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Goals for 2014

Jan 1st, 2014
by sraskie.
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GoalGoals setting and resolutions are among the top things on peoples’ minds when they start the New Year. And rightfully so. A new year signals a fresh, start a new beginning, a clean slate.

Feeling refreshed and ready, most people start on their resolutions with the best of intentions – for about a week or two. Then they either give up, forget, fall back onto the same habits and routines that they promised they’d get out of the year before.

It’s great to have resolutions – but they must be accompanied by resolve. What is resolve? Resolve, according to Merriam-Webster’s dictionary is to make a definite and serious decision to do something. This means planning ahead, expecting obstacles and figuring out ways to push through and achieve your goals. I recommend writing your goals or resolutions down.

Here’s how:

To begin write out your financial, fitness, work, eating, etc. goals that you would like to achieve throughout the course of this year. Make sure you study them carefully and write down reasonable goals. What I mean by this is that it’s important not to set a goal so high that you can’t possibly achieve it. For example, if I wrote down a goal stating that I’d like to be able to save $1,000 per day that would be a goal that’s too high. Instead, I might write down $100 per month. This goal could be sensible and attainable. Now if I was already saving $100 per month – than this wouldn’t be a goal at all – so I may up the amount to $200 and so on.

 

You want to lose weight? Set a reasonable amount you want to lose (2-3 lbs. per week is ideal). That goal can and will be attainable. Make sure you write down your goals and read them every night before you go to bed and every morning when you get up – WITHOUT FAIL.

Also, always write your goals in the first person, present tense. This programs your subconscious to take action immediately in the “here and now.” For example, you may write down, “I save $100 per month.” Or, “I run 5 miles per week.”

Write down your specific goal (whatever money, weight, business goal you want to attain). You can also put up a photo of someone whose net worth, business model or physique you’d like to achieve and of someone you don’t ever want to be or look like. Keep these photos where you can see them every day.

Once you’ve reached a certain goal, reward yourself!! This can be that new toy you’ve had your eye on, or something you’ve denied yourself until you reached that goal.

Finally, sign and date your goals. Giving yourself a deadline and committing to it with your signature produces a sense of urgency and importance. After all, can you think of anything you sign that isn’t important? Think of it as a contractual obligation to yourself!

 

 

 

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Posted on Jan 1st, 2014
by author: sraskie.

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Posted in: #noTOP, fee-only, fiduciary, financial planning, goals, retirement.
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2014 IRA MAGI Limits – Married Filing Separately

Jan 1st, 2014
by jblankenship.
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Separated Strawberry

Separated Strawberry (Photo credit: bthomso)

Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility.

For a Traditional IRA (Filing Status Married Filing Separately):

If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions.

If you are covered by a retirement plan at your job and your MAGI is less than $10,000, you are entitled to a partial deduction, reduced by 55% for every dollar (or 65% if over age 50), and rounded up to the nearest $10.  If the amount works out to less than $200, you are allowed to contribute at least $200.

If you are covered by a retirement plan at your job and your MAGI is more than $10,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2014.  You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

If you are not covered by a retirement plan but your spouse is, and your MAGI is less than $10,000, you are entitled to a partial deduction, reduced by 55% for every dollar over the lower limit (or 65% if over age 50), and rounded up to the nearest $10.  If the amount works out to less than $200, you are allowed to contribute at least $200.

Finally, if you are not covered by a retirement plan but your spouse is, and your MAGI is greater than $10,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2014.  You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

For a Roth IRA (Filing Status of Married Filing Separately):

If your MAGI is less than $10,000, your contribution to a Roth IRA is reduced ratably by every dollar, rounded up to the nearest $10.  If the amount works out to less than $200, you are allowed to contribute at least $200.

If your MAGI is $10,000 or more, you can not contribute to a Roth IRA.

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Posted on Jan 1st, 2014
by author: jblankenship.

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Posted in: #noTOP, 2014 Tax Year, IRA, magi, Roth IRA.
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2014 MAGI Limits for IRAs – Married Filing Jointly or Qualifying Widow(er)

Jan 1st, 2014
by jblankenship.
1 comment
rendered universal joint animation. Español: M...

rendered universal joint animation. (Photo credit: Wikipedia)

Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility.

For a Traditional IRA (Filing Status Married Filing Jointly or Qualifying Widow(er)):

If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions.

If you are covered by a retirement plan at work, and your MAGI is $96,000 or less, there is also no limitation on your deductible contributions to a traditional IRA.

If you are covered by a retirement plan at your job and your MAGI is more than $96,000 but less than $116,000, you are entitled to a partial deduction, reduced by 27.5% for every dollar over the lower limit (or 32.5% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

If you are covered by a retirement plan at your job and your MAGI is more than $116,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2014. You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

If you are not covered by a retirement plan at your job, but your spouse IS covered by a retirement plan, and your MAGI is less than $181,000, you can deduct the full amount of your IRA contributions.

If you are not covered by a retirement plan but your spouse is, and your MAGI is greater than $181,000 but less than $191,000, you are entitled to a partial deduction, reduced by 55% for every dollar over the lower limit (or 65% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

Finally, if you are not covered by a retirement plan but your spouse is, and your MAGI is greater than $191,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2014. You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

For a Roth IRA (Filing Status of Married Filing Jointly or Qualifying Widow(er)):

If your MAGI is less than $181,000, you are eligible to contribute the entire amount to a Roth IRA.

If your MAGI is between $181,000 and $191,000, your contribution to a Roth IRA is reduced ratably by every dollar above the lower end of the range, rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

If your MAGI is $191,000 or more, you cannot contribute to a Roth IRA.

