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Charlie Education Kevin Retirement

Major Changes Coming to Retirement Savings Laws (SECURE Act 2019)

This past Friday the SECURE Act of 2019 passed. The act was a bipartisan effort to help Americans be better prepared for retirement. The title is an acronym: Setting Every Community Up for Retirement Enhancement and the act puts the responsibility on individuals to make plans to finance their retirement. The act contains 29 separate provisions, but we are going to share the most notable changes as outlined by a recent Surgent article.

Most of these changes will increase opportunities to save for retirement. Not sure how this will affect you directly? Give us a call, we can walk you through it and see if this opens a new path for your retirement plan.

Stretch IRA

● Current Law: Non-spouse beneficiaries of IRAs can “stretch” minimum distributions over their own lifetime, which allows funds to grow tax-free for an extended period of time.

● SECURE Act: Funds from inherited IRAs would be required to be distributed within 10 years of the IRA owner’s death.

Raised Age Limit

● Current Law: At age 70 ½, individuals are required to withdraw a required minimum distribution (“RMD”) each year. After age 70 ½, individuals can no longer contribute to traditional IRAs (Roth IRAs have no age limit).

● SECURE Act: Individuals could wait until age 72 to begin taking RMDs, which would defer the tax impact of withdrawals and allow savings to accumulate longer. In addition, there would be no age limitation on Roth or Traditional IRA contributions.

Coverage for Part-Time Employees

● Current Law: Employers may exclude part-time employees from 401(k) savings plans.

● SECURE Act: Employees who work 1,000 hours throughout the year or have three consecutive years of at least 500 hours of service would be eligible to participate in a 401(k) savings plan.

Small Business Tax Credit

● Current Law: Employers are eligible for up to a $500 credit for implementing new retirement plans.

● SECURE Act: Employers could receive up to a $5,000 credit for creating new retirement plans. Additionally, a new $500 tax credit would be available to small businesses to encourage automatic enrollment in retirement plans.

Multi-Employer 401(k) Plans

● Current Law: It is costly and burdensome for many small businesses to offer 401(k) plans.

● SECURE Act: Small business employers could join multiple-employer plans or “open MEPS,” which have reduced costs and reduced regulatory barriers, expanding access for their employees to participate in retirement savings plans.

Access to Annuity Options

● Current Law: Many 401(k) plans do not offer annuities due to liability concerns.

● SECURE Act: Plan providers will have decreased liability concerns when offering annuities to participants of 401(k) plans.

Automatic Enrollment Safe Harbor

● Current Law: Employers may set a contribution rate for employees who participate in an auto-enrollment 401(k) plan. Currently, this contribution rate may not exceed 10%.

● SECURE Act: Employers can raise the contribution rate to 15% for employees.

Birth and Adoption Expenses

● Current Law: There is a 10% early withdrawal penalty on 401(k) distributions.

● SECURE Act: Following the birth or adoption of a child, married individuals could withdraw up to $5,000 from their 401(k) accounts without paying the 10% early withdrawal penalty.

Expansion of 529 Plans

● Current Law: Student loan repayments are not considered qualified education expenses.

● SECURE Act: Funds in 529 College Savings Plans could be used to repay qualified student loan repayments, up to $10,000.

Kiddie Tax

● Current Law: The Tax Cuts and Jobs Act of 2017 (“TCJA”) implemented “Kiddie Tax” measures that tax unearned income of children above $2,200 at the top marginal tax rates for trusts and estates.

● SECURE Act: The “Kiddie Tax” rules would revert to pre-TCJA law, in which a child’s unearned income above the threshold would be taxed at the parent’s marginal tax rate.

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 made reference to directly or indirectly in this video and article will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/20/2019 and are subject to change at any time due to the changes in market or economic conditions.

December 23, 2019

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Charlie Education Kevin

Increase in Retirement Plan Contribution Limits for 2020

 

’Tis the season for the U.S. Internal Revenue Service to make its annual inflation adjustments to a variety of tax rates and limits, including higher estate and gift tax limits for 2020.  In the coming year, individuals will be able to gift or exclude from federal estate taxes a total of $11.58 million—up from $11.4 million in 2019.  The annual gift tax exclusion—the amount you can give to heirs each year without reporting a gift—remains at $15,000.  

The IRS also lifted the annual limit that can be contributed to a defined contribution (401(k) or similar) plan from $19,000 to $19,500, and people 50 or older can make catch-up additional contributions of $6,500—up from 2019’s $6,000.  The amount you can contribute to an Individual Retirement Account is unchanged at $6,000, with a $1,000 catchup limit for people 50 and older.

