วันพุธที่ 28 กุมภาพันธ์ พ.ศ. 2561

Financial Advisors: It's Okay to Say "I Don't Know"

One of the earliest, and most important, lessons I learned when I became a financial advisor was that it’s okay to tell a client you don’t know something. Of course, you need to make it clear that you will find out, and it’s all-important to actually get the right answer, but too often in our industry, the impulse is to confidently rattle off what amounts to your best guess and hope you got it right. It sounds like a simple thing, but it is actually quite counter-intuitive, particularly for an advisor who is relatively new to the business.
For years I had a tax preparer whom I loved. She was actually the mother of a childhood friend, and had gotten into the tax planning business very late in her professional life. Because of this, she had never become bored or jaded with the business, and had this enthusiasm about tax issues that was delightful and infectious, if not a bit odd. Not only in preparing my taxes, which were fairly simple, but when I would call to ask a tax question for a client, she would often tell me she didn’t know the answer off the top of her head, but would do some research and find out. It never bothered me that she didn’t know something immediately, what mattered was she was honest about it and got me the right answer. Give me someone smart and curious who’s willing to do the investigating work any day.

Financial Advisors Are Asked Questions on Many Topics

Financial advisors are expected to be proficient in a wide variety of subjects, and the good ones pride themselves on being the go-to person for their clients when any financial matter comes up. In that role, one is faced with a seemingly inexhaustible number of questions on such a vast range of topics that it can be daunting. We get tax and estate planningquestions, investing and budgeting questions, insurance, benefits, lending and debt questions, and the list goes on. Each of these areas is worthy of singular expertise, yet we may be expected to address them all in a single day. It’s virtually impossible to know everything there is to know about all of those subjects, yet so often, advisors will hazard their best guess rather than admit to not knowing the answer. It takes a lot of confidence to admit one’s own ignorance of something, and to me that confidence tends to come with experience.
It’s one of the things that makes it so hard starting out as a financial advisor. You’re being asked all of these difficult questions across multiple disciplines, and without the experience of repetition, and years of addressing the same issues under your belt, you already feel as though you’re short on answers. It’s so hard to repel the instinct to try to respond confidently, even if we aren’t 100% sure of our answer. The problem is, that’s when serious damage can be done to clients.

Advisors Who Seem to Know Everything

So, if you’ve been with an advisor for a while now, and have never been told he or she doesn’t know something, he or she is either a genius, or isn’t being completely forthcoming. My money’s on the latter. The truth is that everyone makes mistakes, and we’ve all been guilty of giving an answer we were sure was right, only to find out later was wrong. It’s so important though, if there’s even an inkling of doubt, to step back and have the courage to admit it, in order to get to the right solution.
We have a saying we use quite a bit: “We know what we don’t know.” We don’t know what the market will do tomorrow, and we don’t know what tax rates will be in 20 years, but we do know that if we’re honest with our clients when we are unsure, and work to get the right answers on their behalf, they will be much better off in the long run, and respect us all the more for knowing what we don’t know.
(For more from this author, see: 3 Steps to Avoid Investing Mistakes.)


cr. https://www.investopedia.com/advisor-network/articles/financial-advisors-its-okay-say-i-dont-know/

วันอังคารที่ 27 กุมภาพันธ์ พ.ศ. 2561

3 Financial Planning Steps for New Families

My son, Noah, is nearly two years old. It has been an absolute joy to watch him grow up. It’s amazing to see where he is now developmentally compared to just a few months ago. Watching him change since birth is unlike anything I’ve ever experienced. I knew having a child would be special, but I wasn’t prepared for how profoundly the experience would affect me. And if what I’ve been told is true, I expect it will only get better as the months and years pass. However, looking back, there are three steps I would have taken to prepare financially for the birth of my son and my new life as a father.
Whether you are an expectant parent, thinking about having a child in the next few years or already have a young child, think through these three items and take action.

1. Buy Life Insurance and Make Sure Your Beneficiaries Are in Order 

Sorting through the different insurance options available in the marketplace (universal life, whole life, variable life, etc.) can be a bewildering process. In my opinion, purchasing insurance, much like investing, should be simple and easy to understand. As I’ve written before everyone’s personal situation is unique but I believe that term life insurance is an excellent option.
But purchasing life insurance is only half the battle. An often overlooked aspect of life insurance is making sure your beneficiaries are accurately noted. For instance, most people list their spouse as the primary beneficiary and child (or children) as the contingent beneficiary (or beneficiaries) on their life insurance policy. Where this becomes problematic is in the event that you and your spouse die before your contingent beneficiary (e.g. your child or children) reach the age of majority, which is either 18 or 21 years of age, depending upon your state of residence. Until the age of majority, your child is considered a minor and cannot receive the insurance proceeds. If your child needs the money, he or she may have to go through probate, which is an expensive, time-consuming process where an estate guardian will have to be court-appointed to oversee the insurance proceeds until the child reaches the age of majority. (For related reading, see: Who Should Be Your Life Insurance Beneficiary?)
To avoid this unnecessary complication, you can designate that the insurance proceeds be paid to an adult custodian for the benefit of the minor child to be held in a Uniform Transfers to Minors Act (UTMA) account. By creating a UTMA account and listing it as the contingent beneficiary on your insurance policy, you place a trusted relative (or friend) in charge of the insurance proceeds. Please be aware, however, that a UTMA is not customizable like a trust, meaning that once your child obtains the age of majority the insurance proceeds are his or hers to manage. Some parents might not feel their child is capable of responsibly managing the financial windfall an insurance policy provides at such a young age. They may therefore opt to establish a trust which, along with being able to be extended beyond the age of majority, provides the opportunity to engage in more detailed planning. It is important to note, however, that a trust, while providing more flexibility than a UTMA, can be costly to establish, whereas a UTMA is more cost-effective and easier to create.

