This Week In Your Wallet: Beat Uncle Sam To The Punch
Unless you live in Massachusetts or Maine, in which case you’ve got another… hmm, 11 hours, counting down… tax day has come and gone. You can breathe a sigh of relief and not think about them until this time next year, right? Not exactly — particularly if you’d like to tip the scales in your favor a little more next year. “You really can’t do much to change your taxes after the fact, so it’s important that people be focused on those beforehand,” says Greg Rosica, contributing author to the EY Tax Guide 2016.
If you didn’t itemize this year, you might want to start prepping now to do it for tax year 2016. Itemizing is time-consuming but cost effective, and it’s a good choice for people with a lot of controllable items, like real estate taxes and charitable contributions.
“This is a great time to take out a folder, write ‘2016 Taxes’ on it and put it next to where you keep your paperwork,” says Rosica. Every time you get a receipt for a charitable contribution, spend money on stamps or other things for your volunteer pursuits or rack up expenses because you’re searching for a new job in your field, slide it in. Finally, if this is the year you’re starting a business, track those expenses carefully too. There’s a deduction of up to $5,000 in start-up costs available to be taken the year you incur them.
Avoid These Pricey Time-Savers
Most of us can agree that time is money, but retailers often take advantage of how valuable we think time is by providing shortcuts that will really cost you. U.S. News & World Report has a few “time-saving” traps smart consumers should avoid.
- Not Clearing Your Cache: Before shopping online for discounts, flights or other travel deals, clear your browser’s cache or history. Retailers can track how long you’ve mulled something over and may hike the prices as your interest (and maybe desperation) increases.
- Free Shipping: It sounds like a great deal, but many of us end up throwing a few unnecessary items into our online cart to make the free shipping minimum. Turn it around by buying mostly in person and shopping for bulk items online.
- Shrinking Packages: Once again, manufacturers are shrinking products – laundry detergent, tissue boxes and cocoa packets according to U.S. News – so you’re getting more for less. Keep an eye out for the biggest offenders. Aim to buy product refills when you can. And if you need a pick-me-up, this blast from my past all about package shrinking ought to do it.
How Much Will Retirement Really Cost?
Why do cats purr? Why are some people lefties and other people righties? To that list of unanswerable questions, you can add this one: How much will retirement really cost? Four in five Americans aren’t sure how much money they can safely spend in retirement each year without outliving their assets, according to new research from New York Life.
Many experts say 4% is a safe yearly withdrawal rate for the typical retiree. If you stick to it (scaling back a bit in a year when your portfolio is down, increasing slightly when it’s up) your money should last 30 years. Unfortunately, more than half of Americans over 40 believe the number is much higher. And one-third said they thought they could safely spend 10% of their nest egg each year without running out. Wrong! If a retiree withdrew 10% of retirement savings every year, he or she would risk running out of money in 11 years or less.
So what can you do? Educate yourself — use an online calculator or a trusted financial advisor to figure out what a safe retirement spending rate is for you. And if you haven’t retired yet, try using my calculator to determine what size your retirement nest egg should be.
Possible Mortgage Relief
Finally, if you’re still suffering from the housing crisis, you should know that the Federal Housing Finance Agency is now reducing principal — not just interest rates — on some troubled loans. Mortgage services are required to contact eligible borrowers about Principal Reduction Modification (PRM) before December 31 of this year. Eligibility requirements include having a loan owned or guaranteed by Fannie Mae or Freddie Mac and being 90 days or more delinquent as of March 1, 2016. The bottom line: If you’re contacted, listen up (in other words, this is not a scam.) For 33,000 people, help has finally arrived.
Have a great week,
Jean