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Posted on Jan 1st, 2014
by author: jblankenship.

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Posted in: #noTOP, 12/8/2010 update, 2014 Tax Year, IRA, magi, Roth IRA.
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2014 MAGI Limits – Single or Head of Household

Jan 1st, 2014
by jblankenship.
1 comment
David Lee Roth IRA ruins my perfect shot

David Lee Roth IRA ruins my perfect shot (Photo credit: nickfarr)

Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately who did not live with his or her spouse during the tax year, is considered Single and will use the information on this page to determine eligibility.

For a Traditional IRA (Filing Status Single or Head of Household):

If you are not covered by a retirement plan at your job, there is no MAGI limitation on your deductible contributions.

If you are covered by a retirement plan at work, if your MAGI is $60,000 or less, there is also no limitation on your deductible contributions to a traditional IRA.

If you are covered by a retirement plan at your job and your MAGI is more than $60,000 but less than $70,000, you are entitled to a partial deduction, reduced by 55% for every dollar over the lower limit (or 65% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

If you are covered by a retirement plan at your job and your MAGI is more than $70,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2014. You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

For a Roth IRA (Filing Status Single or Head of Household):

If your MAGI is less than $114,000, you are eligible to contribute the entire amount to a Roth IRA.

If your MAGI is between $114,000 and $129,000, your contribution to a Roth IRA is reduced ratably by every dollar above the lower end of the range, rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200. If your MAGI is $129,000 or more, you cannot contribute to a Roth IRA.

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Posted on Jan 1st, 2014
by author: jblankenship.

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Posted in: #noTOP, 2014 Tax Year, IRA, magi, Roth IRA.
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New Year’s Resolutions You Can Keep

Dec 30th, 2013
by jblankenship.
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Gym

Gym (Photo credits: www.mydoorsign.com)

This time of year it’s cliché to make resolutions for the coming year.  Whether it’s to lose weight, stop a bad habit, or begin saving for retirement, many of us set these goals at the beginning of the new year.  And then three weeks into the new year, we’ve left that goal astern – having changed nothing at all.

The problem is in how we set goals for ourselves.  For example, we might make the bold statement that we want to lose weight.  Often, that’s all there is to our resolution – but there’s much more to setting a goal than making a statement about it.  There has to be a plan, and some specifics around the goal.

If the resolution is to lose weight, first of all you need to put some specifics around that goal:

I want to lose fifteen pounds in 2014.

Now, how are you going to do this? Is it going to happen all at once? One fine day you’ll wake up and you’re 15 pounds lighter?  Of course not.  But it’s that “presto” mentality that often derails us.  We dive into our 15-pound goal with much gusto, going to the gym and working out four days a week for the first week. (Have you ever tried to get a treadmill at the gym during the first week of January? Impossible!)

Then, when we don’t see the automatic result after the first couple of weeks, we get discouraged, and we start to fall back into our old routines.  Pretty soon we’ve given up on the goal altogether.  How can you stop this cycle? Incrementalism.

Incrementalism

Instead of focusing on the year-long goal of losing fifteen pounds, look at the goal incrementally – set yourself monthly goals of losing 1¼ pounds each month.  That’s a much more attainable goal, and not one that you have to spend hours on the treadmill each day to achieve.  You might be able to achieve this by taking a walk for 20 minutes, three days a week, and pushing back from the table a bit sooner at mealtime.  Before you know it, you’re incorporating the walks into your daily routine, and you’re not missing the extra helping of taters – and you’ve lost that month’s 1¼ pounds.  Keep up the incremental changes through the year, and voila! you’ve met your yearly goal.

The trick is in looking at shorter-term increments to meet the larger goal. When we look at the larger goal only, we think we’ve got to do something heroic in order to meet the goal.  By taking a short term view, we realize that smaller, incremental changes will help us to get to that short-term goal.

Let’s take saving for retirement as an example: In 2014 you have the goal of saving $5,500 to make a full IRA contribution toward your retirement.  If we focus on the full $5,500 – that can be a significant amount to come up with.  Instead, incrementalize the goal.  Look at it in terms of your regular payroll cycle – every two weeks.  That works out to $211 every paycheck.

That’s not insignificant, especially if you’re on a tight budget already, but it can be done.  There are many places where we’re short-changing ourselves, paying for more things than are necessary.  Most folks have more tax withheld from their pay than is necessary, which results in an over-large income tax refund.  Making a change to your W4 filed with your employer will help to free up some extra cash to make up the $211 each payday that you are looking to save.

Other areas can be reviewed as well – rarely-used gym memberships, rented storage lockers (full of stuff we haven’t thought of for years!), magazine subscriptions that we don’t take time to read, and lunches out while working – all represent places where we can free up cash for the by-weekly $211 contribution to the IRA.

Insurance premiums – for homeowner’s and auto insurance – can be reduced by upping the deductibles on these policies.  For example, a $1,000 deductible on your auto insurance policy (rather than $250) will result in a decrease in the cost of the policy.  Most of the time, if you have minor damage to a vehicle (less than $1,000) you’re better off to pay for it yourself rather than submit a claim, since your insurance company will make up the difference (plus!) by increasing your premium in the coming years.  The same is true for your homeowner’s policy.

Start going through your month-to-month expenses and finding those places to free up the cash on an incremental basis, and soon enough you’ll have that $211 per pay period freed up, and next thing you know you’ve saved that $5,500 for the year.  This is the magic of incrementalism.

