FEATURED POST

Advisors Management Group

Mapping Out Your Future with a Financial Plan
Just like a map or a GPS is needed for someone driving a car on a long trip, a financial plan is useful for anyone wondering about their financial future.  A financial plan lets us know if we are heading in the right direction, for example north instead of south.  Much like a long journey, life will have many twists, turns and a few unexpected bumps in the road.  However, with a well-planned route, we can have a clear idea of whether we are heading in the direction of our destination. What is a Financial Plan? A financial plan is a document that evaluates cash flow, assets, goals, and brings the information together in a document that predicts how much money and income you will have in the future. This document will be used to determine if your current strategy will accomplish your goals, or if you need a different one. Who can benefit from a financial plan? Financial plans are useful for people of all ages. A financial plan looks at money that is coming in (wages for most people), assets that you have saved so far, and what you are currently saving. This along with other factors helps to plan a path for your financial future.  This could be saving for a large purchase, paying off debt, or saving for the future (children’s education or retirement).  Financial plans are also helpful for people already in retirement as they can be used to help identify a strategy for creating retirement income, spending down assets, or planning to leave them to heirs. To prepare a financial plan your financial planner will need to gather some information from you. You will likely need to bring the following: Recent paystubs Last year’s tax return Statements for any retirement or investment accounts that you have Information on any pensions that you may have Social Security Statements (get yours at ssa.gov/myaccount ) More complex plans may require information about insurance and/or legal work Your planner will ask some questions to get to know you and find out what is important to you. A good planner will be interested in not just how much money you have, but also in what you would like to accomplish with your money. This conversation along with the data you bring to your appointment will help your planner to craft a financial plan that is specific to your goals. Your planning process will likely consist of several meetings. Costs are generally dependent on the complexity of your plan, and it is even possible that your advisor will provide some basic planning at no cost. Life will continue to change over time, for this reason it is important to revisit your financial plan with your advisor every so often to account for any detours or bumps along the road of life.  Financial plans are working documents that need to be adjusted as circumstances change. You should expect to update your financial plan several times during your working years. Generally, this will be every few years or when a major life change occurs. If you would like to find out more about having your personal financial plan prepared, contact us to set up your no obligation consultation today. Kate Pederson Investment Advisor Representative & Tax Preparer  Kate joined Advisors Management Group in December 2017. Prior to joining the firm, she worked in manufacturing and healthcare during her career as a financial analyst. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin.   Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses.  Please do not send orders via e-mail as they are not binding and cannot be acted upon.  Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services.  Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.
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18 Feb 2019

Advisors Management Group

12 Ways to Lower Your Auto-Insurance Premiums

Your car insurance bill is probably one of your largest monthly expenses, especially if you have teenage drivers. To lower your premium, ask your insurer for a list of discounts, and let the insurer know if you qualify. For instance, some insurers offer discounts of 10% to 15% for those who make a living at certain profession, such as educators, lawyers, accountants, physicians, and law-enforcement personnel. You could also get a 10% discount for belonging to an alumni association or another organization. You may also receive a discount for carpooling or for having a hybrid car. Pay Your Bills Differently One of the easiest ways to reduce your premiums is to find out if your insurer will give you a break for paying your bill in a lump sum rather than monthly payments. Paying for the full policy term (usually six months) rather than monthly can reduce your rates by 5% to 10%. You may also get a discount if you set up automatic payments from your credit card or checking account. You could also save 3% to 5% on premiums if you sign up to receive bills and other information online instead of in the mail. Boost Your Deductible Increasing your deductible from $250 or $500 to $1,000 can reduce your premiums by up to 20%. It can also prevent you from filing small claims that could lead to a rate increase or jeopardize a claims-free discount. Add some money to your emergency fund so you’ll have cash to pay the deductible if anyone in your family gets in an accident. Bundle Up Buying your car insurance from the same company that provides your home or renters insurance can cut your rates by 5% to 20%. You may also get an extra discount if you add an umbrella policy with the same insurer, too. Get Good Grades Most insurers offer a discount of 15% to 25% for young drivers who maintain at least a B average in high school or college. To qualify, the driver usually has to be a full-time student younger than age 25. Also, tell your insurer if your child moves more than 100 miles away from home for college and doesn’t take a car. Your premiums could drop by 20% or more, but your child will still be covered when home from college. Sign Up for Data Tracking If you drive few miles and have safe driving habits, you could save money by participating in a data-tracking program, such as Progressive’s Snapshot, State Farm’s Drive Safe & Save, or Allstate’s Drivewise. You use an app on your smartphone or plug a device into your car that tracks how many miles you drive, how often you drive late at night, and if you have potentially dangerous driving habits, such as braking hard and accelerating rapidly. The average premium savings for participating is 10% to 15%, although discounts can be as high as 50%. Some insurers will raise your rates if you show risky behavior, but you can usually review your results online so you can improve your habits before your rate is set each term. See How Tracking Rewards Good Drivers for more information. Shop Around Car insurance premiums can vary quite a bit by each company. It’s a good idea to shop around for car insurance every few years, or more often if you’ve had any big life changes, such as getting married, moving, or having a teenager driving. The insurer that had the best rate for a married couple may charge some of the highest rates when you add a teen driver. You can compare rates from several insurers at Insurance.com or InsuranceQuotes.com. You could also get help from an independent insurance agent who works with several companies. Ask Your Insurer for a Rate Cut If you find a better rate from another insurer, let your current insurer know before switching. The insurance company may match the rate in order to keep you as a customer. Drop Certain Types of Coverage on Older Cars Collision coverage pays to fix your car's damages if caused by a collision with another car or object. Comprehensive coverage pays for damages caused by other covered events, such as theft, natural disasters, collision with an animal, or if an object falls on your car (such as a tree). Even if your car is totaled, the most you’ll usually get is the replacement cost for a car of its age. If your car is only worth a few thousand dollars, you may be paying more in premiums than you could ever get back from the insurer after paying your deductible. Compare the premiums for keeping the coverage with the cost to replace the car. An indivdiual can go to KBB.com to estimate their car’s replacement cost. Take a Driver-Safety Program Drivers younger than age 21 who take an approved drivers education course may get a discount. Some insurers even offer their own driver-safety programs that can save you extra money. State Farm’s Steer Clear program, for example, can cut premiums by up to 15% for drivers younger than 25 who have had no accidents and participate in the training program. (The program requires drivers to watch safe-driving videos, take quizzes, and record their trips, all on the Steer Clear app.) Some insurers give discounts of 5% to 15% for drivers age 60 or older who take an accident-prevention class. Watch the Clock After an Accident or Ticket In most states, tickets and at-fault accidents remain on your driving record for three or five years. Longtime customers with good driving records may not get a rate hike at all. Many insurers check motor vehicle records every 12 to 18 months. If your rate does rise, shop around. Some insurers care less about accidents or tickets than others. When an accident or ticket drops off your motor vehicle record, ask your insurer to remove the surcharge and then re-shop your policy. Get a Safe Car Before you buy a vehicle, find out how much it costs to insure. You can find out if a car tends to have higher or lower insurance costs by using State Farm’s vehicle rating tool and checking out a car’s safety ratings from the Insurance Institute for Highway Safety. Improve Your Credit Score In most states, insurers can use your credit score when setting your insurance rates. Check your credit report free at AnnualCreditReport.com, and make sure there aren’t any errors that could hurt your score. Paying your bills on time, limiting new credit, and keeping your charges low in relation to your available credit can also help you improve your score. See the credit-education page at MyFico.com for more information about factors that can affect your score. Source: Kiplinger.com

