Estate planning overview update – key issues to consider for your wills & more

Whether you’re updating an existing plan or starting from scratch, this overview presents the key issues to consider when designing and executing the best estate plan. In a way, it responds to this: Time: millennial estate planning. It also covers much more, as the work does not stop at signing your estate plan documents; you must also complete the follow up work of beneficiary designations, memorandum to fiduciaries, etc. The goal is to avoid the pitfall of having no plan and the disaster when wills and trusts are in place but the asset ownership and beneficiary designations frustrate the plan by having assets pass to the spouse and not the trust.

If you do nothing else after reading this, write and deliver a “Memorandum to Survivors” and review asset ownership, all as described at the end of this post. A comprehensive estate plan can accomplish many goals, such as providing for survivors, ensuring your children are cared for, determining the flow of your assets upon your death, and reducing the amount of taxes your estate will pay while administering your estate. The most important goal is that you have peace of mind knowing that your estate will be administered in accordance with your wishes.

Updating an Existing Plan
If you have a plan already in place, be sure to review it every couple of years. As you grow older, your life circumstances change and these changes may affect your wishes and plans for your estate. Events such as the emancipation of your children, divorce, lapsed relationships with fiduciaries will likely affect your estate plan. Keep these matters in mind when reviewing the remainder of this post. Your change of circumstances could change your pyramid level.

Estate Planning Pyramid
Constructing a pyramid can be helpful for understanding all that goes into an estate plan, much like nutrition and investments. Each level of the pyramid addresses a new level of complexity in your family and financial situation – that is, everyone needs level one, but not all need the later, more complex levels.

Pyramid: Level One
The first level of estate planning provides the most basic protections so it is most suitable to single individuals with no children and few assets. This level of estate plan typically includes the following forms:

  • Health Care Proxy: This document allows you to appoint people to make decisions about your health care and treatment when you are not capable of doing so. You typically select the surviving spouse and then have a first and second alternate if you wish. Some states call such documents “medical directives” or “medical powers of attorney.”
  • Living Will: This makes your wishes clear as to whether or not you want to have heroic means used to prolong your life.
  • Anatomical Gift Instrument: This allows you to have a hospital use organs and other body parts for others in need of a transplant.

Pyramid: Level Two
The second level is most appropriate for individuals in committed relationships. This level includes all the forms listed in the first level, but adds a durable power of attorney. This document grants a power of attorney to the other to manage your financial affairs if you are absent or you become incapacitated.

Pyramid: Level Three
When you have children, you want to ensure that they will be both cared for and provided for in the manner you wish. To achieve this, you need a will to appoint a guardian, for the “care,” and create a trust to manage assets, for the “providing.”

  • A will is a formal document that designates your personal representative or executor, any alternates, plus a guardian and any alternates for children under age 18, then instructs your personal representative to pay off your debts, and distribute your estate per your wishes.
  • A trust is an entity that you create and can be used for many purposes. The trustee acts as the owner of what the trust holds, while the beneficiaries get all the benefits from what the trust holds. For estate planning, trusts are used to reduce estate taxes in various ways. Trust vehicles can also describe how and when assets are distributed. For example, the grantor of a trust could insist that assets not go to children until they are age thirty-five. The trust vehicle could also provide where assets flow if all family members die without issue. For example, assets could flow to a charity or educational institution.

Providing for Survivors: You need to address how your assets and any life insurance flow after your death in order to ensure that your resources allow those who survive you to maintain the same standard of living, during their life expectancies, that you all had during your life. If your investments are not sufficient, even after making liquid certain kinds of personal property (e.g., a second home), then there is a need for life insurance.

Life Insurance: Term insurance, providing only a death benefit, funds the shortfall between assets required to maintain the lifestyle of the survivors and actual assets available. Whole life, variable or other types of insurance should only be used when permanent insurance is required, as in the case of maintaining estate liquidity throughout your lifetime.

Flow of Assets: After you determine the assets required to support the lifestyle of the survivor, you determine to whom the assets flow. For example, at Levels One and Two, you can leave everything directly to survivors, while at Levels Three to Six, you use a trust, and at Level Six you may even separate some portion of the assets by gift now.

Control Over Assets: In Levels One and Two, the survivors have complete control over the assets. At higher Levels, trust vehicles are used for the estate tax savings. However, you also gain a heightened level of attention on the assets: you have engaged a trustee to focus on providing for the surviving spouse, maintaining his or her lifestyle, while still attending to the interests of other beneficiaries, such as children. In this way, the trustee will try to preserve the trust assets in the best way possible for the longest duration. Finally, the trustee must distribute the assets per your instructions; if assets went to a survivor, they are not bound in any way to follow your wishes, so you may not achieve your estate planning goals.

Fiduciaries: In designing the estate plan, many choices revolve around the fiduciary that you select for a particular role.

  • Personal Representative or Executor: This is the person who “marshals” all assets of the estate together, pays death expenses and transfers ownership of property to the surviving spouse or trust. This is approximately a nine-month task.
  • Guardian: This is the person whom you select to love and care for your children in your absence. The spouse selects the surviving spouse and then a second or third choice beyond that. This job lasts until each child has reached majority (age eighteen).
  • Trustee: This person has potentially the longest-term job because he or she must manage the trust assets and make distributions of income and sometimes principal to the surviving spouse, children and even grandchildren. Depending on the terms of the trust, this job could last until the children are young adults.
  • Beneficiary Designations and Ownership: ownership and how life insurance proceeds and retirement plan assets flow is described below.

Pyramid: Level Four
This level of planning addresses state taxes. When the potential combined estate of a husband and wife exceeds $1 million, and they have other beneficiaries for whom they want to maximize the estate after taxes, then trusts are typically used. States such as Massachusetts impose an estate tax over $1 million. Other states have similar amounts, but many are increasing, such as New York which will match the federal credit in 2019. Therefore, additional planning is required if you reside in a state with an estate tax.

Pyramid: Level Five
The fifth level contains trusts that address federal estate taxes, as well as state. Congress has retained the unified gift and estate tax credit, now at approximately $5.34 million (inflation adjusted) with a 40% estate tax rate (up from 35% last year). In addition, the unused portion of the estate tax credit of a deceased spouse is “portable”, allowing it to pass to the estate of surviving spouse.

With the trust structure, sub-trusts can be created so that both the credit and the marital deduction are used. This structure takes advantage of the credit at the first and second deaths. In contrast, wills that pass all assets outright to the surviving spouse would only take advantage of the credit at the second death. The total tax savings for an estate of $10 million or more is excess of $1.75 million for the combined estates.

  • Life Insurance Trust: You can also make an irrevocable trust the owner of any insurance on your life to exclude all proceeds at death from both estates, avoiding estate taxes. That is, the proceeds are completely estate tax free. However, this requires an irrevocable transfer to the trust; you cannot get the insurance back out. You can use this trust to receive insurance proceeds that can pay for estate taxes, thereby preserving more of your estate after taxes without increasing the taxable estate.

