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How will tax reform impact my divorce?

TAX REFORMDividing assets during a divorce is difficult and draining on many levels, but when you're going through it after sweeping changes to the tax code, like there were this year with the passage of the Tax Cuts and Jobs Act, it gets a lot more complicated.

But, like everything when you're dealing with a divorce, forewarned is forearmed. Here are some of the things that might be impacted by the new tax laws.


In the past, the issue of alimony has bedeviled people on all sides of a divorce, mainly because there wasn't any uniform system. States had their own rules governing who is going to pay what, and when. But one thing was clear. The payer could deduct alimony from his or her taxes and the recipient had to pay income tax on it. 

Now, that's out. The payers can't claim alimony on their taxes, and the recipient doesn't have to pay tax on it.

On the one hand, it seems to benefit the lower wage earner who is the recipient of alimony, oftentimes the woman, by relieving the tax burden, but in practice, it might mean she simply gets less in alimony because the spouse will argue he (or she) can't afford more because of the new law.

In addition, taking away the ability to write off that alimony for the payer also takes away a carrot in the mediation process when hashing out such agreements between warring spouses. It also could derail the whole process if setting up two households is simply too expensive.

Married filing separately tax status

In the past, it was not advisable for married couples, even ones who were separated in both living arrangements and finances, to file under "married filing separately" tax status because of the so-called "marriage penalty." In other words, they'd pay more in taxes filing separately rather than jointly if they were still legally married. The new law eliminates that penalty, allowing more couples to choose that status. 

Standard deductions and child tax credits

Individual exemptions for the filer, the spouse and the children were eliminated, but there's a higher standard deduction that will reduce the need to itemize deductions for lower- and middle-class filers. And your child tax credit is refundable, which means you'll get the credit back even if you don't owe anything. 

Home mortgage interest

Mortgage interest and taking children as tax dependents have long been used in mediation efforts: One spouse takes the home mortgage interest, and the other gets the kids as tax dependents. This has changed, because the standard deduction was raised, thus eliminating the benefit of deductible home mortgage interest. It has also eliminated deducting home equity mortgage interest.

This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.

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Busting financial myths about retirement savings

MYTHS BUSTEDWe all know we should be saving for retirement, but from that baseline, myriad variables exist. How much in savings is enough? What role does Social Security play in your overall financial picture? At what age should you retire?

What you don’t know about building wealth and saving for retirement might surprise you. There are a lot of misconceptions floating around out there. Here are some common myths about retirement strategies and the reality behind them.

Myth: I’ll need 80 percent of my current income in retirement.

Reality: This figure varies from person to person based on spending habits, debt and other factors. Do you own your home outright or do you still have a mortgage? What do you want your lifestyle to be like? Hint: Estimate high. The more you can save for retirement the better your golden years will be.

Myth: Social Security will cover my expenses when I retire.

Reality: The amount of Social Security you’ll receive is based on your income, but it's nowhere near as much as your income. Earning $60,000 per year now? Expect $2,096 per month from Uncle Sam when you retire. Unless you're prepared to live on that, you need individual savings, too.

Myth: I’ll start getting Social Security at age 62.

Reality: You can, but you should delay. The amount you’ll receive each month if you retire at age 70 is 76 percent more than the amount you’ll receive if you start at age 62.

Myth: When I retire, I should take my money out of the stock market.

Reality: Stocks allow for potential growth while you are in retirement. Just make sure you have a diversified portfolio consisting of cash, fixed income and equities. Asset allocation and diversification won't ensure a profit or prevent a loss in a declining market, but the strategies can help mitigate risk and volatility.

Myth: I just entered the workforce. I don’t need to start saving now.

Reality: It pays off big to start early. People who start saving at 25 can accumulate twice the savings of someone starting at 35.

Myth: Beyond contributing to my 401(k), there's not much else I can do to save for retirement.

Reality: A savvy financial adviser can help you explore tax options like the saver's credit, which is worth between 10 and 50 percent of the amount you contribute to your 401(k).

Myth: My spouse has a solid 401(k) or IRA. We’re all set.

Reality: The two Ds can mess with this plan: death and divorce. Make sure your spouse names you, not your kids, as the primary beneficiary in case of his or her death. And divorce? If you don’t have your own savings, you could be out in the cold.

Myth: I’ll keep working during retirement.

Reality: Studies show 74 percent of people plan to work after retirement, and that's great, but there's no guarantee that income will keep coming in. Why? Health, family and employer concerns. That's why having a solid amount of savings in your 401(k) or IRA is crucial.

Myth: I should only contribute what the company will match in my 401(k).

Reality: Experts say you should be contributing up to 15 percent of your salary to your 401(k). Companies won’t usually match that much. Be smart and contribute the max. Your future self will thank you.

Myth: I’m 55 and haven’t saved much. Why bother? It’s too late for me.

Reality: Almost half of U.S. workers ages 45-55 have less than $10,000 saved. But it’s not too late! You can still enjoy retirement. You can add more to your Roth IRA or 401(k) the older you are. Pay off existing debt (except your home), and start investing 15 percent of your income now!

