Author Archives: GREG OLIVER


About GREG OLIVER ___________ Greg Oliver have been assisting mature and senior clients for 23 years on how to protect their assets and invest wisely. In fact, he has assisted over 5,212 + retirees to safely invest over 174.4 + million dollars in secure ( SAFE ) investment plans. GREG OLIVER, Understands Effective Financial Planning and Estate Planning Greg Oliver, has been helping people take control of their future with good financial life planning since 1989. He is President and a CEO of OLIVER Financial Services, USA. Greg provides personal financial planning and investment review services for clients in the Continental United States. His primary area of practice is in serving clients either getting ready for retirement or those retired. Greg has special expertise in the financial planning problems of the aging. Prior to entering the financial planning profession in 1989, Greg served 10 years in the United States Marine Corps. Greg and his wife Ann live in Cincinnati. When not working at building OLIVER Financial Services, USA, he enjoys working with charities and supports The Society of Saint Vincent de Paul in helping others in need. CALL Today for a FREE Consultation. No cost / obligation. 513 - 860 – 7934 e-mail

Catching Up on Retirement Saving

Catching Up on Retirement Saving
If you are starting at or near 50, consider these ideas.

2007 Stress out ladt look at computer 2007 pic


Do you fear you are saving for retirement too late? Plan to address that anxiety with some positive financial moves. If you have little saved for retirement at age 50 (or thereabouts), there is still much you can do to generate a fund for your future and to sustain your retirement prospects.

Contribute and play catch-up. This year’s standard contribution limit for an IRA (Roth or traditional) is $5,500; common employer-sponsored retirement plans have a 2018 contribution limit of $18,500. You should try, if at all possible, to meet those limits. In fact, starting in the year you turn 50, you have a chance to contribute even more: for you, the ceiling for annual IRA contributions is $6,500; the limit on yearly contributions to workplace retirement plans, $24,500.1

Look for low-fee options. Lower fees on your retirement savings accounts mean less of your invested assets going to management expenses. An account returning 6% per year over 25 years with an annual expense ratio of 0.5% could leave you with $30,000 more in savings than an account under similar conditions and time frame charging a 2.0% annual fee.2

Focus on determining the retirement income you will need. If you are behind on saving, you may be tempted to place your money into extremely risky and speculative investments – anything to make up for lost time. That may not work out well. Rather than risk big losses you have little time to recover from, save reasonably and talk to a financial professional about income investing. What investments could potentially produce recurring income to supplement your Social Security payments?

Consider where you could retire cheaply. When your retirement savings are less than you would prefer, this implies a compromise. Not necessarily a compromise of your dreams, but of your lifestyle. There are many areas of the country and the world that may allow you to retire with less financial pressure.

Think about retiring later. Every additional year you work is one less year of retirement to fund. Each year you refrain from drawing down your retirement accounts, you give them another year of potential growth and compounding – and compounding becomes more significant as those accounts grow larger. Working longer also lets you claim Social Security later, and that means bigger monthly retirement benefits for you.

Most members of Generation X need to save more for their futures. The median retirement savings balance for a Gen Xer, according to research from Allianz, is about $35,000. A recent survey from Comet Financial Intelligence found that 41% of Gen Xers had not yet begun to build their retirement funds. So, if you have not started or progressed much, you have company. Now is the time to plan your progress and follow through.3,4

1 – [10/25/18]
2 – [5/10/17]
3 – [2/7/18]
4 – [3/2/18]

Trade War

Could a Trade War Soon Start?
The U.S. might soon impose tariffs on certain imports.



What if America taxes imported aluminum and steel? If it does, will other countries impose taxes in response, and what might that mean for the U.S. economy?

Conversations about tariffs and trade wars have been prevalent in the news stream lately. If a trade war does begin in 2018, it is worth considering the potential implications. In the scenario that could unfold, excise taxes would be placed on imported goods or materials sold to consumers or used by industries in America. These taxes would encourage retailers and manufacturers to buy such goods and materials from U.S. sources.1,2

Two tariffs are already in place. In January, President Trump approved a 30% excise tax for imported solar panels (which will gradually reduce to 15% over four years) and a 20% tariff on the first 1.2 million washing machines imported to the U.S. each year, which rises to 50% after the 1.2 million limit is surpassed.1

Foreign steel could be taxed 25%; foreign aluminum, 10%. The White House has proposed such tariffs, with the idea of giving U.S. steel and aluminum producers a major lift and possibly saving some jobs as a byproduct.2

The potential downside? If the shift to domestic steel and aluminum happens slowly (or ends up being slight), goods made with steel and aluminum might soon cost more for consumers. Since business capital equipment and the footprints of brick-and-mortar firms involve great quantities of these base metals, companies might also pay more to operate. In the worst-case scenario, the hit to the economy is felt not only in higher consumer prices, but also in layoffs.

