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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. 2. Selling at the Bottom of the Market When the market goes down, we all feel it. Emotions run wild and investors begin to question their investments and convince themselves that it’s time to get out. The reason for this panic? They’re probably analyzing their investments too often. In a phenomenon known as myopic loss aversion, we know that those who constantly monitor their investments tend to regret losses two to two and a half times more than similar sized gains3. What’s the solution? Work with your financial advisor to create a financial plan based on logic, not emotion. Try to only follow up on your investments occasionally to track important factors such as your performance and make sure your...

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What Counts as Earnings for Social Security

What Counts as Earnings for Social Security

As economic times change and people begin to live longer, it’s becoming more and more common for workers to continue working through retirement. In fact, the 16th Annual Retirement Survey put out by Transamerica Center for Retirement Studies found that 51% of people plan to keep working in retirement1. Luckily, the Social Security system allows you to earn income while receiving benefits or survivor benefits. However, your benefits will be reduced if your earned income is more than the government’s limits before reaching your full retirement age. To make things even trickier, not all earnings are considered “earned income”. So what does and does not count as earned income? Here are the categories: Employment Income If you work for an employer, your gross earnings will count towards your earnings limits for Social Security benefits. That means Social Security considers your wages before any deductions such as income taxes, insurance, and other expenses. What Social Security doesn’t count are your special payments – which includes income such as unemployment compensation, investments, interest, pensions and annuities. Self-Employment Income If you are self-employed, your earned income is any earnings you make after business expenses. This income counts when you receive it, versus when it was actually earned (with the exception of if the income was paid after you were already entitled to Social Security but was earned before you were entitled). There are also some special rules that apply to insurance salespeople who receive commissions for policies they sold before they began collecting benefits. These commissions will not affect their Social Security benefits so long as they are the result of work done before retirement. Exempt Income Essentially, any income that is not considered employment or self-employment income is exempt. This includes a wide variety of income sources, such as pensions and retirement pay, interest and dividends from stocks and bonds, and IRA payments. A more exhaustive list can be found in the Social Security Handbook located here https://www.ssa.gov/OP_Home/handbook/handbook.18/handbook-1812.html. Earnings Test While working and collecting Social Security, your benefits will be reduced $1 for every $2 of earnings over the excess of $15,720 and $1...

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6 Important Life Events that Need Financial Planning

6 Important Life Events that Need Financial Planning

Whether they’re good, bad, or somewhere in between, there are certain life events that should have a financial plan. According to a study done by the Retirement Income Industry Association (RIIA), households that regularly get advice before making a financial decision fare better than those who rarely or never get advice1. The study, done over a ten year period, looked at households who regularly sought financial advice with investible assets of $100,000 versus households who rarely or never received financial advice with investible assets of $100,000. The inflation adjusted difference in financial assets for households who regularly sought financial advice was $106,000. The difference in financial assets for households that rarely or never received financial advice was only $29,000 over the ten year period being observed. Financial advisors can be particularly helpful, especially for these six life events: 1. Starting Your First Full-Time Job Young, fresh out of school, and loaded down with student debt, the last think you may be thinking about when you get your first job is saving money. But now is your best chance to start saving for a comfortable retirement – your future self will thank you! A financial planner can give you guidance in contributing to your employer’s 401k, or help you look into other investment options like traditional or Roth IRAs. You may also be relocating states for your new job and a financial planner can discuss how your tax rates and cost of living will change with the move. 2.  Getting Married Marriage most likely means you’ll be combining finances. To avoid unnecessary fights, we highly recommend visiting a financial professional. A financial advisor can help you divide rolls and determine who should be in charge of paying for what. They can also look at your employee benefits to make sure you’re both benefiting. There’s also the chance that a partner is bringing a financial responsibility into the marriage, such as a child from a previous marriage. Your advisor will be able to help you both navigate these obstacles and prevent any misunderstandings. 3. Having Children Bringing a baby into the family is...

