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.
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.
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.
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!
For many people in the middle years of life, the prospect of parents getting older and being less able to do as much for themselves is scary. And when there is a life changing health diagnosis or other health event and suddenly that time is much closer, people experience many emotions and a slew of questions are often raised. Questions are often wide ranging – how can I best help my parent or other family member? Does this mean a change in living situation? How much time do we have? What can we do now to prepare for what we can expect to happen? What are the financial considerations?
My own experience with this subject began when my dad was diagnosed with Parkinson’s when he was in his early 70s. We soon realized that the trajectory of his life had changed, as Parkinson’s is a progressive and degenerative disease with no cure, and with treatment aimed mostly at providing some relief from symptoms. Once the initial shock of the diagnosis lessened, my dad resolved that one of his highest priorities was to get his financial and legal affairs in order, and he asked me to help him.
Over the next several months we set out on a planning journey, and Dad structured his affairs in a way that considered his current health and how it was likely to change over time. Our planning yielded a financial care plan, which outlined how Dad’s day to day financial affairs, such bill paying and money management, would be handled when he could no longer manage these tasks himself. The plan also addressed bigger picture considerations such as investment management, estate planning, and risk management/insurance. We also developed a financial plan that addressed how to handle Dad’s health care and long-term care costs in the context of his overall financial picture, as these costs would likely be much higher now with the Parkinson’s diagnosis.
The result of our planning, and the implementation of the action steps identified, brought some measure of peace of mind and confidence that we were doing what we could to prepare for an ever- changing situation. We couldn’t change the course of the disease, but at least we could plan for how to navigate through the many changes to come in Dad’s life.
The months and years that followed were often very difficult as Dad’s health declined. He accepted what was happening to him, but at the same time pushed back against it and handled his situation with grace and humility until the end. I am so grateful for having had the opportunity to help him in his time of need.
I am also grateful for this incredible real-life learning experience that has provided me with an opportunity to build on what I have learned and help others who are facing, or who may face similar situations. Over time, I have been able to channel the deep and strong emotions I experienced through this journey into inspiration to help others. So now I have found myself on a mission to work in this space, doing what I can to help people prepare to navigate through similarly choppy waters. I am finding this work to be extraordinarily rewarding and meaningful.
I am in the middle of reading Atul Gwande’s book “Being Mortal”, which takes on the topics of aging, decline and death, and how our society has turned these into medical problems rather than human ones. Gwande reminds us that American medicine has prepared itself for life but not for death, and we treat aging, frailty, and death as just another set of clinical challenges to overcome. As a society, we are so focused on medical treatment for every ailment at every stage of life, and we often fail to recognize, especially as people age and decline, the importance of a life as meaningful and rich as possible under the circumstances. Gwande discovers how we can do better, as he profiles reformers in the medical profession who illustrate how the ultimate goal for many people – a good life all the way to the very end – can be achieved.
Reading this book has inspired me to further the development of my own ideas around financial planning for the later years of life. Most conventional financial planning doesn’t adequately address the financial implications of declining health in the later stages of life. At the very least, a good financial plan should consider the possibility and financial impact of long-term care events and high medical costs. But even if someone has a well-constructed plan, what happens when there is a life-changing medical diagnosis? Suddenly, the trajectory of a person’s life, and finances, changes. When this happens, many questions are raised – how much will my health care cost? Can I expect to need long-term care services, and what will that cost? Do I have enough money to pay for what I need? What if I don’t? What changes do I need to make to my finances to manage? Where can I turn for help?
In future posts, I will address these questions and others in this critically important, and often overlooked, aspect of financial planning. One initial tidbit of advice – wherever you are in life, there is no better time than now to start planning for life’s uncertainties. Of course we can’t predict what may happen to our health – and what our health care will cost, especially as we get older – but there are some tools and techniques everyone can use to prepare as much as possible before a major health event occurs.
|Estate Planning Basics|
2015 Year-End Tax Planning Basics
December 14, 2015
The window of opportunity for many tax-saving moves closes on December 31, so it’s important to evaluate your tax situation now, while there’s still time to affect your bottom line for the 2015 tax year.
Timing is everything
Consider any opportunities you have to defer income to 2016. For example, you may be able to defer a year-end bonus, or delay the collection of business debts, rents, and payments for services. Doing so may allow you to postpone paying tax on the income until next year. If there’s a chance that you’ll be in a lower income tax bracket next year, deferring income could mean paying less tax on the income as well.
Similarly, consider ways to accelerate deductions into 2015. If you itemize deductions, you might accelerate some deductible expenses like medical expenses, qualifying interest, or state and local taxes by making payments before year-end. Or you might consider making next year’s charitable contribution this year instead.
Sometimes, however, it may make sense to take the opposite approach–accelerating income into 2015 and postponing deductible expenses to 2016. That might be the case, for example, if you can project that you’ll be in a higher tax bracket in 2016; paying taxes this year instead of next might be outweighed by the fact that the income would be taxed at a higher rate next year.
Factor in the AMT
Make sure that you factor in the alternative minimum tax (AMT). If you’re subject to the AMT, traditional year-end maneuvers, like deferring income and accelerating deductions, can have a negative effect. That’s because the AMT–essentially a separate, parallel income tax with its own rates and rules–effectively disallows a number of itemized deductions. For example, if you’re subject to the AMT in 2015, prepaying 2016 state and local taxes won’t help your 2015 tax situation, but could hurt your 2016 bottom line.
