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Posted by Greg Caramanica on December 15, 2019

AWP Provides Companies with a Better Corporate Retirement Plan

Arlington Wealth Planning is proud to announce that we have partnered with top-notch, award-winning companies to provide better corporate retirement plans.

Founder, Greg Caramanica, discusses his perspective on how retirement plans can be better:

If your employees don’t understand why they are saving for retirement, will you have good participation in the plan?  Do you have employees asking for advances because they are experiencing financial problems at home?  How focused are they on their career when these issues are occurring?

These issues highlight the value of advisory services – an opportunity to provide a benefit to your employees, who might not have access to financial planning outside the corporate retirement plan.   It’s not only a chance to help them understand the investment lineup and how they can assemble their own portfolio, but also help them evaluate their financial goals and how to achieve them.  It’s an opportunity to help them improve financial habits and improve their wellbeing.

Your retirement plan should bolster your employee wellness program.

Looking back as an employee over my career, every single one of my employers’ 401k programs lacked adequate advisory services.  The plan sponsor would show up maybe once when I joined the plan, but I never saw them again.

The issue seems to be that retirement plans are not the primary focus of advisory firms.  Many shops seem to focus primarily on individuals, not companies, and might take on a few 401ks, but don’t really think about them as a significant opportunity to provide financial planning in a group environment.  With downward pressure on fees, companies are typically looking for the cheapest retirement plan they can find.  This results in bare bones plans that provide little value to its participants other than investment options, absent advisory services due to the low compensation and lack of interest.

I vow to do better.  Our retirement plans will include touch points with our advisors through financial planning seminars, one-on-one discussions, online educational resources and training, and, of course, more attention on ensuring participants know the individual investments in the plan and how to make sense of them.  You’ll see us frequently and you’ll know that we care about providing great customer service and a top-notch experience for plan participants.

Arlington Wealth Planning has partnered with the following award-winning companies:

Charles Schwab for custodian services.  StockBrokers.com ranks Schwab “Best in Class” Overall in 2019 as well as “Best in Class” in the Customer Service, Research, Platforms & Tools, Education, Offering of Investments, and Banking categories. Schwab was also selected as one of the Top 50 companies on the 2019 “World’s Most Admired Companies®” list, as well as ranked #1 for Innovation in Key Attributes of Reputation within the Securities and Asset Management category.

PCS Retirement for recordkeeping and third-party administration.  PCS is recognized as “Best in Class” by PlanAdviser Magazine in: Participant Call Center, Service Responsiveness, and Staff Consistency.  PCS is one of fewer than 50 companies that holds a Centre for Fiduciary Excellence (CEFEX) certification by the American Society of Pension Professionals & Actuaries (ASPPA). Additionally, PCS has received the highest rating by Roland|Criss for retirement plan service providers – “AAA” for Superior Quality.

MillenniuM for investment policy management.  MillenniuM is an unaffiliated ERISA defined independent fiduciary to 401(k) and other defined contribution plans. They are a fee-only, codified investment fiduciary as defined by ERISA section 3(38).  MillenniuM serves as an unconflicted “independent fiduciary” under DOL.§ 2509.95-1(c)(6).

Posted by Greg Caramanica on December 6, 2019

It’s that time! – 2019 End-of-Year Financial Planning

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There are multiple opportunities at the end of the year to make sure you close out 2019 right. Since most year-end planning opportunities have firm deadlines—often December 31st—acting now can help ensure you don’t leave money on the table. It’s not all upside though: Failing to take certain actions can mean penalties in some cases.

401k Contributions – The maximum you can put into your company’s 401k plan for 2019 is $19,000 and it has to be before the end of the year.  So, December is your last chance to contribute if you haven’t reached your maximum.  Check your last paystub to see what your contributions year-to-date have been.  Also take a look at your contributions per paycheck.  Add the remaining contributions to the year-to-date amount and that will be your expected annual contribution.  If it’s less than $19,000 and you want to make additional contributions, log into your company’s 401k website and add a contribution.  If you need help, contact your company’s Human Resources department.

529 Contributions – If you have a Virginia 529 College Savings Plan, you can deduct up to $4,000 per year in contributions against your Virginia State taxes.  So, if you have contributed less than $4,000 this year and would like to get the full tax benefit, you will need to make your contribution before the end of the year.

