Archival photo of Bill de Blasio (right) with wife Chirlane McCray (left) taken on August 16, 2011. Photo courtesy of Bill de Blasio on Flickr

Current Commentary By Larry M. Elkin, CPA, CFP®,

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. He is President, Palisades Hudson Financial Group LLC, and
President, Palisades Hudson Asset Management, L.P.

When a king is married, his spouse usually bears the title of queen. In this country, when a top elected official is married, the spouse traditionally gets the appellation first lady, though that position is just as likely these days to fall to a man.

Our founders wanted to draw a clear distinction between foreign royalty’s pomp and privilege on the one hand, and the Everyman potential of elected office in the newly United States. To be sure, in those days Everyman actually had to be a man, and a white one at that. In most respects, we have come a vast distance toward achieving the sort of equality – of opportunity, not of outcomes – that 18th century liberals might have idealized. In a few minor ways, we may be moving in the other direction.

Consider the position of first lady. The office carries no legal responsibility and no remuneration, though certainly its holder has played an important behind-the-scenes role on many occasions. Dolley Madison was a significant figure in the White House long before she became an ice cream icon, or even before she became first lady, since she served as Thomas Jefferson’s hostess before her own husband’s election. When Woodrow Wilson was laid low by a stroke, his wife, Edith Bolling Wilson, essentially took control of the executive branch, strictly limiting the matters brought before him and even reputedly helping a journalist prepare a fictional interview with the president to conceal Wilson’s true condition. Eleanor Roosevelt took a high-profile role as her husband’s emissary; Jacqueline Kennedy established a White House social scene that played a part in Cold War geopolitics; and Hillary Clinton used her time in the executive mansion to launch a political career that is still playing out.

Yet though a first ladyship can be an important position, most of the time it isn’t. With power comes responsibility. A first lady usually has neither, at least with respect to the official position held by her (or his) spouse. Greet the dignitaries, look after the household and let the chief executive vent in private – if a first lady does that and nothing else, he or she is doing a good job. Let’s not forget that first ladies are entitled to have their own jobs too, though we have not yet seen an instance of one who occupies the White House while concurrently holding a position on, say, a corporate payroll.

First lady is not a bad gig, and there is no shortage of applicants for the position. The title has expanded over the years to include the spouses of governors in many states, and even a few big-city mayors – notably the mayor of New York City.

In the Big Apple, the first lady position offers just a fraction of its White House stature. Two recent mayors, Michael Bloomberg and Edward Koch, were not even married when they served at City Hall. Rudy Giuliani quite publicly split with his first lady, Donna Hanover, while he held the position. Mary Ingerman Beame, who was married to the city’s first Jewish mayor, Abraham Beame, and Joyce Dinkins, wife of the first African-American mayor, David Dinkins, were noncontroversial and seldom in the news.

Things are different nowadays in the city that likes to refer to itself simply as “the city.” Mayor Bill de Blasio’s wife, Chirlane McCray, played a major role in his campaign, especially in helping to galvanize support from the city’s African-American community during the hotly contested Democratic primary. Those community ties did not prevent parts of Manhattan from being tied into traffic knots this month by demonstrators protesting the police chokehold death of Eric Garner, but things might have gotten more out of control had a large segment of New Yorkers not been willing to give their 1-year-old mayoral administration the benefit of the doubt. Most of the doubts directed at the administration have been expressed on the other side, by police, who feel de Blasio has been insufficiently supportive, a feeling that was amplified by last weekend’s murder of two officers in Brooklyn. Caught between police and protesters, de Blasio has had a deer-in-the-headlights look ever since a grand jury refused to issue any indictments in Garner’s death. At least his wife’s sentiments are presumed to be on the side of the demonstrators, and therefore so are his.

Yet McCray has been a source of trouble for de Blasio as well, notably via the position of her “chief of staff.” The first holder of that position, Rachel Noerdlinger, has been on unpaid leave since it was revealed that she failed to disclose her boyfriend’s criminal history to the city. Her son was later arrested for criminal trespass. Noerdlinger is a former spokeswoman for the Rev. Al Sharpton, who has made a career of attacking police treatment of minorities, and her $170,000 position in de Blasio’s administration convinced many cops that the mayor is against them. Many wondered why a city first lady even needs a chief of staff – not to mention a staff of any sort.

Noerdlinger’s salary was almost the same as that of Michelle Obama’s chief of staff, Tina Tchen, who makes $172,200. But Tchen, an attorney, also holds the position of assistant to President Obama, which makes her role less of a lightning rod.

De Blasio may have learned from Obama’s example. Noerdlinger’s replacement is Roxanne John, who was already on the mayor’s payroll and will receive just an additional $25,000 annually to serve as McCray’s chief. But John will also have a newly hired deputy chief, Jackie Bray, who will be paid $125,000. So the total for McCray’s top staff will be $150,000, a bit less than Noerdlinger made.

