Three Points Financial - Serving Clients from Colorado Springs to Denver - Fee-Only Financial Planner

Fee-only financial planner serving Clients from Colorado Springs to Denver, CO

CLARITY? – maybe

By

October 29, 2021

We may have some clarity regarding the highly debated social spending bill, but as of this print, it is not yet signed. Involved are important tax and estate planning issues:
The social spending $3.5 Trillion package seems to have been reduced in an effort to win necessary support to pass. Not everything involving taxes has been removed, but here are a few important topics mentioned. They may directly affect financial, tax and estate planning of our clients:

PROPOSED COMPROMISES TO THE BILL:
-Reversal of their plan to eliminate ROTH IRA conversions, and back door ROTHs. We often recommend this unique ability to build tax free retirement for those normally not qualified to contribute to a ROTH IRA.
-They appear to have removed a significant reduction of estate and gift tax exemptions. (As many know, these assets have already been taxed except for unrealized capital gain: see next.
-It also appears they are not eliminating the step-up basis applied to inherited assets. In other words, inherited assets will still receive a step up in basis to the fair market value as of the date of death. Families with inherited property, even one home owned by a parent that was purchased decades ago and lived in for years, may have been subject to large capital gains on the sale of that home to settle the estate. Many homes bought for $40,000 in CA and other high property value states in the early 1960’s are worth well over $1 million dollars. Had the removal of stepped-up basis occurred, AND a reduction in the estate tax exemption occurred, a relatively ordinary inheritance could have been subject to significant taxes that would reduce the planned inheritance.

WHAT IS CURRENTLY STILL IN THE BILL:
-Increase to the top income tax rate of 39.6% and a 20% top rate on investment income.
-Income above $10 million to be taxed at an additional 5% and scaling up from there. This includes realized capital gains, investment income and earned income. These proposed surtaxes, according to Jeff Levine of Buckingham Wealth Partners will likely occur with:
Sale of large business or other assets such as real estate AND Trust and Estate distributions where the surtax kicks in at a lower amount.
This increase can affect some Inherited IRAs subject to the 10 year payout. A 10 year Inherited IRA distribution could be subject to a 5% surtax if it grew over
those 10 years and the required distributions were over $200,000 a year to deplete. Tax planning is important. Some with larger IRAs may want to consider more ROTH
conversions during their lifetime. And as Jeff Levine mentions, there may be an increase in installment sales of businesses to spread capital gains (income) over a
period of years.

UNCLEAR:
-One item that remains unclear is the discussion of removing the SALT cap (State and local tax deductions on itemized returns capping at $10,000.)
-Also unclear is reporting to the IRS banking deposits and withdrawals at low amounts ($600.00 and other figures have been discussed). This invasion of privacy has
been debated on both sides of the house and within the banking industry. Banks and the IRS are currently ill equipped to enforce this.

Our Clients have individual and unique situations. At Three Points Financial, weighing tax and planning strategies is and will continue to be a valuable part of our fiduciary, comprehensive services. As we continue to follow tax and estate changes we will keep you updated.
MARY ALPERS

Reflections

By

As 2020 draws to an anti-climatic, tired close, we approach Christmas and New Years Eve – good days to end 2020. I want to thank our clients for putting their trust in our services. 2020 was a year of purposeful planning amidst significant client growth, while adjusting to required COVID rules. Our clients and our team worked together to bring success to each client. I sincerely want to acknowledge Keenan Casey, CFP©, our Support Advisor, and Michelle Williamson, our Office Manager. Alpers Financial Planning provides high service levels because our team is willing to go above and beyond to make certain our platinum service goals are achieved. I’m thankful for the unending enthusiasm, experienced and competent output, personal energy, and positive attitudes displayed by everyone in the office, including our off site tech service headed by David Graham. It makes each day a pleasure in our office. This positive office synergy is evidenced with clients frequently attesting to their confidence in our team. Our client appreciation evening in late 2019 culminated a good year, with a very pleasant evening at Biaggis. We hope for a 2021 gathering to more personally show our appreciation. And even with COVID, we emptied our Salvation Army Tree Tags from our tree and delivered 4 shopping carts FULL of gifts for disadvantaged children. Thank you again, everyone.
After this very busy year, it is time for reflection, rest and some preparation for next year. Our office will be closed from noon on Dec 23rd until Jan 4th, 2021. We will be checking email and phone, so if you are a client and an important matter arises, please contact us via through Jan 3rd, and then direct your emails and calls as usual to the appropriate person in our office. Thank you,
Merry Christmas. 🎄

Temporary Reality – Mary R Alpers

By

It’s a challenge adjusting to this temporary reality. Most are heeding instructions to slow the spread of the CoVID-19 virus: social distancing for two weeks, now for another month, and possibly longer. We encourage parents, relatives, friends, children, and co-workers to take precautions. Precious lives have been lost, the broad economy and personal jobs are affected and at this point most of us know someone or know someone who knows someone affected by the CoVID-19 virus. Our emotional health is strained. Thank goodness for facetime, zoom and other apps that bring loved ones nearer.

