7.65% of paycheck goes to Trust Funds. How are they doing?

Every year the Social Security and Medicare Trustees released a report updating the financial health of the Trust Funds.  These programs provide a very important financial base for retirees.  The primary source of funding is the payroll tax (FICA) of 7.65% (double if self-employed).  Additional individual savings and pensions (if any) augment these social insurance benefits to make up one’s standard of living during retirement.

So how are these base social insurance programs doing financially?  Not so well.  Let’s take a deeper look.

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Higher interest charges AND lost deduction? What the HELOC!

For those with Home Equity Lines of Credit (HELOC) and a need for borrowing, the last nine years provided extremely low interest rates – and therefore low interest charges - on amounts borrowed.  It was the flip side for savers earning close to nothing on cash savings.  And unlike credit card or auto loan debt, HELOC interest charges were tax deductible for those who itemized deductions.

Two recent developments have made HELOCs less appealing, though still a solid choice to consider for borrowing needs.

Higher Interest Rates

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It’s Tax Time Again! – Some Tips to Prepare

"The hardest thing in the world to understand is the income tax.”   Albert Einstein

It is that wonderful time of year when our mail and now email boxes are being filled with notices of “IMPORTANT TAX DOCUMENTS”.  As much as tax time is dreaded, the earlier you start gathering your documents and preparing your taxes the better off you will be.  Below are some tips to help you get organized and prepared for tax season.

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Summary of New Tax Bill and Key Changes

The tax law was passed by Congress and signed into law in late December. The changes impacted both individual and corporate taxes. This blog post provides an update – and convenient reference - from my mid-November post when differences between the House and Senate plan were still being considered.
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Wrap the Gift of Financial Wisdom for the College Graduate

I distinctly remember two graduation gifts from my uncles and aunts that I enjoyed – a ‘Choose Your Gift’ catalog and a wallet. Another gift that will provide fond memories – though it may take a little while to appreciate! – is a list of common financial topics and habits that if done early in one’s career, will pay lasting gifts into the future.
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Monitor Illiquid Asset Values for Impact on Estate Planning

Estate planning is an important part of a financial plan. The term can mean different things depending on one’s perspective. Some may believe it is only needed by the wealthy to manage estate taxes, but in fact all people should have a plan for their estate. The level of complexity will vary by wealth and intentions.
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$233,610 to raise a child – excluding college? Seriously?

The USDA recently issued Expenditures on Children by Families, 2015 or more commonly known as “The Cost of Raising a Child” report. The answer: $233,610 per child for a middle-income couple with two children. This is in today’s dollars (not inflation adjusted) through age 17 and does NOT include the cost of a college education.
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