Are You Paying Too Much In Income Taxes?

While we are not accountants and cannot render tax advice, we are very much aware of taxes as we work with our clients.

Based on the information in the Income Level Risks chart, here are some of the questions we review before we make recommendations from where to take income:

  1. What types of investment accounts do you have to work with?  For example, Roth IRA’s offer a tax-free option, taxable accounts, tax-loss harvesting and the opportunity to create capital gain income as opposed to ordinary income.
  2. For clients under the age of 70.5, does it make sense to consider a Roth Conversion?
  3. Will you benefit from holding equities in taxable accounts (due to the possibility of creating capital gain income) and holding fixed income securities in IRA’s?  (Interest from fixed income securities is taxed as ordinary income. Since all income from a traditional IRA is taxed as ordinary income, you may save on taxes by holding equities in taxable accounts and creating capital gain income.)
  4. Are tax-deferral annuities an option?
  5. Do municipal bonds make sense?
  6. Is there is benefit to accelerating charitable deductions?
  7. Can we get your income below the higher Medicare Part B premium threshold?
  8. Can we work to avoid the 3.8% surtax on net investment income?

I am clear that the content of this blog is very technical and complicated.

As always, we welcome a conversation with you and/or your tax advisor.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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Bull Market – Is It Time to Get Out of Stocks?

The U.S. and International equities markets have just given us yet another great quarter end.

How much longer can this continue?

In spite of the fact that this Bull Market is getting to be very long, it’s important to remember that Bull Markets don’t end just because of time.

One of the indicators that a Bull Market is about to end is that the country is entering into a recession.

What are the signs of a recession?

Sam Stovall, chief investment strategist at investment research firm CFRA, looks at four indicators:

  1. Every recession since 1960 has been preceded by a year-over-year decline in housing starts, says Stovall.  The dips have ranged from a 10% decline to a drop of 37%, and they have averaged 25%.  The most recent report on housing starts showed a decline of less than 3%. “So we’re on yellow alert, not red,” says Stovall.
  2. Consumer sentiment is another signpost. Before a recession kicks in, you’ll typically see an average decline of 9% in the University of Michigan’s monthly sentiment index compared with the previous year, says Stovall.  Current reading: up 2.4%.
  3. A drop over a six-month period in the Conference Board’s Index of Leading Economic Indicators means trouble, too, with declines of 3%, on average, registering ahead of an economic downturn. Latest six-month change: up 3%.
  4.  Finally, when yields on 10-year bonds dip below the yields on one-year notes – known as an inverted yield curve – look out, says Stovall. Ominously, long-term rates recently have been under pressure while the Federal Reserve pushes short-term rates higher. “We’re getting a flatter yield curve, but nowhere near an inversion,” says Stovall.  His conclusion: No recession is in sight.

Sometimes people exit a Bull Market too early.

(Source: Kiplinger “When Will the Bull Market End?” by Anne Kates Smith, Senior Editor, June 26, 2017)

Your Resonate advisory team is cautious and continues to follow these important indicators.

If anyone would like to have your current portfolio reviewed or has any questions, we’d welcome a conversation with you.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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What We’re Thinking About the Rest of the Year – Part 3 of 3
VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index.  This shows the market’s expectation of 30-day volatility as conveyed by S&P 500 stock index options prices. (www.cboe.com/products/vix=index-volatility/vix-options  and…/vix-index)

As the chart below depicts, the volatility index is currently very low.

Yet, compared to earnings, sales, and other corporate performance measures, stock prices are very high.

The current S&P 500 price-earnings ratio is 25.70 –  above the five-year average P/E of 15 and the 10-year average P/E of 14. (Source: www.multpl.com/  6/2/17)

Based on the chart above, consumers are shaking this off and focused on other factors.

Your Resonate team thinks this could be an example of what is called “home country bias”.  It means that investors’ natural tendency is to be most comfortable with investments in their home country,

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What We’re Thinking About the Rest of the Year – Part 2 of 3
In January, Kiplinger had predicted that the S&P 500 could yield a 6% return in 2017.  In just the first four months of the year, it exceeded that prediction by delivering 7.2%.

Kiplinger’s is now foreseeing a 9% to 11% return for the year—including a 2% dividend yield.  The considerable gains during the first half of the year may foreshadow subpar results for the second half of the year.

According to Burt White, chief investment officer of LPL Financial Research, investors should think beyond a portfolio of U.S. stocks and bonds.  Investors could score big in this market by venturing overseas.  Your Resonate team agrees with this and have been increasing our international exposure in investment models since third quarter of 2016.  Before making international investments, please have a conversation with us regarding risks and strategies that would be suitable for you.

