Common Financial Questions Amid Coronavirus

Life’s a roller coaster and periodically, events occur that disrupt everyday life, business and markets – and it’s advisable to get help in navigating them. COVID-19 (Coronavirus) continues to spread and its impacts are significant. Aggressive efforts are underway to “flatten the curve” – to reduce its spread and not overwhelm the frontline healthcare professionals and emergency responders – and each of us has the responsibility of self-reliance and taking care of ourselves and family.

We don’t know how deep the impacts and how long they will run. However, at some point they will eventually end. Thus, we position first to survive, and second to prepare for the rebound. Below you will find answers to several common questions among our clients to help you navigate the challenges that exist and those that will develop. Hopefully, these questions will help trigger discussions you should have with your family, colleagues and trusted advisors regarding your specific situation.

Are We Going to Be Okay?

Anxiety is high and it’s okay to be scared. Fight or flee is part of our DNA and there is an urge to “do something” in times of stress. “Being okay” is different for everyone. Yes, it’s scary when wealth temporarily goes into hiding as markets correct, or when your employment may be at risk. Now is a good time to focus on why you’re investing. Your goals might include to retire and stay retired, have choices and options, spend more time doing the things you love, or being financially independent and not being a burden to anyone. Often the discussion then shifts from a stressful financial or investment concern to become one about getting more comfortable again, that eventually things are going to be okay, and the action plan is relevant to those goals.

Should I Move to Cash?

Distinguish between the need for liquidity and the urge to bail out to stop the pain. If it’s because your job is in jeopardy or there’s a buy opportunity because your item goes on sale, then that’s why you have emergency reserves safely socked away in a Federal Deposit Insurance Corporation (FDIC) insured account. On the other hand, if it’s the fear that the markets will go to zero then take a moment and reflect. Assuming your goals haven’t changed, why toss out a well thought out investment plan? History tends to repeat itself – bull runs last longer than bear markets and getting out often means missing out. And despite the pain, the U.S. equities market still stands some 3-1/2 times higher than the low coming out of the 2008 Crisis (S&P 500). However, if you had the wrong investment plan to achieve your goals or to allow you to sleep at night, then consider waiting until we hit dry land again – may be bad timing to abandon the life raft (hopefully of diversification) and to jump into the water.

Is It Time to Buy?

The cable news was on one screen showing the world on fire. The other computer screen had analysts excited with exceptional companies selling at cheap prices. Aristotle’s concept of the golden mean says that the truth may lie somewhere in the middle. While there are plenty of uncertainties including the coronavirus, economic recovery, U.S. presidential election, and more – low prices may offer a good entry point for investable cash. Less than a month ago, the equity markets were selling at all-time highs and the economy was relatively solid. Banking cures are in place following the ’08 Crisis, households are less leveraged, and unemployment was low.

Other Issues? We Are All In this Together

These include business adjustments (supply shifts, cancellations, postponements, or other demand shifts), working remotely, and job security to name a few. Self-isolation and social distancing also generate other issues. Stay connected socially (healthy dosage of phone conversation); it’s okay to turn off the news, and take walks in the sunshine.

Most importantly, don’t forget to wash your hands, often and thoroughly. If you spread anything, spread help, compassion and humor. Don’t panic. Like all outbreaks, this too will eventually end. Wishing you safety and shields. Secure a healthy future both personally and financially.


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Should I Revisit My Investment Portfolio Amid the Coronavirus Pandemic?

The Coronavirus pandemic is a main topic of conversation whether you’re at work, with friends or at a family dinner. And while there’s plenty of speculation of how it began or when it will stop, there are concerns of deceleration of economic production, with declines in China (the second largest economy) and travel, and disruption to non-Chinese markets.

So, when is this coronavirus pandemic going to end and is this an investment opportunity or a time to run to safety?

The S&P 500 Index and Dow Jones Industrials fell around 11-12 percent in the course of six days – the last decline of that size took about three months at the end of 2018. Then we had two of the highest single day point gains in history as of mid-week of Super Tuesday. In addition, there’s been a flurry of action for containment from healthcare and pharmaceuticals, travel restrictions, and governments and agencies, including the Federal Reserve Board’s surprise 50 basis point interest rate cut.