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Divorce and Social Security Benefits: What You Need to Know

Divorce and Social Security Benefits: What You Need to Know

While you may think all ties have been severed between you and your ex, one link may still exist – and that’s your Social Security benefits1. Depending on if you meet the 5 necessary criteria, you may be entitled to up to half of your ex’s benefits if they are higher than your own. Choosing to take your benefits as an ex-spouse could mean thousands over the course of your retirement, so don’t overlook it! The 5 Criteria You Must Meet To receive Social Security benefits on your ex-spouse’s record, the following conditions must be met: 1. Your marriage must have lasted 10 years or longer.2. You are currently unmarried.3. You are age 62 or older.4. Your ex-spouse is entitled to Social Security retirement or disability benefits.5. Your own benefit that you are entitled to receive is less than the benefit you are entitled to receive based on your ex-spouse’s work. After meeting the five main criteria, one additional criteria to note is that if you ex-spouse has not yet applied for retirement benefits, but will be eligible in the future, then to receive benefits on his/her record you must have been divorced for at least two years. How Much of Your Ex’s Benefit will You Receive? Generally, you will receive one-half of your ex-spouse’s retirement benefit if it is greater than your own and you begin collecting at your full retirement age (FRA). If your ex-spouse dies before you, you are eligible to receive his or her full retirement benefit. Here’s an example: Let’s say at your full retirement age, your benefit is $800 per month. Your ex-spouse’s benefit is $2,000 per month. If you receive benefits on their record instead of your own, you’ll receive $1,000 per month, or $200 more than you would by just taking your own benefit. To give you even more perspective, let’s say you’re collecting social security benefits from age 66 to 90. By taking your ex-spousal benefits, you’ll receive $57,600 more over that 24 year period than if you had taken benefits on your own record. Just remember, if you take any benefit...

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What is a Donor Advised Fund and Why Might You Use One?

What is a Donor Advised Fund and Why Might You Use One?

When giving to a charity, you want to be smart and effective with your charitable contributions. One way to do that is by using a donor advised fund (DAF). A donor advised fund is a charitable investment vehicle that is sponsored by a public charity. One potential benefit of a DAF – your charitable contribution is eligible for an immediate tax deduction, even though you can distribute the donation over time. If you had already planned to make charitable donations, this could be big news! Why a Donor Advised Fund? A DAF is a cost-effective, flexible way for donors to get maximum tax benefits for supporting the causes they care for. You can donate things such as cash, stocks, real estate or non-publicly traded assets to support any IRS-qualified public charity. You can choose to donate to your chosen charities immediately, or over time. How does a DAF work? A donor advised fund can be explained in five simple steps: 1. Make an irrevocable contribution of your personal assets. 2. Receive the maximum tax deduction allowable by the IRS. 3. Name your donor advised fund account and establish your advisors as well as any successors or charitable beneficiaries. 4. Your contribution will be placed in a DAF account where it can be invested and grow federally tax-free. 5. Once your account is set up you can recommend grants to the qualified charities of your choice. What are the tax benefits? For many, the tax advantages of a DAF are what makes them most appealing. As mentioned before, donors receive an immediate tax deduction when they make a contribution to a donor advised fund. For a cash donation, you’re generally eligible for a tax deduction of up to 50% of your adjusted gross income. For long term appreciated assets, such as stocks, bonds or real estate, you can take an income tax deduction of up to 30% of your adjusted gross income, and because you’re donating these assets to charity, you generally won’t have to pay capital gains. What other potential advantages to DAFs have? There are many other possible advantages to...

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Understanding Medicare – What You Must Know

Understanding Medicare – What You Must Know

If you don’t rely on it already, Medicare will eventually be a big part of ensuring that your healthcare costs are covered in your retirement. Health care can be one of the largest expenses in retirement – according to a study done by the Employee Benefit Research Institute (EBRI) in October of 2015, the average retired couple will need $259,0001 to cover their health care costs in retirement. Medicare will cover half of this cost. But despite the huge role Medicare plays, many people don’t know the facts about it. Below we’ll discuss a few key questions to ask when creating a Medicare plan. 1. What is Medicare? Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease.2 Medicare is broken into different parts to help cover specific medical services. The chart2 below briefly overviews each part: Medicare Part Coverage Part A Covers inpatient hospital stays, care in a skilled nursing facility, hospice, and some home health care. Part B Covers certain doctors’ services, outpatient care, medical supplies and preventative services Part C Also known as Medicare Advantage Plans. This type of Medicare is offered by a private company that contracts with Medicare to provide you with all Part A and Part B benefits. Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans and Medicare Medical Savings Account Plans. If you’re enrolled in a Medicare Advantage Plan, most Medicare services are covered and aren’t paid for under Original Medicare (Medicare managed by the federal government). Most Medicare Advantage Plans offer prescription drug coverage. Part D Adds prescription drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-for-Service Plans, and Medicare Medical Savings Account Plans. These plans are offered by insurance companies and other private companies approved by Medicare. Medicare part A and B are the lowest upfront cost, but can also lead to some gaps in coverage. Conversely, having Medicare parts A, B and D will have the highest upfront cost but provide the least amount of...

