Archive for CEO blog

Personal Loan or Personal Line of Credit?

cash fanned out across a grey background

When it comes to Personal Loans and Personal Lines of Credit, the options for how to use the funds are endless. However, while both offer flexibility in all the different ways you can use the funds, there are certain instances where choosing a Personal Loan would be a better fit than a Personal Line of Credit and vice versa. Let’s explore your options and help determine which is the best choice for you and your budget.

Consider the nature of the expense.

Personal Loans are distributed in one lump sum and are typically best for large, one-time expenses. Examples include back-to-school costs, paying off high-interest debt, and higher education costs are a few examples. In contrast, Personal Lines of Credit are revolving and operate similarly to a credit card where you only pay on the amount you use for a specified term. This credit line is consistently available – once you pay off the money you have borrowed, the funds open up again.

A Personal Line of Credit can be optimal if you aren’t sure how much money you will need to borrow or for how long. Examples of ways to use a Personal Line of Credit are: supplementing irregular income, home improvements, and backup for when unexpected expenses arise. Therefore, if you’re looking for a shorter-term solution, a Personal Loan might be the better option if you’re also considering a Personal Line of Credit.

Evaluate the terms and how it fits with your budget.

An easy way to remember the difference between a Personal Loan from a Personal Line of Credit is a loan has a fixed interest rate and a line of credit is based on the prime rate and can change over the term. Therefore, if you’re looking for a way to budget a certain amount each month, a Personal Loan ensures you pay a set amount each month for the life of the loan. With a Personal Line of Credit, while the term is longer and you only pay on what you use. For example, if you are extended a $10,000 credit line and only use $2,000 of the money, you will only have to make payments on the amount you’ve used. Alternatively, if you have a Personal Loan, you make payments on the total amount of money borrowed, whether you’ve used the funds or not.

Qualifying for a Personal Loan vs. a Personal Line of Credit

Typically, receiving approval for a Personal Line of Credit is more challenging to obtain than a Personal Loan. Why? Due to the flexible nature of a Personal Line of Credit, having a healthy credit score plays a significant factor in the decision to approve funding. Whereas, a Personal Loan with its fixed term and amount borrowed, allow for easier approvals.

Making the decision

Why is it important to know the differences beyond the interest rate when it comes down to Personal Loans and Personal Lines of Credit? While often confused, these loan types have distinct differences that, if not chosen wisely, you could end up paying more. If you’re looking to fund your next step, Scient Federal Credit Union can help you achieve your goals. Talk to us today about your options and how to choose the right solution for you.

What Are Your Financial Vices Costing You?

2 cheeseburgers, fries and onion rings on a tray

What is one thing you just cannot live without? You know, those little indulgences that help us make it through the day? For some of us, it’s a jolt of caffeine. For others, Netflix and Hulu offer a sweet escape from the hustle and bustle of everyday life. What we sometimes don’t think about is that these things can be a constant drain on our wallets. Here are some things that we could be spending more money on than we intend to and ways you can cut those costs.

Coffee/Energy Drinks

The mid-morning slump, the mid-afternoon slump, and the post-mid-afternoon slump. Ok, we made that last one up, but sometimes the day seems to drag on for way longer than seemingly possible. Some people reach for the nearest Starbucks to replenish their energy reserves. Some crack open an energy drink in the hopes of pushing them through the rest of the day. What neither often consider is that these sources of liquid energy can add up. The average price of a cup of regular (non-latte) coffee from Starbucks is $1.89. That may not seem like much but consider this: an American who drinks coffee at home will save approximately $427 over those who regularly visit coffeeshops. When we look at energy drinks, on average, they cost anywhere between $2-$4. It can be almost double the cost of coffee. A cheaper alternative – green tea! If saving money is high on your priority list, put your at-home barista skills to work.

Subscription Services

From exotic snacks to pet toys, a new wardrobe, and everything in between, there is a subscription service for everything these days. Many, in fact, sometimes forget how many we have subscribed to, leading to a big bill each month. Arguably the most common subscription is Netflix, which will cost you $12.99 a month (if you only want the standard package). Add in Hulu ($5.99), BarkBox ($22), and StitchFix ($20), and you now have a monthly subscription bill of slightly over $60. See how fast that adds up? Not to mention the ever-popular meal subscription services can run about $200 a month. While these modern conveniences are well…convenient, they are also pricey. Most of us don’t want to give up our Netflix, and that’s fine. Take a hard look at your subscriptions. Are you getting your money’s worth? Do you eat all the meals from the meal kit? Do you keep enough from StitchFix that the $20 a month fee is worth it? Odds are, you’ll find one or two subscriptions you can live without. Your quality of life will stay the same, and you’ll save money.

