Comparing Health Insurance Options during Open Enrollment

The decisions you make during open enrollment season regarding health insurance are especially important, since you generally must stick with the options you choose until the next open enrollment season, unless you experience a “qualifying” event such as marriage or the birth of a child.

Fun Medical MGD©As a result, you should take the time to carefully review the types of plans offered by your employer and consider all the costs associated with each plan. With most health insurance plans, your employer will pay a portion of the premium and require you to pay the remainder through payroll deductions.

When comparing different plans, keep in mind that even though a plan with a lower premium may seem like the most attractive option, it could have higher potential out-of-pocket costs.

You’ll want to review the copayments, deductibles, and coinsurance associated with each plan. This is an important step because these costs can greatly affect what you end up paying out-of-pocket. When reviewing the costs of each plan, consider the following:

1) Does the plan have an individual or family deductible? If so, what is the amount that will have to be satisfied before your insurance coverage kicks in?

2) Are there copayments? If so what amounts are charged for doctor visits, specialists, hospital visits, and prescription drugs?

3) Will you have to pay any coinsurance once you’ve satisfied the deductible?

You should also assess each plan’s coverage and specific features. For example, are there coverage exclusions or limitations that apply? Which expenses are fully or partially covered? Do you have the option to go to doctors who are outside your plan’s provider network? Does the plan offer additional types of coverage for vision, dental, or prescription drugs?

In the end, when reviewing your options, you’ll want to balance the coverage and features offered under each plan against the plan’s overall cost to determine which plan offers you the best value for your money.

If you have any questions about how to approach your decisions, please email me at or call my office at (925) 464-7057!

2015 Year-End Tax Planning Basics

As the end of the 2015 tax year approaches, set aside some time to evaluate your situation and consider potential opportunities. Effective year-end planning depends on a good understanding of both your current circumstances and how those circumstances might change next year.

TaxesSMBasic strategies
Consider whether there’s an opportunity to defer income to 2016. For example, you might be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. When you defer income to 2016, you postpone payment of the tax on that income.

And if there’s a chance that you might be paying taxes at a lower rate next year (for example, if you know that you’ll have less taxable income next year), deferring income might mean paying less tax on the deferred income.

You should also look for potential ways to accelerate 2016 deductions into the 2015 tax year. If you typically itemize deductions on Schedule A of Form 1040, you might be able to accelerate some deductible expenses–such as medical expenses, qualifying interest, or state and local taxes–by making payments before the end of the current year, instead of paying them in early 2016.

Or you might consider making next year’s charitable contribution this year instead. If you think you’ll be itemizing deductions in one year but claiming the standard deduction in the other, trying to defer (or accelerate) Schedule A deductions into the year for which you’ll be itemizing deductions might let you take advantage of deductions that would otherwise be lost.

Depending on your circumstances, you might also consider taking the opposite approach. For example, if you think that you’ll be paying taxes at a higher rate next year (maybe as the result of a recent compensation increase or the planned sale of assets), you might want to look for ways to accelerate income into 2015 and possibly defer deductions until 2016 (when they could potentially be more valuable).

BF-AA310_401k_D_20101210153343Complicating Factors
First, you need to factor in the alternative minimum tax (AMT). The AMT is essentially a separate, parallel federal income tax system with its own rates and rules. If you’re subject to the AMT, traditional year-end strategies may be ineffective or actually have negative consequences.

That’s because the AMT effectively disallows a number of itemized deductions. So if you’re subject to the AMT in 2015, prepaying 2016 state and local taxes probably won’t help your 2015 tax situation, and, in fact, could hurt your 2016 bottom line.

It’s also important to recognize that personal and dependency exemptions may be phased out and itemized deductions may be limited once your adjusted gross income (AGI) reaches a certain level. This is especially important to factor in if your AGI is approaching the threshold limit and you’re evaluating whether to accelerate or defer income or itemized deductions.

For 2015, the AGI threshold is $258,250 if you file as single, $309,900 if married filing jointly, $154,950 if married filing separately, and $284,050 if head of household.

NRT-SEPPQ113_02IRA and retirement plan contributions
Deductible contributions to a traditional IRA and pretax contributions to an employer-sponsored retirement plan such as a 401(k) could reduce your 2015 taxable income. (Note: A number of factors determine whether you’re eligible to deduct contributions to a traditional IRA.)

