Mo ne y Sa ving Stra te g ie s during a Ca re e r T ra nsitio n: - PowerPoint PPT Presentation

Mo ne y Sa ving Stra te g ie s during a Ca re e r T ra nsitio n: He a lth I nsura nc e , T a xe s, E tc … BIL L L ACHANCE PRINCIPAL , WJL F INANCIAL ADVISORS, L L C

Ag e nda • Me dic a l • 401K / 403B Ro llo ve rs • T a xe s • Re tire me nt Pla n Withdra wa ls • De duc tio n fo r Jo b • Ma na g ing De b t Hunting E xpe nse s • Co lle g e • T a x Cre dits • I nve stme nt F e e s • Stra te g ie s to De fe r/ Ac c e le ra te • So c ia l Se c urity T iming I nc o me a nd De duc tio ns • Une mplo yme nt NJ 2

ACA Me dic a id, Co st Sha ring & Sub sidy MAGI T hre sho lds 1 $16,642 $30,150 $48,240 2 $22,411 $40,600 $64,960 a mily Size 3 $28,179 $51,163 $81,680 4 $33,948 $61,500 $98,400 F 5 $39,716 $71,950 $115,120 6 $45,484 $82,400 $131,840 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Inc ome me dic a id thre sho ld c o st sha ring sub sidy thre sho ld  Premium subsidies are tax credits – True up occurs when you complete end of year tax return  AGI determines subsidy – documentation for estimate may be required  Cost sharing subsidy only available on Silver plans  Consider total costs (deductibles, copays, premiums etc.) before switching plans  Open enrollment Nov 1 – Dec 15 for upcoming year 3

Othe r Me dic a l • T he I RS a llo ws a o nc e in a life time tra nsfe r fro m a n I RA to a HSA (up to $3,450 fo r a n individua l o r $6,900 fo r a fa mily in 2018)* • Withdra wa ls fro m 401K o r I RA no t sub je c t to 10% pe na lty if use d fo r me dic a l e xpe nse s in e xc e ss o f 10% o f mo difie d a djuste d g ro ss inc o me • Withdra wa ls fro m a n I RA (no t 401K ) use d to pa y me dic a l insura nc e pre miums no t sub je c t to 10% pe na lty if yo u ha ve b e e n c o lle c ting une mplo yme nt fo r a t le a st twe lve c o nse c utive we e ks. *An additional $1,000 annual catch up contribution to an HSA is allowed for participants age 55 and over. 4

T a xe s - De duc tio n fo r Jo b Hunting E xpe nse s • Misc e lla ne o us de duc tio n o n Sc he dule A (sub je c t to 2% o f AGI limita tio n). • Must b e re la te d to se a rc h fo r a po sitio n in c urre nt o c c upa tio n. • Allo wa b le e xpe nse s • Re sume pre p a nd ma iling • T ra ve l e xpe nse s inc luding mile a g e • E mplo yme nt & Outpla c e me nt Ag e nc y F e e s • Ca re e r c o a c he s 5

T a xe s – Cre dits Yo u Ma y Be c o me E lig ib le F o r • E a rne d inc o me c re dit • Une mplo yme nt c o mpe nsa tio n do e s no t c o unt a s inc o me whe n de te rmining e lig ib ility fo r E I C. • Child T a x Cre dit • Ame ric a n Oppo rtunity Cre dit • L ife time L e a rning Cre dit • T uitio n & F e e s De duc tio n • Me dic a l E xpe nse s (inc luding COBRA) 6

T a xe s – Bra c ke ts fo r I nc o me a nd Ca pita l Ga ins 2018 T ax Br ac ke ts Ma rrie d $19,050 $77,400 $156,150 $237,950 Sing e $9,525 $38,700 $93,700 $195,450 $0 $50,000 $100,000 $150,000 $200,000 $250,000 Inc ome 10% 15% 25% 28% 2018 L ong T e r m Capital Gains Rate s T ax Br ac ke t L ong T e r m Capital Gains Rate Up to 15% 0% 25% to 35% 15% 39.6% 20% 7

T a xe s – Stra te g ie s to De fe r I nc o me / Ac c e le ra te De duc tio ns (e xpe c t to b e in hig he r ta x b ra c ke t in c urre nt ye a r) • Pre pa y yo ur Ja nua ry mo rtg a g e pa yme nt to inc re a se yo ur mo rtg a g e inte re st de duc tio n • Ma ke a dditio na l c o ntrib utio ns to yo ur ta x de fe rre d inve stme nt a c c o unts (401K , I RA, e tc .) • De la y de fe rre d c o mpe nsa tio n to fo llo wing ye a r if po ssib le • Pa y e stima te d sta te ta xe s in De c e mb e r inste a d o f Ja nua ry • Pre pa y Re a l E sta te ta xe s • Se ll inve stme nts a t a lo ss (up to $3,000 c a n b e re c o g nize d in a sing le ye a r) a nd use pro c e e ds to purc ha se a simila r (b ut no t ide ntic a l) inve stme nt to a vo id a wa sh sa le 8

