If there’s anything that should motivate you to get your taxes filed early, it’s the increased potential for tax scam the longer you wait.  

Tax Season (aka Scam Season) is Here

With the significant 2017 cybersecurity leaks involving the personal information of millions of Americans, this year’s tax season is expected to be one of the worst ever for tax scams.  Aside from cybersecurity leaks, the mailing of 1099s and W2s results in many people not receiving them through mailbox theft, which is contributing to more cases of tax returns being fraudulently filed.  Many companies now have employees pick up these tax filing forms from the HR department as a means to protect the personal information of their employees.  Scammers also target HR departments via emails requesting employee information while posing as the IRS, which has corporations on edge to maintain the security of employee information.

This year’s scam season officially opens January 29^th, 2018 and runs through April 17, 2018; interestingly the same dates as the 2017 IRS tax filing season.  Scammers are ready and waiting to file tax returns in the names of other people.  Experts advise filing early ahead of scammers to make sure you get your return and someone else doesn’t.  Hundreds of thousands of people will file their taxes this year expecting a return, only to find out the return was sent somewhere else.  What can you do to protect yourself?

File Early.  The sooner you file, the more chance you have to be ahead of the scammer who will likely file multiple returns.

File Electronically with Request for Direct Deposit.  Electronic filing is faster than paper filing.  Secondly, select direct deposit into your bank account to offset the chance your paper check will be stolen from your mailbox if you are expecting a return.  Mailing the tax return your filing from your mailbox is a bad idea as your mail to the IRS runs the chance of being stolen.

Run your Credit Report.  Your credit report will contain an active address for you and previous addresses.  If you see a discrepancy and unknown address in your profile, you may be the target of a scam.  Alert the credit reporting agencies immediately, and all companies where you have credit.

If there’s anything that should motivate you to get your taxes filed early, it’s the increased potential for tax scam the longer you wait.  Happy filing!

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Legacy Planning as Part of Life Planning

Leaving a legacy through the passing assets today and after your death is a process that requires correct planning and execution.  With the recent Tax Cuts and Job Act of 2017, updated tax codes, and an ever-changing political environment, legacy planning requires consulting with multiple professionals in order to pass assets without financial consequences.  Legacy planning should always be a team effort involving an attorney, tax specialist, and your financial advisor if planning involves securities assets, or will benefit more than one generation, non-profit, or other entity.  Transferring wealth has no ‘right or wrong’ way, but is best the way that you prefer. 

Regard your wealth transfer as ‘leaving a legacy for others’, which should include protecting others while you pass on your values and financial dreams for them.  Some people consider transferring wealth to benefit their children and their children’s children, and if the wealth is great enough, endowments can be created to benefit many people.  The complexity of the wealth transfer increases with the number of assets you own, the people it is being created to benefit, and the length of time you want the assets to last.  Legacy wealth transfer may become complex due to the types of assets you own, just like a family can be complex due to different personalities.

Not all people wait until the end of their life to start legacy planning.  It can be a part of your life today as none of us know when our lives will end.  Important things to consider are how much control you want to have, to understand issues from not distributing assets among family members, and if assets should transfer now and the remainder at death.  Transferring wealth through estate and legacy planning should not be a ‘quick decision’ decided in only one appointment.  Not considering all consequences can be costly.

Once your legacy plan is created talk to your family about it.  Invite open dialog, and address their concerns so they can understand the reason behind your decisions.  Let them know the resources of information that helped you decide to leave a legacy may help eliminate concerns when family members know you consulted legal, tax, and asset professionals.  You may not choose to disclose specific information regarding the wealth transfer, which is your decision.  Informing family members that there is an estate plan in place many times eliminates concern regarding asset transfer.

If you have any questions about legacy planning, feel free to reach out to schedule a meeting.

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The Extinction of Pension Plans: Is a Buyout Right for You?

If you’re an employee working for a company that has a pension plan, you’re among an estimated 4% of Americans that still benefit from this type of retirement plan.  Most companies have moved to a dual plan or removed the pension entirely.  Traditional government workers are among the few who benefit from pension plans.  The likelihood of public-sector pension plans having enough to cover future generation payments at the levels promised is looking bleak for many states.  Even the Federal Government is offering differing plan types depending on the job grading and classification of the employee, especially for younger workers.

In recent years employers with pension plans have offered employees who are not yet at retirement age the option to take a pension buyout. The reason for the change from pension to traditional 401k plans is simple; we are living longer than previous generations and companies can no longer afford to fund them at 100% and want employees to participate in their savings.  When receiving a pension buyout offer, there are usually several options:

• Take the value of your pension as a lump-sum payment to roll over to an IRA. The advantage is managing this money yourself and allowing it to grow to a level that would provide a more significant benefit than taking your payments on a monthly basis.
• Take a monthly payout now (earlier than your normal retirement age), with tax consequences.
• Do nothing and take your original pension payment (or a lump-sum if offered) at your normal retirement age. 

Factors to consider:

• If you take one of the buyout options will it put you in a better financial position than doing nothing while waiting until your anticipated retirement age?
• Are you comfortable managing a lump-sum or do you and your advisor have a plan for it?
• Is your financial and/or health situation poor so that taking the monthly payments now would make sense?

These types of offers are likely to continue due to the increasing costs of administering pension plans and the desire to get the liabilities associated with the pension payments off the books.  If you’re an employee offered a pension buyout, you still need to continue saving money by participating in the 401k or other plan replacing the pension. 

If you receive a pension buyout offer, we can help you evaluate it and help you make the best decision for your situation.

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When The Stock Market Corrects

If you’ve been sensitive to the stock market performance in the last weeks, you’re not alone.  Regardless of how your investments fare during market corrections, being aware of your anxiety in light of what you’re seeing, reading or hearing can make a difference in portfolio performance.  We’ve all done it; reacted either internally or externally when watching the news and the reporter says, “The Dow Fell 400 points today”.  But is it a big enough deal that you should react to it?  

The relationship between percentage changes and basis points determines the valuation difference in a financial instrument, such as the stock market.  The Basis Point (BPS), is used to calculate changes in interest rates, equity indexes (stock market), and the yield of fixed income securities.  A basis is 1/100^th of 1%.  In the case of the Dow ‘falling’ 400 points, that would be 4%.  As the media reports performance for the day, remember that there are 20-22 trading days each month.  Reacting to declining market performance news on one day may cause you to make a premature decision. 

In light of stock market corrections, political issues, scandals, and ‘fake news,’ keeping yourself removed from media as much as possible may be healthy for you (and your investments).  Every day we are exposed to stories that affect us and our financial decisions.  Liquidating your investments in a down market versus waiting for share prices to increase before trading has caused many people to hurt themselves.  It is up to you to consider how expensive information may be to you if you react to it.

When it comes your investments, there may be times that your asset allocation needs to be addressed in order for your portfolio to weather market corrections.  Adjusting based on short term performance may not be the answer, but developing an overall strategy is something to consider.  If you’re concerned about stock market performance and your overall portfolio, it’s time for us to have a conversation about it.  Together we can determine at what time and under what conditions we should be reacting to basis point changes.

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If you’re concerned about stock market performance and your portfolio, it’s time for us to have a conversation.  

SAI March 2018 Newsletter Approval 2033825.1

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