By Philip Lee, CFP®
There are a myriad of strategies for cutting your tax bill leading up to and during retirement.
Philip is quoted on Roth IRA Re-characterization deadlines, maxing out on retirement plans, as well as the need to establish solo 401(k) plans by December 31, 2016.
While everyone’s unemployment and financial situations are different, when one loses a job there are some helpful tips to consider in responding to the change:
Tip 1 – Don’t panic---while losing your job is surely a major life event, the emotional and financial implications can usually be overcome. You may be emotionally hurt but you must react to the situation to minimize the long-term financial burden related to being unemployed. While you may want to take a few weeks or so to sit back and appraise your situation -- in reality—you now have a new full-time job…that is to find another job. Join a job loss support group and start networking.
Tip 2 – Understand the conditions of your severance package (if you are offered one). Do you get a lump sum or salary over a fixed period and are there benefits of one option versus the other? When does your health insurance move to COBRA, what are the deadlines for signing the agreement or signing up for various benefits? Will your employer negotiate any additional benefits such as a longer severance package, or paying for outplacement or career services? Was your termination integrated into an early retirement package and what are the implications of that?
By Philip Lee, CFP®
Last week Kristen and Julia, our rising high-school senior, visited McGill University in Montreal, Canada. By all accounts it was a hugely successful trip. Julia is thrilled at the prospect of furthering her education and expanding her horizons. She will be 18-years old soon and "on her own" as a freshman, hopefully, at a college of her choice.
Students may be worried about making new friends, studying, and adjusting to college life. Parents or guardians may share these concerns too, but they should not neglect legal and financial matters. Our 18 year-olds are now adults who can enter into contracts, make their own health care decisions, and are afforded levels of privacy to which we may not be accustomed. Who will make medical decisions on behalf of your child if he or she is unable to do so? What will you do if you need to get medical information in a time of an emergency? Will you be able to have access or make decisions on financial/tuition matters with the bursar’s office? Is it important to have access to your child’s academic record? Consider these items allowing parents/guardians to assist their adult children before they leave for college:
by Philip Lee, CFP®
As the summer wind-down begins it is time to start thinking about upcoming financial planning deadlines:
Sept. 15: Deadline for your Third quarterly estimated tax payment due
Oct. 1: FAFSA Submission Time-window Begins
If you (your child) plans to attend college from July 1, 2016 - June 2017 you can submit the Free Application for Federal Student Aid (FAFSA) form starting October 1st. This is a significant change from the past. More info.
Oct. 15: Medicare Open Enrollment Begins
Open enrollment begins for Medicare Part D prescription drug plans and all-inclusive Medicare Advantage plans, and ends Dec. 7. Plans can change their list of covered drugs and prices from year to year, so retirees should review their coverage and shop for best-priced plans. More info.
Oct. 17: 6-month Tax Return Extension Deadline & Deadline to Undo 2015 Roth Conversions
If you filed for a six-month extension, your 2015 income tax return is due Oct. 17 — two days later than usual because the usual Oct. 15 deadline falls on a Saturday. It is also your last chance to undo a 2015 Roth Conversion.
If you converted a traditional IRA to a Roth during 2015 and paid tax on the conversion with your 2015 return, Oct. 17, 2016 is the deadline for recharacterizing the conversion. Recharacterization could save you money if your IRA has lost money since the time of the original conversion. I'm not expecting this to be the case as the equity markets have been strong this year.
Dec. 31: Year-end deadline for tax planning
Critical deadline to:
Convert your IRA (or a portion of) to a Roth IRA.
Establish a solo 401(k) account for self-employed individuals wanting to defer income for the 2016 tax year. You can fund the solo 401(k) later.
Take annual required minimum distributions (RMDs) from retirement plans and inherited IRAs. For those of you age 70 ½ or older with IRAs and charitable intent, the Qualified Charitable Distribution ("QCD") provision, permits transfers up to $100,000 from their IRA directly to a qualified charity and have it count as their required minimum distribution without increasing their adjusted gross income. Before you contribute to your charity be sure to evaluate your own cash flow needs and estate planning goals. • Make charitable donations that qualify for a tax deduction if you itemize -- yes, you can gift cash but consider gifting your highly appreciated securities.
Sell poor performing securities in your taxable portfolio to offset other gains.
This article first appeared on Philip's LinkedIn page
All too often people take their Social Security benefit as soon as they are eligible, which is typically age 62. While additional income is always appealing, the reality may be that waiting is in your best interest. The answer to, “When to take Social Security” can be complicated. Below are listed five key questions to guide you to the answer right for you.
Each season brings weather challenges depending on where you live. The threat of hail and tornados in the Spring, blizzards in the Winter, hurricanes in the Summer and Fall. The pictures below are of two recent incidents that happened to me – The Blizzard of 2013 - a huge pine tree falling in the back of our house and slighting impaling our porch (fortunately barely missing ou
In each of the last few years, I have been asked to speak about basic financial planning issues to seniors of my alma mater, Mount Holyoke College. The most recent presentation was in March. In just 30 minutes, I tried to impart on the seniors some basic financial knowledge to prepare them for the decisions they will be presented when they enter the working world – how toselec