2015 Personal Finance Year in Review
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The document reviews personal finance trends and studies from 2015, highlighting key issues such as rising retirement costs, lack of consumer knowledge regarding financial products like 529 plans, and the evolving landscape of health insurance under the Affordable Care Act. It emphasizes the significant financial preparedness gap among Americans, particularly concerning retirement savings and health care expenses. Additional findings indicate a correlation between health behaviors and financial planning, as well as increasing wealth inequality and its implications.
2015 Personal Finance Year in Review
- 1. 2015 Personal Finance Year in Review https://learn.extension.org/events/2160 This material is based upon work supported by the National Institute of Food and Agriculture, U.S. Department of Agriculture, and the Office of Family Readiness Policy, U.S. Department of Defense under Award Numbers 2012-48755-20306 and 2014-48770-22587. 1
- 2. Research and evidenced-based professional development through engaged online communities www.extension.org/militaryfamilies Sign up for webinar email notifications at www.extension.org/62831 2
- 3. Join the Conversation Online! MFLN Personal Finance @MFLNPF Military Families Learning Network 3
- 4. Key Take-Aways • Retirement (including retiree health care costs) will be expensive and many people are unprepared • Consumer knowledge of 529 plans and health insurance is limited • Federal income taxes and ACA penalties are related • Credit card security upgrades are widespread • Consumer shopping preferences are changing • Very modest income and estate tax changes in 2016 4
- 5. Reference Links • Each 2015 event that is listed has a reference link • Consider opening up the reference links if you have a second monitor • Some links, unfortunately, have “pay walls” or you can only see a research study abstract for free • You may be able to see enough of the article (title, author, date) to be able to find it through a search 5
- 6. Q1: What Do You Think Was the MOST Significant Personal Finance Event of 2015? 6
- 7. Key Findings from 2015 Personal Finance Studies 7
- 8. Information Search: A Health and Personal Finance Link ? • 2015 Study: Individuals who engage in health search behaviors (e.g., reading nutrition details of food labels) are more likely to engage in financial planning activities • Financial planning was proxied through five different retirement readiness activities • N = 4,825 cases • Cognitive process had significant health-wealth relationship but direct physical activities (e.g., exercise) did not http://afcpe.org/assets/pdf/volume_26_1/pages_3-16.pdf 8
- 9. Lack of Assets and Younger Death Are Related • 2015 EBRI study: Correlation between those with little or no assets and those who die between ages 50 and 64, probably due to poorer health • Households that lost members at relatively young ages were also households with lower income and asset holdings • 29.8% had no assets left; likely worse off than 85+ • N = 1,189; University of Michigan Health and Retirement Study data http://www.ebri.org/pdf/notespdf/EBRI_Notes_04_Apr15_EoL-PolFor.pdf 9
- 10. Financial Cost of Smoking: At Least 1.1 Million in a Lifetime Wallet Hub state-by-state analysis Sources: USA Today (1/22/15): http://www.usatoday.com/story/news/nat https://wallethub.com/edu/the-financial-c Costs included cost of tobacco, health care costs, income losses, and other expenses such as insurance 10
- 11. Fewer Americans Lack Health Insurance • JAMA Article (7/15): Drop of 7.9% in number of Americans who reported being uninsured • Minorities saw the biggest reductions • Impossible to know if changes are solely and directly related to the ACA – Economic recovery may have also had impact http://jama.jamanetwork.com/article.aspx?articleid=2411283 11
- 12. Understanding the Uninsured • May 2015 Robert Wood Johnson Foundation study • Survey of 1,270 uninsured adults ages 18-64 – N = 469 Latinos • Most uninsured think health insurance is important • Cost remains the main barrier – Calculated decision includes all OOP costs • Other reasons: ability to still get care and pay OOP and perception of insurance as a “commitment” • Knowledge gaps: tax credits & special enrollment http://www.rwjf.org/content/dam/farm/reports/surveys_and_polls/2015/rwjf420854 12
