Tag: archive

Categories
Local / State Employees

How to calculate your CalPERS retirement benefits

calculator next to invoices

figure standing on calculator

How to Calculate your CalPERS retirement benefits

 

More than 1.6 million California public employees, retirees, and their families.

Managing one of the largest public pension funds in the US for that many people seems daunting, doesn’t it? And if you’re a recipient trying to calculate your retirement benefits, you may feel a bit lost. But terms like “benefit factor” and “final compensation” don’t have to be intimidating. Let’s break down the benefits, the variables, and get you informed and ready for retirement.

First off . . . when can you retire?

In most cases, you can retire at age 50 with 5 years of service credit. However, if all service credit was earned on or after January 1, 2013, you must wait two more years until the age of 52.

Start educating yourself now with the help of CalPERS tips and tutorials, and make sure to fill out a service retirement application within 120 days of your planned retirement date.

1. Calculating your Retirement Benefit

calculator on top of a document

If you expected a formula, this won’t disappoint:

Unmodified Allowance = Service Credit x Benefit Factor x Final Compensation

First things first. Unmodified allowance is your highest benefit payable, that doesn’t include any benefit for any beneficiary. (More on beneficiary options below.)

Now, on to those variables . . .

a. Service Credit

This equals the total years of employment with a CalPERS employer. Other types of service credit may be added, such as sick leave and service credit purchased.

To earn a full year of service credit, you must work at least:

  • 1,720 hours (for hourly pay employees)
  • 215 days (for daily pay employees)
  • 10 months full time (for monthly pay employees)

 

b. Benefit Factor (aka Age Factor)

The benefit factor is the percentage of final compensation for each year of service credit. It is based on your age at retirement and the retirement formula.

Access your retirement benefit formula chart to figure out your benefit factor or check with your personnel office. You can also check your CalPERS Annual Member Statement to verify your retirement formula.

Find your category below and click on the link to view how benefit factors increase depending on the retirement formulas. The tables illustrating the changes are towards the back, but the entire pamphlet for each member category is extremely helpful.

Local Miscellaneous Member Benefits

If you’re employed by a public agency or special district that has contracted with CalPERS, but you’re not involved in law enforcement, fire suppression, the protection of public safety, nor employed in a position designated by law as local safety.

Local Safety Member Benefits

If you’re employed by a public agency or special district that has contracted with CalPERS and you’re involved in law enforcement, fire suppression, the protection of public safety, or who are employed in a position designated by law as “local safety.”

School Member Benefits

If you’re employed in a classified position within the jurisdiction of a school employer, except:

  • local police
  • those who are covered under CalSTRS
  • those who work directly for the Los Angeles or San Diego County Superintendent of Schools
  • those employed under the jurisdiction of a Joint Powers Authority contract
  • eligible certified employees who elect to retain CalPERS membership

State Miscellaneous & Industrial Benefits

If you’re employed by the state and universities, but are not involved in law enforcement, fire suppression, the protection of public safety, or a position designated by law as industrial, patrol, peace officer/firefighter, or safety.

State industrial members are those who are employed by the California Department of Corrections and Rehabilitation or its Division of Juvenile Justice, other than state safety or peace officer/firefighter members.

State Safety Member Benefits

If you’re employed by the state and involved in law enforcement, fire suppression, the protection of public safety, or are employed in a position designated by law as “state safety.”

 

c. Final Compensation

time cost quality triangle

The final compensation is the highest average annual compensation during any consecutive 12 or 36-month period of employment, depending on your collective bargaining agreement or employer contract. This may include special compensation.

*If your membership date is on or after January 1, 2013, there is a cap on the compensation used to calculate your benefit.

  • If your service is coordinated with Social Security, the compensation cap used to calculate your benefit is equal to the 2013 Social Security wage base, adjusted by the Consumer Price Index for All Urban Consumers: City Average. For 2017, the cap was $118,775.
  • If your service was not coordinated with Social Security, the compensation cap used to calculate your benefit is equal to 120% of the 2013 Social Security wage base, adjusted by the Consumer Price Index for All Urban Consumers: City Average. For 2017, the cap was $142,530.
  • The compensation limit is calculated based on the limit in effect for each calendar year included in the final compensation period.

Are you still with me? We’ve gone through the variables, so now we can calculate your retirement benefit! Remember:

Unmodified Allowance = Service Credit x Benefit Factor x Final Compensation

Let’s look at an example.

A local police officer retires at 60 with 30 years of service and $100k/year as his final compensation.

i. Calculate manually

Before technology changed everything, we had to do this stuff by hand. Using the 3% at 55 retirement formula (3% being his benefit factor), we review the chart on page 46 of his benefits breakdown to see that his chart maxes out at 90% of final compensation.

30 (service credits) x 3% (benefit factor) x $100,000 (final compensation)

= $90,000 unmodified allowance

***If you want a rough estimate of your final compensation, use a Time Value of Money calculator and follow the instructions here.***

ii. Use the CalPERS online calculator

But yes, technology has changed everything, and you have options to find this out:

  • Log into your my|CalPERS account to obtain an estimate that incorporates data your employer already reported to CalPERS. You can generate and save a variety of scenarios.

The calculation we’ve been looking at is for unmodified allowance.

And if you want beneficiaries?

2. Choosing your Benefit Type

 

figures on five different platforms

a. Unmodified Allowance

This is the highest monthly allowance paid for life with no benefit to your beneficiary. The formula we have followed throughout this article is for this option.

 

b. 100% Beneficiary Option 2 with Benefit Allowance Increase

One beneficiary will receive 100% of your monthly benefit upon your death for the rest of his/her lifetime. If your beneficiary dies before you, your benefit will increase to the Unmodified Allowance.

