College is Coming – Have You Started Saving Yet?

How times change! In 1940, half of Americans finished their education in eighth grade. College degrees were relatively rare. Just 6 percent of men and 4 percent of women had one.1

During the past 80 years, college has become far more popular. As interest in higher education grew, America’s network of colleges and universities expanded. Oxford Bibliography described it as:2

“A radically pluralistic system of public, private, and for-profit two- and four-year training institutes and colleges and professional and graduate schools, the American system is generally regarded as the best in the world. A by-product of the American commitment to liberty…Consisting of 4,700 institutions that enroll upward of 20 million students from the United States and abroad…”

Despite the number of colleges and universities, demand has consistently driven education costs higher. In 1940, tuition at the University of Pennsylvania’s Wharton School set students back about $400 per year. Once room and board, books, and fees were added, costs rose to $985 ($16,900 when adjusted for inflation to 2016).3, 4

Is college worth it?

To the dismay of many, college costs have risen far faster than inflation. In 2016, College Board reported the average cost for undergraduate tuition, fees, and room and board was about:5

$11,580 for in-district public two-year colleges and universities
$20,090 for in-state public four-year colleges and universities
$35,370 for out-of-state public four-year colleges and universities
$45,370 for private non-profit four-year colleges and universities

Of course, the amount students actually pay varies by institution. Ten percent of full-time students attend colleges or universities that charge less than $12,000 a year, and 7 percent enroll in schools with tuition of $51,000 or more.5

Imagine having three or more children who are close in age and all want to attend college. Even parents with significant wealth may find it challenging to pay multiple tuitions in a single year. It’s not a surprise the potential cost of college is overwhelming for many parents, and it begs the question: Is the cost of college really worth it?

The simple answer is yes. The Bureau of Labor Statistics reported, “Few things affect people’s earnings power more than their level of education. In general, more education means more dollars earned.” In 2014, income varied significantly by educational achievement. Americans with:6

Less than a high school education earned about $25,000 per year
A high school education earned about $35,000 per year
Some college earned about $40,000 per year
A bachelor’s degree or higher earned about $62,000 per year

When you do the math, the difference in lifetime earnings for a person with a high school diploma and a person with a bachelor’s degree is more than $1 million.

Take one bite at a time

In the 1970s, U.S. Army General Creighton W. Abrams said, “When eating an elephant, take one bite at a time.” It’s good advice anytime you confront a difficult task that seems insurmountable.7 When it comes to college, taking one bite at a time may mean:

Setting aside a few dollars each week or month in a tax-advantaged account earmarked for tuition
Contributing some of a student’s summer earnings to a college account
Asking grandparents, relatives, and friends to give to the college fund at birthdays and holidays, in lieu of gifts
Learning about and applying for local and national scholarships and grants
Completing the Free Application for Federal Student Aid (FAFSA) to qualify for grants, loans, and work-study
Applying to less expensive colleges and universities
Applying to smaller private colleges and universities that may offer more aid to attract good students
Joining a military or community service program that helps pay for college (e.g., ROTC, AmeriCorps, Peace Corps)
Learning through interactive online courses that may be offered for free by some of the world’s best colleges and universities

The bad news is college is expensive. The good news is there are a lot of ways to pay for it. If you would like to learn more about saving and paying for college, please contact our office.


1 (Page 7)



4 Federal Reserve Bank of Minneapolis CPI Calculator app: (Click on App information) (or go to

5 (Page 9, Table 1A)



The above material was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

Resources to Help You Through the Coronavirus Crisis

If you have ever been flattened by a rogue wave while fishing or sunbathing on the shore, you probably recognize the emotional responses that have accompanied the pandemic wave crashing across the United States – shock, anxiety, and concern for ourselves and others.

We’ve been knocked flat by the unexpected – COVID-19.

