{"id":31458,"date":"2018-12-13T14:29:53","date_gmt":"2018-12-13T19:29:53","guid":{"rendered":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/?p=31458"},"modified":"2018-12-14T09:36:16","modified_gmt":"2018-12-14T14:36:16","slug":"financial-advisers-help-clients-with-valuable-year-end-advice-about-retirement-planning","status":"publish","type":"post","link":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2018\/12\/financial-advisers-help-clients-with-valuable-year-end-advice-about-retirement-planning\/","title":{"rendered":"Financial Advisers Help Clients With Valuable Year-End Advice About Retirement Planning"},"content":{"rendered":"
\"\"
Paul Dowen, partner, Whittemore Dowen and Riccaiardelli LLP.
Courtesy Whittemore Dowen and Riccaiardelli<\/figcaption><\/figure>\n

By Susan E. Campbell<\/p>\n

December is\u00a0 <\/span>good time for business people\u00a0 <\/span>to meet with investment, accounting and tax professionals to look at the year behind and the one ahead.<\/span><\/p>\n

At Paul Dowen\u2019s office, Whittemore Dowen and Riccaiardelli, LLP in Queensbury, the team is working to manage retirement accounts in a way that maximizes deductions and minimizes tax liabilities under the new rules.<\/span><\/p>\n

Even though all individual tax brackets, except the 10 percent bracket, are lower because of the Tax Cuts and Jobs Act, the experts can offer some tried-and-true tips for managing the tax burden.\u00a0<\/span><\/p>\n

\u201cThe biggest jump in the new tax tables is from the 12 percent bracket to 22 percent, so the challenge is how we keep more income at the 12 percent rate,\u201d said Dowen. \u201cThe first step is to make sure the maximum amount allowed has been contributed to the company\u2019s 401(k) plan.\u201d<\/span><\/p>\n

These plans must be funded by salary deductions before year-end, so time is running out to play catch-up.<\/span><\/p>\n

\u201cThe new tax laws mean a tax cut or a break-even for retirees,\u201d said Don Tenne of Tenne Financial Group in Glens Falls. But for small proprietors and the self-employed who file a Schedule C, there are two hefty tax breaks now in the code.<\/span><\/p>\n

\u201cStarting in 2018 there is up to a 20 percent deduction in taxable income for those businesses,\u201d said Tenne. \u201cIf net profit is $200,000, for example, $40,000 is not taxed, a savings of $12-13,000 or more. That\u2019s huge.\u201d<\/span><\/p>\n

\"\"
Anthony J. Capobianco, president, CEO Capobianco Financial Advisors of Clifton Park.<\/figcaption><\/figure>\n

Business owners will also be able to write off equipment purchases in the first year, within certain guidelines, rather than depreciating those costs over a period of time, he said.\u00a0<\/span><\/p>\n

\u201cPut these two changes together and certain businesses can trim taxes like never before,\u201d said Tenne.\u00a0\u201cWhen every self-employed person in town gets a deduction on income taxes, they will be in a position to hire more people, buy more equipment, and grow. We should expect to see a positive impact on our communities.\u201d<\/span><\/p>\n

\u201cAn employee who maxes out his 401(k) right now might have a zero paycheck, but will have taken advantage of a provision for reducing taxable income,\u201d said Anthony Capobianco of Capobianco Financial Advisors in Clifton Park.<\/span><\/p>\n

Traditional IRA account holders can wait until April 15 to fund the plan and claim a deduction for 2018, if eligible, as IRA deductibility is phased out by household income.<\/span><\/p>\n

For higher-income taxpayers who earn under a set threshold, there is the non-deductible Roth IRA, and Dowen and Capobianco agree that for some, it may be a good time to convert a traditional IRA to a Roth. <\/span><\/p>\n

Under this conversion arrangement, the plan holder pays income tax on the amount converted in the current year in exchange for the benefit of tax-free withdrawals from the Roth account, including all its earnings, over future years.\u00a0<\/span><\/p>\n

Plus, there is no required minimum distribution (RMD) from a Roth, making Roths useful for achieving estate planning and generation-skipping goals. Every retiree age 70 1\/2 and older is required to take an annual RMD from a traditional IRA or 401(k) plan by Dec. 31 or face an IRS penalty, Dowen said. <\/span><\/p>\n

\u201cRoth conversions make sense in the long run, but not if there will be a jump in the tax bracket during the year of the conversion,\u201d said Dowen. \u201cThis is not an easy decision and cannot be reversed once made.\u201d<\/span><\/p>\n

\u201cThe IRA money does not have to be converted all at once, but can be spread out, perhaps over five years, and taxed at the taxpayer\u2019s ordinary income tax rate applicable those years,\u201d he said.<\/span><\/p>\n

