Planning

11 DEC 2014

Year End Planning 2014

By Bob Donaldson

With 2014 drawing to a close, it's a great time to begin organizing your finances for the New Year. To help you start 2015 on the right foot, we've put together a list of financial planning topics that are worth reviewing.

Health and wellness

Flexible spending accounts. Money in a flexible spending account (FSA) generally must be used by year-end or it will be forfeited. Recently, however, the IRS modified this rule to allow participants to carry over up to $500 of unused funds into the next year. (Your employer plan must elect to participate in this option, so be sure to check your plan terms to see if you can take advantage of the new rule.)

If your employer has not elected the carry-over option, now's the time to schedule those doctor's appointments and stock up on items that are eligible for flexible spending. Taking action immediately may help relieve some last-minute headaches and ensure that you don't lose your hard-earned dollars.

Additionally, open enrollment for certain employee benefit plans begins around this time of year. If you're not using an FSA, take stock of your qualifying expenses and consider whether setting up an FSA for 2015 would make sense. If you already use an FSA, assess how much extra you have left in the account (or how much of a deficit you ran) and recalculate your allotment for the New Year.

Medicare enrollment. Open enrollment for Medicare started in October and ends December 7, 2014. For many, this is the only chance to change health and prescription drug coverage for 2015. If you want to make any changes, act now.

Retirement planning
Review your retirement plan allocation and contribution elections. If you're not taking full advantage of any matching features or potential tax benefits, consider maximizing your contributions. It's also a good time to ensure that your allocation remains in line with your objectives.

Recharacterization of Roth IRA rollovers or conversions. If you converted a traditional IRA to a Roth IRA during 2014 and paid tax on the conversion, mark your calendar now to allow plenty of time to meet the October 15, 2015, deadline for recharacterizing (i.e., undoing) the conversion.

Taxes, taxes, taxes

RMDs. If you're turning 70½, you'll need to devise a strategy for taking required minimum distributions from your traditional IRA and 401(k) plans.

Estimated taxes. Be sure to take potentially large bonuses and a prosperous business year into account when considering your taxes for 2014. You may have to file estimated taxes or increase the upcoming January payment.

Managing marginal tax brackets. In 2013, a number of new tax provisions took effect. If you are on the edge of these tax thresholds, you may be able to defer or accelerate income or deductions to help minimize taxes.

  • The 39.6-percent marginal tax bracket affects taxpayers with taxable incomes in excess of $406,750 (individual), $457,600 (married filing jointly), $432,200 (head of household), and $228,800 (married filing separately).
  • The 20-percent capital gain tax rate applies to those in the 39.6-percent marginal tax bracket.
  • Itemized deductions and personal exemption phase-outs affect those with adjusted gross incomes above $254,200 (individual) and $305,050 (married filing jointly).
  • The 3.8-percent surtax is applied to the lesser of net investment income or the excess of modified adjusted gross income over $200,000 (individual) and $250,000 (married filing jointly).

Too little or too much withholding. Workers with gross earned income of more than $200,000 may have had too little or too much tax withholding in 2014. Employers may have withheld an additional 0.90-percent tax on incomes over $200,000 without regard to the taxpayer's withholding status, which would put these taxpayers at a higher threshold. Other taxpayers may have had too little withholding because of other income from second jobs that was unknown to the employer. Employees should plan to take a credit on their returns or pay additional taxes.

Reporting losses on stock sales. Be aware of important deadlines regarding trading date closings. A trade to sell a long position must be executed by the close of the last trading date of the current year. Similarly, a trade to sell a short position must be executed so that it settles by the last trading date of the current year.

Estate planning

To help ensure that your estate plan stays in tune with your goals and needs, it's important to review and update it on an ongoing basis. If you haven't done so during 2014, take time before the end of the year to:

  • Check trust funding
  • Account for any life changes
  • Update beneficiary designations
  • Review trustee and agent appointments
  • Review provisions of powers of attorney and health care directives
  • Prepare for the distribution of personal effects
  • Get a firm understanding of all of your documents

Saving and goal-setting

Did you set savings goals for the current year? Realistically assess how well you've met those goals and think about your goals for the upcoming year. There's no reason you can't make some financial resolutions along with your other New Year's vows.

