Giving grandkids money without sacrificing your savings
Article written by Alexis Rhiannon, Business Insider.
Offering financial support to a grandchild can be one of the most rewarding parts of being a grandparent. But when that generosity comes at the cost of depleting your own retirement savings, the prospect becomes a lot less compelling.
Happily, a little research yields plenty of creative ways to provide for the next generation beyond dipping into your own hard-earned savings.
The alternatives include everything from special investment strategies to estate planning to savings plans that let you save for your loved ones on your terms. In short, there’s a whole host of options that make the ability to help out a family member feel like a positive again, instead of a mandate to sacrifice your own comfort and stability for theirs.
Legacy Financial Advisors’ Kathryn Amorello spoke to Business Insider in 2020. She had several suggestions for the best ways to support your grandkids.
1. Contribute to a 529 plan
If you know that you specifically want to support your grandchild’s education, there’s no better way to make that happen than by investing in a 529 plan. Named after the section of the Internal Revenue Code that authorizes them, a 529 is an investment account that allows your money to both grow and be withdrawn tax-free. (So long as it’s used to cover college expenses like tuition, board, books, and other necessary supplies.)
The plans are state-sponsored, meaning your area will have its own unique options and investment structures. But contributing to a 529 plan in most states will earn you a deduction on your taxes, and annual contribution limits are often quite high. (They begin at $235,000 for some states.)
However, it’s important to note that any contribution to a 529 is considered a “gift” by the Internal Revenue Service, so those hoping to avoid the gift tax will want to keep their contributions under $17,000 a year. (Setting up automatic monthly deposits means your money can grow out of sight and out of mind.)
Or, if you have the funds available and you prefer, you can deposit a lump sum upon opening the account; you just won’t be able to contribute again for a few years.
Amorello is a particular proponent of the 529 plan for its flexibility, noting, “Contributing to a 529 Age-Based Investment Strategy gives the grandparents options on how conservative, moderate, or aggressive fund choices should be. As the child nears college age, the balance of investments transitions appropriately, from more stocks to more bonds, in order to help your funds grow predictably.”
Adding to that flexibility is the fact that anyone can contribute to the account and that even if the original beneficiary elects not to go to college or selects a cheaper option than predicted, the beneficiary can be reassigned to use up the remaining funds.
2. Write them into your will
The thing about unexpected expenses is that there’s absolutely no way to predict when they’ll crop up. So, one way to make absolutely certain that you won’t end up needing the funds that you set aside for your grandchildren is to write them into your will.
That way, you’ll know you’ve truly set aside all you safely can for your grandchildren without having to grapple with the likelihood of a medical event or stress about the penalty for an unplanned withdrawal from, say, a 529 plan in the process.
It’s like they say on airplanes: Put on your own oxygen mask before attempting to help anyone else. If you run out of retirement money during the course of your life, it doesn’t help anyone — least of all your grandchildren. This is the money that you saved for your retirement, so leaving instructions for its disbursal in your will ensures that you meet that goal before setting another one.
3. Make them your life insurance beneficiary
Along the same lines as recognizing a grandchild in your will, you can also assign a grandchild as your life insurance beneficiary, meaning they would be the one to receive the payout from your insurance company in the event of your death during the covered term.
In fact, many companies let you list multiple beneficiaries who can either divide the payout evenly or receive specific percentages that you set yourself. It’s also easy for you to redesignate the beneficiary, should circumstances change somehow, and you can even specify a contingent beneficiary — a second choice to receive the payout, should your first choice be unavailable.
If you don’t designate a beneficiary, however, the payout will be added to your estate, which opens it up to being argued over by creditors and lenders. And since the whole point of paying into a life insurance policy is to make sure loved ones are financially provided for in your absence, setting a grandchild as your policy’s beneficiary is a no-brainer.
4. Arrange to cover your estate taxes
Speaking of insurance, if you’re a high earner whose estate will qualify for estate taxes, Amorello suggests taking out an insurance policy where the funds are specified to pay off those taxes. “That way, it’s no imposition on a child or grandchild’s actual inheritance.”
At current levels, most American families will have absolutely zero interaction with federal estate taxes.
However, some states have their own estate and inheritance taxes, and the federal exemptions are fluid.
But the bottom line is that your insurance is for you, so make sure you’re selecting a policy with fine print and riders that make it work that way: as a cushion between your loved ones and financial hardship.
