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How to Organize Your Financial Records

Organizing-your-Finances

While the task of organizing your financial records may seem like a tedious and unappealing afternoon-long chore, we highly recommend taking the time to do so. Keep in mind, your recordkeeping system doesn’t have to be complicated. As long as you understand it and can maintain it, that’s good enough! Here are some guidelines to follow to make the organization process a little easier.

Divide and Conquer

Your financial documents can be divided into two main over-arching categories: short term files and long term files. Here are some of the items that should be included in each category:

Short Term:

• Bills
• Bank statements
• Canceled checks
• Credit card statements
• Health records
• Income tax receipts for deductions, income, etc.
• Receipts for large purchases
• Insurance policies

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Wealth, Success, and Mental Health: Finding the Balance Between Healthy and Wealthy

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April marks Stress Awareness Month, which provides a great opportunity to shed light on a topic often overlooked in the world of high-net-worth investors, which is mental health. For anyone who is used to managing substantial wealth, the pressure to sustain success may take a toll on your mental well-being. Here are some of the mental health challe...

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Inflation and Its Impact on the Market and Portfolios

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Understanding the implications of CPI and PPI is crucial for investors. In the ever-evolving world of finance, staying abreast of economic indicators is crucial for  investors looking to make informed decisions. One such key indicator is inflation, which recently made headlines with the release of data in early January 2024. According to ...

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There's Still Time to Fund an IRA for 2023

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The tax filing deadline is fast approaching, which means time is running out to fund an IRA for 2023. If you had earned income last year, you may be able to contribute up to $6,500 for 2023 ($7,500 for those age 50 or older by December 31, 2023) up until your tax return due date, excluding extensions. For most people, that date is Monday, April 15,...

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Working Past Age 73 – What Happens to Your RMD?

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As people live longer, working past the traditional retirement age is becoming more common. If you are healthy and are happy with your job, there’s no reason to stop working if you don’t want to! But if you decide to keep working past age 73, there is some important retirement planning you’ll need to do if you have any tax-deferred retirement savings accounts.

Required Minimum Distribution Basics

According to the IRS, participants in IRAs and employee retirement plans must take their required minimum distribution (RMD) by April 1 of the year after they turn 73 (if you reach age 72 after Dec. 31, 2022). The size of these RMDs is determined by a table published by the IRS known as the Uniform Lifetime Table. But if you are still working  - and intend to keep working - at age 73, there are some exceptions and additional rules you should be aware of.

No Delay for IRA Required Minimum Distributions

For traditional and employer-sponsored IRAs (excluding Roth IRAs), all owners must begin taking RMDs at age 73, and must continue taking distributions each year they are alive. There is no exception to this requirement, even if you are still working and have no need to tap into your retirement savings. But there is also no rule about contributing to your SEP or SIMPLE IRA, which you can do at any age while you are still working.

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Will a 529 or UTMA Affect My College Student’s Eligibility for Financial Aid?

Will a 529 or UTMA Affect My College Student’s Eligibility for Financial Aid?

A client approached us recently with this question: We’re saving money for our daughter’s college education, but she’ll still need a scholarship. What effect will a 529 Savings Plan versus an UTMA have on her eligibility for financial aid?

That’s a great question, and one not many parents think to ask. Here’s a breakdown of how these accounts are factored into the financial aid equation.

The FAFSA

The Free Application for Federal Student Aid (FAFSA) is the form completed by prospective college students to determine their eligibility for financial aid from the federal government, states, colleges and other organizations. FAFSA filing season opens October 1*, and students and parents have until June 30 to file. (Note that your state’s deadline may be different; you can check at studentaid.gov.)

The information reported on the student’s FAFSA is used to calculate a student’s Student Aid Index (SAI), an important figure for students applying for need-based financial aid.1 The Cost of Attendance (COA) minus SAI and Other Financial Assistance (OFA) equals the student’s Financial Need. An entity that utilizes the FAFSA to award need-based aid will not award higher than the student’s calculated Financial Need. For example, if the COA is $20,000 and the SAI and OFA are $17,000, a student will not be eligible to receive more than $3,000 in need-based aid. 

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Midyear 2023 Newsletter

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BENEFICIARY IRA RMD REQUIREMENT PUSHED AGAIN The SECURE Act of 2019 rewrote the rules for non-spouse beneficiaries who inherited IRAs in 2020 or later. While they used to be able to "stretch" their required minimum distributions (RMDs) from inherited IRAs over their lifetimes—thus stretching out the tax bills on their windfalls—the SECURE Act decre...

