Six Tips for Working Beyond Retirement Age

Credit Score Ingredients

Two-thirds of the Baby Boomer generation are now working or plan to work beyond age 65, according to a recent Transamerica Institute study. Some report they need to work because their savings declined during the financial crisis, while others say they choose to work because of the greater sense of purpose and engagement that working provides.



Whatever your reason for continuing to work into your golden years, here are some tips to make sure you get the greatest benefit from your efforts.

Bullet Point Consider delaying Social Security. You can start receiving Social Security retirement benefits as early as age 62, but if you continue to work it may make sense to delay taking it until as late as age 70. This is because your Social Security benefit may be reduced or be subject to income tax due to your other income. In addition, your Social Security monthly benefit increases when you delay starting the retirement benefit. These increases in monthly benefits stop when you reach age 70.
Bullet Point Don’t get bracket-bumped. Keep in mind that you may have multiple income streams during retirement that can bump you into a higher tax bracket and make other income taxable if you’re not careful. For instance, Social Security benefits are only tax-free if you have less than a certain amount of adjusted gross income ($25,000 for individuals and $32,000 for married filing jointly in 2017), otherwise as much as 85 percent of your benefits are taxable.

Required distributions from pensions and retirement accounts can also add to your taxable income. Be aware of how close you are to the next tax bracket and adjust your plans accordingly.

Bullet Point Be smart about health care. When you reach age 65, you’ll have the option of making Medicare your primary health insurance. If you continue to work, you may be able to stay on your employer’s health care plan, switch to Medicare, or adopt a two-plan hybrid option that includes Medicare and a supplemental employer care plan.

Look over each option closely. You may find that you’re giving up important coverage if you switch to Medicare prematurely while you still have the option of sticking with your employer plan.

Bullet Point Consider your expenses. If you’re reducing your working hours or taking a part-time job, you also have to consider the cost of your extra income stream. Calculate how much it costs to commute and park every day, as well as the expense of meals, clothing, dry cleaning and any other expenses. Now consider how much all those expenses amount to in pre-tax income. Be aware whether the benefits you get from working a little extra are worth the extra financial cost.
Bullet Point Time to downsize or relocate? Where and how you live can be an important factor determining the kind of work you can do while you’re retired. Downsizing to a smaller residence or moving to a new locale may be a good strategy to pursue a new kind of work and a different lifestyle.
Bullet Point Focus on your deeper purpose. Use your retirement as an opportunity to find work you enjoy and that adds value to your life. Choose a job that expresses your talents and interests, and that provides a place where your experiences are valued by others.


Marriage Tax Tips

Credit Score Ingredients

If you recently got married, plan to get married, or know someone taking the matrimonial plunge, here are some important tax tips every new bride and groom should know.






1 Notify Social Security. Notify the Social Security Administration (SSA) of any name changes by filling out Form SS-5. The IRS matches names with the SSA and may reject your joint tax return if the names don’t match what the SSA has on file.
1 Address change notification. If either of you are moving, update your address with your employer as well as the Postal Service. This will ensure your W-2s are correctly stated and delivered to you at the end of the year. You will also need to update the IRS with your new address using Form 8822.
1 Review your benefits. Getting married allows you to make mid-year changes to employer benefit plans. Take the time to review health, dental, auto, and home insurance plans and update your coverage. If both of you have employer health plans, you need to decide whether it makes sense for each of you to keep your plans or whether it’s better for one to join the other’s plan as a spouse. Pay special attention to the tax implication of changes in health savings accounts, dependent childcare benefits and other employer pre-tax benefits.
1 Update your withholdings. You will need to recalculate your payroll withholdings and file new W-4s reflecting your new status. If both of you work, your combined income could put you in a higher tax bracket. This can result in reduced and phased-out benefits. This phenomenon is known as the “marriage penalty.”
1 Update beneficiaries and other legal documents. Review your legal documents to make sure the names and addresses reflect your new marital status. This includes bank accounts, credit cards, property titles, insurance policies and living wills. Even more importantly, review and update beneficiaries on each of your retirement savings accounts and pensions.
1 Understand the tax impact of your residence. If you are selling one or two residences, review how capital gains tax laws apply to your situation. This is especially important if one of you has been in your home for only a short time or if either home has appreciated in value. This review should be done prior to getting married to maximize your tax benefits.
1 Sit down with an expert. It is natural for newlyweds to focus their attention on the big day. There are so many decisions to be made from selecting a venue to planning the honeymoon. Because of this, reviewing your tax situation often is an afterthought. Do not make this mistake. A simple tax and financial planning session prior to the big day can save on future headaches and avoid potentially expensive tax mistakes.

