Carol Somoano, MBA, CFP®Financial Advisor Carol Somoano, Vice President of Asset Planning Inc., is a Certified Financial Planner, CFP®, and is responsible for portfolio and financial plan analysis. Before Carol joined API, Inc in 2005 she worked as a management accountant for 15 years before deciding to concentrate on financial planning.  Car...ol obtained her B.S. in accounting from Cal Poly Pomona and her MBA from Cal State Fullerton.  She completed the UCI Financial Planning program and passed the CFP exam in March of 2004.  She is also a Notary Public and Realtor®.  She is an active member of the Orange County Financial Planning Association and has participated in the OC Register Annual Financial Planning Hotline.  She is an active volunteer in her community and has received an Honorary and Continuing Service Award from the California State Legislature in 2003 and 2007. Carol’s core values are client-focused, emphasizing long-term relationships built on confidence and trust.  She works diligently to increase her client’s net worth, plan for their future, and ultimately enhance their lives today. Carol's hourly financial planning rate is $250. Carol's portfolio management fee is a maximum of 1% and is discounted for portfolios over $250,000. PH: 714-827-5794 | Email Carol  More

2019 Medicare and Social Security Changes

Medicare just released the new premiums, deductibles and coinsurance amounts for 2019.

The standard monthly premium for Medicare Part B enrollees will be $135.50 for 2019, an increase of $1.50 from $134 in 2018.

The annual deductible for all Medicare Part B beneficiaries is $185 in 2019, an increase of $2 from the annual deductible $183 in 2018.

If your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount, you'll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA)

Here is a chart for reference

Medicare Premium Chart 2019

Social Security announced that in 2019 there will be a 2.8% Cost of Living Adjustment(COLA).

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Wedding Bells!

Kats Wedding Family Web

From left to right-Kimberly, Dexter, me, Kat, Luke, Jorge, Kyle

The highlight of my summer was the wedding of my youngest daughter, Kat, to my new son-in-law, Luke. They were married at Old Ranch Country Club in Seal Beach and it was a beautiful day! He is from Australia and we had quite a fun wedding with the visiting Aussie relatives. The whole family was involved in the wedding, even Dexter (our dog) – he was the flower dog! The planning and details that go into planning a wedding are intense and if you ever need any referrals for photographer, florist, etc. just let me know. We had a great team.    

 

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Tax Reform: Summary of Changes

President Trump signed the tax reform bill this morning. Most provisions are set to take effect in 2018, but many of those are also set to expire or sunset in 2025. Here's a summary of what we think are the major changes that will affect our clients. We will have a more in-depth analysis and summary in our year end newsletter.

1. Reductions in individual tax rates. The bill retains the current structure of seven investor tax brackets, but lowers five of them. It also includes the sunset provision, meaning it's a temporary arrangement from 2018 to 2025.
Here's the breakdown of the new vs. current marginal tax rates:

Current Marginal Tax Rate

Proposed Marginal Tax Rate

Income Level (Single Filers)

Income Level (Couples Filing Jointly)

10%

10%

$0 -- $9,525

$0 -- $19,050

15%

12%

$9,525 -- $38,700

$19,050 -- $77,400

25%

22%

$38,700 -- $82,500

$77,400 -- $165,000

28%

24%

$82,500 -- $157,500

$165,000 -- $315,000

33%

32%

$157,500 -- $200,000

$315,000 -- $400,000

35%

35%

$200,000 -- $500,000

$400,000 -- $600,000

39.60%

37%

$500,000 and up

$600,000 and up

2. Reduction in corporate tax rate to a maximum rate of 21% (a reduction from 35%). Also, corporate income earned abroad and brought back to the United States will be taxed between 8 and 15.5%, instead of the current 35%. These are permanent reductions.

3. Standard Deductions increasing nearly 90%. For married couples filing jointly, the standard deduction rises to $24,000 from $12,700; for single filers, it moves to $12,000 from $6,350.

