It’s Almost Open Enrollment, Should You Open an HSA?

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This year, Federal open enrollment runs from Monday, November 12, 2018 – Monday, December 10, 2018 and it may be a good time for individuals and families to review and make changes to their health insurance coverage. Even if you have been covered under an employer-sponsored plan for many years and are not planning to make any changes, this year it might be time to consider opening a health savings account, also known as an HSA. To be eligible for an HSA you cannot be enrolled in Medicare and must have a high deductible health plan. For 2018 that means you have a deductible of at least $1,350 for individuals and $2,700 for families where the maximum out of pocket cannot exceed $6,650 for single coverage and $13,300 for family coverage.

HSAs are triple tax advantaged accounts offered through employers and some banks and financial institutions as a way for individuals and families to save for health care expenses as they would save for their retirement. Contributions made to the account are tax deductible regardless of income level. If you invest the funds, any growth is tax deferred and distributions are tax-free when withdrawn for qualified health expenses. Unlike a Flexible Spending Account, you do not have to use the funds you contribute by the end of each year. The balance rolls over year by year and if you are able to cover your current medical expenses through cash flow, the funds can be maintained in the account for future needs.

The IRS adjusts contribution limits to an HSA each year and for 2018 they are set to $3,450 for individuals and $6,900 for families, with a $1,000 catch up contribution if you are 55 or older during the year. While you cannot use HSA funds to pay your health insurance premiums, you can use the funds to pay Medicare premiums once enrolled. If funds are withdrawn for non-medical expenses, there is a 20% penalty until age 65. After age 65, funds can be used for any expense but are subject to taxes if not medically related.

If you miss the November 12th to December 10th window, there is good news. HSAs are not restricted to the open enrollment period and an account can be opened at any time as long as you maintain eligible coverage. Call Sharkey, Howes & Javer at 303-639-5100 to speak with a CERTIFIED FINANCIAL PLANNER™ and determine if it makes sense for you to open your own health savings account.

Protecting the Recently Deceased from Identity Theft

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When a loved one passes away, there are so many things to do in the midst of grief. The last thing on a grieving mind is the risk of identity theft of the person who has recently passed away. Sadly, hackers have reached a new low by taking advantage of such a sorrowful time.

Identity theft hackers have been using information from hospitals and obituaries to steal a deceased person’s identity and file a fraudulent tax return. According to an AARP article, “With a name, address and birth date in hand, they can illicitly purchase the person’s Social Security number on the Internet for as little as $10.”

The term for this ugly practice is commonly referred to as “ghosting” because it can take six months for financial institutions, credit-reporting bureaus, and the Social Security Administration to register death records. This gives the “ghosting” hackers plenty of time to cause a lot of damage. Thankfully, the surviving family members are not necessarily responsible for the financial destruction.

To make it even worse, an article from ABC News warns of a “disturbing pattern of identity theft of financial information belonging to people who were dying. It’s easy to see how that could happen, since people who are gravely ill can easily lose track of the details of their finances.” Therefore, it is always important to help protect the identity of a loved one, especially one who is ill as well as the recently deceased.

The AARP article lists suggested steps to take after a loved one’s death, such as not including a date of birth or any personal identifiers in an obituary and mailing a death certificate copy to the three credit reporting bureaus (Equifax, Experian, and TransUnion). Consumer Action provides a more extensive list of steps to take to protect the identity of a deceased person.

If you would like to discuss identity theft protection with a CERTIFIED FINANCIAL PLANNER®, please call Sharkey, Howes & Javer at 303-639-5100 to schedule a complimentary consultation.

What to Do Now: Financial Advice for Your 40s and 50s

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For many people, their 40s and 50s are still a period of financial transition. Some people are opening their own businesses while others are considering retirement. No matter where you are at this point in your life, it is likely that you still have some financial goals to work toward. These tips may help you work towards a brighter and more financially secure future.

Pay into Retirement

If you have an employer sponsored 401(k) plan, we suggest creating a goal to contribute the maximum amount allowed based on the IRS limits ($18,500 in 2018). Alternatively, if you own a business and don’t have a 401(k) through an employer, you can may be able to set up your own retirement plan to contribute with tax-deferred funds.

While you are adding money to your savings regularly, also make sure to project your savings, ensuring you are on the right track. If you feel like you’re off track and you’re over the age of 50, you can contribute an additional $1,000 to your IRA and $6,000 to your 401(k) to help catch up.

