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New rules affect 2011 flex spending accounts

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WASHINGTON (11/1/10)--Fall means football games to watch, maybe some raking, and, for those of us with flexible spending accounts (FSAs), it’s time to plan how much to set aside for 2011. While contributing to a health-care FSA is a great way to use tax-free payroll deductions to cover medical expenses, health-care reform will change the ways you can use funds in 2011 (Kiplinger Oct. 15). Here are some examples:
* Over-the-counter drugs no longer qualify without a prescription. Starting in 2011, you’ll no longer be able to use FSA money for non-prescription drugs, except insulin. Further, if your employer gives you until March 15, 2011, to use up the money in your account from 2010, you still won’t be able to spend it on over-the-counter drugs without a prescription after Dec. 31.If you regularly use over-the-counter medications, such as pain relievers or allergy medications, ask your physician for a prescription. You may qualify for reimbursement in 2011 by submitting the prescription number along with the receipt. * New rules may cover adult children’s expenses. Since many employers have expanded the definition of dependent to include any child younger than 27 at the end of the year, you may be able to use money in your FSA for adult children’s out-of-pocket expenses. Previously, this worked only if the child was a dependent for tax purposes. * FSA limits will be lower in the future. FSA limits aren’t changing next year, but the maximum limit will shrink to $2,500 in 2013. So if you’re considering a medical procedure that isn’t covered by insurance--such as laser eye surgery--you might want to schedule it in 2011 or 2012.
With a little planning, an FSA is a great money-saving tool. To learn more about benefits of budgeting, see the Home & Family Finance Resource Center calculator “Budget Blueprint.”

HandFF Radio Halloween financial lessons for kids

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WASHINGTON (10/29/10)--Sunday’s H&FF Radio program has advice for teaching kids about money on Halloween, converting your retirement plan to a Roth IRA, and determining if you can afford to retire early. The show, which you also can hear later via the Internet, features Paul Berry, Washington, D.C., journalist and broadcaster, discussing these topics with special guests:
* “Using the Holidays to Teach Your Kids About Money.” Janet Bodnar, editor, Kiplinger’s Personal Finance magazine, Washington, D.C., shares ideas for using Halloween to teach your children important money lessons. * “Small Business Act Lets You Convert Retirement Plan to Roth IRA.” James Lange, attorney and certified public accountant, Pittsburgh, explains how a new law will allow 401(k), 403(b), and 457(b) employees to convert pre-tax account balances into Roth-designated accounts. * “More People Seeking Early Retirement Due to Corporate Stress.” Wayne Copelin, certified financial planner and founder, Copelin Financial Advisors, Sugar Land, Texas, discusses factors that consumers should take into account when considering an early retirement.
Home & Family Finance is a resource center for personal finance information at the Credit Union National Association (CUNA). The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide. Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 90 million members, and is presented by CO-OP Network. CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites. For more information, read “Expert Answers for Your 401(k) Questions” and watch the “Talk With Your Children About Family Finances” video in the Home & Family Finance Resource Center.

New rules for nest eggs affect 72 million Americans

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MCLEAN, Va. (10/27/10)--Do you know exactly how much your 401(k) account costs you? You will, thanks to new rules announced Oct. 14 by the Labor Department (USA Today Oct. 14). By Jan. 1, 2012, an estimated 72 million Americans who participate in 401(k) plans will have access to much-needed transparency--in user-friendly formats--about what their plan fees actually cost and how those fees stack up against other investments. Better yet, the new rules may result in bringing down those fees. The new rules are intended to educate workers about more than half a dozen fees for things like administration, recordkeeping, investment advising, brokerage, and management services. The goal of shedding light on fees is to help workers make better decisions. For example, if your operating expense is 2.5%, the new rules require that you also be told that the fee amounts to a cost of $25 per $1,000 invested. Compare that with an investment having an operating expense of 0.19%--or a cost of $1.90 per $1,000. Bottom line: The lower the fees, the better your return on investment. Most workers don’t realize that high fees eat away at balances over time. A 2006 report by the Government Accountability Office estimated that increasing fees on a worker’s $20,000 401(k) account by just one percentage point could cut the plan’s total value by 17% after 20 years (wsj.com Oct. 14). And for many workers, their 401(k) is the sole source of retirement income besides Social Security (National Public Radio News Oct. 15). That’s why it’s so important to compare fees. Here’s what you can expect by January 2012:
* Regular reporting. You’ll see all administrative expenses on your quarterly statements, and they’ll also be available online. * Apples to apples comparisons. You’ll see an explanation of all fees and expenses as a percentage of assets held and also as a dollar amount for each $1,000 invested. * Performance data. You’ll see information about how each investment option has performed in the past--including one-, five- and 10-year investment results--as well as comparisons with appropriate benchmarks. * Comparison chart. You’ll see a chart--or similar format--that makes it easier for you to compare each investment option. * Glossary. You’ll be given a simple, plain-English glossary of terms so you can understand your investment options. * Website. You’ll be given a website to visit for additional information.
For more information, listen to “Do Better, Do More With Your 401(k),” in Home & Family Resource Center.

