Ryan: Getting organized isn't just about sparking joy, it's about saving money, too. Decluttering this spring will allow you to be the most efficient version of yourself, and professional organizer Heather Cocozza is here to tell you how in our main segment.
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Ryan: On today's show, Sandy and I tell you why you need an online Social Security account, even if you're nowhere near retirement. And we delve back into ill-advised PR pitches. That's all ahead on this episode of Your Money's Worth. Stick around.
Sandy: I'm good.
Ryan: The day that this is coming out is actually the day that I am going to appear on Jeopardy. So if you're listening to this early enough, tune in tonight at 7:00 or 7:30 or wherever it airs in your area, and you could see yours truly at the podium.
Sandy: I'm so excited. I'm going to be in Los Angeles, so I'm already trying to figure out just where it's going to be airing in Los Angeles so I can watch.
Ryan: We're going to a bar, me and a couple of dozen friends, so it'll be a fun time. Keep an eye out for that. But on to more personal finance-related matters. You and I were having a talk before the show, and you were telling me that I should be creating an online Social Security account, and I thought, "I'm far too young and handsome for anything like that." But you assure me that it's a smart thing to do.
Sandy: It's a smart thing to do even if Social Security seems so far away and you're not even sure if it's going to be around, although I think it will be. There are a couple of reasons why it's a good idea to set up a Social Security online account even if you're way far away from actually applying for benefits. And one is that you can go online periodically and make sure that there are no gaps in your earnings. And that's really important because the amount that you get from Social Security is going to be based on how much you earned over your working career.
Sandy: A lot of people, especially young people, change jobs a lot. There's a possibility that maybe one of your employers didn't report your earnings, so you want to fix that well before you're 65 or 66 or older and claiming benefits and finding out that you're short changed. So that's a big one. That's a big part of it. The other one is to protect yourself against fraud. If you set up an online Social Security account, then someone else can't do it. And this is becoming a growing problem.
Sandy: People create these bogus online Social Security accounts and then file for benefits in your name. Well, you don't want to wait until you're 70 and find out that somebody is collecting benefits in your name and you can't get them. So the most effective way to protect yourself from fraud in this instance is to create your own account 'cause once you've done it, nobody else can do it.
Ryan: And this is very much in line with advice that we've given in the past on filing your taxes early so other people can't pretend to be you and get your refund, registering for that USPS thing so when no one else is looking in your mailbox, and so yeah, it seems like a good proactive way to prevent fraud.
Sandy: Right. And this sort of is a continuing theme with identity theft. And in our May issue, we have a whole special report on all the scary ways that people can defraud you. Getting ahead of the gangsters is one of the most effective ways to protect yourself. And in the case of Social Security, having an online account in your name is a good defense. In recent months, Social Security has taken some steps to improve authentication of these accounts. So it's harder for crooks to do it, but go ahead and do it yourself.
Sandy: The final thing I'll mention is, and this is kind of a caveat, if you freeze your credit, which we talked about in an earlier episode, if you freeze your credit reports again to protect yourself against identity theft, you will not be able to set up an online Social Security account until you defrost it. You need to defrost your Equifax report because that's what Social Security uses to authenticate your identity. So that's not a huge big deal, but if you haven't taken our advice and frozen your credit reports, my advice is, go ahead, set up your online account with Social Security and then freeze your credit reports. 'Cause then you don't have to do that.
Sandy: The final thing I'll say as you get closer to retirement having an online Social Security ... and when I say closer, I'm talking about even 40s and 50s. . .
Sandy: When you're starting to figure out, "How much money am I going to need? How much more do I need to save?" Having an online Social Security account will give you access to a lot of tools you can use to estimate how much you're going to get from Social Security, and so Social Security is such a big part of most people's retirement income. Being able to estimate how much you're going to get will help you decide whether you need to increase contributions to your 401k or whether you think you're doing pretty darn well.
Ryan: Or indeed, whether you should take Social Security early or whether you should hold off because the amount that you get depends on how long you delay to take it, right?
Sandy: Right. There's all kinds of strategies that people can use to get the most out of their Social Security benefits. Particularly if you're married, there are all these things spouses can do to sort of use their combined payouts to get the most. And the most effective way to take advantage of these is to know, just get a pretty good idea of how much you're going to get. So certainly as you get close to retirement, this is a good tool, but I think it's good for everybody.
