Divorce & Data: How to Split Your Digital Life Safely

December 26, 2025

The Digital Aftermath

Breaking up used to mean splitting the vinyl collection and deciding who keeps the couch. Simple. Tangible. But today? The most complicated part of a separation isn’t sitting in the living room; it’s floating in the cloud.

We live online. A marriage in 2025 is basically a massive web of shared Netflix logins, joint bank apps, Amazon purchase histories, and thousands of photos on a server somewhere. This is the “Digital Split,” and honestly, it is messy. If people ignore it, they risk more than just awkwardness. They risk security leaks, drained accounts, and losing memories that actually matter.

Untangling this web takes a bit of grit, but it has to be done. Here is the playbook for separating a digital life without everything crashing down.

1. The Audit (Or: Seeing the Mess)

Before changing a single password, stop. Take a breath. You can’t fix what you can’t see. Most couples are far more digitally enmeshed than they realize. The first move is a simple audit.

Sit down and write it out. All of it.

• The Money: It’s not just the big bank account. Think Venmo, PayPal, crypto wallets, and those “buy now, pay later” apps.
• The Boring Stuff: Who pays the electric bill? Whose email is on the mortgage portal?
• The Fun Stuff: Spotify duos, Netflix profiles, gaming accounts.
• The Doorstep: Uber, Lyft, DoorDash.

Imagine the chaos if one person kills a shared credit card on Amazon without saying a word. Subscriptions bounce. Deliveries get canceled. It’s a headache nobody needs right now. Awareness is the best defense.

2. Locking the Virtual Doors

Once the list is ready, it’s time to secure the perimeter. Financial data is vulnerable, and emotions can make people do rash things.

For personal accounts like email, private checking, and social media, the passwords need to change. Today. And please, no more using the dog’s name or that old anniversary date. Pick something random.

This is also the moment to turn on Two-Factor Authentication (2FA) everywhere. It’s annoying, sure, but it’s a lifesaver. Even if an ex-partner guesses the new password, they can’t get in without the code sent to the phone. Also, dig into credit card apps and check for “authorized users.” If that isn’t cleared up, one person could be stuck paying for the other’s post-breakup therapy shopping.

3. The Photo Dilemma: Keep, Don’t Delete

This hurts the most. Who gets the pictures? The wedding video? The baby photos? Unlike a physical album, nobody has to lose out here.

The rule is strict: Duplicate, don’t delete.

Legally, wiping a hard drive or deleting a cloud account can be seen as destroying assets. It’s a bad look in court. Instead, buy a big external hard drive. Download everything, every shared memory, and hand the drive over. Or, use Google Photos to make a massive shared album, let them download it all, and then cut the link. Everyone walks away with their memories intact. No data lost.

4. Cutting the Invisible Ties

Then there are the things running in the background. The invisible tethers.

Check location sharing. Apps like “Find My” or Google Maps are great for knowing when a spouse is home for dinner, but after a split? It’s just surveillance. Unless there’s a solid reason to keep it on, like co-parenting coordination, shut it down.

The smart home is another trap. If one partner moves out, they shouldn’t still have the code to the front door or access to the Nest cameras. Watching an ex-partner come and go via a phone screen isn’t healthy for anyone.

5. The “Legacy” Check

It’s dark, but it matters. Check the beneficiaries.

Life insurance, 401(k)s, and investment apps all have that little “Transfer on Death” field. People fill it out once and forget it exists. If it isn’t updated, an ex-spouse could technically inherit money meant for kids or a new family ten years from now. It takes five minutes to fix, but it saves a lifetime of legal trouble later.

Final Thoughts

Separating a life is heavy work. But in this era, the digital separation is just as heavy as the physical one. It’s about privacy, security, and eventually, peace of mind. By locking down the data and safely copying the memories, the path forward gets a little bit clearer.

Pull the last three months of bank statements. That’s usually where the hidden subscriptions are hiding. Good luck.

Term vs Whole Life Insurance: Simple Guide for Smart Choices

October 15, 2025

Why Life Insurance Matters

Life insurance is really about looking after the people who depend on you. It is not just a form to fill out or another bill to pay. Imagine suddenly not being there. The bills do not stop, school fees still need paying, loans keep coming. Life insurance helps make sure your family is not left scrambling.

Choosing the right type can feel confusing at first. Term life, whole life. The names almost sound the same, right? But they work very differently. Understanding each one can save a lot of money and prevent unnecessary stress later.

Many young people think, “I’m fine for now, I’ll deal with it later.” It makes sense to think that way, but starting early usually keeps premiums lower and makes managing everything much simpler. It might not be exciting to think about, but it is practical and that is what counts in the long run.

Term Life Insurance: Affordable and Straightforward

Term life insurance is actually pretty simple once you get the hang of it. It covers someone for a set number of years, maybe 10, 20, or 30. During that time, premiums are paid. If something happens to the insured, the family gets the payout. If nothing happens, the policy just ends. That’s really it, nothing more complicated than that.