Keep in mind that the net result of your $5,500 contribution to the IRA, if it’s a deductible IRA, will be less than the full $5,500 after you’ve prepared your tax return.  If you’re in the 25% marginal tax bracket, the net resulting cost is $4,125, since you are paying $1,375 less tax on your income by making the $5,500 contribution.

So – go forth and make your resolutions for 2014.  But put some more planning into the process, and incrementalize the goals.  You’ll have a much better chance of meeting them.  And if you follow this advice, leave word below about your plans and your successes.  We’d love to hear about them!

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Posted on Dec 30th, 2013
by author: jblankenship.

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Posted in: goals, IRA, retirement savings.
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What’s in Store for 2014?

Dec 27th, 2013
by sraskie.
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English: Wall Street sign on Wall Street

A few weeks ago I was interviewed by a local business journal about our firm’s thoughts as to how the market would react in 2014 and how to best prepare for that reaction. Essentially, the journal was asking us to predict where the market would be in 2014.

Most of our clients know the answer I am about to write, which was, “No one can predict the direction of the market with any degree of accuracy.” “If that were the case, (as I told the interviewer) neither she nor I would be having this interview.” In other words, we’d be clinking our glasses on our respective tropical beaches because we’d have gotten filthy rich predicting and timing the moves of the market.

Markets are pretty efficient – meaning that the price of any particular stock in any particular sector, industry or country is generally priced based on all available information about that particular security. Think of it this way: Wall Street hires thousands of analysts to comb through the financials of thousands of publicly traded companies. So the information about those companies is known almost instantaneously and the prices of those stocks react instantly to any change in information.

Rhetorical questions:

If Wall Street analysts are good at forecasting the market and different stocks, why do they still work as analysts?

 If Wall Street was any good a predicting the market, how did 2008 happen?

If I had to make a prediction for 2014 it would be this: Markets will rise and fall and be jittery and overly-emotional. They’re just like people – after all, that’s who drives markets anyway.

It can be very tempting to try to predict and time the markets and react emotionally. A few months ago we had the debt ceiling issue and there was worry that markets would crash. We recommended clients hold steadfast – and our clients are happy they did; as markets didn’t crash but actually reached new highs shortly afterward.

This wasn’t brilliance on our part – but sticking to our strategy of once we find the right mix of assets for a particular client, the majority of returns comes from that investment mix – not timing.

Not timing and not predicting prevents us from one of the major psychological flaws that can happen to money managers – confirmation bias. Say we predicted that 2014 was going to be a bullish year and we were right, now we would be tempted to enter 2015 thinking we had superior knowledge of the direction of the market instead of really admitting it was dumb luck.

The best way to predict is to own the market and diversify accordingly. This includes owning a well-diversified mix of index funds and or ETFs (which we do for our clients) and learn to manage emotions (which we try to do for our clients).

This allows our clients time to focus on things worth focusing on such as family, friends, goals and aspirations and frees them from the burden of trying to time their investments (something we admit we cannot do). It also allows us to focus more on building relationships with our clients and keeps our clients costs very low.

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Posted on Dec 27th, 2013
by author: sraskie.

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Posted in: #noTOP, fee-only, fiduciary, investing, investment.
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Roth 401(k) Conversions Explained

Dec 23rd, 2013
by jblankenship.
1 comment
Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Earlier in 2013, with the passage of ATRA (American Taxpayer Relief Act) there was a provision to loosen the rules for 401(k) plan participants to convert monies in those “regular” 401(k) accounts to the Roth 401(k) component of the account.  Prior to this, there were restrictions on the source of the funds that could be converted, among other restrictions.  These looser restrictions apply to 401(k), 403(b) and 457 plans, as well as the federal government Thrift Savings Plan (TSP).

Recently, the IRS announced that guidance was available to utilize the new conversion options.  As long as the 401(k) plan is amended to allow the conversions, all vested sources of funds can be converted, even if the participant is not otherwise eligible to make a distribution from the account.

This means that employee salary deferrals, employer matching funds, and non-elective payins to the 401(k) account can be converted to a Roth 401(k) account (as long as the plan allows it).  Previously, only employee deferrals were eligible to be converted, and then only if the participant was otherwise eligible to make distributions from the 401(k) account, such as being over age 59½ (if the plan allows) or having left employment.

The converted funds will remain under the purview of the 401(k) plan’s distribution restrictions.  Administrators of 401(k) plans can choose to amend their plan to allow these new conversion options or limit existing conversions as they see fit.

Any conversions will cause the converted funds to be included in your ordinary income for the tax year of the conversion, most likely triggering income tax on the additional ordinary income.  If you don’t have funds outside the 401(k) plan to pay the tax on the conversion, the whole operation becomes less attractive, since you’re having to take a (presumably) unqualified distribution of funds to pay the tax on the conversion.  In the future, qualified distributions from the Roth 401(k) account will be treated as tax-free (as with all Roth-type distributions).

For example, if you have a 401(k) account with $100,000 in it and you wish to convert the entire account to your company’s Roth 401(k) option.  If your marginal tax bracket for this additional income is 25%, this means that you would have a potential tax burden of $25,000 on this conversion.  If you have other sources to pull this $25k from, then you can convert the entire $100,000 over to your Roth 401(k) plan.

However (say it with me: “there’s always a however in life”), if you don’t have an extra $25,000 laying around to pay the taxes, you might need to withdraw the money from your 401(k) plan to pay the tax – which would also trigger the 10% penalty on the withdrawal plus tax which adds up to an additional $8,750.  So now your conversion has cost nearly 34% overall – and the chance of such a conversion paying off due to higher taxes later becomes less likely.

