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Coat Drive Expands, Helps South Jersey Citizens

SNJ Today featured HFM Investment Advisors, Inc. for launching its 8th Annual Coat Drive. By spreading the word and informing more people of our goal to keep South Jersey citizens warm this coming winter, HFM hopes to collect a record-setting amount of coats.

To find out how you can help, where you can donate a coat, and who the donations benefit, click here: Help Your Community

Click here to see the Coat Drive coverage:

HFM Coat Drive South Jersey



3 Key Tax Strategies for Small Business Owners

Small business owners pay their taxes all year long, so they should be focusing on tax planning all year long. That doesn’t mean small business owners should make financial decisions based solely on tax considerations. But it does mean they should never make important financial decisions without at least considering the tax consequences.

Health insurance deductions for self-employed individuals

 Many freelancers needlessly overpay their taxes because they’re unaware that the law entitles them to deduct 100 percent of their spending for medical insurance premiums (including qualifying long-term coverage) for themselves and their spouses and dependents.

They take the health insurance deduction “above the line” on Line 29 on the front of the 1040 form, thereby reducing their adjusted gross income (AGI), Line 37.

This is a big break for freelancers and other self-employed individuals, regardless of whether their unreimbursed medical expenses aren’t high enough to claim as itemized deductions on Schedule A of Form 1040, notes the New York Times of Feb. 19, 2017.

There’s an exception for people 65 and older. Their threshold is 7.5 percent. This break went off the books at the close of 2016, though there’s bipartisan support in Congress to extend it beyond 2016.Long-standing rules forbid itemizers from writing off all of their medical outlays. Itemizers can claim their expenditures just to the extent they exceed 10 percent of AGI. No deduction for anything below the 10-percent-of-AGI threshold.

First-year expensing

Tax-savvy freelancers know they have two ways to write off their outlays for purchases of equipment – for instance, computers and file cabinets.

Freelancers who go the “standard” route recover the cost through depreciation deductions over a period of years. Their other option is the frequently overlooked tactic of “expensing,” meaning they deduct a specified amount of equipment in the year of purchase.

To illustrate, a self-employed person’s equipment purchases include $10,000 for cameras, computers, copiers, tape recorders, and the like. Instead of depreciating them over five years, they can be immediately expensed under Code Section 179. A $10,000 write-off lowers taxes by $3,000 for an individual in a top federal and state bracket of 30 percent.

Profit from paying your kids

Do your children help out with some of the chores connected with your business? Could they? Then a savvy way to take care of their allowances or spending money – at the expense of the IRS – is to pay them wages for work they do on behalf of the business. This holds true whether it’s a full-time, long-established operation or just a new, part-time sideline.

Putting your children on the payroll is a perfectly legal way to keep income in the family, while shifting some out of your higher bracket and into their lower bracket. IRS auditors require this kind of expense to pass a two-step test:

  1. Your children have to actually render services.
  2. You pay them wages that the IRS deems “reasonable” – agency lingo for not more than the going rate for unrelated employees performing comparable chores like clerical work or deliveries.

Section 3121(b)(3)(A) authorizes another break. It permits you to sidestep Social Security taxes on the wages you pay your children under the age of 18. To qualify for the exemption, you must operate as a sole proprietorship, meaning the lone owner of a full-time or part-time business that’s not formed as a corporation or partnership, or do business as a husband-wife partnership. Put another way: No exemption for a family business that’s incorporated or a partnership with a partner other than a spouse.

Another break for business owners is that write-offs for equipment purchases and wages save more than just income taxes. They also reduce self-employment taxes owed.

Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com.

From 3 Key Tax Strategies for Small Business Owners, Copyright ©2017, Sift Media.

8 Ways to Reduce the Tax Bite During Retirement

It’s one thing to build up your retirement savings so you can retire. But remember, every dollar you save in tax-deferred plans, including 401(k)s and traditional IRAs, will be taxed when you withdraw money after retirement. It’s also important to plan so that you can minimize that tax bite after retirement.

If you haven’t thought about tax planning yet, it’s not too late. Here are eight strategies to consider as you approach and enter retirement:

(1) Know what you spend.  Many people believe their expenses will go down in retirement, but the reality depends on the lifestyle you want. Do you plan to travel? Take classes or start a new hobby? Help out your children and grandchildren? These activities will cost money. And don’t forget about healthcare costs. Understand what Medicare and supplemental health policies will provide and what you’ll be paying out of pocket. Once you have a firm grasp on your expenses, you can strategically plan your withdrawals.

