Our quarantines and shelter-in-place this year have been difficult for many, but it would be a shame not to use the current situation to learn more about ourselves, says Shlomo Benartzi, PhD, an expert in behavioral finance and a professor at the UCLA Anderson business school. He suggests three questions for us to ponder that could lead to a greater sense of happiness. Money means different things to different people, and he encourages people to use this opportunity to think about what it means for them specifically.

Question 1 – Am I Spending Money On the Right Things?
If the goal is to maximize happiness, am I spending in line with that goal? Many behavioral scientists believe that spending on experiences rather than things leads to a richer emotional life. We can be thrilled by a pair of new shoes or a new set of dishes, but we habituate quickly to the new purchase – it does not continue to thrill us. But experiences, Benartzi says, give lasting pleasure in a few ways. Experiences such as vacations are fun to plan, and then they are fun while they are happening, and they are fun in the re-living of them through shared memories and photos. Experiences can make us happier for a longer period time, these scientists say. The pandemic gives us a unique opportunity for us to find out what kinds of spending makes us happiest. Going to eat at a restaurant gives pleasure to many, and how much do we miss it? What about going to a gym? Once things are open, do we run to the clothing store or to a yoga class with others?

Question 2 – Is This What Retirement Will Feel Like?
Behavioral economists have always suggested that people take a “test drive” for retirement, by taking a break from work to explore what retirement feels like. The Coronavirus quarantine has felt to many like a kind of forced mini-retirement. Several of our clients who are furloughed say they feel this strongly. What does it feel like to stop working? What fills your day? What gives you a sense of fulfillment and contentment? Benartzi says that most of us might never actually take a test drive of retirement in real life because we are too busy to put our lives on hold, just to find our answers to these questions. So with the current situation, he says it’s a good thing to fully explore our situations. Do you have trouble with isolation and miss the office? You might want to plan to work longer. Do you find interests to fill your days and feel fine without colleagues and meetings? Are you anxious to go back to work, or do you never want to go back? Do you dream of a different kind of work? Thinking about these questions will help you create a plan for your real retirement that could make you happier. It’s not the same for everyone, but we can learn from each other’s responses.

Question 3 – Can I Spend Less?
The pandemic has certainly curtailed most of our spending nationwide, whether we wanted to do that or not! Spending dropped more than 23% in the quarter from the year previous, and that’s not surprising, considering that most everything had to be purchased online. This offers an opportunity to analyze ourselves and our spending – are we more happy or less happy with the reduced spending? Academic research gives conflicting results about whether money can buy happiness, and much of it depends on Question 1, how you choose to spend. But Benartzi encourages people to think whether the cut-back in consumption has made them feel better or worse. If you have remained fairly content despite buying considerably less, maybe there is room for more savings in your future.

Behavioral finance is the application of a specific field of psychology—cognitive psychology—to finance. Cognitive psychology focuses on “the study of higher mental processes such as attention, language use, memory, perception, problem solving, and thinking.” What we have learned from behavioral finance has emerged from laboratory research and large group data sets, often conducted by economists.

Another Set of Three Questions

This shelter-in-place is definitely a time to think about values. Many people want to sort that out,  but how to even begin? George Kinder, author of The Seven Stages of Money Maturity, has developed his own “three questions” to try to elicit what people want from their lives.

Question No. 1. Imagine you have enough money to satisfy all of your needs, now and in the future. Would you change your life and, if so, how would you change it?
We can think about what we would do if we didn’t need to worry about money. What would you change about your life? Would your values remain but your goals change? “It’s the winning-the-lottery question,” Kinder says. “What we’re trying to get at is, what do you care about the most?” He says people often mention hobbies they wish they had more time for, things they want to buy, and trips they would like to take. “The people who say they’d quit their job is less than 10%, but the people who say they’d work less might be 40%,” he says.

Question No. 2. This time, assume you are in your current financial situation. Your doctor tells you that you only have 10 years to live, but that you will feel fine up until the end. Would you change your life and, if so, how would you change it?
By narrowing the focus to 10 years or less, Kinder says, he challenges people to consider what is most important to them right now. “You get a sense of mission,” he says. What are you going to deliver? It might be a greater orientation to family, or to travel, or to doing something creative. This is where people might say they want to write a book. This is the question where virtues come out, “People say they want to be better.”