It appears that investors can benefit from this rare, synchronized, economic expansion across the globe.  For the first time, all three major global regions (the U.S., Europe, and Asia) are all growing at the same time.[i]  The International Monetary Fund forecasts world economic growth at 3.5% in 2017, the highest growth rate in five years and up from 3.1% in 2016.[ii]   With consumer confidence at a decade high, consumer spending makes up for about 70% of the U.S. economy.[iii]

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What We’re Thinking About the Rest of the Year – Part 1 of 3
Many of you are asking how much longer the bull market can last.

While no one can answer the question, I thought that the information in this three-part blog might be of interest.

 The Current Bull Market

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Did You Know about This New Charitable Deduction?

Pet therapy for children and the elderly is now considered a charitable purpose by the IRA’s standards.  An organization that has others take their therapy dogs on visits to hospitals and nursing homes at no cost to the patient or facility, now qualifies for tax exemption as a 501 (c)(3) charity.  These pet therapy sessions are intended to improve the well-being of patients, lessen distress and encourage socialization.  Donors can now deduct contributions made to the group.

(Source: The Kiplinger Tax Letter May 19, 2017)

In the same Kiplinger Tax Letter, Knight Kiplinger suggests that things are looking up for the housing market.  As home prices rise, underwater mortgages are falling steadily.  Currently 10% of homeowners owe more on their mortgages than their homes are worth, however this statistic is projected to be 8% by year-end and even fewer next year.  Having fewer folks upside-down on loans means more homes hitting the market.

And finally, Kiplinger warns us to expect more destructive cyberattacks to strike in the coming months.  Recent U.S. intelligence agencies data breaches have exposed hidden security flaws to criminals and other nations.

Microsoft urges Uncle Sam to quickly reveal such security holes so they can be covered.

Although future attacks will be more difficult to stop as malware becomes more sophisticated, there are ways to help fend off hackers.

  • Spend money on anti-virus / anti-malware software and keep it up-to-date with virus definitions
  • Install software updates often and quickly to plug security holes – especially on your operating system such as Microsoft Windows.
  • Back up data regularly with an external remote local hard drive.  Keep it disconnected from your computer between back ups.  Also take advantage of web-based back up storage.
  • Don’t click on suspicious email hyperlinks or unknown attachments without proper vetting.

Your Resonate team continues to increase our security measures on a regular basis.  For example, our broker-dealer, Valmark Securities requires all Resonate employees to undergo ongoing cybersecurity training.  We also back up our files daily.

Of course, we still know that hackers continue to increase their sophistication as well.

As always, we would love to hear from you.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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What is Really Going On with Health Care Reform?
Health Care Costs

Knight Kiplinger shares some interesting information in the May 19 Kiplinger Letter and Kiplinger Tax Letter:

Kiplinger does not believe we should expect quick resolution on replacing Obamacare in the Senate.  GOPers are setting aside the controversial House bill and starting over.  He believes there are great problems in this effort: Senators will have to deal with arcane procedural rules to get a bill passed by a simple majority.  This will involve scaling down the bill, with a result unlikely to satisfy House conservatives. Congress will be bogged down with the controversy over Trump’s firing of the FBI director, therefore passing a major bill in such an inflamed environment will be tough.  Overall, a signed bill is a long way off and any final legislation will look significantly different from the House version.

Next, Kiplinger predicts the annual ceiling on deductible payins to Health Savings Accounts (HSAs) will increase in 2018 to $3,450 for account owners with individual coverage and to $6,900 for those with family coverage.  Those born prior to 1964 can put in an additional $1,000.

Limits on out-of-pocket costs, such as deductibles and copayments, will increase to $13,300 for those with family coverage and to $6,650 for self-only coverage.

Minimum policy deductibles will increase to $2,700 for families and $1,350 for singles.  Proposed changes include the ceiling on deductible contributions nearly doubling, HSA funds being able to be used for the purchase of over-the-counter medicines and the fine for payouts made for nonmedical costs being cut in half.

If you, or someone you know needs it, Resonate can provide excellent independent references for navigating the multitude of health insurance choices.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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Six of the Most Overlooked Tax Deductions

  1. Student Loan Interest paid by mom and dad:  If parents pay back the child’s student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt.  So as long as the child is no longer claimed as a dependent, he or she can deduct up to $2500 of student loan interest paid by mom and dad each year.  And the student does not have to itemize to use this money saver.

(Please note that mom and dad cannot claim the interest deduction, even though they pay the bill, because they are not actually liable for the debt.)

2. State Sales Tax:  Many of our clients live in states that do not impose a state income tax.  Congress offers item misers the choice between deducting the state income taxes or state sales taxes they paid.  You choose whichever saves you more money.  So if your state does not have an income tax, the sales tax write off is clearly the way to go.

3. Out-of-pocket charitable deductions:  Like many of you, Resonate is absolutely committed to both corporate and personal philanthropy.  “Little things” that we do can often go unnoticed.  For example, if you prepare a casserole or dessert for your church potluck, provide food for a not- for- profit soup kitchen, contribute stamps for a school’s fundraising mailing, or have other out-of-pocket costs incurred while doings good work for charity, keep your receipts.  These “little things” actually qualify as charitable income tax deductions.  (If your contributions total more than $250, you’ll also need an acknowledgment from the charity documenting the support that you provided.)

