It’s a new year, full of new possibilities for what may lie ahead.

 Provided by Marc Aarons

 By any measure, 2021 was a strong year for investors. But what’s in store for 2022? From my perspective, I expect that many of the same forces that influenced markets last year will play a role again in the year ahead.

COVID-19 remains tragic and unpredictable. The pandemic was one of the primary drivers of financial market activity in 2021. I hope that the worst is behind us, but I would not be surprised to see COVID-related events influence markets in the New Year.

The Federal Reserve will continue to get its share of headlines. From Fed Chair’s Powell’s nomination hearings to potential changes in interest rates, expect investors’ attention to shift to the Fed from time to time in 2022.

Tax law changes are always possible, but many of the anticipated federal tax law changes in 2021 were linked to President Biden’s Build Back Better plan, which ended the year in debate with Congress. So stay tuned here.

Thanks for your confidence in 2021. Here’s to a prosperous new year!

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

 ^{MMI Disclosure 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}

The post Outlook for 2022 appeared first on Money Managers, Inc..

In this age of marriage equality, there are new possibilities.

 Provided by Marc Aarons

The 2015 Obergefell v. Hodges Supreme Court decision streamlined tax and estate strategizing for married LGBTQ+ couples. If you are filing a joint tax return for this year or are considering updating your estate strategy, here are some important things to remember.

Keep in mind, this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your tax strategy.

You can file jointly if you were married at any time this year. Whether you married on January 1st, June 8th, or December 31st, you can still file jointly as a married couple. Under federal tax law, your marital status on the final day of a year determines your filing status. This rule also applies to divorcing couples. Now that marriage equality is nationally recognized, filing your state taxes is much easier as well.¹

If you are newly married or have not considered filing jointly, remember that most married couples potentially benefit from filing jointly. For instance, if you have or want to have children, you will need to file jointly to qualify for the Child and Dependent Care Tax Credit. Filing jointly also makes you eligible for Lifetime Learning Credits and the American Opportunity Tax Credit.²

You can gift greater amounts to family and friends. Prior to the landmark 2015 Supreme Court ruling, LGBTQ+ spouses were stuck with the individual gift tax exclusion under federal estate tax law. As such, an LGBTQ+ couple could not pair their $15,000-per-person allowances to make a gift of up to $30,000 as a couple to another individual. But today, LGBTQ+ spouses can gift up to $30,000 to as many individuals as they wish per year.³

You can take advantage of portability. Your $11.7 million individual lifetime estate and gift tax exclusion may be adjusted upward for inflation in future years, but it will also be portable. Under the portability rules, when one spouse dies without fully using the lifetime estate and gift tax exclusion, the unused portion is conveyed to the surviving spouse’s estate. To illustrate, if a spouse dies after using only $2.1 million of the $11.7 million lifetime exclusion, the surviving spouse ends up with a $9.6 million lifetime exclusion.³

You have access to the unlimited marital deduction. The unlimited marital deduction is the basic deduction that allows one spouse to pass assets at death to a surviving spouse without incurring the federal estate tax.³

Marriage equality has made things so much simpler. The hassle and extra paperwork that some LGBTQ+ couples previously faced at tax time is now, happily, a thing of the past. Remember to check the tax laws in your state with the help of a tax or financial professional.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

  ^{MMI Disclosure 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}

^{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. ^{Internal Revenue Service, October 14, 2020}
2. ^{Internal Revenue Service, March 12, 2021}
3. ^{Internal Revenue Service, April 12, 2021}

The post Tax & Estate Strategies for Married LGBTQ+ Couples appeared first on Money Managers, Inc..

Six areas of personal finance to review.

 Provided by Marc Aarons

 When training to become a financial professional, much of our course work centers on the six critical areas of creating a financial strategy. Some recognize October as Financial Planning Month, so it’s an excellent opportunity to review those six personal finance areas.¹

Cash Management: This is a broad topic that can address many issues. One area is creating an emergency fund, which is money that’s set aside for unplanned expenses. Cash management also can include looking at your “sources and uses” of money. Financial Planning Month focuses mainly on cash management and spending habits.¹

Investment Approaches: Concerns about investment approaches are among the key reasons people start a relationship with a financial professional. When reviewing investment approaches, it’s critical to consider a person’s goals, time horizon, and risk tolerance.