4. Additional changes to Itemized Deductions. These vary, and some might be more impactful than others.

  • Personal exemption ending, but child tax credit increasing. The bill ends the personal exemption of $4,050 for you, your spouse, and your dependents; it doubles the child tax credit to $2,000 per dependent child under age 17.
  • Limits to state and local taxes ("SALT"). Under the bill, you may only deduct up to $10,000 in state and local taxes, including sales, income, and property taxes. This deduction was not previously subject to limitation.
  • Caps on mortgage interest. The bill allows mortgage interest deductions for current homeowners, but caps the interest deduction at $750,000 in mortgage debt for homes bought in 2018 and beyond, down from the $1 million limit in place now. It eliminates deductions for interest on home-equity loans, as well as deductions for moving expenses and employer-provided expense reimbursements (except for members of the military).
  • Expands medical deductions. Current law allows for deduction of medical expenses over 10% of adjusted gross income (AGI). The bill lowers the threshold to 7.5%.

5. Changes to estate planning.  The bill doubles the estate tax exemption to $10 million, but it's also indexed for inflation after 2011. The bill also calls for doubling the value threshold on the 40% levy on estates worth nearly $11 million for individuals and $22 million for couples. The estate tax exemption also has the sunset provision, meaning that the bill calls for a reversion back to current exemption amounts in 2026.

6. Charitable deductions. Although the current tax deductions stay in place, the doubling of the standard deduction to $24,000 essentially raises the threshold on deductibility. Taxpayers will have to itemize donations to get the benefit.

      From all of us at Asset Planning, Inc. we wish you a wonderful Holiday Season!


*Asset Planning, Inc. does not provide tax advice. We suggest clients consult with a tax-planning professional with regards to their personal circumstances.

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Medicare Reminders

With today being the first day of autumn I thought it would be a good time to send out a reminder about Medicare open enrollment that happens every year from October 15th- December 7th. If you would like to make any changes to your Medicare plan now is the time to do it. If you are currently working, most companies also have their open enrollment times as well and it is a great time to review your current benefits. Be sure you are taking advantage of a flexible savings account for healthcare or childcare. Also, you may want to increase your 401k contributions because of a recent raise in pay. Those are just a couple things to consider when reviewing your benefits.

Another important reminder is if you've received a medicare premium increase due to a higher annual income but you have had a major lifestyle change that has decreased that income you can appeal the higher premiums. Life changing events such as retirement, divorce, death of a spouse, or work reduction are a few examples of a basis for an appeal.

Here is a link to an article that gives you step by step instructions on how you can make an appeal.

https://www.hhs.gov/about/agencies/omha/the-appeals-process/part-b-premium-appeals/index.html

 

 

 

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Big Changes in the Somoano Household

IMG 1990

I am an official empty nester: Kimberly graduated with her Masters in Communicative Disorders and accepted a job as a Speech Language Therapist with the Rialto School district! My other daughter, Kathleen is engaged! She is still living in Australia but will be married in California in 2018. And Kyle has transferred to UC Santa Barbara to complete his last two years of college. I am very proud of all their accomplishments.

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Fake Check Scams

I came across an article about fake check scams and what to look out for if you receive an unexpected check in the mail. Unfortunately, these types of scams are happening more and more frequently. The following are some really good tips on what to do and what not do if you find yourself in this situation.

To avoid fake check scams, follow these tips:

Don’t “keep the change”- No legitimate company will overpay you and ask that you wire the difference back to the company or to some third party. Be extremely wary of any offer-in any context- to accept a check or money order in an amount greater than you are owed.

Don’t cash the “unexpected” check- Companies rarely if ever send checks that don’t include some explanation of why the check was issued. Unless you are expecting the check- and you are absolutely certain it is meant for you- do not cash it.

Call the company directly to verify the check- Remember that some fake checks will have a legitimate company’s actual account number with the correct bank routing number. Call the company directly to verify the check, using a telephone number you obtain on your own from directory assistance. Do not use any telephone number that appears on the check or any instructions you receive.

Know the hallmarks of fraud- Fake check scams typically have a number of red flags, such as:

-Typos: Watch out for online postings or emails that are riddled with typos and poor grammar.

-Mismatched names: Compare the name of the person or company posting the opportunity with the name on the check you receive- and beware if they don’t match.

Pressure to act quickly- Be aware that it can take 10 days or even more for your bank to determine that a check is a counterfeit. Don’t wire or transfer funds until you have verified with your bank that the check has cleared- even if the bank allows you to withdraw the money sooner.