2. Designate Customized Beneficiaries on Your Retirement Accounts 

If you have individual retirement account (IRA), you’ve most likely placed your spouse as the primary beneficiary and child as the contingent beneficiary. Similarly to life insurance proceeds, a minor cannot inherit an IRA in his or her name. It is therefore important to take an additional step and arrange for an adult to manage the money in the event that you and your spouse pass away while your child is under the age of majority. In order to do so, contact your financial institution and ask to establish a trusted relative or friend as a custodian on your IRA accounts.
Your financial institution may require you to complete a beneficiary designation form, and it is a good idea to be as specific as possible in your instructions (e.g. list the custodian’s Social Security number, first, middle and last names, as well as date of birth), to obtain written acknowledgement of your designation from your financial institution, and to keep a copy of the acknowledgement with your will. If you and your spouse die without setting up clear instructions about the custodianship, your IRA will most likely go to probate and will be at the mercy of a judge who will try and interpret what he thought you meant. If your financial institution won’t cooperate, you should move your account elsewhere. (For related reading, see: Designating a Minor as an IRA Beneficiary.)

3. Revisit Your Investment Accounts

Finally, either before or soon after your child is born, it is a great idea to sit down with a financial advisor and evaluate where you stand. Revisit where you currently are and where you would like to be. For instance, have you set up a college savings plan? Do you need to adjust contributions to your 401(k) plan? How about paying for childcare? Have you put enough money aside to buy a house if you’d like to? Discussing these questions is critical to making sure you have a plan to reach your goals.
This is a lot. I know. And if you are feeling overwhelmed, that is completely normal. Taking care of one of these items is a huge accomplishment. Much like preparing for a family or raising a child, it is the incremental progress that matters.
(For more from this author, see: Financial Planning: Preparing for the Unexpected.)

Disclosure: Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA/SIPC. Clearfront Advisory LLC. 157 Columbus Ave., Suite 436 New York, NY 10023. 646-779-9811.This communication is strictly intended for individual residing in the states of GA, IN, NJ and NY. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.



cr. https://www.investopedia.com/advisor-network/articles/3-financial-planning-steps-new-families/

วันจันทร์ที่ 26 กุมภาพันธ์ พ.ศ. 2561

A Personal Finance Year-End Checklist for 2017

As the year comes to a close and the holiday period is underway, the time you spend with loved ones, vacations or trips you are planning, shopping and entertainment options may be on your mind a lot. It is a time to relax and unwind. It’s also a time though to take stock of your year and your personal finances. Becoming organized about your financial planning is important for a healthy and productive new year. Here’s a checklist of the essentials for your personal finances at the end of the year.

Check Your Spending Habits

How are you spending? What did you spend money in the last year? If you use budgeting software like Mint, you can pull up both annual and monthly data and see your expenses in categories. Whether you use software online or just your checkbook directly, it is important that you know your spending habits. Understanding your spending habits is critical to creating a strong financial foundation as you can plan for your immediate future accurately. (For more, see: 6 Budget Must-Haves.)

Create Savings Goals and Budgets

After checking your spending habits and taking into account your monthly essential payments that must be made (rent/mortgage, insurance, credit card, student loans and more), see how much money you have left over that you can allocate to savings. Develop a budget for savings specifically for 2018. You can set as many budgets as you want with specific goals in mind (pay off credit card, buy a car, pay for college, pay for kid’s education, travel fund and the like). After you have determined how much money you have to save based on 2017’s earnings and expenditure, you can prioritize your savings goals.

Automate Your Savings

Next, automate your savings as best as possible. When you have $500 extra in your account for example, it is easy to spend it on the next product that is on sale over the holidays. You could also invest extra funds. By automating savings, you take the guesswork out and remove pressures while insuring that your savings are constantly growing. By saving regularly, you will have more cash than you need on hand and enjoy both peace of mind and more options. Far too often people put off savings, thinking they can do it when they are older or when they have achieved other goals first. Saving regularly and often is essential to growing your wealth.

Pay Down Debt

As much as you can, pay down debt. This can range from your credit card to lines of credit, student and personal loans. Credit cards can easily charge anywhere from 18% to 29% on outstanding balances. That is a lot more money than you borrowed initially. Pay off as much of the balance as you can every month. In terms of student loans, consider paying them down and possibly refinancing your loans if they charge 6% or more. (For more, see: How to Build an Emergency Fund.)

Set Up or Add More to Your Emergency Fund

If you don’t have one already, set up an emergency fund. Having an immediate $1,000 available for any emergency is advisable. You may find you want to put aside more than that for your specific expenses, whether it’s anywhere from one to six months of expenses.

Add Money to Your 401(k) Account

Add as much as you can to your 401(k) account that your employer can match. If your employer does not match your contributions, you can put your savings into a Roth IRA.

Roll Over an Old 401(k) into an IRA

Many 401(k) plans offer lower rates of return. If you have changed jobs or are going to, you can roll over your old 401(k) into an IRA account.

Use Your FSA

Your health flexible spending account, or FSA, helps you pay for additional healthcare expenses. It is meant to be used during the year. If you don’t, the cash can sometimes be forfeited. Check with your specific plan on the options available to you. Many plans today offer the option to carry over into the next year.

