CAS News
2018 Resolutions to Enhance Your Financial Health
Lynn A. Ferraina | èBella Magazine | Updated for accuracy and clarity
2018 is upon us! As we start compiling New Year’s resolutions, the primary focus is usually to improve our health or maybe to lose those extra pounds gained during the holidays.
But how about making some resolutions to improve your financial health as well? Here are some ways to get started:
Dump the Debt
Not only may we have eaten too much at holiday time, we may have spent too much as well. Make a commitment to pay off credit card debt as soon as possible. Many credit cards, especially store credit cards, can have interest rates in excess of 18 percent. Get in the habit of paying off your credit cards in full each month to avoid racking up high balances and interest accumulations. Review your credit scores with one of the three major providers (Equifax, Experian or Transamerica) to avoid potential identity theft.
Set an Investment Goal
If you are still working, make a commitment to max out your company’s retirement plan. Many companies offer to match a certain percentage of their employee’s contribution. For example, if you put 5 percent of your salary in your 401(k) and your company matches 3 percent, that’s a 3 percent raise. If your company doesn’t offer a plan, you can create your own by establishing an IRA (individual retirement account). You are allowed to deposit up to $5,500 in 2018 (or $6,500 if you are over age 50).
When depositing to a 401(k) or IRA, not only does it help you save for retirement, but it gives you a nice tax break as well. If you have old 401(k) plans from previous employers, consider consolidating by rolling over your old plans to the IRA you have established.
Review your Investment Plans
Whether you are still working or retired, it’s a good idea to see how last year’s financial plan met (or didn’t meet) your financial objectives. Is your current asset allocation working to achieve your short- and long-term goals? Financial objectives to consider each year are: time horizon, risk tolerance, how much you need to invest each year to meet your goals, and what investment vehicles to use to keep your plan on track.
Save for Emergencies
Before investing for the long term, make sure you have liquid funds available to cover short-term emergencies so you will not be forced to sell long-term holdings at market value. Six months of living expenses is advisable.
Check your Coverage
At the beginning of the year, it is also a good time to review your insurance plans. Make sure you are adequately covered for all of life’s contingencies, including health, life, homeowners, auto, disability and long-term care insurance.
Avoid Estate Issues
Reviewing your legal plans every other year or when you experience a life change is important as laws change all the time. Evaluate your will, trust, health care surrogate, living will and power of attorney to make sure they reflect current laws and your current wishes. Also, review your beneficiary options on life insurance, annuities, pension plans, IRAS, and 401(k)s to make sure they are correct and consistent with your legal documents.
Seek Professional Advice
Most people cannot do it alone. Advisors have years of education and experience to help you find the gaps in your current plans. They also have witnessed mistakes people make and know how to avoid them.
Establish Systems
One word that generally turns folks off is the word “budget.” Instead, I refer to it as a “system” to know what you own, what you owe, and what your income and taxes are. Basically, it is a way to keep track of what you spend and save each year. It should also include a “system” to list where your personal information and documents are, including your passwords, tax returns, insurance information, investments, legal documents and a listing of who you do business with (your financial advisor, lawyer, CPA, insurance agent, bank, etc.).
This system is crucial if you become ill or incapacitated, so that your previously named, trusted advocate can walk right in and take over your financial life if you can’t.
Downsize
If you haven’t worn an article of clothing or won’t be using a particular item in the future, start to downsize your closet and your life. There is something rewarding about giving away what we no longer need. Not only do you help your favorite charity, but you may receive a tax deduction as a reward for your giving nature.
Now is the time to review and set your 2018 financial resolutions. Good luck and may 2018 be a financially productive year!
Tax Reform Special Update
The GOP has delivered on its campaign promise to overhaul the federal tax code. Both the Senate and the House voted in favor of The Tax Cuts and Jobs Act of 2017, and the President signed the bill into law on Friday.
Our team has combed through all of the major provisions in the tax reform legislation and identified eight key changes that could impact you and your family.
