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
• T

a xe s

• De duc tio n fo r Jo b

Hunting E xpe nse s

• T

a x Cre dits

• Stra te g ie s to

De fe r/ Ac c e le ra te I nc o me a nd De duc tio ns

• Une mplo yme nt NJ
• 401K

/ 403B Ro llo ve rs

• Re tire me nt Pla n Withdra wa ls
• Ma na g ing De b t
• Co lle g e
• I

nve stme nt F e e s

• So c ia l Se c urity T

iming

2

ACA Me dic a id, Co st Sha ring & Sub sidy MAGI T hre sho lds

• 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

$45,484 $39,716 $33,948 $28,179 $22,411 $16,642 $82,400 $71,950 $61,500 $51,163 $40,600 $30,150 $131,840 $115,120 $98,400 $81,680 $64,960 $48,240 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 6 5 4 3 2 1

Inc ome F a mily Size

me dic a id thre sho ld c o st sha ring sub sidy thre sho ld

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
• 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.

4

*An additional $1,000 annual catch up contribution to an HSA is allowed for participants age 55 and over.

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

• 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

T ax Br ac ke t L

• ng T

e r m Capital Gains Rate

Up to 15% 0% 25% to 35% 15% 39.6% 20%

2018 L

• ng T

e r m Capital Gains Rate s

$9,525 $19,050 $38,700 $77,400 $93,700 $156,150 $195,450 $237,950 $0 $50,000 $100,000 $150,000 $200,000 $250,000 Sing e Ma rrie d

Inc ome 2018 T ax Br ac ke ts

10% 15% 25% 28%

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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

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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
• 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

• 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

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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

• 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.

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Adva nta g e s o f K e e ping 401K / 403B

• Ava ila b ility o f L
• 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

Sho uld I Ro llo ve r my 401K / 403B?

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

• 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

I nve stme nt F e e s

• I

nve stme nt fe e s tha t yo u pa y a s pa rt o f yo ur 401K ’ s, I RA’ s a nd o the r inve stme nt a c c o unts a re o fte n q uite sub sta ntia l. E ve n a 1% fe e a dds up

• ve r time . On a $250,000 po rtfo lio tha t 1% pa id o ve r 30 ye a rs will re duc e the

va lue o f the e nding po rtfo lio b y $600,000.

$539,731 $1,165,239 $2,515,664 $491,788 $967,421 $1,903,064 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 10 Ye a rs : $48K 20 Ye a rs: $198K 30 Ye a rs: $612K

8% Re tur n 7% Re tur n (8% Re tur n - 1% fe e )

15

So c ia l Se c urity

L ive to 72 L ive to 95 F ile a t 62 F ile a t 70

* Ave ra g e a nnua l a mo unt c o lle c te d during re tire me nt ** T

• ta l a mo unt c o lle c te d during re tire me nt

Assume s so me o ne Ag e 55 to da y a nd 2% COL A a djustme nt

$29,579 * $295,792 ** $38,164 $1,297,568 $56,627 $113,254 $72,608 $1,887,799

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BIL L L ACHANCE

PRINCIPAL , WJL F INANCIAL ADVISORS, L L C 973- 216- 8748 BIL L @WJL ADVISORS.COM WWW.WJL ADVISORS.COM