The bear economy is creating a bull market for cyber-crooks. An unfortunate side effect of economic downturns is an increase in cyber fraud. Worldwide cyber fraud has hit an all-time high. For the first time on record, data theft has now surpassed the stealing of physical assets as compared to the past two decades. Given our current global pandemic, cyber fraud has only increased as fraudsters try to take advantage of high demand for information regarding COVID-19.
Due to recent restrictions placed on communities and social distancing, more and more people are spending their time online. Cybercriminals are taking advantage of the increase in online traffic. According to the cybersecurity firm, MonsterCloud, there has been an 800 percent increase in cyber fraud claims since the beginning of the year.
Here are some of the most common cyber frauds as reported by Charles Schwab:
Outbreak maps. Malicious actors have begun spreading malware through online maps claiming to track the impact of coronavirus. As users visit the sites or click the links, they are exposing usernames, passwords, credit card numbers, browsing history, or other nonpublic personal information that is then exploited by the attackers or sold to other criminals on the dark web.
Email campaigns. Criminals are also leveraging common forms of fraud like spam email campaigns, using infected attachments or downloads to gather information.
Charitable giving. Scammers may pose as organizations in need. It is important to verify where your donations are going to before donating. One important resource here: https://charitycheck101.org/
Fortunately, there are several steps that individuals, businesses, and families can take to prevent a cyber attack. As many continue to work remotely, and as we transfer to a more digital society, please consider the following:
Make sure everyone is using a VPN, or a virtual private network, to do office work from home.
Require devices to have two-factor authentication, which verifies a person’s identity before logging in.
Only use WiFi networks that are password protected.
Companies should maintain a reliable back up for their data on a different network.
Organizations should make sure their antivirus software is up to date.
Everyone should think before they click on links and emails.
“Think before you click” is perhaps the most important measure here. At DWM, we take cybersecurity very seriously. As the majority of us work from home over the next few weeks, we continue to rely on two-factor authentications, virtual private networks through our cloud platform, antivirus software, and secure home WiFi. We also continue to collaborate with our third-party technology providers to stay proactive and increase our security on a daily basis.
What’s your favorite organizational system? How do you stay up to date with the important items in your life? Maybe you don’t even have a system. We all juggle a lot of information on a day-to-day basis. From time to time, everyone could use a little help on their daily tasks, planning their next big trip, or even ensuring their bills are paid on time. There are numerous ways to approach organizing these elements. The Bullet Journal Method: Track the Past, Order the Present, and Design the Future by Ryder Carroll introduces an inventive way to attack these key issues we all face.
The Bullet Journal Method (BuJo for short) is an ingenious organizational system that many people use as an alternative to a journal, or a traditional planner. The best BuJos feature a symbol format that allows you to easily customize your own page layouts, similar to below. The symbols are the syntax that makes this method so useful. By simplifying tasks, notes, and events into a bullet point format, the BuJo method allows you to focus on only that which is essential. Writing effective bullets is the key to success for a productive and mindful journal. Too much information and your mind may lose sight of the goal. Too little information and your bullet may be ineffective.
In college, one of the most popular ways to retain information is by writing the information out or using flashcards. Like flashcards, the Bullet Journal is solely a handwritten process. It allows you to customize your organizational habits as much or as little as you see fit. Many experts suggest that by writing things down you may improve your memory. Carroll offers that by writing out your day to day life and actively organizing your future, you are creating an archive to look back on and learn from. See what worked and what didn’t work. That is essentially the main point, no pun intended, of the bullet journal method.
Why use a notebook? According to a New York Times article titled “Why is Productivity so Weak?” every year from 1950 to 2000 Americans increased their productivity around 2.3%. However, per the Bureau of Labor Statistics, not until 2005 did we start to see productivity decrease on a year by year basis. Carroll attributes this decrease in productivity to an increase in technology, information overload, and other online distractions. He goes on to suggest that when you are forced to write, you are also forced to unplug and, hopefully, bring more clarity to your thoughts.
You may be wondering “Why not use a software or a phone application instead of a notebook?” Flexibility. Today’s organizational applications have a tendency to do one task extremely well, or many tasks not so well. With a notebook, you are in control, and you can customize as little or as much as needed.