You can kind of think of it like renting protection. It’s really useful when life gets busy and responsibilities are piling up, paying off a home, taking care of kids, or managing loans.

For instance, imagine a 30-year-old buying a 25-year term policy worth ₹1 crore. The annual premium could be around ₹10,000. If something happens during that time, the family gets ₹1 crore. If nothing happens, the coverage stops. No frills, no fuss. Simple, affordable, and gives peace of mind exactly when it’s needed.

Whole Life Insurance: Protection That Lasts

Whole life insurance is actually a bit different from term insurance. So, it covers someone for their whole life, usually up to age 99 or 100, as long as the premiums are being paid. Part of what you pay goes into a cash value account, and over time, that grows slowly. And here’s the thing, you can borrow from it, take some money out if you need to, or even use it to pay future premiums.

This kind of policy is really good for people who want coverage that lasts their entire life or are thinking about leaving some money for their family later on.

For example, imagine a 30-year-old picking a whole life policy worth ₹1 crore. The annual premium could be about ₹60,000. Over the years, the cash value grows little by little, and whenever the insured passes away, the payout is guaranteed. Yeah, it costs more than term insurance, but it gives security for life and a bit of extra flexibility if something comes up.

Understanding the Key Differences

Here’s the thing, term insurance and whole life insurance aren’t exactly the same, even though people often mix them up. Term insurance is temporary and usually cheaper, kind of like renting a flat. Whole life insurance lasts your whole life and costs more, a bit like buying a house that also builds value over time.

The big difference is in how they work. Term insurance mostly just gives protection. Whole life insurance gives protection plus a bit of savings. Term is good for short-term stuff, like paying off a home loan or taking care of kids until they’re grown. Whole life insurance makes more sense if someone wants coverage for life or wants to leave some money for their family later on.

Why Term Insurance Appeals

Term insurance is attractive because it’s cheap, straightforward, and offers high coverage. Some policies allow conversion to permanent insurance if circumstances change.

The downside is obvious: coverage ends after the term, renewals can be costly, and there is no cash value to access.

Why Whole Life Insurance Appeals

Well, whole life insurance is something people usually pick if they want coverage that lasts their whole life. You get a guaranteed payout, and part of what you pay slowly builds cash value. It can also help with long-term stuff, like leaving money for your family or passing on wealth.

Here’s the thing though, it’s not all simple. The premiums are higher, and the cash value doesn’t grow very fast compared to other ways of investing. And some of these policies can get a little tricky, so it really helps to read the fine print and make sure it works for you.

How to Choose the Right Option

So here’s the thing, picking between term and whole life insurance really depends on your own situation. Term insurance is usually good for young families, people with temporary money responsibilities, or anyone who wants higher coverage without spending too much. Whole life insurance makes more sense if you can handle higher premiums and want protection for your whole life, along with a little savings built in.

Basically, term insurance is all about protection. Whole life insurance is protection plus a small financial cushion. It’s not complicated, but it helps to think about what actually fits your life, your budget, and your family’s needs.

A Practical Strategy

Here’s the thing, some families like to mix things up a bit. They go for term insurance to get the protection and then put the extra money they would have spent on a whole life policy into other investments. Over time, those investments can grow quite a bit while still keeping the family covered.

For example, if someone saves about ₹50,000 every year by choosing term insurance and invests it wisely, that could turn into a decent fund in 25 years. This way, the family gets immediate protection and some long-term growth too. It’s kind of a smart balance if you can plan it right.

Conclusion

Well, term life and whole life insurance do kind of different things, you know. Term insurance works if someone just wants coverage for a certain time and doesn’t want to spend too much. Whole life insurance is more for people who want coverage for their whole life and maybe a little savings along the way.

Here’s the thing, it really helps to think about your family, your money, and what your long-term goals are. Picking the right policy can give some peace of mind and make sure your loved ones are taken care of when it really matters.

QLAC 101

August 15, 2024

If you’ve saved well for retirement, then you may find you can cover your living expenses without needing to withdraw from your retirement accounts. But if you think that by age 73, you won’t need your full required minimum distributions or RMDs, then you might want to consider getting a qualified longevity annuity contract, or QLAC. 

Anyone between the age of 18 and 75 can purchase a QLAC, but there may be some people that this annuity makes more sense for. If you’re looking to avoid the market risk on some retirement accounts and ensure a steady, guaranteed income in retirement, a QLAC is probably a good fit for you. If you also have concerns about the longevity of your savings and having enough money later in life, then you may benefit from a QLAC. 

Here’s everything you need to know about a QLAC before deciding if it’s right for you.

How a QVAC Could Lower Your RMDs

A QLAC is a deferred fixed annuity contract sold by insurance and financial companies that you purchase with money from a retirement account, like a 401(k) or an individual retirement account (IRA).It’s important to know that Roth IRAs cannot be used to purchase QLACs as they do not come with RMDs to begin with.

