Resource Center

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.

Inflation Reduction Act: Biden Signs Sweeping Measures into Law

August 30, 2022

What it Means for Climate Change, Health Care, and Taxes

President Biden signed the Inflation Reduction Act into law on Tuesday, August 16, marking a major legislative victory for Democrats.

No Republican lawmakers voted for the bill, and it required a tie-breaking vote in the Senate by Vice President Harris in order to go to Biden’s desk. The legislation was a year in the making, and it contains measures aimed at combatting climate change, increasing tax revenue, and lowering health care costs for Americans. That sounds good, but what does it actually do for the record-high inflation numbers we have seen this year? Critics of the bill argue that it is counterintuitive in the long-run because of the billions in government spending it requires and the stifling of gross national profit through higher corporate tax.

Below, we have a high-level summary of some of the measures taken via the Inflation Reduction Act and how Americans may feel it impacts them now and in the future.

For a more detailed analysis of the bill, the Tax Foundation published this article sharing projections on how the bill will affect the U.S. budget window from 2022-2031.

A Year-Long Legislative Battle

Democrats struggled to make the legislation a reality after conservative Democratic Senator Joe Manchin of West Virginia pulled his support. At the time, Manchin cited concerns over approving more spending measures during a time of record inflation. However, Manchin and Senate Majority Leader Chuck Schumer, D-NY, resumed talks in July and struck a deal.

“The American people won, and the special interests lost,” Biden noted during the bill signing, with Manchin joining him on the dais.

What the Inflation Reduction Act Means for Health Care

When Biden mentioned special interests losing, he was referring to pharmaceutical companies. Many had lobbied against measures in the bill related to Medicare prescription drug costs. That’s because the new law enables the federal health secretary to negotiate the prices of some prescription drugs for Americans on Medicare, leading to lower prices for consumers.

The law also caps out-of-pocket prescription costs for Medicare Part D recipients at $2,000 annually. This cap goes into effect in 2025 and, combined with lower prescription drug costs, it is expected to lower health care spending for more than five million Americans.

Additionally, more than three million diabetic Americans on Medicare are now guaranteed that their monthly insulin costs will be capped at $35.

Finally, the Inflation Reduction Act also provides a three-year extension on the Affordable Care Act (ACA) health care subsidies that were created in 2021 as a pandemic relief measure.

Bold Steps on Climate Change

The Inflation Reduction Act set aside more than $300 billion to be invested in energy and climate reform measures. This gives it the distinction of being the largest federal clean energy investment in American history. In short, it’s the most significant step the U.S. has taken toward addressing climate change.

The law includes a $60 billion allocation to boost renewable energy infrastructure in the manufacturing sector, related to things like wind turbines and solar panels. It also created tax credits for electric vehicles, solar panel systems, and other measures to make homes more energy efficient. These tax credits take effect immediately, and the White House has plans to unveil an interactive website that allows individuals, families, and small businesses to easily access information about the tax credits.

The Biden administration and Democratic congressional leaders say the collective measures will reduce greenhouse gas emissions by 40%, based on 2005 levels, by 2030. However, this still falls short of Biden’s original goal.

Tax Measures

Energy efficiency tax credits aren’t the only tax measure in the new law. The Inflation Reduction Act also established a 15% minimum tax for all corporations earning $1 billion or more in income. This is expected to bring in more than $300 million in revenue.

Critics have noted that the legislation paves the way for 87,000 new IRS agents to be hired. This could disproportionately impact middle-class Americans and small businesses through increased audits.

Read Article: Strategies for Building Wealth In Your 50s

What’s NOT in the Legislation

Democrats initially hoped the new law would include funding for childcare, universal pre-K, and paid family leave. All of these items were dropped as negotiations with Manchin played out.

Additionally, and despite the law’s moniker, it does little to address inflation – at least in the present. The Congressional Budget Office reports that the Inflation Reduction Act will have a negligible impact on inflation in 2022 and into 2023. The Biden Administration says the combination of deficit reduction measures, higher taxes, and new green energy revenue streams will eventually lower inflation.

Additional summary information about the new law is available on the White House website.

If you have questions about the Inflation Reduction Act or wish to speak with a financial professional, 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.

Every Woman Needs Her Own Financial Strategy

August 3, 2022

Ahead of National Women’s Equality Day on August 26th, this article shares key data points highlighting why women must take a different approach to their financial strategy than men.

Women continue to earn less

Despite an increased presence in the workforce, the average woman working full-time earns $0.82 for every $1 earned by her male counterpart.¹

Women live longer

A man reaching age 65 today can expect to live, on average, until age 84, while a woman the same age can expect to live almost 87 years.² As a result, women generally need to rely on retirement income for a longer span. They also face higher health care costs than men during their retirement years.³

Women are more likely to be single later in life

In 2020, 70% of men age 65 and older were married, compared to just 48% of women.⁴ Single women don’t have the opportunity to capitalize on the resource pooling and economies of scale accompanying a marriage or partnership.

