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David Levy is vice president and portfolio manager at Austin-based Republic Wealth Advisors.

How HSAs Appeal More To High-Income Earners

How HSAs Appeal More To High-Income Earners

What a Health Savings Account (HSA) is and how it may make sense for higher-income earners – and not-so-much for lower-income earners.

Do you have a Health Savings Account (HSA)? 

A Health Savings Account, or HSA, is a unique savings account with a triple tax benefit. First, contributions reduce taxable income. Second, growth within the account is tax-free if withdrawals are made for qualified expenses. And third, qualified withdrawals (withdrawals used for medical expenses) are also tax-free. And the HSA may be uniquely helpful to a higher-income earner.  

How An HSA Works

To be eligible to contribute to an HSA, the taxpayer must be enrolled a high-deductible health plan, defined as a plan with a deductible of at least $1,300 (individual) or $2,600 (family), by December 1st of 2017 (contribution amounts are prorated for partial year eligible taxpayers). A single individual can deposit up to $3,400 to an HSA in 2017. Taxpayers age 55 and older can make an additional catch-up contribution of $1,000 per year. For a family, the contribution limit is set at $6,750 for 2017

Here’s a helpful table that shows the relevant contributions, limits, deductibles, and more from the Society For Human Resource Management:

  

HSA & HDHP Table from shrm.org

Unlike Flexible Spending Accounts, HSAs do not have a “use-it-or-lose-it” feature. The account belongs to the taxpayer if he/she does not use the funds before the end of the calendar year. Funds carry over from year to year and can even be invested, making HSAs a great savings vehicle for increasingly high medical bills that may occur in future years.

A bonus benefit is that after the age of 65, the account owner may take distributions from the HSA for any purpose, health-related or not; he or she will pay regular income tax, but with no penalty.

Advantages of HSAs

HSAs often benefit older taxpayers. A typical couple turning 65 today will pay an average of $220,000 in out-of-pocket medical costs before they die, according to a 2013 study by Fidelity Benefits Consulting. That’s a big medical bill that will come due for many people.  

However, according to the Employee Benefits Research Institute (EBRI), a 55-year old taxpayer who contributes the maximum amount to an HSA every year until age 65 could see a balance of $60,000 from $42,000 in contributions, assuming a 5% rate of return. 

Higher-Income Earners Benefit Most

HSAs typically work best for those with high incomes. As with any tax-advantaged investment strategy, you need to be in a high tax brackets to save more money with a tax deduction.

Second, making maximum contributions requires deeper pockets. HSAs work with a high-deductible health insurance plan, remember. That means you need the ability to pay out-of-pocket at least $1,300 (and often a lot more, depending on the policy) in annual medical bills – before the insurance kicks in.

Lower-Income Earners Benefit Less

HSAs are not big money-savers for people in lower income brackets. Low-income families usually don’t have extra cash to tuck away in an HSA. 

Middle-income families will also not likely benefit by not going the high-deductible, HSA route. They just can’t save enough though an HSA to make a big savings difference in the long-run. Because HSAs are usually the last savings vehicles to get funded after 401(k)s and IRAs.

The Bottom Line: HSAs Are Helpful In The Right Place

A healthy person in any income bracket who needs little or no medical care during the year will always come out ahead by choosing the overall cheaper plan and banking the difference.

But you probably shouldn’t start with maxing out an HSA. Financial planners generally agree that individuals should first max out 401(k) plan and IRA contributions for the year before they start funding an HSA, but you will need to consult someone who can advise you on your specific situation.

To speak with an experienced advisor at Republic Wealth Advisors about whether contributing to an HSA is appropriate for your situation, please reach out today. We’re happy to walk through how an HSA may make sense for you.

 


 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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Estate Planning, Death & A Good Financial Strategy

Estate Planning, Death & A Good Financial Strategy

Estate planning basics, one family’s experience, and how to get your financial affairs in order.

Estate planning can be an uncomfortable process.

