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Retirement Tax Breaks You Don't Want to Miss

Some federal tax laws adjust to offer varying benefits or tax breaks at different age brackets.  This can present opportunities to save or alternatively, create costly pitfalls to avoid.  Being alert to the rolling changes that come at various life stages is the key to holding down your tax bill to the legal minimum.  Below are a few ideas that the 65 and older might want to consider.

1.  Bigger Standard Deduction

When you turn 65, the IRS offers a gift in the form of a bigger standard deduction. For 2016 returns, for example, a single 64-year-old gets a standard deduction of $6,300 (it will be $6,350 for 2017). A 65-year-old gets $7,850 in 2016 (and $7,900 in 2017).

The extra $1,550 will make it more likely you’ll take the standard deduction rather than itemizing and, if you do, the additional amount will save you almost $400 if you’re in the 25% bracket. Couples in which one or both spouses are age 65 or older also get bigger standard deductions than younger taxpayers. When both husband and wife are 65 or order, for example, the standard deduction on 2016 joint returns is $15,100 (and $100 more for 2017). Be sure to take advantage of your age.

2.  Easier Medical Deductions

Until 2017, taxpayers age 65 and older get a break when it comes to deducting medical expenses. Those who itemize on 2016 returns get a money-saving deduction to the extent their medical bills exceed 7.5% of adjusted gross income. For younger taxpayers, the AGI threshold is 10%. If you’re married, only one spouse needs to be 65 to use the 7.5% threshold. For 2017 returns, the 10% threshold will apply to all taxpayers.

3.  Deduct Medicare Premiums

If you become self-employed—say, as a consultant—after you leave your job, you can deduct the premiums you pay for Medicare Part B and Part D, plus the cost of supplemental Medicare (medigap) policies or the cost of a Medicare Advantage plan.

This deduction is available whether or not you itemize and is not subject to the 7.5%-of-AGI test that applies to itemized medical expenses for those age 65 and older in 2016. One caveat: You can't claim this deduction if you are eligible to be covered under an employer-subsidized health plan offered by either your employer (if you have retiree medical coverage, for example) or your spouse's employer (if he or she has a job that offers family medical coverage).

4.  Spousal IRA Contribution 

Retiring doesn’t necessarily mean an end to the chance to shovel money into an IRA.  If you’re married and your spouse is still working, he or she can contribute up to $6,500 a year to an IRA that you own.  If you use a traditional IRA, spousal contributions are allowed up to the year you reach age 70 ½. If you use a Roth IRA, there is no age limit. As long as your spouse has enough earned income to fund the contribution to your account (and any deposits to his or her own), this tax shelter’s doors remain open to you. The $6,500 cap applies in both 2016 and 2017.

5.  Avoid the Pension Payout Trap

Upon retirement, many retirees are offered the opportunity to take a lump-sum payment from their company plan, such as pensions, annuities, IRAs and other retirement plans.  However, if you take a lump-sum payment from a company plan, you could fall into a pension-payout trap where the IRS mandates you withhold a flat 20% for income taxes… even if you simply plan to move the money to an IRA via a tax-free rollover.  The IRS will hold on to the 20% until you file a tax return for the year and demand a refund. 

Fortunately, there’s an easy way around that miserable outcome when initiating a rollover from your employer sponsored plan to an IRA.  Simply ask your employer or Certified Financial Planner to send the money directly to a rollover IRA.  As long as the check is made out to your IRA and not to you personally, there’s no tax withholding.

Even if you intend to spend some of the money right away, your best bet is still to ask your employer to make the direct IRA transfer.  Then, when you withdraw funds from the IRA, it’s up to you whether there will be withholding.

To find out which of the above strategies is appropriate for you, consult your Certified Financial Planner or CPA.  Some can be utilized in combination, but others should be selected in lieu of one another, so find out which will provide you with the greatest benefits overall. 

 

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

 

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Financial Decision You May Regret in Retirement

Getting to retirement is a tricky and lengthy proposition that takes a lot of planning and forethought. Unfortunately, many people spend more time planning their 2-week vacations than they do planning for a 30-year retirement. It's easy to make a mistake along the way that you may regret for years. Here are some tips for avoiding some common traps, and making the right choices.

Relocating -- Look Before You Leap

In the exuberance of retirement, you may decide to move to another city or state that has always been attractive to you, because it's warmer, has entertainment and educational opportunities, and is exotic.

