Your 2019 Financial To-Do List

Posted by on Nov 11, 2018 in 401k, 402k, 403b, Boomers. Millenials, Consumer Tools, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, social security, tax returns, taxes, TSA | 0 comments

Things you can do for your future as the year unfolds.   Provided by Frederick Saide, Ph.D.                         What financial, business, or life priorities do you need to address for 2019? Now is a good time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to lowering your taxes. You have plenty of options. Here are a few that might prove convenient.   Can you contribute more to your retirement plans this year? In 2019, the yearly contribution limit for a Roth or traditional IRA rises to $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA: singles and heads of household with MAGI above $137,000 and joint filers with MAGI above $203,000 cannot make 2019 Roth contributions.1   For tax year 2019, you can contribute up to $19,000 to 401(k), 403(b), and most 457 plans, with a $6,000 catch-up contribution allowed if you are age 50 or older. If you are self-employed, you may want to look into whether you can establish and fund a solo 401(k) before the end of 2019; as employer contributions may also be made to solo 401(k)s, you may direct up to $56,000 into one of those plans.1   Your retirement plan contribution could help your tax picture. If you won’t turn 70½ in 2019 and you participate in a traditional qualified retirement plan or have a traditional IRA, you can cut your taxable income through a contribution. Should you be in the new 24% federal tax bracket, you can save $1,440 in taxes as a byproduct of a $6,000 traditional IRA contribution.2   What are the income limits on deducting traditional IRA contributions? If you participate in a workplace retirement plan, the 2019 MAGI phase-out ranges are $64,000-$74,000 for singles and heads of households, $103,000-$123,000 for joint filers when the spouse making IRA contributions is covered by a workplace retirement plan, and $193,000-$203,000 for an IRA contributor not covered by a workplace retirement plan, but married to someone who is.1   Roth IRAs and Roth 401(k)s, 403(b)s, and 457 plans are funded with after-tax dollars, so you may not take an immediate federal tax deduction for your contributions to them. The upside is that if you follow I.R.S. rules, the account assets may eventually be withdrawn tax free.3   Your tax year 2019 contribution to a Roth or traditional IRA may be made as late as the 2020 federal tax deadline – and, for that matter, you can make a 2018 IRA contribution as late as April 15, 2019, which is the deadline for filing your...

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Tax Deductions Gone in 2018

Posted by on Jan 21, 2018 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, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

What standbys did tax reforms eliminate?     Provided by Frederick Saide, Ph.D.                         Are the days of itemizing over? Not quite, but now that H.R. 1 (popularly called the Tax Cuts & Jobs Act) is the law, all kinds of itemized federal tax deductions have vanished.Early drafts of H.R. 1 left only two itemized deductions in the Internal Revenue Code – one for home loan interest, the other for charitable donations. The final bill left many more standing, but plenty of others fell. Here is a partial list of the itemized deductions unavailable this year.1 Moving expenses. Last year, you could deduct such costs if you made a job-related move that had you resettling at least 50 miles away from your previous address. You could even take this deduction without itemizing. Now, only military service members can take this deduction.2,3 Casualty, disaster, and theft losses. This deduction is not totally gone. If you incur such losses during 2018-25 due to a federally declared disaster (that is, the President declares your area a disaster area), you are still eligible to take a federal tax deduction for these personal losses.4  Home office use. Employee business expense deductions (such as this one) are now gone from the Internal Revenue Code, which is unfortunate for people who work remotely.1  Unreimbursed travel and mileage. Previously, unreimbursed travel expenses related to work started becoming deductible for a taxpayer once his or her total miscellaneous deductions surpassed 2% of adjusted gross income. No more.1 Miscellaneous unreimbursed job expenses. Continuing education costs, union dues, medical tests required by an employer, regulatory and license fees for which an employee was not compensated, out-of-pocket expenses paid by workers for tools, supplies, and uniforms – these were all expenses that were deductible once a taxpayer’s total miscellaneous deductions exceeded 2% of his or her AGI. That does not apply now.2,5 Job search expenses. Unreimbursed expenses related to a job hunt are no longer deductible. That includes payments for classes and courses taken to improve career or professional knowledge or skills as well as and job search services (such as the premium service offered by LinkedIn).5 Subsidized employee parking and transit passes. Last year, there was a corporate deduction for this; a worker could receive as much as $255 monthly from an employer to help pay for bus or rail passes or parking fees linked to a commute. The subsidy did not count as employee income. The absence of the employer deduction could mean such subsidies will be much harder to come by for workers this year.2 Home equity loan interest. While the ceiling on the home mortgage interest deduction fell to $750,000 for mortgages taken out starting December...

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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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Could Insurance Rescue You in Retirement?

Posted by on Apr 2, 2017 in 401k, 402k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, credit card statements, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, insurance, Investing, IRA, Medicaid Planning, Medicare Planning, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

