As you approach retirement you’re probably going to be asking yourself when to collect social security benefits. After all, the longer you wait, the more money you can secure. For instance, as long as you’ve paid into the program for 40 quarters (or roughly 10 years), you can start collecting as early as age 62, though full social security retirement age ranges from 65 to 67 for people born after 1943. If you can hold off a few more years, however, your benefit increases by about 8% every year until age 70.
Experts recommend that one thing to look at is whether or not you can afford to wait. Do you have financial flexibility with other assets that can cover your expenses, or do you need the extra monthly payment to keep with the lifestyle to which you’ve grown accustomed? If it’s the latter, you may be forced to withdraw sooner or make changes to your lifestyle. What about existing investments? If you collect early, your investments can grow longer, but they would have to grow by at least 8% a year just to equalize the loss from collecting early.
As you decide when to start withdrawing social security, take into account the age at which you’re planning to retire. If you’re still in the workforce when you become eligible to receive benefits, you can start collecting social security. However, there are some potential downsides to consider. For example, if you haven’t reached your full retirement age, you lose $1 for every $2 you earn above the $15,480.00 earning limit. Your benefits are recalculated to recover those lost benefits once you reach full retirement age, but it can take up to 15 years just to restore the loss.
Another consideration to look at is your marriage status. If you’re married, experts recommend that the higher earner in the marriage hold off on collecting benefits for as long as possible. However, it’s possible for the higher earner to file for benefits at retirement age and then suspend them, which could allow your spouse to collect a spousal benefit equal to ½ of your full retirement benefit. Meanwhile, your benefit continues to grow until age 70.
Lastly, consider your health. If you’re in poor health, you might be better off taking benefits early. According to the Social Security Administration, if you live to the average life expectancy for your age, you’ll get about the same amount of benefits no matter when you start collecting. The longer you live beyond that age, the more you’ll benefit by delaying payments.
With so many factors to consider, there is no “right” age to start collecting social security benefits, so just be sure that you’re making an informed decision when the time comes.
Big Leadership Mindset: How the Practices and Philosophies of the World’s Most Successful Entrepreneurs Can Benefit Small Businesses
Self-made millionaires and billionaires don’t just happen by luck or chance, though sometimes luck and chance play a role. In large part, the world’s leading entrepreneurs demonstrate that innovation, perseverance, and strategic investments – in business and in life – are common denominators for lasting success.
Take Care of Your People and Your Customers
“The key to success in business is all about people, people, people,” says billionaire entrepreneur Richard Branson. “It should go without saying, if you look after your people, your customers and bottom line will be rewarded too.” Real estate entrepreneur and software business leader Tej Kohli agrees. “While strategy, market positioning, and coming up with a long-term plan are all important, focus on making the individual sales and creating happy customers. None of that strategic planning is any good if you can’t keep the lights on because you’re not making enough sales.”
Do the Work
“There are no shortcuts,” says Mark Cuban. “You have to work hard and try to put yourself in a position where if luck strikes, you can see the opportunity and take advantage of it.” This sentiment echoes the formula for success of deceased oil tycoon J. Paul Getty: “Rise early, work hard, strike oil.”
“The biggest risk is not taking any risk,” says Facebook founder Mark Zuckerberg. “In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” But there’s a difference between playing smart and taking risks just for the sake of risks. Heed the warning of Warren Buffet, who says, “Never invest in a business you cannot understand. Risk comes from not knowing what you’re doing.”
Shake Things Up
John D. Rockefeller said, “If you want to succeed, you should strike out on new paths, rather than travel the worn paths of accepted success.” And Groupon co-founder Brad Keywell agrees. “I’ve been involved with companies that hit dead ends, had business ideas I couldn’t get off the ground, been in situations that I desperately wanted to succeed but were on a path to failure. But each setback and adversity could be traced back to the same flawed plan: I had approached the game the way it had always been played.”
Think Long Term
In an age of get-rich-quick schemes, it’s important to remember that there are no shortcuts to lasting success. Jeff Bezos, founder of Amazon, has said that Amazon’s decisions are based on its goal of long-term market leadership – not short-term profits. “Long-term thinking levers our existing abilities and lets us do new things we couldn’t otherwise contemplate,” said Amazon founder Jeff Bezos. “Seek instant gratification – or the elusive promise of it – and chances are you’ll find a crowd there ahead of you.”
Play to Your Strengths
Media CEO Gary Vaynerchuk advises to forget about your weaknesses and bet on your strengths. Founder of Spanx, Sara Blakely agrees. “As soon as you can afford to, hire your weaknesses. What you’re not good at is usually what you don’t like.”