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Better Planned Giving with a Charitable Remainder Trust

Better Planned Giving with a Charitable Remainder Trust

For some, planned giving can be an important component of their estate plan. Planned giving is the practice of making a substantial charitable gift part of a donor’s estate plan, which can either be distributed during the donor’s lifetime or after their death. Often times, smart planned giving involves combining a few different vehicles, such as a donor advised fund, and a charitable remainder trust (CRT). While we’ve explained a donor advised fund in a previous blog, linked above, another very popular option for smart charitable giving is the charitable remainder trust. Not to be Confused with a Charitable Lead Trust A charitable remainder trust is the inverse of its sibling, the charitable lead trust (CLT). Both are known as “split interest” trusts, which refers to the “split” of how they’re broken down into two components. The first is a life interest component, and the second is a remainder interest component. A notable difference between the two is how they pay income. A CLT first pays income to a charitable beneficiary for a specified amount of time, then pays the remaining assets (or remainder interest) to a non-charitable beneficiary. Conversely, a CRT first pays a stream of income to non-charitable beneficiaries for a period of time, and then the remainder is paid to a charity. There are also some substantial tax differences. With a CRT, the grantor can claim a tax deduction on his contribution, whereas the grantor of a CLT does not receive any deductions to their income. The grantor of a CLT may also have to pay a federal gift tax on a portion of each contribution, though it’s only on the amount or remainder interest set aside for non-charitable beneficiaries. So why use a CLT? One example would be for donors who are interested in charitable giving, but have heirs that are minors or may not be ready to assume the financial responsibility of managing the assets. Benefits of a Charitable Remainder Trust As mentioned before, a CRT is a tax-exempt entity. Because of this, they can be extremely useful for donors who want to sell appreciated assets...

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Behavioral Finance - When Perception is Deception

Behavioral Finance - When Perception is Deception

According to conventional, or modern, financial theory, people are generally rational and predictable investors. Some popular conventional finance theories are the Capital Asset Pricing model, which explains the relationship between systematic risk and expected return, and the Efficient Market Hypothesis, a theory that claims it is impossible to beat the market because stocks always trade at fair value. And while these theories sufficed for a while, critics began to notice that these theories couldn’t explain certain “irrational” investor behaviors. Behavioral Finance is the study of these irrational behaviors, and how emotions can drive the stock market. This idea that psychology is a driving factor in market changes is a direct challenge to traditional economic theory, but the reality is that even sensible investors make irrational decisions. Loss Aversion Loss aversion is a fundamental part of Behavioral Finance, and can be explained by the Prospect theory, which states that people make decisions based on the potential value of losses and gains rather than final outcome1. Here is an experiment from Science2 that illustrates this loss aversion: Participants in the study were given $50 at the start of the experiment. They were then asked to choose one of two options, 1. Keep $30 or 2. Gamble with a 50/50 chance of losing the whole $50. The results were that 43% of people chose to gamble. The experimenters then changed the way the secure option was worded, asking participants to choose between, 1. Losing $20 or 2. Gambling with a 50/50 chance of losing the whole $50. The results this time? The participants who chose to gamble rose to 61%. People are more likely to prioritize avoiding a loss than the possibility of a greater gain. This translates into investors holding on to investments that continue to lose money, believing they can avoid loss because the price will eventually come back. Loss aversion causes investors to become reluctant to make a change because they are so focused on what they might lose, instead of what they could potentially gain – a phenomenon known as “inertia”. This inertia is what causes people to put things...

