As the weather turns warmer and the days get longer, we tend to focus upon the positive changes that we can make in our lives. At MMBB, we are continually aware of your financial health and wellbeing. In this issue of Tomorrow, we shine the spotlight on several topics that are central to our ministry and our members.
How Tax Reform Affects Charitable Giving is the first in a year-long series outlining tax reform and how the new tax law may affect your finances, both personally and organizationally. This first article focuses on charitable giving and how the changes in the standard deduction may affect how much individuals donate.
Lilly Initiative: The Debt Stress Pilot Program and the Coaching Process discusses the Debt Stress Workshops conducted by MMBB and the coaching process. How does coaching differ from mentoring and how can it make an impact on a person’s life? The conversation between three coaches who work with participants from the program offers some valuable insights about the role of a coach.
Next, you’ll find information on Using Credit Wisely. In this article, we provide tips on how to manage and use credit as a financial tool to help you achieve your short and long-term financial goals.
What Spouses Need to Know When an MMBB Member Dies in Retirement is the first article in a three-part series. This article addresses the procedures we follow when the deceased is a retired member with a joint annuity.
Finally, we introduce another series, Ask A CFP® which will appear from to time in the newsletter. In this first article we answer the question, “What is Goals-Based Financial Planning?”
At MMBB we realize that your path is different, and so is your financial plan. We stand ready to assist you in achieving your financial goals.
It is our privilege to serve you.
Louis P. Barbarin, CPA
Chief Executive Officer
By Louis P. Barbarin, CPA, Chief Executive Officer MMBB Financial Services
Welcome to our series of articles outlining tax reform and how the new tax law may affect your finances, both personally and organizationally. This first article focuses on charitable giving and how the changes in the standard deduction may affect how much individuals donate to charitable, religious and other non-profit organizations.
The Tax Cuts and Jobs Act (H.R.1) signed into law by President Trump on December 22, 2017 overhauls America’s tax code in an attempt to revitalize our nation’s economy and deliver historic tax relief to workers, families, and local job creators.
A key component of the new tax law doubles the standard deduction that approximately two-thirds of Americans use, to $12,000 for individuals and $24,000 for married couples. This means that significantly fewer Americans will be able to claim a charitable deduction because only those who itemize can claim the deduction. Taxpayers who itemized in the past may find it’s no longer beneficial for them to do so. They will find that the deductions which they were accustomed to taking, including for charitable giving, do not add up to as much as the new higher standard deduction which has increased by $6,000 for individuals and $12,000 for married couples. Some estimates project that as few as 10% of taxpayers will continue to itemize deductions on their returns, down from the current one-third. Additionally, those who continue to itemize will realize less of a tax savings due to the lower tax rates starting in 2018.
With less tax incentive to give, millions of relatively small donations that moderate-income Americans give to mainstream charities could be sharply reduced. Despite the changes due to tax reform, Americans’ charitable instincts will still lead them to give, but they are expected to give less.
The good news is that members of religious congregations should continue to commit small amounts or a percentage of their income regardless of tax incentives. According to a recent study by the Chronicle of Philanthropy, the more important religion is a to a person, the more likely that person is to give to a charity of any kind. Among Americans
who claim a religious affiliation, the study said, 65 percent give to charity1. The tax benefits, while certainly helpful, are secondary to many givers in the faith community.
Prior to receiving the grant from the Lilly Endowment, Inc. at the end of 2015, MMBB conducted a study on financial health amongst members and non-members. We discovered that debt stress was nearly twice as high amongst clergy persons as the average American.
Each of the three initiatives of our Lilly grant, the Financial Wellness Project for Pastoral Leaders and Their Congregations addresses strategies for reducing debt, however, we understood that one of those initiatives needed to focus on the stress that is caused when people feel overwhelmed by debt. We knew that there were spiritual, psychological and emotional factors about debt stress which not only affected the pastoral leaders but also their families and congregations.