Women are time-starved

In their many roles as workers, wives, mothers, and daughters, women are responsible for more than three-quarters of unpaid domestic work.⁵ This includes housekeeping duties and care-taking responsibilities for children, aging parents or disabled family members.

Women are paying the price for going back to school

American now hold over $1.75 trillion in outstanding student loan debt with women holding almost two-thirds of that debt.⁶

For many women, financial independence is the number one concern. But what steps can a woman take to help her achieve this throughout her life? Here are a few key action steps you can take to help create financial confidence in your retirement years:

1. Keep Money In Your Name

Every woman needs a pot of money to call her own. This means that in addition to joint financial accounts you may have, you should consider keeping some financial accounts in your name only. Also, make sure you maintain an individual credit history. You can do this by holding a credit card or personal loan issued just to you.

2. Confront Your Fears

Are you controlling you money, or is it controlling you? Are your ideas about money and money management keeping you from becoming financially confident? As women increase education levels and continue to take on expanded roles in the workforce, they control more wealth. As a result, traditional views about finances need to be redefined, and women need to face financial decisions head-on.

3. Share the Decisions

If you share finances with someone else, you need to start talking. This way, you’ll know if you share the same goals and dreams for the future, as well as whether you are on track to meet those goals. Also, remember that disagreements are bound to happen; good communication is key to working through those disagreements and getting you back on track financially as a couple.

4. Maintain Access To All Financial Documents

Keep your financial records accessible and easy to gather when you need them. This could include brokerage accounts, insurance policies, retirement plan statements, tax returns and other important documents. Keep a record of who owns each account. Be sure to notify the person responsible for handling your estate where all your documents are and whom to contact in the event of your passing.

5. Pay Yourself First

Fund your IRA, 401(k) or other retirement account to the maximum. This will reduce your taxable income and allow you to benefit from tax-deferred compounding. When you leave a job, working with a Certified Financial Planner™ can help you determine if rolling your 401(k) funds into an IRA is right for you. An IRA account balance can continue to grow tax-deferred, and you will gain the ability to choose from a broader array of investments than what is likely available in your employer’s plan.

6. Choose The Right Financial Professional For You

It’s important to work with a Certified Financial Planner™ you trust. Ask for referrals and interview several to find rapport. Don’t be shy about asking for references, and check their credentials. An experienced Certified Financial Planner™ can help you look for the right solutions at every stage of your life and help you build confidence in your ability to take control of your finances.

7. Put Your Strategy In Writing

Ask your Certified Financial Planner™ to help you create a formal, written, long-term retirement income strategy. A written strategy will provide the framework for defining your financial goals and shaping your decisions. It also will help you set your sights on those goals in the long-term and help you keep on track regardless of economic conditions or unexpected life events.

8. Have A Backup Plan

Speaking of life events, don’t let a critical life change – such as marriage, divorce, widowhood or illness – derail your goals. Your Certified Financial Planner™ can work with you to create a strategy to address the unexpected and keep you moving toward your goals.

9. Understand What You Own

Although working with a Certified Financial Planner™ is vital, you must also know and make sense of the financial products you hold. Educate yourself on basic financial principles by taking classes, reading books or financial trade journals, and doing research.

10. Plan For Your Family’s Future

When planning your estate, you can create a strategy designed to take care of your heirs while optimizing your retirement income. Work with a qualified estate planner and Certified Financial Planner™ to design a strategy for passing on wealth to your loved ones while enjoying the fruits of what you’ve worked hard to earn throughout your lifetime.

Financial independence starts with determining your financial goals and putting in place a strategy designed to help you reach them. By implementing the steps outlined here, you can be well on your way to creating financial confidence for yourself, both now and in your retirement years.

¹ Payscale. March 15, 2022. “The State of the Gender Pay Gap 2022.” https://www.payscale.com/research-and-insights/gender-pay-gap/. Accessed May 17, 2022.

² Social Security Administration. “Important Thins to Consider When Planning for Retirement: What is Your Life Expectancy?” https://www.ssa.gov/benefits/retirement/planner/otherthings.html. Accessed May 17, 2022.

³ RegisteredNusing.org. Dec. 28, 2021. “Here’s How Much Your Healthcare Costs Will Rise as You Age.” https://www.registerednursing.org/articles/healthcare-costs-by-age/. Accessed May 17, 2022.

⁴ Administration for Community Living. May 2021. “2020 Profile of Older Americans.” Page 6. https://acl.gov/sites/default/files/Aging%20and%20Disability%20in%20America/2020ProfileOlderAmerican.Final_.pdf. Accessed May 17, 2022.