Ryan: And to defrost your credit report, you want to go ahead and put it in a pot in the sink and run the cold water over it . . .
Sandy: No, no, no. You get when you . . .
Ryan: Put in the microwave . . .
Sandy: No, no. If you've frozen your credit reports, you know this, you've gotten a PIN and you can use that PIN. And as I said right now, Equifax is Social Security's provider, so you don't have to unfreeze them all. You can just put Equifax in the microwave for a couple of minutes, take it out and you're good to go.
Ryan: All right. Sounds good.
Ryan: When we come back, Heather Cocozza visits the studio to talk strategies to get you organized. Stay tuned.
Ryan: We're back, and it's that time of year -- it's spring cleaning time. And we're here with the president of the Washington, DC chapter of the National Association of Productivity and Organizing Professionals, Heather Cocozza, who's also the owner of Cocozza Organizing and Design. Heather, thank you so much for coming on.
Heather: Thank you for having me.
Ryan: The good place to start is why is it worth it to declutter? Why do it now?
Heather: Great question. Well, it is worth your time to declutter. The initial investment in decluttering is going to provide monetary and mental health benefits. In addition, it can save you time on a daily basis. So when I work with clients, I can almost guarantee that we're going to find them some money. We often uncover checks that have not been deposited or we find cash in interesting locations and we find gift cards that had been misplaced.
Heather: In addition to that, through decluttering, it also takes away the things that you don't need, so you can focus on the more important things, such as paying bills on time, so you can reduce any late fees or service charges. And then lastly, what I have found that if people can't find what they need, they will actually go out and buy it again. So you can save . . .
Sandy: Shop your closets.
Heather: Yes. So by decluttering we can actually save you money from buying those duplicate or triplicate purchases that you often do.
Sandy: This all sounds great, Heather, but I think of so many people's houses and it seems so overwhelming. When you go into someone's house to help them get organized, where do you even get started?
Heather: Well, there's been a lot of press recently about Marie Kondo and her . . .
Sandy: She . . .
Heather: Yes, and she certainly makes it seem like it is a large task that has to be done in a very short time period, and that is one method. But there are alternative methods that are still very effective where you can do this decluttering over a longer period of time and in shorter spurts.
Ryan: If I only have short spurts to deal with, if I only have a couple of minutes here and there to start working on this, where should I be focusing on in my house?
Heather: Well, for every person that will be different. So everyone has problem areas. Some people, the closet is perfectly fine, but their office is out of control. If you truly had everything equal and you could start everything needed to have some work, I would actually suggest one of two places. One, is actually the clothes hanging up in your closet. The reason being is it's a very visually satisfying even for one decision. If you think about looking at one dress or one suit, if you make a decision that you no longer need that, taking even that one article of clothing out of your closet will make a difference.
Heather: Whereas if you take one piece of paper out of a folder, it doesn't make that large of a difference. So if you're going for a visual impact and wanting to have that motivation and satisfaction, your closet is a great place. Now, a second place would also be a long flat surface in your home. Whether that be on the top of a piece of furniture or a kitchen countertop that doesn't have too much paper. Is much easier to discard objects and paper. So for our first step, I would say look also for flat surfaces that have a lot of non paper objects.
Sandy: This leads me to question that both Ryan and I had is, is whenever I declutter, clean out a closet or my office or something, I just feel great. It's just so satisfying, as you said. But then a week later I'm back to where I was. So how do you continue the discipline? And once you've decluttered how do you stay on track so you don't get back to where you were?
Heather: Right. Well, there's really two things to look at. One is motivation and the second one are technical challenges. So first everyone, even before they start decluttering, needs to decide and kind of envision, "What is the motivation behind this? What do I want to envision in my home? What do I want my lifestyle to be?" And once you have an idea in your mind of what you're working towards, then you keep reminding yourself of what is that end goal?
Heather: "My goal is to have the space decluttered so I can have downtime or so that I can have more time with my family in this room." So you really have to know what is that larger, bigger picture motivator. So that's the first thing. And then the second thing is the technical challenges. Now, I'll mention a few that are common. One is that after you've decluttered and you've put things back, every item must have a home so that when you're done with it, you know where it goes. And when you go to find it again, you know where to locate it.
