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July, 2012:

Book Review: Abnormal Returns – Winning Strategies From the Frontlines of the Investment Blogosphere

I wasn’t sure what to expect when I opened this book.  After all, the subtitle could lead one to expect some sort of sensationalistic attention-grabbing sort of “get rich quick” scheme.  I was pleasantly surprised, to say the least. I had not read any of author Tadas Viskanta’s writings prior to this book (I’ve since resolved that shortcoming – see Abnormal Returns, you won’t be disappointed!), so I didn’t realize how insightful and reasoned Mr. Viskanta’s commentary could be.  What he has produced in this book is an excellent overview of the components of the investment environment these days.  This book should be required reading for anyone who is investing these days – especially for the non-professional investor who is going it alone, without a professional advisor. The author starts off with a thorough explanation of the concepts of Risk and Return, and then explains the basics of Stock (Equity) […]

Why It Can Be So Important to Delay Social Security Benefits

It seems like every time I write an article about Social Security benefits that includes a recommendation to delay benefits, I get a lot of responses from well-meaning folks who disagree, sometimes vehemently, with the conclusions. There are several points of view that I see in the responses, all believing that you should start taking benefits as soon as you’re eligible: you never know how long you’re going to live; Social Security is going broke, we all know it; IT’S MINE, DADGUMMIT, THEY OWE IT TO ME; and it’s all part of a huge conspiracy; among other reasons too numerous to mention. Believe me, I have no reason to recommend that people do something that isn’t in their best interests.  As a financial planner, my job is to help folks do things that are in their best financial interests all the time.  Sometimes those things that I recommend run counter […]

Deducting Job Search Expenses On Your Tax Return

Searching for a job can get expensive.  These days, let’s face it, if it’s not you, someone you know is on the hunt for a new job.  Did you realize that at least some of those expenses can be deducted on your income tax return? Recently the IRS distributed their Summertime Tax Tip 2012-06, which discusses some of the important facts you need to know about tax-deductible job search expenses.  I’ve added a few explanatory comments to help you get more out of the Tip.  The text of the Tip can be found below: Job Search Expenses Can Be Tax Deductible Summertime is the season that often leads to major life decisions, such as buying a home, moving or a job change.  If you are looking for a new job that is in the same line of work, you may be able to deduct some of your job hunting expenses […]

The Restricted Application for Social Security Spousal Benefits

Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. One provision of Social Security benefits that is relatively unknown is the restricted application for Spousal Benefits.  This provision allows a person to apply for benefits based upon his or her spouse’s record while delaying receipt of benefits based upon his or her own record. The restricted application is only available when three factors have been met: 1 – the individual filing the restricted application has reached Full Retirement Age (FRA); and 2 – the individual has not filed for his or her own Retirement Benefit; and 3 […]

The Difference Between IRA Contributions and Rollovers

Often there is confusion about what constitutes a “contribution” and a “rollover” into an IRA.  This post is intended to clear up the difference. While both activities are technically contributions, there’s a major difference between the two.  The most significant of the differences is that with a regular annual contribution there are several limits imposed that can be quite restrictive. Annual Contribution Limits For an annual contribution to a traditional IRA or a Roth IRA, you are limited to the lesser of $5,000 or your actual earned income for the year.  If you have no earned income, you’re not allowed to make an annual contribution to an IRA.  Above that amount, if you happen to be 50 years old or better, you can add $1,000 more to your annual contribution (2012 figures). Astute readers will point out that there is the option for a spouse to make a spousal IRA […]

Tips for Summer Jobs From the IRS

With summer in full swing, many young folks are working in temporary jobs for the summer.  There are a few things that you need to know about these temporary jobs that the IRS (and I!) would like you to know.  Recently the IRS produced their Summertime Tax Tip 2012-13, which provides important information for students working in summer jobs.  I have added an extra couple of tips after the original IRS text that may be useful to you as well. The original text of the Tip is below: A Lesson from the IRS for Students Starting a Summer Job School’s out, but the IRS has another lesson for students who will be starting summer jobs.  Summer jobs represent an opportunity for students to learn about the tax system. Not all of the money they earn will be included in their paychecks because their employer must withhold taxes. Here are six […]

Guidance on Qualified Charitable Contributions From Your IRA For 2012

January 1, 2013 update: Passage of the American Taxpayer Relief Act of 2012 has extended the QCD through the end of 2013.  See this article for more details. In past tax years (through the end of 2011) there was a provision available that allowed taxpayers who were at least age 70½ years of age to make distributions from their IRAs directly to a qualified charity, bypassing the need to include the distribution as income.  The law allowed the taxpayer to use a distribution of this nature to satisfy Required Minimum Distributions (RMDs) where applicable. This law expired at the end of 2011, but in years past Congress has acted very late in the year and retroactively reinstated this provision.  For more detail on how this provision (if not reinstated) can impact your taxes, see the article Charitable Contributions From Your IRA – 2012 and Beyond. Guidance For 2012 If you […]

Important Factors When Planning Social Security for Couples

Planning for Social Security benefits for a couple can be complicated.  There are many factors to consider, including the amount of benefits each member of the couple is entitled to at various ages, as well as the relative ages of the spouses to one another.  Other factors include whether or not one member of the couple (or both) will earn wages past age 62, as well as longevity: the potential of the couple (at least one member) living past normal life expectancy. Longevity is one of the most important factors to consider – and for a couple this isn’t as straightforward as it is for one person.  According to the National Association of Insurance Commissioners’ Annuity 2000 table, a couple who are both age 50 stand a 50% chance of one member living to at least 91 years of age.  For another example, if the husband is 62 and the […]

Annual Gift Tax Exclusion Increases in 2013

All individuals have the opportunity to give gifts annually to any person without having to file a gift tax return.  For 2012, the amount of the annual exclusion is $13,000. This means that anyone can give a gift of up to $13,000 to any person for any reason without worrying about possible gift tax implications.  A married couple can double this amount to $26,000. In 2013, this annual exclusion amount will increase to $14,000 ($28,000 for couples). For amounts given in excess of the annual exclusion amount, every individual has a lifetime exclusion amount, against which the excess gifts are credited.  For 2012, the lifetime exclusion amount is $5,120,000.  This lifetime exclusion amount is one of the tax law provisions that is set to expire at the end of 2012, along with the other “Bush Tax Laws”. If allowed to expire, the lifetime gift tax exclusion amount will revert to […]