RMDs are mandated starting at the age of 73 as of this year, but that will rise to age 75 in 2033. One appeal of the QLAC is that it can reduce the balance in your retirement accounts used to calculate those RMDs. “People tend to spend their RMDs,” says Steven Kaye, a financial planner in Warren, New Jersey. “So a QLAC forces people—in a good way—to leave more money in their IRAs,” he says.

One way to avoid using your RMDs is to use the funds from one of your retirement accounts to purchase a QLAC, which will guarantee that you receive regular payments for as long as you live. “So, if you used 25% of a $400,000 qualified account, your $100,000 purchase of a QLAC would immediately reduce your RMDs by 25%,” says Jerry Golden, investment advisor.  “And the income from a QLAC could be deferred until as late as age 85,” he says.

When you choose a QLAC, you’ll be able to set your payout date, which is when you’ll begin receiving payments. Just like with Social Security, the longer you wait to receive payments, the higher the payments will be. Once you have a QLAC, you’ll be able to delay RMDs until the payout date of your QLAC, which can be no later than age 85.

The Tax Benefits of Having a QLAC

Once you withdraw money from your QLAC, you’ll need to pay income taxes on it. However, a QLAC can be an efficient tax planning strategy. For example, by using $100,000 of a traditional IRA to purchase a QLAC, you’ll reduce the balance of your IRA by $100,000, which will lower the amount you’ll need to take out for RMDs. The lower your RMD, the lower your income will be on that, which could significantly reduce the income tax you’ll owe.

QLAC Contribution Limits and Inflation Riders

You are now permitted to buy a QLAC for up to $200,000 from an eligible retirement plan. Previously, you were limited to whichever was lesser of $145,000 or 25% of your account balance. The current $200,000 upper limit is a combined cap that applies to all of your eligible retirement accounts, even if you take money from different accounts or purchase more than one QLAC. But if you and your spouse have your own eligible retirement accounts, then you can each spend up to the $200,000 limit on your own QLACs.

Since a QLAC locks in future payments, you are protecting your retirement money from market dips later in life. But unless you purchase an inflation rider with your QLAC, which will lower the initial amounts you receive from an annuity, your monthly payment may lose value over time.If you’re considering acquiring a QLAC, then you’ll want to work with a financial advisor to make sure you’re picking the right one.

Considering Your Spouse When Purchasing a QLAC

Some QLACs offer a survivor payout, also referred to as contingent annuity payments. These would continue your annuity payments to your designated beneficiary, which is usually a spouse, after your death. Other QLACs offer death benefits that would return any unused premiums to your beneficiaries through a lump sum or series of payments. If you have a spouse or individuals who will depend on your annuity after your passing, then you need to make sure any QLAC you choose has one of these features. Without these features in your annuity, your survivors would get nothing.

In addition to making sure your QLAC comes with a survivor payout or death benefit, you may also consider getting a joint QLAC with your spouse. If you’re married, a joint QLAC would provide income payments that continue for as long as one of you is alive. The only downside to choosing a joint contract is that it decreases your income payments, compared to a single life contract.

When a QLAC Isn’t For You

If you’re 65 and in poor health, you probably don’t want to wait until age 85 to start receiving income payments, so a QLAC may not benefit you at all. “If the probabilities are that you have a longer than average life expectancy, QLACs can be a windfall,” says Artie Green, a financial planner. “But if you have a shorter than expected longevity, of course, that works against you with any annuitization.” QLAC recipients can use their funds on whatever they want, but often they spend it on late-in-life health care or housing costs. The purpose of a QLAC is longevity protection that could minimize or even eliminate the risks of running out of money.

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There are really only two scenarios in which a QLAC is a good fit. The first is if you have reached age 73 and do not need your RMDs to cover expenses. The second is if you think you’ll reach 73 and not have enough funds to pull from. QLACs can be a safeguard that guarantees you an income late in life, while also reducing your need for RMDs and even lowering your income taxes on them. At Insureyouknow.org, you may keep all of your financial and retirement planning in one place, making it easy for you to forecast and plan for your future.

Six Things to Know about SIMPLE IRA

April 30, 2024

Offering a SIMPLE IRA (Savings Incentive Match Plan for Employees) to employees is an effective way for small businesses to offer their employees a retirement plan. At a glance, this plan allows both the employer and employee to make contributions, and there are less reporting requirements and paperwork involved for the small business owner. Besides the ease in which these plans can be established for employees, the main perks are tax incentives for both the employer and the employee. “They are fairly inexpensive to set up and maintain when compared to a conventional retirement plan,” says client advisor at First American Bank Karina Valido. “For employers, contributions are tax-deductible. For participants, contributions and earnings are not taxed until withdrawn.”

Even though the SIMPLE IRA is a straightforward retirement option, here are six things to know about this plan, whether you’re an employer or an employee.

1. Employee Contribution Limits in 2024

With a SIMPLE IRA, an employee can, but isn’t obligated to, make salary reduction contributions. In 2024, the maximum amount an employee under the age of 50 can contribute is $16,000. With a SIMPLE IRA, you may also contribute to another retirement plan as long as both contributions don’t exceed the yearly limit. The annual limit for combined SIMPLE IRA and 401(k) contributions in 2024 cannot be more than $23,000 or $30,500 for people who are 50 or older. Since an employer cannot offer both plans, this would only apply to those employees who held a previous account elsewhere.

