A new year is here, and with it comes a flood of year-end tax documents like W-2s, 1099s and others. Before you know it, the April 15 tax filing deadline will be upon us, and it will be time to submit your return.

It’s always wise to meet with your financial professional at the beginning of the year. It gives you an opportunity to discuss the past year, your goals for the coming year and your tax strategy. However, a consultation with your financial professional could be especially helpful this year.
 
The Tax Cuts and Jobs Act was signed into law in late 2017 by President Trump. While some of its changes went into effect last year, 2018 was the first full calendar year under the new law. The return you file in April will likely be the first that reflects much of the law’s changes. Below are a few of the biggest changes and how they could affect your return:
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Increased Standard Deduction
 
The new tax law impacted a wide range of credits and deductions, from the deduction of medical expenses to credits for child care. Those who itemize deductions may have felt the brunt of these changes.
 
However, the tax law significantly increased the standard deduction. In 2017 the standard deduction was $6,350 for single filers and $12,700 for married couples. The new law increased those numbers to $12,000 and $24,000, respectively.1
 
Given the changes to itemized deductions and the increased standard deduction, you may want to consult with a financial or tax professional before you file your return. If you’ve traditionally itemized deductions in the past, that may no longer make sense.

New Tax Brackets
 
The new tax law also made significant changes to the tax brackets. There are still seven different brackets, just as there were before the passage of the law. And the lowest rate is still 10 percent. The top income tax rate is down to 37 percent, however, from 39.6 percent.2 There are similar cuts throughout the rest of the brackets as well.
 
The law also made changes to the income levels for each bracket. Generally, the bracket levels were increased throughout the tax code, which means you have to earn more before moving into a higher bracket. Under the old tax code, for example, a married couple earning $250,000 would be in the 33 percent bracket. Under the new law, that same couple would be in the 24 percent bracket. A single individual earning $80,000 would be in the 28 percent bracket under the old law but is now in the 22 percent bracket.2

Itemized Deduction Changes
 
As mentioned, the new tax law increased the standard deduction amounts. However, those increases came at the expense of many itemized deductions. The new law eliminated or reduced many common deductions, including those for state and local taxes, real estate taxes, mortgage and home equity loan interest, and even fees to accountants and other advisers.
 
However, there could be other opportunities to boost your itemized deductions above the standard deduction level. Charitable donations are still deductible, as are medical expenses assuming they exceed the 7.5 percent threshold. If you’re a business owner, you can deduct many of your expenses, including up to 20 percent of your income assuming you meet earnings thresholds.3
 
Ready to develop your tax strategy? Let’s connect soon and talk about taxes and your entire financial picture. Contact us today at Sprouse Financial Group. We can help you analyze your needs and goals and implement a plan.
 
1https://www.nerdwallet.com/blog/taxes/standard-deduction/
2https://www.hrblock.com/tax-center/irs/tax-reform/new-tax-brackets/
3https://money.usnews.com/investing/investing-101/articles/know-these-6-federal-tax-changes-to-avoid-a-surprise-in-2019
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
18326 - 2018/12/26

Did you recently inherit an IRA from a loved one? An IRA is an effective savings tool because it offers tax-deferred growth, which means that earnings inside the account aren’t taxed until a distribution is made. In a Roth IRA, earnings may never be taxed.
 
That tax deferral can help an IRA owner accumulate assets more quickly than they may in a taxable account. However, as a beneficiary on the IRA, you may have important tax considerations you should think about before you file your beneficiary claim.
 
Many beneficiaries take their benefit as a lump sum. It’s understandable why that’s a tempting option. However, before you take your benefit as a check, you may want to think about all your options. Below are a few IRA beneficiary options. Consult with your financial professional to see which best aligns with your needs and goals.
 
Roll it into your own IRA. 

This option is only available for spousal beneficiaries. If you are the beneficiary on your spouse’s IRA, you have the option to roll the death benefit into your own IRA. You avoid taxes on the distribution and the inherited amount becomes a part of your IRA as if it were your own contributions.
 
This is a popular and helpful option because it’s simple. You can keep all your assets in one account, which may make it easier to manage your income and your investment strategy. Plus all the rule regarding distributions are based on your age rather than your spouse’s, so it may be easier to stay within required minimum distribution guidelines.
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Create an inherited IRA. 

