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11
Dec

Year-End Financial Planning

The end of the year presents a unique opportunity to look at your overall personal financial situation.   With factors like tax reform, life changes or just working towards your goals, now is an especially important time to review things.  Taking what we now know about the new tax law and weaving together all of the other areas of your personal finances is a great way to way to start a review.  Below are some helpful things to consider and take action on, as appropriate, before the year ends.

 

Best wishes to everyone for a holiday season filled with peace and joy.

 

Income Tax Planning –Ensure you are implementing tax reduction strategies like maximizing your retirement plan contributions, tax loss harvesting in portfolios and making charitable contributions can all help reduce current and future tax bills.   It is also good  to review your current year tax projection based on your income and deductions year to date and how that may be different from before.

Estate Planning – Examine a flowchart of your current estate plan to visualize what would happen to each of your assets and how the current estate tax law will impact you.  Be sure that your estate planning documents are up to date – not just your will, but also your power of attorney, health care documents, and any trust agreements – and that the beneficiary designations are in line with your desires. If you have recently been through a significant life event such as marriage, divorce or the death of a spouse, this is especially important right now.

Investment Strategy– Recently, we’ve seen increased market volatility and it may feel uncomfortable.  Market declines are a natural part of investing, and understanding the importance of maintaining discipline during these times is imperative.  Regular portfolio rebalancing will allow you to maintain the appropriate amount of risk in your portfolio.  And, if you are retired and living off your portfolio, you also want to maintain an appropriate cash reserve to cover living expenses for a certain period of time so that you do not have to sell equities in a down market.

Charitable Giving – There are many ways to be tax efficient when making charitable gifts. For example, donating appreciated stock could make sense in order to avoid paying capital gains taxes. Further, you may want to consider bunching charitable deductions by deferring donations to next year or making your planned 2019 donations ahead of time. If the numbers are large enough, you might even consider a private foundation or donor advised fund for your charitable giving.

Retirement Planning –Think about your future when working becomes optional.  Whether you expect a typical full retirement or a career change to something different, determining an appropriate balance between spending and saving, both now and in the future is important. There are many options available for saving for retirement, and we can help you understand which option is best for you.

Cash Flow Planning – Review your 2018 spending and plan ahead for next year. Understanding your cash flow needs is an important aspect of determining if you have sufficient assets to meet your goals.  If you are retired, it is particularly important to maintain a tax efficient withdrawal strategy to cover your spending needs. If you have not yet reached age 70.5, it is prudent to ensure you are making tax-efficient withdrawal decisions.  If you are over age 70.5 make sure you are taking your required minimum distributions because the penalties are significant if you don’t.

Risk Management – It is always a good idea to periodically review your insurance coverages in various areas. Recent catastrophic events like hurricanes serve as a powerful reminder to make sure your property insurance coverage is right for your needs. If you are in a Federal disaster area, there are additional steps necessary to recover what you can and explore the tax treatment of casualty losses. Other areas of risk management that may need to be revisited include life and disability insurance.

Education Funding – Funding education costs for children or grandchildren is important to many people.  While the increase in college costs have slowed some lately, this is still a major expense for most families. It is important to know the many different ways you can save for education to determine the optimal strategy. Often, funding a 529 plan comes with tax benefits, so making contributions before the end of the year is key.  With the added flexibility of funding k-12 years (set at a $10,000 limit), 529 accounts become even more advantageous.

Elder Planning – There are many financial planning elements to consider as you age, and it is important to consider these things before it’s too late. Having a plan in place for who will handle your financial affairs should you suffer cognitive decline is critical.  Making sure your spouse and/or family understands your plans will help reduce future family conflicts and ensure your wishes are considered.

The decisions you make each year with your personal finances will have a lasting impact.  I hope these suggestions have begun to generate some insight to areas of your personal finances that need attention.  Please contact me if you would like to discuss your year-end planning, or any other aspects of your financial planning.

 

The information presented here is not specific to any individual’s personal circumstances, and does not constitute investment, tax, legal, or retirement advice or recommendations.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

 

23
Nov

The Benefits of Donating Appreciated Investments

I am honored to be featured in the latest issue of the University of Vermont quarterly alumni magazine, Vermont Quarterly, in a piece about the benefits of donating appreciated stock and other investments.  See link below to the piece.

planned giving page (VQ November 2018)

31
Oct

Health Insurance Open Enrollment for 2019

November 1 Begins Open Enrollment for Health Insurance Marketplaces

Beginning on November 1, 2018, individuals (including their families) may apply for new health insurance or switch to a different health-care plan through a Health Insurance Marketplace under the Affordable Care Act (ACA). The open enrollment period for 2019 health coverage ends on December 15, 2018.

