Feb 26

Location, Location, Location: Making the Decision to Stay or Go in Retirement

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Location, Location, Location:

Making the Decision to Stay or Go in Retirement

CFP Board Advises on the Financial Considerations of ‘Aging in Place’

 

 

Fargo, ND, February 26, 2015 – With approximately 10,000 Baby Boomers – America’s largest generational group – transitioning to retirement each day, the pressures to plan for where they will spend their retirement years are significant. Soon-to-be retirees must ask themselves where they will be the most comfortable: remaining in their home, also known as “aging in place,” or moving to a dedicated retirement community.

 

CFP Board and Ambassador, Paul Jarvis, CFP®, outline key considerations retirees should take into account when deciding on living arrangements in retirement.

 

“Living in the frigid arctic of Fargo, ND, has many soon-to-be retirees contemplating a warmer climate but cost of living changes have many carefully evaluating the move vs. aging in place,” Jarvis says.

 

In the latest post to LetsMakeaPlan.org, the CFP Board shares some important factors to consider when deciding whether to not to “age in place.”

 

  • Living arrangements: Married retirees or singles living at home with other family members are generally good prospects for aging in place. The primary issue here is safety. As we age, we lose physical acuity, including our vision, hearing, and balance.

 

  • Suitability/adaptability of the home to physical needs: Open floor plans and one-level living are obvious wants and eventual needs for most retirees. As hale and hearty as you may be in your early retirement, you need to be realistic about your physical needs in the future.

 

  • Services in community: How retiree-friendly is the community? Is it easy to get around by means other than driving? Are good medical providers and facilities easily accessible? Some communities with a high concentration of retirement-aged residents are designated as “NORCs” – or Naturally Occurring Retirement Communities – with special services for the aging-in-place retiree population.

 

The CFP Board also advises that when making the decision to “age in place,” financial costs must be carefully evaluated. Retirees determined to stay in their homes need to plan for how they will pay for needed services such as in-home caretaking. Some of the major options to ensure retirees can afford these expenses include:

 

  • Long-term care (LTC) insurance:  Most long-term care policies today provide coverage for in-home caretaking services. Unfortunately, a 2014 Genworth Financial study found that very few Americans have LTC insurance despite the high likelihood they will eventually need care.

 

  • Reverse mortgage:  Rent or mortgage payments, property taxes, and depreciation may make staying in the home while receiving LTC services more expensive than the annual costs of a nursing home or continuing care facility. Reverse mortgages have, fortunately, become a more mainstream financing option and less expensive. However, retirees should still be mindful of the pitfalls involved, such as possible loss of the home if the stipulations of the mortgage agreement are not met.

 

  • Medicaid:  A last-resort option that few retirees like to think about is Medicaid. Unlike Medicare or private health insurance, Medicaid does provide for caretaking services in the home, but only for those aging-in-placers who have exhausted most of their net worth.

 

Choosing to age in place or move to a retirement home requires taking a realistic and non-sentimental view of the potential costs that may be incurred in retirement, and comparing them to the costs of other less familiar and comfortable options. A CFP® professional can help tally up all of the costs to help you make an informed and well-planned decision.

 

 

ABOUT CFP BOARD

The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® professionals and other stakeholders. CFP Board owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.  CFP Board currently authorizes more than 71,000 individuals to use these marks in the U.S.

 

 

CONTACT: Jessica Lewis, Communications Specialist P: 202-379-2256 E: jlewis@cfpboard.org Twitter: @cfpboardmedia

 

 

Jan 26

Approach Retirement with a Smile

CFP Board Gives Tips on How to Control Retirement Spending

 

Fargo, ND, January 26, 2015 – As millions of Americans prepare for and enter retirement, it’s natural for many of us to feel worried or concerned about how much money is needed to live comfortably. Despite all of the apprehension, CFP Board Ambassador Paul Jarvis, CFP® explains that there are a few reasons to smile.

In fact, recent research into retirement spending describes the “retirement smile”: retirees begin retirement at a higher than average spending level and end their retirement period with another higher expenditure level (the corners of the “smile”), but in between the two is the curve of decreasing then increasing spending.

“What soon-to-be retirees often miss is that many retirees start retirement crossing items off their bucket lists causing their income need to go up. Understanding your basic expense needs as well as those additional costs will help you prepare for and to live your one best financial life,” says Jarvis.