Question No. 3. This time, your doctor tells you that you have one day to live. Look back at your life. What did you miss out on? Who did you not get to be? What did you fail to do?
“The point is to reflect on your life,” Kinder says. It’s about what would you regret not being able to do, if that diagnosis were true, and what would you change given the chance. “With this final question, you get down to bedrock, what’s absolutely critical.” Sometimes it’s something creative, like ‘I never got to play jazz in a club.’ Or it could be something that’s blocked a person for years, like ‘I never resolved my relationship with my father.’ Kinder likes this question because it goes to the inner core of what is important in people’s lives. “It’s not about paying the mortgage. It’s not about putting in the new kitchen.” He says that many people find satisfaction from using that framework for thinking about their lives and then making small changes – whether it is spending a little less time watching television and focusing on something they always wanted to learn to do. “If you can figure out what you are passionate about, that can provide a road map. But it can also spur you to consider how you can find extra time for the things you really care about.

Traditional IRA income limits

Can you contribute to an IRA this year? If you are not covered by an employer retirement plan, your contributions to a traditional IRA are generally fully tax-deductible. For those who are covered by an employer plan, the income limits for determining the deductibility of traditional IRA contributions for 2020 have increased. If your filing status is single or head of household, you can fully deduct your IRA contribution up to $6,000 ($7,000 if you are age 50 or older) in 2020 if your modified adjusted gross income (MAGI) is $65,000 or less (up from $64,000 in 2019). If you’re married and filing a joint return, you can fully deduct up to $6,000 ($7,000 if you are age 50 or older) in 2020 if your MAGI is $104,000 or less (up from $103,000 in 2019).

If you’re not covered by an employer plan but your spouse is, and you file a joint return, your deduction is limited if your MAGI is $196,000 to $206,000 (up from $193,000 to $203,000 in 2019), and the deduction is eliminated if your MAGI exceeds $206,000 (up from $203,000 in 2019).

Roth IRA income limits

The income limits for determining how much you can contribute to a Roth IRA have also increased for 2020. If your filing status is single or head of household, you can contribute the full $6,000 ($7,000 if you are age 50 or older) to a Roth IRA if your MAGI is $124,000 or less (up from $122,000 in 2019). And if you’re married and filing a joint return, you can make a full contribution if your MAGI is $196,000 or less (up from $193,000 in 2019). (Again, contributions can’t exceed 100% of your earned income.

Employer retirement plans

Most of the significant employer retirement plan limits for 2020 have also increased. The maximum amount you can contribute (your “elective deferrals”) to a 401(k) plan is $19,500 in 2020 (up from $19,000 in 2019). This limit also applies to 403(b) and 457(b) plans, as well as the Federal Thrift Plan. If you’re age 50 or older, you can also make catch-up contributions of up to $6,500 to these plans in 2020 (up from $6,000 in 2019). (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)

If you participate in more than one retirement plan, your total elective deferrals can’t exceed the annual limit ($19,500 in 2020 plus any applicable catch-up contributions). Deferrals to 401(k) plans, 403(b) plans, and SIMPLE plans are included in this aggregate limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan — a total of $39,000 in 2020 (plus any catch-up contributions).

The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) is $13,500 in 2020 (up from $13,000 in 2019), and the catch-up limit for those age 50 or older remains at $3,000.

Note: Contributions can’t exceed 100% of your income.

The maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2020 is $57,000 (up from $56,000 in 2019) plus age 50 catch-up contributions. (This includes both your contributions and your employer’s contributions. Special rules apply if your employer sponsors more than one retirement plan.)

Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans in 2020 is $285,000 (up from $280,000 in 2019), and the dollar threshold for determining highly compensated employees (when 2020 is the look-back year) is $130,000 (up from $125,000 when 2019 is the look-back year).
 

