Retirement Planning

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Annuity Basics

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Contributed by: Kali Hassinger, CFP® Kali Hassinger

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An annuity is a contract between you, the purchaser or owner, and an insurance company, the annuity issuer.  In its purest form, you pay money to an annuity issuer, and the issuer eventually pays the principal and earnings back to you or a named beneficiary.  Life insurance companies first developed annuities to provide income streams to individuals during retirement, but these contracts have since become a highly criticized investment vehicle.  The surrender periods, fees, and endless annuity products on the market make it difficult for retail investors to understand contracts, let alone feel confident that it's the best option available for their situation.  There are of course pros and cons to consider when entering into an annuity contract, and it's especially important to understand the basics of what an annuity offers. 

Annuities are categorized as either qualified or non-qualified. 

Qualified annuities are used similarly to tax-advantaged retirement plans, such a 401(k)s, 403(b)s, and IRAs.  Qualified annuities are subject to the same contribution, withdrawal, and tax rules that apply to these retirement plans.  That may make you question why someone would use a qualified annuity at all!  If you are merely looking for tax-deferral, a qualified annuity probably doesn't make sense in connection with your retirement account.  However, depending on your goals, there are aspects of a qualified annuity that are not available with traditional retirement plans, such as a living income benefit guaranteed by the insurance company and an additional death benefit. 

One of the attractive aspects of a non-qualified annuity (which means the money deposited has already been taxed), on the other hand, is that its earnings are tax-deferred until you begin to receive payments or make withdrawals. During the period before withdrawing funds, the non-qualified annuity is treated similarly to your typical retirement plan.  The same age requirement is enforced, which means that if you access this account before age 59 ½ there is still a 10% tax penalty on a portion of the withdrawals.  The difference between a qualified and non-qualified annuity becomes apparent, however, when the withdrawal or annuitization payments begin.  Only the part of these payments that represents investment or account growth is taxed at ordinary income tax rates.  When annuitizing a contract, there is an "exclusion ratio" that means each payment represents both a portion of your initial investment and a portion of your investment returns.  This means that the entire payment received isn't taxable to you – only the percentage that represents an investment gain. 

Beyond the categories of qualified and non-qualified annuities, you can then classify annuities into fixed and variable contract options.

A fixed annuity functions similarly to a bank CD.  You make a deposit, and the insurer will pay a specific interest rate over a specified period.  A variable annuity, on the other hand, allows a contract holder to invest the funds in annuity subaccounts or mutual funds.  Insurance companies can offer income riders as an additional benefit to their annuities.  These riders typically have a guaranteed income growth rate, and they will increase the overall cost of the contract. 

It is important to understand that annuities, although they can be an effective savings tool, are not right for everyone.  Most deferred annuity contracts are designed to be long-term investment vehicles and can penalize the contract holder for making early withdrawals.  If an annuity seems like it would fit within your overall financial picture, it is essential to consider which annuity products are appropriate and how to utilize them within your investment portfolio. 

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger, CFP® and not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors.

With variable annuities, any withdrawals may be subject to income taxes and, prior to age 59 1/2, a 10% federal penalty tax may apply. Withdrawals from annuities will affect both the account value and the death benefit. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. An annual contingent deferred sales charge (CDSC) may apply.

A fixed annuity is a long-term, tax-deferred insurance contract designed for retirement. It allows you to create a fixed stream of income through a process called annuitization and also provides a fixed rate of return based on the terms of the contract. Fixed annuities have limitations. If you decide to take your money out early, you may face fees called surrender charges. Plus, if you're not yet 59½, you may also have to pay an additional 10% tax penalty on top of ordinary income taxes. You should also know that a fixed annuity contains guarantees and protections that are subject to the issuing insurance company's ability to pay for them. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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Tax Reform Series: Business & Corporate Tax, and Pass-Through Entities

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Contributed by: Timothy Wyman, CFP®, JD Tim Wyman

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The Tax Cuts and Jobs Act (TCJA) is now officially law. We at The Center have written a series of blogs addressing some of the most notable changes resulting from this new legislation. Our goal is to be a resource to help you understand these changes and interpret how they may affect your own financial and tax planning efforts.

