Our Articles

Tax Changes That May Be Overlooked

6 Retirement Concerns Oftem Overlooked

What Women Shouldn't Retire Without

Before You Claim Social Security

The Major 2018 Federal Tax Changes

The A, B, C, & D of Medicare  (Updated)

The Major Retirement Planning Mistakes

Now 64? Prepare to Sign Up for Medicare.

The Many Benefits of a Roth IRA

Everyone Is Talking About Bitcoin

Retirement Plan Contribution Limits Rise in 2018

Your Social Security Benefits and Provisional Income

Getting (Mentally) Ready to Retire

Life Insurance Products with Long Term Care Riders

One Couple, Two Different Retirements?

Should You Apply for Social Security Now or Later?

Tax Rules on Rental Property

Have a Plan, Not Just a Stock Portfolio

In-Service Withdrawals from Employee Retirement Plans

Financial Thoughts for International Women's Day

Tiny Social Security COLA, Possible Medicare Premium Hike

Why Life Insurance matters

Making Decisions About Life Insurance

Getting Your Financial Paperwork in Good Order

Should You Downsize for Retirement?

Should You File Jointly, or Not?

The Lottery is No Retirement Plan

Hybrid Insurance Products with Long-Term Care Riders

Behind On Your Retirement Savings?

A look at Target-Date Funds

What Beneficaries Need to Know

The Importance of TOD and JTWROS Account Designations

Guarding Against Identity Theft

Are You Prepared to Pay for Long Term Care?

Legacy Planning for Women

How Do You Know When You Have Enough to Retire?

Reassessing Retirement Assumptions

A Primer for Estate Planning

An Estate Planning Checklist

Tax Changes That May Be Overlooked

Some alterations to the Internal Revenue Code were less publicized than others.

Provided by Jane Bourette

Late last year, federal tax laws underwent sweeping changes. Nearly a year later, you can be forgiven for not keeping up with them all. Here is a look at some important (yet underrecognized) adjustments that may affect the numbers on your 2018 federal return.1 

First, most miscellaneous itemized deductions are gone. The Tax Cuts & Jobs Act of 2017 eliminated dozens of them through the year 2025. Tax preparation expenses? You can no longer deduct those. Expenses linked to a hobby that made you some income? In 2018, no deduction available. Legal fees you paid that were related to your work as an employee? No, you cannot deduct them. Chat with a tax professional; if your tax situation is complex, chances are some deduction, which you may have relied on, is history.1     

Can you still claim a deduction for continuing education expenses? No. Some taxpayers used to present the cost of classes or training designed to expand or maintain their job skills as an unreimbursed employee business expense. Some would even claim a deduction for tuition paid toward their MBA. This is now disallowed.1

Employee vehicle use deductions are gone. You can no longer deduct unreimbursed travel expenses related to the performance of your job, and that includes mileage expenses stemming from the use of your car or truck. In response, some employees have asked their employers to set up “accountable” plans allowing them to receive tax-free reimbursements. (You will still find the deduction for certain types of business mileage on Schedule C, and you may still deduct miles you drive for medical purposes and in the service of qualified charitable organizations.)1,3

Speaking of mileage, the moving expense deduction has all but disappeared. Only active duty members of the military may take this deduction now, and only if the move is made in response to a military order.3

You can no longer claim personal casualty losses as itemized deductions. There is an exception to this. You can still deduct these losses in tax years 2018-25 if they occur due to an event that becomes a federally declared disaster (FDD). Unfortunately, most fires, floods, and storms are not defined as FDDs, and most theft has nothing to do with natural or manmade disasters.3

Fortunately, the standard deduction has almost doubled. It was slated to be $6,500 for single filers, $9,550 for heads of household, and $13,000 for joint filers; thanks to tax reform, those respective standard deduction amounts are now $12,000, $18,000, and $24,000. (The personal exemption no longer exists.)4

How have things changed regarding charitable donations? There is less of a tax incentive to make them, because many taxpayers may just take the higher standard deduction, rather than bothering to itemize. The non-partisan Tax Policy Center estimates total U.S. charitable gifting will fall to $20 billion this year, a 38% drop, due to the 2017 federal tax reforms. That said, there are still paths toward significant tax breaks for the charitably inclined.5

    

A traditional IRA owner aged 70½ or older can arrange a qualified charitable distribution (QCD) from that IRA to a qualified charity or non-profit. The QCD can be as large as $100,000. From a tax standpoint, this move may be very useful. The donated amount counts toward the IRA owner's annual mandatory withdrawal requirement and is not included in the IRA owner's adjusted gross income (AGI) for the year of the donation.5

 

Some wealthy retirees are now practicing charitable lumping. Instead of giving a college or charity say, $75,000 in increments of $15,000 over five years, they donate the entire $75,000 in one year. A single-year charitable contribution that large calls for itemizing.5

  

Turn to a tax professional for insight about these changes and others. The revisions to the Internal Revenue Code noted here represent just the tip of the proverbial iceberg. Additionally, you may find that the changes brought about by the Tax Cuts & Jobs Act have given you new opportunities for substantial tax savings.     

   

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - marketwatch.com/story/the-little-noticed-tax-change-that-could-affect-your-return-2018-03-19 [9/19/18]

2 - cpajournal.com/2018/08/01/narrowing-the-casualty-loss-deduction/ [8/1/18]

3 - forbes.com/sites/kellyphillipserb/2018/03/26/taxes-from-a-to-z-2018-m-is-for-mileage/ [3/26/18]

4 - cnbc.com/2018/02/16/10-tax-changes-you-need-to-know-for-2018.html [2/16/18]

5 - kiplinger.com/article/taxes/T055-C032-S000-strategies-for-giving-to-charity-under-new-tax-law.html [10/1/18]

 

 

 

5 Retirement Concerns Too Often Overlooked

Baby boomers entering their “second acts” should think about these matters.

Provided by Jane Bourette

Retirement is undeniably a major life and financial transition. Even so, baby boomers can run the risk of growing nonchalant about some of the financial challenges that retirement poses, for not all are immediately obvious. In looking forward to their “second acts,” boomers may overlook a few matters that a thorough retirement strategy needs to address.

RMDs. The Internal Revenue Service directs seniors to withdraw money from qualified retirement accounts after age 70½. This class of accounts includes traditional IRAs and employer-sponsored retirement plans. These drawdowns are officially termed Required Minimum Distributions (RMDs).1  

Taxes. Speaking of RMDs, the income from an RMD is fully taxable and cannot be rolled over into a Roth IRA. The income is certainly a plus, but it may also send a retiree into a higher income tax bracket for the year.1

Retirement does not necessarily imply reduced taxes. While people may earn less in retirement than they once did, many forms of income are taxable: RMDs; investment income and dividends; most pensions; even a portion of Social Security income depending on a taxpayer's total income and filing status. Of course, once a mortgage is paid off, a retiree loses the chance to take the significant mortgage interest deduction.2

Health care costs. Those who retire in reasonably good health may not be inclined to think about health care crises, but they could occur sooner rather than later – and they could be costly. As Forbes notes, five esteemed economists recently published a white paper called The Lifetime Medical Spending of Retirees; their analysis found that between age 70 and death, the average American senior pays $122,000 for medical care, much of it from personal savings. Five percent of this demographic contends with out-of-pocket medical bills exceeding $300,000. Medicines? The “donut hole” in Medicare still exists, and annually, there are retirees who pay thousands of dollars of their own money for needed drugs.3,4

Eldercare needs. Those who live longer or face health complications will probably need some long-term care. According to a study from the Department of Health and Human Services, the average American who turned 65 in 2015 could end up paying $138,000 in total long-term care costs. Long-term care insurance is expensive, though, and can be difficult to obtain.5

One other end-of-life expense many retirees overlook: funeral and burial costs. Pre-planning to address this expense may help surviving spouses and children.

Rising consumer prices. Since 1968, consumer inflation has averaged around 4% a year. Does that sound bearable? At a glance, maybe it does. Over time, however, 4% inflation can really do some damage to purchasing power. In 20 years, continued 4% inflation would make today's dollar worth $0.46. Retirees would be wise to invest in a way that gives them the potential to keep up with increasing consumer costs.4

As part of your preparation for retirement, give these matters some thought. Enjoy the here and now, but recognize the potential for these factors to impact your financial future.

     

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - thebalance.com/required-minimum-distributions-2388780 [6/3/18]

2 - kiplinger.com/slideshow/taxes/T064-S003-how-10-types-of-retirement-income-get-taxed/index.html [3/27/18]

3 - forbes.com/sites/nextavenue/2018/06/28/the-truth-about-health-care-costs-in-retirement/ [6/28/18]

4 - mdmag.com/physicians-money-digest/practice-management/four-big-retirement-threats-and-how-to-protect-yourself [8/2/18]

5 - money.usnews.com/money/personal-finance/saving-and-budgeting/articles/2018-04-13/6-ways-to-pay-for-long-term-care-if-you-cant-afford-insurance [4/13/18]

 

 

What Women Shouldn't Retire Without

A practical financial checklist for the future.

Provided by Jane Bourette  

When our parents retired, living to 75 amounted to a nice long life, and Social Security was often supplemented by a pension. The Social Security Administration estimates that today's average 65-year-old female will live to age 86.6. Given these projections, it appears that a retirement of 20 years or longer might be in your future.1,2 

Are you prepared for a 20-year retirement? How about a 30- or 40-year retirement? Don't laugh; it could happen. The SSA projects that about 25% of today's 65-year-olds will live past 90, with approximately 10% living to be older than 95.2

How do you begin? How do you draw retirement income off what you've saved – how might you create other income streams to complement Social Security? How do you try and protect your retirement savings and other financial assets?

Talking with a financial professional may give you some good ideas. You want one who walks your walk, who understands the particular challenges that many women face in saving for retirement (time out of the workforce due to childcare or eldercare, maintaining financial equilibrium in the wake of divorce or death of a spouse).

As you have that conversation, you can focus on some of the must-haves. 

Plan your investing. If you are in your fifties, you have less time to make back any big investment losses than you once did. So, protecting what you have is a priority. At the same time, the possibility of a 15-, 20-, or even 30- or 40-year retirement will likely require a growing retirement fund.

Look at long-term care coverage. While it is an extreme generalization to say that men die sudden deaths and women live longer; however, women do often have longer average life expectancies than men and can require weeks, months, or years of eldercare. Medicare is no substitute for LTC insurance; it only pays for 100 days of nursing home care and only if you get skilled care and enter a nursing home right after a hospital stay of 3 or more days. Long-term care coverage can provide a huge financial relief if and when the need for LTC arises.1,3

Claim Social Security benefits carefully. If your career and health permit, delaying Social Security is a wise move for single women. If you wait until full retirement age to claim your benefits, you could receive 30-40% larger Social Security payments as a result. For every year you wait to claim Social Security, your monthly payments get about 8% larger.4

Above all, retire with a plan. Have a financial professional who sees retirement through your eyes help you define it on your terms, with a wealth management approach designed for the long term.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - cdc.gov/nchs/products/databriefs/db293.htm [12/21/17]

2 - ssa.gov/planners/lifeexpectancy.htm [5/9/18]

3 - medicare.gov/coverage/skilled-nursing-facility-care.html [5/8/18]

4 - thestreet.com/retirement/how-to-avoid-going-broke-in-retirement-14551119 [4/10/18]

 

Before You Claim Social Security

A few things you may want to think about before filing for benefits.

Provided by Jane Bourette

 

Whether you want to leave work at 62, 67, or 70, claiming the retirement benefits you are entitled to by federal law is no casual decision. You will want to consider a few key factors first.

How long do you think you will live? If you have a feeling you will live into your nineties, for example, it may be better to claim later. If you start receiving Social Security benefits at or after Full Retirement Age (which varies from age 66-67 for those born in 1943 or later), your monthly benefit will be larger than if you had claimed at 62. If you file for benefits at FRA or later, chances are you probably a) worked into your mid-sixties, b) are in fairly good health, c) have sizable retirement savings.1

If you sense you might not live into your eighties or you really need retirement income, then claiming at or close to 62 might make more sense. If you have an average lifespan, you will, theoretically, receive the average amount of lifetime benefits regardless of when you claim them; the choice comes down to more lifetime payments that are smaller or fewer lifetime payments that are larger. For the record, Social Security's actuaries project the average 65-year-old man living 84.3 years and the average 65-year-old woman living 86.7 years.2  

Will you keep working? You might not want to work too much, for earning too much income can result in your Social Security being withheld or taxed.