Heather: That's a technical aspect is assigning homes. Now, even if you assign a home, but it's not convenient, you won't put things back. So then the home . . .
Ryan: No. I'll dump them all . . .
Heather: Right. It still has to have a home and it has to be convenient. And then when the last things is to keep decluttering ongoing on a regular basis, you have to have a process for things that you don't want. So here's one simple idea. You can put a small bin in your closet or in your kid's closet so that when something no longer sparks joy or if something's outgrown, you put it directly into the bin, instead of hanging it back up in your closet. And then once the bin is filled, it's time to donate those items.
Ryan: Talk about donating items. I mean, what are some of the sort of common items that people probably have laying around their house because a lot of people are going to be, "The weather's getting warm," they're going to want to ... My dad every year it goes and cleans up the garage, cleans up the basement. What are some common things that people have laying around the house that should absolutely be thrown away? Like no questions asked, and then what are some things that people probably have laying around that they should consider selling or donating?
Heather: Well, the idea about throwing away stuff with no questions asked, I should mention that as professional organizers, we always have that discussion with our clients about what's acceptable to them about what can be thrown away or not.
Sandy: And both of them, because sometimes I've put things out and then my husband's brought them back in.
Ryan: You don't need a can of paint that no longer matches any room.
Sandy: He never knew.
Heather: Right. Right now I have a small list just because it's a very personalized thing for each person and each family, but really things that are broken, torn, ripped, stained. The example that you gave is a good one. If you have paint that you truly no longer have used in any wall of your home, that's a possibility. Another is expired coupons. So there are a handful that usually no one will argue with, but it's truly more of a personal decision.
Heather: Now, there are some items that do well on Ebay. For example, electronics do well, cameras, watches, clocks, designer handbags. These are things that you could sell. So they would go into the potential seller category and then really everything else, if it's in good condition, can be donated. And again, if it's in good condition. And that's probably the one thing that I would really ask people to ask themselves if they're trying to decide, "Well, should I take this to Goodwill? Should I donate this?" Is would you ever want someone else to use it? Is it in a condition that you actually feel comfortable giving to another person to use?
Sandy: Yeah, I think I've read several articles recently because of the whole Marie Kondo craze that some goodwills and other thrift stores have just been inundated with stuff that nobody wants and things that really should be thrown away. So I think that's a really good point.
Heather: Yes. And when you are thinking about donating, everybody has their favorite charities, which is great. You can also think about the convenience factor. Goodwill has a great process which is called drive through donations and that's why they have gotten a lot of traffic recently. Salvation Army is also good because they are one of the few that will actually come into your home and remove things, even carry things up and downstairs. So the convenience factor is helpful too when you're donating items.
Ryan: I think generally, we take a sort of do-it-yourself approach. And I can see why, when it comes to investing, when it comes to managing your finances. And so obviously we'd always recommend for people to take the initiative themselves to declutter. But what can hiring a professional organizer ... What can a professional organizer really bring to the table that has that extra element for people?
Heather: Well, there's three main benefits, I believe, of working with a professional organizer. One, is that they keep you accountable. You'll set a goal, you'll set a time to meet with them and then you are accountable for that decluttering or sorting or organizing that you'll be doing with them. So accountability is important. Another one is that a professional organizer will speed up the process. They really do make it more efficient.
Heather: Now, we're not taking away the decision power from the client, so the clients still making the decisions, but we're helping facilitate the process and make it go faster. And then the last is that professional organizers have that expert knowledge. So we've done this a lot, we've done research. Many organizers are actually certified, which means they have a certain level of training and experience. And because of that we bring solutions to client's homes, such as what is the best way to store folded clothes or how do you set up an effective filing system or if you're a business, what do you do with your paper and electronic records.
Heather: That is the third benefit of working with an organizer is that subject matter expertise that we bring.
Sandy: Let's say I have decided, yes, I do need to outsource this job. I do need a professional organizer. How long does it typically taken and how do professional organizers usually charge for the jobs?
Heather: Well, it really depends on what room of the home that you're working in. So a closet can be done usually much quicker than a home office. If you think about it, a stack of papers, one inch stack of papers are probably 30 decisions. So is a lot more decisions that happens, for example, in an office than it would a closet. I believe that the range would be anywhere from six hours to probably 26 hours for a typical room in a typical home.