The elimination of the corporate Alternative Minimum Tax (“AMT”) and a new single 21% tax rate provides significant tax savings for corporations. In general, this is viewed by most as a net positive, at least in the shorter term, for earnings that can influence stock prices and the overall economy.

The purpose of this blog post is to focus on how the TCJA provisions may affect our clients that own businesses and specifically Pass-Through Entities such as partnerships, LLCs, or S corporations.

At this early stage, we see a few potential opportunities and potential trends:

  • Many business owners will want to review the appropriate legal structure of their company in 2018.

  • Pass-Through entities may see significant tax reductions

  • Due to the “Pass-Through entity” changes discussed below, some employees will likely consider becoming independent contractors

  • Large service businesses may consider converting to C corporation status

Pass-Through Entities

Pass-Through entities general include partnerships, LLCs, and S corporations.  Essentially, the net income from the business flows through to the owners; meaning they pay federal income tax at their personal marginal rate, as high as 39.6% in the past.

The good news is that many of these entities, and therefore their owners, will experience meaningful reduction in income taxes. The quid pro quo is that the tax system in this area has become more complex.

How might Pass-Through Entities benefit?

The TCJA provides for a 20% deduction on what is termed Qualified Business Income (“QBI”).  In the end, those that would normally be taxed at the new highest marginal rate of 37% may pay at a top rate of 29.6% (80% of their rate). The chart below, from www.Kictes.com, illustrates the lower Pass-Through rate at different income levels.

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As you might expect, the devil is always in the details. Do all Pass-Through entities receive said benefits? What exactly is considered Qualified Business Income? In addition, will the provisions truly be “permanent” to name a few. To further complicate the issue, the actual deduction will be claimed on the business owner’s personal tax return and not as an above the line deduction or itemized deduction.  Essentially, the affect is that it will not lower Adjusted Gross Income (which can have an effect on taxation of social security, Medicare premiums, and deductibility of some itemized deductions).  On the plus side, this method of reporting will not affect the ability to take the new increased standard deduction if that is of greater value than your itemized deductions.

Ok, what is the big deal? Paraphrasing commentator Michael Kitces, “for the first time ever, self-employed individuals (either as sole proprietors or as owners of partnerships, LLCs, or S corporations) will have a lower tax rate than employees doing substantively similar work, thanks to the 20% QBI deduction.” 

Switch to Independent Contractor status? Proceed with Caution

As you might imagine, the new rules contemplate and try to prevent owners from simply reclassifying their income or wages to benefit from the 20% deduction. Much like under current rules covering social security taxes, “reasonable compensation” to an S corporation owner does not qualify for the 20% deduction. Additionally, there are other limits that are beyond the scope of this article designed to reduce the 20% deduction that generally come into play once the owner’s taxable income exceeds $157,500 for individuals or $315,000 for married couples and become totally phased out at $207,500 and $415,000 respectively.

A special note to our Medical, Legal, Accounting, and Consulting Clients:

Your lobbying groups were not as effective as those representing engineers and architects! The TCJA defines your business as a “specific service trade or business” and special rules apply that essentially limit or eliminate a Qualified Business Income Deduction.  By the way, this also includes financial services practices such as ours. The law is designed to exclude “any other trade or business where the principal asset of the business is the reputation or skill of 1 or more of its employees.” As a result, some commentators have opined that large service business may consider converting to a C corporation as the top corporate rate is now 21%.

How are specific service trade or businesses affected? If you are a specified service business and your taxable income exceed the thresholds described above ($207,500 for individuals and $415,000 for married couples filing jointly), then you lose the deduction completely. This means you are subject to the old pass-through rules and therefore pay tax at your individual tax rate.