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Receive Unemployment Last Year? Prepare for the Tax Bill

We all know 2020 was an unprecedented year for job loss as businesses closed due to stay-at-home orders, loss of consumer spending or, at times, just out of an abundance of caution. From September 2019 to February 2020, the U.S. unemployment rate had been holding steady, hovering between 3.6 percent and 3.5 percent—its lowest since 1969.1 Then the coronavirus pandemic hit, and unemployment skyrocketed to 14.7 percent by April 2020.1 While many Americans have regained employment—in January 2021, joblessness was down to 6.3 percent2—those who received unemployment insurance in 2020 may be facing another unexpected financial burden in the coming weeks: a surprise tax bill. Are Unemployment Benefits Taxed? Unemployment benefits are taxed as income not only at the federal level, but also by most states: AZ, AR, CO, CT, DE, DC, GA, HI, ID, IL, IN*, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, NE, NM, NY, NC, ND, OH, OK, OR**, RI, SC, UT, VT, WV, and WI all impose income tax on unemployment benefits.3 There are no additional FICA (Social Security and Medicare) taxes owed on unemployment benefits. What makes the tax on unemployment insurance particularly burdensome is that applicants must opt into tax withholding by filling out a Form W-4V (“V” is for “voluntary”). However, even those who opted to withhold taxes may still owe additional federal and/or state taxes, as the only withholding option is a flat rate of 10 percent for federal taxes. Additionally, many states had difficulty implementing the Federal Pandemic Unemployment Compensation (FPUC) program with their existing systems to provide the additional weekly unemployment payments of $600 and later, $300. In the struggle to roll out the program, some states found they were unable to withhold any taxes from the additional FPUC money. Conversely, unemployment recipients who didn’t know that their benefits were taxable or didn’t know how to sign up for tax withholding may be in for the biggest surprise at tax time: Depending on how much tax will be owed, it’s possible that the recipient should have been paying quarterly estimated tax payments, and there is a penalty...

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Joe Walsh Named to 2019 Financial Times 400 Top Financial Advisers

Joe Walsh Named to 2019 Financial Times 400 Top Financial Advisers

Walsh & Associates CEO Joseph Walsh Jr. was named to the 2019 Financial Times 400 Top Financial Advisers. Members must have more than 10 years of experience, at least $300 million in assets under management (AUM) and rank highly in areas of AUM growth rate, compliance record, industry certifications and online accessibility. When Walsh entered the field of Finance, he was successfully running a restaurant and just wanted the know-how to manage his profits. But he suddenly found himself in high demand, serving as a resource not only to friends and family who called with their personal finance questions, but also to their friends and family who had been told to “go ask Joe. He’ll know.” The gratification Walsh received from helping others navigate this oftentimes difficult arena set him on a new career path, and he has been happily advising Walsh & Associates clients since 1986. Walsh is pleased to be one of the independent firms on the FT 400 Top Financial Advisers list, which is comprised mostly of multinational financial services companies. His family firm has just 11 employees, three of whom are his sons Tom, Michael and Joe III. “We help so many people, and it’s nice to be recognized,” Walsh said in response to the announcement. “I like what we do, how we do it, the people we do it for — they become our personal friends, and I want what’s best for my friends.” In addition to being an adviser and the CEO of Walsh & Associates, Walsh is a volunteer instructor for Adult & Community Enrichment (ACE) at Suncoast Technical College. His classes cover many of the same topics broached with clients, like Social Security strategies, estate planning and the transition to retirement. He also serves on the volunteer CIMA and CPWA Certification Item/Test Form Review Task Force for the Investments & Wealth Institute (formerly IMCA). Walsh has an MBA in Finance and CFP, CFA, CTFA, AIFA and CPWA designations.

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SECURE Act adds apprenticeships and student loan repayment to 529 plans