Pyramid: Level Six
The final level is for complex estate planning that minimizes federal and state estate taxes through multiple generations. An example of this is a generation-skipping trust. These trusts transfer assets from the grantor’s estate to his or her grandchildren. This is what allows the grantor’s estate to avoid taxes that would apply if the assets were transferred directly to his or her children. The grantor’s children can still enjoy financial benefits of the trust by accessing any income that is generated by the trust while leaving the assets in trust for grantor’s grandchildren.

  • Other entities: Separating assets by gift now would be important if you wanted to ensure some minimum funding for children, such as guaranteeing coverage for their college expenses.
  • 529 Plans: you can use 529 plans or trusts for gifting to cover college costs of a child.

After the Plan has been Executed – Ownership and Beneficiary Designations
Once the documents and insurance are in place, make sure to review and complete the following:

Qualified Plans (IRA’s, 401k plans, etc.):

  • Primary Beneficiary – to the surviving spouse (so he or she can roll over the proceeds to an IRA and thereby defer income taxes); and
  • Secondary Beneficiary – to your children (or your own revocable, depending on whether you want the assets controlled or available to children).

Life Insurance and Annuities:

  • Primary Beneficiary – when not owned by an irrevocable trust, such as group term, to your own revocable trust (for estate tax benefits, e.g., using credit at first death); and
  • Secondary Beneficiary – to the surviving spouse (in case of trust has been terminated for some reason).

Other Assets
Consider changing ownership of any jointly held assets to ownership by one of you. Any assets held as joint tenants with rights of survivorship will go to the survivor by operation of law and never get to your revocable trust. (You want to be sure that you have sufficient assets going to the trust to realize the full tax reduction effect.)

You may even want to fund your trusts, moving investment accounts over to your own revocable trust. This has no impact on your income taxes. You can also choose to fund your revocable trust now. This will save a significant amount of time for the executor, and the attorney he or she hires, as this will need to be done after your death otherwise.

Memorandum to Survivors
Compile a reference book or add to your financial plan book photocopies of important papers, identifying where the originals are, then adding a list of important contacts, instructions to your executor and trustee and other important notes for family and friends. You would update this at least annually with new asset statements (consider this as you gather information for preparing your taxes). To be more specific, the list (and copies) should include:

  • Location of original will, trust, etc.;
  • Location of health care proxy and durable power of attorney;
  • List of professionals with contact information: doctor, attorney, CPA, etc.;
  • List of fiduciaries with contact information: health care proxy, guardians, executors and trustees, attorney-in-fact for durable power of attorney, etc.;
  • Location of insurance policies and valuables such as original titles, etc.;
  • Location of safe deposit box for valuables and items in #5 or 7;
  • List of all bank and investment accounts and location of any stock certificates or other documentation for investments;
  • List of all mortgages, loans and credit card accounts;
  • Any appraisals or other listing of items by value;
  • All automatic debits that need to be addressed (stopped, changed); and
  • List of all password protected accounts (e-mail, on line banking and credit cards, etc.) and where to locate the passwords… and the password to access the password.

Please see planning-for-the-inevitable-end-of-life-services for more ideas on such memoranda. Also, after you review this overview, let us know how we can help you get your estate plan in order.

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Year-end tax planning – how to minimize the total tax paid in 2015 and 2016

To act or not to act? That is the question.

You still have time as year-end approaches to finalize your tax planning for 2015. With that in mind, this post separates areas where you may be able to act and provides more detail on the rules affecting how you act. If any of this is not clear, just ask questions, please.

  • Look through the list below to see if there are any items in your 2015 and 2016 finances that you can change in any way – moving from one year to the other, or delaying further.
  • Determine what impact each of these has and then the impact of all of them in concert:
    • This includes the alternative minimum tax (“AMT”), which is the 28% flat rate as opposed to the marginal rate of up to 39.6%.
    • If your deductions bring the regular tax down too low, the AMT kicks in, so that the deductions are wasted and need to be moved to another year, if possible, or income for that year increased to “pull you out of the AMT.” The AMT exemptions amounts for 2015 are $53,600 for individuals and $83,400 for married couples filing jointly.
  • Be sure to prepare tax projections for both tax years to determine which changes have the best results so that the total tax paid in the two years is minimized.

Not easy!

What do you act on?
To get started, it is helpful to know the current tax rates. Here are the new rates for 2015: Federal Tax Rates for 2015. Also, note that the Standard Deductions rises to $6,300 for single taxpayers and married taxpayers filing separately, $12,600 for married couples filing jointly, and $9,250 for heads of household.

3.8% Medicare surtax
This affects all income for 2015 and beyond, but only to the extent of the lesser of:

  • Net investment income, or
  • The excess of modified adjusted gross income (“AGI”) over the threshold, which is $250,000 ($200,000 for single taxpayers).

Investment income includes interest, dividends, capital gains, annuities, royalties and passive rental income but excludes pensions and IRA distributions.

N.B. – the 3.8% surtax must be covered with your withholdings and estimated payments. See our post Update on the impact of the 3.8% Medicare surtax .

Wages – Can you defer or accelerate between years or even convert income into deferred income, such as stock options, or income to be received at retirement? Can you convert compensation into tax-free fringe benefits?

Stock options – can you exercise a non-qualified option (“NQ”), which is treated as ordinary income, or instead of as an ISO, which can be investment income? Disqualifying an ISO converts it into a NQ, so that you have control over the type and timing of the income.

Schedule C income and expenses – can you defer or accelerate income and deductions between years so that the net income falls in the best year?

Schedule A itemized deductions – like income, can you deductions for the maximum benefit, given the income-based deduction thresholds?

Medical – only the amount above 7.5% (10% above certain income levels) of qualified medical expenses, which include amounts paid for prescriptions, doctor co-pays, long-term care insurance premiums, and glasses, are allowed on Schedule A.

Miscellaneous – only the amount above 2% is allowed on Schedule A. Miscellaneous expenses include unreimbursed employee expenses, tax preparation fees and investment-related expenses.

Deductions – certain itemized deductions are phased out once your AGI exceeds $305,050 for married filing jointly ($254,200 for singles), so that your itemized deductions are reduced by 3%, on up to 80% of the deduction, for the excess of your AGI above $305,050 ($254,200 for single filers).

N.B. – many of the deductions affected by the phase-out are the ones not allowed in the AMT calculation. Also, investment interest expenses are not subject to reduction on Schedule A.

Investment income – can you shift interest, dividends, and capital gains? Can you use an installment sale to spread out a large gain or, if feasible, a like-kind exchange to defer the gain?

(An installment sale that spreads gain over several years; a like-kind exchanges involve investment property, which means you can swap, rent and later convert to residential.)