If you do receive a suspicious check, contact one or more of the following organizations right away: local police, the Internet Crime Complaint Center (a partnership between the FBI and the National White Collar Crime Center), or the U.S. Postal Inspections Service (if the check arrived by U.S. mail).

Source: Compliance E-News, May 31, 2017, Published by The Consortium®

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Congratulations Melani!

Registerred Paraplanner Logo

We are pleased to announce that Melani has earned her Registered ParaplannerSM designation. The coursework she completed has given her the financial knowledge necessary to assist our CERTIFIED FINANCIAL PLANNERSTM in constructing financial plans for our clients. She will work closely with our advisors and is a valuable member of our financial planning team.

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Reminder: 2016 IRA Contributions

We wanted to send out a reminder that it's not too late to contribute to your IRA accounts for 2016 as long as you are still working and have not yet met your contribution limit. The IRS deadline for contributions is April 18, 2017. Please give us a call if you would like to make a contribution or have any questions.

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Medicare Premiums

 

The law requires an increase to your monthly Medicare Part B & D premiums if you have “higher Income”. The higher your income, the more you pay. Most people do not pay the higher premium but we want you to be aware that this might happen if you sell a home or stocks with large capital gains or take large distributions from your IRA accounts because it will increase your AGI. Your 2017 Medicare premium will be based on your Adjustable Gross Income (AGI) from your 2015 tax return. Each year the premium is re-evaluated based on your taxes. If you have a large windfall in one year you will only have to pay the increase for one year and then the premium will go back down.

The following is a table that shows the income amounts that were used in 2016:

Medicare Premiums Income Limits

The Social Security cost of living increase and Medicare premium increase have not been announced yet but is expected to be less than 1%. The open enrollment period to change your Medicare plan is from October 15-December 7.

It is also that time of year for Open Enrollment if you are employed with benefits. Make sure you review all the benefit options you have and choose what is right for you. Take advantage of Flexible Savings accounts for healthcare or childcare. Has your income increased – did you also increase your 401K contributions?

Note: You can dispute the increase if your income has decreased substantially. The number one reason is due to death of spouse or divorce. The Medicare website has a list of what reasons are acceptable and what you need to do to dispute the increase.

 

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Advisors in Transition Speaking Engagement

Sandys headshot for websites

Sandy was invited to speak at The Advisors in Transition meeting on September 14, 2016 at the offices of Brown and Streza in Irvine, California. She was asked to tell the story of how her career started and how she has transitioned through different phases to become the successful financial advisor she is today. This speaking engagement allowed Sandy to share her best practices, help, mentor and inspire other members to grow to new heights.

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Understanding Medicare

 

Medicare seems like a simple concept but just like social security, there are many rules and details that you should understand. First of all, the best place to go for answer is: https://www.medicare.gov  The website is very informative and where I go to if I need to research a Medicare question.

The major components of Medicare are Part A, B, C and D. Parts A, B and D combined are comparable to a PPO insurance plan while Part C is comparable to a HMO plan. You must sign up at age 65 to avoid a penalty but if you can prove that you were covered elsewhere the penalty is waived.

Part A is Hospital Insurance. It is designed to help cover the cost of your care in a hospital, rehab facility, and home health care for a limited period of 100 days per benefit period. There is no premium cost for Part A but there is a $1,288 deductible per year.

Part B is Medical Insurance. It covers doctor services, preventive and outpatient care. The premium cost for new enrollees is $121.80/month and your co-payment is normally 20% of the expenses incurred. The premium is deducted from your social security check but if you delay starting social security you must pay the premium directly to Medicare.

Part D is Prescription Drug coverage. This covers prescription drugs. This coverage is provided by an insurer that is approved by Medicare. To avoid a late penalty you should also sign up for this at the same time as part A & B. You can change the coverage in later years if the coverage is not enough.

Part C is medical insurance offered by private insurers. It is also known as Medicare Advantage. This is offered by HMO type insurers like Kaiser. Medicare deducts the cost of the insurance from your social security check and pays the insurer (e.g., Kaiser) for your benefit. Prescription drug coverage is normally covered as part of this plan too.

Next time, I will discuss medi-gap policies and Medicare premium amounts and what causes them to increase or decrease.