Contributions to a Roth IRA (assuming you meet the income requirements) or a Roth 401(k) plan are made with after-tax dollars–so there’s no immediate tax savings–but qualified distributions are completely free of federal income tax.

For 2015, you’re generally able to contribute up to $18,000 to a 401(k) plan ($24,000 if you’re age 50 or older) and up to $5,500 to a traditional or Roth IRA ($6,500 if you’re age 50 or older). The window to make 2015 contributions to an employer plan generally closes at the end of the year, while you typically have until the due date of your federal income tax return to make 2015 IRA contributions.

Important notes
The Supreme Court has legalized same-sex marriage nationwide, significantly simplifying the federal and state income tax filing requirements for same-sex married couples living in states that did not previously recognize their marriage.

A host of popular tax provisions (commonly referred to as “tax extenders”) expired at the end of 2014. Although it is possible that some or all of these provisions will be retroactively extended, currently they are not available for the 2015 tax year.

Among the provisions: deducting state and local sales taxes in lieu of state and local income taxes; the above-the-line deduction for qualified higher-education expenses; qualified charitable distributions (QCDs) from IRAs; and increased business expense and “bonus” depreciation rules.

Taxes, Retirement, and Timing Social Security

The advantages of tax deferral are often emphasized when it comes to saving for retirement. So it might seem like a good idea to hold off on taking taxable distributions from retirement plans for as long as possible. (Note: Required minimum distributions from non-Roth IRAs and qualified retirement plans must generally start at age 70½.) But sometimes it may make more sense to take taxable distributions from retirement plans in the early years of retirement while deferring the start of Social Security retirement benefits.

Some basics
sscardUp to 50% of your Social Security benefits are taxable if your modified adjusted gross income (MAGI) plus one-half of your Social Security benefits falls within the following ranges: $32,000 to $44,000 for married filing jointly; and $25,000 to $34,000 for single, head of household, or married filing separately (if you’ve lived apart all year).

Up to 85% of your Social Security benefits are taxable if your MAGI plus one-half of your Social Security benefits exceeds those ranges or if you are married filing separately and lived with your spouse at any time during the year. For this purpose, MAGI means adjusted gross income increased by certain items, such as tax-exempt interest, that are otherwise excluded or deducted from your income for regular income tax purposes.

Social Security retirement benefits are reduced if started prior to your full retirement age (FRA) and increased if started after your FRA (up to age 70). FRA ranges from 66 to 67, depending on your year of birth.

Distributions from non-Roth IRAs and qualified retirement plans are generally fully taxable unless nondeductible contributions have been made.

Accelerate income, defer Social Security
It can sometimes make sense to delay the start of Social Security benefits to a later age (up to age 70) and take taxable withdrawals from retirement accounts in the early years of retirement to make up for the delayed Social Security benefits.

file5511312030154If you delay the start of Social Security benefits, your monthly benefits will be higher. And because you’ve taken taxable distributions from your retirement plans in the early years of retirement, it’s possible that your required minimum distributions will be smaller in the later years of retirement when you’re also receiving more income from Social Security.

And smaller taxable withdrawals will result in a lower MAGI, which could mean the amount of Social Security benefits subject to federal income tax is reduced.

Whether this strategy works to your advantage depends on a number of factors, including your income level, the size of the taxable withdrawals from your retirement savings plans, and how many years you ultimately receive Social Security retirement benefits.

Mary, a single individual, wants to retire at age 62. She can receive Social Security retirement benefits of $18,000 per year starting at age 62 or $31,680 per year starting at age 70 (before cost-of-living adjustments). She has traditional IRA assets of $300,000 that will be fully taxable when distributed.

file0001270953716She has other income that is taxable (disregarding Social Security benefits and the IRA) of $27,000 per year. Assume she can earn a 6% annual rate of return on her investments (compounded monthly) and that Social Security benefits receive annual 2.4% cost-of-living increases. Assume tax is calculated using the 2015 tax rates and brackets, personal exemption, and standard deduction.

Option 1. One option is for Mary to start taking Social Security benefits of $18,000 per year at age 62 and take monthly distributions from the IRA that total about $21,852 annually.

Option 2. Alternatively, Mary could delay Social Security benefits to age 70, when her benefits would start at $38,299 per year after cost-of-living increases.

