Personal Finance

My bank, their bank or our bank

Published

9 months ago

April 29, 2024

Delmaine Donson | E+ | Getty Images

Wedding and engagement season is right around the corner and that means many couples will embark on a path toward marriage.

One of the most important conversations newlyweds will need to have is figuring out how and who will pay the bills. The goal is to ensure the bills are being paid, especially on time, so the couple remains current with their finances and that means keeping their credit intact.

Money may not be the most exciting topic to discuss with your new partner, but it is a must. According to a recent study by the Institute for Divorce Financial Analysts, 22% of all divorces are due to money issues. Having a plan and an active dialogue can help strengthen your bond as a couple.

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Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

The way couples approach and accomplish this task can be extremely personal and the end goal can be reached in so many ways.

No one way is the right way, and we will explore some of the more popular ways we have seen this accomplished.

3 ways couples split bill responsibilities

Many couples find it best to address their bills like they have approached their marriage: They look to commingle their finances like they have their lives.

Taking this approach, the couple would set up a joint account for their bills where all the income they receive would be deposited. That joint account would then be used to pay their bills and fund their emergency and other savings accounts. This provides a fair amount of transparency to both members of the relationship to see how much money is coming into their account each month and where it is going.

Some couples would rather not combine their finances in the way previously described, and would prefer keeping things more separated.

We have seen couples that have separate accounts where their respective pay is deposited. The couple then will agree to divide certain household expenses for which they would be responsible.

One member may be tasked with paying the mortgage, taxes and insurance, while another may pay for the groceries, utilities and maintaining the home. Using this method can provide the same level of transparency for each spouse if that is what the couple wants, or it could also be used to keep things a bit more private.

Where a $100,000 salary still buys the American Dream

Another method we see as financial advisors often combines some of the first two ways discussed.

In this situation, we see each person maintaining their own accounts and they each contribute a determined amount each month to a joint account. The joint account would be used to pay all the bills for their collective household.

Usually, one member of the couple would take the lead to make sure the bills are paid and other times we see them divide this responsibility. This provides each person the ability to maintain their own accounts while giving the couple transparency around the household bills and what it costs to run it monthly.

How to make a bill plan as a couple

Bills and paying them are a necessary evil for any couple and how it gets done can be quite different from one household to another. Whatever method you choose, whether it is one outlined here or something very different, it is critical that it works for you both.

There must be an agreement, similar to so many things in a relationship, between the two people or it simply is not going to be followed.

Once that is in place, you need to ensure that it is being followed, the bills are being paid and they are on time, too.

Paying the bills on time will save you the nuisance of paying interest and late fees, which could add strain to your relationship. Another major benefit is to make sure your individual and credit as a couple is maintained or increased to the highest score possible.

Having great credit, which is helped by paying your bills on time, can have a positive effect on your financial situation.

Having a plan and sticking with it is very important. But it is also important that you check in with each other over time to confirm that the current plan is still working for you both. There may be times in your relationship, based on your situation as a couple, that you may need to adjust your approach. Be flexible and as transparent as you can as a couple, and this will only lead to enhancing your relationship.

In the end, financial planning is extremely personal, and you need to find and follow what works best for you.

— By Lawrence D. Sprung, a certified financial planner and founder/wealth advisor at Mitlin Financial Inc.

Personal Finance

Now is an ‘ideal time’ to reassess your retirement savings, expert says

Published

10 hours ago

January 22, 2025

Business Finance News

Hispanolistic | E+ | Getty Images

When it comes to retirement savings, surveys often point to a big magic number you will need to have set aside to live well.

Yet retirement experts say to focus on another number — your personal savings rate — to make sure you achieve your retirement savings goals.

“Early in the year is an ideal time to reassess your retirement contributions and overall savings strategy because you can take advantage of any employer matches, adjust your monthly budget accordingly and stay ahead of potential market shifts,” said Douglas Boneparth, a certified financial planner and president and founder of Bone Fide Wealth, a wealth management firm based in New York City.

