12 Things to Do When You Get a Raise at Work

Getting a raise always feels great. It’s tangible proof that you’re good at what you do and your hard work has been recognized.

But what should you do with the extra income? While most of us can’t help but daydream about all the new things we plan to buy, it’s important to take a close look at your personal finances before going on a spending spree.

That way, you’ll have a clear idea of how much your pay raise actually amounts to, what your financial priorities are, and how to make smarter investments and purchases with your additional income.

How to Handle a Salary Increase

When you first get a raise, it’s tempting to make a big, celebratory purchase. But before you do, there are some steps you should take to ensure you’re making decisions that reinforce your financial stability and improve your financial future.

1. Give It Some Time

Initially, the dollar amount of your raise might sound like a significant windfall, but remember that a considerable portion will go toward taxes, health insurance, retirement, and social security, if applicable.

Before you get ahead of yourself, wait for a couple of paychecks to see how much extra take-home cash your raise amounts to on a biweekly or monthly basis. What sounds good on paper may be significantly less in your pocket after all is said and done.

You can also calculate the biweekly amount of your raise yourself, but it won’t be accurate unless you know the amounts of any relevant deductions.

Waiting it out will give you a chance to see real numbers and how much of a difference it’s actually making on each paycheck. This will allow you to determine what any extra money amounts to so that you can spend it wisely instead of overspending or accidentally increasing your monthly expenses.

2. Reassess Your Budget

Once you know how much your new salary increase will put in your bank account, use it as an opportunity to reevaluate your budget. Now’s a great time to review your expenses to determine where any adjustments can be made and how your raise can do the most good.

For example, you may want to allocate a portion of your salary increase to paying off credit card or student loan debt instead of booking an expensive vacation. Or, you may use the extra cash to bolster your rainy day fund.

It’s easy to fall victim to lifestyle creep after a pay increase by indulging in luxuries and not keeping a close eye on your spending habits. Budgeting helps to keep you in check and supports your financial goals.

Instead of increasing your spending on big-ticket upgrades to your lifestyle each time you get a raise, consider how higher bills will affect your financial health. How would buying a bigger home or a new car affect your retirement plans and how much debt you have?

Use your budget to keep an eye on your cost of living so you don’t accidentally overspend after a new raise.

3. Retool Your Retirement

Especially if you aren’t hard up for cash right now, you can use your salary increase to boost your retirement savings.

For example, you can increase the amount you put into your Roth IRA or 401k retirement accounts. Even a small monthly increase can make a significant impact over time, especially if your employer offers contribution matching.

Not only will investing more in your retirement give you long-term financial security, but it will also make sure your raise is put to good use.

4. Pay Off Debts

If you have debts, entering a new salary range is an ideal way to put more money toward paying them off. For example, you can use your pay increase to cover:

  • Credit card debt
  • Student loans
  • Car loans
  • Medical debt
  • Personal loans

The more debt you pay off, the more you save in interest charges over time, keeping a significant amount of money in your pocket. If possible, save the most by paying off debts entirely instead of just making payments.

You can even improve your credit score by paying off debts, helping your financial situation even more, especially if you plan to make any big purchases, such as a home, in the future.

5. Plan for Taxes

When you get a raise, you can expect to pay more in taxes this year than you did last year. Depending on which tax bracket you’re in, you may even find that your raise is barely noticeable if it means you no longer qualify for certain deductions or tax credits.

Understanding how your new salary will affect your taxes gives you an idea of whether you should expect a refund or a bill.

If you aren’t comfortable calculating or assessing your taxes yourself, get in touch with an accountant or financial planner. They’ll be able to give you a good idea of what to expect come tax time based on your pay increase.

If it looks like you’ll owe more money at the end of the year than you anticipated, talk to your employer about increasing your withholdings so the amount you owe is covered.

6. Increase Charitable Donations

Another way to spend your raise is to increase your donations to charities and nonprofit organizations. Not only will it spread the wealth, but charitable donations typically count as tax deductions, potentially reducing the amount you owe each year.

This is especially useful if your raise bumped you into a higher tax bracket.

You can either choose to donate a specific dollar amount or a percentage of your income, whichever works best for your budget. You can also donate items like a used car, however, you’ll need a tax receipt in order to claim it on your taxes.

7. Add to Your Emergency Fund

Your emergency or rainy day fund is meant to lend a hand when your financial situation changes or you need to make an unexpected purchase. For example, it’s helpful to have a buffer of cash set aside if you lose a job or your fridge decides to stop working.

If you don’t have any pressing purchases to make with your new raise, it’s an ideal time to fill up your emergency fund. Having funds you can rely on in the future will give you peace of mind and save you from having to panic about how to cover an expense during a stressful situation.

8. Monitor Your Spending

It’s completely acceptable to celebrate when you get a raise, but it’s important to keep your spending in check. A nice dinner or night out is one thing, but extended overspending and unaffordable purchases are another.

If you do decide to treat yourself — and you should — make sure whatever you reward yourself with is within your spending limits and that it’s a one-time occurrence. Otherwise, you’ll soon fall victim to lifestyle creep and those luxuries will become the norm.

Choose one or two ways to treat yourself and stop there. Just because you’re making more money doesn’t mean you need to spend your entire raise on frivolous items and outings.

9. Consider Inflation

If you haven’t had a raise in a while, you can safely assume that part of your salary increase will go toward covering the costs of inflation. That means that instead of adding up to extra cash in your pocket, your raise will go toward rising prices for everyday expenses like housing and groceries.

Before spending your raise, take a look at the inflation rate to see how much prices have increased since the last time you received a pay bump. This will give you a better understanding of how much added buying power your raise amounts to and what it will mean for your budget and financial planning.

10. Save for a Big Purchase

If you’re planning to make a big purchase in the near future, use your raise to help get you closer to your goal. For example, put it toward:

  • A down payment on a house
  • A wedding
  • A new vehicle
  • A dream vacation
  • Your child’s tuition
  • A home renovation

Consider whether you have any major expenses coming up before spending your raise elsewhere. Setting aside your extra cash to cover upcoming costs will allow you to reach your goals faster and help you to navigate any unexpected costs you encounter.

11. Invest in Yourself

Investing in yourself is an excellent way to use your raise. For example, you could:

You can even do something like get laser eye surgery or have an old tattoo removed. Whatever helps to improve your personal quality of life and makes your future happier and healthier.

12. Do Something Fun

At the end of the day, you earned a raise through your hard work and dedication. You deserve to acknowledge your accomplishment by treating yourself to something special. Whether it’s a new pair of shoes or a fancy dinner, make sure at least a small portion of your raise goes toward celebrating your success.

Depending on how big your raise is and what you have left after you take care of any financial priorities, you could:

  • Go on a vacation
  • Plan a spa day
  • Buy yourself something nice
  • Treat a loved one
  • Fund a hobby

Take this as an opportunity to recognize your professional achievements and reward yourself for a job well done.


Final Word

Moving up on the pay scale is always worth celebrating, whether it comes with new responsibilities or not. But before you spend all your new money, take some time to consider how to get the most out of it.

That could mean reviewing your budget, paying off debts, or saving up for a big purchase — whatever suits your financial goals and situation.

Regardless of how you choose to spend your raise, remember to set some money aside to treat yourself. After all the time and effort you put into your career, you deserve to celebrate your accomplishments.

Source: moneycrashers.com

7 Costly Social Security Mistakes

Kues / Shutterstock.com

Even a minor Social Security misstep can rob your nest egg of tens of thousands of dollars in retirement benefits.

So, it pays to understand how the system works and how to maximize your Social Security checks.

The following are some of the biggest and most costly mistakes you could make when navigating Social Security — and how to avoid making them.

1. Taking Social Security too early

It’s tempting to start taking Social Security benefits after you become eligible but before you reach what the federal government calls your “full retirement age.” If you do, you’ll wind up with a smaller check each month.

Technically, you should receive the same total amount of benefits over the span of your retirement no matter the age at which you first claimed them. The Social Security system is designed to be actuarially neutral in this regard.