The Roth “five-year rule” – often misunderstood – in part governs when you can take tax-free distributions of earnings from your Roth accounts (IRAs, Roth 401k, or other work-based Roth accounts). Your Roth contributions can be withdrawn tax-free at any time. But the for the account’s earnings: The rule says that to take a tax-free distribution of earnings you must wait five years after your first contribution, the distribution must take place after you turn 59½. There are other provisions for when you become disabled, or when your beneficiaries inherit the assets after your death. Roth IRAs (but not workplace plans) also allow up to a $10,000 tax-free withdrawal of earnings after five years for a first-time home purchase, no matter your age.

While this seems straightforward, several nuances may impact your distribution’s tax status. Here are four things to think about.

When does the clock start ticking?

In some cases, the five-year waiting period may be shorter. The countdown begins on January 1 of the tax year for which you make your first contribution. For example, if you open a Roth IRA on December 31, 2020, the clock starts on January 1, 2020, and ends on January 1, 2025 — four years and one day after making your first contribution. Even if you wait until April 15, 2021, to make your contribution for tax year 2020, the clock starts on January 1, 2020.

Does the five-year rule apply to every account?

For Roth IRAs, the five-year clock starts when you make your first contribution to any Roth IRA. With employer plans, each account you own is subject to a separate five-year rule. However, if you roll assets from a former employer’s 401k plan into your current Roth 401k, the clock depends on when you made the first contribution to your former account. For instance, if you first contributed to your former Roth 401k in 2014, and in 2020 you rolled those assets into your new plan, the new account meets the five-year requirement.

What if you roll from a Roth 401k to a Roth IRA?

If you have never previously contributed to a Roth IRA, the clock resets when you roll money into the Roth IRA, regardless of how long the money has been in your Roth 401k. So use caution. If you think you might do a Roth 401k rollover sometime in the future, consider opening a Roth IRA account for it to go into as soon as possible. The five-year clock starts ticking as soon as you make your first contribution, even if it’s just a minimum amount and you don’t contribute again until you roll over the assets.

What if you convert from an IRA to a Roth IRA?

In this case, a different five-year rule applies. When you convert funds in a traditional IRA to a Roth IRA, you will have to pay income taxes on deductible contributions and tax-deferred earnings in the year of the conversion. If you withdraw any of the converted assets within five years, a 10% early-distribution penalty may apply, unless you have reached age 59½ or qualify for another exception. This rule also applies to conversions from employer plans.
 

You can always count on market swings to challenge your patience as an investor, but these current swings – and the reasons for them – are unprecedented in their speed and depth.

Tune Out the Noise

The media generates news 24 hours a day, seven days a week, and they need to fill all that time. You can check the market and access the news any time and anywhere, and it can be addicting, especially now. This barrage of information might make you feel that you should buy or sell investments in response to the latest news, whether it’s an unexpected pandemic, a large market drop, or a geopolitical event. This is a natural response, but studies show that it’s not wise to react emotionally to market swings or to news that you think might affect the market. We do make changes during times of market stress, of course, but we follow your financial plan and do not react to news with emotion.

“Time in the market” is generally more effective than trying to “time the market.” An investor who remained fully invested in the U.S. stock market over the past 30 years would have received almost triple the return of an investor who missed only the market’s best 12 months. That’s the difference between the gains below.

The markets are volatile and will continue to be. Here’s an illustration about the pitfalls of reacting to economic news: those investors who were spooked on recession fears sparked by an inverted yield curve who sold on August 14, missed out on more than 13% equity market growth during the rest of the year. A yield curve inversion has been a predictor of past recessions, and event rocked the stock market last summer, but despite the headlines, a yield curve inversion is not a guarantee to be an immediate precursor to a recession.

Wise Words

Consider this advice from John Bogle, mutual fund industry pioneer: “Regardless of what happens to the markets, stick to your investment program. Changing your strategy at the wrong time can be the single-most-devastating mistake you can make as an investor.”

This doesn’t mean we don’t buy or sell investments during a crisis, but the moves we make are based on your financial plan, on a sound strategy appropriate for your financial goals and time frame, as well as your capacity and tolerance for risk. A sound investment strategy should carry you through market ups and downs over time. Your portfolio should foremost protect your spending needs in the near-term, so you don’t have to be a forced seller in a down market.

