HOW TO IMPROVE YOUR FINANCIAL FUTURE

Having just emerged from tax season and working on over 500 tax returns, it is important to stop to reflect on client situations, trends, common mistakes and how financial lives can be improved.

TAX PLANNING: “STAY AWAKE”

1. REMEMBER YOUR TAX SITUATION CHANGES FROM YEAR TO YEAR. AS YOUR INCOME FLUCTUATES, YOU MIGHT BE ELIGIBLE TO CONTRIBUTE TO A TAX-DEDUCTIBLE IRA, PENSION PLAN OR H.S.A. ACCOUNT. IRS LIMITS CHANGE FOR SUCH CONTRIBUTIONS OVER TIME WITH INFLATION.
2. SHOULD I BE CONTRIBUTING TO MY 401K OR IRA ON A PRE-TAX OR AFTER-TAX (ROTH) BASIS? KNOWING YOUR TAX BRACKET IS HUGE IN MAKING THIS DECISION. ALTHOUGH THIS SEEMS OBVIOUS, YOU WANT TO SHELTER INCOME IN HIGHER BRACKETS AND PAY TAX IN LOWER BRACKETS.
3. WHEN YOUR INCOME DIPS AND CAN BE EVEN NEGATIVE AFTER PERSONAL DEDUCTIONS, TAX PLANNING IS ESSENTIAL TO “ACCELERATE” INCOME TO OFFSET AND USE THE LOSS. ROTH-IRA CONVERSIONS ARE A GREAT TECHNIQUE TO ACCOMPLISH THIS AND GIVE YOU MAXIMUM FLEXIBILITY.
4. PENDING TAX LAW CHANGES MEANS YOU NEED TO DO YEAR-END TAX PLANNING IN NOVEMBER AND DECEMBER. FOR EXAMPLE, IF YOU ARE TYPICALLY PAYING AMT TAX AND IF THE AMT TAX GOES AWAY NEXT YEAR, YOU WOULD BE BETTER OFF PAYING CERTAIN DEDUCTIONS IN 2018 THAN HAVING THESE DEDUCTIONS LIMITED BY AMT IN 2017.
5. EMPLOYEES THAT RECEIVE CORPORATE STOCK OR STOCK OPTIONS ARE BEST OFF HAVING THEIR RETURN PREPARED BY AN EXPERIENCED CPA. DUE TO THE COMPLEXITY OF THE LAWS AND POOR TAX REPORTING, THIS IS AN AREA WHERE THE GREATEST DANGER EXISTS FOR OVERPAYING YOUR TAXES. I PERSONALLY HAD A NEW CLIENT WITH A ONE HOUR TAX RETURN COME IN THAT HAD BEEN PREPARING HIS OWN RETURN AND REPORTING CORPORATE STOCK TRANSACTIONS. DUE TO HIS INEXPERIENCE IN THIS AREA, WE AMENDED THREE PRIOR YEAR RETURNS AND CORRECTED THE APPROACH FOR 2016 WHICH RESULTED IN $34,000 OF TAX SAVINGS.

FINANCIAL PLANNING APPROACH: “WHAT MADE SENSE 15 YEARS AGO MAY           

HAVE CHANGED AS YOU APPROACHED YOUR RETIREMENT YEARS”

