Category: Income Tax

10th Anniversary Edition!!

Hooray! TGIF 2 Minutes has entered its 11th year! It has been an absolute joy to hear from readers over the past 10 years and be part of your Friday morning cup of coffee or weekend reading time. For kicks, below is an excerpt from the very first edition in May 2014:

Good morning and TGIF,

In my efforts to give you Short & Sweet messages that make a POSITIVE difference in your LIFE, I am starting a “TGIF 2 minutes”. It will not be every Friday but when there’s something to say, it will be on Friday when you may have an extra 2 minutes in your day- or weekend- to read it. It will be worth reading! Please let me know your thoughts.

Continue reading “10th Anniversary Edition!!”

Lack of Clarity = Volatility

Markets prefer certainty. In times of relative economic certainty, market trends can be more defined and steadier. In times of economic uncertainty, markets react with volatility similar to the past 6 to 7 months. Two simple pieces of data:

  • The 10-year US Treasury yield was as high as 5.0% in late-October, then as low as 3.79% just after Christmas, then back up to 4.28% in March and very recently higher to 4.68% a mere few days ago. These levels – and the speed with which they have changed – represent fairly massive volatility based on historical 10-year US Treasury rates.
  • In the US stock markets, there has been similar volatility in both small-company indexes and the larger-company S&P 500 since last year with a noticeably weak 3Q 2023 and then all-time highs taking place just this past April 2024.

Continue reading “Lack of Clarity = Volatility”

A Cost That Cannot Be Underestimated

Guess what might be one of the most painfully underestimated costs of all? If you guessed healthcare and end-of-life care you are correct. Read on for a handful of reasons why it can be dangerous to avoid addressing this topic.

First a brief introduction. Anyone who has been a direct or indirect care giver for an aging relative or friend knows the pain and stress that can be involved. Of course, there are joyful care relationships, which ultimately are the goal. Where the difficulty begins is in estimating the costs of later-in-life care. Then, even worse can be executing the logistics of care and the ultimate reality of having to pay for – or running out of funds to pay for – care, whether for oneself or a spouse or relative. Timing is often almost completely unpredictable.

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“Stupid” Money Decisions

It is possible to go through life without making a stupid decision about money. Said no one ever. The truer statement might be: everyone reading today has at one time made a stupid decision about or with money. Most people have made multiple stupid decisions about money and much more. The important part (possibly after difficult pain or regret) is to be able to answer the question: what lessons were learned?

Two weeks ago, a famous Nobel Prize winning psychologist, who spent his life studying the human mind and decision-making, died. Daniel Kahneman reluctantly accepted the title “economist” as he and his long-time research partner, Amos Tversky, wrote an amazing, internationally best-selling book, Thinking, Fast and Slow. Together Kahneman and Tversky were pioneers in the field of behavioral psychology. Along the way, behavioral psychology was applied to all sorts of economic and investing decisions and the two psychologists were consulted by business leaders around the world. Here are a few of the questions the two men studied over decades, with a few of their answers: Continue reading ““Stupid” Money Decisions”

Tax Season Time Crunch

It is tax season, which means time is at a premium. TGIF 2 Minutes is designed for this concept. Therefore, a 1-minute read today!

Preparing tax documents, expense spreadsheets, records of charitable deductions, W-2 forms, 1099’s, K-1’s and all the rest can really be a hassle. Here are a few bright spots:

  • Learn something right now this year from every time you find yourself saying, “I am going to do this differently next year!“
  • Whether it is your filing system for tax documents and charitable deductions or set-up of online folders for rental property files, go overboard with keeping better track along the way, starting now for tax year 2024.
  • Make sure to ask your financial adviser about tax loss harvesting this calendar year. Last year there were UP months in markets and DOWN months. Make sure your adviser is possibly using the market’s down months to a tax advantage in non-IRA accounts.
  • If it is not already obvious, have a CPA.
  • Ask your financial adviser for assistance in compiling or finding tax documents. This task is always something with which I am happy to assist – with advance notice – for my clients.
  • Look at ways to make changes and tweaks to the way you are contributing to 401k and IRA accounts while it is still early in 2024. Changes can involve:
  • increasing/decreasing contribution rate
  • creating a mix of before- and after-tax (Roth) contributions
  • spreading contributions over the course of the entire year
  • Consider Roth IRA conversions in 2024.