⁵ Free Network. Dec. 20, 2021. “Global Gender Gap in Unpaid Care: Why Domestic Work Still Remains a Woman’s Burden.” https://freepolicybriefs.org/2021/12//20/gender-gap-unpaid-care/. Accessed May 17, 2022.

⁶ AAUW. “Deeper in Debt: Women & Student Loans 2021 Update.” https://www.aauw.org/app/uploads/2021/05/Deeper_In_Debt_2021.pdf. Accessed May 17, 2022.

Content provided by Advisors Excel. © 2022 Advisors Excel, LLC

College Student Financial Tips for the Young People in Your Life

August 2, 2022

How to Help a New College Student Prepare for Success

The first semester of college is an exciting time, and the perfect moment to pass along financial tips for your new college student. Oftentimes, it’s the first chance young people have to leave the nest, spread their wings, and experience the ups and downs that come with financial freedom.

Your kids have come a long way from the days of the tooth fairy and piggy banks as fiscal cornerstones. It’s critical that young people enter into this next stage of life with everything they need to not only succeed academically, but financially, too. The college student financial tips below are helpful topics to discuss with the new college students in your life to help them start off on the right foot.

Tip #1: Learn Budgeting Basics

There are many different ways to budget and prioritize. You can give your child a big advantage by sitting down and coming up with a reasonable and realistic financial plan for fixed items, extracurriculars, academic needs, and even an emergency fund to prepare for the unexpected.

Then determine the best way to keep track of the budget. There are several apps loaded with features that can make it easy to stay on track. Or, if your college student is a fan of spreadsheets, they can put their math skills to good use with some easy formulas and templates. Better yet, see if they can sign up for a budgeting, financial skills, or economics course that can help integrate their personal and academic goals.

Tip #2: Be Wary of Borrowing

Student loans are a staple of college education financing for many students these days. But even though they’re available, it pays to be wary of how much you borrow and how you use the funds. Though there are plenty of temptations in campus life—spring break, shopping, or late-night pizzas—student loan dollars should only be used for tuition, books, and necessary living expenses.

Depending on how savvy your child is with financial situations, you may want to suggest that you help take them through the loan paperwork before they sign it. Student loan debt in the United States totals a whopping $1.75 trillion dollars, and the average U.S. household with student debt owes $62,913. So, it’s important to be clear that there’s a lot on the line.

*Among workers aged 25 years and over; based on average weekly earnings of full-time wage and salary workers.
†Cumulative student loans only (no Parent PLUS); data collected between 2015 and 2018, currency inflated to 2021Q2 values to match income data collection period; amount borrowed is not equivalent to current debt.

Tip #3: Prioritize Education

We want our kids to make the most of college on the academic front, but we also hope that it’s a fun and enjoyable time in their lives. It’s a new and exciting environment, and often the first chapter of their lives in which they are able to branch out on their own and discover who they are and what they want out of life. Of course, life is about balance, and new students need to walk the line between the call of adventure and important academic obligations. Falling behind can quickly lead to failing a class. Not only will that hurt their academic standing, but if they have to make up the class, they’ll likely have to pay for it again.

Tip #4: Credit Is Complicated

Credit cards can seem a bit like an “easy button” for young people tempted by the latest fashions, technology, and experiences. Fortunately, by law, credit card companies aren’t permitted to market on college campuses or issue cards to anyone under 21 without proof of income or an adult cosigner.

You can, of course, add your child to your card as an authorized user, but be sure to limit use to emergencies only and discuss the dangers of high-interest debt.  

Tip #5: Live by the Textbook

Textbooks are notoriously expensive—over the course of a college career a student can easily exceed thousands of dollars on textbooks alone. Buying used books can save some funds, as can sharing costs with a study partner who is in the same class. Renting is also an option—there are plenty of companies online that will let you rent or borrow books one semester at a time for a much lower price point. Make certain your student knows that buying new isn’t the only option.

Tip #6: Master the Basics

Your child may be book smart, but often the biggest life lessons aren’t covered in school. Make sure your new college student has a good grasp of basic living skills. Teach them how to cook on a budget instead of ordering food out. That one habit alone can save them thousands of dollars. Encourage them to carpool or take public transportation instead of relying on cabs or Uber. Making sure they do their own laundry can also ensure their clothes last for years instead of months. These may sound like basic life skills instead of college student financial tips but, when combined, they can help your child prepare for a successful college career and a financially responsible life ahead. 

College Sets the Course

Your child’s college years are consequential on several fronts. How your new college student does in their academic career can have a big impact on their career prospects, of course, but there’s more to it. Looking beyond grades, it’s also a time during which they discover who they are and what they’re made of. Giving sound advice can help them feel confident and accomplished and set them up for a future they (and you) can be proud of. So, use these financial tips for your new college student to help them chart a successful course through college and beyond.

If you think you would benefit from a conversation about personal finance or broader financial planning topics, 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.