Take Out

Do you look at a recipe and instantly get woozy? We get it; cooking isn’t for everyone, and take out can taste so good. Before you pull up DoorDash or GrubHub, consider that the average household spends 3,000 dollars a year dining out. That’s no small amount. On a closer look, a prepared meal at a restaurant costs, on average, $13. Compare that to the average cost of groceries per person for an at-home meal…$4. Yes, that is a $9 savings just from eating at home. The good news is, you don’t have to stop eating out altogether. If you cook at home twice a week, you’ll save a little over $900! More good news is that anyone can cook. All it takes is a little preparation. Plan your meals, choose easy recipes, and don’t expect every meal you prepare to be a Michelin-star experience. Casseroles are an easy meal that is also cheap and tasty, even if they won’t be winning any fancy food contests. If you are completely opposed to cooking, be responsible with your take out. Choose locally-owned businesses and restaurants so that your money is stimulating the local economy. When you use a big delivery service, you aren’t just paying for the food. Your total also includes a service fee, tax, a delivery fee, and a tip. Many times your order total will be doubled. A recent study showed that your meal will cost you 32.8% more when you order food from DoorDash vs ordering directly from a restaurant.

Online Shopping

“Add To Cart.” The temptation is always just a click away. Surfing the net can bring some expensive side effects as we see a constant flood of targeted ads. It is like they know exactly what you’re looking for! Uncanny, isn’t it? When someone meets our wants and needs (and at such deal), we have a hard time passing it up. AND free shipping? It can lead to financial death by a thousand cuts. Sure, you are getting good deals on your online purchases, but this can also make us feel like we can buy just one more thing. Soon, our whole budget has been blown on online shopping. There are many ways you can curb this habit. For starters, make sure to delete your payment information from auto-populating in services like PayPal. Secondly, set strict limits on yourself. In your budget, set aside some funds for “Online Shopping.” If you know this is the only money you have to splurge, you might think twice before clicking “complete purchase.” 

If you do any of the things above, the first thing to remember is not to get discouraged. A cup of coffee or a new shirt never hurt anyone. With most things in life, our financial vices are all about moderation. We wouldn’t expect you never to visit a Starbucks or eat out again. Set realistic goals for yourself and hold yourself accountable; you’ll be amazed at the savings. To easily keep a pulse on your finances and manage your money, you can use one of our convenient options: Online Banking, Mobile Banking, Audio Banking, surcharge-free ATMs, and Shared Branching.

At Scient Federal Credit Union, we are here to help you reach your goals and gain financial stability. Give us a call or visit our website to find out how. 

Check Yourself Before You Rec (Loan) Yourself

It is fair to say that summer 2020 is shaping up to be…unconventional. We all want to have as much fun as possible, but we also want to stay as safe as possible. It may seem as though your summer fun is quickly becoming summer none, but a solution is in reach.

Enter: a recreational vehicle. Whether it be a boat, an RV, or even an ATV, summer excitement is just on the horizon.

With these extremely cool, yet different options, it may be hard to decide which one is right for you and your family. Do you want to take to the road, the water, or forested trails? You’ve come to the right place. We can help you prepare for this thrilling (but important) decision.

RVs

For many people, the thought of an RV vacation conjures images of your in-laws, asking if they can link up to your power supply. However, maybe your in-laws are on to something when it comes to money-saving, yet wholly enjoyable vacations.

Picture this: you and your family are on the open road. Your destination is ahead of you. Your children laugh as they play a card game at the table behind you. Best of all, you don’t have to stop for bathroom breaks.

A recent study found that RV vacations cost much less than other travel, even when factoring in fuel prices and RV ownership cost. According to the study, there are cost savings of 21-64 percent for a four-person travel party, while a two-person travel party saves 8-53 percent. That’s some serious cash. You can spend that money on food, experiences, and the all-important souvenirs. Why yes, you do need that airbrushed t-shirt.

Before purchasing an RV, be sure to do your research. Not all RVs are created equally. There are multiple packages and floor plans that may not be right for every family. Be sure to shop around to find the RV that fits your needs the best.

Keep in mind that, like most motor vehicles, an RV will require maintenance and upkeep. This is an expense that must be factored into RV ownership.

Boats

Did you know, Vitamin D deficiency affects 50% of the population worldwide? You know what is an excellent source of Vitamin D? Sunlight.

There are many ways to get under the sun, but one of the most fun is boating. Yes, this proves that being on a boat is beneficial to your health. Not only that, but taking to the water can be as relaxing or as exhilarating as you want. Gently float along soaking up that Vitamin D, or test your balance on a wakeboard. The possibilities are virtually endless.

You may find yourself asking, “who owns a boat?” To that we say, 2019 saw a six percent increase in the number of people who purchased personal watercraft, bringing the total to approximately 73,000 new boats on the water.

The next logical question, “what type of boat is right for me?” This is a good question as there are so many options you can choose. Do you want a sailboat or one with a motor? If you opt for a motor, what horsepower should you choose? What size boat is perfect for your needs? Am I going to take my boat to the lake? A river? The ocean? All of the above? It would be best if you considered all of these factors before purchasing a boat.

Those people with “Salt Life” and “Lake Life” stickers? That could be you.