Prior to Full Retirement Age, your benefits may be lessened if your income tops certain limits. In 2018, if you are 62-65 and receive Social Security, $1 of your benefits will be withheld for every $2 that you earn above $17,040. If you receive Social Security and turn 66 later this year, then $1 of your benefits will be withheld for every $3 that you earn above $45,360.3

Social Security income may also be taxed above the program's “combined income” threshold. (“Combined income” = adjusted gross income + non-taxable interest + 50% of Social Security benefits.) Single filers who have combined incomes from $25,000-34,000 may have to pay federal income tax on up to 50% of their Social Security benefits, and that also applies to joint filers with combined incomes of $32,000-44,000. Single filers with combined incomes above $34,000 and joint filers whose combined incomes surpass $44,000 may have to pay federal income tax on up to 85% of their Social Security benefits.3

When does your spouse want to file? Timing does matter, especially for two-income couples. If the lower-earning spouse collects Social Security benefits first, and then the higher-earning spouse collects them later, that may result in greater lifetime benefits for the household.4  

Finally, how much in benefits might be coming your way? Visit ssa.gov to find out, and keep in mind that Social Security calculates your monthly benefit using a formula based on your 35 highest-earning years. If you have worked for less than 35 years, Social Security fills in the “blank years” with zeros. If you have, say, just 33 years of work experience, working another couple of years might translate to slightly higher Social Security income.1

Your claiming decision may be one of the major financial decisions of your life. Your choices should be evaluated years in advance, with insight from the financial professional who has helped you plan for retirement.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - fool.com/investing/2018/07/07/4-frequently-asked-social-security-questions.aspx [7/7/18]

2 - ssa.gov/planners/lifeexpectancy.html [7/9/18]

3 - blackrock.com/investing/literature/investor-education/social-security-retirement-benefits-quick-reference-one-pager-va-us.pdf [7/9/18]

4 - thebalance.com/social-security-for-married-couples-2389042 [7/4/18]

 

The Major 2018 Federal Tax Changes

Comparing the old rules with the new.

Provided by Jane Bourette

The Tax Cuts and Jobs Act made dramatic changes to federal tax law. It is worth reviewing some of these changes as 2019 approaches and households and businesses refine their income tax strategies.

Income tax brackets have changed. The old 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% brackets have been restructured to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These new percentages are slated to apply through 2025. Here are the thresholds for these brackets in 2018.1,2

Bracket         Single Filers                    Married Filing Jointly          Married Filing               Head of Household

                                                                or Qualifying Widower       Separately                    

10%               $0 - $9,525                     $0 - $19,050                         $0 - $9,525                   $0 - $13,600

12%               $9,525 - $38,700           $19,050 - $77,400               $9,525 - $38,700         $13,600 - $51,800

22%               $38,700 - $82,500         $77,400 - $165,000             $38,700 - $82,500       $51,800 - $82,500

24%               $82,500 - $157,500       $165,000 - $315,000          $82,500 - $157,500     $82,500 - $157,500

32%               $157,500 - $200,000     $315,000 - $400,000          $157,500 - $200,000   $157,000 - $200,000

35%               $200,000 - $500,000     $400,000 - $600,000          $200,000 - $300,000   $200,000 - $500,000

37%               $500,000 and up            $600,000 and up                 $300,000 and up          $500,000 and up  

The standard deduction has nearly doubled. This compensates for the disappearance of the personal exemption, and it may reduce a taxpayer's incentive to itemize. The new standard deductions, per filing status:

*Single filer: $12,000 (instead of $6,500)

*Married couples filing separately: $12,000 (instead of $6,500)

*Head of household: $18,000 (instead of $9,350)

*Married couples filing jointly & surviving spouses: $24,000 (instead of $13,000)

The additional standard deduction remains in place. Single filers who are blind, disabled, or aged 65 or older can claim an additional standard deduction of $1,600 this year. Married joint filers are allowed to claim additional standard deductions of $1,300 each for a total additional standard deduction of $2,600 for 2018.2,3

The state and local tax (SALT) deduction now has a $10,000 ceiling. If you live in a state that levies no income tax, or a state with high income tax, this is not a good development. You can now only deduct up to $10,000 of some combination of a) state and local property taxes or b) state and local income taxes or sales taxes per year. Taxes paid or accumulated as a result of business or trade activity are exempt from the $10,000 limit. Incidentally, the SALT deduction limit is just $5,000 for married taxpayers filing separately.1,4        

The estate tax exemption is twice what it was. Very few households will pay any death taxes during 2018-25. This year, the estate tax threshold is $11.2 million for individuals and $22.4 million for married couples; these amounts will be indexed for inflation. The top death tax rate stays at 40%.2,4

More taxpayers may find themselves exempt from Alternative Minimum Tax (AMT). The Alternative Minimum Tax was never intended to apply to the middle class – but because it went decades without inflation adjustments, it sometimes did. Thanks to the tax reforms, the AMT exemption amounts are now permanently subject to inflation indexing.

AMT exemption amounts have risen considerably in 2018:

*Single filer or head of household: $70,300 (was $54,300 in 2017)

*Married couples filing separately: $54,700 (was $42,250 in 2017)

*Married couples filing jointly & surviving spouses: $109,400 (was $84,500 in 2017)

These increases are certainly sizable, yet they pale in proportion to the increase in the phase-out thresholds. They are now at $500,000 for individuals and $1 million for joint filers as opposed to respective, prior thresholds of $120,700 and $160,900.2

The Child Tax Credit is now $2,000. This year, as much as $1,400 of it is refundable. Phase-out thresholds for the credit have risen substantially. They are now set at the following modified adjusted gross income (MAGI) levels:

*Single filer or head of household: $200,000 (was $75,000 in 2017)

*Married couples filing separately: $400,000 (was $110,000 in 2017)2

Some itemized deductions are history. The list of disappeared deductions is long and includes the following tax breaks:

 

*Home equity loan interest deduction

*Moving expenses deduction

*Casualty and theft losses deduction (for most taxpayers)

*Unreimbursed employee expenses deduction

*Subsidized employee parking and transit deduction

*Tax preparation fees deduction

*Investment fees and expenses deduction

*IRA trustee fees (if paid separately)

*Convenience fees for debit and credit card use for federal tax payments

*Home office deduction

*Unreimbursed travel and mileage deduction

  

Under the conditions set by the reforms, many of these deductions could be absent through 2025.5,6

Many small businesses have the ability to deduct 20% of their earnings. Some fine print accompanies this change. The basic benefit is that business owners whose firms are LLCs, partnerships, S corporations, or sole proprietorships can now deduct 20% of qualified business income*, promoting reduced tax liability. (Trusts, estates, and cooperatives are also eligible for the 20% pass-through deduction.)4,7

Not every pass-through business entity will qualify for this tax break in full, though. Doctors, lawyers, consultants, and owners of other types of professional services businesses meeting the definition of a specified service business* may make enough to enter the phase-out range for the deduction; it starts above $157,500 for single filers and above $315,000 for joint filers.  Above these business income thresholds, the deduction for a business other than a specified service business* is capped at 50% of total wages paid or at 25% of total wages paid, plus 2.5% of the cost of tangible depreciable property, whichever amount is larger.4,7

* See H.R. 1 – The Tax Cuts and Jobs Act, Part II—Deduction for Qualified Business Income of Pass-Thru Entities

We now have a 21% flat tax for corporations. Last year, the corporate tax rate was marginally structured with a maximum rate of 35%. While corporations with taxable income of $75,000 or less looked at no more than a 25% marginal rate, more profitable corporations faced a rate of at least 34%. The new 21% flat rate aligns U.S. corporate taxation with the corporate tax treatment in numerous other countries. Only corporations with annual profits of less than $50,000 will see their taxes go up this year, as their rate will move north from 15% to 21%.2,4

The Section 179 deduction and the bonus depreciation allowance have doubled. Business owners who want to deduct the whole cost of an asset in its first year of use will appreciate the new $1 million cap on the Section 179 deduction. In addition, the phaseout threshold rises by $500,000 this year to $2.5 million. The first-year “bonus depreciation deduction” is now set at 100% with a 5-year limit, so a company in 2018 can now write off 100% of qualified property costs through 2022 rather than through a longer period. Please note that bonus depreciation now applies for used equipment as well as new equipment.1,7

Like-kind exchanges are now restricted to real property. Before 2018, 1031 exchanges of capital equipment, patents, domain names, private income contracts, ships, planes, and other miscellaneous forms of personal property were permitted under the Internal Revenue Code. Now, only like-kind exchanges of real property are permitted.7

This may be the final year for the individual health insurance requirement. The Affordable Care Act instituted tax penalties for individual taxpayers who went without health coverage. As a condition of the 2018 tax reforms, no taxpayer will be penalized for a lack of health insurance next year. Adults who do not have qualifying health coverage will face an unchanged I.R.S. individual penalty of $695 this year.1,8

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - cpapracticeadvisor.com/news/12388205/2018-tax-reform-law-new-tax-brackets-credits-and-deductions [12/22/17] 

2 - fool.com/taxes/2017/12/30/your-complete-guide-to-the-2018-tax-changes.aspx [12/30/17]

3 - cnbc.com/2017/12/22/the-gop-tax-overhaul-kept-this-1300-tax-break-for-seniors.html [12/26/17]

4 - investopedia.com/taxes/how-gop-tax-bill-affects-you/ [1/3/18]

5 - tinyurl.com/ycqrqwy7/ [12/26/17]

6 - forbes.com/sites/kellyphillipserb/2017/12/20/what-your-itemized-deductions-on-schedule-a-will-look-like-after-tax-reform/ [12/20/17]

7 - americanagriculturist.com/farm-policy/10-agricultural-improvements-new-tax-reform-bill [11/14/17]

8 - irs.gov/newsroom/in-2018-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-unchanged [10/19/17]

 

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The A, B, C, & D of Medicare (Updated)

Breaking down the basics & what each part covers.

Provided by Jane Bourette

Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover and where they come from.

Parts A & B: Original Medicare. America created a national health insurance program for seniors in 1965 with two components. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care, and nursing home care – but not for long and only under certain parameters.1

Seniors are frequently warned that Medicare will only pay for a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the part that does so. Under current rules, you pay $0 for days 1-20 of skilled nursing facility (SNF) care under Part A. During days 21-100, a $167.50 daily coinsurance payment may be required of you.2

   

If you stop receiving SNF care for more than 30 days, you need a new 3-day hospital stay to qualify for further nursing home care under Part A. If you can go 60 days in a row without SNF care, the clock resets: you are once again eligible for up to 100 days of SNF benefits via Part A.2

Part B is medical insurance and can help pick up some of the tab for physical therapy, physician services, expenses for durable medical equipment (scooters, wheelchairs), and other medical services such as lab tests and varieties of health screenings.1

Part B isn't free. You pay monthly premiums to get it and a yearly deductible (plus 20% of costs). The premiums vary according to the Medicare recipient's income level. The standard monthly premium amount is $134 this year, but some people who receive Social Security benefits are paying lower Part B premiums (on average, $130). The current yearly deductible is $183. (Some people automatically receive Part B coverage, but others must sign up for it.)3

Part C: Medicare Advantage plans. Insurance companies offer these Medicare-approved plans. Part C plans offer seniors all the benefits of Part A and Part B and more: many feature prescription drug coverage as well as vision and dental benefits. To enroll in a Part C plan, you need have Part A and Part B coverage in place. To keep up your Part C coverage, you must keep up your payment of Part B premiums as well as your Part C premiums.4

To say not all Part C plans are alike is an understatement. Provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits can all vary widely, so shopping around is wise. During Medicare's annual Open Enrollment Period (October 15 - December 7), seniors can choose to switch out of Original Medicare to a Part C plan or vice versa; although any such move is much wiser with a Medigap policy already in place.5 

How does a Medigap plan differ from a Part C plan? Medigap plans (also called Medicare Supplement plans) emerged to address the gaps in Part A and Part B coverage. If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance, and deductibles for you. Some Medigap policies can even help you pay for medical care outside the United States. You pay Part B premiums in addition to Medigap plan premiums to keep a Medigap policy in effect. These plans no longer offer prescription drug coverage; in fact, they have been sold without drug coverage since 2006.6   

Part D: prescription drug plans. While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with Original Medicare. As per Medigap and Part C coverage, you need to keep paying Part B premiums in addition to premiums for the drug plan to keep Part D coverage going.7 

Every Part D plan has a formulary, a list of medications covered under the plan. Most Part D plans rank approved drugs into tiers by cost. The good news is that Medicare's website will determine the best Part D plan for you. Go to medicare.gov/find-a-plan to start your search; enter your medications and the website will do the legwork for you.

