December 2015


One day in early fall the chief of a Native American tribe was asked by his tribal elders if the winter was going to be cold or mild. Neither the chief nor his medicine man was able to read the signs from the natural world around them.

So the chief decided to take a modern approach. He called the National Weather Service to inquire.

“Yes, it is going to be a very cold winter,” the meteorological officer told the chief. As a result of this brief conversation, the chief went back to the tribe and told his people to collect every bit of wood they could find.

A few weeks later the chief called the National Weather Service once more and asked about the coming winter. “Yes,” he was told, “it is going to be one of the coldest winters ever!”

“How can you be so sure?” the chief asked.

The weatherman replied: “Because the Native Americans are collecting wood like crazy.”

We receive opinions from many sources. Just remember, opinions without documentation are only opinions.


1. Estate planning is for everyone. Estate planning isn’t just dependent on your assets; it’s about identifying what you want to happen after you pass away. Who do you want to take care of your children, for example, and do you want that person to be financially responsible for them as well—they don’t necessarily have to be the same people. When you take control of your estate planning, you are effectively helping to ease the burden that is already felt by your loved ones. Not only will you have already made the difficult decisions, but you can do so in a way that provides additional benefits for your heirs while securing your legacy.
Source Rea & Associates, CPA’s.

2. Fact vs. Opinion. Facts can be proven, can be duplicated, and can be observed. Opinions refer to a particular person’s (or group’s) feelings, thoughts, judgments, beliefs, estimates, and / or anything that is not 100 percent true and can’t be proven. It is important to distinguish fact from opinion when working on your finances. Make sure your advisor verifies all recommendations. Your money is at stake!


3. Don’t overlook a powerful tax tool – Health Savings Accounts. They combine with high deductible health plans and are available to people under 65 years of age. It is the only financial instrument that provides three important tax benefits. You sock money away using a tax deduction. It grows in value and is tax deferred inside the account. You can remove the money tax free for any qualified medical expense service.

4. The tax advantages of a Health Savings Account are only part of the story. The contribution limit for a family in 2016 is $6,750. If both spouses are age 55 or older they each can add another $1,000 to the account. That is a total deduction of $8,750. For a single person, the contribution limit is $3,350, and includes the $1,000 option. It is line 25 on federal tax form 1040.

5. Uncle Sam was busy at work last month closing alleged loopholes in Social Security. Everyone eligible for Social Security is affected by the changes, except widows/widowers. The Bipartisan Budget Act of 2015 was signed into law on November 2, 2015. In essence, it has eliminated some Social Security retirement distribution choices. The changes could cost thousands of dollars in Social Security benefits, depending on your date of birth and marital status. It is important to review your situation with a competent advisor experienced with the new rules on Social Security, and consider doing it as soon as possible. There are deadlines attached to the new law.

6. Home Equity is one of the least used assets in planning and is an excellent source for accessing cash. It is important we have plenty of cash on-hand. Unexpected events occur. Loss of job, disability, medical expenses, replacement of air conditioner, a car, or a roof are just a few of these events. Secure the financing when you don’t need it! Financial institutions probably won’t let you borrow the money when you do need it. It will help you sleep better at night knowing you have access to cash.

7. There are over 8,000 baby boomers turning 65 each day in our country. Many of them will be making a decision on Medicare. The decision of whether to purchase a Medicare Advantage Plan, underwritten by an insurance company, or enroll in federally sponsored Medicare can be a lifelong decision. There are rules and restrictions about moving from one plan to another, and in some situations changing is not allowed. If you or someone you know is facing this decision, do your homework and work with someone who understands the landscape.

8. Year-end statements on your IRAs, or other qualified retirement accounts will be mailed within the next couple of weeks. Remember, when you review your statement think about the future tax consequences, and the amount of control the government has on your account. If your statement reads that you have a million dollars in the account, your portion is after the taxes you will pay. You won’t know the final amount until you start taking withdrawals. Tax brackets and tax rates have changed drastically since the federal government started collecting taxes in 1913.

9. Do you think your current income marginal tax rates are high?A married couple earning $100,000 in 2015 and filing a joint tax return, would be in the 25% marginal tax bracket. A couple in 1946 making the same amount of money, adjusted for inflation, would be in the 34% marginal tax bracket. This is a 36% increase over today’s tax rates. What is your planning strategy if taxes increase in the future? Remember, higher taxes means less money in your pocket for lifestyle expenses.
Source – Tax Foundation


10. What is the ultimate financial strategy at retirement? It is the ability to consume assets without the fear of running out of cash. This technique substantially increases cash flow, and usually reduces taxes at the same time. Is it too good to be true? Remember, they thought Galileo was a lunatic because he said, “The earth revolves around the sun, and the sun does not revolve around the earth.” It does work, but it requires extraordinary and counter-intuitive thinking. Interested? Give us a call and we will schedule a time to talk.

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