Individuals can use Health Insurance Marketplaces to compare health plans for benefits and prices and to select a plan that fits their needs. Individuals have until December 15, 2018, to enroll in or change plans for new coverage to start January 1, 2019. For those who fail to meet the December 15 deadline, the only way to enroll in a Marketplace health plan is by qualifying for a special enrollment period following certain life events that involve a change in family status (for example, marriage or birth of a child) or loss of other health coverage.

New for 2019

While the ACA (commonly referred to as Obamacare) has not been repealed or replaced, there have been changes to the law. The biggest change is the repeal of the tax penalty for failure to have qualifying health insurance. While the individual mandate requiring that most people have minimum essential health insurance coverage (unless an exception applies) still exists, the tax penalty for failure to have insurance has been repealed, effective January 1, 2019.

In addition, states have additional flexibility in how they select their Essential Health Benefits. In effect, states may elect to sell short-term health insurance policies with coverage terms of up to one year. These plans may offer fewer benefits compared with the 10 Essential Health Benefits covered under the ACA.

Those living in hurricane-affected areas in 2018 may apply for a special enrollment period, which provides extra time to apply for health insurance through the Marketplace. Affected areas are those designated by the Federal Emergency Management Agency (FEMA) as eligible to receive “individual assistance” or “public assistance.” So far, several counties in Georgia, Florida, South Carolina, and North Carolina have been designated eligible for federal assistance.

The federal government no longer runs SHOP Marketplaces for small businesses. As an alternative, small business employers may be able to contact insurance companies directly or work with a broker who is certified to sell SHOP policies.  In Vermont, small businesses (up to 100 employees) can obtain health insurance through Vermont Health Connect, or new for 2019, business association plans will be available.  Contact a qualified broker to find out more about association plans.  Individuals without access to employer or other coverage and purchasing coverage on their own can also obtain coverage on Vermont Health Connect.

 

Part D late enrollment penalty

Generally, if you did not sign up for Part D coverage during your initial enrollment period, and you don’t have other creditable drug coverage (at least comparable to Medicare’s standard prescription drug coverage) for at least 63 days in a row after your initial enrollment period, you may have to pay a late enrollment penalty. The late enrollment penalty is added to your monthly Part D premium. Your initial enrollment period is the seven-month period that starts three months before you turn age 65 (including the month you turn age 65) and ends three months after the month you turn 65.

Medicare Open Enrollment Begins October 15

What is the Medicare Open Enrollment Period?

The Medicare Open Enrollment Period is the time during which people with Medicare can make new choices and pick plans that work best for them. Each year, Medicare plan costs and coverage typically change. In addition, your health-care needs may have changed over the past year. The Open Enrollment Period is your opportunity to switch Medicare health and prescription drug plans to better suit your needs.

When does the Open Enrollment Period start?

The Medicare Open Enrollment Period begins on October 15 and runs through December 7. Any changes made during Open Enrollment are effective as of January 1, 2019.

During the Open Enrollment Period, you can:

·       Join a Medicare Prescription Drug (Part D) Plan

·       Switch from one Part D Plan to another Part D Plan

·       Drop your Part D coverage altogether

·       Switch from Original Medicare to a Medicare Advantage Plan

·       Switch from a Medicare Advantage Plan to Original Medicare

·       Change from one Medicare Advantage Plan to a different Medicare Advantage Plan

·       Change from a Medicare Advantage Plan that offers prescription drug coverage to a Medicare Advantage Plan that doesn’t offer prescription drug coverage

·       Switch from a Medicare Advantage Plan that doesn’t offer prescription drug coverage to a Medicare Advantage Plan that does offer prescription drug coverage

What should you do?

Now is a good time to review your current Medicare plan. As part of the evaluation, you may want to consider several factors. For instance, are you satisfied with the coverage and level of care you’re receiving with your current plan? Are your premium costs or out-of-pocket expenses too high? Has your health changed, or do you anticipate needing medical care or treatment?

Open Enrollment Period is the time to determine whether your current plan will cover your treatment and what your potential out-of-pocket costs may be. If your current plan doesn’t meet your health-care needs or fit within your budget, you can switch to a plan that may work better for you.

What’s new in 2019?

Beginning in 2019, Medicare Part D Prescription Drug Plan participants will no longer be exposed to a coverage gap, referred to as the donut hole. Due to changes made by the Bipartisan Budget Act of 2018, Part D participants will see a reduction in their out-of-pocket costs for brand-name drugs from 35% to 25% — a reduction that was originally scheduled to take place in 2020. The gap in coverage for generic drugs will not be closed until 2020. In 2019, Part D participants will pay 37% of the cost of generic drugs.

