http://www.lifehappens.org/boomer-esiason-message-to-the-industry/
Watch a special industry message from record-setting NFL quarterback, seasoned broadcaster and Life Insurance Awareness Month spokesperson, Boomer Esiason. He needs your help to get the word out about the importance of life insurance. Watch at: http://www.lifehappens.org/boomerindustry
This evening PBS Hawaii ran an eye-opening FRONTLINE documentary [http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/] that strongly reinforced my long-held position about the ridiculous, exorbitant fees in the 401k/mutual fund business. As an example, you could take two next-door neighbors, living right here on Ala Moana Blvd. and one person is paying 10 times as much to invest in a 401(k) as the other person. Crazy, right? Well, to understand this whole fee business, FRONTLINE correspondent, Martin Smith, talked to my all-time favorite investing guru/financial mentor, Jack Bogle, the founder of Vanguard (and CEO, The Vanguard Group, 1974-96). I don’t represent Vanguard or sell any of their products, but I’ve always known it to be a stellar company. Vanguard offers some of the lowest-fee products on the market and is the pioneer of low-cost index funds. My favorites. Mr. Bogle says that if you want to improve your retirement outcome, make sure to minimize Wall Street’s take. That’s fees to you and me.
Jack Bogle says, “costs are a crucial part of the equation. It doesn’t take a genius to know that the bigger the profit of the management company, the smaller the profit that investors get. The money managers always want more, and that’s natural enough in most businesses, but it’s not right for this business. He goes on to say, “what happens in the fund business is the magic of compound returns is overwhelmed by the tyranny of compounding costs. It’s a mathematical fact. There’s no getting around it. The fact that we don’t look at it— too bad for us.”
It’s this simple: Fund fees can erode as much as half or more of your prospective gains. For the sake of dramatizing the point, Bogle, shared a startling example. Assume you are invested in a mutual fund, he says, with a gross return of 7 percent, but that the mutual fund charges you an annual fee of 2 percent. Over a 50-year investing lifetime, that little 2 percent fee will erode 63 percent of what you would have had. As Bogle puts it, “the tyranny of compounding costs” is overwhelming.
In short, fees truly matter, in a BIG way. So what can you do? You aren’t going to find a fund that invests your money for free, but experts say you can come close by buying index funds. Their fees can be a tenth of what the average mutual funds charges. And over time, in bull and bear markets, on average, index funds perform better than their more expensive actively managed fund cousins. This is no secret to anyone who is paying attention.
So why aren’t our trusted financial advisers and those ads telling us to buy index funds? In fact, I have personally asked, why do some 401(k) plans not even offer them on their menus? The answer: Greed! It’s because even though an index fund might be a better option for you and me, a broker operating under a suitability standard has no incentive to sell it to us. He or she will make higher commissions from options that have higher fees.
What to do? Well, start paying attention. It’s your 401k or retirement mutual fund, take stock of it. Check out this FRONTLINE documentary [http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/]. I’m in the business and it made me rethink my own 401k and financial future. And as Martin Smith put it, “It just might do the same for you.” -GW
http://www.lifehappens.org/portfolio/alysia-lim-you-need-a-plan/
A disability isn’t always caused by a devastating accident or illness. It can mean a health crisis that takes away your ability to earn a living as you always have. That was the case for Alysia Lim’s father. An aneurysm, and resulting surgery to address it, has made it impossible for him to continue working as an emergency room physician. But Dr. Lim had prepared for the unforeseen with adequate amounts of insurance, including disability insurance.
Now he works as a professor at a local college, but his drop in salary has not changed the way the Lim family lives. His disability insurance has supplemented his income, allowing the Lims to stay in the dream house they built and to maintain their lifestyle.
This lesson hasn’t been lost on Alysia. She had thought her dad overprotective when he would mention that if anything were to happen to him or Alysia’s mother that the kids would be taken care of with the help of insurance. Alysia admits that her dad was right. “It’s a good thing he planned ahead,” she says, and adds that now she really understands the importance of preparing “for whatever may happen.”
The Coolest Jobs of 2013
CNBC says my Sister-in-Law, Noi has the “Coolest Job” in the Country.
http://www.cnbc.com/id/100777577/page/7
Hawaii News Now: CNBC says Oahu Woman has the “Coolest Job” in the Country
http://www.hawaiinewsnow.com/story/22504734/cnbc-says-oahu-woman-has-the-coolest-job-in-the-country
Now that the dust has settled on the new tax legislation, here are a few talking points to take up with your financial advisor or accountant.
