2016 Financial Planning Considerations

Transcription

2016 Financial Planning Considerations
Exceeding Your Expectations
This report is intended for the exclusive use of clients or prospective clients of DiMeo Schneider & Associates, L.L.C. Content is privileged and confidential. Any dissemination or distribution is strictly
prohibited. Information has been obtained from a variety of sources believed to be reliable though not independently verified.
This report provides general information and does not represent a specific recommendation. DiMeo Schneider & Associates, L.L.C. does not provide tax or legal advice.
500 West Madison Street, Suite 1700 | Chicago, IL 60661 | 312.853.1000
Large Enough to Serve, Small Enough to Care
•
•
70 Professionals
2015
1995
•
•
•
Based in Chicago, Illinois
Exceeding $50 Billion AUA
•
Note: AUA = Assets Under Advisement as of 9/30/2015
WWW.DIMEOSCHNEIDER.COM
11 Partners
31 Investment Consultants
25+ Professionals Participate in
Research Efforts
Numerous CFA Charterholders, CIMAs
and CFP®s
Impartial Investment
Consulting
•
Serving over 250
Institutions & 200
Wealthy Families
2
Content Overview
Tax Planning
4-6
Retirement Planning
7-9
Estate Planning
10 - 12
Insurance Planning
13 - 14
College Planning
15 - 17
Photograph by Earl Wilkerson
3
2016 Tax Provisions
2016 Tax Provisions
2016 Tax Provisions II
2016 Ordinary Tax Brackets
2015 Tax Rates
2016 Tax Rates
Single Filers
Married Filing Jointly
10%
15%
25%
28%
33%
35%
39.6%
10%
15%
25%
28%
33%
35%
39.6%
$0 - $9,275
$9,276 - $37,650
$37,651 - $91,150
$91,151 - $190,150
$190,151 - $413,350
$413,051 - $415,050
$415,051 +
$0 - $18,550
$18,551 - $75,300
$75,301 - $151,900
$151,901 - $231,450
$231,451 - $413,350
$413,051 - $466,950
$466,951 +
Tax Planning Checklist
2016 Retirement
Contributions Limits
Retiring Earlier & Living
Longer
Retirement
Considerations
Estate Planning Updates
2016 Estate Planning
How Assets Pass Upon
Death
2016 Risk Management
Long-Term Care by the
Numbers
Savings Account Contribution Updates
Type of Account
Health Savings Account (HSA) Contribution Limits
Self
Age 55+ Catch Up
Family
Flexible Savings Account (FSA) Contribution Limits
Self
2015
2016
No Changes to Tax Rates
$3,350
$1,000
$6,650
$3,350
$1,000
$6,750
In 2016, the income limits for all brackets
and all filers will be adjusted for inflation,
however, tax rates remains unchanged
from 2015
$2,550
$2,550
2016 College Planning
Adjustable Gross Income Thresholds for Additional Taxes
College Funding Options
Filer
Estimating Financial Aid
Eligibility
Single
2015
2016
$200,000
$200,000
$200,000
$200,000
About Our Contributors
Source: Internal Revenue Service, IR-2015-119
4
2016 Tax Provisions
2016 Long-Term Capital Gains Tax Rates
2016 Tax Provisions
0%
2016 Retirement
15%
Longer
Retirement
Considerations
20%
Taxable income less than:
$37K Single
$75K Married Filing Jointly
Taxable income between:
$38K - $415K for Single
$76K - $466K for Married Filing Jointly
Taxable income greater than:
$416K Single
$467K for Married Filing Jointly
Must Know Health Care Taxes
Medicare Surtax
0.9%
Alternative Minimum Tax (AMT)
On earned income above:
$200K for Single
Net Investment Income Tax
(NIIT)
3.8%
Additional 2016 AGI Thresholds
AMT
$53.9K for Single
$83.8K for Married Filing Jointly
Itemized Deduction Limitation (Pease) &
Personal Exemption Phase-out (PEP)
On unearned income above:
$200K for Single
PEP
$259K for Single
Death
Numbers
Eligibility
A Closer Look at Net Investment Income (NIIT)
Net investment income includes:
Interest, dividends and capital gains
Annuities, Rents and Royalties
Passive activities and trading partnerships
The 3.8% tax applies to the lesser of investment income or the amount of
AGI over $200K for Single and $250K for Married Filing Jointly
NIIT Tax Example
Single Taxpayer
$185K Earned Income + $75K Net Investment Income
= $260K Total AGI
The 3.8% tax applies to:
Lesser of Net Investment Income ($75K) or AGI above $200K ($60K)
Therefore, the NIIT is $2,280 ($60K x 3.8%)
5
What DiMeo Schneider is
doing to help clients
2016 Tax Provisions
2016 Retirement
Longer
1. Tax Loss Harvesting / Thoughtful Rebalancing
2. Consider Tax Brackets when realizing gains