The tax rate on capital gains was as low as 0% in 2014, with a cap at 20% and those rates remained in place for 2015. The 20% rate applies in 2015 for AGI over:

  • Married filing jointly – $464,850;
  • Head of Household – $439,000;
  • Single – $413,200;
  • Married Filing Separately – $232,426; and
  • Trusts and Estates – $12,300.

You net losses against gains. If you have a loss, with up to $3,000 of the loss is allowed to shelter other income, with any remaining losses carried to the next year.

Investment Loss – Take advantage of tax-saving losses by selling depreciated stocks or mutual funds that are in a taxable account, not your 401(k) or IRA. However, if your traditional IRA has declined in value, you may want to consider converting some or all of the funds in it to a Roth.


  • Purchasing mutual funds late in the year can lead to dividend and capital gains distributions where the mutual fund price changes but your investment does not. This means that you have no economic gain for the distribution on which you pay taxes – you are effectively pre-paying taxes because you did not purchase after the declared distribution date.
  • If you sell to recognize a loss, and want to hold the stock again, be aware of the wash sale rule which bars recognition of the loss if you re-purchase substantially the same security within 30 days – which applies to different accounts you own, including repurchasing in your IRA. An example of what works: a bond swap with the same issuer, where the maturity or interest rate is different, is a way to recognize a loss without being affected by the rule.

Investment income also includes passive income and losses (rental property, limited partnerships and LLCs).

If you can re-characterize any activities as material participation rather than passive by grouping together to meet the material participation rules, you have a one-time election to regroup.

N.B. – Gains include the sale of a primary residence (above the $250,000 per owner shelter).

Roth conversions – can you convert an IRA to a Roth IRA, so that future distributions are not subject to tax? Be sure to pay the tax with funds outside of the IRA so that the conversion has maximum benefit.

Health Insurance – It’s the time of year to choose your health insurance for next year and your decision could affect your 2015 tax filing:

  • Choosing to opt out of buying health insurance could be a costly decision. The new penalty is $695 per adult and $347.50 per child, with a family maximum of $2,085. Those whose income is too low or for whom insurance is too costly may qualify for an exemption from this penalty;
  • If you purchase insurance on an exchange, you may qualify for a tax subsidy if your income is between 100% and 400% of the federal poverty level; and
  • The subsidy will be based on your expected 2016 income. However, if your income is higher than the estimated income, your credit may factor into your tax filing for that year.

Required Minimum Distribution (RMD) – If you are 70 ½ or older, you must take a withdrawal by the end of the year from your traditional IRA or face a significant penalty. To calculate your RMD, take your year-end IRA balances as of December 31, 2014, and divide each one by the factor for your age, which can be found in IRS Pub. 590-B. If you turned 70 ½ this year, you can delay your payout until April 1, 2016. If you opt to take your distribution 2016, you will be taxed on two IRA distributions in 2016.

Federal Estate Tax Exemption – the exclusion amount for estates of decedents who die in 2015 is $5,430,000, up from a total of $5,340,000 in 2014.

Gifting – can you shift assets by gifting within the $14,000 per year/per person annual gift tax exclusion, or even by filing a gift tax return to use some of your unified credit now, so that income is in the lower tax bracket of new owner?

If you’re looking to shift more than $14,000 per year per person, amounts directly paid to college tuition and medical services are exempt from gift-tax rules.

Inherited IRA – be sure to divide an inherited IRA among beneficiaries to get the maximum life expectancy for RMD calculations for each

If you made it this far, I hope you have a good idea of your 2015-2016 tax plan, or else a set of questions to ask so we can help devise one for you! Please Contact Us.

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Millennials – Don’t let this happen to you (part III in the financial literacy trilogy)

[Originally published at [[|Don’t Let This Happen to You – Learn from your Parents; Mistakes – Part III in a trilogy]], this is the last in our trilogy, with Part I: “Financial Literacy – Millennials received poor marks, but they can fix that” and Part II: “Millennials: Don’t just Speak to Your Parents, Do your own Planning” as originally posted at [[|Millennials, Don’t Just Speak to Your Parents, Do your own Planning]])

Millennials have the time horizon that should allow them to save well, and thus avoid the need to save much more in later years. Otherwise, they will end up like those now nearing retirement that Theresa Ghilarducci describes in her 2012 article on retirement:
Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day. See “Our Ridiculous Approach to Retirement” at [[|Our Ridiculous Approach to Retirement]]

Acting now is crucial, but what do you do?

Step 1 – As a Millennial, accept that you need to start saving now and commit to acting. For encouragement, remember that:
The 35-year-old would need to boost her contribution rate to 9 percent to achieve the same result as the 25-year-old starter who was saving 6 percent. (from [[|Retirment Saving for Young People]]) See our post “You can Ignore Most Financial Planning Rules – here is why” at [[|You can ignore most financial planning rules, here is why]]

Step 2 – Identify how much you need to save by using a retirement calculator. There are many calculators you can use – see what we listed in our post “The results from retirement calculations on different websites vary. Why?” at [[|The results from retirement calculations on different websites vary why]]

Step 3 – Follow this hierarchy for how to set up accounts for your savings:
Start with your employer plan, 401(k), 403(b) or if you are self-employed, SEP-IRA. The contributions you make to a 401(k) or 403(b) are made from payroll deductions, so you never get a chance to spend this money. The deductions reduce your taxable income now, so the government is effectively helping you to save. Also, the amounts invested grow “tax sheltered,” meaning that you pay no tax on any interest, dividends and capital gains. However, when you retire and withdraw from the plan, you are taxed on that amount as regular income.

If you save more, use a Roth IRA next. Set up an auto debit from your checking to fund your Roth IRA, so contributing works like payroll deductions. The amount contributed to a Roth IRA is not deductible, but amounts withdrawn at retirement are not subject to income tax. The amounts invested grow tax sheltered.

Finally, if you still need to save more, set up a “taxable account,” meaning an account with no tax sheltering benefit. You can use auto-debit to add to this account.

Note: for the Roth IRA, you must qualify and have earned income from which to make contributions to the account. Also note that, for any of these tax sheltered plans, withdrawing funds before age 59½ may subject you to a 10% penalty in addition to income taxes, so do not fund any plan when you expect to need withdraw the money before retirement.

Step 4 – Invest. And when you invest, stick to the plan you set in place (this cannot be over-emphasized). The time to retirement is decades away so you can afford to take risks, some of which will take many years to pay off. If you panic and sell, you only lock in a loss; but if you weather the ups and downs, you will be far ahead. (see [[|Start your investment plan now your future portfolio will thank you]])

Creating an asset allocation, where you diversify among stocks, bonds, real estate and cash. Include large cap, mid-cap and small-cap stocks, as well as international stocks. You man also include invest in real estate investment trusts (“REITs”) and hard assets. You can use exchange traded funds (“ETFs”). The low fees of ETFs leave more invested to grow, compared to high fee and load funds.
If you on-going advice, you may want to check out alternatives such as LearnVest and the new Future Advisor site: [[|new Future Advisor site]]

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Millennials – Don’t just Speak to Your Parents, Do your own Planning (part II in the financial literacy trilogy)

(this is Part II of our trilogy that began with: “Financial Literacy – Millennials received poor marks, but they can fix that” as originally posted on )

As Millennials graduate, become employed, start businesses and have families, their finances change. With increasing complexity come many options they must evaluate, as well as new responsibilities. Millennials are more educated that prior generations, but they are also saddled with greater student loan debt than any prior generation. And, despite their higher level of education, they get low marks for financial literacy according to a recent U.S. Treasury Department and Department of Education assessment.