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2023 Newsletter

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SECURE 2.0 ACT CHANGES RETIREMENT SAVINGS The SECURE 2.0 Act of 2022, signed into law in December, brings dozens of changes intended to enhance Americans' retirement savings outlook.The main headliner has been the change to the Required Minimum Distribution (RMD) age: SECURE 2.0 pushed the RMD age to 73 for those born in 1951-1959 and 75 for those ...

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Joe Walsh's Fall 2022 ACE Sarasota Class Schedule

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Joe Walsh Jr is once again presenting financial literacy classes through Adult & Community Enrichment (ACE) at Suncoast Technical College. A program of Sarasota County Schools, ACE provides lifelong learning opportunities to meet the changing needs of the Sarasota community.

Joe is a volunteer instructor, so all registration fees go directly to ACE.

UPCOMING CLASSES:

Tues, Oct 18, 4:00 PM  |  Estate Planning Essentials: Where to Begin?
Estate planning is the key to making sure that everything you have worked for is passed on according to your wishes. These are difficult decisions, but if you don't make them, a court will.

Wed, Oct 26, 5:00 PM  |  7 Things To Do When Planning for Retirement
You’re in the home stretch of the race to retirement, but now is not the time to be complacent. Your retirement plan may need alterations. (…You do have a retirement plan, don’t you?) These seven to-do items will help you shore up your retirement plan so you can approach the finish line with confidence. 

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Second Quarter 2022 Newsletter

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BEAR WITH US There's a bear (market) with us. On June 13, the S&P 500 Index dropped -21.8% from its peak on January 3, officially pushing us into bear market territory. Marked by a -20% drop from a recent market high, bear markets set many investors on edge as economists begin catastrophizing about looming recessions, their doom and gloom ...

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Financial Mistakes Saved by Our Red Flag Audit®

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At Walsh & Associates, one of the most valuable services we offer is our Red Flag Audit® (RFA®). Just as a red flag indicates that conditions are unsafe, our Red Flag Audit® is an opportunity for us to show our clients those things in their financial environment that could be “unsafe”.

Over the years of providing this service, we’ve come across a few scenarios that could have been a hassle to downright disastrous for our clients had they not been caught – all the while our clients were none the wiser! Here are some of the things we’ve caught in our Red Flag Audits®.

Rental Properties without Their Own LLCs

We see this one often. Many times, when people have multiple rental properties, they won’t have them in separate Limited Liability Companies, or LLCs. LLCs provide pass through taxes (which provide the ability of the LLC owner to report their profit and loss on their individual tax returns), limited liability, and legal protection for their personal assets.

Our reasoning behind having a separate LLC for each rental property is for added protection. In the event of a claim in excess of your insurance limits, the maximum you’ll lose is your equity in that particular home (in theory). This leaves your other rental properties safe.

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Walsh & Associates Offering Free Financial Literacy Classes Apr 26, 28 & 29 at DeKalb Public Library

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Our financial advisors have teamed up with the DeKalb Public Library to provide free in-person financial literacy courses April 26, 28 and 29 for Financial Literacy Month. These programs are a collaboration of DeKalb Public Library and other local partners to share information and resources on personal finance topics.

CLASS SCHEDULE:

Social Security's Best Kept Secrets  |  Tues, April 26, 5:30-7:00 p.m. CT 

Did you know a married couple has over 80 different strategies for how they can claim their benefits? Or that a government pension can have a significant impact on the benefits you or your spouse will receive? Social Security planning is not “one size fits all.” If you’re not looking into all your options for collecting, you could make an expensive mistake.

How Financially Successful People Build & Preserve Wealth  |  Thurs, April 28, 5:30-7:00 p.m. CT

No good happens by rushing things, especially when it comes to investing. In this presentation, you'll learn what destroys wealth, how successful investors create wealth, and how to alter behavior to work towards being successful.

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2022 Retirement Plan Contribution Limits

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The IRS contribution limits for 2022 have ticked slightly upward from those of 2021; the maximum employee contribution to a workplace 401(k) or other qualified plan is $20,500 (plus a $6,500 catchup contribution if you are age 50 or older, for a total of $27,000). This limit is for employee elective deferrals and does not include any non-elective contributions or matching contributions made by your employer; the overall limit for 401(k) contributions including money from your employer or any other source rises from $58,000 to $61,000.

Check the chart below for contribution guidelines for other types of retirement plans.

