October 20, 2019

A Will Without Ink and Paper

Ms. DiChello also worries that some states might alter the Uniform Law Commission’s model. She said this happened to standardized trust language in a similar proposal a few years back.

“The Uniform Commission has proposed this model that very few states are going to adopt,” she said. “Some states are going to be more flexible than other states with what constitutes an e-will.”

Using the video chat poses a challenge, too. Israel Sands, a trust and estate lawyer in Miami Beach, Fla., said that the person signing the will might look fine, but that someone outside the video frame could be exerting undue influence. Having a lawyer draft the documents in addition to being there for the signing offers an extra level of protection.

“This is not like getting toilet paper delivered by Amazon instead of going to a supermarket,” he said. “This is a solemn thing that people don’t do every day.”

For people at risk of being exploited, an e-will may be particularly troublesome. John D. Dadakis, a partner at the law firm Holland Knight, represented the estate of Huguette Clark, the reclusive heiress who died without close heirs or a will, in a contentious legal battle over her $300 million estate.

“With Huguette Clark, people were trying to get a will for her for ages,” he said. “How does a vulnerable person come to conclude that they can even create a document like this? Someone needs to write the will for her.”

Mr. Dadakis said such e-wills were likely to work better, at least now, for younger people with fewer assets. But if their lives grow more complicated, the online systems may not be robust enough.

“One of the reasons you go to good advisers is to really understand what you’re signing,” he said. “If you sign a will you’ve picked off a website but don’t realize what the will and trusts means, you’re creating even more difficulty for family to understand what’s happening to you and take care of you.”

Article source: https://www.nytimes.com/2019/10/18/your-money/electronic-wills-online.html?emc=rss&partner=rss

A Will Without a Lawyer

Ms. DiChello also worries that some states might alter the Uniform Law Commission’s model. She said this happened to standardized trust language in a similar proposal a few years back.

“The Uniform Commission has proposed this model that very few states are going to adopt,” she said. “Some states are going to be more flexible than other states with what constitutes an e-will.”

Using the video chat poses a challenge, too. Israel Sands, a trust and estate lawyer in Miami Beach, Fla., said that the person signing the will might look fine, but that someone outside the video frame could be exerting undue influence. Having a lawyer draft the documents in addition to being there for the signing offers an extra level of protection.

“This is not like getting toilet paper delivered by Amazon instead of going to a supermarket,” he said. “This is a solemn thing that people don’t do every day.”

For people at risk of being exploited, an e-will may be particularly troublesome. John D. Dadakis, a partner at the law firm Holland Knight, represented the estate of Huguette Clark, the reclusive heiress who died without close heirs or a will, in a contentious legal battle over her $300 million estate.

“With Huguette Clark, people were trying to get a will for her for ages,” he said. “How does a vulnerable person come to conclude that they can even create a document like this? Someone needs to write the will for her.”

Mr. Dadakis said such e-wills were likely to work better, at least now, for younger people with fewer assets. But if their lives grow more complicated, the online systems may not be robust enough.

“One of the reasons you go to good advisers is to really understand what you’re signing,” he said. “If you sign a will you’ve picked off a website but don’t realize what the will and trusts means, you’re creating even more difficulty for family to understand what’s happening to you and take care of you.”

Article source: https://www.nytimes.com/2019/10/18/your-money/electronic-wills-online.html?emc=rss&partner=rss

It’s Time to Choose a Health Plan. Prepare Yourself for the Cost.

Check whether your plan will still cover your specific prescriptions and whether your doctor and hospital will remain in your covered network — where costs are lower — for the coming year and call to verify it. “Online directories are notorious for being inaccurate,” Ms. Donovan said.

Also, if you’re married, consider whether a spouse’s health plan may be less costly, she said.

If you do choose a high-deductible plan, try to put as much money as you can into an H.S.A., Ms. Donovan said. If you don’t use it, you can keep the money and may even invest it for care in the future. And money in an H.S.A. can be used to pay for children’s care, even if they are covered by a different health insurance plan, Ms. Donovan said.