 

c. 50% Beneficiary Option 3 with Benefit Allowance Increase

One beneficiary will receive 50% of your monthly benefit upon your death for the rest of his/her lifetime. If your beneficiary dies before you, your benefit will increase to the Unmodified Allowance.

 

d. Flexible Beneficiary Option 4

You name one or more beneficiaries and specify a specific dollar or percentage to be paid to each one.

 

You made it! I hope I’ve helped make these murky waters a bit more navigable. And remember, there is plenty more information and resources out there to take you confidently to retirement. You’ve worked a long time to get there. Make sure you’re prepared!

Categories
Teachers / Professors

How to calculate your CalSTRS retirement benefits

child's toy

How to Calculate Your CalSTRS retirement benefits

 

If you ask a California public school teacher what CalSTRS is, they’ll likely respond that it has something to do with their retirement. But for many, that’s as much as they know. In fact, a lot of teachers that I work with have never calculated how much they’re expected to receive from their CalSTRS pension when they retire. Nor do they know when is a good age to retire to maximize their benefits.

Why worry about CalSTRS now?

As appealing as it may sound now to postpone the retirement discussion, it’s not necessarily in your best interest. If you figure out these details now, you’ll have a good idea of how much your fixed income will be during retirement. Not only that, but you can calculate how much you need to save to your voluntary 403(b) plan to supplement CalSTRS.

Let me walk you through the steps so you can rest a bit easier and know that you’re doing what’s necessary now to enjoy those golden years later.

1. Figure out your Benefit Structure

 

This is done using your initial hire date:

  • CalSTRS 2% at 60: You were first hired before 01/01/2013 or were a member of a concurrent retirement system before 01/01/2013 and you performed service under that system within six months of becoming a CalSTRS member.

 

  • CalSTRS 2% at 62: You were first hired on or after 01/01/2013.

 

2. Calculate your Retirement Benefit

 

Retirement Benefit = Service Credit x Age Factor x Final Compensation

Scratching your head at what service credit and age factor are? Let me walk you through those variables:

 

a. Know your Service Credits

Full-time employees generally earn 1 service credit per 1 school year. Part-time employees generally earn a percentage of a service credit based on the percentage of the full-time contract.

Service credit at retirement = Current service credit balance + future service credits expected

For example, if you currently have 20 full-time service credits and are expected to work another 10 years full-time, your service credit at retirement is estimated to be 30.

 If you work 50% of the full-time contract, you will receive 0.5 service credit for that year.

 *Any contributions on earnings from service in excess of one year will be credited to your Defined Benefit Supplement (DBS) account up to any compensation cap.

*For CalSTRS 2% at 60, if you purchased “air time” previously, you can add this to your total service credit at retirement. The ability to buy “air time” ended on 12/31/2012.

What about unused sick leave?

Unused sick leave becomes service credit at retirement:

Days of unused sick leave / # of base days for full-time service = Service credit granted

 *The base service days cannot be fewer than 175 days. If you’re an administrator, add the vacation days per contract year.

For example, if you have 125 unused sick days, and 182 full-time service base days, the service credit granted is 0.687 service credits (125/182). If you’re expected to have 30 years of service at retirement, you will now have 30.687 years of service at retirement.

 

b. Find your Age Factor

Remember your benefit structure that we discussed at the beginning?

CalSTRS 2% at 60

The age factor is set to 2% at age 60. If you retire prior to age 60, this will decrease.

The earliest you can retire is age 50 with a base age factor of 1.1%. However, you must have 30 years of service credits to retire between 50 and 54 years old.

*If you have 30 years of service at age 50, your age factor is 1.3% (1.1% base + 0.2% career factor). (This can be found in the Member Handbook under Age Factor Tables.)

*However, if you have 20 years of service at age 50, you can’t retire until age 55 because you don’t have the mandatory 30 years of service to be able to retire between 50 and 54.

You can retire with any amount of service credits starting at age 55. If you have 30 or more years of service under the 2% at 60 benefit structure, a career factor of 0.2% will be added to the age factor until it maxes out at 2.4%. The age factor maxes out at 2.4% at age 63 regardless.

 *If you retire at 60 years old with 30 years of service, your age factor is 2.2% (2.0% base + 0.2% career factor).

 *If you retire at 60 years old with 29 years of service, your age factor is 2.0% (2.0% base + 0.0% career factor).

 

 CalSTRS 2% at 62

The age factor is set at 2% at age 62. If you retire prior to age 62, this will decrease.

The earliest you can retire is at age 55 with an age factor of 1.16% with any amount of service credits. The age factor maxes out at 2.4% at age 65. (With this benefit structure, there are no career factor benefits.)

 *If you retire at 60 years old with 30 years of service, your age factor is 1.76%.

 

 c. Calculate your Final Compensation

 

 

CalSTRS 2% at 60:

  • If you have 25 or more years of service credit, CalSTRS will use your highest 12 consecutive months of average annual compensation.

 

  • If you have fewer than 25 years of service credit, CalSTRS will use your highest average annual compensation during any period of 36 consecutive months of paid employment covered by CalSTRS.

 

CalSTRS 2% at 62:

  • Your final compensation is based on your highest 36 consecutive months of average compensation, regardless of how many years of service.

 

If you want to get a really rough estimate of your financial compensation, you can use a Time Value of Money calculator. Enter the following values:

  1. Mode: Choose “End”.
  2. Present value: Enter in your current annual salary.
  3. Payment: Leave blank.
  4. Future value: Leave blank.
  5. Annual rate (%): Enter in an estimate of the average annual pay raise you expect to receive. If you think you should average a pay raise of 3% per year, either put that in or put in a lower number, such as 2%, if you want to be more conservative.
  6. Periods: The number of additional years you expect to work. If you think you’re going to retire in 10 years, put in “10”.
  7. Compounding: Choose “Annually” from the list.
  8. Press on the “FV” button to calculate your estimated final compensation.