 

Maximum workplace retirement plan contribution amounts

2022

2021

401(k), 403(b), most 457 plans and federal Thrift Savings Plans

$20,500 

$19,500 

Catch-up contributions in these plans for people 50 and older

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Third Quarter 2021 Newsletter

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WHAT'S ALL THIS "TAPERING" TALK? "Tapering" has been in the news lately, but what exactly is it, and why is it newsworthy? A quick review of some of the coronavirus-related monetary policy events may help in understanding how we got here:January 2020: A novel coronavirus reaches the U.S.February 2020: February 28, stock markets report their largest...

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What Happens to Funds Left in Your HSA?

What Happens to Funds Left in Your HSA?

Before diving in, we’ll start with the basics of a health savings account, or HSA. A health savings account offers those who have health insurance with high deductibles the chance to save pretax funds to use for medical expenses. If there are any unused funds in the HSA at the end of the year, they roll over to the next year. Unlike with a Flexible Spending Account, an HSA also offers the ability to invest the money, and when the HSA owner hits 65 they can withdrawal money for non-medical purposes without penalty (though it will be subject to income tax, much like a traditional IRA). This mean many HSA owners use it as a backup retirement account.   

What Happens at the End of the Year?

A health savings account does not have a “use it or lose it” policy for funds left over at the end of the year. Rather than forfeiting unused funds, your HSA dollars are able to remain in your account, growing tax-free until you are ready to use them.

What Happens if You Change Your Job?

Those who contribute to an HSA are the owners of that HSA account, meaning they can take it with them should they leave their job. If your new employer offers an HSA you like better, then you can choose to roll the money from your old HSA into the new employer’s plan. You can also elect to keep your HSA, so long as you still have your high deductible health plan under the Consolidated Omnibus Budget Reconciliation Act (COBRA), a law that states your right to stay on your current healthcare plan after leaving your job. Your HSA can even be used to help pay COBRA premiums.

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Is the IRS Waiving the 60-Day IRA Rollover Deadline?

Is the IRS Waiving the 60-Day IRA Rollover Deadline?

Until now, if you took a distribution from your employer sponsored plan, such as an IRA or 401(k), with the intention of making a 60-day rollover, but missed the deadline, the tax impact could be devastating. In most cases, the rollover would become invalid and you end up with a distribution that counts as a taxable event.

But in a surprising move by the IRS, in August 2016 under Revenue Procedure 2016-47, they announced that investors can now self-certify that their late rollover contribution was allowable, given that their reason for missing the rollover deadline was one of the 11 reasons the IRS has outlined.

Listed below are the 11 permissible reasons one can now use if they miss the 60-day deadline:

1. The financial institution in charge made an error during the distribution or upon receiving the contribution.

2. The distribution was made in the form of a check that was never cashed or was lost.

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Understanding Your Required Minimum Distribution - and How to Calculate It

Understanding Your Required Minimum Distribution - and How to Calculate It

What is a RMD?

When you hit the age of 72 , you are required by the IRS to withdraw funds from your traditional individual retirement accounts (IRAs) and qualified plans such as 401(k)s. This mandated withdrawal is known as a Required Minimum Distribution, or RMD.

One of the possible benefits of having an IRA is that the money you contribute is not counted as income in the year you contributed – meaning you don’t have to pay income tax on it. The government does this to encourage people to save for their retirement.

But at the age of 72, the government requires you to take money out so they can begin to collect taxes on it (no such thing as a free lunch!). If you’re in a position where you have other sources of retirement income, it may make sense to only take the minimum distribution, that way more of your money can continue to grow tax deferred. For those approaching the distribution age, it’s important to have a well-thought out distribution strategy so you don’t end up wasting a valuable tax-deferral opportunity.

How to Calculate your RMD

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Withdrawal Rules for 3 Popular College Saving Accounts

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When saving for your child or grandchild’s college education, there are several types of education savings accounts to choose from. Three of the most popular college savings accounts are Uniform Gift to Minors Act (UGMA)/ Uniform Transfer to Minors Act (UTMA) accounts, 529 College Savings Plans, and Coverdell Education Savings accounts. Each type has specific rules, laws and taxes associated with it, so it’s important to know the differences before choosing where to invest your money. Walsh & Associates and LPL Financial do not provide legal or tax advice or services so we suggest you consult your legal or tax professional regarding your specific situation. In this article, we cover the pros and cons of each type of account.