It can be hard to keep cool when you see the market dropping or to control your exuberance when you see it shooting upward. The Returns Quilt below shows the returns of different asset classes over the last 10 years,  and each year a different asset class comes in first. But trying to “time the market” by guessing at future direction of those asset classes may create additional risk that could negatively affect your long-term portfolio performance.

And remember the wisdom of Warren Buffet,”Be greedy when others are fearful, and be fearful when others are greedy.”

Financial Literacy for the Pandemic

**NOTE: Our “Financial Literacy for the Pandemic” Zoom calls, which were held weekly during the first few months of the pandemic, will move to monthly as the questions have subsided but many people still need help with financial issues as a result of COVID-19. We will be sending the usual invitation with dates to clients, so you can pass on the link.

Anyone — especially first-responders, nurses, doctors, grocery workers, and delivery people —  who have questions can send them in to postoffice (at) bluesparkfinancial.com and we will address it on the next Zoom Financial Literacy call.

The CARES Act

By now you know that Congress has passed a multi-trillion-dollar relief bill to help keep individuals and businesses afloat during these difficult times. The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes many provisions that could be beneficial to you.

Here are some of the highlights of the CARES Act:

Retirement Plan Distributions

There are no RMDs for 2020. Required minimum distributions from IRAs and employer-sponsored retirement plans will not apply for the 2020 calendar year. That is for regular IRAs as well as inherited IRAs. In addition, the 10% penalty for “premature distribution” that would normally apply for distributions made before age 59½ (unless an exception applied) will be waived for Coronavirus-related retirement plan distributions of up to $100,000. The tax obligation may be spread over three years, with up to three years to reinvest the money.

Federal Student Loan Deferrals

For all borrowers of federal student loans, payments of principal and interest will be automatically suspended for six months, through September 30, without penalty to the borrower. Federal student loans include Direct Loans (which includes PLUS Loans), as well as Federal Perkins Loans and Federal Family Education Loan (FFEL) Program loans held by the Department of Education.
But be careful, private student loans are not eligible for the deferral. Some private lenders are extending their own versions of the CARES Act.

Help for Businesses

The CARES Act included several provisions designed to help self-employed individuals and small businesses weather the financial slam of the COVID-19 crisis.

Self-employed individuals and small businesses with fewer than 500 employees can get a Paycheck Protection Loan through a Small Business Association (SBA) lender. Businesses can borrow up to 2.5 times their average monthly payroll costs, up to $10 million. There has been a lot of fraud already, and many businesses are returning their loans. This loan can become a grant if an employer continues to pay employees during the eight weeks following the origination of the loan – so the employees are not taking unemployment — and uses the money for payroll costs (including health benefits), rent or mortgage interest, and utility costs. These loans have kept millions of businesses solvent during these tough times.

Also available are the emergency grants of up to $10,000 (that do not need to be repaid if certain conditions are met), SBA disaster loans, and relief for business owners with existing SBA loans. I have not heard of any businesses getting one of these emergency grants so far.

Businesses of all sizes may qualify for a refundable payroll tax credit of 50% of wages paid to employees during the crisis, up to $10,000 per employee. The credit is applied against the employer’s share of Social Security payroll taxes. You cannot use both the refundable payroll tax credit and the PPP loan, you have to choose one.

Recovery Checks

Many people will receive a one-time cash payment of $1,200. Each U.S. resident or citizen with an adjusted gross income (AGI) under $75,000 ($150,000 for married couples filing jointly) who are not the dependent of another taxpayer and have a Social Security number, should get the full rebate. Parents also receive an additional $500 for each dependent child who is 16 years old or younger.

These payments are not taxable income.

The $1,200 rebate amount will decrease by $5 for every $100 in excess of the AGI thresholds until it completely phases out. For example, the $1,200 rebate completely phases out at an AGI of $99,000 for an individual taxpayer and the $2,400 rebate phases out at $198,000 for a married couple filing a joint return.