If you’d like a review of how marriage will affect your tax and financial situation, call at your earliest opportunity.



The Right Ingredients to Improve Your Credit Score

Credit Score Ingredients

Your credit score is important. It dictates how easy it is to obtain a loan for a car, house, or business acquisition. Your score is expressed as a number that ranges between 300 and 850 points. The closer you are to 850 points, the more likely you are to receive a loan and the less you’ll pay in interest. So, how is your credit score calculated and how can you improve it?



Credit score ingredients

1 Payment history, 35 percent. The most important element of your credit score is your payment history, or your record of paying your bills on time. Lenders place such a premium on this element that even one payment made later than 30 days after the due date can have a drastic effect. It can drop your score by as much as 100 points, according to FICO, the company that sets the credit score standard.
1 Credit card debt usage, 30 percent. Lenders like to see that you aren’t getting close to using your maximum credit card limit each month. For the best score, you should keep your monthly debt between 10 percent and 30 percent of your maximum limit. The lower the better. A great place to start is to understand your spending limits on your credit cards and keeping any balance on your cards below the 30 percent threshold.
1 Credit age, 15 percent. You get a better credit score depending on how far back your credit goes. The age of your credit is the average of all your accounts, so if you open a lot of new accounts, this will shorten your credit age and start to lower your credit score.
1 Account mix, 10 percent. Lenders like to see that you have a track record of paying a variety of different kinds of debts, such as credit cards, mortgages, car, and business or education loans.
1 Credit inquiries, 10 percent. Each time you apply for a new credit card, a new loan, or ask for a substantial increase in your credit limits you generate a “hard inquiry” on your credit report. It’s a sign that lenders are checking into your credit history to determine your risk. While that’s not necessarily a bad thing, trying to open too many new accounts in a short period of time is seen as a red flag by lenders.

 Key ideas to improve your credit

Bullet Point Pay your bills on time. Ask your credit card providers or lenders to set all your due dates on the same day, and then set a reminder in your calendar. Consider using auto-pay for more important bills like credit cards and mortgage payments.
Bullet Point Manage your credit card debt limits. Ask your credit issuers to increase your card line limit. You can also limit the amount of credit card debt you accumulate by paying your bill in full each month, stop using a card but not closing the account, or switching to cash as you approach your line limits.
Bullet Point Build a credit history. The sooner you get started in establishing a credit history, the sooner you’ll establish a track record of payments that give lenders confidence in your ability to repay debt.
Bullet Point Create variety. Manage your debt, but understand that making student loan payments on time, paying off credit card debts and other loans can present you as a quality credit risk to prospective lenders.
Bullet Point Manage your credit hits. Try to limit the number of new accounts you open over a short period of time. Each hard inquiry will only impact your credit score by a few points, but each one stays on your credit report for two years.
Bullet Point Know your number. Last, but not least, know your credit score. Sometimes a low score can be the result of an error in your credit history or a recent identity theft problem. You have the right to receive your credit report free once per year from each of the major credit reporting agencies. Here is the link:



2017 Standard Mileage Rates

The IRS recently announced mileage rates to be used for travel in 2017. The business mileage rate decreases by 0.5 cents while medical and moving mileage rates are lowered by 2 cents. Charitable mileage rates are unchanged.

2017 Standard Mileage Rates
Mileage Rate/Mile
Business Travel 53.5¢
Medical/Moving 17.0¢
Charitable Work 14.0¢
Mileage Rates

Here are the 2016 rates for your reference as well.

2016 Standard Mileage Rates
Mileage Rate/Mile
Business Travel 54.0¢
Medical/Moving 19.0¢
Charitable Work 14.0¢
Mileage Rates

Remember to properly document your mileage to receive full credit for your miles driven.