And then there’s the additional rub: most 401(k) plans have significant restrictions on taking an in-plan distribution such as the one mentioned above to pay the tax.  Your plan may allow the Roth 401(k) conversion distribution, but not the regular distribution while you’re participating in the plan, so you’re stuck – and will be stuck with a huge tax bill the following April.

Posted on Dec 23rd, 2013
by author: jblankenship.

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Posted in: 401 k, 403 b, 457, Roth 401(k).
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Charitable Donations

Dec 20th, 2013
by sraskie.
2 comments

Donations

This time of year many people find it in their hearts to give. They’ll give to friends, family, loved ones and charitable organizations that can help maximize the gift such as a church, charity, or foundation.

Last week I had written about the law of reciprocity and giving, and this week I’d like to mention how you can make your giving work in favor when tax season rolls around. As of this writing there are about 11 days left in 2013. Some individuals will be looking to see how much they can give or how much more they can give in order to receive the biggest tax deduction they can for charitable giving.

Of course, gifts to friends and family are not deductible, but there are times when gifts or donations are completely deductible and may be to the tax advantage of the person giving or donating the gift.

According to IRS Publication 526 there are some of the organizations that can receive and therefor qualify the giver for a potential tax deduction:

  • Churches, synagogues, temples, mosques, and other religious organizations
  • Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park)

Author’s note: I get a kick out of “reduce the public debt”

  • Nonprofit schools and hospitals
  • The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc.
  • War veterans’ groups

Source: http://www.irs.gov/pub/irs-pdf/p526.pdf

One great way to give this Holidays season is to make a donation to your favorite charity. Another great way (and something my wife and I practice) is when new gifts come in to either us or our children, we make a list (or stockpile – thank you grandparents!) of items our children no longer play with or my wife and I no longer need such as clothes, games (it was tough giving up Hungry, Hungry Hippos), or household items and donate them to our local Goodwill.

Many of the items donated are tax deductible and here at the BFP World Headquarters Jim and I have some excellent resources to put a true dollar amount on the items donated. Generally, the charitable deduction is going to be limited to 50% of AGI and in some cases 20% or 30% – depending on the type of organization or type of property given.

Should you want to make a donation of money there are many organizations such as your church, Goodwill, The Red Cross and others that will gladly accept the needed funds and happily issue a receipt for your records. The Red Cross has been busy with the typhoon relief in the Philippines and locally (just an hour or so up the road) with the efforts to help the town of Washington, IL recover from the devastating aftermath of an F4 tornado.

Finally, as the saying goes, “I’m not against paying taxes; just not more than my fair share” may also be in the thoughts of taxpayers this coming tax season. Many tax payers are happy to donate money and items to help reduce their tax burden and or give the money to an organization they feel may be more efficient and astute and allocating their hard earned money – rather than paying the money directly to Uncle Sam via a higher tax rate.

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Posted on Dec 20th, 2013
by author: sraskie.

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Posted in: 2013 tax year, charitable contribution, fiduciary, financial planning, gift tax, itemized deduction, itemized deductions, tax.
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Book Review: How Much Money Do I Need to Retire?

Dec 16th, 2013
by jblankenship.
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howmuchmoneydoineedtoretireThis book, by Todd Tresidder, cuts through much of the extra “stuff” that you find about retirement planning, to help you do some really useful, back-of-a-napkin retirement planning for yourself.

Tresidder, who has a practice coaching folks with financial planning based on his concepts, developed his planning methods in real practice for himself.  Tresidder “retired” from his regular job at the age of 35 using these tactics, and has been helping other folks to use these methods in planning for retirement ever since.

In this book, Todd goes through the conventional methods of planning for retirement savings, which includes gathering some information that is impossible to calculate:

How much money will you need every year for the rest of your life?
What will be the rate of inflation?
When will you die? Your spouse?
What rate of growth will your investments experience over your lifetime?
What will be the sequence of returns that your investments achieve?
When will you and your spouse retire?

In reviewing these questions, Tresidder points out how difficult it is to develop these numbers for yourself, and then he points out flaws in the conventional methods of determining or estimating these numbers.

Upon reaching a conclusion about the problems with the conventional method of retirement planning, the author then goes on to lay out his methods for determining the amount of money required for you to retire.  His methods are definitely different from the conventional methods, and he gives his reasons for believing that they will provide a useful gauge for you.  I don’t disagree with his findings – I believe he has some very good information to pass along here.

One example of Tresidder’s decision-points is determining an appropriate withdrawal rate from your invested assets.  Tresidder says that the primary factor to use in determining the sustainable withdrawal rate on your investments is the price/earnings ratio in the overall market as of your date of retirement.  The higher the PE ratio, the lower your sustainable withdrawal rate.  I won’t ruin the surprise by explaining it all here, you should read the book if you are interested.

One interesting factor about this book is that Tresidder takes great pains to point out that he believes any planning that is based on past information has flaws.  At the same time, his sustainable withdrawal rate conclusion depends entirely upon a back-test of historical information.  I believe that this anomaly just points out that you must have some historical information to work from – and all methods of planning for the future have shortfalls.

I think this is a great book for anyone who is looking for a do-it-yourself method for planning your retirement.  I would also use other methods to test your results against, since all methods of predicting the future have flaws.  Using a few options to test against one another is a great way to help ensure your success in financial dealings.

Posted on Dec 16th, 2013
by author: jblankenship.

