The divorce is being called the most expensive divorce in recent history, the divorce of Amazon CEO & Founder, Jeff Bezos and his wife.  While his divorce could be expensive, he will financially be able to survive the transition.  Some of us are not so lucky.  

Divorce is always hard on many levels. One of the things that is most important is the financial split of the couple’s assets. These assets include retirement benefits and investments. Figuring out how benefits should be divided, or if they are even able to be divided, can be a minefield if not navigated properly.

It is often that one of the spouses becomes the couple’s treasurer, but it is important that both partners are aware of the couple’s financial situation. This is especially true when it comes to investments. If one spouse was not as attentive to the tax responsibilities, it could affect the other spouse’s share. If the spouse was deceptive about the couple’s investments, this could make issues between the couple even worse. Hiring a forensic accountant can help find discrepancies or deceptive practices by the responsible spouse.

When it comes to retirement benefits, there are only certain things eligible to be split during a divorce. Those eligible are considered community property, and include things like military pensions, GI Bill benefits, IRAs, employee stock option plans, and 401(k) plans. Benefits that are not considered community property are Social Security benefits, Worker’s compensation, and any military injury compensation. It is often advised that if the spouse’s benefits are sizable that the other spouse should petition to split the benefits. Benefits are usually split by percentage instead of a money value in case the value of some of the benefits fluctuates between the time of evaluation and actual settlement.

There are some other exceptions and considerations when it comes to benefits. For instance, if a spouse invested money or started a 401(k) before the marriage and continued to pay into them during the marriage, the amount invested before the marriage must be deducted from the total amount before any valuation can be made.

When it comes to Social Security benefits, a couple must have been married at least 10 years for one spouse to have a claim to them. However, the claiming spouse cannot have their own Social Security benefit value exceed half of their spouse’s. If there is a possibility that a spouse will have a claim to the other’s Social Security benefits, they may request a delay in proceedings in order to pass the 10 year threshold. If the length of marriage is close to 10 years, the court may issue a continuance. If the spouse with the Social Security benefits dies after the proceedings are over, the surviving former spouse can collect 100 percent of their Social Security.

When married couples split up, the financial quandaries can be messy. Knowing the law, and getting advice from a financial expert is a good idea for both spouses involved. It is beneficial for both spouses to be well aware of the collective financial situation so surprising issues like back taxes or hidden assets can be avoided. Maintaining the financial futures of both former spouses is key to making sure the separation is a clean one with no resentment or animosity between those involved.

Congratulations you are closing in on your target retirement date!  While the bulk of your retirement prep work and heavy lifting should be completed by the time you’re still a couple of years from retirement, there’s still a few boxes you’ll want to check off before finally saying adios to the workforce. Let’s go through them.

1. Social Security Decision

You should decide when to collect Social Security benefits. The earliest age is 62. Unless you’re retiring early and need the benefits to help cover expenses like health insurance, it’s advantageous to wait. At 62, your benefits would be reduced by 25% or more. You won’t collect 100% of your benefits until you’re 66 or 67, depending on what year you were born. When you wait to collect, keep in mind that benefits increase by 8 percent/per year up until you’re age 70.

2. Get Your Finances Simplified

Do you have multiple brokerage accounts, savings accounts, checking accounts, 401(k)s, IRAs, and other retirement savings accounts? Perhaps, you’ve lost track of an account?

First, simplifying and consolidating your various small financial accounts into a larger one will make it easier for your heirs to step into control if you had a medical emergency, needed long-term care, or passed away.

Second, you can reduce paperwork, possibly save some cash, and better keep track of your set income to expenses ratio by having everything neatly confined. For example, aggregation with a single provider can offer some economies of scale like cheaper expense ratios.

Lastly, if you’ve lost track of an account, then you’re missing a piece of your financial pie that could make a big change in how retirement tastes. missingmoney.org and unclaimed.org are good places to start tracking lost and unclaimed funds.