Part C & Part D plans are assigned ratings. Medicare annually rates these plans (one star being worst; five stars being best) according to member satisfaction, provider network(s), and quality of coverage. As you search for a plan at medicare.gov, you also have a chance to check out the rankings.9     

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 - mymedicarematters.org/coverage/parts-a-b/whats-covered/ [5/8/18]

2 - medicare.gov/coverage/skilled-nursing-facility-care.html [5/8/18]

3 - medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html [5/8/18]

4 - medicareinteractive.org/get-answers/medicare-health-coverage-options/medicare-advantage-plan-overview/medicare-advantage-basics [5/8/18]

5 - medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/when-can-i-join-a-health-or-drug-plan.html [5/8/18]

6 - medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [5/8/18]

7 - ehealthinsurance.com/medicare/part-d-cost [5/8/18]

8 - medicare.gov/part-d/coverage/part-d-coverage.html [5/8/18]

9 - medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/five-star-enrollment/5-star-enrollment-period.html [5/8/18]

 

____________________________________________________________________________

The Major Retirement Planning Mistakes

Why are they made again and again?

Provided by Jane Bourette

Much has been written about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Aside from these blunders, there are also some classic financial missteps that plague retirees.   

Calling them “mistakes” may be a bit harsh, as not all of them represent errors in judgment. Yet whether they result from ignorance or fate, we need to be aware of them as we plan for and enter retirement.        

Leaving work too early. As Social Security benefits rise about 8% for every year you delay receiving them, waiting a few years to apply for benefits can position you for greater retirement income. Filing for your monthly benefits before you reach Social Security's Full Retirement Age (FRA) can mean comparatively smaller monthly payments. The FRA varies from 66-67 for people born between 1943-59. For those born in 1960 and later, the FRA is 67.1,2    

Some of us are forced to make this “mistake.” The Center for Retirement Research at Boston College says 56% of men and 64% of women apply for Social Security before full retirement age. Still, if you can delay claiming Social Security, that positions you for greater monthly benefits.1     

Underestimating medical bills. In its latest estimate of retiree health care costs, Fidelity Investments says that a couple retiring at 65 will need $275,000 to pay for future health care costs. That estimate may be conservative, as Fidelity's calculation does not include eye care, dental care, or long-term care expenses.3      

Taking the potential for longevity too lightly. Actuaries at the Social Security Administration project that around a fourth of today's 65-year-olds will live to age 90, with about one in ten living 95 years or longer. The prospect of a 20- or 30-year retirement is not unreasonable, yet there is still a lingering cultural assumption that our retirements might duplicate the relatively brief ones of our parents. The American College New York Life Center for Retirement Income recently polled people about longevity, and 47% of respondents over age 60 underestimated the remaining life expectancy for an average 65-year-old male.4

Withdrawing too much each year. You may have heard of the “4% rule,” a popular guideline stating that you should withdraw only about 4% of your retirement savings annually. Many cautious retirees try to abide by it.

So, why do others withdraw 7% or 8% a year? In the first phase of retirement, people tend to live it up; more free time naturally promotes new ventures and adventures and an inclination to live a bit more lavishly.         

Ignoring tax efficiency & fees. It can be a good idea to have both taxable and tax-advantaged accounts in retirement. Assuming your retirement will be long, you may want to assign this or that investment to its “preferred domain” – that is, the taxable or tax-advantaged account that may be most appropriate for it as you pursue a better after-tax return for the whole portfolio.

Many younger investors chase the return. Some retirees, however, find a shortfall when they try to live on portfolio income. In response, they move money into stocks offering significant dividends or high-yield bonds – which may be bad moves in the long run. Taking retirement income off both the principal and interest of a portfolio may give you a way to reduce ordinary income and income taxes.   

Fees have an impact. The Department of Labor notes that a 401(k) plan with a 1.5% annual fee will eventually leave a participant with 28% less money than one with a 0.5% annual fee.5      

Avoiding market risk. Equity investment does invite risk, but the reward may be worth it. In contrast, many fixed-rate investments offer comparatively small yields these days.    

Retiring with big debts. It is hard to preserve (or accumulate) wealth when you are handing portions of it to creditors.   

Putting college costs before retirement costs. There is no “financial aid” program for retirement. There are no “retirement loans.” Your children have their whole financial lives ahead of them. Try to refrain from touching your home equity or your IRA to pay for their education expenses.   

Retiring with no plan or investment strategy. An unplanned retirement may bring terrible financial surprises; the absence of a strategy can leave people prone to market timing and day trading.

These are some of the classic retirement planning mistakes. Why not plan to avoid them? Take a little time to review and refine your retirement strategy in the company of the financial professional you know and trust.   

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.      

  

Citations.

1 - cnbc.com/2017/06/02/how-married-couples-can-maximize-their-social-security-benefits.html [6/2/17]

2 - ssa.gov/planners/retire/retirechart.html [1/8/18]

3 - cbsnews.com/news/how-to-cope-with-health-care-costs-in-retirement/ [9/12/17]

4 - fool.com/investing/2017/06/07/dont-make-this-big-social-security-mistake.aspx [6/7/17]

5 - cnbc.com/2017/04/06/what-you-dont-know-about-401k-fees-can-cost-you-plenty.html [4/6/17]

 

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Now 64? Prepare to Sign Up for Medicare.

This is the time to arrange lifelong health coverage.

Provided by Jane Bourette

 

Age 64 is the age when you are reminded that you are a baby boomer growing older. Regardless of how young or old you feel at 64, you should make sure to sign up for Medicare.

The sign-up period will be here before you know it. In fact, you might already be within it, so act quickly if you are. Medicare gives you a 7-month window in which to enroll. That initial enrollment window opens three months prior to the month in which you turn 65 and closes three months after the month in which you turn 65.1  

If you fail to enroll within that 7-month period, the chances are good that you will end up paying a late-enrollment penalty for not signing up for Part B coverage on time. That penalty is permanent. You will also have to wait until the next general enrollment period (January 1-March 31) to sign up.1,2   

Are you already receiving Social Security retirement benefits? Have you received them for 24 straight months at any point? If your answer to either of those two questions is “yes,” then you will be enrolled in Medicare Part A and B, automatically. You will get your Medicare card in the mail about three months prior to turning 65.2

Are you currently covered under an employer or former employer's health plan? If so, you may qualify for a special enrollment period. On the other hand, you may not.

The rules are complex here. If you are approaching your 65th birthday, your employer (or your health plan administrator) may require you to enroll in Medicare at the first opportunity.  Not all companies demand this. If yours does not, then you can sign up for Medicare coverage later, without being hit with late-enrollment penalties.2

 

If you are still working at 65 and have employer-sponsored health coverage, you face no requirement to sign up for Medicare until you retire or that coverage disappears. (This also applies if you are retired, but your spouse has employer-sponsored health coverage.)2

The month after your employment ends or your employee health benefits linked to that employment end (whichever comes first), an 8-month enrollment period will open for you to enroll in Medicare.2

By the way, COBRA does not meet Medicare's definition of employer-sponsored health insurance. Neither does a health plan sponsored by one of your past employers. You will be allowed no special enrollment period under these coverage circumstances.2  

You will need to decide what types of coverage you prefer. Parts A and B are the basic parts of Medicare. (Sometimes they are simply referred to as “Original Medicare.”) Part A is hospital insurance, and Part B is medical insurance.

Most people pay nothing for Part A; effectively, they have prepaid for the coverage by paying Medicare taxes during years on the job. Every Medicare recipient pays a monthly Part B premium. At this writing, the Part B premium for most Medicare recipients is $134. Should you still be working, this may be all the coverage you need if your employer offers health benefits.1   

You may want more coverage than Parts A and B provide. You might be interested in a Medicare Supplement Insurance (Medigap) policy or a Part D plan to help you pay for medicines. Or, you could sign up for a Part C (Medicare Advantage) plan, offering all basic Medicare benefits, plus prescription drug and medical coverage.3

Contact a Medicare specialist before you enroll. Even with its user-friendly website and plenty of online third-party guides to help those new to it, Medicare remains intricate; its nuances, hard to grasp. A financial or insurance professional well versed in Medicare enrollment, benefits, and regulations may make the process simpler for you.

       

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Citations.

1 - medicare.gov/people-like-me/new-to-medicare/getting-started-with-medicare.html [11/20/17]

2 - fool.com/retirement/general/2016/05/14/do-i-get-medicare-when-i-turn-65.aspx [5/14/17]

3 - kiplinger.com/slideshow/retirement/T039-S001-10-things-you-must-know-about-medicare/index.html [5/17] 

 

The Many Benefits of a Roth IRA

Why do so many people choose it rather than a traditional IRA?

Provided by Jane Bourette

Roth IRA changed the whole retirement savings perspective. Since its introduction, it has become a fixture in many retirement planning strategies. Here is a closer look at the trade-off you make when you open and contribute to a Roth IRA – a trade-off many savers are happy to make.

You contribute after-tax dollars. You have already paid income tax on the dollars going into the account, but in exchange for paying taxes on your retirement savings contributions today, you could potentially realize greater benefits tomorrow.1

You position the money for tax-deferred growth. Roth IRA earnings aren't taxed as they grow and compound. If, say, your account grows 6% a year, that growth will be even greater when you factor in compounding. The earlier in life that you open a Roth IRA, the greater compounding potential you have.2  

You can arrange tax-free retirement income. Roth IRA earnings can be withdrawn tax-free as long as you are age 59½ or older and have owned the IRA for at least five tax years. The IRS calls such tax-free withdrawals qualified distributions. They may be made to you during your lifetime or to a beneficiary after you die. (If you happen to die before your Roth IRA meets the 5-year rule, your beneficiary will see the Roth IRA earnings taxed until it is met.)1,3

If you withdraw money from a Roth IRA before you reach age 59½ or have owned the IRA for five tax years, that is a nonqualified distribution. In this circumstance, you can still withdraw an amount equivalent to your total IRA contributions to that point, tax-free and penalty-free. If you withdraw more than that amount, though, the rest of the withdrawal may be fully taxable and subject to a 10% IRS early withdrawal penalty as well.2,3

Withdrawals don't affect taxation of Social Security benefits. If your total taxable income exceeds a certain threshold – $25,000 for single filers, $32,000 for joint filers – then your Social Security benefits may be taxed. An RMD from a traditional IRA represents taxable income, and may push retirees over the threshold – but a qualified distribution from a Roth IRA isn't taxable income and doesn't count toward it.4  

You can direct Roth IRA assets into many different kinds of investments. Invest them as aggressively or as conservatively as you wish – but remember to practice diversification.

Inheriting a Roth IRA means you don't pay taxes on distributions. While you will need to take distributions from an inherited Roth IRA within 5 years of the original owner's passing, those distributions won't be taxed as long as the IRA is at least five years old (five tax years, that is).3

You have nearly 16 months to make a Roth IRA contribution for a given tax year. Roth and traditional IRA contributions for a tax year that has passed may be made up until the federal tax deadline of the succeeding year. The deadline for a 2017 Roth IRA contribution is April 17, 2018. Making your Roth IRA contribution as soon as a tax year begins, however, gives that money more time to potentially grow and compound with tax deferral.5

How much can you contribute to a Roth IRA annually? The 2018 contribution limit is $5,500, with an additional $1,000 “catch-up” contribution allowed for those 50 and older. (That $5,500 limit applies across all your IRAs, incidentally, should you happen to own more than one.)5

You can keep making annual Roth IRA contributions all your life. You can't make annual contributions to a traditional IRA once you reach age 70½.1

Does a Roth IRA have any drawbacks? Actually, yes. One, you will generally be hit with a 10% penalty by the IRS if you withdraw Roth IRA funds before age 59½ or you haven't owned the IRA for at least five years. (This is in addition to the regular income tax you will pay on any Roth IRA earnings withdrawn prior to age 59½, of course.) Two, you can't deduct Roth IRA contributions on your 1040 form as you can do with contributions to a traditional IRA or the typical workplace retirement plan. Three, you might not be able to contribute to a Roth IRA as a consequence of your filing status and income; if you earn a great deal of money, you may be able to make only a partial contribution or none at all.1,3

These asterisks aside, a Roth IRA has remarkable potential as a retirement savings vehicle. Now that you have read about all of a Roth IRA's possible advantages, you may want to open up a Roth IRA or create one from existing traditional IRA assets. A chat with the financial professional you know and trust will help you evaluate whether a Roth IRA is right for you, given your particular tax situation and retirement horizon.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.  