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Posted in: Book review, financial planning, retirement plans.
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2014 Mileage Rates for Tax Deductions

Dec 9th, 2013
by jblankenship.
2 comments
Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net

Recently the IRS published the mileage rates for various classes of deductible miles driven for tax year 2014. This amount is used in place of managing, collecting and tabulating the exact costs involved in operating a vehicle throughout the year.

In order to use the standard mileage rates, you just track the miles you drive for each purpose (see below) and then compute the deductible mileage on your tax return when you file it the following year.  Keep a log of the miles driven and the purpose of the trip to substantiate the deduction.  This can be as simple as a paper calendar with your log notes, or more elaborate (check around, I bet there are apps out there for your iphone or other gadgets to do this).

You have a choice to either use the standard rate or the actual expense of operating your vehicle.  In either case, parking and toll costs associated with the applicable mileage can be an additional deductible expense.

Business Mileage

For business purposes, you’ll take the deduction on your Schedule C as a sole proprietor, on Form 1065 for a partnership, or form 1120 as a corporation, along with your other business expenses.  Commuting from your home to your place of work is not allowed as a mileage deduction, but travel from your home or office to a temporary work location (for example, as a contractor) or to a client’s location (e.g., sales) can be deductible mileage.

As an employee, unreimbursed mileage (same restrictions as above) can be deducted using Form 2106 (Unreimbursed Employee Business Expenses), carrying the deductible expense to your Schedule A, where it will be subject to the 2% floor, along with your other miscellaneous expenses.

The rate for business mileage for 2014 is 56 cents per mile.  This is a reduction of ½¢ per mile over the 2013 rate.

Medical/Moving Mileage

Certain mileage expenses for auto use when you are moving to a new home can be deducted, using Form 3903, Moving Expenses.  Travel is limited to one trip per person, however, each member of the household can move separately and at separate times. All of the other requirements for moving expenses must be met (time and distance test, and work test).

In addition, mileage driven for medical purposes can be deducted on your Schedule A along with your other medical expenses, subject to the 10% floor and AGI limits (7.5% floor if you’re age 65 or older).  This includes travel for any medical purpose, as long as it’s a legitimate medical purpose.  An example would be to track your regular visits to the doctor throughout the year and deduct the mileage from your income for tax purposes.

The rate for both types of mileage for 2014 will be 23.5 cents per mile, also down by ½¢ per mile over the 2013 rate.

Charitable Mileage

If you use your personal vehicle for charitable purposes, such as hauling your items to donate to the Goodwill store, you can deduct the mileage along with your other non-cash charitable contributions on Schedule A.

The standard mileage rate for charitable purposes for 2014 is 14 cents per mile, which is unchanged from 2013.

Posted on Dec 9th, 2013
by author: jblankenship.

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Posted in: #noTOP, 2014 Tax Year, charitable contribution.
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The Law of Reciprocity

Dec 6th, 2013
by sraskie.
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Give Way

As your wealth accumulates and continues to grow, there is a law I want you to be mindful of and respect. You don’t have to follow it, but believe me, it will pay you more than any bank, investment, mutual fund, or stock could ever do. I’m talking about the law of reciprocity. Some call it tithing, luck, karma, reaping what you sow, give and take. Whatever you want to call it, it works. And I highly recommend that you do it.

Following the law of reciprocity means giving a little of what you make. It could mean giving to your favorite charity, your church, a friend in need, a homeless shelter, or any other cause or helpful service in your community. The point is to give. And it will come back to you in droves. Don’t ask me how it works, it just does. I promise you that. Consider this for a moment: money is called currency for a reason. Like any current, it was meant to flow, to travel, to move. And the more you give, the more comes back to you.

 

 

 

 

 

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Posted on Dec 6th, 2013
by author: sraskie.

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Posted in: fiduciary, financial planning, gift tax.
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Book Review: The Other Talk

Dec 2nd, 2013
by jblankenship.
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A Guide to Talking with Your Adult Children About the Rest of Your Life

This book, a relatively short read at 176 pp before appendices, is a nice guide for folks facing (or in) retirement and dealing with those end of life issues that we all must face at some point in our lives.  As the subtitle implies, this book guides the reader through the process of having the “other talk” with our children.  The first talk is about the birds and the bees, and the analogy between that talk and the “other talk” is apt.  The subject matter is profoundly difficult and emotional for both parties, but avoiding the talk (either one) can have serious impacts for both parties as well – because avoiding either talk will not keep the “event” from occurring.

The author Tim Prosch relies on many personal experiences as well as a great deal of interviews that he conducted with professionals and folks going through or facing the “talk” on a personal level.  From this information he lays out a process that the reader can use to facilitate the “other talk” with his or her children.

The point is that at some time in your life, statistically speaking, you’re going to be in a position where you need to rely on your children (or other younger family members) to help make decisions regarding your life.  These decisions include living arrangements (nursing, assisted living, at-home, or hospice), medical and healthcare (wishes regarding DNR orders or life-prolonging actions), financial, and living your life on your own terms.

Each of the above areas of decisions can have multiple outcomes – and facilitating a talk with your loved ones who will be helping with the decisions will give them a basis for making the decisions.  Of course you cannot know for sure exactly what situations you’ll face, but you can cover the groundwork for the big items.

By doing so – when the time comes that you’re unable to make decisions on your own – your loved ones will have a basis to work from to make those decisions as you would like them to be made.  Without this basis to work from, your children and other loved ones will be left trying to guess what you’d like to do, and (depending upon your state of mind) you may be fighting against the decisions that you disagree with.