Although your Bujo can be a place of combining several important aspects of your life, not everything is to be included. Things not to be included in your journal: passwords! Passwords and other potentially sensitive information shouldn’t live in your handwritten notebook. Much like a checkbook from your bank, your BuJo is something you likely would not want to lose. For a list of potential ways to store your password, you may review our previous blog on this.
At DWM, we have several organizational tools and processes to assist us in servicing our clients. Our core software for relationship management and consistent workflows is Junxure, the leading Client Relationship Management (CRM) software in our industry. In addition to Junxure, our monthly, weekly and daily checklist enables us to make sure we never miss a beat when it comes to assisting our clients with their long-term goals and adding value on a continual, proactive, basis.
In a world where 5-year-olds now know how to use an iPad better than some Millennials, it may not hurt to go back to the basics. For some, these organization pieces come as second nature, but for others, it does not. For your personal life and day to day activities, you may consider the addition of a Bullet Journal (BuJo).
Two weeks ago, the House of Representatives almost unanimously passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act, adopting their version of long-awaited retirement legislation that can now be introduced for deliberation on the Senate side and ultimately head to the President’s desk. While Congress has discussed this for many years, these policy changes come at a time when life expectancy has increased and a greater number of American retirees must ensure that they don’t outlast their savings. The bill is now in the Senate Finance Committee, where action has slowed as a handful of Finance Committee members have some issues they want addressed before agreeing to vote on it.
The marquee provisions in the House bill, estimated to cost $16.8 billion over 10 years, include providing tax credits and removing barriers for small businesses to offer retirement plans and boosting the minimum age for required minimum distributions (RMDs) to begin from 70½ to 72 years old. Other significant changes written in the House bill would make it easier for tax-deferred retirement plans, like 401(k)s, to offer annuities and also repeals the age cap for contributing to individual retirement accounts, currently 70 ½. There are also beneficial measures for part-time workers, parents, home-care workers and employees at small businesses, as well.
As reported by the May 23rd WSJ article, the House legislation also repeals a 2017 change to the “Kiddie Tax” that can boost tax rates on unearned income for low and middle income families that had caused surprise tax increases for many, including many military families of deceased active-duty service members . This policy change would also benefit survivors of first responders and college students receiving scholarships. This provision helped accelerate the passage of the bill to resolve a problem for military families right before Memorial Day.
To help pay for these changes, the House bill limits the “stretch IRA” provisions for beneficiaries of inherited IRAs. Currently, beneficiaries can liquidate those accounts over their own lifetimes to stretch out the RMD income and tax payments. The House bill would cut the time down to 10 years, with some exemptions for surviving spouses and minor children.
A handful of Republican Senate members have some concerns about the House bill, including the House’s resistance to a provision that allows 529 accounts to pay for home-schooling costs. The Senate Finance Committee has introduced a bill closely resembling the House legislation – the Retirement Enhancement and Savings Act. Republican Senators are considering whether to make even broader policy changes than the House bill.
Here are the key items included in the House bill that are of most interest for our DWM clients:
IRAs if you are over 70 ½ – This bill would increase the age for the required minimum distributions (RMD) to begin from 70 ½ to 72. This will allow the accounts to grow and save taxes on the income until age 72. Also, there would no longer be an age restriction on IRA savings for people with taxable compensation – the age had previously been 70 1/2.
401(k)s – Small business employers would be allowed under this legislation to band together to offer 401(k) Plans to their employees, if they don’t offer one already. Long-standing part-time workers would now be eligible to participate in their employer’s Plan and new parents would be allowed to take up to $5,000 from 401(k)s or IRAs within a year of the birth or adoption of a child. Employers would also be required to provide more comprehensive retirement income disclosures on the employee statements and it would be easier for employers to offer annuity options in their 401(k) Plans.
Student Loans/529s – The House version of the bill would allow up to a $10,000 withdrawal from a 529 to be used for student loan repayment.
At DWM, we are always watching for legislative changes that might affect our clients and will continue to report on these important developments. Please don’t hesitate to contact us with any questions or comments!
