Archives for June 2016

Is There a Monster Lurking?

Retirement is always something workers struggle with most of their working career. We are three decades into the 401(k) era and still millions of works struggle to make the most of their investment. According to new research only 32% of workers in the us believe they are on track for retirement.  So what about the other 68%?

In 1980, Ted Benna, a benefits consultant, designed a savings plan that was meant to supplement traditional pensions and savings. 401(k) retirement savings plans quickly dominated the retirement arena becoming the retirement funding vehicle for most working Americans. Americans have invested $3 trillion over the last few decades to 401(k)s. While in the beginning these plans were complicated and heavily laden with fee, over the year the fees have significantly lowered and through features like automatic enrollment and escalation of contributions, the investing mistakes have minimized. Many experts would like to make the 401(k) and other retirement programs mandatory to help close the gap in retirement savings for everyone.

But it this possible? According to a survey from Transamerica Center for Retirement Studies, one-third of the workers in the US would like to see the government increase funding to Social Security. Many workers expect half their retirement to come from government funded programs, which have been eroding over the year making them unstable and ready for collapse anytime.

With the increasing of longevity over the past decades, people are living longer but still retiring as early as 63. This put a strain on the Social Security system. To help alleviate the strain, the minimum retirement age needs to be pushed back to 65 and the max out at 70.

Another way to help is to have employers rethink their retirement policies. There is a frustration with retirement because there has been very little financial education in their lifetime. If there was financial education available for many workers, they would understand the importance of a financial plan. Almost 755 of employees with financial plans are habitual savers, versus 18% without a financial plan.

So what are some things that can be done to help with retirement? Well, you have probably heard this before, but it is important to save. Having a savings account, or some retirement saving plan is the best. Do not rely on social security to be there for you when you retire. Plan ahead, and even if it is as little as ten dollars a week, save something. You will eventually be able to roll that money into something bigger. Have a plan. Execute that plan, and keep it going.

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Millennials in the Work Force

A Millennial is defined as a person reaching young adulthood around the year 2000. They were born between 1982 and 1994, and they most defining feature is they believe they are special. Now I’m not trying to knock millennials. Right now they make up the largest generation since baby boomer. They believe that they are highly intelligent, overachievers, and think they pay their dues quickly before getting on to that large salary. Many have been given an easy road and expect that road to continue into adulthood. But like I said, I’m not trying to knock millennials. They have a lot of good qualities, but many companies have found that the typical retention tools do not work with millennials. So how do you keep millennials in the work force and productive.

So far the biggest worry facing employers is the high level of turnover seen in millennials. In the past jobs were looked at as a way to anchor yourself to adulthood. You chose you career and found ways to advance through the ranks. Millennials see jobs in a completely different light. A job to a millennial is just a stepping stone to something bigger and better. They presume the job market has total job mobility. They focus on the proximity to friends and family, their schedule, opportunities for many different activities, etc. Because they are the focus, it is hard to retain a millennial when they are focused on something other than work.

So the next question is how to you retain a millennial? Since you cannot eliminate turnover completely among millennials, your goal should be to control the turnover among millennials. So how is this achieved? Simple, or at least the concept is. You use the prestige factor. Millennials are used to having the awards and acclamations doled out to them, so reward them with prestige and status. Give the high performers a way to shine in the spotlight, and eventually the lower performers will stick out.

The next item to check off the list to retain millennials, is to understand them as a unique and individual employee who wants or needs to be rewarded in a meaningful way. Many times it is to your benefit to work out special deals with the millennials that meet some of their more unusual needs. Other employers may not be able to replicate those rewards, and that is a card in your pocket when you are trying to retain a millennial.

You know that not all millennials will act or want to be treated this way, but for the vast majority lavishing attention on them when they are talented, skilled and motivated is the way to succeed with a millennial. You have to change your thinking and understand that all they want if to have a happy work environment. If you use this philosophy with everyone, than you can create a happy work environment that everyone flourishes in.