At a minimum, Mr. Rae said, it’s a good idea to contribute the money you save on premiums by switching to a high-deductible plan.

Another money-saving option to consider: Many employers will offer a premium discount, or contribute extra money to a health savings account, if workers agree to take a health assessment or screening. The idea is that identifying factors like smoking or high blood sugar can help people get treatment and avoid developing health problems that are more serious and costly to treat.

Here are some questions and answers about health coverage for 2020:

Can I save money by using “virtual” doctor visits?

Employers are increasingly offering options for workers to obtain treatment from doctors who are in a different location using technology, including live video chats and remote monitoring using mobile apps.

The cost depends on the details of your health plan. Typically, someone with a high-deductible plan will pay about $40 to $50 for a virtual doctor visit, compared with $70 when visiting a convenience clinic and about $140 for an office visit with a primary care doctor, Ms. Watts said.

How much can I contribute to a health savings account in 2020?

The maximum contribution for next year is $3,550 for individuals and $7,100 for family coverage. (People 50 and older can contribute an extra $1,000.) To qualify for an H.S.A. in 2020, a health plan must have a deductible of at least $1,400 for an individual and $2,800 for a family.

Article source: https://www.nytimes.com/2019/10/18/your-money/health-insurance-open-enrollment.html?emc=rss&partner=rss

When a Mortgage Is Part of Your Retirement Plan

In the experience of the financial adviser David Markle, people who are undisciplined about money during their careers will be similarly undisciplined in retirement. So he pushes the anti-debt message hard with his clients, hoping to curb their free-spending impulses. “I tell them, ‘If you have debt, you’re not ready to retire,’” he said.

What if they don’t have cash available to pay off their debt? Mr. Markle, who is based in Allentown, Pa., encourages clients to sell their pre-retirement homes, pay off their loans, and downsize into something more affordable.

Dr. Kotlikoff has an even more drastic-sounding suggestion. If you don’t have cash available, you should consider skipping your 401(k) and other retirement plan contributions and use the funds to pay down your home loan. “This will, on balance, raise your living standard and lower your risk in retirement,” he said.

Dr. Kotlikoff came to this conclusion after running a series of scenarios through the retirement-planning program on his website, MaxiFiPlanner.com. He recently published a case study on the site explaining his findings. The MaxiFi Planner software assumes you will be earning the 30-year Treasury bond rate on your investments, currently a little more than 2 percent.

Many financial advisers will hold their noses at Dr. Kotlikoff’s suggestion. In addition to the immediate tax savings they produce, retirement saving plans often include matching contributions from the employer. “Are you going to forgo a company match in your 401(k)?” Mr. Spero asked. “That would be crazy.”

The bigger issue, though, is that debt can be very useful. The Oregon financial planner Kyle Mast has a client who had a good year with his real estate investments and wanted to pay off a line of credit on his house. But Mr. Mast, who prefers his clients not to carry debt in most cases, told him to hold everything.

“We were able to put $50,000 into a tax-deferred account for him alone because he has his own business. This saved him $22,000 in federal, state and FICA taxes,” Mr. Mast said. When the client retires in two or three years, he can pay down his loans with money from his retirement accounts if he feels the need. His reduced income at that point ought to put him in a lower tax bracket.

Article source: https://www.nytimes.com/2019/10/17/business/when-a-mortgage-is-part-of-your-retirement-plan.html?emc=rss&partner=rss

Medicare Shopping Season Is Here

Enrollees in original Medicare have access to a much wider range of providers, and they do not need to navigate the referral requirements and prior authorization steps used by many Advantage plans.

Many enrollees in original Medicare buy supplemental Medigap policies to cover their out-of-pocket expenses. These can be significant. There’s no annual limit on what you pay out of pocket; Part A (hospitalization) has a deductible this year of $1,364 for each episode of illness, plus fixed daily costs for extended stays. Part B (outpatient care) covers 80 percent after you meet the annual deductible ($185 this year). Users of the original program usually also buy a prescription drug plan, with premiums averaging just over $33 a month this year.

