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17
Nov

Year-End Security and CASH Tax-Related Deadlines

Some year-end tax related transactions involve securities and cash.  Such transactions must be completed by December 31, 2015 to be reported on your 2015 tax return.  Check with your financial institution to find out their cut-off dates for 2015.

  • Deadline for Required Minimum Distributions (RMDs): Clients who are 70½ or older must take an RMD from their IRA and/or their QRP for the 2015 tax year. All RMDs must be withdrawn by December 31, 2015, with the exception of RMDs for clients who turned or will turn 70½ during this calendar year. These clients may defer their first distribution until April 1, 2016. Deferring the distribution is not always the best choice from a tax perspective. Check with your tax professional to see if you should take such distributions in 2015 or 2016.If you have already taken the required distribution for 2015, no other action is required. December 22 is a frequent cut-off date.  Check with your institution if you need additional time.

You may find it advantageous to take your RMD early in the year or establishing a systematic payment to ensure the annual RMD is satisfied every year. Check with your financial institution for instructions on implementing these alternatives.

  • Deadline for Roth IRA Conversions: A Roth conversion form may also need to be submitted before December 31, 2015 to be processed by December 31, 2015. Check with your financial institution to determine the cut-offs and procedures that are required.
  • Deadline for Establishing a 2015 QRP: Check with your financial institution to determine the cut-offs and procedures that are required.
  • Deadline for Removal of Non-marketable Securities: To have non-marketable securities removed from your accounts by the end of the calendar year there may be a cut-off date. Check with your financial institution to determine the cut-offs and procedures that are required.
  • Charitable and Gift Deadlines:
    Check with your financial institution to determine the cut-offs and procedures that are required. 

Mutual Funds:
Due to the nature of processing charitable mutual fund deliveries, you should provide the following information with each request:

    Mutual fund symbol or CUSIP
    Number of shares your client would like to donate
    Mutual fund account number at the receiving firm
    Client account number at the receiving firm

Cash delivered via check and/or federal funds wire:
Between accounts at your financial institution:
Stock delivered via the Depository Trust Company (DTC) system:
Additional information for charitable gifts:

Contact the charity to learn what procedures and accounts they have.
Inform the charity what the specific gift will be (cash or securities). Let them know the amount or securities that they will be receiving.  Identify the security (securities) and the number of shares being transferred.

12
Nov

Medicare Premiums and Other Costs for 2016

During the past several weeks, you may have seen media reports announcing that Medicare Part B premiums would be rising dramatically for some beneficiaries in 2016. But thanks to a provision in the Bipartisan Budget Act of 2015 signed into law on November 2, affected beneficiaries face more modest increases next year. Standard Medicare Part B premiums for the majority of beneficiaries won’t be rising at all.

What you’ll pay for Medicare Part B in 2016

The Centers for Medicare & Medicaid Services (CMS) has announced that in 2016, most individuals (about 70% of Medicare beneficiaries) will continue to pay $104.90 per month for Medicare Part B (Medical Insurance), the same standard premium they paid in 2013, 2014, and 2015. If you fall into this category, your premium won’t be rising because you won’t be receiving a Social Security cost-of-living allowance (COLA) increase in your benefit next year, as was previously announced by the Social Security Administration (SSA). Due to a provision in the Social Security Act, you are “held harmless” from Part B premium increases when no Social Security COLA is payable.

Unfortunately, this is not the case for the approximately 30% of Medicare beneficiaries who are not subject to this “hold harmless” provision. You fall into this group and will pay more for Medicare Part B next year if:

  • You enroll in Part B for the first time in 2016.
  • You don’t get Social Security benefits.
  • You have Medicare and Medicaid, and Medicaid pays your premiums.
  • Your modified adjusted gross income as reported on your federal income tax return from two years ago is above a certain amount.*

The table below shows what you’ll pay next year if you’re in this group.

Beneficiaries who file an individual income tax return with income that is: Beneficiaries who file a joint income tax return with income that is: Beneficiaries who file an income tax return as married filing separately with income that is: Monthly premium in 2015: Monthly premium in 2016:
$85,000 or less $170,000 or less $85,000 or less $104.90 $121.80
Above $85,000 up to $107,000 Above $170,000 up to $214,000 N/A $146.90 $170.50
Above $107,000 up to $160,000 Above $214,000 up to $320,000 N/A $209.80 $243.60
Above $160,000 up to $214,000 Above $320,000 up to $428,000 Above $85,000 up to $129,000 $272.70 $316.70
Above $214,000 Above $428,000 Above $129,000 $335.70 $389.80

Although substantial, Part B premiums are far less than originally projected for 2016 because of a provision in the Bipartisan Budget Act of 2015 that limited premium increases for beneficiaries who are not subject to the “hold harmless” provision.