Although Alpers Financial Planning is deemed “essential” our office is practicing social distancing. One employee is in the office at a time and the others work from home. We have offered virtual meetings for years and can remote in to continue to serve clients.

Medical professionals are “all hands-on deck.” My niece was pulled from her regular nursing position to the front lines. Nursing students were assigned early to medical facilities. Some residents are sewing masks. Entertainment shows featuring MDs and Nurses donated masks and gowns from costume departments. Many churches accept food and cash donations for those in need. Counselors are available to listen, pray and comfort. Some homeowner associations including my own have opportunities for neighbors to help and seek help, or just to communicate, creating avenues of virtual contact. My sister in law is teaching her kindergarten class online. My daughter became an overnight homeschooler. Our financial planning support organization (ACP) offers a daily virtual meeting to share anything on our hearts as we serve our clients and work through tax season.

Comparing to another historic time when our country banded together: During World War II civilians collected rubber (tires) for the military. Women’s fashion statement included nylons, and they went without for needed parachute material. Diets were restricted for military rations. Civilians sewed uniforms, packed rations and cared for children and their home. They took jobs in factories replacing men. My maternal grandmother became a Red Cross nurse. My paternal grandmother worked in Iceland as a riveter.

Both then and now people wonder(ed) how long this would last and how soon will/would we recover. Constant media coverage heightens emotions and can move us to make emotionally weighted financial decisions. That is where we come in. We are here to discuss any concerns about your financial situation. Fortunately, our clients understand why and how they are invested. For retired or nearly retired clients US Treasury Bonds, Cd’s and highly rated bond funds are comforting, and you understand that the stock portion of your portfolio is for long term growth. Equities (stocks) protect against inflation and create long term wealth. Younger clients have time for recovery while continuing to add to savings. Investors have opportunities for wisely managed growth. We recommend maintaining a comfortable level of cash to offset sudden unemployment or unexpected expenses and avoiding credit card and any other unnecessary debt. This is financial wisdom.

Wise tax planning protects net worth. Clients who attended our appreciation dinner last fall heard more about the value of time, savings, wise investment allocations, and that tax planning enhances overall life planning for each individual or couple.

But it’s been difficult to watch the market’s wild ride. So if you (as our client) were to ask me if you should sell everything now, I would recommend “no” at this time, because we set your target allocation and would instead recommend focusing on tactics such as strategic rebalancing, tax loss harvesting, strategies for IRAs, ROTH conversions, and maintaining a healthy cash balance.

From the March 27, 2020 Cares Act: The tax filing season has been extended to July 15th, delaying taxes owed and the first quarter 2020 estimated payments. July 15th is also the deadline for IRA and ROTH contributions for tax year 2019. Ironically,  the second quarter estimates are still due June 15th. This will likely change, so stay tuned.

IRA and Beneficiary IRA Required Minimum Distributions (RMDs) normally taken in 2020 are now suspended. If you took the distribution within the past 60 days, you could deposit the funds back into your IRA provided there were no other indirect rollovers in the past 12 months. If you take your distribution in monthly withdrawals, you can stop those for the balance of the year plus a 60-day lookback. Beneficiary IRA Minimum Required Distributions are also suspended if not already taken for 2020. The last time any Required Distributions were suspended was in 2009 after the 2008 financial crisis.

Suspending these taxable withdrawals and using after tax assets for cash flow allows RMDs calculated based on a higher 12/31/19 balance to remain in the account another year, and this results in less taxable income in 2020. We are discussing this with clients. (UPDATE as of 4/3: The IRS is being pressured to reconsider the 60 days limit and allow any Required Distributions taken in 2020 to be returned to the accounts. So… again stay tuned.