Four-Wheelers 

Gritty. Dirty. Fun. Four-Wheelers can be a major source of excitement, but they can also be dangerous in reckless hands. Before purchasing an ATV, be sure to research all of the safety required. There are other things to consider, like your four-wheeler brand, size, and tire size. Fun fact: at low speeds, a four-wheeler’s wheels move in opposite directions to make parking and maneuvering easier.

What will you do with your Recreational Loan?

There are so many things to consider when purchasing a recreational vehicle, and we are here to help with one of the most important, finances. We offer recreational loans that make financing your summer fun (and beyond) more accessible than ever, no matter which you choose. We’re your credit union. Contact us today to see how we can help 877 860 6928 x1904.

15 Work Out Anywhere Bodyweight Exercises

Scient FCU is committed to helping you stay financially and physically healthy during these difficult times. We have a few tips for you on ways you can still workout at home during the quarantine.* 

With gyms and fitness centers closed and social distancing in effect, you may be looking for effective exercises that you can do at home. Bodyweight exercises, exercises that don’t require weights or machines, can be done anywhere and are some of the best exercises to keep you fit and healthy.

These also are fun for kids if you want to get your family involved. Do one to three sets, completing 10-15 reps per exercise.

Glute bridges

  • Lie on your back with your knees bent and keep your feet on the floor.
  • Place your hands on the ground with your palms facing downward.
  • Lift your hips up and off the floor, squeezing your glutes at the top of the movement.
  • Hold for 2-3 seconds and repeat.

Planks (regular plank, side plank)

  • Press your hands flat on the floor, shoulders aligned directly above them, and keep your back and bottom in a flat position, as you press your belly button toward your back. Hold for 15 to 60 seconds, or as long as you can.
  • For a side plank, lie on one side with your feet stacked. Press your bottom hand flat into the floor (or rest on your elbow), keeping it aligned with your shoulder, and press your body up, keeping it as straight as possible from your ankles through your shoulders.

Plank heeltaps

  • Start in a plank position – pressing your hands flat on the floor, shoulders aligned directly above them, and keeping your back and bottom in a flat position.
  • Keeping your legs straight, raise your bottom until you’re in a pike position.
  • Lift one hand, reach underneath and try to tap your opposite ankle.
  • Come back to starting plank position and repeat with opposite hand and ankle.

Push-ups

  • Start on your hands and knees or in a plank position, keeping your shoulders aligned directly above your hands.
  • Push against the ground as you push your body up, keeping your back and bottom in a flat position.
  • Lower and repeat.

High knees

  • Run in place, keeping your knees high in front of you (not kicking your butt).

Crunches

  • Lie on the floor with your knees bent and your back pressed against the floor.
  • Place your hands behind your head to support your neck or place them on your thighs.
  • Keeping your chin in a neutral position, lift your shoulders up and off the floor, and crunch your body up, pressing your belly button toward the floor.

Lying Leg Lifts

  • Lie on your back with your legs straight and flat against the ground.
  • Place your hands on the ground with your palms facing downward or with your hands placed underneath lower back/bottom for support.
  • Hinging at the hip, lift your feet up as high as you can, while keeping your back on the floor and legs straight.
  • Lower back down to starting position, but don’t let feet touch floor.

Calf Raises

  • Stand and place your hands against a wall or stand with your hands on your hips.
  • With your feet hip-width apart, raise up onto your toes. Hold for a few seconds or come right back down to the starting position and repeat.

Bodyweight squats

  • Stand with your feet shoulder-width apart.
  • With your hands either on your hips or held comfortably in front of you, extend your hips back as you bend your knees (like you’re sitting in a chair).
  • Make sure that your knees stay behind your toes, as you keep your chest lifted and your shoulders back.
  • If you want to challenge yourself, you can add a jump as you return from the squat to standing.

Seated squats

  • These are performed like bodyweight squats except you can place a chair behind you or use the sofa for support.

Lunges (forward, backward, and side)

  • Start with your hands on your hips and your feet together.
  • Step forward with one foot, making sure your knee stays behind your toes, as your other knee bends toward, but doesn’t touch, the floor; both knees should be at a 90-degree angle.
  • Keep your back straight so you aren’t hunched or bending over.
  • These can also be done by stepping your foot back or stepping your foot to the side.

Wall sits

  • Stand and press your back against the wall with your hands facing the wall.
  • Walk your feet out a few inches from the wall.
  • Keep your body flat against the wall as you slide your bottom down the wall until your knees are in a 90-degree position. Draw in your belly button and hold that position for 30 to 60 of seconds, or whatever amount of time you can hold it.
  • Slide back up the wall and repeat.

Dead bugs

  • Lying on your back, lift your knees and feet off the floor until they’re at a 90-degree angle.
  • While pressing your lower back against the floor, extend one leg out straight before returning to start position.
  • For more of a challenge, you can extend one leg out and extend your opposite arm over your head.
  • Repeat with the opposite leg (and arm).

