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Category: Planning

It’s Not Too Late For These 5 Tax Moves!

With 2020 coming to an end, we thought it would be a good time to remind everyone of a few tax planning strategies that can be easily overlooked:

  1. Maximize your 401(K) or other employer plan contributions – Saving funds on a pre-tax basis in a retirement account allows them to grow tax-deferred until they are withdrawn in retirement.
  2. Contribute to your Health Savings Account (HSA) – An HSA is an often overlooked savings vehicle that allows individuals covered by high-deductible health insurance plans to save money on a pre-tax basis. The funds then grow tax-deferred and if used for medical expenses can be withdrawn tax-free. These are sometimes called the triple tax advantages of an HSA.
  3. Get going on 529 contributions – If you have children (or grandchildren, nieces, nephews, or anyone that may attend school in the future), a 529 may be the right savings vehicle for you. The tax deductibility of these contributions depends on your state of residence, and any contributions grow tax-free so long as they are used for qualified education expenses.
  4. Contribute to a cause you care aboutIf you don’t have a charitable organization that you want to support directly in 2020, you can open a Donor Advised Fund to make the charitable contribution this year, allowing you to gift to your favorite charitable organization later. You receive the tax deduction in the year of contribution to the Donor Fund, and this also allows your funds to stay invested, and potentially grow, so that you can give away greater amounts in the future.
  5. Think about financial gifts to individuals – While gifts to individuals are not tax deductible, they are a great way to lower your overall estate and reduce the amount that is potentially subject to estate taxes in the future. Cumulative gifts to an individual up to $15,000 [$30,000 for a married couple filing jointly in 2020] are under the annual gift exclusion and do not require a gift tax return to be filed. If you give more than $15,000 to one person, you may have to file a gift tax return and would encourage you to consult with your tax professional.

For some individuals it makes sense to accelerate their tax deductions in 2020, and for others it may make sense to delay their deductions until 2021. One of the things we do at Hill Investment Group is work with our clients’ clients’ CPAs and estate attorneys to ensure they are maximizing not only their portfolio with us, but their complete financial picture. Feel free to give us a call to discuss.

What Joe Biden’s Tax Plan Means for You

With Democratic Presidential candidate Joe Biden recently releasing his proposed tax plan, we thought it would be good to compare what Biden is proposing to our current tax law. Here is a simple side-by-side comparison of some of the major differences. What does this mean for clients of Hill Investment Group? At this point, not much. While Biden’s proposed plan is certainly different from current law, and in some cases significantly different, we are planning for the future, but aren’t making any changes to clients’ plans (at least not yet). As always, if you have specific questions about your specific situation, please call or email us to set up a time to talk.

Social Security Benefits are Worth More Now

Imagine owning an asset that has increased by 25% during the recent coronavirus pandemic. Now let me tell you a little secret: you probably already own it! I’m talking about Social Security benefits.

At Hill Investment Group, we help clients with all kinds of important decisions to optimize their portfolios. One of these decisions is when to collect Social Security benefits. The question is much more complicated than you might think. Some clients have seen six-figure differences in options after we run our analysis. Timing when to collect on Social Security is even more important today with interest rates near zero. If you are curious about how we do this analysis and are interested in what the answer might be for you, schedule a call here.

Recently, New York Times financial columnist, Jeff Sommer, wrote a piece arguing we should think of our social security as an annuity. Sommer argues it’s an annuity we all own that has skyrocketed in value – to the tune of $1 million for some. As many of you know, we generally advise AGAINST owning annuities of any type and better explain why this is different.

The key points:

  • Social Security can be compared to annuities because similar to an annuity, Social Security provides a monthly guaranteed income for a specified period of time. 
  • With low-interest rates, the income-producing power of other investments has dropped while the value of Social Security has held strong.
  • Because of this, coupled with Social Security payments increasing with inflation, the effective value of the Social Security income stream has soared.
  • As an added benefit over annuities, the US Government guarantees the payments, so it’s virtually risk-free, unlike a stock portfolio. 
  • If you tried to purchase an annuity on the market with similar features, it would be an expensive annuity indeed. Example: for a high-income earner who delays claiming Social Security benefits until age 70, Sommer suggests an annuity providing comparable benefits might cost about $1 million today, an increase in the cost of about 25% from prior years.

 Be sure to check out his article here.

Hill Investment Group