Why Financial Planning Is Crucial to Women?

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Financial planning is a pathway to independence and empowerment for women. Having control over one’s finances enables autonomy, the ability to make informed decisions, and a sense of security irrespective of life’s changes or unforeseen circumstances.

Historically, women have faced unique challenges in the financial realm, making strategic planning and preparation all the more crucial.

Challenges Women Facing Today

  • Longevity and Retirement

Women typically live longer than men, which means their retirement savings must stretch further. Yet, due to earning disparities and career breaks for care-giving roles, many women have smaller pensions or retirement funds. Therefore, robust financial planning becomes essential to ensure financial security during retirement years.

  • Career Interruptions and Flexibility

Women often encounter interruptions in their careers due to family obligations or care-giving responsibilities. These interruptions can impact income and savings, making it vital for women to plan and manage finances to navigate these transitions effectively. Creating financial strategies that accommodate career breaks and flexible work arrangements becomes imperative.

  • Healthcare Costs and Long-Term Care

Women generally have higher healthcare expenses, including longer life expectancies and potential long-term care needs. Financial planning must account for these factors, ensuring sufficient savings and insurance coverage to address healthcare costs effectively.

Steps Towards Financial Empowerment

1. Education and Awareness

Promoting financial literacy through education and workshops tailored for women can foster confidence and informed decision-making.

2. Long-Term Financial Planning

Developing comprehensive financial plans that account for diverse career trajectories, family dynamics, and potential life changes is key.

3. Support Networks and Resources

Encouraging supportive networks and access to financial expertise/resources can provide guidance and mentorship crucial for women navigating financial complexities.

4. Encouraging Investment

Promoting investment education and showcasing the benefits of long-term investment strategies can empower women to grow their wealth effectively.

Financial planning is not just a matter of numbers; it’s a catalyst for empowerment and independence, especially for women. And that is why financial planning holds particular significance for women in today’s world.

Start 2024 on the Right Financial Foot – Practical Steps for a Prosperous Year

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As the new year unfolds, it’s an opportune time to reevaluate and revamp your financial strategies. Whether you’re aiming to build savings, invest wisely, or clear debts, at the beginning of the year a solid financial plan can set the stage for a prosperous future. Here are some practical steps to kick start your financial journey in 2024.

1. Reflect on the Past Year

Before diving into new financial goals, take a moment to reflect on the previous year. Analyze your spending habits, review your investments, and assess how well you adhered to your budget. Understanding where your money went and what financial choices worked or didn’t work for you will provide valuable insights for setting achievable goals in the coming year.

2. Set Clear and Attainable Goals

Establish specific and achievable financial objectives for 2024. Whether it’s saving for kids’ college education, paying off debts, better management for your personal and/or business cash flow, increasing retirement contributions, or starting a new investment venture, define your goals with clear timelines and measurable outcomes. This clarity will help you stay focused and motivated throughout the year.

3. Create or Update Your Budget

A budget serves as a roadmap for your financial journey. Take account of your 2024 income from all sources including your company stock options/employee stock purchase, and evaluate your expenses, and savings goals to create a realistic budget for the year ahead. Consider using budgeting apps or spreadsheets to track your spending and identify areas where you can cut back or reallocate funds toward your financial goals.

4. Prioritize Saving and Investing

Make saving a habit by automating contributions to your savings and investment accounts. Consider setting up automatic transfers from your paycheck to your savings or retirement accounts to ensure consistent progress toward your goals. Explore different investment options based on your risk tolerance and long-term objectives to make your money work for you.

5. Review and Optimize Your Investments

Take the time to review your investment portfolio. Assess the performance of your investments and consider rebalancing if necessary. Diversify your portfolio to spread risk and align it with your current financial goals and risk tolerance.

6. Tackle Debt Strategically

If you have outstanding debts, prioritize paying them off systematically. Consider using the snowball or avalanche method—paying off debts either from the smallest balance to the largest (snowball) or from the highest interest rate to the lowest (avalanche). Choose the method that suits your psychological and financial approach best.

7. Educate Yourself

Stay informed about financial matters. Whether it’s understanding investment strategies, learning about new savings options, or staying updated on tax implications, ongoing education is key to making informed financial decisions.