Downturns are not fun. Many people want to know if they’re going to be ok financially. While it’s too early to tell the course and severity of COVID-19, history and experience provide valuable lessons that can help you manage through this and future pull backs or declines.

Revisit Your Game Plan

What was your response–to panic sell into a double-digit market drop or did you follow your plan? The investment plan is only one spoke of your personal financial plan. The others include cash flow management, tax reduction, estate planning, risk management (insurance), and using your business and employee benefit programs. Also, changes in the investment plan are driven by your goals and financial plan – not driven solely by market conditions.

Remember Why You Invest – Keep the Big Picture in View

There is no one-size-fits-all financial or investment plan. It should be tailored to your goals including maintain your lifestyle or protect your loved ones – keep them in mind as you make decisions. If your goals are achievable by playing it safe – burying savings in the backyard or bank accounts – then do so. However, if you need to earn a decent return, then you’ll have to take on risk and manage it accordingly. If you can’t sleep at night with that risk, then downshift your goals. It’s pretty simple – life has its tradeoffs.

Retirees – Market Declines Become Bad News if You Have to Sell

Savers should love declines – it’s an opportunity to buy at cheaper prices. But retirees may feel otherwise. Consider fine-tuning your investment plan such that you have plenty of liquidity, investment earnings and cash to fund two or three years of withdrawals. That way you’re prepared for bear markets – your equities will have time to recover and you harvest those gains later. Always consult your investment fiduciary.

We’re in correction territory. If you need to adjust your investment strategies, it’s better to make them before market corrections occur – avoid switching horses midstream. Rather than focusing or worrying about things you cannot control; focus on those that you do. Don’t underestimate the power of human grit and ingenuity. We’ll figure this out and another ‘end of the earth’ crisis du jour will be avoided. Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal

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6 Smart Ways to Make the Best Use of Your Tax Refund

When tax season comes around – one of the most common questions on a taxpayers’ mind is whether they’ll get a tax refund or owe the Internal Revenue Service (IRS) money. This year, the IRS expects around 150 million individual tax returns to be filed. Last year, about seven out of 10 returns filed received a refund with the average being about $2,900. The amount of refund, or balance owed, is dependent upon many factors. Many Americans love getting refunds even though the overpayments are interest-free loans to Uncle Sam. They may consider it part of their annual savings plan or spend it as a treat. Some have less predictable income – such as business owners and salespersons – and they’re glad they don’t owe the government more money.

Here are six smart ways to use your tax refund this year:

1. Invest in Your “Rainy Day Fund”
Discipline and a budget are key. It’s recommended that you have at least three to six months’ living expenses in cash reserves. Retirees might even feel better with a bigger cushion of up to one to two years. This protects you in emergencies and gives you flexibility such as switching jobs or relocating.

2. Payoff Debt
The average American owes $29,800 in personal debt (excluding mortgages). According to a 2019 study by Northwestern Mutual, 15 percent of Americans believe they’ll be in debt for the rest of their life. Credit card and mortgages are tied as the main sources of debt for one out of five. Nearly a third pay more than 15 percent interest on cards and 12 percent say they “always” pay only the minimum required payment (covering interest without paying any principal). Paying off an 18 percent credit card is better than leaving a money market balance earning 1.75 percent.

Tip: Free yourself from debt – List your debts and pay off the smallest balances first (it could be a quicker “victory” for you than attacking the highest interest rates).

3. Save and Invest
Fund your goals such as retirement, college or trade school, home purchase and others. About one in five Americans have less than $5,000 saved for retirement and 56 percent don’t know how much they’ll need to retire comfortably. Participate in your employer’s retirement plan at a minimum to get the “free money” match. Invest savings to match the time horizon – if money is needed in two years for a house, then it may be better to avoid stock funds (volatility) or investments with surrender charges.

4. Protect Yourself
Close the gaps on risks you cannot afford to assume. Are you properly insured (life, disability, umbrella, long-term care, etc.) and is it time to update your will and estate plan? Meet with your general insurance agent and attorney as needed.

5. Treat Yourself
Stop and enjoy how far you have traveled. The refund might not cover a major makeover, but will it cover some repairs for your home or car? Or really treat yourself with a family vacation, enroll in a quilting conference at Asilomar, hire a personal trainer, or see the Aurora Borealis by snowmobile.