In just a few weeks, the virus has changed our world in significant ways. We have become familiar with new terms – elbow bump, social distancing, shelter-in-place, flatten the curve – and learned to guesstimate six feet. We’re finding ways to help our children with schoolwork (often while balancing our own work and online meetings), making cloth masks for ourselves and for healthcare workers, and learning to manage the loneliness that accompanies quarantine conditions.

Businesses are seeing sales and revenue decline. As a result, millions of people are without work. In February 2020, the St. Louis Federal Reserve reported 3.5 percent of the civilian workforce, about 5.76 million people, were out of work. By the end of June, estimates suggest unemployment could reach 32.1 percent and about 52.8 million people may be out of work.1

Whether you are working reduced hours, furloughed, or out of work, there are resources available to help you stay afloat financially. The Federal Reserve, commercial banks, financial institutions, and federal, state, and local governments have taken steps to help people cope. Here are some of the financial resources available to individuals.

Economic Impact Payments
The Coronavirus Aid, Relief, and Economic Security (CARES) Act created economic impact payments. The Treasury Department will send payments directly to American taxpayers and Social Security recipients and expects to begin making payments April 2020. The payment you receive will depend on your income and filing status. The IRS website explained:2

• Taxpayers with adjusted gross income up to $75,000 for individuals, and up to $150,000 for married couples filing jointly, will receive $1,200 each.
• Taxpayers with higher incomes will receive lower payments. The payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds.
• Taxpayers with income exceeding $99,000 (filing singly) and $198,000 (filing jointly) and no children are not eligible to receive payments.
• Qualifying children will receive $500 each.
• Social Security recipients and railroad retirees who are not required to file tax returns also are eligible to receive economic impact payments.

You do not have to do anything to receive your payment. As long as you filed taxes for 2018 and/or 2019, the federal government has the information it needs to send your payment. It may be delivered electronically or arrive by check.

Beware of Scams
The Federal Trade Commission has cautioned Americans to beware of scams:3

“Do not give anyone your personal information to ‘sign-up’ for your relief check. There is nothing to sign up for. Anyone calling to ask for your personal information, like your Social Security number, PayPal account, or bank information is a scammer, plain and simple. Also, be on the lookout for email phishing scams where scammers pretend to be from the government and ask for your information as part of the ‘sign-up’ process for the checks…No one has early access to this money. Anyone that claims to [provide early access] is a scammer.”

Electronic transfers of funds will begin on April 9, 2020. Paper checks will be issued, beginning on April 24, 2020, to taxpayers who have not used electronic deposit for tax refunds, reported The Washington Post.4

Higher Unemployment Benefits
The Emergency Unemployment Insurance Stabilization and Access Act of 2020 was passed as part of the CARES Act. It increased unemployment benefits by $600 per week through July 31, 2020. Since the average unemployment benefit in the United States is about $300 per week, according to the Center on Budget and Policy Priorities, households may receive about $900 per week or $3,600 per month in unemployment benefits.5, 6

States also have the option to make unemployment benefits available to independent contractors, gig workers, and other workers who are not usually eligible to receive benefits.5

Paid Sick Leave and Expanded Family and Medical Leave
The Families First Coronavirus Response Act provides additional benefits to people who work for companies with 500 or fewer employees. These benefits include:7

• Paid sick leave: At least two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay if the employee is unable to work because he or she is quarantined or experiencing coronavirus symptoms.
• Basic paid family and medical leave: At least two weeks of paid sick leave at two-thirds of the employee’s regular rate of pay, if the employee is unable to work for reasons related to COVID-19. These reasons include caring for someone who has been quarantined and caring for a child (younger than age 18) whose school or care provider is closed.
• Extended paid family and medical leave: Up to 10 additional weeks of paid family and medical leave at two-thirds of the employee’s regular rate of pay, as long as the person has been employed for 30 days and the leave is related to COVID-19.