- 13. Scary Projections for Retirees • HealthView Services Report (3/15): 66-year old couple retiring in 2015 with average Social Security benefits can expect medical costs to consume 67% of lifetime SS – About 90% of SS for 55-year old couple retiring in 10 years • Social Security benefits grow by about 2% a year • Medical costs grow by 5% to 7% a year • Dental, vision, hearing not covered by Medicare http://blogs.wsj.com/totalreturn/2015/03/26/grim-news-on-health-costs-in-retirement/ 13
- 14. More Scary Projections • Fidelity’s Retirement Health Care Cost Estimate (10/15): https://www.fidelity.com/about-fidelity/employer-services/health-care-costs • Retiree health care costs up 29% since 2005 • Estimated cost: $245,000 throughout retirement for a couple with both spouses age 65 • Assumes Medicare enrollment • Did not include LTC expenses (e.g., nursing home) • Health care is top concern for ¾ of couples but only 22% had factored it into planning http://www.fa-mag.com/news/health-care-costs-for-retirees-keep-increasing-23401.html 14
- 15. Retirement Planning Disconnects • TIAA-CREF Survey of 1,000 U.S. adults (2/15): http://www.fa-mag.com/news/most-people-want-lifetime-income-but-don- • 84% want guaranteed income stream in retirement • 46% concerned they will run out of money • Only 14% have purchased an annuity to secure a steady stream of income • 29% are saving nothing at all for retirement 15
- 16. 2015 EBRI Retirement Confidence Survey (RCS) • Survey of 1,003 workers and 1,001 retirees • Almost a third (28%) of workers have < $1,000 in savings and investments for retirement • 57% say they have < $25,000 • 50% of retirees left the workforce earlier than planned (health, downsizing, etc.) • 69% of workers said they could save $25 more than current savings ($1,300 a year) http://www.ebri.org/pdf/surveys/rcs/2015/EBRI_IB_413_Apr15_RCS-2015.pdf 16
- 17. Rising Equity Glide Paths? • Declining and static equity glide paths in retirement are increasingly being questioned: • Kitces and Pfau (2014): http://www.aaii.com/journal/article/reduce-stock-exposure-in-r • Delorme (2015): http://www.aaii.com/journal/article/mathematical-support-for-ri • Take-Away: Increasing equity allocation in retirement can provide higher lifetime income 17
- 18. Q2: What Was the MOST Significant Personal Finance Event FOR YOU PERSONALLY in 2015? 18
- 19. Annual Savings Survey (2015) • Conducted for 2015 America Saves Week • N = 1,009 adult Americans (cell & landline phone) • Small improvements in nearly a dozen savings indicators (e.g., spending less than income) • Improvements in consumer indebtedness • Those with a savings plan with specific goals save more successfully than those without a plan http://consumerfed.org/press_release/annual-savings-survey-reveals-across-the-board-improvement-in-past-year/ 19
- 20. 529 Plan Knowledge • Edward Jones (investment firm) survey: 66% of Americans don’t know what a 529 plan is • 41% said it was a retirement savings plan and 25% said they didn’t know • 529 plans have been around for >15 years http://blogs.wsj.com/totalreturn/2015/05/13/most-people-get-an-f-on-529-plan-knowledge/ 20
- 21. Economic Value of College-1 • Second annual Gallup-Purdue index • Polled >30,000 college graduates during first six months of 2015 • Recent grads were significantly less likely to believe their education was worth the cost compared with older alumni • One of the main reasons was student loan debt http://www.gallup.com/services/185888/gallup-purdue-index-report-2015.aspx 21
- 22. Economic Value of College- 2 • College degrees pay off with higher lifetime earnings • Earnings for those with degrees averaged about $20,300 more per year over the past 4 decades • Lifetime ROI of more than $420,000 • New college grads start out earning $5,000-$6,000 > H.S. grads; gap grows to $25,000 after 15 years http://www.bloomberg.com/news/articles/2015-04-02/does-college-pay-almost-always-yes-san-francisco-fed-says http://www.sffed-education.org/annualreport2014/files/2014%20Annual%20Report%20Essays.pdf 22
