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What is a Roth IRA and Why Do I Need One?

/// Posted by Scott Tuxbury

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There’s a lot to like about investing in a Roth IRA, Roth 401(k) or Roth 403(b), especially if you’re young or expect to be in the same (or higher) income tax bracket when you retire. Any money you invest in a Roth grows tax-free—even when you cash out in retirement—and it can be invested in a number of ways, from stocks and bonds to mutual funds. Another plus: the 2018 Tax Cuts and Jobs Act (TCJA), makes Roth IRAs even more attractive because they can protect your investment from future tax rate increases.

Roth IRA vs. Traditional IRA

You may already be familiar with a traditional IRA. The primary difference between a Roth IRA and a traditional IRA is when you pay taxes on your contributions (the amount of money you’re investing). With a Roth IRA, you pay taxes upfront, when you make a contribution; with a traditional IRA, you pay taxes later, when you withdraw funds.

Other differences:

  • Income limits. Almost anyone with earned income can contribute to a traditional IRA. There are income limits for contributing to a Roth.

For the 2018 tax year, if you’re filing taxes as an individual, your annual Roth contribution is phased out between modified adjusted gross income (MAGI) of $120,000 and $135,000. If you’re married and filing jointly, the phase-out range is between MAGI of $189,000 and $199,000. In 2019, the phase-out range for individuals is between $122,000 and $137,000; for married couples, it’s $193,000 to $203,000.

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Reimagining Retirement Distribution Planning

/// Posted by Scott Tuxbury

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Retirement distribution planning is not what it used to be. People are living longer, cost of living expenses are on the rise, and healthcare costs are easily outpacing wage increases and the market. Now, more than ever, creating and sticking to a thorough retirement savings plan is necessary to ensure that your latter years and legacy are what you intend them to be.

The majority of people save for retirement without a consistent written plan. This unfocused technique toward saving can lead to increased anxiety, unmet expectations, and unfortunate surprises down the road. The simple act of putting a plan down in writing helps to define your financial goals and lay a path that includes benchmarks toward success.

But we would argue that beyond just having a plan for savings, those retirees that manage their assets with distribution planning in mind will be best prepared for the retirement they imagine. Putting money in will only get you half way. It’s how and when you take the money out that can make or break your later years.

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Scott Tuxbury, Vice President and Leader for the Retirement and Wealth Management Practices at Sapers & Wallack answers 3 questions about our February blog, “Reimagining Retirement Distribution Planning”

Listen to our podcast here:

 

Financial Incentive Guidelines for Wellness Programs

/// Posted by Tom Connors

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Happy New Year to all, and get those Super Bowl plans ready!

Unless you are currently offering a well-organized & exciting wellness program that encourages your employees to get out and take walks at lunch, count their steps, eat healthy, and even consider throwing that pack of cigarettes (or vapes for you youngsters) in the trash,  all those wellness programs that took a ton of our time to plan and got approved by management, that seemed progressive and many times “fun”, just got a kick in the pants!  Where do we go from here?

In response to the AARP lawsuit vs. the EEOC regarding incentives, on December 20, 2018, the Equal Employment Opportunity Commission (EEOC) removed or “vacated” the 30% wellness incentive provision of its final wellness program regulations that were issued back in 2016.  No more incentives, at least not clearly permitted (nor prohibited) as of January 1, 2019 should be part of your programming.

Due to this recent EEOC action, employers are left with no clear guidance regarding financial incentives in wellness programs.  This includes what level of incentives could affect whether the program would be considered “voluntary” or not, which was AARP’s biggest issue with wellness programs and the incentives (or penalties) that came with them. 

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Tom Connors, Managing Director of Group Benefits for the Hilb Group – part of the Sapers & Wallack organization – answers 3 questions about our January blog, “Financial Incentive Guidelines for Wellness Programs”

Listen to our podcast here:

 

Universal Life Insurance: A Rebuttal

/// Posted by Wayne Slattery

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‘Universal Life Insurance, a 1980s Sensation, Has Backfired’

“A long decline in interest rates caused premiums to soar when they were supposed to stay level.” – Wall Street Journal

As soon as I read this headline in the Wall Street Journal I was surprised by how misleading it was, and decided to write a response.  A little bit about me, I started my career in financial services with MetLife in 2004 at the age of 24.  I spent 13 years with them until they sold their whole financial division in July of 2017.  MetLife was a giant in the life insurance industry and a main player in providing the Universal life insurance product, specifically the type mentioned in the attached article.  Many evenings I would make phone calls, receive calls from policy holders, or meet with policy owners to give them the bad news:  Your policy is “blowing up”. This was a term we used when someone had a policy where there was no more cash and the premium was skyrocketing.  Many, as you can imagine, were not thrilled to see or hear from me in this instance.    We will discuss later how I was able to help most people continue their coverage, but first I’d like to discuss some basics of the policy itself.

