News and Articles

Social Security Gets Biggest Boost Since 1981

October 14, 2022

The Cost of Living Adjustment, or COLA, from the Social Security Administration (SSA) is announced every fall and has major implications for the 66 million people who receive benefit checks. With inflation surging, retirees need help maintaining purchasing power. The agency announced its 2023 COLA will be 8.7%, the highest since 1981.

For those concerned about medical costs eating into this increase, Medicare – the health insurance plan for older Americans – said last month it would drop its premiums next year by about 3% for its Medicare Park B Plan.

For more information and context, please read this article from CBS News.

For instructions on how to sign up for a “my Social Security” account with the SSA, which is the fastest way to find out when and how much you will receive, watch the video below:

7 Year-End Tax Planning Tips

October 1, 2022

Consider preparing for the upcoming tax season by taking advantage of a few important end-of-year tax strategies.

Original article from www.usbank.com HERE

We’re now in the final quarter of the year, so why not start thinking about how to minimize our tax burden with actionable tips required prior to December 31st.

1.  Check your paycheck withholdings

An incorrect W-4 can result in an unexpected refund at tax time – or an unexpected tax bill.  Beginning in 2020, the IRS eliminated the old system of withholding “allowances” and now allows employees to provide the specific amount by which they would like to increase or decrease their federal tax withholdings directly. 

Use the IRS Tax Withholding Estimator to find out if you’ve been withholding the right amount or even to calculate your desired refund amount.

Take action:  If you need to make adjustments, file a new Form W-4 at your workplace that includes the added (or subtracted) withholding amount provided by the Withholding Estimator.

Tip:  This is a good time to confirm your state income tax withholding information (if applicable) as well.

2.  Max out your retirement account contributions

Tax-advantaged retirement accounts (such as a traditional IRA or 401(k) plan) compound over time and are funded with pre-tax dollars. That makes them a great investment in your future. They’re also helpful at tax time, since any contributions you make to these plans lower your taxable income.

For the current tax year, the maximum allowable 401(k) contributions are as follows: 

• $20,500 up to age 49
• $27,000 for age 50+ (with $6,500 catch-up contribution)
   

For the current tax year, the maximum allowable IRA contributions are as follows:

• $6,000 up to age 49
• $7,000 for age 50+ (with $1,000 catch-up contribution)
   

If you have an HSA (health savings account), consider maxing out contributions to that account as well (currently $3,650 for individuals, $7,300 for families and an additional $1,000 for individuals age 55+).

Take action: Can’t make the maximum contribution to your 401(k)? Try at least to contribute the amount your employer is willing to match. All 401(k) contributions must be made by December 31 for that calendar year. However, you have a few extra months to make contributions to IRAs and HSAs, up until the tax filing deadline in April.

3.  Take any RMDs from traditional retirement accounts (if you’re age 72 or older)

All employer-sponsored retirement plans, traditional IRAs and SEP and SIMPLE IRAs mandate required minimum distributions (RMDs) by the April 1 that follows the year you turn 72. Thereafter, annual withdrawals must happen by December 31 to avoid the penalty.*

RMDs are considered taxable income. If you don’t take the RMD, you face a 50 percent excise tax on the amount you should have withdrawn based on your age, life expectancy, and beginning-of-year account balance.

Take action: Take your RMD by December 31. Once you turn 72, you must take your first withdrawal on or before April 1 the following year to avoid penalty.

If you don’t need the cash flow and would prefer not to increase your taxable income, you may want to consider a Qualified Charitable Distribution (QCD), directly from your qualified account to a public charity. However, you won’t get the charitable contribution itemized deduction. QCDs are limited to $100,000 per year. Different from rules governing RMDs, you can make a QCD gift as early as age 70 ½ if you’re charitably inclined..

4.  Consider a Roth IRA conversion

While eligibility to open and contribute to a Roth IRA is based on income level, you can convert some or all of the assets in a traditional IRA or workplace savings plan (e.g., 401(k)) to a Roth IRA. Roth IRAs can play a valuable role in your retirement portfolio; unlike traditional IRAs, Roth IRAs are not subject to income taxes at the time of withdrawal in retirement. This can give you more flexibility to manage your cash flow and future tax liability.

Converting qualified assets, such as 401(k) or traditional IRA assets, to Roth IRA assets is considered a taxable event during the conversion year. Any pre-tax contributions and all earnings converted to the Roth IRA are added to the taxpayer’s gross income and taxed as ordinary income. 