8. Review and Update Your Insurance Coverage

Ensure your insurance coverage—health, life, home, and auto—is adequate and up-to-date. Life changes and market fluctuations might require adjustments to your insurance policies to adequately protect yourself and your assets.

9. Seek Professional Advice

Consider consulting with a financial advisor or planner. Their expertise can provide personalized guidance, especially when navigating complex financial situations or planning for major life events.

10. Stay Committed and Flexible

Financial planning is an ongoing process. Stay committed to your goals, but remain flexible enough to adapt to unexpected changes or opportunities that may arise throughout the year.

Starting the year 2024 on the right financial footing involves a combination of diligence, planning, and adaptability. Remember, financial decisions you make today can have significant financial impact in the long run. By taking proactive steps and staying focused on your financial objectives, you can pave the way for a more secure and prosperous future.

Parents, How to Send Your Kids to Dream College without Going Broke

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Sending your child to college is a major financial commitment for most families, and the costs can be staggering. According to the College Board, the average cost of tuition and fees at a private, four-year college is over $37,000 per year. However, with some smart planning and a few key strategies, it is possible to send your child to their dream college without going broke.

  1. Start Saving Early

One of the best ways to prepare for college costs is to start saving early. Even small contributions to a college savings account can add up over time, thanks to the power of compound interest. Popular college savings options include 529 plans and Coverdell Education Savings Accounts (ESAs), both of which offer tax advantages for qualified education expenses.

It’s important to start saving as early as possible, ideally when your child is born or even before. However, it’s never too late to start saving, and even small contributions can make a big difference over time.

  1. Consider Financial Aid

Financial aid can be a valuable resource for families looking to send their child to college without breaking the bank. Financial aid can come in the form of grants, scholarships, work-study programs, and student loans. Some financial aid is need-based, while other aid is merit-based, and there are many sources of financial aid available from government agencies, private organizations, and individual colleges and universities.

To maximize your chances of receiving financial aid, it’s important to fill out the Free Application for Federal Student Aid (FAFSA) as early as possible. The FAFSA is used to determine your eligibility for federal and state financial aid, as well as aid offered by individual colleges and universities.

  1. Research College Costs

When it comes to college costs, not all schools are created equal. It’s important to research the costs of different colleges and universities to find the best fit for your budget. In addition to tuition and fees, you’ll want to consider the cost-of-living expenses, such as room and board, transportation, and books and supplies.

It’s also important to consider the potential return on investment of different colleges and majors. Some majors and schools have a higher earning potential than others, which can help to justify the higher costs of attending certain schools.

  1. Consider Community College or Online Programs

Community colleges and online programs can be a cost-effective alternative to traditional four-year colleges and universities. Community colleges typically offer lower tuition rates and can provide a valuable opportunity for students to earn college credits while saving money. Online programs can also be a flexible and cost-effective way to earn a degree.

It’s important to note that not all degrees and majors are available through community colleges and online programs, and it’s important to consider the potential impact on future job prospects when choosing an alternative education option.

  1. Negotiate Financial Aid Packages

Finally, it’s important to remember that financial aid packages are not set in stone. If you feel that a college or university is not offering enough financial aid, it’s possible to negotiate for a better package. This may involve appealing for more aid, asking for a re-evaluation of your financial need, or exploring other options such as work-study programs or external scholarships.

Sending your child to college is a major financial commitment, but with some smart planning and a few key strategies, it is possible to send your child to their dream college without going broke. By starting to save early, exploring financial aid options, researching college costs, considering alternative education options, and negotiating financial aid packages, parents can better prepare for the costs of higher education and help their children achieve their academic and career goals.

3 Mistakes to Avoid with Your First Million

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Achieving a net worth of one million dollars is a significant accomplishment that can offer financial security and peace of mind. However, it’s crucial to avoid making common financial mistakes that can jeopardize your wealth and hinder your long-term financial goals. Here are three financial mistakes to avoid with your first million dollars:

  1. Overspending and Lifestyle Inflation

One of the most common mistakes people make when they come into money is overspending and inflating their lifestyle. When you suddenly have access to more money, it’s easy to get carried away with extravagant purchases and lavish experiences. However, overspending can quickly deplete your wealth, leaving you with little to invest or save for the future.