New York City taxpayers will never notice that $150,000 on top of all the other stuff they pay for in order to run “the city.” But it shows how far we’ve come from those early days of the Republic, when the spouse of a chief executive was just a spouse, not the holder of a title that came at the expense of the citizenry.

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, N.Y., in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, N.Y., in 2002. The firm expanded to Fort Lauderdale, Fla., in 2005 and to Atlanta in 2008.

Palisades Hudson’s book, “Looking Ahead: Life, Family, Wealth and Business After 55“ http://tinyurl.com/ocro2dx.

Palisades Hudson (www.palisadeshudson.com) is a fee-only financial planning firm and investment adviser based in Scarsdale, N.Y., with $1.3 billion under management. It offers investment management, estate planning, insurance consulting, retirement planning, cross-border planning, business valuation and appraisal, family-office and business management, tax preparation, and executive financial planning. Branch offices are in Atlanta, GA; Fort Lauderdale, FL; and Portland, OR. Read the firm’s daily column on personal finance, economics and other topics at http://palisadeshudson.com/current-commentary. Twitter: @palisadeshudson.

The post CURRENT COMMENTARY: A Populist Mayor’s Royal First Lady By LARRY M. ELKIN appeared first on Yonkers Tribune.

David Walters, CFP®, CPA, heads Palisades Hudson Financial Palisades Group’s Portland, Ore. Some of the text in this article is taken from his chapter on estate planning in Palisades Hudson’s new book, Looking Ahead: Life, Family, Wealth and Business After 55.

Do a New Year’s check of your estate-planning documents, making sure your spouse or some other trusted person has your passwords for your financial accounts. And make sure you have the correct beneficiaries.

As part of your estate planning documents, you should include a list of all online accounts and passwords for your executor. Your will can stipulate what should be done with email and other online accounts at your death.

Think about what would happen if you were to die unexpectedly or become disabled. If your spouse or other loved one doesn’t have your user names and passwords, he or she may find it awkward at best and impossible at worst to manage your affairs.

The list doesn’t need to be formal. It can just be a folder with a printed list of logins and passwords. Passwords change, so updating your list is a good part of an annual process.

If you have password-management software, which is free or inexpensive, you can just give your spouse or executor the master password, which unlocks all others.

Bank and brokerage accounts contain financial assets, but your digital estate often has little or no monetary value but great sentimental value. Items in a digital estate can include a Dropbox account with thousands of photos, email accounts, and social media accounts like Facebook and LinkedIn. All this could be lost without current logins and passwords.

Absent a will, it may be very difficult for an executor to deal with digital vendors. As of this writing, only seven states have laws addressing online estate planning, so in most cases the service contract between the deceased and the online vendor will dictate what powers an executor may have over an online account.

It’s a little bit of the Wild West. Putting your instructions in your will or an addendum to it may not be foolproof, and some vendors may not accept it, but it’s at least a good start.

There’s another area where people need to do an annual checkup. People often forget to update their beneficiaries.

Make sure that you have the correct beneficiaries on all life insurance policies, annuities and retirement accounts such as IRAs, Roth IRAs, 401(k) plans and similar plans.

These assets go to the beneficiary or beneficiaries listed on the account regardless of what your will say. So, it’s crucial that they’re correct and up to date.

Palisades Hudson’s book, “Looking Ahead: Life, Family, Wealth and Business After 55“ http://tinyurl.com/ocro2dx.

David Walters, CFP®, CPA, heads Palisades Hudson Financial Palisades Group’s Portland, Ore. Some of the text in this article is taken from his chapter on estate planning in Palisades Hudson’s new book, Looking Ahead: Life, Family, Wealth and Business After 55. The 326-page paperback and Kindle ebook is available from Amazon at http://tinyurl.com/ocro2dx and Barnes & Noble at http://tinyurl.com/m9ca3qk.

Palisades Hudson (www.palisadeshudson.com) is a fee-only financial planning firm and investment adviser based in Scarsdale, N.Y., with $1.3 billion under management. It offers investment management, estate planning, insurance consulting, retirement planning, cross-border planning, business valuation and appraisal, family-office and business management, tax preparation, and executive financial planning. Branch offices are in Atlanta, Fort Lauderdale, Fla., and Portland, Oregon. Read the firm’s daily column on personal finance, economics and other topics at http://palisadeshudson.com/current-commentary. Twitter: @palisadeshudson.

The post Do New Year’s Update of Your Digital Estate and Beneficiaries So Someone Can Manage Your Finances If You Can’t By DAVID WALTERS appeared first on Yonkers Tribune.