Take action: Talk with your tax advisor or Lane Hipple to determine if a Roth conversion is right for you. If you move forward with a conversion, try to manage the tax impact. One strategy is to convert amounts only to the level where you remain in your current tax bracket. You can utilize partial Roth IRA conversions over a period of years to manage the tax liability.

5.  “Harvest” your investment losses to offset your gains

Tax-loss harvesting is a strategy by which you sell taxable* investment assets such as stocks, bonds, and mutual funds at a loss to lower your tax liability. You can apply this loss against capital gains elsewhere in your portfolio, which reduces the capital gains tax you owe.

In a year when your capital losses outweigh gains, the IRS will let you to apply up to $3,000 in losses against your other income, and to carry over the remaining losses to offset income in future years.  

The goal of tax-loss harvesting is to potentially defer income taxes many years into the future — ideally until after you retire, when you’d likely be in a lower tax bracket. This process lets your portfolio grow and compound more quickly than it would if you had to take money from it to pay the taxes on its gains.

Take action: Tax-loss harvesting requires you to diligently track tax loss across a portfolio, as well as monitor market movements, since the chance for tax-loss harvesting can occur at any time. Lane Hipple can help you identify any losses you can use to offset any gains.

*Note: Tax-loss harvesting does not apply to tax-advantaged accounts such as traditional, Roth, and SEP IRAs, 401(k)s and 529 plans. 

6.  Think about “bunching” your itemized deductions

Certain expenses, such as the following, can be classified as “itemized” deductions: 

• Medical and dental expenses
• Deductible taxes
• Qualified mortgage interest, including points for buyers
• Investment interest on net investment income
• Charitable contributions
• Casualty, disaster and theft losses
   

In order to itemize, your expenses in each category must be higher than a certain percentage of your adjusted gross income (AGI). For example, let’s say you’d like to itemize your medical expenses. For the current tax year, the threshold for itemizing medical expenses is 7.5% of your AGI. If your medical expenses total 5% of your AGI, it wouldn’t be beneficial to itemize.

“Bunching” is a way to reach that minimum threshold. In this example, you could delay 2.5% of your expenses to the following year. And then you’d be more likely to reach the minimum 7.5% AGI that next tax season, allowing you to itemize.

Take action: If you’ve been waiting on certain medical and dental expenses or charitable contributions, you might want to group these expenses to take the most advantage of itemizing the deductions.

7.  Spend any leftover funds in your flexible spending account (FSA)

FSAs are basically bank accounts for out-of-pocket healthcare costs. An FSA earmarks your pre-tax dollars for medical expenses, lowering your taxable income.

When you tell your employer how much of each paycheck to set aside for your FSA, remember you’ll pay taxes on any funds still in the account on December 31*. Plus, you’ll lose access to the money unless your employer allows a certain amount in rollovers for the next calendar year.

Take action: Schedule any last-minute check-ups and eye exams by December 31. Fill prescriptions for you and your family. Still carrying a balance? Stock up on items approved for FSA spending (e.g., contact lenses, eyeglasses, bandages).

*Note: Some employers give you until March of the following year to use your FSA dollars.

With a little planning before the year ends, you can be better prepared for the upcoming tax season.

Take Action

If you think you would benefit from a conversation about year-end tax planning, contact Lane Hipple in Moorestown, NJ by calling 856-638-1855, emailing info@lanehipple.com, or to schedule a complimentary discovery call, use this link to find a convenient time.

Don’t Get Spooked by Estate Planning

September 26, 2022

Tackle Your Estate Planning Fears and Plan for the Future

Nothing strikes fear into the hearts of adults quite like estate planning, and it’s about more than the technicalities of creating a will or a trust. Estate planning brings up anxiety about the end-of-life, fear about what will happen to future generations, and concerns about how much weight the plan itself could hold over the course of your own life.

Certainly, it can be difficult to confront the what-ifs of the future, but it’s critical to plan ahead. Putting off an estate plan isn’t a viable strategy. If you’ve been hesitant, review the estate planning fears below and learn how to overcome them.

1.     Catastrophes and Tragic Accidents

We’ve all had irrational fear creep in from time to time, whether you’re scared of venomous snakes or terrified a train will hop off the rails. It won’t surprise you then that many people make an appointment with a professional before they take a flight, no matter how short or long.