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Protecting Your Home While on Vacation

Memorial Day weekend is the unofficial kick off to summer and for many people, summer is a great time to plan a vacation. Unfortunately robbers know this and it can also be a prime time for home break-ins. Having a house sitter stay in your home to watch your pets, water your plants, gather any mail or flyers, and turn lights off and on is definitely your best option for insuring your home is safe but this may not be an option for everyone. Here are a few tips to safeguard your home while you are away.

  1. Have your mail stopped. Nothing screams that no one is home more than a bunch of mail and flyers piling up on your doorstep. You can visit the post office website and submit a request online.
  2. 2.Get timers for your lights. Leaving your lights on 24/7 is a dead giveaway that you are not home and will make your electric bill sky rocket. Instead, put your living room lights on timers to come on at dusk and turn off at bed time.
  3. 3.Ask a neighbor for help. Usually a neighbor will not mind keeping an eye out for anything suspicious going on at your house and may even be willing to pull out the trash cans for you. Asking doesn’t hurt and I’m sure they would appreciate the favor in return.
  4. 4.Make sure everything is locked up. This seems so obvious but one of the biggest mistakes people make is leaving a door or window unlocked in their rush to get going on their vacation. If your house is locked up tight the thief will have to work harder to break in and will most likely leave if it is taking too long.
  5. 5.Don’t post about it. Everyone loves getting away on vacation but posting this information on social media will notify all of your connections that you are away from home. Think twice before giving out too much information. You can always post those great vacation pics when you get home!
  6. 6.Get a security system. If you travel a lot or are away from home most of the day in general it may be a good idea to get an alarm or a camera security system. The cost for these systems may be small in comparison to the peace of mind you will have knowing that your home is protected.

Most importantly, enjoy your vacation knowing that your home is secure while you are away!

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Spring Cleaning

 

As soon as I finish my taxes I also do some spring cleaning of my paperwork clutter and finances. Here are some tips to get your financial house in shape:

  1. Organize financial papers: Do not leave financial documents around that contain information that could be used to steal your identity. Shred paperwork you no longer need. Save important papers in a secure place and if possible, digitally (scan and save on external drive/usb, etc.) and secure with a password.

  2. Bills, paystubs, bank and investment statements should be kept for one year and then just keep the year end summaries and shred the rest.

  3. Keep invoices and all bills for major repairs, improvements and construction on your home. This is vital to have when and if you ever sell your home for increased cost basis.

  4. Tax returns and all supporting documentation should be kept for at least 7 years. A good rule is to scan your older tax returns and keep them forever.

  5. Run your credit report to see if there are any unusual transactions. Annualcreditreport.com allows one free report per agency per year.

  6. Automate adding to investments and savings.

  7. Adjust tax withholdings on your income (paycheck, IRA’s, etc.) if you owed too much tax or received a large refund.

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Money Makeover

I had the pleasure of being asked to be the financial advisor for this month's Los Angeles Times Money Makeover.  Here is the link to the article:
http://www.latimes.com/business/la-fi-money-makeover-frey-vogel-20130818,0,2305366.story
 

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Personal Financial Plans

In a recent study by deVere Group, one of the world's largest independent financial consultancy groups, they asked clients with investable assets over $1,000,000 what was their number one financial regret. The top 3 answers:

  1. Not putting in place a regular reviewed personal financial plan earlier in life. (57%)
  2. Not consistently scrutinizing personal investments (18%)
  3. Taking on too much unnecessary debt. (13%)

While this survey only surveyed high-net worth families, I think middle-class families would answer the question with similar results.  It is clear the benefits of long-term financial planning and routinely reviewing or revising the plans help keep families on-track to reach their financial goals. 

 

It is interesting to note that all those surveyed have done well financially, but the regret is that it might have been less stressful if they had a plan in place and were monitoring it consistently.

 

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Social Security Statements Online

Last year, to reduce costs, the Social Security Administration (SSA) stopped mailing annual paper statements to anyone under age 60. These statements are a great tool to use for retirement planning. The statements provide a history of your annual earnings and estimates of your social security benefits at various retirement ages, along with estimates for disability and survivor benefits.