While no one likes talking about death, it is one of the few certainties in life.  It is a “when” not “if” proposition, and it is important to plan ahead so that you can control how your assets pass to your heirs (and also not leave a burden to someone else to sort through your affairs when they can’t consult you).  

Estate Planning Basics

There are several things you can do to prepare for your inevitable passing (or your disability). For instance, we recommend you…

  • Identify all individual (and spousal assets) and determine who should receive them.
     
  • Include instructions for your care if you become disabled before you die.
     
  • Name a guardian for minor children.
     
  • Locate and safeguard all life insurance policies.
     
  • Review and update beneficiaries on assets and policies.
     
  • Understand pensions and retirement plans.

Although this isn’t a comprehensive list, it should help you start thinking about the importance of estate planning today. Planning can save weeks and months of heartache in an already taxing time. But with proper planning, the death of a spouse doesn’t have to be as stressful on you personally or financially. 

One Couple’s Experience with Estate Planning: The Lupos 

In a recent story in the The New York Times, one couple’s estate planning helped tremendously.

One couple who went through this exercise, Erika and John Lupo of Sparta, N.J., did so sooner than most, and it paid off. When Mr. Lupo died of cancer last year at age 57, Ms. Lupo, 51, who runs an acting school, was extraordinarily well prepared — unlike many widows.

In his final days, Mr. Lupo, a former salesman, did everything he could to prepare his estate and make sure his wife knew where his assets were — and how they could be bequeathed to her and heirs. There was a bit of complex estate and financial planning involved, because Mr. Lupo had a daughter from a previous marriage, and the couple has a teenage son.

Working with Mark Germain, a certified financial planner with Beacon Wealth Management in Hackensack, N.J., Mr. Lupo had several documents in order just a few weeks before he died.

“We made out wills, durable powers of attorney and a trust” for Mr. Lupo’s daughter, Mr. Germain said. “We also made some arrangements for the son in the will. We had to do some sophisticated planning.”
 

In this instance, the Lupos’ estate planning was complex. There was a previous marriage, another child, and a teenage son in the mix. But with the help of a good financial planner, the Lupos were able to order their financial affairs to help sustain the family when the patriarch passed on. 

Getting Your Estate In Order

Each individual’s (and family’s)situation is unique. What may have been true for the Lupos may have nothing to do with your circumstances. That’s why it’s important to connect with the right professionals to complete your estate planning.  Even if you have previously completed estate planning, the plan should be reviewed periodically to determine if changes are needed.

We recommend consulting with a board certified estate planning attorney in your area. If you need a referral, please reach out and we’re happy to make an introduction!

 


 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

 

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Top Facebook Mistakes Criminals Use To Hack Your Life

Top Facebook Mistakes Criminals Use To Hack Your Life

Facebook mistakes help criminals access your personal information and assets. Fix these problems to limit your exposure.

Facebook mistakes can mess up your life.

Social media platforms like Facebook or LinkedIn can give hackers a wealth of information about you—which can be used to steal your assets or information. You may want to tell your friends that Costa Rica is great. The problem is that criminals (who know where you live) just saw the same update. 

With a little help from IT World, these are some of the top social engineering mistakes and fixes that can help improve your cyber security on Facebook.

Mistake #1 Using A Non-Secure Password

This may be the biggest mistake people make on Facebook - or anywhere online. Here are a few best practices to make your Facebook password more secure…

  • 15+ characters long
  • Use symbols, numbers, capital and lowercase letters.
  • Capitalize a middle letter, use the @ symbol for the letter “a” or the number “0” in place of the letter “o.”
  • Never use keyboard walks (like 12345678 or qwerty).
  • No dog’s name, mother’s maiden name and other easy-to-find information.

Mistake #2: Giving Too Much Personal Information

Limit the information you give out. Criminals will search Facebook, Twitter and other social media websites for information about you and can use it to defraud you, your family and your friends. Every post you share may be seen by people who want what you have. Stay vigilant. Only post something that you’re comfortable with everyone seeing.