3. Tax Aware Investing / Asset Placement
4. Tax Efficient Securities and Active Management
Considerations
Retirement
Considerations
How your tax advisor can help
Death
1. Recognition and Timing of Income
2. Review Estimated Tax Withholding
Numbers
Eligibility
3. AMT Considerations
Areas that DiMeo Schneider
can offer perspective
1. Consider Gifting Long-Term Appreciated Securities rather than cash
for charitable contributions and avoid paying capital gains tax on the
appreciated securities.
2. Charitably Gifting the Required Minimum Distribution of an IRA,
which avoids ordinary income being treated as taxable income.
3. Making Contributions to a Flexible Spending or Health Savings
Account(s) FSA/HSA for growth and use of pre-tax dollars towards
Health Expenses
4. Weighing a Lump Sum Option or Annuity Income stream for Defined
Benefit Plan or Pensions
5. Reviewing Social Security Income Options
6. Taking into consideration Tax Bracket Break-Points and Stock
Volatility when minimizing Single Stock Concentrations
4. Limit State & Local Income Tax Deductions
5. Review Property Tax Deductions
6. Additional State Tax Considerations
6
2016 Retirement Contribution Limits
2016 Tax Provisions
Modified Adjusted Gross Income (MAGI) Limitations
for IRA Contributions
2016 Retirement
Longer
Retirement
Considerations
Traditional IRA
Single Filers
Roth IRA
Single Filers
Roth Conversions
Slight Revisions for 2016
Minor changes made to income phaseouts for IRA contributions. Otherwise,
there were no significant changes to
savings opportunities and income
thresholds
2015
2016
$61,000
$98,000
$61,000
$98,000
$116,000
$183,000
None
$117,000
$184,000
None
Retirement Benefit Limits
Death
Type of Account
Contribution Limits for 401(k)/ 403(b) Plans
Age 50+ Catch-up
$18,000
$18,000
$6,000
$6,000
$12,500
$3,000
$3,000
$5,500
$5,500
$1,000
$1,000
Contribution Limits for Defined Benefit Plans
$210,000
$210,000
Contribution Limits for SEP IRA and Solo 401(k)
$53,000
$53,000
Contribution Limits for SIMPLE IRA Plans
Contribution Limits for IRAs
Eligibility
2016
$12,500
Numbers
2015
Age 50+ Catch-up
Age 50+ Catch-up
7
Retiring Earlier and Living Longer
While more Americans are working past age 65, not everyone will be able to control their retirement timing.
2016 Tax Provisions
Current expectations of retirement vs. actual
experience of retirees
2016 Retirement
Retire before age 65
Retire after age 65 or older
67%
65%
Longer
Reasons cited for retiring earlier than planned
Retirement
Considerations
25%
23%
Death
Numbers
Eligibility
Longevity Fact
Current
Workers
Expectations
Experience of
Actual
Retirees
Current
Workers
Expectations
Experience of
Actual
Retirees
47%
probability that one spouse will
live to age 90 or beyond
Source: JPMorgan Guide to Retirement, 2015 Edition
8
Retirement Planning Considerations
2016 Tax Provisions
Alongside an appropriate asset allocation, the amount of savings is an important decision individuals can
make about their retirement. Below are a few important considerations to help optimize savings:
Our Financial Modeling and Retirement
Projections can help you identify what is
the probability of success that you are able
to achieve your goals during your lifetime
2016 Retirement
Longer
Retirement
Considerations
Source: BLS, CPI Index JPAM
12/1981-12/2015
5%
Numbers
Source: Employee Benefit Research Institute,
2015 Retirement Confidence Survey
Average Inflation from
1982 – 2014 for Health
Care Costs
Death
In 2015, the number of workers who
had tried to calculate how much money
they would actually need to save for a
comfortable retirement
80+ %
48 %
1. Maximize contributions to Retirement Plans (401(k), 403(b)), deferring at least your company’s match
2. Maximize after-tax assets in your portfolio:
I.
Contribute to a Roth IRA or Roth 401(k) to increase tax-free assets within your portfolio
II. Consider making a nondeductible IRA contribution that can be converted to a Roth IRA
III. Consider converting an IRA to a Roth IRA
32%
Ways to Increase Retirement Savings
Eligibility
What’s Your Social Security Strategy?
The max percentage increase in your
benefits if you delay benefits until age 70
3. Consider establishing a Spousal IRA
