Asset Planning, Inc Blog

The flowchart below covers important decision-making factors a client must consider when paying off their mortgage, such as:

• Thoroughly weighing the pros and cons involved in this big decision, and how they specifically relate to their financial situation.

• Recognizing what degree of flexibility they may or may not have after paying off the mortgage.

• Considering any tax implications that may result from paying off the mortgage.

• Identifying sound reasons for paying off the mortgage, and determining the best course of action if applicable.

Should-I-Pay-Off-My-Mortgage-2022.pdf

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. This is a $2 trillion emergency fiscal stimulus package to help reduce the economic damage caused by the virus and “stay at home” policies. The following is a summary of the main provisions for individuals.

Recovery Rebates:

• The CARES Act provides for recovery rebate checks of up to $1,200 for individuals with adjusted gross income (“AGI”) up to $75,000 ($2,400 for joint filers with AGI up to $150,000) plus an additional $500 for each child under the age of 17 for US taxpayers through an advance refundable tax credit against 2020 income taxes. There is a phase out of the rebate, which causes a $50 reduction in the rebate for every $1,000 of AGI above these thresholds. For example, individuals with no children having an AGI of more than $99,000 and married couples with no children filing jointly having an AGI of more than $198,000 would be phased out completely and receive no recovery rebate check. The advanced payment of the recovery rebates will be based on the AGI reported on tax returns filed for 2019, and if no such tax return has been filed for 2019, the AGI reported on the 2018 filed tax returns will be used.
  • The rebate check will be sent directly to the bank account on file with the IRS for your 2019 or 2018 tax return. If the account is closed or there is no account on-file then a check will be mailed.
  • You can receive the rebate if you are retired and receive social security or a pension as long as your AGI is within the limits listed above.

Retirement Accounts:

• Required Minimum Distributions are waived in 2020 for all retirement type accounts (401K, 403B, 457, IRA and Beneficiary IRAs). If you already took part or all of the RMD you might have the option of returning them except for beneficiary IRA distributions.
  • We are waiting to hear more details on the charitable contributions that are paid with RMD funds and we will be in contact with those clients that make charitable contributions from their RMDs to let them know their options for 2020.
• Individuals under age 59 ½, may take coronavirus-related distributions from qualified retirement plans (IRA, 401K) of up to $100,000 without the distributions being subject to the 10% early distribution tax. The distributions are still subject to federal income tax, but the tax owed can be spread over three years.
  • In order to get these favorable terms, you will have to prove that you were adversely affected by the coronavirus.

Unemployment:

• Regular unemployment payments, which are about 55% of your normal pay are increased by $600 per week for a maximum of 4 months. The benefit period is also extended by 13 weeks. It is normally 26 weeks maximum in California, so it can now go to 39 weeks.

There are also several small business and self-employed benefits provided by the CARES Act. We recommend that you discuss with your accountant or business manager the different options and if you should apply and take advantage of them.

Hope you are staying safe, sane, and healthy!

It’s a known fact that people are living a lot longer than they used to. Do you have a plan in place for your aging parents? I came across an interesting article in Financial Advisor Magazine about the toll being a care taker for your aging parents can put on you financially and emotionally. If you are facing the prospect of being the caretaker for your parents as they get older, the time is now to start having the important conversations with your family about getting an action plan together for their care.

Click here to read the full article

While we are deep in the midst of tax season, we thought it was a good idea to remind our clients to get in their 2018 IRA contributions. If you are planning on dropping off a check to us the deadline to get them in is Wednesday, April 10th. This will ensure that your contribution is made before the April 15th tax deadline.

2018 contribution limits are $5,500 or $6,500 if you are over the age of 50

Also, now is as good a time as any to get in your 2019 contributions especially because the limits have been increased. The sooner you get these in the longer they have to grow in your IRA which means more retirement funds for you!

2019 contribution limits are $6,000 or $7,000 if you are 50 years of age or older

When it comes to non-deductible IRA contributions please be sure that you are keeping a record of these contributions by completing tax form 8606 for each year you make a non-deductible contribution. We have run into a few cases where no record is kept, and our clients are left scrambling to find that information when it is time to take distributions from their IRAs. This information will be needed to figure out what amount of your distributions will be counted as taxable income to you, so it is very important.

If you have any questions, please don't hesitate to call us.

We came across an article on InvestmentNews.com written by Mary Beth Franklin. It gives a great explanation as well as examples and limits on how Social Security benefits are taxed if you are planning on working while collecting social security. Definitely worth a read if you have any income from other sources while collecting Social Security.

Click here to read the full article

2019 annual contribution limits for eligible tax filers:

401(k), 403(b), most 457 plans, and Thrift Savings Plan is increased from $18,500 to $19,000.

IRA contributions increased from $5,500 to $6,000 per year. The age 50+ catch-up contribution limit remains at $1,000.

Tax deduction and Income limitations for 2019:

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2019:

If single or joint married taxpayers are not covered by a work retirement plan, they may fully deduct traditional IRA contributions. Other tax filers may partially or fully deduct contributions if they meet the below exceptions:

• Single taxpayers covered by a work retirement plan, can fully deduct if modified Adjusted Gross Income (AGI) is below $64,000. A partial deduction is allowed if modified AGI is between $64,000 to $74,000
•  Married Joint taxpayers, where the spouse making the IRA contribution is covered by a workplace retirement plan, can fully deduct if modified AGI is below $103,000. A partial deduction is allowed if modified AGI is between $103,000 to $123,000

• Married Joint taxpayers, where the spouse making the IRA contribution is not covered by a workplace retirement plan, but the other spouse is, can fully deduct if modified AGI is below $193,000. A partial deduction is allowed if modified AGI is between $193,000 to $203,000

The Modified AGI phase-out range for Roth IRA contributions is $122,000 to $137,000 for singles and heads of household, $193,000-203,000 for married couples filing jointly.

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

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

President Trump issued an executive order directing the Treasury Department to extend the age for required minimum distributions from retirement accounts. Currently the age is 70 1/2. His reasoning is that people are working and living longer. This can be good news for some of our clients who don't necessarily need to take the withdrawals at 70 1/2. Here is an articles from Forbes with some pros and cons to the proposed change.

Read Here

Check out our new Ebook! In it you will find some valuable tips and guidance for retirement planning from our CERTIFIED FINANCIAL PLANNERS^®.

Tips_to_Planning_a_Successful_Retirement.pdf

After the hustle and bustle of the holidays and the start of a new year, most people start to look ahead and like the idea of a fresh start. Take advantage of this motivation by applying it to your finances as well and giving yourself a financial checkup.  Yes, I know that taking a good hard look at your finances is not always something that you look forward to. But being realistic about your current financial situation, making some goals and putting an action plan together will put you on the right track to having a successful retirement with less to worry about and more time to enjoy yourself.

I found an article in the December 2017/January 2018 edition of AARP magazine written by Michelle V. Rafter, that outlines some steps to get you started on your financial check up journey. Check it out by clicking the link below.

https://www.aarp.org/money/credit-loans-debt/info-2017/financial-checkup.html

May 2018 be your most financially fit year ever!

Samantha