News & Insights

Is your CPA a Tax Preparer or a Tax Planner?

by Jim Freeman, CFP® on 8/14/2018

Tax planning ranks low on the list of activities people enjoy. Yet despite how astronomically large the tax bill can be in April, after tax season many people do not sit back down with their tax professionals to do in-depth planning. As a result, simple things getting overlooked on a regular basis that needlessly cost taxpayers thousands of dollars.

The goal of today’s blog is to give you a partial checklist and, most importantly, to inspire you to bring this topic up with your tax advisor and to initiate an annual tax planning protocol.

Below I’ve highlighted a few of the more commonly neglected categories:

  • Am I maxing out my tax deductible retirement plans? There can be numerous tax-sheltered buckets to fill here. Some defined-benefit retirement plans allow for six-figure annual contributions! Filling these buckets both lowers taxable income and allows your savings to compound tax-free.
  • Am I eligible for the new Qualified Business Income deduction? If not, what can be done so that I am?
  • If I am a business owner, am I unnecessarily overpaying on my payroll taxes by paying myself too high a salary?
  • Am I eligible for a Heath Savings Account (HSA) and am I funding it? Many people use their HSA as another retirement account as you get to add $3,500 per year pre-tax, those savings compound tax-free, and years later in retirement they can also be withdrawn tax-free. In this way, the HSA works like a hybrid Traditional/Roth IRA.
  • Are there any simple adjustments available that can help drop my taxable income into a lower tax bracket? For example, business owners can strategically deploy capital expenditures into a certain tax year. Or charitable contributions can be prepaid or delayed. Or 529 College Savings Plans can be strategically funded for tax efficiency.
  • Am I taking advantage of “tax loss harvesting” in my investment accounts?

These are just a few. There are many nooks and crannies to explore and exploit for tax savings. They are often easily uncovered through these basic due-course planning discussions. A great example of this is charitable giving. Oftentimes I see people making annual donations from their after-tax savings when they should not be. For retired clients, they can often use pre-tax IRA funds to make such a donation. Or we’ll see others who could be donating appreciated stock thereby avoiding capital gains tax.

The complexity of taxes scares people off but as you can see there as so many ways that money can be saved by paying a little bit of attention to them. The good news is you don’t have to even understand it. All you need to do is schedule the annual tax planning check-up.

posted in General

Introducing eMoney, a Financial Planning Beneficence for our clients!

by Ellen Li, MSBA, CFP® on 8/1/2018

As of this month, Financial Alternatives is rolling out a Personal Financial Management platform called eMoney for our clients. This portal will provide clients with secure access to real time values of all of their accounts across various custodians including held-away 401K accounts and liabilities such as student loans, mortgages, and credit cards.

What benefits does eMoney provide for our clients?

You can see the whole picture by logging on to just one platform

Gone is the day when you have to wait for Fidelity or Schwab’s month end statements or Financial Alternative’s quarterly reports to get an integrated look at your financial situation, from all angles and leaving no stone unturned.

You’ll no longer need to provide your bank account or liability statements for your annual review if you link the accounts in eMoney. Also, you won’t have to worry about keeping track of multiple account log ins anymore as your information will all be held in one place.

You can reduce time spent on creating a budget

eMoney isn’t just about investments.  Clients can add their bank accounts to this platform as well. Just as Mint does, you can see your checking balances and bills.

Procrastination is a huge problem when it comes to budgeting. Who wants to repeatedly track down every last bill or savings account statement? Reduce time spent on the administrative aspects and you’ll find time spent on creating your budget to be more productive.

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posted in BlogGeneralPersonal Finance

Avoiding the Web Can Be Bad For Your Financial Health!

by Chris Jaccard, CFP®, CFA on 7/23/2018

With cybercrime constantly making headlines, it’s no wonder that some people have resorted to avoiding the web altogether as a way to prevent exposure to this risk.

Think again.

Unfortunately, the premise that you can’t be hacked because you haven’t set up online accounts with your bank, utility company, brokerage firm, etc., isn’t a sound one anymore. Many years ago this may have been true, but the unfortunate reality is that nowadays there is nowhere to hide from cybercrime.

The Allure of Anonymity

Despite the advantages that our cyberconnected world has delivered to our doorstep, it seems like this change isn’t one that people welcome with complete open arms.

According to a study by Pew Research Center, 86% of adult internet users have resorted to tactics to enable them to travel the web incognito. Examples include clearing or disabling cookies, trying to mask your identity, using a fake name, or using an anonymous browsing service (as per Rainie et al, 2013). It’s clear that most people have a desire for more online privacy.

Technology can empower our lives and strengthen our ability to connect with the people and things that we want in our lives. Yet there is a price for this progress. In today’s world it seems as if everything is connected to the internet somehow. As far as we’ve come, however, we’re still in the dark about controlling the flow of information so that it doesn’t get into the wrong hands in the midst of all of this.

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posted in BlogGeneralPersonal Finance

What Your Investment Advisor Should Be Doing to Protect Your Confidentiality

by Financial Alternatives on 4/2/2018

Here are some things your investment advisor should be doing to protect your client confidentiality.

Silence and privacy are the most undervalued assets in a client’s portfolio. We say this to acknowledge an often overlooked facet of investment management and financial planning: client confidentiality. This is something that many financial advisors and even their clients don’t pay enough attention to until it is too late. Is your advisor doing what your advisor should be doing to protect your confidentiality? Read on to figure it out. 