What are they doing about their finances? Sources like Pew Research Center tell us that many Millennials seek advice from their parents. Unlike Boomers who did not want to speak to their parents, Millennials often share interests with their parents and correspondingly seek their counsel.

However, taking financial advice from their parents may not a good approach because many of their parents lack sufficient savings to fund their retirement needs. Mark Grimaldi, co-author of “The Money Compass: Where Your Money Went and How to Get It Back” says “never take advice from someone less successful than you are.” He continues: “With almost 30 years investment experience, I can say with complete confidence that many baby boomers, the parents of Gen Yers, are in a financial mess.”

What, then, should Millennials do then? Talking to their parents is not inherently bad, so long as that is not their sole source. “Of course, there’s a difference between receiving [parental] advice and relying solely on the advice given,” says Kristen Robinson, senior vice president of Fidelity Investments’ women and young investors’ products. “Gen Y should listen to what parents have to say. But at the end of the day, financial decisions are personal matters and best made after carefully considering a number of factors and doing research.” From Millennials: Stop Taking Financial Advice From Mom and Dad at [[|Millennials stop taking financial advice from mom and dad ]]. She concludes that Millennials really need to do is find ethical professionals for help.

So, how do they do this? They search the internet of things, of course! But, wait, is that how to find truly ethical professionals? Yes, if you search with care.
Look for:
 Credentials – check out their bio, are they CFP, JD, or CPA? these are a good start to validation of the advisor;
 Content – are they providing original advice that is sound, helpful?
 Website design – professional, kept up-to-date?
 Clients – who is using them for advice?;
 References – who is willing to put their own reputation at stake for this website?;
 Community – who are their partners and advisors?;
 followers, fans, subscribers and user testimonials – more validation;
 Website design – professional, kept up-to-date?
 tacky websites, “smell test” – if it “smells bad,” then it probably is;
 old content and closed comments;
 too many ads and pop up pop up ads directing you to buy life insurance, etc.;
 no links to anyone you have ever heard of,

For example, companies like LearnVest (see [[|Learnvest knowledge center]] ) and Workable Wealth (see: [[|Workablewealth ]] ) provide general advice to educate before you pay. Workable Wealth has stated in blog post the hope that educating will lessen the stress of handling your finances.

Disclaimer: Our soon-to-be-launched website intends to offer advice with no hidden agenda, and be judged on providing the planning advice and tools Millennials need.

Watch for the third post of the trilogy, which tells you why taking action now is crucial.

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Don’t Rush to Pay off Your Student Loan – make a plan first

Recently posted at [[|MillennialsMny blog on wordpress ]]

This may surprise you: you should worry more about saving for retirement than paying off your student loan. Yes, there are many bloggers testifying to how they paid off their loans, and many trying to tell you that you need to too. The frequency of such posts does not mean that they are right, or that they have factored in all that you need to for a “best use of cash flow over time” plan. In fact, paying off student loans that have relatively low interest rather than investing will be a costly mistake.

Compare student loan payoff blog posts to the many advisors who encourage paying off your mortgage. The urgency to retire your mortgage belongs to the Silent Generation, who survived the Great Depression and are risk adverse. Paying off a mortgage is usually not the way to maximize your net worth. (Watch for a post on “rent vs. buy” discussing investing and use of mortgage debt.) Furthermore, tying up so much capital in a house lacks for diversification and liquidity – you cannot sell your daughter’s room to cover tuition when she goes off to college.

How do you decide what loan to pay off when? Start with this rule: whenever the interest rate on debt is less than the annualized return on investments, only pay the minimum on the loans (that is, paying off the debt does not maximize your net worth). The term “annualized” returns is key here, as one good year is not a good measure, nor is a recent bad year; you want the 5 or better 10 year average return.

Next, when applying this general rule to yourself, be sure to use after-tax values. You can deduct home mortgage interest in most cases, a portion of student loans in some cases, and credit card debt in almost no cases, while you can deduct your investment in your retirement plan and what you invest grows tax-free until withdrawn. Roth IRAs do not give you a deduction now, but do grow tax free and withdrawals are tax-free.

Here is a quick example: say your retirement plan is all in ETFs, so it grows at about 7% per year over time, say you have a student loan with an interest rate of 3%, because you consolidated all your undergrad loans, and it has a minimum payment of $500 per month, and say you have $1,000 per month for which you want to devise the best plan. Apply no more than the required minimum to student loan and invest all the rest, maxing out your 401(k) or 403(b) plan first, and then investing in a Roth IRA next. In 10 years, you will be so much better off than the person who used the full $1,000 to pay her student loan. What if you had a loan with an interest rate of 8%? Tough call. However, because the loan is compounding over time at a higher rate, that persuades me to apply more to the loan, provided that doing so did not give up an employer match on a 401(k) plan.

These examples are overly simple, I realize. Many of you face the quandary of student loan vs. retirement funding vs. rent or buy a home and more. I am working on that …. (Watch for a post on integrating decisions on buying a home, paying off student loans, investing for retirement and all the other issues you are likely to face.)

Oh, and who am I? Steven A. Branson, see [[|about Steven A. Branson]]

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When “free” is not free, when paying is worth it …. and how fits in

as recently posted on [[|MillennialsMny Blog on WordPress]]

First, nothing on the internet is truly free. Many sites are lead generation sites, and most social media websites track our every move to get paid. If you any doubts, please read this article: “Mark Zuckerberg, Let Me Pay for Facebook – ‘Free’ social networking sites cost more than we think.” at [[ |Mark Zuckerberg, Let Me Pay for Facebook – ‘Free’ social networking sites cost more than we think]]

With that in mind:

If you search financial planning and other sites on the web for retirement calculators, you will find many options. See our prior post explaining why they can differ so much [[ |The results from retirement calculations on different websites vary why]]

On of these websites provides “free” use of a gamified retirement calculator. However, when you delve deeper (I read the company form ADV as of May, 2015), you learn that the website may receive compensation from vendors for referring users to financial products and solutions in order to fulfill action steps, such as lenders for a user who needs to refinance her mortgage. The website receives a referral fee from the mortgage lender. The same for a rollover of a 401(k), a fee from Schwab, Fidelity or TD Ameritrade, or for life insurance, a fee from the insurance. Furthermore, management of the website own a registered investment adviser and many are insurance sales people.