The payments will be based on 2019 income tax returns (or 2018 if no 2019 return has been filed) and is being sent by the IRS via direct deposit or mail. People who didn’t qualify for the rebate based on 2018 or 2019 income might still receive a full or partial rebate when they file a 2020 tax return.

Extra Unemployment Benefits

The federal government will provide an extra $600 per week to those getting unemployment benefits as a result of COVID-19, on top of any state unemployment benefits an individual receives. This additional benefit is for up to four months (through July 31.) The federal government will also fund up to an additional 13 weeks of unemployment benefits for those who have exhausted their state benefits (for up to 39 weeks of benefits) through the end of 2020.

The CARES Act also provides assistance to workers who have been affected by the pandemic but who normally wouldn’t be eligible for unemployment benefits, including self-employed, part-time workers, freelancers, independent contractors, and gig workers. Those who had to leave work for coronavirus-related reasons also might be eligible for benefits.
 
 
 

The government left some retirement numbers unchanged and increased some for 2020. The maximum you can contribute to a traditional IRA or a Roth IRA in 2020 is $6,000 if under 50 and $7,000 if 50 or older (or up to 100% of your earned income, if that is less), the same as last year. You can split your contribution between a traditional IRA and a Roth IRA, but it can’t be more than $6,000/$7,000.

Traditional IRA income limits

To have your contribution be fully deductible, your income (modified adjusted gross or MAGI) must be $65,000 or less (if single), up from $64,000 in 2019. If you’re married and filing a joint return, you can fully deduct in 2020 if your MAGI is $104,000 or less, which is up from $103,000 in 2019.

If you are not covered by an employer retirement plan, your contributions to a traditional IRA are generally fully tax deductible. If you are not covered by an employer plan but your spouse is, and you file a joint return, your deduction is limited if your MAGI is $196,000 to $206,000 (up from $193,000 to $203,000 in 2019), and eliminated if your MAGI exceeds $206,000 (up from $203,000 in 2019).

Roth IRA income limits

The income limits for determining how much you can contribute to a Roth IRA have also increased for 2020. You can contribute the full amount to a Roth IRA if your MAGI is $124,000 or less (if single), up from $122,000 in 2019. If you’re married and filing a joint return, you can make a full contribution if your MAGI is $196,000 or less, up from $193,000 in 2019).

Employer retirement plans

Most of the employer retirement plan limits for 2020 have increased. The maximum amount you can contribute as your “elective deferral” to a 401k plan is $19,500 in 2020 (up from $19,000 in 2019). This limit also applies to 403b and 457b plans, as well as the Federal Thrift Plan. If you’re 50 or older, you can also make catch-up contributions of up to $6,500 (up from $6,000 in 2019) for a total of $26,000. Special catch-up limits apply to certain participants in 403b and 457b plans.

If you participate in more than one retirement plan, your total elective deferrals can’t exceed the annual limit. Deferrals to 401k plans, 403b plans, and SIMPLE plans are included in this aggregate limit, but deferrals to Section 457b plans are not. For example, if you participate in both a 403b plan and a 457b plan, you can defer the full dollar limit to each plan — a total of $39,000 in 2020 (plus catch-up contributions).

The most you can contribute to a SIMPLE IRA or SIMPLE 401k is $13,500 in 2020 (up from $13,000 in 2019), and the catch-up limit for age 50 or older remains $3,000.

The maximum that can be allocated to your account in a defined contribution plan (for example, a 401k plan or profit-sharing plan) in 2020 is $57,000 (up from $56,000 in 2019) plus age 50 catch-up contributions. (This includes both your contributions and your employer’s contributions. Special rules apply if your employer sponsors more than one retirement plan.)

Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans in 2020 is $285,000 (up from $280,000 in 2019), and the dollar threshold for determining highly compensated employees (when 2020 is the look-back year) is $130,000 (up from $125,000 when 2019 is the look-back year).
 