Retirement Preparation: This is another crucial reason why a person approaches a financial professional. The chief concern for 49 percent of Americans is running out of money in retirement. The retirement preparation process reviews your current situation and helps you better understand your choices.²

Protection Strategies: This area looks at how you prepared for life’s potential financial risks. Protection strategies also can include health-care considerations. By the way, did you know that 44 percent of Americans cite “declining health” as their second biggest retirement concern?²

Tax Management: Do you feel comfortable with current tax laws? Are you confident about your approach to tax management? Tax rules are constantly changing, and there is no guarantee that the tax landscape will remain the same in years ahead. Financial professionals often work with tax, legal, or accounting professionals when creating an overall tax management strategy.

Estate Strategies: How well you prepare today may help determine how you distribute your assets after you’re gone. Much like tax rules, estate rules are continually changing, and today’s landscape may change in a few years. Financial professionals often work with legal professionals when creating an estate approach.

It can be a challenge to feel confident in all six key areas of creating a financial strategy. If you think you may need help, please give us a call. We’d welcome the chance to review your approach.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

    ^{MMI Disclosure 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.}

^{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. ^{NationalDayCalendar.com, October 2020}
2. ^{AARP.com, May 21, 2019}

The post October Is Financial Planning Month appeared first on Money Managers, Inc..

It’s never too late to start.

 Provided by Marc Aarons

The hardest part is getting started. Even though more than half of U.S. households have some form of investment in the stock market, many new parents may still find that creating a financial strategy is the last thing on their minds. And who can blame them? After all, new parents have a million concerns to keep in mind on top of any unexpected financial pressure that may arise. But for young families with discretionary income, creating a financial strategy may be easier than they realize.¹

Remember that investing involves risk, and the return and principal value of investments will fluctuate as market conditions change. Investment opportunities should take into consideration your goals, time horizon, and risk tolerance. When sold, investments may be worth more or less than their original cost. Past performance does not guarantee future results.

What’s your end goal? What expenses do you anticipate in 5, 10, or even 15 years from now? These can be tough questions to answer while raising a family.

Establishing your investments’ goal or goals is one of the many ways your financial professional can help. Before your first meeting, jot down all the financial questions you can think of – no matter how silly they may seem to you. These answers can help define your family’s short-term and long-range financial goals.

Once you start, try not to stop. If you have already started investing, congratulations may be in order! In getting an early start, you have taken advantage of a powerful financial asset: time. However, don’t overlook the power of consistency. For some, consistent investing may be the most realistic pathway to pursuing their financial goals.

It started, that’s okay too. Remember, it doesn’t always take a lump sum to begin. Even auto-depositing $100 a month into an account is a step toward your family’s goals. And who knows? As your family’s circumstances change, you may be able to contribute even more over time.

There is no “one way.” The point is that there isn’t a single, one-size-fits-all solution for young families that are looking to invest in their future. Financial professionals also know this and can help craft a strategy suited to your risk tolerance, goals, and financial situation.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

_{MMI Disclosure 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.}

_{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. _{PewResearch.org, March 25, 2020}

The post Financial Strategies for Young Families appeared first on Money Managers, Inc..

Are you prepared for the possibility – and expense – of eldercare?

 Provided by Marc Aarons at Money Managers, Inc.

 Do you have an extra $33,000 to $100,000 to spare this year? How about next year, and the year after that? Your answer to these questions is probably “no.”

What could possibly cost so much? Eldercare.