We hope that you enjoyed our early take on the changes that will likely affect businesses and specifically Pass-Through entities. While tax simplification it is not, many business owners should experience a net gain.   We will continue to monitor the tax landscape, including any Technical Corrections to the legislation and look forward to working with you in 2018.

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc.® and is a contributor to national media and publications such as Forbes and The Wall Street Journal and has appeared on Good Morning America Weekend Edition and WDIV Channel 4. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), mentored many CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Timothy Wyman and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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Tax Reform Series: Changes to Charitable Giving and Deductions

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Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

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The Tax Cuts and Jobs Act (TCJA) is now officially law. We at The Center have written a series of blogs addressing some of the most notable changes resulting from this new legislation. Our goal is to be a resource to help you understand these changes and interpret how they may affect your own financial and tax planning efforts.

If you’ve heard the charitable deduction is going away under the Tax Cuts and Jobs Act of 2017, you are certainly not alone – this is a common misconception under our new tax code.  To be perfectly clear, gifts to charity are certainly still deductible!  However, depending on your own tax situation; your deduction may not provide any tax savings due to the dramatic increase in the standard deduction moving into 2018: 

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Standard Deduction vs. Itemizing Deductions

Think of the standard deduction as the “freebie deduction” that our tax code provides us, regardless of our situation.  If you add up all of your eligible deductions (state and local tax, property tax, charitable donations, medical expenses, etc.) and the total happens to exceed the standard deduction, you itemize.  If they fall short, then you take the standard deduction.  Pretty simple, right?

With the standard deduction nearly doubling in size this year, many of us who have previously itemized deductions will no longer do so.  Let’s take a look at how this change could impact the tax benefit of your charitable donations:

Example

Below is a summary of Mark and Tina’s 2017 itemized deductions*:

  • State and Local Taxes = $6,600

  • Property Tax = $6,000

  • Charitable Donations = $5,000

  • Total = $17,600

  

Because the standard deduction was only $12,700 for married filers in 2017, Mark and Tina itemized their deductions.  However, the only reason why they were able to itemize was due to the $5,000 gift they made to charity.  If they didn’t proceed with their donation, they simply would have taken the standard deduction because their state and local tax along with property tax ended up being only $12,600 – $100 shy of standard deduction for 2017 ($12,700).  Their gift to charity created a tax savings for them because it went above and beyond the amount they would have received from the standard deduction!

For the sake of our example, let’s assume Mark and Tina had the same exact deductions in 2018.  It will now make more sense for them to take the much larger standard deduction of $24,000 because it exceeds the total of their itemized deductions by $6,400 ($24,000 – $17,600).  In this case, because they are taking the standard deduction, there was no direct “economic benefit” to their $5,000 charitable donation. 

*This is a hypothetical example for illustration purposes only. Actual investor results will vary.

Planning Strategies

Because many clients who previously itemized will now take the larger standard deduction, reaping the tax benefits for giving to charity will now require a higher level of planning.  For clients who are now taking the standard deduction who are charitably inclined, it could make sense to make larger gifts in one particular year to ensure your charitable deduction exceeds the now larger standard deduction. Or, if you’re over the age of 70 ½, the Qualified Charitable Distribution (QCD) could be a gifting strategy to explore. Of course, we would want to dig deeper into this strategy with you and your tax professional before providing any concrete recommendations. 

For most of us, the number one reason we give to charity is to support a cause that is near and dear to our heart.  However, as I always like to say, if we can gift in a tax efficient manner, it just means additional funds are available to share with the organizations you care deeply about instead of donating to Uncle Sam. 

Don’t hesitate to reach out to us for guidance surrounding your gifting strategy, we are here to help!

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick works closely with Center clients and is also the Director of The Center’s Financial Planning Department. He is also a frequent contributor to the firm’s blogs and educational webinars.