If an employer allows after-tax contributions, or if you’re self-employed, the overall defined contribution plan limit was raised from $56,000 to $57,000.

The IRS also changed the tax brackets for working Americans, raising slightly the thresholds for the 10%, 12%, 22%, 24%, 32%, 35% and 37% rates, and raised the standard deduction to $12,400—$24,800 for married people filing jointly in 2020.

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 made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/13/2019 and are subject to change at any time due to the changes in market or economic conditions. This article was written by an outside source.

 

Sources:
IRA Announces Higher Estate and Gift Tax Limits for 2020
2020 Limitations Adjusted as Provided in Section 415(d), etc.
IRS Announces Higher 2020 Retirement Plan Contribution Limits for 401(k)s and More
The 2020 Tax Brackets are Out.  What is Your Rate?
IRS RP-19-44.pdf

December 23, 2019

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Charlie Education Kevin Video

The Next U.S. Recession

Bloomberg recently published its recession probability model. The model states that as of November 2019, the chance of a recession in the next 12 months is 26%. That sounds okay but what about this? The chances of NOT having a recession are 74%. Now that’s a pretty great number! But is this predictive model a function of the latest stock market performance or does it have real predictive power?

The stock market has performed nicely in the last few months as well as year-to-date. No wonder no one is talking recession at the moment. But the truth is, the exact timing of the recessions and market downturn is unknowable. In fact, we may not even know we’ve had a recession until it’s nearly over.

In this video, Charlie discusses the only surety is that we WILL have a recession sometime in the future and trying to follow the advice of prognosticators to determine when it will happen can be an expensive mistake. Ask anyone who pulled their money out of the markets in January 2019 because of the inverted yield curve. Now that’s a good predictor of recessions, right?

 

To view the recession tracker visit: Bloomberg, U.S. Recession Chances Inch Down to 26% Within Next 12 Months

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 made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/04/2019 and are subject to change at any time due to the changes in market or economic conditions.

December 23, 2019

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Charlie Education Kevin Pilots

No Regrets: Plan for Tomorrow so you can Live in the Moment TODAY

In the last few days I learned about three fellow pilots that have lost or are losing their battles with cancer.

A good friend of mine from the Air Force will be put on hospice care soon to make his last days here on earth as comfortable as possible.  His doctors recently determined he cannot handle any more chemo treatments.  It’s been four years, around 90 rounds of chemo, radiation and several surgeries.

Another UPS pilot I know is battling a rare form of cancer called esthesioneuroblastoma and the stark reality of this cancer is that he will likely lose his vision entirely within 6-12 months.  Furthermore, his life expectancy is perhaps two to three more years barring a miracle.

Just recently, a pilot I know passed away from cancer.  A friend of mine was by his bedside during the last moments of his life.  Fortunately, he died in peace knowing that he did all he could to make sure his family was taken care of after he was gone.  He was happy and had no regrets my friend said to me.

I didn’t write all of this to depress or upset anyone.  These situations are difficult to comprehend and it’s hard to know what we can do for our friends and loved ones in these difficult moments.  I wrote this article because I know there are things our friends would want us to learn from their terrible circumstances.

For starters, (and I am preaching to myself here) I think they would want us to slow down a little, spend a little more time trying to create special moments, maybe spend a little less time working and striving.  I’m very much a planner in everything I do and sometimes I struggle with being “in the moment.”  I have a fear of possibly missing out on that next achievement, the next goal, and sadly, maybe even the next dollar.  Maybe I should trade in my next three-day trip for a lesser paying “two-day” so I can see my daughter’s homecoming festivities at her school.  What is it worth in dollar numbers to see my daughter during this special moment?  Which is more valuable to her?  I’m pretty sure I know how my friends battling cancer would answer that question.

Of course, there are other practical things we must do now in order to make sure that if we were in similar circumstances we could also leave this world with no regrets:

