A year-end summary of financial planning research, trends, and resources

1. Current Financial Issues
for Financial Educators
Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension
boneill@njaes.rutgers.edu

2. Q1: What Do You Think
Was the MOST
Significant Personal
Finance Event of 2017?
Possible Answers:
ACA reform talks, tax reform talks,
demise of MyRA, CFPB payday
lending reforms, Equifax hack, IoT
explosion, strong bull market, DoL
fiduciary standard compliance,
AI/machine learning advances, etc.

3. Key Findings From
Personal Finance
Research Studies

4. Health-Wealth Connection
http://www.bankrate.com/banking/savings/money-pulse-0617/
1 in four Americans avoided
seeking medical attention
due to the cost.

5. Health Insurance Study (10/17)
• 28% of U.S. adults age 19-64 who were insured all
year were underinsured
– Definition: OOP costs are high relative to income (10%+)
• Up significantly from 23% in 2014
• Deductibles have become an increasingly large
factor in underinsurance
• Half of underinsured adults reported problems with
medical bills and debt
• 45% reported not getting care because of the cost
http://www.commonwealthfund.org/~/media/files/publications/issue-
brief/2017/oct/collins_underinsured_biennial_ib.pdf

6. 2017 EBRI Retirement
Confidence Survey (RCS)
• 47% of workers report having < $25,000 in retirement
savings, excluding home equity and pension;
– 24% of workers have < $1,000 in savings
– 20% of workers have $250,000+ in savings
• Workers are less confident about retirement than
retirees are
• 41% of workers (or spouse) have done a retirement
savings need calculation
https://www.ebri.org/pdf/surveys/rcs/2017/IB.431.Mar17.RCS17..21Mar17.pdf

7. CRR (Boston College) 2/17
Retirement Preparedness Study
• 52% of working age U.S. households are at risk of
being unable to maintain their standard of living in
retirement
• Many recognize the possibility of a shortfall but 19%
do not; 24% err on the side of being too worried
• Contributing Factors: Increased life expectancy,
declining Social Security income replacement %, and
shift from pensions to 401(k)s
http://crr.bc.edu/wp-content/uploads/2017/02/IB_17-4.pdf

8. Older American Debt
• More Americans between the ages of 56 and 61 are
carrying more debt than anytime in recent history
• Contributes to the need for people to work longer or
work during retirement
• “Rising indebtedness on the doorstep of retirement”
http://time.com/48754/the-staggering-statistic-
threatening-your-retirement/

9. Best States to Stretch
Retirement Savings
Source: GOBanking
Rates
Takeaway: To
stretch retirement
dollars as far as they
can go, head to
southeast states.
https://www.cnbc.com/2017/08/21/how-long-1-million-will-
last-in-retirement.html

10. Savings Study
2017 Consumer Federation of America America Saves
Week study: during past decade, savings habits eroded
https://americasavesweek.org/over-past-decade-savings-habits-eroded-
but-perceived-savings-outcomes-deteriorated-then-improved-according-to-
tenth-annual-savings-survey/

11. College Savings Imbalance
• Parents put more aside for sons than daughters
• Long term impact on daughters’ financial security
https://www.wsj.com/articles/college-savings-imbalance-parents-put-aside-
more-for-sons-than-daughters-1509938101

12. Student Loans
• New York Fed study: More than 1 in 10 student loan
borrowers are at least 90 days behind on payments
• Delinquency rate is higher than other forms of credit
(e.g., mortgages, credit cards, car loans)
• About 5% of borrowers owe more than $100,000 but
they account for almost a third of outstanding debt
https://www.newyorkfed.org/press/pressbriefings/hous
ehold-borrowing-student-loans-homeownership

13. Credit Card Rewards
• About 60% of American consumers are enrolled in
a credit card rewards program
• Average loss of $50 for households that don’t use
credit
• Average gain of $240 for households that pay with
credit cards
• Costs go up for everyone for merchant interchange
fees but only those collecting rewards benefit
https://www.wsj.com/articles/who-picks-up-the-tab-for-credit-
card-rewards-1493371803

15. Key Findings From
2017 Government
Data

16. U.S. Savings Rate
Source: https://fred.stlouisfed.org/series/PSAVERT
3.1% savings rate in September 2017

17. “Adulting” (4/17 Research Report)
• U.S. Census Bureau study of 4 milestones of
adulthood: moving out of parent’s house, getting
married, having a child, and getting a job
• In 1975, 45% of Americans reached these milestones
by age 34
• In 2016, that percentage fell to 24%
• 1 in 3 people age 18-34 (about 24 million people)
lived in parent’s home in 2015 vs ~ 1 in 5 in 1975
https://www.census.gov/content/dam/Census/library/publications/
2017/demo/p20-579.pdf

