Financial Success in The New Year

Midas touchSo what is the No. 1 thing Americans need to do to find success with their money in 2015?  They should be looking ahead to the future — and regularly contributing to their savings.

One of the best things you can do in 2015 to set yourself up for financial success in the future is to be strategic with your savings. Save as much money as you can in a Roth IRA.

According to a recent article at gobankingrates.com, titled CNBC’s Sharon Epperson on Why You Need a Roth IRA in 2015, in the event of an emergency make sure you're able to withdraw your contributions at any time without incurring penalties or fees. This is also a terrific way to save for retirement, because you might be in a higher or lower tax bracket when you’re in your 60s. Who knows?

With a Roth IRA, typically you can withdraw money tax-free after age 59½. If you qualify for a Roth, you could save up to $5,500 in 2015, or $6,500 if you’re 50 or older. Don’t forget that you have until April 15th to make your contributions for 2014.

Another type of Roth account for retirement savings is a Roth 401(k). This version doesn't have any income limits. If your job has this type of retirement plan (many large employers are expected to offer a Roth 401(k) option in 2015), you can contribute up to $18,000 next year (or $23,000 if you’re 50 or older).

Unlike a traditional IRA or 401(k), Roth contributions won’t reduce your taxable income; however, your overall tax savings (tax-free withdrawals) are likely to be much greater when you retire.

Reference: gobankingrates.com (December 6, 2014) CNBC’s Sharon Epperson on Why You Need a Roth IRA in 2015

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‘Tis the Season to Think about Gifting

When you mention "gifting" what usually comes to mind is a birthday or Christmas. What I’d like to talk about today is gifting assets to another generation. Your federal estate tax exemption, which is the amount you can give away tax free when you die, for this year is $5.34 million and next year will be $5.43 million and if you have more assets than that your estate will owe federal estate taxes. Married couples have an unlimited gifting privilege between spouses in life or death.

In certain states, the estate exemption is just $1 million, not the $5 million (indexed for inflation) as at the federal level. CBS Boston's recent posting, titled All About Gifting Assets, warns that things can get complicated pretty fast and you should have a good estate planning attorney to help you.

The annual gift exclusion for anyone is $14,000. That means you can transfer this amount this year (and then next) to as many recipients as you want, provided you have the money to make the gifts. If married and your spouse joins in, then you can gift a total of $28,000. What's more, you can pay medical or school bills for an individual and not incur a gift tax. In other words, such “gifts” are not counted toward that gift exemption amount.

Taking advantage of these opportunities is a great idea, so why not give away some money to help the next generation accomplish their goals (or to pare down your estate so you won’t owe estate taxes). For instance, if you have an estate worth $1.2 million, there will be no federal estate taxes but (depending on where you live) some state estate taxes. Would you rather give it away to your family or to the government?

If any of your grandchildren are in college or grad school you can pay their tuition and medical insurance, but you need to pay it directly to the school or insurance company. And after paying the bills (if you still have some money left), you can still hand over a check to them for $14,000, or with your spouse, you can make it $28,000.

Reference: CBS Boston (November 27, 2014) All About Gifting Assets


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Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.