The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

 

 

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Tax Reform Series: Changes to the Mortgage Interest Deduction (including home equity loans/LOC implications)

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The Tax Cuts and Jobs Act (TCJA) is now officially law. We at The Center have written a series of blogs addressing some of the most notable changes resulting from this new legislation. Our goal is to be a resource to help you understand these changes and interpret how they may affect your own financial and tax planning efforts.

Washington has been busy and after many twists and turns sweeping tax reform was signed into law on December 22, 2017.  There are key changes for homeowners regarding the mortgage and home equity line of credit (HELOC) interest deductions.

Mortgage

If you own a home, mortgage interest is still deductible. The debt cap of deductibility, however, has been lowered.  The new cap limits interest deductibility to the first $750,000 of debt principal.  Debt principal refers to acquisition indebtedness or loans used to acquire, build, or substantially improve a primary residence.  The new $750,000 cap is a reduction from $1,000,000 and an additional $100,000 of home equity debt. 

  • The reduction to $750,000 expires December 31, 2025 and reverts back to $1,000,000 beginning in 2026.

  • Mortgage debt incurred before December 15, 2017 is grandfathered under the $1,000,000 cap

  • In the future, a mortgage refinance for debt incurred prior to December 15, 2017 will retain the $1 million debt limit (but only for the remaining debt balance and not any additional debt). In addition, any houses that were under a binding written contract by December 15th to close on a principal residence purchased by January 1, 2018 (and actually close by April 1st) will be grandfathered.

Home Equity Line of Credit (HELOC)

Home equity lines of credit give homeowners the ability to borrow or draw money using equity in the home as collateral.  New restrictions mean that home equity loan interest is not necessarily eligible for a deduction. 

While you may have read that interest on HELOC’s is no longer deductible, this is only if the loans are cash out or for purposes other than home purchase or improvement.  It’s important to note that deductibility is not based on whether the loan is a home equity loan or home equity line of credit. Instead, the determination is based on how the proceeds are used.

  • If the money is used to consolidate debt, pay for college or used for any other personal spending not associated with home acquisition or substantial improvement, the interest is not deductible; without grandfathering.

  • Interest on a HELOC up to the total $750,000 cap that is used to build an addition or substantially improve the home is deductible for taxpayers that itemize.

We are here to assist in any way we can.  This summary of mortgage and HELOC interest deductibility changes highlights key areas to keep in mind for 2018 tax planning.  If you have any questions regarding your personal situation, don’t hesitate to contact us.

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc.® In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie is a member of the Leadership Oakland Alumni Association and is a frequent contributor to Money Centered.

The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Laurie Renchik and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Raymond James Financial Services and your Raymond James Financial Advisors do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified Raymond James Bank employee for your residential mortgage lending needs.

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Tax Reform Series: Changes to State and Local Income Tax

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Contributed by: Matthew E. Chope, CFP® Matt Chope

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The Tax Cuts and Jobs Act (TCJA) is now officially law.

We at The Center have written a series of blogs addressing some of the most notable changes resulting from this new legislation. Our goal is to be a resource to help you understand these changes and interpret how they may affect your own financial and tax planning efforts.

The original proposals for tax reform would have completely eliminated any deductions for taxes paid to a state or local government, including local property taxes.

 “State And Local Tax” (SALT) provision varied, and controversially was projected to have a disproportionate impact on states with big cities with high state and local tax rates (like New York, California, and Maryland have some of the highest state income tax rates, and therefore the higher state income tax deductions).  Many people in these states are considering moving to lower taxed states due to this tax law change.

However, in the final version of the Tax Cuts and Jobs Act of 2017, households will be given the option to deduct their combined state and local property and income taxes, but only up to a cap of $10,000. Notably, it is a $10,000 limit on the combined total of property and income taxes, not $10,000 each! The $10,000 limit applies for both individuals and married couples (which is an indirect marriage penalty for high-income couples), and is reduced to $5,000 for those who are married filing separately.