If you determine that you're off track, let us help you develop and monitor a financial plan. We're happy to go over the topics that are most relevant to your personal situation, so you can better prepare for the coming year. Whatever your planning may entail, we wish you a happy, healthy, and prosperous 2015!

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Robert Donaldson is a financial advisor located at Advisory Group West. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (818) 241-9061 or at Derek@advisorygroupwest.com.

©2014 Commonwealth Financial Network®

 

 

01 JAN 2014

The “Magic Age”: What You Need to Know About Social Security Claiming Strategies

By Bob Donaldson

You may have heard that choosing the right social security claiming strategy can help you and your spouse maximize your benefits. But which strategy is best? What's the appropriate age to claim? What about spousal benefits? If you're wondering which path to take, these social security basics may help you get started.

When is the right age to claim?

Retirees can apply for social security anytime between ages 62 and 70. But, until you or your spouse reaches your full retirement age (FRA), you won't be able to take full advantage of social security claiming strategies. For many of today's retirees (those born between 1943 and 1955), that "magic age" is 66.

When determining the best age to claim, keep these considerations in mind:

  • Claiming at 62 can permanently reduce not only your benefits but also your spouse's survivor benefits.
  • Claiming prior to FRA means you automatically apply for both your worker benefit and any additional benefits you qualify for as a spouse, assuming your spouse is already receiving benefits.
  • Claiming after your FRA allows you to take one benefit or the other, switching them at a later date, if advantageous.
  • Delaying your claim until age 70 maximizes your benefit and locks in the highest possible benefit for a widow or widower. Keep in mind, however, that you may need to bridge the income gap by drawing down your retirement portfolio.
  • A note on survivor benefits: A surviving spouse can claim either his or her own benefit or the survivor benefit independently prior to FRA, then switch to the other benefit after FRA.

Making the most of spousal benefits

It's a common assumption that, if both spouses delay claiming social security until age 70, they can maximize their monthly benefits. That's not always the case, however. To help ensure that you don't leave money on the table, here are a few possible strategies to consider. (Note that, for a couple to take advantage of these strategies, at least one spouse must have reached FRA.)

  • Claim the spousal benefit when one spouse reaches FRA. You can only earn delayed retirement credits on your own worker benefit, not by delaying the spousal benefit. If your spousal benefit will always be greater than your own benefit, it makes sense for you to take advantage of the spousal benefit sooner rather than later.
  • "Claim now and claim more later." With this popular strategy, you apply for social security at FRA but suspend payments until age 70. This allows your spouse to submit a restricted application for spousal benefits if he or she has also reached the magic age. In the meantime, both of you will continue to earn delayed retirement credits on your own worker benefits. Then, when each of you reaches ages 70, you can apply for your maximized benefits.
  • Claim the lower benefits first. If, for cash flow purposes, you have to claim before both spouses reach FRA, it may make sense for the spouse with the lower benefit to claim at 62; meanwhile, the other spouse waits until his or her FRA and files a restricted application for spousal benefits. Then, at age 70, the one receiving spousal benefits switches to his or her own higher worker benefit, and the other spouse can switch to the spousal benefit, if it's higher.

Beyond the basics

Clearly, when it comes to determining the optimum social security claiming strategy, numerous variables are at play. For instance, if you and your spouse have shortened life expectancies, a delayed claim may shortchange you. Your financial advisor can help you evaluate the benefits of different strategies and find the option best suited to you and your unique situation.

©2013 Commonwealth Financial Network®

 

 

17 SEP 2013

Tips for Managing Your Finances After a Divorce

By Bob Donaldson

Divorce is often a stressful event, both emotionally and financially. If you're in the process of a divorce proceeding (or have recently been through one), it's normal to be worried about your financial situation. Settling into a new financial life takes time, but there are things you can do today to help prevent divorce from taking a bigger toll than necessary. Here, we offer guidelines to help you stay financially secure, today and into the future.

