By now you have likely heard about it on the news. Equifax, one of the largest credit reporting agencies in the U.S., announced earlier this month that their security systems had been breached thereby potentially exposing 143 million people’s sensitive information to hackers. Among other things, it is possible that credit card numbers, social security numbers, and dates of birth could have been exposed. Here are six suggested steps to take both now and in the future to try to help keep you and your family’s information safe.
1) Determine if you were impacted.
Equifax setup a special website that allows consumers to see if their data was part of the breach at www.equifaxsecurity2017.com. We would encourage you to visit the site to see if your data was compromised.
2) Consider freezing your credit.
By freezing your credit, you restrict access to your credit information, thereby making it more difficult for anyone to use your identity. The positive to this is you essentially are cut off from the credit markets, so no one, including yourself would be able to apply for credit. The downside is if you do need to apply for legitimate credit (even store credit cards, or a 0% finance option at a furniture store) the lender will not be able to pull your credit unless you unfreeze it. In order to freeze your credit, you’ll need to contact each of the three major credit agencies: (TransUnion, Experian, and Equifax), through the following phone numbers or websites:
3) Consider enabling smart phone alerts each time your credit and/or debit card is used.
This option may not be right for everyone, but for those that always want to know what is going on with their accounts, enabling text or push notifications via your smart phone may be an option. I personally have went this route with my cards. Every time I use my card (up to this point it was always me) I get a notification on my phone. For me, these notifications provide me with reassurance that at least I am being proactive in managing my accounts.
4) Think about changing passwords for your email and online financial accounts.
I know this can be a real pain point for some and believe me, I feel your pain. However if your data was part of the recent Equifax breach, using the same password for most of the sites that you use could be an issue. To be safe, consider changing the passwords you use for email and financial accounts now, as well as on a reoccurring basis going forward. The more you change them the harder it can be for scammers to access your data. Just remember to keep track of what they are.
5) Be on the lookout for email phishing scams.
Whether it is personal or work email, force yourself to think before you click. Email phishing scams are a popular way for bad guys to infiltrate your system. Be on the lookout for these scams. Sometimes just by clicking on the email, malware and other tracking software can be sent to your computer to attempt to track sensitive information like passwords, account numbers, etc. These scammers are smart too. They like to put certain words in the subject line hoping that you will be enticed to click on the email. The use of RE:, FWD: and others is very common. They can also look like they are coming from a known source as well. Rule of thumb – if you are not looking for something and it does not feel right, don’t click on it.
6) Always keep your alert up.
I think this is an important step. It is extremely important to always have your guard up to protect yourself and your personal information in today’s connected society. Whether it is Equifax and Deloitte this month, or name your company next month, data breaches and identity theft attempts are likely to be something we will all have to live with for the rest of our lives. Which is why it is important to stay on your toes. Certainly it is much easier (and quicker) just to hop on to an unsecure WIFI network or hit send on an email with sensitive data. Avoid the temptation of being complacent with your online activity. Ask anyone who has been the victim of identity theft if you need a reminder of why security is important.
We have had some great questions from clients this month. Below are three that we thought were worthy to share.
1) I have a brokerage account that shows my cost basis online for tax purposes. A fund that I purchased shows a tax cost larger than what I initially invested. How can that be?
Ah the joys of understanding tax cost basis. These days, large custodial brokerage firms like Schwab, Fidelity, T.D. Ameritrade and others typically provide cost basis on either their website or on their statements. However as is the case with this question, sometimes the difference between tax cost basis and what was actually invested can be confusing. The primary difference between the two is tax cost basis actually increases when items like dividends or capital gain distributions get reinvested. Perhaps it will be easier to show an example. Say you purchase a stock (call it company A) 2 years ago for an initial investment of $10,000. Your cash invested obviously would be $10,000 in that example. Going forward assume that company A paid a quarterly dividend of $100 each quarter. If you elected to reinvest the dividends to purchase more shares of company A each time it is paid, you would have accumulated an additional $800 of company A stock. The additional purchases are added into your cost basis for tax purposes. So in that example, your brokerage firm would be reporting your total cost basis as $10,800 for tax purposes, even though you only invested $10,000. It is important to understand the difference between the two. It is very possible to have an investment that is showing a tax loss on paper, but has actually made you money based on your initial purchase. Try not to fall in the trap of confusing tax basis and actual investment performance.
2) I have a target date fund option in my 401(k), should I use it?
Personally, I like target date fund options for 401(k) participants, especially younger participants or those that want an easier, one stop fits all approach to retirement investing. But with that said, target date funds are not always the best solution. It really depends on what particular target date funds are offered in your plan. Do not just assume that the target date option is the best option. It is possible that target date funds could have higher internal expenses than other investment options in the plan and they are not always as diversified as you think. Each target date option performance should be compared to other target date funds as well as certain applicable benchmarks or category averages. You might consider reviewing independent analysis by Morningstar to get more information: www.morningstar.com. Additionally it is important to make sure you are looking at your full, holistic financial picture to determine if target date funds are right for you. If your 401(k) is only a small portion of your retirement assets, you may consider a more conservative or aggressive mix for that particular account in order to balance out what you have elsewhere. In conclusion, target date funds can be attractive but research is required, there is no such thing as a free lunch.
3) How do I know if I can deduct donations to my church?
The question of can I deduct charitable contributions is a very personal question and it really depends on your personal situation. However in general, in order to deduct charitable contributions, whether they be to your church or any other non-for-profit organization you should first determine if you will be taking a standard deduction or if you will itemize. Not all taxpayers itemize, it really just depends on how much in the way of deductible expenses you have in a given year. A good place to start to determine if you will itemize this year is to review your tax return from last year. Look at line 40 on page 2 of your Form 1040. If the figure is higher than the standard deduction you did in fact itemize last year. If you did itemize, review your Schedule B to see what deductions you took the previous year. Ask yourself if you expect to take similar deductions this year. If yes, then it is very possible that your charitable contributions will be deductible this year. Regardless if you expect to itemize or not, it is always a good idea to track all charitable contributions and provide them to your tax preparer each year. Your preparer should provide you with the final determination as to the tax benefit of charitable contributions for your specific situation.
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