Would these two excise taxes on metals come with carve-outs? That question is also in the air. An across-the-board tariff on all steel and aluminum importers would apply not just to China, but also to Canada and other primary trading partners. President Trump has noted that Canada and Mexico – two of the five biggest steel importers to America – could be exempted from steel and aluminum tariffs if current trade agreements are revised.3,4

China’s steel and aluminum shipments to the U.S. respectively account for about 0.01% and 0.03% of its $11 trillion gross domestic product, so such tariffs might only have a token economic impact in that nation. In terms of countries importing steel to America, it ranks eleventh. Even so, China could retaliate, especially if the U.S. imposes other excise taxes on its electronic, plastic, toy, or furniture goods.5

The fear is that a trade war could become global in scope. Other nations might selectively impose tariffs of their own on imported goods from this or that major trade partner. While the U.S. might not feel economic headwinds from such excise taxes on its exports, the story might be different for nations with manufacturing-centered economies.

Excise taxes on steel and aluminum could provide American suppliers of those base metals with a short-term economic advantage, but a clear protectionist move might also unsettle Wall Street and global investment markets. Economists and investors will have to wait and see how things proceed.

1 – [1/22/18]
2 – [3/2/18]
3 – [3/5/18]
4 – [3/1/18]
5 – [3/5/18]



Mature Couple

The legislation popularly known as the Tax Cuts & Jobs Act did not exactly “rewrite the book” of federal tax laws, but it almost seems that way. On January 1, a host of important, new tax provisions entered the Internal Revenue Code, and others were suddenly repealed.

Due to these reforms, federal tax law has changed to a degree unseen since the 1980s. This guide reviews the major adjustments to the Internal Revenue Code and more:

• Key tax changes for households
• Key tax changes for businesses
• Tax breaks disappearing in 2018
• Social Security & Medicare changes
• COLAs & Phase-Out Range Adjustments
• Last, but not least, some other, interesting developments

Just a reminder as you read this guide: you should consult with a qualified tax or financial professional before making short-term or long-term changes to your tax or financial strategy.

Key Tax Changes for Households

Whether you file singly, jointly, or as a head of household, you will want to keep these significant alterations to federal tax law in mind. These new tax provisions will remain in place through at least 2025.

1 Lower income tax rates and adjusted tax brackets.

Thanks to the tax reforms, the seven income tax brackets of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% have been revised to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The new taxable income thresholds:

Bracket Single Filers Married Filing Jointly Married Filing Head of Household
or Qualifying Widower Separately

10% $0 – $9,525 $0 – $19,050 $0 – $9,525 $0 – $13,600
12% $9,526 – $38,700 $19,051 – $77,400 $9,526 – $38,700 $13,601 – $51,800
22% $38,701 – $82,500 $77,401 – $165,000 $38,701 – $82,500 $51,801 – $82,500
24% $82,501 – $157,500 $165,001 – $315,000 $82,501 – $157,500 $82,501 – $157,500
32% $157,501 – $200,000 $315,001 – $400,000 $157,501 – $200,000 $157,001 – $200,000
35% $200,001 – $500,000 $400,001 – $600,000 $200,001 – $300,000 $200,001 – $500,000
37% $500,001 and up $600,001 and up $300,001 and up $500,001 and up

The federal government is now using the Chained Consumer Price Index to calculate inflation. That should reduce the size of the yearly adjustments to these brackets.

In scrutinizing all this, you may notice something: the “marriage penalty” applying to combined incomes is nearly gone. That is, the thresholds for joint filers are simply double what they are for single filers for five of the seven brackets. Only married couples in the two uppermost brackets now face the “marriage penalty.”1,2

2 The standard deduction nearly doubles.

While the personal exemption is gone (more about that later), the new law gives an enormous boost to the standard deduction in 2018 for all filers.2

*Single filer: $12,000 (instead of $6,500)
*Married couples filing separately: $12,000 (instead of $6,500)
*Head of household: $18,000 (instead of $9,350)
*Married couples filing jointly & surviving spouses: $24,000 (instead of $13,000)

Incidentally, the additional standard deduction remains in place. Single filers who are blind, disabled, or aged 65 or older can claim an additional $1,600 deduction for 2018. Married joint filers can claim additional standard deductions of $1,300 each for a total additional standard deduction of $2,600 in 2018.3

3 AMT exemption amounts are much larger.

The Alternative Minimum Tax was never intended to apply to the middle class – but because it went decades without inflation adjustments, it sometimes did. Thanks to the tax reforms, the AMT exemption amounts are now permanently subject to inflation indexing.