According to the AARP Public Policy Institute, a year of in-home care for a senior costs roughly $33,000. A year at an assisted living facility? About $45,000. A year in a nursing home? Approximately $100,000.¹

Medicare has limitations. Generally speaking, it will pay for no more than 35 hours per week of home health care and only up to 100 days of nursing home care, following a hospitalization. It may pay for up to six months of hospice care. If you or someone you love happens to develop Alzheimer’s disease or another form of dementia, Medicare will not pay for any degree of room and board for them at an assisted living facility.²
  Medicaid is another resource entirely. For seniors who are eligible, Medicaid can pick up assisted living facility or nursing home expenses, and even in-home eldercare, in some instances. Qualifying for Medicaid is the hard part. Normally, you only qualify for it when you have spent down your assets to the point where you can no longer pay for eldercare out of pocket or with insurance.²

  An extended care strategy may factor into a thoughtful retirement strategy. After all, your retirement may be lengthy, and you may need such care. The Social Security Administration projects that a quarter of today’s 65-year-olds will live past age 90, with a tenth making it to age 100.¹

Insurance companies have modified extended care policies over the years. Some have chosen to bundle extended care features into other policies, which can make the product more accessible. An insurance professional familiar with industry trends may be able to provide you more information about policies and policy choices.

Waiting for federal or state lawmakers to pass a new program to help with the costs of eldercare is not much of a strategy. It is up to you, the individual, to determine how to face this potential financial challenge.²

If you lead a healthy and active life, you may need such care only at the very end. Assuming you do require it at some point, you may consider living in an area where you can join a continuing-care-at-home program (there are currently more than 30 of these, essentially operating as remote care programs of assisted living communities) or a “village network” that offers you some in-home help (not skilled nursing care, however).¹

Those rare and nice options aside, retirement saving also needs to be about saving for potential extended care expenses. If insurance addressing extended care is not easy to obtain, then a Health Savings Account (HSA) might be an option. These accounts have emerged as another solution to extended care needs. An HSA is not a form of insurance, but it does provide a tax-advantaged savings account to which you (and potentially, your employer) can make contributions. You can use these funds to pay for most medical expenses, including prescription drugs, dental care, and vision care. You can look into this choice right away, to take advantage of savings over time.³

Once you reach age 65, you are required to stop making contributions to an HSA. Remember, if you withdraw money from your HSA for a nonmedical reason, that money becomes taxable income, and you face an additional 20% penalty. After age 65, you can take money out without the 20% penalty, but it still becomes taxable income.³

An HSA works a bit like your workplace retirement account. Your employer can make contributions alongside you. However, the money that you contribute comes from your pretax income and can be invested for you over time, so it may grow as your contributions accumulate.³

There are also some HSA rules and limitations to consider. You are limited to a $3,500 contribution for 2019, if you are single; $7,000, if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55. Your employer can contribute, but the ceiling is cumulative between your contributions and theirs. For example, say you are lucky enough to have your employer put a hypothetical $1,000 into your account in 2019; you may only contribute as much as the rest of your limit, minus that $1,000. If you go over that limit, you will incur a 6% tax penalty, so it is smart to watch how much you contribute.³

Alternately, you could do without an HSA and simply earmark a portion of your retirement savings for possible extended care costs.

One thing is for certain: any retiree or retirement saver needs to keep the possibility of extended care expenses in mind. Today is not too soon to explore the financial options to try and meet this challenge.

Marc Aarons may be reached at (714)887-8000  or Marc@OCMONEYMANGERS.COM

 ^{MMI DISCLOSURE}

^{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/long-term-care-insurance-has-a-shaky-future-here-are-new-ways-to-tackle-the-high-cost-of-aging-2019-05-22 [8/4/19]}

^{2 – health.usnews.com/health-care/patient-advice/articles/dementia-care-in-assisted-living-homes [8/21/19]}

^{3 – investors.com/etfs-and-funds/personal-finance/hsa-contribution-limits-hsa-rules/ [3/13/19]}

The post Your Extended Care Strategy appeared first on Money Managers, Inc..

If passed, it would change some long-established retirement account rules.

Provided by Marc Aarons at Money Managers, Inc.

If you follow national news, you may have heard of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Although the SECURE Act has yet to clear the Senate, it saw broad, bipartisan support in the House of Representatives.