Still, claiming early can be risky because once you claim benefits, you will be stuck with the same size payment for life. The amount of a person’s monthly benefit typically will never increase except for inflation adjustments.

If you’re the main breadwinner in your family, you may want to think twice about starting your Social Security benefit early since your spouse may receive that smaller benefit amount one day.

Jeffrey A. Drayton of Jeffrey A. Drayton Financial Planning and Wealth Management in Maple Grove, Minnesota, tells Money Talks News:

“When one of you dies, the surviving spouse will get to keep whichever benefit is larger. If yours is the larger benefit, do you really want to reduce it? Doing so means that you might be reducing this lifelong annuity that gets adjusted for inflation permanently not just for yourself but also your spouse.”

2. Claiming benefits and continuing to work

If you claim Social Security before reaching full retirement age and continue working, you might have to pay penalties against your Social Security benefit. This depends on how much money you earn.

One solution is to wait until your full retirement age to claim Social Security. There is no penalty for working while taking benefits after your full retirement age, regardless of how much income you earn.

3. Not checking your earnings record

The amount of your retirement benefit is based on your top 35 years of earnings. So, if there’s an error in your Social Security earnings record, the amount of your monthly check could suffer for it.

For example, if an employer fails to correctly report your earnings for even one year, your monthly benefit upon retiring could be around $100 less, according to the Social Security Administration (SSA). That amounts to a loss of tens of thousands of dollars over the course of your retirement.

While employers are responsible for reporting your earnings, you are responsible for checking your earnings record, as only you can confirm the information is accurate.

To review your earnings record, log into your mySocialSecurity account — or create an account if you have yet to do so.

You’ll want to check each year. The SSA explains:

“Sooner is definitely better when it comes to identifying and reporting problems with your earnings record. As time passes, you may no longer have past tax documents and some employers may no longer be in business or able to provide past payroll information.”

4. Making an isolated decision

A Social Security decision is just one piece of a retirement income puzzle, says Charlie Bolognino, a certified financial planner at Side-by-Side Financial Planning in Plymouth, Minnesota.

It can impact how you draw down other retirement income sources, such as a pension, 401(k) plan or cash savings. It can also impact the amount of retirement income you lose to federal or state taxes.

Failing to consider these other retirement funding factors when making Social Security decisions — as well as rushing to those decisions — can cost you a big chunk of your nest egg.

“This is a big decision with potentially thousands of dollars at stake, so don’t short-cut it,” Bolognino tells Money Talks News. “Find a reputable benefit option comparison tool or work with a financial planner who can help you evaluate options in the context of your broader financial picture.”

5. Failing to understand what qualifies you for Social Security

Social Security retirement benefits are not a guarantee. You must qualify for them by paying Social Security taxes during your working years, or be married to someone who qualifies for benefits, Drayton says.

He continues:

“The qualification rules are complicated. The short answer most people give is that you need to work for at least 10 years. However, it is based on a system of credits and quarters, and there are different types of qualifications for different types of benefits.”

The bottom line? Know your qualification status and, if you’re ineligible, how to qualify for benefits.

To find out whether you’re eligible for retirement benefits or any other benefits administered by SSA, check out the SSA’s Benefit Eligibility Screening Tool (BEST). You can also use the tool to find out how to qualify and apply for benefits.

6. Not knowing the Social Security rules regarding divorce

You may be eligible to claim a spousal benefit based on your ex-spouse’s earnings record after a divorce. Failing to realize this can cost you a lot.

Generally, the member of the divorced couple entitled to the smaller benefit amount may be eligible for this type of spousal benefit — provided they were married for at least 10 years, haven’t remarried and meet a few other requirements.

The member of the divorced couple with the smaller benefit amount applies for a spousal benefit. The applicant must have been married for at least 10 years, not have been remarried and meet a few other requirements.

7. Not accounting for dependent benefits

If you still have dependent children when you claim Social Security retirement benefits, they may be eligible to receive benefits, too. An eligible child can receive up to 50% of your full retirement benefit amount each month, according to the SSA.

Your family would receive that amount on top of your own benefit amount. Payments to your dependents would not decrease your benefit, although there is a limit to how much the entire family may receive in monthly benefits.

So, understanding the benefits that your dependents might be eligible for can help you maximize your family’s collective benefit amount.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

5 Reasons to Claim Social Security ASAP

Happy senior couple
Monkey Business Images / Shutterstock.com

Many people believe that claiming Social Security benefits as early as possible — which generally is age 62 — is inherently bad, since claiming before your full retirement age means smaller monthly payments.

However, the reality is that everyone’s circumstances are different. For some retirees, it makes sense to start claiming benefits as soon as possible.

Following are several situations in which you should not put off claiming your Social Security retirement benefits.

1. You have a short life expectancy

The amount of your monthly Social Security retirement benefit payment is based on a formula that’s meant to be actuarially neutral. That basically means you should receive the same total amount of benefits over your lifetime regardless of the age at which you start claiming them.

In other words, if you claim earlier than your full retirement age as determined by the Social Security Administration, you will receive smaller monthly payments over a longer period of time. If you delay claiming until you’re older, you’ll be getting larger payments over what is likely to be a shorter period of time.

If you expect to have a short life expectancy, it might make more sense to start taking the smaller monthly benefit as soon as you can.

Money Talks News founder Stacy Johnson details one such situation in “2-Minute Money Manager: Should I Wait to Take Social Security?” He writes:

“A few years ago, one of my best friends asked if he should take his pension early, and I said, ‘Hell, yes.’ Why? Because he wasn’t in great shape, health-wise. Both of his parents died young, his siblings died young, and he really needed the money. So, my advice to him was, ‘Take it as soon as you can get it.’ He died one year later.”

2. You need the money

You also might need the money immediately to stay on top of your living expenses.

“You’d be surprised at the number of people who end up retiring before they want to,” says Devin Carroll, founder of the blog Social Security Intelligence. “There are lots of reasons — including being laid off or dealing with health issues — that you have to stop working.”

However, remember that the age at which you claim determines the size of your monthly benefit going forward. In other words, the longer you can postpone claiming, the bigger the benefit you’ll get each month after you do claim.

So, if that sounds good to you, first explore other ways that you could bring in extra income, enabling you to postpone claiming. For example, check out articles like “21 Ways Retirees Can Bring in Extra Money in 2021.”

3. You’ve got kids at home

“Increasingly, people are reaching age 62 and still have minor children at home,” notes Carroll.

When that’s the case, claiming your Social Security benefits early makes sense in that it generally enables you to apply for additional benefits to help you care for minor children. That’s because you must apply for your retirement benefits before you can apply for benefits related to dependents.

4. A higher-earning spouse has health problems

It’s kind of morbid, but when deciding whether to start taking Social Security benefits at age 62, you also need to think about when your spouse might die — and how much he or she makes in comparison with you.

One situation to consider is when the higher-earning spouse has medical problems, says Carroll.

That’s because, after a spouse dies, you may become eligible for survivor benefits (also called widow’s or widower’s benefits) based on the spouse’s Social Security. And if your spouse has a short life expectancy, and you know your survivor benefits would be more than your own full retirement benefit, there may be no reason for you to wait for your full retirement benefit.

To learn more about this subject, check out “Social Security Q&A: How Do Spousal Benefits Work?”

5. A lower-earning spouse is older than you

Maybe your spouse earned much less than you during your working years.

“Their own benefit is going to be lower than yours,” says Carroll. “In fact, their benefit might even be lower than the spousal benefit they’d receive based on your earnings.”

However, as with benefits issued based on your own work history, your partner can only claim a spousal benefit based on your work history after you file for your own retirement benefits.

Add up the cumulative benefits, suggests Carroll. You might discover that your total monthly income is better when you file for your benefit early and your older spouse elects to take the spousal benefit.

A final word: Work with an expert

Before making decisions, though, be sure to work out the math and compare your options. Social Security rules are complex and situations vary.

Also, consider reviewing your situation with a Social Security Administration representative or a knowledgeable retirement planning professional.