Loan and Fee Relief from Banks and Financial Institutions
Many banks and financial institutions put COVID-19 plans into place in March 2020. As a result, you may be able to defer mortgage, auto, and loan payments, as well as small business loan payments. The key word is ‘defer.’ You will receive relief now, but you will have to make the payments sometime in the future, in most cases. Contact your bank to find out what options are available to you. Be prepared to spend a significant amount of time on hold.8

There also are resources available to help business owners, including loans and tax credits.

If you would like to talk about your current financial position, or that of your business, and learn more about steps you can take to improve it, please get in touch. We’re here to help.

4 (or go to

This material was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer or firm.

The 2018 Tax Reform Bill and What’s Important to Know

The New Tax Reform Bill Doesn’t Impact Your 2017 Taxes

For individuals, the tax reform bill’s purpose is to:

  • Simplify the tax process
  • Preserve the mortgage interest deduction
  • Eliminate Obamacare’s individual mandate penalty tax
  • Increase the standard deduction
  • Provide more support to American families
  • Provide relief for Americans with expensive medical bills
  • Improve savings vehicles for education

Difference in Marginal Tax Rates and Brackets

One of the most widely discussed changes in the 2018 tax reform bill involves income tax brackets and marginal tax rates. Tax brackets refer to specific ranges of income and their corresponding tax rates. Marginal tax rates apply to different levels of income—the higher the income, the higher the tax rate. What this means to you is that your income is not taxed at one rate but at several different rates, depending on your income.

For 2018, the tax brackets have shifted, and almost all of the marginal tax rates have been cut. There will still be seven income tax brackets but nearly everyone will have lower income tax rated (on the same income) in 2018

Income Tax RateIncome Levels for Those Filing As:
20172018-2025 SingleMarried-Joint

Not only will taxpayers see lower rates, but the shift in tax brackets will also remove what used to be an unintended tax penalty for married filers. Under the 2017 tax thresholds, some married filers were pushed into a higher income bracket when they combined their income with their spouse’s. The new brackets double for joint filers, so any marriage penalty is effectively removed for 2018.

Difference in the Standard Deduction

Another important difference in the 2018 tax reform bill is that the standard deduction has almost doubled.

The standard deduction is an automatic reduction in a taxpayer’s tax obligation. Taxpayers have had the option of taking the federal standard deduction or itemizing their deductions—identifying which expenses they qualify for and calculating their deductions one by one. Itemizing is more time consuming, but it’s worth it if your itemized deductions exceed the amount of the standard deduction.

Changes to the Standard Deduction
Filing Status2017 Standard Deduction2018 Standard Deduction
Married Filing Jointly$12,700$24,000
Married Filing Separately$6,350$12,000
Head of Household$9,350$18,000


At first glance, the increase in the standard deduction makes itemizing look even less worthwhile. But, the 2018 tax reform bill also eliminates the personal exemption—the amount a taxpayer gets to deduct from their taxable income for themselves and any dependents claimed on their tax return. Here’s an example of how this may work

In 2017, the personal exemption was $4,050 per person and dependent. In 2017, a married couple filing jointly with no dependents who made $100,000 received a $13,000 standard deduction and $8,100 in personal exemptions, leaving them with a taxable income of $78,900. In 2018, that same couple will receive a $24,000 standard deduction and no personal exemptions, leaving them with a taxable income of $76,000.

Essentially, the tax reform bill simplified this portion of the income tax process. In many cases, the increase in the standard deduction will make up for the elimination of personal exemptions, leaving most Americans with quite a bit more money in their pockets.


Difference in Child Tax Credit

In our current tax code, if parents make less than $110,000 jointly and $75,000 individually, they receive a $1,000 Child Tax Credit for qualified children under the age of 17. The 2018 tax reform bill increases that credit to $2,000 per qualified child and raises the income limits for the credit to $400,000 jointly and $200,000 individually. This means a lot more people will be able to receive tax credits for their children. Great news for parents!!

