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Five Ideal Summer Action Items

/// Posted by S&W

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Have you ever come home from a trip with a renewed perspective?  Sometimes the very activities designed to help us relax can also work to free the mind so we can more easily prioritize what needs to get done.  Here are five goals that can be great to achieve during the rest of the summer.  Click on each to learn more.

#1 Summer offers an ideal window during which to hire a tax preparer. If this is a task that has been gnawing at you, bite the bullet and do it! You’ll be thankful come next tax season that this necessary chore has been taken care of.  

#2 Summer is a time for re-evaluating whether you need long term care insurance, or at least learning more about it. Check out our long term care insurance page with a long term care shopper’s guide, tools, calculators and a webinar that walks you through all aspects of long term care insurance.  

#3 Summer is a time to take stock of whether you are fully engaged with your financial picture – or whether you have been letting your spouse or partner take the lead too often, for too long. Over the years, many women fall farther and farther behind in knowledge and familiarity with all things financial. 

#4 Summer is a good time to make sure your high school graduate has the right estate planning documents before heading off to college. To ensure students and their families are as prepared as possible for college life, it is necessary to set up an incapacity plan that includes a health care proxy, durable power of attorney and a HIPAA release.  

#5 Summer is a good time to evaluate your life insurance coverage. If you happen to have a lot of coverage through your group plan at work, take a look at how much you’re being taxed on that coverage.

Have a great summer and of course feel free to reach out if you need help with any of these initiatives.

For additional information or help:

 

Unclaimed Retirement Benefits

/// Posted by Scott Tuxbury

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Unclaimed Retirement Benefits: Do you have money lost in old 401(k)s and pensions? 

There has been a wave of reporting over the last few years around the vast sums of money in unclaimed accounts in the US. Millions of Americans have forgotten or are completely unaware of money in their name from government payouts, bank accounts, and stock sales. But, by far, the largest numbers are held in unclaimed 401(k) and pension plans from previous employers.

 

The nonprofit National Association of Unclaimed Property Administrators estimates that state and government treasuries are sitting on an excess of $33 billion in unclaimed assets. It seems like a good time for a reminder on how and where you might track down long-lost funded pensions or 401(k)s in your name.

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Termination Death Benefit for Large Corporations

/// Posted by Bill Sapers

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Termination Death Benefit for Large Corporations: How Not to Lose Benefits to Taxes, While Insuring Recovery of Accrued Liabilities

It is a hard, somewhat morbid, topic to face, but the death of business executives at large companies is a financially fraught time for both the company and family of the executive alike. The financial payout of termination benefits  at the death of an executive is taxed heavily, usually leaving between 30-35% of benefits after estate and income taxes to their heirs.

Having spent a lifetime analyzing such situations and dealing with them first hand, I can definitively say that I’ve found a better way for all parties to plan for such difficult moments. To first test my theory, I spent a number of months searching through the proxy statements of large corporations who have had executives die while employed. I calculated how much the company paid out in “death benefits” (salary, incentive bonuses, stock options, etc.) that were promised to the employee and now passed on to their estate. In most every case, the company paid large amounts, which were then taxed through the roof leaving only a small portion of what was promised. 

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Why Staying the Course is Helpful

/// Posted by S&W

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I am not normally a fan of Jim Cramer, the loud, stock-picking host of CNBC’s “Mad Money.” That said, this week on the TODAY show he had a sensible reflection about the recent days’ market decline: “No one ever made a dime panicking.”

True!

Most advisors, including me, preach staying the course, having a long-term goal, and an asset allocation model. We caution against selling out, especially now. We talk about risk/reward tradeoff, and pride ourselves on educating investors that the stock markets reward us in the long run for taking on additional risk.

All of this is easier said than done, of course. Especially in volatile markets like we’re experiencing now, especially with the 2008-2009 stock market crash still looming large in our memories.

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Will Debt Spoil Too Many Retirements?

/// Posted by S&W

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What pre-retirees owe could compromise their future quality of life.

The key points of retirement planning are easily stated. Start saving and investing early in life. Save and invest consistently. Avoid drawing down your savings along the way. Another possible point for that list: pay off as much debt as you can before your “second act” begins.

Some baby boomers risk paying themselves last. Thanks to lingering mortgage, credit card, and student loan debt, they are challenged to make financial progress in the years before and after retiring.

More than 40% of households headed by people 65-74 shoulder home loan debt. That figure comes from the Federal Reserve’s Survey of Consumer Finances; the 2013 edition is the latest available. In 1992, less than 20% of Americans in this age group owed money on a mortgage. Some seniors see no real disadvantage in assuming and retiring with a mortgage; tax breaks are available, interest rates are low, and rather than pay cash for a home, they can arrange a loan and use their savings on other things. Money owed is still money owed, though, and owning a home free and clear in retirement is a great feeling.1 

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One of the bread-and-butter staples of a well-conceived employee benefit program is the classic group term life insurance.  You join a company, fill out a beneficiary form, and voila, you are provided with group term life insurance equivalent to a multiple of salary, such as two times annual earnings.  You don’t think much of this benefit until you receive your W-2 form at the end of the year.  Imagine your surprise when you look at Box 12, Code C, and find a taxable cost in the thousands!

Group term life insurance is taxed under IRC Section 79.  An employee is allowed to exclude any cost for the first $50,000 of coverage provided.  Amounts of insurance over $50,000 are considered income to the employee, and taxed using the Uniform Premium Table (Table I) in IRC Section 79.  The dollar amount added to the employee’s taxable income is calculated based on the employee’s age and amount of coverage.  Since Table I uses outdated and artificially inflated rates, the cost to the employee can be significant.

Many of our clients are surprised and exasperated by the high tax cost they are forced to report, and come to us seeking solutions.

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Protecting your Identity and Credit Following the Equifax Breach

/// Posted by S&W

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The Federal Trade Commission has posted a valuable blog post entitled The Equifax Data Breach: What to Do, which we recommend you review.  

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Are You In Danger of Outliving Your Life Insurance Policy?

/// Posted by Ed Wallack

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When individuals purchase permanent insurance (whole life, universal life, variable life), as opposed to term insurance, the expectation is that the policy will remain in force as life insurance until death of the insured. However, due to a marked increase in longevity, many are likely to survive to the end of the mortality tables on which their life insurance policies are based. The bottom line is that there is a grave and imminent danger that many life insurance policies will terminate at age 100 and expose the policy owner to adverse income tax consequences.

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Everyone Needs an Estate Plan!

/// Posted by S&W

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Make sure your plan matches your stage in life

Most people do not like thinking about their own death or the death of family and friends.  Benjamin Franklin famously wrote: “… in this world nothing can be said to be certain, except death and taxes.”  Simply stated, the reason to have your own estate plan drafted is to provide for the orderly administration of your affairs (financial and otherwise) in the event of your incapacity or death.  For many, the words ‘estate plan’ conjures images of luxury and affluence, though everyone, regardless of financial resources should have an estate plan.  To help prove our point, here are some of the top reasons each of the following personas should make creating/updating their estate plan a priority.

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Summer: An Unlikely Time for Changing CPAs

/// Posted by S&W

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Last year my husband and I knew there was something wrong with our boiler, in the basement of our house. We knew this because we lost heat in the house during the winter – twice. We learned that repairing it would involve dismantling part of it and having no heat for a day. Our plumber, whom we see around town, admonished us several times to make arrangements with him to take care of it during that summer, when our need for heat would be close to zero. And we finally did, one week last June – it was the last thing I wanted to be bothered to do, but when winter and snow came, boy were we happy, and relieved.

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