At the least, you could obtain a custom analysis of your claiming options from a specialized company like Social Security Choices.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

“Plus-Up” Stimulus Checks Have Already Been Sent to 9 Million Americans – Will You Get One Too?

If you already received a third stimulus check, you might find an additional check from the IRS in your mailbox in the coming weeks – especially if you filed your 2020 tax return close to the May 17 deadline. The IRS is calling these extra checks “plus-up” payments, and more than 9 million Americans have already receive the supplemental payment. Over 900,000 plus-up payments were sent in just the last six weeks, and more of them will be sent in the weeks and months ahead as the IRS continues to process 2020 tax returns. The big question is: Will you get one?

The IRS is sending plus-up payments to people who received a third-round stimulus check that was based on information taken from their 2019 federal tax return or some other source, but who are eligible for a larger payment based on a 2020 return that is filed and/or processed later. This could happen, for example, if you had a new baby last year that is reported as a dependent for the first time on your 2020 return (see below for other possible reasons).

So, if you recently filed your 2020 return, you might get a plus-up payment soon. If you requested a filing extension and haven’t filed your 2020 return yet, there’s an extra incentive to get it done quickly (i.e., not waiting until October 15 to file your return). Your 2020 return must be filed and processed by the IRS before August 16, 2021, if you want to get a plus-up payment. That means you still have time to act if you got an extension – but not too much time! Plus, the sooner you file your return, the sooner you’ll get your “plus-up” payment (plus any other tax refund the IRS owes you).

How Stimulus Payments Are Calculated

Most eligible Americans have already received their third stimulus check. The “base amount” is $1,400 ($2,800 for married couples filing a joint tax return). Plus, for each dependent in your family, the IRS adds on an extra $1,400. Unlike for previous stimulus payments, the age of the dependent is irrelevant.

However, third-round stimulus checks are then “phased out” (i.e., reduced) for people with an adjusted gross income (AGI) above a certain amount. If you filed your most recent tax return as a single filer, your payment is reduced if your AGI is over $75,000. It’s completely phased-out if your AGI is $80,000 or more. For head-of-household filers, the phase-out begins when AGI reaches $112,500 and payments are reduced to zero when AGI hits $120,000. Married couples filing a joint return will see their third stimulus check drop if their AGI exceeds $150,000 and completely disappear when AGI is $160,000 or more.

The IRS looks at your 2019 or 2020 tax return to determine your filing status, AGI, and information about your dependents. If you don’t file a 2019 or 2020 return, the IRS can sometimes get the information it needs from another source. For instance, it got information from the Social Security Administration, Railroad Retirement Board, or Veterans Administration for people currently receiving benefits from one of those federal agencies (although the IRS may not have gotten all the information it needs to send a full payment). If you supplied the IRS information last year through its online Non-Filers tool or by submitting a special simplified tax return, the tax agency can use that information, too.

If your 2020 tax return isn’t filed and processed by the time it starts processing your third stimulus check, the IRS will base your payment on your 2019 return or whatever other information is available. If your 2020 return is already filed and processed, then your stimulus check will be based on that return. If, however, your 2020 return is not filed and/or processed until after the IRS sends your third stimulus check, but before August 16, that’s when the IRS will send you a plus-up payment for the difference between what your payment should have been if based on your 2020 return and the payment actually sent that was based on your 2019 return or other data.

(Note: The IRS has had tax return processing delays this year. So, even if you submitted your 2020 return before your third stimulus check was sent, your stimulus payment still might be based on your 2019 return because your 2020 return wasn’t processed in time. Returns filed electronically are generally processed faster than paper returns.)

If for some reason you don’t get a plus-up payment, you’ll still get your money if a payment based on your 2020 tax return is higher than the payment you actually received – but you’ll have to wait until next year to get it. In that case, you can claim the difference as a Recovery Rebate credit on your 2021 tax return, which you won’t file until 2022.

[Use our Third Stimulus Check Calculator to compare your payment if it’s based on your 2019 return vs. your 2020 return. Just answer three easy questions to get a customized estimate.]

Who Will Get a Supplemental “Plus-Up” Payment

Again, you’ll only get a supplemental “plus-up” payment if you received a third stimulus check based on your 2019 tax return or other information, but you would have gotten a larger check if the IRS based it on your 2020 return. So, who falls into this category? Of course, it depends on your specific circumstance. However, to give you a general idea, here are a few examples of hypothetical taxpayers who should get a plus-up payment.

You Had Less Income in 2020 Than in 2019: Kay was unemployed for much of 2020. As a result, her AGI dropped from $78,000 in 2019 to $40,000 in 2020. Kay received a $560 third stimulus check that was based on her 2019 return (she is single with no dependents). Since her 2019 AGI was above the phase-out threshold for single filers ($75,000), her payment was reduced. Kay later files her 2020 tax return, which is processed before August 16, 2021. Since Kay’s 2020 AGI is well below the applicable phase-out threshold, her third stimulus check would have been for $1,400 if it were based on her 2020 return. As a result, Kay will receive a $840 plus-up payment ($1,400 – $560 = $840).

You Had a Baby in 2020: Josh and Samantha had their first child in 2020. They’ve been married for five years, and they file a joint return each year. Their AGI was $110,000 in 2019 and $120,000 in 2020, which are both below the phase-out threshold for joint filers ($150,000). The IRS sent Josh and Samantha a $2,800 third stimulus check based on their 2019 return. They filed their 2020 tax return before the IRS sent the payment, but the return was not processed until a week after the payment was sent. That’s why the payment was based on their 2019 return. Since Josh and Samantha claimed their new bundle of joy as a dependent on their 2020 return, their stimulus check would have been for $4,200 if it were based on their 2020 return (i.e., they would have received an additional $1,400 for their baby). As a result, the IRS will send Josh and Samantha a $1,400 plus-up payment ($4,200 – $2,800 = $1,400).

You Got Married in 2020: Patty and Greg were married in 2020. They had a combined AGI of $150,000 in 2020 and have no dependents. In 2019, as separate single filers, Patty had an AGI of $72,000 and Greg had an AGI of $78,000. The IRS sent Patty a $1,400 third stimulus check based on her 2019 return. Since her 2019 AGI was below the phase-out threshold for single filers ($75,000), her payment was not reduced. The IRS sent Greg a $560 third stimulus check based on his 2019 return. Since his 2019 AGI was above the phase-out threshold for single filers, his payment was reduced. Between the two of them, they got a total of $1,960 in third stimulus check payments ($1,400 + $560 = $1,960). After receiving their stimulus checks, Patty and Greg file a joint return for the 2020 tax year that is processed before August 16, 2021. Since the AGI reported on their 2020 joint return does not exceed the phase-out threshold for joint filers ($150,000), their stimulus check would have been for $2,800 if it were based on their 2020 return (i.e., it wouldn’t have been reduced). As a result, the IRS will send Patty and Greg a $840 plus-up payment ($2,800 – $1,960 = $840).

You Used the Non-Filers Tool Last Year: Mary is single and has two dependent children. One turned 15 and the other turned 18 in 2020. Mary was not required to file a 2019 tax return, but she did use the IRS’s Non-Filers tool last year to get a first-round stimulus check. Since children over 16 did not qualify for the extra $500 payment for first-round payments, Mary only reported her youngest child to through the tool. The IRS sent Mary a $2,800 third stimulus check based on the information it received through the Non-Filers tool. Mary later files a 2020 tax return, which is processed before August 16, 2021. She used the head-of-household filing status, reported an AGI of $15,000, and claimed both of her children as dependents. For third-round stimulus checks, an additional $1,400 is added to the total payment for each dependent regardless of the dependent’s age. Since Mary’s 2020 AGI is below the phase-out threshold for head-of-household filers ($112,500), her third stimulus check would have been for $4,200 if it were based on her 2020 return. As a result, Mary will receive a $1,400 plus-up payment ($4,200 – $2,800 = $1,400).