1. IMPORTANT TO REVIEW YOUR RISK TOLERANCE AND INVESTMENT ALLOCATION. MANY PEOPLE SET THEIR 401K ALLOCATION WHEN THEY START THEIR JOB AND NEVER CHANGE IT. YOUR ATTITUDE TOWARDS RISK IS ALWAYS INFLUENCED WHEN YOU ARE MAKING YOUR ALLOCATION DURING THE UPBEAT FEELING OF A BULL MARKET VERSUS THE NERVOUS TIMES OF A BEAR MARKET. WE OFFER A FREE RISKALYZE TOOL ON OUR WEBSITE TO ASSIST YOU IN DETERMINING YOUR APPROPRIATE LEVEL OF RISK/RETURN FOR YOUR PORTFOLIO.
2. BASED UPON THE NEW HIGHER ESTATE TAX EXEMPTION AMOUNTS, MANY PEOPLE HAVE STILL NOT UPDATED THEIR LIVING TRUST DOCUMENTS TO REVIEW IF THEY STILL NEED A BYPASS TRUST UPON THE FIRST DEATH OF THEIR SPOUSE.
3. MOST BABY BOOMERS PURCHASED TERM INSURANCE AND INVESTED THE DIFFERENCE. THIS APPROACH HAS ITS MERITS; HOWEVER, HAVING SOME AMOUNT OF PERMANENT LIFE INSURANCE TO PROVIDE LIQUIDITY TO YOUR HEIRS STILL MAKES SENSE SO THEY CAN REPOSITION THE INVESMTENT PORTFOLIO OR SELL THE HOME AT THE CORRECT TIME OF A MARKET CYCLE. AS TERM INSURANCE POLICIES RUN OUT OVER THE NEXT FEW YEARS, IT IS IMPORTANT TO HAVE A COMPLIMENTARY INSURANCE REVIEW TODAY TO REVIEW YOUR CURRENT POLICIES AND DETERMINE IF THERE ARE ANY GAPS IN COVERAGE.
4. LONG-TERM CARE COVERAGE HAS GOTTEN VERY EXPENSIVE DUE TO RECENT RATE INCREASES. AN ALTERNATIVE TO HIGH LTC PREMIUM COSTS AND THE RISK OF NEVER USING YOUR LTC POLICY COVERAGE EXITS.  WHAT IS MAKING MORE SENSE FOR MANY INDIVIDUALS AS THEIR TERM POLICIES EXPIRE AND WHEN THEY REALIZE THEY NEED SOME COVERAGE FOR ASSISTED LIVING OR LONG-TERM CARE, IS A PERMANENT LIFE INSURANCE POLICY THAT ALLOWS EARLY ACCESS TO THE DEATH BENEFIT TO PAY FOR CHRONIC ILLNESS OR LONG-TERM CARE NEEDS. EXPLANATIONS OF THESE POLICY BENEFITS AND ILLUSTRATIONS ARE COMPLIMENTARY TO THOSE INTERESTED.
5. MORE PEOPLE NEED A FORMAL RETIREMENT PLAN TO ELIMINATE GUESS WORK IF THEY ARE ON TRACK FOR RETIREMENT AT A CERTAIN AGE. WE OFFER RETIREMENT PLANS USING INDUSTRY LEADING MONEY GUIDE PRO SOFTWARE.
6. UNDERSTANDING YOUR HEALTH INSURANCE AND MEDICARE OPTIONS IS CRITICAL PRIOR TO TURNING AGE 65. WE OFFER A COMPLIMENTARY REVIEW WHICH TAKES INTO ACCOUNT YOUR TAX BRACKET, OPTIONS TO DEDUCT THE INSURANCE PREMIJMS, BUDGET AND NEEDS. PREMIUM COSTS SHOULD BE ANALYZED ON AN AFTER-TAX BASIS.
   

   CALL TO ACTION: ACT NOW

   I HAVE MANY BRIGHT CLIENTS WHO MAY BE ABLE TO HANDLE THIS LIST ON THEIR OWN. HOWEVER, MANY RECOGNIZE THEY DON’T HAVE AN EXTRA 40 HOURS PER WEEK TO STAY CURRENT AND MAKE INFORMED DECISIONS.  OUR FIRM SPECIALIZES IN TOP LEVEL PLANNING FROM A CPA/TAX AND FINANCIAL PLANNING PERSPECTIVE.  WE ARE UNIQUE IN OUR APPROACH AND HAVE FOUND THAT TAX SAVINGS CAN OFTEN BE YOUR GREATEST SOURCE OF RETURNS.  I ENCOURAGE YOU TO CHECK OUR WEBSITE, TAKE US UP ON SOME OF OUR COMPLIMENTARY OFFERINGS OR COME IN FOR A COMPREHENSIVE FINANCIAL REVIEW.

    

   FINANCIAL REVIEW CONSULTATION (up to 1.5 hours): $295

   Includes review of tax returns, investment accounts and insurance policies.