Organize Tax Papers, Contribute and Plan

Gather your documents that you will need for your tax filing in April 2018. You can claim any tax credits such as a residential solar energy property credit (available till Dec 31, 2021).
Give a contribution to a charity that is tax deductible. Every year there are events that make certain people and places more vulnerable than others. In the year 2017, there were tragedies that created suffering on a national level. From hurricanes to mass shootings, there are plenty of opportunities to give to a cause you believe in. You can receive a small tax write-off for this.
If the stock prices for your employer’s company dropped, you may want to wait to exercise your stock options until 2018. This also means that you will defer any tax owed until April 2019.

Check Insurance Policies

Check the coverage you have if anything happens to you or your loved ones. Review your coverage for life changes. You may want to add more coverage. You can also discuss the coverage that your parents have, especially if they are older, retired and have healthcare expenses.

Contribute to a 529 College Savings Plan

Plan for your child’s college education with a 529 college savings plan. Enroll early and grow your savings tax free. If you have extra cash available, add more to this account beyond the $14,000 annual contribution limit. Any parent can add up to five years of contributions or $70,000. This means a married couple can put aside $140,000 for a child and benefit from compound growth over time.
By doing these essential steps, you are making active progress towards protecting your future, achieving your long-term goals, growing your wealth and building a strong financial foundation. (For more from this author, see: Set Specific Goals to Manage Your Wealth Better.)



cr. https://www.investopedia.com/advisor-network/articles/personal-finance-yearend-checklist-2017/

วันอาทิตย์ที่ 25 กุมภาพันธ์ พ.ศ. 2561

A Year-End Checklist for Better Financial Health

About 10 years ago, I put together a year-end checklist. I did so because I wanted to see how much financial progress we had made during the year and because I didn’t want to be blindsided by our annual tax bill on April 15th. In the years since, my wife and I also began budgeting, so I’ve added a few items related to that as well.
The year end checklist has made a real difference for a couple of reasons. First, seeing progress year after year, and particularly over the course of several years, keeps us motivated to stick to our plan. Estimating taxes well in advance allows us to identify anything we might do to reduce taxes and to set aside reserves for what we’ll owe. Finally, reviewing our actual spending versus budget helps keep us within spending limits and lets us know what we might need to adjust for the coming year. The specific steps I follow and when I take these steps are as follows. (For related reading, see: IRA Taxes: Tips for Reducing What You'll Owe.)

September

  • Update books for the business: A large part of our income comes the financial planning practice’s income. This amount can vary a good bit from year to year, so I make sure the books are up to date and I have an accurate estimate of income by the end of September.
  • Work with accountant to estimate taxes: Once the books are up to date, I can work with my accountant to estimate what we’ll owe in taxes for the year. Our tax situation is pretty straightforward, so our options for reducing taxes are limited, but knowing which tax bracket we’ll be in for the year is useful in estimating how much additional retirement savings will reduce our tax bill.

November

  • Estimate cash on hand at year end: By mid-November, I can project how much cash we’ll have on hand at the end of the year. Once I’ve estimated this amount and confirmed that it will be enough to cover taxes and bills, I can decide how to allocate any excess cash between paying off debt and adding to savings.
  • Check in on holiday spending: Our spending goes up around the holidays every year because of gifts, events and travel. We save throughout the year for holidays and travel and in mid-November we make sure what we’re planning on spending is in line with what we’ve set aside in reserves. Doing this eliminates the chance that I’ll have a panic attack when I see the UPS guy stopping at our house for the fifth time on December 23rd.  (For related reading, see: The Beauty of Budgeting.)

December

  • Review actual spending versus planned spending: In mid-to-late December we take a look at what we’ve spent during the year versus what we budget in various categories. Based on how we’ve done, we can make changes to the categories. The goal in doing this is to keep overall spending the same, but shift amount categories to reflect what we actually spend.
  • Agree on any changes to discretionary spending: We have several completely discretionary categories in our budget, including travel and vacation, personal spending and holidays. If the upcoming year looks good, we may adjust these upward. Or if we’re planning a big trip or purchase, we may shift spending among categories.

January

  • Update personal balance sheet: I always enjoy doing this because it makes the financial progress we’ve made over the short term clear - how much we’ve added to savings and how successful we’ve been in paying down debt are all there in black and white. This gives us a real sense of accomplishment given all the hard work we put in over the prior year.
  • Update our financial plan: Updating the plan allows us to see how we’re progressing towards our long-term goals. A down market may overwhelm short-term savings, but most years the market is up. In those years, if we have hit or exceeded our savings goals, we see clear, incremental progress.
Your own year-end checklist may differ a bit, but in general if you touch on taxes, cash flow and planned savings and spending, you should be in good shape. You could also add a periodic review of your investment portfolio to make sure it remains reflective of your needs. Once your checklist is in place, stick with it over time and it will become an invaluable tool in keeping you financially on track. (For more, see: Tax Planning Strategies for the End of the Year.)



cr. https://www.investopedia.com/advisor-network/articles/yearend-checklist-better-financial-health/

วันเสาร์ที่ 24 กุมภาพันธ์ พ.ศ. 2561

Using Life Insurance to Help Cover Your Business

This "Life Insurance Special Handling" series has covered prequalification and underwriting and some of the challenges the life insurance process can pose for different situations. It has also defined who qualifies as high-risk and how the life insurance marketplace works. This installment addresses some of the concerns surrounding life insurance for businesses purposes.

How Much Life Insurance Should I Apply for?