Monitor Stocks and Bonds

It is important to keep your stock/bond allocation near it target design and may require periodic rebalancing of the account. This is something you should discuss with your Financial Advisor.

Consider Life & Long Term Care Insurance

Life insurance policies can be important if you have children or any other dependents. If you were to pass away suddenly, your dependents may rely on life insurance proceeds to maintain their standard of living.

You might also consider long-term care coverage, especially if you are in your mid-50s. If you are ever in a position later in life, with illness or injury where you need assistance with daily tasks, this type of insurance plan may pay for these expenses.

Pay Down High-Interest Debts

Credit cards, student loans, and some car loans are all high-interest debts. You can use one of several techniques to fight debt. You should always start with a budget so you can determine what exactly you can afford.

Then, you need a battle plan. Will you use the snowball method to start with the lowest balance and work your way up? Will you use the avalanche method and start with the debt that has the highest interest rate? You can discuss strategies with your financial advisor to establish the right plan.

Consider Social Security Benefits

When was the last time you estimated your Social Security benefits? This is a good time to assess whether you have the ability to delay until age 70 to collect the highest monthly payment in the future. Knowing which benefits will be available to you in the future can help you with this decision.

Create a Retirement Plan

A retirement fund is great, but you also need a retirement plan. Will you be moving into a smaller home? Are you considering buying a home in an area with a lower cost of living? Will you be refinancing your home to lower your debt?

Your retirement plan should take into account your current budget, current savings, and future savings but also consider what it is you want to do in retirement with your time. Are you setting aside enough right now to meet your goals in 10 years? 20 years?

Update Your Estate Planning

Review your estate planning documents and make necessary updates. If you have been divorced, remarried, or added new children to your family, you may want to change your beneficiaries. Also If you have accumulated new assets, your estate plan should be reviewed. Furthermore, changes in tax law might also impact your estate plan.

Connect with a Financial Advisor

Building a relationship with a financial advisor you trust can be beneficial for planning your financial future. An advisor can create a customized plan tailored to suit your needs. Sharkey, Howes & Javer can help you plan for retirement. Get in touch today to learn more about your options.

What to Do Now: Financial Advice for Your 20s and 30s

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Becoming financially savvy can take decades. Each stage of life poses different challenges, some of which can make smart financial choices seemingly impossible. While it’s inevitable that there will be financial slip-ups throughout your life, following these tips in your 20s and 30s can help build a solid foundation for healthy finances.

Create a Monthly Budget

It is very difficult to save responsibly if you don’t first learn how to spend responsibly. Establish a budget, even a simple one, so you can track where your money is going. Remember: no budget is set in stone. You can always revisit your budget in a few weeks, months, or years to reassess your income and needs.

One popular and simple technique for budgeting is the 50/30/20 method. First, use 50 percent of your after-tax income on necessities like rent, groceries, insurances, and auto payments. Next, 30 percent of your income goes to your wants like shopping, travel, and entertainment. The remaining 20 percent of income goes right into savings.

Avoid Credit Card Debt

Credit cards can be a powerful tool, but to avoid losing money on interest payments, you need to pay off your balance in full each month. Spending only as much as you can pay off by the end of the month limits your credit card spending and can prevent you from falling into a pit of debt.

If you are already in debt, set up a repayment plan now and no matter what, avoid paying your credit card bills late. Playing catch-up puts a heavy strain your budget.

Create a Retirement Fund

Many employers offer a matching program for 401(k) retirement accounts. If available, your employer will match your annual contribution to your retirement account, typically up to a certain percentage of your salary or up to a dollar for dollar limit. Now is the perfect time to take advantage of this program. With a traditional 401(k), your contributions will not yet be taxed, allowing additional savings to accumulate.

If your company does not offer such a program, consider setting up a Roth IRA. The benefit of a Roth IRA is the funds can grow tax free.

Diversify Investments

Investing in stocks while you’re in your 20s and 30s gives you plenty of time to let your money grow, but you should be careful not to put all of your eggs in one basket. The stock market is unpredictable and an undiversified portfolio carries a greater amount of risk. Consider multiple assets classes and products like mutual funds and ETF’s which spread your investment across a wider range of different companies.

Monitor Your Credit Reports

Even if you do not plan on making major purchases in the next few months, routinely check out your credit reports. Each reporting bureau must offer one free report per year, but you can stagger your reports from each agency to receive one every few months.

A higher credit score helps you receive better rates on loans and may help you avoid hefty deposits on rentals, utilities, and more as you work to establish yourself financially. When you check your reports, be sure to verify you have not been a victim of identity theft and no one else has taken out credit in your name. Consider placing a credit freeze at each of the three credit bureaus if you do not have a need to access credit soon.