Mountain climbers

  • Starting in a plank position, bring one knee into your chest and then return to plank position.
  • Repeat on other side.
  • For a greater challenge, increase your speed.

Supermans

  • Lie on your stomach.
  • With your hands extended out in front of you, simultaneously lift your arms and legs and hold that position for a few seconds.
  • Return to starting position.

While we’re all making temporary sacrifices to protect each other and our community, we don’t have to sacrifice our fitness. There’s no better time to get active and break a sweat.

 

Originally posted on Virtua.org By Paige Kondrak, Fitness Specialist—Virtua William G. Rohrer Center for HealthFitness

 

*Please consult your doctor before starting an exercise program. Scient FCU is federally insured by NCUA. 

What You Should Know About the Stimulus Checks

Over the weekend, President Donald Trump signed a $2 trillion economic relief plan set to provide aid to millions of Americans impacted by the COVID-19 (Coronavirus) pandemic. The package includes stimulus payments for individuals, additional unemployment coverage, student loan relief, and more.

But, what does that mean for you?

Stimulus Payments

Most adults will receive a check or direct deposit. The amount will vary based on adjusted gross income, filing status, and the number of dependents you claim. The amounts will break down as follows:

  • Single adults who made $75,000 or less annually will receive $1,200. If you have qualifying children 16 or under, you will receive an additional $500 per child.
  • Married couples with no children who made $150,000 or less will receive $2,400.
  • Taxpayers who file as the head of household will get the full payment if they earned $112,500 or less.
  • For single adults who make more than $75,000, the payment gradually decreases until it stops all together at $99,000.
  • For married people with no children who make more than $150,000, the stimulus payment gradually decreases until it stops all together at $198,000.

If someone claims you as a dependent – even as an adult – you will not be eligible for a relief payment. To see your adjusted gross income, look at Line 8B on your 2019 or 2018 1040 federal tax return.

Most people will receive their payments within three weeks. However, according to the bill, you’ll receive a paper notice in the mail a few weeks after your payment has been distributed. That notice will also contain information about where the payment ended up and in what form it was made.

Additional Unemployment Coverage

Under the stimulus package, additional unemployment benefits will be extended to people who wouldn’t typically be eligible for unemployment.

Typically, self-employed and part-time workers, gig workers, freelancers and independent contractors aren’t eligible for unemployment benefits, but under the stimulus package, those groups will be protected. Benefits will be calculated based on previous income using a formula from the Disaster Unemployment Assistance program.

Under the plan, eligible workers will get an extra $600 per week in addition to the state unemployment they are currently receiving. The state unemployment and extra coverage is designed to replace the paycheck that has been lost due to Coronavirus (COVID-19).

Student Loan Relief

The federal government has already waived two months of interest and payments for student borrowers. There will be an automatic payment suspension until Aug. 30 for any student loans held by the federal government. Older Federal Family Educational Loans, Perkins loans or loans from state or private agencies are not eligible. However, if you have a private student loan, it’s worth asking to see what options are available to you.

Retirement Accounts

The stimulus package has also suspended certain retirement account rules for the calendar year 2020. No one will have to take a required minimum distribution from individual retirement accounts or workplace retirement savings plans.

If you have an IRA or workplace retirement plan, you can withdraw up to $100,000 without the usual 10 percent penalty as long as the withdrawal is because of the COVID-19 outbreak. The withdrawal qualifies if you, a spouse or dependent tested positive for the virus or you experienced other negative economic effects related to the pandemic. You’ll also be able to spread out any income taxes you owe as a result over a three-year time period from the date of the distribution.

You can also borrow from your 401(k) and can take out twice the usual amount. For 180 days after the bill passes, if you provide certification that you’ve been affected by the COVID-19 pandemic, you can withdraw up to $100,000. If you already have a loan and it’s supposed to be repaid before Dec. 31, you get an extra year.

We’re facing unprecedented times; the pandemic has touched everyone’s lives in some way. Please know, Scient Federal Credit Union is here for you during this time. If you’re experiencing financial hardship due to the Coronavirus pandemic, reach out and talk to us at 860-445-1060. Let us help you find the option that works best for you. We can get through this together; one step at a time.

Coronavirus Concerns? Consider Past Health Crises

touching a touch screen

Putting current market volatility into historical perspective can help you stay the course during turbulent times.

 

stock price spike

Dollar-cost averaging does not ensure a profit or prevent a loss. Such plans involve continuous investments in securities regardless of fluctuating prices. You should consider your financial ability to continue making purchases during periods of low and high price levels. However, this can be an effective way for investors to accumulate shares to help meet long-term goals.

Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss.