Citations.

1 - forbes.com/sites/jamiehopkins/2017/12/21/4-reasons-to-start-using-a-roth-ira-in-2018/ [12/21/17]

2 - tinyurl.com/ydevpofd [12/18/17]

3 - hrblock.com/get-answers/taxes/taxes-and-penalties/early-withdrawal-penalties-10768 [12/22/17]

4 - investopedia.com/ask/answers/013015/how-can-i-avoid-paying-taxes-my-social-security-income.asp [6/29/17]

5 - tickertape.tdameritrade.com/retirement/2017/12/financial-start-new-year-81999 [12/13/17]

 

 

 

Everyone Is Talking About Bitcoin

But when will the cryptocurrency bubble burst?

Provided by Jane Bourette

 

Investors are excited about bitcoin – perhaps too excited. Their fervor is easy to understand. On December 18, bitcoin closed at $17,566. Back on September 22, bitcoin was valued at only $3,603.1 

Yes, you read that correctly – the price of bitcoin jumped nearly 500% in three months. Thanks to this phenomenon, investors everywhere are asking if they should buy bitcoin or invest portions of their retirement funds in the cybercurrency. The air is filled with hype: bitcoin is “unstoppable,” it is “the answer,” it is “the future.”

It may also be heading for a crash.   

Bitcoin has crashed before. It is highly volatile. On Thanksgiving 2013, a single bitcoin was worth $979; by April 2014, the price was at $422. In late August 2017, it settled at $4,673; by mid-September, it was back at $3,783 immediately before its amazing fourth-quarter climb.1   

With the recent launch of bitcoin futures markets on the Chicago Board Options Exchange (CBOE) and CME Group, bitcoin has gained more respect. Still, there are many investors who will not touch it because of its considerable downside risk and its association with the seedy side of global finance.2  

The free market determines the value of bitcoin. Therefore, it can suffer sudden, dramatic devaluations due to the day's headlines. When China ordered bitcoin exchanges to shutter, the price of bitcoin slid. When JPMorgan Chase CEO Jamie Dimon called bitcoin “a fraud” in September 2017, the price quickly fell 10%. When the Silk Road website disappeared, bitcoin's value took a hit (and its disappearance brings us to the cryptocurrency's other worrisome aspect).3,4

Bitcoin has long been linked to the “dark web.” Even its origins are mysterious: the digital currency was created by someone named “Satoshi Nakamoto,” whose identity is still a question mark. Bitcoins are made in cyberspace by computers, beyond the control of any government. To its advocates, the fact that bitcoin has emerged from the Internet rather than a central bank is attractive. Who bitcoin and other cybercurrencies have attracted is another matter.4,5  

Bitcoin transactions are conducted on multiple exchanges and verified through the blockchain, a digital ledger that leaves transaction records open to the broad community of bitcoin users rather than a financial regulatory authority.3,4

Is this transparency a plus or a minus? You will hear both arguments. Even with this openness, users on bitcoin exchanges are not always required to reveal their identities, which is a plus for criminals. Bitcoin has been linked to money laundering, and earlier in this decade, some economists saw it as little more than a currency for drug lords. Silk Road, a black-market website, saw plenty of bitcoin transactions. How about funding for terrorist cells? Recently, a New York woman was charged with trying to send more than $80,000 to ISIS – cash mostly laundered through bitcoin, federal prosecutors assert.5,6 

The hype says that bitcoin is the “new gold,” but gold has intrinsic value. Governments, banks, and institutional investors share a foundational belief that gold is a valuable commodity. Does bitcoin have such a foundational belief beneath it?  

If speculators stopped believing bitcoin was valuable, then how valuable would it be? Nearly worthless, in the eyes of some observers. As NerdWallet investment writer Andrea Coombes remarks, “The value is in the demand itself.”7

In the financial markets, higher prices are not always succeeded by higher prices. This is essentially the belief holding up bitcoin. Its biggest fans believe its direction will be up and up for years to come, and that it will never really crater again. This is called irrational exuberance, and it has harmed many investors through the years.

Whether you think bitcoin is the “new gold” or amounts to a bubble ready to burst, its extreme, dangerous volatility means one thing – if you do choose to invest in it, you would be wise to only invest money that you can afford to lose.  

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - coindesk.com/price/ [12/20/17]

2 - cnbc.com/2017/12/17/worlds-largest-futures-exchange-set-to-launch-bitcoin-futures-sunday-night.html [12/17/17]

3 - thebalance.com/who-sets-bitcoin-s-price-391278 [2/14/17]

4 - theguardian.com/technology/2017/sep/13/from-silk-road-to-atms-the-history-of-bitcoin [9/14/17]

5 - theguardian.com/business/2013/mar/04/bitcoin-currency-of-vice [3/4/13]

6 - arstechnica.com/tech-policy/2017/12/feds-charge-new-york-woman-with-sending-bitcoins-to-support-isis/ [12/15/17]

7 - nerdwallet.com/blog/investing/is-bitcoin-safe/ [12/7/17]

 

Retirement Plan Contribution Limits Rise for 2018

Slight increases have been made due to mild inflation.

Provided by Jane Bourette

You will able to put a little more into your workplace retirement account in 2018. The federal government has boosted the annual contribution limit on some of the popular qualified retirement plans thanks to inflation and made other adjustments worth noting.

Contribution limits for 401(k)s are rising by $500. This is the first increase seen in three years. In 2018, you can direct up to $18,500 into one of these accounts; $24,500, if you are age 50 or older.1

This $500 increase also applies for three other types of retirement plans – the 403(b) plans in place at schools and non-profit organizations, the Thrift Savings Plan for federal employees, and most 457 plans sponsored by state and local governments.1

The total contribution limit for a defined contribution plan increases. A defined contribution plan is a retirement plan to which both an employer and employee can contribute. If your company has such a plan, the annual limitation on total employer/employee contributions improves by $1,000 in 2018, to $55,000.1

Contribution limits for Health Savings Accounts increase by $50/$150. You must be enrolled in a high-deductible health plan (HDHP) to have one of these accounts. The yearly contribution limit for those enrolled in individual plans rises $50 to $3,450; the yearly limit for those enrolled in qualifying family plans goes up $150 to $6,900. Correspondingly, the respective catch-up limits, which people 55 and older can take advantage of, are also heading north to $4,450 and $7,900.2

The phase-out ranges on IRA contributions are also rising. The annual IRA contribution limits are unchanged for next year ($5,500 for those under 50, $6,500 for those 50 and older), but the adjusted gross income limitations that reduce your eligibility to make IRA contributions are adjusted for inflation.1

If you are single and participate in an employer-sponsored retirement plan such as a 401(k), your new phase-out range is $1,000 higher: $63,000-$73,000. Joint filers who also contribute to workplace plans have a phaseout range of $101,000-$121,000, a $2,000 increase. If you want to contribute to an IRA and do not contribute to a workplace retirement plan, yet your spouse does, your phaseout range is $3,000 higher: $189,000-$199,000.1

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.   

Citations.

1 - benefitnews.com/news/irs-announces-2018-retirement-plan-contribution-limits [10/20/17]        

2 - cbsnews.com/news/irs-allows-higher-retirement-savings-account-limits-in-2018/ [10/24/17]

 

Your Social Security Benefits & Your Provisional Income

Earning too much may cause portions of your retirement benefits to be taxed.

Provided by Jane Bourette

You may be shocked to learn that part of your Social Security income could be taxed. If your provisional income exceeds a certain level, that will happen.

Just what is “provisional income”? The Social Security Administration defines it with a formula.

Provisional income = your modified adjusted gross income + 50% of your total annual Social Security benefits + 100% of tax-exempt interest that your investments generate.1

Income from working, pension income, withdrawals of money from IRAs and other types of retirement plans, and interest earned by certain kinds of fixed-income investment vehicles all figure into this formula.

If you fail to manage your provisional income in retirement, it may top the threshold at which Social Security benefits become taxable. This could drastically affect the amount of spending power you have, and it could force you to withdraw more money than you expect in order to cover taxes.

Where is the provisional income threshold set? The answer to that question depends on your filing status.   

If you file your federal income taxes as an individual, then up to 50% of your annual Social Security benefits are subject to taxation once your provisional income surpasses $25,000. Once it exceeds $34,000, as much as 85% of your benefits are exposed to taxation.1,2

The thresholds are set higher for joint filers. If you file jointly, as much as 50% of your Social Security benefits may be taxed when your provisional income rises above $32,000. Above $44,000, up to 85% of your Social Security benefits become taxable.2

The provisional income thresholds have never been adjusted for inflation. Since Social Security needs more money flowing into its coffers rather than less, it is doubtful they will be reset anytime in the future.

When the thresholds were put into place in 1983, just 10% of Social Security recipients had their retirement benefits taxed. By 2015, that had climbed to more than 50%.2

In 2017, the Seniors Center, a nonprofit senior advocacy organization based in Washington, D.C., asked retirees how they felt about their Social Security benefits being taxed. Ninety-one percent felt the practice should end.2

How can you plan to avoid hitting the provisional income thresholds? First, be wary of potential jumps in income, such as the kind that might result from selling a lot of stock, converting a traditional IRA to a Roth IRA, or taking a large lump-sum payout from a retirement account. Second, you could plan to reduce or shelter the amount of income that your investments return. Three, you could try to accelerate income into one tax year or push it off into another tax year.

Consult with a financial professional to explore strategies that might help you reduce your provisional income. You may have more options for doing so than you think.

Citations.

1 - kiplinger.com/article/retirement/T051-C032-S014-can-you-cut-taxes-you-pay-on-your-social-security.html [9/13/17]

2 - fool.com/retirement/2017/03/26/91-of-seniors-believe-this-social-security-practic.aspx [3/26/17]

 

Getting (Mentally) Ready to Retire

Even those who have saved millions must prepare for a lifestyle adjustment.

Provided by Jane Bourette

A successful retirement is not merely measured in financial terms. Even those who retire with small fortunes can face boredom or depression and the fear of drawing down their savings too fast. How can new retirees try to calm these worries?

Two factors may help: a gradual retirement transition and some guidance from a financial professional.  

An abrupt break from the workplace may be unsettling. As a hypothetical example, imagine a well-paid finance manager at an auto dealership whose personal identity is closely tied to his job. His best friends are all at the dealership. He retires, and suddenly his friends and sense of purpose are absent. He finds that he has no compelling reason to leave the house, nothing to look forward to when he gets up in the morning. Guess what? He hates being retired.

On the other hand, if he prepares for retirement years in advance of his farewell party by exploring an encore career, engaging in varieties of self-employment, or volunteering, he can retire with something promising ahead of him. If he broadens the scope of his social life, so that he can see friends and family regularly and interact with both older and younger people in different settings, his retirement may also become more enjoyable.

The interests and needs of a retiree can change with age or as he or she disengages from the working world. Retired households may need to adjust their lifestyles in response to this evolution.

Practically all retirees have some financial anxiety. It relates to the fact of no longer earning a conventional paycheck. You see it in couples who have $60,000 saved for retirement; you see it in couples who have $6 million saved for retirement. Their retirement strategies are about to be tested, in real time. All that careful planning is ready to come to fruition, but there are always unknowns.

Some retirees are afraid to spend. They fear spending too much too soon. With help from a financial professional, they can thoughtfully plan a withdrawal rate.

While no retiree wants to squander money, all retirees should realize that their retirement savings were accumulated to be spent. Being miserly with retirement money contradicts its purpose. The average 65-year-old who retires in 2017 will have a retirement lasting approximately 20 years, by the estimation of the Social Security Administration. So, why not spend some money now and enjoy retired life?1

Broadly speaking, our spending declines as we age. The average U.S. household headed by an 80-year-old spends 43% less money than one headed by a 50-year-old.1

Retirement challenges people in two ways. The obvious challenge is financial; the less obvious challenge is mental. Both tests may be met with sufficient foresight and dedication.

     This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

       

Citations.

1 - tinyurl.com/ydedsyl5 [4/24/17]

 

Life Insurance Products with Long Term Care Riders

Are they worthwhile alternatives to traditional LTC policies?