1. Market-Timing Is Undependable. It is nearly certain that we will experience another recession; the question is only when. I overheard a man last month brag to his friend, “I sold all my stocks on Tuesday” – I just quietly shook my head. In hindsight, that was not likely his best move. But it is a normal human emotion to want to do something. Market history has shown us time and again that seemingly “sure bets” often end up being losers instead. Even at year-end 2018, when markets dropped precipitously almost overnight, many wondered whether there would be nothing but bad news in 2019. As we now know, that downturn ended up being a brief stumble in an up market. Had one sold everything then, they might still be wondering when to get back in and missed out on the gains. The point is that simple market-timing trades, although tempting, usually don’t work toward your long-term goals. In fact, they are more likely to hurt.
   
2. Market-Timing Odds Are Against Us. Market-timing is stressful, and the odds are against us. That’s in part because “average returns” are not the norm, volatility is. Over time, markets have gone up in alignment with the real wealth they generate. But they’ve almost always done so in dramatic fashion, with some of the best returns immediately following some of the worst. By trying to time it by selling out to avoid the downturns, it is essentially betting against the strong likelihood that the markets will then continue to climb as they always have before. That’s a bet against everything history tells us about expected market returns. The important part is positioning your portfolio for your needs, in anticipation of these ups and downs.
   
3. Market-Timing Is Expensive. Whether or not a market-timing gambit plays out in your favor, all trading has real-money costs and implications. To add insult to injury, when investors make sudden changes that aren’t part of a larger investment plan, the extra costs generate no extra expectation that the trades will be in your best interest. Selling positions that have enjoyed much growth can make the tax consequences (in taxable accounts) financially ruinous.
   
4. Market-Timing Is Guided by Instinct Over Evidence. As has been well studied, human brains excel at responding instantly – instinctively – to real or perceived threats. When fears of market risks arise, these same basic survival instincts flood your brain with chemicals that induce you to want to take immediate fight-or-flight action. If the markets were an actual forest fire, you would be wise to heed these instincts. But for investors, the real threats occur when behavioral biases cause emotions to run ahead of their rational resolve. That’s where we come in, to take a cool look at whether making a change is a rational part of your overall financial plan. Changes and trades should stem from your own personal situation and a macro big-picture view, not knee-jerk reactions to daily tweets or news. Talk to us if you are feeling worried about the volatile markets.
   
   Market Chart

Control by Consensus

Blockchain provides all network participants with simultaneous access to a single body of strongly encrypted data. Each individual (or node) can enter new data, but a majority of nodes on the network must verify the addition before it becomes part of the permanent record. Each transaction is time stamped and linked to the prior transaction, forming a series of blocks in a digital chain. This creates an audit trail each time data is changed, helping to ensure the integrity and authenticity of the information. Because no third-party intermediary (or central authority) is needed, transactions can be completed instantaneously and at a lower cost.

Realm of Possibility

A blockchain can be public (open) or private (closed). Any system or business that relies on a database could be a candidate for blockchain-based innovation. A blockchain can also be coded to execute or enforce smart contracts automatically (without an intermediary) when certain conditions are met. Here are a few examples that are already in the pipeline.

• Financial markets. The financial industry is identifying ways in which the technology could be used to protect sensitive data, increase speed, and cut costs for electronic payments, securities trading, and lending. Since 2015, more than 100 financial institutions, trade associations, regulators, and technology partners have joined forces to set up and test a blockchain that could one day become an industry-wide platform.
• Supply chains. Each link in a company’s supply chain could be held accountable by tracing products from origin to store, discouraging tampering and fraud. This could enhance food and water safety, reduce the costs associated with recalls, and help retailers verify authenticity. For example, customers could be assured that their food was raised on an organic farm or that a specific diamond did not come from a conflict zone.
• Medical records. Blockchain systems are being designed to store health data that can be conveniently shared among patients, doctors, hospitals, and insurers while protecting patient privacy.
• Digital rights. Musicians, photographers, artists, and media businesses could more easily monetize, track, and control the use of their creations, which could reduce piracy.

Some other possible uses include public real estate registries, identity verification, law-enforcement activities, digital voting platforms, and securing Internet-connected devices, among others.

