Tuesday, October 3, 2017

Four Tips for Working Beyond Retirement Age

Many people choose to work into their retirement years. If this is something you’re considering, here are some tips to make sure you get the greatest benefit from your efforts.

1) Consider delaying Social Security. You can start receiving Social Security retirement benefits as early as age 62, but if you continue to work, it may make sense to delay as late as age 70. Your Social Security monthly benefit increases approximately 8 percent for every year you delay receiving them. These increases in monthly benefits stop when you reach age 70. Social Security benefits may be reduced or be subject to income tax due to your other income.

2) Don’t get bracket-bumped. You may have multiple income streams during retirement that can bump you into a higher tax bracket and make other income taxable. For instance, Social Security benefits are only tax-free if you have less than a certain amount of adjusted gross income, otherwise up to 85 percent of your benefits are taxable. Required distributions from pensions and retirement accounts, which you are required to take at age 70½, can also add to your taxable income. Be aware of how close you are to the next tax bracket and adjust accordingly.

3) Be smart about health care. When you reach age 65, you’ll have the option of making Medicare your primary health insurance. If you continue to work, you may be able to stay on your employer’s health care plan, switch to Medicare, or adopt for a two-plan hybrid option that includes both. Consider these options to determine which makes the most sense.

4) Consider your expenses. If you’re reducing your working hours or taking a part-time job in retirement, consider the cost of your extra income stream. The costs of parking every day, meals, clothing, dry cleaning, and any other expenses should be considered in determining your pre-tax income.

These are just a few factors to consider. Give us a call if you have questions.

Rent or Buy? It’s a Matter of Perspective

The buy-or-lease question is a common dilemma, whether you're asking as a homeowner, or for your business. For perspective, think of the big picture. In either case, you're paying for the exclusive use of an item over a set period of time. With that as a point of reference, the difference boils down to two main considerations: cash flow and exit strategy.
The cash flow associated with buying a home is straightforward. After making a down payment, you commit to a long-term obligation. Purchasing a home also offers a tax deduction for interest and real estate taxes. In contrast, renting may mean a monthly payment lower than what you'd pay on a mortgage. However, as a renter, you generally won't benefit from tax breaks.
Business owners receive a tax deduction whether the final decision is to rent or to buy, but the timing of the deduction can vary. Lease payments are generally deductible over the life of the lease. Purchasing offers an immediate tax write-off in the form of accelerated depreciation or Section 179 expensing. The time value of money can play a role in your decision, as money you have today can be worth more than the same amount in the future.
What about exit strategy? When you rent a home, you know you'll likely have to move at the end of your lease term, and you won't benefit from any increase in real estate values. Home ownership has the potential for an increase — or decrease — in the value of your investment. This is especially true the longer you intend to stay put.
Exit strategy can be less of a decision factor for your business, especially if your policy is to keep equipment until it wears out. Do you routinely replace old equipment? A lease might offer an advantage.
Need help resolving the rent-or-buy decision? Contact our office for an in-depth analysis.

Teach Your Kids to Use Credit Cards Responsibly

No doubt you have shared the adage "if it sounds too good to be true, it probably is" with your children. That caution is wise, especially when teaching your kids how to use credit cards responsibly, because misuse of credit can have a long-term impact on financial health. The main lesson you want to impart: While credit cards can be very useful financial tools, the borrowed money is not "free." Here are two opportunities to share that lesson.
When choosing a card. Show your kids the entire credit card lifecycle. Explain that when evaluating credit cards, a comparison of benefits is crucial. For example, although choosing a credit card offering a large signing bonus may be tempting, the annual fee associated with the card can mean the benefit is not worth the cost.
Also make sure your kids grasp the concept of the annual percentage rate (APR). The APR shows the cost of credit as an annual rate that includes points, fees, and other adjustments, and allows the comparison of offers from different card issuers, or different types of cards from the same issuer.
When making payments. Have your kids review the monthly statement with you. Let them see the time lapse between the date a purchase is charged to when the bill is due, and mention how quickly the balance can add up over time if good spending habits are not followed. Explain the consequences of paying only the minimum required amount each month versus the entire amount due.
When teaching your kids good credit card skills, you don't have to have all the answers. Learning together gives you an opportunity to strengthen your understanding of card features and terms as well as your child's understanding. If either of you have questions, give us a call. We're happy to help.