But original Medicare can be less expensive for enrollees who encounter a serious illness and use a lot of services. That is because the annual premiums for Medigap, which cover nearly all cost-sharing requirements in Medicare Part A and B, usually are lower than the out-of-pocket limit found in Advantage plans.

Advantage plans are required to cap total out-of-pocket spending — the average among all plans this year for enrollees in H.M.O. or PPO plans is $5,059 for in-network services, according to Kaiser; the average limit rises to $8,818 when Advantage PPO enrollees use out-of-network services.

Medigap premiums, by contrast, vary greatly by region — but often it is possible to cap out-of-pocket costs at a lower level than what is available in Advantage plans. In New York City this year, Medigap Plan G plans, among the most comprehensive options, range in cost annually from $2,640 to $5,460, according to Medicare data. But in Nashville, Tenn., the same plans carry premiums ranging from $1,044 to $2,580.

“It’s important to look at the doctors and hospitals in the network,” Ms. Neuman said. “Many people are less likely to think about this when they first join Medicare, especially if they are relatively healthy. They don’t really consider whether specialists are in network until they do get a serious illness, which may come years after they first go on Medicare.”

Advantage enrollees who think they may want to shift to original Medicare with a Medigap plan should do so while they are still healthy. When you first sign up for Part B, Medicare’s “guaranteed issue” rules forbid Medigap plans from rejecting you, or charging a higher premium, because of any pre-existing conditions. But after that time, Medigap plans in most states are permitted to reject your application or charge higher premiums.

Article source: https://www.nytimes.com/2019/10/04/business/medicare-retirement-health-care.html?emc=rss&partner=rss

The Should-Be Solution to the Student-Debt Problem

Haley Garberg, a newly married 33-year-old physical education teacher, has been in various repayment plans for nearly a decade. Her first job after graduating in 2008 paid $22,000 annually — a salary that didn’t come close to covering her living expenses and a $700 monthly loan payment. With her parents’ help, she made those payments for a couple of years. But she eventually called her loan servicer and managed to get into a plan that saved her nearly $200 a month — enough wiggle room to afford internet service.

Still, Ms. Garberg was living close to the edge. She moved back with her parents in 2013 to build up her savings as she also dealt with a rare breathing condition that required three surgeries over the following year. A $3,000 insurance deductible meant she had to take out a personal loan to pay her share of the bills, and when she couldn’t afford her inhalers, at roughly $300 to $400 a month, she would do without them. She switched plans again in 2014, and pursued a master’s degree in hopes of boosting her earning power.

“Income-driven repayment doesn’t care that you have 18 bills to pay,” she said.

First instituted 25 years ago, income-dependent repayment was expanded during the administrations of George W. Bush and Barack Obama. It also grew more complicated. Borrowers must sort through an alphabet soup of income-driven repayment plans: I.C.R., I.B.R. (which comes in two flavors, new and classic), PAYE and REPAYE.

Monthly payments are often calculated as 10 to 15 percent of discretionary income, but one plan costs 20 percent. Discretionary income is defined as the amount earned above 150 percent of the poverty level, which is adjusted for household size. For a single person, the federal poverty level is typically $12,490, so single borrowers generally pay 10 percent of what they earn above $18,735. (After 20 years — sometimes 25 — any remaining debt is forgiven. So far, about 20 borrowers have remained enrolled long enough for that to happen, according to the Education Department.)

But the payment calculation is the same for all borrowers, and doesn’t account for local variations in cost of living. And, as Ms. Garberg discovered, it also doesn’t consider borrowers’ other costs.

Article source: https://www.nytimes.com/2019/10/13/your-money/student-loans-income-repayment.html?emc=rss&partner=rss

It’s Tax Time Again for the Millions Who Got an Extension

If someone owes taxes but doesn’t have the money to pay the full balance, it’s still best to file a return, Mr. Christensen said. People are often reluctant to call the I.R.S., but it’s better to initiate communication with the agency and discuss your circumstances, he said. Contact the I.R.S., explain your situation and seek an agreement to pay the bill over time, he said. That way, you’ll avoid late-filing penalties.