The most common type of retirement accounts are traditional Individual Retirement Accounts (IRAs) and company sponsored traditional 401(k) plans, both of which are funded using pre-taxed dollars. The goal of these accounts is to accumulate retirement assets by deferring current year taxes and reducing your taxable income. Later, when funds are withdrawn, either voluntary or as part of a required minimum distribution upon reaching age 70.5, the accumulated earnings and contributions are subject to ordinary income tax. In addition to this, if you are below age 59.5 and you withdraw funds you could be subject to an additional 10% tax penalty.
“Cue the Roth IRA.” One alternative to popular IRAs and traditional 401(k) plans is the Roth IRA and Roth 401(k) (“Roths”). Contributions to both consist of after-tax funds. The accumulated earnings and contributions are not subject to income tax upon withdrawal. In addition to this, there are no required minimum distributions for Roths until the account has reached a non-spouse beneficiary. Although no current tax break is received, there are several arguments as to why Roth accounts can be a significant attribute to your portfolio and to your estate planning. As we will discuss below, the Roth has the ability to grow income tax-free for future generations.
Funding a Roth account can occur in one of two ways; either through yearly contributions, currently limited to $6,000 per year if below age 50 and $7,000 if above age 50 for 2019 Roth IRA accounts. In addition to this, contributions may be limited for Roth IRAs if your income is between $193,000 and $203,000, for married filing jointly, and you are ineligible to contribute if your income is higher than these figures. Roth 401(k) contributions limitations are currently set at $19,000 per year per employee, with an available catch-up contribution of up to an additional $6,000 if age 50 or older. Contributions to Roths are typically more beneficial for young people because these funds will likely grow tax-free for a longer period of time and they generally have a lower current income tax bracket.
The IRS allows you to convert traditional IRAs to Roth IRAs without limitation. You simply have to include the converted amount as ordinary income and pay the tax. Converting traditional IRA funds to Roth is certainly not for everyone. Generally speaking, conversions may only be considered beneficial if you are currently in a lower tax bracket now, than when the funds will be distributed in the future. If you are in the highest tax bracket, it may not make sense to complete a Roth conversion. If you do not have available taxable funds, non-IRA funds, to pay applicable taxes, then a conversion may not be the best strategy for you. Lastly, conversion strategies are not usually recommended if you will have a need for your traditional IRA or Roth funds during the course of your lifetime(s).
In the right circumstances, a Roth conversion strategy may hold great potential to transfer large sums of after-tax wealth to future generations of your family. For example, let’s assume a conversion of an $800,000 traditional IRA. Of course, this would typically be done over the course of several years to limit the amount of taxes paid on the conversion. However, following the completion of the conversion, these funds will continue to grow tax-free over the course of the converters’ lifetime (and spouse’s lifetime). Assuming a 30 year lifespan, at an average rate of 5% per year, this would amount to close to $3,500,000 at the end of 30 years; a $2.7 million tax-free gain. For the purpose of this example, let’s also assume these Roth funds skip over the converters’ children to a future generation of four potential grandchildren. Split evenly, each grandchild would hypothetically receive $875,000. At this point, the grandchildren generally would be required to take a small required distribution, however, the bulk of these Roth funds would grow-tax free until the grandchild reaches 85 years of age. Assuming they receive these Roth funds at age 30, it’s possible each grandchild could receive $5,600,000 of tax-free growth, assuming a 6% average yearly returns. For this example, the estimated federal tax cost of converting $800,000 in IRA funds may be close to $180,000, assuming conversions remain within the 24% tax bracket year-over-year. An estimated state tax cost may vary by state, however, some states such as IL, TN and FL do not tax IRA conversions. Now, if we multiply the $5.6 million times 4 (for each hypothetical grandchild) and add the $2.7 million of appreciation during the first 30 years, this is a total of $25.1 million of potential tax-free growth over 85 years. This obviously has the potential to be a truly amazing strategy. Note that because of the rules that enable people to stretch out distributions of an inherited Roth, the people who benefit the most are young.
To review if Roth strategies may be a good addition to your overall planning, please contact DWM and allow us to assist you in this process.
In the last few years, Elise and I have really gotten into our own family histories. Both sides of Elise’s family came from England, one in the 1830s and one at the turn of the century. My family tree is more diverse. I am 25% German, 25% Finnish, 25% Italian, and, I just recently found out, 25% Jewish. My German ancestors came to America in 1855 and the others came at the turn of the century.