Maintain Health Insurance Annually

Even if you are healthy, you don’t want to skimp on health insurance. Whether you get a plan through your parents, at work, or from the marketplace, you are potentially saving thousands of dollars on a trip to the emergency room.

Medical care is expensive, so any coverage allowing you to pay less for in-network health care is beneficial. Preventative care, like vaccines and check-ups, are often covered and not subject to your deductible. After you meet your deductible, your healthcare costs are reduced while individuals without healthcare coverage risk paying for serious medical care.

Build an Emergency Fund

An emergency fund should cover at least three to six months worth of expenses in case you were to lose your job or become unable to work. This fund also prevents you from going into debt because of unforeseen circumstances, such as your car or air conditioning unit breaking down. Statistics show that most millennials could not pay for a surprise $1,000 expense.

Consider Financial Planning

Having questions about your financial future is natural. Financial planners understand the challenges young people face when they begin setting themselves up for success. If you are ready to set up a complimentary consultation with a CERTIFIED FINANCIAL PLANNER™, contact Sharkey, Howes & Javer today.

What is Filial Law

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Filial Laws impose responsibility on a third party to cover support for poverty-stricken parents and relatives. The concept is derived from a term called filial piety, which is a key virtue in Chinese culture. This virtue essentially stands for respecting and taking care of elders. In more modern context, these laws allow the states to go after the assets of adult children if their parents were on government assistance. This issue often comes up if there has not been proper planning for long-term care needs.

With baby boomers growing older and living longer, almost 70% of people will need some sort of long-term care in their lifetime. Many people do not have the ability to purchase long-term care insurance, so they rely on their own assets to pay for care until they can qualify for Medicaid.

One of the most recent examples of these laws being enforced happened in Pennsylvania in 2012. In the case of Health Care & Retirement Corporation of America v. Pittas, the court ruled that a son was financially responsible for his mother’s nursing home costs during the 6 months that she spent in the facility. The total debt that the defendant had to pay was $93,000.

Filial Laws in Colorado?

There are currently 30 states in the Union that have Filial Responsibility Laws, but Colorado is not one of them. Just because you live in a state that doesn’t have these laws, doesn’t mean they may not affect you. If your parents live in a state that recognizes Filial Laws (say, California for example), you could still be held responsible for paying for their care.

These laws rarely come into play because there are certain requirements that need to be met for them to apply. One of these requirements is that the plaintiff has to have reasonable belief that the relative they are suing has the means to pay the outstanding bill.

If you or anyone you know is concerned about how to plan for long-term care expenses as part of your overall financial plan, contact Sharkey, Howes & Javer to meet with a CERTIFIED FINANCIAL PLANNER™.

What Costs More? Inflation Comparison Then and Now

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We all know that inflation raises prices, but how many of us really understand the compounding effect that it has on the cost of everyday items? What other factors influence prices besides official inflation numbers? And how many of us know how we may protect ourselves from inflation and, at the same time, make the most of inflationary pressures as we plan for the future?

Inflation Through the Years

Let’s take a brief look at individual inflation rates from 1990 to 2018, at the cumulative rate, and at some specific numbers over just the past 28 years.

Comparing prior years, inflation stood at 6.1% in 1990, 3.4% in 2000, 1.5% in 2010, and is expected to be around 2% for 2018. On their own, those numbers may not look too daunting, but when you look at the cumulative effect that it has over the years, small increases over time can have a huge impact.

By adding together each year’s inflation rate, we can see how much the cost of an ordinary $20 item increases over the years. Since 2010, the cumulative inflation rate is 15.4%, so the same item that cost $20 just eight years ago would now cost $23.08. Going back to 2000, the cumulative rate has been 46.1%, raising the cost to $29.22. Looking back another 10 years, we see a cumulative inflation rate of 92.5%. This means the cost to buy that $20 item from 1990 would today cost $38.50.

To put that into perspective, it means that to live in 2018 the way people did in 1990, just taking inflation into account, pay increases would have had to average 3.3% every single year. Which means that a salary of $100,000 in 1990 would need to be $248,204 in 2018. If a person’s annual raises did not average at least that much, then their savings and investments would have had to make up the difference, just to stay even. Since 2000, incomes would have had to increase every year by 2.56% to stay even.

What About Specific Items?