If you’re an IRA beneficiary, but you’re not the spouse of the individual who passed away, you may be tempted to take the benefit as a lump sum payout. However, doing so could create a sizable tax liability, especially if the account is a traditional IRA. Distributions from traditional IRAs are taxable as income. The payout could push you into a higher tax bracket.
 
An alternative is to create an inherited IRA. The account is titled in your name as beneficiary of the loved one who passed away. You get to keep the funds in the account but are required to take minimum distributions each year. This allows you to keep growing the assets on a tax-deferred basis while spreading out the tax liability over many years. If you don’t need the money right away, this could be a wise option.

Take the lump sum benefit. 
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Finally, you always have the option to take the benefit as a lump sum. Again, if the account is a traditional IRA, you’ll likely face income taxes on the distributed amount. Those taxes could be significant so it’s important to consult with a financial professional.
 
If the account is a Roth IRA, the distribution is tax-free. However, you still may want to consult with a professional, so you can plan on how to use the windfall to best meet your financial goals.
 
Ready to develop a strategy for your inherited IRA? Let’s talk about it. Contact us today at Sprouse Financial Group. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
18279 - 2018/11/28

Are you considering an early inheritance for your children, grandchildren or other loved ones? It’s becoming a popular idea. A recent Merrill Lynch study of people age 50 and older found that 60 percent would prefer to give an early inheritance rather than wait until after death to distribute assets.1
 
The idea of an early inheritance may be appealing because it allows you to see how your legacy is used. You could pay for a grandchild’s college tuition or fund your child’s business idea. You may be able to help your children catch up on retirement savings or overcome financial difficulties.
 
However, an early inheritance can also cause problems. You could give too much and create challenges for your own financial stability. Your gift could cause conflict within the family. There could be tax consequences.
 
Below are a few issues and complications to think about as you plan your early inheritance strategy. A financial professional can also help you develop a plan that protects you, your legacy and your loved ones.
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Make sure you can afford it. 
​
You may feel like you can afford to give an early inheritance because you have plenty of assets. Often, when people retire, they have more money than they’ve ever had in their lives. It may seem like it would be impossible to spend your savings.
 
However, there could be risks in retirement that you haven’t expected. For example, you may need long-term care. The U.S. Department of Health and Human Services projects that 70 percent of seniors will need long-term care, which can cost thousands of dollars per month.2
 
You also may spend more than you expect on health care. Fidelity estimates that the average retired couple will spend $280,000 on health care costs above and beyond what’s covered by Medicare.3
 
Before you give an early inheritance, make sure you have a plan in place for these costs. A long-term care insurance policy may be an effective tool.

Have a conversation with your heirs about your plan. 

It’s likely that your family may welcome their early inheritance. They’ll probably appreciate the financial help. That’s not always the case, though. Some children may prefer a traditional inheritance. Others may not be responsible enough to handle a windfall. Some recipients may feel that others don’t deserve a gift.
 
It’s important to have an open conversation with your family about your plans. Solicit their feedback and input without making promises. You may want to develop different plans for each of your children. You also may want to consider a trust, so the assets can be managed and distributed according to your wishes.

Work with a professional and develop a strategy. 

You have the right to give your money to whomever you want, right? Not necessarily. If you give more than $15,000 to an individual in any given year, you may have to pay a gift tax. A married couple can give as much as $30,000 to each individual. Keep in mind: Gifts that are used to pay for medical bills or tuition aren’t included in the taxable amount.4
 
Before gifting your assets, it may be helpful to speak with a financial professional about structuring the gifts in a way that maximizes value for you and your recipients. A professional may also recommend tools that make the process more efficient for all involved.
 
Ready to chart your early inheritance strategy? Let’s talk about it. Contact us today at Sprouse Financial Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
 
1https://www.ml.com/articles/why-make-your-heirs-wait.html
2https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html
3https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs
4https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
18274 - 2018/11/27
 

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​Risk management is central to any financial strategy. It’s difficult to achieve your goals if you’re vulnerable to financial threats. A strong financial plan can help you minimize your vulnerability and protect your future goals.
 
However, you may be unprotected against one significant risk. It’s long-term disability. According to the Council for Disability Awareness, 1 in 4 working adults over the age of 20 will suffer a disability at some point in their life.1 While that statistic may seem surprising, consider that disability isn’t just caused by accidents. It can be caused by a wide range of issues including cancer, heart disease or even complications related to back or joint pain.
 