Hardly sounds free; websites like this are lead generation portals. Compare to those “free” seminars on estate planning put on by insurance salesmen to sell life insurance and other products.

In contrast, there are good tools, for which you pay. One example is the investment firm Betterment, which recently introduced a new tool available to its paying customers called “RetireGuide.” The firm describes it as “a new planning tool, available for free to all Betterment customers, that helps investors work through scenarios, like …. RetireGuide provides sophisticated retirement guidance that is easy to understand, always up-to-date, and simple to change as your life changes. RetireGuide uses information you provide and the balances from your Betterment accounts, as well as assets outside of Betterment, to answer these questions. It also provides a seamless way to start saving more in a globally diversified portfolio of ETFs based on your retirement plan’s recommendations … This is the only retirement planning tool available to investors today that merges an advice engine with a way to automatically save and invest in a diversified portfolio.”

RetireGuide looks very good, as a tool to help you keep with your retirement plan.

Where are we at in all this? We provide calculators for retirement as well as life insurance, college saving, and buy vs. rent. These are all free. For more, see [[|What still under construction will allow you to do ]] You can use our free tools, and we will not use any of your data for leads we can sell.

If you pay, you gain access to our knowledge base of “how to” steps, so you can implement a good plan now. Also, you gain access to us to ask questions and can arrange for a more detailed financial plan from an approved planner.

What do you think of this? Your comments would interest me, thanks.

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Scam alert: your secrets are not safe with the IRS

As recently published at [[|MillennialsMny Blog on WordPress ]]

The IRS recently announced that the tax information of 104,000 filers was stolen by hackers and used to file false returns. The same thieves attempted to steal tax data from an additional 100,000 filers, but were unsuccessful.

The unauthorized access of records occurred between February and May of 2015, when hackers used the IRS’s “Get a Transcript” web tool to access filers’ tax return transcripts. The hackers had previously obtained social security numbers of these 200,000 filers from other sources. The IRS pointed out that their servers were not hacked, but their online service allowed resourceful thieves to access filers’ information.

This breach is especially alarming because IRS Transcripts contain sensitive information about filers. Specifically, they include much of the information reported to the IRS on 1040 and the supporting forms, such as W-2s. The stolen information was then used to file 36,500 fraudulent tax returns seeking refunds. As many as 13,000 of those phony returns were accepted by the IRS, for a total of $39 million in refunds paid.

The IRS acted after discovering the breach by closing down the “Get a Transcript” tool for individual filers. Filers may still request their transcripts, but must do so by mailing in a completed form 4506. The IRS has not indicated when it will provide the online service again.

Their next step was to notify all 200,000 victims, informing them that their social security numbers and possibly other personal data was stolen. For those 104,000 whose tax information was stolen, the IRS is offering credit monitoring services. These victims will receive instructions to sign up for the credit monitoring note: these outreach letters will not request any personal identification information from taxpayers). In addition, the IRS will continue to monitor those tax accounts.

As always, victims may apply for identity protection numbers to prevent the filing of future returns using their information. Additionally, the IRS plans to strengthen its authentication procedures.

The hackers were able to answer many of the “out of wallet” security questions by using information that can be easily found on credit reports and social media sites like Facebook. As a result, the IRS will use questions that are more difficult to answer.

The IRS plans to employ a more proactive approach to prevent future breaches by partnering with private tax software companies, payroll companies and state agencies to share data on uncovered scams. Congress may act as well and may move up the date that W-2 forms must be filed with the government to January 31. This change would make it more difficult for scammers to e-file fake 1040s.

If you were affected by this breach, you will receive a notice in the mail from the IRS. If you do not receive a notice, we still recommend you access your free credit reports annually and stay vigilant about keeping your sensitive data protected.

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Investment advice – trilogy on ETFs

Many people hiring managers are paying too much for little or no value-added investment advice. You do not want to be the typical individual investor, who is buying when the market is nearing a peak, and you would be better off to sell, or selling when the market is nearing a bottom, and you would be better off to buy. Individuals are a contrary indicator! Avoid that with passive investing with ETFs.

For more, see the trilogy:

Start your investment plan – now! Your future portfolio will thank you (part I of ETF investing) see [[|Start your investment plan now your future portfolio will thank you]]

Invest passively, using index funds, so you save fees. Your portfolio will thank you now (part II of ETF investing) see [[ |Invest passively using index funds so you save fees your portfolio will thank you now]]

And soon to come, [[ |You have accepted passive investing for market returns now buy a diverse set of ETFs you set up your portfolio and can sleep until you rebalance next year Part III of EFT investing]]

The Millennials-Money website will have “how to” steps, so you can setup a passive portfolio, avoid the fees, and end up better off in the future.

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Steve Jobs said: “Stay Hungry. Stay Foolish” – so how does that help your career path?

(originally posted at [[|MillennialsMny Blog on WordPress ]])

Michael Simmons recalled the impact of Steve Jobs last January (see his post at: [[|Top predictor of career success 2015]])

Simmons then says: “We think we understand what caused his success. We don’t. We dismiss usable principles of success by labeling them as personality quirks. What’s often missed is the paradoxical interplay of two of his seemingly opposite qualities; maniacal focus and insatiable curiosity. These weren’t just two random strengths. They may have been his most important as they helped lead to everything else … Jobs’ curiosity fueled his passion and provided him with access to unique insights, skills, values, and world-class people who complemented his own skillset. Jobs’ focus brought those to bear in the world of personal electronics.”

In the post, he quotes Steve Jobs form 1995: “Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something.”

How does any of this relate to you and your career? Simmons reports from his 2013 interview of an expert on networks that a key indicator is being in “open networks.” He then indicates how that is beneficial:

• More accurate view of the world. It provides them with the ability to pull information from diverse clusters so errors cancel themselves out. Research by Philip Tetlock shows that people with open networks are better forecasters than people with closed networks.
• Ability to control the timing of information sharing. While they may not be the first to hear information, they can be the first to introduce information to another cluster. As a result, they can leverage the first move advantage.
• Ability to serve as a translator / connector between groups. They can create value by serving as an intermediary and connecting two people or organizations who can help each other who wouldn’t normally run into each other.
• More breakthrough ideas. Brian Uzzi, professor of leadership and organizational change at the Kellogg School of Management, performed a landmark study where he delved into the tens of millions of academic studies throughout history. He compared their results by the number of citations (links from other research papers) they received and the other papers they referenced. A fascinating pattern emerged. The top performing studies had references that were 90% conventional and 10% atypical (i.e., pulling from other fields). This rule has held constant over time and across fields. People with open networks are more easily able to create atypical combinations.

Here is a quote that I find interesting (and can relate to):

This is challenging in that it can lead to feeling like an outsider as a result of being misunderstood and under-appreciated because few people understand why you think the way you do. It is also challenging, because it requires assimilating different and conflicting perspectives into one worldview.