6. Good Karma
What can you do to help make this a better place, or make a difference for others? Mother Teresa said, “If you can’t feed a hundred people, then just feed one.” You might not have any debt and giving away a couple hundred dollars might not impact your savings. So, if you’re feeling generous, donate to a charity of your choice or help out a friend in need.

These are some thoughts not only for your tax refund but also for planning ahead. And by the way, bring a latte or bouquet of flowers to your tax preparer or CPA. This is that time of year they’re busy sifting through your boxes of receipts and their families are left to fend for themselves. Albert Einstein once said, “The hardest thing in the world to understand is the income tax.” Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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The SECURE Act – Planning Opportunities for Your Retirement

Tax legislation affecting retirement savings happens about every ten years, but how effective are they in getting people to better prepare for their future? The new Setting Every Community Up for Retirement Enhancement (SECURE) Act was designed to expand options for retirement savers. The SECURE Act represents one of the most significant updates to retirement plan legislation since the Pension Protection Act of 2006. New legislation may sound exciting, however, as in most cases, the details are more complicated than what they seem. There are many unanswered questions and we await Internal Revenue Service (IRS) regulations to better tell us how the new laws will work. Nevertheless, this article is to provide a brief summary of key provisions that you should consider discussing with your trusted advisors as well as your tax professionals.

Cast a Wide Net

Encouraging access to workplace plans and expand retirement savings.

  • There are provisions to encourage small employers to adopt plans. For example, an employer may adopt a new plan after year end but before the due date of their tax return. This provision might enable 401(k) adoption by Sept. 31 (extension deadline for corporate returns). However, you may be unable to make deductible employee contributions for that year if Dec. 31 has already passed and payroll is closed.
  • Part-timers (working more than 500 hours) may be eligible to participate in a 401(k). However, it appears there’s no cost to employers (e.g. matching contributions, profit sharing, etc.).
  • There is no age limitation for making individual retirement account (IRA) contributions for those who work later in life (past age 70-1/2). Also, the age for making required minimum distributions (RMD) has been pushed back to age 72 (unless you turned 70-1/2 in 2019).

Disclosure and Information

Providing more information and timely reporting.

  • The Lifetime Income Disclosure Act starting next year is intended to inform the participant what their accumulated 401(k) balance might be worth on a monthly or annual basis. The methodology has yet to be determined, however, we understand it to be a single life, annuity payment without a cost of living adjustments.
  • Penalty for late filing of benefit returns has substantially increased tenfold.

A Hook

Congress wants IRAs and other tax-advantaged accounts for retirement, and not for passing wealth to heirs.

  • Removal of “stretch” IRA provisions for inherited IRAs has been eliminated for most beneficiaries (excluding surviving spouses, minor children up to majority, disabled and chronically ill individuals and individuals not more than 10 years younger than the IRA owner). For example, if your adult children are IRA beneficiaries, they would need to withdraw all funds from the inherited IRA (taxable to them) within 10 years. They can no longer stretch the distributions over their lifetime. This may obliterate IRA trust planning and may encourage unnecessary Roth IRA conversions. For example, do you want to pay your kids’ taxes if they’re likely to inherit your IRA? Also, this may be another reason to revisit the naming of charities versus your loved ones as IRA and Trust beneficiaries.

It’s debatable whether the SECURE Act will move the needle in making more Americans retirement ready. Roughly a third of America has inadequate savings but will small modifications to savings plans be a solution to those with spending problems or rising living costs? It may help those who are responsible and prioritize saving and clearly, this is a nod to product providers. Nevertheless, let’s control what we can control. Secure your future wisely.

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The Top Three Financial Pursuits for 2020

How will your finances change for you this year? There are many paths you can take to reach the peak of your financial goals. A common area of discussion with our clients is managing and living with uncertainty. Financially and in life, you can make assumptions, leave room for a margin of error, set goals, review progress and make adjustments along the way. However, in some situations, uncertainty can paralyze one from taking any kind of action. Although lack of action can be good or bad depending on the situation, it’s often beneficial to think things through with your circle of trusted advisors. This way, you’ll have the opportunity to hear different perspectives, learn from those with more expertise and calculate objectivity.