In addition to contributions, there is also an end-of-year note about distributions.  If you are taking distributions from a 529 plan to pay for qualified educational expenses, be careful not to draw from the account in December for January expenses.  You must wait until January to make those distributions, or else they will be considered nonqualified distributions and subject to taxes and fees.

Required Minimum Distributions – If you are over 70.5 years old, you are required to take a certain amount of money out of your tax-sheltered retirement accounts each year.  These are called Required Minimum Distributions (RMDs).  If you don’t take out enough, you will be subject to penalties.  So, before the end of the year, you should check your retirement accounts to see if your RMDs have been distributed.  If necessary, contact your financial planner, broker, or bank to discuss the calculation.  If you haven’t taken the full amount, arrange for it to be withdrawn before the end of the year.  It can go into your bank account, into another (non-retirement) investment account, or wherever you want it to go – it just has to be withdrawn from the retirement account (e.g. you don’t have to spend it!).

Medical Expenses – If you have a deductible and a maximum out-of-pocket limit on your health care insurance, then you may save money by going to the doctor in December instead of waiting until the -new year.  If you have met your maximum out-of-pocket limit, then you will pay less for those necessary medical appointments in December.  If you wait until January, the limit resets and you start over again.  So, review your deductible situation and determine whether you should take the chance to move any necessary medical appointments.

Also, consider your total medical expenses in 2019.  Did you have a major illness in 2019?  Did you pay for braces for multiple children in 2019? If your medical expenses in 2019 were over 10% of your adjusted gross income, then you qualify for medical expense deductions on your 2019 tax return.  This could be another reason to arrange for necessary medical appointments or expenses to occur in December rather than waiting until the new year.

Flexible Spending Accounts – There are two types of flexible spending accounts (FSAs) your employer can sponsor: Medical and Dependent Care. Unlike Health Savings Accounts (HSAs), which don’t expire at the end of the year, FSAs are considered “use or lose,” except for small amounts (e.g. $500, depending on the plan) that may be allowed to roll over to the next year for medical FSA.  This means that in most cases your 2019 FSA can ONLY be used for qualified expenses that happened in 2019.  If your qualified expenses in 2019 haven’t added up to your full FSA contribution, you may want to expedite any qualified expenses that can be expended in 2019.  With FSAs being funded by deductions from your paycheck every month, if you don’t spend it all then it’ll be like throwing your money away.  Check your medical plan for details on rollover allowances.

Tax Withholdings – Yes, the IRS tables are inaccurate again this year for most.  This means that the withholdings from your paychecks (that are sent to the IRS every month to prepay your 2019 federal taxes) might not be enough.  Take the time to review your most recent paystub.  Look at the amount withheld to-date and the amount withheld per paycheck.  Based on these amounts, calculate how much you will have withheld by the end of the year (last paychecks before January 15 count).  To avoid an underpayment penalty, individuals must pay either 100% of last year’s tax or 90% of this year’s tax, by combining estimated and withholding taxes (with a few exceptions).  If you haven’t withheld enough, you can either send a check directly to the IRS or you can arrange for a higher amount to be withheld from your December paycheck(s).

Charitable Giving – Charitable donations of money or goods are deductible on your taxes for the tax year they are incurred.  So, if you want to get the deduction on your 2019 taxes, you must make the donation before the end of the year.  Remember to document what you have donated and the fair market value of the donation, then get a receipt from the qualified charitable organization.  There are rules that could limit your deduction to 50% of your adjusted gross income (AGI) for certain donations or 30% of AGI for other donations, as well as rules about gifts of long-term capital gain property. If you are unsure of whether your donation will qualify and how much of a deduction you can get, speak to your tax advisor.

The end of the year can be hectic, but if you consider these financial planning opportunities and make your moves before the end of the year, you will thank yourself come tax time.


Greg Caramanica, CERTIFIED FINANCIAL PLANNER™
Investment Advisor Representative, COO, and Founder of Arlington Wealth Planning, LLC
Greg@ArlingtonWealthPlanning.com
(703) 300-0448

AWP provides financial planning, insurance, and tax services.
Ask us about our 401k plans!

Posted by Greg Caramanica on April 10, 2018

A costly tax error – Entering incorrect HSA information

High Deductible Healthcare Plans (HDHPs) used to be for people who were willing to receive fewer health insurance benefits to get a lower payment.  If you were okay having to pay for routine medical expenses out of pocket and only wanted insurance to cover the occasional big ticket items, you could elect to have a high deductible, which resulted in less risk for the insurance company and, ultimately, a lower payment for you.  Historically, this was chosen by either the wealthy who could afford the risk, or by those who were healthy and didn’t feel like they had a lot of risk.