Special concerns for higher-income individuals
The top marginal tax rate (39.6%) applies if your taxable income exceeds $413,200 in 2015 ($464,850 if married filing jointly, $232,425 if married filing separately, $439,000 if head of household). And if your taxable income places you in the top 39.6% tax bracket, a maximum 20% tax rate on long-term capital gains and qualifying dividends also generally applies (individuals with lower taxable incomes are generally subject to a top rate of 15%).
If your adjusted gross income (AGI) is more than $258,250 ($309,900 if married filing jointly, $154,950 if married filing separately, $284,050 if head of household), your personal and dependency exemptions may be phased out for 2015 and your itemized deductions may be limited. If your AGI is above this threshold, be sure you understand the impact before accelerating or deferring deductible expenses.
Additionally, a 3.8% net investment income tax (unearned income Medicare contribution tax) may apply to some or all of your net investment income if your modified AGI exceeds $200,000 ($250,000 if married filing jointly, $125,000 if married filing separately, $200,000 if head of household).
Note: High-income individuals are also subject to an additional 0.9% Medicare (hospital insurance) payroll tax on wages exceeding $200,000 ($250,000 if married filing jointly or $125,000 if married filing separately).
You’re more likely to be subject to the AMT if you claim a large number of personal exemptions, deductible medical expenses, state and local taxes, and miscellaneous itemized deductions. Other common triggers include home equity loan interest when proceeds aren’t used to buy, build, or improve your home, and the exercise of incentive stock options.
IRAs and retirement plans
Take full advantage of tax-advantaged retirement savings vehicles. Traditional IRAs and employer-sponsored retirement plans such as 401(k) plans allow you to contribute funds on a deductible (if you qualify) or pretax basis, reducing your 2015 taxable income. Contributions to a Roth IRA (assuming you meet the income requirements) or a Roth 401(k) aren’t deductible or made with pretax dollars, so there’s no tax benefit for 2015, but qualified Roth distributions are completely free from federal income tax, which can make these retirement savings vehicles appealing.
For 2015, you can contribute up to $18,000 to a 401(k) plan ($24,000 if you’re age 50 or older) and up to $5,500 to a traditional IRA or Roth IRA ($6,500 if you’re age 50 or older). The window to make 2015 contributions to an employer plan typically closes at the end of the year, while you generally have until the April tax filing deadline for your 2015 federal income tax return to make 2015 IRA contributions.
Year-end is a good time to evaluate whether it makes sense to convert a tax-deferred savings vehicle like a traditional IRA or a 401(k) account to a Roth account. When you convert a traditional IRA to a Roth IRA, or a traditional 401(k) account to a Roth 401(k) account, the converted funds are generally subject to federal income tax in the year that you make the conversion (except to the extent that the funds represent nondeductible after-tax contributions). If a Roth conversion does make sense , you’ll want to give some thought to the timing of the conversion. (Whether a Roth conversion is right for you depends on many factors, including your current and projected future income tax rates.) For example, if you believe that you’ll be in a better tax situation this year than next (e.g., you would pay tax on the converted funds at a lower rate this year), you might want to think about acting now rather than waiting.
If you convert a traditional IRA to a Roth IRA and it turns out to be the wrong decision (things don’t go the way you planned and you realize that you would have been better off waiting to convert), you can recharacterize (i.e., “undo”) the conversion. You’ll generally have until October 15, 2016, to recharacterize a 2015 Roth IRA conversion–effectively treating the conversion as if it never happened for federal income tax purposes. You can’t undo an in-plan Roth 401(k) conversion, however.
Required minimum distributions
Once you reach age 70½, you’re generally required to start taking required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans (special rules apply if you’re still working and participating in your employer’s retirement plan). You have to make the withdrawals by the date required–the end of the year for most individuals–or a 50% tax penalty applies.
Changes to note
· Generally, the maximum “individual shared responsibility payment” (the amount owed if you don’t have qualifying health coverage for each month of the year, or otherwise qualify for an exemption) increased to 2% of household income with a family maximum of $975 for 2015; in 2016 the maximum amount owed jumps to 2.5% of household income, with a family maximum of $2,085.
· In June, the U.S. Supreme Court ruled 5-4 that same-sex couples in the United States have a constitutional right to marry, regardless of the state in which they live. This significantly simplifies the federal and state income tax filing requirements for same-sex married couples living in states that did not previously recognize their marriage.
Once again, the status of a number of serially extended, popular tax breaks remains uncertain as the end of the year approaches.. These “tax extenders” last expired at the end of 2014. It’s likely that some or all of these provisions will be retroactively extended, but there’s no guarantee. You’ll want to consider carefully the potential effect of these provisions on your 2015 tax situation and stay alert for late-breaking changes. Tax-extender provisions include:
· The ability to make qualified charitable contributions (QCDs) of up to $100,000 from an IRA directly to a qualified charity if you are 70½ or older. Such distributions are excluded from income but counted toward satisfying any RMDs you would otherwise have to receive from your IRA.
· Increased Internal Revenue Code (IRC) Section 179 expense limits and “bonus” depreciation provisions.
· Above-the-line deductions for qualified higher-education expenses, and for up to $250 of out-of-pocket classroom expenses paid by education professionals.
· For those who itemize deductions, the ability to deduct state and local sales taxes in lieu of state and local income taxes.
· The ability to deduct premiums paid for qualified mortgage insurance as deductible interest on IRS Form 1040, Schedule A.
Talk to a professional
When it comes to year-end tax planning, there’s always a lot to think about. A tax professional can help you evaluate your situation, keep you apprised of any legislative changes, and determine whether any year-end moves make sense for you.
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal 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 2015.
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