As Elise and I looked back at not only the DNA of our forefathers and foremothers, but also the culture, traditions, stories and values passed on to us, we realize what wonderful legacies we have been given. In a way, we’re all standing on the shoulders of our ancestors.
In the past few years, there’s been a huge increase in people exploring their family history. Ancestry.com sold 1.5 million DNA kits a year ago on Black Friday. The DNA test uncovers your origins. And, Ancestry.com and others have huge online databases and have put together family trees that you can review and expand. This search has caused us to again look at our potential legacy and what it will be. Do you wonder what your legacy will be?
Legacy is defined as “something transmitted by or received from an ancestor or predecessor from the past.” In the simplest terms, it is everything you have worked for in your life. Certainly, that includes money and property, but it’s much more than that. It includes what you have achieved in your work life and your family life, as well as other social relationships and achievements that you ultimately leave behind.
Your estate, on the other hand, is the sum total of everything you own-all of your property (real, tangible and intangible). Your estate requires an “estate plan” to provide for your desired succession of assets, while minimizing taxes and administrative hassles. If you desire to pass on more than just your assets and transfer your spiritual, intellectual, relational and social capital, you need a “legacy plan.”
The question is not “Will you leave a legacy,” but “What kind of legacy will you leave?” Why not be proactive and intentional in creating your legacy? Why not structure your life in a manner that helps you achieve your purpose and greatest success and safeguards those accomplishments for transfer to future generations? Why not develop and maintain your legacy plan?
If we think of our legacy as a gift, it places an emphasis on the thoughtful, meaningful, and intentional aspects of legacy, as the consequences of what we do will outlive us. What we leave behind is the summation of the choices and actions we make in this life and our spiritual and moral values.
What do you want to leave for your family, the community, your partner or the world? Your legacy can be huge; perhaps a world-changing cause. But it doesn’t need to be a grandiose concept. Instead of wanting to leave a legacy that inspires people to help starving children in the world, you, for example, may relate more with leaving a legacy with your family and friends of how you were kind, accepting and open to others, which might help inspire them to do the same.
A good place to start is to think about the ancestors, mentors and associates whose legacy you admire. What actions can you take to inspire others in the same way?
We encourage you to give some thought to your legacy plan. We’re all creating our legacy every day, whether we realize it or not. And, here at DWM, we’re focused on protecting and enhancing not only your net worth, but your legacy as well.
It’s beginning to “cost” a lot like Christmas! It’s a fun play on the popular holiday song, “It’s beginning to look a lot like Christmas”, originally written by Meredith Wilson in 1951. Though times have certainly changed since the 1950s, the spirit of gifting and giving during the holidays has always remained the same. According to the National Retail Federation, the average American spends an average of $1,000 during the holiday season!
It’s not uncommon, as we approach the holiday season, that you might find yourself feeling grateful, compassionate and more charitable than any other time of the year. Now is the time people eagerly give to their loved ones and generously give back to those in need. Here’s a look into new and exciting ways people are giving and gifting in 2018:
529 College Savings Plans
As the total student loan debt in the U.S. approaches the $1.5 trillion mark, 529 college saving plans have grown in popularity. Unlike ordinary gift checks, a 529 savings plan can an act as an investment in a child’s future that has the ability to grow, tax-free, for the use of qualified educational expenses (K-12 tuition included under the new tax law). While college savings may not be the most riveting gift for a young child to receive at the time, the potential to alleviate the future burden of student loans, all or in part, will be one gift they won’t soon forget.
Custodial Investment Accounts
There are two main forms of custodial investment accounts, UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts. They are virtually identical aside from the ability of UTMA accounts to hold real estate. Custodial accounts can be a great way to teach children about investments while limiting their access to investment funds. Depending on your state, access to custodial accounts is limited to minors until the child has obtained ages 18-21.
In 2018, individual gifts are limited to the annual $15,000 gift-tax-exemption limit ($30,000 for married couples). Family and friends can contribute directly to custodial accounts of another person. If these accounts are properly titled as retirement accounts, such as a Custodial Roth Account, contributions must be made indirectly, limited to $5,500 for 2018, and the donee must have earned an income equal to or greater than the contribution made.