2. Employer Contribution Requirements

Employers must do one of two things: match employee contributions or make nonelective contributions. If an employer chooses to match each employee’s salary reduction contribution, they must do so by up to 3% of their employee’s compensation. While an employer may choose to match less than 3%, they must at least match 1% for no more than two out of five years. If an employer chooses to make nonelective contributions of 2% of the employee’s compensation, they must do so for every employee, regardless of having some employees who are making their own contributions. So if an employer chooses to make nonelective contributions, then they must also match the contributions of those employees who choose to contribute to their own plans.

3. SIMPLE IRA Tax Advantages

For employees, salary reduction contributions to their SIMPLE IRA reduces their taxable income and their investments will grow tax-deferred over time. Because it’s a tax-deferred account, you won’t need to pay capital gains taxes when you buy and sell investments within the account. Plus, unlike many other retirement plans, such as a 401(k), employer contributions to a SIMPLE IRA are immediately vested and belong to the employee.

Employers also benefit from tax incentives with the SIMPLE IRA. They can get a tax credit equal to 50% of the startup costs, or up to a maximum of $500 per year, for three years. This credit is in addition to the other tax benefits they will receive from contributing to employee retirement plans.

4. All About Withdrawals

During retirement, withdrawals will be taxed as regular income. Before the age of 59 ½, there’s a 10% penalty on withdrawals in addition to the income taxes you would owe. With the SIMPLE IRA, the withdrawal penalty rises to 25% if the money is taken out within two years of the plan being contributed to. Under qualified exemptions, like higher education costs or first home purchases, then you may avoid an early withdrawal fee, but you would still have to pay the taxes.

5. Eligibility for SIMPLE IRAs

The Small Business Job Protection Act of 1996 created the SIMPLE IRA. It was designed with small businesses and self-employed individuals in mind and meant to be simple, accessible, and inexpensive. “A SIMPLE IRA is a small-business-sponsored retirement plan that, as the name indicates, is simple to establish and maintain,” explains financial advisor at Marsh McLennan Agency Craig Reid. “Available to U.S. companies with 100 or fewer employees, SIMPLE IRAs are a cost-effective alternative to the mainstream 401(k) plan.”

In order to be eligible for a SIMPLE IRA, an employer must have fewer than 100 employees and have no other retirement plan in place. They must also make contributions each year. For an employee to be eligible, they must receive at least $5,000 in compensation during any two prior years and expect to receive the same during the current year.

6. The Difference Between SIMPLE IRA and SEP-IRA

Both a Simplified Employee Pension (SEP-IRA) and a SIMPLE IRA are employer-sponsored retirement plans that offer employees a tax-advantaged way to save for their retirement. Contributions in each grow tax-deferred until they are withdrawn during retirement. They are each designed to be easily established in small businesses, especially when compared to a 401(k).

One key difference between the two plans is that while a SIMPLE IRA allows both the employer and employee to make contributions, the SEP-IRA only allows the employer to contribute. The SEP-IRA, though, does allow higher contributions, which will be limited to $69,000 in 2024, compared to $16,000 in 2024 for the SIMPLE IRA. The other main difference between the two plans is that any employer can offer a SEP-IRA, while only businesses with less than 100 employees qualify for offering the SIMPLE IRA.

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If you’re a self-employed individual, a small business owner, or you have recently begun working for a small business that offers you a SIMPLE IRA, it will benefit you to know the upsides of having one and understand the rules around the plan. With Insureyouknow.org, you can store all of your financial information and records in one place so that you may stay organized and allow yourself the best decision-making process in your retirement planning.

How to Cut Down on the Cost of Owning a Car

February 15, 2024

In 2023, the average cost of owning a new car was $12,182 a year or $121 a month according to AAA. In addition to car payments, insurance, and maintenance costs, the price of gas is $5 a gallon,, which means that most U.S. households will spend $2,750 on gas per year. “If you are living paycheck to paycheck, it could put you over the edge,” says Ivan Drury, senior manager for Edmunds.com, a car shopping site. “But even if you are not, it’s very emotional. It’s in your face twice a week.”

The good news is that by cutting your expenses in other areas, such as with car insurance, you can save money and make up for the added charges at the pump. Besides simply driving less, which isn’t an option for many people, here are a few ways to make car ownership more affordable.

1. Shop Around For Car Insurance

According to J.D. Power, only 1 in 7 drivers changed auto insurers last year, but shopping around for lower premiums could save you a lot of money. In addition to your location and the type of car you own, other factors affect your rates, including your age and credit score. If you’ve improved your score within the last year, this one factor may lower your car insurance bill.

You can collect quotes through an insurance agent or use an online search engine, such as Experian, who claims to have saved drivers an average of $961 a year or $80 a month in 2021. Calling around or doing a quick search takes only fifteen minutes and could shave a lot of money off of your premium.