UGMA and UTMA Accounts

UGMA and UTMA accounts are education savings accounts that allow adults to make financial gifts to a minor while acting as custodians of the account. Once money is put into these accounts, it is legal property of the minor, but it is the adult custodians’ duty to make sure the money is invested sensibly so that it will benefit the minor in the future. Depending on the state, once the minor reaches 18 or 21, they gain full control of the account and can spend the assets on what they deem necessary for their education. That means parents, or whoever is a custodian on the account, cannot make any stipulations on the expenditures.

As far as taxes are concerned, there is no IRS penalty for withdrawing money, however, any profits made in an UGMA or UTMA are generally taxed at the child’s – usually lower – tax rate, rather than the parent’s rate. This means the student could be subject to the “kiddie tax”, which applies to college students between the ages of 19 and 24. For 2016, under the kiddie tax rule, the first $1,050 of unearned income a student earns will not be taxed, and the second $1,050 of unearned income will be taxed at the student’s tax rate. Anything in excess of $2,100 though will be taxed at the parent’s tax rate. The only way to avoid this is if the student under the age of 24 is providing over half of their own support from their own earned income (aka from a salary, not stocks). This would allow the student’s unearned income to be taxed at their own tax rate, not their parents’ higher rate. For complete details, visit IRS publication on the “Kiddie Tax”.

Another factor to consider with an UGMA or UTMA is that they will affect the minor’s ability to receive financial aid. This is because the Free Application for Federal Student Aid (FAFSA), looks at both the parents’ and student’s income when determining eligibility for aid. Since the assets in an UGMA/UTMA are considered the child’s money, it can weigh harshly on their chance at financial aid.

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Could Filial Responsibility Laws Could Leave You with Your Parents’ Healthcare Debt?

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There’s a relatively unknown law on the books that could put adult children in a situation that jeopardizes their savings. If your parents live in one of the 27 states with filial responsibility laws, you could be held legally responsible for their care. That means if your parents are unable to pay for their healthcare, you may have to foot the bill.

While filial responsibility laws are rarely enforced today, skyrocketing healthcare costs and longer life expectancies are increasing the threat of elderly parents outliving their savings, which could bring these laws back to life.

States with Filial Responsibility Laws

The following states currently have filial support laws:

 AlaskaIndianaMontanaOregon Vermont
 ArkansasIowa NevadaPennsylvaniaVirginia
California KentuckyNew JerseyRhode IslandWest Virginia 
Connecticut LouisianaNorth CarolinaSouth Dakota 
DelawareMassachusetts North DakotaTennessee 
GeorgiaMississippiOhioUtah 

Filial laws stem from England’s 16th century Poor Laws, a set of social measures meant to support impoverished citizens. At one point, 45 U.S. states had statutes that left children responsible for the well-being of their parents,1 but many states repealed these laws after the establishment of Medicaid in 1965, which provides a safety net for low-income people who can’t afford healthcare.

What Happens if Your Parents are Unable to Pay?

If your parents can’t afford their cost of care and their state has filial responsibility laws, you may be asked—or sued!—to pay the bill. The laws vary from state to state, with some imposing financial responsibility and others, criminal penalties. One thing of note: No matter the state, all require the parent to be deemed “indigent” (poor); you aren’t on the hook for your parents’ medical bills if they can pay but simply choose not to.

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5 Misconceptions You Probably Have about Personal Finance

5 Misconceptions You Probably Have about Personal Finance

As much as we wish it wasn’t true, there are some common mistakes we see over and over again that people make with money. But it’s not necessarily surprising - according to Standard & Poor’s Ratings Services Global Financial Literacy Survey, only 57% of U.S. adults are considered financially literate1. That means 43% of the United States population does not understand some or all of the basic financial concepts of numeracy, risk diversification, inflation and compound interest. 

That being said, here are 5 misconceptions we’ve noticed time and again that people have about money, and why they’re wrong.

1. Believing You can Consistently Beat the Market

The thought of beating the market by hand picking stocks may be hard to ignore, but it’s improbable that you will ever be able to consistently outperform it. If no one can consistently predict the future, then no one can consistently beat the market! By going this route, you’ll be taking risks that you probably can’t afford.

Rather than fixating on beating a benchmark and focusing on short term success, you should instead put your effort into reaching a long-term goal. Whether it be providing cash flow for present and future needs, preserving wealth, or growing wealth with the goal of nominal return2 plus inflation – it is better to have a concrete long-term goal rather than attempting to beat the market day by day.

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