Working with a financial planner will ensure you have a solid foundation as you head into retirement. At Harbor West Wealth Management, we're here to help with integrated financial planning that helps you reach your financial goals.

This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.

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Five Financial Facts to be Aware of Before Your Divorce

DIVORCE GRAPHICThe costs of divorce are many. There's the emotional cost of the breakdown of a family, the pain of a failed marriage and the anger that can come with the reasons for the split. Divorce can take a physical toll, too, as the stress of it all wreaks havoc with your sleep, your blood pressure and your immune system.

There's also a financial cost, sometimes a great cost. Divorce can be disastrous for your finances. Surviving divorce means going into it forewarned and informed.

At Harbor West, we have helped many clients through this heartbreaking transition, sorting out the financial issues to help ease their minds. The divorce might be breaking their hearts, but with some sound financial advice, it doesn't have to break their bank accounts.

Here are five financial factors to think about when you're facing a divorce, and ways to prevent common pitfalls.

Credit cards and bank accounts

When you know for sure you're headed to a divorce, cancel all of your joint credit cards immediately so no further charges can be made. Depending on the card company, you may have to pay off the balance before you can close the account, but there will be no chance of your spouse running up further debt and leaving you with it.

Closing your joint bank accounts is easier. Either one of you has the right to withdraw the entire amount without notifying the other, so do it as soon as possible or you could find yourself cleaned out. 

Division of property

Not having a clear picture of marital assets is a sure way to lose what's rightfully coming to you.

Before setting the divorce process in motion, make a list of all your marital assets, including your home, cars and other big-ticket items like boats. Remember to include retirement plans, insurance policies, any stocks or stock options. Then dive deeper. What about accumulated vacation pay? Bonuses from work? Frequent flier miles? Antiques? Artwork?

Also, get your spouse's salary, bonuses, stock options and other information from his or her employer in writing.

Armed with that information, we can assess the value of your assets, even taking tax implications into account, giving you a clear financial picture of what you'll be facing.

Child support and alimony

Child support payments are generally set by the state where you live, but factors include both parents' incomes, the number of children involved and custody agreements. While the non-custodial parent is legally mandated to pay child support, it doesn't always happen. Alimony is paid to the spouse who earns less — the stay-at-home mom whose husband has walked away, for example — but laws vary from state to state.

Your credit report

Divorce itself will not hurt your credit score, but indirectly it could cause that all-important number to drop. The chaos of divorce proceedings can lead to missed payments. Also, a judge can declare your spouse responsible for some joint credit accounts, but there's no guarantee he or she will pay them. Also, keep a close eye on your credit report to ensure your spouse hasn't opened any new accounts in your name.

Loose ends, post-divorce

When your divorce is final, it's not over and done. You still need to tie up some critical loose ends. Cross the Ts and dot the Is. Change the names on the deed to the house, stocks, car titles and any other documents. Change your beneficiaries on life insurance, employer-sponsored retirement savings accounts and your will.

Protect yourself from these potentially devastating financial ambiguities by having a strong financial plan in place. We can help you with that.

This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.

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The Federal Reserve Raises Benchmark Interest Rate

Monetary policy is normalizing due to economic improvement.

On March 15, the Federal Reserve raised the benchmark interest rate by a quarter-point to a range of 0.75-1.00%. The increase was widely expected, and it represented a vote of confidence in the economy. 1

This was the central bank's second rate hike in three months, and Wall Street took it in stride, with the S&P 500 rising nearly 15 points on the day. One reason for that may have been the Fed's latest dot-plot forecast, which remained as it was when the last interest rate adjustment was made in December. The Fed still projects a total of three hikes for 2017. 1,2

When the economy picks up its pace, the Fed responds. In the past several months, job growth and economic output have been steady, and inflation pressure has built to where consumer prices are rising close to 2% a year. The central bank thinks economic growth is now significant enough to warrant a series of small rate hikes. 3

As interest rates slowly rise, retirees & savers could benefit. While higher rates do imply costlier borrowing, there are also some positives that come with tightening. Rising rates are good for interest-bearing bank accounts and fixed-rate investment yields. Higher interest rates encourage banks to lend more, improving the availability of credit.

Rate increases often promote dollar strength, meaning the dollar could buy more abroad - a perk for travelers. Even with slim inventory in the housing market, home sales could now get a boost - prospective home buyers may not want to wait much longer to arrange a mortgage. If interest rate adjustments occur two or three times a year (as they once commonly did), then investors may interpret Fed monetary policy statements less obsessively and focus on market fundamentals to greater degree. 4

As Fed chair Janet Yellen commented to reporters after the Federal Open Market Committee's decision Wednesday, "The simple message is, the economy is doing well." Sustained economic improvement commonly leads the central bank to increase interest rates. 1

Gerard Gruber may be reached at 203.454.3377 or This email address is being protected from spambots. You need JavaScript enabled to view it.

1 - marketwatch.com/story/fed-raises-interest-rates-by-a-quarter-point-sees-two-move-moves-this-year-2017-03-15 
2 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F15%2F17&x=0&y=0 
3 - nytimes.com/interactive/2017/03/15/business/federal-reserve-interest-rates.html 
4 - bankrate.com/finance/federal-reserve/benefits-higher-interest-rates-from-federal-reserve-1.aspx 

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.