In addition, to prevent households from attempting to maximize their state and local tax deductions in 2017 before the cap takes effect in 2018, the new rules explicitly stipulate that any 2018 state income taxes paid by the end of 2017 are not deductible in 2017 and instead will be treated as having been paid at the end of 2018. However, this restriction applies only to the prepayment of income taxes (not to property taxes), and applies only to actual 2018 tax liabilities.  

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc.® Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions.

This information has been obtained from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional.

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Tax Reform Series: Changes to Standard Deduction, Personal Exemption, Misc. Deductions, and the Child Credit

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Contributed by: Matt Trujillo, CFP® Matt Trujillo

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The Tax Cuts and Jobs Act (TCJA) is now officially law. We at The Center have written a series of blogs addressing some of the most notable changes resulting from this new legislation. Our goal is to be a resource to help you understand these changes and interpret how they may affect your own financial and tax planning efforts.

Key Highlights:

  • Personal exemptions, which were previously used to reduce adjusted gross income, have been eliminated entirely

  • The standard deduction has been increased to $12,000 for single filers (previously $6,350) and $24,000 for joint filers (previously $12,700)

  • Several deductions that used to be available to tax filers that itemized their deductions have been eliminated or reduced such as:

    • The deduction for state and local taxes is now capped at $10,000 as opposed to the unlimited amount that was deductible under previous tax law

    • Lowers the threshold for mortgage interest deductibility; now only the interest on debt up to $750,000 is eligible to be deducted as opposed to $1,000,000 under previous tax law

    • Miscellaneous itemized deductions have been eliminated entirely as a category; these deductions included things like unreimbursed business expenses, tax preparation fees, and investment fees.

  • The child tax credit is expanded to $2,000 per child and is refundable meaning even if you have zero tax liability you can still get a check back from the IRS for this credit

    • This credit was previously $1,400 per child and would begin to phase out for joint filers at $110,000 of adjusted gross income; the credit now doesn’t begin to phase out until you reach $400,000 of adjusted gross income (for joint filers)

If you are curious to know more about how the changes may impact your specific situation please contact our office to discuss!

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc.® Matt currently assists Center planners and clients, and is a contributor to Money Centered.

The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

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Tax Reform Series: Changes to Federal Income Tax Brackets

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Contributed by: Robert Ingram Robert Ingram

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The Tax Cuts and Jobs Act (TCJA) is now officially law. We at The Center have written a series of blogs addressing some of the most notable changes resulting from this new legislation. Our goal is to be a resource to help you understand these changes and interpret how they may affect your own financial and tax planning efforts.

The TCJA brings many changes to both corporate and individual tax laws in 2018.  You may be asking yourself, “what do these changes mean for me?” A good place to start may be with the new personal income tax brackets.

How tax brackets work

When calculating our Federal tax liability on regular income, we apply a tax rate schedule to our taxable income. The taxable income is a filer’s income after any adjustments and exclusions (adjusted gross income) and after subtracting applicable deductions and exemptions. Specific rates are then charged on different ranges of income (tax brackets) as determined by tax filing status. Currently, in 2017 there are 7 brackets where the rates are 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. The tax bracket structures and how the taxes would be assessed for two of the most common filings statuses (single and married filing joint returns) are as follows:

Current 2017 Individual & Married Tax Brackets

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Under the current 2017 tax brackets, for example, a married couple filing jointly with taxable income of $150,000 would have the first portion of their income up to $18,650 taxed at 10%.  The amount from $18,651 up to $75,900 would be taxed at 15% and then the remaining amount of their income from $75,901 up to the $150,000 would be taxed at 25%.

What is changing?

While the House of Representatives’ original tax reform proposal would have consolidated the 7 brackets down to 4, the final Tax Cuts and Jobs Act retains 7 brackets but reduces the tax rates on most the brackets by a couple of percentage points and adjusts the income ranges within them.  The examples for those filing as single and for married couples filing jointly are below.

New 2018 Individual & Married Tax Brackets Under the TCJA

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If the bracket rates are generally lower, does that mean my taxes will be lower?