Rebecca Pavese is a CPA and financial planner with Palisades Hudson Financial Group’s Atlanta office.

Make your year-end tax moves now before it’s too late. Tax planning is always a worthy exercise, but it’s even better if it minimizes your current-year taxes

Here are tips for 2014.

First, calculate your income, tax payments and deductions to date so you can figure out what steps to take in December.

Too little tax withheld? Increase your withholding. If you have adjusted your withholding during the year to maximize your cash, check that you have had enough withheld to meet your estimated tax obligations. If not, adjust your December withholding.

The IRS treats taxes withheld as paid ratably throughout the year. This may help eliminate any estimated tax penalties and interest.

To adjust withholding, submit a new W-4 form to your employer. You can decrease the number of allowances you claim and/or set an additional amount you want withheld from each paycheck. Just remember to resubmit a W-4 in January.

If, instead, too much tax is being withheld, increase the number of allowances. If you’re going to get a big refund, you’ve given the government a free loan, .

Boost retirement plan contributions. Contributions to 401(k) plans, 403(b) plans, Simplified Employee Pensions (SEP) IRAs, SIMPLE IRAs, Keogh plans and cash-balance plans reduce your adjusted gross income (AGI).

In 2014, an employee can contribute up to $17,500 ($23,000 for people aged 50 and over) to a 401(k) or 403(b). While most people have the same percent contribution deducted from each paycheck, you can tell your employer to deduct a one-time lump sum to catch up if your plan allows it.

If you have a 401(k) plan, make sure you’re at least contributing enough to obtain the full company match. The employer match is free money that gives you a guaranteed return immediately.

Be aware of capital gains and dividend taxes. It’s tricky. Lowering your AGI can mean getting deductions and exemptions you’d otherwise lose. For example, if you can lower your AGI to below $73,800 for a married filing joint (MFJ) or $36,900 for a single filer, you’ll pay 0% on long-term capital gains from sales of assets held longer than a year and 0% percent on dividends.

Capital gains will increase income and may change your tax bracket. However, only the portion over the threshold will be taxed at the higher rate.

The 20% rate on capital gains and dividends kicks in at $457,600 for MFJ, $406,750 for single filers.

Shift deductions into or out of 2014 to get the most bang for the buck. Normally, you should pay all 2014 state income taxes by December 31 so you can deduct them on your 2014 return. If you owe tax, you can send your state an estimated payment. Other moves include paying your real estate taxes and your January mortgage payment by year-end.

A few taxpayers are better off delaying these payments until 2015. When an additional deduction would trigger alternative minimum tax (AMT), pay your fourth-quarter state income tax and/or real estate tax installment in January.

Give it away instead of selling it. Consider giving highly appreciated stocks or mutual funds you’ve owned for more than one year to a charity. You can deduct the full value of the security if you itemize deductions.

You can also give such securities, cash, or other assets, to your children, grandchildren, or really anyone you would like to give something to. Each taxpayer can give up to $14,000 a year to each recipient without filing a gift-tax return. Giving away income-producing securities also reduces your future taxable income.

Palisades Hudson’s book, “Looking Ahead: Life, Family, Wealth and Business After 55“ http://tinyurl.com/ocro2dx.

Rebecca Pavese is a CPA and financial planner with Palisades Hudson Financial Group’s Atlanta office. She is a contributor to Palisades Hudson’s book, “Looking Ahead: Life, Family, Wealth and Business After 55“ http://tinyurl.com/ocro2dx.

Palisades Hudson (www.palisadeshudson.com) is a fee-only financial planning firm and investment adviser based in Scarsdale, N.Y., with $1.3 billion under management. It offers investment management, estate planning, insurance consulting, retirement planning, cross-border planning, business valuation and appraisal, family-office and business management, tax preparation, and executive financial planning. Branch offices are in Atlanta, Fort Lauderdale, Fla., and Portland, Oregon. Read the firm’s daily column on personal finance, economics and other topics at http://palisadeshudson.com/current-commentary. Twitter: @palisadeshudson.

The post YOUR MONEY: Year-End Tax Moves—Some Familiar, Some Not—from CPA and Financial Planner By REBECCA PAVESE appeared first on Yonkers Tribune.

Fluctuating gas prices have made Americans more acutely aware of energy issues. Image by and courtesy of Flickr. www.FutureAtlas.com Blog.

Fluctuating-gas-prices-have-made-Americans-more-acutely-aware-of-energy-issues.-Image-by-and-courtesy-of-Flickr-www.FutureAtlas.com-Blog.

Current Commentary By Larry M. Elkin, CPA, CFP®,

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. He is President, Palisades Hudson Financial Group LLC, and
President, Palisades Hudson Asset Management, L.P.