Employment gaps slow growth hinder job seekers

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WASHINGTON (10/25/10)--Unemployed and underemployed job-seekers continue to face an uphill battle in today’s economy. Slow economic growth is leading to weak hiring even though unemployment claims fell during the first week of October to their lowest level since July (businesweek.com Oct. 14). Those with large gaps in employment history on their resume face additional hurdles. Potential employers may view a disruption in work history as a lack of commitment, focus, or a bad work experience a job seeker is attempting to hide (wsj.com Oct. 18). All is not lost for job-seekers with large gaps in their work histories. Here are three ways to help potential employers better understand your situation and put to rest any doubts that may arise due to resume gaps:
* Clarify connections. No matter the reason behind employment gaps, use a brief sentence in your cover letter to help explain the situation in a positive light. Describe how your situation gives you unique insight and experience that will directly benefit your potential employer. * Amplify activity. Amplify entry-level stop-gap jobs, training, or other time-fillers like volunteer work. Your experience with customers or learning a new competency may have provided you with valuable skills and understanding that uniquely qualify you for a position. * Demonstrate development. Emphasize what you learned if you left a previous employer on bad terms. Use this as an opportunity to emphasize character growth and your ability to learn from a miscalculation. This demonstrates a level of responsibility and maturity that may separate you from other applicants.
For more information, read “Get Back in the Game After Losing a Job” in the Home & Family Finance Resource Center.

Consumer Financial Protection Bureau discussed on HandFF Radio

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WASHINGTON (10/22/10)--Sunday’s H&FF Radio program covers the new Consumer Financial Protection Bureau, surprising spending triggers and direct-deposit benefits. The show, which you also can hear later via the Internet, features Paul Berry, Washington, D.C., journalist and broadcaster, discussing these topics with special guests:
* “New Consumer Financial Protection Director’s ‘To-Do’ List.” Adam Levin, founder and chairman, Credit.com, New York, shares his thoughts about what Elizabeth Warren needs to accomplish as temporary director of the new Consumer Financial Protection Bureau. * “Tune In to Surprising Spending Triggers.” Susan Tiffany, certified credit union financial counselor and director of consumer periodicals, Credit Union National Association (CUNA), Madison, Wis., offers advice to help you prepare for downstream expenses when one purchase triggers more. * “Go Direct: U.S. Treasury Campaign Urges Direct Deposits.” Tepricka Morgan, Go Direct Campaign spokesperson, U.S. Department of the Treasury, Washington, D.C., discusses the benefits of having your government benefits deposited directly into your account.
Home & Family Finance is a resource center for personal finance information at CUNA. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide. Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 90 million members, and is presented by CO-OP Network. CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites. For more information, read “Tune In to Spending Triggers” and watch the “Use Direct Deposit and Automatic Transfers to Simplify Finances” video in the Home & Family Finance Resource Center.