And this really does ultimately get back to Steve Jobs, who said “Stay Hungry. Stay Foolish” If you have not read, or better yet, watched this, find time to do so: [[ |The 2005 Stanford commencement address Jobs – “Stay Hungry. Stay Foolish”]]

Michael Simmons is a bestselling author and the co-founder of Empact, a global entrepreneurship education organization that has held 500+ entrepreneurship events including Summits at the White House, US Chamber of Commerce, and United Nations. More at [[ |Michael Simmons ]]

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(What our landing page may look like)

As a Millennial, you, like older generations, do not enjoy financial planning. Unlike older generations, you have serious immediate distractions like student loans.

Our website, (“M$M”), was born out of a desire to provide Millennials with quality financial planning with no hidden fees or complicated jargon. Our goal is to enable you to create your own plan that you understand and that you can implement without incurring enormous fees or entanglement in a hidden agenda (like “free” sites that get paid for selling your information when you tell them you want a mortgage or want to open an IRA).

At M$M, we provide on-line financial analysis, individualized planning and educational resources. Simply enter your demographic and financial information and you get results on planning for retirement, “buy vs. rent” for a home, college funding and life insurance purchases to protect your family. For no cost, our tools provide you with a financial analysis detailing what you need to save for retirement, whether it is better to rent or buy a home, how much life insurance you need to purchase, and how much to save for college for your children, or yourself.

Then, for a startup fee of $15.00 and then $9.99/month, you gain access our knowledge base of “how to” steps, our interactive forum and our Financial Planner Marketplace. The financial plan is your roadmap to personal investing, using company benefits, tax strategies, evaluating renting versus buying a home, life insurance and so forth. You can use our Interactive Forum to ask questions, and use our Financial Planner Marketplace, inspired by companies like Uber and AirBnB, to pair you with financial planners, based on bids they make in response to your questions.

We keep you current with our blog, with posts addressing a variety of finance-related subject that you can apply to your finances, as well as other matters of interest.

We hope this becomes your trusted site for advice on all financial matters.

(Look for our post at [[|MillennialsMny Blog on WordPress ]] on how some “free” websites are actually just covers for lead generation or other sales of your information.)

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What we are reading – for laughs, for serious thought and discussion, and just because

She’s right: This Is The Fourth-Grader Who Asked Obama To Put A Woman On The $20 Bill, from BuzzFeed News –
Technology: Musk Plots Energy Storage Fix Where Utility Industry Failed, from Bloomberg –
Humor: Cookie Monster, Life Coach – on YouTube –
Health: A 2-Minute Walk May Counter the Harms of Sitting – Even a few minutes per hour of moving instead of remaining in a chair might substantially reduce the risk of premature death.
Language: 20 Common Phrases Even the Smartest People Misuse, from The Muse –
Comedy: Penn Jillette’s Big Dumb American Crush on Howard Johnson’s, from Eater –
How to Be Emotionally Intelligent – What makes a leader? Knowledge, smarts and vision, but also the ability to identify and monitor emotions and manage relationships. From the NY Times –
Comedy: The Man Who Makes the World’s Funniest People Even Funnier. As comedies become increasingly improvisational, they need an editor like Brent White to sew them together. From the NY Times – Quote: “Sometimes you just create a joke out of nothing.”
How Music Hijacks Our Perception of Time, from Nautilus – Quote: The Royal Automobile Club deemed Wagner’s Ride of the Valkyrie the most dangerous music to listen to while driving.
What Is Your Purpose? We need to forge new ways to seriously discuss the deepest questions in life with modern tools. This is a start. From the NY Times –

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5 Things Every Millennial Should Know About Retirement – You’ve got time, so use that time well!

You’ve got time, and if you use that time well, you may even make up for no pension and no Social Security benefits (as originally posted on [[|MillennialsMny Blog on WordPress ]])

1. You won’t have what your parents had – no pension and no social security. Millennials are the first post-war generation to face retirement with virtually no pension. Fewer than 7% of Fortune 500 companies offer pension plans to new hires. Also, the way that the Social Security system is currently funded, there will be no reserves by 2033. Social security benefits are paid to retirees from the tax withholdings of the current workforce and also from the Social Security Reserves. Once the reserves are depleted, it is estimated the tax revenues the collected at that time will only be enough to pay out three quarters of the scheduled benefits. There are measures Congress could take to head off this eventual depletion, like changing the benefit formulas, raising payroll taxes or increasing the cap on taxable wage income. Until any changes are actually implemented, don’t count on any benefits!

2. Learn how to save and spend – now! It’s never too late to adopt good spending and saving habits, and the sooner you do it, the better. The more you can set aside that is invested now, the better off you will be. Also, avoid accruing any high interest rate debts. You can make your coffee at home if that is what allows you to max-out contributions to your 401(k) plan, especially if your employer matches what you contribute. If you do not have employer-sponsored plan, open a Roth IRA or even a traditional IRA. It’s a lot easier to put money aside now than it is to play catch-up in your 40s. And you can set up auto-debits so the investments are made as soon as your paycheck hits your bank account – keeping it out of your shopping slush fund!

3. We’re living longer, healthier lives. Longer, healthier lives are good, but they also require more investments at retirement. If you hit the Social Security full retirement of 67 now, the Center for Disease Control estimates you will live to around 86. That’s 19 years of retirement that you need to fund. But, if you are younger, living a longer, healthier life, then you will likely live longer, requiring more funds, unless you choose to work later in your life.

4. The good news is you have time. The Center for Retirement Research at Boston College suggests that, by setting aside money at age 25, you will need to save only about 10% of your annual income to retire at 65. If you wait to save, the percentage you need each year increases. If you wait ten years, starting at age 35, your target savings increases to 15%. Wait until you’re 45 and you’ll need to save 27% of your annual income. Imagine if you were 55 today and wanted to retire at age 67? The message is: don’t wait!

5. You also have great resources. With smartphone apps and do-it-yourself trading services, investing is more accessible and less costly than ever. Also, there are more affordable investment products available like ETFs (see our post), so you avoid high fund manager fees. Saving on fees means more to grow for your retirement. Over the course of 40 years, those fund manager fees add up to real money.

In sum, start saving now. Set up a simple portfolio and adjust it as you go along. The time you’ve got now will reward you later!

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Scam update for more on Cyber-Attackers, Cloud Computing – be Vigilant!

We wrote before about the need for vigilance to protect you from cybercriminals. We drew on input from Norton Antivirus about social media scams. In this post, we draw upon the Kiplinger’s Tax Letter and site.

IRS e-mails – You might not think that tax preparers would fall for e-mail scams, but some do. The 2-27-15 Kiplinger’s Tax Letter describes use of bogus e-mails asking professionals to “update their IRS e-services accounts and their electronic filing ID numbers plus provide personal data.” As we have said in prior posts, the IRS categorically states that they do not send out e-mails.