This legislation could make Individual Retirement Accounts (IRAs) a more attractive component of retirement strategies and create a path for more annuities to be offered in retirement plans – which could mean a lifetime income stream for retirees. However, it would also change the withdrawal rules on inherited “stretch IRAs,” which may impact retirement and estate strategies, nationwide.¹

Let’s dive in and take a closer look at the SECURE Act.

The SECURE Act’s potential consequences. Currently, traditional IRA owners must take annual withdrawals from their IRAs after age 70½. Once reaching that age, they can no longer contribute to these accounts. These mandatory age-linked withdrawals can make saving especially difficult for an older worker. However, if the SECURE Act passes the Senate and is signed into law, that cutoff will vanish, allowing people of any age to keep making contributions to traditional IRAs, provided they continue to earn income.¹

(A traditional IRA differs from a Roth IRA, which allows contributions at any age as long as your income is below a certain level: at present, less than $122,000 for single-filer households and less than $193,000 for married joint filers.)²

If the SECURE Act becomes law, you won’t have to take Required Minimum Distributions (RMDs) from a traditional IRA until age 72. You could actually take an RMD from your traditional IRA and contribute to it in the same year after reaching age 70½.³

The SECURE Act would also effectively close the door on “stretch” IRAs. Currently, non-spouse beneficiaries of IRAs and retirement plans may elect to “stretch” the required withdrawals from an inherited IRA or retirement plan – that is, instead of withdrawing the whole account balance at once, they can take gradual withdrawals over a period of time or even their entire lifetime. This strategy may help them manage the taxes linked to the inherited assets. If the SECURE Act becomes law, it would set a 10-year deadline for such asset distributions.⁴

What’s next? The SECURE Act has now reached the Senate. This means it could move into committee for debate or it could end up attached to the next budget bill, as a way to circumvent further delays. Regardless, if the SECURE Act becomes law, it could change retirement goals for many, making this a great time to talk to a financial professional.

Marc Aarons may be reached at (714)887-8000 or Marc@OCMONEYMANAGERS.COM

MMI DISCLOSURE

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 – financial-planning.com/articles/house-votes-to-ease-rules-for-rias-correct-trump-tax-law [5/23/19]

2 – irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2019 [6/18/19]

3 – congress.gov/bill/116th-congress/house-bill/1994 [6/17/19]

The post What the SECURE Act Could Mean for Retirement Plans appeared first on Money Managers, Inc..

Provided by Marc Aarons at Money Managers, Inc.

A self-fulfilling policy. An investment policy statement (IPS) is a document which helps the client and advisor stay “on the same page” by clearly stating the expectations and responsibilities of the client and advisor.

A standard IPS will usually take into account the client’s general investment goals and objectives, but also more specific elements, such as a breakdown of asset allocation targets, any control and monitoring procedures to be followed by everyone involved in the portfolio, and concrete procedures for making any future changes to the IPS.¹

Read the fine print. Because an IPS includes your broad investing goals and objectives, it’s important to read through it fully. For some, it may be helpful to think of an IPS as a way for you to communicate with your advisor, even if you’re unable to be reached. This may also be helpful when quick action is necessary.

That’s because an IPS sets the parameters within which the advisor will operate in order to help you reach a set of preestablished goals. So, if during your read through of an IPS anything feels uncomfortable, a conversation with your advisor is a great idea.

Invest in a conversation. An IPS is a great way to make sure you’re with a professional who understands your risk tolerance, goals, and time horizon. After all, an investment policy statement can be deeply personal and works best when tailored to your circumstances. However, if you happen to find an element of your IPS that doesn’t fit exactly right, don’t despair. A conversation with a financial professional can often help create an investment statement that’s as unique as your portfolio may be.

Marc Aarons may be reached at (714)887-8000 or Marc@OCMONEYMANAGERS.com

MMI Disclosure

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 – cfainstitute.org/membership/professional-development/refresher-readings/2018/the-portfolio-management-process-and-the-investment-policy-statement [06/18/2019]

The post Investment Policy Statements appeared first on Money Managers, Inc..