Mistake #3: Not Setting Privacy Settings Correctly

It is possible to limit the exposure of your Facebook posts. You can setup your account so that only your friends (in theory) can see your post. Keep in mind, it’s not perfect and smart hackers can still find it. But it does limit the potential damage from social media posts. Here’s a great resource to fix your privacy settings on Facebook. 

Facebook Help: Basic Privacy Setting & Tools

Mistake #4: Being Duped By Malware 

Malware is alive and well on Facebook. Bad software can be installed on your computer and affect your system and what other people see on your wall. Only click on trustworthy links. Avoid salacious or outrageous images and headlines. This will improve your chances of not getting infected online.

Mistake #5: Accepting Friend Requests from Attractive & Unknown People

This is a favorite scam for Facebook hackers. If you happen to friend one of these (probably fake) people, the best case you can hope for is to be inundated with worthless or self-promotional updates. The worst case is it turns out to be bait for some scammer trying to socially engineer information from you. It happens.

Here are a few more tips that relate to protecting yourself from social engineering scams from JP Morgan

 

Image from JP Morgan’s Guide to Cybersecurity Awareness

 

Facebook Security Helps Secure Your Financial Peace Of Mind

People make these Facebook mistakes every day – if you’ve made one of these mistakes, you’re not alone. But if you fix these 5 areas and you’ll be ahead of most Facebook users. That will help keep your financial records more secure and give you more peace of mind whenever you’re on Facebook. 

 


  

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

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Four Crucial Cybercrime Prevention Steps

Four Crucial Cybercrime Prevention Steps

Four steps to prevent cybercrime: password protection, secure each device, limit public Wi-Fi, and eliminate malware.

Cybersecurity is a vitally important aspect of overseeing your personal finances. There are two reasons why:

1. The internet is now woven into everything we do.
2. Cybercrime is a growing and serious threat.

In 2016, JP Morgan published an overview of the biggest threats in cybersecurity. In our last post, we reviewed one of those critical areas: email security. This week we cover four other areas that every internet-connected person should consider. This post, along with JP Morgan’s Guide to Cybersecurity Awareness will provide detailed steps to help protect yourself, your assets and personal information.

Cybercrime Prevention Step #1: Secure Passwords

Passwords are your first line of defense against a cyberattack.

Hackers use dictionaries, names, linguistic patterns, and can break into over 60% of passwords used today – possibly including yours. Here are some steps you can take to secure your password.

  • Use long and complex passwords – at least 10 characters.
  • Don’t share your passwords or publicly post passwords.
  • Use special characters and numbers.
  • Use phrases, not just words.

Image from: JP Morgan’s Guide to Cybersecurity Awareness

Cybercrime Prevention Step #2: Secure Each Device

Every device connected to the internet can be hacked. Even your smart watch. Hackers can even create clones of real websites and steal personal data on every devices. Here are some things you can do to help secure your devices.

  • Keep all your browser software up-to-date.
  • Always us HTTPS on websites when entering personal information. (Most sites now include this feature, but you can check by looking at the address bar in your browser.)
  • Log out after conducting an online banking session.
  • Avoid sites containing illegal content or downloads. 

Image from: JP Morgan’s Guide to Cybersecurity Awareness

Cybercrime Prevention Step #3: Limit Public Wi-Fi

Public Wi-Fi is very convenient and very dangerous. It’s become a popular way for hackers to find would-be victims. Use public Wi-Fi only if you must, and always take precautions.

  • Never use public Wi-Fi for banking or shopping transactions.
  • Turn off file sharing to public Wi-Fi so other users can’t access your personal files.
  • Do NOT automatically connect to non-preferred networks.

Image from: JP Morgan’s Guide to Cybersecurity Awareness

Cybercrime Prevention Step #4: Prevent Malware

Malware is a serious and persistent threat. Data thieves can break-in, steal, and destroy any of your internet-enabled devices with malware. Here are some tips to help prevent malware.