The Pilot Project on Debt Stress was designed to address and begin to alleviate the issues that can hinder clergypersons from bringing their best selves to their ministries. The second session was held in Fall 2017 in the Westchester area where 13 MMBB members and several spouses attended the 1-1/2-day workshop. The content emphasized three areas:
At the end of the workshop each pastoral leader and spouse were matched with a coach who provided six coaching sessions over a twelve-month period, via phone or video conference. All the coaches have had considerable coaching experience and were reassured that their responsibility was coaching and not financial guidance. Financial planning assistance is available to all participants as a benefit of their MMBB membership. As the first group of participants have recently completed their year of coaching, we thought it would be useful to sit down with three of the coaches to discuss what coaching is and how it can make an impact on a person’s life. Rev. Margaret E. Lewis (Maggie) is Executive Director of The Center for Career Development and Ministry in Nashua, NH. Olu Burrell is the People Strategy Consultant & Leadership Coach for Spoken IV Solutions LLC in Washington D.C. and Vincent Schera (Vince) is Chief Human Resources Officer at MMBB. Their responses may cause you to think seriously about the ways in which you may benefit from working with a coach.
What is coaching and how does it differ from mentoring? How can working with a coach help a person to address their personal and/or professional goals?
Maggie: The best way to describe the difference is that the coaching relationship is more collaborative than mentoring. A mentor might assume some area of expertise or professional competence that the mentees haven’t yet achieved. A coach would more likely partner with clients to help them identify and build upon their own wisdom and strengths to achieve their goals. There can be some overlap between coaching and mentoring but this is the basic distinction I see.
Olu: Coaching differs from mentoring in that coaching is a future-focused process based upon the client’s self-identified agenda and energy while mentoring focuses on the relationship between the mentor and mentee in that the agenda is for the mentee to glean wisdom from the mentor, who has—for the most part—traveled a similar path. The value of working with a coach to address one’s personal and/or professional goals comes in the form of a professional who uses careful questioning and direct communication informed by the stories and beliefs shared by a client.
Vince: Mentoring primarily focuses on specific tasks and objectives that a person may be struggling with and for which someone who has encountered similar challenges can offer their advice, counsel and expertise. Coaching in essence, is a holistic approach as general goals and overall areas of development are explored with the client by active listening and posing powerful questions. The overall objective in coaching is to bring forth an awareness level in which the client realizes what needs to be done to move forward.
Those are really helpful insights. What is one of the primary obstacles you encounter that people need to overcome in order to address their personal and/or professional goals?
Olu: The primary obstacle I encounter lies in the stories we tell ourselves and subsequently choose to believe. People are experts in self-protection and projection. The realities we live in are often prisons of perception and they often clash with what could be because we often fail to challenge our assumptions.
That is a powerful statement. We may pay a price when we are unable to move beyond the stories we have consciously or unconsciously chosen to believe about ourselves.
Olu: Yes, that can be the case. Most of these narratives find their origins at developmental points in our lives that we have been repeating and reinforcing ever since.
Vince: I agree with you, Olu. I’ve found that people become immersed in their underlying assumptions which in turn become their basis of fact. A key question that I have found myself asking a client on numerous occasions has been “What’s stopping you”? After they give this question careful thought, they become aware that their hesitancy in taking a specific action is due to their assumptions of how others will react or what they think would happen if they do take this action.
So, although we may not always be aware of them, we fall prey to the underlying assumptions and allow them to become our reality.
Vince: Definitely. As people are able to examine these assumptions, they are enabled to overcome these road blocks that they had erected.
Maggie: Frankly, I also find that many people are resistant to putting themselves first on the list. I find clergy so often put other people’s needs ahead of their own and don’t make the time to focus on themselves and their own needs and goals.
I am sure many people who are reading this article recognize themselves in that statement.
Maggie: We’ve all heard about putting the oxygen mask on ourselves first during an airplane emergency before trying to help others. We know this but we don’t always do this.
What are some or one of the signs that a person or couple you are working with has reached a turning point in the process?
Vince: There are many signs that signal a breakthrough. The primary indicator for me is the sense of positive energy that a client brings to the coaching session.
Maggie: I’ve observed that also, Vince. The coaching process can be circuitous; progress can be incremental and barely noticeable until the delicious “Aha Moment”. It’s like finding your way through a thick forest and thinking you’re never going to find your way out when suddenly there is a small clearing ahead and a narrow stream of light is shining through.
Vince: That’s a great way to describe the process. And, the “Aha Moment” may be as simple as a client having a confident demeanor when presenting issues for discussion that they did not have before. There may also suddenly be a high comfort level in the action plan they establish for themselves going forward.
Olu: One of the signs of a turning point is listening to a client talk about their way forward with possibility, hope and determination; when they overtly own their responsibility in the choices they make and resolve to challenge previously-held assumptions that have been holding them back.