Too many people make these common errors. 

Provided by Money Managers,Inc.

Many affluent professionals and business owners put estate planning on hold. Only the courts and lawyers stand to benefit from their procrastination. While inaction is the biggest estate planning error, several other major mistakes can occur. The following blunders can lead to major problems.

Failing to revise an estate plan after a spouse or child dies. This is truly a devastating event, and the grief that follows may be so deep and prolonged that attention may not be paid to this. A death in the family commonly requires a change in the terms of how family assets will be distributed. Without an update, questions (and squabbles) may emerge later.

Going years without updating beneficiaries. Beneficiary designations on qualified retirement plans and life insurance policies usually override bequests made in wills or trusts. Many people never review beneficiary designations over time, and the estate planning consequences of this inattention can be serious. For example, a woman can leave an IRA to her granddaughter in a will, but if her ex-husband is listed as the primary beneficiary of that IRA, those IRA assets will go to him per the beneficiary form. Beneficiary designations have an advantage – they allow assets to transfer to heirs without going through probate. If beneficiary designations are outdated, that advantage matters little.^1,2

Thinking of a will as a shield against probate. Having a will in place does not automatically prevent assets from being probated. A living trust is designed to provide that kind of protection for assets; a will is not. An individual can clearly express “who gets what” in a will, yet end up having the courts determine the distribution of his or her assets.²

Supposing minor heirs will handle money well when they become young adults. There are multi-millionaires who go no further than a will when it comes to estate planning. When a will is the only estate planning tool directing the transfer of assets at death, assets can transfer to heirs aged 18 or older in many states without prohibitions. Imagine an 18-year-old inheriting several million dollars in liquid or illiquid assets. How many 18-year-olds (or 25-year-olds, for that matter) have the skill set to manage that kind of inheritance? If a trust exists and a trustee can control the distribution of assets to heirs, then situations such as these may be averted. A well-written trust may also help to prevent arguments among young heirs about who was meant to receive this or that asset.³

Too many people do too little estate planning. Avoid joining their ranks, and plan thoroughly to avoid these all-too-frequent mistakes.

Marc Aarons may be reached at (714)887-8000 or marc@ocmoneymanagers.com.

www.ocmoneymanagers.com

Citations.

1 – thebalance.com/why-beneficiary-designations-override-your-will-2388824 [10/8/16]

2 – fool.com/retirement/2017/03/03/3-ways-to-keep-your-estate-out-of-probate.aspx [3/3/17]

3 – info.legalzoom.com/legal-age-inherit-21002.html [3/16/17]

^{MMI Disclosure}

^{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.}

The post Key Estate Planning Mistakes to Avoid appeared first on Money Managers, Inc..

Is this age group preparing adequately for the future?

Provided by Marc Aarons @ Money Managers Inc.

How would you guess Gen X is faring when it comes to retirement saving? Americans born between 1965 and 1980 are approaching what should be their peak income years, and many of them have actively contributed to workplace retirement plans, IRAs, and investment accounts. At the same time, Gen X is becoming the new “sandwich generation” – spending time and money to care for kids and aging parents at once.

Here is what we know about Gen X’s degree and pattern of retirement saving, and its progress toward its goals.

Gen Xers began investing for retirement earlier than baby boomers did. According to research from Natixis Global Asset Management, the average Gen Xer started participating in a workplace retirement plan at age 27. That compares with age 31 for baby boomers (and age 23 for millennials).¹

Still, this generation has some catching up to do. Would you like to guess the median amount of retirement savings for a Gen Xer? The answer is $69,000. That finding comes from a Transamerica Center for Retirement Studies survey of more than 4,000 workers, taken last summer. To put that in perspective, a 40-year-old who has $69,000 in retirement savings and defers $250 a month into a retirement account returning 6% annually will have $331,649 at age 60, and $481,331 at age 65.^2,3