Instead, it’s essential to maintain your spending habits and avoid lifestyle inflation. This means living within your means and not increasing your expenses significantly, even though you now have more money. Focus on saving and investing your money for the long term instead of spending it on short-term pleasures.

  1. Failing to Diversify Your Investments

Another mistake to avoid with your first million dollars is failing to diversify your investments. Putting all your eggs in one basket, such as investing solely in real estate or the stock market, can be risky, as it exposes you to significant losses if that investment performs poorly. It’s crucial to diversify your investments across different asset classes, such as stocks, bonds, and real estate.

By diversifying your investments, you can reduce your overall risk and maximize your returns. However, it’s important to remember that diversification doesn’t guarantee a profit or protect against losses. It’s essential to conduct thorough research and consult with a financial advisor to determine the best investment strategies for your financial goals and risk tolerance.

  1. Not Planning for the Future

Just because you’ve hit your first million doesn’t mean you can stop planning for the future. In fact, it’s more important than ever to plan for the long-term. This includes setting goals for retirement, estate planning, and creating a legacy for your family.

To ensure that your wealth is protected and your future is secure, consider working with a financial advisor. They can help you create a comprehensive plan that takes into account your current financial situation and your long-term goals.

In conclusion, hitting your first million is an incredible achievement, but it’s important to avoid these common mistakes to ensure long-term financial success. By avoiding overspending, diversifying your investments, and planning for the future, you can continue to build wealth and secure your financial future.

How to Ensure the Safety of Your Bank Deposits

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As you might have heard in the news, last Friday, March 10, 2023, Silicon Valley Bank (SVB) has collapsed and was ordered by regulators to shut down its business. Part of the reasons that its collapse caused great concern is that it is the biggest bank failure since the 2008 Financial Crisis.

The failure of SVB is caused by a classic bank run. SVB had cash deposits of many startup companies. As bad news about SVB started spreading, a large number of these companies along with other depositors scrambled to pull their money out of the bank at the same time. This created a bank run that doomed SVB.

Naturally, you may wonder is my money safe in my bank?The Federal Deposit Insurance Corporation (FDIC) insures depositor accounts in banks and most types of nonbank thrift institutions up to $250,000. Deposits maintained in different categories of legal ownership, i.e. individual, joint account, irrevocable trust, and testamentary account are separately insured. As a result, a depositor can have more than $250,000 insurance coverage in a single institution. Here is how it works:

Likewise, the FDIC insures your deposits in each different institution in the same fashion as illustrated above. So, if you have $250,000 of deposit at each of four different banks, the FDIC insures a total of $1,000,000 of your deposits. As you can see, if you have a large sum of deposit exceeding $250,000, you need to either deposit the money into different types of accounts at the same bank, or spread the deposit among several banks.

Teen Traders, Good or Bad?

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Recently, Fidelity announced that it is launching a Fidelity Youth Account for 13 to 17 years old.  The no-fee account allows teenagers to buy and sell stocks, exchange traded funds and Fidelity mutual funds. Fidelity pitches this new business as an education opportunity for teens to learn how to manage their money. So, should we cheer for the news that the brokerage house now allows teens to trade stocks? Not so fast.

First, since the start of pandemic last year, many of the new retail investors who entered the stock market are younger investors. Of the 4.1 million new accounts that Fidelity added in the first quarter of 2021, 1.6 million were opened by retail investors 35 and younger, an increase of more than 222% from a year prior, according to CNBC. Now, by allowing teens to trade stocks, is this another tactic for brokerage houses to attract money of even younger demographics?

Second, the name no-fee account is misleading. This could give teens the impression that trading is free. It could also encourage some investors to trade more. Numerous studies in the past have shown that frequent trading by timing the markets are detrimental to average investors’ long-term investment success.

Third, I am all for educating teens on sensible personal finance, but I think this time, it does the opposite of fostering good financial habit. According to a recent industry report that most of the Generation Z investors, people who were born between 1997 and 2015, get their investment advice from social media such as TikTok. Want to know what this means for investment world? Look no further than GameStop stock bubble earlier this year. This kind of investing habits are not unique to Gen Z investors. Think about how many of us who make investment decisions based on the “advice” or “tips” gotten from friends, coworkers, and/or online social media groups.