“You’re better off filing,” he said, “ even if you can’t pay.”

The penalty for filing late is 5 percent of the tax that is owed, for each month (or partial month) the payment is late. The failure-to-pay penalty is 0.5 percent of the amount unpaid, also charged monthly. (Penalties are capped at 25 percent of the tax owed.)

The I.R.S. is often willing to waive the penalties for those filing or paying late for the first time, said Shannon Hudson, a certified public accountant and partner at Altair Group in Bedford, N.H. An abatement is not guaranteed, she said, but If you have a good track record, “more often than not, they’ll abate it.”

The good news is that if you’re due a refund, you won’t owe any penalties. But if you are owed money, it’s best to file a return and collect it, Ms. Hudson said, because there is a window of three years for collecting a refund. So anyone who is due money should file as soon as possible. The average refund is more than $2,700, the I.R.S. said.

If your refund is much larger (or smaller) than expected, it may be a good idea to check how much is withheld from your paycheck each pay period. You can increase or decrease your withholding by filing a new Form W-4 with your employer. The I.R.S. W-4 online withholding estimator can help you fill out the form.

Article source: https://www.nytimes.com/2019/10/11/your-money/tax-filing-extension.html?emc=rss&partner=rss

Average Weekly Allowance? It’s $30, a New Survey Finds

Here are some questions and answers about allowances:

How should I decide how much allowance to pay my child?

A rule of thumb is a weekly amount that is the child’s age in dollars: $5 for a 5-year-old, $10 for a 10-year-old and so on. Parents can consider a larger sum, paid monthly, when the child becomes a teenager, said John Lanza, author of the book “The Art of Allowance.” That “breakthrough” allowance, he said, can help the teenager begin budgeting over a longer period.

If money is tight, the institute’s Financial Literacy Commission suggests that smaller amounts — even a few dollars a week — can help teach the same lessons. The size is less important than what the child does with the money, Mr. Almonte said. The commission offers additional tips on its website.

How can I encourage my child to save when interest rates paid on savings accounts are low?

The premise of saving money over time for larger goals is important regardless of interest rates, financial advisers say. But seeing a balance grow by compound interest builds enthusiasm. One option is to pay a more generous rate on your child’s savings out of your own pocket or to match each dollar your child saves. Mr. Almonte recalled that his father, who stressed financial lessons with his children from an early age, would write a check — “He sort of made a ceremony out of it” — to match the cash his sons had saved over the previous year.

Should I require my child to work in exchange for an allowance?

While many parents favor linking an allowance to chores, that’s not necessarily the best approach, said Todd Yuzuriha, a co-host of “The Money JAR,” a family finance podcast sponsored by Junior Achievement. He recommends decoupling chores from an allowance since the goals of each are slightly different. An allowance, he said, is “a tool for parents to teach their kids about money.” Basic chores like helping around the house, he said, should be considered contributions everyone must make as part of the family.

“You don’t want your kid to think they’re optional,” Mr. Yuzuriha said, lest the child decide to skip taking out the trash and forgo the money. He suggests that parents consider paying only for extra work or projects, above and beyond shared household tasks.

Article source: https://www.nytimes.com/2019/10/04/your-money/weekly-allowance-average.html?emc=rss&partner=rss

Medicare Shopping Season Is Almost Here

Enrollees in original Medicare have access to a much wider range of providers, and they do not need to navigate the referral requirements and prior authorization steps used by many Advantage plans.

Many enrollees in original Medicare buy supplemental Medigap policies to cover their out-of-pocket expenses. These can be significant. There’s no annual limit on what you pay out of pocket; Part A (hospitalization) has a deductible this year of $1,364 for each episode of illness, plus fixed daily costs for extended stays. Part B (outpatient care) covers 80 percent after you meet the annual deductible ($185 this year). Users of the original program usually also buy a prescription drug plan, with premiums averaging just over $33 a month this year.