5. Gift money
Another way to balance out potential estate taxes — which can be as high as 40% — is by gifting money to your grandchildren during your lifetime. Amorello explained: “Gifting money actually can help grandparents lessen their own net worth to lower estate taxes. Because if you’re leaving behind an inheritance, but half of it is going to the estate taxes, that can be a daunting realization.”
She emphasized that if you take this option, it’s crucial to work within federal limits, as gifts exceeding $15,000 per grandchild a year will incur the gift tax. (The donor pays this tax, and it is probably not the way you want your retirement savings eaten up.)
But there are some exemptions to gift tax law: Monetary gifts in excess of $17,000 can remain tax-free as long as they go toward medical or educational expenses and are paid directly to the institution.
6. Do your research
One fail-safe way to help out your grandchildren across the board is by staying up to date on any changes to the law that will affect inheritances. One recent change that Amorello highlighted is buried within the Secure Act, which passed in December 2019 and is intended to help Americans save more and save better for retirement.
You’re probably already aware that the bill made it easier for small business owners to offer retirement plans and raised the required minimum distribution age from 70 1/2 to 72, but you might not have noticed one provision affecting what’s called the stretch IRA.
“Beneficiaries of IRAs used to be able to take income from an inherited IRA over the course of a lifetime, but now there is a 10-year limit,” Amorello explained. Under the new law, anyone who inherits an IRA will have to empty it within 10 years of the death of the original account holder, devastating its growth potential.
As Amorello noted, changes like this one affect income and estate planning across the board, so keeping abreast of them now can help your family avoid a scramble of research and fact-finding during what will already be a traumatic time.
7. Introduce your grandchild to your financial advisor
You know the saying about giving a man a fish versus teaching him to fish? Nowhere is it better applied than to the practice of building solid money habits.
“Introduce your children and grandchildren to your financial advisor to help them help with saving and planning as soon as possible,” Amorello urged. “A good, family-based practice works with all generations to set everyone up for success. The younger you are when you start working with an adviser, the better off you’ll be in the long run. Especially if you are planning on leaving behind a large inheritance, having a professional guiding your grandchildren toward prudent investment strategies can help grow the funds during a time in their life where they likely don’t yet need it.”
Most schools are woefully lacking when it comes to teaching kids about money management, so tackling that task yourself will likely prove indispensable to your family’s future financial health.
Retirement Account Moves to Make Before Dec. 31
Article written by Sandra Block, Kiplinger.
Now is the perfect time to shore up your retirement accounts and make sure you are as well-positioned for the future as possible. Before year-end, aim to top off retirement savings plans, and if appropriate, take your RMDs.
What retirement account moves should you make before 2025?
You have until December 31 to contribute up to $23,000 to your 401(k) for 2024 if you’re younger than 50. You can put in an extra $7,500 if you’re 50 or older by the end of the year, for a total $30,050. For IRAs, you have until the April 2025 tax-return filing deadline to contribute the $7,000 maximum, or $8,000 if you’re 50 or older.
If you’re self-employed, you may be able to stash even more in a retirement account. As a sole proprietor, if you want to make an employee contribution to your own solo 401(k) account for 2024 (the same employee-contribution limit applies as with a 401(k) from standard employment), you must establish the solo 401(k) and indicate that you plan to make an employee deferral by the end of 2024. But you have until the April 2025 tax-return filing deadline to make your employee contribution.
You can also contribute up to 20% of net self-employment income as an employer, and you have until the April 2025 tax-filing deadline to make that contribution. Total contributions have a limit of $69,000 — or $76,500 if you’re 50 or older.
With a SEP IRA, you can contribute as much as 20% of your net self-employment income, with a $69,000 limit for 2024. You have until the April 2025 tax-filing deadline to establish and fund your SEP IRA for 2024.
When should you take RMDs?
If you turned 73 in 2024, the deadline to take your first required minimum distribution from traditional IRAs and 401(k) plans is December 31, 2024.
The law known as SECURE Act 2.0, enacted in late 2022, lowered the penalty for missed withdrawals from 50% of the amount you should have withdrawn to 25% (10% if you correct the missed withdrawal in a timely manner). Still, that’s a significant chunk of your nest egg, so it’s important to get it right the first time. To calculate your RMD, divide your year-end account balance from the previous year by the IRS life-expectancy factor based on your birthday in the current year. Reach out to your financial advisor for help calculating your RMDs.