 

*For example, if you currently make $80,000/year and are expecting to retire in 10 years with an average pay raise of 2% per year, your final compensation is estimated to be $97,519.55. Keep in mind that this is only a rough estimate!

 

Cheers to progress! We’ve gone through the variables, so now we can calculate your retirement benefit! Remember:

 Retirement Benefit = Service Credit x Age Factor x Final Compensation

Let’s look at an example:

You are 60 years old with 30 years of service credits. You’re looking to retire in 2 years. Your final compensation is estimated to be $90,000 per year at retirement. Let’s calculate!

1. Calculate manually:

Before technology swooped in, we had to do this stuff by hand. (Remember that with this example, you fall into the CalSTRS 2% at 60. That is important for your career factor.)

32 (service credits) x 2.4% (max age factor + 0.2% career factor) x $90,000 (final compensation)

= $69, 120 per year benefit

 

2. Use the CalSTRS online calculator:

But yes, technology has made our lives easier, at least in some ways! This calculator will also show you the estimated benefits for the various beneficiary options available … which brings me to … beneficiary options! (You didn’t think that was it, did you?)

 

3. Choose a Beneficiary Option

 

Four white doors

  • Member-only Benefit

This option will give you the highest monthly benefit for your lifetime. However, the benefits stop after you die, whether that is 1 year or 40 years into retirement. If there are any remaining contributions and interest in your Defined Benefit account, they will be paid to your beneficiary or estate in a lump-sum payment.

 

  • 100% Beneficiary Option

You will receive the most reduced benefit with this option. If you die, your beneficiary will receive 100% of what you received. If your beneficiary dies before you, your benefit will be increased to the Member-Only Benefit.

 

  • 75% Beneficiary Option

You will receive a reduced benefit. If you die, your beneficiary will receive 75% of what you received. If your beneficiary dies before you, your benefit will be increased to the Member-Only Benefit.

 

  • 50% Beneficiary Option

You will receive a reduced benefit. If you die, your beneficiary will receive 50% of what you received. If your beneficiary dies before you, your benefit will be increased to the Member-Only Benefit.

 

The lower the percentage for the beneficiary, the greater your payout. After the member-only benefit option, the 2nd highest option for you is 50%, which gives your beneficiary 50% of your pay when you die. With the 75% option, you receive a little less, but your beneficiary will receive 75% of your pay. And lastly, you receive the lowest payout with the 100% option because your beneficiary will receive the same amount as you.

 

That wasn’t so bad, was it? Do you feel a bit more prepared? You’ve devoted your career to our state’s future, so it’s high time you sat down and thought about your own. For more information, be sure to check out the Member Handbook or let yourself be taught for a change with CalSTRS tutorial videos. There’s a wealth of information out there for the taking!

 

Categories
Teachers / Professors

Student loan forgiveness for teachers

Jar with note that says we've got kids to teach & lots & lots of student debt

Jar with note that says we've got kids to teach & lots & lots of student debt

Student Loan Forgiveness for Teachers

 

If I were to ask you what your favorite class in high school or college was, you’ll likely recall the teacher more than the class. Teachers have an undeniable influence on education, but higher education isn’t always so kind to our future teachers.

With student loans averaging in the tens of thousands of dollars, and average teacher salaries in California starting at around $40,000, it isn’t hard to see that student loans are a major obstacle to overcome.

Thankfully, there are student loan forgiveness programs for educators. Keep in mind that these are for federal student loans, not private loans. Let’s take a better look:

 

Public Service Loan Forgiveness (PSLF)

 

One of the most popular ways to forgive student loans, this program forgives the remaining balance on Direct Loans. The Federal Family Education Loan (FFEL) Program Loans and Perkins Loans may become eligible if they are consolidated into a Direct Consolidation Loan.

Requirements:

  • 120 monthly payments have already been made
    • Payments on FFEL and Perkins don’t count towards the 120 required payments
  • Payments were made under a qualifying repayment plan
    • You should repay your loans using the income-driven repayment plans if you’re seeking student loan forgiveness. (See the end of this article for info about these repayment plans and your taxes.)
  • You work full-time for a qualifying employer, but it doesn’t have to be at a Title 1 school

 

Remember to submit the PSLF Employment Certification Form every year and every time you switch employers.

Apply here for the PSLF.

 

Teacher Loan Forgiveness


 Eraser erasing the word debt

This option forgives one of two amounts of your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans.

Either:

$17,500 is forgiven if:

  • You teach mathematics or science at the secondary level
  • You teach special education at the elementary or secondary level

 

OR $5,000 is forgiven if:

  • You teach full-time elementary or secondary level education that doesn’t include mathematics, science, or special education

 

If you have a Direct Consolidation Loan or a Federal Consolidation Loan, you may be eligible for forgiveness of the outstanding portion of the consolidation loan that repaid an eligible Direct Subsidized Loan, Direct Unsubsidized Loan, Subsidized Federal Stafford Loan, or Unsubsidized Federal Stafford Loan.

A Perkins Loan does not qualify.

Requirements:

  • No outstanding balance on Direct Loans or FFEL Program loans as of 10/01/1998 or on the date that you obtained a Direct Loan or FFEL Program loan after 10/01/1998.
  • You’ve worked full-time as a highly-qualified teacher for 5 complete and consecutive academic years.
  • You’re employed at an eligible Title I low-income school. See if your school qualifies here.
  • The loan that you want forgiveness for must have been made before the end of your 5 academic years of qualifying teaching service.

 

Can I have loans forgiven through the Teacher Loan Forgiveness Program AND the PSLF program?

