Financial Wellness in the New Year
  • Benefits Strategy

Financial Wellness in the New Year

Throughout 2020, we hope to help empower you to focus on total well-being, and that first step is taking a look at your financial health. Even if eliminating debt isn’t yet on your list of New Year’s resolutions, there’s no denying that as we come off the holidays – and holiday spending – we often have larger credit cards bills knocking on the door. Whether it’s debt or long-term savings, financial burdens and challenges can be one of the most stressful.

Here are a few ways to ease the stress, plan for the future and maybe even make some space for some play along the way.

Credit Card Debt

Credit card burdens are a problem for almost everyone. About seven in 10 people have at least one credit card, carrying an average debt of $5,673 per U.S. adult.1

There are a few strategies to approach paying off this debt, but no matter which one you choose, one tough reality remains consistent: paying the minimum will keep you in debt for years. Every month that balance remains, even when you make regular payments, interest gets added. Anything you can pay above that minimum amount helps. Even $100 extra each month can save you thousands of dollars in interest charges.

You don’t have to figure out the best strategy for you alone. More and more employers are offering benefits that provide financial planning advice and savings programs. Learn more about these types of benefits in the BenefitsPlace catalog

Unexpected Costs

No matter how hard we plan, situations and circumstances arise that require spending more than our paychecks can cover. For example, major home or car repairs can come out of nowhere and require immediate attention – not to mention the weight of unexpected medical costs or, in the worst case, death.

A new roof could cost anywhere from $5,000 to $9,000, a new furnace $2,00 to $6,000. Replacing the transmission in your car could cost as much as $6,000 as well. Funeral costs pose a heavy financial weight to an already terrible time.2

The last thing anyone wants in these situations is to accrue more debt, but many people choose to borrow from 401(k) plans or other high-interest options that are just as detrimental to long-term financial health. Instead, check with your employer to see if they offer low-cost and socially responsible loans to users through companies like Kashable or NewSilver.

Retirement

Retirement is one of those inevitable phases of life. We all look forward to a relaxed and stress-free life post retirement, but we tend to get worried about the loss of a steady source of income the more we actually think about it .

If you do not prepare yourself financially, retirement can be quite depressing for you and your family. Retirement is a time when income drops and expenses rise. Financial planning is vital for leading a financially independent life into retirement.

 Things to consider as you begin planning:

  1. Retirement goals – what type of lifestyle would you like to live post-retirement
  2. Time to Retirements – how long you have until your planned retirement will determine the level of savings needed each month
  3. Taxes to Investments – remember to account for the after tax rate of your investment returns
  4. Estate Planning – don’t forget to account for long-term health needs, life insurance, and how your wealth will be distributed

Retirement planning and saving is also something your employer can help you with through your benefits. 

Also important to note in regards to retirement savings, on Dec. 20, 2020 Congress passed a new law – the Setting Every Community Up for Retirement Enhancement, or the SECURE Act of 2019. The law takes effect on Jan. 1, 2020.

Key aspects of this new legislation, include:

  • The bill raises the age for required minimum distributions in IRAs and 401(k)s from 70 1/2 to 72 years old.
  • As long as you’re working, you can still contribute to your IRA after age 70 1/2.
  • Small businesses can now band together in group plans.
  • Would allow employer-sponsored 401(k) plans to add annuities as investment options.
  • 529 tax-advantaged savings plans can be used to repay up to $10,000 in student loans, as well as for siblings. 

Here are more articles about the SECURE Act and its potential impact:

10 Ways the SECURE Act Will Impact Your Retirement Savings, Kiplinger

The Secure Act Is Raising Lots of Questions for Retirees. What You Need to Know, Barron's

Learn more about financial health resources in our full BenefitsPlace catalog, which includes more than 15 voluntary, year-round opportunities for wealth, health, and lifestyle benefits. 

 

1 https://www.creditcards.com/credit-card-news/credit-card-debt-statistics-1276.php

2 https://www.moneycrashers.com/types-unexpected-expenses-plan/