3. Give Your Portfolio A Health Checkup

Ideally, your portfolio at this point should be moderate-risk.  If the stock market is causing you any worry, then talk to a Financial Advisor and be sure you are set up to protect your retirement.

4. Make A Plan With HR

Schedule a time to speak with your company’s human resources department about your retirement. Topics you’ll want to ask about include:

• Are unused vacation days paid upon retirement?

• Is receiving profit-sharing payouts, bonuses, 401(k) match, or any other income aspect impacted by your planned retirement date?

• If retiring before Medicare-age, what retiree health benefits are offered?

• If a 401(k) is left as-is verses rolling it over into an IRA, can distributions still be taken? How? Is there a fee?

• If a pension is available, what are the options for payout?

One note on lump-sum pensions to keep in mind is that extending your retirement may not increase your pension. Lump-sum pensions are calculated based on interest rates. The higher the interest rate, the lower the pension. Extending your retirement when interest rates are rising can actually result in your pension going down, not up.

5. Study Medicare Closely

Medicare is a difficult beast to navigate, and the sales pitches you get from supplement insurers only adds to the confusion. So, you’ll want to start studying now, understanding how it works, what coverage gaps exist for you, and what you need verses don’t need in supplements. Here are some highlights you’ll want to consider:

• Upon turning 65, Social Security beneficiaries are automatically enrolled in Medicare parts A (hospital care) & B (doctor and outpatient visits.) If you’re delaying your SS payment, then it’s up to you to enroll on your own.

• If delaying your SS claim and still covered by your employer’s health plan, then you’ll likely find it beneficial to go ahead and sign up for part A at age 65 since there’s usually not a premium.

• You may want to opt out of part B since it charges you a monthly premium for service.
You may also want to opt out of part D, which covers prescriptions. The caveat here is your employer’s offered insurance being as good as what Medicare offers. If not, and you select to opt out, then you’ll face penalties when you sign up in the future.

• To ensure you’re not left without coverage, plan to sign up for part B around six weeks prior to retirement. You have eight months after leaving your job to sign up for part B without penalty.

• Be deciding if you want Medicare Advantage. This is basically a combination of parts B & D with a supplemental medigap plan to cover the copayments, deductibles, and other traditional healthcare costs that Medicare doesn’t include. These plans provide private insurer medical and drug coverage within a network, meaning you’ll need to carefully research your plan options and determine if your preferred health care providers are in the offered network of a plan.

The finish line is just around the corner, but now isn’t the time to slack just yet. You’ll want to make sure these important boxes are checked so that you can retire in peace and confident you’ve worked all these years to afford.  Contact us to discuss your plan.

It’s not so uncommon when you hear someone who retired wanting to pack up their things and move. While it can be an exhilarating time, it can also be rather difficult, especially if their planning on buying a new house altogether.  Did you know that lenders are barred from discriminating against older people who are trying to apply for a loan? Despite having the advantage of not having to worry about discrimination, retirees are still going to face some difficult challenges in obtaining a mortgage.

Read on to learn a few tips about securing a mortgage while in retirement.

Purchasing a New Home Isn’t Always the Best Decision
Purchasing a mortgage is a huge undertaking for anyone, regardless of whether they work or not. Should someone even get approved for one, it’s not always the smartest financial decision to make. A lot of retirees these days have a lower income than they did while they were working. Due to this, many people tend to underestimate how long the money needs to last for them. Adding a mortgage payment can deplete what little money is there even faster, which can make it difficult to live comfortably.

Regardless of age potential home buyers need to do their homework.  Make sure you carefully evaluate your finances before applying for a mortgage. Buying a home involves a lot more than just the monthly payment. You also need to consider property tax and homeowner insurance. In addition, you need to plan for other monthly expenses, which include power, water and even unexpected medical bills.