To make up for the Social Security benefits she’s not receiving from ages 62 to 69, during each of those years she withdraws about $40,769 to $44,094 from the traditional IRA–an amount approximately equal to the lost Social Security benefits plus the amount that would have been withdrawn from the traditional IRA under the age 62 scenario (plus a little extra to make the after-tax incomes under the two scenarios closer for those years).

When Social Security retirement benefits start at age 70, she reduces monthly distributions from the IRA to about $4,348 annually.

Mary’s after-tax income in each scenario is approximately the same during the first 8 years. Starting at age 70, however, Mary’s after-tax income is higher in the second scenario, and the total cumulative benefit increases significantly with the total number of years Social Security benefits are received.*

Back to School and Snore Your Way to Investment Success

I hope you are enjoying these last days of summer and that you have had the chance to take a great vacation! For me, the past few weeks has brought another “Back to School” season for the family. But this time around, the school year’s start is much different!

back-to-schoolInstead of attending more high school, my twin sons, Daniel and Benjamin, are now going “Off to School” to start their freshman years at the University of California, Davis and at the University of Illinois, respectively.

I admire the dedication they have shown over the years and especially how they gracefully navigated the very competitive college admissions environment during their Senior year! As I reflected on their hard work in recent weeks, their journey has reminded me that learning is an on-going process that takes place inside and outside the classroom.

This idea is certainly applicable to just about everything in our lives, even personal finance and investments. And the financial world sometimes provides ample opportunity to “test” how well we have learned our lessons!

Recent conditions in the investment markets, for example, might be providing investors with the equivalent of a mid-term exam! During 2015, returns in the broad US stock and bond markets have struggled at times to produce positive returns.

And in recent days, of course, global equity markets have been much more volatile, temporarily serving up a 10% correction before rebounding and paring some of the losses. The past few weeks have certainly been very different from the tame price fluctuations of the past few years.

roller-coasterThere is also no shortage of economic uncertainty around the world. Investors are trying to digest a potential rise in US interest rates later this year, the rapid decline in oil prices, increasing volatility in the Chinese stock market, and other economic and political worries.

So, the weeks or months ahead might test the resolve of many investors. The “exam” may not be multiple choice, but such a period might be a good assessment of whether one is truly a long-term investor.

Staying the “course” with your investment plan might increase the odds of long-term investment success. If the markets move back into correction territory, and you stick with your plan, you will have “aced” your investment midterm and will be on your way to the coveted diploma!

On the other hand, you could try to predict short-term market movements, sell before another possible market decline and then buy back in at lower prices. But objective studies of market timing have shown that they might not be successful over a reasonable period of time and that they could potentially lead to less optimal returns.

Even the world’s greatest investors cannot reliably forecast short-term market movements, and they happily admit this fact. Here are a few opinions on the subject from some of the best investment “professors” of our time:

file000986451810Warren Buffett, known for holding stocks like Wells Fargo Bank and Coca Cola for decades, once wrote, “We continue to make more money when snoring than when active.” Peter Lynch, one of the most highly regarded mutual fund managers of his era, said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves”.

The logic behind not trying to time the financial markets is compelling. Still, I recognize that it can be difficult to stay on track. To help you through these volatile times, I want to continue my practice of providing relevant financial education articles and to inspire you to make sound financial decisions! Here are a few that might help you navigate the challenging moments:

Should You Worry About China Stock Market Volatility: Many investors are wondering whether China’s stock market volatility might slow down China’s economy and eventually global growth prospects. Should you make any portfolio changes? Read more…

Five Steps to Tame Financial Stress: Studies show that most of us get stressed about money some of the time. Here are some tips that can help you through those tough moments! Read more…

Can You Count on Dividends for Reliable Income? With fixed income investments offering low yields, it is tempting to think about using dividend paying stocks as a substitute for bonds. Here are some issues to consider before you take the plunge. Read more…

Finally, use this blog as a reminder to reflect on your own situation. If you are uncomfortable with the recent market volatility, or are unsure whether your investments are aligned to your long-term financial goals, please email or call me at (925) 464-7057. I would be happy to help!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. Investing involves risk including potential loss of principal.

Should You Worry about China’s Stock Market Volatility?

The volatility of the Chinese stock market has been viewed by U.S. investors with a mixture of concern and fascination. As of August 4, the Shanghai market is still up 16% year to date even after a nearly 30% decline from its June 12 peak. This roller coaster ride has received a great deal of attention; however, the research department at LPL Financial and some other investment firms believe that the impact on China’s economy will be limited.