Did you know you can complete charitable gifts in the name of a friend or family member and still capture the tax deduction? Assuming you itemize, funds given to charity can come from any taxable account (or qualified, see below) of your choosing and may list a donor of your choosing. For example, one can give to St. Judes Children’s Hospital using their own personal funds, receive a tax deduction for doing so, and list the donor as someone other than themselves, like a grandson or other relative. So long as you can prove the funds used came from you, i.e. your name is listed on the account used, you should receive a deduction for these forms of charitable contributions.
There are several ways to give back to charity, one of the more tax efficient ways is by way of Qualified Charitable Distributions (QCDs). This is an alternative to Required Minimum Distributions (RMDs) that you are required to take from your IRA upon obtaining age 70 1/2. A QCD allows you to give a portion or all of the amount that you otherwise would be required to take from your IRA to charity. The benefit of doing so is to exclude these funds from your taxable income. This process can be especially beneficial if, under the new tax reform, you will be using the new increased standard deduction, $12,000 for individuals and $24,000 for married filing jointly, as opposed to itemizing.
There are many forms of giving. Integrating both charitable giving and family giving can be an intricate part of your overall plan, and it doesn’t always have to “cost you an arm and a leg.” Ensuring your gestures are both sustainable and tax-efficient are good questions to ask. At DWM we are always looking for new ways to give back to our clients and friends by assisting in these areas. Please, never hesitate to reach out to us in regards to new ways to give back to your family, friends and charitable organizations.
Labor Day in the 21st century means time for beaches, BBQ, ballgames and quality time with family and friends. For many, Labor Day signifies the last days of summer. But don’t worry, the official end of summer is September 21st so you still have some time to catch some waves and rays. Although Labor Day always falls on the first Monday of every September, there is a lot more to this holiday weekend than an extra day off from work and great sales. From a survey done by WalletHub, here are 10 facts about Labor Day that you may not know:
133 million Americans will enjoy a BBQ this Labor Day
The average Labor Day shopper will spend $58
25% of Americans plan to get out of town
The top three Labor Day destinations include New York City, Chicago, and Las Vegas
Labor Day is America’s third favorite holiday behind Christmas/Chanukah and Memorial Day
There are approximately 89 running races held over Labor Day weekend
The number one hardest working city in America is San Francisco with an 8 hour average work day, and the laziest city in America is Columbia, SC with an average work day of 7.3 hours
Labor Day is the unofficial end of hot dog season in America. From Memorial Day to Labor Day there are 818 hot dogs eaten per second
Most Americans believe Labor Day is only an American holiday when really it was started in Canada
Last but not least, yes, you really can wear white after Labor Day!
From everyone here at DWM, have a great Labor Day Weekend and enjoy some time with the family!
We all lead busy lives, so it’s important to save time and maximize efficiency whenever we can. The new eSignature feature from Charles Schwab allows you to review, electronically sign, and send back eligible forms to us, making a variety of processes quicker and easier than ever before.
At DWM, we always stay up to date with the latest technology and keep you informed, so we can ensure the best possible experience for our clients. As we learn more about today’s changing technology and the need to stay on top of cybersecurity, going digital allows sensitive client material to remain safely guarded, as well as providing an easier, less burdensome and more accurate onboarding process for everyone.
eSignature is accepted on many new account applications, maintenance forms, and managed account forms, such as:
Schwab One Personal accounts
Schwab One Trust Accounts
Company Retirement Accounts (CRA/Pension Trust)
Custodial/Minor IRA Applications
Account Closure Forms
Designated Beneficiary Plan Agreements
Investor Checking Accounts
IRA Distribution Forms
Transfer Your Account (Into or Out of Charles Schwab)
For a full list of eligible forms, click here. This time-saving eSignature feature is extremely efficient, and it’s easy to use, too! Simply follow the steps below and you’ll be well on your way to mastering electronic signatures.
1)When expecting a form for eSignature, keep an eye out for an email from Charles Schwab that states “Documents for Your Electronic Signature.”
2)Click “Review Documents” at the bottom of that email.
3)Log into your Schwab account using your Schwab Alliance when prompted. If you don’t know your account information, let us know or contact Schwab Alliance at 1-800-515-2157.