In addition, remember to evaluate whatever debts you have as well. Having debt not only lowers your credit score, it can significantly hurt your chances of securing a mortgage. Finally, having too much credit can also work against you. It’s recommended that you utilize only 20 percent of your total credit. Lenders like to see that you know how to manage your credit responsibly.

Showing the Right Amount of Income
Having a job is not a requirement for applying for a mortgage and here’s why; any income that is received from pensions or a social security account will count. In addition to that, withdrawing from a retirement account is also counted. Aside from showing a stable income, retirees must also show a low debt-to-income ratio. It may not be a challenge for some people as this depends on how much they have to their name and how much income they have during their retirement.

Talk to a few lenders about the requirements they have when it comes to income and debt-to-income ratios before signing a mortgage application.

It’s important to keep in mind lenders look at a number of factors when you apply for a mortgage. They’ll want to look at your credit score, down payments and occupancy status. If you’re retired and looking to purchase a mortgage, make sure you’re prepared for it. 

2018 was an up-and-down year for many Americans. The stock market boomed, and then it busted. No one knows what is on the horizon for 2019, but it doesn’t hurt to set goals. Here are some financial goals that could help you get off to a great start in 2019.

Start an Emergency Fund
Whether you’ve retired or you’re a professional with many years of experience under your belt, you need an emergency fund. This is the first point of emphasis that many financial experts point to. If you have no emergency fund, you’ll likely have to go into debt when an unexpected expense pops up. A fund of $1,000 is a good start, but many of the same financial gurus that recommend having an emergency fund recommend building it up to between three and six months worth of expenses.

Get out of Debt
If setting up an emergency fund is the first recommendation from most financial experts, getting out of debt is a close second. Whether you look to pay off debt with the debt snowball that encourages people to pay off debts from the smallest to the largest balance or with the debt avalanche that takes interest rates into consideration, paying off debt can pay some serious dividends. If you’re able to retire debt early, you effectively get a rate of return that equals the interest rate that you might have been paying. For credit cards with interest rates of 15 percent or more, paying off the debt can be one of the best investments that you can make.

Read Five Personal Finance Books
This recommendation might be surprising, but those who want to learn about science in college have to read books on science. If you’re looking to improve your personal financial literacy, it’s a good idea to learn as much as possible about the topic. Much of the heavy lifting has already been done. There are financial experts who have gotten where you want to be, and many of them have written books. It’s a good idea to pick up a few and read them. If you have a local library, checking these books out for free would be the smartest option.  Don’t want to read or have the time to dive in to several paperbacks?   Start working with an experienced Financial Advisor to help guide you along the way.  We are here to help you.

Start Side Jobs
Side hustles are all the rage, and there’s a great reason why. The labor market has improved over recent years, but many people no longer have jobs that will comfortably pay their bills each month. One of the best ways to improve your financial standing is through a side job that brings in a few hundred dollars each month. A few hundred bucks could mean the difference between living paycheck-to-paycheck and building up a healthy emergency fund and paying off debt. All side job income should go toward improving your balance sheet each month. That means paying off debt or saving for retirement.

Improve Your Health
Surprised?  You shouldn’t be.  Americans are some of the least healthy people in the developed world. Exercise and healthy diets are not really the norm in the USA. This means that the United States has one of the lowest life expectancy levels in the developed world. Healthcare in the US is also more expensive than anywhere else in the world. For those who are looking to save money and build wealth, avoiding costly healthcare bills is an important step to take. Just deciding to incorporate a few minutes of exercise into your day can make a difference and can cut down on your risk of serious diseases that can cost a load of money.

These are just a few of the goals that could help you with your finances in 2019. Getting started with one or more could be the step that could radically change your life for the better in the coming year. There’s no time like the present to get started.

Arm yourself to save more for your retirement in 2019! The Treasury has announced inflation-adjusted numbers for retirement savings for 2019, as well as a lot of changes that will help investors stuff these accounts.