Inflation is not the only factor that affects prices. A company’s research and development has to be paid for, marketing costs, product launches, building new plants, funding benefit schemes, and the value of innovations to existing and new products or services all impact prices. Let’s take a look at some specific product prices today compared to their prices in the year 2000. All figures are based on the US Bureau of Labor Statistics.

You can see how the price of other items from the Consumer Price Index have changed over the years here.

Planning Ahead

No one knows what the future holds, but by planning ahead and analyzing your present versus future financial situation may be a good way to feel confident about what lies ahead.

If you’re ready to take a look at your situation and work out a plan for the future, contact Sharkey, Howes & Javer today to meet with a CERTIFIED FINANCIAL PLANNER™.

Scholarship Websites

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With the cost of college tuition rising, more students are looking to scholarships to help take pressure off the cost. However, when it comes to athletic scholarships, the odds of a male high school athlete playing basketball at a NCAA Division I school are 107:1, and 88:1 for a female high school athlete. If your student was fortunate enough to receive an athletic scholarship, for the 2014-2015 school year, males received athletic scholarships of $14,270 and females received $15,162 on average at a Division I school. This likely still would not cover the full cost of tuition. So where else should students look for scholarships? According to a report completed by Sallie Mae, many families don’t apply for scholarships because they think they won’t qualify due to grades, finances, or simply because they don’t know what may be available.

Scholarships can come from each school independently, private or community organizations, or state and local governments. With close to $49 billion in grants and scholarships available it is likely that there is a scholarship out there for every student, the tricky part is finding it. Below is a list of websites put together by The Scholarship System to help students get started.

  1. Big Future (College Board)
  2. Broke Scholar
  3. CareerOneStop
  4. Chegg
  5. JLV College Counseling
  6. Student Scholarships
  7. Tuition Funding Sources
  8. Unigo

By using these websites, students can narrow their search by filtering scholarships that tie to their interests and majors. This saves time so they can put more focus into applying for awards they have a better chance of receiving. It is important to track deadlines for each scholarship and be wary of scams. Also, be cautious not to avoid scholarships that seem too small or not worth the time to apply. Others may not apply under the same reasoning, therefore reducing the competition and increasing your chances of receiving the award. Every dollar received can quickly add up!

Contact Sharkey, Howes & Javer at 303.639.5100 to speak to a CERTIFIED FINANCIAL PLANNER™ about how to incorporate scholarships into your child’s education savings plan.

A Financial Checklist for New and Expecting Parents

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As a new or expecting parent, there are a number of expenses you need to prepare for. Raising a child isn’t cheap, and it only becomes more expensive as time goes on. If you want to be sure that you’re prepared for many of the major financial obligations associated with raising a child, this financial checklist will help confirm that you have everything in order.

Step One: Plan for Hospital and Delivery Costs

The average cost of birth in the United States is more than $30,000, without even factoring in the costs of prenatal care and checkups in the months leading up to it. Much of this amount will be alleviated by insurance, but you’ll need to consult with your provider to fully understand the amount you’ll owe following delivery. You will also want to make sure your doctor, hospital, and anesthesiologist are all in network with your insurance, prior to your delivery. By planning for these expenses, you can stay one-step ahead and take at least one worry off your plate when your child arrives.

Step Two: Build Up Your Emergency Fund

You may already have an emergency fund set up, but the amount you save up will change when you have a child. Ideally, you want to have 3-6 months of required expenses including rent or mortgage payments, car and insurance payments, groceries, and more in your emergency savings fund. The goal is that in the event of a job loss, you will have enough to be able to take care of your family while you search for a new job. Your emergency fund will also help cover things like emergency child care, hospitalization for illness or injury, or unexpected home repairs.

Step Three: Examine Your Will

Have you been putting off writing your will? Now is the time to write one or update an existing one. Make sure you’ve designated the individual that you and your spouse would like to raise your child or children in case something happens to you as well as how your assets should be handled. Do you want to create a trust for your children to access when they’re older? Do you prefer to hand over control of your assets to your child’s guardian? Make sure that your estate planning documents leaves your family with everything they will need.

Step Four: Update Your Insurance

Aside from adding your child to your health insurance plan, this will also be a good time to review your life and disability policies. As your family grows, it is more important than ever to make sure that your insurance plans are adequate to provide for the needs of your family in case of death or a disability.