All in all, what I see from Fidelity’s latest venture is not a boon for teens and their families. If we really want to educate our teens on personal finance, teaching them the good habits of saving and budgeting, and understanding the impacts of personal debt are much more important than knowing how to trade stocks at this age.

“Pandemic Puppy” Deserves a Long-term Home

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Since the pandemic began early last year, there were increasing numbers of Americans who adopted so called “pandemic puppies”. These fur babies brought joys and companionship to many families who were confined to their homes due to governments’ lock down orders. Sadly, in a recent article USA Today reported that those dogs are being returned to shelters all cross the country.

I do not know all the reasons behind the surging numbers of returns of these dogs. But, I venture to say that if you have adopted puppies during the pandemic, with a little planning on your part things can work out pretty nicely between your puppies and you. The things you need to consider now that life has been gradually returning to pre-pandemic ways are how your new routines affect your dog and what the long-term costs of having a dog are. I will offer some tips on the financial part while leave it to you to figure out how to make your new routines work out for you and your dog.

 Depending on the breed of the dog, some dog could incur a large amount of medical bills down the road. One way to mitigate the financial burden is to buy pet insurance. Do a cost/benefit analysis. Does it make sense to buy pet health insurance in your individual situation? Many pet insurances only cover cats and dogs, but a couple of insurers will also cover birds and reptiles. Before you purchase health insurance for your dog, be sure you understand what covered and excluded conditions are and how you file an insurance claim. Some plans do not cover routine office visits. Many pet insurance companies put their sample insurance policies on their websites. Locate these policies and read them carefully.

Our pets bring us joys and companionship, but they also depend on us for continuous care. How to provide such care in case we are not able to? The pandemic taught us how important it is for us to have some kind of estate plan in place. Fortunately, pet trust can be a valuable tool for pet owners to do so. So far, all 50 states of the U.S have passed laws allowing pet owners to set up trusts for their companion pets. While considering setting up a trust for your dog, it is a good practice to designate different parties as caregiver of your dog and trustee that administers the funds in the trust for your four-legged companion respectively.

Alternatively, pet owners can opt for a pet protection agreement, which is simpler than setting up pet trusts, to protect their pet. With a pet protection agreement, pet owners can name their pets’ guardians, leaving funds, and providing instructions for how to care for your pets when you are not around.

Hopefully, with a bit of creativity and some planning by you, the “pandemic puppy” will be your companion for many, many years to come. 

How to Help Your College Students Have Positive College Experiences

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I call the period that runs from every September to next May college application season for high school seniors across the country. The 2020/21 college application season is almost over. Now it is time for most high school seniors to weigh the offers and envision the lives they will be living for the next four years.

This is a time of excitement as well as anxieties for both students and their families. As parents of soon-to-be college freshmen, they all want their children to have four successful college years. But, I know that “success” is a highly subjective word. And student’s college experiences may be different due to the kind of colleges or universities they attend.

So, first let us define what success in college means. Success in college, according to many college students themselves, means achieving good grades, graduating on time, maintaining a balanced social life and landing a good job after graduation. On the surface, these goals seem to be simple and easy to achieve, right? In reality, however, there is no small number of students either struggle academically or have a hard time fitting in socially.

After perusing books and articles related to this subject and talking to some parents whose kids have already gone through colleges, I found out some universal traits of college students who have had positive experiences during college.

The first trait of such a student is having definite goals for life. I cannot stress enough of the importance for a college student to have definite goals for his or her life. But, there is a caveat. The goals should be what the students truly want for themselves, not the goals their parents or society set for them. Lucky are those who have concrete goals even before they set foot on college campuses. These students are motivated, self-driven and confident. They will seek and even create the kind of college experiences that help them achieve these goals.  

