Posts tagged with "budgeting"

End of Year check

Annual Financial To-Do List

Annual Financial To-Do List

Things you can do for your future as the year unfolds.

 

Pay Your

 

 

What financial, business, or life priorities do you need to address for the coming year? Now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:

  Can you contribute more to your retirement plans this year? In 2021, the contribution limit for a Roth or traditional individual retirement account (IRA) is expected to remain at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation, but income limits are one factor in determining whether the contribution is tax-deductible.1

Remember, withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty starting again in 2021. Roth IRA distributions must meet a five-year holding requirement and occur after age 59½ to qualify for tax-exempt and penalty-free withdrawal. Tax-free and penalty-free withdrawals from Roth IRAs can also be taken under certain other circumstances, such as a result of the owner’s death.2

Keep in mind, this article is for informational purposes only, and not a replacement for real-life advice. Also, tax rules are constantly changing, and there is no guarantee that the tax landscape will remain the same in years ahead.

Make a charitable gift. You can claim the deduction on your tax return, provided you follow the Internal Review Service (I.R.S.) guidelines and itemize your deductions with Schedule A. The paper trail is important here. If you give cash, you should consider documenting it.  Some contributions can be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the I.R.S. does not equate a pledge with a donation. If you pledge $2,000 to a charity this year but only end up gifting $500, you can only deduct $500.3

These are hypothetical examples and are not a replacement for real-life advice. Make certain to consult your tax, legal, or accounting professional before modifying your record-keeping approach or your strategy for making charitable gifts.

See if you can take a home office deduction for your small business. If you are a small-business owner, you may want to investigate this. You may be able to write off expenses linked to the portion of your home used to conduct your business. Using your home office as a business expense involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional who is familiar with home-based businesses.4

 Open an HSA. A Health Savings Account (HSA) works a bit like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $3,600 contribution for 2021 if you are single; $7,200 if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55.5

If you spend your HSA funds for non-medical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you may be required to pay ordinary income taxes on HSA funds used for nonmedical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

Pay attention to asset location. Tax-efficient asset location is one factor that can be considered when creating an investment strategy.

Review your withholding status. Should it be adjusted due to any of the following factors?

 

* You tend to pay the federal or state government at the end of each year.

* You tend to get a federal tax refund each year.

* You recently married or divorced.

* You have a new job, and your earnings have been adjusted.

 

These are general guidelines and are not a replacement for real-life advice. Make certain to consult your tax, human resources, or accounting professional before modifying your withholding status.

 

Did you get married in 2020? If so, it may be an excellent time to consider reviewing the beneficiaries of your retirement accounts and other assets. The same goes for your insurance coverage. If you are preparing to have a new last name in 2021, you may want to get a new Social Security card. Additionally, retirement accounts may need to be revised or adjusted?

 Are you coming home from active duty? If so, go ahead and check on the status of your credit and any tax and legal proceedings that might have been preempted by your orders.

Consider the tax impact of any upcoming transactions. Are you planning to sell any real estate this year? Are you starting a business? Might any commissions or bonuses come your way in 2021? Do you anticipate selling an investment that is held outside of a tax-deferred account?

If you are retired and in your seventies, remember your RMDs. In other words, Required Minimum Distributions (RMDs) from retirement accounts. Under the SECURE ACT, in most circumstances, once you reach age 72, you must begin taking RMDs from most types of these accounts.6

      

Vow to focus on your overall health and practice sound financial habits in 2021. And don’t be afraid to ask for help from professionals who understand your individual situation.

 

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Traci L. Kovacic is a registered representative of and offers securities through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way; Cincinnati, OH  45242; (513)794-6794
Riverfront Financial and The O.N. Equity Sales Company are unaffiliated companies
Citations
  1. thefinancebuff.com, August 12, 2020
  2. usnews.com, February 12, 2020
  3. irs.gov, April 3, 2020
  4. nerdwallet.com, July 31, 2020
  5. msn.com, August 19, 2020
6. thestreet.com, December 21, 2019
traditional vs roth IrA

Traditional VS. Roth IRA

Traditional Vs. Roth IRA
Do you know the difference?

Provided by Traci Kovacic

 Traditional vs Roth Ira

Traditional Individual Retirement Accounts (IRA), which were created in 1974, are owned by roughly 33.2 million U.S. households. Roth IRAs, however, were created as part of the Taxpayer Relief Act in 1997, are owned by nearly 22.5 million households.1

Both are IRAs. And yet, each is quite different.

Know the limits. Up to certain limits, Traditional IRAs allow individuals to make tax-deductible contributions into the account. Distributions from traditional IRAs at retirement are taxed as ordinary income, and if taken before age 59½, may be subject to a 10-percent federal income tax penalty. Remember, under the SECURE Act, in most circumstances, once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Additionally, you may continue to contribute to a Traditional IRA past age 70½, under the SECURE Act, as long as you meet the earned-income requirement.

Filing single. For singles, the maximum tax-deductible contribution starts shrinking once your modified adjusted gross income (MAGI) reaches $65,000. Singles with adjusted incomes of $75,000 and above are not eligible for a tax deduction.2

Filing jointly. For those who are married and filing jointly, things are a bit more complicated. If you or your spouse makes an IRA contribution that is covered by a workplace retirement plan, the deduction begins phasing out when your adjusted gross income is at $104,000, and it disappears at $124,000. However, if you do not have a workplace plan, but your spouse does (or vice versa), the 2020 limit starts at $196,000, and no tax deduction is allowed once the contributor’s income reaches $206,000.