Look at the change in AMT exemption amounts for 2018:

*Single filer or head of household: $70,300 (was $54,300 in 2017)
*Married couples filing separately: $54,700 (was $42,250 in 2017)
*Married couples filing jointly & surviving spouses: $109,400 (was $84,500 in 2017)

These increases are certainly sizable, yet they pale in proportion to the increase in the phase-out thresholds. They are now at $500,000 for individuals and $1 million for joint filers, as opposed to respective, prior thresholds of $120,700 and $160,900.2

4 The Child Tax Credit doubles to $2,000.

In compensation for the loss of the personal exemption, the Tax Cuts & Jobs Act boosted this credit, which is especially significant for large families. Up to $1,400 of the CTC is now refundable. Phase-out thresholds for the credit have moved north dramatically. They are now set at the following modified adjusted gross income (MAGI) levels:

*Single filer or head of household: $200,000 (was $75,000 in 2017)
*Married couples filing separately: $400,000 (was $110,000 in 2017)

Also, the Child & Dependent Care Tax Credit remains – parents still have a chance to deduct qualified child care expenses of up to $1,050 for one child under age 13 or $2,100 for two children under age 13. Dependent care Flexible Spending Accounts (FSAs) are still allowed as well: employees may save up to $5,000 of pre-tax dollars per year to help pay for qualified child care expenses.

Lastly, see the “Other Interesting Developments” section of this guide to learn about a significant non-financial change involving the Child Tax Credit.2,4

5 You may be eligible to claim a new $500 non-refundable credit for non-child dependents.

This represents an effort to compensate for the loss of the personal exemption taxpayers could previously claim for non-child dependents. The MAGI phase-out thresholds applicable to the Child Tax Credit also apply to this “family credit.” You are eligible to claim it if you have qualifying dependents in your household who do not meet the federal tax definition of a qualifying child: parents, relatives, children age 17 or older.2,5

6 The yearly SALT deduction is capped at $10,000.

This is arguably the most controversial tax law change of 2018 for individual taxpayers. If you live in a high-tax state (or alternately, a state that imposes no income tax), you may be grumbling about the new cap on the state and local tax (SALT) deduction. You can now only deduct up to $10,000 of some combination of a) state and local property taxes or (b) state and local income taxes or sales taxes annually. Taxes paid or accumulated as a consequence of trade activity or business activity are exempt from the $10,000 limit.

The SALT deduction cap is just $5,000 for married taxpayers who file their returns separately.1,6

7 The ceiling on the mortgage interest deduction falls to $750,000.

As the median U.S. home price is well under $750,000, a relatively small percentage of homebuyers will be affected by this change. The new annual $750,000 limit applies for any taxpayer taking out a home loan between December 15, 2017 and December 31, 2025. For those who arranged their mortgages prior to this window of time, the $1 million ceiling remains in place.

There is much more to note on this topic. When the Bipartisan Budget Act of 2018 became law on February 9, a pair of expired tax breaks were retroactively reinstated for the 2017 tax year: taxpayers still have an opportunity to deduct mortgage insurance premiums and may also exclude income from the discharge of debt on their principal residence, if eligible for such a deduction. Regarding mortgage insurance premiums, a taxpayer is fully eligible to claim that deduction when his or her adjusted gross income (AGI) is below $100,000 (a phase-out range occurs between $100,000-$110,000). The total of the mortgage insurance premiums is treated as additional deductible mortgage interest. 7

Homeowners should also be aware that the annual mortgage interest deduction is now just $375,000 for married taxpayers filing separately and that the deduction for interest paid on home equity debt has disappeared.2,6

8 The qualified medical expense deduction improves.

One of the few itemized deductions kept under the tax reforms also has a lower threshold this year. You can now deduct any out-of-pocket medical expenses exceeding 7.5% of your adjusted gross income (AGI). This applies to qualified medical expenses in 2017 and 2018. (The old deduction threshold was 10%.)2,6

9 529 plan assets may now be used to pay for qualified elementary education expenses.

Prior to 2018, 529 plans were college savings vehicles only; assets within them were earmarked for payment of qualified higher education expenses. Now, federal tax law says you can also distribute up to $10,000 a year from a 529 plan to pay for K-12 tuition, tutoring, and linked curriculum materials and that these qualified distributions will be tax free. Some state laws governing 529 plans do not allow this, however. As a result, 529 plan participants in select states are being told to wait before devoting any 529 plan assets to elementary education, as they risk wading into a gray area in terms of tax law by doing so.6,8

Incidentally, funds from 529 plans may not be used to pay homeschooling expenses for students who would otherwise attend classes in grades K-12.8

10 No one may recharacterize a Roth IRA conversion.

Before this year, a traditional IRA owner who “went Roth” and subsequently changed his or her mind had a chance to undo the conversion within a certain time frame. This option is now disallowed.9

11 The federal estate tax exemption doubles.

Very few households will pay any death taxes during 2018-25. This year, the estate tax threshold is $11.2 million for individuals and $22.4 million for married couples; these amounts will be indexed for inflation. The top death tax rate stays at 40%.2,6

12 Two changes apply to the charitable deduction.

The charitable deduction was retained amid the tax reforms, but middle-class taxpayers may have far less incentive to donate to charity than they once did due to the greater standard deduction. A pair of adjustments have been made. One, taxpayers can now deduct charitable donations equal to 60% of their incomes; previously, the limit was 50%. Two, charitable contributions made to a university or college that give the donor the right to buy sports tickets are no longer deductible.2

13 Certain types of discharged student loan debt are now exempt from income tax.

From 2018-25, no income tax will be applied to federal or private student loan debt discharged because of the borrower’s death or disability.