Yes, but not for the same period of teaching service. If you complete 5 years of qualified service, the payments you make will not count towards the 120 payments required under the PSLF. 120 additional payments must be made. Keep in mind:

*The PSLF program forgives the entire amount after 10 years so unless you’re planning on working less than 10 years, the PSLF is your best option.

 *Federal Family Education Loans (FFEL) do not qualify for PSLF. If you haven’t consolidated, go with the Teacher Loan Forgiveness program first, then consolidate your loans to qualify for PSLF.

Apply here for Teacher Loan Forgiveness.

 

Perkins Loan Teacher Cancellation

 Coins stacked up

Up to 100% of your Federal Perkins Loan may be cancelled over a period of 5 years. A small part is forgiven every year according to a scale:

Year 1: 15% forgiven
Year 2: 15% forgiven
Year 3: 20% forgiven
Year 4: 20% forgiven
Year 5: 30% forgiven

Requirements:

  • Employed full-time in a public or non-profit elementary or secondary school:
    • Teacher at a low-income Title I school OR
    • Special education teacher OR
    • Mathematics, science, foreign language, or bilingual education teacher or in any other field of expertise determined by a state education agency to have a shortage of qualified teachers in that state
  • Go here for a listing of Teacher Shortage Areas nationwide

 

To apply, contact the school that issued the loan or with the school’s Perkins Loan servicer.

 

State-Based Loan Forgiveness Programs

 

Check out the link for more information about your state. California does offer the Assumption Program of Loans for Education (APLE) program, but no new applications have been accepted since the 2011-2012 school year.

 

And last but not least . . . what about my taxes?

 

Income-driven repayment plans

With this type of repayment plan, the payment does not exceed 10-20% of your discretionary income. The loan term is increased from the standard 10 years to 20-25 years, and any remaining loan balance is forgiven at the end of the term. However, it IS considered taxable income. See here for more information.

Good news! Student loan amounts under the three plans below are NOT considered taxable by the IRS.

For more information on each, see these links below:

Public Service Loan Forgiveness (PSLF)

Teacher Loan Forgiveness Program

Perkins Loan Teacher Cancellation

 

So . . . feeling overwhelmed?


Lady feeling overwhelmed with hand on forehead

You’re not alone! Rest assured that there are plenty of resources out there to guide you. The California Teachers Association has created a video, and it offers resources available to educate you.

You’ve devoted your life to educating others. Now take some time to educate yourself. When the reward could mean erasing thousands of dollars of student debt, this crash course will be well worth your time.

Categories
Small Business Owners

How do I apply for a small business loan?

two people shaking hands over a desk

two people shaking hands over a desk

How Do I Apply for a Small Business Loan?

You have the idea, you have the passion, you have the work ethic, but you’re missing the capital. What are your options? Small business loans can be intimidating, make no mistake about it. But with the right information and planning, the seemingly impossible and risky can become manageable and worthwhile.

First things first. What types of small business loans are available?

two heads with question marks and light bulbs over them

Not all small business loans are created equal. And that’s great news! Whether you are starting a new business or looking for more capital for your existing one, you have options.

• Small Business Line of Credit: Similar to a credit card, but you get access to cash. Interest is only charged when the funds are withdrawn.

• Accounts Receivable Financing: Your receivables work as collateral in securing you capital. The capital loaned to the business is less than or equal to the amount owed to your company.

• Term Loans: Typically for a fixed amount with a specific repayment period. This is often used for business operations, business expansion, or equipment.

• Working Capital Loans: A loan to finance the everyday operations of the company. These should not be used for long-term investments.

• SBA Small Business Loans: Here the U.S. Small Business Administration (SBA) guarantees a loan through your bank, thereby giving you lower interest rates and better repayment terms. The process is on the lengthier side, but if approved, it’s well worth the trouble.

• Small Business Credit Cards: A flexible option for companies with temporary cash crunches. Rewards and cashback programs can offset the downsides of it being a credit card.

• Equipment Loans: This loan option is secured by the equipment. Interest may accrue at a fixed or variable rate.

Choosing the Right Lenderperson faces decision on multiple directions

Good news! There are more lenders than ever.

• Large Commercial Banks & Small Community Banks

Choosing the right banking partner can offer you higher credit amount and possibly better terms. Many banks (and bankers) will have specialized credit and risk appetite for business lending. If fact, engaging within different divisions of the same bank (i.e. small business, commercial, real estate, and SBA) can result in different levels of approvals. Ask around your professional financial advisors, industry professionals, and other entrepreneurs for possible referrals.
– Jason Lee, Founder and Chief Credit Advisor of Capital Link, LLC

Sure, you have your local bank or the Wells Fargo downtown as options, but divisions within those banks can offer different conditions. Also, remember that if the bank issues loans backed by the SBA, it can result in more favorable interest rates and terms.

• Direct Online Lenders

They’ve been called a “faster lifeline for small businesses” than banks by the New York Times. An option worth investigating for your needs.

• Peer-to-peer Lending Sites

Like direct online lenders, peer-to-peer sites are also increasing in popularity. Recipients have praised the ease and speed of the process.

Getting Organized

checklist with pencil

Now you have some things to do and prepare. Let’s walk through them:

1. Check your credit score

Remember that even if you pay your bills on time, there may be errors that can bring your score down. Check it at least once a year. (Annual Credit Report)

*Your personal FICO Score can range from 300 to 850; scores at 700 or above are considered good.

Lenders may also look at your business credit score through Experian, Equifax, Dun & Bradstreet.

*Your business credit score generally range from 0 to 100; scores of 80 or above are considered good.

2. Create or update your business plan

If just the idea of sitting down to write a business plan makes you quiver, you’re not alone! The good news is there are plenty of resources out there to help you nail this important document. If that’s not enough and the resources only intimidate you more, the Small Business Association has free business counselors for your area. Take advantage!