The amount which you could contribute to an Individual Retirement is being bumped from $5,500 up to $6,000 for 2019.  Also, the amount you can contribute to your 401(k) (or similar workplace) retirement plan goes up from $18,500 in 2018 to $19,000 in 2019.

That means that quite a few high earners and super-savers age 50-plus can sock away $32,000 during these tax-advantaged accounts. If your hiring manager allows after-tax contributions possibly you’re self-employed you can save double. The overall defined contribution product limit moves up to $56,000, from $55,1000. People who are over 50 and working can save up to $7,000 with the new contribution limit in place according to Market Watch.

Do these limits tend to be unreachable?  During 2017, 13% of employees with consideration plans at work saved the maximum of $18,000/$24,000, according to the Vanguard’s Strategies America Saves study. In opportunities offering catch-up contributions, 14% of those age 50 and older took advantage of the savings opportunity. The amount you should set aside will relate to how you want to live after retirement. Survive on the just the basics or play golf every day.  It‘s something each person will need to decide when setting up or making adjustments to their retirement account.

The annual contribution limit for workers who participate in 401(k), 403(b), most 457 plans, as well as federal government’s Thrift Reserves Plan, is $19,000 for 2019, a $500 increase over 2018.   You will need to elect the change to your 401(k) which some employers send you an indication to update your elections for the plan year. You should take that time to evaluate and make necessary changes as needed.

Strengthening the 401(k) contribution is great for savers, but not everyone takes advantage of it. About 10% of participants, according to Vanguard, maxed out their 401(k) in 2016.  

If you need guidance on your retirement plan or to get started, we are here to help.

Since 2008, stocks have rewarded investors with solid returns. Can equity investors count on a repeat of recent history? Well, precise predictions about the market are notoriously difficult to distinguish from luck, and very easy to justify in retrospect.

Risk Factors
This bull market started in 2009 and although it is an adage that “bull markets don’t die of old age”, it is also a bit foolish to assume things will go well simply because they have gone well.

Another factor to consider is industrial activity, often taken as a benchmark of economic health. Industry requires a healthy investment in capital as well as labor, it moves commodities and responds to widespread demand. Copper, being a widely used and necessary metal, provides another hint that things won’t go well for long with this stock market. As this reference shows, bouts of high copper prices sometimes correlate with recessions shortly afterward. This pattern held in the 2001 and 2008 recessions. Note how copper prices have hovered at around $3.15/pound since fall of 2017 and have fallen sharply to $2.66/pound in July 2018.  This sharp drop may be due to lax demand that hints at slowing construction and related business activity which heralds a stock market drop.

On the international stage, Chinese and European growth is becoming less and less impressive. Never-mind the tariff issue. Even without it there would be cause for concern as Chinese demand wavers in the face of ever-rising debt and inefficient use of capital by state-controlled agencies that are motivated by politics far more than by market-based rationality.

Lastly, note the low and flattening unemployment rate curve. Over time, one sees a pattern of a flattening dip that precedes recessions. The short and sweet explanation for this recurring phenomenon is that business costs are made of fundamental components: commodities or “parts” and labor. As more people are employed and job applicants have more bargaining power for wages and benefits, businesses, especially those operating on tight margins, have to either absorb the cost of rising wages, pass on the cost to consumers that are then dissuaded by rising prices, or forego the hire and skill sets/benefits that come with it. Every option is basically bad for profits, so, again, earnings and business activity slows down.

While stock markets don’t necessarily “die of old age”, prolonged economic expansions such as this one lower risk avoidance and encourage speculation by lenders and consumers who are assured that the good times will continue at least long enough for their purposes. The flattening yield curve, correlation with a copper peak and subsequent recessions, rising interest rates, and growing hiccups in the international markets could be enough to continue market volatility or tip the stock market down in 2019.  No one has a crystal ball to predict the future but it may be wise for some investors to plan for capital preservation as a priority over and above prospective gains.