(2) Know your tax bracket.  Staying in a low tax bracket can help retirees minimize the tax they pay on their withdrawals. When your income reaches specified thresholds, you pay gradually higher amounts of tax on the additional income. Check out the tax rate schedules, tax tables and cost-of-living adjustments for certain tax items for 2017. If your withdrawal plan puts you into a higher tax bracket by a hair, you might want to lower the amount you plan to pull out.

(3) Diversify.  Having a variety of accounts that are taxed differently can provide flexibility when it comes to taking withdrawals in retirement. Your retirement savings may include a pension, IRAs, a 401(k) account and stocks, and bonds and mutual funds not held in tax-deferred accounts. Consider drawing from different buckets. Taking funds from already taxed accounts, like Roth IRAs or Roth 401(k)s, may be better than withdrawing from all accounts equally. Leaving your tax-deferred accounts, like traditional IRAs, to grow reduces taxable income. One caveat: If you are 70 ½ or older, you must take minimum distributions.

If you don’t have a Roth IRA or Roth 401(k) you might want to consult an accountant, a CFP® professional, or your human resources department about opening one, or even transferring some of your retirement savings into one. If you have had a Roth IRA for more than five years and are older than 59 ½, you can withdraw money tax-free.

(4) Think about using a Roth IRA, but be careful.  If you don’t have a Roth, and you’re a high earner and therefore precluded from opening a new Roth, you can still establish one by putting $5,500 in a traditional nondeductible IRA and then converting it to a Roth later on. But there’s an important trap to avoid. If you have other IRA accounts that were funded with deductible contributions, the amount converted to the Roth is considered to have come pro-ratably from all your IRAs, and not just from the nondeductible IRA you set up to convert to the Roth.  As a result, some of your conversion may be taxable.

(5) Plan to delay withdrawals. If financial markets are rising, enjoy the ride and wait to withdraw. You’ll pay taxes on the gains later. If you don’t need to pull money from IRAs, 401(k) and other tax-deferred accounts, hold off as long as you can or until you must take distributions at 70 ½. Let those accounts continue to build up on a tax-deferred basis until you need them.

(6) Know the rules for Social Security. The stark reality is it does not generally pay to claim Social Security retirement benefits before full retirement age. That’s age 66 for people born between 1943 and the end of 1954. The retirement age increases in two-month increments until age 67, for those born in 1960 or later.

Here’s why this is important. If you were born in July 1955 (age; 62) and will earn $100,000 for 2017, the Social Security quick benefit calculator displays how your benefit jumps from $1,421 to as much as $2700 per month if you delay social security income.


Retirement age Monthly benefit amount1
62 and 6 months in 2017 $1,739.00
63 in 2018 $1,805.00
70 in 2025 $3,126.00
1Assumes no future increases in prices or earnings.


If you are married, widowed, or divorced having been married for more than 10 years, your claiming strategy gets a bit more complicated, but making the right choice can be even more profitable. Talk to a CFP® professional or another financial professional about strategies you should consider. Your Social Security income is also taxable, depending how much income you receive from other sources, including withdrawals from retirement accounts.

(7) Decide where to live.  For many, the ideal place to retire is someplace with a warmer climate, more affordable housing, and close to family or friends.  But another important factor to consider is how your income and assets will be taxed. Some states have no income taxes for individuals; others don’t tax Social Security benefits and most income from pensions and retirement accounts.  Check out the 10 Most Tax-Friendly States for Retirees.

(8) It all starts with a plan.  It’s important to have a plan in place before you retire. But even if you’re close to retirement, it’s not too late to take advantage of the benefits of tax planning. A financial planning professional can help you identify your goals and develop a personalized plan that will maximize your income and reduce your taxes in retirement. A financial planning professional will also work hand in hand with your accountant to ensure your plan is executed properly.

But remember, unexpected circumstances can arise and tax laws are constantly changing. Meet with your advisors on a regular basis to make sure you remain on track. Balance your need for income against what you truly in enjoy in life, so that you can avoid paying unnecessary taxes.

By J.J. Burns, CFP® From 8 Ways to Reduce the Tax Bite During Retirement Copyright ©2017, Certified Financial Planner Board of Standards, Inc. All rights reserved. Used with permission.