Changes in Child Tax Credit Thresholds
Filing Status2017 Child Tax Credit Threshold2018 Child Tax Credit Threshold
Married Filing Jointly$110,000$400,000



More Changes for Taxpayers With Kids

If you have children, you may have a 529 college savings plan in place. This savings plan acts similarly to a Roth IRA for your kids’ college education. Funds within the account are invested and grow tax-free, but they can only be used for qualifying college expenses. The new tax reform bill changes this significantly.

Starting in 2018, if you have a 529 savings plan for your child, you can use it for levels of education other than college. For example, if you have children in private school, or if you pay for tutoring for your child in kindergarten through twelfth grade, you can use money from your 529 for these expenses tax-free.

While it may seem like a benefit to use a 529 plan prior to college, you should make sure—especially if you want to use the 529 plan sooner than you had originally intended. Taking too much out of a 529 plan early can have a negative effect on the compounding growth the account could experience if the money was just left alone.

Differences for Homeowners

Many people were disappointed in the mortgage deductions in the new tax reform bill. Here’s what everyone’s talking about:

Currently, if you itemize your deductions, the IRS allows homeowners to deduct the interest they pay on their primary residence and/or second home, up to a maximum of $1 million in original mortgage principal. This can include more than one loan—as long as the total is below the $1 million limit—and can include loans to refinance your home as well as mortgages to purchase the home. The new maximum in the tax reform bill is $750,000 in original mortgage principal. Not to worry, taxpayers with existing mortgages in between $1 million and $750,000 will be grandfathered into the old deduction.

Taxpayers are also currently allowed to deduct interest paid on home equity debt, up to $100,000. The Tax Cuts and Jobs Act has removed that deduction for 2018.

Difference in the Alternative Minimum Tax

The Alternative Minimum Tax (AMT) was put into place to ensure that top-income earners paid appropriate taxes. Basically, upper income taxpayers have to calculate their taxes two ways—once under the traditional tax system and once under the AMT—and pay whichever amount is more. Much of the AMT is fairly complicated, however, the AMT tax brackets are not. While the standard tax system has seven brackets, the AMT system has only two—26% and 28%. Below a certain income amount, the 26% rate is applied, and over that amount, the 28% rate is applied to the rest.

Once taxpayers have calculated what they owe in the AMT process, they can deduct an exemption from that amount. The problem is that these exemptions weren’t properly set up to account for inflation. So as time passed, more and more Americans were affected by the AMT—even those who it was never intended for, like the middle class. To address this issue, the Tax Cuts and Jobs Act makes the minimums for the AMT system much higher to avoid the average Joe from having to run their numbers twice. Here’s how the AMT exemptions are changing for 2018.

Changes to the Alternative Minimum Tax Exemption
Filing Status2017 AMT Exemption2018 AMT Exemption
Single or Head of Household$54,300$70,300
Married Filing Jointly$84,500$109,400

In addition, the income thresholds at which the exemption amounts begin to phase out are dramatically increased. Currently, these are set at $160,900 for joint filers and $120,700 for individuals, but the new law raises them to $1 million and $500,000, respectively.

So, what does this mean in plain English? The new tax reform bill significantly increases the exemptions for AMT. Therefore, if you’re one of the many Americans who has to use the AMT for your yearly taxes, you will be seeing increased standard exemptions and higher tax thresholds for the 26% and 28% tax rates. Yay!

Difference in the SALT Deduction

The SALT deduction is another deduction that was heavily deliberated before the tax reform bill was voted in. SALT stands for “state and local taxes” and refers to taxpayers’ ability to deduct their state income taxes and/or sales taxes, if itemizing deductions. In previous years, there was no limitation on the deduction of state and local taxes, which was an advantage to those living in high tax states like California and New York. The new tax reform bill keeps the SALT deduction but limits the total deductible amount to $10,000, including income, sales and property taxes.

The Estate Tax Exemption

The estate tax is a tax on inherited money and property. Currently, heirs pay a tax rate of 40% on any inherited property valued at over $5.49 million.

In the new tax reform bill, individuals have a $11.2 million lifetime inheritance tax exemption and married couples can exclude inheritances of $22.4 million. As you can probably imagine, this won’t leave too many families paying the estate tax.

