The Republican Tax Reform Plan

Posted by on Nov 5, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

What is in it? What could its changes mean for you, if they become law?   Provided by Frederick Saide, Ph.D.   Major changes may be ahead for federal tax law. At the start of November, House Republicans rolled out their plan for sweeping tax reforms. Negotiations may greatly alter the content of the bill, but here are the proposed adjustments, and who may and may not benefit from them if they become law.   The corporate tax rate would fall from 35% to 20%. Wall Street would cheer this development, perhaps with a significant rally. Sole proprietorships, partnerships, and S corporations would also see their top tax rate drop to 25% (although W-2 wages for business owners who invest in these pass-through entities would still be taxed at the owner’s marginal tax rate).1,2   The estate tax and Alternative Minimum Tax would be eliminated. The AMT would die immediately, saving more than 5 million high-earning taxpayers from an annual bother. Death taxes would sunset within six years, and in the interim, the estate tax exemption would be doubled, leaving the individual exemption at about $11 million. This would be a boon for many highly successful people and their heirs.2   Personal exemptions would go away, but the standard deduction would nearly double. The loss of the personal income tax exemption (currently $4,050 per individual claimed) would be countered by standard deductions of $12,000 for individuals and $24,000 for married couples. This could lessen the tax burden for many middle-class households. On the downside, the larger standard deduction might reduce the incentive to donate to charity.1,2   Only four income tax brackets would exist. While the top marginal tax rate would remain at 39.6%, the other brackets would be set at 12%, 25%, and 35%. Individuals earning $45,000 or less and spouses with combined earnings of $90,000 or less would fall into the 12% bracket. Households earning less than $260,000 would be in the 25% bracket. The individual threshold for the 39.6% bracket would be moved up to $501,000 from the current $418,401; it would apply to couples who earn more than $1 million.3    Some state and local tax deductions might vanish. Taxpayers who face higher state income tax rates – such as those living in New York, California, and New Jersey – could lose a big tax break here. The reform bill’s author, House Ways & Means Committee Chair Kevin Brady (R-TX), says that a new revision to the bill would at least let homeowners deduct state and local property taxes up to a $10,000 cap.3   Speaking of caps, the mortgage interest deduction would be halved to $500,000. Real estate investors, developers, and agents are unhappy...

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Questions After the Equifax Data Breach

Posted by on Oct 1, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

Consumers may be at risk for many years.   Provided by Frederick Saide, Ph.D.   How long should you worry about identity theft in the wake of the Equifax hack? The correct answer might turn out to be “as long as you live.” If your personal data was copied in this cybercrime, you should at least scrutinize your credit, bank, and investment account statements in the near term. You may have to keep up that vigilance for years to come.   Cybercrooks are sophisticated in their assessment of consumer habits and consumer memories. They know that eventually, many Americans will forget about the severity and depth of this crime – and that could be the right time to strike. All those stolen Social Security and credit card numbers may be exploited in the 2020s rather than today. Or, perhaps these criminals will just wait until Equifax’s offer of free credit monitoring for consumers expires.   Equifax actually had its data breached twice this year. On September 18, Equifax said that their databases had been entered in March, nearly five months before the well-publicized, late-July violation. Its spring security effort to prevent another hack failed. Bloomberg has reported that the same hackers may be responsible for both invasions.2     Should you accept Equifax’s offer to try and protect your credit? Many consumers have, but with reservations. Some credit monitoring is better than none, but those who signed up for Equifax’s TrustedID Premier protection agreed to some troubling fine print. By enrolling in the program, they may have waived their right to join any class action lawsuits against Equifax. Equifax claims this arbitration clause does not apply to consumers who sought protection in response to the hack, but lawyers are not so sure.1   Should you freeze your credit? Some analysts recommend this move. You can request all three major credit agencies (Equifax, Experian, Trans Union) to do this for you. Freezing your credit accounts has no effect on your credit score. It stops a credit agency from giving your personal information to a creditor, which should lower your risk for identity theft. The only hassle here is that if you want to buy a home, rent an apartment, or get a new credit card, you will have to pay a fee to each of the three firms to unfreeze your credit.1   Three other steps may improve your level of protection. Change your account passwords; this simple measure could really strengthen your defenses. Choose two-factor authentication when it is offered to you – this is when an account requires not just a password, but a second code necessary for access, which is sent in a text message to the accountholder’s...

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Is a Home an Investment?

Posted by on Sep 25, 2017 in 401k, 403b, atuos, Boomers. Millenials, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

From one perspective, the answer is yes; from another, no.   Provided by Frederick Saide, Ph.D.   When you buy a home, are you investing? If you buy it to flip it or buy it as a rental property, the answer is yes. If you buy a home simply to live in it, the answer may be no.   Your home is an expression of your lifestyle, a wonderful setting for your life, and a place you can enjoy in privacy and comfort. As an investment, though, it is essentially illiquid, and its rate of return is no sure thing.     Home values do not automatically increase with time. Buyers learned that lesson in the Great Recession. Simply using the S&P/Case-Shiller home price index as a barometer, house prices today are roughly where they were in 2007 – it has taken the residential real estate market that long to recover from the mortgage meltdown.1   Through the decades, real estate values have risen, and they will probably keep rising for the near term – but perhaps, not as quickly as some buyers hope. Why, exactly?   Home prices are inexorably linked to wages. Over the past year, hourly earnings have grown 2.5%. This has mystified many economists and frustrated others. Normally, when the jobless rate is below 5%, you have much greater wage growth. Six months before the start of the Great Recession (March 2007), the unemployment rate was 4.4% (right where it is now), and wages were growing at 4.2% a year.2,3   Ideally, wage growth keeps pace with rising real estate values. That is not happening now. Across the past year, the 20-city S&P/Case-Shiller home price index has shown home values appreciating at a rate of between 5.5-6% annually. If real estate values continue to climb 6% per year and wages rise just 2.5%, you will soon see buyers priced out of the market – unless, of course, home prices drop because sellers can no longer get the prices they want. That is something prospective sellers (and buyers) ought to keep in mind, plus some other truths.4   The fact is, stocks have appreciated more than real estate in the long run. Through the decades, home values have increased about 4% annually and stocks have increased about 10% annually (albeit with some remarkable year-to-year volatility).1     Stocks do not need upkeep. You will never need to tear out, reroof, or repaint a portfolio. Houses need all kind of repairs with time, and repair costs can eat into your gains. You must also pay property taxes. If you envision your home as an income-producing asset, that means playing landlord on some level. Many homeowners are not ready to...