What percentage of salary do Gen Xers defer into employer-sponsored retirement plans each year? The TCRS says that the median deferral is 7%, which is not ideal, but, perhaps, adequate in light of possible employer matches.³

How much do Gen Xers think they will need to save for a comfortable retirement? The median guess in the TCRS survey was $500,000. That will not get a retiree that far, because a 4% annual withdrawal from a $500,000 retirement fund comes out to $20,000. Social Security benefits plus $20,000 may not even come close to covering household costs in 2035 or 2040, let alone medical ones. Fidelity projects that a 65-year-old married couple retiring today could need $260,000 just to cover health care expenses in retirement – long-term care not included. How much will today’s 40-year-olds end up spending on medicines and medical procedures after they retire a generation from now?^3,4

The TCRS survey found that a majority of Gen Xers had a retirement savings strategy in place. Unfortunately, 40% of those polled did not.³

Does this generation feel more “sandwiched” by financial pressures than the boomers? A comparative poll ought to focus on that question. Absent of one, we can only guess. A couple of troubling factoids can be found in the Transamerica data. This year, 37% of Gen Xers reported having less than $5,000 in emergency savings, and 30% said they had borrowed against their employer retirement accounts or taken hardship withdrawals or early withdrawals from them. These statistics seem to hint at severe, mid-life financial strains.³

Financially, Gen X has taken major steps to prepare for retirement. A problem remains, though – the same problem baby boomers have had to confront. Gen Xers must take another look at their retirement saving strategies as they enter their forties and fifties, because their perception of how much they need to save and invest may fall short of reality.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

www.ocmoneymanagers.com

MMI DISCLOSURES

Citations.

1 – time.com/money/4579452/millennials-mandatory-retirement-saving/ [11/23/16]

2 – investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator [12/22/16]

3 – cbsnews.com/news/gen-x-retirement-plans-still-time-to-catch-up/ [9/8/16]

4 – money.cnn.com/2016/08/16/retirement/retirement-health-care-costs/ [8/16/16]

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.

The post A Portrait of Gen X Retirement Saving appeared first on Money Managers, Inc..

Provided by Marc Aarons @ Money Managers Inc.

What financial, business or life priorities do you need to address for 2016? Now is a good time to think about the investing, saving or budgeting methods you could employ toward specific objectives. Some year-end financial moves may help you pursue those goals as well.

What can you do to lower your 2016 taxes? Before the year fades away, you have plenty of options. Here are a few that may prove convenient:

*Make a charitable gift before New Year’s Day. You can claim the deduction on your tax return, provided you itemize your 2015 tax year deductions with Schedule A. The paper trail is important here.¹

If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the IRS does not equate a pledge with a donation. If you pledge $2,000 to a charity in December but only end up gifting $500 before 2015 ends, you can only deduct $500.¹

Are you gifting appreciated securities? If you have owned them for more than a year, you will be in line to take a deduction for 100% of their fair market value and avoid capital gains tax that would have resulted from simply selling the investment and then donating the proceeds. (Of course, if your investment is a loser, it might be better to sell it and donate the money so you can claim a loss on the sale and deduct a charitable contribution equal to the proceeds.)²

Does the value of your gift exceed $250? It may, and if you gift that amount or larger to a qualified charitable organization, you will need a receipt or a detailed verification form from the charity. You also have to file Form 8283 when your total deduction for non-cash contributions or property in a year exceeds $500.¹

If you aren’t sure if an organization is eligible to receive charitable gifts, check it out at irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check.