In the latest contribution to LetsMakeaPlan.org, CFP Board explains how each of us has more control of our spending in retirement than we may think:

  • There’s nothing “fixed” about retirement. We often think that the last phase of our lives is defined, if not confined, by the constraints of living on a fixed income. The reality is far more flexible. There will be years of more and years of less, years of having fun and years of taking care.
  • While planning for retirement is imperative to ensure you have the resources to support your spending, planning in retirement is critical, too. The ebb and flow of spending – which in turn dictates the amount of taxable income you need to withdraw from your retirement accounts – can create opportunities for creative tax planning. For example, keeping your adjusted gross income down in a low-spending year may allow you to take advantage of certain tax credits and deductions.
  • During the years of spending more, be sure to spend smart. At the beginning of retirement when you’re still healthy, energetic, and have an overflowing bucket list of things to do and places to see, it’s tempting to live large and enjoy life. That can be okay, as long as you plan carefully for that largesse and make smart spending choices. Use the free time afforded by your retirement to budget and price compare before you spend. For example, eliminate all those premiums you paid for convenience while working and time was short. Travel during the off seasons; fly through a connecting city, rather than direct; dine out at that new restaurant at lunchtime rather than dinner; get tickets for the matinee film or play.
  • Just because you are in retirement, does not mean you shouldn’t save for it. Use the lower expense years – that period between ages 70 and 75 – to start preparing for the higher expenses likely to come at the end of retirement. If you can, set aside any “leftover” income at the end of the month in a reserve account to hedge against future medical and personal care expenses not covered by insurance.
  • Real spending is what really matters. Retirees should focus on maintaining the purchasing power of their sources of income. This means keeping a healthy allocation to equity investments, real estate and commodities in one’s portfolio, rather than trying to lock everything into guaranteed sources of income. Playing it too safe, investment-wise, can mean retiring sorry.

If thoughts about retirement are turning a smile into a frown, consider hiring a CFP® professional. CFP Board studies have shown that those who do their financial planning with a trusted professional feel much more in control of their futures.

ABOUT CFP BOARD
The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® professionals and other stakeholders. CFP Board owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. CFP Board currently authorizes more than 71,000 individuals to use these marks in the U.S.

CONTACT: Jessica Lewis, Communications Specialist P: 202-379-2256 E: jlewis@cfpboard.org Twitter: @cfpboardmedia

Dec 29

Market Week for December 29, 2014

Market Week for December 29, 2014

 

PDF for larger viewing here—>  Market Week December 29 2014

 

Dec 26

Have You Been Financially Naughty or Nice This Year?

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Have You Been Financially Naughty or Nice This Year?

Fargo Financial Planner, Paul Jarvis,  shares the“Santa Claus Audit,” a guide to

evaluating your 2014 financial behavior

 

Washington, D.C., December 26, 2014 – If Kris Kringle judged consumers by their financial fitness, who would end up on his “Naughty” and “Nice” lists? This year, consumers can review the jolly ole man’s checklist themselves and determine where they stand, courtesy of CFP Board Ambassador, Paul Jarvis, CFP®,  and the Santa Claus Audit, a list of personal finance do’s and don’ts to consider this holiday season.

 

“Start your New Year’s resolutions early by getting yourself on the right financial track now and use this time for end of year planning to get and keep yourself on the nice list,” Jarvis says.

 

In the Santa Claus Audit, CFP Board shares the “nice” steps consumers need to take and the “naughty” behaviors to avoid ensuring they always make Santa’s “Nice” list.

 

Be prepared to land on the “Naughty” list if you:

  • Increase outstanding credit card balances over the year
  • Dip into emergency reserves for a non-emergency expenditure
  • Don’t request or review free annual credit reports
  • Don’t contribute to an employer’s 401(k) plan
  • Borrow from a retirement plan to cover living expenses

 

Get Santa’s cookies and milk ready; you’ve made the “Nice” list if you:

  • Always shop with a list
  • Prepare a budget every year that guides and governs spending
  • Save for retirement through qualified retirement plans, as well as taxable saving or investment accounts
  • Review the beneficiaries of your retirement, life insurance and annuities plans
  • Speak with a CERTIFIED FINANCIAL PLANNER™ professional

 

As Santa Claus comes to town, meet with a CFP® professional to secure your spot on the ‘nice’ list for years to come.  He or she will help you turn those ‘naughty’ financial habits into personal finance successes to celebrate year-round. Consumers can learn more about ensuring their financial security – including working with a Certified Financial Planner™ professional to develop a plan – at LetsMakeaPlan.org.