If you are concerned about your cash level or equity balance, please call us to discuss. This is particularly important if you have an unanticipated a life change or are concerned about job security or your health. I don’t have answers as to how long this will last or how quickly the market will recover but I can provide the historical chart below. For the 26 market corrections since World War II it shows the overall average market decline was 13.7% (the max being over 20%). We have topped 23% so far. The average recovery cycle was 4 months down then 4 months up.

For small businesses: As of 4/3 the IRS is on its 4th draft of the PPP (Paycheck Protection Program) application that allows small businesses a 100% forgivable loan up to $10,000 to cover payroll costs to avoid laying employees off. If you apply for this, read the fine print carefully. There are 3 other types of loans for small businesses to sustain them through this period.

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options

Above all, stay healthy, rested, hydrated and while practicing social distancing, communicate with those in your life. Find someone to talk with when this temporary reality starts wearing on you. Last week I called a friend because on a personal note, my father was at “end of life” in a local nursing home and I was allowed in to say “goodbyes.” We’ve been unable to see him for weeks for the residents’ and staff protection. It was surreal to have my temperature taken, complete a health form, don a mask and receive orders of where I could go. I left I worried I might not be allowed back in, and he would pass away without family near him. My father peacefully passed away two days later, and they allowed me to be by his side. They were sensitive and gracious and it meant a lot.

While this is our temporary reality, it affects real life in ways we might not imagine. I’m optimistic things will get better and I’m grateful for the kindness I see in others. 

Alpers Financial Planning is available to discuss your concerns because you chose to work with a firm that is interested in more about you than the singular topic of investment rate of return. We are interested in helping you live life to your fullest with solid financial guidance, comprehensive advice and a long-term outlook. Stay Safe.

 

The Curious Tax Law Changes

By

Our Mission: To identify and implement steps towards your definition of  “FINANCIAL INDEPENDENCE” while protecting and growing your wealth.

The Secure Act, passed by congress December 20, 2019, has a significant impact on 2020 newly retirees, future retirees and new beneficiaries of inherited retirement accounts. Let’s start with Inherited IRAs, Inherited 401Ks and Inherited Roths. These new beneficiary accounts have lost their “stretch” benefit formerly available to beneficiaries. Before 2020 non spouse, individual beneficiaries were allowed to “stretch” their withdrawals over their own lifetimes, spreading both taxable income from Inherited IRAs and tax free income from Inherited Roth IRAs. Current owners of these beneficiary retirement accounts can continue this stretch advantage. But those inheriting from Jan 1, 2020 forward must deplete all balances in these accounts within 10 years, with a few exceptions:

Spouses inheriting: the Secure Act rule does not apply

Minors who inherit any of these accounts do not fall under this rule, but only until they become adults, then they must complete the withdrawals within 10 years.

Those with less than 10 years age difference from the deceased (such as a younger sibling) do not fall under this rule.

Those deemed disabled do not fall under this rule.

The disadvantage to this new rule particularly hits a taxpayer in his/her 40’s, 50’s or 60’s who inherit an IRA or 401K from a parent. He/she has 10 years to fully deplete the inherited balance during years with often higher earnings and tax brackets.

On the flip side, for soon to be or retired individuals not yet 70.5 when required distributions from Individual IRAs used to be mandatory, the new required mandatory distribution age is now 72. I’ve not yet seen an adjusted withdrawal table (possibly to be released in 2021) for expected longer lifespans. The last time these tables were adjusted was mid 2002. But this allows more flexibility in IRA distributions.

Planning: Even though newly Inherited Roth IRAs must be withdrawn within 10 years, they grow tax free until withdrawn. So the benefit of having a ROTH to bequeath is still considerable. Clients in high tax brackets who inherit ROTHs can then invest wisely and tax efficiently. Timing matters: the IRS doesn’t care WHEN or how much you withdraw each year from an inherited IRA, 401K or ROTH account, as long as these accounts are depleted within 10 years. Just as we work with clients to consider converting IRAs to ROTHs in lower tax years (such as the first few years in an earlier retirement before normal IRA distributions are taken, or before taking Social Security, or when taxable income is offset by taxable losses) we will evaluate tax advantages for these beneficiary withdrawals.

For some clients, to extend the benefit of an Inherited IRA, we will discuss family gifting, or funding a 529 college savings plan, or charitable gifting. Estate planning will need to be revisited for clients inheriting sizable Inherited IRAs or even Inherited Roth IRAs.