Your financial picture

Create a personal financial statement. A personal financial statement is a great way to keep track of your monthly income and expenses. Try separating basic, have-to-pay expenses from discretionary items so you can see where you have flexibility to make changes. Do you earn enough to continue your pre-divorce lifestyle? If the answer is no, figure out ways to trim your expenses, such as cutting back on dining out and looking for ways to save on groceries.

Continue to save. Even if your goal is to pay down debt, it's important to set aside some money for an emergency fund and long-term savings. If you contribute to a 401(k) plan, be sure to take advantage of any employer match, which is essentially "free money."

Check on your credit. A divorce can play havoc with your credit through no fault of your own. You can request a free copy of your credit report from the three major credit reporting agencies—TransUnion, Experian, and Equifax—through www.annualcreditreport.com. If you notice problems that were caused by your ex-spouse, submit an explanation to the credit bureau.

Getting organized

Review the status of the divorce settlement. It's a good idea to verify that both parties have completed their obligations, such as refinancing a mortgage into one name or removing the other's name from credit cards. If a portion of your ex-spouse's retirement assets was supposed to be segregated for you through a qualified domestic relations order, verify with the plan administrator that it has been done.

Retitle property. If you haven't done so already, change the ownership of property according to the terms of your divorce settlement.

Inform the social security office of your new status. One of the few things that can't be done online, a name change requires a visit to your local social security office. Don't forget to bring originals of your proof of citizenship and identity, as well as the divorce decree. After you receive a new social security card, you can update other identification, such as your driver's license.

Organize your financial records. Whether they're scanned and stored in your computer or locked in a safety deposit box, it's important to keep your documents organized and at the ready. Give a list of their locations to someone you trust, along with a list of contact numbers for people who should be notified in an emergency.

Simplify your payments. Many banks offer online bill payment services that can help you automate your money management. Just set the future payment dates online and let the bank pay your bills automatically.

Insurance considerations

Review your policies and update beneficiaries. If you're working, look into your employer's disability benefits and consider a supplemental policy to replace your income in the event you become disabled. If you're not working, explore long-term care insurance, which will allow you to receive care in your home if you can't care for yourself.

Now that you're single, be wary of letting your life insurance policy lapse, especially if you have family members who depend on you. Also check on your homeowners and auto insurance, and make any necessary adjustments.

In addition, don't neglect to select new beneficiaries for your life insurance, retirement accounts, and transfer-on-death brokerage accounts (unless your divorce settlement prevents you from doing so).

Consider applying for COBRA health benefits. Under COBRA, you may be eligible to continue health insurance through your former spouse's employer for at least 36 months. Keep in mind that there is a deadline to apply for these benefits.

Financial planning

Execute new estate planning documents. Your ex-spouse's fiduciary appointments or beneficial interests are not necessarily terminated upon your divorce. Consider updating your will, trusts, powers of attorney, health care proxies, and living will.

Reassess your investing risk tolerance. We can review your investment plan with you and help you determine if it suits your new goals.

Taking control of your future

After the stress of a divorce, it never hurts to explore options for the future. This might mean considering a change of scenery, exploring a new career path, or maybe even going back to school. Whatever you decide to do once the dust clears, we're here to help you create a financial strategy for your next phase in life.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

IRS CIRCULAR 230 DISCLOSURE:

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Robert Donaldson is a financial advisor located at Advisory Group West. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (818-241-9061) or at (Derek@advisorygroupwest.com).

©2013 Commonwealth Financial Network®

 

01AUG2013

How to Handle a Financial Windfall

By Derek McLaughlin

With every news story about the latest Powerball jackpot, it's only natural to wonder, "What would I do if I won the lottery?" Although your chances of hitting the jackpot may be slim, a financial windfall could well come your way through more ordinary means, such as the settlement of a lawsuit, a severance package, a family inheritance, or simply a larger-than-expected tax refund. Unfortunately, along with the obvious rewards, a windfall can be accompanied by plenty of potential problems.

