Tehachapi's Online Community News & Entertainment Guide
Tehachapi's Online Community News & Entertainment Guide
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Every year, the Internal Revenue Service announces cost-of-living adjustments that affect contribution limits for retirement plans and various tax deduction, exclusion, exemption and threshold amounts. Here are a few of the key adjustments for 2021. Estate, Gift and Generation-Skipping Transfer Tax • The annual gift tax exclusion (and annual generation-skipping transfer tax exclusion) for 2021 is $15,000, the same as in 2020. • The gift and estate tax basic exclusion amount (and gen...
"You can't time the market" is an old maxim, but you also might say, "You can't always time retirement." Market losses on the front end of retirement could have an outsized effect on the income you receive from your portfolio by reducing the assets available to pursue growth when the market recovers. The risk of experiencing poor investment performance at the wrong time is called sequence risk or sequence-of-returns risk. Dividing your portfolio One strategy that may help address sequence risk...
In early 2020, 61 percent of U.S. workers surveyed said that retirement planning makes them feel stressed.1 Investor confidence was continually tested as the year wore on, and it’s likely that this percentage rose — perhaps even substantially. If you find yourself among those feeling stressed heading into the new year, these tips may help you focus and enhance your retirement savings strategy in 2021. 1. Consider increasing your savings by just 1 percent. If you participate in a retirement sav...
The longest bull market in history lasted almost 11 years before Coronavirus fears and the realities of a seriously disrupted U.S. economy brought it to an end.1 Bear markets are typically defined as declines of 20 percent or more from the most recent high, and bull markets are sustained increases of 20 percent or more from the bear market low. But there is no official declaration, so often there are different interpretations and a fair amount of debate regarding when these cycles begin and...
Federal and state governments have spent extraordinary sums in response to the economic toll inflicted by the COVID-19 pandemic. At some point it is likely that governments will look for ways to increase revenue to compensate for this spending and increase income taxes as a result. That's why it might be a good time to think about ways to help reduce your taxable income. Here are three potential sources of tax-free income to consider. Roth IRA Contributions to a Roth IRA are made with after-tax...
Americans use debit cards more often than credit cards, but they tend to use credit cards for higher-dollar transactions. The average value of a debit-card transaction in 2018 was just $36, while credit-card transactions averaged $89.1 This usage reflects fundamental differences between the two types of cards. A debit card acts like a plastic check and draws directly from your checking account, whereas a credit-card transaction is a loan that remains interest-free only if you pay your monthly...
Dramatic market turbulence has been common in 2020, and you can't help but hear about the frequent ups and downs of the Dow Jones Industrial Average or the S&P 500 index. The performance of these major indexes is widely reported and analyzed in detail by financial news outlets around the nation. Both the Dow and the S&P 500 track the stocks of large domestic companies. But with about 500 stocks compared to the Dow's 30, the S&P 500 comprises a much broader segment of the market and is...
The field of behavioral finance focuses on the emotional and cognitive aspects of investing. In recent decades, well-known economists have advanced the theory that investors' decisions can be driven by human emotions such as greed and fear, which helps explain why asset prices sometimes fluctuate erratically.1 It can be difficult to act rationally when your financial future is at stake, especially when unexpected events upset the markets. But understanding certain aspects of human nature, and...
The Roth "five-year rule" typically refers to when you can take tax-free distributions of earnings from your Roth IRA, Roth 401(k) or other work-based Roth account. The rule states that you must wait five years after making your first contribution, and the distribution must take place after age 59½, when you become disabled or when your beneficiaries inherit the assets after your death. Roth IRAs (but not workplace plans) also permit up to a $10,000 tax-free withdrawal of earnings after...
By now you know that Congress has passed a $2 trillion relief bill to help keep individuals and businesses afloat during these difficult times. The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains many provisions. Here are five that may benefit you or your business. 1. Recovery Rebates Many Americans will receive a one-time cash payment of $1,200. Each U.S. resident or citizen with an adjusted gross income (AGI) under $75,000 ($112,500 for heads of household and $150,000 for...
After losing ground in 2018, U.S. stocks had a banner year in 2019, with the S&P 500 gaining almost 29 percent — the highest annual increase since 2013.1 It’s too early to know how 2020 will turn out, but it’s been rocky so far, and you can count on market swings to challenge your patience as an investor. The trend was steadily upward last year, but there were downturns along the way, including a single-day drop of almost 3 percent on Aug. 14. That plunge began with bad economic news from Germa...