4. If self-employed, maximize retirement savings by contributing to a SEP IRA, Keogh, Defined Benefit Plan or Solo 401(k)
9
2016 Estate Planning Updates
2016 Tax Provisions
Slight Revisions for 2016
Exclusion amounts were adjusted for
inflation and there were no changes to
gifting amounts.
2016 Retirement
Longer
Retirement
Considerations
Estate Planning
Updates
State Estate & Inheritance Taxes in 2015
Federal Estate Planning Guidelines
2015
2016
Estate Tax Exclusion
Maximum Estate Tax Rate
$5,430,000
40%
$5,450,000
40%
Lifetime Gifting Exemption
Gifting to Non-US Citizen Spouse
Federal Maximum Gift Rate
$5,430,000
$147,000
40%
$5,450,000
$148,000
40%
Unlimited
$14,000
Unlimited
$14,000
Death
Gift to Spouse
Annual Exclusion Gift
Don’t Forget State Tax!
Numbers
In recent years, many states have “decoupled” from
the federal estate exclusion; as a result, such states
have estate exclusions below the federal level which
may result in state estate taxes.
Eligibility
Source: Tax Foundation, 2015
10
2016 Guide to Estate Planning
2016 Tax Provisions
2016 Retirement
Longer
Retirement
Considerations
Death
Numbers
Level One (Must Haves)
Level Two (Considerations)
Level Three + (Advanced)
Planning for and documenting the transfer of assets
with minimized tax and transfer cost. Review upon
life events (marriage, birth, divorce, adoption, etc.)
Further enhance the direction of assets, minimize
Estate Taxes or increase Asset Protection
For Complex Estate Tax Issues or
Liability Concerns
• A Will appoints guardians for your children and spells out
specifically how you want your property split
• A Living Trust avoids probate, allows for privacy and to
designate how assets are to be divided upon your death
• A Health Care Power of Attorney allows you to designate
a health care agent to make health decisions in the event
you are unable to make decisions for yourself
• A Financial / Property Power of Attorney allows you to
designate an agent to make financial decisions in the
event you are unable to make decisions for yourself
• Joint accounts transferred to a designated person upon
death, it’s important to review co-ownership provisions
and the titling of accounts
• Grantor Retained Annuity Trusts (GRAT) is a technique that
seeks to pass assets to beneficiaries free of estate and gift
tax that have appreciated over the IRS 7520 interest rate
• Explore Charitable Trust, Donor Advised Fund and
Foundation Options
• Since Life Insurance is not estate tax free, establishing an
Irrevocable Life Insurance Trust can help reduce estate taxes
• Qualified Personal Residence Trust
• Intra-Family Loans can provide family members lower
borrowing rates than traditional financing options
• Domestic and Offshore Asset Protection Trusts
offers those in high liability fields of work and
those with high estate tax brackets options to
reduce liability
• Self-Cancelling Notes allow the exchange of
property for periodic payments based upon
mortality
• Family Limited Partnerships and Family LLC’s
provide legal, financial and tax structure to family
businesses
• Special Needs Trusts ensure the proper passing of assets to
ensure beneficiaries with needs are not disqualified from
benefits they are entitled to
• Some assets, such as IRAs, Life Insurance and
Annuities pass to your designated Beneficiaries; it’s
important to review those beneficiary designations
Concept Check: Portability
Eligibility
67%
# of Americans that do not have a
basic will in place
Source: Everplans 2015:
Harris Poll /Ask Your Target Market Surveys
Portability allows you to use your spouse’s unused estate tax exclusion. While portability was made permanent for
federal estate tax purposes, you should check if your resident state also allows for portability of a deceased spouse’s
unused estate exclusion. In the event your resident state does not allow for portability, it may make sense for both
spouses to have assets in their respective name (or trust’s name) up to the resident state’s estate exclusion amount.
11
How Assets Pass Upon Death
Probate vs Non Probate Assets
2016 Tax Provisions
Probate is a public court-process that helps settle legal and financial matters upon death according to a will, if written.