Follow these three financial pursuits to secure your future wisely:

Solve Your Puzzle

Setting up realistic financial goals is key. If you don’t have any goals, it can lead you somewhere you didn’t want to be. Likewise, setting unrealistic goals can also lead you astray. If you’re unsure how much you’ll need to maintain a comfortable retirement, don’t just estimate based on a wild guess. Not only is that unrealistic, it’ll bring financial stress because you may never achieve your goal.

Successful people plan for the future and adapt as needed. Recall the last time you built a jigsaw puzzle. The box cover served as a guide, the puzzle pieces were spread on the table, and a group – often friends or family – helped you assemble the puzzle. Your puzzle today might be how to reduce debt, save for retirement, exit your business, or care for an aging loved one. Your challenges may be difficult, but if your goals haven’t changed, then stick to your plan. Or perhaps you need to rethink your goals, re-map your action plan, or bring new resources to the table to assist you. Adversity strikes, but the persistent prevail.

Retire Later

The question of when to take Social Security retirement benefits can be complicated. There are generally three key ages for consideration – reduced benefits as early as age 62, 100 percent of benefits at your full retirement age (generally between 66 and 67 depending when you were born) and higher benefits if you defer to age 70. However, it’s estimated that 57 percent of retirees elect to take Social Security early, thereby permanently reducing their benefits from then on.

Consider retiring later. You’re projected to get more money – the estimated lifetime benefit of collecting Social Security at full retirement age is about 20 percent greater than benefits at age 62, and about a third higher if you wait until you’re 70-years-old. Second, the survivor benefits for your spouse could be higher (in the event of your death, your spouse may be entitled to half of your benefit or their own retirement benefit, whichever is greater). And third, your retirement savings may last longer because you’re not touching them until later.

Keep Your Balance

There’s an old saying that says, “Money can’t buy you happiness, but it does bring you a more pleasant form of misery.” Consider balance in two main areas: First, your financial plan is more than celebrating a double digit return on your 401(k). It’s about the tens of thousands of dollars you might save by refinancing your home to a lower rate, shorter term loans or by paying off your credit card and student loan debt. It’s also about:

  • Having the right amount of insurance
  • Naming the proper beneficiaries, guardians, co-trustees and powers of attorney
  • Tax and retirement planning opportunities for you from the new SECURE Act
  • Exit planning for your business
  • Revisiting your philanthropy

A comprehensive personal financial plan helps weave and coordinate many areas of your life. Don’t forget about balancing your career, relationships, well-being, spiritual and personal goals.

May the new year be an opportunity to get things right. Expect the best, plan for the worst and prepare to be surprised. Secure your future wisely.

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Financial Resolutions for 2020

The majority of Americans are setting financial resolutions now. According to a survey by Fidelity Investments, the most popular resolutions are saving more money (53 percent of respondents), paying down debt (51 percent) and spending less (35 percent). Whether you take New Year’s Resolutions seriously or deem them as folly, here are some ways to review and refresh your personal finances along with some lessons I’ve learned over time.

5 Planning Areas

Your financial goals are unique. However, there are general planning areas that apply to most people. Here are five that were outlined in a recent planning article called “New Year’s Financial Resolutions: Get Your Finances in Shape for 2020” and some specific planning implications for you to explore with your family and advisors.

1. Creating a budget for life

Set a budget and create a balance sheet annually to hold yourself accountable. Also, establish cash reserves for big expenses that happen infrequently throughout the year (property taxes and car insurance), planned expenditures (vacations or home improvements) and emergency funds (car repairs or a broken arm).

Implication: How will your budget change as you move through various life cycles or patterns of saving and spending?

2. Managing your debt

Maintain an appropriate and affordable level of debt, and develop the right debt reduction plan.

Implication: Is debt consolidation right for you? Use caution with “consolidating” a five-year car loan and a new refrigerator into a 30-year home refinance or using adjustable rate loans in a rising interest rate market.

3. Optimizing investment portfolios

Have a prudent investment strategy and rebalance investment accounts periodically.

Implication: How to use tools available to you in your 401(k) plan (e.g. savings calculators, “off-the-shelf” target date or life cycle funds, and automatic rebalancing versus customized strategies)?

4. Being prepared for the unexpected

Maintain the right insurance protection including health, life and disability, and casualty coverage.