“It’s fine to celebrate success, but it’s more important to heed the lessons of failure,” says Bill Gates. “How a company deals with mistakes suggests how well it will bring out the best ideas and talents of its people, and how effectively it will respond to change.” Perhaps Gates took a play from inventor and businessman Thomas Edison’s playbook, who once said, “I have not failed. I have just found 10,000 ways that don’t work.”
With their first plan shot down in Congress, the GOP has released another, broader tax framework as the Trump Administration attempts to shift the tax code. This new plan has many elements that Congress will need to hash out before anything is signed into law, but taxpayers of all income levels are wondering how this plan may affect them personally. Below are five major developments in the new plan that could affect you come tax season:
- Rate Shift
Our current code has seven different income tax brackets, but the new plan would drop that number down to three: 12, 25 and 35 percent. Although the plan does not specify which income levels would be taxed at each new rate, the wealthy would likely see the greatest benefit since the current top bracket at 39.6% would drop to 35%. The current lowest bracket (at 10%) would see an increase to join the 12% bracket, but the plan claims to aid families in that bracket through an increase in the standard deduction and a greater child tax credit.
- Deduction Increase (for most)
For many taxpayers, the new plan would almost double the current standard deduction. Filers who claim multiple children would not see as high of a increase, but could potentially see that offset by a steeper child tax credit. Presently, about 70% of taxpayers take the standard deduction as it is higher than itemizing. However, experts believe that number would increase significantly if the standard deduction is doubled. The GOP’s plan would remove other deductions to offset the increased standard deduction, but the charitable contribution and mortgage interest deductions would be kept.
- Some Taxes and Deductions Eliminated Entirely
The largest deduction that would meet its end with the new GOP plan is the local and state tax deduction. This deduction is often taken in states where taxes, and average income, is higher, states that are often Democratic. Other taxes that would be eliminated include the alternative minimum tax and the estate tax for those who inherit funds in excess of $5.49 million.
- New Tax Rate for “Pass-Through” Businesses
S corporations, sole proprietorships and partnerships could see a new tax rate at 25% under the new plan. Currently, those “pass-through” businesses pay at the individual rate of their owners, and those businesses make up about 95% of the nation’s business demographic. Although many business owners currently pay a rate lower than 25%, just under 2% of those business owners pay the top rate of 39.6%, which means they could see a significant drop in rate if they are permitted to incorporate as a “pass-through.”
- Change in the Corporate Tax Code
The current plan taxes corporations at 35%, but the new plan would drop that rate to 20%. To offset this steep drop in rate, the proposal submits to eliminate certain business deductions and credits. The plan suggests that the deduction for domestic production could be eliminated, while maintaining exceptions for low income housing and research and development, but leaves many of those choices up to Congress.
Congress must still comb through the GOP’s newest plan and make adjustments before a finalized plan is voted upon, so taxpayers should prepare for more adjustments to be made before anything is signed into law. As developments arise, MKR will continue to keep our clients up to date in future newsletters.
Although Equifax has yet to reveal specifics about the individuals who were affected by their data breach, as many as 143 million Americans may have been impacted. With that in mind, anyone with credit should consider taking measures to protect their identity and funds. Many experts are suggesting individuals freeze their credit, but this may not be the most effective method. While freezing your credit is not a bad decision, it only protects you from new accounts being opened in your name, a form of identity theft that is actually quite rare.
While many taxpayers are now deeply concerned about their lives being destroyed from identity theft, there are many other ways to guard your identity and your money that may be more beneficial than freezing your credit:
- Use two-step verification and secure passwords
Most identity theft occurs on existing accounts, so making it difficult for hackers to access your accounts with financial information is one step you can take to safeguard your personal data.
- Choose ID-verification questions and answers cautiously
Consider choosing questions whose answers cannot be easily found online. Questions such as “Where were you born?” or “What was your high school mascot?” could be easily discovered by checking your social media accounts, so be wise when creating those protective measures.
- Monitor current accounts as often as possible
Ideally, you should check your bank accounts daily to ensure all posted charges were made by you or whoever has access to the account. Since most financial institutions today have an app for accessing account information, monitoring your credit can be as simple as a quick log on from your phone. If you notice suspicious activity, you can then notify your bank immediately to avoid racking up more false charges.
- Set up alerts for new credit activity
Although you can set up a fraud alert or credit freeze, there are other free services that monitor your credit and any new account openings or activity.
- Check credit reports regularly
Every individual is allowed one free credit report annually from each of the three major credit bureaus through AnnualCreditReport.com, a site sponsored by the government. You can receive all three reports at once, or request one every 4 months to space out your monitoring tactics.
- File taxes early
One form of fraudulent behavior that is becoming more common is filing for taxes under someone else’s SSN. But, organizing your tax information quickly and filing as early as possible could lower the chances that someone will file in your name. Plus, if you are owed a refund, you will likely get it sooner than April if you file early.
