Road to Financial Success 2015

2015 the road to

financial success

article guide Succession Plans: Must Haves for Business Owners

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Should You Apply For Social Security Now...or Later?

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Determine your Financial Approach

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All about the Affordable Care Act

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10 Dying Without a Will 12

What to Know Before You Buy a Home

2 // ROAD TO FINANCIAL SUCCESS // January 20, 2015

Succession Plans: Must Haves for Business Owners A rt icle P rov i d e d by E d wa r d Jones

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f you own a business, you may well follow a “do it now” philosophy, which is, of course, necessary to keep things running smoothly. Still, you also need to think about tomorrow, which means you’ll want to take action on your own retirement and business succession plans.

Fortunately, you’ve got some attractive options in these areas. For example, you could choose a retirement plan that offers at least two key advantages: potential tax-deferred earnings and a wide array of investment options. Plus, some retirement plans allow you to make tax-deductible contributions.

In selecting a retirement plan, you’ll need to consider several factors, including the size of your business and the number of employees. If your business has no full-time employees other than yourself and your spouse, you may consider a Simplified Employee Pension (SEP) plan or an owner-only 401(k), sometimes known as an individual or solo 401(k). Or, if your goal is to contribute as much as possible, you may want to consider an owner-only defined benefit plan.

If you have employees, you might want to investigate a SIMPLE IRA or even a 401(k) plan. Your financial advisor, working with plan design professionals and your tax advisor, can help you analyze the options and choose the plan that fits with your combined personal and business goals.

Now, let’s turn to business succession plans. Ultimately, your choice of a succession plan strategy will depend on many factors, such as the value of your business, your need for the proceeds from the sale of the business for your retirement, your successor and how well your business can continue without you. If your goal is to keep the business within the family, you’ll need to consider how much control you wish to retain

(and for how long), whether you wish to gift or sell, how you balance your estate among your heirs and who can reasonably succeed you in running the business.

Many succession planning techniques are available, including an outright sale to a third party, a sale to your employees or management (at once or over time) or the transfer of your business within your family through sales or gifts during your life, at your death or any combination thereof.

Many succession plans include a buy-sell agreement. Upon your death, such an agreement could allow a business partner or a key employee to buy the business from your surviving spouse or whoever inherits your business interests. To provide the funds needed for the partner or employee (or even one of your children) to purchase the business, an insurance policy could be purchased.

Your estate plan — including your will and any living trust — should address what happens with the business, in case you still own part or all of it at your death. The best-laid succession plans may go awry if the unexpected occurs.

All these business succession options can be complex, so before choosing any of them, you will need to consult with your legal and financial advisors.

Whether it’s selecting a retirement plan or a succession strategy, you’ll want to take your time and make the choices that are appropriate for your individual situation.

You work extremely hard to run your business, so do whatever it takes to help maximize your benefits from it.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor

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Whether it’s selecting a retirement plan or a succession strategy, you’ll want to take your time and make the choices that are appropriate for your individual situation.

4 // ROAD TO FINANCIAL SUCCESS // January 20, 2015

Should You Apply For Social Security Now...or Later?

When should you apply for benefits?

Consider a few factors first.

A rt icle P rov i d e d by J CCS

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ow or later? When it comes to the question of Social Security income, the choice looms large.

Should you apply now to get earlier payments?

Or wait for a few years to get larger checks?

Consider what you know (and don’t know). You know how much retirement money you have; you may have a clear projection of retirement income from other potential sources. Other factors aren’t as foreseeable. You don’t know exactly how long you will live, so you can’t predict your lifetime Social Security payout. You may even end up returning to work again.

When are you eligible to receive full benefits? The answer may be found online at socialsecurity.gov/retire2/agereduction.htm.

How much smaller will your check be if you apply at 62? The answer varies. As an example, let’s take someone born in 1953. For this baby boomer, the full retirement age is 66. If that baby boomer decides to retire in 2015 at 62, his/her monthly Social Security benefit will be reduced 25 percent. That boomer’s spouse would see a 30 percent reduction in monthly benefits.

Should that boomer elect to work past full retirement age, his/her benefit checks will increase by 8.0% for every additional full year spent in the workforce. (To be precise, his/her benefits will increase by .67 percent for every month worked past full retirement age.) So it really may pay to work longer.

Remember the earnings limit. Let’s put our hypothetical baby boomer through another example. Our boomer decides to apply for Social Security at age 62 in 2015, yet stays in the workforce. If he/she earns more than $15,720 in 2015, the Social Security

Administration will withhold $1 of every $2 earned over that amount.