Holiday Money Savings Tips

Happy holidays giftTo many the holidays are “the most wonderful time of the year” but, to those on a tight budget the holidays can be very stressful. Why not save money this season by following some of these easy tips:




Question Holiday Cards: Send a holiday postcard rather than a card or letter to reduce postage costs. You can even recycle old cards you did not use from prior years.
Question Wrapping Paper. Use your children’s artwork, or have them help you decorate a roll of plain paper. Ask your local wallpaper store if they have old samples they would be willing to give you. You will not only save money, but you will make a gift that is much more memorable.
Question Decorations. Decorate with nature–use pinecones and evergreen boughs around your home. Fill glass vases with peppermint, colored M&Ms, pistachios, or your favorite candy.
Question Entertainment. Check out your favorite holiday movies from the library, drive around town to see Christmas lights, take a winter wonderland hike, or go caroling.
Question Gift-giving. Ask your family or friends to consider drawing names this year. Have everyone bring one gift and then play a gift-swapping game to see who gets what. To make gifting even less expensive, ask everyone to bring something from their home that they enjoy but no longer need.
Question Don’t buy it, make it. Why not give a gift that truly comes from you. It might be something you make, or bake, or it might be a gift of your time. Some ideas? Offer free babysitting service, dog or cat watching, lawn care or gardening services. Your limit is your imagination.

Five Smart Uses for Your Tax Refund


1 Pay down debt. Start with debts that carry the highest interest rates first, then move down the line. This is like savings on savings as you are freeing up future cash needed to pay the interest on this debt.Ideas: Pay off credit card debt. Lower your student loan debt. Make a principal payment on a mortgage.
1 Add to savings. Save some of your refund for later use.Ideas: Add to your emergency fund to have enough to cover at least six months of your every-day expenses. Add to a college savings account or a tax-advantaged retirement account.
 1 Invest in yourself. Spend some money improving yourself or your well-being. Investing in yourself can have long-term benefits.Ideas: Take a class to develop a hobby into a career. Consider a fitness membership. Take up meditation. Become accredited in your chosen profession.
1 Spend for permanence. Instead of spending your refund on day-to-day expenses, use some of it for capital purchases. Capital purchases are for items that last longer than one year.Ideas: Replace a worn out couch. Purchase a replacement bicycle. Upgrade an outdated light fixture. Consider a minor home improvement.
1 Have some fun. Finally, consider using part of your refund for a well-deserved break. When balanced with using a portion of your refund to improve your financial condition, you can feel better about a little splurging in your life.Ideas: Shop last minute flight deals for a weekend getaway. Take a road trip to a favorite destination.

A Dozen IRS Not so Fine Penalties


Tax penalties

Over the past few years the IRS has made the use of penalties and fines a more prevalent tool to encourage compliance among taxpayers. This “stick” approach is in direct contrast to the “voluntary” philosophy built within our tax system. Here are a dozen of the more common penalties and fees.

Hopefully, by being aware of these common IRS penalties you can make sure they never apply to you or anyone you know. Sometimes when faced with these penalties you can request an abatement of the fine if you are a first-time offender.

Icon S-Corporation and Partnership late filing fee. This $195 fine is due for any month or partial month you are late in filing this tax return. The fine is due even though no tax is usually owed on these flow-through tax returns.
Icon 1099 or W-2 late filing penalty. You are required to issue a 1099 for any vendor that has $600 or more of activity with your business. The filing due date is the end of February or the end of March if e-filed.
Icon Underpayment of tax. This penalty is applied when a taxpayer does not withhold enough of their pay to cover their tax liability. There is a safe harbor calculation that protects you from this penalty. The safe harbor is usually withholding enough to cover 100% of last year’s tax liability or 90% of the current year’s tax liability. Special rules apply for higher income taxpayers.
Icon Late filing fee for form 1040. The fine is 5% of the unpaid tax per month (or fraction of a month) up to 25%. If over 60 days past due, the penalty is the smaller of $135 or 100% of the unpaid tax.
Icon Failure to file correct information returns. Fine: $50 – $260 per form (usually Form 1099s)
Icon Failure to file a tax return.
Icon Failure to have adequate health insurance for the entire year.
Icon 25% Inaccuracy penalty. This penalty applies to things like inaccurate business mileage deductions for the self-employed or to non-cash contributions that have no documentation. The best defense is to keep an accurate mileage log and record of your donations.
Icon Failure to file foreign information returns. If you own property in a foreign country you must consider the need to file annual reporting to the IRS. The rules in this area are strict and the fines can be high as the IRS continues to crack down on the use of foreign accounts to avoid paying U.S. taxes.
Icon Potential 100% penalty for employer failure to pay withholding taxes. The IRS takes a strong stance on employers that fail to send in their employee’s Social Security, Medicare and Federal tax withholdings.
Icon Retirement Account Penalties. There is a 10% penalty for withdrawing funds from qualified retirement accounts like IRA’s and 401(k)s prior to age 59½. There is also a 6% penalty tax for excess contributions to any of these accounts until the excess amount is corrected.
Icon Fine for not taking Annual Minimum Distribution (AMD) from retirement Accounts. If you are age 70½ or older you must withdraw a minimum amount from your qualified retirement accounts each year. Failure to do so creates a potentially large penalty of 50% of the amount that should have been withdrawn.