Remember all those predictions at the beginning of 2014 about how the year would end with gasoline selling for $2.50 a gallon and oil trading at less than $70 a barrel?

Of course you don’t. Neither do I, because there were no such expectations. Yet here we are, just a few weeks from New Year’s Eve, with oil selling for around one-third less than it did when we last made our annual resolutions. Around half of the drop has been in the past month or so, including a fall of nearly 10 percent in one day last week after OPEC oil producers decided not to cut their output.

It is probably the biggest economic story of the year, though it is going to take some time to tell it. Just trying to understand why oil prices have moved the way they have this year is a major undertaking, and it is the question I want to explore in this column. Then there is the question of who is helped by lower prices (oil buyers, obviously), who is harmed (sellers) and how things might play out in economies like that of the United States, which today is one of the world’s biggest producers as well as its leading per capita consumer. Let’s save this topic for tomorrow.

The current media story is that oil prices have cracked because of rising U.S. production, slower global demand due to weakening economies in Europe and China, and OPEC’s refusal to cut production.

There is no doubt a grain of truth in this logic – all else being equal, weaker demand surely translates into lower prices – but it has so many holes in it that I strongly suspect it is more wrong than right.

For one thing, China’s economy has been slowing for the past two years, while Europe and Japan have muddled along with almost no growth – and the United States has seen a gradual but steady pickup in commerce and travel. Yet the last time we saw prices this low was in 2009, near the depths of the Great Recession, a point from which oil prices and other commodities soon rallied sharply. Most of the credit for that rally went to China, which embarked on a massive stimulus to stave off the downturn. But if China held prices up four or five years ago, why didn’t prices plunge sooner, when China’s stimulus stopped?

One possibility is that China’s economy is actually in much worse shape than the country has acknowledged. This could certainly be true; it is a mistake to put too much faith in any official information from Beijing, where energy statistics are often treated as state secrets.

U.S. production has indeed risen, but it also seems overrated as a factor in the price decline. This year’s price moves are as dramatic as any we saw in the recession – without the underlying collapse in demand. Something else, or several somethings, must be at work. Increased production here does not seem like a big enough factor to produce the moves we have seen, especially with a stronger U.S. economy available to take up some of the slack.

If we want to understand why the oil market is suddenly different than the one we knew last year, it makes sense to start by looking at what else is different in the relevant corners of the world. This immediately brings us to Russia, the Middle East and the boardrooms of the major central banks.

Russia displays the starkest difference. With its annexation of Crimea, its invasion of other parts of eastern Ukraine and its stooges’ downing of a Malaysian passenger jet, Vladimir Putin’s regime in 2014 has all but restarted the Cold War – with the difference that Moscow’s currency and economy are much more integrated into the world economy than during the Soviet era. Accordingly, the ruble’s value has collapsed by about 25 percent since the start of the year.

What does this mean for oil? In the long run, it undermines Russia’s production capability, since imported labor and technology cost more in ruble terms. But in the short run, it makes Russian production cheaper when measured in dollars or other Western currencies. A Russian rig worker is paid in less valuable rubles today than just a few months ago, and the electricity that runs the pumps at Russian oil wells also costs less. So a barrel of Russian oil has a lower production cost (measured in dollars) as the ruble falls. This cheaper Russian oil is flowing to major markets, both westward to Europe and eastward to China.

Now to the Middle East. When OPEC leaders gathered last week, the cartel’s price hawks looked to Saudi Arabia to cut its production to support everyone else’s prices. The Saudis refused, noting that an OPEC production cut would simply make room for more oil from non-OPEC nations on global markets. The Saudis appear determined to preserve their market share.

This is widely seen as a move to counter North American competition, but I doubt this. For one thing, although some remote parts of Canada require high oil prices to be competitive, a lot of the new production in the United States will be profitable even at prices as low as $50 a barrel, once drilling activity slows from its recent breakneck pace and production costs fall accordingly.

Moreover, the Saudis are engaged in a genuine war by proxy, but not with us. Their enemy is fellow OPEC member Iran, along with its allies in Baghdad and Damascus and clients that include Hamas in the West Bank and Hezbollah in Lebanon. Iran is already reeling under Western sanctions and struggling to preserve its nuclear program, which the Saudis must feel they have to either halt or, eventually, match. The Riyadh regime has no incentive at all to support the Iranians (and their frequent allies, the Russians) with higher oil prices; it has many good reasons to do the opposite. And that appears to be exactly what the Saudis are doing. Saudi Arabia can get along much longer and much better with low oil prices than can Iran.

