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IMPORTANT IRS ADJUSTMENTS FOR 2013

Posted by mikbon12   |  Posted in November 19, 2012   |  No Comments

IRAs & workplace retirement plans have higher contribution limits.

Presented by Mike Bonacorsi CFP®

The IRS has set annual contribution limits for IRAs, 401(k)s and other retirement plans higher for 2013, and made other important adjustments for inflation as well. Here is an overview of some notable changes just announced.

The 2013 IRA contribution limit: $5,500. This is a $500 increase from 2012, and it applies to both Roth and traditional IRAs. The IRA catch-up contribution limit for those 50 and older remains $1,000.1,3

The 2013 contribution limit for 401(k), 403(b), TSP & most 457 plans: $17,500. For the second year in a row, we see a $500 increase. The catch-up contribution limit on these plans for participants 50 and older remains $5,500.1,2

The phase-out range on Roth IRA contributions has increased. It starts $5,000 higher in 2013 than in 2012 for married couples filing jointly ($178,000-$188,000) and $2,000 higher for single filers and heads of household ($112,000-$127,000).3

The phase-out range on deductible contributions to traditional IRAs has risen. In 2013 it increases by $1,000 for single filers ($59,000-$69,000) and $3,000 for married couples filing jointly ($95,000-$115,000), provided the spouse making the contribution is covered by a workplace retirement plan. If not, the deduction is phased out if the couple’s income is between $178,000-$188,000 – up $5,000 from 2012.1,3

The annual gift tax exclusion rises to $14,000 next year. The IRS has kept this at $13,000 for several years; no more. In 2013, a taxpayer can gift up to $14,000 each to as many different people as he or she wishes, tax-free.4

You may be able to deduct a greater portion of LTCI premiums. For 2013, the deductible portion of eligible long term care insurance premiums that may be included as medical expenses on Schedule A rises. The new limits are $360 for taxpayers 40 or less, $680 for taxpayers aged 41-50, $1,360 for taxpayers aged 51-60, $3,640 for taxpayers aged 61-70, and $4,550 for taxpayers age 71 or older.4,5

The kiddie tax exemption increases to $1,000. It was set at $950 in 2012.4

The foreign earned income exclusion rises to $97,600. That is a $2,600 increase over 2012.4

In addition to these 2013 IRS adjustments, Social Security recipients will see a 1.7% rise in their benefits next year.2

Mike Bonacorsi may be reached at (603) 769-3111 or mike.bonacorsi@lpl.com
www.mikebonacorsi.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – benefitslink.com/src/irs/IR-2012-77.pdf [10/18/12]
2 – money.cnn.com/2012/10/18/pf/taxes/401k-contribution-limit/4021136.html [10/18/12]
3 – www.bankrate.com/financing/taxes/saving-more-for-retirement-in-2013/ [10/18/12]
4 – blogs.wsj.com/totalreturn/2012/10/18/irs-announces-2013-inflation-adjustments/ [10/18/12]
5 – blog.oregonlive.com/taxes/2012/01/are_long-term_care_premiums_de.html [1/17/12]

SHOPPING FOR A BANK OR CREDIT UNION

Posted by mikbon12   |  Posted in October 31, 2012   |  No Comments

What to look for – and watch out for – as you look around.

Presented by Mike Bonacorsi CFP®

Moving your money to a smaller, better bank has become a trend. You can attribute it to poor service at the larger institutions, the promise of higher interest rates or more flexible business lending standards elsewhere, or even the Occupy movement. So what do you look for when you are shopping for a bank or a credit union? First, let’s detail the differences between the two.

How CUs & banks differ. A retail bank is a for-profit institution, and a credit union is a not-for-profit institution. A bank is owned by its shareholders; a credit union is member-owned. Any decent bank is a member of the Federal Deposit Insurance Corporation (FDIC); any decent credit union is a member of the National Credit Union Administration (NCUA), also a federal agency. Both insure deposits up to $250,000.1

Retail banks make a profit by using the money of depositors to make loans at greater interest than they pay to customers. They make even more money through fees, commissions and penalties.

Credit unions pledge to put customer service before profit motive. Even so, they are managed just like banks (though their boards of directors are made up of volunteers). Banks offers their services to the world at large; credit unions offer services only to those meeting eligibility requirements. You may qualify to join a CU because of your employer, your industry, a union or guild membership, or even your home address.