Provided by Jane Bourette

The price of long-term care insurance has really gone up. If you are a baby boomer and you have kept your eye on it for a few years, chances are you have noticed this. Last year, the American Association for Long-Term Care Insurance (AALTCI) noted that married 60-year-olds would pay between $2,000-3,500 annually in premiums for a standalone LTC policy.1

Changing demographics and low interest rates have prompted major insurers to stop offering LTC coverage. As the AALTCI notes, the number of LTC policies sold in this country fell from 750,000 in 2000 to 105,000 in 2015. Not all insurers offer these policies. The demand for the coverage remains, however – and in response, insurance providers have introduced new options.1,2

Hybrid LTC products have emerged. Some insurers offer “cash rich” permanent life insurance policies that let you tap part of the death benefit to pay for long-term care. Other insurance products feature similar potential benefits.1,2

As these insurance products are doing “double duty” (i.e., one policy or product offering the potential for two kinds of coverage), their premiums are costlier than that of a standalone LTC policy. On the other hand, you can get what you want from one insurance product rather than having to pay for two.3

Another nice perk offered by these hybrid LTC products: sometimes, insurers guarantee that the premiums you pay will never rise. (Many retirees wish that were the case with their traditional LTC policies.) Whether the premiums are locked in at the initial level or not, the death benefit, coverage amount, and cash value are all, commonly, guaranteed.3

Hybrid LTC policies provide a death benefit, a percentage of which will go to your heirs. Do traditional LTC policies offer a death benefit? No. If you buy a discrete LTC policy, but die without needing long-term care, all those LTC policy premiums you paid will not return to you.3

The basics of securing LTC coverage applies to these policies. The earlier in life you arrange the coverage, the lower the premiums will likely be. If you are not healthy enough to qualify for a standalone LTC insurance policy, you might qualify for a hybrid policy – sometimes no medical exam is required. The LTC insurance benefit may be used when a doctor certifies that the policyholder is unable to perform two or more of the six activities of daily living (eating, dressing, bathing, transferring in and out of bed, toileting, and maintaining continence).4,5

Lump sums are no longer needed to fund many of these hybrid LTC policies. In the past, insurers would commonly require a single premium payment of $75,000-$100,000. No more. Most insurance companies let you fund these policies with monthly, quarterly, or annual premiums. When a lump sum is necessary, it may not be a major hurdle for a high net worth individual or couple, especially since appreciated assets from other life insurance products can be transferred into a hybrid product through a 1035 exchange.2,3,6

Are these hybrid policies just mediocre compromises? They have critics as well as fans. Detractors cite their two sets of fees, per their two forms of insurance coverage. They also point out that hybrid LTC policies are not inflation protected, so the insurance benefit is worth less with the passage of time. Also, while the premiums paid on conventional LTC policies are tax deductible, premiums paid on these hybrid policies are not.3

Funding the whole policy up front with a single premium payment has both an upside and a downside. You will not contend with potential premium increases over time, as owners of stock LTC policies often do; on the other hand, the return on the insurance product may be locked into today's low interest rates.

Another reality is that many middle-class seniors have little or no need to buy a life insurance policy. Their heirs will not face inheritance taxes because their estates will not exceed the federal estate tax exemption. Moreover, their children may be adults and financially stable, themselves. A large death benefit for these heirs is nice, but the opportunity cost of paying the life insurance premiums may be significant.

Cash value life insurance can be a crucial element in estate planning for those with large or complex estates, however – and if some of its death benefit can be directed toward long-term care for the policyholder, it may prove even more useful than commonly assumed.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

  Citations.

1 - investmentnews.com/article/20160721/FREE/160729979/long-term-care-insurance-market-sees-rapid-decline [7/21/16]

2 - nytimes.com/2016/03/06/business/retirementspecial/hybrid-long-term-care-policies-provide-cash-and-leave-some-behind.html [3/6/16]

3 - today.com/series/starttoday/have-healthy-retirement-jean-chatzky-how-pay-long-term-care-t106862 [1/10/17]

4 - elderlawanswers.com/hybrid-policies-allow-you-to-have-your-long-term-care-insurance-cake-and-eat-it-too-15541# [4/5/16]

5 - elderlawanswers.com/activities-of-daily-living-measure-the-need-for-long-term-care-assistance-15395 [11/24/15]

6 - kiplinger.com/article/insurance/T036-C001-S003-tax-friendly-ways-to-pay-for-long-term-care-insura.html [8/16/16]

 

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One Couple, Two Different Retirements?

After many years together, some retired spouses may find their daily routines far apart.

Provided by Jane Bourette

When you see online ads or TV commercials about retirement planning, do they ever show baby boomer couples arguing? No. After all, retirement planning is about the pursuit of a happy outcome – a fun and emotionally rewarding “second act” that spouses and partners can share. 

Realizing that goal takes communication. As you approach retirement, you may not be who you were at 30 or 50. You and your significant other may want different daily lives once you retire. This is a frequently ignored reality in retirement planning. In preparing to retire, you might want to consider your individual preferences and differences when it comes to these factors:

How you spend your days. What does a good day in retirement look like to you? What does it look like for your spouse or partner?

Social engagement. How much time do each of you want to spend working, volunteering, or socializing? Your preferences may differ.

Your health. If you contend with serious health issues, you may define a “good day” in retirement much differently than your spouse or partner does.

Your spending. Where will your retirement income go? What will it be spent on besides basic living expenses? Your discretionary spending priorities and those of your spouse could vary. If they vary widely, this could be the source of some drama.  

Your time alone. Some couples build businesses together or work in the same office or practice for years; others spend just a few hours per day around each other for decades. In retirement, you will likely be around each other for more hours of the day than when you worked. You will need to decide how much “me time” you need.  

Your roles. Have you done most of the cleaning around the house? Or tackled most of the home improvement projects? Should it remain that way in retirement?

To some extent, your spouse or partner's vision of retirement will vary from yours. It could vary 1%, or it could vary 99%, but some variance is almost certain. It need not breed discord so long as you recognize the following three truths.  

Some of your shared retirement savings will be used to fulfill individual dreams. The money you have saved and invested will provide financial support for you as a couple, but you also must concede that some of those dollars will be spent relative to each other's individual goals, passions, and pursuits. The same applies for your retirement income.

You will not automatically see money the same way. Those online ads and TV commercials would have you believe that some kind of magic happens once retirement starts, leaving every retired couple to walk along the beach smiling, laughing, and in total agreement about their future. Yes, retired couples do disagree about money; they also learn to overcome those disagreements through understanding and compromise.  

Many things are more valuable than money in retirement. Time is probably your most valuable asset, and your health and relationships are close behind. So, whether your retirement savings falls short of or far exceeds the median baby boomer amount of $147,000 (as identified last year by the Transamerica Center for Retirement Studies), keep what matters most in mind.1    

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - forbes.com/sites/forbesfinancecouncil/2017/05/15/retirement-its-not-as-simple-as-it-used-to-be/ [5/15/17] 

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Should You Apply for Social Security Now or Later?

When should you apply for benefits? Consider a few factors first.

Provided by Jane Bourette

 

Now or later? When it comes to the question of Social Security income, the choice looms large. Should you apply now to get earlier payments? Or wait for a few years to get larger checks?

Consider what you know (and don't know). You know how much retirement money you have; you may have a clear projection of retirement income from other potential sources. Other factors aren't as foreseeable. You don't know exactly how long you will live, so you can't predict your lifetime Social Security payout. You may even end up returning to work again.

When are you eligible to receive full benefits? The answer may be found online at socialsecurity.gov/retire2/agereduction.htm.

How much smaller will your check be if you start receiving benefits at 62? The answer varies. As an example, let's take someone born in 1955. For this baby boomer, the full retirement age is 66 years and 2 months. If that boomer decides to retire in 2017 at 62, his or her monthly Social Security benefit will be reduced about 26%. That boomer's spouse would see a 30% reduction in monthly benefits.1,2

Should that boomer elect to work past full retirement age, his or her benefit checks will increase by 8.0% for every additional full year spent in the workforce. So, it really may pay to work longer.2

Remember the earnings limit. Let's put our hypothetical baby boomer through another example. Our boomer decides to apply for Social Security at age 62 in 2017, yet stays in the workforce. If he/she earns more than $16,920 in 2017, the Social Security Administration will withhold $1 of every $2 earned over that amount.3

How does the SSA define “income”? If you work for yourself, the SSA considers your net earnings from self-employment to be your income. If you work for an employer, your wages equal your earned income.3

 

Please note that the SSA does not count investment earnings, interest, pensions, annuity income, and government or military retirement benefits toward the current $16,920 earnings limit.3  

Some fine print worth noticing. If you are self-employed, did you know that the SSA may define you as retired even if you aren't? (This amounts to the SSA giving you a break.)

For example, if you are eligible to receive Social Security benefits in 2017, yet remain under full retirement age for the whole year, the SSA will consider you “retired” if a) you work 45 hours or less per month at your business or work between 15-45 hours a month at a business in a highly skilled occupation, b) your monthly earnings from such self-employment are $1,410 or less.4

Here's the upside of all that: if you meet the two tests mentioned in the preceding paragraph, you are eligible to receive a full Social Security payment for any whole month of 2017 in which you are “retired” under these definitions. You can receive that monthly payment no matter what your earnings total for 2017.4

Learn more at socialsecurity.gov. The SSA website is information packed and user friendly. One last, little reminder: if you don't sign up for Social Security at your full retirement age, make sure that you at least sign up for Medicare at age 65.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. 

Citations.

1 - blog.ssa.gov/2017-brings-new-changes-to-full-retirement-age/ [1/6/17]

2 - fool.com/retirement/general/2016/04/25/3-facts-you-need-to-know-about-social-security-spo.aspx [4/25/16]

3 - ssa.gov/planners/retire/whileworking2.html [4/12/17]

4 - ssa.gov/planners/retire/rule.html [4/12/17]

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Tax Rules on Rental Property

The basics on capital gains & deductions.

Provided by Jane Bourette

 

Buying or selling income property has definite tax consequences. A taxpayer should clearly understand them, whether he or she intends to acquire a property or put one on the market. 

A sale of income property incurs either a capital gain or loss. If you profit from the sale of income property, that profit is considered fully taxable by the Internal Revenue Service. Fortunately, if you have owned that property for at least a year, you will pay only capital gains tax on those profits rather than income tax.1

Your capital gain is determined by subtracting the adjusted basis of the property (i.e., the price you paid for it, plus the total of any renovations, closing costs, and eligible legal fees) from the sale price. For most taxpayers, the capital gains rate is but 15%. If you sell an investment property for a capital gain of $30,000 and your capital gains rate is 15%, you will pay $4,500 of capital gains tax from the sale.1   

Depreciation can factor into this. If the market turns south and you can deduct $20,000 in depreciation within your ownership period, then your capital gain from the sale is $10,000 instead of $30,000.2

Should you happen to sell one investment property at a gain and another at a loss in the same year, you can subtract your capital loss from your capital gain, resulting in a net capital gain or loss for that tax year.1

Should you buy & hold, you could qualify for the homeowner exclusion. If you live in an investment property for two or more years during a five-year period, the I.R.S. will consider that investment property to be your primary residence, whether you do or not. You are, thereby, eligible for the federal homeowner exclusion when you sell such property, which enables you to shield up to $250,000 of capital gains from tax. Joint filers may exclude up to $500,000 of capital gains from tax through this break.1,3 

Income property investors may also qualify for some federal tax deductions. If you happen to utilize an investment property (or even a vacation home) for your personal use, you may be able to take advantage of property tax deductions, the mortgage interest deduction, even the home office deduction. The size of a deduction typically corresponds to how frequently you use the property. For example, you can deduct property management fees, insurance premiums, and certain other costs only when you use the property for longer than 14 days or 10% of the total days it is rented or leased.4

This article is simply an overview of the tax rules on rental property. To fully explore the tax implications of a sale or purchase and the deductions and exclusions you may qualify to receive, speak to a qualified tax, real estate, or financial professional today.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 - finance.zacks.com/tax-liability-selling-investment-property-5957.html [3/28/17]

2 - investopedia.com/articles/mortgages-real-estate/08/rental-property.asp [2/22/17]

3 - irs.gov/taxtopics/tc701.html [1/7/17]

4 - ajc.com/business/personal-finance/these-tax-breaks-can-help-make-homeownership-more-affordable/1rauoRXHzDmeWZVgbfmsoI [3/16/17]

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Have a Plan, Not Just a Stock Portfolio

Diversification still matters. One day, this bull market will end.

 

Provided by Jane Bourette

In the first quarter of 2017, the bull market seemed unstoppable. The Dow Jones Industrial Average soared past 20,000 and closed at all-time highs on 12 consecutive trading days. The Nasdaq Composite gained almost 10% in three months.1

An eight-year-old bull market is rare. This current bull is the second longest since the end of World War II; only the 1990-2000 bull run surpasses it. Since 1945, the average bull market has lasted 57 months.2

Everyone knows this bull market will someday end – but who wants to acknowledge that fact when equities have performed so well?

