Financial fitness is often just as important as physical fitness in providing the quality of life we desire. There is great peace in putting together and implementing a plan to achieve your financial goals. To that end, we will look at some areas that you may wish to examine and consider changes to help you to reach your goals.

1.     Social security

  • Have you thought about when to claim it? The Social Security Administration reduces benefits for people who claim them before their full retirement age by as much as 30 percent for the rest of their life.
  • Benefits are increased by about 8 percent per year for each year a claim is delayed beyond full retirement age, until age 70.
  • Married couples can plan around both benefits to begin receiving some benefits at full retirement age and letting other benefits grow until age 70.

2.     Retirement planning

  • Fund retirement accounts before college savings accounts for dependents. You can borrow for college. You cannot borrow for retirement!
  • Maximize your 401(k) and take full advantage of employer matching contributions.
  • Consider ROTH IRA conversions or ROTH 401(k) contributions. The tax-free nature of ROTH IRAs creates a very powerful savings vehicle, especially if you start young.
    i.    Consider a ROTH IRA for young adults with part-time or first jobs if you would like to make a meaningful gift. After five years, they could take a distribution for a first-time home purchase without penalty or tax               

     ii.    Consider a ROTH conversion in a year when your income is very low. You may be able to pay very little or no tax on the conversion. You are not required to take lifetime distributions from your ROTH IRA, so you could leave that asset to your children to take over their lifetime with no income taxes.

3.     Income taxes

  • Project your income tax liability for the year and consider tax-saving strategies to reduce taxes such as retirement plan contributions, purchase of business assets, taking advantage of tax credits and the like.
  • Self-employed individuals should consider employing their dependent children.
  • Consider the timing of state income tax payments to maximize the tax benefit of the deduction taking into account the alternative minimum tax.
  • Timing income and deductions whenever possible should be considered to smooth income over a number of years and avoid large swings

     i.    Very high income years can cause the phase-out of certain deductions and subject you to certain taxes such as the net investment income tax.

    ii.    Very low income years can cause your deductions to be wasted, as you may receive no benefit from them.

4.     Insurance

  • Review your life insurance to make sure you have enough to cover your family's needs, but not more than you need. Life insurance is generally not the best investment from a return perspective.
  • Consider increasing your deductible on property and casualty policies to reduce premiums, and consider an umbrella policy to protect your assets.

5.     Estate planning

  • Consider reviewing your will and estate plan every five years or whenever you experience a life change to make sure your wishes are properly reflected and your family and assets are protected.
  • Review the beneficiary designation on your insurance policies and retirement accounts to make sure they match with the rest of your estate plan. The beneficiary designation will trump your will so it may need to be updated.
  • Consider what will happen to your business on your passing. Will your heirs be able to take over or should it be sold? Do you have good management in place so the business does not lose value during the time it takes to market and sell it? If not, take steps now to put a plan in place to ease the transition.
  • The federal estate tax exemption is now $5,430,000, and the New York exemption is increasing annually until it matches the federal number in 2019. That is a big number and may mean that you do not need to worry about estate taxes. It does not mean that you do not need an estate plan. Asset protection is still just as important as ever, and you still need to plan for the disposition of your estate in a manner that will support your heirs and maintain family harmony.

Taking control of your financial future is an ongoing process and requires some time and effort, but it is well worth it.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.


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