I think this book is an excellent guide for folks facing these issues at some stage in the future – because we’ll all face these issues more likely than not.  If you’re not in or near retirement age presently, perhaps a parent or grandparent would benefit from the book as well.

The above book review is part of a series of reviews that I am doing in an arrangement with McGraw-Hill Professional Publishing, where MH sends me books with the only requirement being that I read the book and write a review – like it or not.  If you find the information in this review useful, let me (and McGraw-Hill) know!

Posted on Dec 2nd, 2013
by author: jblankenship.

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Posted in: Book review, estate planning, financial planning.
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Save 1% More This year – Your Future Self Will Thank You!

Nov 29th, 2013
by jblankenship.
1 comment

 

 

Save

Save (Photo credit: Images_of_Money)

Like so many other things, practicing financial awareness has few payoffs in the early stages.  Think about exercising, eating right, putting in the extra effort at work, or taking a class to improve your skills.  All of these things have a future payoff for the extra effort that you put into it today.  Small steps matter in all of these areas, and before you know it you’ll look back and thank your earlier self for putting in the work to get where you are today.

Below is the list of my fellow bloggers who have written articles showing ways that you can start to increase your savings rate, as well as showing what the benefits can be.  Thanks to everyone who has participated so far – and watch for more articles in the weeks to come!

How Much is 1% by Sterling Raskie, @SterlingRaskie

Retire Rich With Only 1 Percent More Savings by Steve Doster, @dosterfinancial

One Percent for the One Percent? Think About Your Future Self Instead by Ken Weingarten, @KenWeingarten

The 1% Mindset – Transformation Beyond Money by Neal Frankle, @NealFrankle

Are You Part of The 1%? by Financial Fiduciaries, @FinFiduciaries

What’s the Worst Thing That Could Happen? by Dana Anspach, @moneyover55

Save just one percent more by Doug Nordman, @TheMilitaryGuid

1% a Small Number with Big Implications by Roger Wohlner, @rwohlner

The Journey of $1 Million Dollars Begins with 1% by Richard Feight, @RFeight

Give Yourself A Raise by Ben Rugg, @BRRCPA

The 1 Percent Solution by John Davis, @MentorCapitalMg

Friday Financial Tidbit-What increasing your retirement contributions 1% can do for your retirement account by Jonathan White, @JWFinCoaching

THE 1% MORE BLOGGING PROJECT by Robert Flach, @rdftaxpro

A Simple Strategy to Maximize Open Enrollment by Jacob Kuebler, @Jakekuebler

Take a Small Step: Increase Your Savings by 1% by Jim Blankenship, @BlankenshipFP

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Posted on Nov 29th, 2013
by author: jblankenship.

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Posted in: #noTOP, blogger action, investing, retirement savings, saving.
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How Much is 1%?

Nov 29th, 2013
by sraskie.
1 comment

Wheat_PennyA penny saved is a penny earned and penny-pincher are two common terms that are used to describe someone that is most likely frugal. I would admit I am one of those individuals that aspires to both phrases – and it’s not out of accident.

I am one of those folks who will pick up a penny (heads or tails showing – no superstitions here) when walking down the street and put it in my pocket. That penny, nickel, or quarter (in rare cases a one-dollar bill or even higher) will usually make its way into my piggy bank or more likely one of my daughters’ porcelain pigs.

I pick up the loose change for one of two reasons:

  1. It’s literally free money. To not pick it up is asinine.
  2. Little amounts add up.

Think of it this way – a penny is 1% of a dollar. A dollar is 1% of a hundred dollars, and a hundred dollars is 1% of ten-thousand dollars. 1% seems small, but 1% added and then compounded grows exponentially.

When it comes to saving an extra 1% – it’s easy. If you make $50,000 a year, 1% of that is $500. Next year, save another 1% (for a total of 2%) and now you’re saving $1,000. And that’s annually. Broken down into monthly, that’s about $42 per month – or $10.50 a week – or $1.50 a day – or 6 pennies an hour.

If we look at the bigger chunks when it comes to savings – the amount can seem daunting, but when we break it down – in this case literally 1%, it becomes much more doable.

If you’re not saving now, commit to saving 1%. If you’re currently saving, save 1% more. It might not seem like much, but remember that avalanches are caused by many, many little snowflakes.

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Posted on Nov 29th, 2013
by author: sraskie.

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Posted in: budgeting, fee-only, fiduciary, financial planning, investing, investment, saving.
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Social Security Spousal Benefits versus Survivor Benefits

Nov 27th, 2013
by jblankenship.
4 comments
fra la luce

fra la luce (Photo credit: * RICCIO)

I’ve written a lot about Social Security Spousal Benefits and Survivor Benefits on these pages, but oftentimes there is confusion about how they are applied.  There are things about them that are common, but for the most part there are some real differences that you need to understand as you make decisions about applying for one or the other of these benefits.

For one thing – Survivor Benefits and Spousal Benefits are benefits that you may be entitled to that are based on someone else’s record: your spouse (or ex-spouse) to be exact.  No matter what your own Social Security benefit might be, you have access to the Spousal Benefit and Survivor Benefit, if, of course, you have or had a spouse with a Social Security retirement benefit available on his or her record.

In addition, it is important to note that Spousal Benefits and Survivor Benefits are mutually exclusive.  You can’t receive both at the same time – and if you apply for both at the same time, you’ll end up with the higher of the two.  Technically you wouldn’t apply for both at the same time, you’d just find out which one provides the best benefit for you.  This doesn’t mean that you have to take the higher benefit, because it’s possible that you could receive a better benefit later if you delay filing for one or the other until later.  If you are at least at Full Retirement Age (FRA, age 66 if born in 1954 or before, increasing to age 67 if born in 1960 or later), more than likely the Survivor Benefit is the greater of the two, and neither benefit will increase after you’ve reached FRA, so you might as well receive that benefit at this point.