Court costs, length of time, the lack of privacy and family disagreements are all potential issues that may arise within the probate
process. With proper Estate Planning, you can limit the amount of assets that pass through Probate.
2016 Retirement
Longer
Assets that bypass Probate
Retirement
Considerations
Jointly Held Assets
Death
Numbers
How assets pass upon death
Eligibility
Joint Accounts
JTWROS
Tenancy by the Entirety
Assets w/ Beneficiaries
Retirement Accounts
IRA and Annuities
Transfer on Death
Life Insurance
Assets held in Trust
Trust Agreements
Probate Assets
Individually-owned assets with no
beneficiary (ex. Cars, Home, Bank
Account and Personal
belongings).
Assets titled Tenancy in Common.
Last Will & Testament
To Joint Owner
To Named Beneficiary
To Trust Beneficiary
To Will Beneficiary
12
2016 Guide to Risk Management
A sound risk management plan should at least consider all of the areas below.
2016 Tax Provisions
2016 Retirement
Longer
Retirement
Considerations
Death
Life Insurance
We recommend reviewing the reasons, necessity and beneficiaries of life insurance
policies as circumstances and objectives may have changed since the original purchase.
Disability Insurance
Disability Insurance generally replaces up to 60% of income in the event of disability and can
vary upon length. It’s important to understand the definition of disability in your policy and
whether it covers your own-occupation or any-occupation, particularly those who are in
careers with high specialization (ex. Surgeon, Medicine, Construction, etc.).
Property & Casualty Coverage
It’s important to review your Auto and Homeowners policies to ensure you are adequately
covered. We also suggest purchasing an umbrella liability policy over your existing home
and auto policies. Umbrella insurance can help protect against major claims and lawsuits
– we suggest purchasing an amount that equals your total assets.
Health Insurance Options
Numbers
It’s important to review coverage options, particularly those who are retiring early.
Insurance options are available on health care exchanges while eligibility for Medicare
begins at age 65. While Medicare provides basic medical coverage, purchasing additional
coverage such as a medigap or supplemental policy may make sense.
Long Term Care
Eligibility
Protects against prolonged illness, accident and disability – not covered by traditional health
insurance. We recommend starting the conversation at age 50, reviewing by age 60 but likely
no later than age 70.
13
Long-Term Care By The Numbers
Nursing Home (Semi-Private) Median Annual Cost
Ways to Cover Long-Term Care Need
1.
2.
3.
4.
2016 Retirement
Long-Term Care generally covers:
2016 Tax Provisions
Medicare (max 100 days) and Medicaid
Self-Insure
Long-Term Care Insurance
Hybrid Life Insurance / Accelerated Death Benefits
Skilled care – licensed therapists, nursing homes,
rehabilitation services; Custodial care – home
health aides, companion services; Assisted living
and sheltered care; Adult day care and hospice
care; Care coordination services.
Longer
Retirement
Considerations
Qualifying for benefits generally involves assistance
with two of the Activities for Daily Living (ADLS):
Dressing, eating, toileting, bathing, transferring and
continence.
Death
Numbers
3
Years
Average Length of Care, 8-10
years with Alzheimer’s
Eligibility
70%
At least 70% of people over 65
will require some form of LTC
services and support during
their lives
+4%
Increase in the cost of care
since 2014
$220
/Day
National Median Daily Rate
For Long-Term Care
Source: Genworth 2015 Cost of Care Survey
14
2016 Guide to College Planning
2016 Tax Provisions
Rising Costs
College costs have doubled the cost of health care over 30 years and continued to rise in 2015, as
total costs of college increased 2.8%, 3.4% and 3.5% respectively for Private, Out-of-state Public and
In-State Public.
2016 Retirement
Longer
Total Cost of College (tuition, fees & room & board)
Retirement
Considerations
$96,897
Private College
$47,831
$78,083
Public Out-ofState
Death
$20,000
$40,000
$60,000
New Born
Eligibility
Tuition
$24,061
$0
$80,000
Today