T a xe s – Stra te g ie s to Ac c e le ra te I nc o me / De fe r De duc tio ns (e xpe c t to b e in a lo we r ta x b ra c ke t in c urre nt ye a r) • T a ke Ro th c o nve rsio ns o n a n I RA up to a n a mo unt tha t will “fill up” the lo we r ta x b ra c ke t • Se ll inve stme nts a t a g a in to lo c k in a lo we r c a pita l g a ins ra te . T o the e xte nt yo u a re in the 15% ta x b ra c ke t, yo ur lo ng te rm c a pita l g a ins ra te will b e 0%. • I f o ve r 59 ½, withdra w mo ne y fro m yo ur I RA (o r unde r 59 ½ if yo u q ua lify fo r o ne o f the e xc e ptio ns) a nd pa y ta xe s a t the lo we r ra te . Yo u c a n still c o ntrib ute tha t ye a r. • I f yo u se pa ra te fro m yo ur c o mpa ny a t a g e 55 o r o ve r, withdra w mo ne y fro m yo ur 401K a nd pa y ta xe s a t the lo we r ra te witho ut pa ying the 10% pe na lty (this wo rks fo r a 401K b ut no t a n I RA). • Do no t pa y yo ur q ua rte rly e stima te d sta te ta x pa yme nt until Ja nua ry. • De fe r yo ur Re a l E sta te ta x pa yme nt until Ja nua ry if po ssib le 9

Une mplo yme nt NJ • Une mplo yme nt c a n b e e xte nde d up to 26 a dditio na l we e ks if e nro lle d in a n a ppro ve d tra ining pro g ra m. Gra nts a va ila b le up to $4,000 fo r c o st o f tra ining . • We e kly une mplo yme nt is re duc e d to the e xte nt pa rt time e a rning s e xc e e d 20% o f yo ur we e kly b e ne fit. Ove ra ll b e ne fits (60% o f a ve ra g e we e kly e a rning s during b a se ye a r x 26 we e ks)a re no t re duc e d b ut wo uld spre a d o ve r mo re we e ks. Must still b e a c tive ly se a rc hing fo r full time wo rk. 10

Sho uld I Ro llo ve r my 401K / 403B? Adva nta g e s o f K e e ping 401K / 403B • Ava ila b ility o f L o a ns • No 10% pe na lty fo r withdra wa ls if yo u te rmina te e mplo yme nt a fte r a g e 55 (must b e 59 ½ fo r I RA withdra wa ls to b e pe na lty fre e with a fe w e xc e ptio ns) Adva nta g e s o f I RA Ro llo ve r • No 10% pe na lty fo r withdra wa ls fo r first time ho me b uye rs (up to $10,000) • No 10% pe na lty fo r withdra wa ls fo r q ua lifie d hig he r e duc a tio n e xpe nse s • No 10% pe na lty fo r withdra wa ls fo r to pa y fo r me dic a l insura nc e if yo u ha ve b e e n c o lle c ting une mplo yme nt fo r a t le a st twe lve c o nse c utive we e ks. • Muc h b ro a de r inve stme nt o ptio ns • Ava ila b ility o f Ro th c o nve rsio ns Co nside r a Pa rtia l Ro llo ve r to Ne w 401K a nd Pa rtia l Ro llo ve r to I RA 11

Re tire me nt Pla n Withdra wa ls • Withdra wa ls fro m a tra ditio na l I RA/ 401K / 403B a re g e ne ra lly fully ta xa b le sinc e tho se c o ntrib utio ns we re ma de pre -ta x. • Be c a use Ro th Co ntrib utio ns (a nd c o nve rsio ns) a re ma de with a fte r ta x do lla rs yo u c a n withdra w tho se c o ntrib utio ns witho ut pa ying a ny ta xe s a s lo ng a s Ro th a c c o unt ha s b e e n in e xiste nc e fo r five ye a rs (o r the spe c ific c o nve rsio n wa s ma de a t le a st five ye a rs a g o ). E xc e ptio ns to 10% Pe na lty (if ta ke n b e fo re 59 ½) • Pe rio dic e q ua l pa yme nts (must c o ntinue fo r a t le a st five ye a rs o r a g e 59 ½). • Me dic a l e xpe nse s in e xc e ss o f 10% o f a djuste d g ro ss inc o me • Qua lifie d hig he r e duc a tio n e xpe nse s • Me dic a l insura nc e if yo u c o lle c te d une mplo yme nt fo r a t le a st 12 c o nse c utive we e ks. • 401K / 403B se pa ra tio n fro m se rvic e a g e 55 • F irst ho me purc ha se (up to $10,000) 12

I f Yo u a re F o rc e d to T a ke o n De b t • T a p lo we r ra te so urc e s o f c re dit (ho me e q uity lo a ns, c a sh va lue po lic y lo a ns e tc .) b e fo re ta king o n c re dit c a rd de b t • Unde rsta nd the ra te s yo u a re pa ying o n c re dit c a rd de b t pa rtic ula rly fo r c a sh a dva nc e s. Prio ritize the inte re st ra te o ve r a ny c a rd b e ne fits if yo u think yo u will c a rry a b a la nc e . • Ve rify yo ur c re dit re po rts a nnua lly. • Be ing c lo se to o r ma xing o ut yo ur c re dit limits ma y ne g a tive ly impa c t yo ur c re dit sc o re . I t’ s a g o o d ide a to ke e p yo ur b a la nc e o n re vo lving line s unde r 30% o f yo ur limit. • Pa ying mo re tha n the minimum due ma y impro ve yo ur c re dit sc o re . • Do n’ t miss a pa yme nt. Pa yme nt histo ry ma ke s up 35% o f yo ur c re dit sc o re . I f yo u’ ve misse d a pa yme nt, pa y a s so o n po ssib le . 13

Co lle g e • Re a c h o ut to fina nc ia l a id o ffic e a nd e xpla in c ha ng e in c irc umsta nc e s. • T a p into me rit a s we ll a s ne e d b a se d a id. • Mo ne y in I RAs c a n b e withdra wn witho ut inc urring the 10% pe na lty if use d fo r q ua lifie d hig he r e duc a tio n e xpe nse s. 14