Cloud Computing – SingleHop is a company endeavoring to be private cloud experts. They champion users holding cloud servers accountable for maintaining high level, monitored and updated security for all client files. Their recent newsletter notes that over 250,000 complaints were filed with the FBI’s Internet Crime Complaint Center ( in 2013 alone, of which over 20% were under age 30. (For more on how “private cloud” computing fits in the internet infrastructure, here is a helpful SingleHop page: [[|SingleHop site]])

They caution you not to rely on links from e-mails to the websites you frequent. Instead, they encourage you to create bookmarks for these websites to ensure that you are logging onto the site you intend. They also favor sites that use two levels to authenticate you before granting access to personal information. “With such methods, after logging in with your password, the site will text or email you a single-use code that must be entered. Only the registered phone number or email address will receive the code, making it that much harder for hackers to gain unauthorized access to your accounts.”

Scam Update – With the cautions from both sources in mind, we updated our post, to help you remain vigilant:

//Hidden URLs// – Those shortened URLs are convenient, but they may be links to websites you don’t want to visit, or worse, they could install malware on your computer. SingleHop admonishes, “Especially look out for slightly misspelled words or words that use unexpected characters, such as substituting a “0” (number) for a “0” (letter) — for example, HOME DEPOT. If something looks even a little bit fishy, delete the email or close the site immediately.”
//Phishing Requests// – When you get an invitation to click on any link, think twice. When you click, you may be taken to a fake Twitter or Facebook or to a bank, credit card issuer, or another financial institution login page. SingleHop says “Phishers will design their sites to look exactly like the website of your” institutions. If you fall for the fake website, and enter you username and password, the cybercriminals can use your information on the real website to gain complete control of your account.
//Hidden Charges// – Be wary of those online quizzes that offer to tell you interesting information about yourself like which 1960s sitcom star you resemble. If the quiz asks you for personal information, such as your phone number, stop. If you continue, you many end up subscribing to some service that charges a recurring monthly fee.
//Cash Grabs// – It’s great to make new friends, but maybe not by “friending” strangers on Facebook. That person you just friended on Facebook may soon be asking you for money. You can avoid this situation by limiting your social media connections to people you know personally. Ignore friend requests when you do not know the person and have no friends in common.
//Chain Letters// – Sure, you want to be sure that Microsoft will donate the millions it promised to some worthy charity if you keep the online chain letter going. However, such “chain letter” e-mails are a way for spammers to access your friends to connect with them later. Also, you never know to whom your friends will forward the letter.

Sites that are popular with users are popular with criminals, so remain vigilant when you are on line, and, of course, keep your antivirus and anti-malware software up to date. Be wary and think twice before clicking on a suspicious link!

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Green Investing or Investing in Green – How to Invest in an Environmental IRA

For an increasing number of investors, “doing good” with their investments is as important as doing well. Tapping into this new environmentally conscious market, more not-for-profit organizations are teaming up with money managers to create a new line of impact investments. Here are some examples:
 Green Century Funds at [[|Green Century Funds]];
 Aquinas Funds at [[|Aquinas Funds]]; and
 Calvert at [[|Calvert]]
Caution: before you pick any, use a resource to evaluate and compare, such as Kiplinger’s Finance at [[|Kiplinger’s Finance on investing]].
While there is no “green IRA”, you can pick a mutual fund, such as the ones mentioned above, or select stocks yourself in within your IRA or Roth IRA – for more, see [[|Financial literacy millennials received poor marks but they can fix that]] That is, when you contribute cash to your IRA, it sits in a money market account, doing little until you invest it. If you want to invest in environmentally conscious companies, you can, as follows:

1. Select type of IRA: Before opening and IRA, decide whether a Roth IRA or a traditional IRA suits your needs (see the Financial Literacy post).
2. Open an IRA: Opening an IRA has never been easier. You can contact a financial institution, by phone or online, that offers IRAs, usually a bank, brokerage or mutual fund company. Do your research and be sure the broker offers a self-directed IRA, so you can pick your investment options. Also, be mindful of fees charged for trades, that is the buying and selling of stocks or funds. You want a discount broker. Finally, name beneficiaries in case something happens to you.
3. Choose your Investments: Your IRA can be made of stocks, mutual funds or a mixture. In choosing stocks, experts such as Jennifer Schonberger of The Motley Fool, suggest that you focus on particular countries as you make green stock or mutual fund selections for your IRA. She notes that China is an innovator in green technology, though it is also known as one of the world’s biggest polluters.
4. Fund your Account: Make a plan to fund your account and stick to it! Starting early and contributing regularly can have an enormous impact your account’s value due to tax-free compounding of returns (see “Save 10% of Income” at [[Financial literacy millennials received poor marks but they can fix that|Savec 10% of Income]] )

As with any stock market investing, your Green IRA may show you a roller coaster ride of value swings; however, if you have a long-term horizon, the significant growth potential should out-weigh this volatility risk. Also, if you pick a loser, you can always sell your investment (tax-free) and invest in another. Good luck!

P.S. – you can always decide to invest well, this is both easier and yields better returns, and then donate to environmental groups.

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Make customer service calls work for you – Get them on your side

Your goal on these calls is to convert the customer service rep to your side so that their goal is to make you happy. Most people in customer service are there because they want to please others; you want tap into that bent.
Here are some easy tips:
1. Be Respectful: Make them feel important and validated. Ask them their name, if they did not give it, and use that in the conversation.
2. Show Gratitude: thank them.
3. Recruit Them: Use terms like “we” and clearly state your objective so you turn the call into a mission, with the representative committed to helping you accomplish it.
4. Remain Calm: Avoid trigger words, anger and any swearing. Otherwise you risk losing the bond you created. Maintain the position of being empowered to get what you, as the customer, deserve.
5. Communicate Your Determination: Be clear that you are not going anywhere until your mission is accomplished. Be clear that you are not taking any brush off.
6. Escalate: If you are not making progress, then escalate: ask to speak to a manager. Many representatives are judged by the number of calls referred to managers or supervisors, so asking may prompt them to be more helpful.
This approach may take practice (and patience). However, it is quite effective, so you are likely to see good results.

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Financial Literacy – Millennials received poor marks, but they can fix that

While Millennials have proven themselves an increasingly budget conscious group, e.g., employing smart phone apps to ensure they get the best prices for their purchases, they have also shown themselves to have poor financial literacy. This generation is heavily laden with debt, with young adults holding an average debt load of $45,000. So, having a strong understanding of money management may be more important than ever.

The U.S. Treasury Department and Department of Education recently assessed Millennials’ level of financial literacy, and they scored a D+. Fortunately for Millennials, there are a multitude of resources available to help them become educated. However, recent surveys conducted by Fidelity Investments and TIAA-CREF indicate Millennials turn primarily to their parents for advice. The TIAA-CREF survey found that 47% of its 1,000 participants identified their parents as having a major influence in financial counseling. While parental input can be useful, it’s not always sufficient.