*Beneficiaries with higher incomes have paid higher Medicare Part B premiums since 2007. To determine if you’re subject to income-related premiums, the SSA uses the most recent federal tax return provided by the IRS. Generally, the tax return you filed in 2015 (based on 2014 income) will be used to determine if you will pay an income-related premium in 2016 (your 2013 income was used for 2015 premiums). You can contact the SSA at (800) 772-1213 if you have new information to report that might change the determination and lower your premium (you lost your job and your income has gone down or you’ve filed an amended income tax return, for example).

Changes to other Medicare costs

Other Medicare Part A and Part B costs will change in 2016, including the following:

  • The annual Medicare Part B deductible for Original Medicare will be $166, up from $147 in 2015.
  • The monthly Medicare Part A (Hospital Insurance) premium for those who need to buy coverage will cost up to $411, up from $407 in 2015. However, most people don’t pay a premium for Medicare Part A.
  • The Medicare Part A deductible for inpatient hospitalization will be $1,288, up from $1,260 in 2015. Beneficiaries will pay an additional daily co-insurance amount of $322 for days 61 through 90, up from $315 in 2015, and $644 for stays beyond 90 days, up from $630 in 2015.
  • Beneficiaries in skilled nursing facilities will pay a daily co-insurance amount of $161 for days 21 through 100 in a benefit period, up from $157.50 in 2015.

For more information on costs and benefits related to Social Security and Medicare, visitSocialsecurity.gov andMedicare.gov.

To view the Medicare fact sheet announcing these and other figures, visit Medicare.gov.


The foregoing is provided for information purposes only.  It is not intended or designed to provide legal, accounting, tax, investment or other professional advice.  Such advice requires consideration of individual circumstances.  Before any action is taken based upon this information, it is essential that competent, individual, professional advice be obtained.  JAS Financial Services, LLC is not responsible for any modifications made to this material, or for the accuracy of information provided by other sources.

3
Nov

Some Social Security tactics are eliminated as part of the “budget deal”

Following is a summary of the tactics that will be eliminated:

Voluntary Suspension
The “file and suspend” benefit claiming strategy will  no longer be available in about 6 months. This strategy involves one spouse, usually the higher earner, claiming their benefits and immediately suspending them. The purpose was to allow the worker’s spouse to begin a spousal benefit while the worker’s benefit continued to earn delayed retirement credits.

When the legislation becomes effective, all benefits paid from an account will be  suspended when a person suspends their benefit. Previously, a beneficiary could suspend their benefits while a spouse or qualifying children could continue collecting a benefit from their account. The new legislation will require that a beneficiary be receiving his or her own benefit in order for other benefits to be paid from their record.

The new legislation does not prevent the suspending of benefits for the purpose of accruing delayed retirement credits. If a person files early and later decides it was a mistake, they will be able to suspend benefits at full retirement age and accrue delayed retirement credits. However, any other benefits being paid from the suspended benefit will stop.

Someone who has already claimed benefits with a file and suspend strategy, or anyone who implements such a strategy within the next 6 months, can continue with their strategy.

Restricted Application
The other major change is the elimination of the “restricted application.” Restricted application allowed a spouse who had attained full retirement age, who was also eligible for their own retirement benefit, to collect only a spousal benefit. At a later date, usually age 70, the spouse would switch to their own retirement benefit which would have grown to its maximum with delayed retirement credits.

The new legislation extends a concept called “deemed filing.” Deemed filing has only been a factor before reaching full retirement age. Prior to reaching full retirement age, if a person filed for any benefit, they were “deemed to be filing” for all benefits. This meant that if someone was eligible for their own benefit and a spousal benefit, they would only be paid a single benefit, the higher of the two. But if the individual waited until full retirement age to claim a benefit, they could choose which benefit to receive. If the choice was made to receive a spousal benefit, their own retirement benefit would continue to accrue delayed retirement credits. The new rule extends the deemed filing provision to age 70, meaning that the payable benefit will always be the higher benefit if eligible for more than one.

