Comparing Your 2017 & 2018 Tax Worksheet

The Tradesperson

DISCLAIMER: This is a hypothetical situation and is not based on real-life examples or actual results. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing. Carl didn’t have to go to college to carve out a solid career. He’s skilled at what he does, puts in hard work every day, and has the callouses to show for it. That competence and reliability have paid off in making him an asset to his employers, so the income he brought in over the years coupled with a commitment to living beneath his means has allowed him to create a nice nest egg. He shared that he was starting to feel the years. That’s the tradeoff for doing work you enjoy, I guess. He was looking forward to another ten years on the job, but his body might have other ideas. Carl confessed that his back was starting to feel stiff some days. He wasn’t in pain or injured, but it was taking him a little longer to loosen up in the morning, and he was ready to hit the couch when he got home at night. He wanted to make sure he was protected. He expressed that he would've rathered have a stiff back from wiring a building than sitting at a desk all day. But he wanted to make sure his family would be okay in case he would have to hang up his gear earlier than planned. With a son in college to become an engineer and a teenage daughter who planned to follow in her father’s footsteps by learning a trade, he and his wife, an RN, had tuition and child-rearing expenses to cover. But they’d be empty nesters soon, and he wondered if downsizing their lifestyle could leave them with more options in the long run. Besides regularly setting money aside, he wasn't familiar with investing or tax strategies, so he didn't know where to start. He shared that they were not extravagant people but chose a good school district and mortgage to go with it. When the kids were gone, they were thinking it might be easier on the budget and more enjoyable to move out of the suburbs into a smaller house with some land.

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The Widow

DISCLAIMER: This is a hypothetical situation and is not based on real-life examples or actual results. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing. After the loss of a spouse, widows often find themselves dealing with both grief and pressing financial concerns at the same time. That’s why there’s no time like the present to meet with an attorney and get your documents updated to make sure they are in good order. The eventual (if not immediate) need for a power of attorney and health care proxy to be filed is of the utmost importance. Heart disease is one of the leading causes of death in America. And although we know this to be true, it seems that dementia is right up there with the clients we help. The onset is often young (late 50’s, early 60’s), and to date, there is no cure, no surgery to be done. Laura and her husband came to see me, and I was given a heads up that he was having some memory issues and was having some testing done. She urged me not to mention the ‘D’ word in front of him as it was early in the process for him, and he knew what it meant and what the outcomes were. We had a conversation, the three of us. His comprehension was good, but there were differences. I checked my notes as to the last time their wills were updated… it had been a while. On a subsequent visit, Laura let me know she had difficulty grasping the enormity of the potential expense of caring for him. By choice, long-term care insurance had not been part of their plan. She projected the harsh realities around the cost of care, not to mention the taxes on their IRAs to access those funds. She shared that he has life insurance, but it expires in 5 years. She couldn't stop feeling awful, but she counted on that being there for her, assuming she would have to use their retirement assets to pay for care. I reminded her that it’s not selfish; it’s survival. Her goal was to provide him great care while he was alive. His goal was for the two of them to enjoy their lives together. He would be upset if, after 40 years of professional work, she spent all of it on him. By the end of our conversation, she understood that the death benefit is for the survivor, not the person whom the policy is on. As to the timing of it, my experience is that spouses who survive their loved ones have already mourned the very essence of their being well before their bodies have given up. The willingness to do what is right for him now will somehow be balanced out later.

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The Single Mom

DISCLAIMER: This is a hypothetical situation and is not based on real-life examples or actual results. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing. Life doesn’t always go as planned, but the more dedicated, disciplined, and prepared we are, the better financial future we can enjoy—no matter the circumstances. Paige had been to a presentation I did about her workplace benefits. The company was having on-again, off-again “reduction-in-force” offers to take an early retirement, or to simply leave. When I answered the phone, the caller sounded a little nervous. She had never met with an advisor before, but after attending the presentation, she thought I might be able to help her. She started working at the phone company right out of high school. A few years later, she was married, and soon after that, well, you know those newlyweds! By the time her daughter was five, her husband had left. It turned out, fatherhood wasn’t for him… nor was consistently making child-support payments. That didn’t stop Paige from working and raising her daughter to become a healthy, productive adult, or from making her 401(k) contributions. As the years went by, she had questions like “Is she saving enough? Do the investments make sense? How is she going to pay for college? Can she afford to buy a new car when she retires? Should she pay off her mortgage? Her dream trip to Tuscany… is it doable?” She looked to me for advice and guidance. I admired (and still do) her commitment to providing for her daughter and her consistent resolve to save and invest for her future retirement. Paige accomplished a lot—a whole lot, really. But the best offer yet from her company came in her mid-50s. She had been saving, waiting, for this moment for over 30 years. It was scary—no, intimidating—for her to really contemplate not having that paycheck, paid vacation, and benefits. So how does she evaluate the early retirement offer? How will she live? Where will she get money from? Will she pay taxes on her retirement? What about the company stock? I reminded her that we’ve talked about this many times. She did some great prep work with me, but I understand that big decisions like this can be stressful, especially with the deadlines. I was able to explain it to her again so she could be confident in her decisions. Paige did take that offer. She works part-time now and spends one to two days a week caring for her parents. “Do they have health care proxies, powers of attorney, and wills?” I asked. She laughed as she knows it's a never-ending conversation with me. As long as time marches on and the world keeps changing, it never really ends. The topics of conversation and how I am trying to help keeps our relationship fresh.

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The Married Couple

DISCLAIMER: This is a hypothetical situation and is not based on real-life examples or actual results. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing. Corrine retired first. One of the largest razor blade companies was headquartered in Boston, and they treated their employees well. A pension combined with a 401(k) match in the form of a stock that did very well gave her a comfortable nest egg and monthly income…not to mention a Medical ESOP plan. Her husband Ed retired many years later. An employee of the federal government, he wanted to work longer to increase his pension benefit. He too did well with his Thrift Savings Plan (TSP). But he had some credit card debt, so we devised a strategy to pay it off over two tax years, using vacation buyout money at retirement and TSP funds the following tax year. The couple had been clients of mine for several years, and he had put off retiring more than once. When I saw them call in, I figured he was calling to let me know he had finally decided to retire. Unfortunately, he was calling to let me know that his son died very prematurely. They came in, still reeling from grief, to discuss what they wanted to do next. Corrine and Ed come from a small island nation where family customs favor the eldest son. At the time of his death, he had two young children, the older of whom was two and the other only months old. They want to provide for their grandchildren to make sure they can be educated when the time comes. Neither Ed nor Corrine had attended college, but they made sure their sons did, and now, in their son’s absence, they will provide for his children. Given their young age, I suggested they speak with a local estate planning attorney to see if she thought setting up some type of trust to put assets in (and to name as a beneficiary) would help them accomplish their goals. She agreed, drafted the relevant documents, and they are now comforted by having a plan in place. Their son’s death triggered Ed to retire immediately. He and his wife now care for their grandchildren daily when their mother goes off to work. Their involvement in the grandchildren’s lives helps to ease their pain, pass on family values, and keep the legacy of their son alive.

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