What About Charitable Donations?

Under current tax law, you can deduct up to half of your income in qualified charitable donations if you itemize your deductions. That makes it a popular deduction for people at all income levels. The new tax reform bill has increased that limit to 60% of your income. Great news for philanthropic taxpayers!

However, donations made to a college in exchange for the right to purchase athletic tickets will no longer be deductible.

What About Medical Expenses?

Another frequently used deduction is the medical expense deduction. Prior to the new tax reform bill, you could deduct unreimbursed medical expenses above 10% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken. The new tax reform bill has reduced that hurdle to 7.5% of your AGI. So, if your AGI was $100,000 in 2017, you could deduct medical expenses over $10,000. In 2018, if your AGI is $100,000, you will be able to deduct unreimbursed medical expenses over $7,500.

What About Health Care (Obamacare)?

The Affordable Care Act, otherwise known as Obamacare, remains in effect for 2017. However, the new tax reform bill removes the individual mandate penalty, meaning that people who don’t buy health insurance will no longer have to pay a tax penalty.

It’s worth noting that this change doesn’t go into effect until 2019, so for 2018, the “Obamacare penalty” can still be assessed.

Other Deductions That Are Disappearing

Other deductions that didn’t make it past the chopping block in the new tax reform bill:

  • Casualty and theft losses (except those attributable to a federally declared disaster)
  • Unreimbursed employee expenses
  • Tax preparation expenses
  • Alimony payments
  • Moving expenses
  • Employer-subsidized parking and transportation reimbursement

Don’t worry, teachers can still deduct classroom supplies!

But What Does It All Mean?

The one thing that’s clear through all of this is that taxes are complicated. Even the IRS is scrambling to keep up with all the changes in the new tax reform bill.

But what about tax software or online tax prep? Prior to the new tax reform bill, it might have been safe to rely on those options to file your yearly taxes. But with all the changes coming, there’s no guarantee these programs have caught up. If any year is the year to work with a tax advisor, it would be 2018.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

PLEASE! Call or email us before you spend $5,000 or more

Man on phone at computer

Almost every month I speak with a client who told me about a new house they bought, or a 401(k) loan they took or a service they paid for without running it by us. This is a mistake. I cringe when I have to point out there was a more cost efficient money decision that could have been made. If you’re planning on making a decision that’s more than $5,000 please call or email us. The worst thing that happens is we review your purchase plan and agree that you are going about it the best way.  Many times we help clients save a lot of money.

My favorite recent savings story involved a family looking to refinance their home.  Interest rates had declined more then 1.5% below their current mortgage rate which would allow them to save thousands of dollars.  They were also very close to having more than 20% equity in their home –  the threshhold where Private Mortgage Insurance (PMI) would not be required on their mortgage.  PMI is expensive. It typically costs 0.50% –  1.00% of the amount of the loan annually.  On a $480k loan that could be another $2400 –  4800 expense every year or $200 –  400 more on the monthly payment.  The monthly payment without PMI would be about $2,300 for a 30 year fixed mortgage with 4.00% interest.

The client called me and asked to make a withdrawal of $25,000 from his IRA. I asked what the withdrawal was for since it would trigger a 10% IRS penalty plus tax since the client was not close to age 59.5 (when the 10% penalty goes away). He explained how he would use the money to get under the PMI threshhold. He did some math and figured the breakeven point of this expensive withdrawal would be less than three years without the PMI. However, he did not consider that he was permanently reducing his retirement account – a big no-no outside of massive emergencies.

Rather than take the withdrawal we proposed that he roll $50,000 from his IRA into his new company’s 401(k) plan and set up a loan for the $25,000 his family needed to aviod PMI on his mortgage refinance.  The loan would have a 5% interest rate, but interest paid on 401(k) loans goes to to the borrower’s account so it’s not a necessarily a bad cost. Had he taken the withdrawal the client would have had to take out $33,333 assuming a 25% tax rate and he would have also owed the $3,333 IRS penalty.