Sandy: Okay. What's the best to find a professional organizer? And what kind of questions should I be asking when I call someone?
Heather: Well, a great starting point is to go to the National Association of Productivity and Organizing Professionals website. That's napo.net. From there you can enter in your location information, your zip code, and or the type of services that you're looking for, home organizing, office organizing, coaching, and you will be provided with a list of professional organizers and productivity consultants that can help you.
Heather: Now, it's recommended that you actually interview three different potential organizers so that you can find one that's a fit for you. Many of them will have a no fee initial meeting or a low fee initial meeting. They can meet you at your location, see your space and talk about your needs and more detail.
Ryan: All right. Well, I think I'm excited to get organized . . .
Sandy: I'm inspired. Doing the closets first.
Ryan: . . . and my desk at the office. Heather, thank you so much for coming on.
Heather: Yes, thank you guys for having me. I appreciate it.
Ryan: Coming up. Should you empty Your IRA for IVF? Probably not. Wild Pitches is next.
Ryan: We're back and before we go, we're a family friendly show, right?
Sandy: Oh, yeah.
Ryan: More or less.
Sandy: No bad words.
Ryan: What we have here is a family planning version of one of our favorite segments, Wild Pitches, tales of our wackiest PR pitches. Sandy, what is yours?
Sandy: I would call mine a misguided pitch, and here it is, it's a suggestion that women ... I don't think men can do this ... women use money in their Roth IRAs to create a fertility fund to pay for IVF treatments. And the peg for this is that more and more women in their 30s and 40s are not getting married at all or getting married later. They're worried about being able to have children or they're trying to have children and they can't. Fertility treatments are very expensive. And the pitch is that a Roth IRA could be a great place to get money for these treatments because you can always withdraw your contributions tax-free.
Sandy: And that is true, but there are so many problems with this idea and it gets to something that we at Kiplinger's often bring up, which is you shouldn't be using your retirement savings for anything other than retirement. Even if you take the withdrawals for your fertility fund and don't have to pay taxes on them, that money is not working for you. While it's out of your Roth IRA, it's not in the market, it's not compounding, so you're jeopardizing your retirement security. You really would need to have an awful lot of money in your Roth IRA to cover even one fertility treatment -- it ranges from $10,000 to $12,000, and very often it requires two or three efforts, which gets you up to $60,000.
Sandy: Unless you've been saving since you were 15 and done extraordinarily well in the markets, you're not going to have more than $60,000 in your Roth IRA. And even then, some of that will be earnings and it would be taxable because the maximum you've been able to put in for the last 10 years is 5,000 or 5,500 which was what it is now. So it's not like your Roth IRA is this gold mine sitting there waiting to be tapped. And even if it were, again, retirement savings should be for retirement.
Sandy: If you drain your Roth IRA and you are successful and you have a baby, great, I'm sure you're going to love this child, but someday you are still going to have to retire and we cannot guarantee that this child will let you move in with him or her. So leave your retirement savings alone. I think the takeaway is the first thing you should do is find out if your health insurance covers fertility treatments. Some do. If it doesn't, look for other sources that will not drain your retirement savings because we don't know if you're going to have children, but we do know that someday you're going to retire.
Ryan: And we know how compounding interest works. I feel like I've done this calculation in the magazine five times now, but if you start saving at 20 versus when you start saving at 40, which doing something like this is effectively doing that too. You're really diminishing the principle of what you have in that account, you have to contribute so much more if you are investing over a shorter period to get the same amount of money that you'd end up with in retirement.
Sandy: Right. And once you start having children, as we'll discuss, you're going to be spending a lot of money. So the likelihood that you will be able to replace the money that you've taken out, I think is very slim.
Ryan: Yeah, and that dovetails exactly into what I'm going to talk about, which is you said yours isn't so wild, mine's not so wild either. It's not a shark bracelet. But it does fall under the category of a pitch that I always think is kind of funny to receive, which is a new study that reveals something really, really obvious. This is from my sister's Alma mater actually, Dartmouth. It says, "While previous research has found that having children or lowers parent's happiness ..." Which by the way, I don't know whose research that's based on. I mean, it's certainly not my mother's research. She'll tell me . . .