#1 – Individual Tax Brackets and Standard Deductions
Despite the GOP’s desire to reduce the number of individual tax brackets, the final bill retains the 7-tiered individual progressive income tax brackets. The new tax brackets for individuals and families are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent (see the chart below for a more detailed breakdown by income level).
As such, many Americans will see a slight reduction in their top marginal tax rate. That being said, these updated brackets were passed on a “sunset provision” basis – meaning that the updated tax rates will expire and revert to current levels at the end of 2025 unless Congress reauthorizes the lower rates.
Secondly, the standard deduction will essentially double for both individuals and families. Whereas the current standard deductions are $6,500 for individuals and $12,000 for families, the new standard deductions will be $13,000 for individuals and $24,000 for families.
For most working- and middle-class families, this piece of the tax bill represents the greatest source of tax cuts that each family will realize. In addition to an increased standard deduction, several itemized deductions will be reduced or phased out of the tax code (more details in the following sections).
The intention of increasing the standard deduction is to simplify the tax-filing process for individuals – encouraging more people to claim the standard deduction as opposed to itemizing their deductions.
Figure 1 – Marginal tax rates for individuals under the new tax legislation
#2 – State & Local Tax Deductions and Mortgage-Interest Deductions
One point of contention in the earlier stages of the tax legislation was state and local tax deductions. While the original House proposal called for the elimination of this deduction, pushback from House members in high-tax states persuaded Congress to compromise on this provision. As a result, taxpayers will be able to deduct up to $10,000 in state and local income, property and/or sales taxes from their federal tax burden.
In addition, you may deduct up to $750,000 of mortgage interest under the new tax proposal (a reduction from the current cap of $1 million). This deduction can be applied to your primary residence and one other qualified residence (which could include a vacation home, mobile home or a boat).
As with the new individual tax rates, the revisions to both of these deductions would sunset after 2025.
#3 – Medical Expenses Deduction
In 2017 and 2018, you will be able to deduct out-of-pocket medical expenses that exceed 7.5% of your gross adjusted income (but not on health care expenses that are less than 7.5%). For instance, if you earn $100,000 in a year and your out-of-pocket medical costs are $12,000, you may deduct $4,500 in medical expenses.
Effective January 2019, the threshold will return its current level, with any out-of-pocket medical expenses that exceed 10% of your gross adjusted income being tax-deductible.
#4 – Estate Tax
Due to resistance in the Senate, the GOP was unable to pass a “clean repeal” of the estate tax; and the 40% tax rate will remain unchanged. That being said, they have significantly raised the exemption threshold on taxable estates – meaning that fewer people will be subject to the estate tax.
Under the new policy, individual estates valued under $11.2 million ($22.4 million for couples) would be exempt. Once again, the estate tax provisions will expire at the end of 2025.
#5 – Alternative Minimum Tax
The alternative minimum tax – which is primarily levied on individuals and families who earn more than $200,000 annually – will remain intact. Although the assessment of this tax can vary significantly based on your personal circumstances, the exemptions and phase-outs will be slightly raised. As a result, fewer people will have to pay the tax and those who do will pay a smaller sum. These changes also sunset after 2025.
The 20% corporate alternative minimum tax has been permanently repealed.
#6 – Corporate Tax Rate
Perhaps the most drastic change to our tax code can be observed in the reduction of the corporate tax rate. Whereas the current rate is 35%, the new corporate tax rate will be 21%. Unlike many provisions in the bill, these tax cuts are permanent (i.e. the new rates do not sunset in 2025).
The substantial reduction aligns with the GOP’s promise to slash the corporate tax rate, with the goal of stimulating economic growth. However, contrary to the rhetoric on the campaign trail, none of the tax loopholes or deductions for special interests were eliminated – meaning that many larger, publicly traded corporations will pay an even lower effective tax rate.
#7 – Pass-Through Businesses
Small business owners have typically paid income taxes at their individual tax rate – particularly those who earn income via pass-through entities (limited-liability companies, S corporations, partnerships and sole proprietorships).