What’s more, increasing your retirement savings now gives your money more time to compound — earning interest on both your contributions and previously earned interest. That can “significantly impact your nest egg over the long term,” said Boneparth, who is also a member of the CNBC FA Council.

Boost your 401(k) deferral rate

If you have a 401(k) plan through your employer, now is a great time to look at your contribution rate, according to Mike Shamrell, vice president of thought leadership at Fidelity.

Most importantly, see how your savings rate corresponds to what your employer offers in terms of a company match, he said.

“It’s the closest thing a lot of people get to free money,” Shamrell said.

Oftentimes, companies have a match formula. If you’re not clear on how much you need to contribute to get the full match, contact your human resources department or 401(k) provider, Shamrell said.

Fidelity recommends saving at least 15% of your pre-tax income annually, including your contributions and money from your employer.

If you’re not quite there — or you want to save even more — even just a 1% increase in your deferral rate can make a big difference to your retirement savings over time, Shamrell said.

“It may not have the significant impact on your take-home pay that you that you may be envisioning,” Shamrell said.

Fund your IRA for 2025 — and 2024

Retirement savers also have a window of opportunity to fund individual retirement accounts for both this year and last year.

To count for 2024, contributions can be made up to April 15. (You must designate the deposit for tax year 2024.) For that year, individuals can contribute $7,000, or $8,000 if they are age 50 and over.

The same contribution limits apply for 2025, though savers have additional time — up to April 15, 2026 — to make those contributions.

Savers may be able to deduct those IRA contributions, depending on their income.

Revisit your investment allocations

In 2024, the average 401(k) balance grew about 11%, thanks to soaring stock markets, according to Shamrell.

Heading into the rest of 2025, now is a great time to revisit your personal asset allocations.

“Make sure your allocation didn’t drift too far into equities and that you don’t have more exposure to equities than you might realize,” Shamrell said.

If you’re worried about picking the wrong investment, you can instead opt for target date, asset allocation or balanced funds, which help decide how your funds are allotted for you, according to Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.

Also be sure to consider to your risk capacity — the amount of risk you can afford — as well as risk tolerance — the amount of risk you’re willing to take, said Cheng, who is also a member of the CNBC FA Council.

Identifying those personal limits ahead of time can help you stay the course during market turbulence, she said. Investors who bail during the market’s worst days may miss the best days, which often closely follow, research finds.

If you’ve had any major recent life events — gotten married, bought a house or had a baby, for example — you may also want to check that your allocations still correspond to your long-term plans, Shamrell said.

Personal Finance

There’s a big inherited IRA change in 2025. How to avoid a penalty

Published

10 hours ago

January 22, 2025

Business Finance News

Greg Hinsdale | The Image Bank | Getty Images

Inheriting an individual retirement account is a windfall for many investors.

However, a lesser-known change for 2025 could trigger a costly surprise penalty, financial experts say.

Starting in 2025, certain heirs with inherited IRAs must take yearly required withdrawals while emptying accounts over 10 years, known as the “10-year rule.”

“The big change [for 2025] is the IRS is enforcing penalties for missed required distributions,” said certified financial planner Judson Meinhart, director of financial planning at Modera Wealth Management in Winston-Salem, North Carolina.

There’s a 25% penalty for missing a required minimum distribution, or RMD, from an inherited IRA. But it’s possible to reduce the fee if your RMD is “timely corrected” within two years, according to the IRS.

Here are the key things to know about the inherited IRA change.

Which heirs could face a penalty

Before the Secure Act of 2019, heirs could withdraw funds from inherited IRAs over their lifetime, which helped reduce yearly income taxes.

Since 2020, certain inherited accounts have been subject to the “10-year rule,” meaning heirs must deplete inherited IRAs by the 10th year after the original account owner’s death.

After years of waived penalties for missed RMDs from inherited IRAs, the IRS in July finalized guidance. Starting in 2025, certain beneficiaries must take yearly withdrawals during the 10-year window or they’ll face a penalty for missed RMDs.

