Stop it! Stop it now!

Stop procrastinating your savings goals right now. There truly is no time like the present to start your emergency fund, here are a few reasons why:
Interest rates have been going up and that makes borrowing even more expensive. If you think you can just put an expense on your credit card and pay it later, you will pay more. Never charge more than you can pay off as soon as you get the bill. During times of rising interest rates, it will take longer to pay off a balance and this will cost you more in the end.
You never know where the next emergency will come from. G-d forbid you are in an accident and out of work for a while – how will you cover your basic monthly expenses if you don’t have savings? Try to plan for at least six months of fixed expenses for your emergency fund, then do not touch that account unless an emergency arises.
The tax man will come. April 15th is closer than you think. You still have time to max out your retirement accounts, or harvest taxable losses against taxable gains to make them non-taxable. Please make sure that you match long term gains against long term losses, as well as short term gains against short term losses.

Once you have gotten into the habit of building up your savings, you will never stop. There is no greater piece of mind than having a cash reserve.

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Are you ready for 2019!

2018 is not over yet, and we have not even filed our returns under the new tax laws, but there are changes for 2019 for you to pay attention to.
The standard deduction for 2019 has been increased by $200 per tax filer.
Head of household filers will get an increase of $350.
401(k) and 403(b) contribution limits have been increased by $500, with the $6000 over age 50 additional contribution amount remaining the same.
The individual mandate penalty for not having qualifying health insurance will go away.
The lifetime gift and estate tax exclusion has been changed to $11.4 million vs. the current exclusion of $5.49 million.
While you are preparing for your 2018 tax return, keep in mind that 2019 will bring more benefits.

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It’s time to play match game!

I know you would much rather be thinking about Thanksgiving, Chanukah, Christmas, anything but taxes. What you really need to be thinking about is the end of year moves you need to make now.
One tax saving strategy is to match your capital gains against your capital losses. The tax code allows you to sell investments that have fallen below your purchase price and use the resulting loss to offset capital gains in taxable accounts. That’s a compelling reason to consider jettisoning your losing positions. Investments that you’ve held for a year or less are taxed as ordinary income, but investments you’ve held longer are taxed at the long-term capital gains rate, which ranges from 0% to 23.8%.
After matching short-term losses against short-term gains, and long-term losses against long-term gains, any excess losses can be used to offset the opposite kind of gain. If you still wind up with an overall net capital loss, you can use up to $3,000 of that loss to offset ordinary income and roll the rest over to the following year. Note that once you sell an asset at a loss, you must wait 30 days before reinvesting in it or buying a substantially identical investment.

So free up some tax dollars by playing the match game – you may have more to spend on the holidays.

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Finalize your divorce before 12/31/18, or you could (potentially) lose big.

Let’s face it, there really are no winners in a divorce, but under current tax law, if you are the Payor of alimony, you do receive a break. Currently, the Internal Revenue Code (IRC) §215(a) allows a spouse who pays alimony (“Payor Spouse”) to take a deduction on his or her income taxes for the amount of alimony he or she actually pays. Additionally, the spouse who receives alimony (“Payee Spouse”) must report as income on his or her tax return the amount of alimony he or she actually receives.
As of January 1, 2019 the law changes as follows: the Payor Spouse is no longer entitled to a deduction and the Payee Spouse is not required to claim the payment as income.
If these points are important to you, make sure your get your divorce finalized by year end.

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Is this market a trick or a treat?

As you can imagine, I am getting a lot of concern from clients about the current markets. The Dow Jones Industrial Average, as well as the S&P 500 Index, are both negative for the year. Let’s look at both sides of this coin to see if the markets are a trick or treat for you.

If you are at the stage of your investing where you are taking withdrawals, you may not be happy right now. Mutual funds that pay dividends have been decreasing in value while paying a higher dividend. While most of my clients are happy with the increased dividend, no one likes to see their values decrease. Trick or Treat? Maybe this is more like getting a bite sized candy bar vs. a full sized one.
If you are on the accumulation side of the equations, you may be looking at the current markets as a Treat. If you are adding funds to your accounts regularly through payroll deductions, or just a systematic investment, you are buying more shares on sale than you could last year. More shares will equal more dividends and capital gains in the future. This is a Treat!

Whichever way you look at the current markets, remember your time in the markets is what is important, not trying to time the markets. Investing should be looked at as long term, you will be much more satisfied if you take a long term approach. It is your full sized candy bar.

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This is one time when my rule does not apply.