A Federal Agency Supplied Information to the IRS: Ron is a disabled veteran who receives benefits from the Department of Veterans Affairs (VA). He is single and has one dependent child. Ron was not required to file a 2019 tax return, but the VA sent information to the IRS about Ron. The VA did not send any information about Ron’s child. Based on the information it had, the IRS sent Ron a $1,400 third stimulus check. After receiving this payment, Ron files a 2020 tax return, which is processed before August 16, 2021. Ron filed as a single person with an AGI of $18,000 and one dependent. Since Ron’s 2020 AGI does not exceed the phase-out threshold for single filers ($75,000), his third stimulus check would have been for $2,800 if it were based on his 2020 return. As a result, the IRS will send Ron a $1,400 plus-up payment ($2,800 – $1,400 = $1,400).

Source: kiplinger.com

5 Reasons You Should Not Delay Retirement

Grandfather reading to his granddaughter
LightField Studios / Shutterstock.com

Some people view retirement as something that should be delayed as long as possible. They say that, for many older workers, waiting as long as possible to collect Social Security benefits is the prudent choice.

Important as this advice is for many of us, it may not apply to you. If you are financially prepared, there are good reasons to consider retiring at the traditional age of 65, or maybe even sooner.

“Time is the most valuable asset anyone can ever have,” Mike Kern, a certified public accountant based in South Carolina, tells Money Talks News. “I would encourage anyone who has the ability and wants to retire early to do so.”

There is plenty to see, do and learn in retirement. Many retirees go on to pursue new careers or fulfill lifetime goals they didn’t have time for when they were working. Freed from the burden of a 9-to-5 job, they find that life has many new possibilities.

What follows are powerful reasons not to delay your retirement.

1. Delaying Social Security may not be right for you

Before deciding, consider your personal circumstances, advises Money Talks News founder Stacy Johnson:

“For some people it’s a great idea to take Social Security early, and for some people it’s a great idea to wait.”

You generally can start receiving Social Security as soon as age 62. Some people wait as late as age 70. If you plan to continue working until your benefits reach their maximum at age 70, delaying your claim will result in greater monthly payouts. However, if you have concerns about how long you may live or you need the money right away, filing an early claim may make the most sense.

Good to know: The system is actuarially neutral, designed to make your overall benefits work out approximately the same over the course of your retirement, no matter when you first claim them. Delaying your first claim increases your monthly retirement benefit, but it may not affect the total amount you receive over a lifetime.

2. Retirement can lower your housing costs

When you retire, you no longer need to live close to a job. Where you decide to live in retirement can affect your quality of life, due in part to the price of real estate and rental homes.

“Your house is typically the biggest expense in your budget,” says Kern. “Oftentimes, the best way to considerably decrease your costs is by downsizing or moving to a cheaper place.”

Smaller towns generally have less-expensive housing than large metropolitan areas. For example, in early February, the median home value in Boise, Idaho — a community of about 229,000 residents — was $406,579, according to Zillow.

Sound expensive? Well, compare that to San Francisco. Zillow says Frisco’s median home value in early February was $1,402,470.

3. Your good health may not last

Nobody lives forever. If you don’t get started on your post-retirement goals in a timely manner, you may never reach them.

“As grim as it sounds, if your health is on the decline, then it may make sense to take an early retirement in order to maximize the net payout of your lifetime,” says attorney Jacob Dayan, CEO of Chicago-based tax services company Community Tax.

Consider, too, that you may experience health problems as you age. If your retirement goals require being in good physical shape so that you can hike the Inca Trail in Peru or bicycle through Ireland, it makes sense to retire sooner.

4. You want to start a new career

Retiring allows you to pursue your true passions. Some retirees use their savings and pension benefits to finance the start of another career.

You can’t claim Social Security retirement benefits until age 62, but if you’ve invested in a retirement plan or qualify for a pension, you may be able to use part of those funds to launch a new career.

Dayan advises careful planning and consideration before making a change. If retiring early and starting a new career requires a substantial financial investment, consider all the risks, including tapping your retirement funds. Make sure the switch won’t put you in financial distress.

5. You can afford to do it

Money doesn’t buy happiness, but, with careful planning, an adequate retirement account may allow you to quit your job. If you no longer feel fulfilled at work and can afford it, it may be time to make the transition. A few things to consider:

  • When you’re starting out in your career, it’s easy to become obsessed with getting ahead. At some point, though, you reach your goal. You deserve a reward for your hard work.
  • If you have loved ones who need your help, and you can afford to stop working, retiring frees you to help them with their day-to-day activities.
  • Retirement offers you time to grow, cultivate new interests, pursue hobbies and spend time with loved ones. It frees you to do the things that matter most.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

58-Year-Old Landlord Says Goodbye to Tenants

Meet Frank and Linda, (not their real names). Frank and Linda have been married for 30 years and had begun having conversations around making plans for Frank to leave Corporate America before Frank turned 60. Linda would wind up her teaching career around the same time Frank would retire, and for the first time in their lives they realized that they would soon have the time they always wanted together.

Frank wanted to spend a month in Europe like he had always talked about, and Linda just wanted to go to the beach; sleep late, read books, boil shrimp and enjoy the different wines from her wine club recommendations. “Let’s do Europe in the spring when the weather is cooler,” Frank suggested, “and then we can do the entire summer at the beach when we’re ready for our warm, sunny, lazy days on the beach.” Frank’s idea sounded perfect to both.

And then it hit them: They’re not going anywhere.

Instantly Frank and Linda re-centered around the reality of their real estate portfolio. During their careers, Frank and Linda has acquired three rental homes — a storage facility, a four-plex apartment and two vacant lots in the subdivision where they lived. Frank had watched his father speculate and gamble in the stock market and lose big more than once. Frank was currently helping his dad with medical costs and carried a bit of resentment for his dad’s fast-and-loose ways with money when his dad was younger. At 25, Frank had decided he would build his own personal wealth in real estate, something he reasoned would always be there for him; and it had. Frank and Linda’s real estate portfolio, excluding their primary residence, was now valued at over $2.6 million and represented the lion’s share of the wealth they would rely on for their retirement income to supplement Frank’s Social Security and Linda’s pension as a teacher.

“How about we just sell it all,” Linda suggested, “After all, the market is so good right now.” This seemed like possibly a good idea to Frank. “Then we will have the time and the money to do what we want,” Linda reasoned. Frank said that sounded good but wanted to make sure he knew what the taxes would be, because he knew there could be a fair amount to pay were they to sell.

CPA Delivers Good News and Really Bad News

Frank and Linda had a long-standing relationship with a local CPA who had helped with all the accounting, bookkeeping and filings their real estate holdings had required. Frank offered to reach out to the CPA the next morning and run some numbers on what the tax bill might look like were they to sell all their investment real estate holdings.

Two weeks later Frank went to see his longtime CPA and friend, Lanny. Lanny pulled up Frank and Linda’s tax return from the previous year and started running calculations on all the real estate that the couple have been depreciating. After what seemed a solid half hour of the CPA banging on his keyboard, he looked up, squinted and leaned across his desk. “Well, I have good news, and I have not-so-good news. The good news is, you and Linda have made a lot of money on this real estate. The bad news is you’re going to get killed on capital gains taxes and depreciation recapture.”

Lanny went on to explain that since the total gains were large sums, those gains would be taxed at the current 20% capital gains rate, plus the 3.8% Net Investment Income Tax. He went on to say that depreciation recapture was taxed even higher, at 25%.

“So how bad is it?” Frank asked.

“Just over $500K,” Lanny murmured.

“You mean that Linda and I have to write a check to the IRS for more than $500K if we sell our real estate?” Frank was almost shaking.

In his head he was thinking the number might be closer to $200K, which he thought he might be able to tolerate. The very idea of writing a check to the IRS for more than half a million dollars left Frank angry, astonished and perplexed all at the same time.

How about a 1031 Exchange?

“There’s always a 1031 Exchange,” Lanny offered as what seemed to Frank a flimsy condolence. Frank knew of the 1031 Exchange, but that would just mean selling his real estate and buying other real estate that he and Linda would have to keep up with. Sure, they could sidestep $500K of tax, but he and Linda would have all the same headaches of property ownership, just with different addresses. Tenants are tenants, Frank said to himself, and all that goes with them. No, a 1031 Exchange was not going to solve their problem. Selling and buying again might look good on a spreadsheet, but it was not going to give him and Linda the freedom they wanted.