 

During the last week of February 2020, the S&P 500 lost 11.49% — the worst week for stocks since the 2008 financial crisis — only to jump by 4.6% on the first Monday in March.1 By all accounts, the drop was largely driven by ever-increasing fears about the potential effects of the coronavirus (COVID-19) and its ultimate impact on the global economy. Although many market observers contend that the market was overvalued and due for a correction anyway, the unpredictability, strength, and suddenness of the historic tumble was unnerving for even the most seasoned investors. If recent volatility is causing you to consider cashing out of your stock holdings, it may be worthwhile to pause and put recent events into perspective, using history as a guide.

A look back

Since the turn of the millennium, the market’s negative response to health crises has been relatively short-lived. As this table shows, approximately six months after early reports of a major outbreak, the S&P 500 bounced back by an average of 10.47%. After 12 months, it rebounded by an average of 17.17%. Although there are no guarantees the current situation will follow a similar pattern, it may be reassuring to know that over even longer periods of time, stocks typically regain their upward trajectory, helping long-term investors who hold steady to recoup their temporary losses, catch their breath, and go on to pursue their goals.

Epidemic Month end* 6-month performance, S&P 500 12-month performance, S&P 500
SARS April 2003 14.59% 20.76%
Avian (Bird) flu June 2006 11.66% 18.36%
Swine flu (H1N1) April 2009** 18.72% 35.96%
MERS May 2013 10.74% 17.96%
Ebola March 2014 5.34% 10.44%
Measles/Rubeola December 2014 0.20% -0.73%
Zika January 2016 12.03% 17.45%

Source: Dow Jones Market Data, as cited on foxbusiness.com, January 27, 2020. Stocks are represented by the Standard & Poor’s 500 price index. Returns reflect the change in price, but not the reinvestment of dividends. The S&P 500 is an unmanaged index that is generally considered to be representative of the U.S. stock market. Returns shown do not reflect taxes, fees, brokerage commissions, or other expenses typically associated with investing. The performance of an unmanaged index is not indicative of the performance of any particular investment. Individuals cannot invest directly in any index. Actual results will vary.

*End of month during which early incidents of outbreak were reported.

**H1N1 occurred during the financial crisis, when, as during other periods, many different factors influenced stock market performance.

What should you do?

First, keep in mind that market downturns sometimes offer the chance to pick up potentially solid stocks at value prices, which could position a portfolio well for future growth. Again, there are no guarantees that stocks will perform to anyone’s expectations — and decisions could result in losses including a possible loss in principal — but it may be helpful to remember that some investors use downturns as opportunities to buy stocks that were previously overvalued relative to their perceived earnings potential.

Moreover, if you typically invest set amounts into your portfolio at regular intervals — a strategy known as dollar-cost averaging (DCA), which is commonly used in workplace retirement plans and college investment plans — take heart in knowing you’re utilizing a method of investing that helps you behave like the value investors noted above. Through DCA, your investment dollars purchase fewer shares when prices are high, and more shares when prices drop. Essentially, in a down market, you automatically “buy low,” one of the most fundamental investment tenets. Over extended periods of volatility, DCA can result in a lower average cost for your holdings than the investment’s average price over the same time period.

Finally and perhaps most important, during trying times like this, it may help to focus less on daily market swings and more on the fundamentals; that is, review your investment objectives and time horizon, and revisit your asset allocation to make sure it’s still appropriate for your needs. Your allocation can shift in unexpected ways due to changes in market cycles, so you may discover the need to rebalance your allocation by selling holdings in one asset class and investing more in another. (Keep in mind that rebalancing in a taxable account can result in income tax consequences.)

Questions?

After considering the points here, if you still have questions about how changing market dynamics are affecting your portfolio, you may contact our CFS financial professional, Brendan McMurtrie, at bmcmurtrie@cusonet.com or 860-441-0909. Often a third-party perspective can help alleviate any worries you may still hold.

1Based on data reported in WSJ Market Data Center, February 28, 2020, and March 2, 2020. Performance reflects price change, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.


Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources belived to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The credit union has contracted with CFS to make non-deposit investment products and services available to credit union members.

 

New Spending Package Includes Sweeping Retirement Plan Changes

The $1.4 trillion spending package enacted on December 20, 2019, included the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which had overwhelmingly passed the House of Representatives in the spring of 2019, but then subsequently stalled in the Senate. The SECURE Act represents the most sweeping set of changes to retirement legislation in more than a decade.

While many of the provisions offer enhanced opportunities for individuals and small business owners, there is one notable drawback for investors with significant assets in traditional IRAs and retirement plans. These individuals will likely want to revisit their estate-planning strategies to prevent their heirs from potentially facing unexpectedly high tax bills.

All provisions take effect on or after January 1, 2020, unless otherwise noted.

Elimination of the “stretch IRA”

Perhaps the change requiring the most urgent attention is the elimination of longstanding provisions allowing non-spouse beneficiaries who inherit traditional IRA and retirement plan assets to spread distributions — and therefore the tax obligations associated with them — over their lifetimes. This ability to spread out taxable distributions after the death of an IRA owner or retirement plan participant, over what was potentially such a long period of time, was often referred to as the “stretch IRA” rule. The new law, however, generally requires any beneficiary who is more than 10 years younger than the account owner to liquidate the account within 10 years of the account owner’s death unless the beneficiary is a spouse, a disabled or chronically ill individual, or a minor child. This shorter maximum distribution period could result in unanticipated tax bills for beneficiaries who stand to inherit high-value traditional IRAs. This is also true for IRA trust beneficiaries, which may affect estate plans that intended to use trusts to manage inherited IRA assets.