However, the tax legislation allows individuals to deduct 20% of their qualified business income, up to $157,500 for individuals ($315,000 for joint filers). For small business owners, this deduction will greatly reduce their tax liability. The provisions for pass-through businesses will also expire at the end of 2025.
#8 – Individual Healthcare Mandate
One of the most controversial provisions of the Affordable Care Act (colloquially known as Obamacare) is the individual mandate, where individuals must either purchase a qualifying health insurance plan or pay an annual penalty. Under the new tax code, the individual mandate penalty would be eliminated – reducing the incentive for healthy individuals to sign up for coverage.
Repealing the individual mandate is expected to lead to higher premiums for those who do not qualify for government subsidies or Medicare, and constitutes a renewed effort by the GOP to gradually do away with the Affordable Care Act.
For additional details on how the new tax legislation could affect you and your family, contact your advisor.
Don’t Take the Bait!
Online commerce and communications have become ubiquitous in the lives of millions of Americans. Whether it’s online banking, shopping or social media, the Internet plays an integral role of our society.
Unfortunately, opportunistic hackers and scam artists are often quite tech-savvy, and they are actively attempting to swindle people and sow chaos on your computer or mobile device. Every year, especially during the peak of the holiday shopping season, we observe an uptick in a particular type of online fraud: phishing.
Most phishing emails or text messages share one primary goal: getting you to click on a link or open an attachment. If you receive a suspicious email, the most important thing to remember is DO NOT CLICK on anything in the email! By clicking on the content, you are potentially unleashing a barrage of malware and viruses that could harm your computer or mobile device.
Releasing the malware may be the end goal of some phishing scams, but others go a step further to hijack your personal information for financial exploitation. For example, you may be directed to a fake website prompting you to enter your log-in credentials for a financial institution or to input other confidential information.
Although it is almost inevitable that you will receive a fraudulent email or text message, many of these scams possess several recognizable characteristics. By understanding the signs of a phishing message and remaining vigilant when opening your emails, you can significantly decrease the likelihood of “taking the bait” from a phishing scam.
Telltale Signs of Phishing
♦ The email starts with “Dear Customer” or another generic greeting.
♦ The email is written in broken English or contains an excessive amount of grammatical errors.
♦ Hover your curser over the sender’s name to reveal the sender’s real email address. If the real email address does not match the email address displayed, it is likely a scam.
♦ Do a Google search for the sender’s email address/phone number or the email subject line, followed by the phrase “phishing” or “scam”. Take a look at the first few results to see if the email has been previously identified as malicious.
If the email possesses any of these characteristics, delete it immediately.
Confirm Your Order?
The fake “order confirmation” email is especially prevalent during the holidays. You may receive an email that appears to be from an online retailer, asking you to confirm your purchase. The hacker’s goal when sending an order confirmation phishing email is for you to “review your order” by either clicking on a link or opening the email’s attachment.
Of all the various scams, these emails are perhaps the most enticing. If you did not order anything from the retailer in question, you may be tempted to click or open to see what was ordered. On the other hand, if you had recently purchased from the online retailer, you may assume it was for your legitimate purchase and click on the link or attachment.
If you have an account with the supposed sender, log in to your account and check your order history. If no purchases are listed, the email is a scam. If you do not have an account with the supposed sender, it is almost certainly a scam.
While it is likely that an unexpected order confirmation email is the work of a phishing scam artist, it is also possible that someone has hacked into one of your online retail accounts and made fraudulent purchases. Just in case, monitor your credit card and bank transactions for fraudulent transactions. If detected, report it to the financial institution as soon as possible.
This holiday season, be vigilant when handling suspicious emails or text messages. By following the guidelines in this article and remaining aware of the signs of phishing emails, you can protect yourself and your devices from falling prey to the malicious attempts of online scam artists.
Judy Alexander-Wasley Earns CFP® Certification
We are proud to announce that Judy Alexander-Wasley has earned her CERTIFIED FINANCIAL PLANNER™ certification!