- 23. Credit Scores and Marriage • Federal Reserve Board study (8/15): credit scores might be able to predict marriage stability • People with higher credit scores (or whatever personal qualities credit scores represent) were more likely to form committed relationships and marriages and stay in them • Wide gap in credit scores, more likely to break up • Controlled for education, race, income, other factors http://www.federalreserve.gov/econresdata/feds/2015/files/2015081pap.pdf 23
- 24. Growing Wealth Inequality • One reason for wealth inequality is income inequality • Racial and ethnic disparities are growing • The racial wealth gap grows sharply with age http://datatools.urban.org/Features/wealth-inequality-charts/ • Richest 1% in the world will control >50% of world’s wealth by 2016 http://www.fa-mag.com/news/richest-1--will-dominate-world-wealth-in-2016--oxfam-says-20487.html https://www.oxfam.org/en/pressroom/pressreleases/2015-01-19/richest-1-will-own-more-all-rest-2016 24
- 25. Investor Sophistication and Target-Date Funds • 2015 study by Guillemette et al. • Americans with low investor sophistication are 22.2% more likely to primarily use target-date funds to save for retirement • Evidence provided that investors who stand to benefit the most from target-date investing are the ones more likely to use this product http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2596661 25
- 26. Key Findings From 2015 Government Data 26
- 27. GAO Retirement Security Study • May 2015 report: http://www.gao.gov/assets/680/670153.pdf • Examined Federal Reserve SCF data • About half (52%) of households age 55+ have NO retirement savings (e.g., IRA or 401(k) plan) • Many without savings have few other resources to draw on (e.g., DB pension or non-retirement savings) • Median savings amount of those with savings: – $104,000 age 55-64 (equal to $310/month annuity) – $148,000 age 65-74 (equal to $649/month annuity) 27
- 28. Gender Wage Gap • 2015 Census Study: The U.S. gender wage gap is the lowest it’s ever been in history • The gap is 21 cents: women earn 79 cents for every dollar men earn, on average • More a result of men’s wages stagnating than decreased gender bias http://www.taketheleadwomen.com/blog/the-gender-wage-gap-hits-an-all-time-low-but-hold-the-confetti/ https://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf 28
- 29. Q3: Any Other Interesting 2015 Financial Surveys That You Remember? 29
- 30. Key 2015 Financial Events and Trends and Products 30
- 31. 2015 ACA Penalty for Lack of Qualified Health Coverage • Called a “shared responsibility payment” by the IRS – In effect, an extra tax – Substantially higher than 2014 amount • Taxpayers owe the GREATER OF a flat assessment or a percentage of income • The 2015 flat assessment penalty is $325 per individual with a maximum of $975 per household • The 2015 percentage of income penalty is 2%, up to a maximum of about $12,850 Resource: Tax Policy Center ACA Tax Penalty Calculator: http://taxpolicycenter.org/taxfacts/acacalculator.cfm 31
- 32. Supreme Court ACA Decision • 6-3 SCOTUS ruling in June 2015 • Upheld the use of subsidies nationwide to help Americans buy health insurance • About 87% of those who bought a plan or re-enrolled in the federal marketplace in 2015 received subsidies http://www.wsj.com/articles/health-costs-hinge-on-supreme-court-ruling-1432607402 32
- 33. ACA and Tax Filing Season • 2015: first year to integrate ACA and income taxes • Incorrect tax statements (1095-A forms) mailed; tax filing delays • “Issues” for people lacking health insurance or incorrectly estimating 2014 income • Too high APTCs reduced refunds or resulted in tax bills • Marketplaces rely on consumers to report changes 33
- 34. Increased Health Savings Account (HSA) Use • HSA: Pre-tax savings for OOP medical expenses • Maximum 2015 HSA contribution: $3,350 (single) and $6,650 (family) + $1,000 if age 55 and older • Must have health insurance with a deductible of at least $1,300 (individual) or $2,600 (family) • “Shadow Retirement Plan”: After age 65, no penalty for withdrawing money for nonmedical use – Only works if you are healthy with few OOP expenses • High earners also reduce risk of getting hit with 3.8% surtax on net investment income 34