  • Install anti-virus software.
  • Be careful what you click-on and download.
  • Be wary of suspicious-looking email.
  • Do NOT trust pop-up windows, especially on unfamiliar sites.

 

Image from: JP Morgan’s Guide to Cybersecurity Awareness

Other Cybersecurity Areas To Watch

These are not the only areas to review for optimal cybercrime prevention. Other areas include email security, social engineering protection, mobile attack awareness, and home network security. But this overview should give you a good start in preventing future cyberattacks. Address these 4 areas and you’ll be ahead of most internet users. That will help keep your financial records more secure. 

 


 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

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The Best Retirement Withdrawal Rates: 3 Factors To Help You Decide

The Best Retirement Withdrawal Rates: 3 Factors To Help You Decide

Three factors that determine the best way to withdraw funds during retirement.

We are often asked by clients nearing or in retirement “How much money can I spend in retirement?” This is another way of asking what is a sustainable withdrawal rate? Or, what amount can you withdraw from your investments and ensure you will not run out of money during your lifetime? There is no simple answer that applies in all cases, but there are rules of thumb we use to make generalizations.  

This week, we’d like to share with you these rules to plan by.

Three Factors That Determine Optimal Withdrawal Rates

When evaluating how much you can pull from your retirement savings, your answer will likely depend on 3 primary factors:

1. What is your retirement planning horizon?  While some individuals would like to plan to spend their last dollar on their last day, reality is not this simple.  You will need to ensure that the assets will outlast your life span to ensure your needs are met.  General planning guidelines call for a planning horizon of 30 years, but this can vary depending on various factors including retirement age and family history of longevity.  

2. What is your portfolio mix of stocks, bonds, alternative investments?  The investments you own will impact how much your assets grow over time.  You need to ensure your investments are aggressive enough to grow at a rate that outpaces your withdrawals (if you wish to maintain your principal balance) but not too aggressive such that your balance could be depleted by the combination of market fluctuations and withdrawals.  The chart below shows portfolio at various mixes of stocks and bonds.  You can see that by being less risky, you could actually be putting your portfolio at more risk of running out of money over time.  

 

3. What is the probability of success you are comfortable with?  Based on a tool called Monte Carlo, you can project out scenarios to evaluate the likelihood your funds will last.  If you have a 50% chance of success, you also have a 50% chance of running out of funds.  Alternatively, if you have a 90% chance of success, you are likely to have sufficient funds to meet your withdrawal needs. Generally, you want to see a success rate of over 80% to be considered acceptable.  

For illustrative purposes, let’s consider the following chart which shows how long a hypothetical $1,000,000 initial balance lasts at a 4%, 5%, and 6% withdrawal rate.  The 4% rate—a general rule of thumb introduced in 1994, which adjusts the initial withdrawal amount for inflation over time to preserve purchasing power—maintains assets through the 30 year timeframe.  To the contrary, both a 5% and 6% initial withdrawal rate proves not as successful (you run out of money in approximately 21 years at 6% and 26 years at 5%) and may put retirement spending at risk.  At the very least, the probability of having sufficient funds through your entire lifespan falls to a very low percentage.

 

Best Case Retirement Scenario: Eat The Fruit, Not The Tree

If at all possible, we recommend that you plan to spend the “fruits” of the retirement “tree” and not chop off the “branches”.  In other words, attempt to live off of the growth each year and not eat into the principal balance.  Planning with this approach allows your assets to not only provide income during your lifetime but also to allow for your heirs (or a charity) to receive the remainder.

Given the inputs discussed above, it should be obvious this is a challenging question without an easy answer.  We are happy to discuss your situation with you in greater detail to help evaluate whether your current or planned withdrawal rate is sustainable over the long-term.  Don’t hesitate to reach out to us if we can be of assistance.

