Advisor News Insight

Tax Planning for 2020

The SECURE Act

The SECURE Act -- the most impactful retirement plan legislation since the Pension Protection Act of 2006 -- was included in the bipartisan spending bill signed by US President Donald Trump on December 20, 2019. The SECURE Act will advance the goals of increasing access to defined contribution plans, promoting lifetime income options, and facilitating retirement plan design and administration. These article focuses on the Act’s impact on retirement plans.

Key Changes for your clients’ 2020 Tax Returns

Clients should expect major changes to their 2020 tax returns, according to this article in Motley Fool. For example, the IRS has issued the new 1040-SR tax form to make it easier for retirees to file their returns. Clients can save more in their retirement accounts, while divorced couples can no longer claim alimony deductions next year. Taxpayers can also see inflation-related adjustments, such as higher standard deductions and higher exemption from the AMT.

This article was written by Dan Caplinger, Director of Investment Planning for Motley Fool.

Health Care Planning

HSA Planning When Both Spouses Have A High-Deductible Health Plan (HDHP)

Financial advisors with clients who are married and have mixed health insurance coverage can help their clients understand their actual HSA contribution limits, as these limits depend on the type of plan each spouse has. For spouses covered by separate self-only HDHP plans, each can contribute up to the maximum, self-only limit to their respective HSAs, but they can’t make up for any contribution shortfalls of the other spouse.

This article was written by Jeffrey Levine, CPA/PFS, CFP®, CWS®, MSA CEO, Director of Financ​ial Planning for Blueprint Wealth Alliance.

IRA Planning

IRS Releases Proposed New Life Expectancy Table

IRS has issued new proposed life expectancy tables for calculating required minimum distributions (RMDs) from IRAs and employer plans. This has been a long time coming as the tables currently in use were issued back in 2002. The new tables account for increased life expectancy and should result in lower RMDs for most IRA owners and beneficiaries. The new tables are currently only proposed, and a hearings and comment period has been scheduled before they can be finalized. If all goes as planned, they would be used for calculating 2021 RMDs. RMDs for 2020 are not affected and cannot be calculated using the new tables. Here are some takeaways on the new tables:

• The new tables account for people living longer and include older account owners. While the current tables stop at age 115+, the new ones include retirement account owners up to age 120+. Great news for those IRA owners who are age 119 who will be able to take slightly smaller RMDs!
• The new factor for age 70 is 29.1 and the new factor for age 71 is 28.2. These will be the factors that many IRA owner will use to calculate their first RMDs. This is an increase from the current factors of 27.4 and 26.5, respectively. These new higher factors mean that IRA owners will be taking less each year as RMDs, allowing more tax-deferred growth over the years and resulting in more retirement savings.
• There is a transition rule for those beneficiaries using non-recalculated single life expectancies to calculate RMD from inherited IRAs. They will be allowed to switch to the new life expectancy tables.
• Those taking substantially equal periodic payments [72(t) payments] using the current life expectancy tables will also be allowed to switch to the new tables without concern of modifying the current payment plan.

Systemic IRA Trust Compliance Issue Can Have Big Tax and Penalty Impact

Post-death rules governing IRAs, particularly those involving trusts, are complicated and if not strictly adhered to can lead to severe ramifications for the intended beneficiaries. One such rule, often referred to as the “documentation rule” may not seem that complicated at first glance, but failure to meet its requirements can result in confiscatory penalties.

This paper was distributed by  Estate Planning Review—The Journal, a monthly publication of Wolters Kluwer Tax & Accounting.

The Role of IRAs in US households Saving for Retirement, 2019

Among the findings of this Research Perspective from the Investment Company Institute: IRAs play an increasingly important role in retirement savings. But few Americans contribute directly to IRAs. Instead, most are funded by rollovers from retirement plans.

This report was prepared by Sarah Holden, Senior Director and Daniel Schrass, Economist both of the Retirement and Investor Research Division at the Investment Company Institute (ICI).

Medicare & Medicaid Planning

The 2020 SSI and Spousal Impoverishment Standards

The Centers for Medicare & Medicaid Services (CMS) released an Informational Bulletin with the updated 2020 Supplemental Security Income (SSI) and Spousal Impoverishment Standards.

Retirement Planning

2021 Pension Mortality Improvement Rates Published by IRS

IRS Notice 2019-67 specifies updated mortality improvement rates and static mortality tables to be used for defined benefit pension plans under Section 430(h)(3)(A) of the Internal Revenue Code (Code) and Section 303(h)(3)(A) of the Employee Retirement Income Security Act (ERISA). These updated mortality improvement rates and static tables apply for purposes of calculating the funding target and other items for valuation dates occurring during the 2021 calendar year.

