December 15, 2019

The Decade in Retirement: Wealthy Americans Moved Further Ahead

Just 52 percent of American households owned retirement accounts in 2016, according to Federal Reserve data, not much changed from 2010, when that figure stood at 50 percent. Racial gaps in account ownership are especially pronounced — 58 percent of white households owned retirement accounts in 2016, compared with just 33.6 percent of black households and 27.8 percent of Latino households.

Federal efforts to expand the availability of retirement accounts foundered during the decade. During the Obama administration, Congress refused to enact a system of mandatory auto-enroll I.R.A.s that President Barack Obama had proposed for workers lacking access to workplace plans; since then, 10 states have enacted similar plans of their own and several have launched.

Among households that had workplace retirement plans, the gains have been substantial. Average account balances jumped 22 percent from 2006 to 2018, according to Vanguard data.

More workers are contributing to plans as a result of widespread adoption by plan sponsors of automatic enrollment features. Equally important has been a major shift toward the use of target date funds, which add a level of professional management by automating asset allocation between equities and fixed income, adjusting the mix as retirement approaches. Last year, 52 percent of participants were using a target date fund, up from 13 percent in 2008, according to Vanguard — a figure the company expects to reach 70 percent in 2023.

Workers who lost their jobs in the recession often lost not only their incomes, but also their health insurance. Older jobless people who were not yet eligible for Medicare were at the mercy of the individual insurance market, where the likelihood of pre-existing conditions meant that they paid much higher premiums — and higher deductibles — if they could find coverage at all.

But the passage of the Affordable Care Act in 2010 changed that, and the number of pre-Medicare older Americans without health insurance has dropped during the decade.

This year, 9.4 percent of adults ages 50 to 64 were uninsured, a decline from 14 percent in 2010, according to the Commonwealth Fund. The decline would have been much greater if 14 states had not rejected the law’s Medicaid expansion, according to Commonwealth — in states that expanded, the rate for this age group has fallen to 6.4 percent.

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Check Out the New W-4 Tax Withholding Form. Really.

But allowances were based on personal exemptions — an amount of money you could deduct for yourself and for each of your dependents — and those are now unavailable to taxpayers under the new tax law.

Instead, the new form takes workers through five steps that aim to account for all sources of income — including second jobs, a spouse’s job, self-employment income, and even income from things like dividends and interest — to determine the correct withholding amount. Employees also enter information about dependents and tax deductions to fine-tune withholdings.

“It’s like a mini income tax return,” said Andy Phillips, director of HR Block’s Tax Institute.

Some workers may be leery about alerting employers to second jobs or sharing details about investment income, said Kelley Long, a consumer financial education advocate with the American Institute of Certified Public Accountants.

To address those concerns, the form allows workers to use the I.R.S.’s online tax withholding estimator tool or to complete a printed work sheet to determine how much to withhold. The amount is entered on a separate “extra withholding” line, without details about how it was calculated. (Data from the estimator and the work sheet are not shared with the employer.)

Workers may also calculate the amount and then make separate, estimated tax payments to the I.R.S., independent of paycheck withholding.

The withholding estimator asks detailed questions, so it’s helpful to have last year’s tax return handy along with your most recent pay stub. Because new employees may not have the documents at work or may want to confer with a spouse, Mr. Isberg suggests that employers give new hires extra time to fill out the form — perhaps by letting them take it home.

Alternatively, if new employees are rushed for time, they can simply fill out the first step of the form — which asks for their name, address, Social Security number and filing status — and sign it (Step 5), Mr. Isberg said. Then, after reviewing their withholdings at their convenience, they can submit a revised form to make any necessary changes.

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Last Tax Season Was a Mess. Now’s Time to Prepare for This One.

Why? After the law went into effect, the government told employers how to tweak the amount of tax withheld from workers’ paychecks. It mostly suggested decreases, and, in some cases, filers didn’t have enough withheld. (Over all, however, the average refund amount declined only 1.3 percent last year.)

