It isn’t often that new tax or retirement legislation has such a great or immediate impact on the financial planning process, but the reforms passed by Senate and approved by the President on December 20, 2019 under the SECURE Act are doing just that.
Many of the smart tax moves for 2019 are familiar ones—such as contributing to tax-advantaged retirement plans and increasing or "bunching of deductions.
Transitions are important life pivot points that thrust individuals and families from stability into a position that is new and in flux. Each person will likely experience a handful of transitions over the course of his or her lifetime, and may even experience periods where they go through more than one transition at a time. Common transitions include:
Health Savings Accounts (HSA) are one of the most misunderstood and underutilized opportunities for tax-friendly retirement savings. Many individuals who qualify for these accounts either falsely believe that they are only beneficial for covering medical expenses or are dismayed because the accounts have caps on annual contributions. But, the value of an account that allows assets to grow tax-deferred should never be outruled, even by high-income earners.
Receiving an inheritance is a unique life transition that places individuals at a difficult crossroad between the familiar life they know and one that is new and seemingly full of possibility. But the new and unknown can also be stressful and cause individuals to make rash decisions and lofty promises that may leave them with regret.
Unfortunately, too, so many inheritors of wealth aren’t aware of the tools, people, or resources that are available to help them make sense of their new situation.
Have you ever considered how financially stable your family would be in the unfortunate event you could no longer earn an income due to death, physical disability, or terminal illness? Current statistics indicate that over half of all affluent households (those with an annual household income of at least $150,000) rely on two incomes. This means that for the majority of financially comfortable Americans, losing a primary source of income could drastically impact both their financial well-being and current lifestyle.
While approaching the topics of death and loss can be unpleasant, having a policy in place for the benefit of both yourself and your family can help to prevent financial devastation in already emotionally taxing circumstances. Don’t let one of these common myths leave your family exposed to unnecessary financial risk.
In the not-so-distant past, retirement planning was planning for a financial event—deciding how much you needed to live comfortably for a certain number of years and then figuring out how to accumulate, distribute and sustain that income. Very little attention was paid to a retiree’s quality of life or personal fulfillment in retirement until individuals began living decades beyond their working years.
Still today, in fact, the majority of pre-retirees neglect to psychologically prepare for the changes that accompany the retirement transition—the change in identity, the change in routine, the change in social interactions (types and frequency), and the change in purpose. These retirees may be left feeling socially isolated, bored, depressed, purposeless, and disillusioned about retirement after the “retirement honeymoon phase” wears off.
According to the Social Security Administration (SSA), women account for 55.5% of the 37.8 million social security beneficiaries over age sixty-five and 65% of the beneficiaries over age 85, making social security benefits a more fundamental part of their overall retirement plan.
While marriage may be all about love, it has been said that divorce is all about money. I'm not sure that's always true, but what I do know is that during a divorce, there is an overwhelming amount of personal and financial decisions at a time when most people are already feeling depleted and overwhelmed.
My role as a CDFA® in the collaborative divorce process (as the "Financial Neutral") is to help both the clients and attorneys understand how the financial decisions made today will impact the clients financial future. The financial neutral identifies the short-term and long-term effects of dividing property, considers tax implications of the settlement decisions and assists the clients with all things financial. I'm often asked to help determine if one spouse can afford the marital home after the divorce and if not, to help bring a creative approach to outline additional options.
As parents, we are hard-wired to help our children—emotionally, physically, and financially. Often, we will do whatever is within our power to grant them as many opportunities as we can afford. But, where do we draw the line? How long is too long to assist in supporting your adult children? Is your current level of financial assistance helping or hurting them? Are you sacrificing your own financial goals to do so?
April 15th may seem far off, but once school starts and the holiday season rolls around, tax preparation may be the last thing on your mind. Those who have experienced significant life changes, individuals with Flexible Health Spending Accounts, and high-income earners could especially benefit from the extra planning time to improve their income tax strategy. Why not take advantage of these longer summer days by getting some year-end tax-saving tasks out of the way now?