*Contribute more to your retirement plan. If you haven’t turned 70½ this year and you participate in a traditional (i.e., non-Roth) qualified retirement plan or have a traditional IRA, you can cut your 2015 taxable income through a contribution. Should you be in the 35% federal tax bracket, you can save $1,925 in taxes as a byproduct of a $5,500 regular IRA contribution.^3,4

If you are self-employed and don’t have a solo 401(k) or something similar, look into whether you can still establish and fund such a plan before the end of the year. For TY 2015, you can contribute up to $18,000 to any kind of 401(k), 403(b), or 457 plan, with a $6,000 catch-up contribution allowed if you are age 50 or older. Your TY 2015 contribution to a Roth or traditional IRA may be made as late as April 15, 2016. There is no merit in waiting, however, since delaying your contribution only delays tax-advantaged compounding of those dollars.^4,5

 *See if you can take a home office deduction. If your income is high and you find yourself in one of the upper tax brackets, look into this. You may be able to legitimately write off expenses linked to the portion of your home used to exclusively conduct your business. (The percentage of costs you may deduct depends on the percentage of the square footage of your residence you devote to your business activities.) If you qualify for this tax break, part of your rent, insurance, utilities and repairs may be deductible.⁶

 *Open an HSA. If you are enrolled in a high-deductible health plan, you may set up and fund a Health Savings Account in 2016. You can make fully tax-deductible HSA contributions of up to $3,350 (singles) or $6,750 (families); catch-up contributions of up to $1,000 are permitted for those 55 or older who aren’t yet enrolled in Medicare. Moreover, HSA assets grow untaxed and withdrawals from these accounts are tax-free if used to pay for qualified health care expenses. HSAs are sometimes referred to as “backdoor IRAs,” because once you reach age 65, you may use withdrawals out of them for any purpose, although withdrawals will be taxed if they aren’t used to pay for qualified medical expenses.⁷

 *Practice tax loss harvesting. You could sell underperforming stocks in your portfolio – enough to rack up at least $3,000 in capital losses. In fact, you can use this tactic to offset all of your total capital gains for a given tax year. Losses that exceed the $3,000 yearly limit may be rolled over into 2016 (and future tax years) to offset ordinary income or capital gains again.⁸

 Are there other moves that you should consider? Here are some additional ideas with merit.

 *Pay attention to asset location. Tax-efficient asset location is an ignored fundamental of investing. Broadly speaking, your least tax-efficient securities should go in pre-tax accounts and your most tax-efficient securities should be held in taxable accounts.

 *Can you contribute the maximum to your IRA on January 1, 2016? The rationale behind this is that the sooner you make your contribution, the more interest those assets will earn. In 2016 the contribution limit for a Roth or traditional IRA remains at up to $5,500 ($6,500 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA, though: singles and heads of household with MAGI above $132,000 and joint filers with MAGI above $194,000 cannot make 2016 Roth contributions.⁵

What are the income limits on deducting traditional IRA contributions? If you participate in a workplace retirement plan, the 2016 MAGI phase-out ranges are $61,000-71,000 for singles and heads of households, $98,000-118,000 for joint filers when the spouse making IRA contributions is covered by a workplace retirement plan, and $184,000-194,000 for an IRA contributor not covered by a workplace retirement plan but married to someone who is.⁵

*Should you go Roth before 2016 gets here? You might be considering that. If you are a high earner, you should know that MAGI phase-out limits affect Roth IRA contributions. For 2015, phase-outs kick in at $183,000 for joint filers and $116,000 for single filers (those thresholds move north by $1,000 in 2016). Should your MAGI prevent you from contributing to a Roth IRA at all, you still have the chance to contribute to a traditional IRA in 2015 and then go Roth.⁵

Incidentally, a footnote: distributions from Roth IRAs, traditional IRAs, and qualified retirement plans such as 401(k)s are not subject to the 3.8% Medicare surtax affecting single/joint filers with AGIs over $200,000/$250,000. Dividends, net investment income from taxable interest, passive rental income, annuity income, short-term and long-term capital gains, and royalties are subject to that surtax if your AGI surpasses the aforementioned MAGI thresholds.⁹

Consult a tax or financial professional before you make any IRA moves to see how they may affect your overall financial picture. If you have a large traditional IRA, the projected tax resulting from a Roth conversion may make you think twice.

 What else should you consider as 2016 approaches? There are some other things to note…

 *Review your withholding status. Should it be adjusted due to any of the following factors?

>> You tend to pay a great deal of income tax each year.

>> You tend to get a big federal tax refund each year.

