦ Invest in a Coverdell Education Savings Account. A Coverdell account is a taxadvantaged method to contribute up to $2,000 per year to a child’s account.

Individuals need to be under a certain income level to contribute. The funds will grow free of federal taxes. ♦♦ Consider a Uniform Transfer or Gift to Minors account. This is a custodial account that holds and protects assets for beneficiaries, who are typically donors’ children. The custodian controls the assets until the minor reaches legal age.

The money will not grow tax-free, and it can be used for purposes other than school expenses. The account also may count against the student and parent when applying for financial aid, which is something to keep in mind. ♦♦ Open an IRA. IRAs are often associated strictly with retirement savings, but they also can be used for qualified college payments, as long as the contributions have been made for at least five years, advises Nationwide Insurance. ♦♦ Use a standard savings account. Even though it may not grow as quickly as investment accounts, routinely saving money in a savings account can be another means to save for college.

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JANUARY 24, 2020

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© 2019 Bank of America Corporation. All rights reserved. | 05/2019 Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp.”). MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of BofA Corp.

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Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofAMerrill Lynch, Corp.”).Pierce, MLPF&S is a registered broker-dealer, Member SIPC(also andasareferred wholly owned subsidiary of or BofA Corp. certain Merrill Lynch, Fenner & Fenner Smith Incorporated (also referred to “MLPF&S” makes available Pierce, & Smith Incorporated tooras“Merrill”) “MLPF&S” “Merrill”) makes available cer investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America investment products sponsored, managed, distributed or provided by companies that are affiliates ofCorporation Bank of Amer Investment products: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value (“BofA Corp.”). is a registered broker-dealer, Member SIPCMember and a wholly of BofAsubsidiary Corp. (“BofAMLPF&S Corp.”). MLPF&S is a registered broker-dealer, SIPCowned and asubsidiary wholly owned of BofA Corp.

The Bull Symbol and Merrill Lynch are trademarks of Bank of America Corporation.

Investment products: Are NotAre FDIC Insured Are NotVault-BA13OQ Bank May Lose Value © 2019 Bank of America Corporation.

All rights reserved.

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What donors should know about deductions

G

iving to charity is a selfless act that’s worthy of recognition. That recognition can come in many forms, and donors

should know even the “tax man” likes to reward those who donate to charity.

Both the U.S. and Canada reward donors with tax credits. The financial services firm H&R Block notes, in the U.S., taxpayers can deduct donations made to qualified charities. Such deductions must be itemized, but they can greatly reduce a person’s taxable income.

According to TurboTax, Canada also has a generous tax credit system, rewarding taxpayers who donate to charity by giving them a credit that’s up to 29% of the amount donated at the federal level. In addition, taxpayers also may be entitled to an additional amount up to 24%, depending on which province they call home.

Laws regarding donations and tax deductions can be difficult to understand, so donors should always discuss their donations with their financial planners or tax preparers before filing their returns. The following

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Donating to charity is a selfless endeavor that may lead to rewards when donors file their tax returns. is some general information regarding donations and deductions that can be useful to prospective donors.

Who needs life insurance?

L

ife insurance is one of many

components of estate planning.

Statistics from the insurance

industry groups Life Happens and LIMRA indicate 70% of Americans consider life insurance a necessity.

However, 41% of respondents in 2017 did not have any life insurance.

Even though most people deem life insurance important, it is not necessary for everyone. Determining if you are a good

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You have children If you have children who depend on you, life insurance is a must-have. If your spouse and children could not continue their standard of living on one income, life insurance can fill in the gap or pay for future plans, such as college educations.

Even if you are a stay-at-home parent, your contribution to the household still holds weight. Should you pass away, your spouse will have to pay for tasks you normally perform, such as child care, cleaning services, cooking and transportation.

You’re a business owner Entrepreneurs benefit from life

insurance, since it can help pay off business debts, advises online financial resource Nerd Wallet. When business owners die, their heirs might be able to use life insurance payouts to pay off estate taxes or fund a buy-sell agreement.

You want to leave an inheritance If you do not have a vast accumulation of assets, investing in permanent life insurance can provide a small sum of money to heirs upon your death.