Also in 2019, the Medicare Advantage Disenrollment Period will be replaced by the Medicare Advantage Open Enrollment Period. The Medicare Advantage Disenrollment Period, which ran from January 1 through February 14, allowed you to drop your Medicare Advantage Plan and return to Original Medicare (Parts A and B) and it allowed you to sign up for a Medicare Part D Prescription Drug Plan. In 2019, a new Medicare Advantage Open Enrollment Period will run annually from January 1 through March 31. If you’re enrolled in a Medicare Advantage Plan, you’ll have the opportunity to switch to another Medicare Advantage Plan, switch to Original Medicare Parts A and B, sign up for stand-alone Medicare Part D Prescription Drug Plan (if you are covered by Original Medicare), or drop your Medicare Part D Prescription Drug Plan.

Where can you get more information?

Determining what coverage you have now and comparing it to other Medicare plans can be confusing and complicated. Pay attention to notices you receive from Medicare and from your plan, and take advantage of help available by calling 1-800-MEDICARE or by visiting the Medicare website, medicare.gov.

Refer a friend To find out more click here
IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.

To opt-out of future emails, please click here.

 

30
Sep

The Importance of Simplifying Accounts

Overview

There are many reasons you may have multiple investment and banking accounts.

  • Job changes resulted in multiple retirement plans located at different institutions
  • You started investing in companies or mutual funds by directly buying a small number of shares over a long period of time
  • A family member gifted shares of stock to you
  • A bank offered great rates on savings or loans that you just could not pass up
  • You don’t trust the financial services industry, and decided to keep multiple accounts to decrease the risk of an institution going out of business or someone stealing your money

These all seemed like good ideas at the time, but there are many reasons you should simplify.

Lost Accounts

As the years go by, you may move once, twice, or a dozen times, and forget some of the outstanding accounts you have created. Without any “action” in these accounts, institutions may not be able to find you, and then they will turn over your little pot of gold to the state.

Tax Preparation

In addition, with non-retirement accounts, you will have many outstanding tax forms which can make preparing tax returns more complicated and expensive. Did your grandmother gift you that one share of Disney and now you receive a 1099 for $1.37 for the year? Not only do you have that hassle with that 1099, that one share of stock will also go through probate when you die.

With many institutions providing tax forms online, you may forget to download the form only to be reminded a year later with a fun letter from the IRS letting you know about underpayment.

Retirement Plan Distributions

Most retirement plans have required distributions at age 70 ½. If you have multiple retirement accounts, it will be important to keep track of the required amount that needs to be distributed from all the accounts total. IRA accounts are calculated separately from 401k and 403b accounts. By consolidating accounts, it makes distributions much easier to track. And given the penalty for not taking a distribution is a hefty 50%, you don’t want to mess this up.

Ease of Future Financial Caretaking and Estate Administration

The more assets you have floating out there, the more work that will be required by your financial caretakers if you become incapacitated and by the executor of your estate if you die. This increases hassle, costs, and the risk of mistakes.

So how do you simplify?

Before simplifying, make certain you understand the tax and estate implications of your current situation. After that is clarified, begin to pare down the number of accounts to the following:

  • One checking and one savings account at one institution.
  • One IRA account and all old retirement plans such as 401k and 403b accounts should be rolled into this IRA.
  • One Roth IRA account (if you can have a Roth) – and all Roth 401k and Roth 403b contributions should be rolled into this Roth.
  • One brokerage account – all outstanding stock certificates, direct mutual fund holdings, and other investment accounts should be held in this account.

In addition, if you think there are accounts that you have forgotten about, check the unclaimed property site in the state you think it may be located. The USA.gov website has a great resource for this.

When you consolidate, check the titling and beneficiary designations to make certain they are congruent with your estate plan and your wishes.

By simplifying, you can ease your financial caretaking as you age and save you and your family money and angst in the process.

 Content provided by: Whealthcare Planning, LLC

The information presented here is not specific to any individual’s personal circumstances, and does not constitute investment, tax, legal, or retirement advice or recommendations.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

24
Aug

Picking a Financial Caretaker

I am pleased to present the latest edition of Financial Planning Tips.  This month, I have selected a topic that is often overlooked – picking a financial caretaker to manage your financial affairs if you are no longer able to do so yourself (either temporarily or permanently).  I believe everyone, at any adult age, should plan for this possibility.  Many people think that this type of planning only applies to older folks, but the reality is that even younger people can experience health or other life events that call for this type of assistance.

Picking a financial caretaker

At some point in your life, you may need a financial caretaker to pay your bills, watch over your investments and take care of your tax filings. For many people, the choice is easy – most often adult children or nieces and nephews are willing to help. For some people, there may not be anyone who you can easily turn to. What do you do if you are in this situation?

Hire a friend and a professional

If you do not have family you trust to help with your finances, consider hiring a friend you trust. However, to provide additional protection, hire a professional to oversee the person taking care of your finances, such as an accountant or fiduciary financial planner. How would this work?