Halloween spending neednt be spooky

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MADISON, Wis.(10/20/10)--Halloween falls on a Sunday this year, giving ghosts and goblins an entire weekend to celebrate. That translates into estimated spending of nearly $66.28 a person--up considerably from last year’s $56.31--on costumes, candy and decorations, according to the National Retail Federation’s annual survey. And while spending is expected to increase, three of 10 Halloween shoppers plan to be frugal by using last year’s decorations and costumes, making costumes, buying less candy, or forgoing visits to a haunted house. Parents can use Halloween shopping as a financial responsibility lesson for their children by employing these ideas from the Credit Union National Association’s Center for Personal Finance editors:
* Discuss the budget. Explain how much money you plan to spend; make a list of items that money needs to cover such as costumes, candy, decorations and pumpkins. If you’re having a party, include food, beverages and paper products. * Set a savings challenge. Ask kids to find ways to save money with some comparison shopping. What’s on sale? Can they find any coupons? * Get creative with costumes. How can last year’s princess and Spiderman become this year’s vampire and Avatar? Take children to local thrift stores for ideas, outfit and accessories. Encourage imagination by searching sites like eBay and Craigslist to view items with lower price options. * Do the math. How much candy did you give out last year? What’s the projected weather and how might it affect this year’s trick or treating numbers? How much more--or less--candy do you estimate you’ll need? * Reward efforts by sharing the savings. Demonstrate how frugality pays. Can the kids save enough on costumes to host a party? Will savings be put into an account to fund next year’s celebration or other goals? Set a goal and ask the kids to help track efforts in reaching it.
For more ideas about communicating with your kids about money, see the video “Talk With Your Children About Family Finances” in the Home & Family Finance Resource Center.

Students parents Be realistic about the college payoff

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MADISON, Wis. (10/18/10)--“It’s time to puncture the myth that the more you pay for college, the more you earn upon graduation," said Vince Passione, CEO and founder of Fynanz, a technology provider of turn-key private student lending networks and solutions and a CUNA Strategic Services provider. While it’s never been more important for young people to have a college degree to earn a living that will enable them to have an opportunity to be a middle-income or more wage earner, too many students are spending a fortune on college but choosing--or winding up with--jobs that will never make it possible for them to pay off their student loans, Fynanz said. “The average tuition and fees for one year of private education is $27,000 and has been rising faster than the cost of living. At this cost, potential student borrowers must ask themselves what type of income they will derive from their course of study and if there is a positive return,” Passione said. But the question parents and students have to ask themselves is: Does it make sense to spend that kind of money on just any degree? Seven of the jobs listed in CNN/Money Magazine's (Oct. 4) top 10 paying jobs are in the medical field, for example. "I spent $50,000 a year sending my daughter to the University of Chicago--a great, great school,” a parent said during a recent college tour. “She graduated and took a journalism job that paid her $18,000 annually. She would have been better off financially going to a state school where we invested that kind of money into a house." Well aware of the Sallie Mae study released a week ago that reported one out of four parents saving for their child's college costs plan to raid their retirement savings accounts, Passione said it's important parents and students be realistic about their futures. For one thing, parents dipping into their retirement nest egg are potentially triggering bigger tax penalties than if they tapped into other investment options. Even taking out a loan against a 401(k) can be dangerous because it must be paid back within five years, or immediately when the borrower changes jobs. Also, tapping a retirement account for college reduces the amount of potential financial aid a family qualifies for in the following year by as much as 47%, according to Fastweb.com and FinAid.org. Passione and Fynanz are so convinced that consumers need help with their personal finance matters that they recently launched a personal finance column called “Ken's Corner,” dealing primarily with financial aid issues for college students and their parents.

HandFF Radio gears up for International Credit Union Day

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WASHINGTON (10/15/10)--Sunday’s H&FF Radio program highlights International Credit Union Day, health-care reform, debt settlement changes, and multigenerational living. The show, which you also can hear later via the Internet, features Paul Berry, Washington, D.C., journalist and broadcaster, discussing these topics with special guests:
* “International Credit Union Day.” Bill Cheney, president/CEO, Credit Union National Association, Washington, D.C., discusses what makes credit unions special and how credit unions are celebrating International Credit Union Day on Oct. 21. * “Health Care Reforms: What These Changes Mean to You.” Susan Dentzer, editor-in-chief, Health Affairs, Washington, D.C., reviews which health-care reforms went into effect on Sept. 23, how these changes might affect your plan, and when other provisions become active. * “Debt Settlement: New Federal Trade Commission Consumer Protections.” Michael Bovee, founder and owner, Consumer Recovery Network, Sandpoint, Idaho, explains how recent changes to telemarketing rules will protect consumers. * “Multigenerational Living: Benefits and Challenges.” Amy Goyer, family, parenting, and grandparenting expert, Phoenix, discusses how families can prepare to have multiple generations of relatives living in one household.
Home & Family Finance is a resource center for personal finance information at the Credit Union National Association (CUNA). The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide. Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 90 million members, and is presented by CO-OP Network. CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites. For more information, read “Generations Live Together to Save Costs, Gain Quality of Life” and watch the “Top 10 Reasons to Belong to a Credit Union” video in the Home & Family Finance Resource Center.