A Dozen Financial Topics High School Students Should Know

High school banking

1 How bank accounts work. Provide your student a basic understanding of checking accounts and savings accounts. Show your new banking customer how to use checks and debit cards to pay for goods with their funds. Teach them how to access their accounts and reconcile their statements each month.
2 How credit cards work. Teach your child how credit cards work. Stress the importance of understanding that credit card spending actually creates a loan. Too many young people create credit card debt that they are unable to pay back. Emphasize the importance of not carrying a balance by paying off credit card debt each month.
3 Tax basics. You do not need to create a tax expert, simply a smart consumer that understands the basics of tax. When your student receives their first paycheck, walk through their paystub to explain Social Security, Medicare, federal tax withholdings, and state tax withholdings.
4 The power of the retirement account. While a tough concept for a young person, let them know the availability of long-term savings tools like a Roth IRA. The wise saver can create a self-made millionaire by starting their retirement savings at a young age.
5 How credit scores work. While no one really knows all the aspects that go into creating a credit score, you still have access to a free credit report each year. Consider walking through your child’s free credit report with your student.
6 Spending within your means. Save first then spend. This is a simple concept that is hard to accomplish. By teaching your student this habit early, you give your child a fighting chance of creating strong financial habits.
7 The art of saving. Part of spending within your means implies that your student has healthy savings habits. Walk your child through the techniques that work for you. Perhaps it is setting up a separate savings account. Perhaps it is putting a set amount away each month.
8 The strength of investing. The most valuable investment a young person can make is in themselves. Whether it is a college degree or a trade school diploma, your student can create tremendous value in skills that will provide a positive financial return each year.
9 Mutual fund and stock understanding. With an understanding of self-investment, next consider teaching your student some of the basic investment alternatives available to them. Stocks and mutual funds are most common, but also consider explaining bonds, CD’s, annuities and other investment tools.
10 Budgeting. Help your student create a basic budget and then help them track their savings and spending against this budget.
11 Cash flow. The hard way to learn the lesson of cash flow is when bill collectors are calling and there simply isn’t money to pay them. When creating an initial budget, show your student the flow of funds each month. An easy example of this is to show the flow of funds that relate to a car. There are everyday expenses like fuel, there are monthly expenses like a car payment, and there are periodic expenses for car insurance.
12 Calculation of net worth. Assets (what you own) minus liabilities (what you owe others) equals net worth. This is the math of banks and businesses. The sooner your student understands this concept, the easier it will be to plan to purchase a car, a house, or any other item of value.
13 The bankers dozen: The value of identity.Perhaps one’s personal identity is the most undervalued asset owned by your student. Online media may seem free, but your student has paid for this access with their identity. With the advent of identity theft, government/employer access to personal online information, and the proliferation of online advertising, consider helping your student understand the value of having a small online footprint. Help them establish healthy habits that will protect their personal information.


Tax Savings Ideas are Still Available

As the end of the year approaches, there is still time to make moves to manage your tax liability. Here are some ideas to consider before the glitter ball drops in Times Square.