Implication: Are you reviewing your coverage for adequacy and price competitiveness? How does your income protection change (life and disability) over time? Should you get umbrella liability coverage?

5. Protecting your estate

Update beneficiary designations for retirement accounts and insurance; and review your will, powers of attorney, trusts and titling of assets.

Implication: Planning for death is one thing. How are you planning for living with dignity and independence as you age?

And finally, some lessons I have learned over time:

  1. You’ve got to be the most serious person on the planet about your personal finances.
  2. Run your personal finances like a business.
  3. Time and health are infinitely more valuable than money.
  4. Don’t be afraid of saying “I don’t know” and stay within your circle of competence.
  5. Diversification protects us from the inability to predict the future.
  6. Learn to love what you do (versus doing what you love).
  7. Be humble or life will find a way to humble you.

And I’ll close with one of my favorite quotes from Denis Waitley: “Expect the best, plan for the worst and prepare to be surprised.”

May the new year be a turning point for you. Secure your future wisely.

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Financial New Year’s Resolutions for 2020

The tradition of making New Year’s resolutions originated with the ancient Babylonians about 4,000 years ago. Promises were made to their gods to pay debts and return all borrowed objects. If these promises were kept, they believed their gods would grant them favorable health in the new year. They were also the first to host New Year’s celebrations with a 12-day festival called Akitu when they planted their crops – although their new year began mid-March. As we wait to ring in 2020, I recommend those of us who have not yet retired to save more and follow the teachings of Arkad in George S. Clason’s book titled The Richest Man in Babylon – a classic personal finance book made up of a collection of ancient Babylonian parables. In his book, Clason states that saving at least 10 percent of your earnings is one of the cornerstones of financial independence.

Clason’s book highlights the following Five Laws of Gold:

Save – Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.

Make money work for you and compound – Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

Be cautious and seek expert advice – Gold clingith to the protection of the cautious owner who invests it under the advice of men wise in its handling.

Don’t invest in something you don’t understand – Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.

All that glitters is not gold – Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers.

New Year’s Budgeting Resolutions

Budgeting is a valuable life skill. There are numerous methods including putting pen to paper, creating spreadsheets, and using software. Some of the most popular personal budget software programs include You Need A Budget (YNAB), Quicken, Mint, Acorns, and Every Dollar, among others. The key is to find one that matches your needs and that you will consistently use.

As an example, here are four rules of budgeting used by YNAB:

  1. Give every dollar a job – Where does the money you earn need to go versus where it goes when you emotionally spend?
  2. Save for a rainy day – Debt is not the only option. Set goals for your big and infrequent expenses, including holiday gifts, vacations, property taxes, etc., and fund them monthly.
  3. Roll with the punches – Overspending in some categories does occur. Be flexible and move funds from other categories.
  4. Live on last month’s income – You’ll break the paycheck-to-paycheck cycle by following the other rules. This way, it’ll be easier to pay your bills as they come in.

As you begin to set your financial goals for 2020, we hope you consider saving as one of the top priorities on your list. May your list of worries be shorter than your New Year’s resolutions.

Secure your future wisely.

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Year-End Financial Review: How to Avoid Financial Complacency

It’s that time of the year again, and while you may have had a strong financial year, don’t fall into the financial complacency trap. The U.S. stock market is up with the S&P 500 and Wilshire 5000 recently posting their highest weekly closes in history. Bonds are having their best year since 2002. US jobs growth soared in November. According to Labor Department numbers, hiring was robust, and the unemployment rate fell to its lowest level in fifty years. So, while holiday shopping might be a priority, it’s pivotal to take a moment to plan and check your future.