The Affluent Person’s #1 Fear is Being Discovered 

Anyone who has been taken advantage of financially knows too well that wealth can sometimes attract unsavory types and bring out the greed in people. Most affluent people live in fear (and in fact it is their #1 fear) of having others in their lives –including some of their friends and relatives – know how much money they have. They could end up being judged or criticized and the awkwardness it creates may be harmful to relationships. 

Aside from the social fears, there are real risks to having the public know how much money you have. You face a higher risk of being kidnapped or robbed. And that leads to the affluent person’s second biggest fear – losing it all.  

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posted in BlogGeneral

Beware the Ides of March: Are You Your Own Retirement’s Worst Enemy?

by Financial Alternatives on 3/7/2018

The Ides of March commemorate Julius Caesar, the Emperor who significantly expanded the Roman Empire — only to meet his demise by a conspiracy carried out by his own people.  Just as Caesar’s fate turned to misfortune as a result of his tragic flaw, we see people who are their wealth’s worst enemy. If you’re making these retirement planning mistakes, it’s best to seek counsel before the bright day brings forth the adder.

Making Emotional Decisions

In our decades of experience, we’ve seen examples of perfectly rational, logical people who make emotional decisions that lead to their finances becoming compromised. Unfortunately, being called in to be the independent voice of reason after the fact is a step too late.

A common emotional trap that people run into when managing their own money includes holding on to company stock or an inherited position for nostalgia reasons. This can lead to dangerously undiversified portfolios.

Timing the Market

Very few people get this right. Most of the time, trying to sell at the top of the market and buy when the market has dipped creates more trouble than it prevents. Even professional money managers can’t successfully time the market.

Choose an advisor who will balance your needs for principle protection, income, and growth against market conditions. This approach, rather than one of reactive trading, is the best way to create long term growth.

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posted in BlogGeneralPersonal Finance

What High Earners Should Know About the Tax Cuts and Jobs Act

by Ellen Li, MSBA, CFP® on 1/5/2018

Understanding the implications of the 2017 Tax Cuts and Jobs Act is important for any high earner, or high earning family, who wants to maintain its financial success.

As illustrated below, the recent tax reform will modify the tax rate for high income earners. But that’s just where it begins. High earners should also be aware of how the tax code will significantly impact the decisions you are making about your healthcare, business, and gifting decisions.

Table Source: “Highlights of the Final Tax Cuts and Jobs Act, “ by Tim Steffen, 2017 (http://www.investmentnews.com/assets/docs/CI1136191218.PDF)
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posted in BlogGeneralPersonal Finance

Embracing Retirement by Making the Right Housing Decisions

by Ellen Li, MSBA, CFP® on 9/22/2017

As a busy financial advisor and  mother, I like to balance myself with the practice of yoga. To me, yoga is more than just the practice of body movement, it’s  also an exercise of mental discipline.  Recently one of my favorite instructors used “embrace change” as our mantra and it really resonated  with me both  professionally and personally.

At Financial Alternatives, we recently helped two clients make new housing choices in their retirement years — one client remodeled their house and redesigned the living space on the first floor to make living there safer and more comfortable. The second client decided to move to an assisted living facility. In both cases, it was a transition, a new change that our clients embraced with courage and wisdom.  Stories such as these show the importance of making the right housing decisions  during your retirement years. These decisions could  have a tremendous effect on you  both financially and emotionally.

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posted in BlogGeneralPersonal Finance

5 Steps to Take After the Equifax Breach

by Chris Jaccard, CFP®, CFA on 9/14/2017

Background

Now that some of the dust has settled on one of the worst cyber security breaches in history, we think everyone should go through the 5 steps listed below.  Why everyone?  Because there is no way to be certain if you have been affected by the Equifax breach or not.  I entered false info to test Equifax’s verification site including a last name of “test” and a SSN of “123456” only to find that it positively identified me as a person impacted by the breach.  [9/16/17 Update: Equifax’s Chief Information Officer and Chief Security Officer are “retiring” and their internal investigation continues.]

Also, please make sure everyone in your family has taken these steps including your spouse, kids in college, domestic partner, and perhaps even minor children.

Step 1: Review Your Credit Report

Use the Annual Credit Report site to review your credit report from at least one of the three listed credit reporting agencies (“CRAs”).  By law, you are allowed one copy every 12 months, so we suggest you request a report from one of the three CRAs every 4 months.  Check for rogue activity or inaccuracies, and contact the CRAs to address the issue.

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posted in BlogGeneralPersonal Finance

Thank Vanguard for Lower Investment Costs. What Makes Them Different?

by Jim Freeman, CFP® on 9/5/2017

Most investors do not know this but The Vanguard Group is radically different from all other investment firms. What makes them different is that they are owned by the funds they manage – a unique arrangement that eliminates conflicting loyalties.

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posted in BlogGeneral

New Medi-Cal Recovery Laws; another Reason Why Proper Estate Planning is Needed

by Ellen Li, MSBA, CFP® on 5/24/2017

Long –term care in nursing homes, assisted living facilities, and home care can be very expensive. If you don’t have substantial assets or a good long term care insurance policy, the cost of care may deplete your assets over time.

What happens then?

If you qualify for Medi-Cal, (California’s version of Medicaid), it will pay for the cost of care, subject to recovery (repayment) from the estate when the recipient dies. In the past, the aggressive recovery program  put an inordinate burden on the heirs and survivors who were sometimes  forced to sell the family home to pay the estate claim or forced to sign a “voluntary lien” which accrued at 7% annual interest.

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posted in BlogGeneralPersonal Finance

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Disclaimer

Posts are general in nature and do not constitute the rendering of legal, investment, accounting or other professional advice.