This brief 15 minute conversation saved $11,667 in tax and penalties!

Not every situation results in such large savings, but even if its a few hundred dollars isn’t it worth the call?

Question: What purchase or expense do you have coming up that you would like to run buy us?

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

High Income Earners — You Can Potentially Fund a Roth IRA

Do you like paying taxes? No, of course not. So then having access to an account that will be tax-free1 in retirement sounds awesome —That’s the Roth IRA — But you’re married and your modified adjusted gross income is over $196,000 ($133,000 for singles). The IRS doesn’t allow you to contribute to a Roth IRA. Do you know what to do?

In order to answer that question let’s look at how people save for retirement. Most Americans use a 401(k) or 403(b) plan for retirement savings. If you’re a high income earner, then you are likely making the maximum employee contribution of $18,000 (2017) to your 401(k) or 403(b) plan because you can afford it and because you need to shelter income from taxes this year.  As a general rule deferred taxation is better than tax now, especially when you make a lot of money. If your income is all W-2 wages that pre-tax savings may be your only tax saving move.

Our clients who earn really well almost always have more money to save. We see people do the next logical step and accumulate cash in the bank or invest in a brokerage account. But what is the goal of these funds? Sure you need a cash emergency fund and you probably want some additional money if you decide to buy a big ticket item like a home or a boat. Beyond that though it’s likely additional savings is for your retirement.

Here’s where a rather misunderstood part of many retirement plans comes in handy — after-tax contributions. Currently almost half of 401(k) plans in existence allow for additional after-tax contributions. Does yours?

Your initial reaction might be, “why would I ever put after-tax money into my retirement plan when I already maxed out my deductible contribution?”

First, after-tax contributions to your retirement plan have the opportunity grow tax-deferred just like pre-tax contributions. Second, after-tax contributions can be withdrawn anytime because you already paid the tax so you have some flexibility.

The game changer however, comes from IRS Notice 2014-54 which allows you to roll over after-tax savings in your 401(k) or 403(b) directly to a Roth IRA! Voila`, you now have access to the Roth IRA that was previously unavailable because of your income level.

Some important rules to do this correctly exist of course. The generic way to do this is — upon severance from your company — you roll the entire 401(k) balance out of the plan. Pre-tax contributions and gains roll directly into an IRA. After-tax contributions roll directly into a Roth IRA.

IMPORTANT: You must notify your plan administrator of your intentions to have a separate check for pre-tax money and another separate check for after-tax money so that distributions are reported correctly to the IRS.


Sounds good, what’s the potential amount?

As an example, let’s assume you’re married filing jointly with a combined income of $315,000. Your individual wages are $215,000 and your employer matches 3% of income. In 2017 the employer limit for 401(k) and 403(b) plans is $54,000.


$54,000   2017 employer limit

-$18,000  Your employee savings

-$6,450                    3% employer match

= $29,550                potential after-tax savings you can make


In this example you could save $29,550 to the after-tax portion of your 401(k) in 2017!

If you love saving money or make a lot more than the example, then you should certainly discuss with your financial planner whether contributing after-tax to your retirement plan makes sense.

Finishing the thought on this example, you would certainly have your spouse make the maximum employee contribution of $18,000 before beginning after-tax savings because the pre-tax savings is valuable in the current year. Let’s also assume a 3% employer match of $3,000 on your spouse’s $100,000 of income.

Your personal savings would be $65,550 ($36,000 pre-tax & $29,550 after-tax) — 20.8% of your working income of $315,000. The employer matching is an additional $9,450 bringing 2017’s savings to $75,000 — 23.8% of your working income. And all of that savings enjoys tax-deferred growth potential until you take it out.


How can I be confident this is for me?

The devil’s in the details and you need to make sure you evaluate this information against your personal finances.  If you have investment or other income this will further complicate your tax planning. If you don’t have the time to evaluate your savings strategy fully or just want to talk it through with a CFP® Professional give us a call or schedule a free 15-minute phone appointment through the Contact section on our website.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

1The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs.