Many people want life insurance, but they worry about how much it will cost them. As such, they want to see some rates and “back into” a purchase by balancing the amount of life insurance they would like to have with the amount of money they are willing to spend.
To help you make your decision, a life insurance carrier should either give you a reliable quote or estimate as soon as possible. This number should represent an educated opinion as to what the lowest possible premium would be. If it works for you, then the pre-qualification process continues until the price is solidified. If you don't like the number, you can reassess your purchase, possibly identifying an additional source of premium or reducing the guarantee period for the coverage you want. (For related reading, see: How Much Life Insurance Should You Carry?)

Can the Policy Cover a Business Loan?

The typical way to make sure this happens is to collaterally assign the benefits. Once your policy has been delivered and all delivery requirements have been submitted to the carrier, such as premium payment and signed receipt, coverage will go into effect. At that point, the carrier will assign the benefit to your bank.
Should you pass away before the loan is paid off, the claims department will notify the bank and require proof of the balance due. The bank will be paid the balance to clear your debt, and your beneficiary will receive the rest of the death benefit, if any exists. In these circumstances, both the client and their banker are usually anxious to close the deal. The underwriting of your application can be fast-tracked, and your banker should be updated on the status of the policy. Reassurance that the process is moving along is usually sufficient for them.

Can My Life Insurance Be Owned by A Trust?

Yes. The number one concern in this situation is to make sure the trust has been completed by the time your life insurance application has been approved. This way, the policy can be issued to the appropriate owner with the correct beneficiary designations. The application cannot be submitted without the trust.
It’s important to avoid a scenario in which you get a good offer from the insurance carrier, but can't accept the policy due to delays in finalizing the trust. You would then run the risk of something happening to your health, or otherwise affecting your eligibility for coverage, and losing the good offer. (For more from this author, see: Your High-Risk Life Insurance Questions Answered.)

Does Having My Partnership Be the Policyholder Make Things More Complicated?

The underwriting will be more complex in this case. You will need to provide basic financial data about your business, then an underwriting team will coordinate with your controller or accountant. The underwriters will also need information regarding coverage on your partners to make sure there is parity. 

Does Pre-Qualification Obligate Me to Do Business With That Carrier?

The simple answer is no. You do not sign a contract, nor do you pay for the pre-qualification service. However, the quote you receive should be competitive and reliable, and will require a significant investment of time by the carrier. The service of pre-qualification is reserved for “ready buyers,” those who know they have a need for life insurance, have the means to pay for it and want to obtain a policy now. 
(For more from this author, see: Answers to High-Risk Life Insurance Questions.)


cr. https://www.investopedia.com/advisor-network/articles/using-life-insurance-help-cover-your-business/

วันศุกร์ที่ 23 กุมภาพันธ์ พ.ศ. 2561

How to Prepare for Tax Season Like a Pro

It is in your own best interest to organize your tax records, make sure they are complete, and take adequate time out of your day to meet with a tax professional, so the process is as efficient as possible. Time is money. If your return takes additional hours to complete because your records are disorganized or incomplete, or you don't show up on time for your appointments, it stands to reason you may be charged more for your return than someone who is punctual, organized and compliant.

Keep Your Tax Advisor Informed

If you have a client relationship with a firm, it is also important to keep them abreast of any changes throughout the year. For example, they should be notified when you receive a notice from the IRS or state taxing authority, or when you experience a life event that may impact your tax status. If you open up a business and drain your retirement accounts, reach out to your tax professional or financial advisor.
According to a recent survey conducted by the National Association of Enrolled Agents, an advocacy group located in Washington DC, you can consider the tax preparation experience in three distinct areas: organization, communication and professionalism.

Organize Financial Records

  1. Keep separate bank accounts and charge accounts for your business and personal needs.
  2. Keep your records and receipts for at least four years in the event your tax return is examined and there is a need for substantiation.
  3. Use a mileage log or phone app if you are claiming business mileage. You should also keep a mileage log if you are active in charities and drive to many functions and meetings. (For related reading, see: How to Log Mileage for Taxes in 8 Easy Steps.)

Communicate With Tax Professional

  1. Do not respond to a tax notice without discussing it with your tax professional. they know the language and know how to respond correctly and on point.
  2. Advise your tax professional about life changes such as a growing family or divorce.
  3. Talk about that side gig you want and all that it entails. Remember, your tax information is your own business and is very confidential. Your information cannot be shared without your consent and there must be safeguards in place to make sure the tax preparer is taking the proper steps to safeguard it. If you see a wastepaper basket filled with returns or client information, think twice.

Seek Advice From Proper Channels

  1. Rely on tax advice from a professional, not your BFF or barber.
  2. Your tax refund is based on your own situation, which may be different from your friends and coworkers even though you may have similar income.
  3. “It's the same as last year” really does not cut it. Get receipts or records.
Tax time does not have to be worse than going to the dentist. Just be proactive, be organized and be on time. 
(For more from this author, see: Don't Overlook These Year-End Tax Deadlines)



cr. https://www.investopedia.com/advisor-network/articles/tax-preparation-pro-organization-communication-and-professionalism/

วันพฤหัสบดีที่ 22 กุมภาพันธ์ พ.ศ. 2561

5 Ways You Can Be More Financially Responsible

A lack of financial education can result in carrying a large amount of debt or experiencing financial instability. Financial decision-making is something that can be taught, but many people lack a mentor and have to figure it out on their own through a process of trial and error.
Here are five great tips that anyone, regardless of their financial situation, can benefit from:

1. Create a Budget Centered Around Saving, Not Spending

Of course you need to ensure your essential expenses like housing, food, vehicle, etc. are covered. But I see it over and over again where people fail to stick to a budget because it’s too focused on categorizing and tracking every single little expense rather than achieving a particular goal. Just like a new fad diet, they’ll stick to it for a while, but it eventually it always lacks long-term direction and simplicity so they end up giving up almost as quickly as they started. Budgeting should be a simple and repeatable process. Determine what your essential expenses are, build an automated savings goal on top of that, and then anything left over at the end of the month is yours to do as you please. (For more, see: Best 5 Money-Saving Tips to Get out of Debt.)