First simplify your finances and consolidate your financial picture using a portal such as Mint.com or Yodlee. Set up automatic bill pay for as many payments as possible. Provide your friend and a professional with the login to your aggregator site. The two can work together to make certain you are doing a good job managing your finances.

Once you need assistance with your finances, you can begin with your friend “supervising” your bill paying, watching over your investments, and filing your taxes. Make certain they have a power of attorney to take over for you when needed, and that all of your financial institutions accept your power of attorney document.

Once your friend takes over paying the bills, make certain the financial planner or accountant periodically “audit” your friend’s work. You will have to pay for this service, but the peace of mind with having multiple eyes on your financial picture is well worth the cost.

What if there is no one who can help you pay your bills?

There are professional bill payers, but unfortunately, this profession is in its infancy and is not regulated. The American Association of Daily Money Managers is a great resource for professional bill payers, and they may also provide many other services.

If you hire a professional bill payer, they should provide a monthly accounting of your expenditures, collect all your financial statements, organize your information for your tax return, and review your investments with your professional advisers.

It is important to have your finances set up to your specifications in advance of hiring help so your instructions can be followed. For example, have an investment policy statement, budget, and plan for your sources of income and have the bill paying professional agree to follow your directives.

 

Content provided by: Whealthcare Planning, LLC

 

I hope you find this information to be helpful.  Please contact me with any questions, and feel free to forward to anyone who may benefit.

 

The information presented here is not specific to any individual’s personal circumstances, and does not constitute investment, tax, legal, or retirement advice or recommendations.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

 

27
Jul

Controlling Health Care Costs

Controlling your health care costs

Health care costs are spiraling out of control. New technology, advanced testing, and “designer” drugs along with a “fee for service” system encourages doctors to do more, putting pressure on health care costs. What can you do to get the care you need and keep costs under control? There are a number of steps you can take.

  • Live a healthy lifestyle – it shouldn’t have to be said, but the most important factor to stay healthy is to eat a healthy diet, exercise regularly, don’t smoke, and drink alcohol in moderation. Even if you already have health problems, lifestyle changes makes it easier to keep your health problems in good control.
  • Get appropriate preventive care – the medical system is geared to doing too much, and preventive care is not immune to this. There are competing recommendations on what is valuable in helping prevent illness or detect it early. The U.S. Preventive Services Task Force publishes unbiased recommendations based on what has been proven to be appropriate preventive care. Consider these guidelines along with your personal circumstances when choosing preventive testing.
  • Become an empowered patient – work with your doctor to understand the testing and treatment being offered and why it is being done. Ask the following questions:
    • How will the test being done help the doctor with diagnosis or treatment? Many tests are ordered because of “protocol” or “just because it would be good to know” and these are not good reasons to order costly testing. In addition, tests frequently have false positives or false negatives and you can spend even more time and worry chasing down tests that should have never been ordered in the first place.
    • What are all the options for treatment? Often doctors just recommend the treatment they think is best for you. Make certain you understand what is involved with the treatment and ask if there are any other treatments available that you should consider.
    • Are there less costly drugs that can be used? Doctors often provide medications that are convenient and don’t always consider the costs.
    • If you are on chronic medications, revisit your medication list with your doctor periodically to see if medications are still needed or if better or less expensive options are available.
  • Shop around for medications – charges for medication vary from pharmacy to pharmacy. The price difference is occasionally dramatic.
  • Stay in your insurance provider’s network – out of network doctors or hospitals can add greatly to the cost.
  • Follow your doctor’s advice – once you’ve agreed to a plan of care, be sure to follow through. And if for some reason you can’t follow the recommendations, be sure to let your doctor know that you aren’t following through and the reason you are unable to do so. They can help you make adjustments so you can follow through on what is needed to take care of your health.

It is sometimes difficult to be an empowered health care consumer when you are ill. If this is the case for you, enlist a family member or friend to help you better navigate your health care and follow through on these tips for your health care.

 

29
Jun

Retirement Confidence Improves for Workers, Declines for Retirees in Critical Areas

Retirement Confidence Improves for Workers, Declines for Retirees in Critical Areas

In its 28th annual Retirement Confidence Survey, the Employee Benefit Research Institute (EBRI) discovered that 64% of today’s workers feel very or somewhat confident in having enough money to retire comfortably, up from 60% in 2017. And although far more retirees are very confident in their retirement prospects than workers (32% versus 17%, respectively), retiree confidence in their ability to meet basic expenses and medical expenses dropped from the previous year. Moreover, both workers and retirees question the role Social Security will play in future retiree income.