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Avoiding the Cyber Crooks

Posted by on Sep 11, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

How can you protect yourself against ransomware, phishing, and other tactics?   Provided by Frederick Saide, Ph.D.   Imagine finding out that your computer has been hacked. The hackers leave you a message: if you want your data back, you must pay them $300 in bitcoin. This was what happened to hundreds of thousands of PC users in May 2017 when they were attacked by the WannaCry malware, which exploited security flaws in Windows.    How can you plan to avoid cyberattacks and other attempts to take your money over the Internet? Be wary, and if attacked, respond quickly. Phishing. This is when a cybercriminal throws you a hook, line, and sinker in the form of a fake, but convincing, email from a bank, law enforcement agency, or corporation, complete with accurate logos and graphics. The goal is to get you to disclose your personal information – the crooks will either use it or sell it. The best way to avoid phishing emails: stick to a virtual private network (VPN) or extremely reliable Wi-Fi networks when you are online.1 Ransomware. In this scam, online thieves create a mock virus, with an announcement that freezes your monitor. Their message: your files have been kidnapped, and you will need a decryption key to get them back, which you will pay handsomely to receive. In 2016, the FBI fielded 2,673 ransomware attack complaints, by companies and individuals who lost a total of $2.4 million. How can you avoid joining their ranks? Keep your security software and operating system as state of the art as you can. Your anti-virus programs should have the latest set of virus definitions. Your Internet browser and its plug-ins should also be up to date.2 Advance fee scams. A crook contacts you via text message or email, posing as a charity, a handyman, an adult education provider, or even a tax preparer ready to serve you. Oh, wait – before any service can be provided, you need to pay an “authorization fee” or an “application fee.” The crook takes the money and disappears. Common sense is your friend here; avoid succumbing to something that seems too good to be true. I.R.S. impersonations. Cybergangs send out emails to households and small businesses with a warning: you owe money. That money must be paid now to the Internal Revenue Service through a pre-paid debit card or a money transfer. These scams often prey on immigrants, some of whom may not have a great understanding of U.S. tax law or the way the I.R.S. does business. The I.R.S. never emails a taxpayer out of the blue demanding payment; if unpaid taxes are a problem, the agency first sends a bill and...

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Life Insurance Products with Long-Term Care Riders

Posted by on Jul 16, 2017 in 401k, 402k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicare Planning, Retire Happy Now, Retirement, retirement planning, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

Are they worthwhile alternatives to traditional LTC policies?   Provided by Frederick Saide, Ph.D.   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. Today, only about 15 insurers offer these policies at all. 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 These hybrid LTC policies usually require lump-sum funding. A single premium payment of $75,000-$100,000 is not unusual. For a high net worth...

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Talking to Your Kids About Your Wealth

Posted by on Jul 10, 2017 in 401k, 403b, Boomers. Millenials, Consumer Tools, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Retire Happy Now, Retirement, retirement planning, social security, tax returns, taxes, Uncategorized | 0 comments

How can you convey its importance and its meaning?   Provided by Frederick Saide, Ph.D.   Are you an owner of a thriving business or a medical or legal practice? Are you a highly paid executive? If you have children, at some point they may discern how wealthy you are – and in turn, learn how “rich” they are. How will you handle that moment? How will they handle that knowledge? Some kids end up valuing family wealth more than others. We all know (or have heard) about children from wealthy families who grew up to become opportunistic, materialistic, and unmotivated young adults living off their parents’ largess. Other children learn to treat family money with respect and admiration, recognizing the role it plays for the family, while glimpsing its potential to help charities and the community.   What accounts for the difference? It may boil down to values. When the right values are handed down, a young adult is poised to hold wealth in high regard and receive it with maturity. Some parents never tell their children how wealthy they really are. This is not uncommon: in a recent U.S. Trust survey of households with investable assets greater than $3 million, 64% of those polled indicated that they had said nothing or nearly nothing about their net worth to their kids.1 This is also a risk. In hiding the details and avoiding the talk, parents may see a child grow into a young adult who is ill-prepared to understand and manage wealth. One good step is to set some expectations. After your kids learn how wealthy you are, they may expect your money to play a financial part in their personal lives, especially in adolescence. Tell them, frankly, what you are willing or not willing to do and why. Where will the family wealth come into their lives? Will you want to fund their college educations, or help them with car payments? You may or may not want to do that.   You can help them see that wealth has meaning. Some financial professionals like to ask their clients the question, “what does having money mean to you?” In other words, what should that money accomplish? What dreams should it help you pursue, and what fears or worries could it be used to address? How does having money fit into your vision of success – is it integral to it or inessential to it? It has been said that money never transforms character; it simply reveals it. The responsibility of handling wealth amounts to a test of character. Thoughtful conversations with your children about the meaning of wealth may help them pass that important test when the time...

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