The new rules about restricted application apply only to individuals who attain age 62 after 2015. For those who achieve age 62 prior to 2016, it remains possible to file a restricted application for spousal benefits only at full retirement age. However, this option is being effectively “phased out” over the next four years.

Widows and Divorced Benefits
Nothing in the legislation mentions widows benefits, and some believe the strategies available to widows remain unchanged. It will still be possible for a widow to begin a widow benefit and switch to their own retirement benefit at a later date or vice versa.

Divorced benefits seem to have suffered what some are calling an unintended consequence of the legislation. As of now, since filing a restricted application will not be available for anyone reaching age 62 after 2015, divorced individuals will not able to use this option unless they fall into the grandfathered group who will already be aged 62 by the end of 2015.

The above is an edited version of several explanation prepared before the enactment of the legislation.  It is possible the published version of the legislation may differ.  Your plans included the above tactics, you should revise your plans.  You may need to act quickly if you are close to age 62 to preserve these tactics for your situation.

 

 

22
Sep

Medicare Open Enrollment Period Begins October 15

What is the Medicare open enrollment period?
The Medicare open enrollment period is the time during which people with Medicare can make new choices and pick plans that work best for them. Each year, Medicare plans typically change what they cost and cover. In addition, your health-care needs may have changed over the past year. The open enrollment period is your opportunity to switch Medicare health and prescription drug plans to better suit your needs.

When does the open enrollment period start?
The Medicare open enrollment period begins on October 15 and runs through December 7. Any changes made during open enrollment are effective as of January 1, 2016.

During the open enrollment period, you can:

  • Join a Medicare Prescription Drug (Part D) Plan
  • Switch from one Part D plan to another Part D plan
  • Drop your Part D coverage altogether
  • Switch from Original Medicare to a Medicare Advantage Plan
  • Switch from a Medicare Advantage Plan to Original Medicare
  • Change from one Medicare Advantage Plan to a different Medicare Advantage Plan
  • Change from a Medicare Advantage Plan that offers prescription drug coverage to a Medicare Advantage Plan that doesn’t offer prescription drug coverage
  • Switch from a Medicare Advantage Plan that doesn’t offer prescription drug coverage to a Medicare Advantage Plan that does offer prescription drug coverage

What should you do?
Now is a good time to review your current Medicare plan. As part of the evaluation, you may want to consider several factors. For instance, are you satisfied with the coverage and level of care you’re receiving with your current plan? Are your premium costs or out-of-pocket expenses too high? Has your health changed, or do you anticipate needing medical care or treatment?

Open enrollment period is the time to determine whether your current plan will cover your treatment and what your potential out-of-pocket costs may be. If your current plan doesn’t meet your health-care needs or fit within your budget, you can switch to a plan that may work better for you.

What’s new in 2016?
The initial deductible for Part D prescription drug plans increases by $40 to $360 in 2016. Also, most Part D plans have a temporary limit on what a particular plan will cover for prescription drugs. In 2016, this gap in coverage (also called the “donut hole”) begins after you and your drug plan have spent $3,310 on covered drugs. It ends after you have spent $4,850 out-of-pocket, after which catastrophic coverage begins. However, part of the Affordable Care Act  gradually closes this gap by reducing your out-of-pocket costs for prescriptions purchased in the coverage gap. In 2016, you’ll pay 40% of the cost for brand-name drugs in the coverage gap and 58% of the cost for generic drugs in the coverage gap. Each succeeding year, out-of-pocket prescription drug costs in the coverage gap continue to decrease until 2020, when you’ll pay 25% for covered brand-name and generic drugs in the gap.

 Where can you get more information?
Determining what coverage you have now and comparing it to other Medicare plans can be confusing and complicated. Pay attention to notices you receive from Medicare and from your plan, and take advantage of help available by calling 1-800-633-4273 (MEDICARE) or by visiting the Medicare website,  www.medicare.gov.

Part D late enrollment penalty
Generally, if you did not sign up for Part D coverage during your initial enrollment period, and you didn’t have other creditable drug coverage (at least comparable to Medicare’s standard prescription drug coverage) for at least 63 days in a row after your initial enrollment period, you may have to pay a late enrollment penalty. The late enrollment penalty is added to your monthly Part D premium. Your initial enrollment period is the 7-month period that starts 3 months before you turn age 65 (including the month you turn age 65) and ends 3 months after the month you turn 65.