Basic expenses and health-care costs a concern for many retirees

Retiree confidence in meeting basic expenses dropped five percentage points, from 85% in 2017 to 80% in 2018, while confidence in meeting medical expenses dropped seven percentage points, from 77% in 2017 to 70% in 2018.

“Health care expenses in retirement appear to be playing a notable role in retirees’ confidence,” said Lisa Greenwald, executive vice president of Greenwald & Associates, which co-sponsors the survey each year. “Retirees are less confident in being able to afford medical expenses and the share very confident in affording long-term care also declined.

“Half of retirees say they didn’t even try to calculate health expenses before retirement, and more than four in ten retirees say their health care expenses are higher than they expected,” she continued. “However, those that did the calculation are less likely to report health is costing them more than expected.”

Retirees and workers question Social Security income

Although nearly seven out of 10 retirees report that Social Security is a major source of income for them today, just 45% say they are at least somewhat or very confident that the government program will be able to provide the same level of benefits for future retirees. Similarly, just 36% of workers expect Social Security to provide a major source of income.

This may be one reason why workers are looking for other ways to fill the income gap. For example, 68% of workers expect to work for pay during retirement, compared with just 26% of retirees who say that wages are a source of their income. Eight in ten workers expect that a workplace retirement plan will be a source of income, and the same number of current defined contribution plan participants express interest in putting at least some of their money in guaranteed lifetime income products.

Plan participation leads to confidence

As in past years, those who participate in defined contribution retirement plans were far more likely to report confidence in their ability to live comfortably in retirement than those who do not (76% versus 46%).

“Satisfaction with DC plans is very important because that will encourage their use in building up assets for retirement,” said EBRI senior research associate Craig Copeland. “However, the data suggest many plan participants don’t know what to do with their DC plan assets at retirement. Three in 10 (31%) said they don’t know whether they will roll the money into an IRA, keep it in the plan, or cash it out.”

Refer a friend To find out more click here
IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.To opt-out of future emails, please click here.

 

30
May

10 Years and Counting: Points to Consider as You Approach Retirement

 

12017 Retirement Confidence Survey, Employee Benefit Research Institute2Note that if you work while receiving Social Security benefits and are under full retirement age, your benefits may be reduced until you reach full retirement age.

3Working with a tax or financial professional cannot guarantee financial success.

4EBRI Notes, December 20, 2017

5A complete statement of coverage, including exclusions, exceptions, and limitations, is found only in the LTC policy. It should be noted that carriers have the discretion to raise their rates and remove their products from the marketplace.

10 Years and Counting: Points to Consider as You Approach Retirement

If you’re a decade or so away from retirement, you’ve probably spent at least some time thinking about this major life change. How will you manage the transition? Will you travel, take up a new sport or hobby, or spend more time with friends and family? Should you consider relocating? Will you continue to work in some capacity? Will changes in your income sources affect your standard of living?

When you begin to ponder all the issues surrounding the transition, the process can seem downright daunting. However, thinking about a few key points now, while you still have years ahead, can help you focus your efforts and minimize the anxiety that often accompanies the shift.

Reassess your living expenses

A step you will probably take several times between now and retirement — and maybe several more times thereafter — is thinking about how your living expenses could or should change. For example, while commuting and other work-related costs may decrease, other budget items may rise. Health-care costs, in particular, may increase as you progress through retirement.

Try to estimate what your monthly expense budget will look like in the first few years after you stop working. And then continue to reassess this budget as your vision of retirement becomes reality.

According to a recent survey, 47% of retirees said their healthcare expenses were higher than expected in retirement, while 37% of retirees said their other expenses were higher than expected.1 Keeping a close eye on your spending in the years leading up to retirement can help you more accurately anticipate your budget during retirement.

Consider all your income sources

First, figure out how much you stand to receive from Social Security. The amount you receive will depend on your earnings history and other unique factors. You can elect to receive retirement benefits as early as age 62, however, doing so will result in a reduced benefit for life. If you wait until your full retirement age (66 or 67, depending on your birth date) or later (up to age 70), your benefit will be higher. The longer you wait, the larger it will be.2

You can get an estimate of your retirement benefit at the Social Security Administration website, ssa.gov. You can also sign up for a my Social Security account to view your online Social Security statement, which contains a detailed record of your earnings and estimates for retirement, survivor, and disability benefits. Your retirement benefit estimates include amounts at age 62, full retirement age, and age 70. Check your statement carefully and address any errors as soon as possible.

Next, review the accounts you’ve earmarked for retirement income, including any employer benefits. Start with your employer-sponsored plan, and then consider any IRAs and traditional investment accounts you may own. Try to estimate how much they could provide on a monthly basis. If you are married, be sure to include your spouse’s retirement accounts as well. If your employer provides a traditional pension plan, contact the plan administrator for an estimate of that monthly benefit amount as well.