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18 Feb 2019

Advisors Management Group

Start Trimming Your 2019 Tax Tab Now

When completing your 2018 tax return, turn some attention to your tax plans for 2019. Although tax reform triggered major changes in 2018, the landscape has settled in 2019. Tax rules in 2019 will look very similar to 2018. Once your 2018 taxes are done and you have determined how the new rules affect your personal tax situation, get a jump-start on trimming your 2019 tax tab. Learn how about trimming your 2019 tax tab by reading below. Adjust for Inflation The IRS now uses the chained consumer price index (rather than the traditional consumer price index) to calculate inflation adjustments for various income thresholds and limits. Chained CPI accounts for the fact that consumers change their spending patterns as prices rise, making inflation appear lower. Although inflation adjustments will be smaller, you’ll still find increases across the board. (See the 2019 tax brackets.) Reminder: The standard deduction rises to $12,200 for single filers and $24,400 for married couples filing jointly. The extra standard deduction for those age 65 and older is $1,300 per person for joint filers and $1,650 for single filers. If you were on the edge of taking the standard deduction for 2018, consider whether those higher amounts may close the door on itemizing in 2019. The income threshold for the 0% capital-gains rate also rises to $39,375 of taxable income for single filers and $78,750 for joint filers. Plan Charitable Giving Determining whether or not you itemize could help you decide on other tax moves, especially charitable giving. Itemizers can deduct charitable contributions, but non-itemizers, and even some itemizers, may want to consider a different approach: an IRA qualified charitable distribution. Traditional IRA owners age 70½ or older can directly transfer up to $100,000 a year from their IRA to charity. You don’t get a charitable deduction by doing this, but the money is excluded from your adjusted gross income and can count toward your IRA required minimum distribution. To have a QCD do double duty as your RMD, make sure to do the QCD before taking out the full RMD amount. For example, let’s say your total RMD is $15,000. You can transfer $5,000 directly to charity and take $10,000 out of the IRA by year-end. That satisfies your RMD but only $10,000 will be taxable and included in your AGI. Of course, you can also do QCDs (up to the $100,000 annual limit) in excess of your RMD amount. Review Health Care Expenses New for 2019: The penalty for not having health insurance is zeroed out. If you go without coverage, there is no longer a cost at tax time. The threshold for deducting medical expenses has climbed for 2019. Taxpayers can now only deduct medical expenses that exceed 10% of AGI. Adjust Withholding Look at how your 2018 withholding stacked up against your actual 2018 tax tab. If you got a big refund and expect your tax situation to be similar in 2019, adjust withholding so you hold onto more money throughout the year. If you didn’t withhold enough, increase withholding in 2019. You can have money withheld from various retirement income sources, such as IRA distributions, annuity payments, and Social Security benefits. Pay Estimated Tax You can also make estimated quarterly payments to cover your 2019 tab. Paying estimated taxes can be a pain but not paying estimated taxes is even worse because you may face tax penalties. One way to avoid underpayment penalties is to pay at least 100% of last year’s tax bill (or 110% for higher-income taxpayers) through withholding, estimated tax payments, or both. The first estimated tax payment for 2019 is due Monday, April 15. Source: Kiplinger.com

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06 Feb 2019

Advisors Management Group

How to use your Health Savings Account (HSA) to pay long-term care insurance premiums

