Monthly Archives: December 2017

ObamaCare Open Enrollment dips to 8.7 million

The reduced enrollment, announced by the marketplace this week, is a 500,000 drop from last year, and down about 1.3 million from earlier years.    2.8 million people didn’t do anything and so automatically got renewed in their current plan, at the new higher price in many cases.

Why it happened seems to depend on your view of the world  For some the drop is due to the Trump Administrations’ reduction in the enrollment period length and marketing reductions, and cutting of Cost Reduction Subsidies on Silver plans.

Others believe that the  plans are crazy expensive, offer few choices and have few insurance companies.

From where I sit, I think they are all correct to some extent.  Cost Reduction Subsidies only affected insurance companies, but did drive prices up.  80% of healthcare.gov customers were eligible for plans costing less than $75 a month – and some at no cost.  Humana, Aetna and a number of Anthem/Blue Cross companies left the market.  We found more people panicking after the enrollment ended because they didn’t realize it was already over;  there was a big rush this year after Thanksgiving we have not seen before.

What effect – the repeal of the individual mandate?

The new Tax Bill repeals the individual mandate – in 2019.  Not this year, mind you, you are still required to have insurance this year.   So what affect will this have on ObamaCare going forward?

If you listen to the politicians, Bill Pascrell (D.NJ) said “They obviously couldn’t kill it so they’re trying to starve it to death slowly.”  Lindsey Graham (R.SC) said “…we ripped the heart out of ObamaCare…”  I think both are a bit off base, and here is why-  Despite all kind of claims to the contrary, in my experience with clients, the mandate was not a big modifier of behavior.  Do I have some clients that pay premiums to avoid the penalty?  A few, yes – but not many.  Far more simply said ” I can pay $400- or more- a month for insurance, or pay a penalty a year from now that is far less.  If you make $50,000 a year your penalty is $1000;  insurance for that time period could cost you $6000 or more.

Another great number is the Congressional Budget Office claim that the loss of the mandate will cause 13 million fewer people to be covered over the next ten years.  Considering there are fewer than 10 million under ObamaCare, This trend analysis always seems a bit faulty.  Especially in light of the CBO’s estimates in 2012 that 25 million would currently be covered.

Some of the recent modifications may, in the end, have a much greater affect on policyholders.  here are some of the less-understood changes:

  1.  Cost-sharing subsidies-  Trump “de-funded” these.  When someone who earns less than 250% of the Federal Poverty Level (about $30,150) takes a Silver plan, their deductibles and other expenses are lower than someone who earns more than that amount.  This makes the insurance more affordable on a day-to-day basis.  for 2018, because the insurance companies followed the law and got their policies approved in this manner, they have to honor the lower amounts- but the government isn’t reimbursing the insurance company for those amounts now.  Many carriers saw this coming, and raised their rates accordingly for this year – one reason why rates are so much higher again this year.
  2. Shortened Enrollment and less marketing- The Trump administration cut the enrollment period and sharply dropped the marketing budget for this year.  While enrollment is done, I still have this week several people who just figured out that they missed it for this year!
  3. “Skinny” Health Plans – This may turn out to be the most destabilizing force.  In October, an executive order allows both association plans and Short-term major medical plans to not meet the ObamaCare rules.  Under the Obama Administration, Short Term plans had been limited to 90 days.   Plans like MediShare and US Health Advisors are already gaining traction as people stare in horror at their renewal premium, and these new plans may attract a lot of the younger and healthier folks – adversely putting the sicker into “regular” plans, and driving costs up even further.

 

One thing is for sure – with the changes the Republicans have made, after two years of “repeal and replace” noise – the Republicans now own as much of ObamaCare as the original Architects.  I fully expect that to be used against them in the coming midterm election season.

 

Human Resources Administrator found guilty in 401(k) Lawsuit!

In Tibble vs Edison International, a long-running case that ended up at the supreme court, The Human Resources VP was found guilty.  The case involved improper selection of funds – by using retail funds instead of the available institutional funds, which costs the plaintiffs $7,000,000.  Additionally, they used the retail fees to offset management fees charged by their record keeper.