“It’s safe to say taxpayers were caught off guard by the impact of those changes,” said Brian Ellenbecker, a certified financial planner and senior vice president at Baird, a financial services firm in Milwaukee.

The new law simplified the tax lives of many households because it doubled the standard deduction. About 90 percent of taxpayers used the standard deduction on their 2018 tax return, the I.R.S. said, up sharply from 70 percent in 2017.

But that doesn’t mean there aren’t some simple strategies to consider to lower your tax bill, and there’s still time left in the year to put them to work.

For 2019, the standard deductions are up a little, to $24,400 for married couples filing jointly and $12,200 for single filers. For most people, that will do nicely.

But if your itemized deductions — including mortgage interest, state and local taxes (known as SALT, now capped at $10,000), and charitable contributions — are just shy of topping the standard amount, you might think about bunching certain deductions into alternating years.

Consider a family that gives $5,000 to charity at the end of every year. Instead of making that donation this month, it could do so in January, then make another as usual next December. The family would then have $10,000 in itemized deductions for the 2020 tax year.

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Signing Up for an H.S.A.? First Figure Out How You’ll Use the Money

H.S.A.s can be used for a variety of health and medical expenses, including dental care. The HSA Bank offers a summary of eligible and ineligible expenses on its website.

A complete list is available in I.R.S. Publication 502.

Here are some questions and answers about health savings accounts:

How much can I contribute to an H.S.A.?

For 2020, individuals can contribute up to $3,550 and families up to $7,100. People 55 and older can contribute an extra $1,000. To qualify for an H.S.A. next year, you must have a health plan with a deductible of at least $1,400 for an individual and $2,800 for a family. If you’re not sure if your plan qualifies, ask your insurer.

For this year, the limits are $3,500 for individuals and $7,000 for families. Contributions for 2019 can be made up until the April tax filing deadline.

What if I want to save for a while, then invest the money later?

A reasonable approach, for those who can afford it, is to save enough in your H.S.A. to cover your deductible before you begin investing, said Justin McCarthy, a director and senior wealth adviser at Mariner Wealth Advisors in New York. That can help strike a balance between covering short-term medical needs and saving for future health costs.

Do I have to reimburse myself from my H.S.A. right away?

No. You can let the money in your H.S.A. grow, pay for health costs out of another account, then reimburse yourself for the expenses from the H.S.A. at any time in the future, Mr. Ramthun said. Just be sure to save receipts — whether in an actual shoe box or in a digital version, which many H.S.A. providers now offer. That way, should the I.R.S. request proof that the money was spent on eligible expenses, you’ll have documentation, Mr. Ramthun said. If you do save paper receipts, he said, be aware that ink can fade. It’s also wise to have an online backup.

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Climate Change Adds Wrinkle to Art Collectors’ Concerns

“We wanted users to be able to collaborate with their insurance companies, their estate planners or an auction house if they’re trying to sell the work,” he said. “We wanted the barrier to entry to be low; a lot of the people we were working with were less tech savvy.”

(The service charges a monthly fee based on the size, not the value, of the collection. It goes up to $19 a month for individuals and $96 a month for institutional collectors.)

Geoffrey Koslov, a collector and co-owner of a Houston photography gallery, Foto Relevance, uses the Artwork Archive system for the works of artists he represents. He did it to manage his business as well as for insurance coverage.

But like many collectors, his personal collection is still listed in “binders and folders and a manual spreadsheet” — all things that could be destroyed in a flood, as was his own home in 2001 when a tropical storm flooded Houston. (He rebuilt his home higher, he said, and has weathered subsequent floods.)

There are many services that help owners and artists catalog their works, like Art Galleria, Artlogic and Veevart. Art advisers like the Winston Art Group, among the largest independent art appraisers in the United States, also have their own proprietary systems.

Most important to collectors, though, is keeping what they own confidential.

“If you’re going to have a location, a picture a description and a value of a piece of art, the most important part is confidentiality,” said Shanna Hennig, director of the Southwest region for Winston Art Group. Otherwise, the online system risks being a guidebook for art thieves.