Well, the good news is that the answer is…maybe.

If taxpayers apply the new tax rates in 2018 to the same level of taxable income they would have in 2017, many people would see a lower overall, effective tax rate on that taxable income. (Good news, right?)  However, other changes outlined in the TCJA, such as the new standard deduction amount, the elimination of the personal exemptions, and the cap on the amount of state and local taxes that are deductible could have an impact on your taxable income amount.  As a result, the actual taxes applied may or may not see as much of a reduction. 

Ultimately, how your own tax situation may change in this new tax landscape will depend on a combination of factors and decisions.  It is important to consult with your advisors.  As always, if you have any questions surrounding these changes, please don’t hesitate to reach out to our team!

Robert Ingram is a Financial Planner at Center for Financial Planning, Inc.®

This information and all sources have been deemed to be reliable but its accuracy and completeness cannot be guaranteed. Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax matters. Tax matters should be discussed with the appropriate professional.

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Is it Time to Re-Imagine Your Retirement?

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Contributed by: Sandra Adams, CFP® Sandy Adams

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You are sitting with your financial planner discussing the cash flow projections for your upcoming retirement at the beginning of 2019.  You seem to have everything in place — you and your spouse are maximizing your retirement contributions at work and you are able to save additional funds into an HSA, as well as into individual IRAs and a sizable amount into your after tax investment account.  You have already been trying to live on one of your salaries — simulating what you expect to spend in retirement — and things are running smoothly.  Your estate planning is up-to-date and you have recently been approved for Long Term Care Insurance.  All of the technical aspects of your upcoming retirement seem to be in place.  There is nothing more to do except work your final year and get ready to “hang up the spurs”.  Right?

It just so happens that there might be a little bit more to preparing for retirement that the “technical” side of the planning. The transition you are about to embark on is one that will take some planning from a personal standpoint.  You won’t just wake up the first day of your retirement and know what to do.  In fact, many clients feel somewhat lost at first. 

We recommend intentionally giving some thought, or re-imagining, what you want your retirement to look like:

  • Give some real time and attention developing a “Bliss List,” or list of goals, dreams and desires that you would like to achieve in your retirement years will get you started. Once you have your list, you may need to build out some specifics: when, how much time, how much money, other resources and people that need to be involved.

  • Some of the things on your list may require you to start NOW to put in some practice, lay some groundwork, or make some connections so that you can hit the ground running when retirement day arrives. (i.e. hobbies, volunteer work, a new charitable business venture).

  • Coordinate your list with your spouse to make sure your list is feasible (from a time and money standpoint) and that it works for both of you. You want to make sure you have room for both your individual goals and your joint goals to make things work for your dream retirement.

The transition into retirement can be a bumpy one if you haven’t planned well both on the technical side AND on the personal side. The Center planners are trained to help you with both sides of this planning, and have the tools and resources available to assist you. If you are approaching retirement and find that you need assistance with either the technical or the personal side of retirement (or both), don’t hesitate to give us a call.  We are here to help!

  

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc.® Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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2017 Year-End Financial Planning

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Contributed by: Josh Bitel Josh Bitel

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With the fourth quarter upon us, tedious tasks like assessing your financial situation can often fall by the wayside.  With that in mind, this is a good time for us to share some important items to consider before the end of the calendar year. Here are a few things to consider before you take on 2018.

Establish or tighten up your emergency fund.

As we often recommend, keeping three to six months worth of expenses saved in an easily liquidated and accessible account can protect you against any unforeseen perils that may arise. Getting an emergency fund in place before the year wraps up is a great way to jump-start your budget for 2018.

Check your flexible Spending Account

Make sure you don’t end the year with a balance inside your FSA plan. Most of these plans have a ‘use it or lose it’ feature. So if you’re putting off that pesky doctor’s visit or are overdue for a new pair of prescription glasses, use your pre-tax dollars you’ve elected to cover these expenses!