Several weeks went by for Frank and Linda without mention of their real estate assets. Then, one evening after dinner, Frank and Linda were sitting in their living room where Frank was watching baseball and Linda had her laptop out looking at travel blogs she followed online. Frank’s team was losing badly enough where he was considering turning it off. At that precise moment Linda said, “Frank, what’s a DST?”

 “I don’t know, some kind of pesticide,” Frank quipped.

 “Frank, it says here in this article that I’m reading that a DST is a passive form of real estate ownership that qualifies for a 1031 Exchange. The article says that many people today are opting to sell their real estate using a 1031 Exchange to move their equity into Class A apartment buildings, self-storage portfolios, medical buildings, industrial warehouses and even things like Amazon distribution centers, Walmart stores and Walgreens buildings. Apparently, these investments offer solid monthly income to investors and attractive opportunities for long-term growth,” Linda continued. “Frank, this could be it. This could be what we are looking for.”

Frank and Linda’s dilemma is not uncommon. Perhaps it was an aging population that was considered when in 2002 the state of Delaware passed the Delaware Statutory Trust Act. Revenue Ruling 2004-86 soon followed and allowed for DSTs to qualify as “Replacement Property” for the tried-and-true 1031 Exchange (part of our tax code since the 1920s). Many DSTs offered to real estate investors are capitalized with $100 million or more, and smaller investors can now access these offerings in smaller fractionalized amounts as low as $100,000. Properties include medical buildings, Class A multi-family apartment buildings, hotels, senior living, student housing, storage portfolios and industrial warehouse buildings. Nationally known tenants are typically companies like Walgreens, Hilton and Amazon, among others. Often, investors might feel better with a large and stable company like Amazon guaranteeing their monthly income, rather than the tenants who last skipped out on rent, leaving them high and dry.

Some Caveats to Consider

All real estate investing, including DSTs comes with risk, and investors should do their homework, perform their own due diligence, and read the Private Placement Memorandum, (PPM) before investing any capital.  DST offerings are typically illiquid and would not be considered suitable for a large portion of someone’s wealth when liquidity is needed. Because DSTs are regulated and are “securities,” they must be purchased from a Registered Investment Adviser and/or a Broker Dealer Representative who holds a proper securities license, Series 7 or Series 65. 

Many times, we are asked who can invest in a DST. Accredited Individuals and certain entities qualify. An individual must have a net worth in excess of $1 million, excluding his or her home, OR an income over $200K per year for the last two years. If married, the combined income required is $300K. The income is required to be “reasonably expected” going forward.

For the right person in the right situation, a DST might be the perfect answer to a common dilemma faced today by many real estate investors across America.

For more information, please visit www.Providentwealthllc.com or www.Provident1031.com.

Chief Investment Strategist, Provident Wealth Advisors

Daniel Goodwin is the Chief Investment Strategist and founder of Provident Wealth Advisors, Goodwin Financial Group and Provident1031.com, a division of Provident Wealth. Daniel holds a series 65 Securities license as well as a Texas Insurance license. Daniel is an Investment Advisor Representative and a fiduciary for the firms’ clients. Daniel has served families and small-business owners in his community for over 25 years.

Source: kiplinger.com

7 Reasons Not to Claim Social Security Early

Older woman working at a florist shop
pikselstock / Shutterstock.com

Some people believe in starting to collect Social Security as early as possible, which is generally at age 62.

“Live while it is yet possible to live!” the early birds cry. “After all, I could die tomorrow, and then the government will keep my money.”

What’s more likely is that you’ll live a lot longer than 62.

According to the Social Security Administration (SSA), the average woman reaching the age of 65 today will live until nearly 87. The average man who is 65 today can expect to live until about 84.

One way to help ensure you don’t run out of money before then is to postpone claiming your Social Security retirement benefits. There are advantages to waiting as late as 70 years old.

While waiting until age 70 isn’t for everyone, following are some reasons that claiming sooner than later can be a bad idea.

1. Claiming early reduces your benefit

Some people think that taking Social Security at age 62 means more money overall. That’s not necessarily true.

The amount of your monthly benefit is based on a formula that’s meant to be actuarially neutral. That basically means you should get the same total amount of benefits over the course of your retirement regardless of the age at which you first claim benefits.

Your monthly benefit will be reduced if you claim before reaching what the SSA calls your “full retirement age,” an age set by the SSA that depends on the year you were born. For example, full retirement age for a person born in 1955 is 66 years and 2 months, while full retirement age for anyone born in 1960 or later is 67.

If you delay claiming until after your full retirement age, you will receive an even bigger monthly benefit once you do claim. For every year you hold off past full retirement age, your benefit will grow by as much as 8%.

The SSA’s “Quick Calculator” can give you a rough idea of your own benefit amount based on when you plan to retire.

A custom analysis of your claiming options, offered by specialized companies like Social Security Choices, can further help you determine when the best time is for you to claim your benefits.

Money Talks News founder Stacy Johnson himself got an analysis from Social Security Choices. To learn more about such a report — including how to land a discount on the cost of your report — check out “Maximize Your Social Security.”

2. You might outlive your other retirement income

If there’s a chance that you could use up your retirement funds before you die, a higher Social Security benefit could be crucial.

Getting every last dollar you can in your monthly benefit is important, especially if you don’t have a partner who’s also receiving benefits.

3. Working longer can increase your benefit

Your monthly benefit amount is based on the amount of income you earned during each of your 35 highest-earning working years. However, not everyone is able or willing to work for 35 years, often due to health or family issues.

When that’s the case, the government will substitute zeroes for the missing years in its calculation, which can significantly lower your monthly benefit amount.

Low-earning years also bring down the total, says Emily Guy Birken, author of “Making Social Security Work for You.”

As tempting as early retirement can be, think big-picture and look for ways to bring in more bucks before claiming.

“Anything you can do to replace those zeroes and anything you can do to replace those low-earning years will help beef up your retirement,” Birken tells Money Talks News.

4. COLAs will not boost your benefit as much

A lower monthly benefit means that each cost-of-living adjustment (COLA) — the inflation-based regular increase to your monthly benefit amount — will result in less money than it would have if you had postponed claiming Social Security.

Why? COLAs are a percentage of your monthly benefit. So, the smaller your benefit amount, the smaller your COLA dollar amount.

A 2% COLA, for example, would increase a $2,000 benefit by around $40 a month, or $480 per year. But it would increase a $2,480 benefit by about $49.60, or $595.20 per year.

5. You might stiff your spouse

Working at least until your full retirement age gives your husband or wife a better chance at a reasonably comfortable retirement if you die first.

That’s because widows and widowers often can benefit from Social Security survivors benefits, which are based on their spouse’s benefit amount.

Using the same benefit amounts as above, say a man gets a $2,000 benefit, while his wife’s check will be $1,700 upon her own retirement. If he dies first, she could be eligible for up to $2,000 in monthly benefits. But if he’d waited a few years to claim Social Security, and let his benefit amount grow, she could have been eligible for up to $2,480.

6. You might be hit by a ‘tax torpedo’

Some people want to let their portfolios grow, so they take Social Security early and live on it until they’re forced to withdraw required minimum distributions (RMDs) from their retirement accounts.

This plan can backfire, though, because of how Social Security benefits are taxed.

The extent to which your benefits are taxable is based on what the SSA calls your “combined income.” It includes taxable income, such as withdrawals from tax-deferred retirement accounts like traditional 401(k) plans and traditional individual retirement accounts (IRAs).

Depending on the amount of your combined income, up to 85% of your Social Security benefit could be taxed.

One way to dodge such a tax torpedo is to withdraw less money from your tax-deferred retirement account each year. And delaying claiming Social Security can help you do that because you’ll get a bigger monthly benefit.

In turn, Birken explains:

“You won’t need to take as much from your taxable retirement [plan] to make up the amount you need to live on.”