Shanghai 323Until recently, the Chinese stock market was walled off from the global financial market. Chinese investors could only invest in “A-shares” traded in Shanghai or Shenzhen, and non-mainland investors were not allowed to buy shares in these markets. Though there are now options for non-mainland investors, these investors represent less than 2% of the Chinese stock market.

The link between China’s economy and its stock market is not as strong as it is for the U.S. Chinese investors prefer to hold cash and real estate relative to stocks; only 9% of Chinese household wealth is invested in the stock market, compared with nearly 30% in the U.S.

Most of the money in the Chinese stock market comes from a relatively small group of wealthy (by Chinese standards) investors. Looking historically, regardless of the performance of the equity market, there appears to be very limited correlation between consumer spending and stock prices.

We believe the recent decline in the Chinese stock prices is likely a reaction to a 60% rise in less than six months and the rapidly changing government policies. In April, the Chinese government limited margin lending before quickly reversing course as equities sold off sharply. It has worked to prop up stocks in July and August. These moves, including banning short selling and restricting trading, have been viewed as evidence of panic by policymakers.

While the slowing Chinese economy may be having some impact on the equity market, China’s overall economic outlook is largely unchanged. The small role the market plays in the economy is unlikely to have a material impact on economic growth.

The LPL Research Department and some other investment research organizations continue to recommend that investors who desire exposure to the Chinese market achieve it by investing in the so-called “H-share” market, shares of Chinese companies that trade in Hong Kong.

The Hong Kong market has a more traditional regulatory structure and less intervention than the mainland Chinese market. This market has been less susceptible to wild swings and is more attractively valued than the “A-share” market based on price-to-earnings multiples. This fact does not eliminate the volatility inherent in any China-related investment, but it does offer investors a better risk-reward balance.

As always, if you have any questions, please email me at or call me at (925) 464-7057.

The P/E ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower P/E ratio.

Short selling (also known as shorting or going short) is the practice of selling assets, usually securities, that have been borrowed from a third party (usually a broker) with the intention of buying identical assets back at a later date to return to the lender. The short seller hopes to profit from a decline in the price of the assets between the sale and the repurchase, as the seller will pay less to buy the assets than the seller received on selling them.

Margin debt is debt used to purchase securities within an investment account. Margin debt carries an interest rate, and the amount of margin debt will change daily as the value of the underlying securities changes.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. The economic forecasts set forth may not develop as predicted.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

This research material has been prepared by LPL Financial. Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit

Can You Count on Dividends as a Reliable Income Source?

Dividends can be an important source of income. However, there are several factors you should take into consideration if you’ll be relying on them to help pay the bills, especially if you are no longer earning income.

8-03-2An increasing dividend is generally regarded as a sign of a company’s health and stability, and most corporate boards are reluctant to cut them. However, dividends on common stock are by no means guaranteed; the board can decide to reduce or eliminate dividend payments at any time.

Investing in dividend-paying stocks isn’t as simple as just picking the highest yield; consider whether the company’s cash flow can sustain its dividend, and whether a high yield is simply a function of a drop in a stock’s share price.

Because a stock’s dividend yield is calculated by dividing the annual dividend by the current market price per share, a lower share value typically means a higher yield, assuming the dividend itself remains the same.

Also, dividends aren’t all alike. Dividends on preferred stock typically offer a fixed rate of return, and holders of preferred stock must be paid their promised dividend before holders of common stock are entitled to receive theirs. However, because their dividends are predetermined, preferred stocks typically behave somewhat like fixed-income investments.

For example, their market value is more likely to be affected by changing interest rates, and most preferred stocks have a provision allowing the company to call in its preferred shares at a set time or at a specified future date. If you have to surrender your preferred stock, you might have difficulty finding an equivalent income stream.

Finally, dividends from certain types of investments aren’t eligible for the special tax treatment generally available for qualified dividends, and a portion may be taxed as ordinary income.

Note: All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Investing in dividends is a long-term commitment. Investors should be prepared for periods when dividend payers drag down, not boost, an equity portfolio. A company’s dividend can fluctuate with earnings, which are influenced by economic, market, and political events.

