On Thursday, the GOP announced details of their tax reform proposal.  The proposal provides additional details on the tax package they intend to implement.  And for the first time they released the actual brackets for each tax rate, which is incredibly important when trying to figure out if you will be better off under the new plan or not.  Let’s dive in to a comparison for one family. John and Mary Smith are both working, age 58 and have no children.  John is earning $75,000/year and contributing $10,000/year to his 401k.  Mary is earning $105,000/year and maxing out her 401k ($24,000/year).  For simple rounding purposes, let’s say they pay $9,400/year in New York state income taxes, $4,000/year in property taxes and $6,000/year in mortgage interest. Here is how it shakes out under the current tax structure and under the proposed tax structure: As you can see, the width of each tax bracket is...

On Wednesday, the GOP announced details of their tax reform proposal.  The proposal provides insight into changes that are being discussed but still leaves many questions unanswered.  Let’s go over some of the big points.   1. Reduction in tax brackets and tax rates This is a big change as it reduces the number of brackets from seven down to three and lowers the top bracket to 35%.  Congressional committees working on the reforms left room to add a fourth bracket at a higher rate, but that remains to be seen. The skinny: It depends on how wide each bracket extends, but this will likely lower taxes for many people.   2. Doubling the standard deduction to $12,000 for single filers and $24,000 for married couples There will absolutely be winners and losers created from this change.  The itemized deductions calculation would simply be mortgage interest and charitable contributions, which for many people will not result in...

Retirement is a relatively new concept and before 1960, it didn’t really exist for most people.  We’re still getting used to the idea of living off our savings during the golden years.  This also begs the question “How much can I safely spend from my savings without running out of money in retirement?’ Unfortunately, we cannot answer this question perfectly because we don’t know three very important things about the future: How long are you going to live? What annualized return will your money earn in retirement? In what sequence will you get these returns? Many people have said they will simply “live off the interest” in retirement.  Well, if you ladder a bunch of five year CDs you’re talking about 2.25% interest or $22,500 on $1 million in savings.  Oh, and don’t forget that the latest inflation rate according to the Bureau of Labor Statistics is 1.7% for the 12 months ending in July...

When meeting with clients who are about to retire I inevitably come to the question of how much money do you need each year to live on? Very few people have an answer to that question. If you don’t know how much you need how can you ever expect to know if you are ready to retire? Let me give you an example: if someone asked you to help budget how much gas they might need for an upcoming road trip what would you ask them? Obviously you’d ask where they are going.  Now imagine they said they didn’t know.  There would be no way for you to help them because you don’t know if they are driving across the country or across town. Knowing how much you need to live on is vital to preparing for retirement.  Unfortunately this means you need to budget, which is one of those things we...

It’s the time of the year where we all go through our stuff to clean out the things we no longer need.  We organize our closets and garages but often neglect to organize our financial lives.  Your personal finances are incredibly important because the amount of stress money troubles can put on a person is enormous.  As you approach retirement it becomes even more important to get things cleaned up.  Here are four tips to help with your retirement spring cleaning: Get Organized Knowledge is power so if you don’t know what your big picture financial situation looks like then it’s time to get organized.  Use a spreadsheet or one of several popular software services like Mint.com to pull together all of your information.  Once you know where everything is, what the totals are and where your money is flowing, you will have the information you need to take the next step. Consolidate...