Some people don’t realize they might have to pay taxes on their benefits. Birken calls it “one of the really nasty surprises about Social Security.”

For more ways to keep Uncle Sam from taking part of your benefits, check out “5 Ways to Avoid Taxes on Social Security Income.”

7. You still like your job

Just because you’re old enough to retire doesn’t mean you have to retire.

Even a part-time salary — plus any other retirement benefits — could cover expenses until you hit age 70, at which point your Social Security benefit would be maximized.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

Cost of Living in Thailand – How Much for Rent, Food & Entertainment

How would you like to live in a tropical paradise where a restaurant meal costs $2, a taxi ride costs $3, and a furnished apartment rents for as little as $200 per month?

For decades, the low cost of living in Thailand has made it one of the most popular destinations for anyone looking to live in a tropical climate on a budget. And while prices in this sunny “Land of Smiles” have inched up over the years, you can still live on a fraction of what you’d spend for a similar lifestyle in your home country.

But just how cheap is Thailand in 2021?

How Much Does It Cost to Live in Thailand?

Each of Thailand’s regions offers something unique to travelers and expats. From beach towns to bustling cities and cultural centers to sleepy hideaways, Thailand accommodates every lifestyle — at least as long as you like sunshine.

The overall cost of living in Thailand varies by region. But some expenses, such as cellphone bills, taxes, and visa fees, remain constant, no matter where you choose to live.

Your standard of living has the most significant impact on your cost to live in Thailand. You can choose a life of luxury for a sliver of what it costs in the United States or Europe. But if you’re willing to live like a local with a simple lifestyle, you can stretch money even further.

When comparing prices in a foreign currency, your purchasing power fluctuates with the exchange rate. Since 2018, the exchange rate has held steady in Thailand, ranging from 30 to 33 Thai baht (THB) per $1 U.S.

With the exchange rate in mind, you can compare the cost of living between your current location and Thailand. To make the comparison easier, the prices herein are converted to U.S. dollars.

Average cost-of-living figures come from Numbeo, a crowd-sourced cost-of-living database. After living in Thailand for five months, I found these averages are a good starting point, but they don’t always accurately depict how affordable each destination can be.

Since the crowd-sourced data comes primarily from expats, costs are higher than what you’d spend living like a local.

In addition to Numbeo averages, all other pricing data comes from real properties for rent on Facebook Marketplace and Airbnb.

Rent

Your expenses partially depend on how you find your rental. While accommodation-hunting on Airbnb and other booking websites is convenient, that convenience comes at a price. To find the cheapest rates, search on Facebook Marketplace or (better yet) on the ground — but don’t expect everyone to speak English.

The cost of rent in Thailand also varies dramatically from city to city — even neighborhood to neighborhood.

Bangkok and the Suburbs

As the capital and center of economic activity, Bangkok is naturally the most expensive part of the country.

Luxury apartments on Airbnb can cost more than $3,500 per month in the most desirable parts of Phrom Phong, Silom, Lumpini, and Sukhumvit, all of which make up Thailand’s financial and retail center. Penthouse apartments complete with housekeeping, a private swimming pool, and panoramic views of the big city can run $6,000 per month or more.

But there are plenty of more affordable options.

Tourists and backpackers generally rent rooms on Khaosan Road, where a decent hotel room costs $10 to $25 per night. If you’re on a shoestring budget, shared dormitories in hostels go for as little as $2 per night. Discounts for monthly rentals are also available.

In Bangkok, the average one-bedroom apartment in the city center goes for $580 per month but only costs $290 outside the city center.

One factor that influences price is the proximity to the nearest subway station. The closer it is to the subway (MRT) or Skytrain (BTS), the higher the price.

Public transport is now starting to expand into the suburbs, which can offer the best of both worlds: low rental prices with easy access to the city.

For example, the furnished studio we rented in a luxurious condominium right next to a BTS station in the suburbs costs $460 per month on Airbnb. We could have negotiated an even lower price by paying an owner directly, taking an unfurnished unit, or signing a longer contract.

It had everything we needed built into the complex, including a restaurant, mini-store, gym, infinity pool, and workspace. Since we had everything on-site, we rarely had to leave, which saved us transportation costs.

If you prefer to rent a house, you have to venture outside the city center. Neighboring Nonthaburi and Samut Prakan are technically independent cities but are really more like exurbs of Bangkok. Detached single-family houses in these regions cost as little as $200 per month.

Beach Towns Near Bangkok (Pattaya and Rayong)

A couple of hours southeast of Bangkok, the beach towns of Pattaya and Jomtien have seen aggressive growth in recent years as real estate investors continue to build high-rise condominiums in these once-sleepy fishing towns.

In fact, the 2019 Global Destination Cities Index ranked Pattaya the 15th most overnight tourist-visited city in the world. Many of those tourists have fallen in love with the sunny, relaxed lifestyle and now call Pattaya home.

Despite their popularity, the cost of living in these regions remains surprisingly low.

Pattaya is the most expensive. Its nightlife is a big draw for expats. But even there, you can find one-bedroom apartments just off the beach for less than $500 per month. And the farther you go inland, the lower the prices get.

Rayong is even cheaper, with plenty of furnished studios going for less than $200.

Chiang Mai and Chiang Rai

Chiang Mai is a small town in Northern Thailand near the border of Burma and Laos. Considered by many to be the “digital nomad capital of the world,” Chiang Mai is a hotspot for young backpackers with a thriving expat community. Its popularity is primarily due to a low cost of living, beautiful temples, and foreigner-friendly cafes, nightclubs, and hangouts.

The average rent in Chiang Mai is $430 inside the city center and $300 outside the center. That said, when I went apartment-hunting in Chiang Mai, I found prices to be even cheaper.

In the Nimmanhemin (or “Nimman”) neighborhood, prices have exploded over the past decade due to the influx of digital nomads. We walked around door-to-door asking for rates and couldn’t find any decent studio apartments under $400. But outside touristy areas, it’s not unheard of to score a furnished studio for under $125.

A less popular option is the neighboring town of Chiang Rai, home to three of the most awe-inspiring temples in Thailand. Since it’s a bit more under the radar, it can be even cheaper than Chiang Mai.

The average rent for a midrange one-bedroom apartment in the Chiang Rai city center is $240, with comparable apartments outside the city going for half that. Northeast Chiang Rai is also close to the Burmese border, which is convenient for border runs when you have to renew your visa.

In Chiang Mai, Chiang Rai, or any other touristy town in Northern Thailand, prices fluctuate with the season. During “burning season” — when farmers burn their crops and pollution levels rise — rental costs plummet as foreigners flee in search of cleaner air.

Southern Beaches and Islands (Phuket, Krabi, Songkhla)

The stunning beaches surrounding Phuket and Krabi have surged in cost over the past 20 years as luxurious resorts slowly replace cheap backpacker bungalows.

The average one-bedroom apartment goes for $470 in Krabi, with similar prices in Phuket. There are also still deals on popular islands like Koh Lanta, where you can find simple one-bedroom Airbnbs for as little as $230.

That said, rents vary radically depending on the unit’s proximity to the beach, with luxurious beachfront villas fetching upward of $2,000 per month.

In Songkhla, a less popular resort town near the southern Malaysian border, you can still find bare-bones apartments on Facebook Marketplace for as little as $100 per month. You won’t be living in luxury, but you can’t go wrong for $100, especially if you spend all your time at the beach anyway.

Gulf of Thailand (Koh Samui, Koh Pha Ngan, Koh Tao)

The Gulf of Thailand is home to three of the country’s most popular islands — Koh Samui, Koh Pha Ngan, and Koh Tao. Each island has a unique vibe. And while prices have risen over the past decade, you can still find some steals.

Koh Samui is the largest and most developed of the three islands, with the average one-bedroom apartment rent ranging from $270 to $390 per month. It’s full of resorts and known as a family vacation destination, but plenty of expats also call the island home.

Koh Pha Ngan is home to the infamous Full Moon Party, an enormous beach festival held on the southwest corner of the island every month. But Koh Pha Ngan is more than just parties.