Step Five: Revise Your Budget

Your budget is going to change significantly with the arrival of your child and some of your discretionary income may decrease. Make sure that you’re prepared for the changes to your budget, including:

  • The cost of items the baby will need (clothing, crib, diapers, etc.)
  • The cost of formula or baby food
  • Child care expenses
  • Medical expenses

Step Six: Start a College Fund

Many parents want to give their children the best possible start in life and that includes helping them pay for college. By opening a 529 or other college fund for your child, you can help make it possible without having to worry as much about budget constraints or taking out loans.

Getting your finances in line is an important part of preparing for a new addition to your family. By following these important steps, you’ll put yourself in a better place to deal with the new financial challenges that might be coming your way and set yourself up for better ultimate financial success on this new parenting journey. If you would like to speak to a CERTIFIED FINANCIAL PLANNER™ to learn more or for help setting up a financial plan for your family, please give us a call at 303-639-5100.

Happy Fourth of July from Sharkey, Howes & Javer

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The team at Sharkey, Howes & Javer would like to wish you and your family a very happy Fourth of July. We hope that you enjoy the mid-week break, take the opportunity to celebrate our independence with a great day of parades, barbecues, fireworks, and fun, and take a moment to remember the hard work and sacrifices that were made to protect all of the freedoms that we’re so lucky to have.

In observance of the holiday, our office will be closed on Wednesday, July 4th and we will reopen with our normal business hours on Thursday, July 5th.

Here are some fun facts about the Fourth of July that you can share around the barbecue this week:

  • Philadelphia held the first annual celebration of our independence on July 4th, 1777. Source
  • Fireworks have been a part of Independence Day celebrations since the very beginning. Source
  • John Adams first predicted that Independence Day would be celebrated on July 2nd, the day Congress approved the resolution of independence. Source
  • Only John Hancock and Charles Thomson signed the Declaration of Independence on July 4th, the majority did not sign until August 2nd. Source
  • If you’re out of the country for the 4th, you can still catch a fireworks show in England, Denmark, Norway, Portugal, or Sweden. Source
  • The Philippines and Rwanda also celebrate their independence on July 4th. Source
  • New York hosts the biggest fireworks display, with over 75,000 shells planned for this year’s show. Source

6 Tips to Consider Before Launching a Second Career

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Over the past several years, moving between companies and even jumping between industries has quickly become the norm and an increasing number of professionals are making major career changes 10, 20, or even 30 years into their original intended path.

Whether you’re returning to employment after a hiatus, coming out of retirement, or restarting with something fresh, switching careers can be a daunting endeavor. In our fast-paced business world, you may be worried that you will be left behind before you even get started.

The good news is that many individuals have relaunched or refreshed their work life with great success and it’s possible for anyone with some smart, solid planning. Here are six of the top considerations to keep in mind as you get ready to take the plunge:

  1. What are your reasons? Are you in search of more money, or do you just want to keep busy? Are you simply bored with doing the same thing day-in and day-out? Determining why you want new or different work will help steer you.
  2. What are your skill gaps? Some career shifts are easier than others. If you’re hoping to enter a career requiring specialized skills like the medical field, you may need to return to school. For other careers, you may be able to engage with a seminar or small-scale professional development opportunity to get your feet wet or start earning your required certifications.
  1. Have you volunteered in your target industry? Not all industries or career paths may have volunteer opportunities. However, if yours does, it gives you a great chance to feel out whether you might be happy in the new industry, as well as get your foot in the door to learn about what you might need for your new job. Using tools like LinkedIn or Meetup can help connect you with professionals you might be able to volunteer with or shadow if you don’t already have contacts in the new industry.
  2. What are your dreams and aspirations? For many people, a dream job is one that combines dreams and aspirations with work that makes enough money to create a comfortable lifestyle. Making a list of your goals, aspirations, and “must-haves” can help you determine how to find a job that infuses your work with your personal values. If you are a more visual person, fashioning a career vision board can help you visually display your goals. For others, a traditional list of goals may work better.
  3. Figure out your finances. Can you afford to take some time off of work to explore? Will you need to spend another year in your current job to save up a buffer? Make sure to take into account your current income, investments, and the trajectory of your intended path. If you are planning to start your own business, be sure to consider start-up costs and ramp up time.
  4. Who is in your support network? As you pursue a career change, you will need to surround yourself with people who cheer you on and support your new path. Friends, family, mentors, and contacts in your new industry can help you meet challenges and celebrate you when you reach milestones.

Starting a second career may feel like turning your life upside down, but with good planning and a clear vision, it doesn’t have to. If you’re thinking about starting your second career, contact Sharkey, Howes & Javer to meet with a CERTIFIED FINANCIAL PLANNER™.