Some retirees who have taken the leap have found that living in a new place can be very different from visiting as a tourist. Once you have lived somewhere for a few months or years, you may find that the pace is too slow or too fast. You may miss your friends and neighbors. Even playing golf daily, or taking long walks on the beach may have sounded terrific in a brochure, but can get old over time.

If you decide to retire in another country, it can become even more complex, when learning a new language, new currency, new tax laws and customs can become overwhelming. Remember that when you're a senior, familiar and comfortable surroundings can make life easier, and dramatic change often becomes more difficult. Consider leasing or renting before you buy.

Falling for Scams

The offers can sound very tempting -- guaranteed, spectacular returns in a year without risk. The old adage still holds true -- "If it sounds too good to be true, it probably is." The Federal Trade Commission reports that in 2015, Americans lost $765 million in get-rich-quick schemes. Thirty-seven percent of the victims were age 60 and over.

Look for these warning signs:

* Requirement to wire money or pay a fee before you can receive a prize.

* Demands for personal and sensitive financial information, like your bank account, credit card information, or Social Security number.

* Pressure to make an immediate decision.

* Discouragement about getting advice from an impartial professional advisor.

Planning to Work Indefinitely

Many Baby Boomers intend to work until age 70. This may be because they are still recovering from the Great Recession of 2008 and 2009. It may be because they got to 65 before they knew it, and didn't save enough during their working years.

The disturbing reality, according to a Willis Towers Watson survey, is that only 6% of retirees actually report working in retirement as a source of income. Good intentions are often dashed by circumstances beyond our control -- organizational changes at our company, downsizing, or purchase by another company.

One of the biggest factors causing us to stop working before we would like to is health issues. According to a Transamerica survey, 37% of those who retired early did so because of their own declining health, or that of a loved one.

Consequently, it makes sense to hope for the best, but plan for the worst. Many people like to work because of the income, the paid benefits, and the camaraderie. Work as long as you can, but don't neglect to contribute diligently to an employer-sponsored plan, like a 401(k) or 403(b), or to your own Individual Retirement Account.

Putting Your Children First

It's common in our community and culture to make great sacrifices for the sake of our children. It's an admirable choice, but it's often not a sound one from a financial point of view. For example, many parents tap into their 401(k)s or IRAs to pay for college for their children. However, there are many ways to pay for college, including scholarships, grants, student loans, and work-study. There's a common saying among financial planners, "You can get a loan for a college education, but no one will loan you money for retirement."

If you raid your retirement nest egg to pay for your child's college, you're likely to reduce or suspend current contributions while you're repaying the loan. You may also miss out on any employer matching, and on the tax-deferred growth of your contributions. It's a tough decision, but it may be better to opt for less expensive in-state schools, or to take two years at a community college before transferring to a four-year college. If you're not prudent now, you may end up depending on your children later on.

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

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2016 in Reflect: The Disciplined Investor Won

Calling 2016 an eventful year in the stock market feels like a bit of an understatement.  We started the year with negative sentiments stirring fear in many.  After the first full week of 2016, USA Today headlined an article noting, “Stocks close out week with worst start to year EVER.[i]  It was nerve rattling, to say the least.  The end of January was no better with the market diving as much as 500 points in one trading day, only to close at a loss of 250 points. 

The market dropped quickly in reaction to slowed growth in China as it shifted its economy from one fueled by trading with other countries, to one that is driven more by internal consumer spending, similar to the U.S.  To further fears, oil was selling at $28[ii] a barrel in early 2016, sending many corporations tied to the oil and gas industry into a downward spiral.  While crude oil prices have recovered greatly, unrest in the Middle East, has kept oil prices lower than the commonly seen $100 a barrel price from the 2011-2014 period. 

Then in late June, the world was surprised by the British Exit coined “Brexit” vote to leave the European Union.  The decision had immediate ripple effects around the world, causing stock markets to plummet and the British pound to fall to its lowest levels in decades. 

Shortly thereafter, the US election surprised the world again with presidential candidate Donald Trump making an unforeseen surge to surpass Hillary Clinton and become the 45th President of the United States.  As the US election announcements were declared, overseas markets sharply declined.  However, by morning, the market had reversed course to start what has been coined as the “Trump Rally” through year-end. 

Just over a week away from the 2016 year-end, the S&P 500 is closing in on a 10% gain for the year and the Dow, a gain of approximately 16%.[iii]  Hardly anyone remembers that just 11 months ago, the market was down about 9% and people were questioning whether the US was heading into a bear market. 

Everything in hindsight is 20/20.  However, what 2016 emphasizes again is that the disciplined investor who stays the course, or in this case, stays invested in the market, wins!  As the saying goes, it is an investors’ time in the market, and not market timing that yields returns. 