Upsides & downsides. Banking with a behemoth carries some advantages. ATMs and branches are convenient, products are plenty and varied, mortgage rates may be lower than at a CU, and you may even be offered cash bonuses and perks. (Who knows, high-yield savings accounts may even return in the coming years.) The downside: you could face out-of-control fees and relatively tight lending standards.

Small credit unions can ably compete with big banks. In fact, today many credit unions are offering better interest rates on savings accounts, money market accounts and long-term share deposits. Fees on credit cards and terms on auto loans may be better as well. However, a credit union may not offer you the same array of services and products that you find at a big bank, and some still have only one or two branches (though with the expansion of credit union networks, regional and nationwide access to money has really improved for CU members).2

Between the big bank and the credit union, you have a middle ground – the community bank, or the mutual bank as it is known in the Northeast. This is a bank owned by depositors, usually run with a conservative management and investment philosophy. These banks can prove vital to small businesses: lending decisions are made locally by people who know the community and its business climate.

If you are among the consumers shopping for a bank or a CU, inquire about these fees. Are they too numerous or too onerous? Then head elsewhere.

Account fees. Major lenders charge these “maintenance” fees largely because they can – “maintaining” your account is not financially taxing for a big bank. Occasionally, they are absent or waived as a reward for sufficient deposit activity, debit card usage or online banking. More often, monthly account maintenance fees may run $5-25.

Minimum balance requirements (balance fees). Many lenders will hit you with a monthly fee in the range of $5-20 if your savings or checking account diminishes below a set dollar amount.

ATM fees. Don’t forget the common $2-3 fee for withdrawals from third-party ATMs.

Overdraft fees & returned items fees. $20-40 penalties are not unheard of when you overdraw your account, or leave it overdrawn for a period of time.

Application fees. When you apply for a mortgage or a business loan, there may be a loan origination fee or “processing fee” of $20-100 involved.

Service fees. Need to check a deceased accountholder’s balance? Make copies of deposit slips? Set up online banking? Obtain a reference letter pursuant to an international visa application? You name it, there’s typically a fee for it at a big bank.

Commissions. A big bank’s investment division may be modeled on a full-service brokerage, with commissions and fees exceeding those of discount brokers.

The good news is that you may be able to dodge some of these fees. Just about any bank will still give you free checking if you sign up for additional services such as a direct deposit arrangement. Many online banks will actually reimburse you for ATM fees. Finally, perhaps the best thing about credit unions is that they haven’t yet dreamed up fees for everything under the sun.3

Mike Bonacorsi may be reached at (603) 769-3111 or mike.bonacorsi@lpl.com
www.mikebonacorsi.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – www.ncua.gov/NCUASafe/Pages/default.aspx [6/22/12]
2 – blog.oregonlive.com/finance/2010/02/credit_union_vs_bank_is_it_tim.html [3/5/12]
3 – abcnews.go.com/Business/money-101-tips-tricks-avoiding-bank-fees/story?id=14652687#.T-TzN_WAlAE [10/3/11]

MEDICARE OPEN ENROLLMENT FOR 2013

Posted by mikbon12   |  Posted in October 30, 2012   |  No Comments

A summary of what you need to know.

Presented by Mike Bonacorsi CFP®

Medicare Open Enrollment has arrived. The open enrollment period begins October 15 and ends December 7, 2012. This is not only a period where you may enroll for the program, but also switch providers for your comprehensive health and drug coverage.1

Some key dates to remember. This fall and winter, there are three periods in which Medicare beneficiaries can either enroll or disenroll in forms of coverage:

* Now through December 7: Open enrollment period. This is when you can elect to leave Original Medicare (Parts A and B) for a Medicare Advantage Plan (Part C) and change your prescription drug coverage (Part D). You can also elect to get out of a Part C plan and go back to Parts A and B during this period.

* December 8: Annual enrollment period begins for 5-star plans. As you probably know, Part C and Part D plans are assigned ratings. Beginning December 8, 2012 and ending November 30, 2013, a window opens for you to enroll in a 5-star Part C or Part D plan. You can do this once per 365 days. How do you find the 5-star plans? Visit www.medicare.gov/find-a-plan.

* January 1-February 14: Disenrollment period. If you join a Part C plan in late 2012 and want to reverse that decision, you can disenroll from that Medicare Advantage plan in this window of time and go back to Original Medicare with a stand-alone Prescription Drug Plan (Part D).2,3

What should you look for in a Part C or Part D plan? Be sure to take a look at a few key factors.

