• Well, here we are after the election, with the status quo being upheld. Billions were spent (probably making some “consultants” do quite well in the process), and we were all very distracted here in Worcester … but not much has changed, even for our tax office. Many are happy about it, an ever-so-slight number less aren’t happy — but to all I will say this:

    Over the next four years, what you do will have a larger impact on your income, wealth and happiness than what any president does.

    And yes — there will be many things for us to help you navigate, because come 2013, there WILL be some significant changes.

    With the election behind us, we can expect some traction on the debt limit negotiations, and further discussion of the “fiscal cliff”. But taxes WILL go up next year … whether it’s directly on your income, or in other more-hidden ways. So, as your favorite Worcester tax service, my primary quick-and-dirty tax planning maneuver for you is this: take as much income THIS YEAR as possible, and defer tax-deductible expenses until after December 31, whenever possible.

    (If you want more a more detailed breakdown behind this strategy, don’t miss this:
    http://www.forbes.com/sites/robertwood/2012/11/11/should-you-grab-pay-in-2012-or-defer-til-2013/)

    But there are some other things which the winding-down of the year should cause you to consider, and this is especially true if you are hitting the “middle” of your own road. Here’s what I mean…

    Worcester Tax Service Suggests Getting a Real Checkup
    Generally speaking, many wise adults see a doctor when they hit 50. And the great thing about (most) doctors, is that they’re not financially-incentivized to advise you towards a specific course of action.

    Would that were true about all financial investment advisers.

    So, I thought I would take the time this week to give you an objective, “incentive-free” look at what your finances should look like when you hit the half-century mark.  If you are close to that mark, I thought it might be useful for me to lay out the “perfect” scenario.

    And look–if you’re not perfect, at least let it be a benchmark…

    We should have been saving and investing 15% of our income regularly.
    Even if we don’t want to retire until age 70, by 50 we should be well on our way toward securing our retirement. We have managed to save about eight times our annual lifestyle spending. With a $100,000 per year lifestyle, that means we should have saved about $800,000 toward our retirement.

    We are probably at the point where our children are in college or have recently graduated. When college funding is complete, it’s time to reevaluate and perhaps drop term life insurance coverage depending on our individual circumstances. We purchased the insurance to make sure our children would have enough money to complete their education. When term premiums rise and college accounts are fully funded, we should probably drop our coverage.

    Our estate plan should be in place and fully implemented.
    And, of course, various assets are handled differently. This is the time to make a complete review of how our plan is put together, to ensure that EVERY asset (not just the tangible ones) are still handled properly.

    And, for you “imperfect” savers, we have one last chance after children and before retirement to catch up. Age 50 is the first year we are allowed to take advantage of increased savings and catch-up provisions. In 2012, maximum savings in a 401(k) or 403(b) account increases from $17,000 to $22,500 at age 50. Roth contributions also increase from $5,500 a year to $6,500 with these “catch-up” provisions. If we don’t have eight times our lifestyle spending saved, now is the time to press these limits.

    Of course, saving well is half the battle; investing well is the other half.

    That’s a subject for another day, and which we can discuss more via phone, if you’d like: (508) 753-3532.

    Of course life is too short to ignore meaning at any age. But for many people 50 is a milestone that reminds us to stop and reevaluate. There is still time for a whole new life of significance.

    Financial independence can open exciting possibilities that were otherwise out of the question. If we don’t need the money, we are free to do anything with our lives. People of purpose usually don’t choose 28 years of recreation. Not when we finally have the time and the wisdom to make a difference in the world.

    And counting retirement as a new career is a perspective I’d encourage. When you reach the point in your life where you can celebrate the freedom to work instead of the freedom from work, that’s success. If just a fraction of people in the second half of life turn their experience, time and talent to our nation’s most pressing challenges, imagine the progress we could make.

    Although you can have that attitude at any age, it is especially powerful when redefining the second half of your life!

    All of these issues are things we routinely assist with on behalf of our clients. If you haven’t yet set any of these items into place, call us right away ((508) 753-3532), and we’ll either help you, or connect you with someone who can.