In the past, if a borrower died or became severely disabled while carrying an outstanding education loan balance, the lender could release the borrower from liability and reduce the debt to zero. The only problem: the I.R.S. viewed the discharged debt as the equivalent of income. A $10,000 discharged student loan would have ordinary income tax levied on it. Now, that will not happen. The new law does not mandate private lenders to discharge debt on these occasions, however.6

Key Tax Changes for Businesses

Some of these alterations to the Internal Revenue Code are permanent, unlike nearly all the changes affecting households.

1 The corporate tax rate is now a flat 21%.

Last year, the corporate tax rate was marginally structured and topped out at 35%. While corporations with taxable income of $75,000 or less looked at no more than a 25% marginal rate, more profitable corporations faced a rate of at least 34%. The new, permanent 21% flat rate brings U.S. corporate taxation in line with that in many other nations. Only corporations with annual profits of less than $50,000 will see their taxes go up this year, as their rate will move north from 15% to 21%.2,6

2 Our corporate tax system is now territorial.

The 2018 federal tax reforms instruct the I.R.S. to treat foreign profits more gently. Before the reforms, the U.S. corporate tax system was a worldwide system, meaning that American corporations paid American taxes on profits earned outside America; that amounted to a double tax on those profits, and those profits could be subjected to a 35% corporate tax rate in the process.

Now repatriated earnings are being taxed differently to encourage U.S. companies to bring profits home rather than leave them overseas. A new, one-time repatriation rate of 15.5% on cash (and cash equivalents) and 8% on illiquid assets is in place, payable over a comfortable, 8-year term.2

3 The corporate AMT has been eliminated.

The 2018 tax reforms permanently repealed this 20% supplemental tax.2

4 Many pass-through businesses can claim a 20% deduction on earnings.

Some fine print accompanies this change. The basic benefit is that business owners whose firms are LLCs, partnerships, S corporations, or sole proprietorships can now deduct 20% of qualified business income, promoting reduced tax liability. (Trusts, estates, and cooperatives are also eligible for the 20% pass-through deduction.)

Not every pass-through business entity will qualify for this tax break in full, though. Doctors, lawyers, consultants, and owners of other types of professional services businesses meeting the definition of a specified service business may make enough to enter the phase-out range for the deduction; it starts above $157,500 for single filers and above $315,000 for joint filers. Above these business income thresholds, the deduction for a business other than a specified service business is capped at 50% of total wages paid or at 25% of total wages paid, plus 2.5% of the cost of tangible depreciable property, whichever amount is larger.6,10

5 The Section 179 deduction doubles.

Business owners who want to deduct the whole cost of an asset during its first year of use will appreciate the new $1 million cap on the Section 179 deduction. In addition, the phaseout threshold rises by $500,000 this year to $2.5 million.1

6 Bonus depreciation also doubles.

This is a near-term perk, one that, starting in 2027, will likely vanish for most pass-through firms and corporations. The first-year “bonus depreciation deduction” is now set at 100% with a 5-year limit, so a company can now write off 100% of qualified property costs through 2022 rather than through a longer period. Besides the jump from 50% to 100%, there is another eye-opener here: bonus depreciation now applies for used equipment as well as new equipment.1,10

7 1031 exchanges are restricted to real estate.

Before 2018, 1031 exchanges of capital equipment, patents, domain names, private income contracts, ships, planes, and other miscellaneous forms of personal property were permitted under the Internal Revenue Code. Now, only like-kind exchanges of real property pass muster.10

8 Deductions for business interest expenses are now limited to 30% of AGI for large firms.

This limit pertains to firms with over $25 million in gross receipts.1,10

9 Carryover and deduction rules applying to net operating losses change.

Before 2018, most net operating losses incurred were eligible for a 2-year carryback and a 20-year carryforward, and both carryovers and carrybacks could offset as much as 100% of taxable income. While carrybacks are still permitted for two years, NOLs may now be carried forward indefinitely – but they can only offset up to 80% of income.10,11

Tax Breaks Gone in 2018

Due to the reforms, some standbys of federal tax law are gone this year and for the foreseeable future. It is too early to tell if they will return in coming years.