Judy’s achievement embodies our firm’s ongoing commitment to expand our financial planning acumen through continuing education; which, in turn, heightens our ability to deliver knowledgeable guidance to client families.
“Throughout her five years with CAS, Judy has consistently demonstrated a willingness to learn and grow in her role as an advisor,” said Ray Ciccarelli, Vice President and Co-Founder of Ciccarelli Advisory Services. “Her educational attainment is a prime example of her dedication to serving the ever-changing needs of our client families.”
The CFP® certification is widely regarded as one of the most prestigious and rigorous financial education programs. By successfully completing the program, Judy has developed a strong foundational knowledge of essential financial planning concepts, including:
◊ The financial planning process and regulatory environment;
◊ Planning for retirement needs;
◊ Investment management;
◊ Insurance planning;
◊ Income taxation; and
◊ Estate planning.
In light of Judy’s completion of the CFP® program, Ciccarelli Advisory Services now has eight CERTIFIED FINANCIAL PLANNER™ professionals on our team.
2018 Webinar #1 – Your Life is Not a Game
TO RSVP, COMPLETE THE FORM AT THE END OF OUR BLOG POST.
WE HOPE TO SEE YOU THERE!
Click the image above to view the flyer as a PDF file.
2017 Power of the Purse Charity Event
Ciccarelli Advisory Services was honored to sponsor the Private Patron
Reception at the 2017 Power of the Purse gala luncheon on December 1.
Empowering Women through Community Philanthropy
Our sponsorship not only helped to make this wonderful event possible, but will also benefit a wide range of philanthropic initiatives throughout Collier County.
In particular, three $20,000 grants were presented at the event:
Salvation Army – Assisting those who are food insecure or struggling to afford housing.
Senior Friendship Health Center – Providing medical and dental support to elderly people in the community (particularly women).
Legal Aid – Offering pro-bono legal representation to those who cannot afford attorney fees.
A Spellbinding Message of Hope
The keynote speaker for the event, Ann Curry, delivered a dynamic address during the luncheon – incorporating her experiences reporting on tragedies through the world (particularly the Darfur region of Sudan, but also in the Congo and the former Yugoslav states) into a spellbinding message of hope.
Her key message: Even the most horrendous atrocities in the world are often overshadowed by courageous acts of compassion and empathy. Those who give selflessly of themselves serve as a beacon of hope to the world – reaffirming Ms. Curry’s core beliefs that humanity is inherently good and that we will always coalesce behind the best angels of our nature to counteract suffering, oppression and evil.
A Reception to Remember
Following the program, we transitioned to the Private Patron Reception (the portion of the event that was sponsored by CAS). We had the distinct opportunity to have our photos taken with Ann Curry and to interact with her for a brief time.
We were grateful for the opportunity to play a key role in this year’s Power of the Purse.
The event was a smashing success – and witnessing the positive reverberations of philanthropic action throughout our community was both inspirational and fulfilling.
More Money in Your Pocket!
By Jill Ciccarelli Rapps, CFP®
Your total return on your assets is not only the result of how much money you earn on your investments; your return is also impacted by the amount you keep after taxes. Unfortunately, tax efficiencies are often overlooked when considering how to best preserve and enhance your wealth. As we approach the end of 2017, start planning today to find opportunities to save money on your taxes!
Timing is everything. Compare your 2017 income to your projected income in 2018. If you anticipate that your 2017 income will be greater, you should defer income (i.e. year-end bonuses, collection of debts) to the following year; on the flip side, you may want to accelerate your income if your 2017 income will likely be less than your 2018 income. Likewise, you should use this comparison to determine if you should itemize deductions in 2017 or accelerate to next year (i.e. medical expenses, charitable gifts).
A word of caution: Amidst the Congressional discussion of tax reform, the amount you can claim for your standard deduction may increase in 2018, while other deductions may be eliminated. If the new tax plan does come to fruition, it could be beneficial to claim as many itemized deductions as possible in 2017, as certain itemized deductions may be useless in reducing your 2018 tax burden.