Financial education starts as early as pre-kindergarten and is best implemented by parents and schools. Studies show that children who learn money management skills at a young age enjoy long-term benefits throughout adulthood. A 2011 survey by the Council for Economic Education showed that students who studied personal finance in school were more likely to avoid accruing credit card debt, to be less likely to become compulsive shoppers and more likely to save money.

Young adults with poor financial literacy and money management skills can have a negative effect on society as a whole. Individuals with too much debt, whether credit or student loans, can be prevented from making major life changes such as buying a home, getting married or having children. Additionally, job seekers with too much credit card debt may be precluded from obtaining certain types of employment. There are also psychological and emotional implications, which affect physical health.

There are many resources available to Millennials either to start their financial education or to enhance what they already know. The key is to know where to start and whom to trust. Young people would do well to reach out to a broad set of resources including 401(k) administrators, employers, and financial planning firms that understand the diverse needs of Millennials. (We designed much of the content of our website with this in mind.)

Test your financial literacy at Also see
Here is a useful list of resources:

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Achieving a Better Life Experience Act – first look

President Barack Obama recently signed the Achieving a Better Life Experience Act (ABLE Act). The ABLE Act allows individuals and families to open tax-free savings accounts to save for long-term needs associated with an individual’s disability.

These accounts are modeled after 529 college savings accounts. To qualify, a person must be diagnosed with a disability resulting in “marked and severe functional limitations” by the age of 26. An account can be established for an individual without jeopardizing that person’s eligibility for federal programs such as Medicaid. The funds saved in these accounts can be used for a variety of expenses including transportation, housing, employment support and health care.

Like 529 plans, earnings in these accounts grow tax-free, but contributions are made with after-tax dollars. Accounts can be set up at financial institutions and the annual contribution limit is $14,000. ABLE accounts are allowed to accrue up to $100,000 in savings without affecting a person’s eligibility for government aid such as Social Security. This is a great improvement for ABLE account holders over the current asset limit of $2,000. Medicaid coverage would continue no matter how much money is in the accounts.

These accounts can be a useful planning tool for those living with or caring for someone with a physical or developmental disability.

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Plan now to avoid surprises from the Affordable Care Act when filing 2014 taxes

2014 was the first year Americans had access to health insurance options through the Affordable Care Act (the “ACA”). With this new access to insurance came the obligation to purchase it or face new tax consequences. If you opted not to buy health insurance in 2014, you may be faced with a penalty when you file your 2014 tax returns. Even if you did buy insurance through one of the insurance marketplaces, you may have new tax forms to complete and some surprises when it comes to your refund or tax bill.

For most taxpayers, the impact on their tax filing will be minimal, requiring those who were covered to simply check a box indicating they had insurance throughout the year. Those who received subsidies to purchase insurance and who later had increases in their 2014 salary may be required to pay back some of that subsidy. Those whose salary decreased may receive a larger than expected refund.

As these provisions are new to everyone, there may be confusion for taxpayers and tax preparers alike. Unfortunately, due to recent budget cuts, the IRS expects to be able to speak with only half of the people who call in for assistance.

While gearing up for the 2014 tax season, it’s helpful to understand some the most important provisions of the ACA:

  • 1. Exemptions: The ACA provided some exemptions that allow taxpayers to opt out of purchasing insurance without any penalties, including hardship, affordability and religion. There are different methods for applying for an exemption depending on the type of exemption you are requesting. To learn more, go to:
  • 2. Penalties: Those who do not qualify for an exemption, were insured for only part of the year, or remain uninsured will be required to pay a penalty called “The Individual Shared Responsibility Payment.” The penalty is set to increase over the coming years, so compare not to see if it is more beneficial for you to pay the penalty or buy insurance. The Tax Policy Center has designed a calculator to help you determine your penalty is you opt to remain uninsured:
  • 3. Reconciling: Those who purchased subsidized insurance on the exchanges received an advance on a tax credit. At the time of requesting the subsidy for insurance in 2014, the amount of the subsidy was calculated based on the taxpayer’s 2012 income. The amount of the subsidy granted will be reconciled in the taxpayer’s 2014 filing using the taxpayer’s actual 2014 income and that will affect the taxpayer’s refund or bill. Changes in an individual’s personal circumstances, such as divorce, marriage or a new child can also impact those numbers.
  • There’s still time to plan. Taxpayers facing a loss in premium subsidies because of an increase in income can reduce their income to qualify for the credits. For example, they can contribute to an IRA by April 15, 2015, for the 2014 tax year.

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    Side Hussle Series – Declutter & Make Money

    [from a post scheduled to appear on when launched in 2015]

    We all have things lying around our homes that we have no use for anymore. Instead of holding on to them, sell them to someone who wants them and who will pay you for them. Look around, if you have unwanted electronics, clothes, furniture, books or CDs and DVDs, there’s a market.

    Used Electronics – Those old phones, computers and tablets sitting around your home could make you some quick cash. Companies such as,, and want your used electronics and will pay you for them. The items don’t even need to work! The process is largely the same for all four companies. Simply go to their websites, get a quote for your unwanted electronics, ship the items and get paid. These companies all provide free shipping and some are associated with national retailers so you can get paid right away.

    Clothes, Shoes & Handbags – If you’re like me, you have items in your closet that you haven’t worn in years and chances are, you will never wear them! Consignment shops are a great option for helping you free up some closet space while making a little extra dough. A quick Google search will bring up consignment shops in your area. If you don’t have one nearby, try Thredup will mail you a bag for your unwanted items, with a shipping label so you can send your goods to them at no cost to you. They review your items and pay you up to 80% of the resale value of your clothes. Items that they don’t accept are either donated to a charity, recycled or mailed back to you.

    If you have luxury clothing, jewelry or bags, you can try selling them through They pay up to 70% of the item’s sale price. Like Thredup, The RealReal will send you a bag to mail in your luxury items. Alternatively, you may schedule a “White Glove Pick-up” with your Luxury Manager.

    Furniture & Home Accessories – Like selling used clothing, consignment shops may be a good solution for selling your unwanted furniture and home accessories. These shops generally charge 50% of the sale price, but there are some advantages to selling this way. Namely that the consignment shops do the marketing for you and secondly, you don’t have to worry about strangers coming to your home. If you want to cut out the middleman, try Craigslist allows you to list items for free and buyers come to you. 100% of the sales proceeds are yours.

    CDs and DVDs – Many independent music stores sell used CDs and DVDs. Search online for local shops in your area. Depending on the number of CDs and DVDs you are wanting to sell, they can often sort through your goods and let you know how much they can offer while you wait.

    Books – There are plenty of online companies that are willing to buy back your unwanted books and text books. will simplify the work for your by scanning 40 other websites and let you know which one will offer you the best price. For text books, offers the most competitive buyback prices according to

    With a little effort and some “letting go” you can free up some extra space and make a few extra bucks!

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