SECURE Act adds apprenticeships and student loan repayment to 529 plans

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law December 2019 to boost retirement planning. Some of its key provisions gave small businesses easier access to tax-advantaged retirement savings plans, allowed part-time workers to participate in these plans and pushed the required minimum distribution age from 70 ½ to 72. But this retirement enhancement act also included two non-retirement provisions in the form of new qualified plan expenses for 529 college savings plans. Apprenticeship Programs The first qualified plan expenses the SECURE Act added to 529 college savings plans are apprenticeship programs. The Department of Labor provides a search tool1 to find out if your particular apprenticeship program is eligible. If it is, 529 plan funds can be used towards program fees, books, supplies and equipment, including the often-expensive tools needed for the trade. Student Loan Repayment The second new qualified plan expense for 529 plans is student loan repayment. Beneficiaries of a 529 plan can use up to $10,000 of their plan’s balance to repay any qualified education loan, as can any siblings of the beneficiary. The $10,000 amount is the lifetime limit per recipient; this means, for example, a person cannot use $10,000 from their own 529 plan and then additional funds from their sibling’s 529 plan towards their student loans. Before withdrawing funds for loan repayment, call your state’s plan provider to confirm whether they adopted the Tax Cuts and Jobs Act federal language for what constitutes a “qualified higher education expense.” If your state did not conform to the new federal tax laws, then the SECURE Act expansion to include student loans may not apply at the state level, which means if your state has income tax then you would owe state income tax on the earnings portion of the 529 plan distribution. Keep in mind that the IRS prevents double-dipping, so if you make a student loan payment with a distribution from your tax-advantaged 529 plan, you cannot then claim a student loan interest deduction on the interest you paid using a 529 plan. While a 529 plan has many benefits, there are...

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Joe Walsh Named to 2020 Financial Times 400 Top Financial Advisers

Joe Walsh Named to 2020 Financial Times 400 Top Financial Advisers

Walsh & Associates CEO Joseph Walsh Jr. was named among the 2020 Financial Times 400 Top Financial Advisers in the country. Members must have more than 10 years of experience, at least $300 million in assets under management (AUM) and rank highly in six areas including: AUM, asset growth, compliance record, years of experience, industry certifications and online accessibility. This is Walsh’s second consecutive year on the list. He was ranked by his home office in Sarasota, Florida, but he is the only Sarasota or DeKalb, Illinois advisor on the list. "It is flattering to be recognized by the Financial Times as one of the top 400 advisors, but it’s more important for our clients to think of us as a top advisor," says Walsh of the award. This is especially true amid these trying times of stay-at-home orders, a barrage of coronavirus news on TV and current market volatility. Having seen several economic downturns during his career, Walsh says, "What makes a great advisor might come out in these times more than other times. Good returns and comprehensive service is all well and good, but planning for the unexpected and reacting appropriately is far more important." Walsh recommends having a plan in place before a crisis, but for those seeking advice on changes they can make right now, he suggests: "There are numerous differences in the taxes for 2020 due to the CARES Act. If you haven’t thought about revising your tax strategy, or your estate plans, do that now." Walsh has an MBA in Finance and CFP®, CFA®, CTFA, AIFA®, CRPC®* and CPWA® designations. He has been advising Walsh & Associates clients since 1986, and his sons Joe III, Michael and Tom have joined the family firm. Disclosures *CRPC conferred by College for Financial Planning. The Financial Times 400 Top Financial Advisors is an independent listing produced annually by Ignites Research, a division of Money-Media, Inc., on behalf of the Financial Times (April 2020). The FT 400 is based on data gathered from advisors, broker-dealer home offices, regulatory disclosures, and the FT’s research. The listing reflects each advisor’s status in...

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How to Use and Take Advantage of Net Unrealized Appreciation

How to Use and Take Advantage of Net Unrealized Appreciation

Do you have company stock through a plan with your employer? If so, don’t miss out on a possible tax planning strategy utilizing a net unrealized appreciation (NUA) strategy. NUA is often misunderstood and/or overlooked. Here are some things you should know about NUA, and how it can benefit you when it comes to taxes.  Net Unrealized Appreciation Net unrealized appreciation is the gain in employer stock shares that are held in a tax-deferred account such as a 401k. An NUA strategy allows gains that happen inside the plan to be taxed outside of the plan at lower long-term capital gains rates. For example: imagine you own 500 shares of your company’s stock in your 401k and the initial price was $10. The total cost basis is $5,000 (500 x $10). Some years later, it is now time for retirement and the stock is worth $25. Your cost basis is $5,000 (what you initially paid), while your NUA is $7,500 ($25 X 500 Shares -$5,000 Cost). Normally this would be distributed out of the plan and you would owe ordinary income tax on the entire $12,500 value of the shares at distribution. By utilizing NUA you can pay taxes on the gain portion of the distribution at the long-term capital gains rate instead of the ordinary income tax rates, which tend to be higher. How to Utilize a NUA                            In order to use NUA, there are a few requirements that you must adhere to. The first is you must go through a triggering event. Triggering events include reaching retirement age, termination of the plan, and the most common event is separating from service. Once you separate from service you need to make a calculation to determine if NUA treatment will be the best choice for you. This would depend on your anticipated future tax rates, future Required Minimum Distributions from tax-deferred accounts, Social Security Benefits, Pension earnings etc.   Next you must make a lump sum distribution. This means the entire account balance MUST be distributed in one tax year. This is not just the stock with the gain amount but...