4)Click “Agree/Continue” to agree to the eSignature terms and conditions.
5)Review the document and ensure that it is accurate before signing.
6)When you are ready, choose from two signing options: automatic signature or draw, in which you digitally “draw” your own signature.
7)Click “Sign” in all places where signature or initial is needed.
8)Click “Finish” to complete the process. DWM will be notified promptly and you will then receive a confirmation email.
We could all use some time back in our day, so if you’d like to learn more about eSignature, reach out to us at any time or contact Schwab Alliance at 1-800-515-2157 for more information.
Everyone always remembers their first paycheck and asking themselves, “Who’s FICA, and why is he taking all of my money?” If you’re like most people, the number that really matters to you is the bottom line: money in the bank! You may even throw out the rest of your pay stub. However, it is so important to review your pay stub and be able to analyze the information you find there to spot potential errors.
While your paycheck may not always give you the physical wealth you were looking for, it will give you a wealth of knowledge about your finances. Carefully reviewing pay stubs is a step we at DWM take with all of our clients to ensure they’re clear on available benefits, tax rates, employer matches, withholdings, and more.
So, without further ado, here’s a comprehensive guide to reviewing and analyzing your pay stub.
Important Terms and Definitions
First, to help you better understand the different acronyms within your pay stub, let’s take a look at a few of them and their definitions:
PPD: Pay period
REG: Regular hours worked
OT: Overtime hours worked
HOL: Paid holiday hours
VAC: Paid vacation hours
PTO: Paid time off
FT or FTW: Federal tax withheld
ST or STW: State tax withheld
LT: Local tax withheld
SS: Social Security tax
MED: Medicare tax withheld
FICA: Your employer’s portion of the Social Security and Medicare taxes
WC: Workers’ compensation contribution, typically paid by your employer
Additionally, there are a number of terms you will need to know:
Gross pay: This is the total amount you earned during the given pay period (pay period discussed below). It includes your wages or salary, plus bonuses and tips if applicable. Most pay stubs will also include how much you’ve earned year to date.
As almost all areas of your pay stub relate to gross earnings, this number is usually located on the first line of your pay stub with the remaining figures telling you how much of those earnings were withheld for taxes and other uses.
Pre-tax benefits: Some benefits may appear on your pay stub as pre-tax income. For example, if your employer pays for some or all of your childcare expenses, travel expenses, or your parking pass, these may show up as taxable benefits.
Net pay: Also known as “money in the bank,” this number is what you receive as your paycheck after taxes, insurance premiums, retirement contributions, and other deductions have been taken out.
Pay Period: By looking at the dates on your pay stub (usually located at the very top of your pay stub), you can tell if you’re being paid monthly, weekly, or bi-weekly. This helps to know if you need to multiply your current pay by 12, 52, or 26 to determine annual salary. If you are using a mid-year pay stub, you may multiply your current pay by the number of pay periods remaining and add this to your year-to-date figure, mentioned earlier.
Federal income tax: Your pay stub will show how much money was taken out of your gross pay for federal taxes. The exemptions you claimed on your W-4 form determine the amount withheld for federal taxes.
State income and local tax: If you live in a state that requires that you pay an income tax, that number will also be determined based on your W-4 exemptions.
Social Security tax: The federal government requires that every employee and employer pay a tax for Social Security purposes. You, as the employee, pay 6.2 percent of up to $128,400 in wages for 2018. So, if you earn $100,000 per year, your Social Security tax comes out to $6,200 for the year. This tax makes it possible for you to receive Social Security benefits when you retire.
Medicare tax: Similar to the Social Security tax, the Medicare tax is mandatory for employees and employers alike. You’ll pay a 1.45 percent tax on wages up to $200,000 ($250,000 if married) for 2018. There is an additional 0.90 percent, 2.35 percent overall, tax on wages over $200,000 ($250,000 if married). Medicare tax exists so that you can benefit from the program when you come of age.
Understanding Your Benefits
Now that the hard part (taxes) is out of the way, it’s time to understand your benefits.
Insurance premiums: If your benefits include insurance like health, dental, vision, life or disability, your employer may require that you pay for at least a portion of the plans’ premiums. That cost will come out of your gross pay automatically, and how much you pay shows up on your pay stub. Be sure to take some time to understand your insurance policies, as well!