But original Medicare can be less expensive for enrollees who encounter a serious illness and use a lot of services. That is because the annual premiums for Medigap, which cover nearly all cost-sharing requirements in Medicare Part A and B, usually are lower than the out-of-pocket limit found in Advantage plans.

Advantage plans are required to cap total out-of-pocket spending — the average among all plans this year for enrollees in H.M.O. or PPO plans is $5,059 for in-network services, according to Kaiser; the average limit rises to $8,818 when Advantage PPO enrollees use out-of-network services.

Medigap premiums, by contrast, vary greatly by region — but often it is possible to cap out-of-pocket costs at a lower level than what is available in Advantage plans. In New York City this year, Medigap Plan G plans, among the most comprehensive options, range in cost annually from $2,640 to $5,460, according to Medicare data. But in Nashville, Tenn., the same plans carry premiums ranging from $1,044 to $2,580.

“It’s important to look at the doctors and hospitals in the network,” Ms. Neuman said. “Many people are less likely to think about this when they first join Medicare, especially if they are relatively healthy. They don’t really consider whether specialists are in network until they do get a serious illness, which may come years after they first go on Medicare.”

Advantage enrollees who think they may want to shift to original Medicare with a Medigap plan should do so while they are still healthy. When you first sign up for Part B, Medicare’s “guaranteed issue” rules forbid Medigap plans from rejecting you, or charging a higher premium, because of any pre-existing conditions. But after that time, Medigap plans in most states are permitted to reject your application or charge higher premiums.

Article source: https://www.nytimes.com/2019/10/04/business/medicare-retirement-health-care.html?emc=rss&partner=rss

Low-Cost Investing Can’t Get Any Lower Than Free

“Keep in mind that these firms aren’t charities,” Mr. Bryan said.

The new plan will cost Schwab roughly 3 to 4 percent of its total net revenue — perhaps $100 million each quarter. But the firm noted that its “commissions per revenue trade” have been falling for several years, which may have given Schwab the confidence to become the first major firm to eliminate commissions across the board.

Schwab’s fee elimination follows Interactive Brokers Group’s announcement last week of IBKR Lite, a service that will offer unlimited commission-free trading on domestic stocks and exchange-traded funds. (E.T.F.s are similar to index funds but trade like stocks on an exchange, meaning investors must pay commissions whenever they buy or sell shares, which also carry underlying investment fees.)

Investment firms have long been moving in this direction, with no-fee E.T.F. offerings expanding steadily since they first appeared about a decade ago.

A sampling: TD Ameritrade, which began offering no-fee trades on 100 E.T.F.s in 2010, now charges no commission on 500. Last year, Vanguard announced that it would offer more than 1,800 exchange-traded funds on a commission-free basis, which it said translated into 90 percent of all E.T.F.s trading on the major exchanges. Fidelity and Schwab announced on Feb. 12 that they would double the number of commission-free E.T.F.s in their lineups to more than 500.

Costs of stock trades have fallen as well. Robinhood, a Silicon Valley start-up, made a splash when its app was released in late 2014, offering commission-free trading on exchange-trade funds as well as stocks. At the end of 2018, it had more than six million brokerage accounts. And last year, JPMorgan Chase started offering 100 free stock and E.T.F. trades within You Invest, a digital investing platform.

While transaction costs have moved lower, so have the expenses embedded in mutual funds: Fidelity introduced two free mutual funds last year, capping a trend toward lower fund expenses.

But Schwab’s announcement pushes another new boundary.

Its shares fell almost 10 percent on Tuesday, but competitors that may feel pressure to match its offer were hit even harder. E-Trade was down more than 16 percent, and TD Ameritrade was down more than 25 percent.

Article source: https://www.nytimes.com/2019/10/01/your-money/charles-schwab-free-trades.html?emc=rss&partner=rss