 


 

Chart Disclosure: These charts are based on 50th percentile which means that 50% of the time you’ll have better outcomes.  Based on the high percentage of outcomes that tend to be clustered near the median, this may be considered the most likely potential outcome.  The charts are for illustrative purposes only and must not be used, or relied upon, to make investment decisions. Portfolios are described using equity/bond denotation (e.g. a 40/60 portfolio is 40% equities and 60% bonds). Hypothetical portfolios are composed of US Large Cap for equity, US Aggregate Bonds and US Cash for cash, with compound returns projected to be 6.25%, 3.00% and 2.00%, respectively. J.P. Morgan’s model is based on J.P. Morgan Asset Management’s (JPMAM) proprietary Long-Term Capital Markets Assumptions (10–15 years). The resulting projections include only the benchmark return associated with the portfolio and does not include alpha from the underlying product strategies within each asset class. The yearly withdrawal amount is set as a fixed percentage of the initial amount of $1,000,000 and is then inflation adjusted over the period (2.25%). Allocations, assumptions and expected returns are not meant to represent JPMAM performance. Given the complex risk/reward tradeoffs involved, we advise clients to rely on judgment as well as quantitative optimization approaches in setting strategic allocations. References to future returns for either asset allocation strategies or asset classes are not promises or even estimates of actual returns a client portfolio may achieve. 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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Tax Consequences of Alternative Investments

Tax Consequences of Alternative Investments

Alternative investments as limit partnerships, dealing with a possible late K-1, and handling additional tax questions about your alternative investments.

As we’ve covered in past blogs, as part of many of our clients’ overall asset allocations, we consider investing in alternative investments in addition to stocks and bonds.

Alternative investments differ from their traditional counterparts in a number of ways, especially when talking about private equity and private debt offerings.  Differences include illiquidity, a lack of daily pricing, and additional tax reporting.  In the spirit of tax season, today we’ll cover how many alternative investments are reported for tax purposes.

Alternative Investments as Limited Partnerships

Typically, alternative investments involve your investing as a limited partner or “LP”.  Limited partners receive their share of income, deductions, and credits on a Schedule K-1.  This differs from traditional investments which report taxable gains and/or income on a form 1099 issued by your custodian (i.e. Fidelity, Schwab, TD Ameritrade).  

It is important to remember that you are required to provide the Schedule K-1 to your tax professional in addition to the tax documents received from your custodian.  The timing of receiving K-1’s also differs from that of custodial tax reporting.  In our experience, many K-1’s are issued in the first week or two of April, running very close or up to the tax filing deadline.  We have even seen K-1’s issued as late as July.  

File An Extension If Your K-1s Are Late

If you’ve yet to receive your K-1 by April 15th (or this year April 18th), it may be necessary to file for a tax extension.  While many like to file their taxes on time so they can “check the box”, we posit that this shouldn’t be a big deal to you.  It may simply be seen as one of the tradeoffs for making an investment in an alternative.

Keep in mind that not all alternative investments generate K-1’s.  For example, business development companies (BDCs) report their income through a 1099.  

In addition, remember that there are other potential tax consequences of owning alternative investments.  The number one issue that comes to mind is unrelated business taxable income or UBTI which can be triggered when holding certain types of alternative investments in IRA accounts.  This is a complicated topic of which a whole blog could be authored so please inquire if you need additional information.  

Need More Help? Check With A Good CPA Firm

Of course, the tax ramifications of investing in alternative investments can become complicated.  We recommend you speak to your tax professional regarding how investing in alternatives may impact your individual tax situation.  If you need a referral to a CPA firm, please let us know and we’re happy to provide one. 

 


 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

  

 

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Trump Delays the DOL Fiduciary Rule & Why It Doesn’t Matter to Our Clients

Trump Delays the DOL Fiduciary Rule & Why It Doesn’t Matter to Our Clients

How President Trump delayed the Department of Labor's Fiduciary Rule, what the Fiduciary Rule is, and why it doesn't matter to Republic clients.