It is important to understand how these seemingly small decisions can have enormous repercussions.  Recent fee-oriented suits by employees at Nordstrom, BlueCross Blue Shield, Lockheed Martin, and a number of educational facilities show that these suits are not going away.  Further, audits are increasing, as the Department of Labor has found that 70% of plans are not in full compliance.

According to a 2012 article in Financial Advisor Magazine, “An estimated 70% of retirement plans audited by the Department of Labor (DOL) in 2009 and 2010 were fined, received penalties or had to make reimbursements for errors–all of which ending up costing plan fiduciaries about $450,000 per plan, according to the department.” 

2017 End of Year financial Checklist

Your Year-End Financial Checklist

Seven aspects of your financial life to review as the year draws to a close.

 

Provided by Reeve Conover

 

The end of a year makes us think about last-minute things we need to address and good habits we want to start keeping. To that end, here are seven aspects of your financial life to think about as this year leads into the next.

Your investments. Review your approach to investing and make sure it suits your objectives. Look over your portfolio positions and revisit your asset allocation.

Your retirement planning strategy. Does it seem as practical as it did a few years ago? Are you able to max out contributions to IRAs and workplace retirement plans, like 401(k)s? Is it time to make catch-up contributions? Finally, consider Roth IRA conversion scenarios. If you are at the age when a Required Minimum Distribution (RMD) is required from your traditional IRA(s), be sure to take your RMD by December 31. If you don’t, the IRS will assess a penalty of 50% of the RMD amount on top of the taxes you will already pay on that income. (While you can postpone your very first IRA RMD until April 1, 2018, that forces you into taking two RMDs next year, both taxable events.)1

  

Your tax situation. How many potential credits and/or deductions can you and your accountant find before the year ends? Have your CPA craft a year-end projection including Alternative Minimum Tax (AMT). In years past, some business owners and executives didn’t really look into deductions and credits because they just assumed they would be hit by the AMT. The recent rise in the top marginal tax bracket (to 39.6%) made fewer high-earning executives and business owners subject to the AMT – their ordinary income tax liabilities grew. The top bracket looks as though it will remain at 39.6% for 2018 even if tax reforms pass. So, examine accelerated depreciation, R&D credits, the Work Opportunity Tax Credit, incentive stock options, and certain types of tax-advantaged investments.2

 

Review any sales of appreciated property and both realized and unrealized losses and gains. Look back at last year’s loss carry-forwards. If you’ve sold securities, gather up cost-basis information. Look for any transactions that could potentially enhance your circumstances.

 

Your charitable gifting goals. Plan charitable contributions or contributions to education accounts, and make any desired cash gifts to family members. The annual federal gift tax exclusion is $14,000 per individual for 2017, meaning you can gift as much as $14,000 to as many individuals as you like this year, tax-free. A married couple can gift up to $28,000, tax-free, to as many individuals as they like. (The limits rise to $15,000 and $30,000 in 2018.) The gifts do count against the lifetime estate tax exemption amount, which is $5.49 million per individual (and therefore, $10.98 million per married couple) in 2017.3,4

 

You could also gift appreciated securities to a charity. If you have owned them for more than a year, you can deduct 100% of their fair market value and legally avoid capital gains tax you would normally incur from selling them.5

 

Besides outright gifts, you can explore creating and funding trusts on behalf of your family. The end of the year is also a good time to review any trusts you have in place.

 

Your life insurance coverage. Are your policies and beneficiaries up-to-date? Review premium costs and beneficiaries, and think about whether your insurance needs have changed.

 

Life events. Did you happen to get married or divorced in 2017? Did you move or change jobs? Buy a home or business? Did you lose a family member or see a severe illness or ailment affect a loved one? Did you reach the point at which Mom or Dad needed assisted living? Was there a new addition to your family this year? Did you receive an inheritance or a gift? All of these circumstances can have a financial impact on your life as well as the way you invest and plan for retirement and wind down your career or business. They are worth discussing with the financial or tax professional you know and trust.

 

Lastly, did you reach any of these financially important ages in 2017? If so, act accordingly.

 

Did you turn 70½ this year? If so, you must now take Required Minimum Distributions (RMDs) from your IRA(s).

Did you turn 65 this year? If so, you are likely now eligible to apply for Medicare.