Tax season comes quickly after the year comes to a close. In 2018, a few changes have occurred due to legislation that was created by the Tax Cuts and Jobs Act of 2017. One of the main changes was a lowering of tax rates and a near doubling of the standard deduction. Also, a number of expenses that were allowed as itemized deductions in previous years have been severely restricted or eliminated. It helps to understand which changes were made so that you can get ahead of preparing your return. Here are some of the changes that were made that may affect you in 2018:

Changes To Itemized Deductions

In 2018, tax bracket numbers stayed the same. However, rates were reduced. The tax rate at the top of the scale was lowered to 37 percent. While the standard deduction increased, other changes to allowable itemized deductions may mean that you will actually have a higher tax bill to pay.

Tax prep fees, investment expenses, foreign real estate taxes paid, home equity loan interest that wasn’t used for home improvement and personal exemptions are no longer allowable as itemized deductions. Alimony payments for any divorce that is finalized in 2019 or after will also be added to that list and be applicable in 2019.

A Change To Charitable Donations

Charitable donations can only be used as a deduction if you decide to itemize. However, if you do itemize and have any cash contributions that were made to public charities, those can be deducted by as much as 60 percent of their AGI, which is up 10 percent from the previous limit which was 50 percent.

Tax Reform Only Offers A Few New Opportunities

There was a change in 529 plans. You now have the ability to use as much as $10,000 per year from the plan to pay for tuition related to kindergarten through 12th grade. The advantage of using a 529 plan is that it provides tax-free withdrawals and tax-free growth at the federal level for all qualified expenses.

Another change involves S corporations, partnerships and sole proprietorships. If you own one of these businesses, you may be eligible for a 20 percent deduction. However, this deduction does have some contingencies related to the type of business and the amount of income received.

Changes To The Alternative Minimum Tax For Individuals

There were also changes made to the Alternative Minimum Tax (AMT) for individuals. If you are married and filing jointly, exemptions have been raised to $109,400. If you’re single your exemption has been raised to $70,300. These start to phase out at the $1 million level if you are a couple and $500,000 if you’re single.

What Is The Best Way To Prepare

It’s always a good idea to get stared as soon as possible before the end of the year to understand how any changes in the tax reform will affect your filing. It also helps to use a professional tax advisor or CPA who understands the nuances of the new tax act. You want to make sure that you pay the appropriate amount for estimated taxes or for your withholding tax for the year.

You have until December 31 to do a qualified charitable distribution (QCD) for 2018. This is an effective tax strategy that many individuals are overlooking. A QCD is worth considering if you are donating to charitable organizations and taking required minimum distributions (RMDs) this year.  With the increase in the Standard Deduction, many people (specifically Retirees) won’t be itemizing. If you plan to give to charity and you’re over 70 & ½ , using a QCD can be an efficient way to accomplish your charitable giving goals while being tax efficient.
If you are an owner or beneficiary of an IRA and you are at least 70 ½ years old, you can make a QCD, unless you intend to distribute funds from a Roth IRA. Read on to learn about the advantages and stipulations of QCDs.

Tax Break on Giving Back

Thanks to tax reforms, QCDs are more beneficial than ever for the 2018 tax year. If you take the standard deduction, you would be eliminating your tax deduction for gifts to charity since you would not be itemizing deductions. You can get a tax break for this year’s charitable contributions with a QCD.

Lower AGI

You can add a QCD to the standard deductions. It lowers your AGI by allowing you to deduct charitable donations disbursed from your IRA from your income.

QCD Limits

The annual limit is $100,000 per individual. Married couples can both quality, each contributing a QCD of $100,000 each year. However, you will not be able to take a tax deduction for the charitable gift.

How to Make a QCD

You must make your QCD as a direct transfer from the IRA to the nonprofit of your choice. You could also have the IRA issue a check made payable to the your preferred organization. If you receive a distribution, you are not allowed to forward those funds to your charity.