A life insurance policy is a wise investment for people whose survivors could benefit from some financial assistance in the wake of their deaths.

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candidate for life insurance involves doing a little research. These qualities often make life insurance a smart move.

You’re married or in a committed relationship If you are married or in a relationship in which your partner depends on you financially — even if just partially — it is smart to have a life insurance policy. This way, your significant other does not have to rely entirely on their income to pay off debts or maintain the quality of life you currently enjoy. Many households cannot function without two incomes. Life insurance can ensure financial burdens do not rest entirely on the shoulders of surviving loved ones.

Are all donations deductible?

H&R Block notes, in the U.S., donations must go to one of three types of groups in order to qualify for deductions. Donations made to nonprofit religious groups, nonprofit educational groups and nonprofit charitable groups, which are often referred to as 501(c)(3) organizations, may qualify for deductions.

The Government of Canada notes the Charities Directorate can be contacted directly at 800-267-2384 to confirm if a charity qualifies for a tax deduction.

Does a donation have to be money in order for it to be deducted?

Non-cash donations are eligible for deductions in both the U.S. and Canada.

Do I need to get anything from the organization I donate to?

In most instances in the U.S., H&R Block notes charitable organizations must provide donors with certain information for donations to be deducted: a receipt that indicates the organization’s name, address and the date and location of the donation must be submitted.

In addition, the amount of the donation when donating cash or, in the case of non-cash donations, a reasonably detailed description of the items donated.

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MIKE’S ESTATE PLANNING MINUTE

By Michael J. Amthor, Esq.

HAVE YOU TALKED WITH YOUR FAMILY ABOUT MONEY? YOU SHOULD. HERE’S WHY.

Photo courtesy of Metro Creative

Investing requires risk, but novice investors should not allow that to keep them on the sidelines.

Investing tips for beginners

I

nvesting is a key component of long-term financial planning. By choosing the right investments,

investors can ensure their money outgrows inflation, making it possible for them to realize their retirement goals and live comfortably long after they have stopped working.

Risk is a part of investing, and many veteran investors recognize that. However, the fear of losing hard-earned money might compel would-be beginners to avoid the markets altogether. That can be a costly mistake, and it’s one research suggests millennials are making, choosing to keep their money in savings accounts — which provide very little return in terms of interest — rather than invest in the markets.

According to a recent analysis from the online financial resource NerdWallet, a 25-year-old millennial who is not investing today and does not invest until they retire at 65 could lose out on more than $3.3 million in retirement savings.

It can be nerve-wracking for novices to begin investing their money, but these three investment strategies can help calm those nerves and pave the way for a bright financial future.

Tax from page 3B compliance, it also has costs for taxpayers, particularly for low-income workers who may be liquidity constrained and could benefit more from larger regular paychecks than from larger annual tax refunds.”

For the team at California Payroll, the changes mean making sure clients are well equipped with knowledge and their expert guidance. The company handles human capital management, which

Identify your risk tolerance Young investors may be told that they’re in prime position to choose risky investments because they have fewer responsibilities than older investors, and more time in the workforce to make up for losses. While that’s true, young investors should only be as risky as they’re comfortable being. The financial experts at Principal advise beginners to identify their risk tolerance before investing.

Investments with a high potential for return, which might include emerging markets and limited partnerships, also generally have a higher potential risk for loss, and vice versa.

Investors should only accept a level of risk they’re comfortable with.

Diversify your investments Principal notes one way to manage risk is choose a mix of investments from various asset classes. For example, stocks and bonds traditionally move in different directions. So when stocks are up, bonds may be down, and vice versa. Investing in different types of assets is known as diversification, which can help investors protect themselves against risk.

Make changes as you age As investors age, their aversion to risk should grow. The closer you get to retirement, the closer you are to needing all the money you have invested and earned over the years. Speak with a financial planner about how to reallocate your investments as retirement draws near.

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includes providing payroll, timekeeping, attendance and human-resource software and services.

California Payroll is located at 1240 Central Blvd., Suite B, in Brentwood.

For more information, visit www. californiapayroll.com.

For more information on the tax forms, visit: www.bit.ly/2017tcja; www.bit.ly/2020-w-4; and www.bit.ly/ usgaowithholding.