What You Must Know About Required Minimum Distribution Rules

The IRS requires that you start taking withdrawals from your qualified retirement accounts (IRA accounts, 401(k)s, 457 plans and other tax-deferred retirement savings plans like a TSP, 403(b), TSA, SEP, or SIMPLE) once your reach age 70 1/2. This requirement is called a required minimum distribution, or RMD.

When must I start taking required minimum distributions?

Your first RMD must occur by April 1st of the year after you reach age 70 ½, but most people will find it most tax-efficient to take their first distribution in the year they reach age 70 1/2.

Example: Bob’s birthday is in February. Thus he turns 70 ½ in August. His first distribution must occur by April 1st of the following year, although he could take it in the current year. If Bob waits until April 1st of the year following the year he turns 70 ½, he will have to take a required minimum distribution for both years. His decision to wait and take two distributions in the second year, or take his first distribution in the year he turns 70 ½ should be based on which option will result in the least taxes over those two years. With the hundreds of retirees I have worked with, I have seen very few cases where it made sense to delay the first RMD.

Do I have to take RMDs from a Roth?

You are NOT required to take minimum distributions from your own Roth IRA. However, you are required to take RMDs from other types of Roth accounts.

For example, IRS rules require you take RMDs from Roth 401(k)s, however, at retirement, you can roll your Roth 401(k) into your Roth IRA and thus avoid this requirement.

You also must take RMDs from inherited Roth IRAs so when your children inherit your Roth IRA they can’t let the funds grow tax-free forever – they have to start taking a specified amount out each year.

What if I am still working at age 70 1/2?

If you are still working and contributing to your employer-sponsored retirement plan, some plans will allow you to delay your RMD.

Each qualified plan has its own set of rules. You have to check with your plan to see if you will be required to take distributions at age 70 1/2 if you are still working.

How much do I have to take out?

The amount of your required distribution is based on two things: your prior year’s December 31st account balance, and an IRS table based on your age.

You use your age as of your birthday in the year of your distribution. So if you are taking a distribution in 2017, use the age that you attain on your birthday that occurs in 2017.

For your reference, the first twenty years (covering distributions for ages 70-90) of the most commonly used table, the Uniform Life Expectancy table, is listed at the bottom of this article. To calculate required distributions for someone over age 90, reference the complete Uniform Lifetime table on the IRS website (on this IRS page scroll down to the bottom for Table III to find the Uniform Table).

If you have a spouse who is ten years younger than you, or you are taking distributions as a non-spouse beneficiary of an IRA account, than use an alternate table at one of the links below:

Can I rollover my RMD to a Roth?

No, you cannot roll your required minimum distribution to a Roth IRA. However, you can distribute funds from your IRA in-kind, meaning you distribute shares of an investment instead of cash. Then those funds remain invested in a brokerage account.

Can I direct my RMD to a charity?

You can direct your RMD to a charity, and it will not be reported as taxable income on your tax return. This provision was a temporary provision in the tax code but was made permanent starting in 2016. It is called a “qualified charitable distribution.”

How do I calculate my required minimum distribution?

To determine how much you have to withdraw, take your prior year’s December 31st IRA account balance, look up your age on the appropriate table, and divide your account balance by the factor (remaining distribution period) based on your age.

Example: Bob had $100,000 in his IRA on December 31st of the prior year. Bob is 70 and decides to take his first distribution in the year in which he turns 70 ½.

  • $100,000 / 27.4 = $3,649.63
    This is the amount Bob must withdraw for the calendar year in which he turns 70 ½.

Try an online RMD calculator to estimate your current or future year’s required minimum distribution.

What? A penalty for not taking a required minimum distribution!

The penalty for not taking a required minimum distribution is a tax of 50% on any amounts that were not withdrawn in time.

For additional information on required minimum distributions see:
IRS Retirement Planning Facts Regarding Required Minimum Distributions

First 20 Years Of The Required Minimum Distribution Table

First Twenty Years Of The
Required Minimum Distribution Table (Uniform Lifetime)
Age Distribution Period
70 27.4
71 26.5
72 25.6
73 24.7
74 23.8
75 22.9
76 22.0
77 21.2
78 20.3
79 19.5
80 18.7
81 17.9
82 17.1
83 16.3
84 15.5
85 14.8
86 14.1
87 13.4
88 12.7
89 12.0
90 11.4


The Equifax Data Breach Is Massive — Here’s How to Protect Yourself

From Motleyfool.com

Equifax announced a data breach that could affect 143 million consumers. Here’s what you need to know.