A Work in Progress

Businesses and governments worldwide are exploring blockchain technologies as they seek to improve transparency, increase productivity, and reduce costs. As a result, investment in blockchain initiatives were an estimated $700 million in 2018. Numerous industry consortia are working together on business solutions for shared interests, while some individual companies are racing to influence what might become common industry standards.

Despite the heightened levels of interest and investment in blockchain, deployments are still fairly rare, and widespread adoption could be years away. Many businesses have no interest in blockchain or no plans to investigate or develop the technology. Some factors slowing the pace of adoption are governance issues, a lack of regulatory frameworks, and a shortage of professionals with blockchain skills.

In the longer term, however, blockchain could be a transformative and/or disruptive force that creates a new set of winners and losers. Speedy and successful implementation could deliver a competitive advantage to some companies while punishing others that don’t keep up with the pace of change. There may also be some societal costs, including the technology’s potential to displace a large number of human workers.

New technology ventures are often risky. Some blockchain projects may turn out to be viable and profitable, but many others will likely fail. Bad actors are also trying to capitalize on the blockchain buzz by luring people into highly speculative investments and some outright scams.

Single women – those who have never married, those who have experienced divorce, and those who have outlived a spouse – need to take a more proactive approach to growing and protecting their finances, according to a new study.

The Single Women and Money Study found that while the overwhelming majority of single women (97%) believe it is important to be engaged in managing their money, three factors were holding them back from taking action:

1) underestimating their knowledge and experience,
2) neglecting to plan ahead for their financial future, and
3) saving too heavily in cash.

Money causes stress and worry

Women have more financial earning and decision-making power today than in the past, yet, many limit the benefits of that power by shying away from taking control of their financial futures.

More women are choosing to remain single and others take on that sole financial responsibility through divorce or outliving a spouse. The study shows that it is critical that women be actively involved and invested in the financial choices that can allow them to make smart choices.

Single women are less likely to consider themselves knowledgeable than other demographic groups when it comes to saving for retirement, creating a financial plan and investing. This perception may be holding some women back from taking the necessary steps to secure their desired financial future.

While most single women associate their finances with positive sentiments like security, peace of mind and being in control, some also see their finances as a cause for stress and worry, more so than their male counterparts.

Single women were the least likely (28%) to have a comprehensive financial plan in place to help them set savings goals and navigate paying down debt. And, while they worry about unexpected financial hurdles, nearly half (47%) have not put an emergency fund in place to cover three-to-six months of essential expenses.

Single women are also likely not to have other long-term financial protections in place that can be critical in times of necessity. Women who have never married are the least likely to have a number of key safeguards in place, compared to those who have had a partner at some point. But many said they wanted to become better prepared, with more than half saying they need to spend more time on their finances or admitting they don’t spend any time managing their finances at all.

Best practices for women

Make it a priority early to establish strong financial habits. Here is a short list of best practices to get you started:
• Get into the driver’s seat: know what you own, how much you owe, and what your goals are for your money to ensure that your investments are working toward your future.
• Put financial safeguards into place, including a holistic financial plan that is based on your individual situation and goals.
• Know that your investments suited toward your tolerance for risk, and time horizon to save.
• Make it a priority to check-in on your finances at least annually.

Widows share wisdom

Widowed women are more likely than any other group surveyed to say they feel confident about their finances and in control of their money. This positive financial outlook may be connected to early planning. About 65% of widows say they had a financial plan in place prior to losing their spouse, and 80% of those women had worked together with their partner to build that plan.

• Know where all important financial and healthcare information can be found
• Have a will and other estate documents in place
• Make sure beneficiaries are correct and current for all accounts
• Make sure both names are on mortgages, insurance policies, and other accounts
• Don’t delegate financial planning – make sure that you work together

Divorced women more financially free, in control

Major life events can often be a catalyst for action with our finances. Among divorced women, the large majority said they feel more in control of their finances after their divorced (84%) and have more financial freedom than when they were married (76%). Two thirds said they are in better financial shape today, although nearly half (45%) report they have had to cut back their spending to save post-divorce. One quarter applied for or started a new job, and 18% improved their earnings prospects by working toward a new educational degree.