Five Steps to Tame Financial Stress

Do you sometimes lie awake at night thinking about bills that need to be paid? Does it feel as though you’re drowning in debt? If this describes you, you might take solace in the fact that you’re not alone. A recent report released by the American Psychological Association (APA) showed that 72% of adults feel stressed about money at least some of the time, and 22% said the amount of stress they experienced was extreme.

IMG_0691The bad news is that stress can be responsible for multiple health problems, including fatigue, headaches, and depression. And, over time, stress can contribute to more significant health issues, including high blood pressure and heart disease. The good news is that there are some simple steps you can take to reduce or eliminate some of the financial stress in your life.

1. Stop and assess

The first step in reducing financial stress is to look at your situation objectively, creating a snapshot of your current financial condition. Sit down and list all of your financial obligations. Start with the items that are causing you the most stress. For debts, include the principal due, the applicable interest rate, and the minimum payment amount. If you’re not already doing so, review your bank account and credit-card statements to track where your money is going. The goal here is not to solve the problem; it’s to determine and document the scope of the problem. You might find that this step alone significantly helps alleviate your stress level (think of it as facing your fears).

2. Talk to your spouse
If you’re married, talk to your spouse. It’s important to communicate with your spouse for several reasons. First, you and your spouse need to be on the same financial page; any steps you take to improve your situation are going to be most effective if pursued jointly.

Second, not being on the same page as your spouse is only going to lead to additional stress. In fact, the APA report showed that 31% of spouses and partners say that money is a major source of conflict or tension in their relationship.

Additionally, your spouse or partner can be a valuable source of emotional support, and this emotional support alone can lower stress levels.4 If you’re not married, family or friends might fill this role.

3. Take control
First, go back and take a look at where your money is going. Are there changes you can make that will free up funds you can save or apply elsewhere? Even small changes can make a difference. And exerting control over your situation to any degree can help reduce your overall stress level.

Start building a cash reserve, or emergency fund, by saving a little bit each paycheck. Think of the emergency fund as a safety net; just knowing it’s there will help reduce your ongoing level of stress. Work up to a full spending plan (yes, that’s another way of saying a budget) where you prioritize your expenses, set spending goals, and then stick to them going forward.

2014-04-13 12.56.094. Think longer term
Look for ways to reduce debt long term. You might pay more toward balances that have the highest interest rates. Or you might consider refinancing or consolidation options as well.

Beyond that, though, you really want to start thinking about your long-term financial goals, identifying and prioritizing your goals, calculating how much you might need to fund those goals, and implementing a plan that accounts for those goals. Having a plan in place can help you with your stress levels, both now and in the future.

5. Get help
Always remember that you don’t need to handle this alone. If the emotional support of a spouse, friends, or family isn’t enough, or the level of stress that you’re feeling is just too much, know that there is help available. Consider talking to your primary-care physician, a mental health professional, or an employee assistance resource, for example.

A financial professional can also be a valuable resource in helping you work through some of the steps discussed here, and can help direct you to other sources of assistance, like credit or debt counseling services, depending on your needs.

The most important thing to keep in mind is that you have the ability to control the amount of financial stress in your life.

1,3,4 American Psychological Association, “Stress in America™: Paying with Our Health,”, February 4, 2015

2 Mayo Clinic Staff, “Stress Symptoms: Effects on Your Body and Behavior,”, July 19, 2013

Converting Your After-Tax 401(k) Dollars to a Roth IRA

Here’s the dilemma: You have a traditional 401(k) that contains both after-tax and pre-tax dollars. You’d like to receive a distribution from the plan and convert only the after-tax dollars to a Roth IRA. By rolling over/converting only the after-tax dollars to a Roth IRA, you hope to avoid paying any income tax on the conversion.

piggy-bank-661969_1280For example, let’s say your 401(k) plan distribution is $10,000, consisting of $8,000 of pre-tax dollars and $2,000 of after-tax dollars. Can you simply instruct the trustee to directly roll the $8,000 of pre-tax dollars to a traditional IRA and the remaining $2,000 of after-tax dollars to a Roth IRA?

In the past, many trustees allowed you to do just that. But in recent years the IRS had suggested that this result could not be achieved with multiple direct rollovers. Instead, according to the IRS, each rollover would have to carry with it a pro-rata amount of pre-tax and after-tax dollars. The legal basis for this position, however, was not entirely clear.

