On paper, it seems as if in today's economy, there are plenty of jobs to go around.

The unemployment rate in July was 4.2%, per the Bureau of Labor Statistics, and it's been fairly consistent, hovering in the 4% to 4.2% range since May of 2024.

That doesn’t mean the job market is strong, though. As CNN reported in July, the number of recurring unemployment claims rose to its highest level since November 2021. Put another way, it hasn't been this hard to find a job in almost four years.

While the labor market might seem uninviting to job seekers on the whole, it can be especially difficult for workers 50 and older to find work after a layoff. A January 2025 AARP survey of Americans 50 and older finds that 74% think their age could be a barrier to getting a job offer.

If you got laid off at 52 with $620,000 in savings, you might be in a tough position if the only job opportunities you’re finding now are lower-paying roles.

While a $620,000 nest egg isn’t chump change — it’s more than five times the median $115,000 retirement savings balance among those ages 45 to 54 as reported by the Federal Reserve.

Moreover, it also might not be a sum you’re comfortable retiring on. Taking a lower-paying job could not only be demoralizing, but also impact your long-term financial plans.

That said, such a situation is far from hopeless. You might need to be a little flexible and open-minded to come out of it unscathed.

Don't write off the idea of being rehired

If you’re struggling to find a role that’s comparable with your most recent one in today’s job market, it might not be a matter of age discrimination so much as a lack of available opportunities. However, Kyle Elliott, a tech career coach and mental health expert, acknowledges that being age 50 and older might lead to some challenges.

“Truthfully, those in their early 50s are going to have a bit more of a difficult time navigating the job search. Age discrimination is both real and rampant,” he says.

However, Elliott says, that doesn’t mean it’s impossible to land a job. It just means you might need to approach your search more strategically.

“If you're worried about age discrimination, use LinkedIn to research current employees in similar roles at the company. You'll get a sense of the company, culture and vibe,” he says.

“If you notice that the entire team is in their early 20s, it might be a sign that they tend to only hire people who look like them. If it's a more diverse team, you likely stand a better chance of landing a role.”

Elliott also says that many companies do seek out experienced professionals.

“As the applicant, it's your job to show you’re just as agile and hardworking as anyone younger. You can do this by pursuing courses and taking on special projects; then feature these achievements on your résumé and LinkedIn profile and mention them confidently in your interview.”

Consider a low-paying job temporarily

If your attempts to find a job you’re happy with aren’t fruitful, and you’re reaching the point where you risk dipping into your savings, it might be time to pivot and approach your job search differently, says Elliott.

“Accepting a temporary lower-paying job isn’t a career death sentence,” he says. “While easier said than done, try not to be too hard on yourself if you take a role that pays less. At the end of the day, you must look out for yourself, and that includes meeting your financial needs.”

If you decide to take a lower-paying job, Elliott says, then you might want to pause your job search temporarily to get settled and give yourself a bit of a reset. But there could be a benefit to taking a lower-paying job for a period of time.

“If the role isn't too intense, it might even allow you to search for what's next while also taking home a paycheck and continuing to contribute to your retirement,” Elliott says.

Try to avoid tapping your savings

If you’re 52, you might not be looking to retire for another decade or longer. Even if you’re forced into a lower-paying role on a long-term basis that makes it difficult to add to your retirement savings, a $620,000 nest egg invested at an annual 7% return, which is a few notches below the stock market’s average, could double over a 10-year period.

The key is to try to avoid dipping into your existing retirement savings. Doing that might require some changes on your part.

It could, for example, mean cutting spending or downsize to a smaller home sooner than you’d like. It could also mean supplementing your wages with gig work.

It’s important to do your best to preserve your nest egg so it can continue generating growth. Making sacrifices during the tail end of your career could open the door to more flexibility once retirement arrives.

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Losing a job can be a devastating financial blow at any age. But when you’re older, it can hit especially hard. Although it’s illegal to discriminate against job candidates due to older age, it’s a hard thing to prove. And unfortunately, many older workers inevitably fall victim to age discrimination. That’s why a layoff at 59 can be downright brutal.

It’s one thing to be let go at 59 with a few million dollars in savings. But if you’re sitting on a 401(k) with an $800,000 balance, that may not be a large enough nest egg to support a fairly early retirement.

That said, a situation like this isn’t hopeless. And with the right strategy, you can make it work for you.

Pause, breathe ... and think about what you want

A recent survey by the Employee Benefit Research Institute found that about 40% of retirees left the workforce earlier than planned. If you’re laid off at 59, it could easily lead to an unexpectedly early retirement — but it doesn’t have to, says Evan Drury, ChFC and financial advisor at U.S. Financial Services LLC.

Drury has seen clients land in this situation before. And the first question he likes to ask is, "What do you want?"

It's one thing if the client wants to keep working full-time for another five years to maximize earnings and savings, he explains. It's a different matter if they're happy to transition into part-time or freelance work, which may be easier to find.

If you’d rather lock down another full-time job so you can save for a few more years, Drury says that rather than let your age be an impediment, you can use it to your advantage.

"You have a wealth of experience to compete with others in the marketplace," says Drury. If you network aggressively and maximize your skills, you never know what opportunities might present themselves.

On the other hand, you may find that a high-paying side hustle is a good solution for you — one that enables you to cover your expenses and leave your nest egg mostly untouched for a few more years, but perhaps spares you the frustration of trying to land a full-time job.

Drury had a client years ago who was laid off at 65 and couldn’t retire at that time. He encouraged her to find the best job she could, considering her desire for more free time and her financial needs. They landed on a hybrid retirement where she earned a part-time income and took small distributions from her portfolio.

“Retirement means many different things these days. Fully retiring isn't the only approach,” Drury insists.

Make the numbers work

Getting laid off late in life can be a shock, and you may need some time to recover emotionally. But one important thing to do, says Drury, is assess your financial situation so you know what you’re dealing with.

First, he says, review your cash flow based on your current expenses and available income. In the near term, that could be a combination of small portfolio withdrawals and unemployment benefits.

Next, consider trimming expenses and what that might look like. At 59, your home may be paid off, or close to it. If you’re able to downsize, you might walk away with a chunk of money you can invest and use for income. You might also lower your housing costs.

All told, says Drury, you need a sense of what your expenses will look like for the next bunch of years. That’s instrumental in helping you decide whether you can afford to work part-time (or not at all) versus needing a full-time job.

Unfortunately, at 59, you’re too young to get Social Security. And as Drury likes to remind people, while 62 is the earliest age to sign up for it, “your benefit is reduced significantly when compared to your full retirement age.” This means that for a good number of years, you may have to live on a combination of portfolio distributions and whatever income you bring in.

An $800,000 balance in a 401(k) will only yield $32,000 in annual income using the 4% rule. And it may not even be safe to use a 4% withdrawal rate at age 59, so that’s something to consider when deciding whether to pursue full-time versus part-time work.

This assumes, of course, that you can access your 401(k) penalty-free. You generally need to be 59½ for that to happen, though in a situation like this, the rule of 55 may apply, giving you earlier access to that money.

One final piece of the numbers puzzle is healthcare. At 59, you’re too young for Medicare, so you may have to shop for a plan you pay for yourself if you decide to pursue part-time work between now and age 65.

In the meantime, take care of your physical and mental health. Now is the time to adopt healthy aging habits, ideally keeping your healthcare costs to a minimum.

It pays to get help

A situation like this one is unquestionably tricky. If it happens to you, don’t hesitate to get help from different resources. That could mean talking to recruiters and career counselors for guidance and leaning on your social and professional network for support.

Drury also recommends talking through your options with a financial professional. A layoff at 59, he insists, is an opportunity to "make your wants a reality." However, you need a plan, and your finances must support it.

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If you have a 401(k) or other retirement plan at work, your employer may add money on your behalf, commonly with matching contributions. For example, the company may provide 50 cents for every $1 you save, up to 6% of your annual salary. Say that you earn $100,000 and sock away $6,000 for the year in your 401(k) — the full 6%. Your employer would contribute an additional $3,000 for the match. 

To encourage employees to stay loyal, your plan may include vesting requirements that you must meet to keep the extra money your employer contributes. Your employer’s human resources or finance department should have provided you with a plan document that lists the vesting schedule details. Keep them in mind as you consider the impact of changing jobs. 

Vesting ins and outs

Vesting is the process through which you gradually take ownership of a payment or benefit. In this case, it involves becoming the owner of any employer contributions to your workplace retirement account. Retirement plan vesting follows a time-based schedule. If you quit or are fired before a certain period has passed, you forfeit money to your employer. Vesting doesn’t apply to your own contributions to the retirement plan; that’s your money from the start, so your employer can’t take it back. 

There are two approaches for time-based vesting. With a cliff schedule, it’s all or nothing. If you leave your job before working the number of years that your employer requires, you lose all the employer contributions. Once you pass the threshold, you get to keep everything. 

Alternatively, your plan may use a graded schedule that unlocks a percentage of your employer’s matching contributions for every month or year you’ve worked, depending on the plan design. If your plan follows a four-year graded schedule, for example, you unlock 25% of the contributions per year before qualifying to keep everything after four years. 

Say you receive $1,000 a year from your employer for the retirement plan, and after two years you have $2,000 of employer contributions. You then quit. If your plan uses a three-year cliff, you will forfeit all $2,000 because you haven’t reached the three-year limit yet. If your plan uses a four-year graded schedule, you keep 50% of the employer contributions (two out of four years). In this case, you leave with $1,000. 

You need to clear the plan vesting requirements only once. After you reach the required years of employment, all future employer contributions are 100% yours. 

Worker protections

Federal rules cap the amount of time that workplace retirement plans can require you to stay with an employer to become fully vested. Three years is the longest a cliff vesting schedule can last; six years is the longest period a plan can use for a graded schedule. Your employer may choose to use shorter limits or even have no vesting at all, but it cannot exceed those limits. 

Certain other rules apply, too. For one, you must be fully vested by the time you reach the target retirement age listed in your plan. For instance, if your 401(k) lists a target retirement age of 65 and you join the plan at age 63, you’ll be fully vested within two years, when you turn 65. The regular employee vesting schedule doesn’t apply. 

Additionally, if your employer shuts down the retirement plan, you immediately become 100% vested for all past employer contributions. If your employer lays off more than 20% of employees participating in the retirement plan, all affected employees are fully vested (employees who are not laid off are still subject to the standard vesting rules). 

And employers cannot use vesting for SEP IRAs or SIMPLE IRAs. These plans have different rules and contribution limits than a 401(k) and are mainly used by small businesses. If you are in one of these plans, any employer contributions become yours immediately.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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During the past few months, the “Sahm rule” has become a ubiquitous part of the conversation surrounding issues such as the economy, unemployment and the Federal Reserve interest rate policy. The Sahm rule was created in 2019 by economist Claudia Sahm, who sought to build a recession indicator that would not be dependent on the whims of committees or politics. Instead, her rule would be rooted in one of the foundational elements that all recessions share: rising unemployment. 

As of Aug. 2, the day of the July jobs report, the Sahm rule was triggered, causing many to believe we are entering a recession.  

What is the Sahm rule?

The Sahm rule is simple and straightforward, which adds to its usefulness as a measure of economic and employment health. The Sahm rule states that the economy has entered or is entering a recession when the current three-month average unemployment is 0.5 percentage points higher than the three-month average within the past 12 months.  

Rather than using any one month’s reported unemployment rate, the average three-month unemployment rate is used to avoid overreacting to spiking data. With any measurement, avoiding false positives is important for designing accurate policy responses. This rule is meant to be an early warning sign that shows how quickly unemployment is rising over time in the hopes that policymakers will begin to craft a response to correct or dull the effects of worsening economic conditions. 

How does the Sahm rule differ from other recession indicators?

Unlike many other metrics and measures meant to predict recessions, the Sahm rule is not a prediction tool at all. Per Sahm herself, her rule is meant to show that a recession may be imminent, and therefore the Federal Reserve and other governmental authorities can begin to fight back.  

Claudia Sahm, who writes on the Substack Stay-At-Home Macro (SAHM), explains that the criteria for the measure were to use a simple and highly accurate formula that follows a well-known statistic and will be triggered early in a recession. Her rule meets these criteria. Based on her research, this rule has been triggered early on in every recession since 1970 and, most importantly, never outside of one.  

This can be compared to one of the other popular leading recession indicators, the inverted yield curve, which has alluded to past recessions but has not proven perfectly accurate. While an inverted yield curve has preceded recessions, it has not done so with any predictable time frame. Over the past 60 years, there have been recessions that take place concurrently with the inversion as well as recessions that have lagged by 30 or more months. This makes the yield curve inversion an imprecise trigger for economists and investors alike. 

Why does the Sahm rule matter?

After 27 straight months of unemployment below 4% (February 2022 through April 2024), unemployment has risen the past three months. It is the speed of this rise that the Sahm rule is most focused on, rather than the absolute number reported.  

In May, unemployment measured 4.0% for the first time since January 2022. This is still a historically low number and well below the 5.69% average since 1948. However, since May, unemployment has continued to rise and hit 4.3% in the July report, triggering the Sahm rule’s threshold for a 0.5 percentage point rise on the three-month average unemployment rate.

Since its creation, this will be the first significant test of the Sahm rule under relatively normal circumstances. During the economic shock that followed the response to the COVID pandemic, the rule was also triggered, but it was during a time when businesses were being forcibly shuttered and demand for many businesses dried up inorganically. If the rule proves accurate under more normal circumstances, then it means that we are likely in a delicate economic position today — albeit, one that still has many bright spots, including low unemployment and a brisk GDP growth rate.  

How should investors respond?

It is not time to panic nor predict forthcoming doom even if (or when) the markets continue to respond negatively.

It is important to realize that no one indicator is perfect, because many measures of our economy are also not perfect. No one data point can be used in isolation to build or change an investment thesis. As more economic data becomes available in the coming months, we will have more certainty about the direction of the economy and how policymakers will respond. 

How you should respond will depend greatly on how you invest today. If you are trading on news, you will have your fill of it through the end of the year and may find that this will be a boon for your strategy. If you are investing for the long term, this is one of many future bumps in the road, and you should be well-prepared. Maintain a disciplined risk management strategy and seek professional advice if you are anxious about your current financial standing.  

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The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

After a year of layoffs and rumors of a potential recession, what will 2024 look like for the job market? According to Randstad RiseSmart’s 2023 Global Severance report, 92% of employers are predicting more layoffs. But what happens if you find yourself out of a job right before you’re set to retire?

In times of economic uncertainty, it’s best to expect the unexpected. Even if you are confident in your current job status, planning for a job loss will set your finances up for success if it should happen.

File for unemployment

The current unemployment rate sits at 3.7%, according to the Bureau of Labor Statistics. If you find yourself in this position, filing for unemployment could be a good place to start. How much will you receive from unemployment? That depends on where you live. Each state has its own rules for how unemployment is paid out, as well as how long it lasts.

For example, in Florida the average length of unemployment pay is 12 weeks, but in Wisconsin it is 26 weeks. Filing for unemployment and collecting this money as soon as possible is your first step. At the very least, this allows you to continue paying your bills and gives you time to evaluate your employment options if you are hoping to retire soon.

Consider other income sources

Depending on your situation, you may need to find a part-time job before you can retire full time. More people than ever before are working into their 60s or 70s. One in five Baby Boomers are delaying retirement due to the state of the economy. While many may be working to stay busy, others need to continue working to afford retirement. If you are someone who does not want to work in retirement, make sure you are saving enough ahead of time.

Ideally, you are putting away at least 10% to 15% of your income into retirement accounts during your working years. How much will you need to live a comfortable life in your golden years? Most people believe they will need more than $1 million to retire comfortably. Start saving now to save yourself trouble down the road!

Take a look at your savings

Between your retirement accounts, Social Security and your personal savings, you need to know how much you have saved. Once you have a good idea of what you have, you can figure out how much money you can withdraw from those accounts and where to take it from.

After you assess how much you have in savings, calculate how long it will last after a job loss based on your current expenses and budget. Remember, your expenses will be different once you retire. You have to take into account health care as well as any travel and other large expenses. You want to ensure that your money lasts throughout retirement, which could be decades or more!

If you don’t already have one, now is the time to create a budget and stick to it. A financial adviser can help you take a closer look at your savings and help you create a retirement budget to fit your needs.

Assess your Social Security options

If you are at least 62 years old and you find yourself without a job, it might be smart to start taking your Social Security benefits before you hit full retirement age (FRA). While retirees have no control over rising costs, they do have control over when they claim their Social Security benefits.

Remember, claiming benefits before FRA results in a permanent reduction of as much as 30% of your benefit. I recommend clients wait to claim Social Security benefits until their FRA, but if you need the income, this could be a good option for you.

If you end up working again in retirement, you need to plan ahead to make sure your earnings stay within the income limits. If you are under your FRA, that limit is $22,320, and the Social Security Administration will deduct $1 from every $2 you earn above that. If you are reaching your FRA in 2024, the limit on your earnings for the months before FRA is $59,520, and it will deduct $1 from every $3 you earn. Social Security can be a complicated topic, but working with a financial adviser can help make it easier to understand.

The economy is always changing. Good times and bad times won’t last forever. It’s important to plan for both. The current state of our economy highlights the need for comprehensive financial planning. With the right plan in place, your finances can make it through an economic downturn or a job loss, and you will feel much more comfortable facing either one. A financial adviser can help you choose the right plan and the right path for your retirement.

Drake & Associates is an independent investment advisory firm registered with the U.S. Securities & Exchange Commission. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may view this report. Neither the information nor any opinion expressed it so be construed as solicitation to buy or sell a security of personalized investment, tax, or legal advice. The information cited is believed to be from reliable sources, Drake & Associates assumes no obligation to update this information, or to advise on further development relating to it. Past performance is not indicative of future results. Registration as an investment adviser does not imply a certain level of skill or training.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

To help you understand what is going on in the economy at a state level, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

The New England states will see only modest employment growth this year after a better-than-expected 2023. Labor markets are close to returning to normal, with unemployment ticking up and people leaving their jobs approaching pre-pandemic levels. Job openings are down significantly from their 2022 peak, though still elevated.

Massachusetts

Massachusetts job growth will slow to 0.7% this year, versus 2.5% in 2023. The strongest sectors for employment at the moment, healthcare and hospitality, are both still playing catch-up from the pandemic. By contrast, jobs in professional, scientific and technical services appear to have peaked over the summer. Biotech also remains a bright spot: 

In December, the Food and Drug Administration gave its first approval to a gene-edited drug, Casgevy, produced by Boston-based Vertex Pharmaceuticals and CRISPR Therapeutics. Expect other groundbreaking medicines to follow. The defense sector is surprisingly important to the state, which ranks eighth in Pentagon spending. Raytheon, General Electric and MIT are all major recipients.

Maine

Since the pandemic, Maine has experienced the best job growth in the region, in part because it has attracted the most new people. Many are retirees, but enough are workers to help the labor force grow, particularly in healthcare and hospitality. Look for employment to increase by 0.7% this year, compared with 1.3% in 2023. 

A key issue to watch is the state’s love-hate relationship with clean energy. Maine incentivizes residential heat pump installations and solar energy development, but there has been pushback, both from small towns worried about the disposal of old solar panels and environmentalists concerned about clearing Maine’s forests.

Connecticut

Home prices will continue rising at a strong clip, possibly as much as 4%, after a 9.5% increase last year even though inventory levels remain extremely low — 70% of homes sold in Hartford in October were above asking price, the second highest rate in the nation. Signs of progress are few, with November building permits half what they were a year ago.

Connecticut employment growth will also ease to 0.6%, from 1.5% last year. Strength in the healthcare, defense and trade/transportation sectors has helped to offset the ongoing decline of its finance and insurance industries. At 3.6%, the unemployment rate is still below the pre-pandemic norm and reflects a labor force that has not fully recovered. The good news? The state’s out-migration rate is shrinking. 

New Hampshire

New Hampshire will follow New England’s employment slowdown, with job growth of 0.6% this year, down from 2.0% in 2023.  Although the healthcare sector has already returned to its prepandemic level, the hospitality sector struggled in 2023, but the number of tourists is expected to finally surpass pre-pandemic levels in 2024.

The state is still drawing transplants, but the inflow from neighboring states is falling. It’s also worth noting the boom in degrees being earned by remote learners, which can be attributed to Southern New Hampshire University’s online programs pulling in such students.

Vermont

Vermont’s job growth, by contrast, has lagged other New England states since the pandemic, growing only 1.2%, compared with a regional average of 1.9%. This year, it will lag all but Rhode Island, with 0.4%, versus 0.6% for the region as a whole.

Hospitality remains a standout, adding 2,600 jobs in 2023 (an 8.1% increase). But the manufacturing sector lost 1,600 jobs (-5.5%). The Green Mountain State has also become a popular entry point for migrants avoiding the U.S. southern border. More than 10,000 migrants tried illegal entry in the Swanton sector, half initially from Mexico.

Rhode Island

Rhode Island will have it the worst of all the states in the region. Job growth has been stagnant since the beginning of 2023, a trend that will continue into 2024. On the plus side, the state’s population has increased slightly thanks to immigration from other countries and a decrease in out-migration to other states. 

Meanwhile, the housing market is very tight, with over half of recent home sales in Providence above the asking price. Along with Connecticut and Massachusetts, the Ocean State is making a big play for offshore wind development but has, thus far, seen as many setbacks as victories.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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Amidst a period of low unemployment rates and a recovering jobs market, there is a renewed focus on employee rights in the workplace. To help you understand what is going on and what we expect to happen in the future, our highly-experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest...

Non-compete clauses may violate federal labor law, except in limited cases, according to a recent memo by Jennifer Abruzzo, general counsel of the National Labor Relations Board. Such pacts are likely illegal if workers could view them as hindering their ability to quit and/or switch jobs, and thus their ability to organize with others and collectively bargain. The memo sets the stage for a possible NLRB ruling on the issue, with Abruzzo directing regional Labor Department officials to submit any cases that involve arguably illegal noncompete agreements to the general counsel’s office. It also strengthens the Biden administration’s regulatory overlap between the NLRB and Federal Trade Commission (FTC), which proposed a rule in January 2023 to ban non-compete clauses. The two agencies are collaborating in their efforts. 

Roughly one in five Americans is bound by a non-compete agreement. But they are more prevalent in certain industries, most notably, the tech sector, where 35%-45% of workers are subject to the restrictions of non-compete clauses, possibly preventing workers from taking certain jobs after leaving a current employer.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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If you feel like there are reports of layoffs every day, you're apparently not alone. A vast majority of Americans are worried about job losses across the U.S. and in their own industries, a new survey found.

A whopping 75% of Americans said they were concerned about widespread job losses in the U.S. in a Morning Consult report released Thursday. Nearly half — 49% — of respondents said they're concerned about job losses in their own industry, while 44% were concerned about job losses in their own company. Two-fifths of Americans said they were concerned about losing their own job. 

Between generations, millennials were the most concerned about losing their own job, with 56% saying so, while only 17% of baby boomers reported the same in the report. The report surveyed 2,200 American adults. 

A public image disconnect on jobs and layoffs

Layoffs in the thousands at high-profile companies like Meta and Amazon have been dominating headlines, contributing to the narrative that no job is secure. Meta began an expected 10,000 layoffs this month, and in March, Accenture announced 19,000 job cuts while Amazon announced 9,000. They're dizzying numbers, and combined with rumblings of a forthcoming recession, it makes sense that people are worried about potential layoffs. 

The interesting disconnect, though, is that these worries come as the labor market is at a strong point statistically. In March, 236,000 jobs were added, according to the latest data from the Bureau of Labor Statistics. That report came in a string of solid monthly jobs reports. 

However, the Kiplinger Letter economic experts, who analyze this data regularly, said in Kiplinger's latest jobs outlook that there are signs of cracks in the labor market, despite these apparently strong numbers. The unemployment rate declined in March, it's true, but that's because the number of people coming into the labor force looking for work declined. 