Can you share a recent success story in which you feel the coaching process made a difference?
Maggie: Oh yes! I recently did financial coaching with a minister who had significant debt, partly due to unplanned medical expenses and partly due to not having adequately understood paying quarterly estimated federal taxes. The person was absolutely overwhelmed and didn’t even know where to begin to dig themselves out of this debt. We took it step by step, little by little. The most important thing we did was to put $1,000 into an Emergency Fund. It was hard finding that money in their limited budget and frustrating not to use it to pay down some debt. But I knew they would never achieve financial solvency if they didn’t have money set aside for emergencies. One day I received an email from the person after they had just encountered an unexpected major expense. They said, “First, I panicked and wondered how I would ever pay for it. And then I remembered that I had an Emergency Fund! Problem solved!” The person was reclaiming their power and flexing their newfound financial competence muscles. It was a good day
Olu: I had a client who seemed to have a negative association with budgeting and living frugally. Through the coaching process it was revealed that there was a long-held fear of feeling/being poor and how that belief contributed to an aversion to mindful spending. Through our engagement I was able to challenge the language used in the story they told themselves. A simple reframing like moving from “I have to save” to “I get to save” enabled them to see things from an appreciative standpoint where they were being a ‘driver’ of behavioral change instead of a ‘passenger’ to whom change happened. As a result, their face brightened as they perked up, and their outlook became quite positive.
Vince: I recall that during a recent coaching engagement I helped my clients identify the underlying issues that were preventing them from addressing what they believed was their primary area of concern. By vetting and assessing their underlying assumptions they were able to develop meaningful action plans and proceed with confidence. They were also able to prioritize and avoid conflating their objectives and give themselves kudos for what they had accomplished.
Those are refreshing stories that can be a source of hope as we face the obstacles, often self-imposed, that hold us back from achieving our goals. Are there any parting thoughts you want to share?
Olu: I want to point out that in Appreciative Inquiry2, we use a phrase, “words create worlds.” The words we speak often becoming a self-fulfilling prophecy in our lives, so I encourage clients to speak LIFE.
Maggie: One of my colleagues at the Center for Career Development and Ministry often says that coaching helps you live brave. I love that. Coaching can help turn vague ideas into concrete action steps that help you to live brave.
2Appreciative Inquiry (AI) is a model that seeks to engage stakeholders in self-determined change. https://en.wikipedia.org/wiki/Appreciative_inquiry
In today’s world, just about everyone uses credit to obtain the things that they want or need, but do not have the cash on hand to pay for immediately. We use credit in many forms, such as a mortgage loan to buy a house, a student loan to pay for education for ourselves or our children, an automobile loan to purchase a vehicle, or credit cards to purchase big ticket items like new appliances.
When used wisely credit can be a helpful financial tool, allowing you to spread the cost of a large purchase over time. Many consumers will also use credit cards when faced with unexpected expenses, including home or auto repairs and medical emergencies. Credit cards offer convenience when traveling, such as renting a car, reserving a hotel room and making purchases all without carrying a lot of cash.
There is also a downside to using credit. It can be expensive. You need to be aware of interest rates, finance charges, annual fees, and penalties. These items can all considerably increase the cost of any purchase made using credit. There is also the ever-present temptation to overspend, since it so easy to just swipe your card and not worry about the amount that is being charged. Overspending on credit cards leads thousands of consumers into financial difficulty each year.
It is possible to use credit wisely if you take control of your finances by creating a realistic spending and savings plan so that you are aware of how much credit you can afford. This is where a budget can be very helpful. It allows you to outline your monthly expenses looking at how much you have available to spend and save, as well as how much debt you can afford to take on and repay. It is important to borrow only what you can afford to pay back. The general rule of thumb is to spend no more than one-third of your income on debt including mortgages, credit cards and consumer loans (auto loans, student loans, and lines of credit).
The goal is to pay off your balance as quickly as possible.
The death of a loved one is never easy. Even though as Christians we celebrate the gift of eternal life that is central to our faith in Jesus, we will still experience a profound sense of separation and finality that often leads to tremendous grief. That deep sense of loss is further magnified when the loved one is a spouse.1
Psychologists confirm that there are few things in life that compare to the pain of losing a spouse. For most people, the death of their husband or wife will be traumatic whether it is expected after a long illness or whether the person’s death is sudden and unexpected.