How does the SSA define “income”? If you work for yourself, the SSA considers your net earnings from self-employment to be your income. If you work for an employer, your wages equal your earned income.

Please note that the SSA does not count investment earnings, interest, pensions, annuities and capital gains toward the current $15,720 earnings limit.

Some fine print worth noticing. Did you know that the SSA may define you as retired even if you aren’t? (This actually amounts to the SSA giving you a break.) For 2014, the SSA considered you “retired” if you were under full retirement age for the entire year and your monthly earnings were $1,290 or less.

If you are self-employed, eligible to receive benefits and under full retirement age for the entire year, the SSA generally considers you “retired” if you work less than 15 hours a month at your business.

Here’s the upside of all that: if you meet the tests mentioned in the preceding paragraph, you are eligible to receive a full Social Security check for any whole month of a year in which you are “retired” under these definitions. You can receive that check no matter what your earnings total for all of that year.

Learn more at socialsecurity.gov. The SSA website is packed with information and is quite user-friendly. One last little reminder: if you don’t sign up for Social Security at full retirement age, make sure that you at least sign up for Medicare at age 65.

Mike McCloskey may be reached at 406.761.2820 or mmccloskey@jccscpa.com.

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JCCS article, continued from page 4 www.jccscpa.com This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - socialsecurity.gov/retire2/agereduction.htm [11/6/14] 2 - socialsecurity.gov/retire2/delayret.htm [11/6/14] 3 - forbes.com/sites/janetnovack/2014/10/22/social-security-benefitsrising-1-7-for-2015-top-tax-up-just-1-3/ [10/22/14] 4 - ssa.gov/retire2/whileworking2.htm [11/4/14] 5 - socialsecurity.gov/retire2/rule.htm [11/6/14]

6 // ROAD TO FINANCIAL SUCCESS // January 20, 2015

Determine your Financial Approach

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he key to being financially successful is to find a program that works for you. Every person is different, and therefore, there isn’t a “one size fits all” approach to financial well-being. Each person needs to try out different approaches to financial wellness and determine which approach is most appropriate for them. This means some must organize their financial budget into envelopes of money so that they can physically see how much they have spent and how much is left at any time. For others, they may prefer to keep a spreadsheet of all of their finances. Others may wish to invest in a computerized program that helps prepare and keep a budget. Whichever way works best for you as an individual is what matters.

RMCU_Chronicle_FinancialSuccess_Halfpage_FINAL.pdf

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1/15/15

Article Provided by Rocky Mountain Credit Union

The budget is where financial wellness begins and ends. You need to understand where your money is going before you successfully change how you’re spending it.

This means you should start simply by tracking your spending and organizing that spending into categories. This is a simple budget. Once you have done this, you can start making small changes to your spending habits to help make yourself feel a little better about your financial well-being. A small extra payment to a credit card or a small decrease in spending can be enough to help encourage you to keep dedicating time and efforts to your financial success.

After you have a good tracking program in place of where your money is being spent each month, you can start taking extra strides. A major step to take is to plan for the unexpected. Start an emergency fund by putting a little extra money away into savings every month. This will start building an emergency cushion for you. This way, when your car breaks down, you become ill or some other unexpected event happens, the financial impact is much easier to weather. Just putting a little money away every month can make all the difference when it comes to life’s surprises.

Another big step that you can take is to start making additional payments towards your debt. A good rule of thumb to follow is to pay the extra to the loan with the

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MEMBERSHIP

MAKES YOU FEEL GOOD.

JOIN RMCU

It’s the simple satisfaction knowing that, as a member of RMCU, you are in control of your money and financial experience.

We’re here to help you through all life’s events, big and small.

406.586.1505 • RMCU.NET

ROAD TO FINANCIAL SUCCESS // January 20, 2015 // 7

RMCU article, continued from page 6 highest interest rate. If you will pay more in interest on credit card than on your car loan, you should make extra payments on the credit card when you can. Get your debt that you pay the most for paid off first. Then, when your highest interest loan is paid off, you can move to the next highest.

This tactic will help save you paying a lot of money to interest throughout the life of each loan.

Finally, when all the aforementioned steps have been successful for you, it’s time to start putting extra away for vacation, a new car, retirement, etc.

Take the extra money that you no longer have tied up with monthly loan payments and save for your future.

This is when you know that you’re truly financially sound!

8 // ROAD TO FINANCIAL SUCCESS // January 20, 2015

All about the Affordable Care Act A rticle P rov i d e d by r u d d & c ompa ny

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re you ready to do your taxes? Don’t be surprised if your tax preparer asks you additional questions related to your health insurance this year.