Also remember that you can deduct $0.14 per mile plus parking and tolls paid for any philanthropic/volunteer work.

4. Deduction of Medicare Premiums for the Self-Employed:  This deduction is available whether or not you itemize.  Further, it is not subject to the 10% adjusted gross income test that applies to itemized medical expenses for those 65 and older (changed from 7.5% as of 1-1-17).  So, if you continue to run your own business after qualifying for Medicare, you can deduct the premiums for Medicare part B and part D plus the cost of supplemental Medicare policies or the cost of a Medicare advantage plan.

5. Reinvested Dividends:  Many of our investors choose to automatically reinvest their dividends, so that they can purchase extra shares.  Remember that each reinvestment increases your cost basis – just as if you had written a check yourself.  When you decide to sell some shares, it is very important to be sure to include the value of your reinvested dividends in your cost basis.

6. Refinancing points:  Most people know that you get to deduct the points paid to get your first mortgage in a lump sum.

When you refinance, though, you have to deduct the points on the new loan over the life of that loan.  That means if you take out a 30 year mortgage, you can deduct 1/30th of the points per year.

If you happen to sell the house or refinance before the existing mortgage is paid off, then you can deduct all of the as yet un-deducted points in a lump sum.

Beware: if you refinance a refinance loan with the same lender, then you have to go back to deducting points gradually over the life of the new loan.

(Please note that, while we are not accountants and cannot provide tax advice, we do work cooperatively with very qualified accountants.  The information that we will share is available to the general public and should not be construed as giving income tax advice.  We are simply providing it as a value-added service to our clients, their friends and family.)  Credit to Kiplinger’s, 2017

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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What the Worldwide Aging Population Means for Women: Part 3
Health Care Costs

The first two parts of this blog provided the information supporting the fact that women face an unfair disadvantage in terms of planning for a successful retirement.

If you’ve not yet read parts one and two of this blog, please take a few moments to do so.

Here are the action steps that women can take to help prepare themselves for healthcare and retirement costs.

  1. Tell your story and expect to be heard and honored. You and your planning needs are unique.  You deserve the opportunity to “share your story as well as your hopes, fears and dreams”.

Regardless of your current life experience and financial knowledge, you deserve to be listened to without judgment.

You deserve to have all of your questions answered honestly and completely.

You deserve transparency around fees, commissions, and any other form of advisor compensation.

  1. Create a plan and follow it. Again, this is “your plan”.  It needs to be designed specifically for you to get you from “where you are to where you want to be”.
  1. Invest with appropriate risk level. Again, your investment portfolio needs to be designed specifically for you and what it is you want to accomplish.
  1. If you are of a pre-retirement age, be prepared to save aggressively to meet your goals.
  1. If you are already retired, then the allocation of your investment portfolio may be even more critical because you may no longer have the capacity to continue to save to reach your retirement goals.
  1. Be sure you understand how programs such as Social Security, Medicare, and employer-sponsored retirement plans can best be coordinated for maximum results.
  1. Consider products such as life insurance with long-term care riders, products that are designed to create guaranteed lifetime income in retirement, products that are designed to create income tax savings, and anything else that may be appropriate to help you reach financial peace of mind.
  1. Once your plan is in place, be sure to continue with annual conversations with your team of advisors.

As you can see, planning done well is complex and involves the integration of both programs, products and planning.

Do you remember the old Greyhound bus slogan, “Go Greyhound and Leave the Driving to Us”? 

It is suggested that the new slogan might be “Keep Texting and Leave the Driving to Us!”

Whether you find yourself familiar with the first slogan or relate more to the new slogan, we invite you to a conversation at Resonate.  Regardless of your age, our motto is to help you define and discover what Richness of Life means to you.  Then, it is our job to help create the pathway for you to experience this desired destination.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500


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What the Worldwide Aging Population Means for Women: Part 2
Health Care Costs

In the first part of this three-part blog, we talked about why the U.S. demographics of an aging society present more of a challenge for women than for men.

Here are some additional thoughts for your consideration:

In part one, we suggested that the fact that women still tend to outlive men by 3 to 5 years definitely contributes to the financial challenges that women face in retirement.

Here is a chart that supports that information:

The second reason that women face an uneven challenge is because we still experience a disadvantage in the work place.  In addition to the fact that women are still more likely than men to leave the workforce intermittently, we also know that women are more likely to hold lower- wage and part-time jobs, both of which are detrimental to funding future retirement.

So what can women do about this?  That will be the focus of part three in this series.

If you’ve already read enough, please contact us now.  Otherwise, please be sure to read part three.

Barbara A. Culver
Resonate, Inc.
(513) 605-2500

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