How to feel in control amid layoff news

While you probably can't control macroeconomic forces and executives' decisions, there is actually still plenty within your control personally. If you're worried a layoff is headed your way, you can continue to follow basic personal finance health measures to keep yourself on solid ground. 

Take count of your savings and investments and see if you have an appropriate mix of funds in appropriate places. If you don't already have one, you can start an emergency fund with a few months of reserves set aside. And think about where to put those funds — if you think you'll need to access your savings soon, for example, you may want to opt for putting any extra cash into a high-yield savings account vs. a CD, where you can access it at any time without penalty. 

On an ongoing basis, keep track of your budget, and, if you have debt, work on paying it off, Shane W. Cummings, wealth adviser and director of technology/cybersecurity at Halbert Hargrove, suggested to Kiplinger readers about how to prepare for a job loss. 

And it's never a bad time to dust up your resume and reach out to your network to maintain professional connections. Even if you don't end up needing a new job after all, you'll have reviewed your recent professional successes — and connected with friends who might share the same anxieties. 

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With all the changes in the world over the last several years, it is an important time for those of us still in our working years to review our financial situation in the event of a job loss or change.

Even if you have a job and feel secure and comfortable right now, taking some time to review your personal balance sheet and do a temperature check is good financial housekeeping. 

Here are some important items you can review now and regularly in the future:

Take stock of your savings and sources of liquidity

I normally recommend having some cash savings set aside for my clients as an emergency fund.  The amount you need may vary from case to case and can vary from three months’ worth of expenses to 12.  If you are at the low end of that and don’t have any outstanding debt to pay down, you may want to consider moving that target from three to six months as an extra cushion, for example.

A high-yield savings account could earn you a decent return on cash in the bank. The national average savings account yield is just 0.54%, according to Bankrate, while some of the best high-yield savings accounts offer rates of more than 4%.

If you have investments in stocks or similar securities in a brokerage account, those can also be tapped if cash is needed suddenly, but remember that they could be subject to price swings if the market is more volatile than usual.

Focus on debt paydown

If you are carrying any long-term credit card debt or other loans and may be unable to make payments if your employment is unexpectedly impacted, then now is the time to determine if you can address the debt faster. Typically, credit card debt charges have significant interest rates (between 15% and 25%) and can be hard to escape if you are only able to make minimum payments. 

If you have not done so already, start a spreadsheet of all your current debt by bank and note the interest rate on each. A good strategy is to allocate extra debt payments to the balances that have the highest interest rates, since those are accruing interest at the highest rates. 

In some circumstances, you may be able to get temporary relief from debt payments, such as mortgage, student loan or auto loan payments, with a job loss. You can research your current lenders' specific policies. 

In the case of auto loans, the servicing company may have options to delay payments for a period of time, such as three to four months.  Your mortgage company may have assistance programs in place, or you may qualify for deferment under certain federal policies (for example, loans guaranteed by the FHA or Veterans Affairs).  Likewise, student loan payment forbearance may be available, but you may still be accruing interest on loan balances.

In rarer circumstances, some people have taken loans against their workplace 401(k) accounts. One important thing to be aware of with 401(k) loans is that if you unexpectedly leave employment, the balance of that loan becomes due by the date you file your next tax return. If you are unable to repay it within that period, it is considered a taxable distribution, so you will still have tax liability owed on the amount not repaid (and possibly early-withdrawal penalties if you’re under age 59½). At the very least, you will want to be aware of this so it does not take you by surprise.

Do you have a budget?

If you have not done any budgeting in the past, consider this a good excuse to spend some time documenting your monthly expenses.  While you’re at it, make note of which expenses are essential to your household and which are discretionary.

These days, with the proliferation of subscription services, you may be surprised at how much you’re spending each month without realizing it (Netflix, Spotify, any phone apps and other recurring fees can really add up). Fortunately, many of these services don’t require a long-term contract if you suddenly need to cancel them to cut expenditures.

Things like your utilities fall into the essential bucket and will make up the core of your required spending. Keep in mind that some expenses are variable. For example, fuel or transportation costs may drop if you’re out of work temporarily.

Review and understand your employer benefits

It’s important to fully understand your workplace health care benefits and what happens if you suddenly are no longer employed. You may be eligible to continue your health care coverage at termination temporarily through COBRA, but you will be required to cover the full cost of the monthly premiums. If your employer subsidizes or currently covers these costs, you may be surprised by how high they are when you’re 100% responsible. If you happen to know that number, it would be an important item to include in your budget.

If COBRA coverage is prohibitively expensive, another alternative may be to shop for policies through your state’s health insurance exchange, if available. Since the passage of the Affordable Care Act, some states have introduced their own state-specific health insurance marketplaces. If you happen to be in a state with a competitive marketplace, you may find options that are more cost-competitive than COBRA with different coverage features. You may be willing to trade a lower monthly premium for a plan with higher deductibles or co-pays. If you happen to reside somewhere with few state options, your best option may differ.

Similarly, you should research with your employer if other benefits they provide, such as life insurance, disability insurance, etc., are portable. If you have savings in your workplace retirement plan, you may be able to leave assets in the plan after termination if you wish, or you may want to do a tax-free rollover to an IRA at another institution of your choice. Hopefully, you will not need to consider drawing on your retirement savings for living expenses, and that should be considered a last resort as that could hurt your retirement readiness down the road.

Review your résumé and professional connections

This probably seems like a no-brainer, but it never hurts to review your résumé and make sure it’s up to date and ready to send out should you need to start submitting job applications. While you’re at it, reconnect with peers whom you may want to act as references for you.

If there are a lot of layoffs at many workplaces across the U.S., you'll want to be ready with any advantages you have in a competitive job situation where a solid track record or professional reference could tilt the scales in your favor. 

With luck, you won’t need to experience job loss and the stress of finding another job, but being prepared and having a plan in place should provide you with a little extra peace of mind when thinking about the uncertain future ahead.

Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant.

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• What's Typically in a Severance Package

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Time is running out if you haven't already filed your 2021 federal tax return. For most people, the tax return filing deadline is April 18 this year (residents of Maine and Massachusetts get one extra day). So, for all you tax procrastinators out there, it's time to get moving. One of the first things you should do is collect and organize your tax records. If you're going to file your own 1040, you should also check out tax software options. If you need more time to file your return, request a tax filing extension (although you'll still have to pay any tax you expect to owe). And, no matter when you fill out your 2021 tax return, you first want to familiarize yourself with the tax law changes that may impact it.

Many (but not all) of the new items on the 2021 1040 form come from the American Rescue Plan Act, which was enacted last March. This Covid-relief bill made changes to the child tax credit, child and dependent care credit, earned income tax credit, and more. Other changes stem from the expiration of earlier Covid-related provisions that expired at the end of 2020. There are a few modifications to some of the main 1040 schedules, too. And, of course, there are the normal inflation-based adjustments that occur every year.

There are many reasons why you should know and understanding these changes up front. First and foremost, it very well may result in a larger tax refund or a smaller tax bill. You're also likely to get through your return faster if you're already aware of any new twists and turns. If someone else prepares your 1040, it will be easier to catch any errors when you review the return. But since "Tax Day" is right around the corner, you don't have much time left to get up-to-speed on what's new and changed for your 2021 tax return. So take a look at our list below and study up now so you know what to look for before tackling your 1040.

"Tax Day" is the day that federal personal income tax returns are due. It was delayed the past two years because of COVID-19. In 2020, Tax Day was pushed back to July 15, and last year it was moved to May 17. This year, however, the tax return filing deadline is moved back to its normal spot on the calendar…well, sort of.

Federal income tax returns are normally due on April 15. But this year most 2021 tax returns aren't due until April 18. That's because of a holiday in the District of Columbia. If you live in Maine or Massachusetts, your federal return isn't due until April 19, thanks to a local holiday in those states. Victims of certain recent natural disaster can wait even longer to file their return.

There are some subtle, but important, changes to the 1040 form itself for 2021 tax returns. Generally, they're needed to account for changes to the tax laws that are discussed below. For instance, the line on page 1 of the 1040 used for reporting the $300 deduction for charitable cash contributions was moved down on the form so that the deduction no longer impacts your federal adjusted gross income (AGI). This is important because your federal AGI is used to calculate several other tax breaks and obligations. It's also used by many states as the starting point for determining your state income tax liability.

Lines 19 and 28 on page 2 of the 1040 form were also adjusted to account for the fact that the child tax credit is fully refundable for the 2021 tax year. Line 27 was also modified and expanded (including a new check box) to satisfy changes to the earned income tax credit. (See more about changes to the child tax credit and earned income credit below.)

The idea of having a postcard-size tax form has been totally abandoned, too. We see this in the expansion of Schedules 1, 2, and 3 that go with the 1040 form. For 2020 returns, each of these schedules fit on one page. Now, for 2021 tax returns, they're each two pages long. The extra length is due to various additions to income, "above-the-line" deductions, extra taxes, and less common credits now getting their own line on these forms instead of being lump together as an "other" item to include.

Approximately 90% of all taxpayers claim the standard deduction instead of itemized deductions. Fortunately, the standard deduction amounts you'll use on your 2021 tax return are larger than last year, thanks to the annual adjustment for inflation. For the 1040 form you'll complete this year, married couples filing a joint return can claim a $25,100 standard deduction. That's a $300 increase over the 2020 tax year amount. For each spouse 65 years of age or older, you can tack on an additional $1,350 ($1,300 for 2020).

Single filers can claim a $12,550 standard deduction on their 2021 tax return ($12,400 for 2020). That jumps to $14,250 if you're at least 65 years old ($14,050 for 2020).

For head-of-household filers, the standard deduction for 2021 tax returns is $18,800 ($18,650 for 2020), plus an additional $1,700 if they're at least 65 years old.

Regardless of their filing status, blind people can add an additional $1,350 to their 2021 standard deduction ($1,700 if they're unmarried and not a surviving spouse).

The tax rates you'll see on your 2021 tax return are the same as they were last year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. However, the income ranges that apply to each tax rate bracket have changed. Use the tables below to find the appropriate tax bracket for your 2021 return. It's based on your filing status and taxable income (Line 15 of your 1040 form).

Remember, though, that the tax rate associated with the bracket you fall into doesn't apply to all your income. It only applies to the amount of your taxable income that's within the bracket's range. So, for example, if you're single with $50,000 of taxable income in 2021, only the last $9,475 of your taxable income is taxed at the 22% rate ($50,000 - $40,525 = $9,475). The rest is taxed at either the 10% or 12% rate.

2021 Tax Brackets for Single Filers and Married Couples Filing Jointly

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2021 Tax Brackets for Married Couples Filing Separately and Head-of-Household Filers

If you hold on to a capital asset (e.g., stocks, bonds, real estate, art, etc.) for at least one year, any gains from the sale of the asset are taxed at a lower capital gains rate – either 0%, 15%, or 20%. The same rates apply to qualified dividends. Which rate applies to you depends on your taxable income.

For your 2021 federal income tax return, the 0% rate applies if you're single with taxable income up to $40,400 ($40,000 for 2020), a head-of-household filer with taxable income up to $54,100 ($53,600 for 2020), or a married couple filing a joint return with up to $80,800 of taxable income ($80,000 for 2020).

The 20% rate kicks in at $445,851 of taxable income for single filers ($441,451 for 2020), $473,751 for head-of-household filers ($469,051 for 2020), and $501,601 for joint filers ($496,601 for 2020).

If your taxable income falls between the 0% and 20% thresholds for your filing status, then the 15% rate applies.

As mentioned above, the $300 deduction for cash contributions to charity no longer affects your federal AGI. There's also another important change to this deduction for 2021 tax year returns – married couples can now deduct up to $600. For 2020 returns, married couples who filed jointly could only deduct $300. However, one deduction is allowed per person now, which means each spouse can deduct up to $300 on a joint 2021 return.

Note that this deduction is only available if you claim the standard deduction. It also expired at the end of 2021, so you won't be able to claim it on your 2022 return.

Several significant upgrades to the 2021 earned income tax credit (EITC) were made by the American Rescue Plan Act. The biggest changes will allow more childless workers to claim the EITC on their 2021 tax return. For one thing, the minimum age for claiming the credit without a qualifying child is lowered from 25 to 19 (except for certain full-time students). Workers over the age of 65 can claim the credit on their 2021 return, too. The maximum credit available for workers without a qualifying child also jumps from $543 to $1,502. Expanded eligibility rules for former foster youth and homeless youth were put in place for the 2021 tax year as well.

While the modified rules listed above for childless workers only apply for the 2021 tax year, the American Rescue Plan Act made a few other changes to the EITC that are permanent. For example, the $3,650 limit on a worker's investment income is bumped up to $10,000, and the cap will be adjusted for inflation each year going forward. In addition, certain married couples who are separated can now claim the credit on separate tax returns. And certain workers who can't satisfy the EITC identification requirements for their children can now qualify for the credit as a childless worker.

Finally, as with the 2020 EITC, you can use your 2019 earned income to calculate your 2021 EITC if it's more than your 2021 earned income. Since this can increase or decrease your EITC, calculate the credit using both your 2019 and 2021 earned income to see which method will save you the most money.

To calculate your EITC, complete the worksheets associated with Lines 27a, 27b, and 27c of Form 1040 in the instructions for Form 1040. If you have a qualifying child, also complete Schedule EIC and attach it to your 1040 form.

As with the earned income tax credit, the American Rescue Plan Act made major improvements to the child tax credit for the 2021 tax year. For instance, the credit amount for 2021 tax returns was increased from $2,000-per-child to $3,000-per-child six to 17 years of age and to $3,600-per-child five years old and younger. However, the extra $1,000 or $1,600 is phased out for single filers with a federal AGI above $75,000, head-of-household filers with a federal AGI above $112,500, and joint filers with a federal AGI above $150,000. The credit is further reduced under pre-existing rules for single and head-of-household filers with a federal AGI above $200,000 and married couples filing jointly with a federal AGI above $400,000.

Any child tax credit claimed on your 2021 return is also fully refundable for most parents, even if you don't have any earned income (normally, the credit is only partially refundable – up to $1,400-per-child – and you must have at least $2,500 of earned income). Children who are 17 years old also qualify for the 2021 credit (child normally must be 16 or younger to qualify). Finally, unless you opted-out of the payments, families received 50% of their estimated 2021 child tax credit amount in advance through monthly payments sent between July 15 and December 15 last year.

To calculate the child tax credit allowed on your 2021 tax return, you must subtract the monthly payments you received last year from the total credit that you're otherwise entitled to claim for the 2021 tax year. (The IRS will send you a Letter 6419 showing the amount paid to you in monthly payments.) If the total child tax credit amount is more than your combined monthly payments, you can claim the excess amount as a credit on your return. However, if the total credit amount is less than your payments, you might have to pay back the extra child credit payments.

Use Schedule 8812 to reconcile the advance payments you received last year with the actual child tax credit you're entitled to claim on your 1040 form, and to see if you need to pay back any payments (they will be paid back in the form of an additional tax calculated Part III of the schedule).

For more information about claiming the 2021 credit, see Child Tax Credit FAQs for Your 2021 Tax Return.

Parents benefiting from the child tax credit enhancements may be able to cut their 2021 tax bill even further because of big changes to the child and dependent care credit made by the American Rescue Plan Act. For example, the maximum credit is increased from 35% to 50% of eligible expenses for the 2021 tax year. Plus, the credit percentage won't be reduced for families making less than $125,000 a year (instead of $15,000 per year), and all taxpayers earning less than $438,000 can claim at least a partial credit on their 2021 return.

The 2021 credit applies to more child or dependent care expenses, too. The credit percentage is applied to as much as $8,000 of eligible expenses for one child/disabled person and up to $16,000 of expenses for two or more (the amounts are usually $3,000 and $6,000, respectively). That means the total credit amount can be as high as $4,000 if you have just one child/disabled person and $8,000 if you have more ($1,050 and $2,100, respectively, for 2020).

The child and dependent care credit for the 2021 tax year is also fully refundable for most people (it's usually a nonrefundable credit). Form 2441 is used to calculate the credit.

See Your Child Care Tax Credit May Be Bigger on Your 2021 Tax Return for details.

The American Rescue Plan Act improved the premium tax credit for 2021 and 2022 to lower premiums for people who buy health insurance through an Obamacare exchange (e.g., HealthCare.gov) on their own. The credit amount was increased for eligible taxpayers by reducing the percentage of annual income that households are required to contribute toward their health insurance premium. The law also allowed the credit to be claimed by people with an income above 400% of the federal poverty line.

For certain people who purchase health insurance through an exchange, an estimated premium tax credit amount is paid in advance to the insurance company. If advance payments are made on your behalf, you must reconcile the credit and the advance payments when you file your tax return. If the advance payments are greater than the actual allowable credit, the difference (subject to certain repayment caps) usually must be paid back. However, the American Rescue Plan Act eliminated the repayment requirement – but only for the 2020 tax year. As a result, excess advance payments made in 2021 will have to be repaid when you file your 2021 tax return.

Use Form 8962 to calculate your premium tax credit and reconcile it with any advance payments. Also make sure you submit Form 8962 with the rest of your 2021 tax return.

The nonrefundable credit for expenses related to the adoption of a child is a little larger for the 2021 tax year. For 1040 forms filed this year, the credit can be worth up to $14,440 ($14,300 for 2020). Plus, the full credit is available for a special-needs adoption, even if it costs less.

The credit begins to phase out if your modified AGI is over $216,660 and it's eliminated altogether if your modified AGI reaches $256,660 ($214,520 and $254,520, respectively, for 2020). To claim the credit, complete Form 8839 and report the credit amount on Line 6c of Schedule 3. Also submit Form 8839 with the rest of your 2021 tax return.

The income tax exclusion for company-paid adoption aid was also increased from $14,300 to $14,440 for the 2021 tax year.

The alternative minimum tax (AMT) was originally designed to hit only wealthier Americans. However, the AMT exemption amount wasn't always adjusted annual for inflation – but it is now. For the 2021 tax year, the AMT exemption jumped from $113,400 to $114,600 for married couples filing a joint return and from $72,900 to $73,600 for single and head-of-household filers.

The phase-out ranges for the AMT exemption are adjusted for inflation each year, too. For 2021 tax returns, the exemption is gradually reduced and can ultimately be eliminated if alternative minimum taxable income (AMTI) on a joint return is between $1,047,200 and $1,505,600 ($1,036,800 and $1,490,400 for 2020). For single and head-of-household filers, the 2021 phase-out range is $523,600 to $818,000 of AMTI ($518,400 to $810,000 for 2020). The 2021 range for married people filing a separate return is $523,600 to $752,800 ($518,400 to $745,200 for 2020).

In addition, the 28% AMT tax rate doesn't kick on 2021 tax returns until you hit $199,900 of AMTI. That's an increase over the 2020 threshold, which was AMTI of $197,900 or more.

Use Form 6251 to calculate your AMT and file the form with your 2021 Form 1040.

Say goodbye to the tuition and fees deduction, which was worth up to $4,000 per year. It was repealed starting with the 2021 tax year.

On the bright side, the phase-out thresholds for the lifetime learning credit were increased. They're now the same as the phase-out amounts for the American Opportunity credit. So, beginning with 2021 tax returns, the lifetime learning credit is gradually reduced to zero for joint filers with a modified AGI from $160,000 to $180,000 ($118,000 to $138,000 for 2020) and single filers with a modified AGI between $80,000 to $90,000 ($59,000 and $69,000 for 2020). If you're claiming either the lifetime learning credit or the American Opportunity credit, you must first complete Form 8863 and then attach it to your 1040 form.

The phase-out ranges are also higher in 2021 for the exclusion of interest on Series EE and I savings bonds redeemed to help pay for tuition and fees for college, graduate school, or vocational school. For 2021 tax returns, the exclusion starts to phase out for joint filers with a modified AGI exceeding $124,800 and for other people with a modified AGI of $83,200 or more ($123,550 and $82,350, respectively, for 2020). The exclusion is totally phased-out for joint filers with a modified AGI of $154,800 or more and for other taxpayers with a modified AGI of at least $98,200 ($153,550 and $97,350, respectively, for 2020). You must compete Form 8815 to claim the exclusion and then report the exclusion amount on Line 3 of Schedule B.

The recovery rebate credit is back, but with one important change. As you may recall, this credit made its first appearance on the 2020 Form 1040 and was available for people who didn't receive a first or second stimulus check, or who didn't receive the full stimulus check amount they were entitled to.

For 2021 tax returns, the credit is for people who didn't receive a third stimulus check (or didn't receive the full amount). Those payments were for up to $1,400, plus an additional $1,400 for each dependent in your family. Similar to the monthly child tax credit payments the IRS sent last year, your third stimulus check was an advance payment of the recovery rebate credit. As a result, when you file your 2021 return, you must reduce the recovery rebate credit you're entitled to claim by the amount of your third stimulus check. (The IRS will send you a Letter 6475 showing the amount of your third stimulus check.) For most people, your third stimulus check payment will equal the 2021 recovery rebate credit allowed. If that's the case for you, the credit will be reduced to zero. But if your third stimulus check was less than the credit, your recovery rebate credit will equal the difference. And what if your third stimulus check was more than your 2021 recovery rebate credit? You get to keep the difference!

Use our Third Stimulus Check Calculator to see you how large your third stimulus check should have been.

Two tax breaks that encourage saving for retirement were tweaked for the 2021 tax year. In both cases, the changes are the result of annual adjustments for inflation.

The first retirement-related change for 2021 tax returns is to the deduction for contributions to a traditional IRA. If either you or your spouse was covered by an employer retirement plan, your IRA deduction may be reduced (potentially to zero), depending on your filing status and income. The income levels that trigger a reduction for 2021 returns have been adjusted. For married couples filing a joint return, the deduction is gradually phased out if you're modified AGI is between $105,000 and $125,000 (between $104,000 and $124,000 for 2020 returns). For single and head-of-household filers, the phase-out range is from $66,000 to $76,000 ($65,000 to $75,000 for 2020).

If only one spouse is covered by a retirement plan at work, the deduction is reduced if the couple's modified AGI exceeds $198,000, and it's totally eliminated if their modified AGI hits $208,000 ($196,000 and $206,000, respectively, for 2020). (NOTE: If you made any nondeductible contributions to a traditional IRA for 2021, report them on Form 8606.)

The second change is to the "Saver's Credit," which encourages lower- and middle-income people to save for retirement. The credit is allowed for either 10%, 20%, or 50% of the first $2,000 ($4,000 for joint filers) you contribute to retirement accounts, depending on your filing status and income. The lower your income, the higher the percentage you can use to calculate the credit. For 2021 tax returns, single filers, married people filing a separate return, and qualified widow(er)s can claim a 50% credit if their AGI is $19,750 or less ($19,500 for 2020). They can claim a 20% credit if their AGI is from $19,751 to $21,500 ($19,501 to $21,250 for 2020), and the 10% credit is available if their AGI is from $21,501 to $33,000 ($21,251 to $32,500).

For married couples filing a joint return, the 50% credit is available if their AGI doesn't exceed $39,500 ($39,000 for 2020), the 20% credit is available if their AGI is from $39,501 to $43,000 ($39,001 to $42,500 for 2020), and the 10% credit is available if their AGI is from $43,001 to $66,000 ($42,501 to $65,000 for 2020).

The 50% credit can be claimed by head-of-household filers with an AGI of $29,625 or less ($29,250 for 2020), while they can claim the 20% credit with an AGI from $29,626 to $32,250 ($29,251 to $31,875 for 2020) and the 10% credit with an AGI from $32,251 to $49,500 ($31,876 to $48,750 for 2020).

To claim the credit, complete Form 8880 and send it to the IRS with your 1040 form.

For 2021 tax returns, standard mileage rate for business driving is 56¢ a mile – that's less than the 57.5¢ per mile for 2020. The rate for medical travel and military moves also dropped for the 2021 tax year from 17¢ to 16¢ a mile.