A health savings account (HSA) enables you to set aside pre-tax money to pay for qualified medical expenses. The advantage is that this may help lower your overall healthcare costs.  Usually, you can’t use an HSA to pay insurance premiums. But there is a happy exception; you can use your HSA to pay for qualified long-term care insurance premiums. Keep reading to learn more and reach out to a financial advisor in LaCrosse for additional assistance. Benefits of an HSA An HSA can be invaluable if you have health insurance with a high deductible. As you get older, your deductible limits rise while medical expenses increase, and an HSA becomes increasingly helpful. An HSA has three major benefits: Tax deduction on contributions Tax-deferred benefits growth Tax-free distributions on medical expenses - that includes long-term care insurance! “Qualified” long-term care insurance Of course, like anything else to do with tax benefits, some qualifications must be met. Click to learn about the treatment of qualified long-term care insurance. To be considered tax-qualified, the long-term care insurance policy: Must be guaranteed renewable Can only pay for long-term care expenses Cannot have cash value Must be structured so all refunds of premiums and policyholder dividends are applied as a reduction in future premiums or to increase future benefits Withdrawal amounts There are limits to how much you can withdraw from your HSA to pay for long-term insurance premiums.  Those limits are based on the age you reached before the end of the tax year, and they typically change every year. The older you are, the more you can withdraw. Here are the allowed withdrawals for 2022 and 2023: [table id=1 /] Contribution limits In addition to a limit on withdrawals, there is also a limit on contributions. For 2023, you can contribute $3,850 for individual coverage You can contribute $7,750 for family coverage If you are age 55 or above, you may contribute an additional $1,000 to “catch up” Using your HSA to pay for long-term care insurance If your HSA has an attached checking account, you may write a check directly to the insurance company.  You may also pay the insurance company from another source and reimburse yourself. Contact us for more information about using your HSA to pay insurance premiums If you have questions about how you can best save money with your HSA,  how you can use it to pay long-term care insurance premiums, or whether your long-term care insurance is tax-qualified, contact us now.  Advisors Management Group has offices in La Crosse (608) 782-0200, or you may contact our Eau Claire financial advisors at  (715) 834-9512 or our Green Bay financial advisors at  (920) 434-2192. Advisors Management Group, Inc. is a registered investment adviser whose principal office is located in Wisconsin. Opinions expressed are those of AMG and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security. Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses. Please do not send orders via email as they are not binding and cannot be acted upon. Please be advised it remains the responsibility of our clients to inform AMG of any changes in their investment objectives and/or financial situation.  This commentary is limited to the dissemination of general information pertaining to AMG’s investment advisory/management services. Any subsequent, direct communication by AMG  with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.

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14 Jan 2019

Advisors Management Group

Tax Forms Q & A

What documents do I need to prepare my tax return, and when will I receive them? The documents you need will vary from person to person depending on the situation. The following are some of the most common forms you can receive for tax time. They will be sent to you by January 31. W2 reports income earned from an employer 1099-INT reports bank interest earned 1098 reports mortgage interest paid 1098-E reports student loan interest paid 1099-SA shows any distribution from an HSA account SSA-1099 reports social security income received 1099-R shows a distribution from a retirement account such as an IRA or 401(K) 1095-(A,B or C) shows proof that you you’ve had health insurance coverage The next two forms have a deadline of February 15. 1099-B reports sales of stocks, mutual funds or bonds 1099-Div reports dividends and interest from stocks, mutual funds and bonds Tax forms can be delivered to you via mail or electronically. If you receive electronic statements or pay stubs, you will also typically receive your tax form electronically. This usually occurs through a website "portal". These are the most common tax forms, but there are many more. If you have questions, talk with a tax professional or call Advisors Management Group. This material is for general information and education purposes only. It does not constitute individual investment, tax or legal advice.  Consult your individual advisors for investment, tax or legal advice specific to your circumstances. Opinions expressed are those of Advisors Management Group, Inc. and are subject to change, not guaranteed, and should not be considered recommendations to buy or sell any security.  Past performance is no guarantee of future returns, and investing involves multiple risks, including, but not limited to, the risk of permanent losses. Advisors Management Group, Inc. is a fee-only SEC Registered Investment Advisory firm with its principal place of business in Wisconsin providing investment management services.  A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.  