3. All those financial and tax documents you have? Organize them!

One of the simplest ways to save time and frustration is to get all financial and tax documents organized. The constant paper chase during the underwriting period can be frustrating for both borrower and the bank.
– Jason Lee, Founder and Chief Credit Advisor of Capital Link, LLC

These documents should include:

• Personal background
• Resumes
• Business plan
• Use of loan
• Time in business & business size
• Personal credit report
• Business credit report
• Personal & business income tax returns
• Financial statements
• Collateral
• Legal documents

4. Provide collateral

Think real estate, equipment, accounts receivable, and possibly inventory.

5. Good character and presence

Reputation and responsibility. Lenders will check everything from social media to Yelp reviews to professional references. The money may be for your business, but remember that you are the face of your business.

It comes down to you. You have the idea, you have the passion, you have the work ethic. Now go get that capital!

Categories
General

Why you shouldn’t save your passwords in your browser

Screen with username and password box

Screen with username and password box

Why You Shouldn’t Save Your Passwords in Your Browser

 

In light of the recent Facebook/Cambridge Analytica drama, I believe it’s important to highlight another less publicized issue that unfolded a few months ago.

How many passwords do you have? Email accounts, online banking, music streaming, social media … whether you use one password or ten, it turns out how you save it is just as important as the password itself.

We are now in a time where data has surpassed oil as the most valuable resource in the world.

While many rely on their Internet browser to remember their passwords, a recent scandal in a niche online community reveals we shouldn’t be so quick to rely on our browsers anymore. Here’s what happened, and here is how to protect yourself.

Magnifying glass with one's and zero's

How One Company Revealed Just How Vulnerable We Are

One thing that clients don’t know about me is that I love flight simulation and aviation in general. There’s nothing better than being able to execute a gate-to-gate real world flight plan from LAX to JFK in a virtual Boeing 737-800 or Airbus A320, or exploring the beautiful terrain of the Pacific Northwest in a Bell 407 helicopter.

But in order to fly high fidelity versions of these aircraft, you have to purchase add-on software from various developers. Imagine downloading that add-on and your anti-virus software sends you a warning that it detects suspicious malware. In some cases, people didn’t even receive notice of or realize what had happened. But those who did wanted answers.

It turns out that FlightSimLabs (FSLabs) included a password dump tool in their installer, which is essentially a tool to extract all the passwords saved in your Internet browser.

This malware was intended to target pirates. FSLabs claims it discarded all information that didn’t match pirated serial numbers previously singled out. But all the data was sent unencrypted, and all the passwords from the Internet browser were obtained, not just those of the user. In short, this was incredibly illegal.

So while the intentions of FSLabs may have been honest, many are criticizing their aggressive approach.

And many more are realizing that Internet browsers are not the safest place to keep our passwords.

 

Now take a moment and think of all those passwords you use. You may think that the flight sim market is a small one and has nothing to do with you, but the truth is that it exposes the vulnerability of our information.

If FSLabs can do it, why can’t others? Is it just a matter of time until more do?

 

So, what are your options to protect your information?

Keyboard locked with chain

The Top 5 Password Managers and Generators

You can find detailed information about each option, but here’s a quick rundown:

1. LastPass

  • My personal choice and the most popular of the 5 provided here
  • Autofill option plugs in your information on websites, saving you precious time
  • Stores digital records (i.e. insurance cards, memberships, etc.) in one place
  • Free and premium options, depending on your needs

 

2. Dashlane

  • LastPass’ closest competitor
  • Autofill option plugs in your information on websites, saving you precious time
  • Bulk password changer can change many passwords instantaneously in the event of a data breach
  • Free and premium options, depending on your needs

 

3. RoboForm

  • Ability to gain emergency access
  • Autofill option plugs in your information on websites, saving you precious time
  • Email customer support available 24/7/365
  • Free and premium options, depending on your needs

 

4. KeePass

  • More suited for the technologically-savvy user
  • Open source so anyone can investigate it for weaknesses
  • Multiple-user support
  • Free option only

 

5. Sticky Password

  • Made by people behind AVG Antivirus
  • Autofill option plugs in your information on websites, saving you precious time
  • Excellent browser support: 16 browsers on all 4 major platforms
  • Free, premium, and lifetime options available

 

There are excellent options available to keep your data secure. Take your time exploring them and rest assured that your personal information can be protected for very little or no money. In this day and age, that means everything.

 

Categories
General

Top 8 estate planning mistakes

Two people sitting at a table signing paperwork

Top 8 Estate Planning Mistakes

 

Perhaps you have heard the expression:

“If you fail to plan then you plan to fail.”

This statement was never truer than for estate planning. By some accounts, 70% of adult Americans have no will or trust in place for their loves ones. Furthermore, others who initially did prepare an estate plan have failed to update it in light of changing circumstances in their lives.

You can benefit from avoiding the 8 most common estate planning mistakes that I have seen people make.

1. FAILURE TO PRESERVE YOUR INHERITANCE FOR YOUR GRANDCHILDREN SHOULD YOUR SON/DAUGHTER DIE AND THEIR SURVIVING SPOUSE REMARRY

You need to take steps in drafting your estate plan to assure that your assets are distributed to your grandchildren should your son/daughter die and not left to your daughter-in-law/son-in-law who could eventually remarry and end up using your inheritance with the new wife/husband and his/her step kids – all of whom have no familial relationship to you.

2. FAILURE TO AVOID A GUARDIANSHIP PROCEEDING FOR YOUR CHILDREN

 

If you have children, have you considered who would raise them if for some reason you or their other parent couldn’t. While this is not an easy subject to contemplate, having a guardian arrangement spelled out as part of your estate plan will ensure they will be properly cared for by someone you trust and have chosen. A legal guardian is a person who is given the legal authority and responsibility to take care of your children’s needs, such as providing food, education, medical care, dental care and shelter. If you have minor children it is imperative to have a plan in place to protect them in the event you cannot.

