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Lifestages Series: Single/New to the Workforce

Posted on Oct 22, 2019 in Confidence

Over the years, we have tried more and more to make financial education a cornerstone of what we do for people. And as the old adage goes “the earlier the better.” So today I thought I’d spend a few moments speaking to those who are in the early part of their careers and financial lives…or in today’s vernacular, those who are “adulting.” It as actually a pretty timely topic because Connie and I have just launched our eldest daughter, Maddie, into her first full-time job, and we have spent time over the past year or so discussing these same issues (so this post would be for parents of young adults as well =). The first step in any young adult’s financial life should be to make sure that you have an emergency/savings fund (funds that could be used for unexpected expenses, like dental or medical costs or even unplanned travel expenses). A general rule of thumb is to try to build up at least 3 months of gross monthly income in this account (e.g if you currently are making $3,000/mo., then you would try to build up $9,000 in this account). Of course, every situation is a bit different, so you need to consider what debt load you are currently under and the stability of your current job situation…both of those things would impact how much you would want to keep in a primary reserve. [I’m not going to spend time in this post about how to manage debt, although that is obviously a hugetopic and challenge that exists for young people today. My encouragement for those that are carrying a high debt load (e.g. $10,000) is to seek individualized advice on how to attack that.] Tied to this first step is the beginning of some sort of budgeting process. I think it is important for every young person to have a tracking system, so you know where your money is being spent and then can be mindful of whether your spending is exceeding the money you are bringing in. There are lots of great apps out there nowadays to help with this. I like and use Mint to...

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FAQ Series: Does Your Social Security Income Get Taxed?

Posted on Oct 1, 2019 in Confidence

The unfortunate news is that some of you will have to pay federal income taxes on your Social Security benefits. This usually happens only if you have other substantial income in addition to your benefits (such as wages, pensions, self-employment, interest, dividends and other taxable income that must be reported on your tax return). For purposes of determining how the Internal Revenue Service treats your Social Security payments, “income” means your adjusted gross income plus nontaxable interest income plus half of your Social Security benefits. If your total income is more than $25,000 for an individual or $32,000 for a married couple filing jointly, you must pay income taxes on your Social Security benefits. Below those thresholds, your benefits are not taxed. That applies to spousal, survivor and disability benefits as well as retirement benefits. The portion of your benefits subject to taxation varies with income level. You’ll be taxed on: up to 50 percent of your benefits if your income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married couple filing jointly. up to 85 percent of your benefits if your income is more than $34,000 (individual) or $44,000 (couple). Say you file individually, have $50,000 in income and get $1,500 a month from Social Security. You would pay taxes on 85 percent of your $18,000 in annual benefits, or $15,300. Nobody pays taxes on more than 85 percent of their Social Security benefits, no matter their income. All of the above concerns federal taxes; 13 states also tax Social Security to varying degrees. If you live in Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, North Dakota, Vermont, Utah or West Virginia, contact your state tax agency for details on how benefits are taxed. Keep in mind If your child receives Social Security dependent or survivor benefits, those payments do not count toward your taxable income. That money is taxable if the child has sufficient income (from Social Security and other sources) to have to file a return in his or her own name. Supplemental Security Income (SSI) is never taxable. If you do have to pay taxes on your benefits, you have a choice as to how: You can...

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