Here are three areas that you should focus on before you ring in the new year:

Review Account Statements

  • Diversify Your Accounts – Are your 401(k) plans and other investment accounts properly diversified to achieve the returns required for your goals and are comfortable with the level of risk? Often times, having all cash accounts or stable value funds (SVF) can be jeopardize your future, as can all growth stocks accounts. All cash (too safe) can result in too little return. All stocks can expose you to excess volatility. Successful investing is as much about making money when markets advance, as it is losing less when they decline. It’s best to adjust (and have protection in place) before market corrections occur.
  • Adequate Savings – Contribute enough to your 401(k) to earn matching company contributions. If you max out your 401(k) contribution limits, contributing after-tax to your 401(k) plan is unlimited, and it allows you to benefit from additional tax deferral earnings, capital gains and interest of your investments.
  • Simplify – What accounts can you consolidate? According to the Bipartisan Policy Center, there are an estimated 25 million orphan 401(k) accounts that aren’t being monitored. Orphan accounts are abandoned accounts left with former employers. Avoid leaving accounts behind and always tend to your funds.
  • Cash Reserves – You should have an emergency fund, which is equal to three to six months’ worth of living expenses if you’re working, and one to two years of savings if you’re retired. Ask your banker for competitive interest-bearing accounts or consider on-line Federal Deposit Insurance Corporation (FDIC) insured money market accounts.

Paycheck Review

  • Adjust Tax Withholding – Do a quick forecast of your 2019 income taxes and adjust your withholding as needed for your remaining December paychecks. Your accountant or enrolled agent would appreciate the opportunity to act before the end of the year.
  • Automatic Transfers – It’s a lot easier to save money before you have a chance to spend it. Take the time to review and update your 2020 budget.

Risk Management

  • Insurance Review – Do you have adequate coverage, and is it competitively priced? Talk to your advisors, insurance agent and get bids as needed. Also, if you have a Flexible Spending Account (not a health savings account), file for any remaining 2019 balances.
  • Update Your Beneficiaries – Review and update your life insurance, annuities and retirement accounts, as needed. And consider charities as potential retirement account beneficiaries – that’s a tax-efficient way to transfer your wealth.
  • Estate Plan – Is it time to schedule an estate plan review with your attorney? Schedule a meeting with your attorney to start the new year off on the right foot.

Reflect and celebrate what you’ve accomplished in 2019. Whether it was sticking to your savings and investment plan, getting your debt under control or being promoted in your career – don’t forget to celebrate your victories.

Secure your future wisely.

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The Season of Charitable Giving

The year is almost over, and it’s time to make a few important decisions before 2020 begins. According to Cerulli Associates, a research firm that specializes in global asset management, a significant wealth transfer is expected to occur over the next 25 years. During this time period, an estimated $68 trillion will transfer from 45 million U.S. households to heirs and charities.

Naming your kids, nieces, nephews or other family as heirs is natural. It’s projected that Generation X will replace Baby Boomers as the wealthiest generation within 25 years. Some Boomers will leave their wealth to their kids outright, some may attach strings (trusts), while others hesitate to name their kids as sole heirs. These donors ask themselves, “how much is enough?” or, “we’ve invested in education and training—the kids will make their own way in the world.” And some fear the “Shirtsleeves to shirtsleeves in three generations” curse – the Scottish version goes “The father buys. The son builds. The grandson sells. And his son begs.” These types of discussions are not uncommon. Warren Buffett plans to “Leave them enough so they feel they can do anything, but not so much they could do nothing.”

While some people’s future may be left to their family, many find their gifts have great value with their alma mater, church, community health center and other favorite charities. As we find ourselves in the season of giving, we’re sharing some tips to plan for your next charitable donation.

Why Do People Give?

  • It makes them feels good
  • Their personal beliefs – making a difference, helping their fellow man
  • Personal experience – they or a loved one had a life-changing experience
  • Image and recognition – a way of being remembered
  • Reduce tax liability

There are also reasons why people don’t give. Maybe there are simply too many choices, they lack the funds, or they’re saving the money for the future or an emergency.

There are approximately 1.5 million non-profits in the U.S., so how do you pick one to donate to? What can you do to feel confident that you won’t run out of money in your retirement?

Charitable Giving Planning Tips

You can take better care of others once you’ve taken care of yourself. Before making a donation, meet with your advisors and implement a plan for a well-funded and secure future. This includes having contingency plans for life’s surprises.

Questions to Consider About Where to Give

  • What issues are important to me, and where do I volunteer my time?
  • How do I structure my giving (budget and means)?
  • How do I find and vet organizations?
  • Is it time to expand or refine my giving?