The mileage rate for charitable driving doesn't change from year-to-year. So, it stayed put at 14¢ a mile for 2021 returns.

Self-employed taxpayers can claim some tax breaks that other people can't. And some of those tax breaks are tweaked for 2021 tax returns. For instance, the sick or family leave credits self-employed people could claim on their 2020 tax return if they missed work for Covid-related reasons was extended for 2021 – but not for the full year. For 2021 returns, the credits are only available for qualified absences through September 30, 2021. In addition, the family leave credit can only be claimed for 50 days missed from January 1 to March 31, 2021, but it can be claimed for up to 60 days missed from April 1 to September 30, 2021. Self-employed people should use Form 7202 to calculate the sick and family leave credits they're entitled to claim on their 2021 1040 form.

The income threshold for limits on the 20% deduction for qualified business income were also adjusted for the 2021 tax year. The taxable income threshold is $329,800 for married couples filing a joint return, $164,925 for married people filing a separate return, and $164,900 for all others ($326,600 for joint filers and $163,300 for all others for 2020 returns). Use Form 8995 or Form 8995-A to figure your qualified business income deduction.

Self-employed people who are wining and dining clients can take advantage of another perk for both the 2021 and 2022 tax years. The deduction for business meals at a restaurant is increased from 50% to 100%. This deduction is claimed on Line 24b of Schedule C.

If a self-employed person had a Paycheck Protection Program (PPP) loan forgiven in 2021, the canceled debt is not taxable income and doesn't have to be reported on Form 1040. However, if you have tax-exempt income resulting from the discharge of a PPP loan last year, you must attach a statement to your 2021 tax return that includes certain information related to your PPP loan (see the instructions to Form 1040 for details). You should also write "RP2021-48" at the top of the statement.

Unfortunately, there are also a couple of negative changes that may increase the 2021 tax bill for some self-employed taxpayers. First, none of the self-employment taxes owed for the 2021 tax year can be deferred as they could on 2020 returns. In fact, half of any 2020 tax deferred had to be paid by the end of 2021, while the rest is due by the end of 2022. Second, the cap on deductible business losses is back after being suspended for the 2018 to 2020 tax years. For 2021 tax returns, the inflation-adjusted limit is $262,000 ($524,000 for married couples filing a joint return). Form 461 is used to calculate a self-employed taxpayer's limitation on business losses.

The $10,200 exemption for unemployment compensation in effect for the 2020 tax year is no more. Under the American Rescue Plan Act, which authorized the exemption for families with a federal AGI less than $150,000, the tax break was for one year only.

As a result, any unemployment compensation you received last year will be fully taxed on your 2021 tax return. Report the benefits on Line 7 of Schedule 1.

If you're paying for long-term care insurance, you might be able to deduct a portion of your premiums – and the deduction maximums, which are based on age, are higher for the 2021 tax year. Taxpayers age 71 or older can deduct up to $5,640 per person on their 2021 tax return ($5,430 for 2020). If you're 61 to 70 years old, you can deduct as much as $4,520 of your premiums ($4,350 for 2020). Anyone 51 to 60 years old can write-off up to $1,690 ($1,630 for 2020). For people 41 to 50 years of age, the max is $850 ($810 for 2020). And, finally, the maximum deduction is $450 if you're 40 or younger ($430 for 2020).

Long-term care insurance premiums are only deductible as medical expenses for most people, which means they must itemize deductions on Schedule A to claim the tax break. However, self-employed people can deduct their premiums on Line 17 of Schedule 1 without having to itemize.

Before the 2021 tax year, canceled or forgiven student loan debt was considered taxable income. However, from 2021 to 2025, most canceled student loan debt that was incurred for a post-secondary education is tax-free. Therefore, you shouldn't report qualified student loan debt that was canceled last year on Line 8c of Schedule 1.

The IRS has also told lenders and student loan servicer providers not to file Form 1099-C or submit payee statements for qualified student loan debt that's discharged, canceled, or otherwise forgiven through 2025. So, if you do receive a 1099-C form reporting discharged student loan debt that you believe is not taxable, contact the lender or loan service provider that issued the form and ask them to send a corrected form.

Americans working abroad may be able to exclude all or a portion of their foreign-earned income from taxable income on their U.S. tax return. For 2021 returns, the maximum exclusion amount is $1,100 higher than it was for the 2020 tax year – it jumped from $107,600 to $108,700.

In addition to the foreign earned income exclusion, taxpayers living abroad may also be able to claim an exclusion or deduction for their foreign housing. For the 2021 tax year, the maximum foreign housing exclusion is generally $15,218 ($15,064 for 2020), although it can be higher in certain high-cost areas.

Use Form 2555 to figure both your foreign earned income exclusion and foreign housing exclusion/deduction.

COVID survivors who are unable to work because of lasting effects from the virus should consider applying for disability benefits, though this can be a difficult road, says Barbara Comerford, founder of the Law Offices of Barbara B. Comerford in Paramus, N.J.

Social Security disability insurance is one option. To qualify for it, generally you must have earned 40 credits during your working years, 20 in the last decade before you became disabled, though younger workers may qualify with fewer credits. In 2021, workers earn one credit for every $1,470 in wages, or a maximum of four credits after $5,880.

You must also meet the definition of disabled. That means you are unable to continue working at your job, you can't switch to a different position because of your condition, and the disability is expected to last for at least a year. Comerford, who has represented clients that have applied for disability because of long COVID, says the Social Security Administration has been more willing to pay out benefits, especially for older workers who are close to full retirement age.

To determine your disability payment, Social Security uses a formula similar to the one for calculating retirement benefits. It's based on your average monthly income from the age of 21 until you become disabled and factors in up to 35 years of earnings. (The formula for retirement benefits is based on your 35 highest earning years.) Once you reach your full retirement age, your disability benefit changes to a retirement benefit that continues to pay out at the same amount. Taking disability does not reduce your retirement benefit.

If you have long-term disability insurance through an employer or a plan you purchased and can show that you became disabled before a certain age, these policies will pay a percentage of your salary annually until a specified end date, typically your full retirement age for Social Security. In general, once you notify your employer that you will apply for short-term disability benefits, which you may do after taking sick leave for seven days, you can request and submit the forms to the disability insurer. If your claim is approved, you will be paid the benefit for 26 weeks. After that, you will need to apply for long-term disability if you are still unwell.

Getting insurance companies and some self-insured employers to pay out these claims can be difficult -- even more so for COVID-19 patients, Comerford says. Insurers are "being harder on long COVID cases because so much is unknown and a lot of physicians don't know enough about the disease," Comerford says. Finding a doctor experienced in treating COVID patients is important for documenting your condition.

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Links mentioned in this episode:

• Taxes on Unemployment Benefits: A State-by-State Guide
• The Basics of Unemployment Benefits: Who Qualifies, How to Apply, How Much You’ll Get
• Job Listing: Associate Personal Finance Editor
• Job Listing: Associate Investing Editor, ESG
• 10 Best Marijuana Stocks to Buy for 2021
• Investing in Cannabis? Beware These Red Flags
• How Long Should You Keep Tax Records?
• 22 IRS Audit Red Flags
• How to Fix Your Social Security Earnings Record

Transcript:

David Muhlbaum: A few weeks ago we talked about green investing, a very hot sector in the stock market. Today, we're going to cover another kind of green, green gold. I'm talking about cannabis, marijuana, which is generating plenty of investor interest. Also, unemployment insurance and a recovering job market are increasingly at odds. All coming up on Your Money's Worth. Stick around.

David Muhlbaum: Welcome to Your Money's Worth. I'm Kiplinger.com Senior Online Editor David Muhlbaum, joined by my cohost, Senior Editor Sandy Block. How are you doing, Sandy?

Sandy Block: I'm doing great, Dave, back from a road trip.

David Muhlbaum: Okay. Well, over the past year we have cranked out all sorts of content here about unemployment and unemployment benefits because, obviously there was a lot of unemployment. And historically, we paid a lot of attention to unemployment and job creation from this macroeconomic perspective, but this year was obviously much more how-to, here's how you get the benefits, here's how you navigate the system, and here's how you pay taxes on it if you have to.

Sandy Block: Right. And navigating the system turned out to be a real challenge for a lot of people, not only because they were first-timers at this, but because a lot of states were overwhelmed. It wasn't fun, but the unemployment benefits were ultimately pretty good.

David Muhlbaum: Yeah. They were pretty good because of these big bump-ups that came from the federal stimulus programs. Some of these date back to the early days of the pandemic. Congress, over the past year, was, what, $300?

Sandy Block: Yes.

David Muhlbaum: A week to every out-of-work American's unemployment check and-

Sandy Block: On top of what they were already getting from their state.

David Muhlbaum: On top of what they got from the state. And now, we're getting pushback from literally, states, about this sort of thing.

Sandy Block: Right. And that's because, and on my road trip, I saw this everywhere I went. There's the perception that this is causing people to stay home and contributing to a labor shortage. Now, the April's jobs report showed-

David Muhlbaum: What did you see?

Sandy Block: Oh my gosh, every single place I stopped, fast-food, gas, whatever, had a sign begging for people to come in. And places that you wouldn't normally think of as being really generous, fast-food joints, were promising signing bonuses, healthcare, 401(k)s, and my favorite was, free food. Now, I worked in a fast-food joint, free food was a given 40 years ago.

David Muhlbaum: What about a shifty?

Sandy Block: A shifty?

David Muhlbaum: Did you not use that term?

Sandy Block: No. No.

David Muhlbaum: Shifty is a drink at the end of ... at a place that serves booze. A shifty is a drink at the end of your shift.

Sandy Block: Oh, right. Right. No, I never worked at a place that served booze so I only got free milkshakes at the end of my shift and that's not so much fun. But the question is, is the reason that these folks can't hire -- and there really is a problem, I saw a lot of places saying they had to cut back on hours because they didn't have enough people, or were only operating the drive-through window -- is that really because of this extra unemployment benefit? Is $300 a week keeping that many people at home, or are there other factors going on here?

David Muhlbaum: Yeah. Is it a labor shortage, a perceived labor shortage? A lot of this sprung up after the April jobs report with rather disappointing job growth and it's gotten to be a pretty partisan issue too. All the states that are cutting off the additional federal unemployment benefits, all those states have Republican governors. The other side is the Biden administration.

Sandy Block: Right. And again, there's a lot of back and forth on this and it's really not been tested because we don't know what's going to happen. I guess the real test will come in September, when this extra $300 runs out. Is all of a sudden everybody going to go work at fast-food places or are we still going to have a labor shortage because what's also happening here, what we're hearing is that some people are still at home taking care of their kids. Some people don't feel safe going back to work, maybe they didn't get vaccinated, or they don't want to get vaccinated. And in some places, this could be hitting places, where people are realizing, working in a restaurant is a crummy job. You didn't make very much money -- and they are holding out. That actually seems to be working because a lot of places are raising their wages.

David Muhlbaum: Obviously, we're seeing what you're seeing in terms of the signs. I'm seeing it here at my mother's continuing care facility where they are basically putting out apology notes about the food service because they are having a hard time hiring line cooks. But, actually, since I brought that up, it's actually a somewhat odd situation because here at this CCRC, working in food service is really a whole lot different than the restaurant industry that you're referring to. This is normal hours, benefits, actually, frankly, not working for tips. It seems a sort of good place to wait out the pandemic and yet it seems that restaurant owners are at least able to hire away enough of the staff there to make a difference. There are enough people who want to go back to what, maybe I'm calling it the old way, and maybe the money's up.

Sandy Block: Maybe it's, what did you call that, the shifty? Maybe it's the shifty.

David Muhlbaum: Maybe it's the shifty.

Sandy Block: Maybe it's the shifty. I don't think they have a shifty at the retirement community.

David Muhlbaum: No, but they have, I just remembered, they don't have the shifty, they don't have the shifty here, but out in the real world, if you will, they have the Restaurant Revitalization Fund. There's more stimulus money so possibly one of the things behind that rising pay in the sector is all the stimulus money that's flowing in there. If it isn't one stimulus, it's another.

Sandy Block: Right. And that's really why this is, I think, hard to call. Because the stimulus is still unfolding, the checks got a lot of attention from us and others. There's still more money coming from state and local governments, other programs. So I think this supply and demand labor situation is kind of hard to call right now while all of that money is still out there.

David Muhlbaum: Yeah. A lot of firms are hiring including us, Kiplinger.

Sandy Block: Yes.

David Muhlbaum: We are looking for an Assistant Personal Finance Editor. No, seriously. You can help us cover all these crazy times. You could maybe even help on the podcast, if you can talk pretty. And we also need an Associate Investing Editor, someone who really knows ESG, environmental, social, governance factors. It's a close cousin to the green investing that we talked about here a month ago. Both of these positions are on LinkedIn and other sites and I'll put in a link to the show notes.

Sandy Block: Will they get a shifty?

David Muhlbaum: No. But I'd still like to hear from you.

Sandy Block: It's still a great place to work.

Cannabis Investing with Matt Hawkins

David Muhlbaum: Welcome back to Your Money's Worth. Joining us this week is Matt Hawkins who has a long track record in cannabis investing. I'll put in a link to your bio, Matt, but founder and managing partner of Entourage Effect Capital, a leading private equity investment firm, that's your current title. Welcome, Matt, and please feel to correct or clarify my introduction.

Matt Hawkins: That's perfect, thank you. It's great to be here.

David Muhlbaum: Also co-hosting for this segment today is our Senior Investing Editor, Kyle Woodley. Matt, you already know Kyle because, well, Kyle, you explain.

Kyle Woodley: Hello, hello. Matt's CV now includes being a contributor to Kiplinger. He brings a lot of expertise to our coverage of this still-emerging industry, but I think one of the most important things he has to offer to listeners is, being able to not just give us a fish, but teach us how to fish. That is, he can provide the insight that investors need to evaluate marijuana investments for themselves, just like they would, say consumer staples or tech stocks. I'll admit, I actually learned a lot about what I didn't know about the space in his most recent piece for us, Investing in Cannabis: Beware these Red Flags. I'm really glad you could join us today, Matt.

Matt Hawkins: I appreciate that. I'm interested to hear what you guys have to ask me.

David Muhlbaum: Contributing writer for Kiplinger, you're going to have to put that on the top of the resume. That's a great piece. It's one that we want to explore today as well as Kyle mentioned touching on investing opportunities in cannabis broadly and since I've been doing so much of the talking, Kyle really ought to ask the first question.

Kyle Woodley: Every stock market sector, industry, theme, each one has its own set of factors that investors need to heed and do their due diligence on. What makes the marijuana industry distinct? Are there any specific, I don't know, red flags?

Matt Hawkins: Absolutely. The thing about the marijuana industry, especially in the United States is that you're dealing with companies that are either listed on the Canadian Securities Exchange or on the smaller exchanges like over the counter. There's no real action on the NASDAQ or New York Stock Exchange, save for a few ETFs and maybe a couple of non-plant-touching companies. And so it's harder to find out research. It's hard to find the research that's out there. Some investment banks that are more boutique in nature provide that kind of coverage, but for the most part, it's not like going to buy Apple. It's a different program.

David Muhlbaum: I assume that one of the fundamental reasons for that is marijuana's ongoing status as a controlled substance under federal law.

Matt Hawkins: That's exactly right. And until it becomes either quasi-legal through a variety of legislative initiatives, that's going to be the case. There's a couple of things on the horizon, one being the Safe Banking Act, which has already passed the House I believe three times now. It is in the Senate, and I think once the Senate flipped to the Democrats after the Georgia run-offs, the prospects of that piece of legislation being passed by the Senate went up dramatically.

David Muhlbaum: As a follow-up question to that, a number of companies, as you mention in your piece, that are in the marijuana space, are there because they are dealing with these stop-gaps, they are providing stop-gaps because of the legalization status. What's going to happen if/when marijuana becomes federally legal? It's going to change a lot of people's business plans, no?

Matt Hawkins: Totally. And there are some of those stop-gap measures, I think I may or may not have referred to it in the piece, but we like to those companies bandaids. For example, we don't really like to look at alternative banking solutions because I believe they are just bandaids. Once the Safe Banking Act passes, all the big banks are going to want to take deposits. Right now, it's just state charter banks, credit unions, local banks, municipal banks. But the minute BofA can start taking deposits because the federal government lets them, they are going to want to do it. And so all these different mechanisms by which money is being moved or held or whatever the case may be, not only do those business models change, they likely cease to exist.

David Muhlbaum: To step for a moment beyond the immediate legislative outlook of the industry, can we just take a step back to talk about the industry as a whole. We've been talking about red flags, we've been talking about warnings, we've been talking about limited availability of U.S.- traded stocks, but can you just give us some sense of what the big upside is for the marijuana sector? There's a reason you're here, and by that, I don't mean on this podcast; I mean in this sector.

Matt Hawkins: Well, look, I had a luck-in-timing moment back in 2014. I had exited a multi-family play. I had done some private lending in the downturn. I started dabbling in that again and one of the things that I was seeing in 2014, which is when Oregon, Colorado, the State of Washington all went recreational adult-use legal. In Denver, there were warehouse owners looking to refinance their mortgages out of commercial debt into private debt, which would then give them the ability to lease their facilities to growers. They were paying high yields, it was a nice play. You have the security of a first lien on a piece of real property. But my luck-in-timing moment was realizing that if I could somehow figure out how to raise money and underwrite the actual cannabis assets themselves, I would have a first-mover advantage -- and I did.

There was just one or two other groups at the time doing it and we got lucky. We were able to make some big bets in an emerging industry and we've been able to ride that wave, at least initially, and now we've got 68 investments I think to date out of our family of investment vehicles. It's been a good ride, but we're doing it because of what's on the horizon. We won't see anything in our lifetime like an event that brings in this much capital, that can provide a huge boost to the industry and provide returns to early adopters of this sector and that's what we're playing for.

David Muhlbaum: Got it. I'm going to use your explanation of your history to pivot us, I think, to talking about investing, the individual investor's approach. As you've just made clear, you're an investment banker, you raise money -- a lot of it -- to make strategic capital investments in companies. Some of the names I got from your site. Acreage, GTI, Ebbu. Am I pronouncing that right?

Matt Hawkins: I believe it was Ebbu, yes.

David Muhlbaum: And Form Factory. Now, some of these, or the companies that acquired them, are publicly traded, so for reasons I'm sure you'll appreciate, we're not going to talk about individual cannabis stocks with Matt. But if you, listener, are interested in investing in individual cannabis stocks, fear not, we've got just the thing for you, 10 Best Marijuana Stocks to Buy for 2021 by our contributor Will Ashworth. I'll put in a link to that.

Kyle Woodley: But we do want to ask you about cannabis funds, specifically as they are used as just another tool in the toolbox. When you've got an industry that's still in a great state of flux, that's still finding itself, like the marijuana industry is, many investors are probably going to think to themselves, okay, why don't I just buy a marijuana fund, so that I don't have one big single stock pick that goes the wrong way, it doesn't just completely blow up in my face, blow up my whole portfolio. But do you think that investors clip a lot of that potential in the industry by making such a diversified investment or is there enough ceiling for a slew of stocks to collectively make waves?

Matt Hawkins: Let me just give one disclaimer that most of our investing is obviously on the private side but I think the rule of thumb for being diversified in the cannabis industry applies to both public and private opportunities. On the private side, because of the nascency of this industry, and because of the lack of knowledge of what goes on in a cottage industry like this, you would be wise to invest with someone like us, who knows the industry cold, that's been doing it since 2014. And I think the same thing can be said for the public side, is that if you don't have the ability to diversify yourself on a variety of these, maybe it's the top 10 picks that was just referenced, but if not, then perhaps an ETF is better suited for you.

But ultimately, both the public and the private sector are going to benefit from this change of a major dynamic when legalization occurs. There's going to be an influx of capital both on the private and on the public side so I think that only increases valuations.

Kyle Woodley: No. I was just going to follow up on that and just ask, do you have any, out of curiosity, any particular preferred ETFs out there? We talk a lot about the ETFMG Alternative Harvest ETF, that's ticker MJ, which is the largest fund out there by assets and one that a lot of people know. We've actually recommended the AdvisorShares Pure US Cannabis ETF, ticker MSOS, because of its focus on U.S. marijuana stocks versus MJ and others which, they have very distinctly Canadian and international tilts. Are there any funds out there that you look at and you go, this is an interesting way, a distinct way to invest in the cannabis space?

Matt Hawkins: Without giving investing advice, I will say this. We don't look at ETFs, we obviously know the public sector cold. I would say that, because the public sector is our lifeblood, that's where we either sell companies to or we get lucky and do off-market pipes. We know the sea levels of most every important publicly traded company in the United States and so we may be a bit bias, but my opinion is that you'd be much better off looking at an ETF that contains primarily U.S. Assets. And the reason is that the U.S. market is not only the largest cannabis market in the world, but it's about to go through a shift and a paradigm that is like we've never seen before.

Canada has already done that. Canada is already completely legal and the market, God bless 'em, is smaller than the state of California. It's doesn't make much sense, and to me, the Canadian licensed producers have a flawed model, to begin with. Originally they were set up to be the outsource providers to the world, but their cost structure doesn't allow them to do and so a lot of them, Canopy was smart, Canopy tried to get creative with how they could indirectly own U.S. Assets with Acreage and they got ownership in TerrAscend and a few others. But the other licensed producers have been slow to move and so that's problematic.

Kyle Woodley: What was the trigger point for you where you all of a sudden realized, this is the opportunity, because marijuana, to some extent, had been out there in some way or another, but the point at which you go, wait a minute, this is truly an opportunity. What was that flashpoint where you were like this is why I need to be in this business?

Matt Hawkins: I knew that when I took the chance in 2014 that it was going to be a huge risk/reward because I thought there could be something like this on the horizon, but I had no way of knowing for sure. And plus, it wasn't easy raising money back then. Hell, I live in Dallas, Texas and so you can imagine how hard it was to raise money back then, just from the conservative nature of our state, but what that moment in time was, is when California went adult-use legal in 2016. When that happened, that changed everything, and the fact that California became the largest market in the world overnight with this election was just downright, not only eye-opening, but it was kind of like, holy crap, this is going to happen. Then we decided to get really smart about where to pour the capital. We spent a conscious effort to spend the next three years investing a fair amount of capital in that state and now we've got a pretty good presence there. We're excited about the prospects.

David Muhlbaum: It's interesting you mentioned the difficulty of raising money back then in Texas. We talked a good bit about federal legislation and as most people know, marijuana's legality varies by state. We have Idaho and Washington next to each other, very different takes on it and that's a reminder that marijuana has a cultural history as an illegal substance. And it's taken a lot of restraint, I haven't made a single wacky weed joke today. We've treated this sector as oil and gas. Now that might be a future illegal substance, but that's another story. But I am curious about whether, as you go about your business, Matt, whether you get pushback or teasing or whatever, like, the Cheech and Chong stuff.

Matt Hawkins: I certainly did for the first three years of doing this. Not only that, but I had people judge me, like what's wrong with you, and thought I was crazy. Now, those same people either want to join our investments or they want to talk about it and laugh about it and sometimes they ask me for product. I'm like, look, I'm not your dealer. But the truth of the matter is, that just points to the stigma is almost 100% gone. There is still a sliver of the far right in the Bible Belt where I live that thinks this is still the gateway drug and that's unfortunate, because we've seen time and time again the medicinal benefits that this product has. But look, it's still a vice product, there's no doubt about it, and there's always going to be some people that say it shouldn't be used and sold.

The problem I have with that argument is that it's already there so why not tax and regulate it and bring in some revenue to your state and probably reduce crime in the process because you're taking it off the illicit market and bringing it to a more controlled situation.

David Muhlbaum: The flip side is that you may be in a situation where people essentially expect you to evangelize for marijuana, for the product itself, rather than the investment opportunity.