This article was written by John Manganaro, Deputy Editor of planadvisor.com.

Social Security Planning

The Positive Impact of Claiming Social Security Later

The most popular age for claiming Social Security benefits is age 62, the first year in which the benefits are available to people, according to the Center for Retirement Research at Boston College.

Thirty-five percent of men and 39% of women claim their benefits at that age. A mere 23% of men claim their Social Security benefit at full retirement age, and just 16% of women wait until that time.

The problem with that, according to a study by the Center, is that retirees would get substantially more in their Social Security check if they waited until age 70 to sign up.

This article was written by Lee Barney, Managing Editor of planadvisor.com.

Practice Management

4 strategies to help increase communication with clients

A survey from YCharts revealed that many advisory clients would like more personalized and frequent communication from their advisors. The study recommended four steps advisors should take to improve frequency and quality of communications, including creating new opportunities for communication and understanding how to service different clients.

This article was written by Ginger Szala, Executive Managing Editor of Investment Advisor magazine.

Assumed Federal Rates (AFRs)

§7520 Rate for January is: 2.0%

Breakdown:

Financial Facts of the Month

Backstop

The Pension Benefit Guaranty Corporation (PBGC) was forced to take over an average of 5½ failed private pension plans each month over the last 5 fiscal years, i.e., 2015-2019 (Source: PBGC).

Buckeye Brains

The state of Ohio has correctly backed the winner of the U.S. presidential election in the last 14 races for the White House, i.e., 1964-2016 (Source: usconstitution.net).

Down But Still a Bull

The bull market for the S&P 500 is 129 months old as of today. During the bull run, the stock index has overcome 14 drops of at least 5%, including 6 drops of at least 10% (Source: S&P Dow Jones Indices).

Estate Shift

Shifting future growth out of an estate has always been an effective course to take. The specter of the 2026 tax cliff warrants greater planning urgency. Also, in order to avoid application of transfer taxes to valuation increases, clients should consider making gifts sooner rather than later. For example, $1 million growing at an after-tax rate of return of just 3% from January 1, 2020 to December 31, 2025 (5 years) will increase in value by $159,247. Getting that growth out of an estate saves 40% of that amount, or $63,710 (Source: unknown).

If They Are Right

55% of 3,400 high net-worth individuals surveyed in October 2019 anticipate a “significant drop” in financial markets before the end of 2020 (Source: UBS Investor Watch).

Long-term Guess

When President Franklin D. Roosevelt proposed the Social Security retirement program in 1935, FDR’s financial people projected that total Social Security expenditures would reach $1.3 billion in 1980 or 45 years into the future. The actual Social Security outlays in 1980 were $149 billion. Thus, the analysts’ 1935 estimate represented less than 1% of actual 1980 Social Security expenditures (Source: U.S. Social Security Administration (SSA)).

Old and Still Owning Money

In 2016, 46% of American homeowners ages 65-79 had outstanding mortgage debt on their primary residence, almost double from the 24% of this age bracket that had mortgage debt 30 years earlier (Source: Joint Center for Housing Studies of Harvard University).

That Would Hurt

Individual income taxes paid by American taxpayers would have to increase by +57% in order to eliminate our $984 billion deficit from fiscal year 2019 (Source: U.S. Department of Treasury).

The Next Ten-Year Guess

Actual Social Security outlays for fiscal year 2019, i.e., the 12 months ending 9/30/19, were $988 billion, 24% of the nation’s total outlays of $4.1 trillion. In August 2019, the Congressional Budget Office projected that Social Security outlays for fiscal year 2029 will be $1.82 trillion, 26% of the nation’s estimated outlays of $7.0 trillion for fiscal year 2029 (Source: Congressional Budget Office (CBO)).

The Risk of Just One Stock

56 individual stocks within the S&P 500 are up at least +50% YTD through the close of trading last Friday, including 11 stocks that are up at least +75% YTD. There are also 13 stocks that are down at least 30% YTD, including 4 stocks down at least 50% (Source: BTN Research).

Up Again

The bond market has had just 3 down years in the last 40 years, i.e., 1979-2018. The bond market is up +8.8 YTD (total return) through 11/27/19. The Bloomberg Barclays Aggregate bond index, calculated using 6,000 publicly traded government and corporate bonds with an average maturity of 5 years, was used as the bond measurement (Source: BTN Research).

Would You Live This Way?

For the recently completed fiscal year 2019, i.e., the 12 months ending 9/30/19, the US government had total tax receipts of $3.462 trillion and total outlays of $4.447 trillion, analogous to taking in $1 of tax revenue but spending $1.28 (Source: U.S. Department of Treasury).