But now we are seeing more and more companies moving to HDHPs as their only offered health insurance plan.  This is due to increasing health insurance costs and the need to provide options that are more affordable.  What was once a less expensive plan with risk shifted to the customer by choice, is now often the only plan.

One benefit of having an HDHP is that you typically gain access to a Health Savings Account (HSA), which allows you to save pre-tax money in an account to use for qualified medical expenses.  The gist of this arrangement is that it saves you money on your health expenses.  I won’t get into the economics of this and how it will drive up medical costs, I’m only addressing a tax concern in this blog.

If you aren’t paying attention, you could cost yourself thousands in taxes if you don’t enter your HSA correctly into your tax return

In most cases, the IRS does a good job of getting companies to send you information to drop into your tax return, keeping it easy for us.  Among these tax forms, you will typically receive a W2 that shows your earnings and withholdings, a 1095-C showing your health coverage, and a 1099-SA showing the distributions from your HSA.  But in the case of HSAs, these forms don’t have the information you need!

We, as taxpayers, use IRS form 8889 to enter information about our HSA.  You’ll notice that there is a place to enter how much you contributed to your HSA (line 2), a place to enter how much your company contributed to your HSA (line 9), and a place to enter how much of your distributions were qualified (line15). Entering this information is trickier than you think.

Issue with Contributions::

On the W2, under box 12, your employer states how much money was contributed to your HSA (labeled as category ‘W’).  But when you read the fine print in the form’s instructions, you find that this value bundles the amount that you contributed to your HSA with the amount your employer contributed to the HSA.  If you put this number into line 9 of your form 8889 (like some tax software tools automatically do), you will miss the entire deduction of your contribution to your HSA.  This could be a lot of money!

To avoid this, you need to reference your final paystub from the tax year to see the summary of year-to-date contributions to your HSA.  The total amount you contributed should be there.  Otherwise, use an end of year HSA statement to find this number.  This is the amount YOU contributed.  Then the difference between that number and item W on your W2 is the amount YOUR EMPLOYER contributed.  These are the numbers that go into line 2 and 9 on your 8889.

Issue with Distributions::

The 1099SA form shows how much was distributed from your HSA, but it doesn’t say whether it was used for qualified medical expenses.  Even though most of us have to show proper evidence of qualified medical expenses to get the distribution, I suppose there are ways to get the money for other reasons.  So, review the meaning of qualified medical expense in IRS Publication 969 to see if your expenses meet the definition.  If they do, make sure you enter the amount of qualified medical expenses on line 15.  If you don’t the full amount of distributions (line 14a) will be taxable, potentially increasing your overall tax.

These two issues are caused by inadequate information on the tax forms provided by employers and health providers, presumably because the IRS approved tax forms aren’t asking for the information.  Keep an eye out for these issues or you may find yourself paying thousands more than you need to in taxes.

 

 

About the Author:

Greg Caramanica is the managing member and COO of Arlington Wealth Planning, LLC, a Registered Investment Advisor located in Arlington, Virginia.  Mr. Caramanica is a CERTIFIED FINANCIAL PLANNER™, providing financial planning , insurance, and tax services.

Posted by Greg Caramanica on March 5, 2018

When to file your taxes – should I file early?

2017 tax returns are Due April 17th, 2018.  Should you file before then?

Remember that massive data breach in 2017?  This could have a significant impact on your decision to file early.  If you don’t remember, in 2017 there was a huge security breach at the credit reporting company Equifax that exposed sensitive information, such as Social Security numbers and addresses, of up to 143 million Americans (CNN article).

Criminals have been known to file false tax returns in the attempt to get their hands on a person’s tax refund.  Even if you don’t think you are entitled to a refund, these bad actors could easily falsify a tax return to show a tax refund.  Using your name, social security number, address, and other information (stolen from Equifax), they file the tax return and collect a tax refund in your name – all without you knowing. Then when you go to file your tax return, there is a problem.

The moral of the story is that you should file as soon as you can.

It’s a balance of filing too early and filing too late.  If you file too early, you could continue getting tax forms in the mail that you should have included in your return, forcing you to file an amended return later.  But if you file too late, you could expose yourself to tax return fraud.