* While premiums matter, overall plan expenses ultimately matter most; scrutinize the copays, the co-insurance and the yearly deductibles as well. Attractively low premiums might not tell you the whole story about the value of a Medicare Advantage plan.

* How inclusive is the plan network? Assuming the plan has one, does it include the hospitals you would choose and the physicians that now treat you?

* Regarding Part D, how wide-ranging is the prescription drug coverage? Look at the list of approved drugs (the formulary). If the drugs you want or need aren’t listed, you are probably going to have to open your wallet to pay for them. The frustrating thing about formularies is how they change; drugs on this year’s list may not always be on next year’s list.

* Every fall, Medicare plans mail out Annual Notice of Change (ANOC) letters to their plan members. Use this notice to determine if your current plan is still right for you and your medical care needs. If you didn’t receive such a letter in September, contact your plan.4

Premiums are rising. A report from Avalere Health, a prominent healthcare advisory company, advises that some Medicare prescription drug plans will see premiums rise by as much as 23%. The report goes on to state that the jump can be attributed not to the Affordable Care Act, but market dynamics. Regardless of the reason, this turn of events underlines the wisdom in taking the opportunity to review your Medicare plans during the open enrollment period; a better rate could give you a lot more room to move, in terms of your day-to-day finances.5

Mike Bonacorsi may be reached at (603) 769-3111 or mike.bonacorsi@lpl.com
www.mikebonacorsi.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations
1 – http://health.usnews.com/health-news/news/articles/2012/10/12/medicare-open-enrollment-starts-monday [10/12/12]
2 – http://www.freep.com/article/20121014/FEATURES08/310140046/Medicare-changes-What-you-need-to-know-this-year [10/14/12]
3 – http://www.q1medicare.com/PartD-Important-Dates-To-RememberPartD.php [4/3/12]
4 – http://www.medicare.gov/help-and-resources/mail-about-medicare/plan-annual-notice-of-change.html [10/12/12]
5 – http://www.chicagotribune.com/business/breaking/chi-medicare-drug-premiums-set-to-jump-in-2013-20120925,0,796177.story [9/15/12]

Protecting Yourself While Shopping Online

Posted by mikbon12   |  Posted in October 29, 2012   |  No Comments

What steps should you take?

Provided by Mike Bonacorsi CFP®

Whether you shop online routinely or infrequently, the risk of identity theft rises as you offer more and more information about yourself online.
Don’t use a debit card, and use only one credit card. If your debit card gets hacked, the thieves may be able to access your bank account. But if you use just one credit card for online shopping, you’ll just have one card to cancel if your card number is compromised. (It would also be wise to keep a low credit limit on that particular card.)
Look for the “https://” before you enter personal information. When you see that (look for the “s”), it should indicate that you are transmitting data within a secure site. Depending on your browser, you may also see a padlock symbol at the bottom of the browser window.
Watch what you click – and watch out for fake sites. Pop-ups, attachments from mysterious sources, dubious links – don’t be tempted to explore where they lead. Hackers have created all manner of “phishing” sites and online surveys – seemingly legitimate, but set up to siphon your information. It is better to be skeptical.
Protect your PC. When did you install the security and firewall programs on your computer? Have you updated them recently?
Change stored passwords frequently – and make them really obscure. It is a good idea to change or update your passwords once in a while. Mix letters and numbers, and use an uppercase letter if possible. And never use “password” as your password!

Don’t shop using an unsecured wi-fi connection. You are really leaving yourself open to identity theft when shop using public wi-fi. Put away the laptop and wait until you leave that coffee shop or airport terminal. Yes, hackers can tap into your Smartphone via the same tactics by which they can invade your PC.

Mike Bonacorsi may be reached at 603-769-3111 or mike.bonacorsi@lpl.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

IRA DATES & MILESTONES TO REMEMBER

Posted by mikbon12   |  Posted in October 24, 2012   |  No Comments

These are the dates (and deadlines) too often forgotten.

Presented by Mike Bonacorsi CFP®

IRAs come with complex rules and regulations. As these rules and regulations are occasionally forgotten or misinterpreted by IRA owners, here is a refresher.