On Thursday, Sept. 7, Equifax announced a data breach that could potentially impact 143 million U.S. consumers. Among the information that was accessed were names, Social Security numbers, birth dates, addresses, and more. Here are the details of what happened and what you can do to protect yourself.

What happened?

Equifax reported that unauthorized access of certain files occurred from mid-May through July 2017, which could potentially affect millions of consumers. The criminal activity was detected on July 29, and the company says that it acted right away to stop it.

A glove hand holding credit card over a computer keyboard.


Criminals obtained information such as names, Social Security numbers, birth dates, addresses, and driver’s license numbers. Credit card numbers for more than 200,000 consumers and credit report dispute letters for about 182,000 consumers were also accessed.

However, the company says that no unauthorized access on Equifax’s core credit reporting databases (consumer or commercial) has been detected.

Equifax also plans to send direct mail notices to consumers whose credit card numbers or dispute documents (which contained personal identifying information) were accessed.

How to protect yourself

To help protect consumers who may have been affected, Equifax is offering free credit file monitoring and identity theft protection for one year to all U.S. consumers at www.equifaxsecurity2017.com. It may be a smart idea to take advantage if you don’t already use a credit monitoring service.

According to Matt Schulz, CreditCards.com’s senior industry analyst, “When breaches like these happen, consumers need to be diligent — and not just in the short term. Just because nothing looks amiss on your bank statements or your credit report now, that doesn’t mean you haven’t been compromised. Bad guys can be very patient, so it’s important to keep an eye out long after this story fades from the headlines.”

In other words, the best defense is to monitor your credit report frequently to check for any suspicious activity, such as accounts you didn’t open, address changes, or anything else that you don’t recognize.

You may want to consider a fraud alert

If you believe that your identity has been compromised, or if you just want to be on the safe side, you can place an initial fraud alert on your credit report. Doing so is free, and all you need to do is to contact one of the three credit bureaus (Equifax, Experian, or TransUnion), and they will inform the other two.

In a nutshell, a fraud alert makes it tougher for would-be thieves to open fraudulent accounts in your name. Lenders see the fraud alert when checking your credit, and then must take additional steps to verify that it is actually you opening the account.

An initial fraud alert lasts for 90 days, and can be renewed or cancelled as needed. Equifax offers an “automatic fraud alert” feature, which automatically renews the fraud alert every 90 days.

A credit freeze is a more effective step

Freezing your credit makes it virtually impossible to open an account in your name, as it will deny lenders access to your credit report. This means that they won’t be able to complete a credit check and therefore won’t be able to open an account. Unlike a fraud alert, a credit freeze won’t expire until you choose to remove it.

You must place a credit freeze with each bureau individually, and doing so can come with a fee, depending on what state you live in (usually less than $10 per bureau). However, if you’re already a victim of identity theft, a credit freeze is 100% free.

If your identity is stolen

Aside from placing a fraud alert or freezing your credit, if you see a fraudulent account show up on your credit file, there are a few important things to do, according to the Federal Trade Commission.

  • First, it’s important to create an identity theft report, which you can do at identitytheft.gov, or by calling the FTC at (877)438-4338. This can serve as proof that your identity was stolen and gives you certain rights when trying to do damage control, such as the ability to close fraudulent accounts and have them removed from your credit report.
  • Next, call the fraud department of the company where the account was opened and explain that someone stole your identity. Ask them to close the accounts right away to prevent further fraudulent charges.
  • Once you have an identity theft report, you can go to your local police station and file a report. Be sure to get a copy of it.
  • If you find fraudulent charges on your current credit accounts, call the fraud department and explain which charges aren’t yours and ask that they be removed.
  • Write to each of the credit reporting agencies, explaining which information came from identity theft, and ask them to block that information. Include a copy of your identity theft report.
  • If your identity has been stolen (and you have an identity theft report), you can place an extended fraud alert that lasts for seven years. You’ll need to contact each of the three credit bureaus.

Note that this is not an exhaustive list, and depending on your situation, there may be other steps you can take. You can find the FTC’s suggested situation- and account type-specific steps to take on the agency’s website.

The bottom line

To be perfectly clear, the Equifax data breach shouldn’t be a cause for panic, as many people who have their information stolen never experience any issues.