Finally there are the central banks. While the U.S. Federal Reserve has ended its quantitative easing program and is laying the groundwork for higher interest rates, Europe is creeping in the opposite direction. Japan’s bankers have already flooded the market with yen, driving their currency down by nearly half from its peak a few years ago. All this has made the dollar one of the world’s strongest currencies this year. Presto: As the dollar’s value rises, the price of oil as measured in dollars must decline. It has declined everywhere, but by somewhat less when measured in pounds or euros, and by much less when measured in yen.

None of this distresses me. Oil and other commodity prices are cyclical; each big move contains the seeds of its own reversal through eventual changes in production and consumption. And to the extent lower prices constrain the resources of dangerous and nasty regimes around the world, we ought to applaud what we are seeing on the world stage. Which will be a good place to pick up the discussion tomorrow.

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, N.Y., in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, N.Y., in 2002. The firm expanded to Fort Lauderdale, Fla., in 2005 and to Atlanta in 2008.

The post CURRENT COMMENTARY: Making Sense Of The Oil Price Fracture By LARRY M. ELKIN appeared first on Yonkers Tribune.

The Ossining Documentary & Discussion Series from Robert Reich – December 6, 2014 @ 6:30 p.m., Free.

The post The Ossining Documentary & Discussion Series – December 6, 2014 @ 6:30 p.m., Free appeared first on Yonkers Tribune.

Laurie Samay is a client service associate with Palisades Hudson Financial Group in Scarsdale, N.Y. She can be reached at info@palisadehudson.com.

Many Americans own Canadian securities or earn wages in Canada. If you do, you’ll want to make sure that you’re not paying tax on the same income to both the Internal Revenue Service (IRS) and the Canada Revenue Agency (CRA).

U.S. citizens and residents pay U.S. income tax on worldwide income, but those earning income in Canada may also be subject to Canadian income tax on certain types of income. That includes income earned from employment in Canada, income earned from business conducted in Canada and capital gains from taxable Canadian property.

Avoiding double taxation is possible. Some methods are simple and automatic under the U.S.-Canada Tax Treaty, while others can be complex. The U.S.-Canada Tax Treaty was designed to prevent or at least reduce double taxation for U.S. and Canadian residents. Under the treaty, any U.S resident with Canadian employment income under C$10,000 annually is exempt from Canadian income tax. You may also be exempt if you earn more than C$10,000, but are not physically present in Canada for 183 or more days in the year. In either case, the income will be subject only to U.S. income tax.

For Americans earning interest from Canadian bank accounts, bonds and money market funds, only U.S. income tax will be due. With dividends, it’s different: Americans receiving dividends from Canadian companies must pay both U.S. and Canadian income tax on that income, though the treaty caps the foreign tax at 15 percent for recipients who are also the dividends’ beneficial owner.

Under the treaty, capital gains from the sale of personal property located in Canada are generally exempt from Canadian income tax for U.S. residents if the seller does not have permanent establishment there. For example, if you sell shares of a Canadian company that does not principally derive its value from real property situated in Canada, you will only owe U.S. income tax on the resulting capital gain.

Smart Income-Tax Strategies
While the treaty relieves some instances of double taxation, individuals can take further steps to minimize any income-tax overlap. Qualified U.S. citizens and resident aliens can exclude some foreign earnings from income with the foreign earned income exclusion – up to $99,200 in the 2014 tax year. Alternatively, U.S. residents can claim a foreign tax credit on income taxes paid in Canada, or take an itemized deduction for eligible foreign taxes. It’s usually better to take a credit than a deduction because a credit reduces your U.S. income tax on a dollar-for-dollar basis.

Besides filing the usual Form 1040 with the IRS and a state tax return if required, Americans who are subject to Canadian income tax must file Form 5013-R with the CRA, otherwise known as the Income Tax and Benefit Return for Non-Residents and Deemed Residents of Canada.

Canada Taxes Income in Retirement Accounts Unless You Act
Income from Canadian securities are supposed to be exempt from Canadian income tax when they’re held in a retirement account such as an IRA, SEP IRA or Keogh plan. However, custodians may be required to withhold Canadian tax in retirement accounts, with the exception of IRAs. For non-IRA retirement accounts, you must apply to the CRA for an exemption. Once the CRA has approved your application, the withholding will cease going forward. In some cases, you may have to be very persistent with the CRA to get results.

Taxes on Death Are Complex, Possibly Onerous
Canada has no estate or inheritance taxes. Instead, it levies a capital gains tax on the deemed disposition of all capital assets when someone dies. The estate of an American with Canadian assets can thus face three or four levels of taxation: Canadian capital gains tax; U.S. and Canadian income tax on deferred compensation, retirement plans and annuities; federal estate tax; and state estate tax, if applicable. While only estates exceeding $5.34 million ($10.68 million for a married couple) are subject to U.S. estate tax, a number of states tax estates exceeding $1 million.