Age 70½: Required Minimum Distributions (RMDs). Once you reach age 70½, you are required to make withdrawals from any traditional (“regular”) IRAs that you have established. (Original owners of Roth IRAs never have to take RMDs.)1

**You must take your initial RMD from a traditional IRA by April 1 of the year following the year during which you turn 70½. You may not want to wait that long, however.

**If you do wait that long and choose to take your first RMD in the year after you turn 70½ rather than the year during which you turn 70½, you have to take two RMDs in that year after you turn 70½ – one by April 1, and another by December 31.

**In all succeeding years, you must take your annual RMD by December 31.1

Age 59½: option to make penalty-free IRA withdrawals. With few exceptions (see below), original owners of Roth and traditional IRAs must wait until age 59½ to take money out of their IRA without a 10% early withdrawal penalty. The IRS defines “age 59½” as the point at which you are midway through your 59th year.2

Age 59½: option to donate IRA funds to charity. While the IRA charitable rollover is no more, IRA owners aged 59½ and older can still distribute IRA assets to a qualified charity. The deadline to do so for a particular tax year is December 31. One problem: your gift to charity will also boost your adjusted gross income (AGI). As with an RMD, this type of IRA distribution qualifies as taxable income. You can claim a charitable deduction as you report the distribution as income to the IRS.3

The timeline for 72(t) payments. These are the special periodic payments by which you can exempt yourself from the 10% early withdrawal penalty normally due on IRA withdrawals prior to age 59½. In the 72(t) option, equal payments (distributions) from your IRA are scheduled for five or more years or until you hit age 59½, whichever time frame is longer. The time frame reaches its limit when a) you are exactly 59 years and six months old or b) exactly five years have passed since the first of the periodic payments.2

The 12-month limit on IRA-to-IRA rollovers. There is no annual deadline for these rollovers, but there is a 12-month time limit affecting how many you can make. You can only make one IRA-to-IRA rollover per IRA account per year, whether the IRA is a traditional IRA or a Roth. So if you have three IRAs, you can make a total of three rollovers (one per IRA) in a 12-month period, be they IRA-to-IRA rollovers or Roth-to-Roth rollovers.4

The 5-year rule on Roth IRA conversions. You may know about the five-year rule here – when you convert a traditional IRA to a Roth IRA, you have to wait until you either a) turn 59 1/2 or b) five years have passed before you can take a penalty-free distribution of a Roth IRA conversion. The asterisk comes in terms of measuring those five years. It isn’t five years from the day you complete the Roth conversion; the five-year measurement actually starts on January 1 of the year in which the funds are first deposited in the Roth IRA.2

The 5-year rule for Roth IRA qualified distributions. Here we have a slightly different circumstance, and a slightly different five-year rule. You may know that once your first Roth IRA is five years old, you can start taking tax-free and penalty-free withdrawals from it under the following circumstances: a) you are age 59½ or older, b) you are disabled, or c) you are a first-time homebuyer using Roth IRA assets for that purpose.2

With regard to qualified distributions, when is your Roth IRA judged to have turned five? It depends on which calendar year you earmarked your first Roth IRA contribution for – for example, you can make a 2012 Roth IRA contribution up until April 15, 2013. The five-year time frame starts on January 1 of the calendar year for which the contribution is designated. An interesting wrinkle: if you open additional Roth IRAs in the future, that initial five-year time frame also applies to them; there is no reset per new Roth IRA.2

The deadline(s) for RMDs made by non-spouse beneficiaries. If you are a non-spouse beneficiary of someone else’s IRA, you usually have to start taking RMDs from that IRA by December 31 of the year after the death of that IRA owner. In other words, you have from 12-24 months to take that first RMD. One exception comes if an IRA accountholder dies after age 70½ without taking his or her initial RMD. If that is the case, then the non-spouse beneficiary of the IRA will end up having to take the initial RMD from that IRA by the end of the calendar year in which the deceased IRA owner has passed away.2

Mike Bonacorsi may be reached at (603) 769-3111 or mike.bonacorsi@lpl.com
www.mikebonacorsi.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – www.irs.gov/retirement/article/0,,id=96989,00.html#2 [1/5/12]
2 – www.smartmoney.com/retirement/planning/iras-5-timing-rules-you-need-to-understand-1337271033972/ [3/5/12]
3 – counselprotect.com/making-charitable-ira-donations-in-2012/ [4/23/12]
4 – www.theslottreport.com/2012/05/one-ira-rollover-per-year-per-ira.html [5/4/12]

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