Do you have rental income? Be sure to include that in your calculations. Might you continue to work? Some retirees find that they are able to consult, turn a hobby into an income source, or work part-time. Such income can provide a valuable cushion that helps retirees postpone tapping their investment accounts, giving the assets more time to potentially grow.

Some other ways to generate extra cash during retirement include selling gently used goods (such as furniture or designer accessories), pet sitting, and participating in the sharing economy — e.g., using your car as a taxi service.

Pay off debt, power up your savings

Once you have an idea of what your possible expenses and income look like, it’s time to bring your attention back to the here and now. Draw up a plan to pay off debt and power up your retirement savings before you retire.

Why pay off debt? Entering retirement debt-free — including paying off your mortgage — will put you in a position to modify your monthly expenses in retirement if the need arises. On the other hand, entering retirement with a mortgage, loan, and credit-card balances will put you at the mercy of those monthly payments. You’ll have less of an opportunity to scale back your spending if necessary.

Why power up your savings? In these final few years before retirement, you’re likely to be earning the highest salary of your career. Why not save and invest as much as you can in your employer-sponsored retirement savings plan and/or IRAs? Aim for maximum allowable contributions. And remember, if you’re 50 or older, you can take advantage of catch-up contributions, which enable you to contribute an additional $6,000 to your 401(k) plan and an extra $1,000 to your IRA in 2018.

Manage taxes

As you think about when to tap your various resources for retirement income, remember to consider the tax impact of your strategy. For example, you may want to withdraw money from your taxable accounts first to allow your employer-sponsored plans and IRAs more time to potentially benefit from tax-deferred growth. Keep in mind, however, that generally you are required to begin taking minimum distributions from tax-deferred accounts in the year you turn age 70½, whether or not you actually need the money. (Roth IRAs are an exception to this rule.)

If you decide to work in retirement while receiving Social Security, understand that income you earn may result in taxable benefits. IRS Publication 915 offers a worksheet to help you determine whether any portion of your Social Security benefit is taxable.

If leaving a financial legacy is a goal, you’ll also want to consider how estate taxes and income taxes for your heirs figure into your overall decisions.

Managing retirement income to result in the best possible tax scenario can be extremely complicated. Qualified tax and financial professionals can provide valuable insight and guidance.3

Account for health care

The Employee Benefit Research Institute (EBRI) reported that the average 65-year-old married couple, with average prescription drug expenses, would need $226,000 in savings to have at least a 75% chance of meeting their insurance premiums and out-of-pocket health-care costs in retirement in 2017.4 This figure illustrates why health care should get special attention as you plan the transition to retirement.

As you age, the portion of your budget consumed by health-related costs (including both medical and dental) will likely increase. Although original Medicare will cover a portion of your costs, you’ll still have deductibles, copayments, and coinsurance. Unless you’re prepared to pay for these costs out of pocket, you may want to purchase a supplemental Medigap insurance policy. Medigap policies are sold by private health insurers and are standardized and regulated by both state and federal law. These plans cover certain specified services, but offer different combinations of coverage. Some cover all or part of your Medicare deductibles, copayments, or coinsurance costs.

Another option is Medicare Advantage (also known as Medicare Part C), which allows Medicare beneficiaries to receive health care through managed care plans and private fee-for-service plans. To enroll in Medicare Advantage, you must be covered under both Medicare Part A and Medicare Part B. For more information, visit medicare.gov.

Also think about what would happen if you or your spouse needed home care, nursing home care, or other forms of long-term assistance, which Medicare and Medigap will not cover. Long-term care costs vary substantially depending on where you live and can be extremely expensive. For this reason, people often consider buying long-term care insurance. Policy premiums may be tax deductible, based on a number of different factors. If you have a family history of debilitating illness such as Alzheimer’s, have substantial assets you’d like to protect, or want to leave assets to heirs, a long-term care policy may be worth considering.5

Ease the transition

These are just some of the factors to consider as you prepare to transition into retirement. Breaking the bigger picture into smaller categories and using the years ahead to plan accordingly may help make the process a little easier.

Refer a friend To find out more click here
IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.To opt-out of future emails, please click here.

 

3
Mar

Tax Cuts and Jobs Act

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act legislation was signed into law on December 22, 2017. The Act makes extensive changes that affect both individuals and businesses. Some key provisions of the Act are discussed below. Most provisions are effective for 2018. Many individual tax provisions sunset and revert to pre-existing law after 2025; the corporate tax rates provision is made permanent. Comparisons below are generally for 2018.

Individual income tax rates

Pre-existing law. There were seven regular income tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.

New law. There are seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These provisions sunset and revert to pre-existing law after 2025.