When a large sum of money is thrust into their hands, otherwise smart people can make serious financial mistakes. In fact, as many as 70 percent of Americans who receive a windfall lose it all within a few years, according to the National Endowment for Financial Education. If you find yourself on the receiving end of a windfall—whether it's millions of dollars or a few thousand—following the advice outlined here will help you make the most of your good fortune.  

Before you do anything

In the initial rush of excitement, it may be tougher than you think not to make any quick decisions. Before deciding how to use your newfound funds, take a step back, think carefully about your situation, and assess all of your options. To avoid making choices you may regret later, keep these basic tips in mind:

  • Stay grounded and realistic about the amount of money you have. Remember, drawing too much attention to yourself may attract friends or distant relatives who are more interested in getting handouts than in your personal well-being.
  • Avoid hasty purchases on big-ticket items.
  • Establish a budget to keep from spending too much. One rule of thumb is to avoid spending more than 5 percent of your new funds in the first year of your payment. 

Know how much you really have. Oftentimes, recipients overvalue a windfall, failing to consider taxes and other factors. Some windfalls, such as insurance payouts, are tax-free. Lottery or severance payments may have taxes withheld before funds are paid to you, but you might need to set aside more money for taxes if the windfall pushes you into a higher tax bracket. Before visions of sports cars and mansions start to fill your head, be sure to put a real number on the money you have. 

Don't immediately quit your job. It's also unwise to assume you can stop working.You'll need to evaluate if you have enough money not only to replace your current income but to see you through retirement. Remember that, if you quit your job, you will stop earning income that contributes to social security and other retirement benefits.

Involve your advisor. As your financial advisor, we can guide you in the right direction and help you put your assets to best use. Working with your existing financial plan, we can strategically assess your options, taking into account tax considerations and your risk tolerance. We can also help you weigh the potential benefits of strategies such as trust funds and special types of life insurance.

 Spending wisely

Once you've evaluated your new financial situation, consider these smart spending tips:

Set aside emergency savings. If you don't already have a bank account or money market fund with enough to hold you over in case of a "rainy day," creating one should be a top priority. Ideally, you'll want to set aside sufficient funds to cover your expenses for 6–12 months (3–6 months at the least). Be sure to factor in all of your expenses, including your mortgage or rent, car payments, utilities, and groceries. 

Pay off high-interest debt. If you have any debt, getting it out of the way is likely a wise move. High-interest debt, such as credit card balances and payday loans, can be particularly worthwhile to pay off in the short term; the return on any investment you might otherwise make with that money isn't likely to offset the loss from high interest rates. 

Evaluate your health and retirement plans. Here are a few options to consider: 

  • Maximize your employer's retirement plan. If your windfall comes in the form of a bonus, it may be easy to transfer funds directly to your retirement account. 
  • Weigh the benefits of a Roth IRA. If your income level is too high, you can always contribute to a traditional IRA and convert. For more information, visit www.irs.gov/Retirement-Plans/Roth-IRAs.
  • If you contribute to a health savings account (HSA), think about paying all of your health care costs out of pocket and letting your HSA grow tax-free.

Treat yourself a little. Clearly, it's best to proceed with caution when making decisions regarding a financial windfall. At the same time, it doesn't hurt to enjoy a bit of freedom with your newfound wealth. Perhaps you'd like to travel to a place you've never had the extra money to visit or treat the family to a fancy dinner and night out. A small indulgence could actually reduce any urge you might feel to spend the funds unwisely.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend that you consult a tax preparer, professional tax advisor, or lawyer.

Derek McLaughlin is a financial advisor located at Advisory Group West. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (818 241-9061 or at (Derek@advisorygroupwest.com).

©2013 Commonwealth Financial Network®

 

 

Healthy Lifestyle
25 JUN 2013

The "Magic Age": What You Need to Know About Social Security Claiming Strategies

By Commonwealth

You may have heard that choosing the right social security claiming strategy can help you and your spouse maximize your benefits. But which strategy is best? What's the appropriate age to claim? What about spousal benefits? If you're wondering which path to take, these social security basics may help you get started.

