When a Monsoon Wipes Out Your Rainy-day Fund
If you are new to budgeting or have been doing it most of your adult life, you likely understand a few things. First, successful budgeting means ensuring your expenses do not outweigh your income. Second, if you get the first right, you'll avoid unnecessary debt.
Every day you're faced with budgeting choices. Whether deciding how much you can spend on lunch to juggling payments for rent, phone, Internet, or other bills. Having a budget is important in managing your finances, building your savings, and planning for retirement. A sound financial plan and budget can even prepare you for the unexpected.
And the unexpected is what we've all seen in 2020. If we've learned anything this year, it's that our lives don't always fit our best plans.
Making sure you plan for a rainy day – or in the case of this year, a monsoon – is essential so that you don't find yourself flailing for a financial life raft or drowning in waves of debt.
If you're experiencing that financial monsoon this year, do you know how to recover your financial health?
INPRS's free budgeting webinar can help.
Our experts will help you answer your important questions and more:
- How do I start or re-start my budget?
- What is 50/20/30? Is it right for me?
- How can I get the most out of my income?
- All these bills! How can I prioritize my spending?
- I have no extra money. How can I create an emergency fund?
The webinars are available on multiple dates in October and November. To pick one and register go to https://inprsfinancialeducation.timetap.com.
Three Steps to Help Manage Your Debt
Make a plan. Reduce your debt.
Managing debt can be overwhelming, but starting with small steps can help you reach your big goal.
Preparing to live your best life means knowing ways to manage your debt, so you can be financially healthier, wealthier and wise.
Understand what you owe. Understanding how debt can cost you over time and beginning to plan a way to eliminate it will help you find your financial balance. Once you know how much you owe, you may want to identify unnecessary spending and a debt elimination goal over time. It all starts with a plan!
Develop a pay down strategy. First, you may want to prioritize how you want to pay off your balances. One option is the avalanche method, paying off the highest interest rate first, while also making minimum payments on the rest. Another option is the snowball method. You pay off the lowest balance and then, take the amount you would have paid for that card each month and roll it into the next debt amount.
Build a budget. A budget will help you get the most out of your income. Knowing how much debt you have and how much you need to allocate towards living and spending expenses is important in helping to pay down debt fast. When you have a plan for your money, it can work better for you and help you reach your goals faster.
Source: Voya Financial
COVID Distribution Tax Implications
Facts on CARES Act Relief for Families Affected by the Pandemic
Did you take a COVID-related distribution from your INPRS defined contribution (DC) account? If you did, you’ll want to consider the tax implications.
INPRS was permitted by an Indiana Executive Order to allow COVID-related distributions under the federal CARES Act.
If you received one of these distributions, you may wish to discuss it with a tax advisor after reviewing the points below.
- Any applicable IRS 10% early withdrawal penalty tax and federal 20% mandatory withholding that otherwise applies to distributions will not apply to Coronavirus-related distributions (CRDs).
- The CRD will be reported as a distribution for the tax year 2020. Still, you may include the amount in gross income ratably over three years – unless you elect to claim the income all in one year.
More information on coronavirus related distributions is available on INPRS website: https://bit.ly/CARESActFAQs.
How to Manage Debt (and Still Have Fun)
Yes, it’s true: spending money is fun. Buying a new TV, treating yourself to a massage, taking a vacation—all of these things can feel, well, awesome. Especially when you’re rewarding yourself for the hard work you do. But going into debt to be good to yourself? That takes a little of the shine off the experience, doesn’t it? Fortunately, it’s possible to enjoy life and manage debt, at the same time!
You’re a grown up, so you probably don’t need to be reminded why racking up debt is a bad idea. But it never hurts to recap a few ways to reign in your personal debt and stay on track to help meet your long-term goals:
- Set up a budget to track your expenses and spending. Try our online Home Budget and Savings Calculator to get started. It’s easy to use and it even gives you a chart showing where your money is going.
- Use cash for everyday purchases like groceries and eating out. You’ll automatically start to rein in your spending when the money comes right out of your pocket.
- Carefully monitor your credit card spending each month. Try not to spend more than you can pay off in full each month.
- Pay more than the minimum amount due. Paying just the monthly minimum on credit cards can add extra years to pay off your balance because of all the additional compounded interest you are paying.
- Pay off the credit card with the highest interest rate first. Then pay off the card with the next highest rate. You want to pay off highest interest rates first because they eat up more of your income.
- Pay off credit cards and short-term debt before paying off home mortgages. Interest paid on short-term debt is not tax-deductible. But mortgage interest is.
- As you pay off your credit cards, keep paying into your savings and retirement plans. If you don’t have a retirement plan, it’s easy to open up an IRA account. An IRA lets you save for your retirement without paying taxes on the money your savings could earn while in the IRA.
- Avoid paying off credit cards by borrowing against your home or 401k. Your home and retirement are important assets. Try not to put them at risk.
A little debt is OK (and sometimes unavoidable). It’s part of life. The key is to manage debt while you continue to save. Create a balance and you can treat yourself now and then, while preparing for bigger goals like buying a home, tuition, retirement and more.
Source: Voya Financial
Important Updates from INPRS
Legislative Changes
The 2020 General Assembly passed Senate Bill 10 (SB 10) updating how INPRS is allowed to provide additional annuity options for members. Effective January 1, 2021, active members of PERF TRF and the LEDC plans who meet age and service requirements for a normal retirement are permitted to take in-service distributions of their defined contribution (annuity savings) account without consequence to the member’s pension benefit, no separation of service required. If you meet minimum age requirements and are age and service eligible for normal retirement, you do not have to wait 30 days after separation to withdraw from your defined contribution account.
The legislative update allows INPRS to provide defined contribution annuity options for members to select that do not include the minimum death benefit. Also, it addresses how benefit payments will be distributed upon the death of a member or a member and all survivors while receiving or eligible to receive benefits.
Contact our Member Advocate Teams at (844) GO-INPRS (844-464-6777) or view your member handbook online for more information on member funds.
Your Options for Receiving Benefit Payments From INPRS
Part of planning for retirement is deciding how you will receive your benefit payment from INPRS. Your choices when completing the retirement application will be direct deposit to a bank account, or payment via an INPRS debit card.
INPRS is in the process of converting the few INPRS retirees who receive benefit payments via mailed check to one of the two options noted above.
A list of commonly asked questions regarding the INPRS debit card is available online by visiting: https://bit.ly/INPRSDebitCards.
Navigate Your Retirement Future Online at myINPRSretirement.org
Planning for retirement starts with a goal! Learn how close you are to your retirement goals or what you may need to do to reach them by tapping into the resources INPRS has made available to you. Log on to your INPRS account for resources on:
- Plan benefits
- Investment fund updates
- Financial education tools and calculators
- Virtual workshop or counseling registration
- Retirement planning
If you’re hoping to better understand your future retirement income outlook, check out the myOrangeMoney® retirement calculator. Located on the first page after you log in, the myOrangeMoney® retirement calculator will show you the future monthly income you may need and your progress towards that goal. If you’re falling short, you can try out different savings and investment return scenarios to help you reach your ultimate retirement income.
Every attempt has been made to verify that the information in this publication is correct and up-to-date. Published content does not constitute legal advice. If a conflict arises between information contained in this publication and the law, the applicable law shall apply.