2. Check For Discounts and Adjust Your Existing Policy

Your existing carrier may offer discounts you don’t even know about, such as for paying your bill online and in advance. According to Zebra, paying your bill early online saves the average customer $170 a year. Bundling insurance policies, such as combining your homeowners and auto insurance, is another way insurance companies incentivize their policies through discounted rates.

There are usually three types of coverage on any given insurance policy, including liability, collision, and comprehensive. While most states require drivers to carry some amount of liability coverage, eliminating collision and comprehensive coverage could save you up to $900 a year. You may also opt to lower your car insurance premium by raising your deductible from $500 to $1,000. This makes sense if you don’t have a new or expensive car and can afford to pay the deductible if anything were to happen.

3. Outside Financing And Refinancing

One of the smartest ways to avoid high interest rates on a car payment is by securing outside financing. Compared to what the dealership will offer you, this can save you a ton of money in interest alone. Your local bank or credit union can help you shop around for the best offer. If you already have a monthly car payment, the next best thing to do is to look into refinancing your loan. Drivers who benefit the most from refinancing are those who have improved their credit score since initially securing their loan.

Of course if you can purchase a car outright, avoiding any kind of financing is always the very best option. If it’s possible for you to stick to a budget and save up, you may even be able to negotiate a better deal on the purchase price of your desired vehicle. Forty percent of the cost of owning a car is actually depreciation, which can equal more than $3,000 annually. That means that buying a gently used car is a great deal, without the rapid decline in value.

4. Sell One of Your Cars or Trade it Out

If you have a luxury or oversized vehicle, then trading your vehicle or a more practical car is always an option. Once you have a simpler car, you’ll save money on gas, insurance, and even maintenance costs. “Less fancy cars are more reliable,” says editor of Autotrader Brian Moody. “They have fewer gadgets.”

If your family has more than one car, then you may be able to sell one of them and end up saving a lot of money every month. Many families find that they adjust to sharing a vehicle, and when you need your own car for some reason, using Uber or Lyft periodically may still cost less than owning a vehicle. 

5. Save on Gas

Nearly twenty percent of the cost of car ownership comes from fuelling up. Unless your vehicle requires premium fuel, save by filling up with regular gas. You may also choose to slow down as gas mileage increases at lower speeds. If you can, try driving less, such as by walking to close destinations or starting a carpool for work. If you are able to get your annual mileage below 7,500, then your insurance company might even give you a discount on your coverage for that too. 

6. Save up for Maintenance

The cost of vehicle maintenance is equal to fourteen percent of the total cost of owning a car. By keeping up on routine maintenance and using synthetic oil, you will avoid more expensive issues down the road. When a large repair does arise, always call around to get quotes and go with the best deal. Since emergencies happen, setting up a sinking fund for unplanned car expenses is always a good idea. By putting away only $83 a month, you’ll save up $1,000 a year, which could be used for an unforeseen mechanic bill. “You could set aside money every week,” suggests Lauren Fix of Car Smarts. “Then the money will be available rather than using a credit card at a high interest rate.”

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The less money you spend on your car, the more you’ll have for other expenses in your life, from groceries to vacations. With Insureyouknow.org, you can store all of your vehicle and financial records in one place. That way when it’s time to refinance, shop around for better insurance, or sell your car, everything you need will already be at your fingertips. There’s never a good reason to throw away your hard-earned money on unnecessary expenses.

Five Things To Know About the Capital Gains Tax

September 15, 2023

It’s never too early to start planning for tax season. While much of what you own will experience depreciation over time, any profit made from something you sell may be subject to the capital gains tax. So if you think you’ll be making a return on a previous investment this year, then you’re going to want to be well-versed in the capital gains tax.

Understanding the Capital Gains Tax

A capital gains tax is a tax on profits made from the sale of assets, such as stocks, businesses, real estate, and other types of investments. When you sell anything and make a profit, the U.S. government views that profit as taxable income. The capital gains tax is calculated by deducting the original cost of the asset from the total sale of that asset. It’s important to understand the capital gains tax guidelines, such as profits made from real estate or collectibles, which come with their own unique rules. Understanding the rules can help you make the best decisions about your capital gains income.

In order to minimize losses and maximize your gains, here are five things to know about the capital gains tax.

The Real Estate Rules

If a person sells their home for $250,000 or less, or a married couple sells their home for $500,000 or less, then they are exempt from the capital gains tax; this exemption is only available once every two years. If you sell your home or any other investment property for more than that but reinvest the money made from the sale into a new property, then you would also be exempt from paying taxes on your real estate gains; this is known as the 1031 exchange. Cory Robinson, financial portfolio manager says, “That’s the beauty of taking gains: You can immediately reinvest.” For a home to qualify as a primary residence, you must have lived in it for at least two years, or two years out of a five year period. It’s important to understand the rules around property sales, so speaking with an advisor is always recommended before selling your home. “Familiarize yourself with the capital gains tax exclusion rules and consult a tax advisor,” says financial analyst Greg McBride. “If the property has been your primary residence for less than 24 months, for example, you may decide to hold off until you’ve reached that threshold to avoid capital gains tax.”