20. Q2: Any Other
Interesting 2017
Financial Surveys That
You Remember?

21. Key 2017 Financial
Events and Trends
and Products

22. Oldest Baby Boomers (born in
1946) Must Start Taking RMDs
• Forced to spend down tax-deferred employer plan
savings and traditional IRAs, whether or not they
need the money (RMD “waterfall”)
• RMD schedule does not fit retiree spending patterns
– First RMD at age 70 ½ is 3.65% of account balance
– RMD at age 90 is 8.77% of account balance
Source:
http://www.aaii.com/journal/article/strat
egies-for-managing-required-
minimum-distributions.touch

24. Low Interest Rates on Savings
• Retirees continue to get squeezed and concerned
about making savings last
• “The average one-year CD hasn’t paid more than
1% since 2009”
https://www.wsj.com/articles/stocks-have-tripled-since-crisis-but-low-rates-
are-still-squeezing-savers-1488969009

26. Older Workers
• The percentage of Americans working past age 65
hit new highs in July 2017 jobs report
• 19% of those age 65+ working at least part time
• The age 65+ is expected to be the fastest-growing
demographic in the workplace by 2024
https://www.washingtonpost.com/news/on-
leadership/wp/2017/07/19/retirement-deferred-workers-and-companies-
grapple-with-a-new-reality/?utm_term=.b950a39237f1

27. Hurricanes Harvey, Irma, Maria
• Insurance companies continue to shift risks and costs
to consumers
• 30-day waiting period after buying flood insurance
before policy takes effect
• 1% to 10% hurricane deductibles are popular
– Consumers must pay up to 10% of the total insured value of
the building or its contents
• Beware clauses stating if a covered and non-covered
event happen at the same time, NEITHER is covered
https://www.wsj.com/articles/what-homeowners-insurance-wont-cover-if-a-
hurricane-hits-1504897428

28. Checking Account Hoarding
• $10.7 trillion in total bank deposits and $2 trillion in
checking accounts
• Average U.S. checking account deposit is about
$3,600, up from $1,000 in 2007
• Reasons for “checking account hoarding” include
– Reluctance to spend due to economic uncertainty
– Steady job market
– Inadequate investment options (only ½ of U.S. holds stock)
– Interest rates on CDs and savings accounts are barely
above checking accounts
• https://www.usatoday.com/story/money/2017/07/13/americans-hoarding-
money-checking-accounts/472736001/

29. Bank Checking Account Fees
• Bankrate survey: Fees on basic checking and
requirements to avoid them have been increasing
• 38% of banks offered non-interest-bearing checking
accounts without fees or minimum balances
• The average monthly service fee for an interest
account is $14.69
• The average balance required to avoid a fee is
$6,485
http://www.bankrate.com/banking/checking/checking-account-survey/

30. Equifax Hack
• Exposed personal info of 145.5 million Americans
• Criminals had access to names, SSNs, birth dates,
addresses, credit card numbers and driver’s license
numbers which can be used for identity theft
• “Crown jewels of personal identification information”
• Jammed phone lines and frozen web sites after hack
was announced publicly more than a month after it
was discovered
https://www.bloomberg.com/news/articles/2017-10-02/urgent-equifax-2-5-
million-more-americans-may-be-affected-by-hack
https://www.wsj.com/articles/equifax-hack-disclosed-drivers-license-data-for-
more-than-10-million-americans-1507664315

31. Equifax Hack Follow-Up
• Former Equifax CEO Richard Smith was forcibly
retired (9/17)
• Four senior executives who sold shares after the
hacking was discovered were exonerated (11/17)
• Public discussion of alternatives for Social Security
numbers to establish a person’s identity
• Consumers were told to “be vigilant”
https://www.nerdwallet.com/blog/finance/equifax-changed-your-life/
https://www.wsj.com/articles/equifax-special-committee-clears-executives-on-
trades-before-breach-disclosure-1509715006

32. How to “Be Vigilant”
http://moneytalk1.blogspot.com/2017/09/how-to-be-vigilant-in-aftermath-of.html

33. ATMS Were 50 Years Old in 2017
• First ATM installed by Barclays Bank in a London
suburb in 1967
– Radical concept at the time
• Roughly 3 million ATMs in the U.S. today
• More ATM functions than ever (stamps, bill paying)
• Most are owned by private companies that install
them in public places, not by banks
• Since ATMs became popular, $20 bills are the
second most popular denomination after $1 bills
https://www.voanews.com/a/the-atm-at-50-how-it-has-changed-consumer-
behavior/4038670.html