Consider Taking These Steps Immediately Regarding the Massive Equifax Data Breach

If you have been captivated with the hurricanes pounding the South and Southeast you may have missed the most impactful story to you regarding one of the big three credit bureaus, Equifax.

Equifax had an unprecedented data breach that they have stated affected 143 Million Americans. The estimated population is 326 Million Americans — that’s over 43% of us!

Between May and July 2017 computer thieves accessed people’s names, Social Security numbers, birthdates, addresses and driver license numbers. Equifax also stated that 209,000 credit card numbers were stolen.

So what do I do?

  1. Visit and check whether Equifax believes that you were part of the breach. The site will as you for your last name and the last six digits of your Social Security number to run the check.
  2. Decide for yourself whether you want to accept Equifax offer for a year of free credit monitoring. There was language in their terms of acceptance notice that indicates that accepting any product from Equifax could make you only eligible for arbitration and waive your right to participate in a class action law suit. This language has been removed and Equifax has stated that they will not deny anyone their full rights in conjunction with this data breach but it’s a bit hard to trust them right now. We are not attorneys so we cannot advise what your rights are, just be aware and read up before making your decision.
  3. If you do not elect Equifax free year of credit monitoring, consider obtaining credit monitoring from a third party. A quick Google can provide you a list of companies. You should also check with your credit card companies because some offer a subscription for free.
  4. Check your credit reports from Equifax, Experian, and TransUnion for activity that you do not recognize— it’s FREE once every 12 months — at
  5. If you do not anticipate needing to do something, such as apply for a loan or credit card, anytime soon, consider placing a credit freeze on your files with all three credit bureaus. You can do this online with each bureau. Depending on the state you live in there may be a small fee for each and there may also be a small fee to lift the credit freeze. If you may need to access your credit in the near term, consider whether you want to go through the steps to temporarily unfreeze your accounts at each bureau when you apply for credit.
  6. If you don’t do the credit freeze, consider using a fraud alert on your credit bureau files. This lets companies that need to check your credit that you might be a victim of identity theft and that they should pay close attention to verifying that anyone applying for credit in your name is really you.
  7. Check your existing bank and credit card accounts regularly for charges or transactions you do not recognize.
  8. File your taxes as early as possible — Tax scammers are people who attempt to file tax returns as you in order to collect your refund check before you can or people who try to use your Social Security number to get a job. If you get any IRS letters act on them promptly for your personal security.

If you have more questions about what this breach means to you shoot us an email or call us.


Are Your Stocks and Bonds in the Right Accounts?

“It’s not how much you make, but how much you keep.” Are your investments set up with this wisdom in mind? Many of the people we meet with who manage their investments themselves often have their stocks, bonds and other investments in the wrong accounts.

Having your investments in the right accounts is a simple concept when tax treatment of investments and accounts is reviewed.

To help you determine if you have your investments in the right accounts let’s see how you will be taxed on savings accounts, corporate bonds, municipal bonds, and U.S. stocks. While there are many other types of investments, these are some of the most common ones that you are likely to have in your investments.

  • Savings Accounts — Each year your bank pays you a stated interest rate
    • The interest fully taxable at your current tax bracket
  • Corporate Bonds — Each year the bond issuer pays you a stated interest rate
    • This interest is fully taxable each year at your current tax bracket
    • If you sell the bond before maturity the difference between what you lent the bond issuer initially and the sold value is a capital gain or loss
    • If you owned the bond less than one year, the capital gain is fully taxable at your current tax bracket
    • If you owned the bond for a year or more the capital gain is taxed at a special rate lower than your current tax bracket and will range from 0-20% based on your annual income
  • Municipal Bonds — Each year the municipality issuer pays you a stated interest rate
    • When you purchase these correctly the interest can be tax-free on your Federal and state tax return
    • It may also be tax-free if your city has a local tax
    • If the bond is sold before maturity the difference between what you paid initially and the sold value is a capital gain or loss
    • If you owned the bond less than one year, the capital gain is fully taxable at your current tax bracket
    • If you owned the bond for a year or more the capital gain is taxed at a special rate lower than your current tax bracket and will range from 0-20% based on your annual income
  • U.S. Stocks — Stocks can have two investment return components — dividends and capital gains
    • Stock that qualifies for special tax treatment have dividends that are taxed like long-term capital gains at the preferential tax rates stated above
    • Gains in stocks held less than a year — short-term — are fully taxed at your current tax bracket
    • Gains in stocks held a year or more — long-term — receive the special tax rate that ranges from 0-20% based on your annual income