10 Ways You’re Wasting Money at the Supermarket
Article written by Donna Fuscaldo, AARP
The supermarket is where you go for the ingredients to prepare an affordable meal. But it’s also a place where you can overspend if you aren’t careful.
1. Loading the cart up with processed food
Time-strapped consumers love the convenience of throwing a frozen pizza in the oven or a burrito in the microwave when they need a quick bite, but relying on processed food to save time will cost you.
“You don’t have time to make a meal, so you buy something you can pop in the oven, but you are paying a lot more for that,” says Trae Bodge, a money expert and founder of TrueTrae.com.
That’s not to mention the impact processed foods can have on your health. Research published this spring in the journal BMJ found people who had a higher intake of processed foods had a higher risk of dying early, compared with people who ate the least amount of processed foods. Instead of buying a frozen pizza or another processed meal, Bodge encourages cost-conscious shoppers to buy individual ingredients and make meals from scratch, which are cheaper and often healthier.
2. Buying snack packs
From cookies to nuts, it’s easy to find snack packs in the grocery store. They’re convenient, without a doubt, but they’re also more expensive than buying a larger quantity and portioning it out yourself.
3. Opting for precut veggies and fruits and prepared meals
Precut produce is a time saver, but it’s also a money waster. Supermarkets attach a premium to these items because they’re doing the work of cutting and preparing the foods for you. “The last time I was at the grocery store, a woman fighting arthritis asked for my help shucking some corn. Instead of opting for the more expensive preshucked, cellophane-wrapped corn, she got a 3-for-$1 deal and a little conversation just [by] asking [for my help],” says Vines.
4. Shopping without a list
A surefire way to overspend at the grocery store is to go without a shopping list. That causes “one of the biggest budget leaks,” says April Lewis-Parks, director of financial education at Consolidated Credit, a debt relief company. “You wander the aisles, picking up extras, and before you know it, your cart is full of things you didn’t plan for or really need.”
By walking into the grocery store armed with a meal plan and an accompanying shopping list, you’ll be less susceptible to tempting displays and shiny packages. “You’ve got a plan, and sticking to it means no more impulse buys that inflate your bill,” she says.
5. Stocking up on bottled water
Last year alone Americans consumed nearly 16 billion gallons of bottled water, with sales for the industry up 6.5 percent year-over-year. That’s despite the impact plastic bottles have on the environment. “It’s so easy to make your own bottled water. Invest in one reusable water bottle per family member and get a filtered pitcher if your refrigerator doesn’t have one,” Bodge recommends. A plus: You’re not using all those plastic bottles that end up in a landfill for 450 years.
6. Being too loyal
Many of us are creatures of habit and have a favorite grocery store we tend to frequent. But being loyal to a particular store can backfire if you can nab better sales at a rival supermarket. “Let the deals lead your shopping outings,” says Vines.
7. Shunning store brands
These days most grocery stores sell their own private label products that sit next to the major brand names, with store brands up to 20 percent cheaper, says Vines.
8. Fearing loyalty programs
Most supermarkets reward loyal shoppers with discounts, deals and freebies. To reap the rewards, you usually have to sign up for the loyalty program online or through an app. That typically requires giving up some of your personal information, but in return you get access to special offers. “Many supermarkets extend weekly deals to loyalty club members,” says Vines. “Those savings can be compounded by downloading store apps, which in many cases feature access to digital coupons.”
There is a movement underway to make loyalty programs easier to use for shoppers who aren’t tech-savvy. Some supermarkets now have kiosks at the entrance to the store, where shoppers can scan their loyalty card or enter their phone number to get that week’s digital offers uploaded onto their shopper’s card and applied at checkout automatically.
9. Buying small quantities
Nobody wants to waste food, but Lewis-Parks says in certain categories, including rice, canned goods and frozen veggies, it’s cheaper to buy in bulk. “You’re stocking your pantry for the long haul without burning through your budget,” she says. Buying beef and poultry in bulk can also help you save money. If you choose to freeze these foods, make sure to eat the food within the proper time frame; generally, beef can be stored in a freezer for up to one year and poultry for up to four months.
10. Not taking advantage of deals and discounts
Supermarkets pull out all the stops to get you to spend more, but many also offer ways for you to save. From manager specials to senior discount days, you’re missing out on big savings when you don’t use coupons or take advantage of sales. “Senior discount days at your local supermarket are like getting a secret membership card that unlocks a percent-off treasure every week,” says Lewis-Parks.
