One common trait among the highly successful is their endless drive to improve and learn. Take a page from their book during your downtime this holiday season by feeding your curiosity and keeping your mind engaged. Make space on your digital device for some of these popular finance-focused podcasts:

  1. National Public Radio’s Planet Money tackles broad economic topics with a fun, inventive approach. One example: In August, a five-episode series chronicled their 100-barrel oil purchase, following it from a Kansas well to its final stop at an Iowa gas station. Look for new podcasts once or twice a week.
  2. Marketplace delivers a daily podcast that takes a detailed look at the day’s business and financial news in a relatable and highly digestible format.
  3. What started in 1997 as a syndicated newspaper feature has evolved into Motley Fool Money, a weekly radio show and podcast. A team of analysts helms this production, deciphering technical jargon and covering investing-related stories and interviews.
  4. Fans of the 2005 nonfiction bestseller “Freakonomics” may appreciate the eponymous weekly podcast, which looks at economic systems from fresh perspectives. Podcast topics range from an economist’s take on ride-sharing apps to conversations with innovative entrepreneurs like Tim Ferriss and more.
  5. Stacking Benjamins focuses on personal finance, alternating between guest interviews that touch on earning, saving and spending, and a roundtable format that features other podcasters and bloggers.

Time is money, so spend it wisely. Put your downtime to good use with these and other informative podcasts.

spending-your-bonus

Whether it’s tied to performance, holiday profits or a tax refund, nothing beats the joy of receiving a bonus. But resist the temptation to blow it all on something that could be short-lived. Instead, consider the following, all of which can have a lasting impact.

  • Pay down debt. If you’re carrying a credit card balance or another high-interest, short-term debt, here’s a chance to reduce it. With average credit card debt at nearly $8,000 per household, even a modest holiday bonus can make a serious dent and minimize the snowball effect.
  • Refresh your emergency fund. Are you one of the 63 percent of Americans who doesn’t have the savings to cover an unexpected $500 expense? Consider building a cash cushion that will help prevent you from reaching for your credit card at the next emergency.
  • Superfund your retirement savings. Take this opportunity to max out your IRA or 401(k). Using a bonus to put more long-term money into tax-advantaged accounts lets you avoid the end-of-year funding rush.
  • Leap ahead a few payments. Overpaying your usual mortgage amount means you’re shaving down the principal faster, which results in less interest. You can do the same with student loans and other long-term payments, just make sure there isn’t a prepayment penalty.
  • Don’t just treat yourself; invest in yourself. Reserve 10 to 20 percent of your bonus for a home, health or education upgrade. Spending in areas that are likely to generate more money in the future is a smart way to rationalize a purchase since you’re putting the unexpected funds to good use.

Consider dividing your bonus among multiple categories, giving higher percentages to your more urgent priorities. Using this strategy for a lump-sum windfall can turbocharge your existing short-term and long-term financial goals while still giving you a little breathing room to enjoy your reward.

dealing-with-financial-anxiety1

When unexpected or worrisome financial news hits, what do you do? Constantly checking your portfolio can derail you from long-term goals, while having zero awareness of your finances can lead to reckless overspending or other bad behavior.

Information travels faster than ever these days, and it’s easy for investors to feel alarmed or panicked about finances when they read the headlines. Get a handle on financial anxiety with a few helpful strategies.

  • Start to see others’ fears as opportunities. When the markets go down, investments can lose value and appear on sale. That’s when some say it’s time to buy rather than sell. Whatever you choose, zoom out on S&P 500 charts to get some perspective and look at the long-term picture.
  • Revisit your goal-based investment plan regularly but not necessarily in response to world events. Sometimes all it takes is a check-in to remember why you have a particular portfolio set up just so. If changes must be made, consider timing them with significant life events like a birth, death, career move or change in marital status.
  • Begin incorporating mindfulness techniques and meditation into your daily life. Not only are these practices ideal for reducing anxiety and stress, which can lead to larger health conditions that are expensive to treat, but they can also improve cognition and concentration.

With the potential for more volatility on the horizon as markets tend to fluctuate during presidential election years, there’s no time like the present to practice taming financial anxiety with the above suggestions. Employing thoughtful techniques can help you stay balanced and on track, both mentally and financially.

With higher education costs escalating faster than traditional inflation, it’s important to treat the college selection process as the serious investment it is. Whether you, your child, grandchild or other loved one is researching colleges and universities, calculating the actual value of higher education can help whittle down the options and justify the escalating costs. Here are three interesting metrics to consider:

  1. Total Debt at Graduation — Earning an undergraduate degree is a crucial milestone, but starting a new life chapter saddled with tremendous debt can disrupt that momentum. States and institutions can take different approaches to student loans, so pay attention to the student debt trends at each university or college to set realistic expectations.
  2. Alumni Earnings Above Expectations — While U.S. News & World Report provides a popular college ranking list each year, the minds behind The Economist created their version with a unique, finance-oriented premise. The magazine’s first-ever ranking of four-year, nonvocational colleges is based on how much money graduates earn compared to how much they could have made had they studied elsewhere.
  3. Highest 4-Year Graduation Rates — While overall graduation rates matter, the ideal situation is earning the degree in as little time as possible since college costs can skyrocket as more semesters are added. Looking at graduation rates for those who completed college in four years can help prospective students find campuses with similar work ethics.