The second trait of a successful college student is having a good amount of self-control. The majority of high school seniors will leave their childhood homes and live in some kind of campus housing arrangements for the first time. No longer in their lives will there be nagging about eating healthy food and finishing their homework on time. At the same time, they are constantly facing the tasks of making choices: going to parties or working on that course assignment which is due very soon, eating healthy meals or eating whatever they want, and etc. Life is about trade offs. College life is no exception. The students who have successful college lives are those who are able to make good decisions most of the time. Generally speaking, making good decisions need good amounts of self-control.    

The third trait of a successful college student is the possession of good study skills. Academics are a big part of college life. It is hard to believe that a college student is having a positive experience when he or she struggles academically. For students who lack confidence in this skill set, I would like to share with them the formula for academic success outlined in Purdue University’s Guide to Creating a Successful College Experience:

  • Read the syllabus
  • Go to every class
  • Sit near the front in class
  • Find a study partner or group in every class
  • Take good notes.
  • At the beginning of each semester, ask yourself:
    • Do I understand what is expected of me in each class?
    • Do I have contact information for someone in every class to study with or contact in case I’m sick?
  • Manage your time wisely
  • Never let a week go by where you don’t understand the content in your courses
  • If you are confused or lost in a class, visit your professor, go to a help lab or study with a friend. Use your campus resources — they are there to help you
  • Study 2 hours for every hour you are in class

The fourth trait of a successful college student is getting involved in a wide range of activities. We know that college success is more than just good grades. Activities outside classrooms not only enrich students’ lives, they also help students explore their interests, develop social skills and possibly gain life-long friendships. Some of the activities include volunteering, working part-time on campus, getting involved in student’s residence hall, doing internships or studying abroad.

In addition to the above four traits, another factor affecting students’ college experiences is the emotional support or lack of it from their families. College years are coincident with a person’s transition period to adulthood. And this transition period is filled with stresses and struggles. In Janet Hibbs and Anthony Rostain’s apt named book – “The Stressed Years of Their Lives”, they talked about the mental problems facing today’s college students. Alarmingly, almost one-third of all college students report having felt so depressed that they had trouble functioning in the last twelve months according to the authors. Although so called “helicopter parents” are mocked and discouraged, this does not mean that parents can stay out of their college-age children’s lives other than writing tuition checks.

Before parents send off their children to college, they need to be aware of two important laws that could be critical to their children’s well beings. They are HIPAA and FERPA. HIPAA stands for Health Insurance Portability and Accountability Act. HIPAA protects a person’s confidential health information. FERPA stands for the Federal Educational Rights and Privacy Act of 1974. FERPA was designed to protect the privacy of educational records and to give students the right to inspect and review their educational records (collegiateparent.com).

In most states 18 is the legal age of majority, which means most college students’ health information and academic records are protected under law and not shared with their parents without the students’ consent. By checking the students’ academic records parents could detect early signs of their children’s mental issues. In order to access their students’ transcripts parents need a consent form to disclosure of FERPA protected academic records. In the age of Covid-19, it is also important for parents to have signed HIPAA waiver and health care proxy from their college-age children in order to make medical decisions on their children’s behalf. If parents need more information on these forms they can contact their financial advisors and/or family attorneys for help.

Looking back, 2020/21 college application process is quite a journey for both high school seniors and their families amid a global pandemic. As the high school seniors are about to open a new chapter of their lives, I wish them all successes in college.

ISO vs. NSO – Employee Stock Options Basics

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ISO and NSO, what do these terms mean? These terms stand for incentive stock options (ISOs) and non-qualified stock options (NSOs or NQSOs) respectively. They are mostly common among companies which use their company stocks as part of the employee’s compensation and/or retirement benefit packages.

NSO or NQSO are options to buy shares of company stock at a stated price and can be exercised over a specific period, i.e. over 10 years. The exercise price is normally 100% of fair market value on the date the option is granted, but it can be set lower.

ISO is an option to buy shares of company stock at a set price on the date of grant and can be exercised over a period of up to 10 years. Like NSO, the exercise price of ISO is normally set at the fair market value on the date the option is granted.

After reading the above definitions of ISO and NSO you are probably wondering: what are the differences of these two options? The differences mostly lie in the employer tax deductions and income tax treatment of exercising ISO and NSO options to the employees.