Matt Hawkins: Sure and what I just said is about as evangelistic as I get when it comes to this because that's not what we do. The last thing that we want to do is try to change people's minds if they are opposed to it. It's just not our job. It's not our position. We've been lucky enough in the course of our period of time where we put capital together that the stigma has been lifted and so like I said, some of the same people that were against it, in the beginning, have become some of our better investors just in the past years.

David Muhlbaum: It's also interesting that we talk about "in the past year or so." You are, as we described at the beginning, a long-time investor in the marijuana space, shall we say, I'm not sure, but if we look at it in absolute years, it's not that many years. It's like pot years are measured differently somehow. Things are moving fast.

Matt Hawkins: Exactly, and the same amount of money we have under management would be, if I was just in the lower middle-market PE world, it would be a gnat's eyelash compared to what most of the larger funds manage. But for cannabis, we're one of the largest firms and that's just because of the nature of the world we live in. It's all family offices and high net worth individuals that are putting the capital to work and we're just one of the organized groups doing it.

Kyle Woodley: I can't think of another situation in which so much money was primed to go to work because here, you already know what the product is. The product has been in use for literally centuries. We've just been waiting for the legalization so that it can turn into this actual legal business structure or whatever. But think about any other invention, you had to prove it out to people. Even like the smartphone, we had phones before, but the smartphone, that took some ... We didn't just have iPhones right away, we had the Zack Morris cellphone, first and we made our way along. You had to prove to people, and eventually build up demand from there.

Here there is very, very clear demand for it and everybody is just waiting to be able to put money on that. And that makes this so much different than a lot of the other, almost every other investment opportunity I think we've ever seen in our lives whether that makes it necessarily the best one or not is to be determined, but it is certainly different and exciting from that perspective.

Matt Hawkins: Or you can just quit your day job and come help us put...

David Muhlbaum: To follow on Kyle's tangent for a moment, it makes me wonder, and I don't know my history here, but it makes me wonder what was the scene like in 1933 at the end of Prohibition where there were companies that had been beaten down to a shell of their former selves looking to revive? Were there new entities coming in? They were probably going to be in a more government-regulated space, one that continues to today, in terms of how government has kept a foot in alcohol. That's my riff. Kyle, I think there is a parallel.

Matt Hawkins: There absolutely is, because there's a three-tiered system in alcohol and that's one thing that the federal government would have to get their arms around if they decided to make it 100% federally legal and federal oversight controls everything. Right now there's not a three-tiered system in a lot of states. In some states, like California, you can be vertically integrated completely and that's a huge problem because you're going to have real issues if you try to break up those companies that have done that. That would be next to impossible.

David Muhlbaum: Wow, I hadn't even thought about the regulatory structure from an antitrust perspective. That's a whole 'nother thing.

Matt Hawkins: That makes my head hurt just thinking about all the regulatory nightmares that fair regulators who going to have to go through to try to make it work. It scares the hell out of me.

David Muhlbaum: Right.

Matt Hawkins: But just real quick back to Prohibition, look, you had families that made generational money off some of this ... Look at the Kennedys, my gosh. That could be the case in cannabis, but some of these people that were early, early on founders of some of these large public companies, they are doing things that could be life-changing for their families going forward.

David Muhlbaum: Legacies. Where does the name, Entourage Effect, come from? Your company.

Matt Hawkins: Good question. We originally, back in 14, we started the company, it was called Cresco Capital Partners. Cresco is Latin for grow and then over the years we kept getting confused with our friends at Cresco Labs, which is a multi-state operator, and Charlie Bachtell, who is the CEO, would literally sit there and laugh at conferences about how many times people would ask us about the other and I finally just said to him, "We're changing our name. I'm sick of this." He laughed and said, "thank you."

Entourage Effect is the interaction between the cannabinoids and the THC to give the medicinal benefits of the plant and so we liked that analogy because not only is it applicable obviously to marijuana, but it's also applicable to what we do as a firm.

Matt Hawkins: Like I said, we've got 68 investments. Part of our strategy is to bring everybody together, if there's a way for them to work together, we obviously want that to happen. We have a deep network outside of our portfolio and we bring that to the table to the benefit of our investments and so we aren't just money, we are relationships and we're the Entourage Effect.

Kyle Woodley: I actually did have a question about your status working in private equity, which means, frankly, you get to invest in companies before we do. You get to invest in the earlier stages and that means you're probably going to be closer to the leading edge of technology in this space. And so my question for you is, what is there that you see out there that you look at and you're like this is interesting leading-edge technology of the marijuana industry.

Matt Hawkins: That's a tough one because the technology side, we have made a couple of investments in that space, but I would put breeding and biosynthesis and the propagation of the plant, those things are the genetics, and all those I consider to be the technology side of this. And from that standpoint, I think that's where you're going to see some real interesting things happen over the next several years. You've got botany experts and horticulturalists that are coming into the industry unlike ever before that were coming from other parts of the food chain outside of marijuana. And so that, to me, shows the influx of not only talent but also just insight and development and progress. We've got a few plays in those arenas and we're excited about the prospects.

David Muhlbaum: And maybe also the diminution of the stigma issue for those individuals who choose to participate.

Matt Hawkins: Oh gosh, yes. Look, you're getting C-level people come in now from CPG companies, Proctor and Gamble folks, Starbucks, Amazon. The stigma to me is just not an issue and I think people are now seeing this as a, we may be in the third or fourth inning here and I want to get in on the action while I can, and that's a good thing.

Kyle Woodley: The technology answer was right on the money because technology, what that looks like, just completely different by sector. It's not always like AI or a smartphone in front of you. This is effectively the ag sector, the ag industry and so in that case, yeah, whether you're putting a product out that is either higher potency or better crop yield or whatever, those are exciting technologies, maybe not necessarily to just your passerby or whatever, but they are very exciting if you're inside the industry.

Matt Hawkins: Yep. Couldn't agree more. Those sectors, you'll start hearing a lot more about where they are headed as some of the companies that actually, some of them that we've been involved in for a couple, three years now, once they start making the big headways, you'll start hearing more about that and I think it's one of those things that will be very attractive to the con-agras of the world, for example. They want to be in this business, they're just handcuffed right now because of the legality.

David Muhlbaum: Well, when that happens, I hope Kyle will ask you to write about it for us.

Kyle Woodley: I'm going to be making plenty of asks of Matt here for the foreseeable future so hopefully, we'll get more of his wisdom here on, not just on the show, but also online at Kiplinger.com here for plenty of years to come.

David Muhlbaum: Thank you very much for joining us today, Matt.

Matt Hawkins: Awesome, guys. Thank you so much. Happy to do it.

Tax Documents to Keep, Tax Documents to Toss

David Muhlbaum: All right, Sandy, the tax deadline has come and gone, and at every meeting leading up to the tax deadline that I had with my boss, Robert, he would say, "Has everyone filed their taxes?" And I would kind of look away, but I did manage to file an extension. How about you?

Sandy Block: I had to file my taxes because we owed, which tells you, even though I write about taxes and I do our own taxes, I must not be very good at it because we did end up writing a check to the IRS. Yes, we did file on time, we had no choice.

David Muhlbaum: Well, I filed an extension and I paid what I think I owed. I'll sort it out later. But yes, it's that cobbler's shoes metaphor. I attempt to do as good a job as I think I know I should. But of course, as part of that, I was up to my eyeballs in either paper or digital paper, with my wife using an app to scan and create PDFs out of the things that we still have on paper and then archiving things as I went into the Google Drive so that I can hopefully find them again. But the whole thing reminded me of, a) that keeping paper is going away, but, b) it has not gone away yet so I think we should maybe touch on a little bit of, hey, tax season's over, I hope it's more over for you than it is for me. What do I do with this stuff, because it's just sitting there in a manila folder?

Sandy Block: We've been doing this article for every year and it's always very popular and people always argue with us about it. What to keep and what you can safely throw away. I think most people err on what to keep and actually what your wife is doing is really smart because the IRS does accept digital versions of documents, so scanning things, as long as you've got some kind of system. You don't have to keep everything and you probably shouldn't because then you risk losing stuff that you really want. A couple of things you might want to keep potentially forever is one, just your actual tax return. That's a really good record for-

David Muhlbaum: Forever?

Sandy Block: Well, some financial planners say to keep it, you don't have to. And we'll go through that. But the idea of keeping your tax return is this: It's a really good snapshot of your life at that time and if you applied for a mortgage or want to start a business or any kind of loan, you don't know how far back they're going to ask to see your taxes so I personally keep the actual return. Again, you can keep a digital, if you use tax software, it's probably stored for you somewhere. And you can get it from the IRS, but I do keep the actual return.

David Muhlbaum: One thing you actually mentioned about having it in a piece of tax software is that I think the safer bet would be to make sure you've exported a PDF of the actual file.

Sandy Block: Yeah. I wouldn't want to leave it in the cloud.

David Muhlbaum: And not only because of security issues, but because your financial relationship with that provider, you may not renew it.

Sandy Block: And usually, they will give you a PDF. I have them on my computer. The other thing you might want to keep is your W-2 forms, which is just one thing you get at the end of the year. We're not talking a mass ... and the reason you want to hold onto that is when it comes time to file for Social Security sometimes there are errors in your earning record and that could hurt your benefits so you're going to want to be able to point to these W-2 forms and say, yes, I did work at this place this year and as a result, I owe benefits for that time.

David Muhlbaum: On that note though, you can get ahead of that, can't you, because it's possible to get essentially a Social Security transcript or a statement that reflects each year's earnings.

Sandy Block: You can do that every year, which I have not done. Yes, you could go through it every year and make sure it's right, but just in case you don't, the W-2s are a good backup. And I think it's good to know how much you made. I like to go back and say how did I possibly eat on that salary. That's a journalism thing. The general rule is this, the IRS has three years after the due date of your return or in your case, the day you actually file it, if you get an extension to kick off an audit of your returns so you should hold on to your tax records at least until that time has passed. But as I mentioned earlier, there are some records, like maybe the actual tax return and your W-2s that you want to hold on a little longer.

Sandy Block: Things you can throw away after one year are your pay stubs. After you've checked them against your W-2s, the W-2 has all that information. If all the totals match, you can shred the pay stubs and you can take a similar approach with your monthly brokerage statements, which can really pile up. You can generally dispose of them if they match up with your year-end statements and 1099s.

David Muhlbaum: Or you could have gone paperless, I just want to note.

Sandy Block: Right, exactly. Now, the things you should keep, we mentioned the IRS has three years to audit you. There is an exception that I'll get to in a minute, but because within that period, you should hold onto all of the documents that support any income, deductions, or credits claimed on your tax return for those last three years after the tax filing deadline. And that includes, again, your W-2s, which you're holding forever anyway, 1099s, if you have deducted mortgage interest, and again, a lot of these things are digital. 1098 forms, canceled checks if you made charitable contributions --and you still are able to deduct them.

David Muhlbaum: Okay, I want to challenge this for a moment because many of the forms that you've mentioned are ones that are already being reported to the IRS. If there's going to be a challenge to you, isn't it going to be more about something weird like some stock you sold with a tax basis that dates to 1955 that you got from Grandma?

Sandy Block: That's a good question, but I wouldn't assume that, if your information doesn't match theirs, maybe you were right. I wouldn't count on my brokerage to have them for one thing. What if the IRS comes back and audits you and your brokerage has gone out of business or something? You don't know. Those are just things that the IRS might want to see if you get audited. And the other thing I wanted to mention is you took withdrawals from a health savings account or a 529 plan, you went eligible expenses and contributions to a tax-deductible retirement savings plan, just a traditional IRA, because again, you are deducting these things on your tax returns. If you don't itemize deductions, and most of us don't, you don't have to hold onto as many of these things.

David Muhlbaum: What is it now, like 90% of people are taking the standard deduction?

Sandy Block: Yes. The caveat here is we've got this little break in the coronavirus legislation. We were allowed to deduct $300 of charitable contributions or $600 this year if you're married. So you would want to hold onto records of that. But in general, if you don't deduct, you don't need to hold onto all that stuff because you're not deducting it. If you're not deducting your mortgage interest, you don't need to hold onto documents for mortgage interest because the IRS isn't going to ask you about it.

David Muhlbaum: Right. Fundamentally though, and I guess I'm coming back to my point about which forms and what kind of recordkeeping matters. I agree with you on the principle, but I think one of the things people could almost inform themselves with when making these decisions about where they really need to pay attention to recordkeeping is another bit of Kiplinger content about 22 IRS Audit Red Flags because if you look at those and you look at those and see, is anything I'm doing in these categories? It doesn't mean you're doing something wrong, it just means your tax return has categories that the IRS likes to pay attention to. That's an additional warning that you better have your paper in order if you are filing that kind of return.

Sandy Block: And that's a really good point, because I think one area that I'll just touch on briefly. We could do a whole segment on it, is if you work for yourself. I used to interview a lot of self-employed people and almost all of them had been audited and the reason is when you work for yourself, you're self-reporting. Our taxes are withheld from our paychecks so it's hard for us to cheat or make mistakes really because the money just goes right to the IRS. But if you work for yourself, you are reporting your income. Basically, it's on you to report your income. It's on you to report your expenses and I think the IRS routinely audits a lot of those tax returns just because they don't have a backup like they do. So if you work for yourself, my advice is, keep just absolutely assiduous records. And I think that's a really good idea to put the audit red flags because it will show some other things that just sort of might get the IRS's attention and you do want to keep better records.

David Muhlbaum: And while I agree we should follow the numbers, fundamentally it kind of comes down to, are you a record keeper or not a record keeper? It's like the people who are early to the airport and the people who don't feel satisfied unless the doors shut on their behinds as they got onto the plane. People are just two different kinds.

Sandy Block: I'm the person who leaves the night before, so you can imagine my file cabinets are pretty full.

David Muhlbaum: I'm early to the airport, but I'm a mess at record keeping. I guess you can diverge. Thanks very much, Sandy. Feel free to bug me when it's October and I've really got to file those things.

Sandy Block: Okay.

David Muhlbaum: That will just about do it for this episode of Your Money's Worth. If you like what you heard, please sign up for more at Apple podcasts or wherever you get your content. When you do, please give us a rating and a review. And if you've already subscribed, thanks. Please go back and add a rating or review, if you haven't already. To see the links we mentioned in our show along with other great Kiplinger content on the topics we've discussed, go to kiplinger.com/podcast. The episodes, transcripts, and links are all in there by date. And if you're still here because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.

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In good times and bad, scammers are looking for their next mark, and the billions of dollars in gov­ernment benefits delivered during the pandemic created numerous opportunities for fraud. It’s not just money that con artists are after; they’re also trying to persuade you to share sensitive information they can use to steal your identity. Common targets for fraud:

Unemployment benefits. Unemployment-benefits fraud skyrocketed during the pandemic as millions of people filed for benefits for the first time. The claims overwhelmed the ability of some states to process unemployment-benefits applications, and some states lacked measures to verify that the applications were legitimate, says Pete Eskew, senior vice president, public sector, at ID.me, an identification-verification software company. In addition, some states removed authentication measures in an effort to speed up the processing of benefits as job losses increased. That made it easier for crooks to file claims using stolen identities. Most victims don’t discover that their information has been compromised until they receive a Form 1099-G from their state informing them that they owe taxes on benefits the scammer received in their name.

If you’ve received a Form 1099-G for benefits you did not receive, report the fraud to the IRS and the state that issued the form. Go to https://www.irs.gov/identity-theft-fraud-scams/identity-theft-and-unemployment-benefits for more information.

You can protect yourself by creating an account at your state’s unemployment website, even if you’re not filing for benefits. Once you have created an account, it’s much more difficult for a scammer to create one using your information. However, a swindler can still create an account in other states, says Eva Velasquez, president of the Identity Theft Resource Center, so remain on guard and take steps to protect your personal information.

Stimulus checks. Three rounds of economic stimulus checks have also created fertile ground for swindlers. And with the IRS scheduled to start sending out monthly advance payments of the child tax credit in July, there will likely be another round of scams, including “known perpetrator” fraud, which occurs when someone you know misuses your (or your child’s) information. For example, an ex-spouse bearing a grudge could use his former spouse’s credentials to claim a child, then route payment to himself.

Vaccine passports. As millions of Americans get vaccinated, the next wave of fraud is expected to focus on fake “vaccine passport” sites, as well as counterfeit vaccination cards.

“You might get an e-mail or call saying that it’s from your state government and that they need more information, such as your Social Security number, for an alleged vaccine passport,” says Lauren Hall, author of advocacy group Consumer Action’s Scam Gram newsletter. Don’t post a photo of your vaccine card on social media, because scammers will use that information to make counterfeit cards look credible.

FEMA funeral funds. The Federal Emergency Management Agency recently announced a funeral re­imbursement program for families of people who have died from COVID-19. The program will reimburse families for up to $9,000 per funeral, with a maximum of $35,500 per application. (If you lost more than one family member, you can have more than one funeral listed on your application.) Families must provide a death certificate that identifies COVID-19 as the cause of death. Hall expects that scammers will pose as FEMA agents looking to help grieving families, as death certificates and obituaries are easy to find. Don’t give out personal information over the phone to someone claiming to be from FEMA or click on a link purportedly from the agency. If you believe you’re eligible for funeral assistance, call the COVID-19 Funeral Assistance line at 844-684-6333.

If you received unemployment benefits last year and filed your 2020 tax return relatively early, you may find a check in your mailbox soon (or a deposit in your bank account). Since May, the IRS has been sending tax refunds to Americans who filed their 2020 return and reported unemployment compensation before tax law changes were made by the American Rescue Plan.

The tax agency recently issued about 430,000 more refunds (totaling more than $510 million) averaging about $1,189 each. That brings the total count to over 11.7 million refunds totaling $14.4 billion for the 2020 unemployment compensation exclusion.

About the Unemployment Compensation Exemption

The American Rescue Plan Act, which was enacted in March, exempts up to $10,200 of unemployment benefits received in 2020 ($20,400 for married couples filing jointly) from federal income tax for households reporting an adjusted gross income (AGI) less than $150,000 on their 2020 tax return. If you received more than $10,200 in unemployment compensation last year, any amount over $10,200 is still taxable.

The IRS has identified over 10 million people who filed their tax returns before the plan became law and is reviewing those returns to determine the correct amount of tax on their unemployment compensation. For those affected, this could result in a refund, a reduced tax bill, or no change at all. (You can use the IRS's Interactive Tax Assistant tool to see if payments you received for being unemployed are taxable.)

The IRS started recalculating impacted tax returns with returns from single taxpayers who had relatively simple returns, such as those filed by people who didn't claim children as dependents or any refundable tax credits. The tax agency then shifted to joint returns filed by married couples who are eligible for an exemption up to $20,400 and others with more complex returns.

Remember, though, that the tax exemption only applies to unemployment benefits received in 2020. So, if you receive unemployment compensation in 2021 or beyond, expect to pay federal tax on the amount you get.

Refunds for Unemployment Compensation

If you're entitled to a refund, the IRS will directly deposit it into your bank account if you provided the necessary bank account information on your 2020 tax return. If valid bank account information is not available, the IRS will mail a paper check to your address of record. (If your account is no longer valid or is closed, the bank will return your refund to the IRS and a check will be mailed to the address the tax agency has on file for you.) The IRS says it will continue to send refunds until all identified tax returns have been reviewed and adjusted.

The IRS will send you a notice explaining any corrections. Expect the notice within 30 days of when the correction is made. Keep any notices you receive for your records, and make sure you review your return after receiving an IRS notice.

The refunds are also subject to normal offset rules. So, the amount you get could be reduced (potentially to zero) if you owe federal tax, state income tax, state unemployment compensation debt, child support, spousal support, or certain federal non-tax debt (i.e., student loans). The IRS will send a separate notice to you if your refund is offset to pay any unpaid debts.

Should I File an Amended Return?

Although the IRS says there's no need to file an amended return, some early filers may still need to, especially if their recalculated AGI makes them eligible for additional federal credits and deductions not already included on their original tax return.

The IRS, for example, can adjust returns for those taxpayers who claimed the earned income tax credit and, because the exemption changed their income level, may now be eligible for an increase in the tax credit amount which may result in a larger refund. That said, most taxpayers will need to file an amended return if they didn't originally claim the tax credit, or other credits like the additional child tax credit, but now are eligible because the exclusion changed their income, according to the IRS. (These taxpayers may want to review their state tax returns as well.)

There are two exceptions to this general rule. First, you don't need to file an amended return to claim the recovery rebate credit, earned income tax credit with no qualifying children, or the premium tax credit even if it wasn't claimed on your return. If you're suddenly eligible for these credits when the unemployment exemption is applied, the IRS will calculate the credit for you and include it in any overpayment. Second, don't file an amended return to claim the additional child tax credit or earned income tax credit if you reply to a notice from the IRS stating you may be eligible for one of these credits and you're not requesting any other changes to your 2020 tax return.

E-Filing Your 2021 Tax Return

Next year, when you try to e-file your 2021 tax return, you will have to sign and validate your electronic return by entering your prior-year AGI or your prior-year Self-Select PIN. If you use your AGI, make sure to use the AGI as originally reported on Line 11 of your 2020 Form 1040 or 1040-SR. Don't use the corrected AGI if the IRS adjusts your 2020 return to account for the unemployment exclusion.

Withholding from Unemployment Compensation

Again, the $10,200 exemption only applies to unemployment compensation received in 2020. So, to avoid a big tax bill when you file your 2021 return next year, consider having taxes withheld from any remaining unemployment payments you receive this year.

Contact your state unemployment office to have federal income taxes withheld from your unemployment benefits. You may be able to use Form W-4V to voluntarily have federal income taxes withheld from your payments. However, check with your state to see if it has its own form. If so, use the state form instead.

Victims of Unemployment Fraud

Whenever the government starts sending checks, criminals will try to get their hands on some of that money. That's certainly the case with the unemployment compensation tax refunds. The good news is that you won't be punished if a crook uses your name and personal information to steal a tax refund from Uncle Sam.

So, for example, if you received an incorrect Form 1099-G for unemployment benefits that you didn't receive, the IRS won't adjust your tax return to add the unemployment compensation to your taxable income. You should still report the fraud to the state workforce agency that issued the incorrect form, though.

What About State Taxes?

Just because the federal government is waiving taxes on the first $10,200 of your 2020 unemployment benefits, that doesn't mean your state will too. To see if your state has adopted the federal exemption for state tax returns, see Taxes on Unemployment Benefits: A State-by-State Guide.

One year after the novel coronavirus pandemic began crippling the U.S. economy – especially the job market – the numbers remain discouraging: 18.2 million Americans were still filing for weekly unemployment benefits as of late February; 770,000 workers filed initial unemployment claims in the week ended March 13; and the unemployment rate – while improving slightly – has plateaued around 6.2%.

For many laid-off workers, this may be their first time dealing with the unemployment-benefits system, a joint state and federal program that provides those out of work with temporary yet steady cash payments to help them financially while finding a new job.

The good news: A new round of stimulus coverage passed by Congress earlier this month – known as the American Rescue Plan Act of 2021 – further extends the period for those who’ve filed for unemployment benefits to receive supplemental weekly federal benefits.

Let us help you navigate the changing unemployment-benefits system to get you the help you deserve. The sooner you apply, the better.

Unemployment benefits are available to workers who are unemployed through no fault of their own, such as a layoff. Those fired for cause (such as misconduct), or who leave voluntarily or refuse an offer for work, need not apply.