Sandy: Best that ever happened to her.
Ryan: ... or any mother I've ever talked to . . .
Sandy: Maybe they went to a band concert or something.
Ryan: Yeah, who knows, but a new study from Dartmouth finds that happiness increases with children as long as they don't make it difficult to pay the bills, which ... Oh, my other favorite one is, "Children under the age of 10 bring more happiness than those between the ages of 10 and 14." Really? You think?
Sandy: 13-year-olds are so much fun.
Ryan: What a delight. What a delight, the rides to middle school on the bus where for all the adults involved. All right, I accept the notion that having children makes you happier if they don't hurt you financially or if they don't put you in a difficult situation financially, but obviously having children is really expensive and it's obviously going to eventually induce financial stress for a lot of people.
Ryan: If you can pay for everything you want to provide for your kids forever and ever and you're happy and everything's wonderful, great. Just fast forward to the end of the podcast, but we did want to mention a couple of ways that parents can save money when it comes to having kids. One of the ways is through your taxes, and if you thought you were going to make it through this episode in late March without having any tax count in . . .
Sandy: Not going to happen.
Ryan: ... come on. But it's me for a change. Me Talking about taxes. First of all, you're going to get tax credits for every child you have.
Sandy: They're larger this year.
Ryan: $2,000 per qualifying child that used to be a thousand. The number of children you have a reflects on how much you're going to get in the earned income tax credit. Just jump in here anytime I screw one of these things up.
Sandy: No, you're right on it that you can also get tax credits for child care, which is probably the most expensive part ... I bet I shouldn't say probably ... is the most expensive part of raising children is paying someone to take care of them while you're working. There are tax credits for that dependent children that you can set up a dependent care spending account. There are ways to get tax breaks that will alleviate that cost.
Ryan: Yeah, the dependent care credit will cover up to 35% of child care expenses or up to $3,000 for a child under 13. Your employer can also exclude up to $5,000 from your taxable wages for . . .
Sandy: That's the dependent care account. Yes. Right.
Ryan: Exciting stuff. The last thing that we always talk about is 529 plans. What is a 529 plan? I think we've covered it a little bit in our podcast.
Sandy: Yes. Basically, you suck my energy ... And we will be a reporting on this in our May issue as well. So look for that. But basically you can put away money in a tax advantaged account that will grow tax free, earnings will grow tax free and you can take it out tax free as long as you use it for college expenses. And that's probably the second most or first most expensive part about having children is paying for them to go to college.
Sandy: A lot of people can't afford to bribe college coaches to get their kids in the best schools. They got to go in the front door. So start saving early and no one says having kids doesn't cost a lot of money. But I think people have kids because they want to have children. And then once you do that, then you figure out with the help of our magazine, you figure out how to manage those costs.
Ryan: You're going to get federal tax breaks for investing in a 529. And depending on what state you live in you may get breaks as well. We recommend that . . . Vanguard has a 529 state deduction calculator (opens in new tab). That's worth checking out, and we'll link to some of our content in terms of plans that we like in the show notes, but it's certainly something worth looking into for people who are saving for college.
Ryan: That'll do it for this episode of Your Money's Worth for show notes and more great Kiplinger content. On the topics we discussed on today's show, visit kiplinger.com/link/podcasts. You can stay connected with us on Twitter (opens in new tab), Facebook (opens in new tab) or by emailing us at email@example.com (opens in new tab), and if you like the show, please remember to rate, review and subscribe to Your Money's Worth wherever you get your podcasts. Thanks for listening.
Links and resources mentioned in this episode
- How to Protect Yourself Against Social Security Fraud (opens in new tab)
- 5 Steps to Maximize Your Social Security Benefit (opens in new tab)
- National Association of Professional Organizers (opens in new tab)
- Cocozza Organization + Design (opens in new tab)
- Can Tidying Up Change Your Life? (opens in new tab)
- Decluttering in Retirement (opens in new tab)
- Money-Smart Ways to Get Rid of Your Stuff (opens in new tab)
- Child-Care Tax Breaks for Working Parents (opens in new tab)
- What You Should Know About 529 College Savings Plans (opens in new tab)
- Vangaurd's College Planning Tools (opens in new tab)
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