Overly exuberant investors might want to pay attention to the words of Sam Stovall, a longtime, bullish investment strategist and market analyst. Stovall, who used to work for Standard & Poor's and now works for CFRA, has seen bull and bear markets come and go. As he recently noted to Fortune, epic bull markets usually end “with a bang and not a whimper. Like an incandescent light bulb, they tend to glow brightest just before they go out.”2

History is riddled with examples. Think of the dot-com bust of 2000, the credit crisis of 2008, and the skyrocketing inflation of 1974. These developments wiped out bull markets; this bull market could potentially end as dramatically as those three did.3

A 20% correction would take the Dow down into the 16,000s. Emotionally, that would feel like a much more significant market drop – after all, the last time the blue chips fell 4,000 points was during the 2007-09 bear market.4

  

Investors must prepare for the worst, even as they celebrate the best. A stock portfolio is not a retirement plan. A diversified investment mix of equity and fixed-income vehicles, augmented by a strong cash position, is wise in any market climate. Those entering retirement should have realistic assessments of the annual income they can withdraw from their savings and the potential returns from their invested assets.

Now is not the time to be greedy. With the markets near historic peaks, diversification still matters, and it can potentially provide a degree of financial insulation when stocks fall. Many investors are tempted to chase the return right now, but their real mission should be chasing their retirement objectives in line with the strategy defined in their retirement plans. In a sense, this record-setting bull market amounts to a distraction – a distraction worth celebrating, but a distraction, nonetheless.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

  

Citations.

1 - money.cnn.com/2017/03/31/investing/trump-rally-first-quarter-wall-street/index.html [3/31/17]

2 - fortune.com/2017/03/09/stock-market-bull-market-longest/ [3/9/17]

3 - kiplinger.com/article/investing/T052-C008-S002-5-reasons-bull-markets-end.html [4/3/14]

4 - thebalance.com/stock-market-crash-of-2008-3305535 [4/3/17]

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In-Service Withdrawals from Employee Retirement Plans

You might be able to take money out of your 401(k), 403(b), or 457 plan while still working.

Provided by Jane Bourette

If you withdraw money out of a workplace retirement plan in your fifties, will you be penalized for it? In most cases, the answer is yes. Distributions taken from a qualified retirement plan before age 59½ usually trigger a 10% IRS early withdrawal penalty. The key word here is “usually,” for there are ways to make these withdrawals with no IRS penalty, even while you are still working for your employer.1

You may have a strong reason to make such a withdrawal. Maybe you want the money now. Maybe you are tired of your plan's limited choices and high fees and want to invest those assets in a different way. In fact, some of these withdrawals are made just so the assets can be transferred to an IRA. An IRA allows you many, many more investment options than the typical employer-sponsored retirement plan.1,2

You can avoid the 10% penalty through an in-service, non-hardship withdrawal. Some 401(k), 403(b), and 457 plans permit such distributions for plan participants who are still working. You may be able to arrange one, but you must pay attention to the rules.2

Different plans have different requirements for these distributions. Some only permit them if the employee has worked for the company for at least five years. Others shorten that obligation to two years. A plan may only let employees have this option starting in the calendar year in which they turn 59½. Employees are sometimes unable to withdraw their whole account balance. Spousal consent, in writing, may also be required.2   

You need to know the mechanics of the distribution. Can you withdraw your earnings as well as your contributions? Can you withdraw any matching contributions your company has provided? Is there a dollar ceiling on this type of distribution? Does the plan itself penalize such withdrawals (as opposed to the IRS)? Finally, you will want to ascertain the timeline of how long it will take to distribute the assets.       

What are the potential drawbacks to doing this? When you take an early distribution from a 401(k), 403(b), or 457 plan, you do so with a strong conviction that you are putting that money to better use or directing it into a better investment vehicle. There is always the chance that time could prove you wrong. Taking the money out of the plan may also mean losing out on future company matches. Also, while you can currently put up to $24,000 a year into a 401(k), 403(b), or 457 plan starting at age 50, the annual contribution limit for a Roth or traditional IRA is only $6,500 once you turn 50.3

If you need the money for an emergency, taking a loan from your plan might be a better option. If you just take the funds out of the plan without arranging a direct rollover (trustee-to-trustee transfer) to an IRA, every dollar you pocket will be taxed because the IRS considers a lump-sum retirement plan withdrawal to be regular income.2,5     

Should your current workplace retirement plan prohibit in-service, non-hardship withdrawals, take heart: you can reach back and withdraw funds from 401(k), 403(b), and 457 accounts held at past employers after you turn 59½. So, if you have an old employer retirement plan account, you could go this route instead; though, the balance of that account might be relatively small.4

Speak to a financial professional before you do this. A trustee-to-trustee transfer is one way to do it: you never touch the money, and the funds can go straight from your plan into an IRA with no tax ramifications resulting from the transfer. That move is ideally made with a financial professional's help.5

    

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

   

Citations.

1 - irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions [8/25/16]

2 - titanfinancial.net/blog/how-to-rollover-401k-funds-while-still-working-for-employer [4/24/16]

3 - forbes.com/sites/ashleaebeling/2016/10/27/irs-announces-2017-retirement-plans-contributions-limits-for-401ks-and-more/ [10/27/16]

4 - thebalance.com/what-age-can-funds-be-withdrawn-from-401k-2388807 [8/16/16]

5 - al.com/business/index.ssf/2017/01/avoid_this_costly_ira_rollover.html [1/4/17]

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Financial Thoughts for International Women's Day

Every March 8, we reflect on the financial progress women have made (and still need to make).

Provided by Jane Bourette

March 8 is International Women's Day, a day to celebrate the social and economic progress and cultural achievements of women worldwide.

There really is much to celebrate. Globally, the wealth of women is growing at a faster rate than the wealth of men. The increase was about 8% a year from 2010-15 according to Boston Consulting Group, a global business consulting firm. BCG sees women's wealth expanding another 7% per year through 2020, with women controlling $72.1 trillion in assets three years from now. Domestically, Census Bureau data shows women now owning more than a third of U.S. businesses.1

Today, women have more opportunity to build wealth than they did generations ago, plus more information and resources to help them plan for that objective – but how many women are taking advantage of all this? More should, especially with their retirements in mind.

Even with all this progress, there may be a retirement crisis in the making. The Department of Labor notes that just 44% of the 63 million employed women in the U.S. participate in an employee retirement plan. Vanguard research shows that while the mean 401(k) account balance for men is around $123,000, it is only about $75,000 for women.2,3     

As the DoL points out, today's average 65-year-old female has a life expectancy of 85. So, a retirement of 20 years (or longer, if a woman retires before age 65) will be normal. If a woman has but $75,000 in a workplace retirement plan – and perhaps, say, $100,000-150,000 in other investments or retirement accounts – will that be enough, along with Social Security and/or a pension, to sustain a comfortable 20- or 25-year retirement? Even if her accumulated assets remain invested in equities, this is doubtful, especially with inflation.2 

For single women, the risk is heightened. The Employee Benefit Research Institute's 2016 Retirement Confidence Survey discovered that roughly 40% of unmarried American women have less than $1,000 in retirement savings.3

If that fact seems unsettling, so is a perception brought to light by the EBRI survey. Approximately 36% of unmarried females responding to the survey felt that they could retire adequately with less than $250,000 in retirement savings – again, a highly debatable assumption. That assumption might prove true for a retirement lasting 5-10 years, like the retirements that were common 30-40 years ago. With today's longer lifespans, it might prove faulty. (In contrast, a majority of men surveyed by EBRI felt they should save at least $500,000 for their retirements.)3

The bottom line is that many women need to save more, invest more, and prepare more for retirement and its two biggest risks: longevity risk and inflation risk. Longevity risk is the risk of outliving your money. Inflation risk is the risk of gradually losing your purchasing power as consumer prices presumably rise with time.

A woman saving and investing for her future would do well to regularly consult a financial professional along the way. This may be a key step in the pursuit of her retirement goals; a step that could help reveal paths to attaining them.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

Citations.

1 - time.com/money/4360112/womens-wealth-share-increase/ [6/7/16]

2 - dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/publications/women.pdf [9/15]

3 - cnbc.com/2016/03/18/women-more-likely-than-men-to-retire-poor.html [3/18/16]

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Tiny Social Security COLA, Possible Medicare Premium Hike

Retirees will get only a few dollars more per month in 2017. 

Provided by Jane Bourette

The average Social Security recipient will get a $5 raise next year. Yes, a whopping $5 per month. In 2017, Social Security's mean monthly benefit is projected to rise – from the current $1,355 – by this scant amount, all because of low yearly inflation measured by the federal government.1,3,4

Social Security cost-of-living adjustments are tied to changes in the CPI-W. This is a version of the Consumer Price Index that measures inflation for urban wage earners and clerical workers. If that seems a bit incongruous to you, it also does to many senior advocacy groups. They would prefer that these cost-of-living adjustments be based on the CPI-E, a version of the CPI that tracks consumer costs for the elderly.1,2,3

The CPI-E gives more weight to increases in medical and housing costs than the CPI-W. If Social Security COLAs were linked to the CPI-E, the thinking goes, they might be greater. Data from the Bureau of Labor Statistics backs up this assertion, as healthcare costs alone advanced 5.1% in the 12 months ending in August.1,3

Medicare payments might jump for some seniors. While most Social Security recipients will see all of their 2017 “raise” go toward covering Medicare Part B premiums, some may not.1,4

Federal law governing Social Security limits annual Medicare Part B premium increases for 70% of Social Security recipients, with the other 30% left to shoulder most of the burden. Just who makes up that other 30%? Seniors who will be enrolling in Part B for the first time in 2017, Social Security recipients whose income already prompts them to pay higher Part B premiums, and people who currently receive Medicare benefits, but collect no Social Security.1,4

Those groups could see their Part B premiums rise 22% next year – $149 a month, according to the latest Medicare Trustees Report – unless the federal government acts fast. In late 2015, a large premium increase was reduced when the U.S. Treasury loaned $7 billion to Medicare.1,4

The tiny 2017 Social Security COLA at least beats expectations. Social Security's Board of Trustees had forecast the mean monthly benefit to rise 0.2% in 2017, not even $3 a month for the average recipient. Monthly Social Security benefits have risen an average of 2.3% per year since 2000, even with no COLAs occurring in 2009, 2010, and 2016.1,3,4

Citations.

1 - time.com/money/4533881/social-security-2017-increase-cola-cost-of-living-adjustment/ [10/18/16]

2 - ssa.gov/oact/STATS/cpiw.html [10/19/16]

3 - fool.com/retirement/2016/09/24/heres-why-your-social-security-check-is-hardly-goi.aspx [9/24/16]

4 - usatoday.com/story/money/personalfinance/2016/10/18/social-security-cola-medicare-premiums-cost-of-living/92051378/ [10/18/16]

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Why Life Insurance Matters

Besides the death benefit, it may also help you financially during your life.

Provided by Jane Bourette

As Bankrate.com noted, 43% of Americans have no life insurance. Some view it as optional; some have simply procrastinated when it comes to buying a policy. Others believe that they can't afford it.1

In reality, life insurance is cheap today. If you just want term life coverage – essentially, life insurance that you “rent” for X number of years – you may find it quite affordable wherever you live. Plugging in some sample variables, a little comparison shopping online reveals that a 40-year-old, non-smoking woman in excellent health who lives in New Hampshire would pay premiums of just $380-420 a year for a 20-year level term policy with a $500,000 death benefit. (She would have several providers to choose from.)2

If you choose permanent life insurance rather than term life, new possibilities emerge. In addition to a benefit for your heirs at your death, an insurance policy capable of building cash value gives you more capability to address financial needs during your lifetime.

Permanent life insurance allows you the opportunity to build cash value. The premiums on a whole, universal, or variable life policy are higher than for a term life policy, but there is a reason for that – as you pay into one of these policies, the policy, itself, accumulates cash value. That cash value grows without being taxed.3

In all probability, the cash value will continue to be available as long as you live. While it's true that some insurance companies have gone under, the reality is that very, very few do. They guarantee the death benefit and the viability of the policy as long as you keep making the premium payments.3

If you need a loan someday, a cash value life policy may give you an option. Some of these policies allow withdrawals of the cash value, meaning that you can borrow against the cash value once you have funded the policy with a sufficient amount of premiums. (You can even tap the cash value to pay the premiums, if you like.) Naturally, loans taken from the policy will reduce the death benefit amount. The policyholder faces no requirement to pay back the loan, but the loan is subject to interest.3

Many of these policies come with degrees of flexibility. You may be able to transfer some of the cash value into another insurance product with the death benefit unaffected.