In addition to possibly reevaluating beneficiary choices, traditional IRA owners may want to revisit how IRA dollars fit into their overall estate planning strategy. For example, it may make sense to consider the possible implications of converting traditional IRA funds to Roth IRAs, which can be inherited income tax free. Although Roth IRA conversions are taxable events, investors who spread out a series of conversions over the next several years may benefit from the lower income tax rates that are set to expire in 2026.

Benefits to individuals

On the plus side, the SECURE Act includes several provisions designed to benefit American workers and retirees.

  • People who choose to work beyond traditional retirement age will be able to contribute to traditional IRAs beyond age 70½. Previous laws prevented such contributions.
  • Retirees will no longer have to take required minimum distributions (RMDs) from traditional IRAs and retirement plans by April 1 following the year in which they turn 70½. The new law generally requires RMDs to begin by April 1 following the year in which they turn age 72.
  • Part-time workers age 21 and older who log at least 500 hours in three consecutive years generally must be allowed to participate in company retirement plans offering a qualified cash or deferred arrangement. The previous requirement was 1,000 hours and one year of service. (The new rule applies to plan years beginning on or after January 1, 2021.)
  • Workers will begin to receive annual statements from their employers estimating how much their retirement plan assets are worth, expressed as monthly income received over a lifetime. This should help workers better gauge progress toward meeting their retirement-income goals.
  • New laws make it easier for employers to offer lifetime income annuities within retirement plans. Such products can help workers plan for a predictable stream of income in retirement. In addition, lifetime income investments or annuities held within a plan that discontinues such investments can be directly transferred to another retirement plan, avoiding potential surrender charges and fees that may otherwise apply.
  • Individuals can now take penalty-free early withdrawals of up to $5,000 from their qualified plans and IRAs due to the birth or adoption of a child. (Regular income taxes will still apply, so new parents may want to proceed with caution.)
  • Taxpayers with high medical bills may be able to deduct unreimbursed expenses that exceed 7.5% (in 2019 and 2020) of their adjusted gross income. In addition, individuals may withdraw money from their qualified retirement plans and IRAs penalty-free to cover expenses that exceed this threshold (although regular income taxes will apply). The threshold returns to 10% in 2021.
  • 529 account assets can now be used to pay for student loan repayments ($10,000 lifetime maximum) and costs associated with registered apprenticeships.

Benefits to employers

The SECURE Act also provides assistance to employers striving to provide quality retirement savings opportunities to their workers. Among the changes are the following:

  • The tax credit that small businesses can take for starting a new retirement plan has increased. The new rule allows employers to take a credit equal to the greater of (1) $500 or (2) the lesser of (a) $250 times the number of non-highly compensated eligible employees or (b) $5,000. The credit applies for up to three years. The previous maximum credit amount allowed was 50% of startup costs up to a maximum of $1,000 (i.e., a maximum credit of $500).
  • A new tax credit of up to $500 is available for employers that launch a SIMPLE IRA or 401(k) plan with automatic enrollment. The credit applies for three years.
  • With regards to the new mandate to permit certain part-timers to participate in retirement plans, employers may exclude such employees for nondiscrimination testing purposes.
  • Employers now have easier access to join multiple employer plans (MEPs) regardless of industry, geographic location, or affiliation. “Open MEPs,” as they have become known, offer economies of scale, allowing small employers access to the types of pricing models and other benefits typically reserved for large organizations. (Previously, groups of small businesses had to be affiliated somehow in order to join an MEP.) The legislation also provides that the failure of one employer in an MEP to meet plan requirements will not cause others to fail, and that plan assets in the failed plan will be transferred to another. (This rule is effective for plan years beginning on or after January 1, 2021.)
  • Auto-enrollment safe harbor plans may automatically increase participant contributions until they reach 15% of salary. The previous ceiling was 10%.

The SECURE Act may have the largest impact on retirement planning since the Pension Protection Act of 2006.


Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources belived to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The credit union has contracted with CFS to make non-deposit investment products and services available to credit union members.

 

Tips for First-Time Homebuyers

Even if you’re not a first-time home buyer, looking for and financing a home can be stressful. When you don’t know where to begin or what to do, it can be even more stressful. We’ve got a few tips for first-time homebuyers to get the most out of your home buying experience.

Determine how much house you can afford and get pre-approved.

When you’re ready to look for your dream home, it’s important to know how much home you can afford. This will narrow down your home search and will give you a realistic view of the types of homes you can buy inside of your price range. You will also avoid the temptation to purchase a home where you’ll struggle to make the payments.