Places in the United States That Feel Like Europe
Article written by Katherine LaGrave, Afar.com
When your passport has expired or a long-haul flight isn’t in the cards, these 15 U.S. destinations will make you feel like you’re in Europe.
1. Pella, Iowa
If you love: The tulip fields of Holland
Where to stay: Royal Amsterdam Hotel
It may seem like a random place for one of the country’s largest tulip festivals, but Pella, Iowa, is full of surprises. From Dutch bakeries selling windmill cookies to a giant pair of clogs you can take photos in, Pella makes visitors feel like they’ve been transported to the Netherlands. The town’s annual Tulip Time festival takes place every year during the first weekend of May. Even if you don’t come to the town then, there are still plenty of Dutch-themed things to do: visiting the historical village, the Vermeer Windmill, the Scholte House Museum, and the Pella Opera House. And when you’re ready to head back to modern times, Des Moines is less than an hour away.
2. New Orleans, Louisiana
If you love: The romantic architecture of France
Where to stay: The Henry Howard Hotel
While the French Quarter’s energy is certainly very different from that of cities like Paris, the architecture is reminiscent of buildings in France. Find a quiet moment in front of one of New Orleans’s most distinctive buildings—the Old Ursuline Convent Museum, the last intact example of colonial French architecture in the Big Easy—and dig into the city’s rich Creole cuisine (po’boys, anyone?). And there’s always Mardi Gras (a raucous celebration with deep French roots) if you really want to party.
3. St. Augustine, Florida
If you love: Málaga, Spain
Where to stay: St. Francis Inn
St. Augustine, Florida, the oldest continuously occupied settlement in the United States, was founded by the Spanish in 1565. Old World Spanish influence can be felt all over the city’s historic district, from its cafés to sites like the Castillo de San Marcos National Monument, which the Spanish built to protect its regional trade routes in 1695. Aviles Street, also located in St. Augustine’s Old Town, is home to the city’s art district and is considered the oldest street in the country. As for where to stay, the St. Francis Inn dates back to 1791, and its rooms and suites have a Spain–meets–Key West vibe: Think stucco walls, bright shutters, wood floors, and antique beds.
4. Cape Cod, Massachusetts
If you love: The artsy and craft-centric coastal region of Cornwall, England
Where to stay: Chatham Bars Inn
Miles of gorgeous Atlantic coastline, sweeping sand dunes, delicious seafood, and a thriving arts and crafts community: Cape Cod could easily pass for Cornwall, as long as you’re OK swapping Cornish pasties for clambakes. Wake up to ocean views at the historic 1914 Chatham Bars Inn and enjoy its private quarter-mile-long beach. Head into town for a little history lesson at Atwood House & Museum, in a 1750s home (open seasonally), harvest your own oysters with Chatham Shellfish Company, and cap off the day with a pint and pub grub at Hog Island Beer Co.
5. Virginia Wine Country
If you love: Off-the-radar Italian villages and rustic vineyards
Where to stay: The Goodstone Inn & Restaurant
The architecture may be more colonial than Tuscan, but Virginia’s wine country exudes the same rural appeal as the Italian countryside. About an hour’s drive west of Washington, D.C., Middleburg’s Goodstone Inn & Restaurant beckons with secluded stays in suites and cottages. Nearby wineries with tastings include Greenhill Vineyards, Boxwood Winery, and Stone Tower Winery.
6. Sonoma County, California
If you love: The lavender fields and rolling vineyards of Provence, France
Where to stay: Farmhouse Inn
You may be familiar with the wineries and dramatic coastline of California’s Sonoma County, but it’s also home to lavender farms that bloom each summer, like Monte-Bellaria di California (near Sebastopol) and Matanzas Creek Winery (in Santa Rosa). You’ll have a hard time convincing yourself you aren’t in the French Riviera. After a day outdoors in the fragrant fields, check into Forestville’s Farmhouse Inn. With only 25 rooms with private patios set among flowering gardens and a Michelin-approved restaurant with a dozen-odd tables, this charming resort is delightfully intimate.
According to SHRM, a 2021 Employee Benefits Survey conducted by XPertHR showed that roughly 82% of employers studied matched a portion of their employees’ contributions while the remaining 18% didn’t provide any matches at all.
Source: shrm.org, 2021
Entertainment & Education
Looking for something to read?
This list consists of the top 7 retirement books of 2024.
Source: Morningstar.com
On the Bright Side
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