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14 Jan 2019

Advisors Management Group

5 Often-Overlooked Questions to Ask Your Financial Adviser in the New Year

A new calendar year is always a great time to take a step back to reflect on your goals and reset your financial plan to make sure you are on track. It is said that great outcomes come from asking great questions. This is also a useful way to think about your finances and can often save you from making costly mistakes. Start 2019 off by being one step ahead; ask your financial adviser these five commonly overlooked questions to help you optimize your finances. How much am I paying in fees? It's not always easy to get a handle on your investing costs, but you should know what you're paying. Getting that information should also be as easy as asking your adviser to spell it out for you. Do you know what your annual advisory fees are? That's a great place to start. Then, ask your adviser to outline anything else that you could be paying for, such as fund fees, account fees, and transaction fees. While costs like operating expenses on ETFs or mutual funds are often inevitable, some products have higher fees that others. It's crucial to keep an eye on how they are affecting your returns.  What employer-sponsored savings accounts and financial benefits should I take advantage of? Make time to ensure that you're taking full advantage of any employer-sponsored retirement plans, savings accounts, or other financial benefits available to you. Your adviser can help you determine how your 401(k) fits into your broader retirement plan, as well as the best way to leverage other financial plans your employer might offer. Other financial plans may include medical savings accounts (a flexible spending account or a health savings account) or employee stock purchase plans. If your employer offers contribution matching to your 401(k), it's generally smart to take advantage of the full match. An additional benefit of any amount contributed by your employer is that it doesn't count toward the annual IRS limit you can contribute yourself to max out your 401(k), meaning what you can put toward your retirement. How do the (relatively) new tax laws impact me? The Tax Cuts and Jobs Act that passed in late 2017 first took effect last tax season, but chances are you may still be adjusting to the changes. It's a good idea to look closely at how they affect you at the beginning of the year. A few noteworthy differences to be aware of include most tax brackets being lower, the child tax credit has gone up, the allowance for itemized medical expense deductions has increased, alimony payments are no longer deductible from taxable income, and inheritance tax exemptions have risen significantly. Even if you are aware of the new tax environment, you could have overlooked some of its effects. Be sure to speak with your financial adviser, as well as a tax adviser, about how these and other tax changes could impact your finances. How much risk is appropriate for me right now? The answer to this question is going to be different for each investor, and your financial adviser can help you determine how much risk within your portfolio is appropriate for you based on your age, financial situation, long-term goals, and general level of risk aversion. It's just as important to remember that your risk tolerance will likely change as you get closer to retirement and make more conservative financial moves. This is why it is wise to re-evaluate where you stand periodically. What other services are available to me? Finally, ask your adviser what other services are available to you through their firm. Can they help you with your estate, legacy, tax, banking, or other planning? These items may be important pieces of your financial plan. Don't be afraid to ask what you get for your advisory fee in order to maximize your financial professional's expertise or for a reference to an outside expert. Most importantly, make sure any conversation with your financial adviser relates to your specific long-term goals and how you are tracking against them. A final question to ask during a meeting can be as simple as, "What else should I be considering, and do you have a specific recommendation for me?" Your life stage, your needs, and goals are all unique to you. Your plan of attack for the new year should be the same. Source: kiplinger.com

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11 Jan 2019

Advisors Management Group

When is the Earliest You Can File Your Tax Return in 2019?

The sooner you file your tax return, the sooner you’ll receive any refund due. The IRS recently announced that it will start accepting 2018 tax returns on January 28, 2019, which is one day earlier than last year. Tax refunds will be on time according to its normal schedule. If you have a federal tax refund coming, you could get your money back in as little as three weeks. In the past, the IRS has issued over 90% of refunds in less than 21 days.  If you want to speed up the refund process, e-file your 2018 tax return and select the direct deposit payment method. Paper returns and checks slow things down considerably. However, don't expect your refund before mid-February if you claim the earned income tax credit or the additional child tax credit. By law, refunds for returns claiming these credits must be delayed. This applies to the entire refund, not just the portion associated with the credits. Source: kiplinger.com