I have discussed the importance of estate planning many times in these articles.

Saving money, peace of mind and making things easier for those you leave behind are just a few of the benefits. However, with estate planning typically comes difficult conversations with family members that does not come natural. Subjects such as who you want to be in charge of your estate after death, who should receive your assets and end of life issues are just the beginning. Nine out of 10 Americans consider it important to have a financial plan but almost half have difficulty discussing finances with loved ones. There are three reasons for this: It can be overwhelming, it can be awkward and talking about a future plan is difficult when you don’t have one in place. The statistics tell an interesting story.

38% of people do not even talk to their spouse or partner about the other’s financial situation before getting married. 55% of those without a financial plan say they are not confident in their retirement and a full 86% of us do not feel they have saved enough for retirement. It starts with a conversation and

sometimes we just need a little help to take that first step. When I talk to clients about estate planning, I do so without making them feel guilty or being ashamed. The most important step you take is talking with someone. I reassure my clients that it is never too late nor too early to start talking about finances after death. Most of my clients have a very real sense of accomplishment and relief because many have been putting it off for years. I cannot emphasize enough the peace of mind my clients walk away with when we complete their estate plan and they know this important issue has been handled. Make a commitment to yourself and talk to your family today about these issues. Keep it light and do not take it too seriously. Your next call should be to my office and we will put your plans into action.

If you have questions on this or any other estate planning topic, call me at (925) 5164888. East County Family Law Group, 1120 Second Street, Brentwood – Advertisement www.eastcountyfamilylaw.com

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JANUARY 24, 2020

A New Decade… What will you do differently?

appy New Year and Cheers to 2020! A new decade ripe for new adventures, new challenges, and new successes!

As we enter a new decade, it is always good to look back on the past decade and learn from the good, the bad, and the ugly. The early years of the “teens” were about as ugly as anyone could have imagined. We were working our ways through the total financial collapse that began in 2008.

I do not know a single person who came through that time period unscathed. We all know people who lost their homes, lost their businesses, lost their jobs, and lost their savings. I personally lost my job 3 times during a 2-year period. I was working for a smaller company and we came into work one day and the boss said “sorry, I can’t meet payroll. Yes, the last two weeks you worked for free”. There were 500 people standing there wondering how they were going to make their mortgage payment.

I learned from that experience and decided to go to work for one of the largest corporations in the world, who will remain unnamed. I thought they will never be affected by this ‘recession’. Well, one morning they called for a mandatory conference call and laid off 4000 people in one 10-minute phone call, me being one of them.

I was talking to my oldest a few weeks ago about “2008” as we often refer to it. I said, “you might be a little too young to really remember how bad it was”. They looked at me and said “Mom, I remember when I asked for $20.00 so Charlie and I could go bowling, and I got a 30-minute lecture on the value of $20.00. I remember!”

LOL. We can laugh now, but, boy howdy, back then, it was no laughing matter. $20.00 could have meant gas in the car, or even dinner that night. Things were so baaad!

So, what do we learn from all this? One lesson that I continually repeat to my kids, and anyone else who will listen, is that we will survive. Being a single mom there were certainly times when I wondered how we were going to survive, but by golly, we did! Growing up, I remember a poster my mom had plastered to the front of the fridge.

It was a mouse pulling an elephant up a hill by its tail and it said, “Where there is a will, there is a way!” My mom lived by that motto and instilled it in us kids. There was a will, and there was a way, and we are all proof of that!

So, as the rest of the “teens” played out we all began to, not only survive, but we began to thrive. Real estate values began to recover, there were jobs to be had, 401Ks began to grow, the stock markets began to rally. We turned the corner and here we are today, beginning a new decade.

Each of us comes into this new era with different needs, wants, and dreams. Some of that is due to socioeconomic backgrounds, different levels of education, different goals, and values. Some of it dictated by our ‘generation’, some dictated by how we were raised, and some of it dictated by what came our way over the years of our lives.

As we make decisions about the next decade, one question may be how to better fund your retirement years.

You may consider getting a roommate, selling your home

Beth Miller-Rowe has been in the mortgage industry for 36 years specializing in reverse mortgages for the past 10 years. Beth has degrees in economics and business administration. and downsizing, or maybe sharing your home with another generation. Or perhaps cashing in stocks or getting a home equity line of credit (HELOC) or a reverse mortgage.

