Many people think of estate planning as merely a set of documents that lays out their instructions after they die. However, estate planning also involves strategic preparation during your lifetime. Everyone has different goals with their estate planning including protecting their vulnerable beneficiaries, leaving instructions for end of life care, providing for children and grandchildren, or even maximizing gifts to charities. But there is one goal that everyone can typically agree on: Minimizing taxes. Here are some steps to take before the end of the calendar year to reduce your tax bill. Tax Losses If some of your investments have done really well this year, and you have significant gains, you might want to offset some of those with tax losses. While you might not think of investment losses as a good thing, they could really help reduce your tax bill. In order to “harvest” your losses, you’ll need to
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While there may have been a time when people looked to their employers and Social Security to finance their retirement, those days are long gone. The reality today is that to enjoy a comfortable retirement, not to mention the ability to provide for your loved ones and ensure your legacy, you should have an adequately funded, well-designed retirement plan. We can help you develop such a plan, by “stretching and protecting” your wealth. What do we mean by this? “Stretching” refers to maximizing income tax deferral and wealth accumulation while minimizing tax liability. “Protecting” involves minimizing the threats posed by creditors or predators. As an experienced estate planning law firm, we can evaluate all options for minimizing tax liability and the erosion of savings that results from paying too much in taxes. We can also utilize a range of tools for reducing taxes in your golden years, including taxes on
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For the vast majority of people considering retirement, one question looms above all others: Have I saved enough to make the dream of retirement a reality? Tough question, given that it is impossible to predict how long we will live and what future costs we might incur (particularly with regard to health care). An article in U.S. News & World Report provided the following strategies for retirees to cut monthly expenses and make their life savings last longer. Pay off your mortgage Eliminating monthly mortgage payments is of the best ways to make retirement more affordable. While you will still have to pay taxes and maintenance costs on your home, these expenses are most likely a fraction of your mortgage payments. Downsize your home When your children have moved out and become independent, do you really need that house with several bedrooms in a community with good schools and large
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Maybe you’re looking to relocate to a state you’ve always dreamed about living in. Or perhaps you just want to downsize to a more manageable property. Whatever the reason, the decision whether to buy or rent a home in retirement is a difficult one. A recent article in Consumer Reports Magazine offers some helpful advice on making this decision. One of the most important factors to consider is how long you expect to live in your new home. Retirement does not necessarily mean you’ll never want (or need) to move again. The shorter you reside in the home, the less financially attractive purchasing it becomes. You will have less time to recoup closing and moving costs, and if you finance the home, you will have little equity in the new property when you sell it. In addition, the federal income tax reduction on mortgage interest may be less advantageous if
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Losing one’s husband is difficult enough in and of itself. Unfortunately, many widows must also contend with the financial consequences of the loss of their husbands. According to government figures cited in a New York Times article, the household income for widows typically drops 37 percent after a spouse dies, far more than the 22 percent income decline experienced by men who lose their wives. The assets of widows also tend to fall substantially more than those of widowers. This is compounded by the fact that women typically live longer than men. Census figures indicate that one in four women from 65 to 74 are widows. By the age of 85, three out of four women are widows. To make matters worse, even couples with estate plans often fail to address the need for adequate income that will be faced by a surviving spouse. Talking about income, especially with regard
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Health savings accounts are tax-advantaged medical savings accounts available to people enrolled in high-deductible health plans (plans with deductibles of at least $1,350 for individuals and $2,700 for families). To qualify for a health savings account, your plan also needs to meet an out-of-pocket maximum below specified thresholds. In 2019, the out-of-pocket maximum for an HSA-qualified health plan must be less than $6,750 for individual coverage or $13,500 for family coverage. Money contributed to a health savings account is not subject to federal income tax at the time it is deposited. For 2019, people with individual medical coverage can deposit up to $3,500 in a health savings account while people with family plans can deposit up to $7,000. If you are age 55 and older, you can contribute an additional $1,000 to your account. In addition to being an excellent way to cover out-of-pocket medical expenses, health savings accounts provide
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In this post, we continue our discussion of protecting your nest egg in retirement. Tap retirement accounts in the proper order. Lacking a sound withdrawal strategy can be costly. According to Carrie Schwab-Pomerantz, Chief Strategist for Consumer Education at Charles Schwab, the most tax-efficient approach is to first draw down the principal from maturing bonds and certificates of deposit, since they are no longer bearing interest. After that, if you are 70½ or older, you should take your required minimum distributions (RMDs) from traditional tax-deferred accounts, like IRAs and 401(k) plans, with a focus on assets that are no longer appropriate for your portfolio or overweighted. This is because you will be subject to severe penalties from the Internal Revenue Service if you fail to take your RMDs on time. Next, you’ll want to sell from taxable accounts, since you only have to pay taxes on their capital gains. (It
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Americans are living longer than ever before. That’s great news, but it has a downside—the possibility of outliving our life savings. According to the Social Security Administration, a 65-year-old man can expect to live to age 84, on average, while a woman of the same age may make it closer to age 87. So if you retire at the age of 62, your nest egg may have to last for at least 20 years. Sure, Social Security will provide an income stream, but the amount is not enough for most retirees to live comfortably. Little wonder, then, that according to a survey by the Transamerica Center for Retirement Studies, the most frequently cited retirement concern among Americans is outliving their savings and investments. In the survey, 44% or respondents across all ages expressed this fear, as compared to 41% of retirees. In addition, 47% of retirees believed they had not
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Most people rely on IRAs, 401(k)s and Social Security benefits to fund their retirement. An article in U.S. News & World Report explored some other options to boost your retirement income. Here are some highlights. Renting out part or all of a home. If your children are on their own, you may have more house than you need. Renting out a room, or making improvements like a kitchenette and bathroom to create an “apartment” within your home, can have a dramatic impact on your income. If you don’t like the idea of having a permanent housemate, websites such as HomeAway and Airbnb allow you to rent out a room or your entire home on a temporary basis. Taking out a reverse mortgage. If you are a homeowner age 62 or older, you can use a reverse mortgage to receive regular payments based on the equity in your home. However, when
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