The option to make a qualified charitable donation (QCD) directly from an Individual IRA or a Inherited IRA is available provided you are at least age 70.5 at the time of the gift and the gift is made directly to a qualified charity. The limit per year is $100,000. These qualify as part or all of the required mandatory distribution. They can be made to one or more qualified charities. We also analyze gifting of appreciated stock for individual tax benefits, especially in light of the increased standard deduction that went into effect in 2018 tax year.

So in brief, this is a summary of part of the Secure Act. The result: Taxes will be collected earlier due to these changes. It is estimated that the IRS will collect up to 16.4 billion in tax revenue over the next 10 years due to implementing the Secure Act.

As to how this inflow of tax revenue is spent by our government, we can only guess. Regardless, it is gratifying to focus on our stated Mission Statement and strategically plan to protect and grow our clients’ wealth.

The Gratification of Organization

By

Alpers Financial Planning moved recently – to a convenient new location on Gleneagle Drive. Sorting, deciding what to keep, what to upgrade, packing, transporting, unpacking, arranging files, etc. was a 1 week event. Setting up the technology, getting computers to talk to the printers they are supposed to talk to, establishing our network, backup, security, new phone system, furniture delivery, setup and arranging was another week. The ongoing final touches to make it what we have envisioned has been the fun part. A huge thank you to our tech guy, Eric, the voice and data technician, Aaron, the build out crew from the building, and of course, Michelle and Jeff. It was gratifying to see everyone coordinating so well to settle us in. We look forward to meeting our clients in our new space.

This endeavor reminds me of talking with clients about organizing their financial lives. Undoubtedly most everyone has had a few moves, and even between moves, it is wise to survey your overall organization of financial, estate, insurance documents and other legal documents. Briefly, and not inclusive, your tax returns should remain on file for 7 years, longer if they relate to an existing business, installment sale, some active trusts, carryforward losses, etc. Your current insurance policies, mortgage documents and latest Wills and Trusts should be secured with at least one beneficiary or attorney knowing how to access them. Your online passwords should be secured with access available to those someday needing this information. We provide new clients with a home organizer and while some prefer to do all online storage, we encourage physical filing of the most important papers that may need accessing quickly. Many have a home safe or a safety deposit box. The well written article below discusses various password protection options, depending on complexity and security needs. Be certain once you decide how to store passwords that whoever needs access in the event of an emergency, is in the know.   https://www.washingtonpost.com/news/the-switch/wp/2014/08/07/how-to-keep-track-of-your-passwords-without-going-insane/

Another thought I had during the move was the importance of balance between simplifying and keeping what will serve a useful purpose or enhance one’s life. In our personal lives, this includes determining the difference between cherished personal property, collections, memorabilia, useful or comfort possessions versus unnecessary clutter or junk. It is a good idea to basically “clean house” every now and then. There is something quite gratifying about simplifying, from giving away old DVDs or even VHS tapes, purging your closets of clothes not worn for several seasons or ones that no longer fit, cleaning out drawers and generously giving away toys no longer used or needed. Remember, they’ve created shows about hoarding. Just be sure it is your possessions you are decluttering, and not another family member’s, unless you have their permission. We hear stories of regret about throwing out someone else’s prized “fill in the blank” rather than giving it to him/her to decide its future.

What I like most about this exercise is that there is strong evidence decluttering lowers tension, refocuses our minds, brings peace, and a sense of order and rejuvenation. I enjoyed reading this blog written by Erin the Organizer. http://www.chicagonow.com/organizing-with-erin/2013/01/the-physical-and-mental-benefits-of-decluttering/

Happy last days of summer, and maybe this fall you can carve out a time for fall cleaning as you contemplate raking leaves. And come by to see our new office.

 

Investment Management

By

Being an astute investor should not be a haphazard exercise. As fee-only fiduciary planners we put our clients’ interests first. A well-constructed portfolio allows each investment to fulfill a specific function appropriate for your unique financial situation.

Learn More >>

What We Do…

By

We do “Financial Planning for Life.” Your personal goals provide the framework for expert advice and implementation. Your interests are always first and we are here to help you reach financial independence.

Learn More >>

What to tell the kids about your money by Margaret Magnarelli (Money Magazine)

By Leave a Comment

The September issue of Money Magazine features a quote from myself in the article “What to tell the kids about your Hos Vikingslots hittar du forutom manga olika slots aven andra spel, sa som roulette online , blackjack och video poker, och populara spel som bingo, keno och skraplotter. money” by Margaret Magnarelli. I am pleased to offer my commentary to this very important topic. To view the article, click here.

Alliance of Comprehensive Planners

National Association of Professional Advisors

National Association of Tax Professionals