The death benefit may do much to preserve your loved ones' quality of life. Life insurance death benefit proceeds are almost never taxed (only under rare circumstances does the IRS count them as gross income). So a permanent life policy will give your heirs money to address funeral and burial expenses and possible estate taxes, and those funds could also provide them with part of their inheritance.4 

Cash value life insurance also means permanent coverage as long as the policy is in force. The death benefit will not be readjusted or diminished if you fall ill, and if you buy a policy in your thirties or forties, you save money compared to those who purchase a policy after age 50. 

Permanent life insurance is also highly useful in estate planning. Several kinds of trusts may be used in conjunction with permanent life policies, such as irrevocable life insurance trusts (ILITs), special needs trusts, spendthrift trusts, simple living trusts, and more. Often, a trust can be named as beneficiary of a permanent life policy, an estate planning step toward an eventual financial benefit to heirs.5

First and foremost, life insurance matters for its death benefit – but those considering it should not overlook its financial utility in other situations during the course of life.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - bankrate.com/financing/insurance/how-painful-is-the-life-insurance-talk/ [9/15/15]

2 - term4sale.com/cgi-bin/cqsl.cgi [8/9/16]

3 - investopedia.com/terms/c/cash-value-life-insurance.asp [8/9/16]

4 - irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Interest,-Dividends,-Other-Types-of-Income/Life-Insurance-&-Disability-Insurance-Proceeds/Life-Insurance-&-Disability-Insurance-Proceeds [1/1/16]

5 - aol.com/article/2015/05/07/how-to-supercharge-trusts-with-life-insurance/21173793/ [5/7/15]

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Making Decisions About Life Insurance

Life insurance choices can be confusing.

Provided by Jane Bourette

Man is Mortal. That makes life insurance a little unique and interesting, doesn't it? We purchase things like health insurance, car insurance and home insurance, then hope we never have a need to use them. Life insurance is different because it's a widely accepted fact that, sooner or later, each one of us will die.

So many choices. When it comes to life insurance, there are many options. You may have heard terms like “whole life insurance,” “term insurance,” or “variable insurance,” but what do they all mean? And what are the differences? Well, first let me point out what they have in common: all life insurance policies provide payment to a beneficiary in the event of your death. Except for that basic tenet, the differences between policies can be major.

Whole life insurance. This type of insurance covers your entire life (not just a portion or a “term” of it). Insurance companies tend to be cautious when selecting their investments, so the benefits could be, potentially, lower than if you invested on your own. Whole life policies also tend to cost more than “term” policies. This is both because they grow what is known as “cash value,” and, after a certain period of time, you will be able to borrow against or withdraw from your whole life benefits.

Term insurance. Rather than covering your whole life, “term” insurance covers a pre-determined portion of your life. If you die within that term, your beneficiaries receive a death benefit. If not, generally, you get nothing. To put it simply, term insurance allows you to purchase more coverage for less money. Basically, you are betting on the probability of your death occurring within that specified “term.”

Variable life insurance. Variable life insurance is a permanent insurance. Unlike whole life insurance, however, variable insurance allows you to invest the cash value of your policy into “subaccounts” (which can include money market funds, bonds or stocks). Variable insurance offers a bit of control, as the value and benefit depend upon the performance of the subaccounts you select. That means there could be significant risk involved, though, since the performance of your subaccounts cannot be guaranteed.

Universal life insurance. With universal insurance, it all comes down to flexibility. It is permanent life insurance that provides access to cash values, which, over time, build up tax-deferred. You can choose the amount of coverage you feel is appropriate, and you retain the ability to increase or decrease that amount as your needs change (subject to minimums and requirements). You also have some flexibility in determining how much of your premium goes toward insurance, and how much is used within the policy's investment element.

So, which is right for you? Many factors come into play when deciding what type of life insurance will best suit your needs. The best thing to do is speak with a trusted and qualified financial professional who can assist you in looking at all the factors and help you to choose the policy that will work best for you.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

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Getting Your Financial Paperwork in Good Order

 Help make things easier for your loved ones when you leave this world.

Provided by Jane Bourette

 

Who wants to leave this world with their financial affairs in good order? We all do, right? None of us wants to leave a collection of financial mysteries for our spouse or our children to solve.

What we want and what we do can differ, however. Many heirs spend days, weeks, or months searching for a decedent's financial and legal documents. They may even discover a savings bond, a certificate of deposit, or a life insurance policy years after their loved one passes.

Certainly, you want to spare your heirs from this predicament. One helpful step is to create a “final file.” Maybe it is an actual accordion or manila folder; maybe it is a file on a computer desktop; or maybe it is secured within an online vault. The form matters less than the function. The function this file will serve is to provide your heirs with the documentation and direction they need to help them settle your estate.

What should be in your “final file?” Definitely a copy of your will and copies of any trust documents. Place a durable power of attorney and a health care proxy in there too, as this folder's contents may need to be accessed before you die.

Copies of insurance policies should go into the “final file” – not only your life insurance policy, but home and auto coverage. A list of all the financial accounts in your name should be kept in the file – and, to be complete, why not include sample account statements with account numbers, or, at least, usernames and passwords, so that these accounts can be easily accessed online.

Social Security benefit information should also be compiled. That information will be essential for your spouse (and, perhaps, for a former spouse). If you happen to receive a pension from a former employer, your heirs need to know the particulars about that.

They should also be able to access documentation pertaining to real estate you own. If you have a safe deposit box, at least one of your heirs should know where the key is – otherwise, your heirs will have to pay a locksmith, directly or indirectly, to open it. Along those lines, the combination to a home safe should be disclosed. If you have trust issues with some of your heirs, you can only disclose such information to the trusted ones or to an attorney.

Contact information should be inside the “final file” as well. Your heirs will need to look up the email address or phone number of the financial professionals you have consulted, any attorneys you have turned to for estate planning or business advice, and any insurance professionals with whom you have maintained relationships.

Other documentation to include: credit card information, vehicle titles, and cemetery/burial information. Be sure to include your social media and e-commerce passwords for sites like Facebook, Twitter, LinkedIn, Pinterest, Amazon, and eBay. Some social media sites may require a copy of your death certificate or obituary notice before allowing any other party to access your profile. Furthermore, you may also wish to leave a letter or note instructing your heirs on how the world should be notified of your death.1

Your heirs will want to supplement your “final file” with contributions of their own. Perhaps the most important supplement will be your death certificate. A funeral home may tell your heirs that they will need only a few copies. In reality, they may need several – or more – if your business or financial situation is particularly involved.

A “final file” may save both money & time. If documentation is scant or unavailable, settling an estate can be a prolonged affair. As National Academy of Elder Law Attorneys president Howard Krooks told Reuters, “It could be six months or longer if you don't have the paperwork in order.” In the worst-case scenario, probate consumes 5% or more of an estate.2 

One other important step may save your heirs money & time. If you add the name of an heir to a key bank account, that heir can pay a hospital bill or make a mortgage payment on your behalf without undue delay.2   

Be sure to tell your heirs about your “final file.” They need to know that you have created it; they need to know where it is. It will do no good if you are the only one who knows those things when you die.

You can compile your “final file” gradually. The next account statement, income payment, or real estate or insurance newsletter than comes into your inbox or mailbox can be your cue to tackle and scratch off that particular item from the “final file” to-do list. Yes, it takes work to create a “final file” – but you could argue that it is necessary work, and your heirs will thank you for your effort.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - marketwatch.com/story/13-steps-to-organizing-your-accounts-and-assets-2016-03-03 [3/3/16]

2 - reuters.com/article/us-retirement-death-folder-idUSKBN0FK1RW20140715 [7/15/14]

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Should You Downsize for Retirement?

Some retirees save a great deal of money by doing so; others do not.

Provided by Jane Bourette

You want to retire, and you own a large home that is nearly or fully paid off. The kids are gone, but the upkeep costs haven't fallen. Should you retire and keep your home? Or sell your home and retire? Maybe it's time to downsize.

Lower housing expenses could put more cash in your pocket. If your home isn't paid off yet, have you considered how much money is going toward the home loan? When you took out your mortgage, your lender likely wanted your monthly payment to amount to no more than 28% of your total gross income, or no more than 36% of your total monthly debt repayments. Those are pretty standard metrics in the mortgage industry.1

What percentage of your gross income are you devoting to your mortgage payments today? Even if your home loan is 15 or 20 years old, you still may be devoting a significant part of your gross income to it. When you move to a smaller home, your mortgage expenses may lessen (or disappear) and your cash flow may greatly increase  

You might even be able to buy a smaller home with cash (if finances permit) and cut your tax liability. Optionally, that smaller home could be in a state or region with lower income taxes and a lower cost of living.

You could capitalize on some home equity. Why not convert some home equity into retirement income? If you were forced into early retirement by some corporate downsizing, you might have a sudden and pressing need for retirement capital, another reason to sell that home you bought decades ago and head for a smaller one.   

The lifestyle reasons to downsize (or not). Maybe your home is too much to keep up, or maybe you don't want to climb stairs anymore. Maybe a condo or an over-55 community appeals to you. Maybe you want to be where it seldom snows.

On the other hand, you may want and need the familiarity of your current home and your immediate neighborhood (not to mention the friends close by). 

Sometimes retirees underestimate the cost of downsizing. Even the logistics can be expensive. As Kiplinger notes, just packing up and moving a two-bedroom condominium's worth of furniture will cost about $1,500 if you are resettling locally. If you are sending it across the country, the journey could take $5,000 or more. If you can't sell or move everything, the excess may go into storage, and the price tag on that may be well over $100 a month. In selling your home, you will probably pay commissions to both your agent and the buyer's agent that add up to 6% of the sale price.2

Some people want to retire and then sell their home, but it may be wiser to sell a home and then retire if the real estate market slows. If you sell sooner instead of later, you can always rent until you find a smaller house that could save you thousands (or tens of thousands) of dollars over time.

Run the numbers as accurately as you think you can before you make a move. Downsizing always seems to have a hidden cost or two, but for many retirees, it can open a door to long-term savings. Other seniors may find it cheaper to age in place.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - nerdwallet.com/blog/mortgages/two-ways-to-determine-how-much-house-you-can-afford/ [2/3/16]

2 - kiplinger.com/article/retirement/T010-C022-S002-downsizing-costs-add-up.html [4/1/16]

 

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Should You File Jointly, Or Not?

For many married couples, filing jointly is a good idea, but there are exceptions.

Provided by Jane Bourette

 

Ninety-five percent of married couples file joint federal tax returns. Filing jointly can be convenient. Frequently, there's a financial advantage, but that does not mean it should be done without consideration.1

Years ago, there was less incentive to file jointly. That was because the “marriage penalty” for doing so was effectively greater. There is no written “marriage penalty” in the Internal Revenue Code, but, in the past, income tax brackets were structured a bit differently and spouses having similar annual incomes sometimes paid more taxes by filing jointly than single taxpayers did.

There are many good reasons to file jointly. Nearly all of them involve saving money.

Joint filing may give you an effective tax break right off the bat. Currently, married taxpayers who file separately face the 28%, 33%, 35%, and 39.6% income tax brackets at lower income thresholds than other unmarried taxpayers.2

Joint filers can claim significant tax credits that marrieds filing separately cannot. If you want to claim the American Opportunity Tax Credit, the Lifetime Learning Credit, the Elderly or Disabled Credit, or the Earned Income Tax Credit (EITC), you have to file jointly. Joint filing also gives you the potential to claim the full Child Tax Credit, rather than a reduced one.3

Deductions, too, decrease when you file separately as a married couple. Standard deductions fall significantly. Phase-out ranges affect itemized deductions, and some itemized deductions are unavailable for married couples who do not file jointly. Couples who file separate 1040s can only deduct 50% of the capital gains losses joint filers can. In addition, if one spouse elects to itemize deductions, so must the other (there must be a separate Schedule A for each spouse). The spouse with fewer deductions has no ability to use the standard deduction to lower his or her taxable income.2,3

Joint filing even helps you with regard to the Alternative Minimum Tax. When you file separately as a married couple, your AMT exemption falls by 50%. So you may be more susceptible to the AMT if you file separately. If the AMT affects you, you will find many federal tax deductions reduced or unavailable to you.3

Do you live in a community property state? If you do, you may know that state tax law defines what is considered separately held or jointly held property. If you want to itemize deductions in a community property state, the paperwork can be onerous.3

More of your Social Security benefits may be taxed if you file separately. Social Security gives you a “base exemption,” an income threshold above which Social Security benefits may be taxable. The base exemption for married couples filing jointly is $32,000, meaning that if 50% of the Social Security benefits you receive in a tax year plus your other income in a tax year exceeds $32,000, taxes may apply. The base exemption for married couples filing separately who live together at any time during the tax year is $0. It improves to $25,000 for married couples filing separately who live apart for an entire year.4

So why would you not file jointly when married? In certain circumstances, filing separately may be wiser.