When is the right age to claim?

Retirees can apply for social security anytime between ages 62 and 70. But, until you or your spouse reaches your full retirement age (FRA), you won't be able to take full advantage of social security claiming strategies. For many of today's retirees (those born between 1943 and 1955), that "magic age" is 66.

When determining the best age to claim, keep these considerations in mind:

  • Claiming at 62 can permanently reduce not only your benefits but also your spouse's survivor benefits.
  • Claiming prior to FRA means you automatically apply for both your worker benefit and any additional benefits you qualify for as a spouse, assuming your spouse is already receiving benefits.
  • Claiming after your FRA allows you to take one benefit or the other, switching them at a later date, if advantageous.
  • Delaying your claim until age 70 maximizes your benefit and locks in the highest possible benefit for a widow or widower. Keep in mind, however, that you may need to bridge the income gap by drawing down your retirement portfolio.
  • A note on survivor benefits: A surviving spouse can claim either his or her own benefit or the survivor benefit independently prior to FRA, then switch to the other benefit after FRA.

Making the most of spousal benefits

It's a common assumption that, if both spouses delay claiming social security until age 70, they can maximize their monthly benefits. That's not always the case, however. To help ensure that you don't leave money on the table, here are a few possible strategies to consider. (Note that, for a couple to take advantage of these strategies, at least one spouse must have reached FRA.)

  • Claim the spousal benefit when one spouse reaches FRA. You can only earn delayed retirement credits on your own worker benefit, not by delaying the spousal benefit. If your spousal benefit will always be greater than your own benefit, it makes sense for you to take advantage of the spousal benefit sooner rather than later.
  • "Claim now and claim more later." With this popular strategy, you apply for social security at FRA but suspend payments until age 70. This allows your spouse to submit a restricted application for spousal benefits if he or she has also reached the magic age. In the meantime, both of you will continue to earn delayed retirement credits on your own worker benefits. Then, when each of you reaches ages 70, you can apply for your maximized benefits.
  • Claim the lower benefits first. If, for cash flow purposes, you have to claim before both spouses reach FRA, it may make sense for the spouse with the lower benefit to claim at 62; meanwhile, the other spouse waits until his or her FRA and files a restricted application for spousal benefits. Then, at age 70, the one receiving spousal benefits switches to his or her own higher worker benefit, and the other spouse can switch to the spousal benefit, if it's higher.

Beyond the basics

Clearly, when it comes to determining the optimum social security claiming strategy, numerous variables are at play. For instance, if you and your spouse have shortened life expectancies, a delayed claim may shortchange you. Your financial advisor can help you evaluate the benefits of different strategies and find the option best suited to you and your unique situation.

©2013 Commonwealth Financial Network®

 

 

25 MAR 2013

Preparing for Medicare Enrollment

By Commonwealth

With all the options available to you, the Medicare enrollment process can seem overwhelming, especially if you leave important decisions to the last minute. To help ensure that you make the best Medicare choices, here are some steps to take before you turn 65.

Mark your calendar
If you won't be enrolled in Medicare automatically when you turn 65, you'll need to keep these key dates in mind:

  • You're first eligible to enroll during the three months before your 65th birthday or during the three months after you turn 65.
  • If you miss the first deadline, you can enroll between January 1 and March 31 every year, but you may have to pay a penalty for late enrollment.
  • If you're currently covered by group insurance through an employer or a spouse's employer, you may qualify to enroll without penalty while you are covered by a group health plan or during the eight-month period that begins the month after your employment ends or the coverage ends, whichever comes first.