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03 Dec 2018

Advisors Management Group

5 Tax Strategies for Small-Business Owners

Small-business owners are increasingly being congratulated for their contributions to the economy. They create jobs, provide much-needed services, promote diversity and put money back into their communities. Yet, those same business owners often are so busy with their day-to-day pursuits that they neglect their own financial needs. In doing so, they miss opportunities to protect the revenue that can help them further grow their business and secure their retirement. That particularly holds true when it comes to taxes. I can tell you from personal experience that paying taxes is easily the most frustrating part of owning a successful small business — and finance is what I do for a living. I know others face even bigger challenges — either because they don’t know what they don’t know or because they’re afraid they’ll do something to get the attention of the IRS and they’ll be audited. As far as audits go, there are two points to keep in mind: The IRS is not out to get you and in the case of an audit, as long as your return was honest and accurate, and you cooperate fully with the IRS’ requests, the process shouldn’t be too painful. Just make sure you are ALWAYS following the letter of the law. It’s unlikely you will be audited. For example, in 2016, 0.70% of individual tax returns overall, and only 1.7% of those making over $200,000, were audited. Neither of those concerns should keep you from using available tax strategies to maximize the value of your company to the benefit of your employees, your customers and your own future. Here are five scenarios to consider when consulting with your financial adviser, CPA and/or tax attorney. 1. Start saving for your retirement. Many of the entrepreneurs I meet seem to be constantly teetering on the brink of personal insolvency due to an isolated focus on their business. The most successful business owners I know are able to be more competitive because they feel financially fit themselves and thus more confident about the moves they make. An easy first step is to establish a retirement plan that offers you financial security regardless of the long-term success of your business. These plans come in many shapes and sizes, and a trusted financial professional can help you decide which is best for you. The most popular is the defined contribution plan, most often implemented as a 401(k) or SEP IRA to which you can contribute up to $55,000 per year. (Contribution limits may be even higher for those over age 50.) You may want to also use a cash balance pension plan to stash away closer to $150,000 per year in total. If you can use these tools to get your taxable income below certain thresholds, you could qualify your business for the new 20% pass-through tax break. If you’ve already taken this step, you may want to evaluate establishing what the founder of Wealth Factory, Garrett Gunderson, calls cash flow insurance, or properly structured cash value life insurance, providing you the ability to access these funds via policy loans before age 59½. What’s more, if the loans are used for your business, in most cases the interest you pay back to yourself is tax deductible. 2. Put your family members to work. I find employing family members to be one of the most overlooked and yet resourceful ways to begin reducing the household tax burden. By employing my wife as the director of operations for our firm, for example, we’ve been able to double the amount of income that can be deferred into our 401(k) plan. My wife spends a great deal of time heavily involved in our regular business activities. Even if your spouse isn’t working with you full time, he or she may be more engaged in your business than you think and could have a place there. If you have children, it may make sense to put them on the payroll, as well, as legitimate employees. Our family business has helped us teach our children about the value of a dollar and the importance of hard work. Our children have been employed nearly since they were born, initially under modeling contracts, as they have been utilized for advertising and promotional materials, then as they got older they were able to help with various menial tasks around the office justifying a higher, but still modest wage. Children typically will be in a lower tax bracket, but that doesn’t mean they aren’t spending plenty of the household money. Why not maximize the net income? Rather than taking your personal wages and paying for the children’s expenses, you can pay them their wages directly, so they can cover those expenses themselves at a lower tax rate and potentially no tax if their income doesn’t exceed their standard deduction. You could even have them open a Roth IRA to help them learn how to manage their investments and lay the foundation for their own tax-free retirement. 3. Rent your home when it’s used for business activities. If you regularly host business-related events at your home or some other dwelling you own, you may be overlooking an extraordinary opportunity. The Internal Revenue Code allows dwelling unit owners to rent their property to other individuals or entities for 14 days or fewer in a calendar year and exempts the income received from taxation. Just be sure you’re executing a contract in which the rent is paid at fair market value and that it is an ordinary and necessary business expense of the entity. 