Roth IRA

Also, within certain limits, individuals can make contributions to a Roth IRA with after-tax dollars and then qualify for tax-free and penalty-free withdrawals at retirement.  Roth IRA distributions must meet a five-year holding requirement and occur after age 59½.3

Income impacts total contributions. Like a traditional IRA, contributions to a Roth IRA are limited based on income. For 2020, contributions to a Roth IRA are phased out between $196,000 and $206,000 for married couples filing jointly and between $124,000 and $139,000 for single filers.

Contribution limits. In addition to distribution rules, there are limits on how much can be contributed each year to either IRA. In fact, these limits apply to any combination of IRAs; that is, workers cannot put more than $6,000 per year into their Roth and traditional IRAs, combined. So, if a worker contributed $3,500 in a given year into a traditional IRA, their contributions to a Roth IRA would be limited to $2,500 during that same year.4

Catch-up contributions. Individuals who reach age 50 or older by the end of the tax year can qualify for “catch-up” contributions. The combined limit for these is $7,000.5

Let’s chat. When it comes to picking an IRA, both traditional and Roth IRAs may play an important role in your retirement strategy. If you have any questions, let’s chat soon about how these products may be a good fit for your goals.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
_________________________________________________________________________________
Traci L. Kovacic is a registered representative of and offers securities through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way; Cincinnati, OH  45242; (513)794-6794
Riverfront Financial and The O.N. Equity Sales Company are unaffiliated companies
 
Citations.
1 – irs.gov/retirement-plans/individual-retirement-arrangements-iras, [01/09/2020]
2 – irs.gov/retirement-plans/ira-deduction-limits, [12/20/2019]
3 – irs.gov/retirement-plans/are-you-covered-by-an-employers-retirement-plan [01/08/2020]
4 – irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits [02/07/2020]
5 – Internal Revenue Service, 2019. The Tax Cuts and Jobs Act of 2017 eliminated the ability to “undo” a Roth conversion.

 

Budgeting

Budgeting for Beginners

Budgeting for Beginners
Getting started with your household budget.

Budgeting

Budgeting towards needs and goals. One of the objectives of creating a household budget is that, as time moves on and the various household members advance in their careers, they are likely to make more money. Knowing where that money goes can help direct that money to not only meet your day-to-day needs but also to potentially realize your financial goals. Rent payments may become mortgage payments, and socking away a few bucks into your savings each payday could change into an effective financial strategy involving various investment tools.1

Remember that investing involves risk, and the return and principal value of investments will fluctuate as market conditions change. Investment opportunities should take into consideration your goals, time horizon, and risk tolerance. When sold, investments may be worth more or less than their original cost. Past performance does not guarantee future results.

The back of an envelope or a spreadsheet app. Traditionally, a household budget could be worked out “on the back of an envelope.” Of course, this is still true, though you may have access to more bells and whistles than previous generations. Whether you prefer to work it out with pencil and paper or by computer, the main rule is to create and stick to the budget.

Easy come, easy go. Start by taking note of your income. Some Americans have more than one income source, either through a second gig or even a hobby turned small business. You don’t have to be making money very long, though, to realize that it doesn’t always sit still in your checking account. Along with your income, tally up your expenditures: Housing costs (rent, utilities, etc.), groceries, student loan payments, transportation expenses, phone, and Internet, as well as entertainment. It adds up! (More like subtracts, actually.)

Make adjustments. Ideally, the number at the bottom of this reckoning should be a positive number. This means that you’re living within your means and, while you may want to make that a larger number by adjusting your expenses, you’re at a good starting point.

Adjustments are probably overdue if you have a negative number; you’ll need to take a cold hard look at those expenses and think about can I live without (such as mountaineering lessons) and what isn’t going to give (the essentials: food and shelter).

 

Your other choice, of course, is to make more money. As you move on in your career, this will likely happen as you earn salary increases or build your business. Don’t forget, though, that life gets more expensive over time, as well. Rents and fees will rise as time goes on. Regular adjustments are a natural part of good budgetary maintenance.

Goals and strategies. If you have money coming in that is not being gobbled up by line items on your budget, and you stick to it and keep it that way, you’re (literally) coming out ahead. Now’s the time to put that money to work toward goals and strategies. Goals can be small, like saving up for a vacation or upgrading an item in your home. Or they can be larger, like saving for a major expense.

Goals can work side-by-side with financial strategies, which tend to be “bigger picture” in scope. Financial strategies tend to be things like looking ahead to your retirement or investing in creating more income (so you can get back to mountain climbing). For these bigger strategies and the shorter-term goals, there is an advantage to seeking out a financial professional geared toward helping you get the most from your efforts.

There is no “one way” to budget. There isn’t a single, one-size-fits-all solution for creating and maintaining a household budget. Financial professionals also know this and can help craft a strategy suited to your risk tolerance, goals, and financial situation.

 

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

 

_________________________________________________________________________________
Traci L. Kovacic is a registered representative of and offers securities through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way; Cincinnati, OH  45242; (513)794-6794
Riverfront Financial and The O.N. Equity Sales Company are unaffiliated companies
Citations.
  1. PewResearch.org, March 25, 2020