Her group will catalog a collection while appraising it and consulting on buying and selling pieces. Ms. Hennig said that work revealed how lax some private collectors can be and the risk that poses.

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Yes, You Can Get Free Trading. But There’s Often a Catch.

And free trades might not even be worth that much to you. Few enlightened investors are chasing hot stocks anymore; they’re buying and holding a diversified mix of index funds to help them pay for big life events like college and retirement. (Index funds are basic mutual funds that track wide swaths of the stock market.)

The big brokerage firms know this, and many of them have followed the lead of smaller, upstart firms like Betterment, which are known as roboadvisers, to provide mass-manufactured digital portfolios that operate largely on autopilot, and cost very little.

Schwab introduced its own digital investment service in 2015, and tried to one-up its competitors by making its service “free.” But there was a catch.

Many roboadvisers typically charge an overall fee — say roughly 0.30 to 0.50 percent of a customer’s assets annually — along with the (usually very low) underlying cost of the investments. Schwab omitted that overall fee, charging just the cost of the underlying funds.

But investors must keep anywhere from 6 percent to 29 percent of their portfolio in cash, which currently pays 0.45 percent, according to a Schwab spokesman. Schwab earns more money the bigger the allocation is.

In 2017, Schwab added a premium service for those with at least $25,000 in assets, which includes help from a human certified financial planner: That now costs $30 a month, plus a one-time initial $300 fee, along with the costs of investments. And it also requires the high cash component.

Even with a commission-free trading structure, said Greg McBride, chief financial analyst at, “there are other revenue levers behind the scenes that brokers can pull.”

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For Millennials Making Their Way, a Detour: To Caregiving

For baby boomers who fretted about every aspect of their children’s lives, here’s another worry for the list: Their children may become their caregivers while also handling the pressures of young adulthood. One-fourth of the 40 million caregivers in the United States are millennials, ranging from their early 20s to late 30s, according to a report by the AARP Public Policy Institute.

These caregivers are members of what an expert on aging, Gretchen Alkema, calls the panini generation: “They are feeling the heat, and they are feeling pressed.”

They differ from the typical middle-aged caregiver in the so-called sandwich generation, she said.

“Millennials are just starting out — they are building their careers and creating their families,” said Dr. Alkema, vice president of policy and communications at the SCAN Foundation, which provides grants for aging-related projects. Their responsibilities may make it difficult for them to gain a toehold on the economic ladder, she said.

A change in family structure is one reason for the large number of millennial caregivers, Dr. Alkema said. “Boomers had their kids at a later stage of their life than their own parents, and they had fewer children to provide the care,” she said.

Also, many boomers are divorced and single, leaving caregiving to their children rather than to a spouse, she said. And those younger caregivers are more likely than older caregivers to be men, according to a SCAN-financed poll by The Associated Press-NORC Center for Public Affairs Research.

Younger caregivers spend an average of 21 hours a week on those tasks, usually for a parent, grandparent or close friend, according to AARP. And more than half perform such difficult jobs as helping someone bathe or use the toilet and preparing injections.

The long-term consequences can be severe, said Susan Reinhard, senior vice president of AARP and the director of its Public Policy Institute. During several dinners the institute held last year, many millennial caregivers said their family responsibilities limited their choices when it came to employment and children, she said.

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How to Give Away Your Trust Fund

“First you need to figure out: What do I actually have? How much can I access?” says Willa Conway, who is 31, currently has $3 million at her disposal and will eventually inherit millions more from a sand-mining fortune. Don’t ignore a feeling that you have more than you need. When Conway was in her mid-20s, a graduate-school adviser told her about Resource Generation, which helps the young and wealthy redistribute their wealth. At a four-day retreat Conway attended, a presenter said, “Give your money to social-justice organizing led by people most impacted by oppression.” After Michael Brown Jr. was shot by the police in Ferguson, Mo., Conway helped lead a campaign that raised $1.4 million for more than 100 organizing groups led by African-Americans.