The Difference Between Short and Long-term Capital Gains

Put simply, if you have held any asset for less than a year before selling it, then that asset is considered a short-term capital gain and is subject to a higher capital gains tax; if you own that asset for longer than a year before selling, then your profit is considered a long-term gain and subject to a lower tax rate. This is why selling any asset before you’ve owned it for at least 12 months should be avoided if possible.

Investment and Rental Property Strategies

The rules around investment property are different since their value typically depreciates over time. A 25 percent rate then applies to the gain from selling real estate that depreciated, because the IRS wants to recapture some of the tax breaks you’ve been getting due to depreciation, known as Section 1250 property. If you sell a rental property that you have not lived in for at least two years for over $250,000 (or $500,000 if married), then that property could be subject to not only the depreciation rate but a capital gains tax that is based on your income bracket. One wat to avoid this could be to invest in property in opportunity zones, areas identified as economically disadvantaged, which are tax-free when sold after ten years. Deducting expenses, such as home improvements, repair, and even closing costs, is another way to lower the amount of profit that is subject to the capital gains tax.

Your Income Bracket Determines Your Capital Gains Tax Rate

Tax rates are determined by your tax bracket, so a lot of people will actually pay no capital gains tax on the sale of long-term assets if they fall in the 0% tax rate. For the 2023 tax year, a single person that made up to $44,625, and a married couple that made up to $89,250 jointly would not have to pay any capital gains taxes.

Keep Track of Both Gains and Losses

When an asset is sold for more than what it cost, it results in a capital gain, but when the asset is sold for less than it cost, it results in a capital loss. If you have both gains and losses, it will be important to know your net gain, or your gains minus your losses; only net gains are subject to the capital gains tax. If you only have losses in a given year, then capital losses could actually lower your taxable income. This loss is limited to $3,000 per year per person (or $1,500 if you’re married). If you have an excess of $3,000 in losses, then those losses can actually be carried forward to future tax years.

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It’s never a good idea to buy or sell assets solely for tax purposes, but that doesn’t mean you shouldn’t be well aware of the rules around the capital gains tax. Insureyouknow.org can help you store all of your financial records in one place, so that it’s easier for you to keep track of your assets and taxable income. Before selling any investment, it’s important to know the laws unique to your state and speak with an advisor, who will know best what taxes you may be held responsible for. It’s good to know that for many, zero taxes on gains are actually possible.

5 Benefits of Paying Off Your Mortgage Early

August 17, 2023

For many Americans, a home mortgage is one of the heftiest and lengthiest investments they will make in their lifetime. According to the Federal Reserve Bank of New York, mortgages accounted for 71% of combined household debts in 2022. The good news is with proper planning, this stressor can be eliminated. Depending on your financial position, opting to pay off your mortgage early can make a positive impact on your finances. It can simultaneously offer you a sense of peace and stability and provide greater financial freedom.

“Paying off your mortgage is a major milestone,” said Meaghen Hunt of Bankrate. “It’s a moment to celebrate, but also to take specific steps to ensure you’re the legal owner of the property, and to continue paying your homeowners insurance and property taxes on your own.”

1. Reduce Interest Costs

The more time you carry a mortgage for, the more interest you will pay. Paying off your mortgage early allows you to save significantly on interest. Laura Tarpley of Business Insider estimates that paying off your mortgage early could save you tens of thousands of dollars. “Just make sure to clarify with your lender that all extra payments will just be going toward your principal, not interest,” she cautioned.

2. Live Debt-Free

Forbes estimates that nearly 10 million American homeowners who are still paying off their mortgages are 65 years of age or older. That is a significant number of individuals still saddled with debt well into their old age. The increased financial security of having a paid-off mortgage means greater room in your finances to address other debts. The funds spent to make a mortgage payment can be redistributed to pay off other outstanding debts such as loans, credit card balances, and more. Overall, the ability to live debt-free without the stress of having to make a substantial payment is a significant benefit.

Hunt cautions that you may see your credit score suffer after paying off your mortgage especially if it was the only debt you carried. Although there is a brighter side. “In some cases, your score can improve, depending on what other kinds of credit you’ve borrowed,’ she added.

3. Eliminate Monthly Payments

Most homeowners can expect to pay off their homes in 30 years making normal monthly payments. Not having to meet monthly payments frees up a sizable amount of money that can be invested in other, potentially high-earning, endeavors. This could allow for more wealth to be generated over time. Additionally, if you are unable to make your monthly payments due to financial instability, you are protected from losing your home.

4. Be Financially Free

Mortgage payments often make up a substantial portion of one’s expenses and are also multi-year, with the average mortgage spanning between 15-30 years. Paying off your mortgage ahead of schedule frees up funds and allows for greater room to direct funds to other places.