Both the Spousal and Survivor benefit can be reduced by WEP.  They both can also be reduced or eliminated by the GPO.

Differences

One of the first differences between Spousal and Survivor benefits is the relation to your own retirement benefit.  If you have your own retirement benefit and you haven’t filed for it, filing for the Spousal Benefit before FRA will force a filing for your own retirement benefit, and it could wipe out the Spousal Benefit for you.  If you’re at or older than FRA, you can file solely for the Spousal Benefit and have no impact on your own retirement benefit.

At the same time, if you’re eligible for a Survivor Benefit, you can file for it at any time and have no impact on your future retirement benefit (or Spousal Benefit, for that matter).

So – for example, Phil’s wife Joan died this year.  Joan was 65 years old, and had not started receiving Social Security benefits.  Phil has a Social Security retirement benefit available to him when he decides to file for it.  Phil is 65 years old, and his available benefits look like this:

His own retirement benefit will be $2,000 when he reaches FRA next year.

His Spousal Benefit based on Joan’s record could be $900 at FRA, since Joan was due a benefit of $1,800 at FRA had she reached that age.

Phil’s Survivor Benefit based on Joan’s record could be $1,800 at FRA.

If Phil filed for the Survivor Benefit now, at age 65, he could receive a monthly benefit that is reduced 4.7% from Joan’s FRA benefit, or $1,715.40.  This way he could delay receiving his own benefit until at least FRA – possibly even as late as age 70.  He could also wait until next year (his FRA) and file for the full Survivor Benefit of $1,800, again delaying his own benefit until later.

Any other set of choices would result in a lower benefit for Phil.  It’s possible that he could file for his own benefit right now, at age 65.  This would result in a lowered retirement benefit for him for the rest of his life – and since the Survivor Benefit is less than his own benefit, it wouldn’t make sense to ever file for the Survivor Benefit.  Also available is the option for Phil to not file for any benefits at all this year, and then at FRA he could file a restricted application for the Spousal Benefit alone.  This would result in a $900 monthly benefit – half of Joan’s age 66 benefit.  But since the Survivor benefit will not increase beyond Phil’s age 66, he might as well file for the Survivor Benefit at that point, since it’s double the Spousal Benefit.  As mentioned above, he can still file for his own benefit later, even though he’s collected the Survivor Benefit.

If we reverse the circumstances and Joan is the survivor, here are the benefits available to her:

Her own benefit at FRA is $1,800.

The Spousal Benefit based on Phil’s record could be $1,000 at Joan’s age 66.

The Survivor Benefit based on Phil’s record would be $2,000 at Joan’s age 66.

So Joan has the following options available to her right now, at age 65: she could file for her own benefit now and collect a reduced benefit of approximately $1,680 a month.  She could then file for the Survivor Benefit at FRA, and receive a benefit of $2,000 a month.

On the other hand, Joan could file for the Survivor Benefit now, at age 65 and receive a reduced monthly benefit of $1,906.  She could then wait until she reaches age 70 and file for her own benefit, which would have grown to $2,376 due to the Delay Credits.

The third option for Joan is to do nothing at this point.  She could then file for the Survivor Benefit at FRA, receiving a monthly benefit of $2,000, and then wait to file her own benefit later as detailed above.  If she’s waited to FRA to file, any other option would result in a lower benefit for her – if she filed for her own benefit at FRA, she’d only receive $1,800.  She might as well file for the Survivor Benefit at this point and receive $2,000.  This would then leave open the option to file for her own benefit at the delayed, increased amount as mentioned above.

In both cases, the Spousal Benefit doesn’t come into play, since the available Spousal Benefit for both Phil and Joan is less than the other available benefits.

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Posted on Nov 27th, 2013
by author: jblankenship.

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Posted in: Social Security, social security survivor benefits, spousal benefits.
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See How 1% More Can Benefit You

Nov 25th, 2013
by jblankenship.
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saving and spending

saving and spending (Photo credit: 401(K) 2013)

We have a project going to encourage people to increase personal savings by at least 1% more this month.  This means that you would add 1% more of your income to your savings rate – so if you earn $75,000 per year in your household and you currently save around $2,250 per year, that’s 3%.  Adding 1% more would bring that total to $3,000 for the year, which works out to an increase of only $62.50 per month.  Give it a shot!

Below is the list of my fellow bloggers who have written articles showing ways that you can start to increase your savings rate, as well as showing what the benefits can be.  Thanks to everyone who has participated so far – and watch for more articles in the weeks to come!

The 1% Mindset – Transformation Beyond Money by Neal Frankle, @NealFrankle

Are You Part of The 1%? by Financial Fiduciaries, @FinFiduciaries

What’s the Worst Thing That Could Happen? by Dana Anspach, @moneyover55

Save just one percent more by Doug Nordman, @TheMilitaryGuid

1% a Small Number with Big Implications by Roger Wohlner, @rwohlner

The Journey of $1 Million Dollars Begins with 1% by Richard Feight, @RFeight

Give Yourself A Raise by Ben Rugg, @BRRCPA

The 1 Percent Solution by John Davis, @MentorCapitalMg

Friday Financial Tidbit-What increasing your retirement contributions 1% can do for your retirement account by Jonathan White, @JWFinCoaching

THE 1% MORE BLOGGING PROJECT by Robert Flach, @rdftaxpro

A Simple Strategy to Maximize Open Enrollment by Jacob Kuebler, @Jakekuebler

Take a Small Step: Increase Your Savings by 1% by Jim Blankenship, @BlankenshipFP

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Posted on Nov 25th, 2013
by author: jblankenship.