1 Personal exemptions are eliminated.

In the interest of simplification, the new tax reforms repeal the core personal exemption, plus the exemptions taxpayers could claim for relatives and dependent children. (The personal exemption phase-out rule naturally disappears as well.) The new $12,000 standard deduction financially surpasses the previously scheduled combination of the personal exemption and standard deduction for 2018 ($6,500 standard deduction + $4,150 personal exemption).1,2

2 Many itemized deductions are gone.

When the Tax Cuts & Jobs Act headed to Congress in fall 2017, it appeared the list of repealed deductions would be very long. While some itemized deductions were retained, the list of lost deductions includes the following:

*Home equity loan interest deduction
*Moving expenses deduction
*Casualty and theft losses deduction (though it still applies this year in certain areas; see the “Other Interesting Developments” section)
*Unreimbursed employee expenses deduction
*Subsidized employee parking and transit deduction
*Tax preparation fees deduction
*Investment fees and expenses deduction
*IRA trustee fees (if paid separately)
*Convenience fees for debit and credit card use for federal tax payments
*Home office deduction
*Unreimbursed travel and mileage deduction

Under the conditions set by the reforms, many of these deductions could be absent through 2025.12,13

Several expired deductions have been put back into place for the 2017 tax year, thanks to the Bipartisan Budget Act of 2018.

*The above-the-line deduction for qualified tuition and related expenses was retroactively reinstated for TY 2017. With this in place again, a taxpayer has the option to take a deduction for the amount of tuition and linked higher education expenses from adjusted gross income (AGI) on page 1 of Form 1040, if it provides a better tax break than claiming the Lifetime Learning Credit or the American Opportunity Tax Credit for the same expenses.
*As noted earlier, the deduction for mortgage insurance premiums is back.
*So is the chance to exclude the amount of debt forgiven on your principal residence from your taxable income.
*Three credits pertaining to energy efficiency have been restored for 2017. One, the 10% tax credit for energy-efficient home improvements returns, with its $500 ceiling now limited to a lifetime available credit. Two, the 10% residential energy property credit for the use of qualified fuel cell, small wind energy, fiberoptic solar lighting, and geothermal heat pump components returns – in fact, these credits will be offered through 2021. Three, the 10% tax credit for buying a two-wheeled, plug-in electric vehicle returns, with a limit of $2,500.
*If you are eligible to claim the Earned Income Tax Credit for 2017, you can either use your earned income from 2016 or 2017 to calculate the credit – whichever amount gives you the chance for a larger tax break.7

Social Security & Medicare Changes

1 Social Security benefits increase 2.0%.

This increase in retirement income is essentially eaten up by higher Medicare Part B premiums for many seniors, however (see #3 below).14

2 Social Security withholding thresholds are higher.

Before and during the year you reach Full Retirement Age, Social Security withholds some of your benefits when your earned income surpasses certain thresholds.

If you have yet to reach your FRA, you may earn up to $17,040 in 2018 before having $1 in benefits withheld for each additional $2 in earned income above that level.

If you reach your FRA in 2017, you may earn as much as $45,360 before having $1 in benefits withheld for each additional $3 in earned income above that level.14

3 Many seniors are paying higher Medicare Part B premiums this year.

In 2017, Medicare’s “hold harmless” statute held Part B premium costs down for about 70% of Medicare enrollees. While around 30% of Medicare recipients paid about $134 per month for Part B coverage, others paid Part B premiums of just $107-109 as a result. They got this discount because the “hold harmless” rule says that on an annual basis, Part B premiums cannot increase more than Social Security’s cost-of-living adjustment – and the 2017 COLA was tiny.

This year, about 42% of Medicare recipients will pay the standard Part B premium even though they are subject to the “hold harmless” provision, as the annual increase in their Social Security benefits will equal or surpass the increase in their Part B premiums. Around 28% of recipients will pay less than $134 per month for Part B, since the annual increase in their Social Security benefits will be less than the Part B premium increase.15

4 Medicare’s Part A deductible increases.

In 2017, the Part A deductible (on hospital stays) is $24 higher than in 2017, rising to $1,340. The yearly Part B deductible remains at $183.15

5 There are some Part D adjustments of note.

Medicare enrollees in Part D drug plans will pay only 35% of the cost of brand-name medications and 44% of the cost of generics while in the “donut hole” in 2018. Average monthly premiums for standalone Part D drug plans are expected to become $1.20 cheaper this year; the projected average is $33.50. The annual Part D plan deductible limit rises $5 this year to $405.16

6 New I.D. cards are being issued to Medicare recipients.

“Why did Medicare put my Social Security Number on my Medicare I.D. card?” If you have ever asked this question (and in this age of rampant identity theft, you may have asked it more than once), you will be glad to know an answer to this problem is just ahead. Medicare is mailing out new I.D. cards in April. These new cards will not have your SSN, but a new 11-character Medicare Beneficiary Identifier (MBI) code made up of numbers and upper-case letters.17

COLAs & Phase-Out Range Adjustments

Here are some details pertaining to retirement plans and other items largely unaffected by the 2018 tax reforms.