The island’s west side offers laid-back beach towns with expat communities dedicated to yoga, mindfulness, and spirituality.

It’s hard to find anything under $200 per month in Koh Pha Ngan, which would get you a rustic bungalow. For a modern furnished apartment with air conditioning and a beach view, expect to pay upward of $1,000 monthly.

Koh Tao is the smallest and least developed of the three islands, a favorite for backpackers wanting to scuba dive on a budget. Since it’s so small, most rental prices you find online are expensive Airbnbs. If you search on the ground and negotiate directly with locals, you can find rustic bungalows for under $150 per month.

Off-the-Beaten-Path Destinations

Generally, the further you go from tourist destinations, the cheaper your cost of living. Rent for a basic one-bedroom place in a rural Thailand region like Isan can be as little as $50 per month.

Remember, the 2021 daily minimum wage in Thailand ranges from $10.03 to $10.77. You won’t get a Western standard of living on less than $11 per day, but if you learn to live like a local, you’d be shocked at how far your money stretches.

Utilities

When renting an unfurnished apartment on a long-term contract, you’re usually responsible for paying your own utility bills.

But even many furnished accommodations exclude electricity in the price. That’s because electricity is expensive compared to rental costs, especially if you’re blasting the air conditioning all day. Some rentals even include electricity for everything except air conditioning, which they meter separately.

To make matters more complex, when property owners charge for electricity in furnished apartments, they set their own rates per kilowatt-hour. The official power tariff in 2021 is $0.11 per kilowatt-hour, but depending on how much the property owner wants to profit, you could pay anywhere from $0.12 to $0.25 per kilowatt-hour.

When comparing rental options, factor in:

  • Whether they include electricity
  • How much they charge for it
  • How much you plan to use

It can get confusing, and we ended up creating a full-blown spreadsheet to keep everything straight. Just know that if you pay the property owner for electricity (versus paying the electric company directly), the monthly cost of your electricity bill could double depending on the rate they set.

Numbeo reports that the average utility bill (electricity, heating, cooling, water, and garbage) in Thailand is $68.

And choosing a cooler climate doesn’t necessarily lead to a lower air-conditioning bill. You also have to factor in pollution. Bangkok is known for its pollution, and on bad days, you won’t want dirty air circulating through your house. That means keeping the windows closed and the air on and investing in an air purifier for your home.

Similarly, during the burning season in Chiang Mai and the northern regions, the air quality reaches harmful levels, and you should keep the windows closed.

Food

Thai food is delicious and cheap. Eating out is so affordable that most Thais build their houses without a full kitchen. That means, unless you pay for a property built specifically for Westerners or tourists, you won’t cook many meals at home.

Food costs vary by location. Touristy areas like the islands and expat hangouts generally have the highest prices. But no matter where you go, there’s usually always a food cart or small family restaurant serving tasty rice and noodle dishes for $2 or less.

Rural areas can cost much less. I once visited an orphanage on the outskirts of the small town of Chiang Rai. The founder invited us to a delicious feast at a local restaurant, and our bill came out to a shocking $0.80 per person, including drinks.

When hunting for the cheapest restaurants in town, look out for general cleanliness to avoid getting sick. If it’s packed with locals, that’s a good sign the food is safe.

Thailand is also full of vendors selling fresh fruit and fruit shakes on the streets. While in Bangkok, we bought $1 coconut shakes and a bag of $0.50 mangoes every day.

Coffee lovers in Bangkok spend an average of $2.20 per cappuccino. The average chicken breast runs $1.10 per pound if you want to cook yourself. But with such cheap and delicious restaurants, it’s often hard to justify the time spent cooking.

That said, not all food in Thailand is cheap. After living in Thailand for a while, many expats start to miss Western food. And Western food in Thailand is pricey — and underwhelming.

Many Western ingredients, like cheese, are hard to come by in Thailand. That means foods like burritos, hamburgers, and pizza are both expensive and taste funny with substituted ingredients.

Transportation

Public transportation in Thailand is so cheap and convenient that owning a car is rarely necessary. Instead, most expats use motorbikes or public transit.

The average cost of a basic scooter rental varies by region, but you can usually pick one up for as little as $60 per month. You can also rent bigger motorcycles, but they cost two to five times as much, depending on the model you choose. In addition to rental fees, you have to factor in gas costs, which average $3.36 per gallon in Thailand.

When renting a motorbike, choose a model with parts made in Thailand. That way, if you crash or scratch the bike, you won’t have to pay outrageous fees to import parts from a different country. Also, record a video showing the condition of the motorbike before you rent it. Otherwise, the rental agency may try to charge you for damages you weren’t responsible for. I learned that the hard way.

You technically need an international driver’s license to ride a scooter or motorbike in Thailand. If you plan to live in the country long-term, it’s worth getting. If you’re just visiting, many tourists rent scooters without it. If the police pull you over, they give you a ticket or try to extort a bribe from you. So sticking to public transit may be best.

If scooters aren’t your forte, there are plenty of other affordable transportation options available. For example, there’s the metro system in Bangkok, moto taxis, and the famous shared red truck taxis (called “songthaews”) in other regions like Chiang Mai.

For example, when we lived in Chiang Mai, a songthaew within the city limits of Chiang Mai cost us roughly $1 per person.

Fares for Bangkok’s BTS and MRT depend on the distance you travel, ranging from $0.50 to $1.70.

If you live in a walkable neighborhood or beach town and take subways or songthaews once per day, you’re looking at $2 per day round trip, or $60 per month in transportation expenses.

On the other extreme, if you live in Bangkok and constantly take taxis across the city — which cost an average of $0.66 per mile, according to Numbeo — your transportation bill could shoot up to a couple hundred dollars.

Entertainment

There’s more to life than food, rent, and transportation. Thailand is famous for its nightlife, and that’s where a lot of people run into trouble.

Based on our experience, beers in most bars and nightclubs only cost $2 to $4. That said, expats and vacationers can quickly find themselves partying a bit too hard and spending even more than they do back home.

Some nightclubs have free entry, but we’ve paid up to a $15 cover. If you’re going out multiple nights per week — which can be tempting in a city that never sleeps — your monthly budget can quickly go off the rails.

If you prefer to entertain yourself with travel and exploration, you’re in luck. Thailand has 1,430 stunning islands, many of which you can access fairly cheaply.

For example, an 11-hour bus ride from Bangkok to Krabi costs less than $20. And if you buy in advance, direct local flights can be just as cheap.

Phone and Internet

In the past, one trade-off of living in Thailand was slow and unreliable Internet speeds. That’s no longer the case. In fact, fast Wi-Fi is one of the reasons expats and digital nomads choose to live in Thailand over other similarly affordable countries.

In Thailand, the average price for a 60-megabits-per-second or faster Internet plan is less than $20 per month.

Prices for cellphone plans vary based on:

  • Provider
  • Length of contract
  • Amount of data
  • Data speeds

Prices also depend on whether you need a data-only plan, a calling plan, or a combination of the two.

For example, with TrueMove H, you can get an unlimited data plan with a couple hundred calling minutes for less than $20 per month.

Note that many “unlimited” data plans only include a certain amount of data at maximum speed. After that, it’s throttled.

Gyms, Spas, and Self-Care

Gyms in Thailand can be surprisingly expensive.

The gym we joined in Chiang Mai cost $30 per month, three times as expensive as Planet Fitness in the U.S. Of course, our gym catered to expats, with air conditioning and well-maintained equipment. You can also find more rustic gyms for as little as $5 per month.

That said, many condos have free gyms on-site. So if it’s important to you, finding one could save you money even if it’s more expensive than another rental.

Thailand’s massage culture is world-renowned and a big part of many expats’ lives. Steeped in Buddhist traditions, Thai massage techniques have been passed down from generation to generation for centuries.

You can find massage parlors on almost every corner. While living and traveling around Thailand, most parlors we saw cost between $5 and $15 for an hour-long massage.

Cost of Health Care in Thailand

Health care in Thailand is incredibly cheap, especially coming from countries with outrageous health care costs like the U.S.