I have stuck hard and fast to the rule of not taking Social Security benefits before full retirement age, or better yet, delaying for an annual 8% increase for each year past your full retirement age that you delay. Recently, I have had to realize this rule does not apply to all.
If you take your Social Security benefit between the age of 62, the earliest you can draw benefits, and full retirement age, you will have a permanent reduction of up to 30%, depending on your birth year.* That hurts. I have met with a few people this year who are over age 62, but not at full retirement age yet. What makes them unique is that they have been diagnosed with terminal illnesses.
The reason you shouldn’t wait to file for Social Security when your health is poor boils down to maximizing benefits over the course of your lifetime. Social Security is actually designed to pay you the same lifetime total regardless of when you initially file. The logic is that any reduction you face by claiming benefits early will be offset by the greater number of individual payments you collect in your lifetime, and vice versa — filing later will increase your payments, but you’ll collect more of them. This formula, however, assumes that you live an average life span. But if you pass away at a younger age than the average senior, you’ll come out ahead financially by filing for benefits as soon as you can.
Are you taking the risk that you’ll end up living longer than you or your doctors expect, thereby causing yourself to lose out on some money in your lifetime? Maybe. But you’re probably better off taking that risk than doing the opposite — depriving yourself of money you could use while you’re still alive to make your days more comfortable.

*According to ssa.gov

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This $100,000 expense is real.

I have written in the past about the expense incurred when my Father-in-law was suffering from Parkinson’s. He passed away 4 years ago. At that time, we could not believe how much his care cost. Well, those expenses were nothing compared to the expense of long term care now.
A recent study conducted by Genworth Insurance uncovered the following current expenses associated with long term are:

While the U.S. inflation rate was 2.1 percent for the first half of the year, the cost of a one-room assisted living facility grew by 6.67 percent from 2017 to 2018.
There, the annual median cost of a nursing home stay in a private room is $330,873, Genworth found.
Assisted living facilities offer residents more independence and less medical care and assistance than nursing homes.
For individuals who’d like to receive care at home and still live largely on their own, there’s the option of having a home health aide come to visit.
Indeed, home-health aides are expected to be a growing job sector, with a projected growth rate of 41 percent from 2016 to 2026, but median annual wages of $23,210, according to the Bureau of Labor Statistics.

My Father-in-law had some insurance to cover some of his care, the rest had to come out of pocket.
Prepare by identifying how you’d like to receive care.

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Why are you trying to de-rail your retirement?

Helping my clients plan for their retirement by using a comprehensive planning program is a huge part of what I do each day. The amount of data I gather is much more than anyone expects when we first start working together, but the more I know, the more confident I can feel about the planning I provide. I have to ask – what are you doing to your plan? Some of my clients make these mistakes, not many, and some cannot be helped. Please, if it is in your control to not de-rail your retirement, avoid doing the following:
Spending too much on your Grandkids: I know you want to spoil them but do they really need that toy? Talk to your kids to see what would be a wise gift to get, and when.
Supporting your adult children: If you find yourself blindly writing a check every month, reconsider, especially if you’re endangering your own financial well-being. There has to be a time when the bank of Mom & Dad closes.
Skipping senior discounts: My husband has just crossed over to senior discount territory, but he does not like seeing those offers. If you continue to ignore the senior discounts you may be paying an extra 5-20% on a variety of items.
Taking Social Security too early: This is one of my biggest concerns for retirees. Often retirees will not wait until full retirement age to start their Social Security benefits. By taking the benefit early, most retirees will subject themselves to a 25% cut in Social Security forever. On the flip side, every year you defer past your full retirement age, you will receive an 8% increase in your benefit.
Underestimating your life expectancy: I often ask what family history dictates for life expectancy, but with advances in science, and better lifestyle choices, many of us are living longer. I like to use age 90 as a minimum life expectancy in my plans and if I am wrong, it generally works in favor of the client and their heirs.

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To cook or not to cook, that is the question.

A number of years ago I did a personal cost analysis on eating dinner out vs. my cooking for myself and my husband. At that time, it was a fine line between the costs of eating out vs. cooking at home. I love to cook, I cook dinner almost every night, and it is much healthier to eat at home, but I am learning I am the exception.
I have a friend that never cooks anymore. She cooked the whole time her kids were at home, and was a very good cook, but she hated it. Now, she doesn’t even make breakfast at home. She has determined that for her and her husband, there is not much difference in cost, but the satisfaction factor is significant.
Spending at restaurants and bars has soared since the early spring, rising to the highest yearly pace in 25 years. Sales of food and drinks purchased outside the home leaped 10.1% in the 12 months from August 2017 to August 2018, according to a recent report by MSN Money. This may be a side effect of the empty-nest syndrome, or a sign of a stronger economy with consumer confidence being high.
I will continue to cook at home, but I am certainly the exception among my peers.

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