There are a lot of options to research.

The key is to do just that, do your own research.

I hear from my clients all the time about the friend who says ‘don’t get a reverse mortgage. It is BAD’. I ask why she said it was bad, and I hear that she heard from her sister’s husband’s cousin’s nephew that a reverse mortgage is BAD but really wasn’t quite sure why.

I recently had a client say “I heard that to take out a reverse mortgage is to steal from your children”.

He went on to quote some of the most notable MYTHS about the reverse mortgage program. ♦♦ The bank owns your home when you take out a reverse mortgage. Absolutely Not True! ♦♦ When you die, the bank takes the house. Absolutely not true! ♦♦ The kids will end up with nothing because a reverse mortgage will always use up all the equity. That is clearly not true, especially with the ‘new math’ reverse mortgage that went into effect in October 2017 with the goal of equity preservation. ♦♦ You could outlive a reverse mortgage. Not true! As long as you pay your property taxes, homeowners’ insurance, HOA dues, live in the home, and maintain the home, you can stay there forever, until the day you die, literally.

When we consider the fact that 60% of seniors are still helping their adult children financially, we realize that there is a lot more ‘need’ than there is ‘want’ when it comes to seniors’ finances.

A recent AARP article shows that 79% of grandparents do not see themselves financially supporting their grandkids, and yet 94% of them do, in fact, provide support of some kind. In some cases, it is helping with

college, in other cases, it may be helping with a first car.

Parents are so strapped these days, especially trying to survive in California, that kids turn to their grandparents for even the very basics, like food and shelter.

I cannot count how many homes I walk into where there are multiple generations living under the same roof.

Some by design, some by desire, most by default - the kids and grandkids have nowhere else to go, they cannot afford to live independently in the bay area.

As we look to the future, we don’t necessarily need the luxuries of a movie star, but we do want to enjoy our retirement.

That might mean more travel, it might mean a larger safety net for a greater sense of security, or a new kitchen, or a new car, or it might mean taking our family on a vacation and building memories.

We are retiring healthier than ever before, with more years ahead of us that we are looking forward to enjoying.

And that is okay. We have earned it!

The most important piece, as you think through your options is to do your own research.

This is your home, your retirement, your money.

Work with a specialist and meet face to face. Fed Ex, email, and phone calls do not give you the time, and respect you deserve when dealing with your future.

If you would like a no pressure, no obligation presentation in your home, Let’s sit down, at your kitchen table, and look at whether a reverse mortgage might be a good idea for you.

Let me show you the truth about how you can enjoy a Fun-tirement AND potentially leave a legacy. Win-Win. – Advertorial

Let’s take a look and see if we can Make Your Retirement Dreams Come True.

Beth Miller-Rowe NMLS: 294774

Branch Manager and Reverse Mortgage Specialist

The Reverse Mortgage Group • A Division of American Pacific Mortgage Corp.

Office: 925-969-0380 Cell: 925-381-8264 Beth@YourReverse.com

3478 Buskirk Ave., Ste. 1000 Pleasant Hill, CA 94523

Your Retirement Dreams Can Come True!

A Division of American Pacific Mortgage Corporation NMLS 1850

DRE: 00950759/01215943 • NMLS: 294774/831612/1850 Licensed by the Dept of Business Oversight under the California Residential Mortgage Lending Act

*Reverse mortgages are loans offered to homeowners who are 62 or older who have equity in their homes. The loan programs allow borrowers to defer payment on the loans until they pass away, sell the home, or move out.

Homeowners, however, remain responsible for the payment of taxes, insurance, maintenance, and other items. Nonpayment of these items can lead to a default under the loan terms and ultimate loss of the home. FHA insured reverse mortgages have an up front and ongoing cost; ask your loan officer for details. These materials are not from, nor approved by HUD, FHA, or any governing agency. **American Pacific Mortgage Corporation is not financial service company or licensed tax advisors; the material provided is for informational and educational purposes only and should not be construed as investment, tax and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors. We are not financial or tax advisors, please contact your financial professional for your personal financial situation.