Research Medigap and Medicare Advantage plans
Look into how Medigap and Medicare Advantage plans work and decide if either type of plan would benefit you. Here's an overview:

  • Medigap policies can help pay for some of the costs that original Medicare doesn't cover (e.g., copayments, coinsurance, and deductibles). Medigap policies require you to pay premiums, which are standardized according to federal and state laws.
  • Medicare Advantage plans provide Part A (hospital insurance) and Part B (medical insurance) coverage, but not Original Medicare. For more information, visit www.medicare.gov/find-a-plan/questions/home.aspx.

Talk to your providers

It's essential to double-check that your health care providers accept Medicare and that they accept assignment, which means that they will restrict their fees to the Medicare limit. To locate doctors near you who accept assignment, use Medicare's provider search, available at www.medicare.gov/find-a-doctor/provider-search.aspx.

Seek advice from a trusted resource

Enrolling in Medicare doesn't have to be confusing or frustrating. A knowledgeable financial advisor can guide you through the enrollment process, answering any questions you may have and helping you get the most out of your new benefits. By planning ahead and working with a trusted advisor, you'll pave the way for a smooth transition to Medicare.

©2013 Commonwealth Financial Network®

 

 

26FEB2013

Buyer Beware: Tips for Safe Online Shopping

By Commonwealth

Are you one of the millions of consumers who hunt for deals and unique items on sites like eBay and Craigslist? While cyber shopping can be a convenient way to find bargains on both new and used items, it's important to protect your identity and financial information,

especially when dealing with individual sellers (as opposed to the online versions of brick-and-mortar stores).

Before you purchase anything listed on an online classified ad, auction, or marketplace site, keep these precautions in mind.

Online classifieds (e.g., Craigslist)

  • Never wire funds. If a seller asks you to wire payment using Western Union or MoneyGram, you're likely dealing with a scammer.
  • Safeguard your personal information. Sellers on Craigslist and similar sites don't need your personal financial information, such as credit card numbers. To keep your information safe, it's best to pay with cash.
  • Don't go it alone. Always take someone with you when meeting a seller. Be sure to tell a friend or family member where you'll be, and take your cell phone with you.
  • Pick up in a public place. Choose a busy location to meet the seller. If you're picking up the item at the seller's house, it's particularly important to have a friend or family member join you.

Online auctions (e.g., eBay)

  • Read the fine print. Before you enter a bid, be sure to review the entire listing, as well as the sales policies of the auction site. Remember: you win, you pay. Once you've won an auction, you're obligated to complete the transaction.
  • Check out buyer feedback. Auction sites let buyers post feedback on their purchases, which can give you insight into a seller's business practices. Be sure the seller has a high rating before making a purchase. If you see lackluster feedback, it's probably best to look for the item elsewhere.
  • Pay with a credit card or PayPal account. Using a debit card linked to your checking account may not be safe, as most debit cards don't offer fraud protection. You may also want to consider buyer protection; eBay offers such a plan that covers many items purchased on its site.
  • Beware of fraudulent e-mails. After you've made a purchase, be wary of any unusual e-mails you may receive. Avoid opening suspicious messages or clicking on links they contain.

Online marketplaces (e.g., Amazon, Etsy, Overstock)

  • Know what you're purchasing. Searches on these types of sites may pull up both new and used items for purchase. Though they're often cheaper, used products may not be in perfect shape. Don't neglect to read all the product details, as well as individual sellers' return and refund policies.
  • Look for positive seller feedback. As with online auctions, be sure to read sellers' ratings and keep your eyes open for red flags.
  • Pay safely. Pay for purchases using a credit card or PayPal, which offer greater buyer protection than other methods.
  • Ensure a secure checkout. Before you purchase an item, look for HTTPS at the beginning of the web address on the transaction page, which indicates a secure connection. Addresses that begin with HTTP only aren't secure.

Don't pay with your identity
When shopping online, it's easy to get caught up in the excitement of finding a great deal—or what seems to be one. But don't let the thrill of bargain-hunting override common sense or cause you to jeopardize your sensitive information, particularly if you're dealing with an individual online seller.