In March 2020, when the coronavirus first disrupted the economy, Congress granted unemployment benefits to workers who weren’t previously covered. Those who now qualify include:

• Workers permanently or temporarily laid off due to coronavirus measures
• Workers whose employers reduced their work hours due to coronavirus measures
• Self-employed workers who have lost income due to coronavirus measures
• Workers quarantined and unable to work due to coronavirus
• Workers unable to work due to risk of exposure to coronavirus
• Workers unable to work while caring for a family member due to coronavirus

Each state, district and territory sets its own guidelines for who is eligible for unemployment benefits and how much they’ll receive. You must meet your state’s criteria for wages earned or time worked during an established period, known as a “base period,” which is usually the first four out of the last five completed calendar quarters before the time that your claim is filed, according to the U.S. Department of Labor. (Due to changes in the law over the past year, some states may not have updated their published guidelines yet. If you think you’re eligible, you should apply now in the state where you worked.)

The general rule of thumb is that unemployment benefits are based on a percentage of one’s earnings – roughly between 40% and 60% – over a recent 52-week period, and paid out weekly over a period of between 12 to 28 weeks, depending on the state. (Federal stimulus measures have extended the benefits period. More on that below.)

If you’ve received a severance package from your former employer – usually in the form of a lump-sum payment – it’s important to check with your state’s labor department to see if you qualify for unemployment insurance. Some states, such as California, don’t disqualify you from receiving benefits if you have severance pay, be it a lump sum or in regular installments. But Texas prohibits people from qualifying for unemployment benefits while receiving most types of severance pay.

Contact your state’s unemployment insurance program office immediately upon losing your job, especially in light of the sharp increase of claims filed throughout the country over the past year due to the pandemic. Check with the office to determine the preferred method of registering in the system, be it online or by phone. While doing so in person was traditionally an option (that’s how we got “unemployment lines”), it’s a bad idea now.

Keep in mind that registering your claim for unemployment benefits takes time to process, especially in light of the COVID-19 pandemic, so budget your pocketbook accordingly before your first payment appears. According to the U.S. Labor Department’s CareerOneStop site, it usually takes two to three weeks after filing your claim to receive your first benefit check, but that estimate was pre-pandemic. Many state unemployment offices continue to struggle to keep up with the spike in demand.

Some states, and the District of Columbia, normally require a one-week waiting period. In that case, you will file your first unemployment claim (in which you list the jobs you applied to that week), but you won’t receive a payment. Rather, your first payment would apply to the second week of your unemployment claim. Many states, including California, Hawaii and New York, have waived their waiting period as a result of the recent pandemic. And, under the new $1.9 trillion American Rescue Plan, the federal government will continue to provide temporary full funding for the first week of unemployment (more below). Check your state’s site about changes to the waiting period.

Under the new $1.9 trillion American Rescue Plan Act of 2021, which was signed into law by President Joe Biden in early March, American workers who are unemployed will receive federal unemployment benefit payments of $300 per week – on top of standard benefit levels – through September 6, 2021.

What’s more, as much as $10,200 of unemployment benefits received in 2020 will be exempt from tax for households whose incomes were less than $150,000. (Note: The IRS is working on 2020 tax form and software updates to account for the new exemption. If you already filed your 2020 tax return, don't rush to file an amended return – wait until the IRS issues instructions. More details below.)

The better prepared you are, the faster your unemployment claim will be processed (and happier is the rep who processes your claim). Assemble supporting paperwork as if you’re going to the Department of Motor Vehicles — but with the reward of a paycheck.

Your Social Security number alone is not enough (but it’s a start). You will also need to provide the name, address, phone number and dates of employment from your most recent employer. For most people, this is all you need. Some states, such as Utah, require a driver’s license as a form of identification. If you’re not a U.S. citizen, but legally authorized to work in the U.S., you will need to provide your Alien Registration Number (that eight- to nine-digit USCIS number). For ex-military, have handy your DD214 form, which is your certificate of release or discharge from active duty (if you don’t have it, you can request a copy through the U.S. Department of Veterans Affairs’ milConnect website). Former federal employees will need to provide either their Standard Form 8 (SF-8) or Standard Form 50 (SF-50). If you receive, or will receive, severance pay from your former employer, you will need to provide documentation detailing your payout. Qualified pension recipients should have their pension documentation at the ready.

Each state’s unemployment office provides its own calculator – and explanation – to help you determine how much you will receive on a weekly basis. Formulas can be as easy as taking the highest quarter of wages in your base period and dividing it by the number of weeks the state grants you unemployment compensation; more complex formulas incorporate additional factors.

Massachusetts’ Department of Unemployment Assistance, for example, provides an unemployment benefits determination calculator in which you enter the total wages you received in the past four quarters. Upon entering the quarterly amounts, the calculator computes your weekly pay and the number of weeks you’ll be paid unemployment benefits (26 weeks, in the case of the Bay State).

Keep in mind that these calculators are intended to help you estimate your benefits and are intended only for advisory purposes. Ultimately, it will be your state’s computer system that will crunch your numbers and determine your official weekly amount. Since benefits for the self-employed are a new phenomenon, don’t expect estimates.

Discovering that your unemployment benefits are taxed may not be nearly as shocking as the news of your job loss, but it can be just as tough to accept. The reality is that unemployment benefits are a form of income, and that income is taxable at both the federal and state level.

But a special tax break under the new American Rescue Plan allows Americans who received unemployment benefits in 2020 the ability to exempt up to $10,200 in unemployment benefits from federal income tax for households with an adjusted gross income under $150,000. If you're married, you and your spouse can each exclude up to $10,200 of unemployment compensation.

Yet there's one big question surrounding this new tax exemption: How do you claim it? The IRS doesn't have an answer for everyone yet – but it's working on it. How to handle the new tax break will also depend on whether or not you already filed your 2020 tax return. If you haven't filed yet, the IRS has updated the Schedule 1 (Form 1040) instructions and provided an Unemployment Compensation Exclusion Worksheet for paper filers. It's also working with tax software companies to update their products so that users will be able to claim the exemption on their 2020 tax returns. So, if you received unemployment compensation last year, you might want to wait a little bit longer before using one of these software products to complete your 2020 return.

If you already filed your 2020 tax return, the IRS is working on a way to automatically issue refunds for the $10,200" exemption. That would prevent the need to file an amended return to claim the new tax break if you filed your 2020 return before the exemption was enacted.

What’s more, just because the federal government is waiving taxes on the first $10,200 of your 2020 unemployment benefits, that doesn't mean your state will too. Although some states don't tax, or don't fully tax, unemployment compensation, most states do. However, a handful of states exempt unemployment compensation just for 2020 and/or 2021 to help residents impacted by the pandemic. Other states are adopting the $10,200 exemption for state tax purposes. To see how your state treats unemployment benefits, see Taxes on Unemployment Benefits: A State-by-State Guide.

Normally, you have the option to have as much as 10% of your weekly unemployment benefits withheld for federal taxes. Taxpayers will receive a Form 1099-G from the IRS, which shows the amount received and the amount of any federal income tax removed from your benefits. Taxes may be withheld from unemployment benefits at the request of the benefits claimant by using Form W-4V, while others who choose not to have their taxes withheld may need to make estimated tax payments during the year, according to the IRS.

You should file your claim in the state where you worked. For instance, for residents of Maryland and Virginia who work in the District of Columbia, it is required that you file your claim with the District of Columbia.

If you worked in multiple states, check with the unemployment office of the state you currently live in for information on how to file your claim appropriately with other states.

Obviously, if you’re still working full-time, then you’re not unemployed and, therefore, not eligible for unemployment benefits. But if, say, you’ve lost one job but kept another, or if you get paid for a temporary assignment, you can still collect unemployment benefits. However, they will be reduced accordingly to compensate for the additional income you’re receiving. You must report your gross wages earned each week, not just your take-home pay.

In Missouri, for example, partial unemployment benefits are calculated by taking your weekly wages and subtracting $20, or 20% of your weekly benefit amount, whichever is greater. That amount is your deduction, which is then subtracted from your weekly benefit and rounded down to an even dollar amount. Any withholding for federal taxes and such is taken from this amount.

Although state policies vary, as a general rule, if you perform part-time or temporary work, which includes self-employment, you are still required to fulfill your state’s requirement of providing a list of new job searches each week. The District of Columbia, for example, requires listing two job applications each week (although this requirement has been suspended during the coronavirus pandemic; filers aren’t required to list two applications, for now). And your state wants you to have the time to actively look for full-time employment, with the selfish goal of stopping payments of unemployment benefits to you when you return to work full time.

Now that you’ve calculated how much you'll receive in unemployment benefits on a weekly basis, there’s no better time to put pen to paper and budget for the next few months. “This is an important time to determine your fixed and discretionary expenses,” says Lisa Brown, chief strategy officer at financial planning firm Brightworth in Atlanta. Brown recommends speaking with your mortgage company if you’re a homeowner and inquiring with creditors, including credit card companies, to see if there are special programs for those whose jobs are impacted by the COVID-19 pandemic and to see if you’re eligible to defer or reduce monthly payments above and beyond what the government is proposing.

Creditors in particular want you to know that they’re concerned about your financial wellbeing, and your ability to pay your bills. You’ve likely seen e-mails from mortgage services, credit card companies and banks expressing their commitment to help you stay on top of your finances. While it’s better to maintain your monthly payments pre-virus and pre-unemployment, it might be worth it to reach out and inquire about your options to reduce your minimum monthly payments.

Brown also recommends that you look at how much money you have in your bank, and stretch it out as much as possible to avoid tapping into retirement accounts (which could come with a significant tax penalty).

The U.S. Labor Department's CareerOneStop site provides links to each state’s relevant agency to speed your path to filing claims for unemployment benefits. The site also boasts a wealth of resources aimed at getting you back to work: education/training courses, job search resources and scores of toolkits for researching careers.

The American Rescue Plan Act – the massive, $1.9 trillion economic stimulus package that President Biden signed on March 11 – sends a lot of money in many different directions. Almost every American will be impacted in one way or another. But when it comes to providing significant financial relief directly to Americans suffering the most through the COVID-19 pandemic, a lot of the American Rescue Plan's provisions really don't provide a lot of bang for the buck. In other words, they won't necessarily make an immediate and/or meaningful impact on the financial health of Americans who need help the most.

However, there are a handful of provisions in the new stimulus law that go above and beyond when it comes to putting (or keeping) substantial amounts of money in the pockets of millions of Americans who are struggling financially right now. These six American Rescue Plan provisions will provide the most financial relief for the greatest number of people. As outlined below, most of them involve some sort of tax break, a couple of them provide direct payments, but all of them provide (or could provide) financial assistance that is both deep and wide.

[Stay on top of all the new stimulus bill developments – Sign up for the Kiplinger Today E-Newsletter. It's FREE!]

$1,400 Stimulus Checks

The American Rescue Plan authorizes a third round of $1,400 stimulus checks for each eligible person ($2,800 for couples), plus an additional $1,400 for each dependent (regardless of the dependent's age). However, as with the first- and second-round payments, the third-round stimulus checks will be reduced – or eliminated – for people with an income above a certain amount.

If you filed your most recent tax return as a single filer, your third stimulus check will start to be "phased-out" (i.e., reduced) if your adjusted gross income (AGI) is $75,000 or more. That threshold jumps to $112,500 for head-of-household filers, and to $150,000 for married couples filing a joint return. Third-round stimulus checks will be completely phased out for single filers with an AGI above $80,000, head-of-household filers with an AGI over $120,000, and joint filers with an AGI exceeding $160,000. Use our Third Stimulus Check Calculator to estimate the amount of your stimulus payment.

Nonresident aliens and anyone who can be claimed as a dependent on someone else's tax return do not qualify for a stimulus check.

Eligible Americans who don't receive a third stimulus check, or don't receive the full amount, can claim the difference as a Recovery Rebate credit when they file their 2021 tax return next year.

For more information, see Your Third Stimulus Check: How Much? When? And Other FAQs.

Unemployment Benefits

Last March, the CARES Act was a life saver for people who lost their job because of the pandemic. Unemployment benefits were provided to self-employed people, independent contractors, and others out of work because of the coronavirus pandemic who don't otherwise qualify for benefits. Weekly unemployment checks were also increased by $600 through July 2020. Benefits were made available for a longer period of time, too.

In December, the COVID-Related Tax Relief Act extended benefits for people who usually don't qualify for unemployment. An extra payment was also authorized, but at $300 per week instead of $600 per week. The number of weeks of benefits someone may claim was increased from 39 to 50, too. However, these benefits were set to expire on March 14.

Under the American Rescue Plan, the enhanced unemployment benefits are extended to September 6, 2021. That includes the $300-per-week of additional payments beyond the normal unemployment compensation allowed. (Progressives wanted a minimum of $400 in extra weekly benefits, but the amount was pushed back down to $300 during negotiations in the Senate.)

There's also a new tax break for the unemployed. Thanks to the American Rescue Plan, the first $10,200 of unemployment benefits received in 2020 are exempt from tax for households with an adjusted gross income of $150,000 or less (although unemployment compensation received doesn't count toward the $150,000 cut off). The IRS is figuring out how people who already filed their 2020 tax return can claim this new tax exemption. They will probably be able to automatically issue a refund to affected taxpayers – so don't file an amended return at this point. (Also remember that state taxes may still apply to the full amount of unemployment benefits you received in 2020.)

For more information on these new developments, see American Workers Get Enhanced Unemployment Benefits as Biden Signs Stimulus Package.

Child and Dependent Care Tax Credit

Finding and affording childcare is one of the more difficult challenges workers are facing during the pandemic. To help address the childcare affordability crisis, the American Rescue Plan significantly expands the child and dependent care tax credit for one year.

For the 2020 tax year, if your children were younger than 13, you were eligible for a 20% to 35% non-refundable credit for up to $3,000 in child-care expenses for one child or $6,000 for two or more. The percentage decreased as income exceeded $15,000.

The American Rescue Plan makes a number of enhancements to the credit for the 2021 tax year. First of all, the new stimulus law makes the credit refundable for this year. That helps lower-income people the most, since they are more likely to lose all or some of the credit's worth when it's non-refundable. It also bumps the maximum credit percentage up from 35% to 50% for 2021.

More of your childcare expenses are subject to the credit, too. Instead of up to $3,000 in childcare expenses for one child and $6,000 for two or more, the American Rescue Plan allows the credit for up to $8,000 in expenses for one child and $16,000 for multiple children in 2021. When combined with the 50% maximum credit percentage, that puts the top credit for this tax year at $4,000 if you have just one child and $8,000 for more kids.

In addition, the full credit will be allowed for families making less than $125,000 a year (instead of $15,000 per year). After that, the credit starts to phase-out. However, all families making between $125,000 and $440,000 will receive at least a partial credit.

See Child Care Tax Credit Expanded for 2021 for more information.

Child Tax Credit

Another way to help families with children is to increase the child tax credit. For 2020 tax returns that you're filing this year, the credit is worth $2,000 per child age 16 or younger. It also begins to disappear as income rises above $400,000 on joint returns and above $200,000 on single and head-of-household returns. For some lower-income taxpayers, the credit is partially "refundable" (up to $1,400 per qualifying child) if they have earned income of at least $2,500. That means the IRS will issue you a refund check for the refundable amount if the credit is worth more than your income tax liability.

The American Rescue Plan provides a dramatic, one-year expansion of the child tax credit for the 2021 tax year. One of the biggest changes is to the amount of the credit. For 2021, it jumps from $2,000 to $3,000 for most children – but to $3,600 for children 5 years old and younger. The extra amount ($1,000 or $1,600) is reduced – potentially to zero – for families with higher incomes, though. For people filing their tax return as a single person, the extra amount starts to phase-out if their adjusted gross income is above $75,000. The phase-out begins at $112,500 for head-of-household filers and $150,000 for married couples filing a joint return. The credit amount is further reduced under the pre-existing $200,000/$400,000 phase-out rules.

Another important change is that the 2021 credit is fully refundable. That means refund checks triggered by this year's credit can be greater than $1,400. The $2,500-of-earned-income required is dropped for 2021, too.

Children age 17 also qualify for the 2021 credit. That will make a huge difference for parents with kids turning 17 this year – that's an additional $3,000 they weren't expecting.

Last but not least, half of the 2021 credit amount will be paid in advance through periodic payments issued between July and December of this year. We expect the periodic payments to be monthly, but that will be up to the IRS (they might make payments on a different schedule). You'll claim the other half of the credit on your 2021 tax return, which you'll file next year. Kiplinger's 2021 Child Tax Credit Calculator lets you know how much your credit will be for 2021 (including how much your advance payments will be if paid monthly).

For more information about the 2021 child tax credit, see Families Get a $3,000 Child Tax Credit for 2021.

Earned Income Tax Credit

The earned income tax credit (EITC) provides an incentive for people to work. And, for 2021, many more workers without qualifying children will be able to claim this valuable credit, including both younger and older Americans. The "childless EITC" amounts will be higher, too. Plus, there are other changes that will help the bottom line for lower-income Americans as well.

For the 2020 tax returns that people are filing now, the maximum EITC ranges from $538 to $6,660 depending on your income and how many children you have. But there are income limits for the credit. For example, if you have no children, your 2020 earned income and adjusted gross income (AGI) must each be less than $15,820 for singles and $21,710 for joint filers. If you have three or more children and are married, though, your 2020 earned income and AGI can be as high as $56,844. (Note: People can use their earned income from 2019 to determine the EITC for the 2020 tax year if it results in a higher credit amount.) If you don't have a qualifying child, you must be between 25 and 64 years old at the end of the tax year to claim the EITC.

The American Rescue Plan expands the 2021 EITC for childless workers in a few ways. First, the new law generally lowers the minimum age from 25 to 19 (except for certain full-time students). It also eliminates the maximum age limit (65), so older people without qualifying children can claim the 2021 credit, too. The maximum credit available for childless workers is also increased from $543 to $1,502 for the 2021 tax year. Expanded eligibility rules for former foster youth and homeless youth apply as well.

As with the 2020 EITC, you can use your 2019 earned income instead of your 2021 income if that will boost your credit amount. That will help many people who were laid off, furloughed, or otherwise suffer an income loss this year.

There are also a few permanent EITC changes in the American Rescue Plan. For instance, workers who otherwise wouldn't be able to claim the credit because their children can't satisfy the identification requirements can now claim the childless EITC. Certain married but separated couples can now claim the EITC on separate tax returns, too. The limit on a worker's investment income is also increased from $3,650 (for 2020) to $10,000 (adjusted for inflation after 2021).

Student Loan Debt

Our final power punching piece of the American Rescue Plan won't affect very many people right now. But it will save millions of Americans big bucks if it's eventually paired with another financial benefit on President Biden's wish list – student loan forgiveness.

Normally, the amount of any debt that is canceled, forgiven, or discharged for less than the full amount you owe is taxable and must be reported on your tax return. For example, if you have a $20,000 loan that is forgiven for some reason, you must report $20,000 of additional income on your tax return. There are several exceptions to this general rule, but in most cases forgiven student loans currently result in a higher tax bill.

The American Rescue Plan adds a temporary exception to the general rule for student loans. From 2021 to 2025, forgiven student loan debt is not subject to federal income tax. (To be clear, the American Rescue Plan doesn't forgive any student loan debt. At this time, the tax exemption only applies to debt cancelled under current student loan forgiveness programs.)

Right now, relatively few people have their student loans wiped away. But President Biden promised to forgive up to $10,000 of student loan debt per person when he was running for office. If he keeps that promise, the tax exemption could save millions of people thousands of dollars. If, for example, you're in the 22% tax bracket, having $10,000 of forgiven student loan debt taken off your tax return will save you $2,200. So, as you can see, the tax exemption for forgiven student loan debt has a lot of potential.

For more on this development, see Forgiven Student Loan Debt Will Be Tax-Free.

Millions of anxious, unemployed Americans are breathing a collective sigh of relief knowing that they will continue to receive – without interruption – supplemental weekly federal unemployment benefits into early September after President Joe Biden signed into law on Thursday the $1.9 trillion stimulus package known as the American Rescue Plan Act of 2021.

Biden’s signature comes just days before the enhanced federal unemployment benefits, established by previous stimulus packages, were set to expire. As part of the new plan, nearly one-third of American households who are currently unemployed or will lose their job this summer will receive federal unemployment benefit payments of $300 per week – on top of standard benefit levels – through September 6, 2021. What’s more, as much as $10,200 of unemployment benefits received in 2020 will be exempt from tax for households whose incomes are less than $150,000. (Note: The IRS is working on 2020 tax form updates to account for the new exemption. If you already filed your 2020 tax return, don't rush to file an amended return – wait until the IRS issues instructions.)

The American Rescue Plan, which was finalized by the House on Wednesday in a firmly partisan 220-211 vote (with one Democrat voting no), is the latest iteration of federal health and economic aid to cushion the blows wrought by the novel coronavirus which, since March 2020, has significantly hobbled the American economy.

The costs of the extended unemployment benefits represent about 13% of the package’s $1.9 trillion budget, which also includes a new round of stimulus checks, an enhanced child tax credit, relief for renters and more. The original version of the bill, approved by the House on February 27, provided federal unemployment benefit payouts of $400 a week through the end of September, but a bevy of last-minute compromises between conservatives and progressives on the Senate floor, in order to secure approval among all Democratic senators, ultimately shrank the payouts by $100 a week and cut the period of the payouts by three weeks.

Democratic lawmakers assert that extending the timeline for providing the bonus federal unemployment benefits into early September will hopefully prevent millions of Americans from losing those benefits abruptly when the Senate is on summer recess. That's what happened last summer, causing millions of unemployed Americans to worry about making up for that supplemental income.

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Links and resources mentioned in this episode:

• A Kiplinger Special Report: Roth Conversions
• Your Guide to Roth Conversions
• Marguerita M. Cheng, CFP®, RICP®
• Kennet Lyle Block

Transcript

David Muhlbaum: The COVID-19 pandemic and accompanying recession have been hard on women with millions of jobs lost. What does this mean for future earnings and retirement savings? We talk with financial planner Marguerita Cheng about how she's helping clients adjust. Also, what dad taught us about personal finance. Coming up on this episode of Your Money's Worth. Stick around.

David Muhlbaum: Welcome to Your Money's Worth. I'm kiplinger.com senior editor, David Muhlbaum, joined as ever by my co-host, senior editor Sandy Block. How are you, Sandy?

Sandy Block: I'm doing great, David.

David Muhlbaum: I have one single financial trivia question for you. I'm going to give you someone's first and middle name and you're going to give me the last name. Okay?

Sandy Block: Okay.

David Muhlbaum: William, Victor...

Sandy Block: Roth. William Victor Roth, Senator from Delaware. Last Republican the first state elected to the United States Senate.

David Muhlbaum: Yep. That is some crazy detail you got there, but it wasn't what I was expecting. Come on. Why do you know who he is? Because his name is on...

Sandy Block: Obviously David, the Roth IRA.

David Muhlbaum: Well, I think we'd be hard pressed to find another product known for a politician. No, seriously. Like, there are laws that sometimes carry the names of their sponsors. I'm thinking of Sarbanes-Oxley or McCain-Feingold or my old favorite, Dingell-Tauzin. It's all very Washington stuff, but Roth, he lives on.

Sandy Block: Yeah. Well, that's partially because he created a framework that has held up really well. Those laws you mentioned... Well, they've been superseded by court decisions and new legislation and whatnot, but the Roth IRA is still soldiering on more than 20 years later.

David Muhlbaum: Right. Now, why do I want a Roth IRA again?

Sandy Block: Because it's simple and there's a very good chance it will reduce the amount of taxes that you have to pay on your savings, which everybody likes. When you put money in a Roth, as long as you've owned it for at least five years, and when you're 59 ½ and you take the money out, all of your earnings, everything that's in there, your contributions are tax-free. You can take out a little bit, you can take out a lot, you can leave it to your kids. But compared to traditional IRAs, which are subject to all kinds of rules and taxes, sometimes 100% of the amount that you take out, a Roth is really, really nice thing to have in your portfolio because it's so easy and it's so flexible. But David, you didn't bring up William V. Roth Jr. just to make sure people remembered his name.