Though crash landings could hypothetically occur, it’s incredibly unlikely. In fact, it’s far more common for someone to need long-term care or develop an end-of-life illness than to die in a plane crash. While revisiting or creating your estate plan is a good idea under almost any circumstance, fear of a freak accident shouldn’t be the only impetus. An estate plan includes health directives and assigns power of attorney – the right for someone to make financial or medical decisions on your behalf – which is important to have in place in a multitude of circumstances.

2.     Over-Considering Contingencies

Just like it’s unlikely a plane crash will cause your demise, it’s (thankfully) equally unlikely that some catastrophic event will take out your entire immediate family. That’s a great comfort in many ways, but even the extremely unlikely possibility that it could occur is enough to twist people’s minds into an estate planning pretzel.

Analysis paralysis, the inability to move forward with a decision because of overthinking the issue, can set in. When faced with that difficult scenario, it can feel equally impossible to pick a charity or next-tier contingent beneficiary.

So, how do you proceed? Consider your options thoughtfully, but also as quickly as possible. Agonizing over what would happen if everyone you love passes away simultaneously isn’t helpful to your state of mind or your estate. Choose a contingency plan you’re comfortable with and move forward.

3.     ‘Do and Then Die’ Thinking

It’s a common, but faulty, fear that the grim reaper will come for you the moment you sign the dotted line on your estate planning documents. Facing mortality head-on can make you forget all logic in favor of the what-ifs.

One trick that can help you get past this kind of thinking is to remind yourself that you can change your plan whenever you like. Though the document should accurately reflect your current wishes, thinking of your estate plan as a first draft can help you overcome the illogical reasoning that a completed will means you’ll be meeting your demise soon.

Financial Goal-Setting Tips to Help Achieve Your Money Goals

1.     Decisions = Family Discontent

Money can be a divisive topic in some families, which is why a common estate planning fear is stirring up conflict in your family. Though making estate planning choices can seem difficult, having any plan in place – even a flawed or clandestine one – is better than not having any plan at all.

It’s easy to become overwhelmed by the thought of causing family trouble, but try to think past it. If tragedy strikes, it would be even more challenging for your family if there’s no estate plan to guide the ones you leave behind.

2.     Too Complicated, Too Costly

Doing anything that requires an attorney is enough to spook people, especially when it comes to estate planning. Many people fear the complications or the cost. On average, professionally done estate plans cost around $2,500, which can be a hefty sum to swallow. But consider this: if your home is valued at $500,000 and you have no estate plan to protect it, it will cost roughly $40,000 when it goes through probate.

If your financial situation is holding you back, it can be difficult to prioritize something that feels far off. However, it’s worth saving up now for a professionally prepared will or living trust to protect your assets and your loved ones in the future.

3.     Limited Time Only?

There’s a common misconception that an estate plan is somehow structured like a warranty—that it will run out after a period of time. However, there’s good news if this is what’s been holding you back—these documents are valid until revoked or amended. There’s no need to fear that your plans will expire or that your hard work will go to waste.

Estate Planning: There’s No Time Like the Present

If you think you would benefit from expert help to dispel your estate planning fears and get your assets in order for your heirs, contact Lane Hipple Wealth Management Group at our Moorestown, NJ office by calling 856-638-1855, emailing info@lanehipple.com, or to schedule a complimentary discovery call, use this link to find a convenient time.

Illuminated Advisors is the original creator of the content shared herein. We have been granted a license in perpetuity to publish this article on our website’s blog and share its contents on social media platforms. We have no right to distribute the articles, or any other content provided to our Firm, by Illuminated Advisors in a printed or otherwise non-digital format. We are not permitted to use the content provided to us or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

Five Charitable Giving Strategies that Come with Tax Advantages

September 2, 2022

Enjoy the Financial Benefits of Your Philanthropic Efforts

Charitable giving tax advantages are probably not the first thing on your mind when you decide to make a philanthropic gift. After all, deciding to give to an organization or cause that you care about is a personal decision reflective of your values, passions, and hopes for the future. Your philanthropy helps those in need, and maybe even satisfies something deep in your soul. However, those are not the only benefits. When you use the right charitable giving strategies, you can also minimize your tax burden. Below, we’ll discuss five such strategies to help you maximize the positive benefits of your giving.

1.    Whenever possible, itemize.

In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which almost doubled the standard deduction you’re allowed to take on your taxes due to charitable giving. Now, you can deduct cash gifts you make throughout the year, up to 60% of your adjusted gross income. Despite this increase, or perhaps because of it, less than 10% of taxpayers are itemizing their deductions now. If you’re among the majority failing to itemize your deductions, you may be missing out on some of the advantageous tax benefits that your philanthropy makes possible.