34. Employer Loans to Workers
• More employers teaming up with financial institutions
to offer small personal loans to their workers
• Many low-income workers lack a credit history and
access to credit cards or bank loans
• Loans are kept confidential from borrower’s
managers
• Unlike payday employer-based loans can help
borrowers build a credit history
• CFPB crackdown on payday lenders will require
alternative forms of credit
https://www.wsj.com/articles/new-workplace-perk-loans-for-low-

38. Q3: Any Other
Interesting 2017
Financial Events,
Trends, or Products?

39. Key Government
Legislation and
Policies Affecting
Personal Finances

40. ACA Changes in 2017
• Employer mandate penalties adjusted for inflation
• Individual mandate penalties NOT adjusted
• Several attempts to repeal and replace the ACA
• Executive order allowing expansion of limited
insurance policies with fewer benefits
• Cost-sharing reduction payments (to help low-income
consumers pay out-of-pocket costs) scrapped
https://www.theatlantic.com/health/archive/2017/10/executive-order-
associated-health-plans/542718/
https://www.nytimes.com/2017/10/12/us/politics/trump-obamacare-executive-
order-health-insurance.html

41. ACA Cost-Sharing Reduction
Payments Halted
Subsidies paid by the federal government to insurers to
offset copays and deductibles for people with lower
incomes who buy ACA marketplace health insurance
– Called “extra savings” by www.healthcare.gov
– Halted by federal government in October 2017
– Expected Result: Increase in premiums to make up for
lost government payments as insurers continue to provide
cost-sharing subsidies; higher earners will feel the most
http://www.foxnews.com/politics/2017/10/13/cost-sharing-reduction-
payments-what-are-subsidies-trump-cut.html

42. More People Get Free ACA Plans
• ACA Marketplaces are open from 11/1 to 12/15/17
• Growing number of consumers will be able to get
2018 coverage without paying a premium
• Side effect of the decision to end cost-sharing
reduction payments
• Qualify for larger federal premium subsidies that
cover full cost of a plan
• Promotional push by insurance agents
https://www.wsj.com/articles/more-aca-plans-to-come-with-no-premiums-in-
2018-1509096602?mg=prod/accounts-wsj

43. Demise of the myRA
• myRA begun in 11/15 to help workers without an
employer savings plan save for retirement
• July 2017 announcement to end myRA program
• Program costs of $70 million and only 20,000
Americans signed up (cost of $3,500 per account)
https://www.nytimes.com/2017/10/19/opinion/the-sad-
tale-of-the-myra.html

44. DoL Fiduciary Rule
• Went into partial effect on 6/9/17 with full
implementation originally slated for 1/1/18
– Includes an expanded definition of fiduciary investment
advice
– All fees must be clearly disclosed and no advisor profit
from fiduciary role
• DoL filed for an 18-month delay to 7/1/19 in August
2017; proposed delay approved by OMB
– Full implementation of all elements pushed back to 7/1/19
– Postponement could be challenged in court
https://www.investopedia.com/updates/dol-fiduciary-rule/
http://www.investmentnews.com/article/20171110/FREE/171119992/borzi-
hard-for-acosta-to-justify-long-dol-fiduciary-rule-delay

45. CFPB Payday Lending Rule
• Requires lenders to conduct a “full-payment test” to
ensure that borrowers can repay loans and fees within
2 weeks while meeting major financial obligations
• The rule also caps the number of loans that can be
made in quick succession at three
• Lenders are barred from debiting customer checking
accounts after two unsuccessful attempts at collection
https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-rule-stop-
payday-debt-traps/
http://files.consumerfinance.gov/f/documents/201710_cfpb_fact-sheet_payday-
loans.pdf

46. Q4: Any Other
Interesting 2017
Financial Legislation or
Policies?

47. New or Revised
Financial Education
Resources in 2017

48. New NGPF Resources
• CURRICULUM:
– PAYBACK (online game) -- https://www.timeforpayback.com/
– Semester Course (lessons & assessments for 90 class periods) --
https://www.ngpf.org/courses/semester-course/
– Middle School resources (inquiry-based lessons, assessments, and resource libraries for
MS teachers) -- https://www.ngpf.org/courses/middle-school/
– Spanish translations (83 favorite NGPF resources translated to Spanish) --
https://www.ngpf.org/blog/new-products/twenty-20-spanish-activities-now-available/
– Spreadsheet YouTube playlist (just-in-time instruction on spreadsheet skills) --
https://www.youtube.com/playlist?list=PLras78WftBVTcWdRKKmc2eOtISWdGkNtK
– Daily Question of the Day (blog post each morning) -- https://www.ngpf.org/blog/question-
of-the-day/
• ADVOCACY:
– Who has access to financial education in America today? (advocacy report)--
https://drive.google.com/file/d/0B7wBayeobK4fY2YzN2lXUU8wQXc/view
– Finding Finance (mini-documentary) -- https://youtu.be/nlbvtgV6vDY
– Advocacy Toolkit (how to make personal finance a requirement) --
https://drive.google.com/drive/folders/0Bymvq1l-1i1HSVhZVElKT3FVUk0
• PROFESSIONAL DEVELOPMENT:
– FinCamp (one-day professional development) -- https://youtu.be/8pF_WsslozI