Flex spending account (FSA) or health savings account (HSA): If you opted to participate in an employer-sponsored FSA or HSA, you’d typically see a deduction for these on your pay stub and also note whether your employer has made a contribution (free money!).
Contributions to your retirement plan: This figure is how much you agreed to contribute to your employer-sponsored retirement plan. Common retirement plans include 401(k), 403(b), and 457 plans. If you get a match (more free money!), this number is on your pay stub, too, which shows you how much your employer contributed.
You can divide your employer’s contribution by your gross pay to determine what percentage they’re contributing to your retirement. If you know your employer matches your contributions up to a certain percentage limit, this is a good area to see if you are reaching your full contribution potential and whether you need to adjust accordingly.
Final step! Now that you’ve reviewed each aspect of your pay stub, you have probably come across one or two items you’d like to change. Unfortunately, you can’t do anything about Social Security and Medicare taxes, but you can increase or decrease your federal and state tax withholdings by updating your W-4 form. This can be done by contacting your HR department.
If you’d like to review your pay stub, DWM is always happy to be your second set of eyes and ensure that your pay stub reflects your best interest.
The ultra-inexpensive era of mortgage rates is coming to an end, and quickly. Mortgage rates have reached unprecedented 7-year highs. The average 30-year mortgage this week will cost consumers 4.7%, up nearly a full 1% from 2016.
While a 1% increase may not seem like the end of the world, it is important to realize the effect this may have over the course of a mortgage. Consider a consumer who purchased a home with a $200,000 mortgage in 2016. Assuming a 3.7% interest rate, this would amount to a principal and interest monthly payment of $921. In today’s environment, the same consumer may have a monthly payment of $1,037. Over the life of a conventional 30-year mortgage, today’s consumers may pay $41,760 more than those who locked in a rate in 2016.
Reviewing rates in today’s environment may leave some consumers discouraged. However, in comparison to many historical rates, today’s rates are actually relatively low. Take 1981, for example, when the average 30-year mortgage rate was 16.64%. Using a 16.64% interest rate, a $200,000 mortgage in 1981 would cost the consumer $2,793 per month, or, over the course of 30 years, $632,160 more than a consumer today.
For those looking to purchase a new home, the question remains: Is now a good time to buy? The answer is not so simple. There are a few factors to consider before determining if it’s the right time to buy for you.
First of all, as the economy improves overall, mortgage rates are likely to continue to increase. The culprit behind increased mortgage rates is actually surging wage growth. According to the Census and Bureau of Labor Statistics, average household income is at an all-time high, while mortgage rates have been laying low—until now. As wage growth continues to increase the money supply to consumers, consumer spending power increases. Unfortunately, increased consumer spending also increases demand for goods and will ultimately raise the price of goods–inflation.
With the expectation of rising inflation comes a steady increase in the yield of the 10-year Treasury note. The yield on the 10-year Treasury note, which usually affects the 30-year mortgage rate, has risen to its highest close since 2011, ending up at just over 3.1%.
In addition, the Federal Reserve has indicated that it will be raising short-term rates at least three to four times this year alone, and potentially several more times in the coming years.
Current home owners should also not expect to refinance anytime soon. As rates rise, the group of homeowners who would benefit from or be eligible for mortgage refinancing has decreased drastically by 46% this year, according to Black Knight Inc.—the smallest group since 2008.
But with mortgage rates trending upward and no sign of lowering again in sight, many people are choosing to strike while they still have the chance.
Overall, your decision depends on if you want to wait it out and hope that mortgages rates will decrease again, or if you want to buy now while the rates are still relatively low, even with the 1% jump. One effective tip to help counteract for the increase in mortgage rates is to lower your price range accordingly and look for a house priced lower than what you would have pursued had mortgage rates remained at their lowest point.
Of course, there are many other factors besides mortgage rates which may affect a consumer’s decision to purchase a home. For example, economic factors such as rising rents, home appreciation, and predictable monthly housing payments.
Bottom line: Rising rates are expected to continue for some time, so it is important to weigh all factors at play and make the decision that’s right for you today and in the future.