That said, it’s important to keep an eye on the situation and take additional steps as appropriate. If you don’t already have a credit monitoring service, it may be a good idea to take advantage of the free year of Equifax’s services being offered, just in case any suspicious activity takes place.

Author Matthew Frankel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy  See Sept 10, 2017 article at https://www.fool.com/credit-cards/2017/09/10/the-equifax-data-breach-is-massive-heres-how-to-pr.aspx 

How American Families Pay for College

From ThinkAdvisor,com:

Here’s how a typical family financed a college education in 2016-2017 according to the latest annual report, How America Pays for College, from Sallie Mae:

  • Scholarships & grants:                     35%
  • Parent income & savings:                23%
  • Student loans:                                   19%
  • Student income & savings: loans:     11%
  • Parent loans:                                       8%
  • Relatives & friends:                          4%

There was little change in the breakdown from last year – just a 1 percentage point difference up or down in all categories except for parent income and savings, which fell by six percentage points, and student loans, which rose by six percentage points.

Neither saving less nor borrowing more is good news, and they are related.

“When parent income and savings are less available, the funding gap appears to be bridged by borrowing, more student borrowing than parent borrowing,” according to the study,  which is based on telephone interviews with 800 parents of undergraduates, ages 18 to 24, and 800 undergraduate students, ages 18 to 24, conducted by Ipsos Public Affairs.

(Related: 30 Best Paying College Majors: 2017)

Forty-two percent of families surveyed borrowed money to help pay for college this year, according to the report. The typical loan amount was just over $9,600 for students and almost $3,900 for parents, and federals loans were the most popular for both.

Borrowers were more likely than non-borrowers to attend college full-time and in a four-year program, and more likely to venture out of state, attend a private school and choose one based on its academic program.

The study also found a disconnect between parents and children concerning loan repayment.

While 84% of student borrowers expect to be solely responsible for repaying their loans, only 58% of parents concurred with that and 12% of parents expect to repay those loans. In contrast, 41% of parent borrowers expect to be solely responsible for repaying their loans while 21% of students expect the responsibility lies with them

Despite the decline in savings and increase in borrowing, families and students are focused on college affordability, according to the report. Not only are they seeking scholarships – 7 in 10 families did but only 49% reporting using them – but most are completing the Free Application for Student Aid (FAFSA) (86%) needed to qualify for student aid, and 73% report choosing an in-state schools.

In addition, 50% of  students were living at home in the 2016-2017 academic year, 26% were enrolled in an accelerated program to graduate early (and spend less), 76% were working to help pay for college – working year-round or during school breaks—and 26% were enrolled in accelerated programs to graduate earlier (and save money). Many families were also reducing personal spending and working longer hours to help pay for college.

One action many families aren’t undertaking, however, is developing a plan to pay for college. Even though nine in 10 surveyed said they anticipated college attendance since their child was in pre-school, less than half (42%) said they made a plan to pay for it.

The survey covered families across the U.S. and found that those in the Northeast stood out from families in other regions of the country. Families in the Northeast spend about 70% more on college, and finance that with more borrowing and a larger contribution from parents. Enrollment in private school and on a full-time basis higher among those families as is academic programs as a key reason for college choice.

Article from Think Advisor , July 18, 2017  http://www.thinkadvisor.com/2017/07/18/how-american-families-pay-for-college-2017?eNL=596e5a89140ba0f942a97de8&utm_source=TA_DailyWire&utm_medium=EMC-Email_editorial&utm_campaign=07182017&page_all=1


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Is Social Security Enough for Retirement?

Use These Strategies to Help Stretch Your Dollars

Despite a tumultuous political climate, Social Security seems safe. But Social Security is rarely enough to cover more than the most basic living needs. And with the average monthly Social Security benefit coming in around $1,250  and growing slowly, this fact isn’t going to change anytime soon.

For some, a government or corporate pension may provide additional, regular income.  The majority of Americans, however, will have to maximize what they themselves have set aside in their retirement plans to sustain their standard of living throughout retirement.

I spoke with a couple about to retire recently. They told me about all the things they anticipated doing in the next few years: travel, taking some classes at the local community college, becoming more tech savvy to keep up with the grandkids. A shadow, however, passed over the wife’s face as she mentioned something she was NOT looking forward to – retirement.

“I’m going to miss that green envelope,” she said.  “Knowing I won’t be seeing it in our mailbox makes me really nervous.”