3. FAILURE TO PUT YOUR REAL PROPERTY BACK IN AN EXISTING TRUST AFTER A REFINANCING

Did you know that most home refinancings require that your home be transferred out of a living trust back to your own name(s), at least until after the new lender has recorded its new mortgage or deed of trust on the property? The problem is that is most cases, no one ever thinks to transfer your real property back into the trust. This failure can result in an unforeseen probate of your home at the death of the second spouse.

4. FAILURE TO ENSURE THAT YOUR ASSETS ARE DISTRIBUTED THE WAY YOU WANT AND NOT PURSUANT TO THE GOVERNMENT’S DEFAULT PLAN FOR YOU

Everyone has an estate plan. It is either the one we have created or the default so-called Plan B of the state in which we live. In our experience, it is very unlikely that a state’s default plan is what clients would really want. State laws vary, but generally they have it set for the assets go outright to the closest family members. Whom a state considers to be “closest” can be complicated in non nuclear families. Non family members, like an unmarried partner, will not receive any of the assets. This failure to act could cause family member fights over their inheritance.

5. HAVING A WILL MEANS YOU HAVE A TICKET TO ATTEND THE DREADED PROBATE PROCESS, WHICH COSTS YOUR FAMILY TIME AND MONEY

 

Having only a will is a just ticket to participate in the dreaded probate process costing your family time and money. Additionally, for those who don’t have a will, their assets will probably have to go through the intestate (“no will”) proceeding. Either of these scenarios will require that your assets go through probate before they can be fully distributed to the heirs. Probate proceedings vary from state to state, but many view the time, cost, and loss of privacy and control that come with probate as unnecessary evils which can – and should be – avoided.

6. AN OLDER PERSON HOLDING TITLE TO THEIR REAL ESTATE IN JOINT TENANCY WITH A CHILD OR GRANDCHILD

Many older people add an adult child (or grandchild) to the title of their assets (especially their home) as a joint owner in order to avoid probate. However, this type of jointly titled property can create all kinds of problems, including:

  • When a joint owner is added, the original owner loses control
  • Jointly owned assets are exposed to the joint owner’s possible misuse of them
  • Part of these assets could be lost to the joint owner’s creditors
  • The assets could become part of a joint owner’s divorce proceedings

7. FAILURE TO PROTECT FAMILY MEMBERS WITH DRUG, ALCOHOL, OR GAMBLING ISSUES

 

Many parents with a trust fear that an inheritance left to a child may be lost because of poor money handling skills or a drug, alcohol or gambling addiction of their children. With a living trust, you can instruct the successor trustee to retain a person’s inheritance in trust and instruct the trustee to make payments, as needed, directly to third parties for rent, insurance, car payments, etc. to keep it out of their hands.

8. FAILURE TO HAVE POWERS OF ATTORNEY FOR UNMARRIED ADULT CHILDREN

Let’s say you have a college student or a young adult over 18 who is unmarried. They are no longer minors that you have the legal authority to make decisions for. The law now classifies them as adults with the legal right to privacy. If they have not prepared a Power of Attorney (“POA”), problems could arise if they are out of the country or incapacitated with matters such as:

  • Driver’s license or vehicle registration renewals
  • Registration/admission for college
  • Tax return filing
  • Banking transactions
  • Ongoing legal matters (e.g., pending lawsuit from that fender-bender a few months back or speaking with child’s landlord)
  • Jury duty summons
  • Passport renewal

I often urge clients to prod their adult children to draft POA on or around their 18th birthdays. So don’t forget a POA and make it one of the most important things on your to-do list.

Advertisement

Categories
General

Is it time to #DeleteFacebook?

Cell phone with Facebook logo on screen

Cell phone with Facebook logo on screen
IS IT TIME TO #DELETEFACEBOOK?

 

Birthday reminders, family pictures, memes for that mid-afternoon comic relief, or maybe recommendations for local businesses. However you use Facebook, it’s undeniable that this social network has seeped its way into our lives, into multiple generations, and influences how we see the world.

So when the news comes out that over 50 million users’ private information has been accessed and used to influence the elections, many of us are left thinking … so what now? Who’s viewing my information and how is it being used and protected? And the million-dollar question: Should I get off Facebook?

First, let’s wrap our heads around recent events.

WHAT EXACTLY HAPPENED?

Cambridge Analytica accessed the data of millions of Facebook users. The data included details about users’ personal information, their networks of friends, and their “likes.” From this data, they created profiles of people and then zeroed in on them with digital ads to sway their voting behavior.

WHAT IS CAMBRIDGE ANALYTICA?

Cambridge Analytica is a political data firm that collects data, analyzes it, and then combines that with strategic communication to influence elections. The company has been funded in large part by Robert Mercer, a major Republican donor, and Stephen K. Bannon, former advisor to President Trump. The firm was hired by President Trump’s 2016 election campaign.

WAS THIS A DATA BREACH?

Shadow man with briefcase running from Facebook background with user data

Well, no … and yes. When you create an account on Facebook, you consent to researchers accessing your data for academic purposes. What isn’t accepted is for this data to be given or sold to advertising networks or services such as data brokers. And that’s exactly what happened when Dr. Kogan, a Russian-American psychology professor at Cambridge University, gave 50 million profiles to Cambridge Analytica. In doing so, Dr. Kogan violated Facebook rules.

When Facebook found this out, they deleted Dr. Kogan’s app that allowed him to harvest this data. They received certification that the data was destroyed, but it turns out this was not the case. Investigations are now underway with the FTC, Congress, the British Parliament, and the attorney general of Massachusetts.