- 35. Workplace Wellness Programs • April 2015 EEOC regulation: U.S. employers can reward workers with up to 30% of cost of health insurance in return for wellness program participation • More than a third of employers charge a penalty that averages $50 a month if workers don’t participate – Some charge as much as $1,600 a year • Some companies penalize “holdouts” by removing company HSA contributions and charging tobacco- related surcharges http://www.fa-mag.com/news/employers-can-pay-workers-for-weight--exercise--u-s--says-21500.html 35
- 36. Medicare Turned 50 in 2015 • “Medicare for a New Generation” • If still working at 65 and haven’t claimed Social Security, enrollment isn’t automatic • Must go to www.socialsecurity.gov three months before turning 65 and sign up for free Part A (and Part B if no employer coverage) • Must enroll in Part B within 8 months after the month you retire to avoid risking late penalties • Substantial penalties and waiting periods http://m.kiplinger.com/article/insurance/T027-C000-S002-guide-to-getting-the-most-out-of-medicare-2015.html 36
- 37. Long-Term Care Insurance • “Policies are getting pricier, harder to find, and increasingly difficult to justify as a worthwhile purchase”: http://www.wsj.com/articles/long-term-care-insurance-is-it-worth-it-1430488733 • 2014 LTC insurance sales were down 24% from 2013 • Cost for 60-year old couple (for both): $1,685 to $2,813 – With 3% inflation protection: $3,549 to $4,746 for couple – Based on typical policy with $164,000 of potential proceeds • New Trend: “Hybrids” (LTC benefits with life insurance, annuities) • CRR Study: Nearly half of men’s and 36% of women’s nursing home stays don’t exceed 3 months (within Medicare’s 100-day maximum): http://crr.bc.edu/wp-content/uploads/2014/11/wp_2014-12.pdf – Nursing home stays are shorter than previously believed 37
- 38. Pension Pressures • Increasing numbers or employees are receiving “lump sum vs. pension” offers • Give up future monthly pension in exchange for a current lump sum (sure thing vs. an unknown) • More than 400 company offers since 2012 • Dozens more expected in 2015 • Prompted by new regulations, low interest rates, and increasing PBGC premiums charged to employers • Put money in traditional IRA and must take RMDs http://www.wsj.com/articles/should-you-take-a-lump-sum-pension-offer-1433519945 38
- 39. Public Pension Woes • 87% of the 82 state retirement systems that reported data for FY 2014 are under-funded • Top 10 states with most underfunded pensions: Alaska, Connecticut, Hawaii, Illinois, Kansas, Kentucky, Louisiana, Massachusetts, Mississippi, New Hampshire • Three “Alert” categories: Critical, Severely Endangered, and Endangered Source: Understanding Clients’ Underfunded Pension Plans, Journal of Financial Planning, July 2015, p. 15 39
- 40. Bank Fees • 72% of largest U.S. credit unions offer free checking vs. only 38% of large banks: http://time.com/money/3726738/where-to-find-free-checking/ • Record ATM use fees for ATMs not tied to a customer’s bank account: averaged $4.52 per transaction and $5 to $8 in some places (10/15 study): http://www.wsj.com/articles/atm-fees-rise-toward-5-per withdrawal-1443981841 40
- 41. Same Sex Marriage • SCOTUS Ruling: Same-sex couples have a right to marry in every U.S. state • Same-sex couples can file joint federal and state income tax returns • Marriage penalty or marriage bonus could kick in • Eligibility for Social Security spousal benefits and strategies such as “file and suspend” • Eligibility for pension benefits • Unlimited spousal asset inheritance and combined estate tax exemption http://m.kiplinger.com/article/taxes/T065-C000-S002-same-sex-marriage-affects-taxes-social-security.html 41
- 42. Robo-Advisors • Increase in automated investment services – Examples: Betterment, Wealthfront, FutureAdvisor • Over $2 billion AUM, primarily from millennials • Small but growing % of managed wealth • Services launched by Schwab, Vanguard, Fidelity • Target market: young, self-directed, and tech savvy • Compliment or threat to human advisers? http://www.fa-mag.com/news/will-financial-advisors-become-obsolete-20265.html http://blogs.wsj.com/moneybeat/2015/03/13/going-robo-what-schwabs-move-means-for-you/ http://www.wsj.com/articles/putting-robo-advisers-to-the-test-1429887456 42