4. Reduce self-employment tax with an S corporation. Many people get so caught up in getting their business started that they forget to make the appropriate election to avoid paying excessive self-employment taxes. You have until the end of the year to elect to be taxed as an S corporation retroactively. You still must run your payroll and pay yourself a fair wage, but distributions can allow you to eliminate this 15.3% tax on a good chunk of your annual income. Keep in mind that avoiding self-employment taxes may ultimately reduce the amount of Social Security income you are supposed to receive in the future. My personal feeling on this is that I would rather save for my own retirement, rather than letting the government do so on my behalf, however if you feel the government can do a better job saving for your retirement than you it may make sense to pay a higher level of self-employment tax. 5. Evaluate the benefits of a C corporation. There’s been a long-running debate regarding the benefits of establishing a C corporation over an S corporation. Generally, an S corporation allows you to avoid being taxed twice as earnings realized at the corporate level flow through to your personal return. For most businesses, this is probably the most advisable default. But for some, the C corporation structure may offer comparable advantages. A C corporation gives you the ability to make use of tax-free employee fringe benefits not offered to S corporations, such as meal expenses; medical, disability and long-term care insurance; and even tuition reimbursements. In some instances, it may even make sense to combine corporate structures for the biggest tax benefits. Don’t be afraid to take legal measures to reduce your tax burden. Tax deductions, tax credits, tax-free reimbursements, corporate structures and more are all part of the tax code. As long as you follow the letter of the law, keep good records and have good counsel from a competent tax professional, as I do, you should be able to keep more of your money where it belongs: in your pocket. Source: Kiplinger.com

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03 Dec 2018

Advisors Management Group

Paying Cash Helps Exit Medicare Drug Doughnut Hole

Given the high cost of many prescription drugs, you sometimes are better off paying a lower cash price instead of using insurance. Why? Because, in some cases, the Medicare co-pay can be higher than the out-of-pocket expense for the same medicine, especially if you can use a discount coupon. The strategy drew attention recently because of a new law that bans “gag clauses,” which had prevented pharmacists in some states from letting customers know about a lower price for their drugs if they paid cash or didn’t use insurance. The clauses had been regularly included in pharmacy contracts with insurers. The ban takes effect immediately for private insurance and is effective January 1, 2020, for Medicare Advantage and Part D prescription-drug plans. If you know to ask about a lower price, the pharmacist is permitted to tell you, even before the ban starts (see New Laws Lift 'Gag Clauses' on Pharmacists). But what you may not realize is that if you have Medicare Part D or Medicare Advantage, and you pay the lower cash price at a pharmacy in your plan, the money you pay can count toward your out-of-pocket expenses. You will have to submit documentation to your Part D or Advantage plan, and you will be credited up to the amount of the co-payment or the co-insurance you would have paid under your insurance, says Julie Carter, senior federal policy associate at the Medicare Rights Center. People definitely are not aware of this policy for the most part,” Carter says. “Still, all of the news around gag clauses and the cash price could mean people need to know this information more than before.” Why It Matters Having your out-of-pocket costs count under Medicare is important because the expenses you incur count toward getting you out of the coverage gap known as the doughnut hole. For 2018, once you and your plan have spent $3,750 on covered drugs, you’re in the doughnut hole. In the gap, you pay 35% of the costs of brand-name drugs and 44% of the cost for generics. Once you exceed $5,000 in out-of-pocket spending, you’re out of the coverage gap, and you automatically get “catastrophic coverage.” You face only a small co-insurance or co-payment of about 5% for covered drugs for the rest of the year. The coverage gap changes in 2019 (see below). Making sure your cash outlays for a drug count toward your total out-of-pocket costs can help you exit the coverage gap more quickly. Some Medicare beneficiaries hear about the policy only if their pharmacist happens to know and shares the information, says Leslie Fried, senior director for benefits access at the National Council on Aging. Though slightly hard to find, the policy is included in the Medicare Prescription Drug Benefit Manual at cms.gov (here's a link to the policy; go to the chapter titled "Direct Member Reimbursement"). Call your Part D or Advantage plan to confirm it will count your expenses and to get information on the necessary documentation, Fried says. You also should keep all your receipts. Then be sure to follow through and submit your documentation. “It will require you to jump through some hoops,” Fried says. Doughnut Hole in 2019 Initial Coverage Period. You pay up to your annual deductible (the standard Part D deductible is $415). Then you pay 25% of prescription-drug costs up to $3,820. Coverage Gap for Generics. For 2019, the doughnut hole closes for brand-name drugs -- you pay 25% of those costs until reaching catastrophic coverage. But the coverage gap remains for generics -- you pay 37% of those costs while in the coverage gap. Exit the Gap. Once out-of-pocket costs total $5,100 in 2019, you exit the coverage gap. Catastrophic coverage kicks in, and you now pay the greater of 5% of drug costs or $3.40 for generics and $8.50 for brand-name drugs. Source: Kiplinger.com