Over the next few decades, as much as $68 trillion will be passed on, mostly from baby boomers to their heirs, in what some characterize as the greatest wealth transfer in history. Honest, open communication is ideal for an intergenerational exchange. Conway is in ongoing conversations with her parents and brother about gaining earlier access to the inheritance. For Conway’s grandparents, building a fortune was driven by a desire for well-being and security. Conway says: “My generation, we’re like, O.K., that didn’t work; we’re all going to die from climate change anyway. Capitalism didn’t protect us, and now we need to find different mechanisms to keep one another safe.”

Resource Generation provides giving guidelines at various tiers, ranging from redistributing all capital gains (“say no to making wealth off of wealth”) to giving away 10 percent of your assets annually to redistributing all inherited wealth or earned income beyond a moderate standard of living. Conway gives about 17 percent (around $500,000) annually. Find financial advisers you trust to help you.

Conway spent years feeling ashamed, when even her closest friends didn’t know she had a trust fund. Talk about money, equality and need with rich and working-class people alike (Conway calls these “cross-class conversations”). “If you’re in community, you realize that you don’t actually need as much money,” Conway says. “I don’t want my kids to have a trust fund.”

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Help! Renting a Vehicle Through Europcar Drove Me Crazy!

Because currency conversion rates vary daily, Europcar Chile sets a fixed rate based on the exchange rate on the first day of the month, plus 2 percent to account for the rate variance through the month. That’s generally industry standard. Acknowledging that you might not have had full access to the terms and conditions when you booked through a third-party site, Europcar has refunded your $194.

Our tire blew out shortly after picking up a BMW from Europcar in Rome. We were told that roadside assistance would cost 300 euros, plus the price of the tire; alternatively, I could exchange the car at the nearest Europcar location, about 16 miles north. But with a flat tire? Our Airbnb host helped us purchase and install a new tire, but I lost $96 in the process. Chris

Europcar confirms that its 24-hour roadside assistance for a flat tire should have been free, and that “it is not the company’s policy to ask a customer to drive with a blown-out tire.” (Amen to that.) In order to resolve what it has called “an honest misunderstanding,” Europcar has refunded you for the cost of the replacement tire. Here’s hoping that your next trip to Rome won’t be such a … Roman holiday.

The Oct. 27 edition of Tripped Up, in which a woman unsuccessfully tried to travel internationally with a passport set to expire four months, inspired all sorts of reactions from Times readers. Kate R. got right to the point: “Wouldn’t it make life easier if the powers that be just put that info on their websites instead of folks having to guess? That’s a problem with many government websites.” Agreed!

Sarah Firshein formerly held staff positions at Travel + Leisure and Vox Media, and has also contributed to Condé Nast Traveler, Bloomberg, Eater and other publications. If you need advice about a best-laid travel plan that went awry, send an email to

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FAFSA Says How Much You Can Pay for College. It’s Often Wrong.

But it also generates their expected family contribution, or E.F.C. — a number that can easily be misleading. It’s often higher than many households can afford, and yet in many cases, like the Phipps family’s, it’s still not enough.

“For a long time, there has been this growing chasm between the need-analysis formula and accurately reflecting a student and their family’s ability to pay for college,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators, which has members at nearly 3,000 schools.

The gap has grown wider not just because of the exponential rise in college prices, but also because of the E.F.C. formula itself. The formula, which stretches across 36 pages, often assumes families have far more income available to pay for college than they actually do, financial aid experts said, particularly in high-cost areas. The reason lies in its basic assumptions: that a family of four, for example, can subsist on less than $30,000, no matter where they live.

“Students have a lot more need than we are recognizing,” said Eddy Conroy, an assistant director at the Hope Center for Community, College and Justice at Temple University. “But the system isn’t really capturing that properly.”

Colleges use the E.F.C. to determine a student’s financial need — the difference between the college’s cost of attendance and the family’s expected contribution. Then, schools come up with a financial aid package. (About 400 schools, mostly private colleges, also use another formula, known as the CSS Profile, to determine institutional aid.)

But unless a student attends a college that promises to meet 100 percent of his or her need — and the vast majority do not — students and their families will probably pay more than what the FAFSA estimates.

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