2. Max Out Employer-Sponsored Retirement Plan Before Anything Else

This is super important. I’ve had people tell me they want to open an IRA or taxable investment account to start saving more only to find out once we dig in that they’re not even maxing out their 401(k). IRAs only allow you to contribute up to $5,500 a year ($6,500 if over 50), and have tax deduction and/or income phase-out limits for contributions. Your 401(k), on the other hand will, let you contribute up to $18,000 year. Your employer may match dollar for dollar, often up to 6%, sometimes even more. Before opening an IRA or any other invested savings account, make sure you’re maxing out that employer-sponsored plan if you have one.

3. Refinance, Consolidate Debt With Lower Interest Rate

Take a look at any outstanding balances you have and compare interest rates. If you’ve got a lot of high-interest consumer debt, for example, a personal loan at a lower rate may be a great way for you to save money over the lifetime of paying down that balance. Another option could be a credit card balance transfer from a higher interest rate card to a lower interest rate card.
For student loans, there’s a number of great companies out there that offer reasonable rates and can help you shorten the term of your loan. If you have direct government student loans you have quite a few more repayment options, such as income-based repayment, so going straight to a private company to refinance may not always be in your best interest. A good financial planner will be able to help you determine what's the best fit for you, or if cost is an issue, seek out the help of a non-profit debt counseling organization.

4. Set Spending Limit Alerts on Credit Cards

I get it. There’s lots of benefits to using credit cards such as earning points or miles, having certain protections on purchases or rentals and more. However, don’t let your need or desire to use a credit card allow you the opportunity to rack up debt that gets out of control. A simple way to avoid this is to create a spending alert on your card so you get notified anytime your balance starts to creep towards that number. I generally recommend setting it a couple hundred dollars below your desired limit so you can easily catch yourself before it’s too late. This also assists in being mindful about your purchases.
With the debit/credit cards, it’s so much easier to lose track of what you’re spending versus carrying around a fixed amount of cash when you go out to make purchases. Alerts can help mitigate some of that mindless spending that’s all too common with the flimsy pieces of plastic we love to carry around in our pockets these days.

5. Build a Financial Plan With Professional Help

If you are still struggling to get on track or are not even sure if you are on track with your financial goals, one option is to seek out a financial planner. A financial plan can help you get where you need to go. It can be adapted as your life and financial situation changes.

The Bottom Line

Making smarter financial decisions will help you achieve your financial goals and can provide a greater sense of peace of mind and confidence. Consider taking the steps above to develop a solid plan. (For related reading, see: How the Cost of Debt Affects Retirement.)



cr. https://www.investopedia.com/advisor-network/articles/5-ways-you-can-be-more-financially-responsible/

วันพุธที่ 21 กุมภาพันธ์ พ.ศ. 2561

5 Key Tax Law Changes Impacting Businesses

The Tax Cuts and Jobs Act (TCJA), a $1.5 trillion tax cut package, has several implications for businesses. It was signed into law in December of 2017 and most of its provisions became effective in the 2018 tax year. Below are five ways the new tax codes will impact businesses.

1. Corporate Tax Rates

The new legislation establishes a single flat corporate rate of 21% and abolishes the previous graduated tax brackets of 15%, 25%, 34% and 35%. TCJA permanently repeals the corporate alternative minimum tax (AMT).

2. Pass-Through Business Income Deduction

If you are a sole proprietor or partner who receives business income from a pass-through entity, you typically report that business income on your individual income tax return and pay tax at an individual rate. For tax years 2018 through 2025, a new deduction is available, equal to 20% of qualified business income. This deduction applies to partnerships, S corporations, sole proprietorships and limited liability companies (LLCs) that are not taxed as C corporations. (For related reading, see: Starting a Small Business: Business Structures.)
If taxable income on your personal tax return exceeds certain thresholds, your deduction may be limited or phased out entirely. If you're single with taxable income below $157,500 (or $315,000 if married filing jointly), the 20% pass-through deduction amount can be claimed in full. Single filers with taxable incomes between $157,500 and $207,500 (or between $315,000 and $415,000 if married filing jointly) may be able to claim a partial deduction.
If you are above those taxable income thresholds, the deduction is generally limited to the greater of: 50% of the W-2 wages reported by the business or 25% of W-2 wages plus 2.5% of the value of qualifying depreciable property held and used by the business to produce income. This especially benefits real estate owners and other capital-intensive businesses. The deduction is completely disallowed for businesses that involve the performance of services. This disallowance pertains to industries such as: health, law, accounting, actuarial science, performing arts, consulting, athletics and financial services.
Taxable income doesn't simply mean income from the business. For example, if you are single and your pass-through business income as a consultant is $140,000, and your investment and other income totals $35,000, your combined income is $175,000. You take the standard deduction of $12,000 but have no other deductions. You're above the $157,500 threshold at $163,000 ($175,000 minus $12,000). Since you are employed in the disallowed field of consulting, you won't get any pass-through business deduction.
Here's a different example. Your tax status is married filing jointly. You and your spouse together have taxable income of $300,000. Even if you are a service-based business, you can take the full pass-through business deduction of 20% because you're below the $315,000 income threshold.