With most NSOs, if the employee opts to exercise the options to hold the shares of company stock, then the employee must recognize as ordinary income the amount of difference between the option grant (exercise) price and the fair market value of the underlying stock at the time of exercise. This income is subject to social security (FICA) and federal unemployment (FUTA) taxes. Subsequently, the employee will recognize either capital gains or losses on any appreciation or depreciation in the stock value from the day of exercise until the day the employee sells the stock. Alternatively, the employee can opt to exercise to sell, and then the employee will pay income and social security taxes on the amount realized on the sale of the stock minus the option price.

Unlike NSO, where the employee has to pay ordinary income taxes when he or she exercises the options to hold the stock, an employee who receives ISOs does not have to pay regular income tax at the time of exercise. If, after the exercise the shares are held for at least one year from the date of exercise and two years from the date of grant of the options (1year/2year holding period requirements), the sale of the shares will result in long-term capital gain from the date of the option grant to the date of sale of the stock. If, the 1year/2year holding periods are not met, then the sale becomes a disqualifying disposition and the ISO is treated like a NSO, where the difference between the option price and the fair market value at the time of exercise will be taxed as ordinary income.  

The difference between the taxation of a disqualifying disposition of an ISO and that of an NSO is that the recognized ordinary income from the disqualifying ISO is not subject to social security and federal unemployment taxes.

Here are two examples explaining how ISO and NSO work:

  • Adam received 100 shares of NSOs from his employer ABC Industry, Inc. on February 8, 2017. The option exercise price is $5 per share. On the date of grant, there is no taxation to Adam. On March 15, 2018, when the fair market value of the ABC’s stock is $10 per share, Adam exercised his options. Adam would recognize $500 ($10-$5=$5 times 100 shares) as ordinary income. On March 20, 2019 when the ABC’s stock price rises to $20, Adam sells all of his 100 shares of ABC stock. Adam would recognize $1,000 as long-term capital gain and would pay capital gain taxes because he has held the stocks for more than 12 months after he exercise his NSOs. If, instead of exercising the NSOs on March 15, 2018, Adam waited until March 20, 2019 to exercise the option and simultaneously sell the underlying stock, then, Adam would recognize all proceeds from the sale, $20 stock price/share – $5 option price times 100 shares = $1,500, as ordinary income and would pay regular income tax and social security taxes on this $1,500.

  • Eve received 100 ISOs from XYZ Industry Inc. on January 28, 2017. The option exercise price is $5 per share. If Eve exercised her ISOs on January 31, 2018 when the fair market value of the stock was $10 per share, she would recognize no income for regular tax purposes. If subsequently, Eve sells the stocks when its price rises to $20 on February 9, 2019, she would be able to recognize the entire gain of $ 1,500 as long-term capital gain because she has met the 1year(from exercise)/2 year(from grant) holding period requirements. If,  Eve sells the stocks on December 31, 2018, then she has not met the 1year/2year holding period requirements. In this case, the $500 from the exercise of the options on January 31, 2018 would be treated as ordinary income and the subsequent gain of $1,000 from sale of the stocks on December 31, 2018 would be recognized as short-term capital gains.

With NSO, the employer can take a deduction in the amount of income that is taxed to the employee. With ISO, however, if the employee complies with the 1year/2year holding period requirements, the employer gets no tax deduction from it.

If an employee is given stock options, he or she needs to be clear what kind of options they are. There is an employment requirement for employees who receive ISOs. That is, the employee who receives ISOs must remain employed with the same employer from the time of the grant of the options until at least 3 months before the exercise.

Another difference between these two employee stock options is that ISOs are not transferable except at death, while NSOs are transferable during the employee’s lifetime.

Your 2021 Essential Financial To-do List

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2020 is finally behind us. What is your plan for year 2021? Here I outlined some financial tips for you to put on your early 2021 to-do list to jump start the year to be a successful and prosperous one for you and your loved ones. Below are some of the essential personal financial information you will want to save and keep in handy as your reference guide throughout the year.