She was referring to her husband’s monthly pay receipt. For decades, his paycheck had been deposited as regularly as clockwork in their checking account and was the anchor and compass of their financial management. Without it, they felt like they were on their own trying to figure out how much they could withdraw from their retirement reserves – not to mention how to plan for taxes, deciding which accounts to draw from first, and how to invest.

In many cases, after a lifetime of receiving paychecks on a consistent basis, retirees must shift gears and start creating their own income. However, like my retiree couple, they find the prospect pretty challenging and, at times, overwhelming.

To take back control of their financial future

Retirees must learn to separate fact from fiction when it comes to generating the income needed for their sunset years. By focusing on actionable goals, retirees can maximize their retirement assets. First, let’s get the fallacies out of the way.

  1. One magic withdrawal rate will ensure you will never run out of money.It’s true that there has been considerable research done on “safe withdrawal rates” — defined as the highest yearly payout from an investment portfolio that will keep the portfolio intact over a given period. While so much depends on the parameters used to identify this rate, there is generally a consensus that a 4 percent annual withdrawal rate is a reasonable payout over the life expectancy of most retirees.But retirees need to understand that this rate should be flexible. There may be years that a higher rate is warranted or necessary – during times when the investment portfolio is doing well, for example, or when there are large expenses, perhaps for medical costs.This is where an annual conversation with a financial advisor works better than a hard-and-fast rule. Each year, the advisor can help reevaluate the need for greater or lesser withdrawals from the portfolio, while also considering the longevity of the portfolio in a way that fits the unique circumstances of a retiree’s life.
  2. Safe, income-producing investments can be relied on to create income in retirement.It’s too simplistic to call investments that pay interest or dividends “safe,” and say that growth stocks are not.Retirees often confuse regularity with safety. For example, while bonds provide predictable income, this does not mean that this income is perfectly safe. Bond issuers  default sometimes, and companies that pay dividends occasionally cut their payouts to shareholders. Furthermore, inflation will also reduce the purchasing power of those regular payments from bonds and dividends.And in today’s low interest rate economy, it can be difficult to find yields on fixed income investments sufficient to maintain a retiree’s lifestyle. This scenario drives many retirees to search for higher yields, which often carry unacceptable risk.For most retirees, a healthy allocation of investments that will grow over time, rather than those that promise regular income, is warranted. Today’s growth is needed for higher payouts in the future.
  3. Spending capital from the retirement portfolio is a bad idea.Traditional IRAs, 401(k)s, 403(b)s, and self-employed plans are structured, under the tax laws, to be paid out over our lifetimes. In fact, retirees are penalized if they fail to take principal from these accounts at a certain age. Many retirees find the prospect of spending down these accounts very upsetting, when, in fact, doing so under the guidance of a qualified financial professional can result in a far more comfortable, secure retirement.And now for the facts: here’s what really matters to a retiree drawing out income from his or her retirement savings.
  4. Taxes matter.Of course they do – and where they really matter is in determining acceptable withdrawal rates.Suppose, for example, a retiree decides he needs about 4 percent from his retirement portfolio to cover his annual living expenses. As discussed above, a 4 percent payout is a reasonable (but not certain) rate to ensure portfolio longevity.But when this payout is made from a tax-deferred retirement account, the retiree will need to withdraw an additional 1 percent from the portfolio to cover the tax liability on these withdrawals. As a result, the sustainability of the portfolio over his lifetime may drop considerably.When saving for retirement, many individuals fail to appreciate the importance of using both taxable and tax-deferred accounts. Having the flexibility to choose between the two types of accounts when it’s time to make a withdrawal, and thereby controlling the amount of taxes owed in any given year, can be critical to sustaining the retirement portfolio.
  5. Timing matters.

    The month and year a retiree chooses to start taking income from his or her retirement accounts can make a huge difference. As individuals who retired in 2007 or 2008 are all too aware, a bad investment market combined with portfolio withdrawals may diminish the sustainability of those withdrawals by several years. In cases of bear markets, those able to delay retirement and continue earning income rather than consuming assets are in a much better position to avoid running out of money during their lifetimes.
  6. Spending matters more than investments.

Getting it “Right”

Many retirees believe that if they could just get the portfolio allocation and security selection “right,” they will have enough for their retirement. It may surprise them, however, to realize that in the studies done on sustainable withdrawal rates, the allocation of the portfolio providing the withdrawals was not very important to the results.