Icon Maximize your retirement plan contributions. This includes IRAs and 401(k) plans at work. Given the contribution limits in 2016 are not increasing, now is the time to maximize the contribution potential for this year.
Icon Estimate your current and next year taxable income. With this estimate you can determine which year receives the greatest benefit from a reduction in income. By understanding what the tax rate will be for your next dollar earned, you can understand the tax benefit of reducing income for this year versus next year.
Icon Make charitable contributions. Consider which tax year will benefit most from your charitable giving of cash and non-cash items. Shift your giving into the year that will provide you the most benefit. Remember to track your charitable mileage. It is deductible as well.
Icon Take capital losses. Each year you can deduct up to $3,000 in capital losses in excess of capital gains. Start to identify which investments may make sense to sell to take advantage of this. If planned correctly, these losses can offset ordinary income.
Icon Consider donating appreciated stock. This strategy gives you a charitable deduction for the market value of the stock while not having to pay capital gains tax on the charitable gift. If you provide an annual pledge sheet to your church, this can be a great way to maximize your gift while giving needed funds to your church at the beginning of the year.
Icon Standard or itemized deductions. The standard deduction for 2015 and 2016 is $12,600 for joint filers and $6,300 for single filers. If your itemized deductions are close to these amounts, consider shifting the deductions into next year. You can then maximize the benefit of itemizing into one tax year.
Icon Retirement plan distributions. If you are age 70½ or older, don’t forget to take your required minimum distributions for the year. If you are retired, but younger than 70½, consider taking tax efficient distributions from your retirement accounts. By paying some tax now, you may avoid paying higher taxes later when you have to follow the minimum distribution rules after reaching 70½ years old.
Icon Consider pending tax legislation. There may be late breaking tax legislation once again. Should this happen, please be prepared to move quickly to take advantage of any tax law extensions. Save receipts if you are a teacher. Consider charitable deductions from your retirement plan if you are a senior. Keep receipts of large purchases in case sales tax is added as an itemized deduction in lieu of taking a state income tax deduction.

As always, should you have any questions or concerns regarding your situation please feel free to call.

Understanding Capital Gains and Losses

Multiple tax rates hold the key

With the recent volatility in the stock market, it is only natural to want to sell your investments. While the market may panic, making an informed, calm, and planned decision can be your best option. Part of this decision-making process is understanding the tax consequences of selling your investments.

Investment Tax Rates
Investment Tax
Retirement Accounts:
401(k), 403(b), traditional IRA, SEP IRA, SIMPLE IRA
Ordinary income (when funds are withdrawn from the account) Determined by the account type (usually withdrawals after age 59½) 0% up to 39.6%* There is not a tax event when an investment is sold within your account. The tax rate depends on your annual income at time of fund withdrawal.
Retirement Accounts:
Roth IRA and Roth 401(k)
No tax on withdrawals 5 years and 59½ years old or older. N/A Earnings are not taxed as long as rules are followed.
Short Term Capital Gains (STCG) Ordinary income 1 year or less 0% up to 39.6%* For investment sales such as stocks and bonds
Long-term Capital Gains (LTCG) LTCG rates More than 1 year
0%: in 10 or 15% tax bracket
15%: in 25-35% tax bracket
20%: in 39.5% tax bracket*
For investment sales such as stocks and bonds
Depreciation Recapture Special Any 25% When you sell property that has been depreciated in prior years, part of your sale price may be taxed as a recapture of this prior period depreciation.
Collectables Special Any 28% A special tax rate applies to gains on the sale of items you collect; like coins and baseball cards.
Investment losses Ordinary income Any Offset benefit:
0% up to 39.6%
Losses can offset income up to $3,000 each year
* a3.8% Net Investment Income Tax may also apply to these earnings.

As the above tax rate chart suggests, understanding the tax consequence of selling an investment can be complicated. Your tax obligation could be subject to no tax or up to 39.6% plus an additional 3.8% for the Net Investment Income Tax. Here are some things to think about.

Within retirement accounts

Point Selling investments within retirement accounts. Selling investments within your retirement accounts is not usually a taxable event. The potential tax event occurs when you take the funds out of your account either by a withdrawal or occasionally as a rollover into another account.
Point Follow the account rules. Each of your retirement accounts has its set of rules. If you follow them, you can avoid early withdrawal penalties. Following the holding period rules within Roth accounts can also make your withdrawals tax-free.

Gains and losses outside retirement accounts

Point Losses. You may deduct investment losses of up to $3,000 per year. These losses first offset any investment gains. If there are no gains your loss can offset your ordinary income. So the benefit of losses can be worth next to nothing or up to 39.6% if it offsets ordinary income.
Point Non-investment losses. Unfortunately, individuals may not offset losses on the sale of non-investment property. So if you sell a car and make money, you need to report the gain. If you sell the car and lose money, there is no deductible loss unless it is part of a business transaction.
Point Long-term better than short-term. Holding an investment for longer than one year is key if you want to minimize your tax obligation. Short-term gains are taxed the same as wages.

If nothing else, please remember your investment decisions can often have tax consequences. Please ask for help before taking action.