Income Bracket Thresholds
Tax Rate Single Married Filing Jointly/ Surviving Spouse Married Filing Separately Head of Household Trust/Estate
10% $0 $0 $0 $0 $0
12% $9,525 $19,050 $9,525 $13,600 N/A
22% $38,700 $77,400 $38,700 $51,800 N/A
24% $82,500 $165,000 $82,500 $82,500 $2,550
32% $157,500 $315,000 $157,500 $157,500 N/A
35% $200,000 $400,000 $200,000 $200,000 $9,150
37% $500,000 $600,000 $300,000 $500,000 $12,500

Standard deduction, itemized deductions, and personal exemptions

Pre-existing law. In general, personal (and dependency) exemptions were available for you, your spouse, and your dependents. Personal exemptions were phased out for those with higher adjusted gross incomes.

You could generally choose to take the standard deduction or to itemize deductions. Additional standard deduction amounts were available if you were blind or age 65 or older.

Itemized deductions included deductions for: medical expenses, state and local taxes, home mortgage interest, investment interest, charitable gifts, casualty and theft losses, job expenses and certain miscellaneous deductions, and other miscellaneous deductions. There was an overall limitation on itemized deductions based on the amount of your adjusted gross income.

New law. The standard deduction is significantly increased, and the additional standard deduction amounts for those over age 65 or blind are still available. The personal and dependency exemptions are no longer available.

Many itemized deductions are eliminated or restricted. The overall limitation on itemized deductions based on the amount of your adjusted gross income is eliminated.

·         The 10% of AGI floor for the deduction of medical expenses is reduced to 7.5% in 2017 and 2018 (for regular tax and alternative minimum tax).

·         The deduction for state and local taxes is limited to $10,000. An individual cannot prepay 2018 income taxes in 2017 in order to avoid the dollar limitation in 2018.

·         The deduction for mortgage interest is still available, but the benefit is reduced for some individuals, and interest on home equity loans is no longer deductible.

·         The charitable deduction is still available, but modified.

·         The deduction for personal casualty losses is eliminated unless the loss is incurred in a federally declared disaster.

These provisions sunset and revert to pre-existing law after 2025.

Standard deduction, itemized deductions, and personal exemptions

Personal and Dependency Exemptions (you, your spouse, and dependents)
Pre-existing law New law
Exemption $4,150 No personal exemption

 

Standard Deduction
Pre-existing law New law
Married filing jointly $13,000 $24,000
Head of household $9,550 $18,000
Single/married filing separately $6,500 $12,000
Additional aged/blind
Single/head of household $1,600 $1,600
All other filing statuses $1,300 $1,300

 

Itemized Deductions
Pre-existing law New law
Medical expenses Yes, to extent expenses exceed 10% of AGI floor Yes, 10% AGI floor reduced to 7.5% for 2017 and 2018
State and local taxes Yes, income (or sales) tax, real property tax, personal property tax Yes, limited to $10,000 ($5,000 for married filing separately)
Home mortgage interest Yes, limited to $1,000,000 ($100,000 for home equity loan), one-half those amounts for married filing separately Yes, limited to $750,000 ($375,000 for married filing separately), no home equity loan; the $1,000,000/$500,000 limit still applies to debt incurred before December 16, 2017
Charitable gifts Yes Yes, 50% AGI limit raised to 60% for certain cash gifts
Casualty and theft losses Yes Federally declared disasters only
Job expenses and certain miscellaneous deductions Yes No

Child tax credit

Pre-existing law. The maximum child tax credit was $1,000. The child tax credit was phased out if modified adjusted gross income exceeded certain amounts. If the credit exceeded the tax liability, the child tax credit was refundable up to 15% of the amount of earned income in excess of $3,000 (the earned income threshold).

New law. The maximum child tax credit is increased to $2,000. A nonrefundable credit of $500 is available for qualifying dependents other than qualifying children. The maximum refundable amount of the credit is $1,400, indexed for inflation. The amount at which the credit begins to phase out is increased, and the earned income threshold is lowered to $2,500. The changes to the credit sunset and revert to pre-existing law after 2025.

Child Tax Credit
Pre-existing law New law
Maximum credit $1,000 $2,000
Non-child dependents N/A $500
Maximum refundable $1,000 $1,400 indexed
Refundable earned income threshold $3,000 $2,500
Credit phaseout threshold
Single/head of household $75,000 $200,000
Married filing jointly $110,000 $400,000
Married filing separately $55,000 $200,000

Alternative minimum tax (AMT)

Under the Act, the alternative minimum tax exemptions and exemption phaseout thresholds are increased. The AMT changes sunset and revert to pre-existing law after 2025.