While itemizing your charitable giving can be a smart tax strategy, it’s not necessarily the right move for everyone. To determine if itemizing is right for you, you’ll want to first add up the total of your allowable deductions. This should include deductions such as any mortgage interest and property, state, and local income tax. You’ll then want to consider what the standard deduction for that tax year is. (See 2022 standard deductions here.) If your total amount of deductions are greater than the standard deduction, then itemizing is likely the right move for you.

2.    Bunch your gifts.

If you’re committed to giving back on an annual basis, one of the charitable giving tax advantages you may benefit from is bunching your donations. Bunching is when you prefund your charitable gifts into one tax year rather than spreading them out among multiple years. This is typically done by donating appreciated securities or by putting your gifts into a donor-advised fund (more on this below). By doing so, you’re able to make your itemized deductions exceed the standard deduction threshold, and ultimately, minimize your tax bill for the current year.

3.    Think “out of the box” with your charitable giving.

While giving cash is great, there are ways that you can give to charities you love outside of simply writing them a check. A great way to give back while also being tax-savvy is to give stocks, bonds, or other appreciated securities directly to the charity. By gifting an appreciated stock directly, rather than selling it for a profit, both you and the charity will be able to avoid capital gains tax on the appreciation. What’s more? You may be eligible to receive a tax deduction equal to the fair market value of the shares you donate. So, you’ll be able to maximize your impact while also enjoying significant tax advantages.

4.    Create a donor-advised fund.

Establishing a donor-advised fund (DAF) is another tax-savvy way to give back – and not just where bunching gifts is concerned, as mentioned above. DAFs are personal charitable investment accounts that you can fund with assets such as cash, stocks, or bonds. With a DAF, you get to strategize how you want your gifted (but not yet granted) dollars to be invested, and from there you can recommend when you wish for the money to be given to any qualified charitable organization you choose, on a timetable that works with your financial plans. As your money sits in a DAF, the funds are invested and, therefore, growing tax-free, which may allow you to give even more money to causes you’re passionate about.

Related Article: Financial Goal-Setting Tips to Help Achieve Your Money Goals

5.    Gift your Required Minimum Distribution.

At the age of 72, you’re required to begin taking Required Minimum Distributions (RMDs) from your retirement accounts, whether you need the additional income or not. Typically, when this is done, you are then required to pay income tax on these distributions. However, if you gift your distribution to a charity instead, the IRS allows the distribution to remain tax-free. So, if you don’t need your RMD to support your lifestyle, you may want to consider donating some or all of it to a qualified non-profit instead.

Gifting your RMD should be considered as one of your charitable giving strategies when possible because it allows you to accomplish four things: satisfying your RMD requirement, supporting a charity that you care about, avoiding having to pay the taxes that come with your distribution, and mitigating the risk that your distribution may have pushed you into a higher tax bracket.

Are You Maximizing Your Charitable Giving Tax Deductions?

Philanthropy is a meaningful way to enrich lives – both your own and those that are impacted by the charities you choose to support. Giving back not only helps to immediately address critical needs in your local community and across the globe, but it creates ripple effects for the future, too. By giving yourself, you can inspire those around you to take up philanthropy and make a difference, too. While there’s no “one size fits all” charitable giving strategy to accomplish this, there are a plethora of ways that you can choose to give back while also personally benefitting from charitable giving tax advantages.

If seeking to create impact beyond yourself is a priority for you, contact Lane Hipple Wealth Management Group at our Moorestown, NJ office by calling 856-638-1855, emailing info@lanehipple.com, or to schedule a complimentary discovery call, use this link to find a convenient time.

Illuminated Advisors is the original creator of the content shared herein. We have been granted a license in perpetuity to publish this article on our website’s blog and share its contents on social media platforms. We have no right to distribute the articles, or any other content provided to our Firm, by Illuminated Advisors in a printed or otherwise non-digital format. We are not permitted to use the content provided to us or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

It’s Back to School Time: Does Your Retirement Savings Plan Earn a Passing Grade?

August 30, 2022

Here’s How to Give Your Financial Education a Boost

They don’t often teach how to create a retirement savings plan in school, but it’s time to put your thinking cap on and ask yourself a question: what grade would your retirement savings plan earn if it was put to the test today?