The Affordable Care Act added the “individual mandate,” which requires you and the other people you claim on your tax return to be covered by health insurance in 2014. If you are covered, you will need to give your tax preparer the information about your health insurance coverage so they can properly report it. If you aren’t covered, you are required to pay an excise tax which will show up on your individual tax return.

Here are the basics: • You are required to have health insurance that meets minimum guidelines in 2014 OR pay the “individual shared responsibility payment.”

• The payment for 2014 is one percent of your income above the filing threshold for your status (single, married, etc.), OR a flat dollar amount, whichever is HIGHER. • The payment amount is capped at $285 for a family OR the amount you would have paid for a bronze level health plan for you and your family. Again, whichever is HIGHER. • These amounts go up for 2015 and again in 2016.

• There are several exceptions that to paying the excise tax if you didn’t have coverage. Some of these are: • Coverage is considered unaffordable • Short coverage gap- you went without coverage for less than three secutive months

con-

• Your income is below the return filing threshold • You are a member of a health care sharing ministry • Gap in coverage at the beginning of 2014- if you were enrolled with an effective data on or before May 1, you get a pass • General hardship- you need to apply for an exemption in order to claim this one • Several others- see your tax professional for more information How is this all going to be reported? There are several new forms that will need to be filed with your 2014 individual tax return. There are also new forms that your insurance provider will be required to file with the IRS. If you purchased coverage through the Marketplace, you will receive a 1095-A in the mail that will list what months you were covered by health insurance and also give information about any Advance Premium Payments you received to help pay for premiums.

If you purchased coverage through another provider, you will still receive a form that shows what months you were covered.

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Rudd & Compnay article, continued from page 8 If you had coverage all year long, you will check a box on your tax return to indicate that. If you didn’t receive any Advance Premium Payments, you are done with the new rules.

If you received Advance Premium Payments, you are required to reconcile the amounts you received with the amounts you should have received. This is reported on the new Form 8962 Premium Tax Credit. If the estimate you provided for your income is high compared to your actual income for 2014, you may receive more money back from the IRS. However, if the estimate you provided was low compared to your actual income, you may need to pay back some of those Advance Premium Payments.

There are several new forms that will need to be filed for your 2014 tax return.

If you only had coverage for part of the year, you or your tax professional will need to determine if you owe the excise tax. That will be determined on the new Form 8965 Health Coverage Exemptions. You will also indicate on this form if you can avoid the tax because you qualify for an exemption.

If you did not have coverage at all, you will note that on the Health Coverage Exemptions form and calculate your excise tax payment.

There is a lot of information available if you want to learn more. Contact your tax professional or give us a call at Rudd & Company and we would be happy to help you.

Good luck to you with tax season!

Tax Free Exchanges • Bookkeeping & Payroll Services

Call us today to speak to one of our Tax Professionals

10 // ROAD TO FINANCIAL SUCCESS // January 20, 2015

What to Know Before You Buy a Home A rticle by St e v i e C r o i sa nt, b ozeman daily chronicle

Thinking about purchasing your dream home this year?

Improving mortgage and lending conditions may make 2015 the right time for borrowers.

Still, many first-time home buyers have inaccurate perceptions about home lending, according to Robert Gregory, Vice President and Real Estate Manager at First Security Bank. Buying a new home or refinancing shouldn’t be a stressful process. If you’re worried about the home lending process, here are a few of the top misconceptions, and their realities, behind borrowing for a home.

“I don’t have an adequate down payment.”

Many don’t believe they have an adequate down payment or the equity required to purchase or refinance, believing that at least 20 percent is now the only option. It is true that with a larger down payment or more available equity, you are likely to receive a better rate and terms. However, some common lower down payment examples include: • USDA Rural Development offers an option for zero percent down payment, with a two percent upfront mortgage insurance fee that may be financed into the loan.

You do not need to be first time homebuyer to qualify.

• Veteran’s Administration (VA) Loans require a zero percent down payment, and the typical 2.15 percent VA funding fee may be financed.

• Federal Housing Administration (FHA) Loans offers a 3.5 percent down payment required loan with a 1.75 percent upfront mortgage insurance fee. The annual fee has recently been reduced, saving the typical homebuyer around $900 per year.

On conventional loans, mortgage insurance may be added to reduce the down payment requirement to as little as three percent-- a decrease from five percent in the past. The mortgage insurance premium will vary with credit score and down payment.

Total cost of a loan with mortgage insurance will be higher, but may provide a way to get started on your path to homeownership.

“I don’t believe I will qualify to refinance or for a mortgage.”