  • Adjust your retirement plan contributions for 2021

2021 retirement plan contribution limits

Plan Maximum
Deferral
Age 50
and Over
Catch-up
Contribution
401(k)/403(b) $19,500 $6,500  

Deductible IRA
$6,000 $1,000
Non-Deductible IRA $6,000 $1,000  
Roth IRA $6,000 $1,000

The individual IRA contribution deadline for 2020 is April 15, 2021.

Phase out range for deductible IRA is $105,000-$125,000 for joint filing if covered by a workplace retirement plan; Phase out range for Roth IRA is modified AGI from $198,000-208,000 for joint filers.

Health Savings Account Contribution Limit for 2021:

  Self-only Family Coverage
Contribution Limit $3600 $7200
Contribution Limit over age 55 $4600 $8200
High-deductible health plan
minimum deductible  
$1400 $2800
High-deductible health plan
out-of-pocket maximum  
$7000 $14,000
  • Keep in mind these important income tax facts for 2021:

2021 Income Tax Brackets and Rates:

Tax
Bracket
Single Filer
Income Range
Married File Jointly
Income Range
10% $9,950 or less $19,900 or less
12% $9,951- $40,525 $19,901 – $81,050
22% $40,526 and $86,375 $81,051 and $172,750
24% $86,376 and $164,925 $172,751 and $329,850
32% $164,926 and $209,425 $329,851 and $418,850
35% $209,426 and $523,600 $418,851 and $628,300
37% $523,601 or more $628,301 or more

The standard deduction is $12,550 for individuals and $25,100 for married couples filing jointly.

2021 Alternative Minimum Tax (AMT) Exemption Amounts:

  Single or
Head of
Household
Married File Jointly
or
Qualified Widow
Married File
Separately
Maximum
Exemption
$ 73,600 $ 114,600 $ 57,300
25% reduction
if over:
523,600 1,047,200 523,600          
Exemption
Eliminated
818,000 1,505,600 752,800

2021 Qualified Dividend and Long-term Capital Gain Tax Rate:

Income Range:
Single filer
Income Range:
Married file jointly
Capital Gain Tax Rate
$0-$40,400 $0-$80,800 0%
$40,401-$445,850 $80,801-$501,600 15%
Over $445,850 Over $501,600 20%

Net Investment Income Tax:

Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds:

Filing Status Threshold Amount
Married filing jointly $250,000
Married filing separately $125,000
Head of household (with qualifying person) $200,000
Qualifying widow(er) with dependent child $250,000
Single $200,000

The Net Investment Income Tax (NIIT) applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.

  • Annual Exclusion for Estates and Gifts

In 2021, the first $15,000 of gifts to any person is excluded from tax.

Since 2018, the Tax Cuts and Jobs Act temporarily increased the basic exclusion amount for estate and gift taxes for tax years 2018 through 2025, with both dollar amounts adjusted for inflation. For 2021 the exclusion amount is $11,700,000 per individual, and $23,400,000 for a couple.

  • Review your Insurance policies

If your situation has changed during 2020, such as change of job, birth of a new child, or purchases of new car, house, etc., you need to review your insurance coverage or talk to your financial adviser to help you come up with proper coverage amount for your current insurance needs.

Don’t forget the deadline for individual tax filing is Thursday April 15, 2021.

Gather and organize all your paperwork such as W-2 forms, bank statements, mortgage payment statements, property tax receipt, business expenses, investment statements from your broker-dealers, charity donation receipts, etc. for your 2020 tax filing.

  • A couple of events that you might want to keep an eye on:
    • House Ways and Means Committee Chairman Richard Neal plans to reintroduce in the new Congress the Securing a Strong Retirement Act of 2020, which would boost the required minimum distribution age from 72 to 75. In 2019, the Secure Act passed by congress has pushed the age that retirement plan participants need to take the required minimum distributions (RMD) from 701/2 to 72. If this new bill passes, it would create more favorable financial planning opportunities to people contributing to various retirement plans.
    • Another thing to watch for is for families with kids applying for college in the fall 2021. The dates and places of taking the SAT/ACT had been changed a couple of times last year by the institutions which offer these tests due to the pandemic. Since the pandemic is still going on parents need to make sure their high school kids know the exact dates and places of taking these tests. Parents and students can go to www.collegeboard.org to check out the latest updates on SAT test or www.act.org for ACT tests.