And while some experts suggested that it might be possible to achieve a tax-free Roth conversion of after-tax dollars using 60-day rollovers, the process was fairly complicated, and it required taxpayers to have sufficient funds outside the plan to make up the 20% mandatory withholding that would apply to the taxable portion of the distribution.

IMG_0920IRS Notice 2014-54
Thankfully, in Notice 2014-54 (and related proposed regulations), the IRS has backed away from its prior position. The Notice makes it clear that you can split a distribution from your 401(k) plan and directly roll over only the pre-tax dollars to a traditional IRA (with no current tax liability) and only the after-tax dollars to a Roth IRA (with no conversion tax). The IRS guidance, which took effect January 1, 2015, also applies to 403(b) and 457(b) plans.

When applying Notice 2014-54, it’s important to understand some basic rules (also outlined in the Notice). First, you have to understand how to calculate the taxable portion of your distribution. This is easy if you receive a total distribution–the nontaxable portion is your after-tax contributions, and the taxable portion is the balance of your account. But if you’re receiving less than a total distribution, you have to perform a pro-rata calculation.

This is best understood using an example. Assume your 401(k) account is $100,000, consisting of $60,000 (six tenths) of pre-tax dollars and $40,000 (four tenths) of after-tax dollars. You request a $40,000 distribution. Of this $40,000, six tenths, or $24,000, will be taxable pre-tax dollars, and four tenths, or $16,000, will be nontaxable after-tax dollars.

What this means is that you can’t, for example, simply request a distribution of $40,000 consisting only of your after-tax dollars. The Notice requires that you treat all distributions you receive at the same time as a single distribution when you perform this pro-rata calculation (even if you subsequently roll those distributions into separate IRAs).

Taking this example a step further, could you now direct the trustee to directly transfer the $16,000 of after-tax dollars to a Roth IRA (with no conversion tax) and send the remaining $24,000 to you in a taxable distribution? The answer is no, and this leads to a second basic rule described in the Notice:

Any rollovers you make from a 401(k) plan distribution are deemed to come first from your pre-tax dollars, and then, only after these dollars are fully used up, from your after-tax dollars. If you’re rolling your distribution over into several different accounts, you get to decide which retirement vehicle receives your pre-tax dollars first.

It’s these new rules that allow you to accomplish your goal of rolling over only the after-tax portion of your 401(k) plan distribution into a Roth IRA. Going back to our example, these rules make it clear that you can instruct the 401(k) plan trustee to transfer only your pre-tax dollars–$24,000–to your traditional IRA, leaving the remaining $16,000–all after-tax dollars–to be rolled over to your Roth IRA in a tax-free conversion.

Review Your Finances Mid Year

You made it through tax season and now you’re looking forward to your summer vacation. But before you go, take some time to review your finances. Mid-year is an ideal time to do so, because the demands on your time may be fewer, and the planning opportunities greater, than if you wait until the end of the year.

2015road496240933Think about your priorities
What are your priorities? Here are some questions that may help you identify the financial issues you want to address within the next few months.
1) Are any life-changing events coming up soon, such as marriage, the birth of a child, retirement, or a career change?
2) Will your income or expenses substantially increase or decrease this year?
3) Have you managed to save as much as you expected this year?
4) Are you comfortable with the amount of debt that you have?
5) Are you concerned about the performance of your investment portfolio?
6) Do you have any other specific needs or concerns that you would like to address?

Take another look at your taxes
Completing a mid-year estimate of your tax liability may reveal tax planning opportunities. You can use last year’s tax return as a basis, then make any anticipated adjustments to your income and deductions for this year.

You’ll want to check your withholding, especially if you owed taxes when you filed your most recent income tax return or you received a large refund. Doing that now, rather than waiting until the end of the year, may help you avoid a big tax bill or having too much of your money tied up with Uncle Sam. If necessary, adjust the amount of federal or state income tax withheld from your paycheck by filing a new Form W-4 with your employer.

To help avoid missed tax-saving opportunities for the year, one basic thing you can do right now is to set up a system for saving receipts and other tax-related documents. This can be as simple as dedicating a folder in your file cabinet to this year’s tax return so that you can keep track of important paperwork.

IMG_5787Reconsider your retirement plan
If you’re working and you received a pay increase this year, don’t overlook the opportunity to increase your retirement plan contributions by asking your employer to set aside a higher percentage of your salary. In 2015, you may be able to contribute up to $18,000 to your workplace retirement plan ($24,000 if you’re age 50 or older).