3. Bonus Depreciation

The cost of tangible property used in a trade or business usually must be recovered through annual depreciation deductions. For most qualified property acquired and placed in service before 2020, special rules allowed an up-front additional "bonus" amount to be deducted. For property placed in service in 2017, the additional first-year depreciation amount was 50% of the adjusted basis of the property. The TCJA extends and expands first-year additional (bonus) depreciation rules. Bonus depreciation is extended to cover qualified property placed in service before January 1, 2027. (For more, see: An Overview of Itemized Deductions.)
For qualified property that's both acquired and placed in service after September 27, 2017, 100% of the adjusted basis of the property can be deducted in the year the property is first placed in service. The first-year 100% bonus depreciation percentage amount is reduced by 20% each year starting in 2023 (i.e., the first-year bonus percentage amount will be 80% in 2023, 60% in 2024, and so on) until bonus depreciation is eliminated entirely in 2027. For qualified property acquired before September 27, 2017, prior bonus depreciation limits apply (i.e. 50% limit).

4. Expensing

Small businesses may elect under Internal Revenue Cose Section 179 to expense the cost of qualified property rather than depreciating it. The Act increases the maximum amount that can be expensed in 2018 from $520,000 to $1 million and expands the range of property eligible for expensing. The threshold at which the maximum deduction begins to phase out has also increased from $2.07 million to $2.5 million.

5. Foreign Income

Under prior corporate tax rules, U.S. companies were taxed on worldwide profits and received a credit for foreign taxes paid. If a U.S. corporation earned profit through a foreign subsidiary, no U.S. tax was typically due until the earnings were returned to the United States (generally in the form of dividends).
Accordingly, some domestic corporations moved production overseas and multinational companies often kept profits outside the U.S. The new law fundamentally changes the way multinational companies are taxed, shifting from worldwide taxation of income to a more territorial approach. Under the new rules, corporations must pay U.S. tax on prior-year foreign earnings that have accumulated outside the United States in foreign subsidiaries through a one-time "deemed repatriation" of the accumulated foreign earnings.
The one-time tax is not limited to C corporations. It can apply to all U.S. shareholders, including individuals. After paying the one-time deemed repatriation tax, foreign earnings can be brought back to the United States without paying any additional tax. This encourages 10% shareholders of foreign corporations to bring production back to the U.S. and stimulate our domestic economy. The key provision impacting most small business owners is the 20% pass-through business income deduction. (For more from this author, see: 6 Tax Season Tips for Small Business Entrepreneurs.)

The Bottom Line

The Tax Cuts and Jobs Act will impact businesses in a number of ways. Among the most significants changes is the lowering of the corporate tax rate and how pass-through business income will be taxed.

Disclosure: WorthyNest LLC (“WN”) is a registered investment adviser offering advisory services in the State of Missouri and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by WN in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption. All written content is for information purposes only. Opinions expressed herein are solely those of WN, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.



cr. https://www.investopedia.com/advisor-network/articles/5-key-tax-law-changes-impacting-businesses/

วันอังคารที่ 20 กุมภาพันธ์ พ.ศ. 2561

Financial Planning for Medical Professionals

Residents, doctors and medical students are often the target of financial advisors, brokers and insurance agents because of their high earnings potential, which will most likely lead to significant investing. However, if you are in the medical profession, it's important for you to make your own informed decisions when it comes to your financial health rather than depending on a financial advisor, especially a non-fiduciary advisor, to tell you what to do with your money.
As a medical student, you probably have mountains of student loan debt, so when you actually have extra cash, you might be at a loss as to what to do with it. The following is a list of potential landing spots for your extra cash; which ones you choose depends on your personal circumstances. 

1. Emergency Savings

This one is pretty easy. It's important to have an emergency fund available to cover unexpected expenses without having to dip into your retirement plan or take on more debt. But before you can determine how much to save, you need to know how much you're spending on a monthly basis and where you can cut extra spending. Consider using a budgeting app like Mint or Mvelopes to track how much money you are spending and where it is going.

2. 401(k) or 403(b) Retirement Plan 

If you are a resident, then you very well may have a 401(k) or 403(b) plan available, but your student loan debt is waiting around the corner and it’s big. If your employer offers a contribution match of any kind, contribute enough to get the match. You can receive anywhere from a 3% to 5% pre-tax contribution from your employer, which means it grows tax deferred but is fully taxable when you take it out in retirement. Get the match, then move on.

3. High-Interest Debt

Student loan debt is scary enough. For 2017 the average medical school debt is $189,000 according to Student Loan Hero, and most residents think this  estimate is too low. If you have credit card debt or car loans on top of it, you need a game plan. The waterfall approach to paying off debt really does work. Start with the debt with the highest interest rate and pay it off first. Then add that monthly payment to the next highest interest rate and work your way down. This takes dedication and sacrifice of your wants and wishes, but the solid financial footing and peace of mind will be well worth it.

4. Health Savings Account

You’re young and healthy, and you rarely have healthcare expenses. So save money on a high deductible plan and open a health savings account (HSA). You don’t need to max out your annual contributions now, but pick a low-cost plan where you have the option of investing the money in your HSA. Your future self will thank you. When you’re around 50 years of age you’re going to want to consider a long-term care policy, and you can pay the premiums out of your HSA account and receive a current year tax deduction on your contributions. (For related reading, see: How to Use Your HSA for Retirement.)