Did you turn 62 this year? If so, you can choose to apply for Social Security benefits.

Did you turn 59½ this year? If so, you may take IRA distributions without a 10% early withdrawal tax penalty.

Did you turn 55 this year? If so, you may be allowed to take distributions from your 401(k) account without penalty, provided you no longer work for that employer.

Did you turn 50 this year? If so, you can make “catch-up” contributions to IRAs (and certain qualified retirement plans).1,5

 

The end of the year is a key time to review your financial “health” and well-being. If you feel you need to address any of the items above, please feel free to give me a call.

 

Reeve Conover may be reached at 843-800-8190 ro at reeve@reevewillknow.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.

 

«RepresentativeDisclosure»

Citations.

1 – fool.com/retirement/2017/04/29/whats-my-required-minimum-distribution-for-2017.aspx [4/29/17]

2 – businessinsider.com/trump-gop-tax-reform-plan-bill-text-details-rate-2017-10 [11/2/17]

3 – irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes [10/23/17]

4 – turbotax.intuit.com/tax-tips/estates/the-gift-tax-made-simple/L5tGWVC8N [11/10/17]

5 – kiplinger.com/article/taxes/T055-C032-S014-4-year-end-tax-savings-tips-to-try-by-thanksgiving.html [10/17]

6 – merrilledge.com/article/ready-set-retire-8-deadlines-you-need-to-know [11/10/17]

 

Fear Must Not Inhibit a Financial Strategy

Too often, it persuades investors to make questionable moves.

 Provided by Reeve Conover

 Fear affects investors in two distinct ways. Every so often, a bulletin, headline, or sustained economic or market trend will scare them and make them question their investing approach. If they overreact to it, they may sell low now and buy high later – or in the worst-case scenario, they derail their whole investing and retirement planning strategy.

Besides the fear of potential market shocks, there is also another fear worth noting – the fear of being too involved in the market. People with this worry are often superb savers, but reluctant investors. They amass large bank accounts, yet their aversion to investing in equities may hurt them in the long run.

Impulsive investment decisions tend to carry a cost. People who jump in and out of investment sectors or classes tend to pay a price for it. A statistic hints at how much: across the 20 years ending on December 31, 2015, the S&P 500 returned an average of 8.91% per year, but the average equity investor’s portfolio returned just 4.67% annually. Fixed-income investors also failed to beat a key benchmark: in this same period, the Barclays Aggregate Bond Index advanced an average of 5.34% a year, but the average fixed-income investor realized an annual return of only 0.51%.1

This data was compiled by DALBAR, a highly respected investment research firm, which has studied the behavior of individual investors since the mid-1980s. The numbers partly reflect the behavior of the typical individual investor who loses patience and tries to time the market. A hypothetical “average” investor who merely bought and held, with an equity or fixed-income portfolio merely copying the components of the above benchmarks, would have been better off across those 20 years. In monetary terms, the sustained difference in performance could have meant a difference of hundreds of thousands of dollars in earnings for an investor across a lifetime, given compounding.1

Other people are held back by their anxiety about investing. They become great savers, steadily building six-figure cash positions in enormous savings or checking accounts – but they never sufficiently invest their money.

That confusion comes with a severe potential downside. Just how much interest are their deposit accounts earning? Right now, almost nothing. If they invested more of the money they were saving into equities – or some kind of investment vehicle with the potential to outrun inflation – those invested dollars could grow and compound over time to a degree that idle cash does not.

A large emergency fund is a great thing to have, but it can be argued that a tax-advantaged retirement fund of invested dollars is a better thing to have. After all, who retires on cash savings alone? Tomorrow’s retirees will live mainly on the earnings generated from the investment of the dollars they have saved over the decades. Seen one way, a focus on cash is financially nearsighted; it ignores the possibility that even greater abundance may be realized through its sustained investment.

Fear dissuades some people from sticking with a long-term financial strategy and discourages other people from developing one. Patience and knowledge can help investors contend with the fears that may risk hurting their retirement saving prospects.

Reeve Conover may be reached at 843-800-8190 or reeve@reevewillknow.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 – zacksim.com/heres-investors-underperform-market/ [5/22/17]

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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