Financial / Insurance Calculators & Websites

An extensive list of online calculators and informational websites.

Requirement Updates

Several states have updated their insurance CE requirements. (View updates, CE requirements and more by clicking on the link below.)

CFP Ethics Webinar

“Ethical Practices for Professionals”
(Course#: 248997)

During this live webinar, Ed will present the CFP Board’s Ethics CE program to help bring CFP® professionals up-to-date on the new Code and Standards.

CFP®, ChFC®, CLU®, CEBS®, RPA, CRPS®, CRPC®

DATE: MONDAY, JANUARY 13, 2020

TIME: 2:00PM - 4:00PM EASTERN TIME

CREDIT: 2-HOURS OF CFP ETHICS CE
(NOTE: This webinar does NOT include state insurance credit.)

FEE: $49.00 (USD)

PAYMENT OPTIONS:

1. CFP ONLY license: $49.00
2. CIMA / CPWA ONLY license: $49.00
3. CFP AND CIMA / CPWA licenses: $49.00 plus an additional
   fee of $25.00

(“Investments & Wealth Institute® has accepted this CFP Ethics webinar for 2 hours of CE credit towards the CIMA®, CPWA®, CIMC®, and RMA® certifications.”)

The webinar consists of:

• Five learning objectives:
1. Identify the structure and content of the revised Code and Standards, including significant changes and how the changes affect CFP® professionals.
2. Act in accordance with CFP Board’s fiduciary duty.
3. Apply the Practice Standards when providing Financial Planning.
4. Recognize situations when specific information must be provided to a Client.
5. Recognize and avoid, or fully disclose and manage, Material Conflicts of Interest.
• Five vignettes (review questions)
• Interactive polling questions at the end of each learning objective (except for Learning Objective Number Four)
• Five interactive quiz questions after all Learning Objectives have been presented (credit received for attendee time logged and participation, no examination required)
• Webinar Evaluation Form after the presentation has ended (will open after the presenter has ended the webinar. You will also receive a follow-up email 24 - 48 hours AFTER the webinar has concluded, with a link to access the online Evaluation Form.)

Click on the “Upcoming webinars” button below to view future CFP Ethics Webinar dates/times.

Unable to attend this month’s webinar? Receive updates and registration information for future webinars by clicking on the “Subscribe” button below.

Advisor Insight Audio Podcast

HOSTED BY: EDWARD J. BARRETT

CFP®, ChFC®, CLU®, CEBS®, RPA, CRPS®, CRPC®

Below is a list of available Advisor Insight Audio Podcast episodes:

2019

• Episode 1: 2019 IRS Tax Information
• Episode 2: 2020 COLA Numbers
• Episode 3: 2020 HSA Numbers

2018

• Episode 1: Roth IRA Recharacterizations After the Tax Cuts and
  Jobs Act of 2017
   
• Episode 2: Financial Exploitation of Seniors
   

NOTE: OUR PODCAST EPISODES ARE NOT APPROVED FOR CE CREDIT!

Featured Self-Study CE Courses

“BEST CE Courses Updated for 2020”

BEST courses have been updated for 2020, including provision of the SECURE Act of 2019.

Self-Study CE Course List

As a top-notch continuing education provider we:

• Deliver CE to financial and insurance advisors
• Offer up-to-date and industry pertinent CE courses that maximize credits
• Provide ClearCert certified long-term care and annuity training CE courses
• Supply CE courses that are approved in all 50 states and the
  District of Columbia

Order CE courses toll free: 1-800-345-5669 OR
send an email to self_study@brokered.net.

Super CE Program

Top 5 reasons to schedule a Super CE program:

1. Classroom course: 1-hour (instructor-led)
2. Self-Study/Correspondence course: Provides up to 21 hours of state insurance CE and 5 or 10 hours of professional designation CE
3. Increase meeting attendance and leverage your time
4. Assist advisors in meeting their mandatory CE requirements
5. Position your company’s strategy, product solutions and value-added programs

What Advisors Say...

“Thanks! This was the most enjoyable CE I’ve completed in my over 14+ years as an advisor. I’ll be back.”  ~ Raymond James Advisor

“I didn’t even need the CE, but took the class to expand my knowledge and understanding. Thank you BEST.”  ~ Merrill Lynch Advisor

“BEST has perfected the Super CE program!”  ~ Morgan Stanley Advisor

“Productive & effective use of time in meeting Continuing Education requirements.”  ~ Wells Fargo Advisor

“Excellent program, well worth the time!” ~ UBS Advisor

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