As if the annoying back and forth to avoid the fiscal cliff at the close of last year wasn’t bad enough, the end result, dubbed the American Taxpayer Relief Act of 2012, could mean a lot of scrambling on your part to hem in what you owe the IRS. No matter what your tax bracket or circumstances, chances are you’re probably already feeling the impact from the expiration of the “payroll tax holiday”. The news isn’t all bad, however: While your bill may go up, there are still some major tax breaks you can snare for your business. The bottom line is it’s an opportune time to schedule a meeting with your financial advisor or accountant to examine strategies.
Here’s a summary of some of the most important developments to come out of the new legislation:
Income Tax Rates and Deduction Reduction.
Tax rates made the biggest headlines during the fiscal cliff standoff, and for good reason. When the dust settled, Washington raised the income tax rates on those who make over $400,000 (or $450,000 in the case of married couples) to 39.6% from 35%. That’s potentially a minimum of nearly $20,000 you’ll have to hand over to Uncle Sam if you qualify. That’s not the only increase: If you make over $200,000 — $250,000 in the case of a couple filing jointly — you’ll pay an additional 0.9% tax on your earned income, while you’ll also be assessed an additional 3.8% on your net investment income.
Strategies to consider:
There’s ample reason to mull over alternatives with your tax accountant the minute there’s the risk you might fall into either of those brackets. If you’re the boss, or if you and one or more of your key employees fall over the threshold, there’s never been a better time to investigate either deferring income or setting up non-qualified deferred compensation arrangements. If you’re the owner of an LLC, Partnership or S Corporation, now might be the time to see if there is an advantage to switching over to a C corporation. The reason: The switch to C corporation status might make it possible to take advantage of the nearly 5% gap that has opened up between the highest personal income and corporate tax rates.
Payroll Taxes.
If you draw a salary, you can count on your payroll taxes rising this year. The government rolled back the 2% it cut from the Social Security tax assessed on your wages — the rate returns to 6.2% of your 2013 wages up to $113,700 (the 2013 Social Security wage base). This is up from last year’s 4.2%.
Strategies to consider:
If you make quarterly estimated tax payments, you may want to revisit your calculations in order to take the increase into account.
Depreciation Deductions.
The new tax law still makes it possible to log some sizeable deductions — on generous terms, too. For instance, there’s the depreciation on the purchase of new or used gear for your business. Beginning in 2013, you’re eligible to deduct the full cost — 100% — of certain pieces of new or used equipment you bring in up to $500,000. It’s also possible to amass up to $250,000 in deductions for real estate as part of that total amount. You may be able to opt for bonus depreciation on top of what you would report for first-year use of some equipment. There are restrictions, however, based on your business’s taxable income and your structure, matters you’ll want to review closely with your tax professional.
Strategies to consider:
It may well be an opportune time to pony up for the new computer system or trucks you’ve had your eye on. Again, check in with your tax pro.
While the negotiations over the new tax bill certainly made for a lot of sound bites, the result is once more very much the same: There are still ways to work the rules to minimize your tax bill. Take it as incentive to spend a bit more time with your advisor or accountant to figure out the solutions that work best for you.
This concept restates the obvious. Many people who think they are immortal need to come to grips with reality. Not everyone realizes this simple fact. There is a 100% probability of death. If you don’t die before age 65, you’ll die after age 65. You’re not immortal. Your doctor could pronounce you fit today, and you could die tomorrow. No one ever dies at the right time. Think Michael Jackson. He died at only age 50. Or do you remember hearing about former NFL QB Steve McNair who was found shot to death at age 36? And then there was the Charlie’s Angel, Farrah Fawcett, who died of cancer at 62. We all could add to this sad list, but it is reality.
Sometimes we need to be reminded that no one has a lease on life…or on good health. Life insurance is like a parachute. You have to get it before you need it. By the time you know you need it, it may be too late. How much are your tomorrows worth? How long do you expect to live? What is your life worth to your family? How long do you expect to be dead? Do you want your life insurance to be in force when you die?