It’s tough to know exactly how much you should save, what strategies might work for you, and exactly how to get to where you want to be. Just like in the classroom, though, the best way to get a passing grade for your retirement savings plan is to educate yourself and put in the effort.

If you aren’t sure where you stand – or you know that your plan could be strengthened – the following advice can help you cram for your retirement savings plan.

First, if you don’t feel like you’ve earned an A+ on the retirement progress you’ve made to-date, know that you’re not alone. The Road to Retirement Survey from TD Ameritrade found that most Americans feel like they’re doing poorly saving for retirement. Of surveyed adults ages 40 to 79, the majority gave themselves a grade of C or lower. This result seems fair when you look at the data, too. Nearly two thirds of 40-year-olds have less than $100K saved for retirement, and one in five of those in their 70s have less than $50K saved.

If you’re in this boat, these steps will help:

1.     Keep building your nest egg

There are many reasons people can’t seem to attain the savings they need. Yet there are as many reasons you should save for retirement as there are excuses not to. Even if you’re only able to save a small amount at present, stay the course. It all makes a difference down the road.

If you’re under 40 and have saved even a small amount, you’ve got several decades ahead of you to make up for any lost time. If you start putting away $500 a month in an IRA or 401(k), you could retire in 25 years with an additional $380,000, assuming a conservative annual average of 7% market returns during that time.

If you’re closer to 60 than to 40, though, you have less time to get your retirement savings plan right. Putting money into savings now will mean you struggle less in the future. Consider some big-time ways to sock away more money—maybe a second job, moving to a smaller home with a smaller mortgage, or other ways to build up your savings.

Say you’re around 57 years old and want to retire in a decade. If you save $500 a month for the next 10 years, you’ll only be able to save $83,000, assuming the same conservative 7% rate of return mentioned above. If you double that and put away $1,000 a month instead, you’ll double your savings amount. While $166,000 may seem like a lot of cash, it’s hard to stretch that through your retirement years. Instead, consider readjusting your lifestyle and maxing out your 401(k).

2.     Increase your Social Security benefits

Social Security benefits can help anyone approaching retirement have peace of mind. Avoid making the mistake of depending too much on them, though. As the system works now, benefits are projected to replace around 40% of the average American’s preretirement income, but most people need around 80% of their former earnings to live at the comfort level they’re accustomed to.

Still, there are significant benefits to Social Security. It’s a government-backed, 8% guaranteed investment. Navigating the system can be complicated, but there are ways you can plan to get the most out of your retirement options, especially these days a people live much longer than they used to.

These tips can help you increase your Social Security income:

• Earn as much as you can right up until full retirement age (usually 66 years old), or even beyond
• Work at least 35 years or more
• Wait as long as possible to claim (If you wait until age 70, you can boost your benefit by 8% a year)
• Pay attention to taxes—50% to 85% of your benefits could be subject to federal taxes if you reach a certain income threshold

These strategies are helpful, but remember that even if you maximize your Social Security benefit in these ways, you’ll likely still have to make up the difference with personal savings. So, preparation is critical.

Related Article: Retirement Planning: How to Live Like It’s Summer Vacation Forever

3.     Boost your retirement readiness grade

If you have concerns about your retirement savings plan, the good news is that there are different strategies for different stages in life. No matter where you are, there are ways to plan and prepare for where you want to be.

When it comes to retirement, having your finances in order is about more than just money. It’s a direct indication of how much you’ll be able to savor that chapter of your life.

It’s important to consider how ready you are. Do you make the grade, or are you like one of the many Americans who barely pass the retirement readiness test? Readiness requires discipline, clearly defined goals, and actionable plans. This requires quite a bit of hard work and preparation, but the result is enjoying and maintaining the same standard of living you’ve experienced while in the working world.

Get A+ Strategies for Your Retirement Savings Plan

If you think you would benefit from expert help with your retirement readiness plan, contact Lane Hipple Wealth Management Group at our Moorestown, NJ office by calling 856-638-1855, emailing info@lanehipple.com, or to schedule a complimentary discovery call, use this link to find a convenient time.

Illuminated Advisors is the original creator of the content shared herein. We have been granted a license in perpetuity to publish this article on our website’s blog and share its contents on social media platforms. We have no right to distribute the articles, or any other content provided to our Firm, by Illuminated Advisors in a printed or otherwise non-digital format. We are not permitted to use the content provided to us or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.