\u201cThe concept of the Roth conversion is very good, but you have to pay the taxes at conversion out of your own pocket rather than have the IRA custodian withhold them,\u201d said Capobianco. \u201cThat means you have to write that tax check and people are hesitant to do that.\u201d<\/span><\/p>\n

Dowen points out that with all \u201cmiscellaneous itemized deductions\u201d like attorney costs, investment fees and out-of-pocket business expenses disappearing from the Schedule A starting in 2018, IRA plan holders can save money in the way they pay their annual custodial fees.<\/span><\/p>\n

\u201cIn the past I recommended clients pay their IRA fees with a personal check and deduct the amount on their tax return,\u201d he said. \u201cNow I am instructing them to have the fee taken out of the investment account and thus pay with pre-tax dollars.\u201d<\/span><\/p>\n

\"\"
Don Tenne of Tenne Financial Group in Glens Falls.<\/figcaption><\/figure>\n

Capobianco said he believes Roth IRAs are the \u201cretirement plan of the future. Clients may have accumulated $1 million, but really may have only $600\u2013700,000 based on their tax bracket.\u201d<\/span><\/p>\n

Dowen believes that one of the greatest risks to retirement investors today is that no one can plan what the tax brackets of the future will be. The current rules are set to expire in 2025, unless some of the provisions can be changed before then. <\/span><\/p>\n

\u201cA client in the 33 percent bracket today may assume to be in a lower bracket in retirement, but can find their tax bracket is just the same,\u201d which might negate the tax breaks during the accumulation years, he said.\u00a0<\/span><\/p>\n

\u201cTo not do it, though, to not put aside funds for your own retirement is a bigger gamble,\u201d Dowen said. \u201cBetter to take the chance of a lower bracket and hopefully the retirement account has grown substantially.\u201d<\/span><\/p>\n

Capobianco said one of the greatest risks to retirement investors today is the growing cost of medical care, \u201cnot just health insurance costs, but if someone needs medical care of any kind, how they are going to pay for it.\u201d<\/span><\/p>\n

He said he is selling more long-term care insurance than ever before, without actively marketing it.<\/span><\/p>\n

\u201cWe all know someone with a real life situation who lost all their money to medical costs,\u201d he said.\u00a0<\/span><\/p>\n

\u201cLong-term care insurance premiums can run $3,500 a year and up, depending on the provisions and term of the coverage,\u201d he said. \u201cBut this insurance gives clients the maximum options for the type of care and facility they choose while protecting their financial assets.\u201d<\/span><\/p>\n

Often Capobianco works with legal professionals to make sure the long-term care policy he offers dovetails with the irrevocable trust they create for their mutual client.\u00a0<\/span><\/p>\n

Year-end is also the time to sign on for a Health Savings Account, or HSA, though the employer, the experts said.\u00a0<\/span><\/p>\n

An HSA allows an employee with a high deductible health insurance plan to pay medical costs with before-tax money because the account is funded with salary reductions, said Capobianco.\u00a0<\/span><\/p>\n

\u201cHigh deductible plans keep insurance premiums lower and offer HSA eligibility,\u201d he said. \u201cMax out your HSA and accumulate a nice sum that can be used for the future.\u201d<\/span><\/p>\n

HSAs are different from FSAs, or Flexible Spending Arrangements designed to be used along with lower deductible health care plans.<\/span><\/p>\n

\u201cIf you don\u2019t use up the FSA account during the year the employer gets to keep the money,\u201d Dowen said. \u201cTo benefit, add up what you think your co-pays will be for the year and try to break even.\u201d<\/span><\/p>\n

Dowen said given limited dollars to put aside, maximize retirement contributions first and then fund the HSA, or FSA if available through the employer or a financial institution.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

By Susan E. Campbell December is\u00a0 good time for business people\u00a0 to meet with investment, accounting and tax professionals to look at the year behind and the one ahead. At Paul Dowen\u2019s office, Whittemore Dowen and Riccaiardelli, LLP in Queensbury, the team is working to manage retirement accounts in a way that maximizes deductions and […]<\/p>\n","protected":false},"author":89,"featured_media":31459,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"yoast_head":"\r\nFinancial Advisers Help Clients With Valuable Year-End Advice About Retirement Planning - Glens Falls Business Journal<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2018\/12\/financial-advisers-help-clients-with-valuable-year-end-advice-about-retirement-planning\/\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"Financial Advisers Help Clients With Valuable Year-End Advice About Retirement Planning - Glens Falls Business Journal\" \/>\r\n<meta property=\"og:description\" content=\"By Susan E. 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