- 43. 529 Plan Rule Change • Included in ABLE Act (signed 12/19/14) • Allows 529 plan account holders to change their investment holdings TWICE a year vs. once • Psychological boost: don’t feel as locked in http://www.wsj.com/articles/rule-change-allows-529-investors-to-adjust-holdings-more-often-1420516879 43
- 44. Student Loans • Outstanding debt: $1.3 trillion and counting: http://www.finaid.org/loans/studentloandebtclock.phtml • Nearly 7 million students with debts haven’t made a payment in a year: http://www.wsj.com/articles/student-debt-payback-lags-1442189980 • Some 94% of undergraduate private student loans are cosigned (77% in 2008-09): http://blogs.wsj.com/totalreturn/2015/06/19/risks-of-cosigning-student-loan 44
- 45. Credit Card Security Upgrades • As of 10/1/15, merchants have to foot the bill for fraudulent transactions if they haven’t upgraded terminals to accept more secure credit cards – Called EMV terminals (Europay, Mastercard and Visa) • Shifting fraud liability to retailers from creditors • Consumers received new cards with an embedded computer chip instead of magnetic stripes – Stolen card info is useless; data changes with each use – Causing “turbulence” for subscription sevices (gyms, Netflix) – Dip cards into a slot at terminal instead of swiping http://www.wsj.com/articles/card-liability-is-set-to-shift-1443567562 45
- 46. Credit Score Update • Majority of big banks are offering free FICO credit scores to their customers on monthly statement, online, or via a mobile app – Example: Citibank customers can see credit score online • USAA providing free VantageScore http://www.kiplinger.com/article/credit/T017-C011-S002-get-a-free-credit-score-from-your-bank.html • Experian (credit reporting agency) allows monthly rent payments to be reported by landlords as evidence of creditworthiness http://www.experian.com/credit-education/credit-report-faqs.html 46
- 47. U.S. Bankruptcy Filings • January 2015 American Bankruptcy Institute report: Total of 910,090 bankruptcy filings in calendar year 2014 (1/1/14-12/31/14) • Dipped under one million annual filings for the first time since 2007 • Reasons cited: high costs to file and sustained low interest rates http://www.acainternational.org/creditors-bankruptcy-filings-decrease-by-12-percent-in-2014-34672.aspx 47
- 48. Sustained Drop in Gas Prices • Cheap gas saved U.S. households $65 billion in first half of 2015 • “Windfall” spread unevenly through the economy • Many retailers (clothing, home furnishings) did not see expected sales uptick • Increased savings and spending on health care, autos, travel, hotels, restaurants http://www.wsj.com/articles/lower-gas-prices-yield-uneven-benefits-1441390917 http://www.wsj.com/articles/savings-at-the-pump-become-savings-at-the-bank-1425337448 48
- 49. Recent Shopping Trends • Millennials place a high value on experiences over “things” and boomers are starting to do likewise – “the similarities in attitudes across generations is striking” • Purchasing experiences makes people happier http://time.com/money/4030036/millennials-boomers-buying-experiences/ • Macy’s closing up to 40 more stores (9/15) http://money.cnn.com/2015/09/09/news/companies/macys-store-closings/ • More personalized promotions based on previous purchases • Earlier holiday layaway plans (Wal-Mart: 8/28/15) http://abcnews.go.com/Business/christmas-august-walmart-launch-layaway-plan/story?id=33367633 49
- 50. Stock Market Downturn • 2015 and 2020 target date fund holdings are a concern to new and close retirees: http://www.wsj.com/articles/a-bracing-year-for-target-date-funds-1444010538 • “Correction” called a Bear Market in late September by CNBC, Marketwatch, Forbes, etc. http://www.cnbc.com/2015/09/04/6-reasons-the-bear-market-has-just-begun-commentary.html http://www.cnbc.com/2015/09/29/we-are-in-a-bear-market-carter-worth.html http://www.marketwatch.com/story/the-bear-market-has-begun-2015-09-23 http://www.forbes.com/sites/investor/2015/09/21/we-are-in-a-bear-market-look-at-the-chart/ 50