Review your retirement accounts to make sure you’re on track to maximize your contributions

Whether it is an IRA account, either traditional or Roth, or an employer sponsored plan, the end of the year is a great time to assess your contributions and make sure you’re on track to meet your goals. This is important for your tax situation as well, as you may be able to deduct contributions to certain retirement plans. Although IRA accounts can be funded up until April 15th of the following year (up to $5,500 if you’re under age 50), it’s never too early to make sure you’re on track!

Give a tax-deductible charitable contribution

The end of the year is a time when we’re all thinking about giving. If you are charitably inclined, the end of the year is a great time to donate to any causes you are passionate about so you can receive a write off on your taxes for 2017. Don’t forget, donating appreciated securities from a taxable account is often more advantageous for you and the cause you believe in! Make sure you are making this donation for something you really believe in and not just for the potential tax write-off, the holiday season is a great time to asses this.

As always, in regard to your financial life, we are here to assist in anyway we can. These are just a few of the things you should keep in mind as the year wraps up. If you have any questions regarding your personal situation, contact us here at The Center for Financial Planning.

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®

Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional.

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Webinar in Review: Year-End Tax Planning

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Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

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On November 14th, Melissa Joy, CFP® and I hosted The Center’s annual Year-End Tax Planning Opportunities and Strategies webinar which continues to be one of our best attended discussions throughout the year.  In 2016, Melissa and I hosted the webinar two days after the presidential election and this year, the presentation was held several days after the latest GOP tax reform proposal.  Needless to say, it’s been a great chance for our team to share timely updates with clients and strategic partners! 

If you weren’t able to attend the webinar live, we’d encourage you to check out the recording below.  Here are a few key points and takeaways from our discussion:

Potential Tax Reform Highlights  

  • Moving from seven tax brackets down to three or four: 12%, 25%, 35% and 39.6%

  • Elimination or caps on popular deductions:  State and local taxes, medical expenses, student loan interest, mortgage deduction cap, property tax cap

  • Larger standard deduction (almost doubling from $12,700 for married filers to $24,000)

  • Repeal of Alternative Minimum Tax (AMT)

  • Corporate tax reduction (moving down to 25%)

  • Estate tax exemption (almost doubling from $5.5M to $11M, with the goal of repealing the estate tax completely within 6 years)

2018 Updates

  • Social Security Cost of Living Adjustment (COLA), Medicare premium adjustments, retirement plan contribution and income limit adjustments, etc.)

Retirement Planning   

  • Evaluate your savings rate moving into the new year and if you’re not maxing out your 401k ($18,500 or $24,500 if over the age of 50), consider increasing your savings percentage by 1% - 2% each year

  • Work with your advisor to determine if the Traditional (pre-tax) or Roth (after-tax) retirement vehicles makes sense for your situation given your current and projected future tax bracket  

Charitable Giving

  • Consider utilizing a Donor Advised Fund to gift appreciated securities from a brokerage account – allows you to take a tax deduction and also avoid paying capital gains tax

  • Consider utilizing the Qualified Charitable Distribution (QCD) if you’re over the age of 70 ½ - allows you to gift funds directly to charity from your IRA

Investment Planning  

  • Review your allocation before year end to see if your mix between stocks and bonds is appropriate for your situation

  • Consider the asset location of your portfolio to potentially improve after-tax returns

  • Consider proactive planning such as tax-loss harvesting

As mentioned during the webinar, don’t forget to check out our Year-End Planning Opportunities guide in the resources portion of our website.  This guide acts as a helpful tool to help organize your financial picture before year and also provides further insight on retirement planning strategies to consider as well as a detailed overview of proposed tax reform.  Please feel free to contact your financial planning team at The Center with any questions or concerns, we’re here to help.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick works closely with Center clients and is also the Director of The Center’s Financial Planning Department. He is also a frequent contributor to the firm’s blogs and educational webinars.

This information is being provided for educational purposes only and is not intended as specific tax or investment advice. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

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