College is a booming business, and it’s critical to consider the financial impact from a variety of angles, especially if your goal is to help yourself or someone else on the path to lasting success

 

The information provided in Eddleman’s Economic Insight is not intended to be used as investment advice; rather it is provided as general economic news and information for your awareness or for discussions with your investment professional. Please consult your investment professional or CPA for advice specific to your situation! Past performance is not indicative of future results.

beautiful beach and tropical sea

If you’re like most of our clients, you’ve thought long and hard about the financial aspects of your retirement. You’ve likely worked hard and saved diligently. But, retirement for each person is different. Perhaps you plan on a working retirement with a new job and less stress, focused on what you love. Or, perhaps you plan to travel, play golf, or just rock on the porch. Or, maybe you want to downsize to a smaller house, spend time with the grand-kids, or take up sky diving. Who knows? Whatever the plan, don’t forget to consider the location you plan to call home.

Where you “officially” call home can make a difference in your retirement lifestyle. Even if you plan to travel or live out of your RV, the place you officially live can impact your taxes and other living cost factors. Obviously, most people realize that retiring to California or New York will be generally more expensive than retiring to Tennessee. So, what are some of the factors to consider when picking a retirement destination?

For most retirees, the two largest expenses in retirement will be medical care and taxes. Yes, a milder climate not only means a more enjoyable tennis match, but it can also mean lower utility bills. However, lower utilities are not likely to be as big of a financial factor as other considerations. Regarding medical expenses, BenefitsPRO recently completed an analysis on healthcare costs in the US. Now, keep in mind that the analysis merely compares Medicare premiums, but this can still be a fair comparison on what average medical costs by state may be because Medicare premiums consider medical costs as a major factor. Believe it or not, the cost to have a heart attack is different in different parts of the country. So, on average, Florida has the highest Medicare premiums running 35% more than Hawaii, which has the lowest. This makes sense from a supply and demand standpoint; there are many more retirees in Florida needing medical care, which likely means there are consistent strains on supply, which in turn drives up the cost. Tennessee did not make the top ten lowest or highest for Medicare premiums.

Taxes are the other major factor for most retirees. Kiplinger recently listed six factors to consider when picking a retirement destination and each of the six factors were different types of taxes. Most retirees consider income taxes and while income taxes can be a major factor for some retirees, Sales Tax, Property Tax, and Estate Tax can be even more important. This is because once you reach retirement, you may have already earned most of your income; now it is more a matter of spending it. If income taxes are really your biggest issue, you might actually consider life outside the US. Over half-a-dozen countries actually have no income tax, but keep in mind, you’ll have to give up your US citizenship and other expenses may far outweigh the income tax savings unless your income is significant. Also keep in mind, the IRS will make you pay tax on your IRA before you expatriate, so don’t look to leaving the US as a way to avoid your Required Minimum Distribution (RMD). One income tax you may want to watch out for is income tax on certain investments. For instance, Tennessee has no income tax on earned income; however, it does have income tax on interest income over a certain level. These hidden taxes can sneak up on you and make a difference. Another somewhat hidden income tax is Social Security income tax. Some states have been moving away from taxing SS, but as of this writing, thirteen states still do tax it.

If you are less affluent, then sales taxes and property taxes will likely be more significant factors. When considering property tax, keep in mind that most often this is a function of county government rather than state or federal government. If you own or plan to own significant amounts of real property, moving across the county line could mean a significant difference. Also consider if the county/state allows for a property tax “freeze” for owners who reside in the property. This can ensure that property taxes do not go up for you.

As for sales taxes, this is a function of states and local municipalities, but usually more dependent upon the state’s rate. Again, moving across a state or county line or even out of city limits can be factor. Also be aware that the sales tax rate may vary by item. For instance, some states do not charge sales tax on food or may charge a different rate on certain large purchases.

Finally, there are estate and inheritance taxes. The difference in these two is the way they are calculated. Estate taxes are charged to the estate, but inheritance taxes are charged to the inheritor, which may have differing rates depending upon whether the inheritor is a spouse, child, sibling, or unrelated. And, not only do the rates vary, the exemption amounts (how much you can pass on without having the tax) varies by state. Some states match the federal government’s exemption, but most don’t.

In all determining where to retire is an important consideration for which weather may be a big consideration. Just don’t forget to look at the financial implications of location too. And, if you need help evaluating those consideration, call us at 877-5WEALTH.