Long-term disability can cause serious financial challenges, primarily a loss of income. If you’re physically unable to work because of an injury or illness, you could miss out on years of income. You also may have limited ability to save for retirement.
 
Fortunately, you can minimize the risk of disability costs by planning ahead. Below are a few common ways in which people overcome financial challenges related to disability. A financial professional can help you develop and implement the right strategy for your needs.
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Social Security Benefits
 
Social Security is a valuable retirement resource, but it also provides income to those who can’t work due to disability. However, it isn’t easy to gain approval. In 2017 there were more than 2.1 million applications for Social Security disability benefits. Only 762,141 were approved.2 Many people have to file multiple claims and appeals before they receive a benefit approval. Some are never approved.
 
Even if you do qualify for Social Security disability, it’s unlikely to fully support your lifestyle. In September 2018 the average Social Security disability benefit amount was $1,198 per month.3 That’s more than $14,000 per year. While those benefits may be helpful, they likely won’t replace a full-time income.

Retirement Assets

If you’re forced to leave your career early because of disability, you may be tempted to tap into your retirement plans, like your 401(k) or IRA. These are tax-deferred accounts, which means your asset growth isn’t taxed until you take distributions. However, that also means you can’t take distributions before retirement age, or 59½. If you take a distribution early, you may have to pay taxes and a 10 percent penalty.

While your retirement assets may seem like a logical choice to cover your disability costs, there are a few issues with this strategy. The taxes and penalties can be costly, especially if you’re well under the 59½ age threshold. You may pay penalties for years if you plan on regularly tapping into your qualified accounts.
 
However, there’s also the fact that early distributions limit your future growth. When you take distributions, you reduce the amount of assets that are invested. That suppresses your growth, which means you could have fewer assets available later in retirement. Qualified plan distributions could help you in the present, but they could cost you in the future.
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Long-Term Disability Insurance
 
Long-term disability insurance can be an effective tool for minimizing disability risk. You pay premiums today, and the insurer pays you benefits in the future if you ever become disabled. A wide range of policy types are available, so you can find the right one for your needs and budget.

Many employers offer long-term disability insurance as part of their benefit package. Even if you have group coverage, it may not be right for your needs. Many group policies have maximum benefit amounts or require total disability in order for you to be eligible for benefits. An individual policy may provide more effective protection. A financial professional can help you find the right policy for your needs.

Ready to protect yourself against disability risk? Let’s talk about it. Contact us today at Sprouse Financial Group. We can help you analyze your risk and implement a plan. Let’s connect soon and start the conversation.
 
1http://disabilitycanhappen.org/overview/
2https://www.ssa.gov/oact/STATS/dibStat.html
3https://www.ssa.gov/oact/STATS/dib-g3.html
 
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18185 - 2018/10/22

​Are you one of the millions of Americans using a qualified plan such as a 401(k) or 403(b) to save for retirement? Do you also contribute to a traditional or Roth IRA? These vehicles are powerful retirement accounts because they offer tax-deferred growth. That means you avoid paying taxes on growth while the assets are in the account.
 
While you may have an idea of the balance of your accounts, have you estimated the potential income your qualified accounts will generate in retirement? If you answered no, you’re not alone. A recent study from the LIMRA Secure Retirement Institute (LIMRA SRI) found that more than half of all workers don’t know how their retirement assets will translate into income.1
 
The LIMRA study found that a retirement income estimate can boost your confidence in your retirement strategy. Almost 70 percent of the surveyed participants said they were more confident in their ability to retire after estimating their income. Of those who hadn’t estimated their income, only 30 percent were confident.1
 
You can use a retirement income estimate to gain insight into your planning and make important changes. You may see that you need to increase your contributions or perhaps make a change to your allocation. Below are a few tips on how to use a retirement income estimate in your planning:
​
Consolidate and analyze your retirement accounts and income sources.
 
There was a time when people worked for the same employer for most of their career. Those days are long gone. Today, many people make multiple job changes throughout their career. Each time they do, they may leave a 401(k) account behind at their old employer. It’s possible that you have old 401(k) plans and IRAs spread across multiple employers and financial institutions.
 
The first step in developing your retirement income estimate is to make an inventory of your accounts and assets. Gather statements from your investment accounts. Contact old employers to get information on old 401(k) balances, deferred compensation and even pension benefits. You can also use a tool on the Social Security Administration’s website to estimate your benefits.
 