©2013 Commonwealth Financial Network®

 

28MAY2013

Avoiding Inheritance Conflict in Your Family

By Commonwealth

Even in the most close-knit families, an inheritance can cause a feud if the deceased hasn't left a detailed plan. You might be thinking, "That would never happen to my family!" Unfortunately, family feuds over inheritances are all too common.

To help ensure that your clan won't be left bickering about money after you pass away, here are some tips to consider:

  • Be realistic and communicate openly. Your children may be depending on a significant inheritance to help them purchase a home, pay for a child's education, or cover another large expense. To avoid disappointment, give them a sense of where you stand financially, emphasizing that your finances may change depending on medical expenses or other unexpected costs.
  • Keep your documents up to date. Be sure to update your will and beneficiary designations to reflect life events such as marriages, divorces, new grandchildren, and so on. Keeping your documents current will help ensure that you don't unintentionally include or exclude anyone.
  • Address personal property. In addition to your will, leave a separate list of personal property with instructions detailing who should inherit each item. The list should describe each piece of property you wish to gift, leaving no room for interpretation.
  • Don't task the oldest beneficiary with distributing your assets. Many parents inadvertently create conflict by naming the eldest child as the beneficiary of their assets, expecting him or her to evenly distribute the inheritance to the other siblings. If you want all of your children to inherit equally, put them all down as legal beneficiaries.
  • Give everyone a role. When you assign responsibility for handling your estate, you're making a statement about whom you think is capable and trustworthy. Consider how your children will react; if possible, assign everyone a role, even a small one, to play in the decision-making.
  • Explain yourself. What happens if you don't want to split your assets equally among your children? Many parents consider this option if one child is financially successful while another is struggling. If you plan to distribute your assets unequally, include a personal note with your will, explaining why you distributed your assets the way you did.
  • Eliminate uncertainty with a trust. A common estate planning tool, a trust can help you manage and control the distribution of your assets in the event of your death. Through a trust, you can elect to distribute an inheritance in increments if you pass away before your children are mature enough to manage money wisely. If your child has financial problems or creditor concerns, you might also consider using a trust to hold a distribution until a later date.

Though the estate planning process involves many legal responsibilities, it's important not to lose sight of the personal aspects. By carefully planning and setting expectations ahead of time, you'll help protect the most valuable part of your legacy—your family.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax preparer, professional tax advisor, and/or lawyer.

©2013 Commonwealth Financial Network®

 

 

30 APR 2013

Getting on the Right Financial Track After Graduation

By Commonwealth

Do you know anyone graduating this year? According to the Project on Student Debt, an initiative sponsored by the Institute for College Access & Success, graduating seniors carried an average of more than $26,000 in student loans in 2011.

With that in mind, we've compiled some ideas designed to help new grads take charge of their finances.

Controlling student loan debt

  • Know your loan repayment options. For federal loans, you may be able to reduce your payments by choosing a different type of repayment plan.
    • With a graduated plan, your payments start low and then gradually increase, usually every two years.
    • With an extended plan, you can stretch your payments over a period of up to 25 years, but you must have an outstanding loan balance greater than $30,000.
    • With an income-based plan, your payments fluctuate each year based on annual income, household size, and loan balance.
  • Look into consolidating your loans. By combining multiple student loans into one, possibly at a lower or fixed interest rate, consolidation programs may allow you to dramatically reduce your monthly payments. To learn more, visit www.studentaid.gov and click on Repay Your Loans > Loan Consolidation.
  • Consider public service. If you enter a field dedicated to public service (including the Peace Corps and AmeriCorps), your outstanding loan balance may be eligible to be forgiven; for more details, go towww.studentaid.gov and click on Repay Your Loans > Forgiveness, Cancellation, and Discharge.
  • Don't miss payments. Missing payments hurts your credit. Plus, the government can confiscate your tax refund and even some of your wages to collect the amount you owe.