Instead, the most effective way to ensure that retirees’ resources will last in retirement is for them to focus primarily on expense management.

Taxes, timing, and spending are fairly simple principles. What’s not so simple is coordinating the three. Finding a financial professional can make a big difference here:  He or she is trained to take all these factors into account in designing an individual retirement income strategy that makes sense for you.

From Is Social Security Enough for Retirement? ©2017, Certified Financial Planner Board of Standards, Inc. All rights reserved. Used with permission.

What You Need To Know About Social Security

It’s most important to know:

  • Your full retirement age: Your age has a big impact on your Social Security benefits. While you can typically claim Social Security at age 62, it can pay off to wait until you reach your full retirement age. For those born between 1943 and 1954, the full retirement age is 66 – meaning the age at which a person may become entitled to full benefits. The full retirement age will gradually rise toward 67 for those born after 1954. If you decide to claim your benefits early, it can result in risks and permanent reductions to your income.
  • Understand spousal benefits: Both current and ex-spouses (if you were married for more than ten years and did not remarry prior to age 60), as well as widow and widowers are eligible to receive spousal benefits once they reach retirement age. Your spouse will need to file for their benefits first in order for you to be eligible; spousal benefits can be up to 50 percent of your spouse’s Social Security benefits. If you are a widow or widower and of retirement age, you may also be eligible to receive 100 percent of your spouse’s benefits.
  • You don’t need to stop working to collect Social Security benefits: If you reach your full retirement age but aren’t quite ready to take the plunge into retirement, you can continue to work and receive your benefits. If you are younger than the full retirement age (currently 66), your monthly benefits will be temporarily reduced. Once you reach full retirement, your benefits will increase to make up for lost time.
  • Delaying your claim can pay off: If you can afford to delay claiming your Social Security benefits, it can result in an increase in the amount you receive later on. Your benefits can stand to grow 7-8 percent a year if you delay until age 70. Cost of living adjustments (COLA) will also be included in that increase. Similarly, if you are a widow or widower, delaying your spousal claim can also increase your income. 
  • Benefits aren’t always tax exempt: Throughout your career you will have paid into the Social Security Trust Fund, but when you begin receiving benefits you will likely need to continue paying taxes on your benefits. Benefits lost their tax-free status in 1984, and, depending on your income, you may be required to pay tax on up to 85 percent of your benefits.

Navigating the Social Security landscape can be complicated

Ensure you fully understand your options and make the most of your benefits by consulting a financial planning professional.

From What you need to know about Social Security Copyright ©2017, Certified Financial Planner Board of Standards, Inc. All rights reserved. Used with permission.


Claiming Social Security Benefits: Think Before You Point and Click

It was October 15, 2007 and the cameras were rolling.  At a media event hosted by the Social Security Administration, Kathleen Casey-Kirschling applied online for her retirement benefits.  Born January 1, 1946 at 12:01 a.m., she was officially America’s first Baby Boomer to file for Social Security.

Casey-Kirschling merrily pointed and clicked her way through the online application, saying:  “It’s so easy! You can do this from home.”

And so launched the “silver tsunami” of retiring Baby Boomers filing for benefits at a clip of more than 10,000 per day for the next two decades.

Ask any financial planning professional, what we may have thought about this momentous occasion, and you would have probably heard a loud groan.  The unintended message sent to the Baby Boomer generation by this short media clip was not a very good one.

Why was it bad?

First of all, Ms. Casey-Kirschling was 62 years old. Yes, this is the age Americans with a sufficient work history become eligible for retirement benefits from Social Security. But was Kathleen aware of how much she was forfeiting in benefits by not waiting until she reached her full retirement age (FRA) of 66? The answer is approximately 30 percent.  And if she had waited an additional four years till age 70, her benefit would be 62 percent higher than what she got at age 62.

Next, as her hyphenated last name suggests, Kathleen was married.  That fact alone opens up all sorts of possibilities for coordinating her claim with her spouse, to give her more in benefits than what she would receive based solely on her own work record.  Figuring out which spousal claiming strategy makes the most financial sense is anything but something you can easily do in a few minutes from home.  It takes some real analysis, yet it can lead to upwards of tens of thousands of additional dollars over retirement.