Look at your previous year’s tax return and the forms you received in support of that tax return.  If your situation is similar to last year and have received everything you received forms from all the same institutions you received last year, then you are good to go.  If you are expecting more, wait.

If you need help preparing and filing your tax returns, schedule an appointment with Arlington Wealth Planning, LLC – a provider of financial planning and tax preparation services.

Phone: 1 (571) 263-1178 or Book an appointment here

 

About the Author:

Greg Caramanica is the managing member and COO of Arlington Wealth Planning, LLC, a Registered Investment Advisor located in Arlington, Virginia.  Mr. Caramanica is a CERTIFIED FINANCIAL PLANNER™, providing financial planning , insurance, and tax services.

Posted by Greg Caramanica on January 29, 2018

Saving money with your diet – a new year’s resolution

Since my last post, we’ve entered a new year and many of us have made new year’s resolutions.  One of the most common resolutions is to lose weight, so this got me thinking about the financial benefits of dieting.  This is NOT dieting advice, so don’t think I’m going to give you the answers to maintaining a healthy weight or eating right.  I’m am merely going to reflect on a few observations I’ve had over the last year or so.

What I’ve discovered is that over eating is expensive!

This past year, I survived a few different attempts at dieting, starting with a vow to eat “cleaner.”  This meant fewer processed foods, more vegetables, and simple preparation of meats.  It was probably similar to a Paleo type diet, but instead it was driven primarily by the need to simplify so that I could count calories more easily.  What I found was that my perception of portion sizes was way off, which was causing me to go through much more food each week than I should have – racking up nearly $2,500 a month between meals at home, at work, and the occasional dinner out for our 4-person family.  But with my meal planning, I was down to under $1,000 a month in groceries, saving myself around $1,500 per month!  I was flabbergasted!  That’s around $18,000 per year in savings.  I could buy a car for that kind of cash or, even better, greatly improve my ability to save for numerous goals.  As a financial planner, I was hooked immediately.

I started by talking to my doctor and determining the right number of calories, protein, and carbohydrates for my body type and my goal weight.  Then I created a schedule that showed what foods I would eat each day, entering them all into an app that gave me estimated nutrition information.  I balanced and traded until it was right, then created a shopping list from my plan.  Here is what the schedule looked like:

example diet schedule(I purposely made this hard to read because I’m not providing diet advice!)

As part of my plan to simplify, I scheduled meals so that I was eating leftovers from the previous night’s dinner at lunch the next day.  I didn’t plan for elaborate (high calorie) recipes, but I did try to vary the preparation to keep it more exciting, looking up recipes that were simple, low-calorie, and tasty.

The first thing I noticed was that I could stretch the same amount of protein I used to eat at one meal to two meals, cutting those expenses in half.  With protein being the most expense part of my meals, the savings were significant.  Also, I used to go out for lunch every day for a sandwich or a few items on the buffet, but now I was bringing my lunch every day.  That, in itself, was saving me a lot of cash as well – with lunches that usually ran $10-$15 now costing me around $3.  Each of the changes I made added up over the course of the week to save me a whopping $375/week.

I then started shopping online.  I paid a small fee for the grocery store to collect all the groceries for me and I would pick them up.  This served multiple functions: (1) it helped me to avoid temptations to buy other things – I only got what I planned to get and it was exactly what I needed (2) it saved me a ton of time – with putting extra time into planning, it was nice to cut 2 hours of effort out of my schedule to shop for groceries (3) it helped me to see the financial impact – the online shopping tool listed all the prices and I could evaluate my options from the quiet of my living room, rather than standing there in front of the food in the store (4) I could repeat my order if I wanted to – for weeks where I didn’t feel like planning, I could copy an order from a previous week and it was already planned.  All these are great reasons to shop online.  Yes, there were some glitches, but still well worth it.

Now, not all diets are like this.  Many are more expensive and might result in spending more money than before, depending on the type of diet, whether you pay for counseling, etc.  So it’s up to you to figure out your own path.  However, there may be more significant financial savings once you reach your goal.

 

About the Author:

Greg Caramanica is the managing member and COO of Arlington Wealth Planning, LLC, a Registered Investment Advisor located in Arlington, Virginia.  Mr. Caramanica is a CERTIFIED FINANCIAL PLANNER™, providing financial planning , insurance, and tax services.