In his first 100 days in office, President Trump has attempted to accomplish quite a bit.  One such item is a memo he issued on February 3rd ordering the Department of Labor to review new rules regulating financial professionals handling of clients funds known as the ‘Fiduciary Rule’.  This will likely delay the implementation of the ruling which was previously set for April 10, 2017.

What is a Fiduciary?

The Department of Labor’s definition of a fiduciary demands that advisors act in the best interests of their clients, and to put their clients' interests above their own. Advisors are required to disclose any potential conflict of interest.  In addition, all fees and commissions must be clearly disclosed to clients.

According to a 2015 report from the White House Council of Economic Advisors, conflicts of interest by brokers reduce annual returns on retirement savings by one percent, on average.  This is estimated at up to $17 billion per year.

While there are other nuances and the rule is in fact complex, simply put, the Fiduciary Rule seeks to apply this fiduciary standard to individual retirement accounts as well as rollovers from 401k’s.  

With baby boomers entering retirement, the issue of considering the best option for the assets with their employer’s 401k plan is ever important.  

What is Republic Wealth Advisors’ Duty?

At Republic, a Registered Investment Advisory firm, we are upheld to a fiduciary standard on all client assets, regardless of whether the type of asset is impacted by the Fiduciary Rule.  In other words, regardless of whether the Fiduciary Rule is delayed, we still maintain this standard.  We are a fee-only firm, meaning we do not charge a commission on any investments our clients choose to invest in.  We have a duty to put our clients first and always make decisions that are in their best interest.

Many individuals may not know the difference between a broker and an investment advisor representative.  After all, we both are able to invest our client’s funds in similar fashion.  One difference is that brokers can charge a commission regarding the sale of an investment or product while an investment advisor representative cannot.  

Of course, not all brokers ignore a fiduciary obligation.  One notable exception are CERTIFIED FINANCIAL PLANNER™ professionals who are also held to a fiduciary standard of care, even if they are a broker.

The media coverage regarding the Fiduciary Rule should bring to light that not all financial advisors are created equal.  To protect yourself, if you can’t answer the question “How is my advisor compensated?”, I’d recommend you ask.  

Coverage over the Fiduciary Rule will continue and we will see its eventual outcome.  If you’re looking for a fee-only fiduciary advisor, don’t hesitate to reach out to us at Republic Wealth Advisors.

 


 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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Financial Fitness 2017: What Shape Are You In?

Financial Fitness 2017: What Shape Are You In?

Last month we focused on financial goal-setting in 2017. But financial stability doesn’t end with goal setting. Now comes the hard part: achieving your established goals.

A great first step in working to achieve your goals in 2017 is to assess your current financial situation. Time.com posted a series on financial fitness which provides some guidance in determining the shape of your finances. The following is a reprint of part 1 of their series: 10 Days to Total Financial Fitness

David

 


 

When you think about what kind of shape your finances are in nowadays, you may be feeling downright buff. Retirement plan balances are at record highs, home prices are back to pre-recession levels in most parts of the U.S., and the job market is the strongest it's been since 2006.

No wonder Americans are more optimistic about their finances.

Given that, it's understandable that some bad habits may be creeping back into your routine. Americans, overall, are slipping into a couple problems:

  • Household debt is at a record high, fueled by an uptick in borrowing for cars and college and more credit card spending. Vanguard reports that investors are taking risks last seen in the pre-crash years of 1999 and 2007.
     
  • What's more, the financial regimen that's been working well for you of late may not cut it anymore. In this slow-growth, low-interest-rate environment, both stock and bond returns are expected to be below average for several years to come.

To pump up your finances in 2017, you need to shake up your routine. The plan that follows can help you do just that.

See What Shape You're In

Even if you're a dedicated exerciser, you could be ignoring whole muscle groups, leaving yourself susceptible to injury. For example, 39% of people earning more than $75,000 a year wouldn't be able to cover a $1,000 unexpected expense from savings, according to a 2014 Bankrate survey. So the first step is to establish your baseline by asking yourself these questions.