Note: projected college expenses for a new born assumes a 4% increase in total cost every year until age 18
356%
$48,743
Public In-State
722%
$38,544
Numbers
Cumulative % Price
change since 1983
$100,000
Medical Care
$120,000
Sources:
BLS, Consumer Price Index, J.P. Morgan Asset Management. Data represents
cumulative percentage price change from January 1983–August 2015.
College Board Trends in Annual Pricing 2015
15
2016 Tax Provisions
% of Parents who
own an account
27%
2016 Retirement
529 Plan
•
•
•
•
•
Tax-free investing and distribution for college education expenses
Can change beneficiaries
No income limits for contributors
$70,000 maximum contribution in one-year (5 years of annual gift exclusion)
Every State offers a 529 plan and there are 34 states that offer resident tax benefits
Longer
Retirement
Considerations
Custodial Account (UGMA/UTMA)
9%
Death
•
•
•
•
Funds must be used for child’s benefit, not necessarily for college
Can be taxed to child or parent (kiddie tax)
High impact to financial aid eligibility
Child assumes full control at age of majority (in most cases, age 18 or 21)
Numbers
College Funding
Options
Eligibility
Coverdell Education Savings Accounts
11%
•
•
•
•
Tax-free investing and withdrawals for any level of education
Maximum $2,000 annual contribution per beneficiary
Low Impact on financial aid eligibility
Contributors subject to income limitations
Source: Sallie Mae, How America Saves for College, 2015
529 Rankings
2016 Lowest Cost Plans
State
New York College Savings
Plan
Fees
0.17%
Illinois Bright Start
Nevada’s Vanguard 529
0.20%
0.21%
Utah Ed. Savings Plan
Wisconsin Edvest College
Savings Plan
0.22%
0.24%
2015 Morningstar Gold Plans
Gold Rated Funds
Maryland College Investment
Plan
State
MD
T. Rowe Price College
Savings Plan
Vanguard 529 College
Savings Plan
AK
Utah Educational Savings
Plan
UT
NV
Websites such as Savingforcollege.com
can be a helpful resource for evaluating
529 plans
16
Estimating Financial Aid Eligibility
2016 Tax Provisions
Filing a FAFSA Application
The Department of Education uses the Expected Family Contribution (EFC) formula to determine
whether your child is eligible to receive any financial aid.
2016 Retirement
Longer
Retirement
Considerations
Death
Numbers
Total Cost
of College
_
Expected Family
Contribution
=
Federal Financial Aid Eligibility
What’s Considered in EFC:
Parents
• 22 to 47% of Adjusted Gross Income above exclusion (factoring household, number of students in college)
• Up to 4.64% of investment, savings and 529 plan accounts
Students
• 50% of income above $6,400
• 20% of all assets owned by child
Grandparents or Other
Eligibility
• 0% of income and assets considered, though, 529 withdrawals may be considered student income and must be
reported on FAFSA forms
Source: Federal Student Aid Website, 2015
17
Senior Professionals Serving You
2016 Tax Provisions
• 5 years industry experience;
Joined DiMeo Schneider in 2014
• Consults with high net worth
clients and nonprofit clients as a
member of The Wealth Office™
• University of Illinois, BS
• Texas Tech University, MS
• CFP®
• Member of the Auxiliary Board at
Midtown Educational Foundation
•13 years industry experience, numerous
articles and whitepapers; 8 years with
DiMeo Schneider
•University of Illinois, BA; College of
Financial Planning, CFP®
•CFA Charterholder (Chartered Financial
Analyst); Member of the CFA Institute and
the CFA Society of Chicago
2016 Retirement
Longer
Retirement
Considerations
Death
Numbers
Nick Breit, CFA, CFP®
Senior Investment Consultant
Altan Wuliji, CFP®
Investment Consultant
[email protected]
[email protected]
312.224.4143
312.224.4141
Eligibility
18

2016 Financial Planning Considerations

Transcription

Similar documents

I`m helping to end MS by participating in the 2016 Jayman BUILT MS

The Board of Directors of Qatar Fuel (WOQOD) is pleased to invite

5 `S` Training Program at ABV-IIITM, Gwalior on 21.07.2016

Porky Expo Flyer

The NeuLion Report

Sept 30-Oct 2, 2016 Nov 4-6, 2016 @Camp Tadmor

4 star ALOE HOTEL, PAPHOS

the Guidelines for the registration on

Ticket plus hotel packages for the Chelsea Flower Show 2016

loyola institute for ministry on-campus open house thursday, may 12