 “For people nearing retirement, a paid-off mortgage means they have that much more free cash flow from their fixed income when they stop working,” said Miranda Marquit of Bankrate. “It allows you to tap the equity in your home if you need money in the future.”

5. Have Peace of Mind

Arguably one of the most advantageous benefits of having a fully paid mortgage is the right to own your home outright. Additionally, it protects you from the instability of the housing market which can lower the value of your home.

Insureyouknow.org

Having a mortgage paid off early provides many advantages, such as money saved long-term that permits debt and interest-free living and greater availability of funds to direct towards other investments. While not having to keep up with costly monthly payments into your retirement sounds appealing, it is important to take inventory of your finances before making the decision to pay off your mortgage early. Use insureyouknow.org to keep a track of your payments and debts to determine if an early mortgage payment is the right fit for you.

The Everything Kids’ Money Book

November 15, 2022

You want your children to become financially stable adults. But how can you interest them in this important topic, and make it easy to learn about and fun, when they are in their formative years? Your answer is The Everything Kids’ Money Book by Brette Sember that visually depicts boys and girls undertaking some enterprise having to do with money such as having a lemonade stand, saving for a new bike, or collecting coins. Written with kids ages 7 to 11 in mind, the author promises to teach them about money—“Earn it, save it, and watch it grow.”

Hands-On Activities Covered

Would your child like to . . .

• Learn how to make money at jobs appropriate for their age?
• Track where a dollar bill has been before they got it? There’s a simple way to find out. 
• Learn how to make all their pennies shiny? It’s easy.
• Design their own dollar with someone’s face they like—Batman? Spiderman? The Incredibles?
• Do a magic trick with a dollar bill to impress their friends?
• Find out what fun things they can do for free? Grandpa and Grandma might know.
• Make a pizza garden?

Fun Money Facts Revealed

Would they like to know . . .

• Why they are called Piggy Banks, not Doggy banks, or something else?
• What is the name of the buffalo on the nickel and where did it live?
• What are dead dollars?
• What are some things money has been made from in the past?

Difficult Concepts Explained

As a New York Law Guardian, Brette Sember has many years of experience working with children. She has written more than 40 books on a variety of topics, such as law, health, food, travel, education, business, finance, parenting, adoption, and seniors. In The Everything Kids’ Money Book, she tackles subjects such as:

• Investments
• Budgets
• Saving money
• The cost of living
• Credit cards and debit cards
• Income tax
• Why borrowing money can lead to trouble
• Why lottery tickets are not a good investment
• Investments
• Budgets
• Saving money
• The cost of living
• Credit cards and debit cards
• Income tax
• Why borrowing money can lead to trouble
• Why lottery tickets are not a good investment

All these topics are covered in easy-to-understand language and unfamiliar terms are defined in the glossary. Answers to some of the questions posed and a page of resources are included at the back of the book. This section features books and websites with ideas kids will enjoy, more magic tricks to perform with money, how to start a small business, a website with money games, and how to collect coins.

Kids’ Money Book Promoted

MyBankTracker.com which “tracks thousands of banks to help you find the perfect match for your banking needs,” says this book is “more than simply a manual; The Everything Kids’ Money Book is a well-organized workbook that covers everything from money printing to compound interest.”

Investopedia.com which calls itself “The world’s leading source of financial content on the web,” echoes this opinion by saying the book, “Not only teaches kids how to save and earn their own money but also how to invest and earn interest.”

InsureYouKnow.org

If you decide to spend some bonding time discussing money concepts with your daughter or son, you may learn or relearn some basic financial truths. Keep a list of your kids’ moneymaking, spending, and savings plans at insureyouknow.org. You can measure their financial success on this portal and watch with them the ebb and flow of their profits and expenses.

Look Forward to Increases in Your 401(k) Limits

October 31, 2022

The amount you can contribute to your 401(k) plan in 2023 has increased to $22,500, up from $20,500 for 2022. The Internal Revenue Service (IRS) announced this change and issued technical guidance regarding all of the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year 2023 in Notice 2022-55 posted on IRS.gov.

Highlights of changes for 2023

This contribution limit applies to employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan.

The limit on annual contributions to an IRA increased to $6,500, up from $6,000. The IRA catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan has increased to $7,500, up from $6,500. Participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $30,000, starting in 2023.

The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE (Savings Incentive Match PLan for Employees) plans has increased to $3,500, up from $3,000. (This plan allows employees and employers to contribute to traditional IRAs set up for employees. It is ideally suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.)

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2023.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.)