MMBB understands that this is a time when the last thing a person may want to deal with are the “business” details that accompany the passing of a spouse. But it is most important that you notify MMBB of the member’s death by phone, mail or e-mail as soon as possible. If notification is delayed, adjusted benefits cannot be made available on a timely basis. Adjustments to an annuity may occur based on the annuity payments received following the death of the member and the date MMBB is notified, either may cause an overpayment or underpayment of annuity benefits. In most cases the deceased person is a retired member with a joint annuity, however, if the person is an active premium paying member, there will be aspects of the benefit determination process that will differ for the surviving spouse or beneficiary. This article will focus on procedures we follow when the deceased is a retired member with a joint annuity.
Once MMBB receives notification that a member has died, a Senior Benefits Specialist (SBS) will call the spouse or family representative to offer our condolences. The SBS who is assigned to the case, will review the details of the annuity plan, determine the benefit eligibility and draft a letter to the survivor or family with instructions and forms that need to be completed in order to manage the transfer of benefits process. In addition to expressing MMBB’s condolences to the spouse or family member, the letter will also explain the terms of the benefits for which they are eligible. Typically, the letter will explain the following:
There are three types of joint annuity options;
If notification to MMBB is delayed, this will have a greater financial impact on surviving joint annuitants whose survivorship benefits are being reduced. Benefits may need to be reduced to cover an overpayment of benefits in addition to being reduced as a result of the chosen 80%/80% or 100%/60% annuity option.
The death benefit is treated as group life insurance and it is not taxable income however, the survivorship benefit is taxable income.
There are several important tax issues which surviving spouses and joint annuitants need to be aware of with respect to the death benefit and their survivorship annuity benefits. The death benefit is treated as group life insurance and it is not taxable income however, the survivorship benefit is taxable income. Additionally, if your clergy spouse usually claimed the annuity as clergy housing allowance, that tax exemption will not be available to non-clergy beneficiaries on the survivorship annuity income because the IRS does not grant that exclusion to surviving spouses or joint annuitants.
Part 2 of this series will cover “What Members Need to Know When their Joint Annuitant Dies.” Procedures that are followed when the person is an active premium paying Comprehensive Plan member who dies prior to retirement will be covered in Part 3.
Welcome to MMBB’s new column, Ask the CFP®, where our staff of CERTIFIED FINANCIAL PLANNER™ professionals answer your financial planning questions. This column will appear occasionally throughout the year. At MMBB our approach to financial planning is different. We offer diligent, personal guidance and service no matter what your financial circumstances. The first question we’ll address is about goals-based financial planning.
Q: What is goals-based financial planning?
A: That’s a great question and one that comes up frequently. As a starting point, let’s first define traditional financial planning. Historically, financial planning was a process that evaluated your financial picture by looking at income, expenses, assets (like investment accounts and a home) and liabilities (like a mortgage or student loans). These financial building blocks were projected out into the future based on a set of assumptions using average rates of return. The result was an estimated surplus (or deficit) at some point in the future. For example, saving an additional $100 per month for 20 years at an average annual return of 6% could increase your retirement account balance by a little over $46,000. The process produced a result—a number—but it didn’t tell you how likely you were to achieve your goal.
Goals-based financial planning incorporates advanced statistical techniques into the process to estimate the likelihood of achieving a goal like retirement. By running multiple simulations in the background, financial planning software can not only estimate the probability of reaching a financial goal, it can also quantify the impact of saving for one goal over another goal. This results in a better understanding of how financial goals are interrelated—for example, saving more for a child’s college education might negatively impact the ability to achieve the retirement goal. A typical goals-based financial plan would incorporate all of your financial data and produce an estimated probability of achieving a goal.
Using goals-based planning to create comprehensive financial plans allows financial planners to “stress test” the plan and compare different planning options or scenarios—focusing on alternatives that could have the highest probability of success. Note, goals-based planning does not guarantee a particular outcome, but it does help weigh the pros and cons of various financial choices. It has evolved into a useful tool to help evaluate the likelihood of achieving a given goal and is commonly used as part of an annual review to chart progress toward achieving that goal over time.
The MMBB CERTIFIED FINANCIAL PLANNER™ professionals are available to assist you in achieving your financial goals. Call us at 800.986.6222? or email financialplanning@ mmbb.org? to speak with financial planner. Like you, we’re students of the Parable of the Talents: we are called to shepherd the resources entrusted to us so you, your family and your church can focus on serving God’s kingdom.