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Posted in: #noTOP, Uncategorized.

Book Review: How to Give Financial Advice to Couples

Nov 25th, 2013
by jblankenship.
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How to Give Financial Advice to CouplesSubtitle: Essential Skills for Balancing High-Net-Worth Clients’ Needs

This book, by Kathleen Burns Kingsbury, is a very good book for all financial advisors to read – even if your clientele isn’t “high-net-worth” clients.  I’ve had my share of client-couples who had difficulty in reconciling financial concerns with one another, and (as you probably know) the number of digits on the couple’s bottom line net worth has nothing to do with it.

Author Kingsbury, a wealth psychology expert, has a great deal of experience and knowledge on the subject to share.  She covers the issues that couples face when dealing with monetary subjects, which can range from having opposite but complementary skills and mindsets regarding money to having basic problems in dealing with conflict with one another.  Every couple has areas where they’re not completely in concert with one another – it would be really unusual if everything about a couple fit like a hand in a glove.

These conflicts, no matter how large or small, can cause difficulties in many areas, and financial dealings are no exception.  In fact, it is in financial dealings that these conflicting viewpoints are often manifested (among other places), since dealing with financial issues is an emotional thing for most folks. Being such an emotional area of our lives, when big decisions need to be made it can be very difficult to come together on a compromise.  For many folks, the worldview about money that they have learned over time from family and friends isn’t very helpful – again, because of the emotional nature of money.  Oftentimes in families monetary issues are dealt with in secret and are the source of conflict. The  messages that are passed on to children are not generally useful when the child becomes an adult and needs to deal with similar issues.

This is where the advisor comes in – because, during the course of working out financial plans there are many decisions to be made, client-couples often find it difficult to come to a decision. And if they do come to a decision, it’s often one partner exerting his or her will over the other – and the other partner may exercise his or her learned reaction to the situation.  This could mean acquiescence, stonewalling, or even actively sabotaging the process.  To be successful, the advisor must recognize when a conflict exists and help the couple to work through it.

Ms. Kingsbury then uses the latter half of the book to show how an advisor can help the couple in a situations like this.  She draws on her own experiences with many, many couples through the years, as well as on her own personal experiences in her life.  The examples are excellent illustrations to help the advisor/reader to understand how to help the couple work out their issues.

I recommend this book for any financial advisor – regardless of the nature of your practice, you’re dealing with situations of conflict among couples, it can’t be avoided.  How you deal with these situations depends a lot on your own background – if you don’t have a lot of experience in successfully dealing with couple conflict successfully, this book can be a great help.  With Kathleen Burns Kingsbury’s guidance, you have a much better chance to help couples to deal with the issues and wind up with better results on the long run.  Otherwise, if the advisor doesn’t deal with the conflict, all the effort involved in putting plans together is wasted.

The above book review is part of a series of reviews that I am doing in an arrangement with McGraw-Hill Professional Publishing, where MH sends me books with the only requirement being that I read the book and write a review – like it or not.  If you find the information in this review useful, let me (and McGraw-Hill) know!

Posted on Nov 25th, 2013
by author: jblankenship.

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Posted in: Book review, estate planning, financial planning.

You won’t regret it, I promise!

Nov 22nd, 2013
by jblankenship.
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regrets

regrets (Photo credit: mayeesherr. (away))

I often have opportunity to speak to young folks who are just starting out with their retirement accounts – this usually happens when we’re looking at ways to reduce taxes, primarily, so we start looking at IRAs and diverting income via 401(k) accounts.  One of the things I point out is that this is an activity that you aren’t likely to look back on in 20 years and say “Gee, I sure wish I hadn’t saved all that money!”  We may have many things we look back on in our lives and wish we hadn’t done them, but I think you’ll agree that saving is rarely in that category.

So take the encouragement of my fellow blogging brethren and sistren (you betcha sistren’s a word, regardless of WP’s spell-checker!) and put aside at least 1% more of your income into your savings, starting right now.  You won’t regret it, I promise.

Below is the list of my fellow bloggers who have written articles showing ways that you can start to increase your savings rate, as well as showing what the benefits can be.  Thanks to everyone who has participated so far – and watch for more articles in the weeks to come!

Are You Part of The 1%? by Financial Fiduciaries

What’s the Worst Thing That Could Happen? by Dana Anspach, @moneyover55

Save just one percent more by Doug Nordman, @TheMilitaryGuid

1% a Small Number with Big Implications by Roger Wohlner, @rwohlner

The Journey of $1 Million Dollars Begins with 1% by Richard Feight, @RFeight

Give Yourself A Raise by Ben Rugg, @BRRCPA

The 1 Percent Solution by John Davis, @MentorCapitalMg

Friday Financial Tidbit-What increasing your retirement contributions 1% can do for your retirement account by Jonathan White, @JWFinCoaching

THE 1% MORE BLOGGING PROJECT by Robert Flach, @rdftaxpro

A Simple Strategy to Maximize Open Enrollment by Jacob Kuebler, @Jakekuebler

Take a Small Step: Increase Your Savings by 1% by Jim Blankenship, @BlankenshipFP

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Posted on Nov 22nd, 2013
by author: jblankenship.

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Posted in: #noTOP, blogger action, retirement savings, saving.

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