It’s complex enough to start. All of these concerns become more complicated when it is unclear whether an individual is deemed a resident of the United States, Canada, or both for tax purposes. If you own a significant amount of Canadian assets, it’s wise to consult a professional who’s knowledgeable about estates and taxes in both countries.

Laurie Samay is a client service associate with Palisades Hudson Financial Group in Scarsdale, N.Y. She can be reached at info@palisadehudson.com.

Palisades Hudson (www.palisadeshudson.com) is a fee-only financial planning firm and investment adviser based in Scarsdale, N.Y., with $1.3 billion under management. It offers investment management, estate planning, insurance consulting, retirement planning, cross-border planning, business valuation and appraisal, family-office and business management, tax preparation, and executive financial planning. Branch offices are in Atlanta, Fort Lauderdale, Fla., and Portland, Oregon. Read the firm’s daily column on personal finance, economics and other topics at http://palisadeshudson.com/current-commentary. Twitter: @palisadeshudson.

The post YOUR MONEY: Have Canadian Stocks or Wages? Make Sure You’re Not Getting Taxed Twice By LAURIE SAMAY appeared first on Yonkers Tribune.

Anthony D. Criscuolo, CFP®, EA, is a financial planner and portfolio manager with Palisades Hudson Financial Group’s Fort Lauderdale office. He can be reached at: info@palisadeshudson.com.

New Medicare Surtax Adds Complexity

A smart strategy for withdrawing money from taxable, tax-deferred, and tax-free accounts can save retirees a lot in taxes. Tax planning is crucial for every retiree, particularly for the affluent because of the new Medicare surtax.

Withdrawing funds from your taxable accounts first is the general rule. When you sell stocks and mutual funds that have appreciated longer than a year, you’ll pay a long-term capital gains tax. The rate is relatively low for most taxpayers.

Look next to tax-deferred accounts. Withdrawals are taxed at your ordinary income tax rate, so they’re a less attractive source of funds. Tax-deferred accounts include traditional IRAs, 401(k) plans and Keogh plans. Once you reach age 70½, you must take the annual required minimum distribution (RMD) or pay a hefty excise tax.

Tax-free accounts—the Roth IRA—are generally last in line.

The longer you can keep your money in them, the better. However, it could be wise to use assets in your Roth IRA for large emergency expenses, like major home repairs or medical bills. If you withdraw a lot of money from a tax-deferred account, it might push you into a higher tax bracket. But pulling a large amount from a Roth IRA will not impact your overall tax rate.

There are exceptions.

If you have a low-income year, you may want to pull some money from tax-deferred account to benefit from that year’s low tax bracket. If you have a high-income year and investments in a taxable account have a lot of appreciation, it may make sense to instead withdraw from a Roth IRA.

If you own securities that have lost ground in a taxable account, selling some could be a good move in a high-income year to help offset your other income.

Tax Torpedo

Social Security benefits are taxed based on your other income, which is generally the sum of your adjusted gross income, nontaxable interest, and half of your Social Security benefits. As your income rises, the proportion of your benefit that is taxable does, too.

This can result in the Social Security tax torpedo.

Retirees who collect Social Security benefits early often need to supplement them with taxable withdrawals from an IRA or other retirement account. But when income in early retirement exceeds relatively modest levels, your marginal tax rates could increase.

If you take your Social Security benefit relatively early, allow for the ripple effect that taxation of your benefits could have on your overall tax rate. Understanding the Social Security tax is the first step in reducing it.

Medicare Surtax

Starting with the 2013 tax year, a new 3.8% Medicare surtax applies to taxpayers who have net investment income (NII) and whose modified adjusted gross income (MAGI) exceeds $250,000 for married taxpayers and $200,000 for singles.

This surtax effectively raises the marginal income tax rate for wealthy retirees. A large part of their income often comes from investments, so this new tax may significantly impact them.

To minimize the tax, you can reduce your NII and/or your MAGI. Tactics that can accomplish this include investing more heavily in municipal bonds and/or tax-deferred annuities, buying cash-value life insurance, carefully planning the timing of estate or trust distributions, converting a traditional IRA to a Roth IRA, and creating a charitable remainder trust and/or charitable lead trust.

The law defines net investment income* specifically. Understand what sorts of income count toward the threshold and try to structure your portfolio to minimize the NII tax.

While stock dividends are taxed at a lower rate than bond or bank interest, they’re given no such break from the NII tax.

State income taxes also can take a substantial chunk of your retirement income.

Some people move to a state with low or no income taxes when they retire. This strategy can work, but it isn’t the only solution. One option is to invest in state-specific municipal bond funds. But before you do anything, understand how state and local taxes will affect your retirement nest egg.