David Muhlbaum: No. William V. Roth Jr. No, you're right. My interests are not purely historical, they're partially promotional, because I want to push a link to a special report Kiplinger's just published about converting an existing IRA to a Roth IRA, which is one of the main ways people get on the Roth track, but it's not super easy and it has potential tax consequences and social and Medicare effect. So, you want to get it right and that's the point of this report: helping with that.

Sandy Block: And it's a really good report, David, but what's the catch?

David Muhlbaum: Well, you'll have to give us your email address, but don't fear, it's an opt-in situation. So if you want to hear more from Kiplinger beyond this report, you have to check to do that. And frankly, if you don't want to play around with that at all, you can just search, Your Guide to Roth Conversions. I'm proud to say our content dominates that search.

Sandy Block: I know, and I wrote it.

David Muhlbaum: Exactly. You're welcome, Sandy. When we return in our main segment, the shecession, what women and men can do to cope.

David Muhlbaum: For our main segment, we're joined by Marguerita Cheng, the CEO and founder of financial advisory Blue Ocean Global Wealth. She's a certified financial planner who has contributed to a variety of outlets, including well, Kiplinger. You'll find her content in our Building Wealth channel. Welcome, Rita.

Marguerita Cheng: Thank you so much for having me. So excited to be here.

Sandy Block: You've got an impressive array of certifications, Rita, but the one that stood out to us for today's discussion, was your work on women's initiatives at the Certified Financial Planners board. This episode is going to air on International Women's Day and personal finance issues affecting women is what we want to talk to you about.

David Muhlbaum: Yes, and notably, this women's day comes on what's been an extremely difficult year, specifically in the economy. Coming into 2020, women had just hit this milestone of making up the majority of the workforce and then wham, pandemic. Who's losing the bulk of jobs? Women, and this is quite different from 10 plus years ago during the Great Recession. Now, we're not a think tank and you're not a labor economist, but you do know the topic and you have clients, which puts you closer to the situation. So, what are you seeing out there?

Marguerita Cheng: Sure. Well, the one thing I can say is I am based here in Maryland and of course I love the Washington Post and there was an article in Sunday's paper that talked about childcare and infrastructure. And when people think infrastructure, they think roads, bridges, public transportation, and that's true, that is infrastructure, but we need infrastructure to support women in the workplace. And that means childcare. So what I'm seeing is particularly for women, especially those who have school-aged children, it has been challenging. You can't just leave your eight-year-old in front of the computer all day, but first of all, Child Protective Services might come. You can't leave children under 13 unattended and it kind of violates everything that we've told ourselves... Limit your screen time. So it has posed unique challenges.

Sandy Block: So Rita, you're talking about... We were talking about this off mic about women who still have jobs -- and for some people that's a problem they'd like to have -- and maybe they even have above-average family income and savings. And it's the nature of a lot of the news coverage of this so-called shecession to focus on the hard luck stories. People have trouble getting food on the table, but it sounds like you're saying this is kind of tough for everybody.

Marguerita Cheng: It is tough for everyone. I would be remiss if I didn't acknowledge that people of certain communities are more affected than others and certain occupations. Women have experienced either loss of income or income volatility and in some situations I did tell clients it's okay to cut back on your retirement plan contributions. This is last year, they were furloughed. So they were glad that they still have a job and they have healthcare, but they did have to cut back. Now, things are a little bit better for them and they're able to increase their contributions, but it still is nonetheless challenging. So I think being a certified financial planner, I don't just help people manage their portfolio, I'm helping them manage their financial plan and ultimately manage their financial lives. So sometimes hearing from somebody, that it is okay for you to temporarily suspend 401(k) contributions or reduce them, that way you can have your cash flow to make sure you're able to pay your mortgages and other bills.

Marguerita Cheng: Sometimes it's good for people to hear that that is okay. These are extraordinary times and sometimes it's okay to just pause and just focus on the more short to intermediate-term priorities.

David Muhlbaum: But at the same time, that's the sort of fundamental risk or that's the fundamental issue of women having a harder time building up retirement savings. That's one of those long-term challenges that women face.

Marguerita Cheng: Absolutely. With retirement, there are challenges. So we talked about how there is a wage gap or income gap, which actually then leads to the wealth gap, because women who do work part-time or who are independent contractors are less likely to have access to a retirement plan. And if their earnings are less, that means their Social Security benefit will be less. And if their earnings are less, they may not be able to save as much and they might not have access to my goodness, a pension or a defined benefit plan. And then you couple that with longer life expectancy and living longer isn't necessarily a risk or a liability, it's just something that we need to be aware of. So we have smaller guaranteed lifetime income, smaller asset bases to fund longer goals. So, it is very important that we are being aware of this challenge and doing our best to address it.

David Muhlbaum: Those are concerns women have faced for well, a while. What I'm trying to wrap my head around is why is this recession, this shecession, why is it different from 10-plus years ago? Why is it women who are taking the hit, losing so many jobs in the workplace?

Marguerita Cheng: So this is what's interesting and I do remember the Great Recession, 2007 to 2009. It seems so long ago, but it's like one of my clients told me, "Today I am 60. During the great recession, I was 48. Oh my God, I'm 60." This is my client talking, not me. Back then, education... Like the jobs that were not affected then are almost like jobs that are affected today. Service, more human contact. Also, if you're in healthcare... I actually have a client who is a registered nurse and one would think, "Oh my goodness, your job is secure." She's a registered nurse at Children's Hospital. Some of the sickest patients and some of these procedures have actually been canceled. So even though she's a registered nurse at Children's Hospital, like she didn't lose her job, but the opportunity to pick up extra shifts is just not there.

Marguerita Cheng: So, she did say this to me and I did help this family refinance their mortgage. They were able to save a lot of money, like almost $600 a month. She said that that savings came at a great time. She's blessed because she has a job and she has health insurance, but she's not able to pick up those extra shifts.

Sandy Block: So Rita, we're talking a lot about some macroeconomic issues, but Kiplinger is all about actionable advice. And I know a lot of your clients are women. Given the challenges that women face, not just now, but ongoing because of lower wages, longer lifespans, divorce, I just wonder when women come to you, how do you advise them to sort of overcome some of these obstacles that we can't solve on this podcast? But we know they're out there, particularly with respect to retirement, because we know that a lot of women really struggle in retirement, that there's a big fear that they'll outlive their money, require long-term care. I'm just wondering, some of the basic advice you give to women to overcome some of the obstacles that they're facing?

Marguerita Cheng: So the first thing that I do is I always start with financial planning. I actually do not accept money management-only clients. And the reason for that is I want to understand their assets, their liabilities, their income, expenses, as well as insurance they have. So, that's their baseline. And sometimes even if your baseline is bad, sometimes people don't even know their baseline. So we start there. Then we look at their employer benefits. We take the time to explain Social Security and discuss claiming strategies. And I think because I focus a lot on financial planning and the process, it's very educational. So people start to feel more comfortable and confident about their situation and taking action. I think for women... It doesn't mean this is not important to men. I want to be very clear, but women really value that integrated approach or holistic approach

Marguerita Cheng: And I can make sure I quantify that. So if a woman comes in and she doesn't have enough for retirement, but she has the cash flow and you tell her to save for retirement, it doesn't mean that she doesn't want to save, she may be thinking four or five steps ahead. "So, Rita, if you tell me to save more for retirement, I know that's pre-tax or post-tax and that 59 and a half, I might not have enough money in my cash reserve. So how does that decision affect my other decisions?" And so I think that that is particularly helpful for women understanding where they are and then based on action steps, how that affects their current situation and what they can do to improve it. And that way, it's not me telling them what to do, it's me guiding them and providing options.

David Muhlbaum: You're obviously in touch with your clients and adapting your guidance to them for the current circumstances, but you're also very much connected to the Certified Financial Planner board, the CFP board and the community more broadly. So, I'm wondering what's the buzz internally? Like what are planners talking about, both among yourselves and as policy, to help women cope?

Marguerita Cheng: So, we have known for some time that women are underrepresented in our profession, and that has consequences for the public because then if they are underrepresented in our profession, they may be underserved. Now, people say, "Marguerita, women represent more than 51% of the population. Women are not a niche." I understand, but broad-based, women are not served. And then if you have women of color or women of more diverse populations, the gap is even more severe. So what CFP Board is doing, and I am part of the WIN, the Women's Initiative, as well as the Diversity Advisory Group is we are making sure that we make room for women in the profession. How we do that is as a certified financial planner, CFP Pro, I take the time to make sure that I'm available to answer questions of what it's like to be a certified financial planner, how I prepare to be a certified financial planner and what the profession is like. Unfortunately, when people hear financial planner, they have a vision of like Wall Street or Boiler Room, and that's not the case. So, it's overcoming those perceptions and building awareness and then creating opportunities.

David Muhlbaum: We know the percentage of women in CFP, it's like 25%?

Marguerita Cheng: It's about 23%. Now what is interesting about this number, some people say, "Well, that number has been flat." It was 20%, 21%, 30 years ago when I entered the profession. The number of female or women CFP certificants has increased, but so has the proportion of overall certificants. So, there are more certified financial planners certificants who are women in 2021 than 2015 and 2016. That is a good thing. The percentage has increased slightly, maybe not as much because the overall population of CFP professionals has also increased.

David Muhlbaum: Got it.

Marguerita Cheng: But I am on a mission to create awareness because it's not enough to just recruit women. Retention is very important.

David Muhlbaum: Which brings me to a question about... I'm sure there are plenty of women who want to have a woman as their CFP, but given the numbers, that may not always work. Is part of these initiatives you're doing helping male CFPs be better in some way or more responsive to women's concerns?

Marguerita Cheng: Absolutely. The reality is some women do want to work with a women's CFP and other women say, "You know what? I don't really have to have a woman CFP, but I want to make sure my CFP understands that I'm not just a woman. I have many roles. I'm wife, mother, daughter, caregiver, employee, entrepreneur." So, understanding that their lives are multifaceted, but it's absolutely true. We need to make sure that as a profession, we are sensitive to the needs of women.

Sandy Block: Rita, we have a lot of listeners and a lot of them are men and we don't want to rule them out. So I guess my question to you is we know the obstacles facing women, that they live longer, that they earn less, that often they're able to save less. What should men be doing to help their partners succeed, to prevent them from running out of money? What should men be doing?

Marguerita Cheng: Sure. So, I think that it is certainly okay if one partner or spouse takes a lead in the financial planning or financial decisions for the family. However, it is important that he, she, or they invite the other spouse, partner to the table. And here's exactly what I mean. It is never too late and it's never too early. My client today, she is 51. And she started planning with me when she was 36. And her parents had a planner, I never solicited. But one day her dad realized at this time he was 70. And he's like, "You know what? I think I need to work with your planner," talking to his daughter. And she's like, "Why? I thought you like your planner." "I realized..." This is the husband talking, "... that our planner doesn't really talk to your mom." And so, they became clients when they were 71 in 73.

Marguerita Cheng: And when I first met them, the wife was a little bit shy. But then in subsequent meetings, she'd come to the table and bring a notebook. And her husband, he wasn't being sexist. He's like, "You go girl, look at you being all prepared. Are you really taking an interest in personal finance?" This was so profound for me. She's like, "You know why I'm taking an interest? Because Rita actually takes an interest in me." She was 73 at the time and she's still alive and she's 78 today. So, the conclusion our story connect is it is certainly okay to be the lead, but at least invite that person into the decisions and conversations you're making particularly about when you decide to take social security or healthcare or long-term care issues, because this is something that's near and dear to my heart.

Marguerita Cheng: My parents were 14 years apart. And even though sometimes my mom might not have been interested in the details, my dad is no longer with us, but my dad made sure that my mom and I made sure too, was aware of what was in place to protect her so that... I know she misses my dad, but she is going to be okay in retirement.

David Muhlbaum: We were talking a couple of weeks ago with Mari Adam about couples and money. And one of the things that came up, one of the topics we discussed was spousal contributions to retirement plans, particularly when you had a differential of income between one of the spouses. This seems to me like it could be something that's become entirely topical because if you have a couple where one partner is now suddenly, and perhaps surprisingly out of the workforce, it could be time to reassess how their retirement is being funded. If they are no longer contributing to the retirement, maybe it's time for the spouse and in this case, it could be the husband, because we're talking about the shecession, to step up and make contributions to their retirement fund for them. Am I on to anything there, Rita?

Marguerita Cheng: I think that's a fantastic strategy. So I was talking about as you're in retirement being involved, but I like this. This is proactive and I've actually implemented that strategy. I really approach it with sensitivity because let's just say one spouse or partner is at home because it was their decision maybe to care for the children, or it could be a situation where maybe they lost their job. It's important and I've never had anybody be angry at me about this. I tell people that it's important that we are planning as a couple for your retirements. We want to take advantage of the tools that are available to us, right? And so, you don't have access to a retirement plan, but that should not preclude you from not being able to save for retirement. And I know you love your husband or wife, spouse, partner. That's not what this is about, but it's important that you have retirement set aside in your name. Not because he or she's going to take it. That's not what I'm saying, but it's important that just because your circumstance has changed, that your need to save for retirement has not.

Marguerita Cheng: So yes, I think it's a fine strategy, but it's always important that you approach it with sensitivity. You don't want the person who's not earning an income to feel that they're any less worthy and you don't want to feel like there's an issue of distrust or mistrust. I understand that can happen, but for purposes of conversation. So, David, I think it's a fantastic strategy.

David Muhlbaum: Thank you. And Rita, thank you so much for joining us today with your insights here for International Women's Day. We appreciate it very much.

Marguerita Cheng: Well, thank you so much for having me.

David Muhlbaum: So, Sandy, last week when we were talking with Cameron Huddleston, you mentioned that your father had died a few weeks ago. And my understanding is you're going to hold a memorial celebration for him in the next few days.

Sandy Block: That's right.

David Muhlbaum: Obviously again, my condolences and I'm sure you'll hear condolences from our community as well, but I thought maybe this would be an opportunity for while you're thinking about him, his life, his legacy, maybe to share something with us about what you learned from him about personal finance.

Sandy Block: Well, David, the thing I learned most importantly, and this is really striking me now because I'm settling his estate is that my dad really lived below his means. And he saved before everybody sort of realized that they needed an IRA or a 401(k). His company offered him stock at a discount and he thought that was such a good deal that he bought a lot of it. And as a result, I graduated from college debt-free. His house was paid for years ago. He pretty much lived off Social Security and a modest pension and his savings were there when I really needed it for his care. So, I think about the thing I learned most about my dad was just living not just within your means, but below your means. He would drive his cars until the wheels fell off.

And I'm sure other people thought we had a lot less money than we did, but in the long term it gave us so much more freedom and so much more flexibility to do the things that we wanted to do and to take care of things that we really needed to take care of. So, I really respect that. We weren't millionaires, but I think he lived a lot like the millionaire next door, which as the story goes, this is the guy who drove the oldest car, had the smallest house on the block, but probably had the most money in the bank.

David Muhlbaum: Right. What jumps out at me there is the idea of having freedom and flexibility and being able to take care of the unforeseen. Those are the upsides, the payoffs of that thrift your dad demonstrated. And I think that's what some people would describe as living comfortably, not the comfort of owning this or that thing, but the comfort of having reserves and knowing you're prepared.

Sandy Block: That's right. When he was getting older and medical expenses started going up or we needed to do things with the house, there was always money there for that. And I even remember him telling me, this is in his later years. He says, "When I go down to Walmart, I don't care what the grapes cost. If I want grapes, I buy them because I can afford that." So to him, that was the idea that was wealth, that he didn't have to check the price of grapes so he could just buy as many as he wanted, but I think that came from a lifetime of frugality. And the other thing it enabled him to do, which was really important to him, and I hope passes on to us, is he was very generous. He gave to a lot of charities. He had a lot of causes that were very important to him and he was able to help them out. And I think that enhanced his life. It was a very important thing to him and much more important than having a new car every couple of years.

David Muhlbaum: Yeah. That's the reward of giving, right? And I love the part about the grapes. Part of the trick of being thrifty is not letting it dominate you. To have those things where you can say, "What the heck, that's what I want, whatever." You need discipline to get to that place. But you also need self-awareness to remember to treat yourself and treat others. And please tell us something about the dogs. I understand that everyone knew him as the guy with the dogs.

Sandy Block: They all knew him as the guy with the dogs. My dad, when he retired fairly early, and that was another advantage of him having lived below his means, so he was retired on his own terms and he also had a pension. And his project, he adopted a Golden Retriever and trained that dog to do everything. And he got really interested in therapy dogs. His dogs were so well-trained that he took them to hospitals and nursing homes all over our area. The number of people that he... said he visited kept going up as he got older, but he claims he made at least 10,000 visits with these dogs. And he would just take them to visit people. Sometimes people who're very isolated, sometimes people with Alzheimer's who had never spoken, but just totally lit up when they saw the dogs and would react to them and respond to them. And the dogs were so well-trained that he could put treats on their paws and have them do little tricks and things like that. And they were very calm and really good with the old people.

Sandy Block: And that just gave him so much satisfaction. And that's what people remember about him, that he was the guy with the dogs. He would take them to Walmart and let them sit out front while he went in and shopped and come out and they would still be there, which just blew people away that these dogs would just sit patiently outside. And then he'd give them the bag and they'd carry it to the car. So they were definitely very famous in our town.

David Muhlbaum: That's awesome. They would sit outside? Unleashed, on a sit command and wait for him to come out?

Sandy Block: Yeah, on a sit command. They would sit in front of the Walmart and because people would come by and pet them and talk to them, but they wouldn't leave. They would just sit there until dad came out and then he would give them his bag, whatever he bought and they would carry it back to the car. That's how well trained those dogs were. That was his second career, training these dogs, and he was really good at it. And they were good dogs.

David Muhlbaum: Well, thank you for sharing, Sandy.

Sandy Block: Thank you for asking, David. It gives me a lot of peace to talk about my dad.

David Muhlbaum: That will just about do it for this episode of Your Money's Worth. If you like what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and a review. And if you've already subscribed, thanks, please go back and add a rating or a review if you haven't already. To see the links we've mentioned in our show, along with other great Kiplinger content on the topics we've discussed, go to kiplinger.com/podcast. The episodes, transcripts and links are all in there by date. And if you're still here, because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.

If you recently lost your job, you probably have a lot of questions about unemployment benefits. How do I apply for them? How much will I get? How long will the benefits last? You'll need answers to these questions right away so that you can start receiving compensation and readjusting your finances. But once the payments start arriving, another question will likely spring to mind: Will I have to pay taxes on my unemployment benefits?

When it comes to federal income taxes, the general answer is yes. Uncle Sam taxes unemployment benefits as if they were wages. However, when it comes to state income taxes, it depends on where you live. Most states fully tax unemployment benefits. However, some states don't tax them at all (sometimes because the state doesn't have an income tax), and a handful of states will only tax part of your benefits.

State Taxes on Unemployment Benefits: Alabama doesn't tax unemployment benefits. In addition, the first $50,000 received from an employer as severance pay, unemployment compensation, and the like as a result of "administrative downsizing" is also not taxed.

State Income Tax Range: Low: 2% (on up to $1,000 of taxable income for married joint filers and up to $500 for all others). High: 5% (on more than $6,000 of taxable income for married joint filers and more than $3,000 for all others). Some Alabama municipalities also impose occupational taxes on salaries and wages.

State Taxes on Unemployment Benefits: Alaska does not tax unemployment compensation.

State Income Tax Range: There is no state income tax.

State Taxes on Unemployment Benefits: Arizona taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 2.55% (on up to $57,305 of taxable income for joint filers and up to $28,653 for single filers). High: 2.98% (on taxable income over $57,305 for joint filers and over $28,653 for single taxpayers).

Beginning in 2023, a flat rate of 2.5% applies.

State Taxes on Unemployment Benefits: Arkansas taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 2% (on taxable income from $5,000 to $9,999 for taxpayers with net income of $84,500 or less, and on the first $4,300 of net income for taxpayers with net income over $84,500). High: 4.9% (on taxable income from $23,600 to $84,500 for taxpayers with net income of $84,500 or less, and on taxable income over $8,500 for taxpayers with net income over $84,500).

State Taxes on Unemployment Benefits: Californians don't have to pay state income taxes on unemployment benefits.

State Income Tax Range: Low: 1% (on up to $20,198 of taxable income for married joint filers and up to $10,099 for those filing individually). High: 13.3% (on more than $1,354,550 for married joint filers and $1 million for those filing individually).

State Taxes on Unemployment Benefits: Colorado taxes unemployment compensation to the same extent that it's taxed under federal law.

Income Tax Range: Colorado has a flat income tax rate of 4.4% starting with the 2022 tax year. (It was lowered from 4.55% to 4.4% by Proposition 121, which was approved by voters on November 8, 2022.) The rate can also be lowered later if there is a high fiscal year revenue growth rate.

Denver and a few other cities in Colorado also impose a monthly payroll tax.

State Taxes on Unemployment Benefits: Connecticut taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 3% (on up to $20,000 of taxable income for married joint filers and up to $10,000 for those filing individually). High: 6.99% (on the amount over $1 million for married joint filers and over $500,000 for those filing individually).

State Taxes on Unemployment Benefits: Delaware taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 2.2% (on taxable income from $2,001 to $5,000). High: 6.6% (on taxable income above $60,000). Wilmington also imposes a city tax on wages.

State Taxes on Unemployment Benefits: The District of Columbia (Washington, D.C.) doesn't tax unemployment benefits.

State Income Tax Range: Low: 4% (on taxable income up to $10,000). High: 10.75% (on taxable income over $1 million).

State Taxes on Unemployment Benefits: There are no taxes on unemployment benefits in Florida.

State Income Tax Range: There is no state income tax.

State Taxes on Unemployment Benefits: Georgia taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 1% (on the first $1,000 of taxable net income for married couples filing jointly; on the first $750 for individual filers; and on the first $500 for married couples filing separately). High: 5.75% (on taxable income over $10,000 for married couples filing jointly; on taxable income over $7,000 for individual filers; and on taxable income over $5,000 for married couples filing separately).

Beginning in 2024, the state is switching to a flat rate of 5.49%. From 2025 to 2029, the rate will gradually be reduced to 4.99% if certain economic targets are met. If the economic targets are not met, the rate reduction schedule will be delayed.

State Taxes on Unemployment Benefits: Hawaii taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 1.4% (on taxable income up to $4,800 for married couples filing jointly; on up to $2,400 for married couples filing separately and individual filers). High: 11% (on taxable income over $400,000 for married couples filing jointly and surviving spouses; on over $200,000 for married couples filing separately and individual filers).

State Taxes on Unemployment Benefits: Idaho taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 1% (on taxable income up to $3,324 for married joint filers and up to $1,662 for individual filers). High: 6% (on taxable income of $16,622 or more for married joint filers and $8,311 or more for individual filers).

Beginning in 2023, a flat rate of 5.8% on taxable income over $2,500 ($5,000 for joint filers) will apply. The threshold will be adjusted annually for inflation after 2023.

State Taxes on Unemployment Benefits: Illinois taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: There is a flat rate of 4.95% of federal adjusted gross income after modifications and personal exemptions.

State Taxes on Unemployment Benefits: Although unemployment benefits are taxable in Indiana, part of your benefits may be deductible. The deductible amount depends on your federal adjusted gross income, how much unemployment compensation you receive, and your filing status. Complete the "Unemployment Compensation Worksheet" in the Form IT-40 instruction booklet to calculate the exact amount of your deduction.

State Income Tax Range: The Hoosier State has a flat rate of 3.23% of state adjusted gross income after modifications. Counties also levy income taxes.

For 2023 and 2024, the state rate is reduced to 3.15%. If state revenues reach certain thresholds, the state rate will drop to 3.1% for 2025 and 2026, to either 3% or 3.1% for 2027 and 2028, and to either 2.9%, 3% or 3.1% after 2028.

State Taxes on Unemployment Benefits: Unemployment benefits are fully taxable in Iowa.