While none of these methods are entirely foolproof, taking precautionary steps to protect your credit are always advised. If you do fall victim to identity theft, check out the Federal Trade Commission’s step-by-step recovery guide for helpful information.
Considering joining the “startup” world but unsure how to find funding? Whether you’re simply in the research phase or you’ve developed a full blown business plan and have some capital, below are the most common ways new startups, who aren’t yet ready for venture capital, fund their business.
- Personal Savings
Personal capital is the most relied on source by entrepreneurs, according to the Small Business Administration. Many entrepreneurs dedicate a good chunk (or occasionally the whole lot) of their personal savings to their new venture, often relying on family or friends for a little help paying the bills or a place to crash if they find themselves in a bind. However, consider speaking with family and friends before you start to ensure they will be there to pick you up if needed, and always leave yourself a small nest egg in case the venture goes awry.
- Credit Cards
Credit cards are certainly the easiest, but most dangerous, form of funding. They provide easy and quick access to a significant cash flow before founders can give themselves a full salary, but they can also put founders in the hole by losing money to late fees or damaging their personal credit. Be careful about how much you rely on credit cards now, as it could prove to be a major hang-up in your future.
- Personal Wages
Many entrepreneurs take it slow, or develop their business or product on the side, while continuing to work a day job and receive income. This avenue may be the most exhausting, or time consuming, by essentially working two jobs, but may be the most financially viable and more common than many realize. The founder of YouTube, Steve Chen, was still employed at Facebook when he began his video platform venture.
The age of the internet has provided entrepreneurs with a wealth of new resources when it comes to funding. Sites like Indiegogo or Kickstarter allow individuals to raise money by “soliciting” online funders for their product, game or other business. Backers take the risk that they may not be repaid in the anticipated time frame, while founders must be aware that not delivering risks ruining their reputation and their chance for future ventures.
Founders can go the traditional route of seeking out a bank or other loan service, or they can consider the newer concept of peer-to-peer online loan platforms like Upstart or LendingClub. Entrepreneurs have many lines of credit or business loans at their disposal, but should take into account the payback of such options, which often include interest.
New business venturers have a bevy of funding possibilities to consider, even if they are not established enough for venture capital funding, but proper planning and multiple financing avenues are always advisable. Talk to family, friends, and trusted financial advisors before jumping into the unknown of owning your own business, and find a funding plan that places you on the path to success.
We are deep in the throws of tax season, and although many of you have already filed, it certainly never hurts to become more aware of possible deductions. And it goes without saying that we all love saving money or getting a larger return. Below are some unusual deductions that taxpayers often don’t consider or simply don’t even know exist.
- Letting a friend crash on your couch – Did you know that you could have been claiming your college buddy who’s been sleeping on your couch for the last 5 months as a dependent? That is if said friend is earning less than $4,050 and you have been providing significant financial support. Similarly, children supporting their retired, elderly parents may claim them as dependents, even if they don’t live in the same home.
- Putting in a pool – Unfortunately, you cannot deduct this item simply because you like to cool off in the summertime and it cost you a lot of cash. However, if you have significant health issues, such as obesity or heart disease, and your doctor has recommended swimming as a beneficial form of regular exercise, putting a pool in your backyard may qualify as a deductible medical expense.
- Sending your kids to camp – This credit is only available to working parents. If both spouses work, and you send your child or children to either a summer day camp, a mini winter camp or even a daycare program over winter break, you may be able to receive a credit between $1000-$2000, depending on the number of children. Unfortunately though, overnight camps do not qualify under this credit.
- Losing money in Vegas – For those who gamble with some regularity, you know you must report your winnings and pay the subsequent taxes. However, reporting your losses as well can offset the amount of taxes charged on your winnings. One thing to keep in mind though is that you can only claim in losses the amount you made in winnings, no more.
- Taking a course – Did you take a design or business course in the last year to expand your knowledge or further develop yourself in your career? Anyone who took a course that enhanced their knowledge to boost job prospects and paid tuition or enrollment fees, or purchased books or supplies, can claim the Lifetime Learning Credit. The max amount one can receive is $2000, and the credit phases out altogether once your income reaches a certain level.
- Searching for a job – Paying fees to a job agency, hiring a career coach, or traveling to long-distance interviews can all be deducted if they amount to less than 2 percent of your adjusted gross income. However, buying a new suit or a nice pair of shoes for an interview do not qualify as deductible expenses.
- Driving for work – While your commute to work does not count as a deduction, most of the driving done during your work day, such as driving to a meeting or even to Office Max, can be deducted as work-related up to 54 cents per mile. Miles must be tracked exactly and documented properly to receive any deduction though.
If you have any questions about these potential income tax deductions, please contact me at pmcallister@MKRcpas.com.