For some, feeling more financially savvy came immediately. For others, this took time: one third divorce said that it took more than a year after divorce to feel financially grounded; roughly 25% said they still don’t feel secure.

When asked what financial choices they would have made differently in their marriage, divorced singles said they wish they had saved more and better educated themselves about how to invest for the long term.

Results of the survey were based on an online omnibus conducted among a demographically representative U.S. sample of 2,260 adults comprising 1,503 single women (including never married, divorced, and widowed), 250 single men, 251 married women and 256 married men 18 years of age and older. The survey funded by Fidelity was completed during the period May 16-23, 2017 by MarketVision Research, an independent research firm.

While scams are especially prevalent during tax season, they can take place any time during the year. A client recently had a call from someone at Social Security, or so they told her. They coaxed this very intelligent woman into revealing quite a bit about her financial life, using profoundly professional-sounding authority and a sense of urgency about her Social Security number.

The government reports that scams are up again this year. It’s in your best interest to always be vigilant so you don’t end up becoming the victim of a fraudulent scheme.

Here are some of the more common scams to watch out for:

Phishing

Phishing scams usually involve unsolicited emails or fake websites that pose as legitimate IRS sites to convince you to provide personal or financial information. Once scam artists obtain this information, they use it to commit identity theft or financial theft.

It is important to remember that the IRS or the Social Security Administration will never initiate contact with you by phone or email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media. If you get an email claiming to be from the IRS, don’t click any of the links; instead forward it to phishing@irs.gov.

Phone scams

Beware of callers claiming that they’re from a government agency. They could be scam artists trying to steal your money or identity. This type of scam typically involves a call from someone saying that you owe money to the IRS or that you are entitled to a large refund. The calls may even look like they are coming from a legitimate source on your Caller ID, could be accompanied by fake emails that appear to be from the IRS, or involve follow-up calls from individuals saying they are from law enforcement. Sometimes these callers threaten with arrest, license revocation, or even deportation.

If you don’t owe taxes and believe you have been the target of a phone scam, you should contact the Treasury Inspector General and the Federal Trade Commission to report the incident.

Tax return preparer fraud

During tax season, some pose as legitimate tax preparers, often promising unreasonably large or inflated refunds. They try to take advantage of unsuspecting taxpayers by committing refund fraud or identity theft. It is important to choose a tax preparer very carefully, since you are legally responsible for what’s on your return, even when it is prepared by someone else.

A legitimate tax preparer will generally ask for proof of your income and eligibility for credits and deductions, sign the return as the preparer, enter the Preparer Tax Identification Number, and provide you with a copy of your return. Always ask friends and family for references, don’t hire someone you found in an Internet search. 

Fake charities

Scammers sometimes pose as a charitable organization in order to solicit donations from unsuspecting donors. Be wary of charities with names that are similar or sound like more familiar or nationally known organizations, or that suddenly appear after a national disaster or tragedy. Before donating to a charity, make sure that it is legitimate. There are tools at irs.gov to assist you in checking out the status of a charitable organization, or you can visit charitynavigator.org to find more information about a charity.

Tax-related identity theft

Tax-related identity theft occurs when someone uses your Social Security number to claim a fraudulent tax refund. You may not even realize you’ve been the victim of identity theft until you file your tax return and discover that a return has already been filed using your Social Security number. Or the IRS may send you a letter indicating it has identified a suspicious return using your Social Security number. If you believe you have been the victim of tax-related identity theft, you should contact the IRS Identity Protection Specialized Unit at 800-908-4490 as soon as possible. 

Stay one step ahead

The best way to avoid becoming the victim of a tax scam is to stay one step ahead. Consider taking the following precautions to keep your personal and financial information private:

• Keep an eye out for emails containing links or asking for personal information
• Do not ever open links in emails from unknown senders
• Don’t answer calls when you don’t recognize the phone number. Let them leave a message, so you can think clearly about whether you need to call them back and so you have a record of exactly what they said.
• Maintain very strong passwords
• Use two-step authentication

Finally, if you are ever unsure whether you are the victim of a scam, remember to trust your instincts. If something sounds questionable or too good to be true, it probably is.