49. Revised or Expanded NGPF
Resources
• Saving unit revamp --
https://www.ngpf.org/curriculum/saving/
• Paying for College unit revamp --
https://www.ngpf.org/curriculum/paying-for-college/
• Interactive Library & accompanying worksheets (28 new) --
https://www.ngpf.org/interactive-library/
• Questions of the Day (40 new) --
https://www.ngpf.org/question-of-the-day/
• Case Studies (9 new -- coming Nov 30!) --
https://www.ngpf.org/case-studies/
• Quizlet Verified Creator (coming Dec 5!) --
https://quizlet.com/NGPF/folders

51. RCE Financial Education
Lesson Plans
http://njaes.rutgers.edu/money/

53. CFPB Webinars
https://www.consumerfinance.gov/practitioner-resources/adult-
financial-education/webinar-training/

54. NJCFE Webinars
http://www.njcfe.org/?page=Webinar

55. Solid Finances Webinars
http://www.msuextension.org/solidfinances/schedule.html
http://www.msuextension.org/solidfinances/pastrecordings.html

56. University of Florida/IFAS
Webinars
http://blogs.ifas.ufl.edu/okaloosaco/2013/04/12/fina
ncial-management-webinars/

57. Q5: Any Other New
Financial Education
Resources Developed in
2017?

58. Preview of Announced
2018 Personal Finance
Changes

59. Income Taxes
• Employer retirement savings plan contribution limit
increases to $18,500 from $18,000 (past 3 years)
– Catch-up contribution for age 50+ stays at $6,000
• Increases to income phase-outs for IRA contributors
• Increases in AGI to utilize the saver’s credit
• Maximum defined contribution plan limit increases to
$55,000 from $54,000 (e.g., self-employed workers)
http://www.investmentnews.com/article/20171019/FREE/171019920/irs-
raises-2018-contribution-limit-for-qualified-plans-to-18500
https://www.irs.gov/newsroom/irs-announces-2018-pension-plan-limitations-
401k-contribution-limit-increases-to-18500-for-2018

60. Social Security
• Maximum taxable earnings to increase to $128,700
(2018) from $127,200 (2017)
• Quarter of coverage to increase to $1,320 (2018)
from $1,300 (2017)
• Earnings limit to increase to $17,040 per year
(2018) from $1,300 (2017)
• SS beneficiaries will receive a 2% COLA for 2018
https://www.ssa.gov/news/press/factsheets/colafacts2018.pdf

61. Tax Cuts and Jobs Act
• Will impact every person and business on a scale not
seen in over 30 years
• “Chained CPI” will be used for future indexing
• Elimination of personal exemption deduction (2018-2025)
• Nearly double standard deduction ($12,000-s; $24,000-mfj)
• $10,000 cap on State and Local Tax (SALT) deductions
• Repeals ALL miscellaneous itemized deductions
currently subject to 2% of AGI floor
• Effectively eliminates itemized deductions for all but
wealthy; retained deductions will only benefit them
• Future impact on real estate prices and charities?

62. More Tax Cuts and Jobs Act
• Seven temporary tax rates ranging from 10% to 37% (after 2017)
that expire after 2025 (up from 10% to 39.6%)
• Enhanced child credit: $2,000 per qualifying child ($1,400 refundable)
• ACA shared responsibility requirement repealed effective for
penalties assessed after 2018 (penalty remains in place for 2017 & 2018)
• Lower medical expense deduction threshold: 7.5% of AGI
• Eliminates P&C/theft loss (unless disaster declared by President) and
moving expense (except a service member PCS move) deductions
• AMT retained for individuals (higher AMT exemptions through 2025)
• Estate tax exclusion per person: $11.2 million in 2018 (double $5.6
million exemption slated under current tax law)
• Alimony no longer deductible/taxable for divorces (after 12/31/18)

63. Gift Tax
Annual gift exclusion will increase to $15,000 for 2018,
up from $14,000 since 2013 (due to inflation indexing)
https://www.forbes.com/sites/ashleaebeling/2017/10/19/irs-announces-2018-
estate-and-gift-tax-limits-11-2-million-per-couple/#244825ae4a4b
http://rhcpas.com/tax-reform-gift-estate-gst-taxes/

64. Two Frequent Questions

66. Comments? Questions?
oneill@aesop.rutgers.edu
@moneytalk1 on Twitter