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07 Nov 2018

Advisors Management Group

Retirees, Avoid These 11 Costly Medicare Mistakes

Medicare covers the bulk of your health care expenses after you turn 65. But Medicare's rules can be confusing and mistakes costly. If you don't make the right choices to fill in the gaps, you could end up with high premiums and big out-of-pocket costs. Worse, if you miss key deadlines when signing up for Medicare, you could have a gap in coverage, miss out on valuable tax breaks, or get stuck with a penalty for the rest of your life. Here are 11 common Medicare mistakes you should avoid making. Keeping Your Part D Plan on Autopilot Open enrollment for Medicare Part D and Medicare Advantage plans runs from October 15 to December 7 every year, and it's a good time to review all of your options. The cost and coverage can vary a lot from year to year—some plans boost premiums more than others, increase your share of the cost of your drugs, add new hurdles before covering your medications, or require you to go to certain pharmacies to get the best rates. And if you've been prescribed new medications or your drugs have gone generic over the past year, a different plan may now be a better deal for you. It's easy to compare all of the plans available in your area during open enrollment. Go to the Medicare Plan Finder and type in your drugs and dosages to see how much you'd pay for premiums plus co-payments for plans in your area. See How to Find the Best Medicare Drug Plan for You for 2019 for more information about picking a plan. Buying the Same Part D Plan as Your Spouse There are no spousal discounts for Medicare Part D prescription-drug plans, and most spouses don't take the same medications. One plan may have much better coverage for your drugs while another may be better for your spouse's situation. "You need to look at the coverage for your specific drugs," says Tricia Blazier, of Allsup Medicare Advisor, which helps people with their Medicare decisions. You can look your drugs and dosages using the Medicare Plan Finder to estimate out-of-pocket costs for each of you under the plans in your area. Just be careful if you and your spouse sign up for plans with different preferred pharmacies—some plans only give you the best rates if you use certain pharmacies, so you could end up paying a lot more if you get your drugs somewhere else. Going Out-of-Network in Your Medicare Advantage Plan If you choose to get your coverage through a private Medicare Advantage plan, which covers both medical expenses and prescription drugs, you usually need to use the plan's network of doctors and hospitals to get the lowest co-payments (and some plans won't cover out-of-network providers at all, except in an emergency). As with any PPO or HMO, it's important to make sure your doctors, hospitals and other providers are covered in your plan from year to year. You can switch Medicare Advantage plans during open enrollment each year from October 15 to December 7, and you can compare out-of-pocket costs for your medications and general health condition under the plans available in your area by using the Medicare Plan Finder. After you've narrowed the list to a few plans, contact both the insurer and your doctor to make sure they'll be included in the network for the coming plan year. Not Switching Medicare Advantage Plans Mid Year If Needed Even though open enrollment for Medicare Advantage plans runs from October 15 to December 7, you may still be able to change plans during the year. In 2019, you have a new opportunity to change plans after open enrollment. You now have from January 1 to March 31 to switch to a different Medicare Advantage plan. You can also switch plans outside of open enrollment if you have certain life changes, such as moving to an address that isn't in your plan's service area (see Special Enrollment Periods for more information). And if you have a Medicare Advantage plan in your area with a five-star quality rating, you can switch into that plan anytime during the year (you can use the Medicare Plan Finder to see whether a five-star plan is available in your area). Not Picking the Right Medigap Plan If you buy a Medicare supplement plan within six months of enrolling in Medicare Part B, you can get any plan in your area even if you have a preexisting medical condition. But if you try to switch plans after that, insurers in most states can reject you or charge more because of your health. It's important to pick your plan carefully. See How Preexisting Conditions Can Affect Medigap Insurance for more information on choosing a plan. Some states let you switch into certain plans regardless of your health, and some insurers let you switch to another one of their plans without a new medical exam. Find out about your state's rules and the plans available at your state insurance department Web site. You can also find more information about medigap policies in your area at Medicare.gov. Forgetting That You Can Sign Up for Medicare at 65 If you're already receiving Social Security benefits, you'll automatically be enrolled in Medicare Part A and Part B when you turn 65 (although you can turn down Part B coverage and sign up for it later). But if you aren't receiving Social Security benefits, you'll need to take action to sign up for Medicare. If you're at least 64 years and 9 months old, you can sign up online. You have a seven-month window to sign up—from three months before your 65th birthday month to three months afterward (you can enroll in Social Security later). You may want to delay signing up for Part B if you or your spouse has coverage through your current employer. Most people sign up for Part A at 65, though, since it's usually free—although you may want to delay signing up if you plan to continue contributing to a health savings account. See the Social Security Administration's Applying for Medicare Only for more information. If you work for an employer with fewer than 20 employees, you must sign up for Part A and usually need to sign up for Part B, which will become your primary insurance (ask your employer whether you can delaying signing up for Part B). Not Signing Up for Part B If You Have Retiree or COBRA Coverage When you turn 65, Medicare is generally considered to be your primary insurance, and any other coverage you have is secondary, unless you or your spouse has insurance through a current employer with 20 or more employees. But the coverage must be with a current employer. Other employer-related coverage, such as retiree coverage, COBRA coverage, or severance benefits, isn't considered to be primary coverage after you turn 65. That means if you don't sign up for Medicare, you may have gaps in coverage and be subject to a lifetime late-enrollment penalty of 10% of the current Part B premium for every year you should have been enrolled in Part B but were not. You may also have to wait to get coverage: If you miss the window for enrolling when you turn 65 or eight months after you leave your job, you can only sign up for Medicare between January and March each year, with coverage starting on July 1. For more information, see the Medicare Rights Center's Medicare Interactive page about the rules for job-based insurance after age 65. Forgetting About the Part B Enrollment Deadline After Leaving Your Job If you have coverage through an employer with 20 or more employees, you don't have to sign up for Medicare at 65. Instead, you may choose to keep coverage through your employer so you don't have to pay the Part B premiums. But you need to sign up within eight months after you leave your job or you may have to wait until the next enrollment period (January through March, for coverage to begin on July 1). That means you could go for several months without coverage. You may also get hit with the 10% lifetime late-enrollment penalty. Making Financial Moves That Boost Your Medicare Premiums Most people pay $134 per month for Medicare Part B premiums in 2018. But if you're single and your adjusted gross income is more than $85,000 (or more than $170,000 for joint filers), you'll have to pay from $187.50 to $428.60 per month in 2018. And you'll have to pay a high-income surcharge for your Part D prescription-drug coverage, too, which can boost your premiums by $13 to $74.80 per month. If you're near the income cutoff, be careful about financial moves that could increase your adjusted gross income and make you subject to the surcharge, such as rolling over a traditional IRA to a Roth or making big withdrawals from tax-deferred retirement accounts. To stay below the limits, you may want to spread your Roth conversions over several years or withdraw money from Roths rather than just from tax-deferred accounts. Not Contesting the High-Income Surcharge for the Year You Retire Your Part B and Part D premiums are higher if you earned more than $85,000 if single or $170,000 if married filing jointly. The Social Security Administration uses your most recent tax return on file (generally 2016 for 2018 premiums) to determine whether you're subject to the surcharge. But you may be able to get the surcharge reduced if your income has dropped since then because of certain life-changing events, such as marriage, divorce, death of a spouse, retirement or a reduction in work hours. In that case, you can ask Social Security to use your more recent income instead (you'll need to provide evidence of the life-changing event, such as a signed statement from your employer that you retired). See the Social Security Administration's Medicare Premiums: Rules for Higher-Income Beneficiaries for more information. Signing Up for Medicare Part A If You Want to Contribute to an HSA You can't contribute to a health savings account after you sign up for Medicare, but that doesn't necessarily mean that you have to stop making HSA contributions at age 65. If you or your spouse has health insurance through your current job, you can delay signing up for Part A and Part B and keep contributing to an HSA. This isn't an option if you have already signed up for Social Security or your employer has fewer than 20 employees—in that case, you can't delay signing up for Part A. Be careful about your contributions in the year you leave your job and sign up for Medicare—you must prorate your HSA contributions based on the number of months before you were covered by Medicare. See FAQs About Health Savings Accounts for more information. Source: Kiplinger.com