Once you’ve gathered that information, consolidate it in one report. You may need to work with a financial professional to convert your balance information into an income estimate. However, adding up your total assets and income is a good first step.

Estimate sustainable withdrawal rates.
 
Once you’ve gathered your balance information, the next step is to project your retirement income. There are a few ways to do this, including some simple formulas for a quick estimate.
For example, you might assume that you can withdraw 4 percent of your retirement assets each year, as that would hypothetically last 25 years.
 
Be careful with quick estimates, though. They’re not always accurate. Your income is likely to fluctuate throughout your retirement. Also, your cost of living may increase because of inflation and rising health care costs. Your asset values might fluctuate, causing you to change your withdrawal amount. A quick estimate doesn’t account for those variables.
 
A more effective approach may be to work with a financial professional to run retirement withdrawal simulations. For example, your financial professional may be able to use software to model different rates of return and withdrawal amounts to show you what is sustainable in retirement. That could give you more confidence or help you identify areas for adjustment.

Develop a retirement budget and adjust your plan as needed.
 
A budget is always a helpful financial tool, but it’s especially powerful when planning for retirement. You can project your retirement expenses based on your current spending and inflation. You can then compare your estimated spending with your projected retirement income.
 
If your income exceeds your expenses, you may be on the right track. If there’s a gap, you may need to do more work and consider saving more money to reach your retirement goal.

Again, this is a process in which you may benefit from speaking with a financial professional. They have experience building retirement budgets and can advise you on costs and issues that you may not have anticipated.
 
Ready to estimate your income and boost your retirement confidence? Let’s talk about it. Contact us today at Sprouse Financial Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
 
1https://www.limra.com/Posts/PR/Industry_Trends_Blog/More_Than_Half_of_All_U_S__Workers_Have_Difficulty_Understanding_Retirement_Savings_in_Terms_of_Future_Monthly_Income.aspx

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18184 - 2018/10/22

​Do you have an estate plan? It’s an important part of any long-term financial strategy, especially as you enter retirement. An estate plan addresses your assets and how they should be distributed after you pass away. It can help make sure those assets go to the correct heirs and that your family is taken care of after you’re gone.
 
You can also use your estate plan to eliminate taxes and other costs. Estate taxes are usually only an issue for the ultrawealthy, but there are other expenses and complications your heirs could face.
 
One of the biggest potential costs is probate. That’s the legal process for settling one’s estate. Every estate goes through probate, even if a will exists. The probate process usually includes tasks such as notifying heirs, paying debts, selling property and filing taxes. Probate can take weeks or even months, and it can delay the distribution of assets. It can also be expensive, as your estate may need to hire attorneys, accountants and others.
 
Fortunately, there are steps you can take to eliminate the impact of probate on your estate. Below are three such steps. If you haven’t planned for probate, now may be the time to do so. These steps could ease the process for your heirs after you pass away.

Gifting
 
One of the best ways to minimize the impact of probate is simply to remove assets from your estate. You can do this by gifting assets to heirs and loved ones while you’re still alive. Be careful, though. Many states have laws about how long an asset must be out of your estate for it not to be included in probate.
 
There are also gift tax and income tax laws that apply to gifting. You’ll likely want to consult with a financial professional to see how those laws apply to your strategy. Finally, be sure to consider how your loved ones may feel about the gifts. Some may feel that the gifts aren’t fair. If the gifts will create conflict, you may want to consider an alternate plan.

Trust
 
A trust is another effective strategy for minimizing the impact of probate. A trust is a legal document that’s used to manage investments, savings, property and other assets. You create the document with the help of a legal or financial professional, and then retitle assets to ownership by the trust.
 
Upon your death, the assets are distributed to your trust beneficiaries. Since you name the direct beneficiaries in the trust, the assets bypass probate. That could help your heirs receive their inheritance faster and at less expense.

Life Insurance, Annuities and Qualified Accounts
 
Trust assets aren’t the only assets that bypass probate. Any account with a beneficiary designation avoids the probate process. That includes life insurance, annuities and qualified accounts such as IRAs and 401(k) plans.
 
Consider ways you can maximize these assets to take advantage of the probate bypass. For example, you may consider putting assets into an annuity. Many of these products have other attractive features like guaranteed* rates of return and market risk protection. A financial professional can help you determine the best strategy for your needs.
 
Ready to develop your probate plan? Let’s talk about it. Contact us today at Sprouse Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
 
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18086 – 2018/10/1