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Monday, March 31, 2014

It's a Balancing Act

As with an Olympic gymnast, success in reaching investment goals requires precise balance. Depending on our risk tolerance, time horizon, and objectives, a portfolio balances a mix of investments types to create the proper asset allocation. In order to maintain balance, the gymnast requires ongoing practice and training. It is not as difficult for our investments, but they do require some regular rebalancing.

In 2013, equities (stocks) increased on value by approximately 26% according to the S&P500 index. Bonds on the other hand were down almost 4% according to the Barclay’s Aggregate Bond Index. Without rebalancing, it is likely that portfolios have become more weighted towards equities in 2013. Now is the time to make sure your investments haven’t lost their balance.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Asset allocation does not ensure a profit or protect against a loss.

Monday, March 17, 2014

Should I take a Loan from My 401(k)?

Your employer has just put in a new 401(k) plan and now there is a loan provision! You've made some home improvement purchases lately and have been wondering how you can get some money to make life a little more comfortable. Should you take advantage of your company's new loan provision? Here are some pros and cons via FINRA.

If, after weighing the pros and cons, you decide a loan from your 401(k) is your best plan of action, remember the consequences of a default. Since 2008, 401(k) loan defaults are on the rise. Most of these defaults happen when the employee changes jobs and fails to repay the loans. CNN explains this in more detail. Contact your financial and tax advisor to decide your best course of action.

Thursday, March 13, 2014

In My Opinion the Simplest Tax Deduction Regardless of Your Income

Folks, let me start by saying please consult your tax professional for the application of the below to your personal situation.

I have recently seen a rash of folks frustrated with their tax rate that have good income and great savings balances. They are searching for deductions. These people all have one item in common and it has to do with health insurance. They all have an HSA plan at work, but are not fully funding it. The max amount for an individual for 2013 is $3,250 and for a family is $6,450. If you are 55 you can add another $1,000. The great thing about these are that you can contribute for the prior year up until April 15th, just like with your IRA. Go look at your tax return, line 25, front page. If there is nothing in that line and you have an HSA you are missing out!

Brian, what happens if I do not use the balance by the end of the year?

I’m glad you asked. You just keep it in the account and use it for the following year. FSA’s or Flexible spending accounts are accounts that you must “use it or lose it” by the end of the year.

Brian, My deductible is smaller than the single max and family max, why would I contribute the full amount?

Thanks for asking such a great question. You can use HSA money for health expenses, deductible, copays, eye appointments and dentist or orthodontist visits. If that is not great enough, some HSA’s allow you to move a portion of the money into an investment account so it can grow for future health expenses. If I changed the name from HSA to “Account that you get a tax deduction regardless of your earned income, that you can use for medical expenses tax free at any time and you can invest just like an IRA” do you think people would want to contribute more? I think so!!

If you have more questions let the fine people at Argus help you out.

Friday, March 7, 2014

2013 Tax Changes

The tax items for 2013 of greatest interest to most taxpayers include the following changes. This list is provided by Troy Ginzer, CPA at TAG Account. For more information visit

·         Beginning in tax year 2013 (generally for tax returns filed in 2014), a new tax rate of 39.6 % has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return).  The other marginal rates --- 10, 15, 25, 28, 33 and 35% --- remain the same as in prior years.  The guidance contains the taxable income thresholds for each of the marginal rates. 
·         The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.
·         The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).
·         The personal exemption rises to $3,900, up from the 2012 exemption of $3,800.  However beginning January 1, 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $150,000 ($300,000 for married couples filing jointly).  It phases out completely at $211,250 ($422,500 for married couples filing jointly.)
·         The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. 
·         The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children.
·         Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.
·         The standard mileage rates are as follows: a) Business - 56.5cents, b) Charity - 14cents, c) Medical - 24cents.
·         An additional 0.9% increase in the Medicare payroll tax  once an individual exceeds $200,000 in taxable salary and wage income and a new 3.8% surtax on "net investment income" once modified AGI is $200,000.
·         Medical expenses are subject to 10% of AGI for taxpayers under age 65.

·         All Americans starting January 1, 2014 will be required to have reasonable quality health insurance for themselves and their dependents or pay a penalty in 2014.  The penalty will be paid with Form 1040.

Troy A. Ginzer is not affiliated with LPL Financial.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that youdiscussyour specific tax issues with a qualified tax advisor.