Here are 7 things you need to know about inflation, Social Security, Motor Oil, and more!
Not Everything is More Expensive
We all know that inflation has sent prices soaring in recent years, but not everything is more expensive than it used to be.
The website HistoryFacts.com says the average American family spends about 3 percent of its household budget on clothes. That’s down from 10-12 percent 60 years ago, mainly because most U.S. clothing production moved overseas, where labor costs are lower and production output is higher.
Televisions have gotten bigger and better, but their prices have kept coming down. Back in the 1950s, RCA introduced its first 15-inch color TV set, which cost about $1,000. Today, you can get a 65-inch, high-definition smart TV for half that amount, and that doesn’t even take inflation into effect. The price of many other tech devices has come down, too.
Even the price of gasoline, adjusted for inflation, is about the same as in 2005.
Airfares, toys, washing machines, and aluminum are also on the list of items that have gotten cheaper over the years.
Vanguard Adds Fees
The mutual fund giant Vanguard is now requiring that its brokerage account holders pay new fees on a wide range of customer transactions. For example, they now charge a $100 processing fee to close an account or to transfer money to another firm. Vanguard says the fees help “offset the costs of asset transfers.”
Other fees include:
- $100 to deposit physical share certificates
- $25 to use the services of a Vanguard broker to help you make trades involving Vanguard Funds
- 20% of the money recovered from class action lawsuits filed on behalf of its clients
Vanguard also warns its customers that they can be terminated without warning or explanation if they “excessively rely” on telephone customer service agents.
A recent Wall Street Journal article noted that many long-time Vanguard account holders are fed up with the company’s inefficient customer service.
Vanguard made its reputation by offering low-cost investment options, making the addition of the above fees an interesting one.
It is also worth noting that EKS clients who use Schwab are considered “institutional” customers, and are not charged a fee to close accounts.
Social Security and Federal Income Taxes
Did you know your Social Security benefits might be subject to federal taxes?
Up to 85 percent of your benefit could be taxable, depending upon your income. To be clear, you are not subject to an 85 percent tax rate. Instead, if you receive $10,000 in Social Security payments this year, up to $8,500 could be taxed as ordinary income. If you’re in the 24 percent tax bracket, you could owe $2,040 ($8,500 x .24).
The income threshold is $34,000 for single filers and $44,000 for joint returns. That’s been the case since the Reagan administration, as those numbers are not adjusted for inflation. When they took effect 40 years ago, only 10 percent of Social Security recipients were affected. Now it’s about half.
It’s also worth noting that the taxes you pay on your Social Security benefits go back into the Social Security Trust Fund, helping to prolong its financial lifespan.
What to do with Money Left in a 529 Plan
As of the beginning of this year, you can roll over funds from your 529 education savings plan into a Roth IRA, without having to pay any taxes or penalties.
There are some restrictions, including a $7,000 limit per year and a lifetime $35,000 limit on rollovers. 529 contributions made in the past five years cannot be rolled over, and the 529 account must have been opened at least 15 years before any rollover is made. In addition, the owner of the Roth account must have earned income at least equal to the amount rolled into it.
Some states, including California, impose a tax on a 529-to-Roth conversion. New Jersey is still reviewing that issue.
The new rollover rules took effect at the beginning of this year. However, many tax and financial advisers say caution is warranted as the IRS could still issue new guidance about how the rollovers are implemented. Contact your EKS adviser before making any moves.
The Number of 401(k) Millionaires is Soaring
It’s certainly not a “get-rich-quick” scheme, but it works if you stick with it: maxing out your investments in your company’s retirement plan.
According to Fidelity, an all-time high of 485,000 people were 401(k) millionaires at the end of the first quarter. That’s up nearly 15 percent from the end of last year and a whopping 43 percent from a year earlier.
That’s just 2 percent of the 45 million retirement accounts analyzed by Fidelity, and those people did not accumulate that hefty nest egg overnight. Fidelity says they have been investing in their retirement accounts for an average of 26 years.
This year, workers can contribute as much as $23,000 to their 401(k) and 403(b) plans, and people over 50 can contribute an additional $7,500.
Peak Boomer Years
A record 4.1 million Americans will celebrate their 65th birthday this year, or more than 11,200 people every day.
The Retirement Income Institute says that pattern will continue through 2027, and by 2030 all Baby Boomers will have reached age 65. At that point, one-fifth of the U.S. population will be 65 or older.
According to the Pew Research Center, more seniors continue to work past the traditional retirement age than ever before. It also says that nearly 20 percent of 65+ Americans were still in the workforce last year, roughly double the rate in the late 1980s.
Many remain in the workforce because they need the money, but many also continue to work because they enjoy it.
Should You Use Synthetic Motor Oil?
If you do regular preventative maintenance on your car, you probably get an oil change every few months. If so, you may have been caught off guard by the question: conventional or synthetic? Which one is better for your vehicle?
According to AAA, synthetic oil is more chemically stable, allowing you to wait longer between oil changes. It also keeps your car engine cleaner and holds up better to extreme hot and cold temperatures.
The main downside to synthetic oil is that it can cost two to four times as much as conventional oil.
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This is part of our “Things to Know” series. Here are links to some past articles. (Please note that even though these tips are still relevant today, some of the numbers in the articles may have changed in 2024).
7 Things to Know About Saving, Spending, and Paying for College
7 Things You May Not Know About 529 Plans
7 Tips to Help You Manage Your Money
7 Tips for National Savings Day
6 Tips to Improve Your Financial Health