Hint: If you are charitably inclined, consider establishing a donor-advised fund (DAF) to accelerate your charitable giving. By creating a DAF, you have the flexibility to make varying yearly contributions to your fund based on your annual income.
For instance, if you have earned a significantly higher income in 2017, you could make a larger donation to your fund to offset your income. You will receive a charitable deduction for the full amount in 2017, but you have the flexibility to disperse assets to your favorite charities over the course of several years.
Don’t pay taxes on your IRA distributions. For those of you who are 70 ½ or older, another effective way to reduce your taxable income is to direct your required minimum distributions (RMDs) towards the charity of your choice. If you set up a direct link between your IRA and your preferred charity, your IRA distributions will not be reported as income on your tax return.
As an example, if you are in a 28% bracket and make the maximum annual contribution of $100,000 from your IRA, you may enjoy a savings of $28,000 in taxes; essentially, it only costs you $72,000 to make a $100,000 gift to your favorite charities.
A word of caution: All contributions must go directly to the charity by December 31.
Hint: This charitable giving technique could also save you money on your Medicare premiums and reduce other types of taxes like the 3.8% additional Medicare tax.
Take full advantage of the tax benefits available through retirement savings vehicles. Traditional IRAs and employer-sponsored retirement plans (such as 401(k) plans) allow you to contribute funds on a deductible or pre-tax basis. To fully leverage these tax-advantaged accounts, you should contribute the maximum annual amount.
For 2017, you may contribute:
♦ Up to $18,000 to a 401(k) plan (or $24,000 if you are age 50 or older); and
♦ Up to $5,500 to a traditional IRA (or $6,500 if you are age 50 and older).
Employer plans typically have a contribution deadline of December 31, whereas IRA contributions can be made until April 15, 2018.
Hint: For 401(k) plans, if you want to accelerate your tax deduction for 2017 by making the maximum annual contribution, ask your employer to defer a larger portion of your December income.
Review your investment portfolios now! Understand whether you have realized or unrealized gains or losses in 2017, and whether you have any carry-forward losses from prior years. If you have unrealized losses in your portfolio, you should consider the benefits of “tax harvesting” – that is, selling these positions to offset realized gains. For instance, if you have realized long-term losses of $20,000 and realized long-term gains of $20,000, you essentially have wiped out $4,000 of taxes (assuming the 20% long-term capital gains tax rate).
Word of caution: Long-term (held for more than 12 months) and short-term gains are treated differently. Make sure you to understand how each of these scenarios will impact your tax harvesting.
While these tips will likely have a positive impact on the amount of money in your pocket this year, there are many more strategies that can be implemented – especially if you are a high-income earner. Above all, you should meet with your financial advisor and CPA before the end of the year to determine the best plan for you to capitalize on tax relief opportunities.
Happy savings!
Sustain Your Family’s Philanthropic Legacy
Kim Ciccarelli Kantor, CFP®, CAP® | Featured in the Community Foundation of Collier County’s 2017 Fall Newsletter
We all hold a special place in our hearts for the charities and other non-profit organizations that are dedicated to serving our community and our country. In gratitude for their admirable initiatives, many of us feel compelled to support these community organizations by donating our time, talents or financial support.
However you choose to pledge your support, charitable action is a truly rewarding means of expressing our altruism and impacting meaningful, positive change. As someone who has had the privilege of working alongside many successful families in the Naples community, I have always been impressed by our clients’ selfless philanthropic efforts.
Above all, I have been inspired by their eagerness to engage the entire family in the charitable giving process. By unifying their family members behind a common goal, these clients have not only instilled the virtue of philanthropy within their children and grandchildren; they have also established a powerful legacy that extends well beyond their lifetime.
Specifically, we have found that Donor-Advised Funds (DAFs) are a phenomenal vehicle for channeling your goodwill as a family unit, while also minimizing your tax burden and preserving your wealth.