- 51. Madoff Victims Settlement • Madoff Ponzi scheme fraud detected in Fall 2008 • 10/15 Announcement: Madoff victims with less than $1,161,000 in losses will get ALL their money back – About 56% of victims • $7.2 billion returned by widow of Madoff lawyer – Declared a “major victory”; not typical for fraud cases http://time.com/money/4080208/madoff-ponzi-scheme-victims-get-million/ http://www.nbcnews.com/business/business-news/most-madoff-victims-will-now-get-all-their-money-bac 51
- 52. Housing Market Trends • 2015 National Association of Realtors prediction: “Less than one third of families who lost homes to foreclosure or other distressed events in the last decade are likely to become homeowners again” • Pool of new home buyers is not as big as some are expecting • Reasons given: ineligibility to borrow again or won’t have the desire to buy again http://www.wsj.com/articles/many-who-lost-homes-to-foreclosure-in-last-decade-wont-return-nar-1429548640 52
- 53. Cell Phone Trends • Nearly every cell phone user is a smart phone user • Cell phone purchase subsidies are going away • So are 2-year contracts tied to cell phone purchases • Bottom line: re-shop your service http://www.kiplinger.com/article/business/T057-C000-S002-pay-for-your-smartphone-save-on-your-plan. • New data hog: Live video (e.g. Periscope, Meerkat) http://www.wsj.com/articles/watch-out-live-video-is-the-new-data-hog-1443124141 53
- 54. Car Buying Trends • August 2015: Fastest pace of car sales in 10 years • Even despite stock market downturn • Key factors: financing incentives and low fuel prices • One of best sales years for auto industry since 2000 http://www.wsj.com/articles/auto-sales-cool-in-august-on-later-labor-day-1441108884 54
- 55. Q4: Any Other Interesting 2015 Financial Events, Trends, or Products? 55
- 56. Key Government Legislation and Policies Affecting Personal Finances 56
- 57. myRA Rollout • Proposed in 2014 SOTU address to encourage workers without company retirement plans to save for retirement – Like a Roth IRA “on training wheels” – No fees and no account minimums • $15,000 cap or 30-year limit; then money must be transferred to a private Roth IRA • Secondary role as a reserve fund (workers can withdraw their own contributions) • Slow roll out process; official roll out in November 2015: https://www.washingtonpost.com/news/get-there/wp/2015/11/04/introducing-myra-a-free-retir • Video: https://www.youtube.com/watch?v=_qUUt_dKtUU 57
- 58. 2015 Income Tax Highlights • Health insurance penalty • Higher tax-deferred retirement account limits: ($18,000 + $6,000 catch-up) • Starting in 2015, you can only make one rollover from an IRA (to a new account) in a 12-month period – Does NOT include “trustee to trustee” transfers – Designed to prevent short-term, interest-free loans • Indexed federal marginal tax brackets • Indexed Alternative Minimum Tax (AMT) exemption amounts (up 1.5% from 2014) 58
- 59. Income Tax Identity Theft • 2015 announcement: Increased cooperation between the IRS, states, and tax prep firms to deter ID theft – More information exchanges among them • 2013: IRS lost $5.8 billion to stolen-identity refund theft • At least 12 states will be requesting W-2 forms earlier from employers in 2016 • Expect heightened security in the future • Minimize tax refunds so you don’t have to wait http://www.wsj.com/articles/a-new-joint-effort-to-combat-tax-identity-theft-1434734299 59
- 60. Q5: Any Other Interesting 2015 Financial Legislation or Policies? 60
- 61. Military Financial Events • Military Compensation and Retirement Modernization Commission Report (1/29/15): http://www.mcrmc.gov/public/docs/report/mcrmc-finalreport-29jan15-hi.pdf • Military Lending Act Final Rule (7/21/15; effective 10/1/15): https://www.fdic.gov/news/news/financial/2015/fil15037.html http://www.defense.gov/News/News-Releases/News-Release-View/Article/612795 http://www.defense.gov/News-Article-View/Article/612675 61
- 62. New or Revised Financial Education Resources in 2015 62
- 63. Annual Limits Relating to Financial Planning http://www.cffpinfo.com/annual-limits/ 63
- 64. 64