Long-Term and Yearly Tax Planning Both Vital

Create a long-term plan that governs how much you should withdraw each year and from which accounts. The plan should consider what you might pay on your savings while you’re still working and how to best allocate your investments in order to minimize your taxable income.

At the same time, annual tax-bracket planning lets you uncover opportunities arising from changing circumstances. Such planning will allow you to strategically realize capital losses and take advantage of itemized deductions, while keeping an eye on tax changes that could affect your plans.

Tax planning is complex for everyone, and the surtax has made it even more complex for the wealthy. Consider getting qualified help from a tax expert or financial planner. It can save you more than it costs.

• The IRS defines net investment income (NII) as the sum of three buckets of gross income, reduced by allowable deductions. The first bucket is gross income from interest, dividends, annuities, royalties and rents (other than those derived in the ordinary course of business or those that are earned passively). Passive-activity income makes up the second bucket. The third bucket comprises net capital gains.

Anthony D. Criscuolo, CFP®, EA, is a financial planner and portfolio manager with Palisades Hudson Financial Group’s Fort Lauderdale office. He can be reached at mailto:info@palisadeshudson.com.

Palisades Hudson (www.palisadeshudson.com) is a fee-only financial planning firm and investment adviser based in Scarsdale, N.Y., with $1.3 billion under management. It offers investment management, estate planning, insurance consulting, retirement planning, cross-border planning, business valuation and appraisal, family-office and business management, tax preparation, and executive financial planning. Branch offices are in Atlanta, Fort Lauderdale, Fla., and Portland, Oregon. Read the firm’s daily column on personal finance, economics and other topics at http://palisadeshudson.com/current-commentary. Twitter: @palisadeshudson.

The post YOUR MONEY: Retirees Need Smart Withdrawal Strategy to Minimize Taxes By ANTHONY D. CRISCUOLO appeared first on Yonkers Tribune.

Paul Jacobs, CFP®, is chief investment officer of Palisades Hudson Financial Group, based in the firm’s Atlanta office. He can be reached at info@palisadeshudson.com.

Getting the Right Allocation Now and in Future Depends on Many Things

While many 529 college savings plans offer standardized glide paths that reduce risk as the child gets closer to college, these paths are one-size-fits all. Parents can do better.

Instead of choosing the plan’s glide path, customize your allocations to achieve a better fit for your personal situation and goals.

Start with a 100 percent equity allocation until the beneficiary is 12 years old. Thereafter, move 10 percent of the account to a conservative investment option each year. This will result in a 100 percent conservative allocation by the child’s final year of a four-year program, assuming he or she goes directly from high school to college

But this baseline approach often needs to be customized. You should consider these factors:

• Risk tolerance. Some investors are willing to take on more risk than others, even among those with equal ability to do so. It is important to realistically assess your tolerance for risk, both for your overall portfolio and for your 529 plan account.

• Additional sources of college funding. If you can meet college costs from other sources, such as your personal taxable accounts, a riskier 529 strategy may be more palatable to you. In addition, you may expect the beneficiary to benefit from outside college funding, such as scholarships, financial aid or gifts from other family members. In this case, you may be willing to take on more risk in pursuit of higher returns.

• Graduate school. If the student intends to attend graduate school, you may not want to shift to a fully conservative asset allocation as soon as you otherwise would. It may be appropriate to maintain a more aggressive allocation until a few years before the beneficiary intends to enroll in graduate school.

• Expected cost of college. If the beneficiary seems likely to attend a lower-cost public or in-state school, you may want to take on less risk in the account. Conversely, if the beneficiary has his or her heart set on an expensive private institution, taking on more risk for a potentially greater return might make sense.

• Number of college-bound children or grandchildren in the family. A 529 plan account with excess funds after a beneficiary graduates can be rolled over to another beneficiary within the family. As a result, you may consider taking on more risk in an older child’s account. If the markets underperform, you can supplement the older child’s account using a younger child’s account, with the intention of recouping any losses using the younger child’s account with a longer time horizon.

This list is not exhaustive, but illustrates some of the most common factors that may cause investors to deviate from our baseline recommendations.

Paul Jacobs, CFP®, is chief investment officer of Palisades Hudson Financial Group, based in the firm’s Atlanta office. He can be reached at info@palisadeshudson.com.

Palisades Hudson (www.palisadeshudson.com) is a fee-only financial planning firm and investment adviser based in Scarsdale, N.Y., with $1.3 billion under management. It offers investment management, estate planning, insurance consulting, retirement planning, cross-border planning, business valuation and appraisal, family-office and business management, tax preparation, and executive financial planning. Branch offices are in Atlanta, Fort Lauderdale, Fla., and Portland, Oregon. Read the firm’s daily column on personal finance, economics and other topics at http://palisadeshudson.com/current-commentary. Twitter: @palisadeshudson.