1 Many cost-of-living adjustments have been made.

*401(k), 403(b), 457 Plan Contribution Limits
The ceiling on elective deferrals to these plans rises to $18,500, with an additional standard catch-up contribution of up to $6,000 permitted for those who will be 50 or older by the end of 2018.18

*Defined Contribution Plan Annual Addition Limit
In 2018, the cap on annual employer profit-sharing additions to these plans heads from $54,000 up to $55,000.18

*SEP Plan Contribution Limits
Employers may contribute up to $55,000 (or up to 25% of eligible compensation per employee) to a SEP plan in 2018, to a cap of $275,000. Both limits were $5,000 lower in 2017. The minimum compensation level is again at $600.18

*Limit on ESOP Maximum Balance
This improves by $25,000 to $1,105,000 in 2018.18

*Amount for Lengthening of 5-Year ESOP Period
As in 2017, this limit gets a COLA of $5,000, moving north to $220,000.18

*Limit on Annual Retirement Benefit Payable from a Defined Benefit Plan
Another $5,000 COLA also pushes this limit to $220,000.18

*Limit on Income Subject to Social Security Tax
For 2018, the taxable wage base rises to $128,400, an increase of $1,200. 18

*Health Savings Account Contribution Limits
The annual contribution limit for a self-only policy increases $50 this year to $3,450. It is $4,450 for those who will be 55 and older in 2018. The contribution limit on a family policy rises $150 this year to $6,900 and $7,900 for those who will be 55 and older this year.19

*Out-of-Pocket Amount Limits for Medical Savings Accounts (MSAs)
The 2018 caps are $4,600 for self-only coverage (a $100 increase) and $8,400 for family coverage (up by $150).20

*Earned Income Credit
If your family has three or more qualifying children and you are married and filing jointly, the maximum EIC is $6,444 this year, $126 more than last year.20

*Adoption Credit
The credit has a limit of $13,840 in 2018, a $270 increase. (Married couples who file separately may not be eligible to claim it.)21

*Annual Gift Tax Exclusion
For the first time in five years, this limit gets a COLA. It rises $1,000 to $15,000 in
2018. (It is never adjusted in increments greater than $1,000.)21

*Foreign Earned Income Exclusion
This rises $2,000 to $104,100 in 2018.20

No 2018 COLAs have been made to these limits:

*IRA Contribution Limit
The yearly cap of $5,500 stays in place. An additional $1,000 catch-up contribution
is allowed for those who will be 50 or older by the end of 2018, so the cap for those
IRA owners is $6,500.18

*SIMPLE Plan Contribution Limit
The annual limit is still $12,500 with a $3,000 catch-up contribution permitted for those who will be 50 or older by the end of this year.18

*Definition of a Key Employee
The dollar limitation linked to the definition of a key employee in a top-heavy plan stays at $175,000.18

*Definition of a Highly Compensated Employee
The definition (used with regard to defined contribution and defined benefit plans) stays at $120,000 this year.18

2 Numerous phase-out ranges have been adjusted higher for inflation.

*Traditional IRA Contribution Deductions When You or Your Spouse Have Access to a Retirement Plan at Work
In 2018, the MAGI phase-out ranges are:

*Single filer or head of household: $63,000-$73,000 ($1,000 higher)
*Married couples filing jointly: $101,000-$121,000 ($2,000 higher)
*Married couples filing separately: $0-$10,000 (it never changes)

Below the phase-out ranges, you may claim a dollar-for-dollar deduction for contributions to a traditional (i.e., deductible) IRA. These are not phase-outs affecting the amount of your traditional IRA contributions. They only affect the amount of the deduction you may take on your 1040 form for making them during 2018.22

*Traditional IRA Contributions if You Lack Access to a Workplace Retirement Plan, but Your Spouse Has Access to Such a Plan
Note the slight increase for joint filers here.

*Married couples filing jointly: $189,000-$199,000 ($3,000 higher)
*Married couples filing separately: $0-$10,000 (it never changes)22

*Roth IRA Contributions
Your ability to make a 2018 Roth IRA contribution is reduced when your MAGI falls into these phase-out ranges. If it exceeds the high end of these ranges, you cannot make one.

*Single filer or head of household: $120,000-$135,000 ($2,000 higher)
*Married couples filing jointly: $189,000-$199,000 ($3,000 higher)
*Married couples filing separately: $0-$10,000 (it never changes)22

*Lifetime Learning Credit
This year, the phase-out ranges start at $57,000 for single filers ($1,000 higher) and $114,000 for joint filers ($2,000 higher).21

*Adoption Credit
The MAGI phase-out range in 2018 rises by $4,040 to $207,580-$247,580. This range applies for all filing statuses.21

*Saver’s Credit
In 2018, taxpayers are not eligible to claim this credit of up to $2,000 if their MAGI is above $63,000 as a joint filer, $47,250 as a head of household, or $31,500 otherwise.22

Other Interesting Developments

1 The long-term capital gains tax rate thresholds do not quite sync with the new income tax thresholds.

Taxpayers in the bottom two marginal tax brackets paid no tax on long-term capital gains tax in 2017. Taxpayers in the top marginal bracket paid a tax of 20%. Everyone else faced a tax of 15%. This year, the long-term capital gains rates are structured as follows:

Bracket Single Filers Married Filing Jointly Married Filing Head of Household
or Qualifying Widower Separately

0% $0 – $38,600 $0 – $77,200 $0 – $38,600 $0 – $51,700
15% $38,601 – $425,800 $77,201 – $479,000 $38,601 – $239,800 $51,701 – $452,400
20% $425,801 and up $479,000 and up $239,501 and up $452,401 and up

As for short-term capital gains, they are taxed as ordinary income – and since tax rates fell slightly at the beginning of 2018, any short-term gains you take in could be taxed less than they would have been last year.