You can make a QCD from IRA, Roth IRA, SIMPLE IRA, or inactive SEP. However, you are not allowed to do a QCD from any employer plan. QCDs can only apply to taxable amounts in your retirement account. Because of this exception to the pro-rata rule that typically applies to traditional IRA distributions, Roth IRA QCDs are not common.

What about RMDs?

The amount you transfer from your IRA to your nonprofit as a QCD will count toward your RMD for 2018. Your QCD may help you meet all or a portion of your RMD. For instance, if your 2018 RMD is $20,000, you can withdraw $10,000 and do a $10,000 QCD.

How to Report on Tax Return

To report a QCD on your tax return, report the total amount of the donation on the line for IRA distributions. Enter “zero” on the line for the taxable amount if the entire amount was a QCD, and enter “QCD” next to the line. You can find more information in the Form 1040 instructions.

You will be required to file Form 8606, Nondeductible IRAs if:

-the QCD is disbursed from a Roth IRA; or

-you make the QCD from a traditional IRA in which you have basis and receive an IRA distribution during 2018.

Words of Caution

You must not receive any remuneration of any kind — financial, gift, or otherwise –for the donation. QCDs do not include gifts to private foundations or donor advised funds.

If you plan to do a QCD for this year, inform your tax preparer. The 2018 Form 1099-R that you will receive from the IRA custodian will not likely have any information regarding a QCD if the donation is made close to the end of the year. Make them aware of the the disbursement to prevent any oversight.

Failing to take your RMD exposes you to penalties of up to half of the amount you were supposed to have taken. QCDs allow you to donate to your favorite causes tax-free, help you meet your RMD, and avoid the stiff and unnecessary cost of not using your money. You still have time to tap into this tremendous opportunity.

Yes, saving for retirement and planning for income is important but so is planning for the unexpected.  It is incredibly easy to get caught up in the present and not think about how much one needs to take care of themselves in the future.  This is why retirement planning is more about planning for all aspects of your retirement years and now just about income.

As one ages, the amount that they have to spend to take care of themselves will likely increase. For those entering the old age, these payments tend to be significantly more. Medical bills and housing costs increase with time. In short, everything becomes more expensive over time, and your earnings in the present need to be able to take care of your needs in the future.

Doing the math and figuring just how much you can save for the future is essential, even as one starts their career. People who are in well-paying jobs and who are more than well situated for their futures to decide to start planning early to take care of their lives in advance. To understand the importance of planning early, here are some of the prominent statistics that have been derived after a thorough analysis of the earnings that people have and the costs associated with them as a result of their savings.

1. 52% of the total population above the age of 65 are in need of specific resources that can aid them with their medical bills and additional care. As a person ages, they tend to encounter a lot more health problems than those who are younger and healthier. This means that when planning for one’s future, they have to take into account certain costs that are associated with medical bills and care costs.

2. 14% of the total population need long-term care for more than five years. This again is because of the prevalent health issues that people within this category tend to face. Persistent health issues and conditions often need a lot more tending to, especially in the later stages of one’s life, and planning for this future is incredibly important for anyone who wants to get treated for their conditions.

3. 10% of Americans over the age of 65 have developed some form of neurological disorders, or have been diagnosed with Alzheimer’s or Parkinson’s. These are disorders in which individuals need round-the-clock care, and a lot of treatments to get better. Since these aren’t cheap by any means, paying for them can burn one’s pocket rather easily.

4. 57.5% of the population who are above the age of 65 years tend to spend around $250,000 on long-term care. As the number of disorders that people face tends to increase, the expenditure on medical costs also tends to go up. Americans generally spend incredible amounts on health care, and these costs are only going to grow over the next few years.

5. 3.8% is the amount of inflation that nursing rooms tend to experience every five years. This means that over the years, the amount that one is going to need to spend on a simple room to take care of themselves is only going to increase. Since these become a necessity in many instances, it becomes important for an individual to plan properly for the future.

We are here to help you plan for the road ahead.  Contact us, today.