SO …SHOULD I DELETE FACEBOOK?

Facebook uninstall page on mobile app

First, ask yourself what you use Facebook for. If it’s just the occasional birthday reminder and funny meme, then maybe you wouldn’t miss it that much. But keep these points in mind.

Cons of deleting

  • Deleting your profile doesn’t stop them from tracking you, nor does it stop them from using the data they have already collected.
  • Facebook isn’t the only company that collects your data. Other companies will find ways to collect it and sell it, so in the long run, deleting your account probably won’t do that much for your data security.
  • Essentially, data security is more an issue of corporate surveillance. How are companies tracking and profiling everyone? Mobile devices are essentially tracking devices, and most of us would have a hard time leading our daily lives without them.
  • Small businesses rely on Facebook to reach their communities, and Facebook advertising has proven very effective to get new clients and keep businesses prospering. Even if you’re not a small business owner, most of us want to support them over their giant corporate counterpart.
  • It’s the Internet. Nothing will ever go away completely. A truth we must face in these modern times.
  • You’ll be out of touch. Whether with your community, family pictures and birthday reminders, you’ll have to make more of an effort to stay connected through other means.
  • Loss of community. Beyond sharing cute memes and cat videos, professionals and small business owners find each other and help each other on Facebook. I personally belong to a few advisor groups where we advise each other on practice management and financial planning topics.

Then again, life did exist before Facebook, and deleting your account could have its advantages.

Pros of deleting

  • Those people who really want to keep in touch may find other ways to do so. Deleting Facebook doesn’t mean you have to say goodbye to all your friends, though your circle may grow smaller without it.
  • According to an experiment, people who gave up Facebook for a week ended up happier, less lonely, and less depressed. We don’t have to constantly compare ourselves to others.
  • You might waste less time browsing and become more productive.
  • It’ll give you the temporary satisfaction and illusion of controlling your data, however temporary and illusory that may be.

I WANT TO DELETE FACEBOOK, BUT HOW?

Keyboard with panic and delete button

If you’ve made up your mind, but aren’t sure how to go about it, follow these steps. It’s more than deleting just your Facebook account.

  • Delete all Facebook apps from devices (Facebook, WhatsApp, Instagram, Messenger)
  • Deauthorize all apps and websites from your Facebook account
  • Go into Ads and stop all tracking there
  • Get rid of Facebook’s ability to track you
    • Follow the prompts on the Digital Advertising Alliance’s opt-out page
    • Delete cookies in browsers for every device
  • Never use Facebook again

BUT WAIT! IS THERE A HAPPY MIDDLE GROUND?

You can minimize its effect by doing the following:

  • Don’t use Facebook to sign on to other apps and websites.
  • Only become friends with people you know.
  • Don’t use the location tagger.
  • Be careful of what you like and post.

 

Articles, talk shows, podcasts, and blogs like this one will abound telling you why you should or shouldn’t delete Facebook. Think about your reasons. Is it just to make a statement to big tech companies, keeping in mind that we live in a surveillance state? Are you okay with that? Only you can make this decision, but hopefully your decision will now be an informed one.

Categories
Small Business Owners

Retirement plans for small business owners

A person drawing business plan pictures in a notebook.

A person drawing business plan pictures in a notebook.

Retirement Plans for Small Business Owners

 

Retirement. Just one word can elicit everything from excitement for those bucket-list vacations to the stress of planning for those golden years now while you’re working and able. Perhaps you’re more worried now about your child’s education, or paying for that dream condo in Los Angeles, but the truth is that nowadays more people are living longer, and fewer people are saving for retirement.

Did you know . . .?

  • The average retirement age is 63.
  • The average length of retirement is 18 years.
  • The average savings of a 50-year-old is $42,797.
  • Out of 100 people who start working at the age of 25, by the age of 65, 63% are dependent on Social Security, family and friends, or charity.

Click here for more information.

How can a retirement plan benefit me and my business?

Overhead view of a table with a finance poster

If you’re a small business owner, you’re likely not only figuring out how to save for your own retirement, but how to provide benefits to your staff, too. And rightfully so! Having an employer retirement plan has been shown to help boost employee morale. Employees view retirement plans as an investment in their future by the company, so it helps attract talent and reduce employee turnover.
Click here for more information on benefits for your business.

And if you’re an employee, it’s never too soon (or too late!) to think about retirement. A little each year can go a long way, and allowances are even provided by the IRS to help you catch up if you’re older than 50.

Keep in mind:

  • Contributions can be made pre-tax, thereby reducing your taxable income. In this case, the funds in the plan grow tax-deferred.
  • Certain plans are eligible for Roth contributions which are contributed on an after-tax basis. In this case, earnings and qualified withdrawals are generally tax-free.
  • Compound interest, or essentially earning interest on interest, is an excellent tool in your favor.

 

What are the four main types of retirement plans?

Light bulb on a chalkboard

  • Savings Incentive Match Plan for Employees of Small Employers (SIMPLE IRA)
  • Simplified Employee Pension Plan (SEP IRA)
  • One-Participant (Solo) 401(k)
  • 401(k)

The first three are typically for small businesses that have fewer than 100 employees. And although the 401(k) has historically been associated with larger businesses, it may still be a viable option.

Let’s go to the nuts and bolts of the plans:

SIMPLE IRA

Business team fist bumping

This option is available only for businesses with fewer than 100 employees. An employee must have earned $5,000 or more during the preceding calendar year.
More information is available here and here on the SIMPLE IRA.