Save up for a down payment.

With such a big purchase, having a down payment to invest in your home is important. A good rule of thumb for a down payment is to save 20% of your mortgage. For instance, if you have a $100,000 mortgage, your target down payment is $20,000.

If 20% of your mortgage doesn’t seem feasible, there are other options for first-time homebuyers that will allow you to save and invest a smaller amount into your mortgage. If you’re wondering how much you need to save to achieve your desired payment, check out a down payment calculator for reference.

Payoff as much debt as possible

One of the factors that will determine your creditworthiness is your debt-to-income ratio. A debt-to-income ratio measures the total amount of debt you’re paying off each month compared to the amount of income you’re bringing in within the same period. If the amount of debt you’re paying off is considerably more than your income, this will negatively impact your credit score. In turn, this will hurt your chances of being pre-approved for and financing a mortgage.

Try at all costs to avoid inquiries on your credit report

When you’re looking to finance your first home, one item that first-time homebuyers seem to overlook is avoiding new lines of credit. For instance, opening a new cell phone line, television service, or even setting up a utility account will all affect your credit score and your inquiries.

Before you buy a house, your focus should be on maintaining and improving your credit score while saving as much as possible for a down payment and closing costs instead of building new avenues of credit.

Save up for a down payment.

With such a big purchase, having a down payment to invest in your home is important. A good rule of thumb for a down payment is to save 20% of your mortgage. For instance, if you have a $100,000 mortgage, your target down payment is $20,000.

If 20% of your mortgage doesn’t seem feasible, there are other options for first-time homebuyers that will allow you to save and invest a smaller amount into your mortgage. If you’re wondering how much you need to save to achieve your desired payment, check out a down payment calculator for reference.

Buying your first home is no easy feat. Take the first step and contact one of Mortgage Specialists at 860 441 0902 to discuss all your options to owning your very own dream home in no time.

For College Savings, 529 Plans Are Hard to Beat

Raising kids is hard enough, so why not make things easier for yourself when it comes to saving for college? Ideally, you want a savings vehicle that doesn’t impose arbitrary income limits on eligibility; lets you contribute a little or a lot, depending on what else happens to be going on financially in your life at the moment; lets you set up automatic, recurring contributions from your checking account so you can put your savings effort on autopilot; and offers the potential to stay ahead of college inflation, which has been averaging 3% to 4% per year.1 Oh, and some tax benefits would be really nice, too, so all your available dollars can go to college and not Uncle Sam. Can you find all of these things in one college savings option? Yes, you can: in a 529 plan.

Benefits

529 college savings plans offer a unique combination of features that are hard to beat when it comes to saving for college, so it’s no surprise why assets in these plans have grown steadily since their creation over 20 years ago.

Eligibility. People of all income levels can contribute to a 529 plan — there are no restrictions based on income (unlike Coverdell accounts, U.S. savings bonds, and Roth IRAs).

Ease of opening and managing account. It’s relatively easy to open a 529 account, set up automatic monthly contributions, and manage your account online. For example, you can increase or decrease the amount and frequency of your contributions (e.g., monthly, quarterly), change the beneficiary, change your investment options, and track your investment returns and overall progress online with the click of a mouse.

Contributions. 529 plans have high lifetime contribution limits, generally $350,000 and up. (529 plans are offered by individual states, and the exact limit depends on the state.) Also, 529 plans offer a unique gifting feature that allows lump-sum gifts up to five times the annual gift tax exclusion — in 2020, this amount is up to $75,000 for individual gifts and up to $150,000 for joint gifts — with the potential to avoid gift tax if certain requirements are met. This can be a very useful estate planning tool for grandparents who want to help pay for their grandchildren’s college education in a tax-efficient manner.

Tax benefits. The main benefit of 529 plans is the tax treatment of contributions. First, as you save money in a 529 college savings plan (hopefully every month!), any earnings are tax deferred, which means you don’t pay taxes on the earnings each year as you would with a regular investment account. Then, at college time, any funds used to pay the beneficiary’s qualified education expenses — including tuition, fees, room, board, books, and a computer — are completely tax-free at the federal level. This means every dollar is available for college. States generally follow this tax treatment, and many states also offer an income tax deduction for 529 plan contributions.

Drawbacks

But 529 plans have some potential drawbacks.

Tax implications for funds not used for qualified expenses. If you use 529 plans funds for any reason other than the beneficiary’s qualified education expenses, earnings are subject to income tax (at your rate) and a 10% federal penalty tax.

Restricted ability to change investment options on existing contributions. When you open a 529 college savings plan account, you’re limited to the investment options offered by the plan. Most plans offer a range of static and age-based portfolios (where the underlying investments automatically become more conservative as the beneficiary gets closer to college) with different levels of risk, fees, and management objectives. If you’re unhappy with the market performance of the option(s) you’ve chosen, you can generally change the investment options for your future contributions at any time. But under federal law, you can change the options for your existing contributions only twice per year. This rule may restrict your ability to respond to changing market conditions, so you’ll need to consider any investment changes carefully.