Many investors are stirred by unpleasant financial headlines, political shifts or negative market sentiments that are backed by very convincing data.  However, reacting on emotion can have a detrimental effect on an investment portfolio.  The important thing that a long-term investor needs to know is that after each market decline, the market pushes on to new record highs.  This is why those who sell at the bottom of the downturn, locking in losses, are often regretful later on.  Although it is sometimes difficult, those who are patient and do not panic are rewarded. 

Case in point, a person invested solely and unwavering in the S&P500 during the 2010’s would yield a whopping return of 95% on their investment.  However, if that same investor were to have timed the market and missed just the top 10 performing days in the market, their return would drop to 34% during the same window.[iv]

History has shown that the best-performing asset class doesn't hold the position very long, and changes quickly.  U.S. large company investments, like the Standard and Poors 500 index, had a good run since the bottom of the recession in March 2009.  In 2016, the U.S. small companies, emerging markets and U.S. value asset classes took the lead, proving that a diversified strategy is often the most prudent way to invest.   

Sir John Templeton, one of the founders of the Franklin Templeton mutual funds, famously said, "The only investors who shouldn't diversify are those who are right 100% of the time." One of the more reliable strategies in a volatile market is to build a portfolio that is just the opposite of "putting all your eggs in one basket." It's difficult to guess the best-performing asset class for the year, even for research firms that study investments 24/7 with analysts stationed around the world.  When you have a globally diversified portfolio that balances all of the available asset classes, no matter which asset class is performing well, you will benefit from its good performance.

Taking advantage of the market's long-term potential is one of the better ways to beat inflation and accomplish your family's most important goals.  Don’t forget, time is on your side!

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.


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Identity Theft and Taxes

Identity theft is one of the fastest growing crimes in America affecting millions of unsuspecting individuals each year. A dishonest person who has your Social Security number can use it to obtain tax and other financial and personal information about you.

Identity thieves can get your Social Security number by:

●  Stealing wallets, purses, and your mail.

●  Stealing personal information you provide to an unsecured website, from business or personnel records at work, and from your home.

●  Rummaging through your trash, the trash of businesses, and public trash dumps for personal data.

●  Posing by phone or email as someone who legitimately needs information about you, such as employers or landlords.

Tax-related identity theft occurs when a thief uses your Social Security number to file a tax return and claim a fraudulent tax refund. In 2015 alone, the IRS stopped 1.4 million confirmed identity theft tax returns, protecting $8.7 billion in taxpayer refunds.¹ The IRS has become increasingly diligent in its efforts to thwart identity theft with a program of prevention, detection, and victim assistance.

Stay Vigilant

By remaining vigilant and following a few commonsense guidelines, you can help keep your personal information safe. Here are a few tips to consider:

●  Protect your information. Keep your Social Security card and any other documents that show your Social Security number in a safe place.

●  DO NOT routinely carry your Social Security card or other documents that display your number, in case your wallet or purse is stolen.

●  Monitor your email. Be on the lookout for phishing scams, particularly those that appear to come from a trusted source such as a credit card company, bank, retailer, or even the IRS. Many of these emails look authentic, but will direct you to a phony website that will ask you to input sensitive data, such as your account numbers, passwords, and Social Security number.

●  Safeguard your computer. Make sure your computer is equipped with firewalls and up-to-date anti-virus protections. Security software should always be turned on and set to update automatically. Encrypt sensitive files such as tax records you store on your computer. Use strong passwords and change them routinely.

●  Be alert to suspicious phone calls. The IRS will never call you threatening a lawsuit or demanding an immediate payment for past due taxes. The normal mode of communication from the IRS is a letter sent via the U.S. postal service.

●  Be careful when banking or shopping online. Be sure to use websites that protect your financial information with encryption, particularly if you are using a public wireless network via a smartphone. Sites that are encrypted start with "https." The "s" stands for secure.

●  Google yourself. See what information is available about you online. Be sure to check other search engines, such as Yahoo and Bing. This will help you identify potential theft sources and will also help you maintain your reputation.

Fear You Have Been Scammed?

If you feel you are the victim of tax-related identity theft - e.g., you cannot file your tax return because one was already filed using your Social Security number - there are several steps you should take.

●  File your taxes the old-fashioned way -- on paper via the U.S. postal service.

●  Print an IRS Form 14039 Identity Theft Affidavit from the IRS website and include it with your tax return.

●  File a consumer complaint with the Federal Trade Commission (FTC).

