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Tax Cuts Present 401k Savers Rare Opportunity


The vast majority of American taxpayers are about to experience a rare event; their paychecks are most likely getting larger in 2018, even if their salaries haven’t changed.  This is because the Tax Cuts and Job Act (TCJA) passed in December comes with a slew of once-every-few-decades tax law changes, including lower tax rates for most individuals.  The IRS, every accountant in America, and employers, are scrambling to adjust to the new tax law. One adjustment that has to be made and must be in place for all employers by February 15th is utilizing new withholding tables for paychecks.  These tables dictate how much tax your employers or payroll providers must hold back from each paycheck you receive.  Because tax rates under the TCJA are lower, most individuals will experience lower amounts of tax withheld from their paychecks.  This means that you should expect your take home pay to increase when...

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4 Crucial Financial Tips for Recent College Graduates


So you graduated from college and you are off to your first job.  Congratulations on making it this far!  I’d tell you things are about to get real, but you know things are already “real” and you’ve proven you can handle it.  What is about to happen is your next major life change.  Here are four tips that are crucial to set you up for financial success moving forward. BUDGET – If this sounds like a dirty word to you, then it is time to get comfortable with a cuss word that your grandmother will actually approve of.  The most basic budget simply tracks your take-home pay against your monthly cash outflows.  Where it tends to get a little tricky is converting cash-flows into monthly amounts, so that you end up comparing apples-to-apples.  For weekly expenses like groceries, multiply the expense by 4.3 to get the monthly amount.  Also, if you...

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If you or your spouse are at least age 70-and-a-half, have an IRA, and donate money to charity, then you should consider the advantages of a qualified charitable distribution (QCD).  A QCD lowers your adjusted gross income (AGI), which in turn may: lower the amount of your Social Security benefit subject to tax reduce your Medicare premiums keep your itemized deductions from being phased out lower the threshold for deducting medical expenses and miscellaneous itemized deductions What is a QCD, you ask? A QCD occurs when an IRA owner has money distributed from their IRA directly to a public charity.  This is different from having money go from your IRA, into your own pocket, and then gifting it to a charity, in which case you would deduct the amount on Schedule A and potentially lose the benefits listed earlier.  Some other rules of a QCD are: Must be at least age 70.5 on the day the...

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Icarus and Hubris: A Key Lesson from the Election


Regardless what side of the political spectrum you fall on, most can agree that the way the markets moved before, during, and after the night of the Presidential election didn’t quite add up.  I am frequently reminding my clients that the markets do not like uncertainty or surprises; a Donald Trump win threatened to offer plenty of both. The days leading up to the election seemed to tell us the markets preferred a Hillary Clinton win.  They fell 9 days in a row as the FBI investigation into Clinton’s email server was reopened and her polling numbers dropped.  Then, on Monday November 7, the Dow rallied almost 400 points when the FBI once again cleared her in their investigation.  This is a logical market reaction given that Clinton represented the status quo -- that is, she represented certainty for the markets. The markets began to plummet the night of the election as...

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Sleep On It – How To Save Your Retirement With A Spare Bedroom


Are you coming up short on saving for retirement, or worse yet, coming up short on paying for a retirement you are already in?  If you answered “yes” to that question and you have an unused bedroom, you may be sitting on, or rather, sleeping on the answer. Airbnb is a peer-to-peer online marketplace that allows residential property owners to rent out a room, or their entire home, to individuals looking for short-term lodging.  Think of it as a way to make money off your home like it’s an unofficial hotel. says they have 2 million+ listings in over 191 countries, so this is a serious business. Let’s say your CERTIFIED FINANCIAL PLANNER™ professional is telling you that you need to save another $500 a month to get on track for the retirement you want.  You’ve scrutinized your budget and there is just no way to come up with that money. ...

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The Power of the Mortgage Refinance


The Federal Reserve once again decided on September 21 to hold off on raising interest rates.  That may not help the paltry interest you are receiving on your savings account or bank certificate of deposit, but it is something that can still make – or rather save you some money. Interest rates on home mortgages remain near all-time lows. lists the rate on a 30 year, fixed-rate mortgage refinance at 3.35% and the rate on a 15 year, fixed-rate mortgage refinance at 2.63% as of 9/29/16.  No one can forecast whether rates will go up or down, but it is highly unlikely they will go much lower.  That means now is a good time to consider refinancing. Consider someone who bought a $200,000 home 10 years ago with 20% down and took out a traditional 30 year mortgage for the remaining $160,000.  If the interest rate on the mortgage was 5.25%,...

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Ignoring that HSA May be Bad for Your Financial Health


If you are in a high deductible healthcare plan (HDHP), then you are eligible to utilize a Health Savings Account (HSA).  This is an often-ignored tool that can potentially produce large tax savings.  Your contributions are pre-tax, they grow tax-deferred, and they come out tax-free as long as they are used for qualified medical expenses.  Not even a 401k gives you that many tax advantages!  The maximum 2016 contributions are $3,350 for an individual and $6,750 for a family plan.  You can add another $1,000 to those numbers if you are age 55 or older. The following example shows just how much impact an HSA can have on your bottom line: Let’s say you are single, living in New York State, making $52,000 a year and eligible to contribute to an HSA through your employer-provided healthcare plan (commonly referred to as a Section 125 Cafeteria Plan). You know that you will have...

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Don’t Time the Market -Listen to Cicadas Instead!


Peter Lynch, the famous and very successful mutual fund manager, is quoted as saying “Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in the corrections themselves.” Recent market events have provided us with yet another example of why trying to “time” the investment markets just doesn’t work.  At the close of business on June 23, 2016, the night before the Brexit vote results were released, the S&P 500 was up 4.52% for the year.  Most investors probably went to bed that night confident that leaving their money in the markets was the right thing to do since the polls were leaning toward the U.K. remaining in the European Union.  As we know now, the vote went in the opposite direction and Brexit heavily impacted the U.S. markets in the morning, sinking the S&P 500 by 3.76% almost instantly. A market-timing...

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