The highest earners should know that the 3.8% net investment income tax still exists – it was not repealed in December, and its income thresholds remain the same.2

2 The individual health insurance mandate is still here for 2018, but scheduled for repeal in 2019.

The Affordable Care Act instituted tax penalties for individual taxpayers who went without health coverage. As a condition of the 2018 tax reforms, no taxpayer will be penalized for a lack of health insurance next year. Adults who do not have qualifying health coverage will face an unchanged I.R.S. individual penalty of $695 this year.1,20

3 The electric car credit is still around.

Electric car buyers can claim a credit of as much as $7,500 this year. The credit begins to phase out for buyers of certain makes, however, once a manufacturer sells more than 200,000 plug-in vehicles.23

4 The school supplies deduction remains.

This is the deduction that teachers take for out-of-pocket expenses they incur to buy classroom materials. Although certain legislators in Washington wanted to double it as part of the tax reform package, it was not sweetened. It stays at $250 this year, and teachers may take it whether or not they choose to itemize.6,23

5 Business owners can no longer deduct some food and entertainment costs.

If you are accustomed to writing off some of the cost of a corporate lunch, you are in luck: in most cases, businesses may still deduct 50% of the expenses of qualifying meals. The cost of complimentary snacks you put out for your workers, however, is now just 50% deductible – it gets the same federal tax treatment as restaurant meals you provide to employees.

The deduction for business expenses for employee entertainment fell victim to the reforms and is gone as of 2018.1,23

6 Two important education tax breaks are preserved.

First, tuition waivers for graduate students engaged by universities as researchers or teaching assistants remain tax free. Some worried that their waivers would be subject to income tax as a result of the reforms.

Second, interest on student loan debt can still be deducted, even if a taxpayer declines to itemize deductions.6,23

7 Parents must provide SSNs for their kids when claiming the Child Tax Credit.

You must do this for each child you claim the CTC for in 2018.5

8 Casualty, disaster, and theft losses are still deductible for some taxpayers, depending on where they live.

During 2018-25, taxpayers who suffered such losses as an effect of a federal disaster declared by the President may still qualify to take a federal tax deduction for these types of personal losses.

In addition, the Bipartisan Budget Act of 2018 extends tax benefits to victims of Hurricanes Harvey, Irma, and Maria and California wildfires. Federal tax relief provided for disaster areas declared between September 21 and October 17, 2017 in the aftermath of Hurricanes Harvey, Irma, and Maria has been prolonged. New rules now allow Golden State residents impacted by wildfires access to retirement funds and temporarily lift limits on deductions for charitable contributions. They also permit deductions for personal casualty disaster losses and alter measurement of earned income to help affected taxpayers qualify for the Earned Income Tax Credit.

Taxpayers who live in 2016 presidentially declared disaster areas may take distributions of up to $100,000 from IRAs and workplace retirement plans regardless of age restrictions – they will not be hit with the 10% early withdrawal penalty for withdrawing these assets too early, they can spread the taxable income represented by the withdrawal over three tax years, and they can optionally repay the amount distributed to them within three years.9,13,24

9 Chained CPI is now the benchmark for yearly inflation adjustments to federal tax thresholds.

Before 2018, the Consumer Price Index for All Urban Consumers (CPI-U) was the inflation yardstick used to calculate COLAs. Now, the “chained” version of the CPI-U, commonly called the Chained CPI, is being used.

The Chained CPI makes a subtle but important assumption – it assumes that given higher prices, a consumer will choose to substitute a cheaper product or service for a more expensive one in its class. As increases in the Chained CPI are smaller than those of the CPI-U, the switch to the Chained CPI implies that tax bracket and phase-out thresholds will rise in smaller increments, and it also implies smaller COLAs for some credits and deductions.2

Do these tax law changes prompt any concerns or questions? If they do, please feel free to contact me at «representativephone» or via email at «representativeemail». I will be happy to discuss them with you.