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Your Pet Could Qualify You for a Tax Break

Your Pet Could Qualify You for a Tax Break

Let’s face it – taxes aren’t fun and, although sometimes helpful, neither are the articles written about them. Now that the pressure of the 2017 tax season has come to an end, we thought we’d share something a little more lighthearted for our animal loving readers. What Deductions Can You Get From Your Pet? Do you have an animal that works for you? Business animals such as dogs and cats could be eligible for deductions. Working animals include guard dogs for a place of business, or a cat that is at the office for rodent control. In order to get these rare deductions, you need to keep a good record of the working animal’s hours. This deduction can help cover a lot of the animals needs like vet bills, food, or even job related training programs. If you take your animal home and it is a family pet, it may be harder to prove that the animal is a business animal, therefore making it difficult to qualify for the deduction. Do you donate to animal related charities? As we all know, charitable contributions can be deductible, and this includes pet related charities. If you donate to your local shelter or rescue organization that donation can count towards your normal charitable deductions. It is important to note that adoption fees are NOT considered donations, thus making them ineligible for a charitable deduction. An important recommendation is to get a receipt for all of your donations and maintain records of each. In order for the IRS to accept the deduction, your donation must be paid to a qualified charitable organization. Do you foster pets for your local shelter? A lot of shelters have a foster program where you can look after an animal until they are ready to be adopted. There are multiple benefits to fostering an animal. You are helping the animal, your local shelter, and it may even count as a deduction on your taxes. Any unreimbursed expenses you acquire can be deducted. Common unreimbursed expenses can include food, vet bills, or transportation fees to and from the shelter. It is...

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How to Handle Your Sudden Wealth

How to Handle Your Sudden Wealth

You’ve heard this cautionary tale before: a lucky soul inherits a new wealth – from the lottery, from family, from fame – only to squander it before their retirement. A sudden influx of wealth can be both an incredibly joyous and stressful experience. In fact, there’s even a stress-related disorder known as “Sudden Wealth Syndrome” that can come with newfound wealth. If you’re the fortunate recipient of sudden wealth, we urge you to consider these strategies to help manage your wealth responsibly. Evaluate Your Situation and Set Goals First, consider just how much money you’ve actually come into before making any major life decisions (i.e. quitting your job). Don’t let your new money turn you into an impulse spender. You’ll need to consider your current and future needs before your desires, and answering these questions can help you do that: Do you have any debt?Is your current income enough to support you?Will you be paying for your children’s education?Do you need to improve your retirement savings?Are you planning on buying a home? Are you still paying off your home?Are you considering giving to a charity?Are you planning on supporting other loved ones?Can you minimize and income or estate taxes? It can be overwhelming to try and come up with answers to these questions all at once. Times like these are when knowledgeable financial professionals are crucial. If you don’t already have a good, comprehensive financial planner, an accountant, or an attorney, this is the time to find them. Develop a Comprehensive Financial Plan Many financial organizations claim they provide comprehensive financial plans, but you may just be getting a plan that’s no more customized than it is for any of their other customers. In some cases, this standardization isn’t necessarily a bad thing – it can create highly efficient portfolios that match an investor’s risk tolerance and long term needs. But with your new wealth, you’ll need more than purely investment help. With your sudden wealth, your advisor should be able to also give you guidance with your taxes, estate plan, education planning, and charitable giving. Be Cautious of Family and...