The foregoing is provided for information purposes only.  It is not intended or designed to provide legal, accounting, tax, investment or other professional advice.  Such advice requires consideration of individual circumstances.  Before any action is taken based upon this information, it is essential that competent, individual, professional advice be obtained.  JAS Financial Services, LLC is not responsible for any modifications made to this material, or for the accuracy of information provided by other sources.
16
Aug

Identity Theft

It seems there are an increasing number of reports of identity theft ID).  I recently saw an article by Sid Kirchheimer that was published by AARP about the use of identities of people that have died.  “Postmortem identity theft may be shocking but it’s hardly rare, especially because the victims.”

One of the best known sources of information for ID is the Social Security Administration’s Death Master File.  The list is maintained to allow employers, financial institutions and government agencies to identify fraud.  That file’s use is intended to be restricted to  those entities.

“But federal law requires a version known as the Social Security Death Index be made available to the public.”  Social security numbers are not on the list.  Information on the list is often enough information for ID theft.  The details maybe available free on genealogy and other websites.

Kirchheimer’s article includes the following to block ID theft of the deceased:

  • “Immediately send death certificate copies by certified mail to the three main credit reporting bureaus.  Request that a ‘deceased alert’ be placed in the credit report.
  • Mail copies as soon as possible to banks, insurers and other financial firms requesting account closures or change of joint ownership.
  • Report the death to the Social Security Administration at 800-772-1213 and the IRS at 800-829-104.  Also notify the DMV.
  • In obituaries, don’t include the deceased’s birth date, place of birth , last address or job.
  • Starting a month after the death, check the departed’s credit report at www.annualcreditreport.com for suspicious activity.

IRS Taxpayer Guide to Identity Theft:

Office of the Inspector General Social Security Social Security Administration – Report Fraud:

12
Aug

Interest Rates on New Federal Student Loans Fall Slightly

The new interest rates apply to loans issued July 1, 2015 through June 30, 2016.

Interest Rates Decrease Slightly on Student Loans

14
Jul

A Harvard professor of economics thinks inveseting is complicated

The article’s title,  “Why Investing Is So Complicated, and How to Make It Simpler”, caught my attention.  The article was in the July 11, 2015 edition of TheUpshot NY Times.   Sendhil Mullainathan (the author of the article) compared investing to “taking a final exam in a class” he never attended.

Sendhil concludes his article with his realization that paralysis is the biggest cost of procrastination.  The paralysis was caused by his fear of making a mistake in choosing an investment.  During the time he did not act his money did not earn anything as his money was not invested.

He identified some of the reasons why investing is so difficult.  One reason is the lack of sound employer-provided pension plans.  Today we must take the steps to provide the comfortable retirement that we want.  Savings  becomes a primary activity required to meet our financial goals.  I am including investing as part of savings for this purpose.  Maximizing contributions to 401(k) accounts and IRAs (Traditional and/or Roth) become important. Adopting tax favored retirement plans are an important tool for the self-employed entrepreneur.

Finding quality financial advisers was another issue he identified.  A study he was associated with “…examined advisers who did not charge clients directly.  Their advice was ‘free,’  but under current rules, their advice only had to meet a very low standard – it only had to be ‘suitable’ in a broad sense of the word.”  Mr. Mullaimathan referred to the need for a meaningful fiduciary standard.  The struggle to adopt a fiduciary standard has been going on for a long time.  Congress seems to have been the roadblock.  I leave to your imagination why they resist holding all financial advisers to a fiduciary standard.

The discussion included the variation in funds (mutual funds and exchange traded funds).  His approach was to find a broad-based indexed fund.  He mentioned the Standard & Poor’s 500 and the Russell 2000 indexes.  Many funds do not include the entire index.  There are funds that use statistical sampling to include a desired portion of all the securities in the index.  Other funds filter out some securities.  A fund may use one or more factors to determine the securities to be included. Some, but not all the, factors are: how may years the firm has existed, how long the security has been listed, profitability, dividends,  balance sheet and sales.  There are indexes that only include specific sectors, specific regions, specific firm size, growth characteristics, social responsibility, etc.  Another variation is the weight each security has within the index. Some, but not all, determine the amount of each security by: the firms total market value, by the value of a share, and equal amount of each security.