Keeping your day-to-day finances in check

  • Try online budgeting tools. Sites such as www.mint.com and www.yodlee.com can help give you a complete picture of your finances by tracking your expenses, showing you where you're spending most of your money, and organizing your accounts.
  • Watch your credit. You need a good credit score to lease an apartment, get a mortgage or a car loan, and even land a job. That's why it's essential to make loan payments on time and to avoid using more than 30 percent to 50 percent of any given credit line. Also, opt to keep old credit cards open and in good standing instead of closing them.
  • Pay off higher-interest debt first. Many graduating seniors have at least one credit card, with an average of more than $4,000 in credit card debt, according to Credit.com. Depending on the card's interest rate, it may make sense to pay off those balances before paying down student loans.
  • Start saving for retirement today. Thanks to the power of compounding interest, saving early may make a significant difference. If your employer offers a retirement plan program, consider contributing what the company is willing to match. You may also want to consider a Roth IRA, which allows you to withdraw contributed funds early without penalty.

We're here to help
Graduating students face a number of challenges when it comes to managing their finances. Beyond these tips, we're happy to offer personalized advice to help you or someone you know start off on the right foot financially.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax or legal professional regarding their individual situation. Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than original value.

©2013 Commonwealth Financial Network®

 

 

 

28 JAN 2013

Tax Filing Tips for 2012 Taxes

By Commonwealth

The New Year

has brought with it new tax legislation. Some of the changes will affect your 2012 taxes, while others won't kick in until tax years 2013 through 2017. Minimizing your potential income tax liability requires a regular review of your financial picture and the current tax strategies available to you.

Although your tax picture is unique to you, there are steps you can take now to ensure that you are better prepared to file your 2012 taxes.

  • Organize your 2012 tax file. Keeping complete records may help you save money, especially if it prevents you from having to hunt down or recreate information.
  • Update your name and address. If you moved or changed your name in 2012, be sure to update this information with all mediums that relate to your taxes, including with former employers, banks and lenders, the IRS, your state tax agency, and the Social Security Administration.
  • Review IRA opportunities. If you haven't maxed out contributions to your retirement accounts, it's not too late. For most accounts, the deadline for 2012 contributions is April 15, 2013 (extensions may apply). Remember: Contributing more to pretax retirement accounts lowers your taxable income—and thus your tax burden—for the year.
  • Use up your flexible spending account (FSA). If you find that you haven't spent enough to get all of your deductions back, contact your plan supervisor or payroll department to see if you have any extra time to do so; the deadline is generally around March 15.
  • E-file your return. E-filing is not only an environmentally friendly way to file your taxes, but it's also a faster way to receive your refund.
  • Notify the IRS if you fell victim to identify theft in 2012. The IRS will provide you with an Identity Protection Personal ID Number (IP PIN) and flag your account. The IP PIN will serve to verify your tax return and protect your refund.

Mistakes to avoid
Every year, many Americans make easily avoidable mistakes on their tax returns:

  • Claiming the wrong status. When filing your return, you cannot simply choose either single or married. If you are married, you have to indicate whether you are filing separately or jointly.
  • Failing to use the correct forms and schedules. Using the incorrect forms and schedules can delay the approval of your return—and increase your chance of getting audited.
  • Not signing and dating the return. If you fail to sign and date the return, the return is considered unfiled. Unfiled tax returns are subject to many penalties and interest on taxes you may still owe. This also applied to e-filed returns, which require a PIN for an electronic signature.
  • Failing to report all income. Unreported income has come under heavy scrutiny recently, and it could even lead to civil and criminal sanctions. Be sure to keep a detailed record of any and all income you receive.

Taking advantage of these tips can be key to a more efficient tax filing process, but the most important step you can take is to get started. Happy filing!

Commonwealth Financial Network® does not provide legal or tax advice.

IRS CIRCULAR 230 DISCLOSURE:
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

©2013 Commonwealth Financial Network®

 

 

 

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Robert Donaldson (CA Insurance License #0541081) is a Registered Representative and Investment Adviser Representative with/and offering securities and advisory services through Commonwealth Financial Network, Member FINRA / SIPC, a Registered Investment Adviser. Additional advisory services offered by Advisory Group West, a registered investment adviser, are separate and unrelated to Commonwealth.

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