- 65. Rutgers Cooperative Extension/ NJ Department of Education Financial Education Lesson Plans •Risks and Benefits of Entrepreneurship (85k PDF) •Compound Interest: Your Best Friend or Worst Enemy (106k PDF) •Know the Score: Credit Score Modeling and Impacts (360k PDF) •The Impact of Inflation (128k PDF) •Monetary Transaction Tools (572k PDF) http://njaes.rutgers.edu/money/ 65
- 66. Making the Case for Financial Literacy Annual publication of Jump$tart Coalition for Personal Financial Literacy: http://jumpstart.org/assets/files/Making-the-Case-2015.pdf 66
- 67. Curated Lists of Financial Education Resources • Edudemic (2/15): http://www.edudemic.com/16-best- teaching-resources-of-2015/ • Jump$tart Coalition (11/15): http://www.jumpstartcoalition.org/assets/State- Sites/ME/files/Financial-Education-Resources---Educator- Recommendations--2015-Conference.pdf 67
- 68. More Curated Financial Education Resource Lists • Higher One (7/15): http://www.higherone.com/knowledge- center/higher-one-blog/item/82-top-10-online-student-financial- literacy-resources • National Youth Involvement Board (2015): http://www.nyib.org/?page_id=180 68
- 69. Q6: Any Other New Financial Education Resources Developed in 2015? 69
- 70. Preview of Expected 2016 Personal Finance Changes 70
- 71. Social Security • No 2016 COLA for Social Security recipients • Main reason: low gas prices and CPI index change • Same maximum taxable earnings as 2015: $118,500 • Same earnings limit under FRA as 2015: $15,720 • Quarter of coverage: $1,260 (up from $1,220) https://www.ssa.gov/news/press/factsheets/colafacts2016.html 71
- 72. Retirement Savings Plans • Same $18,000 401(k), 403(b), TSP, 457 plan limit • Same $6,000 maximum catch-up ($24,000 maximum) • Same $5,500 maximum IRA contribution limit • Same $1,000 maximum catch-up ($6,500 maximum) • Same $53,000 annual defined contribution limit http://www.401khelpcenter.com/pdf/2016_plan_limits.pdf https://www.irs.gov/pub/irs-news/IR-15-118.pdf http://benefitsattorney.com/charts/maximums/ 72
- 73. Income and Estate Taxes • Standard deductions for singles and married couples will remain the same as 2015 • Personal exemptions will rise $50 from $4,000 in 2015 to $4,050 • Slight increase in AMT exemption • Estate tax exclusion will rise to $5,450,000, up from $5,430,000 in 2015 https://www.irs.gov/uac/Newsroom/In-2016-Some-Tax-Benefits-Increase-Slightly- Due-to-Inflation-Adjustments,-Others-Are-Unchanged 73
- 74. Key Take-Aways • Retirement (including retiree health care costs) will be expensive and many people are unprepared • Consumer knowledge of 529 plans and health insurance is limited • Federal income taxes and ACA penalties are related • Credit card security upgrades are widespread • Consumer shopping preferences are changing • Very modest income and estate tax changes in 2016 74
- 75. Key Take-Away Applications • Encourage increased retirement savings in tax-deferred plans • Provide information on college savings and health insurance • Integrate health insurance and tax planning information • Update consumers on ID theft fraud prevention • Provide information on wise shopping practices for purchases of interest (e.g., travel, cell phones) • Update financial education materials with 2016 information 75
- 76. Comments? Questions? [email protected] @moneytalk1 on Twitter 76
- 77. Evaluation and CEUs The Personal Finance Concentration Area offers 1.5 CEUs from AFCPE for AFC-credentialed participants and 1.5 CEUs from FinCert for CPFC-credentialed participants. To receive CEUs, complete the evaluation and post-test at: https://vte.co1.qualtrics.com/jfe/form/SV_1TH9BF7jj0k9HqR Must pass post-test with an 80% or higher in order to receive certificate. 77
- 78. Personal Finance Upcoming Event Thrift Savings Plan Review • Date: January 12, 2016 • Time: 11 a.m. ET • Location: learn.extension.org/events/2361 For more information on MFLN- Personal Finance go to: http://blogs.extension.org/militaryfamilies/personal- finance/ 78
- 79. Find all upcoming and recorded webinars covering: Community Capacity Building www.extension.org/62581 This material is based upon work supported by the National Institute of Food and Agriculture, U.S. Department of Agriculture, and the Office of Family Readiness Policy, U.S. Department of Defense under Award Numbers 2012-48755-20306 and 2014-48770-22587. 79