The Tax Cuts and Jobs Act roughly doubled the standard deduction ($12,200 for single filers and $24,400 for married taxpayers filing jointly in 2019) and indexed it for inflation through 2025. As a result, far fewer taxpayers will itemize deductions on their tax returns, and some people may be disappointed that they no longer benefit from writing off their donations. If you are 70½ or older, you can use a qualified charitable distribution (QCD) to donate from your IRA and get a tax...
What if you're saving as much as you can, but still feel that your retirement savings goal is out of reach? As with many of life's toughest challenges, it may help to focus less on the big picture and more on the details. Regularly review your assumptions Whether you use a simple online calculator or run a detailed analysis, your retirement savings goal is based on certain assumptions that will, in all likelihood, change. Inflation, rates of return, life expectancies, salary adjustments,...
According to a recent survey, 76 percent of Americans reported having at least one financial regret. Over half of this group said it had to do with savings: 27 percent didn't start saving for retirement soon enough, 19 percent didn't contribute enough to an emergency fund, and 10 percent wish they had saved more for college.1 The saving conundrum What's preventing Americans from saving more? It's a confluence of factors: stagnant wages over many years; the high cost of housing and college;...
It's fairly difficult - even for professional investors - to consistently "beat the market." This realization led to the creation of index mutual funds, which are passively managed investment vehicles designed to match the performance of a particular market index by owning the same securities included in the index. Today there are hundreds of indexes and index funds tracking various types of assets.1 Still, index funds are not the only game in town, and there is plenty of discussion in the...
As an investor, you probably pay attention to nominal return, which is the percentage increase or decrease in the value of an investment over a given period of time, usually expressed as an annual return. However, to estimate actual income or growth potential in order to target financial goals – for example, a certain level of retirement income – it's important to consider the effects of taxes and inflation. The remaining increase or decrease is your real return. Let's say you want to purchase a...
Each year for its Retirement Confidence Survey, the Employee Benefit Research Institute (EBRI) surveys 1,000 workers and 1,000 retirees to assess how confident they are in their ability to afford a comfortable retirement. Once again, in 2019, retirees expressed stronger confidence than workers: 82% of retirees reported feeling "very" or "somewhat" confident, compared with 67% of workers. A closer look at some of the survey results reveals various lessons today's workers can learn from current...
Many investors may be inclined to review their portfolios only when markets hit a rough patch, but careful planning is essential in all economic climates. So whether the markets are up or down, periodically reviewing your portfolio with your financial professional can be an excellent way to keep your investments on track, and midway through the year is a good time for a checkup. Here are three questions to consider. 1. How have my investments performed so far this year? Review a summary of your...
No matter how much money you have or which life stage you're in, becoming financially independent starts with a dream. Your dream might be to finally pay off the mountain of debt you've accumulated, or to stop relying on someone else for financial support. Or perhaps your dream is to retire early so you can spend more time with your family, travel the world, or open your own business. Financial independence, however you define it, is freedom from the financial obstacles that are keeping you from...
If you're a small-business owner, you probably pour your heart, soul and nearly all your money into your business. When it comes to retirement planning, do you cross your fingers and hope your business will provide the nest egg you'll need to live comfortably? What if you become ill and have to sell your business early? Or what if the business experiences setbacks just before you retire? Rather than relying on your business to define your retirement lifestyle, consider a tax-advantaged...
A financial crisis can be scary at any age, but this is especially true when you're in your 40s or 50s. Perhaps you're way behind on saving for retirement or have too much debt from unnecessary spending. Or maybe an unexpected challenge, such as a job loss, illness or break from the workforce for caregiving responsibilities, took a direct hit on your finances. Regardless of how you got to this point, it's important to develop a strategy that will help you re-establish financial stability....
Did you know that Social Security may pay benefits to your eligible family members when you die, helping to make their financial life easier? Take this quiz to learn more. Questions 1. What percentage of Social Security beneficiaries receive survivor benefits? a. 5% b. 10% c. 15% 2. Your child may be able to receive survivor benefits based on your Social Security earnings record if he or she is: a. Unmarried and under age 18 (19 if still in high school) b. Married and in college c. Both a and b...
Being named as the executor of a family member's estate is generally an honor. It means that person has been chosen to handle the financial affairs of the deceased individual and is trusted to help carry out his or her wishes. Settling an estate, however, can be a difficult and time-consuming job that could take several months to more than a year to complete. Each state has specific laws detailing an executor's responsibilities and timetables for the performance of certain duties. If you are ask...
Being named as the executor of a family member's estate is generally an honor. It means that person has been chosen to handle the financial affairs of the deceased individual and is trusted to help carry out his or her wishes. Settling an estate, however, can be a difficult and time-consuming job that could take several months to more than a year to complete. Each state has specific laws detailing an executor's responsibilities and timetables for the performance of certain duties. If you are...