Year-End Giving Strategies

  • Get started early. Be aware of year-end deadlines from the Internal Revenue Service (IRS), charities or financial institutions. Plan ahead for illiquid assets, operational requirements, holidays, weather delays and vacations.
  • Review your appreciated assets – they can be good candidates for funding outright gifts, donor-advised funds and other gifting vehicles by avoiding or minimizing the capital gains tax.
  • Qualified Charitable Distribution (QCD) – individuals 70-years-old or older may contribute some of their Individual Retirement Account (IRA) to charity. The distribution goes directly to the qualified charity and can count towards satisfying your required minimum distribution.
  • Consider naming a charity as a beneficiary of your IRA. It could be more advantageous than naming them as a beneficiary of your trust.
  • Consult with your tax expert – share your intentions with your Certified Public Accountant (CPA) or enrolled agent and seek their advice in advance. Sometimes it’s better to make your donation in January rather than December because you aren’t planning to itemize, you’ll have more donations or taxable income next year, etc.

Leo Rosten says, “The purpose of life is not to be happy – but to matter, to be productive, to be useful, to have it make some difference you have lived at all.” Money can be a tool to help you have an impact on the things that matter most.

Secure your future wisely.

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Everything You Need to Know About Medicare

Retirement can spur more life satisfaction, relaxation, freedom, free time and travel opportunities. In retirement, however, health often replaces money as the number one priority. As we age, healthcare becomes more expensive, and it’s important to have the right plan in place to keep health expenses manageable. Now through Dec. 7 is the annual Medicare Open Enrollment period. Medicare recipients can now make changes to their coverage for 2020. Rather than rushing through the process, be in-the-know on these essential Medicare facts so you can make a more informed decision.

What is Medicare and who is eligible?

Medicare and Medicaid first became available in 1966 after President Lyndon B. Johnson signed the Medicare Act of 1965. They are the government’s second-largest expenditure after Social Security. Medicare is the national health insurance program for people age 65 or older and people with qualifying disabilities and medical conditions. Medicaid is a joint federal and state program providing healthcare for qualified low-income individuals.

Medicare Parts and Costs

Medicare consists of four different parts, and each helps cover specific services. Part A is for hospital services, Part B covers doctor visits and outpatient services, Part C is Medicare advantage plans and Part D covers prescription drug costs. Part A is generally free if you or your spouse paid Medicare taxes for 10 years or more. The 2020 cost for Part B is approximately $145 per month (7 percent higher than 2019), and Part D depends on the prescription plan you choose (the national average is about $33 per month).  Seniors can also elect to purchase a Medicare supplement policy from private insurance companies to help fill the gaps of Part A and B (e.g., copayments, co-insurance and deductibles). According to recent studies, the average health insurance cost for single coverage premiums ranges from $200 to $400 a month. Finally, Part C is an Advantage Plan where you get coverage for Part A and B through a private insurance company with possible options, including prescription drugs, dental and vision insurance, and more.

Income Related Costs

You may have to pay additional costs for Parts B and D based on your income through an income-related monthly adjustment amount (IRMAA). Medicare claims that less than 5 percent of insureds are affected. The additional costs start at a modified adjusted gross income (MAGI) of $87,000 for single taxpayers and $174,000 for joint taxpayers for the upcoming year. Your MAGI is calculated by adding your Adjusted Gross Income and municipal bond income – consult your tax expert. Your cost is determined by your income two years ago. Depending on your income, the additional costs could range from about $500 to $4,000 annually for Part B and $150 to $500 annually for Part D.

Tips to Reduce IRMAA Costs

One of the biggest IRMAA planning opportunities considers your income levels before and after you retire. Medicare’s two-year look-back period could involve your highest income-earning years. But you can appeal Medicare’s IRMAA calculation if you’ve had a “life-changing event that significantly reduced your income” including the death of a spouse, work reduction or stoppage (including retirement), and more. Discuss eligibility with your tax expert and, if necessary, contact the Social Security Administration and appeal to use your current income instead of the two-year look-back income. Form SSA-44 might save you thousands of dollars.

Deciding which Medicare plan options are best for you can be confusing. Other issues you may encounter include when to enroll and how to incorporate other assets like health spending accounts. Be sure to consider needs like assisted living or custodial care. Keep a pulse on health policy developments like the recent executive order pushing for medical savings accounts and high deductible Medicare Advantage plans. Talk with your family and your trusted advisors to determine what’s best for you.

Secure your future wisely.

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