5. Additional Retirement Savings or Payments on Lower Interest Loans

If you’re in medical school or residency, you’re probably still in a low tax bracket, so adding additional money to your 401(k) or 403(b) will not be of great benefit unless you have access to a Roth 401(k) or Roth 403(b). Paying extra on lower interest loans, like your student loans, is certainly a viable option, or consider investing in a Roth IRA.
When you are young, risk is your friend, and the prospect of tax-free compounding is too good to pass up. To qualify for a Roth IRA, you have to have earned income, and there are income limits. For 2017 taxes, if you are married filing jointly and your modified adjusted gross income (MAGI) is less than $199,000 but more than $189,000 then you can do a partial contribution. If your joint income is less than $189,000, you can each do the full $5,500 ($6,500 if over age 50). If you are single, head of household or married filing separately, the MAGI limit is $120,000, then a partial contribution is allowed up to $135,000.
If you are a resident and your spouse is not a high earner, you shouldn’t be hitting the income limits, which makes you eligible to contribute to a Roth IRA. Once you are working full-time, you likely will not be able to contribute to a Roth IRA because of your income. However, you will be able to do a backdoor Roth at that time. We'll discuss the specifics of a backdoor Roth in a later issue, but it’s important to note that you will not want to have any traditional IRAs when you do a backdoor Roth, which is another reason why the Roth IRA is recommended now instead of a traditional IRA. The last reason for the Roth IRA is you can access your contributions if you get in a pinch. Unlike a Roth conversion where you must wait at least five years before accessing your funds, in a Roth IRA you can take your contributions out at any time without penalty. (For related reading, see: The Pros and Cons of Creating a Backdoor Roth IRA.)

6. Taxable Accounts

The final bucket is a taxable account. If you have covered the last five options and still have cash left on hand, you’re doing great! Don’t mess it up. There are many, many advantages to building up a taxable investment account. If you are a participant in a 401(k) plan, you should be contributing as much as you can until you reach 15% of your income. Many young professionals are underfunding their retirement, and it will cause them a great deal of stress later in life.
If you are a well-paid physician, 15% of your income could very well be more than you are allowed to contribute annually to a 401(k) plan. In 2018, participants under age 50 can contribute $18,500 ($24,500 for those 50 and above). If you are making more than $123,000 a year, that 15% is maxing you out. This is when it becomes important to add taxable dollars to investment accounts to counter the retirement income you will be losing due to these limitations. In addition, the more income you earn, the less of an impact Social Security will have on income replacement. Low income earners use Social Security benefits to replace more than half of their income; workers earning more than $250,000 a year use Social Security benefits to replace 15% or less of their income. (For related reading, see: Not All Retirement Accounts Should Be Tax Deferred.)
You may also be tempted to start looking at private investments like hedge funds, private placements, privately held businesses, etc. There are good investments here, but there is also substantial risk.

Have a Plan and Stick to It

The most successful physician I know socked money away in his trust every year, invested it in the market through his advisor and never touched it. He will be able to retire comfortably because he kept his game plan simple and put his extra money in the right place at the right time. (For related reading, see: Saving for Retirement: The Quest for Success.)



cr. https://www.investopedia.com/advisor-network/articles/medical-professionals-advocate-your-own-financial-path/

วันจันทร์ที่ 19 กุมภาพันธ์ พ.ศ. 2561

7 Ways You Are Preventing Employee Productivity

Wasted employee productivity is detrimental to the long-term success of your business. As a business owner or a manager wasted productivity, from even one employee, can hurt your business. Here are seven productivity traps you need to avoid:

1. Too Much Structure

Creating a roadmap of procedures and processes helps maintain a consistent workflow. However, being too rigid in that structure is a productivity disaster. Your employees are only human and need room to adapt the processes. As an employer, allowing your staff to have some flexibility improves internal motivation and gives a sense of empowerment, allowing your employees’ personal creativity and productivity to flourish.

2. Ignoring the Big Picture

Your business has a lot of moving parts and each employee was hired to perform a specific role to keep it running smoothly. While keeping up with the tasks they were hired for is a top priority, keeping them informed about strategic projects is a productivity essential. Details are important, but sharing your vision for how all the parts work together stresses the importance of their individual efforts. When an employee sees that their work matters, they are more likely to contribute more effort. (For more, see: Asset Protection for the Business Owner.)

3. Prohibiting Process Changes

Why are your business tasks done a certain way? If the answer is “because that’s the way we’ve always done it,” you could be in trouble. With the changing times, advances in technology and staff turnover, the way you’ve always done it could be sapping your productivity without you even knowing.
Encourage input from your employees on changes to enhance the workflow. From something as simple as moving the copy machine to another part of the office to major process adaptations, you need to know when to let go of outdated practices to improve workflows and enhance productivity.

4. Restricting Time Off

While it might seem counterproductive, stepping away from our work actually increases productivity. It’s because our brains operate on limited cognitive “bandwidth” and productivity suffers when employees are mentally overclocked.
Though you don’t have much control over increasing the working hours in a day, you can increase the amount of energy your employees are able to expend on their tasks simply by encouraging them to take regular breaks while at work. Break time is not wasted time. A well-timed break replenishes valuable resources that allow your staff to stay on task, be attentive and solve problems.

5. No Accountability

As a business owner, you’re no stranger to accountability. After all, your success to this point has largely hinged on your ability to keep yourself on track. What you may not realize, however, is that not stressing accountability among your staff reduces both their motivation their productivity.
What’s worse, a lack of accountability also reduces employee morale. When morale is low, your staff loses trust in each other and in you. Keep your staff accountable by creating guidelines to monitor their productivity. Encourage weekly goals and deliverables and, most importantly, make sure you’re leading by example.