1. How are my vital signs?

Tick off the basics: Check your credit, tally up your emergency fund (aim for six months of living expenses), look at how much you are contributing to your retirement plans, and get a handle on how you're splitting up your savings between stocks and bonds.

Less than half of workers have tried to calculate how much money they'll need for retirement, EBRI's 2014 Retirement Confidence Survey found. Take five minutes to use an online tool that will show you if you're on track, such as the T. Rowe Price Retirement Income Calculator.

2. What's my day-to-day routine?

The very first thing Rochester, N.Y., CPA David Young does with his clients is go over their spending. Budgeting apps like Mint.com and Personal Capital, he notes, "make the invisible credit card charges visible." As important as the "how much" is the "on what," says Fred Taylor, president of Northstar Investment Advisors in Denver. Divide your expenses into the essential costs of living, investments in your future (savings, education, a home), and the discretionary spending you have the flexibility to cut.

3. Am I juicing my finances too much?

In other words, how toxic is your borrowing? Your total debt matters. But the kinds of debts you have and the implications for your future are crucial too, says Charles Farrell, author of Your Money Ratios and CEO of Northstar.

4. What's my biggest weak spot?

You need to guard against familiar risks, like insufficient insurance. But David Blanchett, head of retirement research for Morning-star, says you should also think about less obvious threats. Will new technology put your livelihood at risk? Are you counting on a pension from a financially shaky firm? Do you live in an area, such as Northern California, where home values hinge on the success of one industry?

Once you know how much progress you've made so far and what areas need the most work, you're ready to get going on your financial fitness plan.

 


 

If you have any more questions about your financial situation, we would love to help. Contact Republic Wealth Advisors to schedule a meeting today.

 


 

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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Birthday Milestones & Why Half-Birthdays Really Matter

Birthday Milestones & Why Half-Birthdays Really Matter

Birthdays can be great fun for kids. Whether it’s a bouncy castle party, a special visit to Chuck E Cheese, or just a simple cake-and-presents party with friends from school, most kids love birthdays. 

As we get older, we may not mark our birthdays with as much fanfare as kids. But there are some birthdays that matter in your finances – even a couple of half-birthdays. We compiled a list of birthday milestones that should be kept in mind in your planning…

Age 18: Privacy, Contracts, & Voting

When you turn 18, you can now enter into contracts, make your own personal health care decisions and are granted new privacies.  If your child just turned 18, you will need a HIPAA release form to deal with your now-adult child’s medical records. Other things change too due to this major milestone, including a new right to vote. Congratulations, you’re now an adult!

Age 21: Credit Cards

When you turn 21, you can now signup for a credit card. The Credit Card Act of 2009 prohibits credit card companies from issuing cards to anyone under the age of 21 unless they have a co-signer over age 21. As an alternative, you can prove you’re capable of repaying the debt to get a credit card before 21. For everyone else, age 21 is another financial milestone. However, this milestone can include financial landmines. If your child is turning 21, talk with them about the responsible use of credit cards. 

Age 25: Car Insurance Premiums Often Drop

Insurance actuaries think age 25 is important. If you’re turning 25, your car insurance premiums tend to decrease because those under that age have higher accident rates. Of course, insurance premiums are based on a many factors including claims, type of vehicle and more. Still, 25 year old drivers often see benefits based on their age and a clean driving record.

Age 26: Dependent Health Insurance Coverage Ends

Unless something changes with the new administration, the Affordable Care Act allows a person to keep his or her status as a dependent and stay on the parent’s health insurance plan until the age of 26. If your health plan is through an employer, check carefully to find out the exact date a child's benefits will terminate. It may be the birthday month or another time, so check before the child is dropped. If you’re the 26 year old, make sure to verify yourself.  

Age 50: IRA Catch-Up Contributions & AARP Discounts

When you turn 50, you can put an extra $1,000 a year into an IRA or Roth IRA or $6,500 total. You can also contribute an additional $5,500 into a 401(k) plan or $23,000 total. Also, watch your mail: AARP mailings and discounts usually start at age 50. 