A Donor-Advised Fund serves as a conduit between your family and the charitable organizations you wish to support. Once you’ve established a fund, the family donors associated with your DAF have the flexibility to contribute as you see fit; thus, the DAF provides you with considerably more freedom in comparison to a private family foundation. In many cases, the contributions to your DAF are entirely tax-deductible. Then, your family members (or other successor advisors) are responsible for directing the funds towards the organizations that best align with your values and passions.
How do I involve my family members in a DAF?
In our experience, the long-term effectiveness of a Donor-Advised Fund is greatly enhanced by the family’s willingness to unite behind a common philanthropic mission. Family unity can best be achieved through open discussion about finances between family members. The question is: How do you go about initiating this conversation and ensuring ongoing communication about your DAF?
First, a family meeting is a time-tested method for facilitating the free flow of ideas and bridging the communication gap between family members. The key is openness: ask each person about their charitable passions, their history of donating time and money, and their most important priority in terms of giving.
As the founder of the fund, you should share your wisdom and insight about philanthropy, and express your eagerness to engage each member in the decision-making process for the DAF. In addition, several of our client families have benefited from hiring an objective third-party facilitator, who can drive a meaningful conversation, alleviate emotional tension and address the most pressing areas of discussion.
Perhaps the greatest accomplishment that can be gleaned from a family meeting is the development of a family mission statement: a concise summary of your collective goals and wishes. Your mission statement will provide you with a set of well-defined criteria for selecting charities that are congruent with your family’s values and passions. In doing so, you can be confident that your philanthropic endeavors will impact change that is meaningful and fulfilling for the entire family.
Secondly, utilizing a website or closed social media group for your DAF can be an effective way to (1) articulate formal grant-making procedures and (2) promote continuous communication between family members. Using technology in this capacity could encourage younger family members to become more engaged in the DAF – inspiring the next generation to research new charities that are close to their heart and to support your family DAF for years to come.
Your Donor-Advised Fund serves as a tangible representation of your philanthropic vision and deeply held values. Your children, grandchildren and future posterity will always appreciate the charitable giving mechanism you have established – and with consistent communication, they can sustain your family mission and values into perpetuity.
Sharpening our Financial Acumen
In an effort to sharpen our financial acumen and remain on the cutting edge of industry best practices, our CAS family team of advisors recently attended two professional conferences in Orlando.
Both conferences focused on several key considerations that are paramount to our firm, including:
♦ Holistic Wealth Management: Designing a comprehensive plan that encompasses all of your priorities and goals, while also providing additional service offerings so we may serve all of your financial needs.
♦ Thriving in the Fiduciary Era: Navigating the new DOL rules and regulations in a manner that promotes the well-being of our client families.
♦ Advanced Tax Strategies: Examining the current tax code and identifying opportunities to alleviate your tax burden.
♦ Operational Best Practices: Maximizing efficiency in terms of our client service and processing.
♦ Current Market Environment: Closely analyzing market performance and trends.
Ray, Paul, Jill, Lynn and Tony represented Ciccarelli Advisory Services at the Advisor Group’s ConnectED conference. This year’s event featured a star-studded lineup of speakers, including Alan Mulally, former president and CEO of the Ford Motor Company; and Neil Cavuto, senior VP and managing editor of Fox News Channel and Fox Business Network.
After ConnectED, Kim, Ray, Paul, Jill and Lynn continued to the City National Rochdale conference.
We are eager to apply our enhanced knowledge and insight in a way that promotes your family’s financial wellness!
CAS Rochester Market Wrap 2017
Thank you to all of our Rochester client families who joined us for the Market Wrap event!
More than 180 clients gathered together with our CAS team for an enjoyable, informative evening at The Monroe Golf Club in Pittsford, NY.
Ray delivered an edifying update on CAS and commentary on the current market environment; then, we treated our guests to a decadent dessert buffet. With more than 1200 sweet treats to indulge upon, our Market Wrap definitely ended on a sweet note!