Maybe you do not trust your spouse financially. If your spouse is a tax cheat or interprets federal tax law very loosely, filing jointly could prove hazardous in the case of an audit or other troubles. Both spouses must sign a joint return, meaning that both spouses are legally responsible for all taxes, penalties, and fines linked to that return. Yes, an innocent spouse may be offered tax protection by the IRS, but that innocence must be proven.2,3

Maybe you or your spouse have large out-of-pocket medical expenses. If so, and if the spouse contending with such bills earns much less than the other, there may be merit in filing separately. By doing so, the spouse with far less income might have an opportunity to meet the 10% AGI threshold needed to itemize medical expenses. (The 7.5% AGI threshold for itemizing these costs is still in place for taxpayers age 65 and older.)2

Maybe you are separating or divorcing. If that is the case, then it may seem only natural to begin filing separately while still married. Doing so now may lessen the chance of the two of you wading through tax issues in the aftermath of a split.

If you are unsure about whether to file jointly or singly, you can ask a tax professional for his or her opinion. Or, that professional can look at last year's return and run the numbers for you. Most couples find that filing jointly works out best, but there are exceptions.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - forbes.com/sites/robertwood/2016/01/26/married-filing-joint-tax-returns-irs-helps-some-couples-with-offshore-accounts/ [2/6/16]

2 - abcnews.go.com/Business/filing-taxes-jointly-good-idea/story?id=22504248 [2/17/14]

3 - foxbusiness.com/features/2015/03/06/should-couples-file-taxes-separately-or-jointly-which-is-best-for.html [3/6/15]

4 - irs.com/articles/how-are-social-security-benefits-taxed [2/11/16]

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The Lottery Is No Retirement Plan

Pay yourself first instead, with your future in mind.  

Provided by Jane Bourette

Powerball fever swept across America last week, with a record jackpot of $1.5 billion eventually being split by three winners in the January 13 drawing. Millions lined up for lottery tickets, hoping to realize their dreams of being rich, independent, and carefree.1,2

This infinitesimal chance at massive wealth was certainly alluring – to too many, more alluring than the practical steps that can be taken in pursuit of personal wealth and retirement security.

The passion for Powerball defied logic. It may have been a commentary on our wishful thinking, and on the lack of financial literacy in America as well.

As Creighton University professor Brad Klontz remarked to CNBC, “A lot of individuals who are not saving for their retirement are standing in line to buy a Powerball ticket. It's a lot more seductive than instituting a savings plan.”1

On January 13, a Powerball ticket buyer had a 1-in-292-million chance to win the big prize. In comparison, the odds of someone being killed by a falling vending machine within the next 365 days are 1 in 112 million, and the odds of a person being struck by both lightning and a meteorite during their lifetime are 1 in 210 million.2

When the Powerball jackpot reached $1.3 billion last week, a widely circulated Internet meme claimed that the jackpot could end poverty, stating that every American would get $4.3 million if it were divided equally among the population. This was passed along as truth rather than colossally bad math – it would only apply if there were 300 Americans. Since there are roughly 300 million Americans, divvying up the $1.3 billion across the entire U.S. population would give each of us $4.33, give or take a few cents – enough to buy a flavored latte.3

What if we simply saved $4.33 per day, or more? Our financial lives might take a turn for the better.

Usually, wealth is not a matter of fate or luck. We can all take practical steps toward financial freedom, and even if we do not end up rich, those steps may improve our personal finances and retirement prospects. 

First, spend less than what you make. Two or three percent less, 5% less, 10% less – whatever the number, it must be calculated from a comparison of your monthly income versus your monthly budget. That comparison may take a half an hour, but it is time well spent. Size up the money coming into your household per month with the money going out of it per month, and set a percentage that you would like to save every month. In effect, you will be paying yourself X dollars a month – and paying yourself, rather than your creditors, is a fundamental move for financial independence.

Two, direct these savings into investment accounts as well as savings accounts. It is vital to build up savings so that you can have an emergency fund – a good, strong emergency fund amounts to several months' worth of salary. Another portion of the money can go into retirement savings accounts, preferably to be invested in equities. Yes, 2016 has started poorly on Wall Street, but one bad month (or year) is not the historical norm for the market.

Three, cut down bad debts. There are some “good debts” in life – debts that we take on in pursuit of a worthy outcome, such as a home loan or an education loan. Bad debts outnumber them, and the average credit card statement will note many. Some financial professionals and consumer advocates will tell you to try and pay off the debt with the highest interest rate first, then the one with the next highest interest rate, and so on; others will tell you to eliminate the smallest debt first and work your way up to the largest. One way or the other, you want less debt and you want to pay off any credit card balances in full each month.

Four, chat with a financial professional to determine your money goals. When will you have enough savings to retire? When should you claim Social Security, and how long should you keep working? How much monthly income might you need when you are retired? Most people retire without any answers to these questions, only guesses. It is important to know not only what you are doing, but also where you are going – and through a long-run saving and investing strategy, you can set objectives and measure your progress toward them over time.

The fantasy of receiving great wealth with no effort inspires people to play the lottery and try other forms of gambling. The reality is that saving for retirement takes planning and commitment. While some may not want to acknowledge this reality, those who do may find themselves making financial strides as others struggle.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

Citations.

1 - cnbc.com/2016/01/14/lost-the-powerball-now-its-time-to-really-focus-on-finances.html [1/14/16]

2 - latino.foxnews.com/latino/money/2016/01/13/what-powerball-chances-likelier-hit-both-meteorite/ [1/13/16]

3 - cnet.com/news/can-powerball-end-poverty-lottery-meme-fails-to-check-the-math/ [1/12/16]

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Hybrid Insurance Products with Long-Term Care Riders

With the cost of long term care insurance rising, they are gaining attention.

Provided by Jane Bourette

Could these products answer a financial dilemma? Many high net worth households worry about potential long term care expenses, but they are reluctant or unable to buy long term care insurance. According to a 2014 report from the Robert Wood Johnson Foundation, less than 8% of U.S. households have purchased LTCI.1

Costs of traditional LTCI policies are rising, and then you have the “use it or lose it” aspect of the coverage: if the insured party dies abruptly, all those insurance premiums will have been paid for nothing. If the household is wealthy enough, maybe it can forego buying a LTC policy and absorb some or all of possible LTC costs using existing assets.

Are there alternatives allowing some flexibility here? Yes. Recently, more attention has come to hybrid LTC policies and hybrid LTC annuities. These are hybrid insurance products: life insurance policies and annuities with an option to buy a long term care insurance rider for additional cost. They are gaining favor: sales of hybrid LTC policies alone rose by 24% in 2012, according to the American Association for Long-Term Care Insurance's 2014 LTCi Sourcebook. Typically, the people most interested in these hybrid products are a) wealthy couples concerned about the increasing costs of traditional LTCI coverage, b) annuity holders outside of their surrender period who need long term care coverage. Being able to draw on LTCI if the moment arises can be a relief.2

They can be implemented with a lump sum. Often, assets from a CD or a savings account are used to fund the annuity or life insurance policy (the policy is often single-premium). In the case of a hybrid LTC policy, the bulk of the policy's death benefit can be tapped and used as LTC benefits if the need arises. LTC benefits generated can end up equaling 400% of the initial deposit (or even more). In the case of a hybrid LTC annuity, the money poured into the annuity is usually directed into a fixed-income investment, with the immediate or deferred annuity payments increasing (possibly even doubling or tripling, in some cases) if the annuity holder requires LTC.2,3

What if the annuity or policy holder passes away suddenly, or dies with LTC benefits left over? If that happens with a hybrid LTC policy, you still have a life insurance policy in place. His or her heirs will receive a tax-free death benefit. It is also possible in many cases to surrender the policy and even get the initial premium back (what is known as a return of premium rider). The annuity holder, of course, names a beneficiary – and if he or she doesn't need long term care, there is still an immediate or deferred income stream from the annuity contract.3

There are some trade-offs for the LTC coverage. Costs of these products are usually defined by the insurer as “guaranteed” – LTCI premiums are fixed, and the value of the policy or annuity will never be less than the lump sum it was established with (though a small surrender charge might be levied in the first few years of the annuity). In exchange for that, some hybrid LTC policies accumulate no cash value, and some hybrid LTC annuity products offer less than fair market returns.4

Tax-free withdrawals may be used to pay for LTC expenses. Thanks to the Pension Protection Act of 2006, the following privileges were granted regarding hybrid insurance products:

*All claims paid directly from appreciated hybrid LTC annuities and hybrid LTC policies are income tax free so long as they are used to pay qualified long term care expenses. In using the cash value to cover LTC expenses, you are not triggering a taxable event.2,4

*Owners of traditional life insurance policies and annuities are now allowed to make 1035 exchanges into appropriate hybrid LTC products without incurring taxable gains.2

If you shop for a hybrid insurance product, shop carefully. The first hybrid LTC policy or hybrid LTC annuity you lay eyes on may not be the cheapest, so look around before you leap and make sure the product is reasonably tailored to your financial objectives and needs. Remember that annuity contracts are not “guaranteed” by any federal agency; the “guarantee” is a pledge from the insurer. If you decide to back out of these arrangements, you need to know that some insurers will not return your premiums. Also, keep in mind that over the long run, the return on these hybrid products will likely not match the return on a conventional fixed annuity or LTCI policy; actuarially speaking, when interest rates rise there is no incentive for the insurer to adjust the fixed income rate of return in response.2,4 

Are hybrid insurance products for you? If you can't qualify medically for LTCI but still want coverage, they may represent worthy options that you can start with a lump sum. You might want to talk to your insurance or financial consultant about the possibility.  

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - rwjf.org/content/dam/farm/reports/issue_briefs/2014/rwjf410654 [2/14]

2 - forbes.com/sites/jamiehopkins/2014/04/21/new-and-unexpected-ways-to-fund-long-term-care-expenses/ [4/21/14]

3 - fa-mag.com/news/hybrid-ltc-insurance-gains-traction-among-the-affluent-17070.html [2/25/14]

4 - kitces.com/blog/is-the-ltc-cost-guarantee-of-todays-hybrid-lifeltc-or-annuityltc-insurance-policies-just-a-mirage/ [10/16/13

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Behind on Your Retirement Savings?

What steps could you take to catch up?

Provided by Jane Bourette & Christi Kemprecos

 

If life has not allowed you to build substantial retirement savings, what can you do to improve your retirement prospects? Here are some suggestions.

Play catch-up. If at all possible, take advantage of the catch-up contributions the IRS allows you to make to IRAs and other retirement accounts starting in the year in which you turn 50. For example, this year a worker age 50 or older can put $24,000 into a 401(k) account compared with $18,000 for someone younger.1

Get the match. If your employer matches your retirement plan contributions to some degree when you contribute to a workplace retirement plan at a certain level, you should make every effort to get the match and take advantage of what amounts to an offer of free money.

Work a little longer. More years contributing to retirement accounts means additional inflows into those accounts, and additional growth and compounding for those assets. It means you claim Social Security later, resulting in a larger monthly benefit. It also leaves you with fewer years of retirement that you must fund.

Alternately, think about working a little early in retirement. It is true, your Social Security benefits could be docked as a result – but the tradeoff might be worthwhile.

If you are a Social Security recipient and younger than full retirement age in 2015, Social Security will withhold $1 in benefits for every $2 you earn over $15,720. This is called the Social Security earnings test. Social Security essentially balances this penalty out, however, by boosting your benefit as you reach full retirement age – and for that matter, you can earn as much as you want at full retirement age or later with no reduction to your benefits.2

If you retire at 62 and make $25,000 a year through a part-time job you hold during the first five years of your retirement, you are putting a dent in any Social Security income you receive until age 67 – but that $25,000 yearly income can represent $25,000 you do not have to withdraw annually from your retirement savings. You could also invest some of that income, and the annual yield on your investment could exceed annual consumer infl