I once needed a procedure that would have cost over $25,000 in America. In Bangkok, I had it done for $1,500, including a one-night stay in a surprisingly luxurious private hospital room.

You can find hospitals with English-speaking staff in all the main tourist hubs. But if you have a complicated situation, Bangkok is the place to go.

Also, just because a hospital is more expensive or internationally recognized doesn’t necessarily mean it has the best doctor for your condition. To find a specialist, I searched for the top surgeons in Bangkok for that discipline. It turns out the best specialist in all of Asia worked out of a small private hospital — a hospital nowhere to be found on the online lists of best Bangkok hospitals for expats.

Many expats living in Thailand on a tourist visa rely on travel insurance or international health insurance for their coverage. These plans range from basic $40-per-month SafetyWing travel insurance to more comprehensive plans that cost hundreds of dollars per month. Whichever plan you choose, your premiums depend on factors like your age, the coverage you need, the country you’re from, and the insurance company you choose.

Expats with a resident visa can also buy local private insurance like Luma Health for coverage in Thailand. These plans are comparable in price to international health insurance plans, and most hospitals can bill them directly. It’s more convenient than a travel insurance policy that requires you to pay out of pocket and submit claims for reimbursement.

Lastly, if you work legally in Thailand and pay Social Security taxes, you receive free government medical insurance. If you’re used to Western standards, set your expectations appropriately. Odds are you won’t be impressed with the treatment you receive under free government insurance in a developing nation.

Thailand Visa Expenses

American tourists on short-term vacations don’t need an entry visa.

But if you plan to stay in Thailand full-time as a retiree, recurring tourist, Thai spouse, student, or business owner, you need a visa.

To keep these visas current, you must pay to renew them regularly.

For example, a single-entry education (ED) visa — which you could use to take Thai language lessons — costs $80, and you must renew it every 90 days.

The fee for a five-year retirement visa is $400. It also requires proof of an income source greater than 65,000 baht (roughly US$2,000) per month. Immigration waves the monthly income requirement if you maintain a balance of at least 800,000 baht (US$24,585) in a Thai bank account.

That said, many countries have introduced digital nomad and remote work visas in the wake of the pandemic. Thailand is in the process of creating its own remote work visa, which would eliminate much of the hassle and expense remote-working expats face.

Income Tax in Thailand

Just because you live abroad doesn’t make you exempt from income taxes. If you live in Thailand for more than 180 days (roughly six months) per year, you’re considered a resident. Residents in Thailand must pay taxes on income earned worldwide. If you are not considered a resident, you must still pay taxes on income earned in Thailand.

Thailand has progressive income tax brackets similar to those in the U.S., ranging from 0% to 35%.

Americans must also file taxes in the U.S., but you can avoid double taxation thanks to the U.S.- Thailand tax treaty, foreign earned income exclusion, and foreign tax credit.


Final Word

In addition to everyday living expenses, you also have to factor in the cost of an intercontinental move and building a healthy emergency fund.

Not only do you have to buy a plane ticket across the globe, but unless you stick to renting expensive furnished spaces, you also need to buy a bed, fridge, furniture, cookware, and decorations.

That said, even though Thailand isn’t quite as cheap as it once was, it’s still one of the best places you can live on $2,000 per month or less.

Source: moneycrashers.com

Are You Getting a Monthly Payment for Your Kids? Check the IRS’s Child Tax Credit Portal

If you’re wondering if the IRS is going to send you a child tax credit payment, there’s an easy way to find out. Use the Child Tax Credit Update Portal on the IRS’s website. Right now, this online tool lets you:

  • See if you’re eligible for monthly payments;
  • Opt-out of monthly payments;
  • See a list of your monthly payments; and
  • Update or add your bank information for future monthly payments.

Later, you’ll also be able to update your mailing address for future payments; revise the number of dependents, marital status and income that are used to calculate your monthly payments; and re-enroll for monthly payments if you previously opted out. The ability to change your address is supposed to be available in early August. The other upgrades will take place later this summer.

How Much Will You Get Each Month?

The 2021 child tax credit is worth $3,600 for each child 5 years old or younger and $3,000 for each kid 6 to 17 years of age. Each monthly payment will equal 1/12 of your total credit amount. That comes a maximum monthly payment of $300 for each child under age 6 and $250 for each child ages 6 through 17.

However, the credit amount – and therefore your monthly payment amount – is gradually reduced for wealthier families. So, if your income is high enough, you won’t receive the maximum credit or monthly payment. In fact, certain families won’t get a credit or monthly payments at all because they make too much money.

There will be six monthly payments in 2021. Eligible parents will get them on July 15, August 13, September 15, October 15, November 15, and December 15. The combined total of your monthly payments should equal 50% of your total child tax credit for the 2021 tax year. You’ll claim the rest of the credit when you file your 2021 tax return next year. To get a customized estimate of your monthly payments, use our 2021 Child Tax Credit Calculator.

Direct Deposit of Monthly Child Tax Credit Payments

Most monthly child tax credit payments will be directly deposited into your bank account. That’s what the IRS will do if it has your bank account information from:

  • Your 2019 or 2020 tax return;
  • The IRS’s online tool used last year by people who aren’t required to file a tax return to get a first-round stimulus check;
  • A federal agency that provides you benefits, such as the Social Security Administration, Department of Veterans Affairs, or the Railroad Retirement Board; or
  • The Child Tax Credit Update Portal.

If the IRS doesn’t have your bank account information, you’ll get a paper check or debit card in the mail.

Accessing the Child Tax Credit Update Portal

To help prevent fraud and identity theft, you have to verify your identity before accessing the Child Tax Credit Update Portal. If you have an existing IRS account, use that account’s username and password to sign-in to the portal. You’ll have to enter a security code as part of the multi-factor authentication process.

If you have an existing account with ID.me from a state government or federal agency, you can use the email and password associated with that account to access the portal. You’ll also have to complete the multi-factor authentication process.

If you don’t already have an existing IRS or ID.me account, you’ll have to create a new ID.me account to use the portal. Note that ID.me only authenticates people who are at least 18 years old. If you’re 17 or younger, call the telephone number on the letter the IRS sent you about child tax credit payments if you want to opt-out of monthly payments.

For complete coverage of this year’s child tax credit and monthly payments, see Child Tax Credit 2021: How Much Will I Get? When Will Monthly Payments Arrive? And Other FAQs.

Source: kiplinger.com

Social Security Increase Comes Up Short in 2021, Study Finds

Unhappy senior woman counts money
Pixel-Shot / Shutterstock.com

Your Social Security check may not feel quite as fat as you had hoped this year.

Each fall, the federal government announces how much Social Security payments will rise for the following year. But it turns out that the increase announced last October does not feel quite as large as many had hoped.

In fact, 63% of participants in a survey by the Senior Citizens League say their 2021 cost-of-living adjustment — which was 1.3% — raised their net monthly Social Security benefit by less than $15.

The Social Security Administration had projected in October that the 1.3% COLA would increase the average monthly Social Security retirement payment by $20.

What accounts for the lower boost than expected in Social Security benefits? There also was an increase this year in the Medicare Part B premium, which generally is deducted from a senior’s Social Security payment.

The Senior Citizens League notes that 65% of retirees in the survey say their 2020 monthly household expenses rose by more than $80 — with 40% saying such expenses were up by $120 or more.

Food prices in particular are climbing, with the cost of fresh fruits and vegetables rising due to crop damage from severe weather and wildfires, the league says.

And the situation may get more difficult for seniors. As the league notes in a press announcement:

“Some economists and policy makers worry that the new economic stimulus will cause consumer prices to spiral. Consumer price index data through February showed a big jump in some prices and suggests that the next Social Security COLA may in fact be much higher — the highest since 2019 when the COLA was 2.8%.”

Although a large COLA increase would be welcome, higher prices could wipe out those gains, the league says. It advocates “tying the annual COLA to a consumer price index that more closely reflects the spending patterns of older Americans.”

Wondering when is the best time to claim Social Security benefits? Stop by Money Talks News’ Solutions Center and learn about expert, low-cost help that can ensure you get the most from this retirement program.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com