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Military Tax Benefits

Memorial Day passed and there are many ways we, as citizens of the US thank the people who serve in our armed forces. Since May was National Military Appreciation Month, the IRS released its annual Armed Forces Tax Guide to help members of the military learn about the many tax benefits. When you serve in the military you are helping our country maintain its freedoms, and because of this there are some different rules that govern our military forces.

Combat Pay

Any military personnel that serves in a designated combat zone, qualified hazardous duty area, or certain other qualified areas, the pay or part of the pay is fully tax free. This pay is not required to be reported when dealing with gross income, but is required to be considered when determining limits on contributions and deductions of contributions to IRAs.

Duty-Related travel

While most of the time the military pays to relocate military members, this does not always apply to reservists whose duties take them more than 100 miles from home. The unreimbursed travel expenses can be deducted using the Form 2106 or Form 2106-EZ even if you chose not to itemize the deductions. When you are in active duty and are moved to a permanent change of station all unreimbursed expenses such as household goods and personal effects can be deducted along with out-of-pocket expenses such as gas and oil, and a standard rate of 23 cents per mile.

Foreign Posting

Service members stationed abroad have until June 15th to file a federal income tax return. This is extra time. Anyone serving in a combat zone have even longer. They receive typically 180 days after they leave the combat zone to file their tax return.

Tax Credits

Like regular civilians, low and moderate income service member qualify for tax benefits such as Earned Income Tax credit or Child tax Credit. Check to see if you qualify for the credit.

Free Filing

For all service member who prepare their own return, you qualify to file for free using the IRS Free File. The IRS also partners with Volunteer Income Assistance program, to provide free tax preparation to service members and their families. You can find these services at bases in the US and around the world.

If you would like to find out more about what the IRS offers military members check the official IRS publication at  https://www.irs.gov/pub/irs-pdf/p3.pdf.

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The Marriage Penalty

You have picked out the perfect china pattern, and registered for everything you will need to start your new life. They wedding is planned and even though you have spent a pretty penny on the ceremony and reception, you are ready to start your life as man and wife. For many people the average cost of a wedding is $30,000, but even though the cost is that of a small car, nothing is too good for the couple on their perfect day. They have thought of everything, but what about after? Have they thought about the tax implications of getting married? For many couples there could be a tax penalty for getting married.

So what is this tax penalty? When a couple shifts from a single filing to a joint filing, there can is either a penalty or bonus for those that fall above the 15% bracket. If the filers have about the same income there may be a penalty, but if there is a large gap between the two incomes then they might have a bonus.

Over the years there has been an effort to eliminate the marriage penalty. The standard deduction for joint returns is almost double of the standard deduction for singles. The cutoff in the bottom of the bracket is exactly double of single filers, but the cut off in the upper bracket is not double of single filers. For example, if you look at the 10% bracket for 2016, the single filer is a $9,275 and joint filers is $18,550. If you look at the 25% bracket the cut off for singles is $91,150 while for joint filers is $151,900 which is not twice the amount. So if the couples is in the 25% bracket, then it is most likely they will be pushed into the next higher tax bracket, creating a penalty.

Another tax problem seen by newly married couples is the name change. While it seems trivial to most, it can cause returns to be over looked or rejected. If the name does not match what is associated with the social security number, the return can be delayed or rejected. Address are also becoming more important to because of ID theft.

Newlyweds should compare insurance policies. It would be ok to keep two separate ones, but it may be beneficial to pick the one with the better plan that included life insurance and disability insurance.

If there is a sale of one or two houses, then the couple needs to familiarize themselves with the exclusion of gain from the sale of your home. You can find out more information at https://www.irs.gov/taxtopics/tc701.html. Up to $250,00 could be deducted if the newlyweds sale their house at the right time.

All of these laws also apply to couples entering into a same-sex marriage. Since last year when the Supreme Court sanctioned same-sex marriage as the law of the land, the benefits or penalties of marriage also apply to all couples getting married.

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