The post YOUR MONEY: 529 Plans – Customize Your Glide Path By PAUL JACOBS appeared first on Yonkers Tribune.

The Ossining Documentary & Discussion Series from Robert Reich – December 6, 2014 @ 6:30 p.m., Free.

The post The Ossining Documentary & Discussion Series – December 6, 2014 @ 6:30 p.m., Free appeared first on Yonkers Tribune.

Unemployment Insurance Claims Office. Photo by and courtesy of Flickr user Bytemarks

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. He is President, Palisades Hudson Financial Group LLC, and
President, Palisades Hudson Asset Management, L.P.

Current Commentary By Larry M. Elkin, CPA, CFP®,

People generally do what you pay them to do. If you pay them to work, they work; if you pay them not to work, they don’t.

I am not the first person to make this observation, nor is this the first time I have made it. But a recent study by the Federal Reserve Bank of New York puts an interesting spin on this proposition, one that helps explain why job creation is surging and unemployment is falling, even though wages are stagnant.

It turns out, apparently, that if you pay someone not to work, it makes it more expensive for an employer to pay them to actually show up at a job every day. In the parlance of economists, you have raised the “reserve wage,” which is the minimum wage at which someone is willing to take a particular job. By raising the reserve wage, and thus the cost of labor generally, you create a strong incentive for employers to try to get by with fewer workers, and thus you discourage job creation.

This insight turns one of the criticisms of unemployment benefits on its head. Many on the conservative end of the political spectrum believe generous and prolonged payments to unemployed individuals discourage those individuals from seeking work. It may turn out that the bigger consequence is that such benefits discourage businesses from creating jobs in the first place. The two effects are not mutually exclusive.

From this angle, recent signs of progress in the U.S. economy make more sense. The national unemployment rate fell to 5.8 percent in October, according to the Bureau of Labor Statistics. Since the beginning of the year, the unemployment rate has declined 0.8 percent overall. Employers added 214,000 new jobs last month, and as Ben Casselman observed at FiveThirtyEight, “Job growth has now topped 200,000 for nine straight months for the first time since the Clinton administration.”

As the New York Fed study observed, these developments coincide almost perfectly with the nationwide end of federally funded extended unemployment benefits this past January. While this change is not the only reason for the rate’s decline, it has had an effect all the same, which the study sought to quantify by contrasting developments in adjacent states during the previous five years, a period in which extended unemployment availability changed multiple times, and at different times in neighboring states.

When their benefit window runs out, some workers continue to search for work, but others do not. Some of them may turn to disability claims instead. Disability applications have dropped relative to last year, but remain much higher than pre-recession levels.

While employment has not returned to pre-recession levels yet, the trend has continued to move steadily in that direction. Yet according to exit polls at the midterm elections, 70 percent of respondents said the economy was bad and 78 percent said they were worried about what would happen to the economy in the next year. A good deal of the disconnect between the positive unemployment data and the skeptical public reaction to it is probably explained by another statistic from the BLS, which reported no rise in hourly wages in October. An average worked earned $24.57 an hour in October, only 2 percent more than October 2013.

It is also worth noting that while fewer people are unwillingly working only part-time than was the case during the Great Recession, involuntary part-timers still account for 4.8 percent of those employed. This number is probably driven, at least in part, by employers’ incentive to offer more part-time positions and fewer full-time ones when possible to avoid certain provisions of the Affordable Care Act that make full-timers significantly more expensive.

Another consequence of extended unemployment benefits can probably be found in the number of workers staying in the work force, or exiting it. Over the past six years, 12.6 million Americans have left the labor force altogether, according to the Pew Research Center. A sizable fraction of them likely dropped out after their unemployment eligibility expired, since it is a condition of receiving benefits that the worker remain available for employment if a suitable job comes along. Our long experiment with extended unemployment benefits probably slowed down the exodus of marginally attached workers from the labor force, but it could not stop it.

The Great Recession began late in 2007 and was officially over by the middle of 2009, yet we continued to offer long-term, federally paid unemployment benefits until the end of 2013. During that time, we have seen a listless recovery that was slow to create jobs until this year, when the extended benefits ran out, and that continues to be slow to raise workers’ wages. What lessons can we draw?

One would seem to be that unemployment benefits are a powerful narcotic for workers and politicians alike. They can be necessary sometimes, but should be prescribed sparingly and for as short a term as possible if we want to encourage a speedy return to real economic health.

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, N.Y., in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, N.Y., in 2002. The firm expanded to Fort Lauderdale, Fla., in 2005 and to Atlanta in 2008.

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