In all fairness, Ms. Casey-Kirschling may have been completely aware of what resulted in a penalty for taking benefits before full retirement age, and perhaps had done her homework on how she could coordinate her benefits with her husband’s. The reality, however, is that most Americans do not know that there are smart and not-so-smart ways to take Social Security. Too many believe that it’s best to take the money at the first opportunity and run.

How I wish we could have added 20 more seconds to that 2007 Social Security media clip with a consumer-friendly message of my own.

Here’s what else needed to be said

  • Think twice before claiming at age 62.  Make sure you have done some financial planning to account for your health, family longevity and other resources before automatically signing up the minute you are eligible.
  • If you are married, be aware that for married couples there are multiple strategies to increase combined benefits. These may include suspending benefits or filing a restricted claim to spousal benefits.  The “best” strategy depends on the difference between the spouses’ ages and the amount each spouse would collect on his or her own record, as well as the couple’s basic financial and health circumstances.
  • If you are single and divorced but were once married for over 10 years, you still have the opportunity to make a claim based on your former spouse’s record.
  • If you are widowed, widowed and remarried after age 60, disabled, and/or have a disabled spouse, there are even more possible strategies for claiming benefits.

Bottom line

Before you point and click to get your Social Security retirement benefits, spend some time getting good advice about your options. Be aware that the Social Security Administration, while extremely helpful, efficient and high-tech, cannot give you advice about when and how to claim.

Better still is to work with a Financial Planning professional who can look at your whole financial picture, and has the expertise and specialized software to help you make a good decision.  This could make all the difference between just getting by in retirement and truly enjoying life in your later years.


From Claiming Social Security Benefits: Think before you point and Click Copyright ©2017, Certified Financial Planner Board of Standards, Inc. All rights reserved. Used with permission.

Have You Reviewed Your Beneficiary Designations Lately?

Properly drawn estate planning documents can protect finances, both during life and after death.  Establishing an estate plan can also save your family from paying Federal and New Jersey estate taxes.  Regardless of age or financial status, everyone should have a Will, Living Will, and General Durable Power of Attorney.


Surprise! Beneficiaries Can Trump your Will

Often clients are surprised to learn that beneficiary designations can supersede the provisions of their Will.   Many individuals spend a substantial amount of time and money to establish their estate plans.  Those same individuals may spend only a few minutes designating the beneficiaries of their IRAs and life insurance policies.   Sometimes the beneficiaries listed on a particular account are not consistent with the provisions spelled out in a Will.   The result can be that your IRAs and life insurance policies pass in an undesirable manner.


Careful attention should be given as to whom you have listed as beneficiary on your IRAs. The IRS rules for determining when income tax has to be paid on an account holder’s death vary depending upon who is listed as the designated beneficiary.

There is not a standard beneficiary designation that applies to everyone.  Instead, the proper beneficiary depends on the account holder’s goals and objectives.


More options if you designate your spouse as a beneficiary

If a spouse is a beneficiary then this provides the most flexibility.  A spouse can “roll over” IRA proceeds into their own account or leave the IRA in the deceased account holder’s name as a beneficiary designated account.   If a “roll over” is elected then distributions do not have to be made from the IRA until the spouse reaches their required distribution date (generally, April 1 of the calendar year after reaching the age of 70 ½ ).  Income tax does not have to be paid until distributions are made.


If a deceased account holder has children from a prior marriage, they may not want their IRA passing directly to their spouse because they fear that the surviving spouse will exclude the children from the first marriage from receiving a portion of the account.  Furthermore, if a trust was established by the deceased account holder they may prefer the funds be placed in the trust.  If a trust is the beneficiary for retirement proceeds then different rules apply for determining minimum distributions.   As long as the trust meets certain IRS requirements distributions can be taken over the lifetime of the oldest beneficiary of the trust.   This will enable IRA proceeds to be placed into the trust with out triggering immediate income tax on the entire account value.


If a child or grandchild is a beneficiary of an IRA then distributions can me made over the life expectancy of the child or grandchild.  Usually this will provide the longest period of time to “stretch out” distributions from an IRA.


Consistency is Key

In summary, careful consideration should be given to whom you have designated on your accounts.  Furthermore, contingent beneficiaries should be designated in case your initial beneficiary is not living.  Both your primary and secondary beneficiaries should be reviewed periodically to verify that they are consistent with your Will.


Information provided by Guest Authors Douglas Fendrick and Jaime Shuster Morgan of Fendrick & Morgan, LLC, Voorhees, NJ
Learn more at www.fendrickmorganlaw.com