Janell A. Israel & Associates
1585 Kapiolani Blvd., Suite 1604, Honolulu, Hawaii 96814 Phone: 808-942-8817
September 2015 Tax Newsletter
Fourth Quarter Tax Planning - It's How You Finish That Counts
The fourth quarter is often make-or-break time in sports. Likewise, tax-cutting steps you take in the last three months of the year can transform a financial plan into a bona fide winner.
Late-year tax planning is often a matter of reviewing your inflows and outflows. For instance, income from capital gains can be subject to both capital gains tax and the 3.8% Medicare surtax. To offset capital gains, you might sell investments that have lost value since you purchased them. Net capital losses can be used to reduce ordinary income by up to $3,000. A tax-saving examination of your portfolio is a good time to rebalance your holdings between asset classes.
Interest and dividend income can be subject to the 3.8% Medicare surtax too. Plan for this by considering investments in municipal bonds that pay tax-free interest. If you are contemplating a mutual fund investment between now and the end of the year, check the fund's expected dividend date. Purchasing a mutual fund now could bring an unwanted taxable dividend before December 31.
On the outflow side, look for opportunities to maximize deductions. Accelerate your charitable donations and consider donating appreciated securities you have owned for more than one year. This strategy can offer double value - you get the benefit of a deduction, at fair market value, and you don't have to pay tax on the gain.
Take advantage of increased retirement plan contribution limits for 2015. This year you can contribute as much as $5,500 to a Roth or traditional IRA ($6,500 if you're age 50 or over). The limit for 401(k) plans is $18,000, plus an additional $6,000 if you're 50 or older. While checking on the status of your retirement plan contributions, review your list of beneficiaries too.
Another important fourth quarter exercise is an analysis of your federal and state income tax withholdings and estimated payments. These can be affected by personal events such as a change in marital status, the sale of your home, or a new job.
Effective tax planning is a matter of finishing well. Contact our office to discuss steps to make the fourth quarter a strong one for you.
WHAT'S NEW IN FINANCES:
When Will You Retire?
According to research conducted this spring, U.S. workers expect to stay employed past age 65 and to transition into retirement by reducing hours on the job over time.
Whatever your expectations for your post-work life, planning now can mean you'll be prepared to manage your retirement years. Review your health and disability insurance needs, tune up your retirement plan savings strategies, and estimate how much annual income will allow you to live the life you envision. Contact us to make an appointment for a comprehensive review of your financial situation.
Avoid These Retirement Planning Mistakes
Retirement can creep up on you. One day you're climbing the corporate ladder or building a client base for your business. Next thing you know, you're in your 50s or 60s. Thoughts of spending your days playing golf, pursuing a favorite hobby, or traveling to far-flung regions start calling you away from the daily grind. But without careful planning, your golden years may become tarnished. Before you take that gold watch at your farewell party, make sure you're avoiding these retirement planning mistakes:
* Failure to plan. Ideally, you started planning for retirement early in your career and your investments have been growing. But maybe you've avoided such thoughts until now. Don't wait. Plenty of online calculators will help you get a handle on how much you need to save, when to take social security benefits, how to determine retirement expenses, and so on. Finance professionals can also craft a plan to fit your circumstances. As the old saying goes, "Failure to plan is planning to fail."
* Failure to save. If your employer offers a 401(k) plan, take full advantage of the employer match, and sock away as much as you can, as early as you can. If you're self employed, set up a SIMPLE retirement plan. Regardless of your place of employment, saving for retirement should be a priority.
* Failure to consider inflation. No matter how much you save, expect inflation to eat away at the purchasing power of your money. At a 4% rate of inflation, expenses will double every 18 years. To cover that increase in expenses, your money needs to maintain its value. For most people, keeping up with inflation will require investing some portion of their nest egg in a diversified portfolio of stocks or stock mutual funds.
* Failure to consider life expectancy. These days, if you're a 65-year-old man, you can expect to live to age 82. A woman of the same age may live to age 85. These, of course, are averages. Depending on your health, family history, and other factors, you may live into your nineties or beyond. As a result, your nest egg (supplemented by pensions and social security benefits) may need to last 30 years or more. Take stock of these numbers and plan accordingly. Strive to ensure, as much as possible, that your retirement dreams come true.
All information is believed to be from reliable sources, however we make no representation as to its completeness or accuracy. The information contained in this newsletter is provided by Mostad& Christensen, Inc. The information is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information on anything in this newsletter, or for assistance with any of your tax, business, or financial strategy concerns, contact our office.
In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Mutual funds are sold by prospectus. Investors should read the prospectus carefully and consider the investment objectives, risks, charges, and expenses of each fund carefully before investing. The prospectus contains this and other information about the investment company. Please contact your representative or the investment company to obtain the prospectuses.
Diversification helps you spread risk throughout your portfolio, so investments that do poorly may be balanced by others that do relatively better. Neither diversification nor rebalancing can ensure a profit or protect against a loss.
Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Mosted& Christensen, Janell Israel & Associates and NPC are separate and unrelated companies. NPC does not provide tax or legal advice.
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Please visit www.janellisrael.com for up-to-date financial information & www.postoplanning.com for information regarding long term care insurance.