Phase-out ranges

In a traditional IRA deduction phase-out, taxpayers can deduct contributions if they meet certain conditions. If during the year either they or their spouse was covered by a retirement plan at work, the deduction may be phased out until it is eliminated, depending on filing status, and adjusted gross income (AGI):

• For single people covered by a workplace retirement plan, the IRA phase-out range is $73,000 to $83,000, up from $68,000 to $78,000.
• For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $116,000 to $136,000, up from $109,000 to $129,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $218,000 and $228,000, up from $204,000 and $214,000.
• For married individuals filing a separate return who are covered by a workplace retirement plan, if they lived with their spouse at any time during the year, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

For a Roth IRA income phase-out, AGI ranges for taxpayers include the following provisions:

• The income phase-out range for singles and heads of household is $138,000 to $153,000, up from $129,000 to $144,000.
• The income phase-out range for married couples filing jointly is $218,000 to $228,000, up from $204,000 to $214,000.
• For married individuals filing a separate return, if they lived with their spouse at any time during the year, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The 2023 income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers has increased to:

• $73,000 for married couples filing jointly, up from $68,000.
• $54,750 for heads of household, up from $51,000.
• $36,500 for singles and married individuals filing separately, up from $34,000.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The amount individuals can contribute to their SIMPLE retirement accounts has increased to $15,500, up from $14,000.

InsureYouKnow.org

After you review the IRS retirement plan changes for 2023, keep a record at insureyouknow.org of your retirement accounts so you’ll be able to take advantage of the new limits for your contributions and deductions.

Do You Realize How “Precious” a Child Is?

September 15, 2022

The cost of raising a child through high school has risen to $310,605 because of inflation that is running close to a four-decade high, according to an estimate by the Brookings Institution, a nonprofit public policy organization based in Washington, DC.  

In 2017—years before the pandemic and during an extended period of very low inflation—the U.S. Department of Agriculture (USDA) projected that the average total expenditures spent on a child from birth through age 17 would be $284,594. This estimate assumed an average inflation rate of 2.2 percent and did not include the expenses associated with sending a child to college or supporting them during their transition to adulthood. Since 2020, the inflation rate has skyrocketed— 8.5 percent as of July 2022—partly due to supply-chain issues and stimulus spending packages that put more cash into Americans’ pockets. The Federal Reserve has now raised interest rates substantially to control inflation.

The multiyear total is up $26,011, or more than 9 percent, from a calculation based on the inflation rate two years ago, before rapid price increases hit the economy, reports the Brookings Institution.

The new estimate crunches numbers for middle-income, married parents, and doesn’t include projections for single-parent households, or consider how race factors into cost challenges. 

Expenses

The estimate covers a range of expenses, including housing, education, food, clothing, healthcare, and childcare, and accounts for childhood milestones and activities—baby essentials, haircuts, sports equipment, extracurricular activities, and car insurance starting in the teen years, among other costs.

In 2019, the typical expenses to raise a child were estimated by the USDA as follows:

• Housing: 29%
• Food: 18%
• Childcare and Education: 16%
• Transportation: 15%
• Healthcare: 9%
• Miscellaneous (included Personal Care and Entertainment): 7%
• Clothing: 6%

Housing

Housing at 29 percent is the most significant expense associated with raising a child. The cost and type of housing vary widely by location. Other variables include mortgage or rent payments, property tax, home repairs and maintenance, insurance, utilities, and other miscellaneous housing costs.

Food

The cost of food is the second-largest expense, at 18 percent of the overall cost of raising a child. Over time, food prices have trended up, with food-at-home pricing increasing 12.1 percent and food-away-from-home pricing increasing by 7.7 percent from June 2021 to July 2022. The USDA expects rising costs for 2022, with increases as high as 10 percent and 7.5 percent, respectively.

Childcare and Education

Childcare and education expenses in 2019 accounted for 16 percent of the cost of raising a  child, and it continues to increase.

The widespread acceptance by employers of remote work and letting employees work from home part or full-time has eased the burden of childcare costs for many families, cutting the cost by as much as 30 percent for some workers.

Education is a major expense when it comes to raising children. When it comes to kindergarten through high school, parents can choose between public and private schools. For private schools, the Education Data Initiative estimated that tuition costs an average of $12,350 per year. Associated costs, like technology, textbooks, and back-to-school supplies, could bring that up to $16,050. For a child to be in private school from kindergarten through eighth grade, the estimated cost could be about $208,650. Additional expenses for extracurricular activities such as sports, the arts—music, theater, and yearbook—and other clubs also add up and are accompanied by fees for participation, equipment, and travel, which have also increased due to inflation.

Healthcare

The total cost of a health plan is set according to the number of people covered by it, as well as each person’s age and possibly their tobacco use. For example, a family of three, with two adults and a child, would pay a much higher monthly health insurance premium than an individual.

Strategies

Raising children is rewarding and fulfilling to many people. But it’s also become very expensive. By preparing mentally and implementing financial planning strategies, you can be well-equipped to raise your child to adulthood comfortably, even on a budget.

InsureYouKnow.org

If you are a parent, you are responsible for raising your child and providing food, clothing, shelter, and security. Consider getting insurance coverage—including life, short- and long-term disability, and health insurance to avoid putting your family at risk financially in the event of unexpected hardship. To cope with the rising costs of raising children, live within your means, save money wherever possible, and shop around for home and auto insurance each year for the best deals. At insureyouknow.org, you can track your expenses to raise a child and file insurance policies that cover your family’s financial and healthcare needs.