 

 

ABOUT CFP BOARD

The mission of Certified Financial Planner Board of Standards, Inc. is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning. The Board of Directors, in furthering CFP Board’s mission, acts on behalf of the public, CFP® professionals and other stakeholders. CFP Board owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.  CFP Board currently authorizes more than 71,000 individuals to use these marks in the U.S

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CONTACT: Dan Drummond, Director of External Relations P: 202-379-2252 M: 202-550-8259 E: ddrummond@cfpboard.org Twitter: @cfpboardmedia

Dec 10

2014 Year-End Tax Planning Basics

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2014 Year-End Tax Planning Basics

PDF Version Click Here ->Tax Tips

 

December 10, 2014

AMT triggers

You’re more likely to be subject to the AMT if you claim a large number of personal exemptions, deductible medical expenses, state and local taxes, and miscellaneous itemized deductions. Other common triggers include home equity loan interest when proceeds aren’t used to buy, build, or improve your home, and the exercise of incentive stock options.

Required minimum distributions

Once you reach age 70½, you’re generally required to start taking required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans (special rules apply if you’re still working and participating in your employer’s retirement plan). You have to make the withdrawals by the date required–the end of the year for most individuals–or a 50% penalty tax applies.

2014 Year-End Tax Planning Basics

When it comes to year-end tax planning, you need to have a good understanding of both your own financial situation and the tax rules that apply. For some, that’s going to be a little challenging this year because a host of popular tax provisions, commonly referred to as “tax extenders,” expired at the end of 2013. And while it remains possible that Congress could retroactively extend some or all of the expired provisions, you can’t count on it. Despite this uncertainty, the window of opportunity for many tax-saving moves closes on December 31, so it’s important to evaluate your tax situation now, while there’s still time to affect your bottom line for the 2014 tax year.

Timing is everything

Consider any opportunities you have to defer income to 2015. For example, you may be able to defer a year-end bonus, or delay the collection of business debts, rents, and payments for services. Doing so may allow you to postpone paying tax on the income until next year. If there’s a chance that you’ll be in a lower income tax bracket next year, deferring income could mean paying less tax on the income as well.

Similarly, consider ways to accelerate deductions into 2014. If you itemize deductions, you might accelerate some deductible expenses like medical expenses, qualifying interest, or state and local taxes by making payments before year-end. Or, you might consider making next year’s charitable contribution this year instead.

Sometimes, however, it may make sense to take the opposite approach–accelerating income into 2014, and postponing deductible expenses to 2015. That might be the case, for example, if you can project that you’ll be in a higher tax bracket in 2015; paying taxes this year instead of next might be outweighed by the fact that the income would be taxed at a higher rate next year.

Factor in the AMT

Make sure that you factor in the alternative minimum tax (AMT). If you’re subject to the AMT, traditional year-end maneuvers, like deferring income and accelerating deductions, can have a negative effect. That’s because the AMT–essentially a separate, parallel, income tax with its own rates and rules–effectively disallows a number of itemized deductions. For example, if you’re subject to the AMT in 2014, prepaying 2015 state and local taxes won’t help your 2014 tax situation, but could hurt your 2015 bottom line.

Additional considerations for higher-income individuals

Changes that first took effect in 2013 complicate planning opportunities for higher-income individuals. First, a higher 39.6% marginal tax rate applies if your taxable income exceeds $406,750 in 2014 ($457,600 if married filing jointly, $228,800 if married filing separately, $432,200 if head of household); prior to 2013, the highest marginal tax rate was 35%. If your taxable income places you in the top 39.6% tax bracket, a maximum 20% tax rate on long-term capital gains and qualifying dividends also generally applies (prior to 2013, the top rate that generally applied was 15%).

Second, if your adjusted gross income (AGI) is more than $254,200 ($305,050 if married filing jointly, $152,525 if married filing separately, $279,650 if head of household), your personal and dependency exemptions may be phased out for 2014, and your itemized deductions may be limited. If your AGI is above this threshold, be sure you understand the impact before accelerating or deferring deductible expenses.