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Organizing Your Finances When Your Spouse Has Died

Organizing Your Finances When Your Spouse Has Died

Losing a spouse is a stressful transition. And the added pressure of having to settle the estate and organize finances can be overwhelming. Fortunately, there are steps you can take to make dealing with these matters less difficult. Notify others When your spouse dies, your first step should be to contact anyone who is close to you and your spouse, and anyone who may help you with funeral preparations. Next, you should contact your attorney and other financial professionals. You'll also want to contact life insurance companies, government agencies, and your spouse's employer for information on how you can file for benefits. Get advice Getting expert advice when you need it is essential. An attorney can help you go over your spouse's will and start estate settlement procedures. Your funeral director can also be an excellent source of information and may help you obtain copies of the death certificate and applications for Social Security and veterans benefits. Your life insurance agent can assist you with the claims process, or you can contact the company's policyholder service department directly. You may also wish to consult with a financial professional, accountant, or tax advisor to help you organize your finances. Locate important documents and financial records Before you can begin to settle your spouse's estate or apply for insurance proceeds or government benefits, you'll need to locate important documents and financial records (e.g., birth certificates, marriage certificates, life insurance policies). Keep in mind that you may need to obtain certified copies of certain documents. For example, you'll need a certified copy of your spouse's death certificate to apply for life insurance proceeds. And to apply for Social Security benefits, you'll need to provide birth, marriage, and death certificates. Set up a filing system If you've ever felt frustrated because you couldn't find an important document, you already know the importance of setting up a filing system. Start by reviewing all important documents and organizing them by topic area. Next, set up a file for each topic area. For example, you may want to set up separate files for estate records, insurance, government benefits,...

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Financial Planning for Aging in Place: It Costs More Than You Think

Financial Planning for Aging in Place: It Costs More Than You Think

It’s probably no surprise to hear that most senior citizens in America would prefer to live out their days at home. According to an AARP Research Center study1, 87 percent of adults 65 or older want to stay in their current home as they age. Unfortunately, many times circumstances don’t align so that aging in place is a feasible, or affordable, option. Factors that Make Aging in Place so Costly It can be hard to imagine living at home would ever become more costly than an assisted living facility. In the beginning years of retirement, care needs are often light and are typically able to be taken care of by spouses or family members – thus making aging at home seem like the sensible option. But not everything always goes according to plan. Some seniors don’t have family close by, or maybe their family cannot take on the extra responsibility. There’s also the possibility that a spouse will pass away while caring for another, or both spouses will be in need of extra care. When this is the case, a professional caregiver is needed – the national median cost of which is about $4,000 a month2 for about 6 hours of help a day. This is in addition to potential home renovation costs to make your current home livable in your later years, medical expenses, and general living expenses. Understand Medicare and Medicaid Once you hit 65, you may be able to get some of your long-term care expenses covered by Medicare or Medicaid – but there are some key differences to be aware of. Medicare will cover a few costs of long-term care, but they must fall under very specific requirements. General custodial care, aka support for your day to day personal care needs, is not covered by Medicare. What it will help with is some of the costs of long-term care in a hospital, skilled nursing care at a skilled nursing facility, and some home health-care services. Overall, one should not rely too much on Medicare to cover their home health care needs Medicaid on the other hand, covers...

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Joseph Walsh, Jr. Recognized as One of LPL Financial's Top Financial Advisors

Joseph Walsh, Jr. Recognized as One of LPL Financial's Top Financial Advisors

[SARASOTA, FL/ DEKALB, IL] — [February 14, 2018] — Joseph Walsh, Jr., an independent LPL Financial advisor at Walsh & Associates in Sarasota, FL and DeKalb, IL today announced his inclusion in LPL’s Executive Council. This premier award is presented to less than 1% of the firm’s approximately 15,000 advisors nationwide. “On behalf of LPL, I congratulate Joseph Walsh, Jr.” said Andy Kalbaugh, LPL managing director and divisional president, National Sales and Consulting. “Joe has demonstrated tremendous value to his clients with the service he provides to help them pursue their financial goals. We thank Joe for the contributions he makes to his clients, his commitment to offering his clients independent financial advice and his ongoing relationship with support of LPL. We wish him continued success.”   Walsh has been providing financial services to clients across the country for over 30 years. Walsh provides a full range of financial services, including retirement planning, financial planning, and asset management. Walsh & Associate’s also provides Red Flag Audit® reviews, a proprietary comprehensive wealth management process developed by the firm to provides an in-depth review of all areas of a family’s financial plan. This in depth process of uncovering financial red flags and opportunities is just one way Joseph Walsh and his team at Walsh & Associates set themselves apart from other financial advisors. LPL is a leader in the retail financial advice market and the nation’s largest independent broker/dealer*, providing resources, tools and technology that support advisors in the delivery of personal, objective financial advice.  About Walsh & Associates Walsh & Associates is an Investment Advisor registered with the Securities and Exchange Commission, with locations in Sarasota, FL and DeKalb, IL. Joseph Walsh, MBA, CFP®, CFA®, CRPC®, is President and CEO of Walsh & Associates and has more than three decades of experience as a financial advisor. Walsh & Associates is a full service, fee-based financial planning firm, specializing in their Red Flag Audit® procedure. Walsh & Associates focuses on building a foundation of trust by offering personal service and innovative wealth management strategies, as well as placing an emphasis on education and industry...