Securities and investment advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC 

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On the Bright Side

Oregon State University researchers recently concluded that working just a year past 65 can be good for longevity. Analyzing 28 years of data from the National Institute on Aging-funded Healthy Retirement Study, they found that healthy 66-year-old retirees were found to have had an 11% lower risk of death than those retiring at 65. 4

4 - http://www.investopedia.com/articles/retirement/051216/why-working-after-retirement-good-your-health.asp

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Retiring with an Age Difference

If you are 10 or 15 years older than your spouse or partner, to what degree should that age gap influence your retirement planning? You will want to consider this question, for it may affect many aspects of your financial future – such as your planned retirement dates, how you decide to claim Social Security, and how you choose to invest.

Your age difference will lengthen your total retirement experience as a couple. For example, Social Security projects that the average man turning 62 this month will live 84.6 years and die in 2039. The average woman turning 45 this month is forecast to live 85.5 years and die in 2057. So a hypothetical couple with a 17-year age gap would need to keep a 40-year retirement time horizon in mind if the older spouse or partner retired today, potentially including 17 years alone for the younger spouse or partner.

If you and your partner have an age gap, the two of you might need to work longer and ramp up your retirement saving. A more aggressive approach to investing may be wise. If you are the older spouse, you may want to claim Social Security as late as possible and opt for joint-and-survivor pension benefits. If you are more than 10 years older than your spouse, the calculated Required Minimum Distributions from your 401(k)s and IRAs will end up being slightly smaller than standard. 1,2

1 - tinyurl.com/zthnpdq   
2 - ssa.gov/cgi-bin/longevity.cgi 

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What Vaccinations Should You Think About Getting After 65?

Your specific answer to that question depends on the advice of your doctor. Keeping that fundamental in mind, there are some vaccines that many health care professionals advocate for seniors.

Since influenza can aggravate asthma and other pre-existing medical conditions in older people, a yearly flu shot is commonly recommended. The Centers for Disease Control and Prevention advocates the shingles vaccine for anyone past 60 who has had chicken pox; vaccination could cut the risk of developing shingles by half. The PREVNAR and PCV23 vaccines may help seniors avoid pneumonia, and a booster dose of whooping cough vaccine is recommended every ten years for adults. 3

3 - https://www.consumeraffairs.com/news/four-vaccinations-seniors-should-consider-011817.html

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On the Bright Side

A report from the non-partisan American Enterprise Institute says that in 1970, Americans in the middle 40% of U.S. income distribution had saved an average of 33% of their yearly income in retirement accounts. That compares to an average of 210% of annual earnings for Americans in the same income demographic today. 3

3 -bloomberg.com/view/articles/2017-01-04/a-little-optimism-on-the-future-of-retirement

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What Does the 21st Century Cures Act Mean for Health Care?

Last December, the 21st Century Cures Act became law, opening the door to the assignment of greater federal funds for medical research and more expedient approval of medical devices and drugs by the Food & Drug Administration.

The Act directs the FDA to use "real world evidence" as well as random clinical trials when evaluating whether medicines and devices should be approved. "Data summaries," instead of full clinical trial results, can now be used to support approval of certain medicines. Drug makers are now allowed to promote off-label uses for medications to insurance companies. Critics of the Act say that it could risk rushing flawed drugs and treatments into the health care market; supporters applaud the Act for giving the FDA the potential to fast-track "breakthrough" devices and drugs. 2

2 - http://www.nextavenue.org/winners-losers-21st-century-cures/

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Can You Work Your Way into Retirement?

As 2016 ended, the 17th Annual Transamerica Retirement Survey appeared and noted a preference for a phased retirement among a majority (53%) of workers polled by the insurance and investment company's Center for Retirement Studies. In fact, 48% of the pre-retirees surveyed felt that their current employer would allow them to continue working in some capacity after age 65.

How many employers are okay with workers staying on the job past 65? Perhaps more than many of us may assume: 72% of the workers Transamerica talked with said that their employer supported the idea, and 48% felt the company culture where they worked was "aging friendly."

On the downside, just 20% of employees surveyed said that their employers would let them ease into retirement through shorter workweeks or flextime, and 26% said that the company where they worked was doing "nothing" to help its employees make retirement transitions. Regarding aging in the workplace, one other statistic from the survey stands out: only 42% of respondents said that they were keeping their job skills up to date, which might be a necessity if they want to stay in the workforce into their sixties. 1

1- http://transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2016_sr_retirement_survey_of_workers_compendium.pdf%20

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Regulatory Disclosure: The information on this website has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. This website is neither an offer to sell nor a solicitation to buy any securities. Gerard Gruber offers Securities and Investment Advisory and Financial Planning service through Geneos Wealth Management, Inc, Member FINRA/SIPC.  Investments are not FDIC insured. Investments are not deposits of the financial institution and are not guaranteed by a financial institution. Investments are subject to investment risks including loss of principal amount invested.