1 – [6/2/17]
2 – [12/4/17]
3 – [8/8/17]
4 – [1/3/18]
5 – [12/22/17]
6 – [12/30/17]
7 – [12/26/17]
8 – [12/26/17]
9 – [12/21/17]
10 – [1/3/18]
11 – [1/3/18]
12 – [11/14/17]
13 – [1/2/18]
14 – [12/26/17]
15 – [12/20/17]
16 – [1/4/18]
17 – [11/17/17]
18 – [9/14/17]
19 – [1/3/18]
20 – [11/29/17]
21 – [10/19/17]
22 – [11/1/17]
23 – [10/19/17]
24 – [12/19/17]

Fear Must Not Inhibit a Financial Strategy

Fear Must Not Inhibit a Financial Strategy

Too often, it persuades investors to make questionable moves.


Fear affects investors in two distinct ways. Every so often, a bulletin, headline, or sustained economic or market trend will scare them and make them question their investing approach. If they overreact to it, they may sell low now and buy high later – or in the worst-case scenario, they derail their whole investing and retirement planning strategy.

Besides the fear of potential market shocks, there is also another fear worth noting – the fear of being too involved in the market. People with this worry are often superb savers, but reluctant investors. They amass large bank accounts, yet their aversion to investing in equities may hurt them in the long run.

Impulsive investment decisions tend to carry a cost. People who jump in and out of investment sectors or classes tend to pay a price for it. A statistic hints at how much: across the 20 years ending on December 31, 2015, the S&P 500 returned an average of 8.91% per year, but the average equity investor’s portfolio returned just 4.67% annually. Fixed-income investors also failed to beat a key benchmark: in this same period, the Barclays Aggregate Bond Index advanced an average of 5.34% a year, but the average fixed-income investor realized an annual return of only 0.51%.1

This data was compiled by DALBAR, a highly respected investment research firm, which has studied the behavior of individual investors since the mid-1980s. The numbers partly reflect the behavior of the typical individual investor who loses patience and tries to time the market. A hypothetical “average” investor who merely bought and held, with an equity or fixed-income portfolio merely copying the components of the above benchmarks, would have been better off across those 20 years. In monetary terms, the sustained difference in performance could have meant a difference of hundreds of thousands of dollars in earnings for an investor across a lifetime, given compounding.1

Other people are held back by their anxiety about investing. They become great savers, steadily building six-figure cash positions in enormous savings or checking accounts – but they never sufficiently invest their money.

That confusion comes with a severe potential downside. Just how much interest are their deposit accounts earning? Right now, almost nothing. If they invested more of the money they were saving into equities – or some kind of investment vehicle with the potential to outrun inflation – those invested dollars could grow and compound over time to a degree that idle cash does not.

A large emergency fund is a great thing to have, but it can be argued that a tax-advantaged retirement fund of invested dollars is a better thing to have. After all, who retires on cash savings alone? Tomorrow’s retirees will live mainly on the earnings generated from the investment of the dollars they have saved over the decades. Seen one way, a focus on cash is financially nearsighted; it ignores the possibility that even greater abundance may be realized through its sustained investment.

Fear dissuades some people from sticking with a long-term financial strategy and discourages other people from developing one. Patience and knowledge can help investors contend with the fears that may risk hurting their retirement saving prospects.

1 – [5/22/17]

Avoiding the Money Pitfalls of Past Generations
Take these financial lessons to heart.



You have a chance to manage your money better than previous generations have. Some crucial financial steps may help you do just that.

Live below your means and refrain from living on margin. How much do you save per month? Generations ago, Americans routinely saved 10% or more of what they made, either depositing those savings or investing them. This kind of thriftiness is still found elsewhere in the world. Today, the average euro area household saves more than 12% of its earnings, and the current personal savings rate in Mexico is 20.6%.1

In 1975, the U.S. personal savings rate hit an all-time peak of 17.0%; it has been below 4% since June. Easy credit is one culprit; the tendency to overspend in a strong economy is another. Remember to pay yourself first, not credit card companies. Collect experiences rather than possessions.1

Recognize that there is no “sure thing” investment. Investors found that out in 2000 and 2007 when things shifted in the financial and housing markets. What returns 15-20% a year from now may not next year or three years on. Diversification matters: you never know what asset class might soar or plummet in the future, and allocating your assets across different investment types gives you the potential to reduce overall portfolio risk.

Plan for a 30-year retirement. According to Social Security estimates, the average 65-year-old man is currently projected to live until age 84, and the average 65-year-old woman, to age 87. With advances in health care, living to 95 may become the norm for the average 35-year-old.2

Plan for your retirement first, your children’s college education second. Some baby boomers did the inverse, and some who did wonder if they made the right decision for their futures. College students can work and receive financial aid; for senior citizens, it is a different story.

Switch jobs for better pay. Generations ago, people tended to stay at the same job for several years or longer, whether their prospects were promising or not. If a better job lures you, do not be ashamed to leave your current employer for it – you may gain, financially. Payroll processing giant ADP found recently that a job change resulted in an average pay increase of 4.5% for a full-time worker.3

Congratulate yourself on the good moves you have made, and plan more. Make another good move and chat with a financial professional about the ways you can continue to plan for a prosperous future.

1 – [12/14/17]
2 – [12/14/17]
3 – [2/8/16]