The rule applies to heirs who are not a spouse, minor child, disabled, chronically ill or certain trusts — and the yearly withdrawals apply if the original IRA owner had reached their RMD age before death.

One group who could be impacted are adult children who inherited IRAs from their parents, according to CFP Edward Jastrem, chief planning officer at Heritage Financial Services in Westwood, Massachusetts.

But the rules have become a “spiderweb mess of decision-making,” he said.

Avoid the ’10-year tax squeeze’

For 2025, there’s a enforced penalty for missed RMDs. But heirs also need to manage withdrawals to avoid the “10-year tax squeeze,” said Jastrem.

Over the past few years, some heirs have skipped yearly withdrawals from inherited IRAs, which could mean larger required withdrawals before the 10-year window closes, he said.

For example, boosting adjusted gross income can impact things like Medicare Part B and Part D premiums, eligibility for the premium tax credit for Marketplace health insurance and more.

Of course, timing inherited IRA withdrawals depends on your complete tax situation, including multi-year projections of your adjusted gross income, Meinhart said.

Personal Finance

‘Era of the billionaire.’ Here’s why wealth accumulation is accelerating

Published

12 hours ago

January 22, 2025

Business Finance News

President-elect Trump's cabinet to have more billionaires than any in history

The rich are getting richer.

The combined wealth of the world’s most wealthy rose to $15 trillion from $13 trillion in just 12 months, according to Oxfam’s latest annual inequality report — notching the second largest annual increase in billionaire wealth since the global charity began tracking this data.

Last year alone, roughly 204 new billionaires were minted, bringing the total number of billionaires to 2,769, up from 2,565 in 2023, the global charity found.

“Not only has the rate of billionaire wealth accumulation accelerated — by three times — but so too has their power,” Oxfam International’s Executive Director Amitabh Behar said in a statement Sunday.

“We’ve reached a new era now, we are in the era of the billionaire,” said Jenny Ricks, general secretary of the human rights group Fight Inequality Alliance. “The challenge now is turning this around and making this the era of the 99%.”

Despite the fact that America ranks first as the richest nation in the world in terms of gross domestic product, 36.8 million Americans live in poverty, accounting for 11.1% of the total population, according to the latest report from the U.S. Census Bureau.

“We need government serving people’s real needs and rights,” Ricks said, with increased funding for education and healthcare, among other social services.

‘Tax us, the super rich’

After Oxfam’s report was released, some of the world’s wealthiest people called on elected representatives of the world’s leading economies to introduce higher taxes on the very richest in society.

In an open letter to political leaders attending the annual World Economic Forum in Davos, Switzerland, more than 370 billionaires and millionaires said that they wanted to “tackle the corrosive impact of extreme wealth.”

To that end, “start with the simplest solution: tax us, the super rich,” the letter said.

36% of billionaire wealth is inherited

Oxfam found that 36% of billionaire wealth is now inherited. Much of that wealth will also get handed down. A separate report by UBS found that baby boomer billionaires’ heirs stand to inherit an estimated $6.3 trillion over the next 15 years.

“As the great wealth transition gains momentum … we expect the proportion of multigenerational billionaires to increase,” the report said.

According to Oxfam’s analysis, half of the world’s billionaires live in countries with no inheritance tax for direct descendants.

In the U.S., there is a federal estate tax up to 40%, depending on the amount of the estate over the current exclusion limit.

In 2025, the basic exclusion amount rose to $13.99 million per person, up from $13.61 million in 2024.

Meanwhile, President Donald Trump has vowed to fully extend the trillions in tax breaks he enacted via the Tax Cuts and Jobs Act in 2017, which also doubled the estate and gift tax exemption.

After 2025, the higher estate and gift tax exemption will sunset without action from Congress. If the provision expires, the exclusion will revert to 2017 levels, adjusted for inflation.

Some Democrats have pushed back on TCJA extensions, noting that they disproportionately benefit the wealthy, rather than middle-class families.

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