Last week, the SSA added the ability to access your Social Security statements online. Here is the website to start the process to access your statement:
http://www.socialsecurity.gov/mystatement/

I recommend that you review this at least once a year to make sure that your income is recorded accurately in the Social Security database. Your future monthly benefit is based on your average earnings over your lifetime. If your earnings are incorrect, your benefit will most likely be wrong.

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Social Security and Medicare changes for 2012

For the first time since 2009, social security recipients will get a 3.6% cost-of-living adjustment (COLA).  The COLA adjustment will also affect other areas:

  1. The maximum amount of earnings subject to the social security tax will increase from $106,800 to $110,100.
  2. The minimum amount a worker must earn to qualify for a quarter of coverage under social security is $1,130.
  3. The amount a social security recipient can earn before having to forfeit social security benefits is increased to $14,640.  This only applies to people that are receiving benefits before their “Full Retirement Age” (FRA) and are also receiving wages.  For example, if you started to receive benefits at age 62 and your FRA is 66, you cannot earn more than $14,640 in wages without being penalized.  The income limit does not apply to investment or pension earnings.

 

Medicare also just announced their premium adjustments for 2012.  The new premium for part B will be $99.90/month.

  1. If you were on Medicare in 2008, your premium was frozen at $96.40, due to a law that freezes part B premiums in years that there are no COLA increases if you also receive social security.
  2. If you started Medicare in 2009 – 2011, the premium was $115.40, so the premium will be reduced to $99.90 for those recipients.
  3. Medicare premiums are higher for recipients that have Adjusted Gross Incomes of more than $85,000 for single and $170,000 for married taxpayers.  Those premium adjustments have not been announced yet.

Medicare Part D prescription drug coverage and Medicare Advantage enrollment runs until December 7th this year, which is earlier than in previous years when enrollment ran until the end of the year.  A great resource to help you decide is on the medicare website:

www.medicare.gov/find-a-plan

You just need to provide information about your prescription drugs and you will see what each plan in your area will cost in premiums and out-of-pocket expenses.

 

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Time is running out for tax planning on IRAs inherited last year

Normally, heirs get to take distributions from inherited IRAs over their lifetimes. But if just one beneficiary of the account isn't an individual person, the IRA has to be distributed within 5 years for all beneficiaries. The problem can occur when a decedent names a charity or college as one of the beneficiaries. Tax Planning Tip: The IRS allows the individual beneficiaries to take distributions over their lifetime (enjoying tax free earnings growth) as long as the charity, school, etc. is paid off by September 30 of the year following the death of the IRA owner.

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Debt Ceiling Debate and Possible US Default

The debate about whether to raise the debt ceiling and under what conditions has been loud, harsh and somewhat misleading. The debt ceiling is currently set at $14.2 trillion. They don't admit it, but lawmakers basically agree to raise the debt ceiling every time they vote for a spending hike or tax cut. So when they argue over the debt ceiling they are arguing over whether to pay the bills that have already been incurred. The likelihood of a default is virtually 0%. This is because the government still takes in more tax revenue each month than is needed to pay interest on its debt and the same for Social Security payments.

A great deal of what is happening in the media is political posturing and emotional rhetoric and this creates uncertainty. And uncertainty creates nervousness among consumers. And nervous businesses do not expand or hire. Overall, Corporate earnings for the past 6 months have been positive and the stock market has reacted well to good earnings news, but any gains are tempered by uncertainty of the future. Even though the market has been volatile as of late, we expect positive growth to continue, once the political show comes to an end.

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Social Security Tax Break

For the next two years, the social security tax that is withheld from an employee's paycheck is reduced from 6.2% to 4.2%. This concerns me because I keep hearing that social security is not going to be fully funded in the future. I guess the logic is to worry about that problem later. So my purpose today is to give you some recommendations of what to do with your larger paycheck.

I think this is a great opportunity for you to increase your retirement contributions. If you make $100,000, you will have a extra $2,000 for the year. I recommend that you increase your 401K (457 or 403B) or IRA accounts by 2%. This amount is tax deferred and able to grow tax free until you need it in retirement. This will help you increase your retirement savings so that you are not completely dependent on social security.

If you are younger than 50 years old, you can contribute as much as $16,500 to your 401K in 2011, And another $5,500 if you are 50 or older for a total of $22,000.

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