On August 2nd, 1996, a Los Angeles television station carried a story about Marcia Clark and Christopher Darden, who were the prosecuting attorneys in the O.J. Simpson trial, attending a fundraising event the prior evening for the Van Sloten family.
According to an article, which appeared in the April 20th, 1996 issue of the Los Angeles Times, Martha Van Sloten, a 40-year-old legal secretary, had died in April from breast cancer, which had spread, into her bones. Her husband, Richard, who is 48, and who is a prosecuting attorney for Los Angeles County, has been diagnosed as having an inoperable brain tumor. Doctors say he’ll be fortunate to live a few more months.
The Van Slotens have three daughters, one of whom is a 19-year-old who has been forced to drop out of college in order to help with her younger sisters who are ages 4 and 8. Arrangements have been made for the girls to live with relatives in Washington State. According to the article, the family’s life insurance was modest.
What are the chances that even one spouse would die, let alone both? The chances are 100%. We just don’t know when death will occur. No one has a lease on life. Life insurance must be purchased before you need it. By the time you know you need it, it’s too late.
Have you recently reviewed your life insurance and your wills and trusts and guardianship arrangements? Wouldn’t it make sense to do so right now? Richard Van Sloten died the day before Thanksgiving that year at the age of 49. If this real life story doesn’t wake you up and hit you between the eyes, please, get your pulse checked.
In 1989. I graduated from UCLA, where Jackie Robinson (“the greatest UCLA athlete of all time”) became the Bruins’ first four-sport letterman, playing football, basketball, track, and baseball. Curiously, Robinson traveled to Hawaii in fall 1941 to play football for the semi-professional, racially integrated Honolulu Bears. Of course, his sports breakthrough by itself isn’t nearly the full measure of the man’s impact, but I do know that Jack Roosevelt Robinson makes me proud to be a Bruin, because he changed the world.
Photo Copyright https://www.miltonwheeler.com
On a day-to-day basis, I help individuals and their families plan financially for a better tomorrow–from top-tier life insurance and income (disability) protection, to long term care (LTC) coverage and 401(k) planning. They expect and deserve the human touch.
However, many of my valued, existing clientele do not actually realize that I serve entrepreneurial companies and small employer groups (2-15 employees), as well with the same level of personal attention. Businesses are made up of people, so why would the level of service a group gets be any different than that of an individual? As a part of Guardian’s BRC (Business Resource Center), I work with closely-held businesses on a wide-range of financial programs that are geared toward the specific needs of the small business owner—from Buy-Sell Agreements and Key Person Coverage to 401k Programs. But like my own family businesses, most companies are looking to save money wherever they can. And yes, while there is an excellent chance we can get a group a lower rate for their state-mandated TDI coverage, for example, Guardian truly offers a whole heck of a lot more. We presently serve many of Hawaii’s larger employer groups (100+ employees). In fact, on a national level, over 1,400 large group customers are teaming up with Guardian. We provide individualized solutions and exceptional service. From Angie’s List to the San Diego Zoo, our large market customers look to us to be their hands-on provider. We offer:
Before meeting with me, many of my clients were not aware of the tax deductibility of long-term-care insurance. The good news is that long-term-care insurance premiums are tax-deductible, and the limits went up again this year. The Internal Revenue Service (IRS) considers tax-qualified long-term-care premiums a medical expense for individual taxpayers. How much you will save on your taxes largely depends on your age and what you do for a living. If you work for someone else and itemize your deductions, you can deduct your long-term-care premiums under medical expenses on Schedule A. For those of us who are self-employed, the tax advantages of a long-term-care policy jump-up sharply. You can deduct your long-term-care premiums under medical expenses directly on line 29 (“Self-employed health insurance deduction”) on Form 1040. For more information, go to: http://www.irs.gov/taxtopics/tc502.html
2013 LONG-TERM CARE INSURANCE
Per diem limitation for periodic payments received under qualified long-term care insurance contract or life insurance contract periodic payments treated as paid by reason of death of chronically ill individual under Code Section 7702B(d)(4) = $320
2013 LONG-TERM CARE PREMIUMS
Attained Age Before the Close of the Taxable Year
40 or less $360
More than 40 but not more than 50 $680
More than 50 but not more than 60 $1,360
More than 60 but not more than 70 $3,640
More than 70 $4,550
HERE’S MORE IMPORTANT 2013 INCOME TAX NUMBERS YOU NEED TO KNOW
The numbers presented in this “blog” issue are current at the time of its publication. As part of the American Taxpayer Relief Act (ATRA) passed in January 2013, many key tax rates, exemptions, and rules scheduled to be implemented in 2013 were changed. The following reflect the changes that were made by ATRA.