Borrowers with good credit scores may find it easier to qualify than they expect. Be optimistic about the credit scores that may be necessary to qualify.

If you are refinancing, you may be concerned about owing more than your home is worth. If your current loan was made prior to June 2009, you may qualify for the

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“Home,” continued from page 10 Home Affordable Refinance Program (HARP) or the Home Affordable Modification Program (HAMP), programs designed to help in that situation.

“The process is too time consuming and expensive.”

According to Black Knight Financial Services, a mortgage analytics company, there are 7.4 million mortgage borrowers overall in the United States, with rates of 4.5 percent or higher, who could qualify for and benefit from refinancing.

Gathering tax documents and pay stubs isn’t always fun, but the savings might more than compensate you for your time.

For example, borrowers that currently have a 30-year loan with a $200,000 balance and rate of 6.5 percent who refinance to four percent could save approximately $500 per month. In this example, it would take less than one year to make up your closing costs in payment savings.

Local lenders offers a range of residential loan plans to fit your needs at competitive rates. Often, real estate loan application and related documents can be started in the comfort of your home and then completed with the help of a local mortgage expert. Make this your year.

12 // ROAD TO FINANCIAL SUCCESS // January 20, 2015

Dying Without a Will

Article Provided by Montan a state university Extension offices

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n individual without a will may have writing one on their to-do or New Year’s Resolution list, but it’s a task that is easily put off. “Some people assume Montana law would distribute property the same way they would, so there is really no need to formalize their bequests with a will,” said Marsha Goetting, MSU Extension Family Economics Specialist.

“The following examples are only two of the many that I use during my estate planning programs to show how Montana law may not be best for individual family situations,” Goetting said.

Assume Jack dies without writing a will. He has property valued at $800,000 in his name only. Jack’s survivors are his wife and parents. What dollar amount, if any, will Jack’s wife receive? Most people believe that Jack’s wife receives all $800,000, which is incorrect. Why? Montana law provides for the surviving spouse to receive the first $200,000 in value of the estate and three-fourths of the balance. Because the property is solely in Jack’s name, the remaining balance (one-fourth) passes equally to his parents. Thus, Jack’s wife receives $650,000. Jack’s father and mother receive $75,000 apiece. This is not the distribution Jack wants for his spouse. He wants his wife to receive all of his estate. Jack needs to write a will.

Now let’s see what happens in Gary’s family. Gary has remarried after his wife passed away a year ago. He titled his ranch in joint tenancy with his new wife shortly after their marriage. Recently Gary wrote a will leaving the entire ranch to his children. If Gary dies, who receives the ranch? Most people believe Gary’s children do because the will was the most recent document. Wrong! The joint tenancy title to the ranch is a contract and has priority over his will. Gary cannot undo the contract with his written will. He has disinherited his children without realizing it. To make matters worse, if Gary and his wife were in an accident and his wife dies more than five days after he does, her children receive the ranch-- not Gary’s children. “If Gary wants his children to receive the ranch, he first needs to visit with his attorney, undo the joint tenancy

contract and then review his will to be sure it accomplishes his goal,” Goetting said.

‘But my family situation is different,’ you say. Then you need to work through a Web site (or a CD for those who don’t have Internet access) that reveals where your property would pass under Montana law if you don’t have a will. Goetting and Keri Hayes, MSU Extension Publication Assistant, created a Website that lets you see where your property would be distributed if you pass away without writing a will. Whether you are married with kids, married without kids, single and so on you can simply click “yes” or “no” to a variety of questions and then see where your property goes. www. montana.edu/dyingwithoutawill For people who have “slow” or no Internet service, an interactive CD with the same information as the Website is available at no charge by contacting Goetting by email at goetting@montana.edu.

Goetting would be the first to say you need to think beyond its simple answers. “If you agree with how Montana law would distribute your property, maybe you don’t need to write a will. On the other hand, would your husband or children know who Aunt Suzy’s ring goes to if you don’t have it written down? For that matter, would your family members even know which ring is Aunt Suzy’s?”

A will with a separate listing of personal property clarifies that issue, making it possible and easier for surviving family members to follow your wishes about who gets your treasured items. “Saves family feuds,” Goetting added.

While the 39 illustrations in the Web site describe “typical” family situations, if you discover that your family situation is not illustrated, you can send Goetting an email asking for more information.

For people who do not have computer access, copies of a fact sheet, “Dying Without a Will,” is available from your local Extension office.

It is also available on the Web http://msuextension.org/publications/ FamilyFinancialManagement/MT198908HR.pdf or from Goetting, PO. Box 172800, Montana State University, Bozeman, MT 59717.