Tax time is not always the most pleasant time of the year but all we can do is make the best of it. Thank you for all the positive feedback in recent weeks!

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.

Timely 401k Contribution Info

Today’s edition will take 2 minutes and 38 seconds to watch and could save you a bundle of taxes in the long run. Simply understanding better – at lower and higher income levels – the taxes around 401k, 403b (and TSP) contributions is an advantage. Early in the year timing is key. Why? Please ask me and watch the video.

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.

 

Safety Check of Sensitive Information, Part 1

If the safety of your personal information is not currently at the top of your radar screen, please move it up to the top TODAY. Why? Because there are really bad actors lurking for over one or two decades – in the background of email, credit agencies, and whatever cyber universes exist – and these bad actors are both patient and aggressive about seeking to compromise your identity and financial transactions.

This is not new. In 2017, Equifax, one of the world’s largest credit reporting and monitoring agencies with sensitive data for over 800 million individual consumers, was hacked. Private information of over 147 million American citizens along with British and Canadian citizens were compromised in a security breach. This from a leading company whose entire purpose is monitoring the most sensitive of personal information.

Continue reading “Safety Check of Sensitive Information, Part 1”

More Year-Ahead Tax Planning

Following on last week’s 2023 Year-End Tax Planning come several key tax moves to consider over the next year or two. These moves do NOT need to be made by year-end 2023 but still need to be top of mind, especially for those in higher tax brackets and those having accumulated significant savings.

Plus, for those approaching retirement and looking to accumulate tax-free monies down the line, there are considerations too. Why bring up this topic now? Because the 2017 tax cuts, set to expire in 2025, did lower the top tax bracket AND expanded the very reasonable 24% tax bracket. Use the lower brackets while they still exist.

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Year-End Tax Planning 2023

Year-end tax planning is a sort of double-event this year, due to 1) the approaching 2023 year-end, and 2) the 2017 TCJA tax cuts expiring at the end of 2025 (sooner than it sounds) – meaning limited time to take advantage of Roth IRA conversions and certain gifting strategies. There are a number of items and trust strategies that can be planned in advance. This week will be Part 1 and next week Part 2.

Part 1 includes basic, yearly items that can be addressed in these final months of 2023:

  1. Have you maxed out your 401k? Many people do not know they can temporarily increase 401k contributions through December 31st to reach the $22,500maximum contribution (those age 50 and older get an extra $7,500 catch-up contribution, for a total of $30,000). Lots of 401k or 403b plans allow participants to contribute 25-30% – or even 100% of pay – and then revert to a lower contribution rate on January 1st of next year.
  • These 401k contributions can be tax-deductible unless you are contributing to a Roth 401k (which can be an excellent idea too).
  • It is not too late!

Continue reading “Year-End Tax Planning 2023”

Part 2 – Tax & 401k Info for ALL Ages

Part 2 of “under the radar” tax law changes. These changes lead to a needed discussion of current, related tax topics applying to ALL ages of savers with 401k accounts – and possibly IRA accounts too. There is still a decent amount of time remaining in 2023 to make a difference in 401k saving.

Remember that Roth 401k plans have slightly different income requirements than Roth IRA accounts:

  • Roth 401k accounts (which run alongside regular 401k accounts) have NO income limits.
  • Roth IRA accounts DO have income limits.
Roth 401k monies have NO RMDs under current tax law. Traditional, pre-tax 401k monies have RMDs and create taxable income in the future.

Continue reading “Part 2 – Tax & 401k Info for ALL Ages”