There are a lot of advantages to using index funds.  Look for what is included, what is excluded and weighting the fund gives to each security included in the index.   The number of funds and types of funds you should have should be determined based on your specific situation.  Pay close attention to cost.  One potential advantage of an indexed approach is reduced cost.  Too many indexes could defeat the diversification of a portfolio. You should also look at how the index fund compares to the index.  If the performance is not close to the index, then you may not get what you are looking for.

 

 

 

26
Jun

Supreme Court Upholds Health Insurance Subsidies

The case of “King v. Burwell” challenged the interpretation of a portion of  the Affordable Care Act (ACA).  The ACA provided health insurance subsidies for quailed persons.  One requirement was that the insurance be purchased through state-based exchanges (marketplaces).  Only 16 states and the District of Columbia operated their own state-based exchanges.  Most consumers purchased insurance through federal exchanges through the federal government websites.  June 25, 2015 the U.S. Supreme held that insurance subsidies were available to those that qualified for subsidies purchased insurance through the federal exchange.

2
Jun

Some reasons to review your estate documents.

There are many reasons why estate documents should be reviewed periodically.  Life events are often a reason to review estate documents.  These events may change circumstances, goals and priorities.  Another reason is changes in the applicable laws.  You may not be aware of the changes.  Following area few changes that make it advisable to have your estate documents reviewed.

Privacy regulations were issued after the passage of the  Health Insurance Portability and Accountability Act (HIPPA).  There are  situations when you want others to be able communicate with your employer, insurer or health care provider.  A written authorization with specific language is required to allow such communications.  You should have your estate documents reviewed if they do not include this authorization.

Changes in the federal estate tax in 2010 reduced rates and increased the exclusion.  Provisions in estate documents to minimize and/or postpone the estate tax may no longer apply.

Estate planning documents for married couples prior to 2013 often had provisions designed to minimize and/or postpone the estate tax until the death of the surviving spouse.    The cost of assets for purposes of determining gain for assets sold by the surviving spouse was generally the value at the death of the first spouse to die (“step-up basis”).  This may not be the  preferred strategy as a result of the above changes.  There are new strategies that will allow a “step-up basis” at the death of the surviving spouse.

You should contact your estate planning attorney if you are sure if these changes apply to you.

 

6
Mar

The lessons learned from “the old Enron story” still apply.

The following is from Edward Mendlowitz’s Feb. 24, 2015 Blog.
“in his book Money: Master the Game, Tony Robbins dredges up the old Enron story, which I agree with, and want to call to your attention now.  Here is a brief listing copied from Tony’s book of the lauds, Enron received right up until their bankruptcy filing.

Mar 21, 2001 Merrill Lynch recommends
Mar 29, 2001 Goldman Sacks recommends
June 8, 2001 J.P. Morgan recommends
Aug 15, 2001 Bank of America recommends
Oct 4, 2001 A G Edwards recommends
Oct 24, 2001 Lehman Brothers recommends
Nov 12, 2001 Prudential recommends
Nov 21, 2001 Goldman Sacks recommends (again)
Nov 29, 2011 Credit Suisse First Boston recommends
Dec 2, 2001 Enron files Bankruptcy

Millions of Investors trusted these venerable firms and followed their recommendations.  A question I had at the time was, “How much work did they do before they made their recommendations?”  I could not have been too much since every recommendation was wrong.  Another observation is that many of the largest mutual funds has significant positions in Enron.

Now, lets fast forward to today.  Has anything changed?  Were lessons learned?  Are more intensive analysis being done now?  I suggest that nothing has changed.  Examples are in the many recommendations to buy oil stocks a few months ago before a subsequent additional 35% drop.  …Next, as Robbins points out, most actively managed mutual funds do not outperform the index they are trying to beat….

The principles in the book are easy to understand, digest and act on…. I have condensed them [his seven steps] and … restate as follows:

1. Commit to regular savings program
2. Know and understand why you are investing in
3. Develop a plan and, while at it, reduce spending, keep investment costs low and shed debt
4. Allocate your assets carefully and rebalance periodically
5. Create a lifetime income plan
6. Invest like the .001%, i.e. don’t be stupid and re-look at step 2
7. Be happy by growing and giving

All good advice you can start following today.