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Why Your Kid Could Use a Roth IRA

Why Your Kid Could Use a Roth IRA

If you didn’t already know, anyone with earned income can have a Roth IRA….including children! That’s right, there is no minimum age in the tax code to be qualified for a Roth IRA. All that is required is reportable earned income, and the contributions to the Roth cannot exceed that income. Let’s be realistic though – not many children are going to think to save their newly hard earned money for a time in their life that seems lightyears away. That’s where the parents, or a generous relative, come in. Establishing Your Child’s Roth IRA As soon as a child has earned income, a Roth IRA can be established on the child’s behalf by a family member. That family member can also fund the Roth on behalf of the child, just so long as the amount is equal to or less than the amount earned by the child that year. So why is this an attractive option? For starters, the Roth IRA is simply a smart savings tool. The assets contributed to the account will grow tax-deferred for decades (assuming the child keeps the account past age 18), including the earnings, and can be withdrawn tax-free, so long as they follow the rules to avoid penalty.  But the really appealing reason to start a Roth for your child is the benefit they’ll receive from the effects of compounding. Let’s say you invest the maximum $5,500 each year for the roughly 40 years of your adult working life. With a hypothetical 8 percent annual return, that puts you at $1.5 million in retirement. Now let’s say you add 10 additional years onto that number for the time you could have had a Roth while earning an income as a child. Due to compounding, and assuming the same rate of annual return, you would have over $3.4 million in retirement – more than double! Knowing the Rules It’s very important that parents, family members, or whoever is making the contributions on the child’s behalf keep detailed records of all contributions. The reason being, IRS rules allow for Roth contributions to be withdrawn tax...

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Understanding Social Security Benefits for Children

Understanding Social Security Benefits for Children

There are millions of children in the United States receiving Social Security benefits. In 2017, a whopping 4.2 million1 children were receiving benefits. The total for these benefits? Over $2.6 billion each month. As large as those numbers sound, there are actually many more children that are eligible for these benefits but are not actually receiving them. And this isn’t because the benefits are difficult to receive, but rather, most people have no idea their children are eligible, so they don’t know to apply. How Do Children Qualify for Benefits? First, you must have a working parent or parents (or in some cases, working grandparent) for a child to become eligible to receive Social Security benefits. Should either parent retire, die, or become disabled, Social Security would begin replacing part of his or her monthly earnings. Once you or your qualifying spouse begins to receive Social Security benefits, your unmarried child can also begin receiving them, so long as they are: Under 18 years old; orBetween 18 and 19 but still in school as a full time student; orAge 18 or older and severely disabled with a disability that began before age 22 So long as these rules are followed, some dependent grandchildren could also be eligible. You can read more about social security benefits for grandchildren here https://www.ssa.gov/OP_Home/handbook/handbook.03/handbook-0325.html. How Much Do Children Receive? Qualified children with disabled or retired parents will be eligible to receive up to 50% of their parent’s full retirement age benefit. Should the parent die, the child will then be eligible for up to 75% of the parent’s full retirement age benefit. But just because a child may be qualified to receive a certain percentage, there is a maximum limit that the Social Security Administration will pay to the family as a whole, which can affect how much the eligible child receives. This is called the Family Maximum Benefit, and it is computed based on a worker’s Primary Insurance Amount (PIA), which is explained further here https://www.ssa.gov/OACT/COLA/Benefits.html#PIA.  The 2020 formulas for calculating these benefits are as follows: 150 percent of the first $1,226 of worker’s PIA,...

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