6. Micromanaging

The most important skill for increasing employee productivity is a hands-off approach to management. Taking a step back and allowing your staff to operate independently of your control introduces autonomy to the workday. People are more motivated by autonomy than by financial rewards and managing less will deliver better results.
The key to letting go is trusting your employees to manage day-to-day operations and, rather than trying to do it for them, offer to coach them as needed. While this is especially difficult if you’re a detail person, there is great benefit when you reorient your focus to a more strategic approach. When you trust your staff to do the job you hired them to do, their productivity will soar.

7. No Financial Plan

Preparing your business for future growth and development requires a strong financial plan. Without it, you’re likely to lack direction and feel an overwhelming amount of stress as you contemplate what your future might look like. With stress being one of the biggest deterrents to effective leadership, how are you supposed to lead and manage your staff when you lack focus and direction?

Productivity Boosts Your Bottom Line

2014 survey by Salary.com found that 69% of employees admit to wasting up to an hour of work each day. That can add up to more than 250 hours a year of wasted productivity from a single employee. Employees are complex people, and creating a work environment that encourages them to perform well is key to your success. If you trust them to do the job you hired them for and develop for yourself a strategic focus through avoiding these common productivity restraints, you’re more likely to boost employee productivity and enjoy increased profit and improved performance for years to come.
Your employees expect you to have a plan for your business - one that extends far into the future and provides them with job security. Creating a plan for business development and coordinating your personal finances with your business finances, will give you confidence in the future of your company. Your confidence will spill over to your employees, giving them a boost that may result in increased productivity. (For more from this author, see: How Small Business Owners Can Create Cash Flow.)

Disclosure: The information being provided is strictly as a courtesy. When you link to any of these web-sites provided here, you are leaving this site. Our company makes no representation as to the completeness or accuracy of information provided at these sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, sites, information and programs made available through this site.
Registered Representative/Securities and Investment Advisory Services offered through Signator Investors, Inc. Member FINRA, SIPC, and Registered Investment Advisor. AspenCross Wealth Management is independent of Signator. 1400 Computer Drive Westborough, MA 01581



cr. https://www.investopedia.com/advisor-network/articles/7-ways-you-are-preventing-employee-productivity/

วันอาทิตย์ที่ 18 กุมภาพันธ์ พ.ศ. 2561

The Tax Consequences of Having Multiple Managers

In today’s investing landscape, it is common for brokers or advisory firms to use multiple third-party managers to invest portions of their clients’ money. It is also common to receive investment management services from multiple firms or advisors at different firms. However, this can create unintended adverse tax consequences for investors.
There are many reasons why a person or entity would want multiple accounts, and possibly multiple advisors, managing their investments or parts of their investments. These are often rooted in not wanting all of one’s money with one person or firm in order to protect assets, gain multiple perspectives and harness intellect and experience. While this may give people perceived diversification, these types of arrangements can cause very specific and ultimately harmful conflicts of interest for investors, if not managed and watched carefully. (For related reading, see: Top Four Signs of Over Diversification.)

Adverse Tax Consequences

One of the more important, often overlooked and commonly found conflicts occurs with one manager or company selling an investment while the other is buying it. This can and often does have tax consequences on top of transaction fee generation that does not result in a change of portfolio composition. It can end up costing the investor in multiple ways. Other than the potential for additional transaction costs, this issue can cause the triggering of the wash sale rule, which results in an unintended negative tax consequence.
The wash sale rule disallows losses for tax purposes. It occurs when a tax payer sells stock or securities at a loss and reinvests in substantially identical stock or securities within 30 days, before or after the date of sale. There is a 61-day window where this rule can apply which many confuse with a 30-day window of time.

Wash Sale Rule: An Example

An Investor owns stock XYZ at a loss and would like to recognize that loss to offset capital gains and generate up to a $3,000 deduction versus ordinary income and/or have a carry forward of anything more than the $3,000 loss to offset gains in future years. They sell the stock in their portfolio at a loss. If they were to buy this stock again within 30 days of this sale, the loss would not be allowed and an adjustment (increase) in their new cost basis for the previous taken loss would occur. This reduces the potential gain on a future sale of the stock, effectively deferring the benefits of the loss from the original sale.
It is important to remember that this rule applies to a window of time, 61 days of taking the loss. A common strategy is to double up on a stock position with the advanced knowledge that the investor will sell the lot or shares that have a loss and hold the others to maintain exposure in the investment. This occurs because there is a notion it will be a good longer-term investment. It is important to understand that a purchase prior to the loss sale could have a similar effect. Various transactions qualify as re-acquisition during this time frame. They include the purchase of the same stock whether in the same account or not, purchase of an option, being granted a stock option, exercising a stock option or reinvesting a dividend that automatically purchases more shares of the stock. (For more, see: Can IRA Transactions Trigger the Wash-Sale Rule?)
It is easy to see that buying and selling to oneself can occur, if not watched out for. This could happen especially in the case where one manager likes a stock because it is now considered a value stock and fits their mandate, while another is selling it from their portfolio of growth stocks, because it no longer meets their portfolio management mandate. If the investor's accounts are held at the same investment firm when there is more than one account held with different managers, this could easily occur.
Another common scenario is that the investor has multiple firms they work with independent of each other. One account at one firm is buying a stock that the other is selling at a loss to generate the tax benefits of taking a loss.

Limiting Conflicts

Having all your money at one firm who can offer diversification and access to top quality products, managers and investment professionals with an eye on managing these portfolio conflict of interest issues, is key to successfully limiting conflicts and adverse tax scenarios. (For related reading, see: In Praise of Portfolio Simplicity.)



cr. https://www.investopedia.com/advisor-network/articles/common-and-often-undetected-conflict-interests-your-portfolio/