Certain kinds of coverage may help to sustain you financially in an emergency.   Provided by Frederick Saide, Ph.D.   You plan for retirement with expectations in mind. You hope to enjoy a certain quality of life, with sufficient income resulting from smart financial choices. Ideally, your future unfolds as planned. What if the unexpected happens? Will you have the right insurance in place to deal with it?   Insurance matters more in retirement planning than you may think. It is seldom “top of mind” in retirement planning conversations, but the right coverage could help you maintain some financial equilibrium in the face of sudden money pressures.   A life insurance payout could provide income for a surviving spouse. Thanks to late-night TV commercials marketing small funeral insurance policies, many retirees associate life insurance benefits with paying off burial costs. Benefits from larger policies can potentially accomplish much more. Suppose a 75-year-old widow receives a $500,000 death benefit from a policy purchased by her late spouse. An income stream could be arranged from that death benefit, with the widow receiving $20,000 annually from that lump sum (or more) into her nineties. The payout could also be invested.       Liability insurance could help you out in retirement. As an example, say you are one of three drivers involved in a multi-car accident that leaves a teenager with a disability. You are the only driver cited for a traffic violation, and you happen to be in your seventies. You could now be a target for “predators and creditors.” Say you have some neighbors over for a barbecue, and one of them stumbles on your patio and breaks an arm or a hip; a lawsuit may be next. Few retirees think about or carry umbrella liability policies, but more may want to consider them.   What if you or your spouse needs long-term care? Genworth’s 2016 Cost of Care Survey says that the median cost of a semi-private nursing home room was $6,844 last year. How many years of such care would you be willing to pay for out of your savings? True, long-term care insurance has grown costlier. True, some people may never need it. Even so, three or four years of such care – for you, your spouse, or your elderly parents – might draw down your retirement savings more quickly than you would imagine. Think of how large those costs might be ten or twenty years from now. Long-term care coverage may end up being worth every penny.1   Insuring yourself against the above possibilities is only prudent. With such coverage in place, you may go a long way toward insuring the quality of your retirement as well....

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How Long do You Have to Keep Your Statements

Posted by on Feb 22, 2015 in 401k, 402k, 403b, bank statements, credit card statements, Fixed Income Investing, insurance, Investing, IRA, IRS, Retirement, sales | 0 comments

How Long Do You Have To Keep Your Statements? A year? Seven years? It depends.   Provided by Frederick Saide, Ph.D.    “You should retain copies of your federal tax returns for 7 years.” Is that true, or a myth? How long should you keep those quarterly and annual statements you get about your investment accounts? And how long should you keep bank statements before throwing them away?   Your age, wealth & health might shape your answer. If you are not yet retired, then you may wish to follow the general “rules of thumb” presented across the rest of this article.   On the other hand, if you are retired and there is any chance that you might need to apply for Medicaid, then you should keep at least five years of all financial records on hand (including credit card statements).   Why? Medicaid has a five-year “lookback” period in many states. To be approved for benefits in those states, you have to prove that you didn’t give away funds during that five-year period. To prove this, you must produce complete records from every bank and brokerage account to which you have access, including those held jointly.1   Another special circumstance: if someone you love ends up under court supervision via guardianship or conservatorship, all financial records must be kept from the date of that guardian’s or conservator’s appointment until the court gives final approval to the fiduciary’s financial account. For more information on guardianships and conservatorships, visit: caregiver.org/protective-proceedings-guardianships-and-conservatorships   All that said, many people do not need to retain all financial statements “forever.” Here are some suggestions on what to keep and when to purge.   Tax returns? The Internal Revenue Service urges you to keep federal tax returns until the period of limitations runs out. The period of limitations = the time frame you have to claim a credit or refund, or the time frame in which the IRS can levy additional taxes on you. (This is a good guideline for state returns as well.)2      If you file a claim for a credit or refund after you file your tax return, the IRS would like you to keep the relevant tax records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. If you claim a loss from worthless securities or bad debt deduction, you are advised to hang onto those records for 7 years. The IRS also advises you to retain employment tax records for at least 4 years after the date that the tax becomes due or is paid – again, whichever is later. The exception is if you...

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You Can’t Hide in Fixed Income

Posted by on Dec 8, 2014 in 402k, Fixed Income Investing, Investing, Retirement, TSA | 0 comments

Investing timidly may shield you against risk… but not against inflation.  Provided by Frederick Saide, Ph.D.  When is being risk-averse too risky for the sake of your retirement? After you conclude your career or sell your company, you have a right to be financially cautious. At the same time, you can risk being a little too cautious – some retirees invest so timidly that their portfolios barely yield any return.  For years, financial institutions pitched CDs, money market funds and interest checking accounts as risk-devoid places to put your dollars. That made sense before the Federal Reserve took interest rates down to historic lows. As the benchmark interest rate is now negligible, these conservative options offer you minimal potential to grow your money.   In 2014, annualized inflation has vacillated between 1.1% and 2.1%. Yields on typical 1-year CDs, money market funds and interest checking accounts haven’t even kept up with that.1,3,4   The rise of the all-items Consumer Price Index doesn’t tell the whole story of inflation. Food and electricity prices rose 3.1% during the 12 months ending in October, for example.2    With the federal funds rate still at 0%-0.25%, a “high-yielding” 6-month CD might return 0.75% for you, and the yield on a 1-year CD might barely be above 1%. Looking at Bankrate’s survey of CD rates as 2014 draws to a close, that’s exactly what we see. A good yield on a 5-year CD is less than 2.5% right now. (Some history worth noting: on average, those who put money in long-term CDs at the end of 2007 the start of the Great Recession saw the income off those CDs dwindle by two-thirds by the end of 2011.)3,4    Retirees shouldn’t give up on growth investing. Many people in their fifties, sixties and seventies need to accumulate more wealth for retirement – even with their current or imminent need to withdraw their retirement savings. Because of that reality, many baby boomers and seniors can’t refrain from growth investing. They need their portfolios to yield at least 3% and preferably more. Otherwise, they risk losing purchasing power as consumer prices increase faster than their retirement incomes.    Do you really want to live on yesterday’s money? Could you imagine trying to live today on the income you earned back in 2003 or 1998? You wouldn’t dare try, right? Well, this is essentially the dilemma that risk-averse retirees face. They realize that their CDs and money market accounts are yielding almost nothing; they are withdrawing more than they are earning and their retirement fund is shrinking. So, they must live on less.    In recent U.S. history, inflation has averaged 1.7%-4%. What if that holds true for the next 20 years?5...

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