●  Contact one of the three national credit reporting agencies -- Experian, Transunion, or Equifax and request that a fraud alert be placed on your account.

If you have been confirmed as a tax-related identity theft victim, the IRS may issue you a special PIN that you will use when e-filing your taxes. You will receive a new PIN each year.

For more information on tax-related identity theft visit the IRS website, which has a special section devoted to the topic: https://www.irs.gov/individuals/identity-protection

¹ The Internal Revenue Service, "How Identity Theft Can Affect Your Taxes." IRS Summertime Tax Tip 2016-16, August 8, 2016.

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

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Caring for Loved Ones at Home

If you provide home-based care to a loved one, you are not alone. Millions of Americans provide unpaid family care every year. 

Being a caregiver can be overwhelming, particularly if you are juggling other responsibilities, such as working or raising a family. Knowing where to turn for help can make a difference -- both in the quality of care your loved one receives and in lessening the stress and responsibilities on you. Here are some of the resources you can turn to for help.

Where to Go for Assistance: Elder Care Support

If the person you are providing care for is 65 or older, there are many resources available to you. One of the first stops to make is the U.S. Administration on Aging (AoA), which can be found online at www.aoa.gov. The AoA is dedicated to helping "elderly individuals maintain their dignity and independence in their homes and communities."

The AoA also maintains a Web site called the Eldercare Locator (www.eldercare.gov) that can help caregivers find local agencies that provide home and community-based services such as transportation, meals, home care, and support assistance.

Other helpful online resources:

■  The Medicare website (www.medicare.gov) details the various types of home health care services that are covered under Medicare and furnishes tools designed to help those in need of care choose home health care providers. Be sure to access the booklet "Medicare and Home Health Care."

■  ElderCarelink (www.eldercarelink.com) is a referral service consisting of over 50,000 senior care providers across the United States and includes nursing homes, assisted living facilities, adult daycare, and home care services.

■  The Visiting Nurse Association of America (VNAA) website (www.vnaa.org) has a database of visiting nurses in your area. The VNAA is an association of individuals who provide cost-effective health care to the elderly and the disabled.

■  If your loved one is a veteran, the U.S. Department of Veterans Affairs (www.va.gov) provides a detailed listing of VA health care benefits. Additional services can be obtained from the nonprofit Disabled American Veterans (www.dav.org), including claims assistance and transportation to VA hospitals.

■  The consumer-facing site of the National Association for Home Care and Hospice (www.nahc.org/consumer) offers guidance and resources to help caregivers find services in their area.

■  Both the National Cancer Institute (www.cancer.gov) and Cancer.Net (www.cancer.net) have extensive sections devoted to caregivers that include guidance on finding support services, including home health care.

Where to Go for Assistance: Caregiver Support

The National Family Caregivers Association (NFCA) has a wealth of resources for caregivers at its Web site (www.thefamilycaregiver.org), including an online support network and a library of helpful tips on topics ranging from reducing stress to care management techniques. Other resources include:

■  The Family Caregiver Alliance (www.caregiver.org) started as a small task force created to assist San Francisco-based caregivers. It has now grown into a national organization dedicated to advancing the development of high-quality, cost-effective programs for caregivers in every state.

■  AARP (www.aarp.org) has a number of online communities devoted to caregivers, including those specific to loved ones who are suffering from cancer and Alzheimer's. There is no age requirement to participate in any of AARP's communities.

■  The National Alliance for Caregiving (www.caregiving.org) also has online resources to help those who are providing help to others, including its Family Caregiving 101 site (www.familycaregiving101.org), which offers education and support.

The average family caregiver works either full or part-time -- in addition to nearly 20 hours of care per week. The stress of meeting those responsibilities can mount quickly. Do your best to heed the advice of the many advocacy groups encouraging caregivers to carve out some time to take care of themselves, both physically and mentally.

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

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EDUCATIONAL WORKSHOPS

2019 TENTATIVE SCHEDULE 

YOUR 2019 INVESTMENT STRATEGY

Saturday, March 16, 2019

10:00 a.m. - 12:00 p.m.

La Canada Flintridge Library**

4545 North Oakwood Ave.

La Canada Flintridge, CA  91011

**does not constitute endoresement by the Library

 

 

YOUR 2019 INVESTMENT STRATEGY

Saturday, March 23, 2019

9:00 a.m. - 11:00 a.m.

Ken Nakaoka Center*

1670 W. 162nd St.,

Gardena, CA  90247

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Contact Us

300 North Lake Avenue, Suite 920
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Phone: (626) 449-7783
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