>> You recently married or divorced.

>> A family member recently passed away.

>> You have a new job at a much greater salary.

>> You started a business venture or became self-employed.

*If you are retired and older than 70½, remember your RMD. Retirees over age 70½ must begin taking Required Minimum Distributions from traditional IRAs and 401(k), 403(b), and profit-sharing plans by December 31. The IRS penalty for failing to take an RMD equals 50% of the RMD amount.¹⁰

 If you have turned 70½ in 2015, you can postpone your initial RMD from an account until April 1, 2016. The downside of that is that you will have to take two RMDs next year, both taxable events – you will have to make your 2015 tax year withdrawal by April 1, 2016 and your 2016 tax year withdrawal by December 31, 2016.¹⁰

Plan your RMDs wisely. If you do so, you may end up limiting or avoiding possible taxes on your Social Security income. Some Social Security recipients don’t know about the “provisional income” rule – if your MAGI plus 50% of your Social Security benefits surpasses a certain level, then some Social Security benefits become taxable. Social Security benefits start to be taxed at provisional income levels of $32,000 for joint filers and $25,000 for single filers.¹¹

*Consider the tax impact of 2015 transactions. Did you sell real property this year? Did you start a business? Have you exercised a stock option? Could any large commissions or bonuses come your way before January? Did you sell an investment held outside of a tax-deferred account? Any of this might significantly affect your 2015 taxes.

*Would it be worth making a 13th mortgage payment this year? If your house is underwater, it makes no sense – and you could argue that those dollars might be better off invested or put in your emergency fund. Those factors aside, however, there may be some merit to making a January mortgage payment in December. If you have a fixed-rate loan, a lump sum payment can reduce the principal and the total interest paid on it by that much more.

 *Are you marrying in 2016? If so, why not review the beneficiaries of your workplace retirement plan account, your IRA, and other assets? In light of your marriage, you may want to make changes to the relevant beneficiary forms. The same goes for your insurance coverage. If you will have a new last name in 2016, you will need a new Social Security card. Additionally, you and your spouse no doubt have individually particular retirement saving and investment strategies. Will they need to be revised or adjusted with marriage?

*Are you coming home from active duty? If so, go ahead and check the status of your credit, and the state of any tax and legal proceedings that might have been preempted by your orders. Make sure your employee health insurance is still there, and revoke any power of attorney you may have granted to another person.

 Talk with a qualified financial or tax professional today. Vow to focus on being healthy and wealthy in the New Year.

Marc Aarons may be reached at 714-887-8000  or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

Citations.

1 – irs.gov/uac/Newsroom/Six-Tips-for-Charitable-Taxpayers [5/19/15]

2 – philanthropy.com/article/Donors-Often-Overlook-Benefits/148561/ [8/29/14]

3 – irs.gov/Retirement-Plans/Traditional-and-Roth-IRAs [3/18/15]

4 – turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/4-Last-Minute-Ways-to-Reduce-Your-Taxes/INF22115.html [10/20/15]

5 – forbes.com/sites/ashleaebeling/2015/10/21/irs-announces-2016-retirement-plans-contribution-limits-for-401ks-and-more/ [10/21/15]

6 – irs.gov/Businesses/Small-Businesses-&-Self-Employed/Home-Office-Deduction [10/16/15]

7 – bankrate.com/finance/insurance/health-savings-account-rules-and-regulations.aspx [10/7/15]

8 – fidelity.com/viewpoints/personal-finance/tax-loss-harvesting [9/9/15]

9 – kitces.com/blog/how-ira-withdrawals-in-the-crossover-zone-can-trigger-the-3-8-medicare-surtax-on-net-investment-income/ [12/2/14]

10 – fool.com/investing/general/2015/09/29/mrd-requirements-for-your-retirement-accounts.aspx [9/29/15]

11 – ssa.gov/planners/taxes.html [10/20/15]

^{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.}

The post Your Annual Financial To-Do List: Things you can do before & for 2016. appeared first on Money Managers, Inc..