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November is Long-Term Care Awareness Month

/// Posted by Aviva Sapers

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Long-term illnesses are very challenging emotionally, physically, and especially financially.  I should know, as I have lived through 3 grandparents, 2 in-laws, and one mother who all needed or still need care.  It is difficult to watch those you love lose the ability to do for themselves, and to experience the toll it takes on family and friends who are thrust into the role of caregiver. 

Some of these situations seem to come out of nowhere after a stroke, a fall, or a surgery gone awry, while others are slow and progressive, like Parkinson’s, Alzheimer’s, or cancer.  Regardless, if you are thrust into the situation over night or if it happens gradually, it will affect your spouses and children in many different ways:  Families will differ on the course of care that should be given: whether or not to keep a person at home or move them to a facility, who is available to provide the care or should they hire a professional to provide the needed assistance?  If a spouse is still able and willing to provide care, what toll might that take on them both physically and emotionally?  Is there someone at home who can help administer needed medications?  So many questions and details to manage!

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Is There a Better Option for College Savings than Using a 529?

/// Posted by Aviva Sapers

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Many people feel that the most cost effective way to fund college for their kids is by contributing to a 529 plan.  The benefits are:

  • All earnings grow tax free and are distributed tax free if used for qualified education expenses
  • 30 states offer full or partial deduction – Not MA
  • Owner can change beneficiaries and maintain control past college
  • Funding can vary as needs dictate
  • No age or income limits or annual contribution limits (up to $500,000 per beneficiary)

However, there are some definite drawbacks to college funding via 529 savings plans:

  • Lack of liquidity while you save – cashing it in results in a 10% penalty + income taxes
  • Single purpose vehicle for life
  • Market risk – Expected duration of 22-26 years (18 years of accumulation and 4-8 years utilization). Could see many down years with likelihood of 4 of those down years being greater than 10% – where you could lose money

In addition to the drawbacks mentioned above, there are other factors to keep in mind.  Off Campus room and board may not be fully covered by a 529 plan.  Not all tuition is considered qualified tuition and things like insurance, sporting events, parking, transportation and some administrative expenses are not covered.  Payments must occur in the same calendar year as withdrawals.  You must track expenses covered by 529 plans as you will get a 1099-Q and a 1098-T for each 529 that you will need to reconcile annually and file with your taxes.  Finally, during the withdrawal phase, you can’t move your money into cash so you expose the account to market corrections during the 4+ years in which you are paying tuition.

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Retirement in the Age of Rising Health Care Costs

/// Posted by Scott Tuxbury

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Most people make a concerted effort to plan and save for retirement, but many fail to account for the projected toll that health care costs will take on their mandatory expenses throughout their retirement. There is a common misconception that savings will be enough to cover living expenses while Medicare can cover health care related costs, but reality doesn’t always match the numbers, and Medicare only covers approximately 60%.  

Earlier this year, the Fidelity Retirement Health Care Cost Estimate found that an average retired couple, age 65 in 2018, would need around $280,000 saved (after taxes) just to cover health care expenses. That is a big ask for most couples, and both health care inflation and expected lifespan are continuing to increase at expedited rates to compound the problem.

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Have you Protected your Property, Employees, and Reputation?

/// Posted by Aviva Sapers

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Whether you’re the owner of a small business or involved in risk management for a national organization, the right Property and Casualty coverage can have a huge impact on protecting your business against unforeseen events. P&C Insurance exists to safeguard the buildings, vehicles, and people that make up your business structure, but P&C coverage can be as varied as the types of businesses out there. 

Once a year, we like to remind our current and prospective clients to work with their insurance broker to review the specifics of their P&C coverage. Property liability and bodily injury in the workplace can deal a devastating financial blow to  a business of any size. Staying on top of the unique components that make up your coverage will not only provide peace-of-mind for you and your employees, but also mitigate chances of reputational damage or other catastrophic setbacks to your business goals caused by injury, mishap, property damage, or negligence.

For smaller businesses, a Business Owner’s Policy (BOP) combines property coverage and general liability insurance into one blanket policy. BOPs have limited eligibility requirements based on number of employees, amount of revenue, low risk industry status, and smaller office/workspace.   

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