Getting started

529 college savings plans are offered by individual states (but managed by financial institutions selected by the state), and you can join any state’s plan. To open an account, select a plan and complete an application, where you will name an account owner (typically a parent or grandparent) and beneficiary (there can be only one); choose your investment options; and set up automatic contributions if you choose. You are then ready to go. It’s common to open an account with your own state’s 529 plan, but there may be reasons to consider another state’s plan; for example, the reputation of the financial institution managing the plan, the plan’s investment options, historical investment performance, fees, customer service, website usability, and so on. You can research state plans at the College Savings Plans Network.


1College Board, Trends in College Pricing, 2014-2018

Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CFS”) a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS:are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS for investment services. Atria Wealth Solutions, Inc. (“Atria”) is a modern wealth management solutions holding company. Atria is not a registered broker-dealer and/or Registered Investment Advisor and does not provide investment advice. Investment advice is only provided through Atria’s subsidiaries. CUSO Financial Services, LP is a subsidiary of Atria. Prepared by Broadridge Advisor Solutions Copyright 2019.

Ten Year-End Tax Tips for 2019

Here are 10 things to consider as you weigh potential tax moves between now and the end of the year.

  1. Set aside time to plan
    Effective planning requires that you have a good understanding of your current tax situation, as well as a reasonable estimate of how your circumstances might change next year. There’s a real opportunity for tax savings if you’ll be paying taxes at a lower rate in one year than in the other. However, the window for most tax-saving moves closes on December 31, so don’t procrastinate.
  2. Defer income to next year
    Consider opportunities to defer income to 2020, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.
  3. Accelerate deductions
    You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year (instead of paying them in early 2020) could make a difference on your 2019 return.
  4. Factor in the AMT
    If you’re subject to the alternative minimum tax (AMT), traditional year-end maneuvers such as deferring income and accelerating deductions can have a negative effect. Essentially a separate federal income tax system with its own rates and rules, the AMT effectively disallows a number of itemized deductions. For example, if you’re subject to the AMT in 2019, prepaying 2020 state and local taxes probably won’t help your 2019 tax situation, but could hurt your 2020 bottom line. Taking the time to determine whether you may be subject to the AMT before you make any year-end moves could help you avoid a costly mistake.
  5. Bump up withholding to cover a tax shortfall
    If it looks as though you’re going to owe federal income tax for the year, especially if you think you may be subject to an estimated tax penalty, consider asking your employer (on Form W-4) to increase your withholding for the remainder of the year to cover the shortfall. The biggest advantage in doing so is that withholding is considered as having been paid evenly throughout the year instead of when the dollars are actually taken from your paycheck. This strategy can also be used to make up for low or missing quarterly estimated tax payments. With all the recent tax changes, it may be especially important to review your withholding in 2019.
  6. Maximize retirement savings
    Deductible contributions to a traditional IRA and pre-tax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your 2019 taxable income. If you haven’t already contributed up to the maximum amount allowed, consider doing so by year-end.
  7. Take any required distributions
    Once you reach age 70½, you generally must start taking required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans (an exception may apply if you’re still working for the employer sponsoring the plan). Take any distributions by the date required — the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of any amount that you failed to distribute as required.
  8. Weigh year-end investment moves
    You shouldn’t let tax considerations drive your investment decisions. However, it’s worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.
  9. Beware the net investment income tax
    Don’t forget to account for the 3.8% net investment income tax. This additional tax may apply to some or all of your net investment income if your modified adjusted gross income (AGI) exceeds $200,000 ($250,000 if married filing jointly, $125,000 if married filing separately, $200,000 if head of household).
  10. Get help if you need it
    There’s a lot to think about when it comes to tax planning. That’s why it often makes sense to talk to a tax professional who is able to evaluate your situation and help you determine if any year-end moves make sense for you.

Timing of itemized deductions and the increased standard deduction
Recent tax law changes substantially increased the standard deduction amounts and made significant changes to itemized deductions. It may now be especially useful to bunch itemized deductions in certain years; for example, when they would exceed the standard deduction.

IRA and retirement plan contributions
For 2019, you can contribute up to $19,000 to a 401(k) plan ($25,000 if you’re age 50 or older) and up to $6,000 to traditional and Roth IRAs combined ($7,000 if you’re age 50 or older). The window to make 2019 contributions to an employer plan generally closes at the end of the year, while you typically have until the due date of your federal income tax return (not including extensions) to make 2019 IRA contributions.


Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CFS”) a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS:are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS for investment services. Atria Wealth Solutions, Inc. (“Atria”) is a modern wealth management solutions holding company. Atria is not a registered broker-dealer and/or Registered Investment Advisor and does not provide investment advice. Investment advice is only provided through Atria’s subsidiaries. CUSO Financial Services, LP is a subsidiary of Atria. Prepared by Broadridge Advisor Solutions Copyright 2019.