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07 Nov 2018

Advisors Management Group

10 Myths About Health Savings Accounts

When you’re choosing a health plan for the year -- whether you get coverage through your employer or on your own -- one option may be a high-deductible plan that makes you eligible to contribute to a health savings account. There are a lot of misconceptions about how HSAs work. Health savings accounts offer a triple tax break -- contributions aren’t taxed, the money grows tax-deferred, and it can be used tax-free for eligible medical expenses at any time. Here, we take a look at several of the most common HSA myths -- and the reality. Myth: You Must Use HSA Money by Year-End This is the biggest misconception about HSAs. Unlike flexible spending accounts, HSAs have no use-it-or-lose-it rule. You can use the money tax-free to pay eligible medical expenses at any time. The money can pay current medical expenses -- such as your insurance deductible, co-payments for health care and prescription drugs, and out-of-pocket costs for vision or dental care -- but you’ll get the biggest tax benefit if you keep the money growing in the account and withdraw it for medical expenses much later, such as in retirement. You can withdraw HSA money tax-free, for instance, to pay Medicare Part B, Part D and Medicare Advantage premiums after you turn age 65. Most HSAs let you invest the money in mutual funds for the long term. Myth: You Can Only Get an HSA Through Your Employer Although many employers pair an HSA with a high-deductible health insurance plan, anyone with an HSA-eligible health insurance policy can contribute to an HSA. (HSA-eligible policies must have a deductible of at least $1,350 for single coverage or $2,700 for family coverage in 2019.) Many banks and other financial institutions offer health savings accounts. You can find HSA administrators at www.hsasearch.com, where you can compare fees and investing options. If your employer does offer an HSA, however, that’s usually your best option because many employers contribute money to employees’ HSAs (an average of $500 per year for individuals and $1,000 for families), and employers tend to cover most of the fees for employees’ HSAs. Also, contributions made through payroll deduction are pre-tax, avoiding federal and Social Security taxes. If you contribute to an HSA on your own, your contributions are tax-deductible. Myth: You Can’t Use Money in the HSA After You Sign Up for Medicare You can’t make new contributions to an HSA after you enroll in Medicare, but you can continue to use the money that’s already in the account tax-free for out-of-pocket medical expenses and other eligible costs that aren’t covered by insurance, such as vision, hearing and dental care and co-pays for prescription drugs. You can also take tax-free withdrawals to pay a portion of long-term-care insurance premiums based on your age, ranging in 2018 from $410 if you’re 40 or younger to $5,110 if you’re 70 or older. And after you turn 65, you can use HSA money to pay premiums for Medicare Part B, Part D or Medicare Advantage. You can even withdraw money from your HSA to reimburse yourself if your Medicare premiums are paid directly out of your Social Security benefits. “You just need to keep your payment notification from Social Security in your tax records, and you can reimburse yourself dollar for dollar,” says Steven Christenson, executive vice president at Ascensus, a benefits consultant. Myth: You Can’t Contribute to an HSA After You Turn 65 Eligibility to make HSA contributions stops when you enroll in Medicare. That’s not necessarily when you turn 65. Some people who keep working for a large employer at age 65 choose to delay signing up for Medicare Part A and Part B so they can continue to contribute to an HSA (especially if their employer contributes money to the account, too). However, you can only delay signing up for Medicare at 65 if you have health insurance from a current employer (or if you have coverage through your spouse’s employer); the employer generally must have 20 or more employees. Otherwise, you generally have to sign up for Medicare at 65. If you are eligible to delay signing up for Medicare, be sure to enroll within eight months of losing your employer coverage so you won’t have a late-enrollment penalty. You can make pro-rated HSA contributions for the number of months before your Medicare coverage takes effect. If you sign up for Medicare Part A after age 65, your coverage takes effect retroactively six months before you enrolled. Myth: You Must Get Permission From HSA Administrators to Withdraw Money Unlike with an FSA, which usually requires you to gather receipts and get permission from the administrator to make withdrawals, you can withdraw money from your HSA whenever you want. Many HSAs have debit cards that make it easy to use the account for eligible expenses, but you can also withdraw money on your own and keep the records in your tax files to prove that the withdrawals should be tax-free. “FSAs require the administrator to substantiate the claim, but with HSAs, there is no substantiation requirement -- you just have to keep the receipts,” says Steve Auerbach, CEO of Alegeus, which provides technology for HSAs. Myth: You Must Use HSA Funds Within a Certain Time Period After You Incur Medical Bills One quirk of the HSA rules is that there’s no time limit for using the money after you incur an expense. Say you have knee surgery and pay a $1,000 deductible in cash. As long as you had the knee surgery after you opened an HSA, you can withdraw that $1,000 tax-free from the account anytime -- even years later. You just need to keep track of your receipts for the HSA-eligible expenses. Many HSA administrators make it easy to import medical claims-payment records from your health insurance to your HSA and keep track of whether you paid the bill with your HSA or with cash. “We store all of those claims and receipts for you. If, say, in two years you want to take the money out, it can come out tax-free because you’ve already incurred those expenses,” says Auerbach, of Alegeus. Myth: You Can Only Invest the HSA Money in a Savings Account HSAs have savings accounts, so you know the money will be there if you plan to use it for current expenses. But many HSA administrators also let you invest the money in mutual funds for the long term. The fees and investing options vary a lot by company -- some offer low-cost funds from Vanguard, Fidelity and other well-known fund companies. You can compare fees and investing options at www.hsasearch.com. Some HSA administrators charge extra fees unless you maintain a minimum balance. Myth: Your Spouse and Kids Can Only Use HSA Money If Covered by Your Health Plan The rules for contributing to an HSA are different than they are for using the money. For 2019, you can contribute up to $3,500 to the account if you have health insurance coverage on you only or up to $7,000 if you have family coverage. You can also contribute an extra $1,000 if you’re 55 or older. But no matter whether you have individual or family health insurance coverage, you can use the HSA money tax-free for qualified medical expenses for yourself, your spouse and your tax dependents -- even if those family members are covered under a different policy, says Roy Ramthun, CEO of HSA Consulting Services. Myth: You Can’t Use the HSA After You Leave Your Job Here’s another way that HSAs differ from FSAs: You can keep the HSA even if you leave your job. You can usually maintain the HSA through the current administrator or roll it over to a different one (similar to an IRA rollover). And if you have an HSA-eligible high-deductible policy -- whether through a new employer or on your own -- you can continue to contribute to the HSA. Myth: It Doesn’t Make Sense to Have an HSA-Eligible Policy If You Have a Lot of Medical Expenses Some people are reluctant to choose a high-deductible health insurance policy if they have a lot of medical expenses. But you need to do the math and compare the overall costs. In some cases, the premium savings by choosing the high-deductible policy rather than a lower-deductible plan may cover most of the difference in the deductible. And if you have employer coverage, your employer may contribute to your HSA to help close the gap. The employer contribution is generally seed money rather than a match. Many employers deposit a fixed amount of money into the account at the beginning of the year for anyone who has an HSA-eligible policy, says David Speier, managing director of benefits accounts at Willis Towers Watson, a benefits consultant. Add up the difference in premiums, deductibles and other out-of-pocket costs for your regular medical expenses, as well as any employer contribution, when deciding on a policy. Many employers are introducing decision-making tools to help with the calculations, says Speier. Source: Kiplinger.com

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