Servion Financial Advisors Newsletter March 2021

MARCH 2021

In This Issue IRA Contributions Budget Checkup: Tax Time is the Right Time Women’s History Month: Women in Investing 7 Essential Things to Know Before You File Your 2020 Tax Return

Now is the time to make final contributions to your IRA for 2020.

Any contributions made before April 15, 2021, may mean an additional deduction or credit on your 2020 tax liability if you have not yet met the maximum contribution level (typically $6,000 for those under 50, or $7,000 for those older than 50). If you’d like more information about reducing your 2020 tax liability or if you would like to open an IRA or make changes to your retirement plan, contact Servion Financial Advisors.

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Budget Checkup:

Tax Time Is the Right Time Every year, about 140 million households file their federal tax returns.1 For many, the process involves digging through shoe boxes or manila folders full of receipts; gathering mortgage, retirement, and investment account statements; and relying on computer software to take advantage of every tax break the code permits.

It seems a shame not to make the most of all that effort.

Tax preparation may be the only time of year many households gather all their financial information in one place. That makes it a perfect time to take a critical look at how much money is coming in and where it’s all going. In other words, this is a great time to give the household budget a checkup.

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IRS, 2019

Six-Step Process A thorough budget checkup involves six steps: Start by dividing expenses into useful categories.

Creating Some Categories Some possibilities: home, auto, food, household, debt, clothes, pets, entertainment, and charity.

Don’t forget savings and investments. It also may be helpful to create subcategories. Housing, for example, can be divided into mortgage, taxes, insurance, utilities, and maintenance.

Go through all the receipts and statements gathered to prepare taxes and get a better Following the Money understanding of where the money went last year. Track everything. Be as specific as possible, and don’t forget to account for the cost of a latte on the way to the office each day.

Knowing how much was spent per budget Projecting Expenses Forward category can provide a useful template for projecting future expenses. Go through each category. Are expenses likely to rise in the coming year? If so, by how much? The results of this projection will form the basis of a budget for the coming year.

Add together all sources of income. Make sure to use net income.

Determining Expected Income

It’s time for the moment of truth. Subtract projected expenses from expected income. If Doing the Math expenses exceed income, it may be necessary to consider changes. Prioritize categories and look to reduce those with the lowest importance until the budget is balanced.

If it’s not in the budget, don’t spend it. If it’s an emergency, make adjustments elsewhere.

Sticking to It

Women’s History Month:

WOMEN IN INVESTING For many women, being financially secure is an important goal, whether you’re married, single, working, or staying home with children. This financial independence can give you a certain level of empowerment and confidence about the future.

The truth is that women face different issues than men when it comes to financial planning. Women today face a longer life expectancy than men by about five to eight years and typically spend fewer years in the workforce due to childcare. They also earn less in Social Security benefits and lower pay than men, despite recent gains in equality. Issues such as retirement, college planning for children, caring for an aging parent, and divorce and widowhood can make a big impact on a woman’s budget.

So how can you protect yourself and make sure your own financial goals are

being met? What are your options for seeking help in getting your finances in order? It’s time to focus on planning for your unique situation and life changes specific to women investors.

Together, we can start making decisions today that can positively impact your financial future.

WEBINAR PROGRAM Provide complimentary educational webinars to your members with help from Servion Financial Advisors.

SPEAKERS

SLIDE DECKS

Servion Financial Advisor

SFA provides slides

INVITES/RSVP

PRESENTATIONS

CU can invite via its channels

SFA advances slides and takes audience questions

WHY WEBINARS? Position Your Credit Union As a Resource

Webinars about retirement, investing and related topics send the message to members that your credit union is resource for more than checking accounts and basic lending.

Stay Connected to Your Members

Webinars offer a chance to stay in contact with members and continue helping them succeed.

Financial Literacy

Nearly 60% of Americans are worried that they don’t have enough money to retire.* Webinars help equip your members with knowledge and skills to improve their financial future. *https://www.simplywise.com/blog/ retirement-confidence-index/

2021 WEBINAR TOPICS January/February 2021 Market Outlook

Social Security

May/June

September/October

March/April

July/August

November/December

Financial Literacy

Life Insurance

College Savings

Preparing for Retirement

Servion Financial Advisors would love to work with you to provide financial education to your members. To learn more about the webinar program and how we can build a presentation that would be valuable for your membership, contact Ellie Meenan at: 651-787-9575 or emeenan@servionfa.com.

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ESSENTIAL THINGS TO KNOW BEFORE YOU FILE YOUR 2020 TAX RETURN

The IRS tax season started on Friday, Feb. 12, 2021.

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That February start date is about three weeks later than in past years. So why the delay? The IRS needed more time to program and test its systems after the changes that Congress made to the tax law on Dec. 27 that provided another round of Economic Impact Payments and other benefits. IRS Commissioner Chuck Rettig called this a “massive undertaking.”

“Given the pandemic, this is one of the nation’s most important filing seasons ever,” Rettig said in a statement.

“This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible.”

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The IRS is taking longer than usual to process paper returns. So e-file instead.

The agency is urging taxpayers to file their tax returns electronically and to choose direct deposit to receive refunds.

“Direct deposit means any tax refund is electronically deposited for free into a taxpayer’s financial account,” the IRS states. “Eight out of 10 taxpayers get their refunds by using direct deposit. It is simple, safe and secure.”

File your tax returns as soon as you can.

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The IRS states that despite its Feb. 12 start date, you can file your returns immediately with tax software companies, including IRS Free File partners. Filing as early as possible is particularly advantageous if you are in line for a refund, since you can get it sooner.

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You may owe taxes on your unemployment checks.

“A lot of people have collected unemployment and didn’t have it taxed properly and they may wind up in a position where they owe,” Roberts said. If you file early, you can get a payment plan set up if you need one as soon as possible and get that debt off your shoulders.

“Millions of Americans received unemployment compensation in 2020, many of them for the first time,” the IRS states. “This compensation is taxable and must be included as gross income on their tax return.”

You don’t need to pay taxes on the pandemic stimulus payments.

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The Tax Institute’s Garrett Watson said those checks and direct deposits do not count as taxable income.

“The stimulus payments are considered a tax credit on your tax return so you won’t have to pay any tax on either prior stimulus payments that were made or any additional amount that you’ll be able to receive,” Watson said.

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If you work from home, you may or may not be able to deduct your work-related expenses.

If the pandemic prompted your employer to send you home to work from there, you may be wondering about the home office deduction. Unfortunately, you can’t deduct any work expenses that you incur at home if you’re still an employee on your company’s payroll.

The home office deduction only applies to taxpayers who are self-employed — such as freelancers, consultants, entrepreneurs, gig workers, and other types of independent contractors.

“If you are self-employed and you moved into a home-office environment, you should look into potentially deducting those expenses, if you haven’t already before, because you can do that under certain limitations,” Watson said.

Deducting medical expenses, including anything related to COVID, depends on a few things.

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If you itemize your deductions, you can deduct only those eligible medical and dental expenses that exceed 7.5% of your adjusted gross income. So you should carefully go over the numbers with a tax preparer, tax software, or another resource.

Source: https://www.fox5ny.com/news/2020-tax-returns

651-631-3111 • servionfa.com

Registered Representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker-dealer and a Registered Investment Advisor. Investments are: • Not FDIC/NCUSIF insured • May lose value • Not financial institution guaranteed • Not a deposit • Not insured by any federal government agency. Cetera is under separate ownership from any other named entity. 500 Main Street, Suite 100, New Brighton, MN 55112. 651-631-3111.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.