Additionally, a 3.8% net investment income tax (unearned income Medicare contribution tax) may apply to some or all of your net investment income if your modified AGI exceeds $200,000 ($250,000 if married filing jointly, $125,000 if married filing separately, $200,000 if head of household).

Note:  Individuals with wages that exceed $200,000 ($250,000 if married filing jointly or $125,000 if married filing separately) are also subject to an additional 0.9% Medicare (hospital insurance) payroll tax.

IRAs and retirement plans

Make sure that you’re taking full advantage of tax-advantaged retirement savings vehicles. Traditional IRAs and employer-sponsored retirement plans such as 401(k) plans allow you to contribute funds on a deductible (if you qualify) or pretax basis, reducing your 2014 taxable income. Contributions to a Roth IRA (assuming you meet the income requirements) or a Roth 401(k) aren’t deductible or pretax, so there’s no tax benefit for 2014, but qualified Roth distributions are completely free from federal income tax, which makes these retirement savings vehicles appealing.

For 2014, you can contribute up to $17,500 to a 401(k) plan ($23,000 if you’re age 50 or older), and up to $5,500 to a traditional IRA or Roth IRA ($6,500 if you’re age 50 or older). The window to make 2014 contributions to an employer plan typically closes at the end of the year, while you generally have until the April 15, 2015, tax filing deadline to make 2014 IRA contributions.

Roth conversions

Year-end is a good time to evaluate whether it makes sense to convert a tax-deferred savings vehicle like a traditional IRA or a 401(k) account to a Roth account. When you convert a traditional IRA to a Roth IRA, or a traditional 401(k) account to a Roth 401(k) account, the converted funds are generally subject to federal income tax in the year that you make the conversion (except to the extent that the funds represent nondeductible after-tax contributions). If a Roth conversion does make sense (whether a Roth conversion is right for you depends on many factors, including your current and projected future income tax rates), you’ll want to give some thought about the timing of the conversion. For example, if you believe that you’ll be in a better tax situation this year than next (e.g., you would pay tax on the converted funds at a lower rate this year), you might want to think about acting now rather than waiting.

If you convert a traditional IRA to a Roth IRA and it turns out to be the wrong decision (things don’t go the way you planned and you realize that you would have been better off waiting to convert), you can recharacterize (i.e., “undo”) the conversion. You’ll generally have until October 15, 2015, to recharacterize a 2014 Roth IRA conversion–effectively treating the conversion as if it never happened for federal income tax purposes. You can’t undo an in-plan Roth 401(k) conversion, however.

“Tax extenders”

A number of popular tax breaks expired at the end of 2013. It’s possible that some or all of these provisions will be retroactively extended, but there’s no guarantee. You’ll want to consider carefully the potential effect of these provisions on your 2014 tax situation and stay alert for any late-breaking changes. Tax-extender provisions include:

  • The ability to make qualified charitable contributions (QCDs) of up to $100,000 from an IRA directly to a qualified charity if you were 70½ or older. Such distributions were excluded from income but counted toward satisfying any RMDs you would otherwise have to receive from your IRA.
  • Increased Internal Revenue Code (IRC) Section 179 expense limits and “bonus” depreciation provisions.
  • The above-the-line deduction for qualified higher-education expenses.
  • The above-the-line deduction for up to $250 of out-of-pocket classroom expenses paid by education professionals.
  • For those who itemize deductions, the ability to deduct state and local sales taxes in lieu of state and local income taxes.
  • The ability to deduct premiums paid for qualified mortgage insurance as deductible interest on IRS Form 1040, Schedule A.

Talk to a professional

When it comes to year-end tax planning, there’s always a lot to think about. A tax professional can help you evaluate your situation, keep you apprised of any legislative changes, and determine whether any year-end moves make sense for you.

Refer a friend To find out more click here
IMPORTANT DISCLOSURESUnited Capital Financial Advisers, LLC (“United Capital”) provides financial guidance and makes recommendations based on the specific needs and circumstances of each client. For clients with managed accounts, United Capital has discretionary authority over investment decisions. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. The information contained in this newsletter is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. United Capital does not provide tax or legal advice.United Capital is independent from and not affiliated with Broadridge Investor Communication Solutions, Inc.Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014.

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