Deductible, Nondeductible, and Roth IRA Contribution Limits: IRC Sec. 219(b)(1)(A)
This is the limit in 2013 on how much can be contributed to an IRA: $5,500 (Indexed in $500 increments)
IRA Catch-Up Provision for Individuals 50 or Older by year end: IRC Sec. 219(a)(5)(b)
This is the amount that can be contributed for those 50 and older by year end. $6,500
The catch up is $1,000 in 2013. The listed number is the total amount that can be contributed.
2013 SOCIAL SECURITY TAX RATES
The 7.65% employee rate is imposed on the taxable wage base of $113,700 in 2013. 7.65% for Employers
Social Security Tax Rate (Self-Employed) = 15.30%
This is the percentage at which a self-employed individual is taxed for social security purposes.
2013 SOCIAL SECURITY BENEFITS
$2,533 Per Month (Age 66). Maximum Monthly Social Security Benefit at Full Retirement Age: For retirees born in 1942, full retirement age is 65 and 10 months; for those born in 1943 to 1954, it is 66. Full retirement age will gradually increase to age 67 for those born in 1960 and later.
*2013 PERSONAL INCOME TAX RATE SCHEDULES MARRIED INDIVIDUALS FILING JOINT RETURNS
Taxable Income Not over $17,850=Tax equaled to 10% of the taxable income
Over $17,850 but not over $72,500=Tax equaled to $1,785 plus 15% of the excess over $17,850
Over $72,500 but not over $146,400=Tax equaled to $9,982.50 plus 25% of the excess over $72,500
Over $146,400 but not over $223,050=Tax equaled to $28,457.50 plus 28% of the excess over $146,400
Over $223,050 but not over $398,350=Tax equaled to $49,919.50 plus 33% of the excess over $223,050
Over $398,350 but not over $450,000=Tax equaled to $107,768.50 plus 35% of the excess over $398,350
Over $450,000=$125,846 plus 39.6% of the excess over $450,000
*This is only a synopsis of the 2013 PERSONAL INCOME TAX RATE SCHEDULES and is not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor, or attorney.
2013 ESTATE PLANNING AMOUNTS
Annual Gift Tax Exclusion—Present Interests Code Sec. 2503= $14,000
GST EXEMPTION Code Sec. 2631 $5,250,000
Dollar Amount Used to Compute “2 Percent” Portion of 6166=$1,430,000
APPLICABLE ESTATE TAX EXEMPTION=$5.250,000
APPLICABLE GIFT TAX EXEMPTION=$5,250,000
DISCLAIMER: We are not in the business of providing tax or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor, or attorney.
Now that the debate over tax rates and the so-called “Fiscal Cliff” has ended – for now – taxpayers and their advisors will turn their attention to learning more about what’s inside the American Taxpayer Relief Act of 2012 and how it impacts them. Let’s review some of the more important details in the tax bill and address some of the planning implications raised.
The American Taxpayer Relief Act of 2012 (“Tax Relief Act of 2012”) signed by President Obama on January 2, 2013, to avoid the so-called “fiscal cliff”, represents the first major tax increase on upper income taxpayers in 20 years. Even though Congress failed to address a number of tough issues, the provisions contained in the bill are significant, and will impact consumer behavior for years to come. What follows is a summary of the more important provisions of the bill, as well as an overview of some of the planning implications.
Conclusion
While certainly not perfect, the new tax bill represents an important milestone. Although the 2012 tax return season may be delayed while the IRS struggles to finalize forms, and the 2013 withholding tables will certainly need to be adjusted to take the new rates into consideration, the clear take-away is that the tax bill disproportionately impacts high-income earners. What this means is that executives, professionals, business owners, high income and high net worth individuals and families still need planning advice and expertise now, as much as before.
Please contact M. Garrett Wheeler, via email Gage@successhawaii.com to receive a PDF copy of the entire 7-page document.
SEA Financial Hawaii 