Benefits

  • Low cost and easy to set up
  • Employees can contribute pre-tax, thereby decreasing their tax liabilities
  • The employee is 100% vested meaning they have immediate access to the employer’s contributions

 

Rules & Limitations

  • The employer cannot have any other retirement plan set up through the business
  • The employer contributes on a pre-tax basis only
  • The employer is required to provide a match for participating employees with the following options:
    • Matching 100% of employee contributions, generally up to 3% of the employee’s salary (see here for more information), or
    • Contributing a fixed 2% percent of each eligible employee’s salary, regardless of whether or not the employee contributes
  • Maximum annual contribution: 100% of salary up to $12,500 + $5,000 catch-up (as of 2018) for participants ages 50 and over

 

SEP IRA

Overhead view of table with newspaper and laptop
More information on the SEP IRA is available here.

Benefits

  • Low cost and easy to set up
  • You don’t have to contribute every year
  • The employee is 100% vested meaning they have immediate access to the employer’s contributions

 

Rules & Limitations

  • The employee must have worked for the employer 3 of the last 5 years and earned $600 during the year from the employer
  • Only the employer is allowed to make contributions
  • The employer contributes on a pre-tax basis only
  • The employer is required to contribute the same percentage of salary for all eligible employees. So if as an employer you contribute 20% to yourself, you must contribute 20% to all eligible employees
  • Maximum annual contribution: 25% of the employee’s compensation or $55,000, whichever is less (as of 2018)

See here and here for more information on rules and limitations

One-participant 401(k)

Single woman working on a laptop

This option is only available for a business owner with no full-time employees other than the business owner(s) and their spouse(s).
More information on the one-participant 401(k) is available here.

Benefits

  • Low cost
  • The spouse can contribute if he/she earns income from the business
  • The business owner can contribute as an employer and an employee (see rules below)
  • Contributions can be either pre-tax, after-tax, or Roth depending on the plan documents
  • Loans and hardship withdrawals may be available

 

Rules & Limitations

  • This option has the same rules and requirements as any other 401(k) plan
  • Maximum annual contribution: no more than $55,000 not including catch-up contributions, or $61,000 with catch-up contributions (as of 2018)
    • When contributing as an employee, annual contributions may be up to 100% of compensation or $18,500 + $6,000 catch-up for participants ages 50 and over, whichever is less (as of 2018)
    • When contributing as an employer, you can contribute up to 25% of compensation or your net self-employment income

 

401(k)

Company with many employees in a open work floor
More information on the 401(k) is available here and here

Benefits

  • Loans and hardship withdrawals may be available
  • Contributions can be either pre-tax, after-tax, or Roth depending on the plan documents
  • The employer can match the employee’s contributions

 

Rules & Limitations

  • With more complex compliance requirements, this plan has a higher cost than the other options
  • Employer contributions may be subject to a vesting schedule where the employee may have increasing access to the matching over a set period of time or full access after a set period of time
  • Maximum annual contribution: $18,500 with $6,000 catch-up for participants ages 50 and over (as of 2018)
  • Total (employee + employer) annual contribution is either 100% of participant’s compensation or $55,000 ($61,000 including catch-up contributions), whichever is less (as of 2018)

See here for more information on rules and limitations

Retirement doesn’t have to be a cause of stress. Speak with a financial planner if you’re unsure about what’s best for you, and start thinking more about that bucket list!

Categories
General

Want to buy a house? Here’s how to save for a down payment

piggy bank

Want to buy a house? Here’s how to save for a down payment

Thinking about buying a house within the next 3 years? Or a bit farther down the road? Timing is everything and it turns out that simple question makes a difference.

According to Zillow, the median home value in Diamond Bar is $697,000. So how much of that should you put down? Down payments vary depending on the loan type, but in general they are:

20% is the recommended down payment on a house

You may have heard this before, but we’ll say it again. Try to put at least 20% down. Why? If you finance more than 80% of the home value, you will have to pay Private Mortgage Insurance (PMI). (But if you can take out a VA loan, PMI is not required.)

Even just 3.5% or $24,395 on a home in Diamond Bar, CA is a good chunk of money. And whether you’re fighting the good fight as a small business owner, still paying back those student loans, or just trying to save a bit each month like all of us, it’s hard to know what to do with that money you have managed to save. Which brings us to …

When are you looking to purchase a home?

I want to buy a home within 3 years

If you’re looking to buy sooner rather than later, consider keeping your money in a cash account, like a savings account or something similar. Remember that savings accounts will yield greater interest than a regular checking account. You don’t want to invest this money for such a short period because of market volatility. Just think:

Imagine you’ve built up a decent amount for a down payment and you invested this money in the stock market. A recession comes and you take a 30% hit on your balance. That will likely prevent you from buying your home within your three-year goal.

I want to wait at least 4 years before buying a home

If you’re not in a big rush, investing in the market might be a better option for you. Should you invest, do so with caution and don’t be too aggressive. Be smart, calculated, and balanced with your portfolio picks. Make sure you have a healthy mix of stocks and bonds. And keep in mind that you’ll want to rebalance your portfolio at least once a year. Why?

Imagine that you have a portfolio of 10 different stock and bond ETFs, or Exchange-traded funds. Each ETF is invested at a fixed percentage of your overall portfolio. As the year goes on, the allocations will wander from their targets. Those doing well will become a larger part of your portfolio. Those not doing so well will become a smaller part of your portfolio. When you rebalance, you bring things back in line with your target percentages, so you’re selling high and buying low.

Also keep in mind dollar-cost averaging, or investing a certain fixed amount on a regular schedule. Basically, you buy a larger number of shares when the markets are down and everything is at a lower price, and fewer shares when prices are high. This is recommended over making large, infrequent, lump sum contributions because it will bring the average cost per share down over time.

If these investing ideas are a bit daunting to you, you’re not alone! Speak with a financial planner to help you evaluate your options and navigate these uncertain waters. An advisor can be just the direction you need to reach your goal and buy a house.