Now that we have reviewed how some of your most common investments will be taxed in a regular account, let’s also review how the tax treatments of two other account structures may affect how much of your retirement savings you keep. Tax rules for these account types supersede the tax rules of individual investments. We are happy to help you figure this out. Give us a ring.

  • 401(k), 403(b), and Traditional IRA — Monies deposited in these accounts are saved pre-tax
    • money grows inside the account tax-deferred
    • when any money is withdrawn (after age 59.5) every dollar is fully taxable at your current tax bracket
  • Roth 401(k), Roth 403(b), and Roth IRA — Dollars deposited in these accounts are saved after tax
    • money grows in the account it is tax-deferred
    • when any money is withdrawn (after age 59.5) every dollar is fully tax free on the Federal level and in most cases state tax free (Consult your tax advisor for your state’s tax rules)

Funding a Roth type account typically makes a lot of sense when your income today is lower than your future earnings will be — typically your early career years. Paying tax at a lower rate when you know that your future tax rate is going to be higher, is simply to your advantage mathematically. And by funding a traditional 401(k), 403(b), or IRA account you can defer taxation. If you have additional savings beyond IRS limitations for saving into tax-qualified plans, it will naturally spill over to a savings or investment account — a very good thing.

Putting it All Together

Households with high income should pay extra attention to the amount of cash savings they accumulate since interest from savings accounts will add directly to their tax bill. Also, cash reserves greater than a recommended 3 to 6 months of expenses warrants considering additional tax relief investments. We help our clients evaluate municipal bonds and tax-free money market funds that fit their investment comfort level every day. We often find our top earning clients are sitting on “too much cash” — either because they like the feeling or because they are earning it faster than they can think about investing it.

Corporate bonds larger investment return component is current year income. We can defer that income to a later date by placing these investments in a 401(k), 403(b) or Traditional IRA. If we have a Roth type account, then placing high income paying corporate bonds in it can turn an annually taxable investment into one that is potentially tax free.

Because qualifying stocks receive preferential tax treatment on dividends and because tax is deferred on capital gains until the stock is sold, placing stocks in a regular investment account ‘makes more sense’ than a tax-qualified account where it would actually be increasing taxation on investment growth.

How can I use this info to keep more of my money?

OK, so create a list of your accounts by tax status — and asset type — to identify opportunities to relocate assets to accounts that will get a further benefit from a tax perspective.

There is some good news: if you find that you have more bonds in regular accounts and more stocks in tax-qualified accounts then the cost to relocate assets may be reasonable. Because high quality bonds often trade rather close to their purchase price, selling may only cost you a commission or fee with low capital gains release. In tax-qualified accounts selling stocks to buy bonds has no tax implication so only the cost of a trade would apply.

If you don’t have the time to do this exercise on your own or simply want to ensure that you are set up right, please reach out to us at Rightirement Wealth Partners. You may schedule a 15-minute phone meeting on our website or call in or write. We look forward to speaking with you.




The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investorís yield may differ from the advertised yield. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply. If sold prior to maturity, capital gains tax could apply.

No investment strategy assures a profit or protects against loss. Investing involves risks including possible loss of principal.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 1/2 may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA withdrawals may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 1/2 or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

An investment in the money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.