If you’re already retired, take another look at your retirement income needs and whether your current investments and distribution strategy will continue to provide enough income.

Review your investments
Have you recently reviewed your portfolio to make sure that your asset allocation is still in line with your financial goals, time horizon, and tolerance for risk? Though it’s common to rebalance a portfolio at the end of the year, you may need to rebalance more frequently if the market is volatile.

Note: Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss.

Identify your insurance needs
Do you know exactly how much life and disability insurance coverage you have? Are you familiar with the terms of your homeowners, renters, and auto insurance policies? If not, it’s time to add your insurance policies to your summer reading list. Insurance needs frequently change, and it’s possible that your coverage hasn’t kept pace with your income or family circumstances.

Will Entrepreneurship Be Your Next Mid Life Career Move?

An exciting aspect of mid-life career change is the opportunity to seek new ways to tap one’s skills and experience developed over a lifetime. Having counseled scores of people in the midst of transition, I find it so inspiring to meet professionals who have creatively applied a lifetime of work skills to their new endeavors!

dreamstime_xs_39003948Increasingly, it appears that a larger number of baby boomers are choosing various forms of entrepreneurship as their preferred avenue to apply their knowledge and professional talent. According to the 2015 State of Entrepreneurship Report recently issued by the Kaufmann Foundation, entrepreneurship remains alive and well in the US and the birth cohort known as the “baby boomers” are actually the primary group driving this trend.

Their report cited data showing that Americans in their fifties and sixties have started businesses at a faster pace over the last decade, while that pace has continuously slowed among other age groups. The trend makes sense since entrepreneurship seems to be enjoying a renaissance for a variety of reasons, according to the Kaufmann Foundation.

Venture and angel investment levels in recent years mirror those of the late 1990s and very early 2000s. City and state governments increasingly build economic development strategies around entrepreneurship. And Baby Boomers appear well positioned to lead this trend. Professionals in their 50s and 60s have historically exhibited high levels of entrepreneurial activity, according to the Kaufmann Index of Entrepreneurial Activity cited in the report.

Who knows? With the US economy now appearing to be on more solid ground, this might be a good time for you to consider an alternative career path or entrepreneurial pursuit if you are attracted to the freedom and opportunity that comes with a non-traditional work model.

dreamstime_xs_18998686This could lead you to start a business, but it could also involve considering any number of professional paths that may entail less career or financial risk than starting your own venture. For example, you could think about consulting in your current field, or consider other types of engagements that reflect your professional passions and expertise.

Anecdotally, I meet many professionals who are seeking non-traditional work options that appeal to their professional interests and where they can think they might have greater freedom to make work choices based on their personal values. If these ideas resonate with you, then this might be an opportune moment to consider your career goals before you one day stop working!

It goes without saying that you would need to consider your personal finances, among other factors, before making a decision about a new path. Please feel to free to access our firm’s free Career Transition Workbook, which may help evaluate the financial and life planning aspects of moving in a new professional direction.

In addition to offering the Workbook, we will continue striving toward offering financial educational resources to help you make confident and informed financial decisions. Here is a sample of recent content added to our blog page, and which might help along your very own career and financial planning journeys:

Happy Belated Birthday Bull Market: After recently witnessing a sixth consecutive year of attractive stock market gains, many investors are wondering how much steam is left in the equity markets. But the possibility of continued modest stock market gains during 2015 is not as unlikely as it may seem. Read more…

Evaluating a Franchise for a Second Career: Buying a franchise might be an excellent way to break into starting a business. But how do you evaluate whether a franchise is right for you? Read more…

dreamstime_xs_15566306A Do It Yourself Approach to Retirement Planning: Worried about whether you will save enough money to one day be able to stop working? You can follow a step by step process to make your goal less overwhelming. Read more…

Starting a Business — Make Sure You Have a Plan: If the idea of starting your own venture holds some appeal, starting your own business or endeavor might be an appealing career alternative, especially if you enjoy the freedom and challenge of trying to fill an unmet market need. Here are some thoughts about preparing to make venture your fly. Read more…

I hope these thoughts and ideas help you move toward feeling more confident and settled about your financial and career goals! As always, if you have any questions, please email me at or call me at (925) 464-7057!