1. Work to create special moments and great memories.
Many people believe the quality of their relationships and memories created are a better measure of wealth than their money. I tend to agree. No one on their death bed ever wished they would have spent more time working!
2. Get the appropriate amount and the right type of life insurance for your circumstances.
I think it’s a safe generalization to say that most people do not have enough life insurance.  The amount of life insurance depends on several variables; your net worth, family dynamics, age, etc.  Additionally, there is rarely a need for any other type of life insurance than term life.  Do the math on the amount of life insurance you need and consult someone you can trust to help you determine what type of life insurance is right for you.
3. Make sure your Last Will and Testament and your beneficiaries are up to date.
A new client mentioned to me the other day, “Every time I get in the car with my wife for date night, I wonder what would happen to our kids if we died in a car accident.”  This is a terrible feeling.  Let’s not wonder anymore and make sure we clearly articulate in our will what needs to happen in case of our untimely deaths.And yes, we do know of someone that died and their ex-wife was the beneficiary on their life insurance.  “We’ll never know if that was intentional or not,” said one of the family members.
4. Get a financial plan.
We end almost every article we write with this advice.  The reason I think this is an important step in this context is that almost every family, including my own, struggles with the following question; “How do we balance preparing for the future and still enjoy our time now while our kids are young and we’re healthy?”Financial planning will help clarify the answer to this question.  Planning will help bring balance and confidence to our daily lives because we’ll know that we are doing our best to enjoy our time now, staying in the moment, while still giving ourselves the best chance at achieving our financial goals for the future.

Finally, I am going to give up my three day trip for a two-day in order to go to my daughter’s school homecoming festivities.  It’s the right thing to do and when my time on this earth has come to an end, I want to be able to say, “I don’t have any regrets”.

 

All the best,
Charlie

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 made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 11/25/2019 and are subject to change at any time due to the changes in market or economic conditions.

December 23, 2019

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Charlie Clint Education Kevin Quarterly Reviews Retirement

The Strategy Is In the Long Game – 2019 3rd Quarter Financial Review

Investing is not golf. You don’t win with your short game. The 3rd quarter of 2019 reminded us that investing requires a long game approach. Short term investors didn’t see great returns in the 3rd quarter; it was an unexciting period of time.

In his quarterly review, Kevin goes over the numbers, touches on some unexpected outcomes and explains why you should invest your money for at least 10 years to ensure the highest probability of success.

Further information referenced in Kevin’s video:

MYTH or Fact: An Inverted Yield Curve Predicts a Recession

Click below to view the charts and data presented in this video.

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 made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 11/07/2019 and are subject to change at any time due to the changes in market or economic conditions.

December 23, 2019

Categories
Charlie Education Kevin

Post-Death Planning

Last week was National Estate Planning Awareness Week.  We are sharing a few articles on how to make sure your estate is in order.  Read on…

Post-Death Planning

Have you ever wondered what happens to your unpaid bills after you die? You might be surprised to know that it depends on what kind of debt is still outstanding…

 

In most cases, your estate will have enough assets to pay off all bills—assuming you have a positive net worth at the time of death. But understand that life insurance proceeds, retirement and annuity accounts and brokerage accounts are left outside the estate — and therefore cannot be forced to pay off debts. Your estate’s actual net worth may not be as great as you think it is.

 

Your executor will review the assets and debts in your estate and prioritize the debts according to some fairly straightforward rules. Certain creditors, like those who issue medical or mortgage bills, must be paid first. A probate court will decide which remaining debts go in which priority, unless there are clear directions in your will.

 

🏠 Mortgage debt normally passes to the spouse or partner whose name is also on the loan documents, but if there is no joint mortgage holder, and the estate has insufficient funds to pay the mortgage, whoever inherits the home can usually move in and resume making the mortgage payments. The rules are different with home equity loans; with these, the bank can demand that whoever inherits the home (and the loan) immediately repay the outstanding balance. However, this is not required of the lender; in many cases, the bank will agree to let the heir continue to make the loan repayments on schedule.

 

🚘 Auto loans work similarly to mortgages; the estate handles payments if the money is available. If not, whoever inherits the car has the option to continue making payments or selling the vehicle to cover the cost of the auto loan.

 

💳 What about credit cards? Any joint account holder is liable for the debts after the co-account holder dies. But if you’re the sole account holder, the credit card cannot go after any unpaid debts from your estate when you die. Spouses who live in community property states may or may not be liable for the outstanding debt.

 

👩🏽‍🎓 Student loans are typically paid out of the estate, but if those funds are not available, the loan provider cannot force anyone to pay off the loans, since they are unsecured. However, if there is a co-signer for the loan, that person is liable for repaying the debt. Once again, however, a spouse in a community property estate may be liable for student loans incurred during the marriage.

 

Many financial planners will recommend a term life insurance policy for a specified time for people who are still building their financial lives, to avoid burdening the family with debt in the event of a premature death. And of course everybody should have a will, and the will should clarify where the existing financial accounts reside, and how to access them. A little upfront planning can save having to deal with a mess later on.

December 23, 2019

Source:  TheStreet

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 made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 10/26/2019 and are subject to change at any time due to the changes in market or economic conditions.  This article was written by an guest author.