State Income Tax Range: Low: 0.33% (on up to $1,743 of taxable income). High: 8.53% (on taxable income over $78,435). Alternative tax rates and computation methods are allowed for certain lower-income taxpayers. Iowa also has local income surtaxes used for schools and emergency medical services.

Beginning in 2023, the lowest Iowa personal income tax rate will be 4.4% (on up to $6,000 of taxable income for single filers and up to $12,000 of taxable income for joint filers), while the highest rate will be 6% (on more than $75,000 of taxable income for single filers and more than $150,000 of taxable income for joint filers). The top rate will drop to 5.7% in 2024 and then to 4.82% in 2025. Starting in 2026, a flat rate of 3.9% will apply.

State Taxes on Unemployment Benefits: Kansas taxes unemployment benefits to the same extent they're taxed under federal law.

State Income Tax Range: Low: 3.1% (on taxable income from $2,501 to $15,000 for single filers and from $5,001 to $30,000 for joint filers). High: 5.7% (on more than $30,000 of taxable income for single filers and more than $60,000 for joint filers). Kansas also has an "intangibles tax" levied on unearned income by some localities.

State Taxes on Unemployment Benefits: Kentucky taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Kentucky currently has a flat income tax rate of 5%. Certain counties, cities and other local government entities (such as school boards) can levy an additional occupational license payroll tax on wages earned by employees working within their boundaries.

The state rate is reduced to 4.5% beginning in 2023. Further 0.5% reductions are possible in future years if certain revenue and budget conditions are met and the state legislature authorizes a reduction.

State Taxes on Unemployment Benefits: Louisiana taxes unemployment benefits to the same extent as they're taxed under federal law.

State Income Tax Range: Low: 1.85% (on $12,500 or less of taxable income for individuals, $25,000 for joint filers). High: 4.25% (on more than $50,000 of taxable income; $100,000 for joint filers).

Each personal income tax rate will be reduced beginning April 1, 2024, and each April 1 thereafter through 2034, if the prior fiscal year's actual individual income tax collections exceed a certain amount.

State Taxes on Unemployment Benefits: Maine taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 5.8% (on taxable income less than $23,000 for single filers; less than $46,000 for joint filers). High: 7.15% (on taxable income of $54,450 or more for single filers; $108,900 for joint filers).

State Taxes on Unemployment Benefits: Maryland taxes unemployment benefits to the same extent they're taxed at the federal level.

State Income Tax Range: Low: 2% (on less than $1,000 of taxable income). High: 5.75% (on more than $250,000 of taxable income for single filers; more than $300,000 for joint filers). Maryland counties and Baltimore City levy additional income taxes.

State Taxes on Unemployment Benefits: Massachusetts taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Massachusetts has a flat rate of 5% for most classes of taxable income.

Beginning in 2023, an additional 4% tax applies to taxable income over $1 million (the additional tax was approved by Massachusetts voters on November 8, 2022).

State Taxes on Unemployment Benefits: Michigan taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Michigan has a flat tax rate of 4.25%. Cities can levy income taxes as well, on both residents and non-residents (who are taxed half the rate of residents).

State Taxes on Unemployment Benefits: Minnesota taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 5.35% (on less than $28,080 of taxable income for single filers and on less than $41,050 for joint filers). High: 9.85% (on more than $171,220 of taxable income for single filers and on more than $284,810 for joint filers).

For 2023, the lowest rate applies to the first $30,070 of taxable income for single filers and the first $43,950 of taxable income for joint filers. The highest rate applies to taxable income over $183,340 for single filers and over $304,970 for joint filers.

State Taxes on Unemployment Benefits: Mississippi taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 4% (on taxable income from $5,001 to $10,000). High: 5% (on taxable income over $10,000).

Starting in 2023, there is no tax on the first $10,000 of taxable income. The tax rate on taxable income above $10,000 will also be reduced to 4.7% in 2024, 4.4% in 2025, and 4% in 2026 and thereafter.

State Taxes on Unemployment Benefits: Missouri taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 1.5% (on taxable income from $112 to $1,121). High: 5.3% (on more than $8,968 of taxable income). Kansas City and St. Louis also impose an earnings tax.

Beginning in 2023, the top rate is reduced to 4.95% and the first $1,000 of income is exempt (adjusted for inflation after 2023). Starting in 2024, additional top rate reductions of 0.15% are possible if the net general revenue collected by the state exceeds a certain threshold. In addition, up to three more top rate reductions of 0.1% are possible if net general revenue exceeds a different threshold.

State Taxes on Unemployment Benefits: Montana currently doesn't tax unemployment benefits. However, beginning in 2024, the exemption for unemployment compensation is repealed.

State Income Tax Range: Low: 1% (on up to $3,300 of taxable income). High: 6.75% (on taxable income over $19,800).

Beginning in 2024, there will be only two tax rates: 4.7% (on up to $20,500 of taxable income for single filers and $41,000 for married couples filing jointly) and 6.5% (on taxable income over $20,500 for single filers and $41,000 for married couples filing jointly).

State Taxes on Unemployment Benefits: Nebraska taxes unemployment compensation to the same extent that it's taxed under federal law

State Income Tax Range: Low: 2.46% (on up to $3,440 of taxable income for single filers and $6,860 for married couples filing jointly). High: 6.84% (on taxable income over $33,180 for single filers and $66,360 for married couples filing jointly).

Beginning in 2023, the top rate is gradually reduced according to the following schedule: 6.64% in 2023, 6.44% in 2024, 6.24% in 2025, 6% in 2026, and 5.84% in 2027 and thereafter.

State Taxes on Unemployment Benefits: There are no taxes on unemployment benefits in Nevada.

State Income Tax Range: There is no state income tax.

State Taxes on Unemployment Benefits: There are no taxes in New Hampshire on unemployment benefits.

State Income Tax Range: New Hampshire doesn't have an income tax. However, currently there's a 5% tax on dividends and interest in excess of $2,400 for individuals ($4,800 for joint filers).

The tax on dividends and interest is being phased out. The rate will be 4% for 2023, 3% for 2024, 2% for 2025, and 1% for 2026. The tax will then be repealed on January 1, 2027.

State Taxes on Unemployment Benefits: New Jersey does not tax unemployment compensation.

State Income Tax Range: Low: 1.4% (on up to $20,000 of taxable income). High: 10.75% (on taxable income over $1 million). Newark also imposes a payroll tax.

State Taxes on Unemployment Benefits: New Mexico taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 1.7% (on up to $5,500 of taxable income for single filers and $8,000 for joint filers). High: 5.9% (on taxable income over $210,000 for single filers and over $315,000 for married couples filing jointly).

State Taxes on Unemployment Benefits: New York taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 4% (on up to $8,500 of taxable income for single filers and up to $17,150 for married couples filing jointly). High: 10.9% (on taxable income over $25 million).

Beginning in 2028, the highest rate will decrease to 8.82% on taxable income over $1,077,550 for single filers and over $2,155,350 for married couples filing jointly.

New York City and Yonkers impose their own income tax. A commuter tax is also imposed on residents of New York City, as well as on residents of Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester Counties.

State Taxes on Unemployment Benefits: North Carolina taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: North Carolina has a flat rate of 4.99% of state taxable income. However, the rate is decreased to 4.75% for 2023, 4.6% for 2024, 4.5% for 2025, 4.25% for 2026, and 3.99% for 2027 and thereafter.

State Taxes on Unemployment Benefits: North Dakota taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 1.1% (on up to $41,775 of taxable income for singles and up to $69,700 for married couples filing jointly). High: 2.9% (on taxable income over $458,350).

State Taxes on Unemployment Benefits: Ohio taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 2.765% (on taxable income from $26,051 to $46,100). High: 3.99% (on taxable income over $115,300). Cities and school districts in Ohio can also impose local income taxes.

State Taxes on Unemployment Benefits: Oklahoma taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 0.25% (on up to $1,000 of taxable income for single filers and up to $2,000 for married joint filers). High: 4.75% (on taxable income over $7,200 for single filers and over $12,200 for married joint filers).

State Taxes on Unemployment Benefits: Oregon generally taxes unemployment compensation to the same extent that it's taxed under federal law. However, the state does not tax unemployment benefits received as a result of work performed in any federally recognized Indian reservation in Oregon or other land in the state that has been set aside as the home of tribal Indians under federal protection.

State Income Tax Range: Low: 4.75% (on up to $3,750 of taxable income for single filers and up to $7,500 for married couples filing jointly). High: 9.9% (on taxable income over $125,000 for single filers and over $250,000 for married couples filing jointly).

Counties and special districts can also impose local income taxes.

State Taxes on Unemployment Benefits: Unemployment compensation is not taxable for Pennsylvania income tax purposes.

State Income Tax Range: Pennsylvania has a flat rate of 3.07%. Municipalities and school districts can also impose taxes on wages or income.

State Taxes on Unemployment Benefits: Rhode Island taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 3.75% (on up to $68,200 of taxable income). High: 5.99% (on taxable income over $155,050).

For 2023, the 3.75% rate applies to the first $73,450 of taxable income, while the 5.99% rate applies to taxable income over $166,950.

State Taxes on Unemployment Benefits: South Carolina taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 3% (on taxable income from $3,200 to $16,039). High: 6.5% (on taxable income over $16,039).

Beginning with the 2023 tax year, and each year thereafter until it equals 6%, the top rate will decrease by 0.1% if general fund revenues are projected to increase by at least 5% in the fiscal year that begins during the tax year.

State Taxes on Unemployment Benefits: South Dakota does not tax unemployment benefits.

State Income Tax Range: There's no state income tax.

State Taxes on Unemployment Benefits: There is no tax on unemployment benefits in Tennessee.

State Income Tax Range: Tennessee has no state income tax.

State Taxes on Unemployment Benefits: Texas does not tax unemployment benefits.

State Income Tax Range: Texas has no state income tax.

State Taxes on Unemployment Benefits: Utah taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Utah has a flat tax of 4.85%.

State Taxes on Unemployment Benefits: Vermont taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 3.35% (on up to $42,150 of taxable income for singles and up to $70,450 for joint filers). High: 8.75% (on taxable income over for $213,150 for singles and up to $259,500 for joint filers).

State Taxes on Unemployment Benefits: There are no taxes on unemployment benefits in Virginia.

State Income Tax Range: Low: 2% (on up to $3,000 of taxable income). High: 5.75% (on taxable income over $17,000).

State Taxes on Unemployment Benefits: Washington does not tax unemployment benefits.

State Income Tax Range: Washington has no state income tax. [Note that, beginning in 2022, Washington is scheduled to impose a 7% tax on the sale or exchange of certain long-term capital assets if the profits exceed $250,000 annually. However, the constitutionality of the capital gains tax is being challenged in the courts. A lower court has ruled the tax is unconstitutional, but the Washington Supreme Court has put the lower-court ruling on hold until it can address the matter.]

State Taxes on Unemployment Benefits: West Virginia taxes unemployment compensation to the same extent that it's taxed under federal law.

State Income Tax Range: Low: 3% (on up to $10,000 of taxable income). High: 6.5% (on taxable income of $60,000 or more). West Virginia municipalities can also impose city service fees on people working in the city.

State Taxes on Unemployment Benefits: Wisconsin generally taxes unemployment benefits. However, a portion of your benefits may be exempt from tax. Complete the "Unemployment Compensation Worksheet" in the Schedule SB instructions to see if you can exclude any portion of your unemployment benefits from Wisconsin income taxes.

State Income Tax Range: Low: 3.54% (on up to $12,760 of taxable income for singles or up to $17,010 for married couples). High: 7.65% (on taxable income over $280,950 for singles or over $374,600 for married couples).

State Taxes on Unemployment Benefits: There are no taxes on unemployment benefits in Wyoming.

State Income Tax Range: Wyoming has no state income tax.

When most people think of identity theft, images of phony bank accounts, fraudulent tax returns, and unauthorized credit card purchases spring to mind. But there are many other ways scammers can use your personal information to steal money or property – like filing false unemployment benefit claims. There was a rash of this kind of identity theft activity in 2020, which was driven by the rush to get unemployment benefits out quickly during the pandemic and the lure of an extra $600 per week in benefits for part of the year.

But some identity theft victims are now getting a Form 1099-G in the mail reporting unemployment benefits they never received. Unemployment benefits are subject to federal income tax just like wages, and most states tax them too. So, does that mean identity theft victims will have to pay taxes on the unemployment benefits that were swindled using their personal information?

The IRS says "no." The tax agency is telling ID theft victims who receive an incorrect Form 1099-G for unemployment benefits they didn't receive to contact the issuing state agency and request a revised Form 1099-G showing that they didn't get these benefits. The IRS is also instructing states to issue corrected forms to the identity theft victims as soon as possible after the error is discovered.

Identity theft victims who are unable to obtain a corrected 1099-G form before filing their 2020 tax return should still file a return, but only report income they actually received (2020 returns are due April 15, 2021). The IRS will receive a copy of the corrected 1099-G form when it's issued.

Identity Protection PIN Numbers

If you're worried about your personal information being stolen and used to file a fraudulent tax return, you can request an Identity Protection PIN (IP PIN) from the IRS. An IP PIN is a six-digit number that prevents someone else from filing a tax return using your Social Security number. The IP PIN is known only by you and the IRS, and this step helps the IRS verify your identity when you file an electronic or paper tax return.

In the past, only confirmed identity theft victims were able to get an IP PIN. However, starting in 2021, anyone can request an IP PIN and an extra layer of protection from tax-related identity theft. You'll have to pass a rigorous identity verification process, though. Spouses and dependents are also eligible for an IP PIN if they can pass the identity proofing process.

How do you get an IP PIN? If you're a confirmed identity theft victim, the IRS will mail you an IP PIN if your case is resolved prior to the start of the next filing season. Otherwise, you should use the IRS's online Get an IP PIN tool. If you don't already have an account with the IRS, you must first register to validate your identity.

Forecasting the future is no easy task, but that's what Kiplinger reporters and editors do, digging deep into data and reaching out to experts in academia and the private sector. We tap our sources in government to understand how regulations will affect emerging technology. Moreover, we look at past and present trends and apply careful, considered judgment to forecast and analyze coming developments.

In what promises to be an eventful 2021, here are 10 big trends and stories to watch.

GDP growth should top 5% in 2021, as Democratic control of the Senate will likely lead to another fiscal stimulus package this year, including help for states. The deficit will continue to rise, which is likely to boost long-term interest rates more. Look for 10-year Treasury yields to end the year close to 2%. Mortgage rates will pick up to 3.5%, from 2.7% currently. An upward drift in mortgage rates could incite some panic buying, pushing up home prices more.

This story was adapted from the January 8 issue of The Kiplinger Letter. Get a free sample issue now to see how you can prosper from The Letter’s latest forecasts all year long.

Consumer loan rates and home equity line-of-credit rates will stay low, since they are influenced by the short-term federal funds rate, which the Federal Reserve will continue to set at close to zero. Rates on longer-term auto loans will likely tick up.

The jobless rate may get stuck at times, but the overall trend is down. There are still 5.5 million former workers who are counted as having dropped out of the labor force since Feb. As the pandemic subsides, many of those folks will likely be looking for work. If they do, it could cause the unemployment rate to drop more slowly, since they’ll then be counted as officially unemployed. But more people looking for work shows optimism for finding a gig, and that's a good thing. By the end of 2021, figure on the unemployment rate falling to 5.3%.

Donald Trump’s grip on the GOP will persist for years to come despite efforts to strip the president of his duties over his role in the violent invasion of Capitol Hill. While many Republican lawmakers are eager to be rid of Trump, the president’s sway with the party’s rank and file remains significant. Expect Trump to use that influence for all it’s worth, even if he won’t or can’t run for office again in 2024.

Democrats are poised to push key priorities after victories in both Georgia runoff Senate elections, giving them 50 seats in the 100-seat chamber. (Vice President-elect Kamala Harris can break any ties.) President-elect Joe Biden can pick the administration that he wants, with a clear path to secure nominations for cabinet positions, judges and other executive posts.

This story was adapted from the January 8 issue of The Kiplinger Letter. Get a free sample issue now to see how you can prosper from The Letter’s latest forecasts all year long.

Some smaller Democrat-led efforts will succeed, though any major legislation still requires 60 votes because of the filibuster. Another pandemic relief bill is likely, including more stimulus checks.

Voting rights measures that make it easier for citizens to vote will get an early look. Clean energy and climate change initiatives are also likely (though no Green New Deal). However, don’t expect a tax hike on the rich in 2021: Biden’s campaign plan to hike taxes on individuals making over $400,000 will take a backseat to other issues.

Two centrist Democrats will hold significant power. One will be Sen. Joe Manchin (D-WV), the most conservative Democrat in the Senate. Given his party’s slim margin of control in the chamber, Manchin will play a key role in shaping the Democrats’ agenda. Expect him to block many proposals favored by more progressive Democrats, such as legislation that expands the Supreme Court or grants statehood to Washington, D.C. Another: Sen. Chris Coons (D-DE), a key ally of President-elect Joe Biden and one of the few bipartisan dealmakers left in Washington. Expect Biden to rely on Coons to broker tough legislative compromises with Republicans, when necessary.

After staying quiet or being sidelined as spending soared, fiscal conservatives will make a loud return. The national debt has ballooned by one-third during the past four years, soaring to $27 trillion. Calls to lower Uncle Sam’s debt will play a central role in GOP messaging. The current pushback from GOP leaders to $2,000 stimulus checks for COVID relief is an early example. Leading the charge: Senate Majority Leader Mitch McConnell (R-KY) and House Minority Leader Kevin McCarthy (R-CA). Calls for drastic spending reductions are on tap from Republicans, though such cuts will have little chance of becoming law.

Trade tensions with China will remain on roughly the same path. Scrutiny of China by Washington has become a bipartisan affair, and Biden is likely to continue with a “tough on China” policy. Top concerns include intellectual property theft, illegal government subsidies to corporations and forced technology transfers.

The Biden administration will call on close allies to help pressure Beijing. U.S. tariffs on Chinese imports will stick around to keep the heat on, but note that the White House will be analyzing how duties hinder economic growth.

The price of a bitcoin saw a spectacular 300% rise in 2020, and recently hit an all-time high of $41,000. Expect the crypto momentum to continue, partially driven by institutional investors, with many seeking to capitalize on gains as ultralow interest rates continue. Keep an eye on PayPal’s plan to let users tap cryptocurrency for payments, starting early this year. PayPal users can buy, sell and hold certain cryptocurrencies, and use their balances to pay the 26 million merchants using the payment processor. As more businesses and people use cryptocurrency, its utility and value will increase.

Expect 2021 to be a big year for autonomous trucks. On the short list of potential breakthroughs: Start-up TuSimple, in partnership with Navistar, plans to begin operating trucks with no human in the cab next year, with the goal of creating a nationwide autonomous freight network by 2023. Retail giant Walmart, meanwhile, is partnering with several self-driving companies and will make deliveries in Arkansas with fully autonomous box trucks starting in 2021.

This story was adapted from the January 8 issue of The Kiplinger Letter. Get a free sample issue now to see how you can prosper from The Letter’s latest forecasts all year long.

Eventually, full autonomy could save the industry over $100 billion in the U.S. in overall operating costs. But note that job losses (roughly 3.5 million folks work as truck drivers in the U.S.), accidents and technical glitches could invite popular backlash and stall progress.

Social media platforms will face even stronger scrutiny from Congress. Many lawmakers are increasingly angry at how misinformation spreads on platforms. Expect investigations into how popular sites played a role in the Capitol Hill riot. While Democrats and Republicans fundamentally disagree on social media regulation, the swell of opposition to Big Tech’s power is making bipartisan agreement more likely. Meanwhile, Facebook’s antitrust battles will invigorate its competition. The legal pressure on Facebook, with lawsuits that could play out for years, will give breathing room to other social media firms to experiment and gain ground.

Geopolitical battles with China are revving up, causing Huawei to hunker down as U.S. export controls threaten its phone business. Other vendors figure to gain global market share, including some thought to be past their heydays, such as Motorola, LG and Sony. Note, too, that geopolitical battles are sure to come to a head over the development of important 5G technical standards. China’s input has heavily shaped these up to until now, but with Chinese telecom firms banned in many nations, expect more tension. Sub-$200 5G models will hit the market, helping spread 5G cellular tech to far more users. Faster speeds will boost cellular providers and mobile app creators.

In addition to a $600 stimulus check, the 5,600-page long stimulus bill President Trump signed on December 27 provides temporary expanded relief to the unemployed.

"This legislation should help prevent a substantial number of individuals from falling over a financial cliff in the coming days and weeks," says Mark Hamrick, senior economic analyst at Bankrate.com. Half of households have taken a hit to income this year, and of those, some 51% believe it will take six months or longer to recover, according to a recent BankRate survey.

How Much?

The stimulus bill provides an additional $300 a week to those who qualify for unemployment insurance in their state. This number is added to the total you receive from your state.

Who Qualifies?

Anyone who qualifies for regular unemployment benefits will also qualify for the expanded unemployment benefits. In most states, this means you have to be unemployed through no fault of your own. But if you don't qualify for unemployment benefits in your state, you may still qualify for the federal government's expanded pandemic unemployment assistance.

What About Self-Employed and Gig Workers?

The bill also extends Pandemic Unemployment Assistance, which provides benefits for people who usually don't qualify for unemployment, including the self-employed and gig workers.

How Long Will the Unemployment Benefits Last?

Payments will extend to March 14, 2021, but you may be able to continue receiving checks through April 5, 2021, if you haven't used the maximum number of weeks available to you. The new legislation also increases the number of weeks of benefits someone may claim from 39 to 50.

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Age discrimination exists. It is an unfortunate fact, held up by statistics.

In 2014, the AARP Public Policy Institute's Future of Work@50 sponsored a survey that examined how Americans over 50 had fared since the Great Recession. The resulting study, The Long Road Back: Struggling to Find Work after Unemployment, reported that 50% of older workers who had become unemployed in the prior five years were not working. Of those who did find work, 48% reported earning less than they had with their previous job. And that deficit could be substantial: A discussion paper by the Urban Institute’s Program on Retirement Policy found that re-employed men ages 50 to 61 received a median hourly wage that was 20% less than they had received previously, while men over 62 took a 36% salary cut.

If you’re currently unemployed or furloughed, I suggest that you realistically consider your chances of re-employment. Don’t continue to act (and spend) as if you’ll soon be receiving your former income — even if you’ve been furloughed. “Call it realism or pessimism,” writes Christopher Rugaber of the Associated Press, “but more employers are coming to a reluctant conclusion: Many of the employees they’ve had to lay off in the face of the pandemic might not be returning to their old jobs anytime soon. Some large companies won’t have enough customers to justify it. And some small businesses won’t likely survive at all despite aid provided by the federal government.”

I’m not saying these things to depress anyone — just the opposite, in fact. When it comes to your finances, I believe it’s best to plan for the worst and hope for the best. If you can be OK with a worst-case scenario, you’ll feel even better if the worst doesn’t happen.

To create a plan that can help you get through an open-ended period of unemployment, I suggest you:

Evaluate your financial situation

When considering your finances, assess your condition as if you are not returning to your previous position. What other sources of income do you have? What expenses? Do you have any benefits available to you? Create a cash flow plan so that you can see exactly where you are financially, and where you want to be.

Make any necessary changes

If you’ve unexpectedly lost your job, you may need to cut back on expenses. Put everything on the table. Do you really need two cars, or can you sell one? Is it time to downsize your house? You don’t need to make every cutback you ascertain, but I do think it’s important to identify any expenses that can be reduced, and to seriously consider them.

Think about taking Social Security early

Though you may have planned to wait to take Social Security later, don’t discount taking it before your full retirement age. In fact, you may want to take it for a year as a sort of interest-free loan. That’s right: If you are 62 or older, you can opt to take your benefits and then change your mind. If you do so within 12 months, you can withdraw your Social Security application and repay the money you have received without interest, (although you will need to include any money withheld for Medicare premiums or taxes).

