Mid-Year Financial Check-up

May 2017

Although it may not feel like it, summer is just around the corner!  With the 2016 tax season being over, and summer fun at our doorstep, now is a good time to give yourself a financial check-up to make sure you are still on track.

Track your spending If you didn’t do this at the beginning of the year, now would be a great time to look at what you spend each month.  Write down all your non-discretionary bills (i.e. rent/mortgage, car payment, utilities, etc.) and your discretionary spending (i.e. going out to eat, entertainment expenses, the morning Starbucks stop, etc.)  You may be surprised to see what excesses you have in your monthly spending habits.  By reducing your unnecessary expenses, you may be able to put more money away for things such as increasing your emergency fund, retirement, the annual vacation fund, or even paying down a debt.

While using new found money to fund goals such as retirement or a vacation fund is very rewarding, it is very important that you also fund your emergency account.  We all have unexpected emergency expenses (job loss, home repairs, medical expenses, etc.).  By having three to six months of living expenses set aside, we will be prepared for these types of expenditures without having to borrow or increase our credit card debt.

Check your credit report– If you haven’t already done so this year, you should request your free annual credit report at www.annualcreditreport.com.  With tax return fraud still rampant, it is still important  that we regularly check our credit reports for any fraudulent activity.  Reviewing our credit report also gives us an opportunity to make sure our outstanding debt is being accurately reported.  Your free annual credit report consists of reports from the three major credit reporting agencies:  Equifax, TransUnion and Experian.  You can stagger your requests from each credit reporting agency every four months, this way you are able to check your credit report for free three times a year.

Social Security Records- Whether you are still working, getting ready to retire or already receiving social security, it is a good idea to update your user ID and pin # on the social security website.  You can do this at www.ssa.gov and go to “my social security” to log in.  If you are still working, you should check your wage history to make sure it is being reported correctly.  This will ensure that your social security benefits will be calculated accurately.  If you are already receiving social security, the site gives payment history, information on benefits, and a host of other information.

Beginning on June 10, 2017, the SSA website is going to have a second method of verifying your identification when you log in by sending you a text or email.  Update or create an account today – go to https://secure.ssa.gov/RIL/SiView.do.

Qualified Charitable Donation (QCD)-  For those of you who are 70 ½ or older and are taking your minimum required distribution, you know that this money is taxable income to you.  The QCD was finally made permanent in December of 2015.  This allows those of you over 70 ½ to contribute up to $100k directly to a charity from your IRA and not have it includible in gross income, while also counting towards your minimum required distribution requirement, which is a win-win.

Because this was an on-again/off-again tax law, many taxpayers did not utiliize it to their full advantage, and may not understand the full benefits it can have.  Depending on your adjusted gross income (AGI), by making a QCD, and reducing your AGI, you can potentially have less of your social security taxed; allow you to have a greater medical itemized deduction (if you qualify); have less of a Medicare premium, (if you are in the higher Medicare bracket), and potentially reduce your tax bracket, which could save your hundreds and even thousands of dollars in federal and state income taxes.

If you generally give to charities, it is definitely worth your time to discuss the QCD with your tax professional to see how it can help you lower your tax bill and increase your other benefits.

One word of caution worth noting – we all know that Congress is working on new tax legislation.  What that will look like and when a law will actually be passed, is anyone’s guess.  Make your tax decisions on what the laws are today, not the rumors and opinions that are in the news!

Good Luck and enjoy the summer!

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