The information provided in Eddleman’s Economic Insight is not intended to be used as investment advice; rather it is provided as general economic news and information for your awareness or for discussions with your investment professional. Please consult your investment professional or CPA for advice specific to your situation! Past performance is not indicative of future results.

 

AMT

Well, it’s almost April 18th (the tax deadline is extended three days this year). If you’re like most people waiting until the last minute to file, you likely anticipate owing taxes instead of receiving a refund. And, if you owe tax, you may have higher than average income, which means at some point, you could be subject to Alternative Minimum Tax (AMT). What is AMT, you say?

In short, the AMT is a tax provision that ensures your tax bill will be higher than it would have been without AMT. AMT itself is based on a complex series of formulations and depends on your income, deductions, and other factors. It is not an “add-on” tax, but is rather a parallel tax calculation where the filer is required to pay the higher of the two tax amounts calculated under the normal system or the AMT system. The predecessor to AMT called “minimum tax” was first introduced in 1969 in part because 155 affluent tax filers paid no federal taxes. What impacted a mere 155 persons in 1969 now affects millions because until recently, AMT was not effectively adjusted for inflation. AMTs impact today, as the “greater of” the two tax calculations, was introduced in 1982, with some modifications made since then. In the current form, AMT mainly functions to limit the use of deductions. According to the IRS, “Under the tax law, certain tax benefits can significantly reduce a taxpayer’s regular tax amount. The AMT applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers pay at least a minimum amount of tax.”

While individuals, corporations, estates, and trusts may all be subject to AMT, it is filers who claim more significant deductions such as dependents, mortgage interest and charitable deductions or who have capital gains, or higher state or local income taxes who are more likely to be susceptible to the AMT calculation. These tax advantages are not applied to the AMT calculation, like they are to normal federal income tax calculations. Also, the higher your income, the more likely AMT will affect you.
How much income is necessary before you could be affected by AMT? Not as much as you may think. While every tax situation is different, we usually begin to see AMT negatively impact a married couple’s tax burden at around $200,000. According to the IRS, “The Alternative Minimum Tax [individual] exemption amount for tax year 2016 is $53,900 and begins to phase out at $119,700 ($83,800, for married couples filing jointly for whom the exemption begins to phase out at $159,700) . . . “. This impact can become greater as your income increases, but there is actually an AMT “Sweet Spot” where AMTs effect is reduced.

So, how can you reduce the impact of AMT? One way is actually to further increase your income into this “Sweet Spot”. While AMT reduces your ability to take deductions, the top tax bracket for AMT is 28% instead of 35%. This means that the AMT tax amount grows more slowly than the regular tax amount. This Sweet Spot is different for everyone each tax year, but for most it will be at annual incomes between ~$500,000 and $750,000.

American citizenship

According to the Treasury Department, 4,279 people renounced their American citizenship in 2015. This is up 864 from the previous high of 3,415 in 2014.  From 2013 to 2015, 10,693 citizens have renounced their citizenship, which is more than the 10,189 renouncements in the previous 15 years from 1998 to 2012. So why are so many more citizens renouncing their citizenship now more than ever?

One theory is the Foreign Account Tax Compliance Act (FATCA) that was passed in 2010. This act introduced reporting rules for foreign financial institutions, as well as American citizens that hold money in foreign accounts. This bill was introduced to combat tax avoidance for Americans that hold money in foreign accounts, but it also makes life more difficult for Americans that are living overseas. Since the installment of this bill in 2010, 14,940 Americans have renounced their citizenship. In 2010, the first year after the bill was put into effect, the number of citizens that renounced their citizenship doubled.

This bill makes the U.S. one of only two countries in the world that taxes their citizens on all income earned, whether they live in the U.S., or in another country. This means that American citizens working in a foreign country are taxed twice on their income. This double taxation could be one of the main reasons why citizens are choosing to renounce their citizenship now more than ever.

fraud alert stencil print on the grunge white brick wall

As we all know, there are many scams taking place every day in our modern world, but one of the fastest growing is an IRS scam. So, with tax season fast approaching, we wanted to make you aware of the latest tactic by scammers to use you and the IRS. In short the scam involves fraudsters contacting you posing as the IRS to collect payment.

First of all, the IRS will never call and demand immediate payment over the phone. If you have not received a bill in the mail from the IRS first, the call is more than likely a scam. Secondly, the IRS will not require you to make payments in a certain way, such as a prepaid debit card. The IRS will also not ask for a credit or debit card number over the phone. Finally, the IRS will never threaten to send police or other agencies to your home to arrest you for failure to pay, at least not over the phone. The IRS handles criminal investigations through the courts.

If you do not owe any money to the IRS, hang up immediately. Do not give out any personal information. If you owe money, or think you may owe money, contact the IRS directly. They will be able to help you. You can also contact our offices and we’ll be happy to help you through the process if you prefer to have someone handle the issue for you.

For more information on what the IRS will and will not do, visit the IRS website.

For more infomation on filing your taxes, visit Eddleman Accounting.