Change your driving habits to avoid costly repairs

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MADISON, Wis. (10/13/10)--It’s not just your imagination: U.S. thoroughfares are bad and getting worse. According to recent analysis of Federal Highway Administration data, the average annual cost of wear and tear on your car due to rough city streets and highways is $400 a year (TRIP Sept. 22). TRIP’s report shows that San Jose, Honolulu and Los Angeles top the list of U.S. cities with more than 60% of road pavement in poor condition. As a result, drivers in those areas can expect to pay extra annual operating costs of more than $700 a car. As if that news weren’t bad enough, the prospects for short-term improvement appear dismal. The Department of Transportation estimates that planned expenditures for the next 15 years are $189 billion short of what’s needed to keep streets and roads in their current condition. Making improvements will require an additional $375 billion. While you wait for Congress and taxpayers to address those needs, here are some things you can do to minimize year-round pothole damage to your car, courtesy of the Credit Union National Association’s Center for Personal Finance:
* Keep your car in shape. Resist the impulse to underinflate your tires, thinking they’ll smooth your ride. Tires with less than proper pressure wear out faster and may cause expensive wheel damage. Letting your car’s shocks and struts go soft can be dangerous, too; a sloppy suspension reduces your car’s traction and braking ability. * Slow down. Because force equals mass times velocity, doubling your speed doubles the amount of impact your tires and suspension must absorb. Driving slower also gives you more time to take evasive maneuvers if necessary. * Try alternatives. Don’t let force of habit blind you to choices that will prolong the life of your car. Reroute your daily commute to avoid particularly bad stretches of road. Carpool and split the cumulative wear and tear with a co-worker. Better yet, cut down on short trips and use a bicycle or public transportation when convenient.
For more information, read “Keep Your Old Car Running” in Home & Family Finance Resource Center.

Self-employed Save on health-insurance premiums

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NEW YORK (10/11/10)--Are you one of the 23 million self-employed Americans who pay their own health-insurance premiums? A new tax break lets you deduct the costs of the premiums you pay for yourself and your family before computing your self-employment tax, rather than basing your deductions on your entire income (The New York Times Sept. 29). This break can help reduce the self-employment taxes you pay—also known as payroll taxes—that cover Social Security and Medicare. The tax break, part of the Small Business Jobs and Credit Act of 2010 (H.R. 5297), is scheduled to last until the end of this year. It provides you the same tax benefit related to health insurance expenses that regular employees enjoy. The size of the tax break declines as your income increases. Depending on your income, you could save as much as 15% of what you pay for health insurance. If you are a self-employed business owner and you meet all of these requirements, you can take advantage of this new tax deduction when you prepare your 2010 taxes for the April 15, 2011 tax filing deadline:
* You file an IRS Form 1040 Schedule C tax form or Schedule E with earned income. This includes sole proprietors, single member LLCs, and sole owner S-Corporations. * You pay self-employment taxes via IRS Form 1040 Schedule SE. * You pay for individual or family health coverage in 2010.
The National Association for the Self-Employed (NASE) estimates you can save anywhere from $456 to $968. It bases these figures on the average premiums paid by single individuals and families. To get an idea of how much you can save when you file next year, add up your total 2010 health insurance costs and multiply by 15.3%. The result represents your prospective savings--unless your annual income is more than $106,800. The size of the break declines as your income increases. Ask your tax professional to assist you with calculating your tax savings. The NASE has numerous resources on its website to help you understand the benefits of the Small Business Jobs Act. For more information, read “Prep Your Home-Based Business for Success” in the Home & Family Finance Resource Center.