Age 55: Penalty-Free 401(k) Withdrawals Start

The 10% early withdrawal penalty is lifted on the 401(k) withdrawal at 55 if you leave a job after 55 and the 401(k) was from your most recent employer. This may or may not be in your best interest. Check with your financial advisor or CPA about the best time to begin taking withdrawals.

Age 59 ½: Early Withdrawals Penalties Removed

Age 59 ½ is the first half-birthday financial milestone. When you cross that line, the 10% early withdrawal penalty for IRAs and 401(k)s goes away. Withdrawals are still taxable. If your Roth IRA is open for 5 years, Roth IRA contributions withdrawals of contributions are tax-free. But be careful. A separate “5-year rule” applies to each Roth IRA conversion.

Age 60: “Senior” Discounts 

Take advantage of “senior” pricing at shops, restaurants, and entertainment. You earned it.

Age 62: Eligible for Social Security

When you turn 62, you are now eligible for Social Security. This is an early date and will mean you’ll receive reduced benefits. If you continue to work, benefits can be withheld due to a wage limit. This goes away at full retirement age (see Age 66-67 below).

Age 65: Medicare Enrollment

At 65, you can now enroll in Medicare. At this age, Medicare becomes the primary medical insurance for many people and usually the most affordable option. Make sure you enroll during open enrollment when you turn 65 or 6 months before.  

Age 66-67: Full Retirement Age for Social Security

When you turn 66 and 67, you have reached Social Security’s “full retirement age.” The previous caps on what you can earn from a job are removed and you can begin drawing the maximum amount for your situation.  

Age 70 ½: Required Minimum Distribution (RMD) in Effect

Age 70 ½ is the next significant half-birthday. At this age, you’re subject to the Required Minimum Distribution (RMD) rules governing IRA and employer retirement plans.  You can take your first required distribution until April 1 of the next year, however you will effectively “double up” your distributions for that year, which may not be tax advantageous – check with your CPA to make sure. 

If you don’t take the RMD each year, there’s a 50% IRS penalty assessed on that amount you should have withdrawn. Withdrawals are considered taxable income except for any previously taxed portion, i.e. your basis.

There are two exceptions to the RMD Rule: One, Roth IRAs are not subject to the same RMD rules.  Two, if you continue working you can delay distributions from your current employer-provided plan until April 1 of the year after you retire.

Next Steps for Your Next Birthday Milestone 

If you’re reaching any of these significant birthday milestones in 2017, take appropriate action. If you have any questions about these milestones, check with our advisors at Republic Wealth Advisors or another one of your trusted professionals. 

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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Key Tax Rates & What Changes in 2017

Key Tax Rates & What Changes in 2017

As the year ends and a new year begins, our thoughts turn to 2017. Every year tax rates can change, IRA contributions may adjust, and long term care premiums count more or less against your taxable income. And sometimes nothing changes. 

That’s why it’s good to review things once a year. 

This year we prepared a simple 2-page PDF document that covers the important financial data for 2017 – especially for tax purposes. We should mention President-Elect Trump has promised to revise the tax code so these numbers may change sometime in 2017. But it’s the best information available at the end of this year.  

According to Motley Fool, there are some notable changes to the tax code next year…  

  • Tax brackets have been adjusted for inflation.
  • Standard deductions have increased slightly – up $50 for individuals, up $100 for couples.
  • Traditional and Roth IRA phase-outs will be adjusted higher.
  • Medical expense deductions will change for certain seniors.
  • The estate tax exemption will increase by $40,000 from 2016 levels. 

Checkout the complete checklist of financial data and tax info for 2017 below. We hope you find it helpful for your tax planning next year.

DOWNLOAD: Key Financial Data – 2017 (1.3 MB)

And if you have any questions, we’re only a phone call away. 

Wishing you a prosperous and happy 2017!  

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

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