Don’t skip health care

If you’re eligible for Medicare, congratulations. If you’re not, can COBRA carry you until you’re 65? Or can you find a good plan on the marketplace? No matter what, don’t court disaster by leaving yourself or your family uncovered.

Adjust your investment strategy

At my firm, we believe that people over 50 should invest conservatively since they may not have the time to recover from large losses. If you are over 50 and unemployed, I think a defensive approach may be even more important, and suggest that you carefully consider the risk in your portfolio relative to the financial situation you face and modify your investment strategy accordingly.

If you’ve been laid off or furloughed, I truly hope that you find employment again soon at your previous salary or better. But if not, I hope that by planning for the worst, you’ll survive and even thrive.

All expressions of opinion reflect the judgment of the author, Ken Moraif, as of the date of publication and are subject to change. Ken Moraif is a controlling owner and investment adviser representative of MMWKM Advisors, LLC, doing business as Retirement Planners of America, which is an SEC registered investment adviser. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that Retirement Planners of America has attained a certain level of skill, training, or ability. Readers should not rely on the content as the sole basis for any social security or investment decisions. A professional adviser should be consulted and/or independent due diligence should be conducted before implementing any of the options directly or indirectly referenced. This should not be construed as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice. Retirement Planners of America makes no warranty, express or implied, for any decision taken by any party in reliance upon the information discussed. While information presented is believed to be factual and up-to-date, Retirement Planners of America does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

A record 39 million Americans have filed for unemployment benefits since March as a result of the economic crisis stemming from the coronavirus pandemic. The total number is staggering, particularly when you consider the impact a sudden job loss has on the lives and families of those who’ve been let go.

If you’re among those who have been laid off, you may be feeling overwhelmed and anxious about your financial stability. That’s understandable, but don’t let panic or fear guide your reactions. Now is the time to take stock of your situation and control what you can. Here are five tips to help you manage your finances during this difficult time and establish good habits that can serve you well into the future.

1. Manage your expenses

After a job loss, re-evaluate your monthly spending and look for ways to reduce your expenses. Consider cutting discretionary services that you can handle yourself, such as house cleaning, landscaping or other household tasks that you’ve previously hired others to do.

Also, use the opportunity to reach out to your service providers of essential items — like internet, phone service and insurance coverage — and see if you can trim back these expenses. Now would be a good time to negotiate a lower rate, especially if you haven’t done so in some time. This move can reduce your expenses without sacrificing important things.

2. Obtain health care

As the global health crisis evolves, now is not the time to be without health insurance. If your employer provided you with a severance package, check the details to see if you qualify to remain on the company medical insurance and for how long. It’ll give you some time to decide how to handle health insurance, once you’re no longer on the company plan.

Typically, you have three health care options to choose from.

• If you’re married, and your spouse remains in his or her job and it offers health coverage for you, then that’s most likely the family’s best bet.
• You can also choose to go on COBRA (Consolidated Omnibus Budget Reconciliation Act), which may allow you to continue the insurance coverage through your former employer for potentially 18 to 36 months. This will usually be your most expensive option, since you must pay the full premium on the coverage without your company’s subsidy.
• The third option is to search the Affordable Care Act marketplace. Depending on the state you live in, there can be a variety of plans that offer an array of coverage options. You’ll need to do some research. You also might check with your doctors to see if they take the coverage before committing to a specific plan.

3. Avoid tapping retirement accounts

Though you may be looking for ways to make ends meet after losing your job, tapping your retirement accounts should be a last resort for covering expenses. Normally, by withdrawing money from your 401(k) or IRA before age 59½, there’s a 10% penalty on the distribution, plus you have to pay income tax on your withdrawal as well. The $2.2 trillion stimulus bill, the CARES Act, which passed in March, lifted the penalty for 2020. If you’re financially affected by the coronavirus crisis, you can take a distribution up to $100,000 penalty-free, and spread the tax payment on the money over three years.

However, I discourage using this option if you can avoid it. By pulling money out of a retirement account now, you’re selling your assets during a downturn, which means you’re selling more shares. This reduces the number of shares in your portfolio, which cuts into how well your portfolio will compound moving forward. It potentially puts your retirement at risk.

4. Decide what to do with your 401(k)

While you should avoid making an early withdrawal from your nest egg, you’ll need to decide what to do with your employer-sponsored retirement account if you have one. This may not be your first thought, but it’s an important decision to consider now that you no longer work at the organization. If you like your investments, then you often have the option to keep it within the employer retirement plan. Look into whether there’s an extra fee for doing so.

Another option that many investors prefer is to roll their 401(k) over into an individual retirement account (IRA). By doing so, you’re often able to access an increased number of mutual funds and investing strategies. It can offer a more flexible and personalized way to allow those funds to grow, even after you find your next job.

As you’re considering what to do with your 401(k) discuss with your tax and financial professional all the pros and cons of any action you might pursue so that you make a fully informed decision.

5. Leverage government relief options

Last, but not least, make sure to sign up for unemployment insurance benefits if you qualify based on your state’s rules. The CARES Act also provided an additional $600 more per week in unemployment, under the new law, running through the end of July. While unemployment benefits may not cover all of your expenses, they can provide a much-needed influx of cash, potentially paying for your health insurance and other essential needs.

The CARES Act has a variety of provisions set in place that may provide relief to those who have lost their jobs. Creditor protection, foreclosure protection and eviction protection are among the benefits that the CARES Act provides. Take the time to understand how this bill can provide relief for your situation.

Losing a job can present you with many financial challenges and decisions. However, taking these steps can help you get through this challenging time and protect your financial future.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

Ameriprise Financial Services, LLC., Member FINRA and SIPC Copyright disclosure

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Oh well, it was nice while it lasted. Even though there were tough negotiations, Republicans and Democrats in Washington were able to quickly pass the first few coronavirus economic stimulus bills. But now it looks like hyper partisanship reigns supreme once again in the nation's capital. For evidence of this, look no further than the most recent stimulus package being kicked around in Congress — the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. Democrats just pushed the massive, $3 trillion bill through the House of Representatives. But President Trump and Republican lawmakers have declared it "dead on arrival" in the Senate. It seems as if the two sides couldn't be further apart.

But there's a glimmer of hope. There are enough lawmakers on both sides of the aisle who believe Americans need more help. So, while the HEROES Act as it exists right now is destined to go nowhere, it's likely that another stimulus package of some sort will eventually get through Congress and be signed into law by the president. Are there any provisions in the current HEROES Act that could be included in the next law? You bet! Here are five HEROES Act proposals with a good chance of ultimately becoming law.

The HEROES Act calls for a second round of stimulus checks to most Americans. The plan is to provide a $1,200 base payment to each eligible person ($2,400 for married couples filing a joint return), plus an additional $1,200 for each dependent (up to a maximum of three dependents). So, for example, a married couple with three children could get up to $6,000. As with the first round of stimulus checks, the HEROES Act stimulus payments would be phased-out for people with higher incomes. (For a comparison of the first round of stimulus checks and the second round as proposed in the HEROES Act, see How a Second Stimulus Check Could Differ from Your First One.)

President Trump has expressed interest in a second round of stimulus checks. That certainly improves the chances of an additional round. Plus, while Senate majority leader Mitch McConnell (R-Ky.) wants to wait before passing any additional stimulus legislation, he hasn't publicly closed the door on the idea, either. Several other Republican Senators aren't necessarily enthusiastic about another second round of stimulus checks right now, but many of them seem open to the idea if they are needed later.

Republicans certainly aren't likely to support a stimulus check program that is too costly (like the proposal to send $2,000 monthly checks until the pandemic is over). However, as long as payment amounts aren't too high, eligibility isn't too broad, and the duration is limited, the odds of seeing a second round of stimulus checks are good.

The CARES Act, an earlier economic stimulus law enacted in March 2020, created a new payroll tax credit for businesses impacted by the coronavirus pandemic that continue to employ their workers. It's called the employee retention credit, and both Democrats and Republicans are interested in making it better.

The credit can be worth up to $5,000 per paid employee (50% of up to $10,000 in qualified wages). However, it only applies to qualified wages paid from March 13 through December 31, 2020. What is considered "qualified wages" depends on the number of employees the business had in 2019. If a company averaged more than 100 full-time employees, qualifying wages are only those paid when an employee is not working due to (1) a full or partial suspension of the employer's business operations by a governmental order, or (2) the business experiencing a significant decline in gross receipts. For smaller firms, all wages paid when business operations are suspended, or the business is experiencing a significant decline in gross receipts, are eligible for the credit.

The HEROES Act offers several improvements to the credit. For instance, it would bump the maximum credit amount from $5,000 to $36,000 per paid worker. The bill would also change the 100-employee rule for determining qualified wages for large employers. Under the HEROES Act, only a company with more than 1,500 full-time employees and gross receipts greater than $41.5 million in 2019 would be treated as a large employer. Among other things, the bill would also extend the credit to eligible state and local government employers and allow businesses that take out Paycheck Protection Program loans to qualify for the credit.

There's bipartisan support for these or similar changes. Regarding the credit, Rep. Kevin Brady (R-Tex.) indicated that Republicans are "willing to discuss, in a bipartisan way, how to make it work better and to expand it." It's a win-win proposition for both sides. Democrats like the fact that it will boost employment retention for workers, and Republicans can get behind the business-support aspects of the proposal. Expect enhancements to the employee retention credit to be enacted in the future.

The HEROES Act also calls for enhancements to another one of the CARES Act relief measures—the Paycheck Protection Program (PPP). Under the PPP, a small business can borrow up to 2½ times its average monthly payroll costs (up to $10 million) without collateral, personal guarantees, or fees. All loan payments are deferred for six months, but interest accrues during this period. Borrowed funds don't have to be repaid to the extent they're used to cover the first eight weeks of payroll costs, rent, utilities and mortgage interest. Businesses must keep their workforce largely intact during that period to qualify for loan forgiveness. At least 75% of the forgiven amount must be used for payroll expenses. The interest rate is fixed at 1%.

Among other things, the HEROES Act includes provisions to:

• Extend the PPP program through the end of the year;
• Guarantee access to PPP loans for small businesses with 10 or fewer employees;
• Increase the eight-week loan use period to 24 weeks;
• Create a safe harbor for borrowers who can't rehire workers in the required timeframe;
• Repeal the requirement that 75% of the forgiven loan amount be used for payroll; and
• Clarify that expenses paid with PPP loans that are forgiven are tax deductible.

This has been an extremely popular (and high-profile) program. In fact, demand for PPP loans was so high that the program ran out of money just a few days after it was launched. Fortunately, a second act of Congress quickly resupplied the program's coffers. Both Democrats and Republicans support the PPP program, and expanding it seems like a no brainer for the next stimulus bill to get through Congress. While all the PPP enhancements contained in the HEROES Act won't eventually become law, expect at least a few the bill's most significant PPP provisions to move forward.

Democrats have been pushing hard for more aid to state and local governments, and they're not likely to vote for any future stimulus package that doesn't include this type of relief. While Sen. McConnell has said there would be no aid to states without liability protections for business and suggested that states should declare bankruptcy instead, he has not completely ruled out state and local government assistance. In addition, even though President Trump has been critical of "bailing out poorly run states," White House officials are reportedly open to negotiating a state and local aid package.

Few people deny that state and local governments need financial help. After all, both Democratic and Republican lawmakers in Congress come from states that are hurting. That's why the odds of aid to states eventually being approved are high. How much? That's the real question. The HEROES Act calls for more than $1 trillion in aid to state and local governments. Don't expect an agreement for that much money, but we'll probably see a more modest relief package enacted into law. According to a Tax Foundation report, the projected two-year state and local government revenue loss from the coronavirus crisis is less than $500 billion. A good guess for an enacted aid package would be in that range.

There could be restrictions on how states and local governments use the funds, though. Some Republicans will insist that the money be used to address coronavirus-related problems, such as putting employees back to work.

The day before the HEROES Act passed in the House, the Department of Labor announced that a whopping 36.5 million Americans lost their job during the previous eight weeks because of the COVID-19 pandemic. These are staggering numbers that catch the attention of lawmakers on both sides of the aisle. Because the need for additional unemployment compensation is so great, Republicans are likely to go along with some extension of benefits.

The CARES Act provided relief for the unemployed back in March. Among other things, that legislation:

• Provided up to 39 weeks of unemployment benefits for self-employed people, independent contractors and others out of work because of the coronavirus pandemic who don't otherwise qualify for benefits;
• Increased weekly unemployment checks by $600 through July 2020;
• Reimbursed states for the first week of unemployment benefits until the end of the year (states normally impose a one-week waiting period before paying benefits); and
• Authorized an additional 13 weeks of unemployment benefits.

Under the HEROES Act, these and other CARES Act unemployment compensation measures would be extended to January 31, 2021. However, don't expect that much relief for the unemployed in the next stimulus bill to become law.

The main concern for Republicans is that payments to unemployed people will increase to the point where workers feel they're better off staying at home instead of going back to work if the opportunity arises. As a result, it will be difficult to get an extension of the extra $600 per week in unemployment compensation through Congress. Extending unemployment benefits in other ways is less problematic, so expect some enhancement of unemployment compensation to eventually pass.

The coronavirus (COVID-19) outbreak is crushing the U.S. economy. The stock market is tanking (we're now in a bear market), businesses are closed, unemployment claims are spiking, consumer spending is down sharply, 2020 GDP estimates are dropping fast, and a recession is on the way. We're in a bad place.

But the federal government has made several moves that we all hope will turn things around. Congress and the Trump administration worked together on stimulus legislation, the Federal Reserve lowered interest rates, and the IRS provided relief to taxpayers. Other government agencies and institutions are pushing forward with additional measures to stop the bleeding and get the economy back on track. It will take time, and we have a bumpy road ahead, but action is being taken.

While some of the economic stimulus will prop up businesses, many initiatives will flood the economy with cash and directly benefit ordinary Americans who are facing a financial hit. There are also other ideas being discussed at the highest levels of government that could be rolled out later. Here are 11 coronavirus stimulus measures already in place that could help you financially in 2020. They all won't necessarily apply to you, but one or two of them could significantly impact your financial health.

TOOL: Stimulus Check Calculator

Americans will be getting stimulus checks in the mail soon. The idea is to pump massive amounts of cash into the economy as quickly as possible.

The stimulus checks will actually be advanced payments of a new tax credit added by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The checks will be worth up to $1,200 for each taxpayer ($2,400 for married couples who file a joint return), plus $500 for each qualifying child 16 years old or younger that you have. The check amount will be gradually reduced for single filers with an adjusted gross income above $75,000, joint filers with an AGI above $150,000, and head-of-household filers with an AGI above $112,500. To see how much your check will be, go to our Stimulus Check Calculator. For additional information about the economic stimulus checks, see Your 2020 Stimulus Check: How Much? When? And Other Questions Answered.

People are losing their jobs because of the coronavirus crisis, and spiking unemployment just makes things worse. The Families First Coronavirus Response Act pumps an additional $1 billion into the unemployment compensation system to ease the burden on states processing and paying unemployment benefits. States with greater unemployment increases will receive more funds, and employers are encouraged to reduce the number of hours worked by employees in lieu of layoffs. States are also directed to ease eligibility requirements and access to unemployment benefits for workers who do lose their job. The federal government will also pay 100% of coronavirus-related extended unemployment compensation, instead of the usual 50%. Many people who lose their job because of the coronavirus outbreak will benefit from these changes.

The CARES Act provides even greater benefits. For example, it provides up to 39 weeks of unemployment benefits for self-employed people, independent contractors and others out of work because of the coronavirus pandemic who don't otherwise qualify for benefits. Weekly unemployment checks are also increase by $600 through July. The federal government is also reimbursing states for the first week of unemployment benefits until the end of the year (states normally impose a one-week waiting period before paying benefits). An additional 13 weeks of benefits is included, too.

We don't want sick or potentially infected people going to work simply because they don't want to miss a paycheck. To address this concern, paid sick and family leave for many workers affected by the coronavirus outbreak was expanded when President Trump signed the Families First Coronavirus Response Act on March 18, 2020. Under the new law, employers with fewer than 500 workers are required to provide up to 80 hours of paid sick leave to employees affected by the virus. Workers can take paid leave if they are sick or quarantined, or if they have to stay home to care for someone else. Leave can also be taken to care for minor children who are home from school. Full pay is available for workers who are sick or quarantined (up to $511 per day), but workers taking qualified sick leave for other reasons only get two-thirds of their normal wages (up to $200 per day).

The new law also extends the existing Family and Medical Leave Act (FMLA) to cover a worker's absence to care for a child home from school or daycare. After 10 days away from work, employees will receive two-thirds of their regular salary while on coronavirus-related FMLA leave. However, this pay is limited to $200 per day ($10,000 in total). The expanded FMLA provisions generally apply to employers with fewer than 500 employees.

For more information on the new paid sick and family leave provisions, see Tax Credits Included in Coronavirus Paid Leave Law.

While they don't get the same sick and family leave benefits available to employees, the Families First Coronavirus Response Act provides self-employed people with two refundable tax credits tied to the amount of time they can't work because of the coronavirus outbreak. The sick leave credit compensates self-employed people for up to 10 days away from their business for a reason that would entitle them to coronavirus-related sick leave if they were employees. The family leave credit covers up to 50 days away from work for any reason that would qualify an employee for coronavirus family leave. Both credits have limits based on the business owner's average daily self-employment income and specific reason for missing work. For more information, see Tax Credits Included in Coronavirus Paid Leave Law.

With everything else that's going on, at least you don't have to worry about filing your tax return by April 15. The IRS extended the deadline to help taxpayers, and tax preparers, who are struggling with the coronavirus crisis. The new deadline is July 15, which applies to both return filing and tax payments. Penalties and interest won't apply if you pay any tax due before the extended deadline. This relief also applies to 2020 estimated tax payments, and 2019 contributions to an IRA or HSA, that would otherwise be due on April 15. For more information, see Income Tax Returns and Payments Extended.

You should also check with your state's tax agency to see if the filing and/or payment deadline for your state income tax (or other state tax) is changed because of the coronavirus crisis.

Student loan debt can be a heavy burden in the best of times. During an economic meltdown, it can drag you under water. Lawmakers recognize this, and that's why there are several student loan relief measures in the CARES Act.

First, student loan payments are deferred until September 30, 2020, without penalty or interest for all federally owned loans. This covers over 95% of student loan borrowers. Collection activities against borrowers who were already behind on payments will also be suspended.

In addition, students who leave school for a coronavirus-related reason will also have student loan obligations cancelled and won't have to return grants. Likewise, students participating in work-study programs will still be paid if they're unable to fulfill their obligations because of the coronavirus pandemic. For students who drop out of school as a result of the coronavirus, their grades also won't affect the academic requirements to continue receiving Pell Grants or student loans.

Finally, if your employer pays some of your student loan debt through the end 2020, up to $5,250 of that benefit won't be taxed. The $5,250 cap applies to both student loan repayment benefits and other educational assistance (e.g., tuition, fees, books, etc.) offered by your employer under current law.

In any crisis or emergency situation, people look to churches, food pantries, and other charitable organizations for help. It's no different with the coronavirus crisis—charities will provide relief to those who are suffering like they always do. So, to encourage charitable giving in 2020, the CARES Act includes two tax provisions that reward people who donate to charity.

First, a new "above-the-line" deduction of up to $300 is allowed for cash donations to charity in 2020. Donations to donor advised funds and certain organizations that support charities are not deductible. You can't claim this deduction if you itemize deductions on your 2020 tax return (i.e., you must claim the standard deduction).

For taxpayers who do itemized on their 2020 return, the 60% of adjusted gross income limit that normally applies to cash contributions is waived. That means you can deduct more of your charitable cash contributions this year. As with the new above-the-line deduction, donations to donor advised funds and supporting organizations don't count.

Taxes are generally deferred when you save money in IRAs, 401(k) plans and other retirement accounts. However, once you turn age 72 (70½ before 2020), you have to start withdrawing money out of those accounts whether you need it or not. And that's when the IRS claims its cut. These withdrawals are called required minimum distributions (RMDs), and failure to take an RMD triggers a stiff penalty equal to 50% of the amount you should have withdrawn. First-time RMDs are due April 1, while others are due by the end of the year.

Many seniors were worried about having to take RMDs when the stock market is in the dumps. Since there probably won't be enough time for the market to recover before their RMDs would be due, a lot of retirees would be forced to sell their investments for a loss or at a low price to avoid the hefty RMD penalty.

To avoid this result, the CARES Act suspends RMDs for 2020. This applies to both first-time RMDs due April 1 and to other RMDs that aren't due until December 31. For more information, see A Hidden Benefit of the Coronavirus Stimulus Bill: You Can Wait to Take Your RMD.

People in a financial pit often just need access to cash in order to climb out of the hole they're in. One way to get cash quickly is to withdraw it or borrow it from a retirement account, such as a 401(k) plan or IRA. However, anyone younger than 59½ who withdraws money from a retirement account is hit with a 10% penalty. That's in addition to the taxes you'll have to pay on the amount you take out. If you want to borrow from a 401(k) plan, you can only take out 50% of your account balance, up to $50,000. Plus, most loans must also be repaid within five years.

The CARES Act includes a number of provisions that make it easier to get money out of a retirement account (up to $100,000) if you're infected by the virus, have family members who catch it, or experience adverse financial consequences because of it. First, the 10% penalty for withdrawals by people age 59½ or younger is waived if you're affected by the virus. Taxes on withdrawals by people affected by the coronavirus will also be spread out over three years. You can also recontribute the money to an eligible retirement plan within three years, without regard to that year's cap on contributions, and have it treated as a tax-free rollover.

In addition, the amount a person affected by the coronavirus can borrow from a 401(k) plan is doubled from $50,000 to $100,000, and repayment requirements are relaxed.

The Federal Reserve took one of the first coronavirus-related stimulus measures when it cut interest rates to nearly zero. While this is bad news for savers, its good news for borrowers. For instance, low interest rates reduce the cost of mortgages, which helps would-be homeowners and current homeowners looking to refinance. The plunge in interest rates could also reduce borrowing costs for students who take out federal loans for the 2020-2021 academic year. Parents taking out PLUS loans could get a break, too. Expect lower rates for car loans and home equity lines of credit as well.

If you have credit card debt, you may also see interest rates on the balance fall. But even if your rate falls from, say, 17% to 16%, that will result in just a few dollars in savings per month for someone making the minimum payment on credit card debt of $5,000 (which is close to the average balance). So, paying down credit card debt should still be a high priority.

Note: Anyone still looking for savings opportunities in this coronavirus-driven environment should check out Finding the Best Savings Account After the Coronavirus Interest Rate Cuts and Strategies for CD Savers After the Coronavirus Interest Rate Cuts for our latest advice.

For anyone laid off from work or otherwise suffering financially because of the coronavirus-induced slowdown, losing the roof over your head is one of the scariest outcomes. That's why the CARES Act includes mortgage relief provisions for certain homeowners. First, any American with a federally backed mortgage can stop making payments for up to one year if they are experiencing financial hardship due to the coronavirus crisis. The relief is not automatic, though. You have to request it and affirm that you are suffering financially from the COVID-19 emergency. Mortgage payment relief will initially be granted for up to 180 days, but you can submit a second request for up to 180 additional days. No additional fees, penalties, or interest can be imposed by the lender during the time a homeowner is not making mortgage payments.

The CARES Act also imposes a 60-day foreclosure and eviction moratorium for homeowners with federally-backed mortgages. The 60-day period starts on March 18, 2020; however, the moratorium does not apply to vacant or abandoned property.

Federally-backed mortgages include those purchased by Fannie Mae and Freddie Mac, insured by the Federal Housing Administration (FHA), guaranteed or insured by the Department of Veterans Affairs (VA loans) or Department of Agriculture (USDA loans), and others.