Alternative Minimum Tax (AMT)
Pre-existing law New law
Maximum AMT exemption amount $86,200 (MFJ), $55,400 (Single/HOH), $43,100 (MFS) $109,400 (MFJ), $70,300 (Single/HOH), $54,700 (MFS)
Exemption phaseout threshold $164,100 (MFJ), $123,100 (Single/HOH), $82,050 (MFS) $1,000,000 (MFJ), $500,000 (Single, HOH, MFS)
26% rate applies to AMT income (AMTI) at or below this amount (28% rate applies to AMTI above this amount) $191,500 (MFJ, Single, HOH), $95,750 (MFS) $191,500 (MFJ, Single, HOH), $95,750 (MFS)

Kiddie tax

Instead of taxing most unearned income of children at their parents’ tax rates (as under pre-existing law), the Act taxes children’s unearned income using the trust and estate income tax brackets. This provision sunsets and reverts to pre-existing law after 2025.

Corporate tax rates

Under the Act, corporate income is taxed at a 21% rate. The corporate alternative minimum tax is repealed.

Special provisions for business income of individuals

Under the Act, an individual taxpayer can deduct 20% of domestic qualified business income (excludes compensation) from a partnership, S corporation, or sole proprietorship. The benefit of the deduction is phased out for specified service businesses with taxable income exceeding $157,500 ($315,000 for married filing jointly). The deduction is limited to the greater of (1) 50% of the W-2 wages of the taxpayer, or (2) the sum of (a) 25% of the W-2 wages of the taxpayer, plus (b) 2.5% of the unadjusted basis immediately after acquisition of all qualified property (certain depreciable property). This limit does not apply if taxable income does not exceed $157,500 ($315,000 for married filing jointly), and the limit is phased in for taxable income above those thresholds. This provision sunsets and reverts to pre-existing law after 2025.

Retirement plans

Under the Act, the contribution levels for retirement plans remain the same. However, the Act repeals the special rule permitting a recharacterization to unwind a Roth conversion.

Estate, gift, and generation-skipping transfer tax

The Act doubles the gift and estate tax basic exclusion amount and the generation-skipping transfer tax exemption to about $11,200,000 in 2018. This provision sunsets and reverts to pre-existing law after 2025.

Health insurance individual mandate

The Act eliminates the requirement that individuals must be covered by a health care plan that provides at least minimum essential coverage or pay a penalty tax (the individual shared responsibility payment) for failure to maintain the coverage. The provision is effective for months beginning after December 31, 2018.

Refer a friend To find out more click here
IMPORTANT DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018. 
10
Nov

FINANCIAL PLANNING FOR THE LATER YEARS IN LIFE, POST #3

Aging and the changes it brings are often regarded with apprehension. We know in many ways it can be good to get older, and enjoy the fruits of a life well lived.  However, we often fear the changes to our body and mind that may cause us to lose independence and control. Discussing these possibilities is not always comfortable for the aging person or the people who may have to care for them.

When to delegate financial decision-making, change living situations, quit driving, and seek assistance with health care decisions are difficult topics. They can be emotionally and financially very costly if plans are not put in place. People are forced to make decisions under duress, elders may often be neglected or abused, and family fights ensue.

I am excited to announce that I am now able to provide planning services that address many of the financial and related concerns that people often have around aging.  I am using tools developed to prepare families for the challenges associated with aging.  My approach is to help plan for aging-related transitions well in advance. This will reduce the likelihood of reactive decisions and the subsequent unnecessary costs that result from lack of preparation. My goal is to provide people with peace of mind at all stages of the aging process.

I pleased to be able to offer this service to both new and existing financial planning clients. The approach starts with three online questionnaires.  Each one takes about 15-20 minutes to complete.

  • The “Financial Caretaking Plan” outlines steps you may have taken to prepare for transferring bill paying, investment management, and estate planning, and the tasks you need to complete to get ready for the day you can no longer manage finances on your own. This module collects trusted contact information specific to the person answering the questions, and generates a customized financial decision-making transition plan
  • The “Risk Profile” is designed to identify traits that could place a person at risk for bad financial decision-making and financial exploitation. The questionnaire is based on a study conducted by geriatric psychiatrists.
  • The “Proactive Aging Plan” addresses a person’s living situation, transportation needs, and health care preferences. The program generates health care and long-term care cost estimates based on a person’s own situation, and provides a customized plan for managing life transitions.  Recommendations include ways to reduce unnecessary costs and age successfully in the living situation a person desires.

After a client fills out each questionnaire, the software will provide me as planner with a report indicating what the client is doing now and what they need to do to optimize their situation. It will contain a personalized list of to-do items, and information a client can give to their family to inform them of the client’s desires as they age. The reports also include links to a wealth of educational materials to help clients complete the recommended tasks. I send the reports to clients, answer any questions and provide any additional clarification, and I assist in implementing the tasks where appropriate.

Please contact me if you would any additional information about this valuable service.  I hope to have the opportunity to work with many of you to build a successful aging plan!