HandFF Radio topics flex spending accounts scam recovery

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WASHINGTON (10/8/10)--Sunday’s H&FF Radio Program helps you develop a new wealth-building mindset, understand changes to flexible spending account rules, save on Halloween items and avoid investment scams. The show, which you also can hear later via the Internet, features Paul Berry, Washington, D.C., journalist and broadcaster, discussing these topics with special guests:
* “Psych Yourself Rich.” Farnoosh Torabi, personal-finance journalist, author and TV personality, New York City, shows how to develop the right mindset and discipline for growing wealth on your own terms and building a healthier relationship with money. * “Health Care Reform Changes Flexible Spending Account Reimbursement Rules.” Dennis Zuehlke, compliance manager, Ascensus IRA Services, Middleton, Wis., describes how health-care reform affects flexible spending accounts. * “Don’t Let the Cost of Halloween Scare You This Year.” Barry Boone, president and founder, currentcodes.com and dealhunting.com, Tulsa, Okla., shares strategies for finding discount codes and other deals on Halloween costumes, decorations, and treats. * “Can Your Recover Your Money Lost in a Scam?” Rodney Ballance Jr., financial-services expert, author and radio host, Williamston, N.C., explains how to identify an investment scam and what to do if you are the target of one of these schemes.
Home & Family Finance is a resource center for personal finance information at the Credit Union National Association (CUNA). The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide. Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 90 million members, and is presented by CO-OP Network. CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites. For more information, read “In a Down Market, It Pays to Know the Financial Risks” and use the “What’s It Worth to Cut Back My Spending” calculator in the Home & Family Finance Resource Center.

Do homework before enrolling in a private college

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McLEAN, Va. (10/6/10)--As many Americans try to earn more education to get ahead in the tough job market, more questions are being raised about for-profit colleges. Accreditation issues and high student-loan debt are some indicators that may put up a red flag about a school (USAToday.com Sept. 29). Many for-profit college students take on mountains of debt while in school. The Department of Education has proposed penalizing for-profit colleges whose students graduate with more debt than they can afford. Congress began a series of hearings this summer to investigate whether federal aid to for-profit colleges is being put to good use. Protect yourself before enrolling to make sure you’re getting what you’re paying for in a private school, advises Michelle Dosher of the Credit Union National Association’s Center for Personal Finance, Madison, Wis. Here's how:
* Check accreditation--Ask if specific programs are accredited and by whom. For job-specific training, ask if there are licensing or registration requirements beyond the earned degree and if the program prepares students to take any required exams upon graduation. Then verify the information. * Check graduation, placement and retention rates--The National Center for Education Statistics, Washington, D.C., is a good place to start. * Search for complaints--Most attorney general offices have consumer complaint divisions that log grievances against educational institutions. If not, state education departments should point you in the right directions. Searching the Web also can turn up information about lawsuits, scams, or accreditation issues. * Find earning potential--You can find wage data from the U.S. Bureau of Labor Statistics. The Labor Department breaks down information by specific career and location. * Talk to potential employers--Ask employers if they are familiar with certain private school programs and if they’ve ever hired its grads. * Compare community colleges--Community colleges and public, nonprofit technical schools often offer programs similar to those at private schools--and typically at a much lower cost.
For more information about what to know before you apply to a private college, read “For-Profit Colleges: Study Up Before You Enroll” in Home & Family Finance Resource Center, and talk to the professionals at your credit union for questions about student aid.

Consumers You can deal with overdue payments

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NEW YORK (10/4/10)--Although the Federal Reserve reports a drop in total consumer credit card debt this year, it’s actually a case of financial institutions writing off more delinquencies (Smart Money Sept. 21). Consumers who have missed a payment can recover by considering these suggestions:
* Keep emotions out of it. It’s best to put aside any feelings of awkwardness or embarrassment when a payment is delinquent--especially if they prevent you from taking action. When dealing with the lender, keep in mind that this is business, not personal. * Seek help immediately. Don’t wait. Consumers who find themselves falling behind should start by meeting with a nonprofit credit counselor. An experienced counselor can explain the options and establish a plan. To find a counselor, contact the National Foundation for Credit Counseling (nfcc.org or 800-388-2227) or ask for a referral at your credit union. * Start a debt repayment plan. Settlement and bankruptcy are rough on a credit score. Consumers who can make their minimum payments should opt for debt management plans. Often, a credit counselor can negotiate a plan that employs a reduced interest rate and a realistic payment schedule. * Avoid debt-settlement offers. In the past, debt-settlement companies have been a trap for consumers more often than a helpful service. Many of these companies charge large fees for services you can do yourself.
Learn more about how a credit counselor can help with the Home & Family Finance Resource Center video, “Tough Times Series: Credit Counselors Can Help Balance the Bills.”