• Should Millennials Be Your Money Models?

    Gen Y is doing some things right when it comes to saving & investing.

     

    Provided by MidAmerica Financial Resources

     

    Financially, Generation Y is often criticized for being risk averse & unaware. Is this truth, or is it fiction? In some instances, pure fiction. Here are some good financial habits common to millennials – habits their parents and grandparents might do well to emulate.

     

    Millennials are good savers. Last year, Bankrate found that about 60% of American adults younger than 30 were saving 5% or more of their paychecks. Only around half of the adults older than 30 were doing so. This difference is even more interesting when you think about the overhanging college debt faced by many millennials and the comparatively greater incomes of older workers. Twenty-nine percent of millennials were saving 10% of their incomes last year, right in line with the average for other generations (28%).1

      

    Millennials value experiences more than possessions. Data affirms this view – in a Harris Poll of millennials, 78% of those surveyed said that they would rather spend their money on an experience or an event rather than some pricy material item. In contrast, some members of Gen X and the baby boom generation have spent too much money on depreciating consumer goods, with too little to show for it.2

      

    Relatively speaking, Gen Y is less prone to drawing down its retirement funds. In the 2016 Transamerica Retirement Survey, just 22% of Gen Y workplace retirement plan participants said that they had tapped into a plan for a loan or a withdrawal. That compares with 28% of boomers and 30% of those in Generation X.3

     

    Millennials are directing money into equity investments at a relatively early age. As Investors Business Daily reported in May, the median age at which millennials begin investing in these vehicles is 23. For Generation X, it was 26. Younger baby boomers made their first such investments at a median age of 32, and older baby boomers did so at a median age of 35. While roughly one-third of millennials are invested in equities, their comparative head start may help them compensate.4

     

    They also embrace technology in a way that some boomers do not. The Internet is filled with financial information, and millennials may go out and learn on their own about investment types, tax laws, and saving and investing resources rather than waiting for a tax, financial, or human resources professional to explain things to them. While a little knowledge can be dangerous, having some information is better than none.

     

    In short, the members of Generation Y are doing some things that may really pay off for their financial futures. Other generations might want to take notice.

       

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com

    www.mid-america.us

     

    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 - cnbc.com/2016/03/28/are-you-as-good-at-saving-as-millennials.html [3/28/16]

    2 - money.usnews.com/money/personal-finance/articles/2016-10-07/5-finance-lessons-baby-boomers-could-learn-from-millennials [10/7/16]

    3 - transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2016_sr_retirement_survey_of_workers_generation.pdf [12/16]

    4 - investors.com/etfs-and-funds/mutual-funds/why-many-millennials-retirement-savings-will-be-more-than-twice-baby-boomers/ [5/15/17]

     

  • Should You File Jointly, Or Not?

    For many married couples, filing jointly is a good idea, but there are exceptions.

     

    Provided by MidAmerica Financial Resources

     

    Ninety-five percent of married couples file joint federal tax returns. Filing jointly can be convenient. Frequently, there’s a financial advantage, but that does not mean it should be done without consideration.1

       

    Years ago, there was less incentive to file jointly. That was because the “marriage penalty” for doing so was effectively greater. There is no written “marriage penalty” in the Internal Revenue Code, but, in the past, income tax brackets were structured a bit differently and spouses having similar annual incomes sometimes paid more taxes by filing jointly than single taxpayers did.

     

    There are many good reasons to file jointly. Nearly all of them involve saving money.

     

    Joint filing may give you an effective tax break right off the bat. Currently, married taxpayers who file separately face the 28%, 33%, 35%, and 39.6% income tax brackets at lower income thresholds than other unmarried taxpayers.2

     

    Joint filers can claim significant tax credits that marrieds filing separately cannot. If you want to claim the American Opportunity Tax Credit, the Lifetime Learning Credit, the Elderly or Disabled Credit, or the Earned Income Tax Credit (EITC), you have to file jointly. Joint filing also gives you the potential to claim the full Child Tax Credit, rather than a reduced one.3

     

    Deductions, too, decrease when you file separately as a married couple. Standard deductions fall significantly. Phase-out ranges affect itemized deductions, and some itemized deductions are unavailable for married couples who do not file jointly. Couples who file separate 1040s can only deduct 50% of the capital gains losses joint filers can. In addition, if one spouse elects to itemize deductions, so must the other (there must be a separate Schedule A for each spouse). The spouse with fewer deductions has no ability to use the standard deduction to lower his or her taxable income.2,3

     

    Joint filing even helps you with regard to the Alternative Minimum Tax. When you file separately as a married couple, your AMT exemption falls by 50%. So you may be more susceptible to the AMT if you file separately. If the AMT affects you, you will find many federal tax deductions reduced or unavailable to you.3

     

    Do you live in a community property state? If you do, you may know that state tax law defines what is considered separately held or jointly held property. If you want to itemize deductions in a community property state, the paperwork can be onerous.3

     

    More of your Social Security benefits may be taxed if you file separately. Social Security gives you a “base exemption,” an income threshold above which Social Security benefits may be taxable. The base exemption for married couples filing jointly is $32,000, meaning that if 50% of the Social Security benefits you receive in a tax year plus your other income in a tax year exceeds $32,000, taxes may apply. The base exemption for married couples filing separately who live together at any time during the tax year is $0. It improves to $25,000 for married couples filing separately who live apart for an entire year.4

     

    So why would you not file jointly when married? In certain circumstances, filing separately may be wiser.

     

    Maybe you do not trust your spouse financially. If your spouse is a tax cheat or interprets federal tax law very loosely, filing jointly could prove hazardous in the case of an audit or other troubles. Both spouses must sign a joint return, meaning that both spouses are legally responsible for all taxes, penalties, and fines linked to that return. Yes, an innocent spouse may be offered tax protection by the IRS, but that innocence must be proven.2,3

     

    Maybe you or your spouse have large out-of-pocket medical expenses. If so, and if the spouse contending with such bills earns much less than the other, there may be merit in filing separately. By doing so, the spouse with far less income might have an opportunity to meet the 10% AGI threshold needed to itemize medical expenses. (The 7.5% AGI threshold for itemizing these costs is still in place for taxpayers age 65 and older.)2

     

    Maybe you are separating or divorcing. If that is the case, then it may seem only natural to begin filing separately while still married. Doing so now may lessen the chance of the two of you wading through tax issues in the aftermath of a split.

     

    If you are unsure about whether to file jointly or singly, you can ask a tax professional for his or her opinion. Or, that professional can look at last year’s return and run the numbers for you. Most couples find that filing jointly works out best, but there are exceptions.

     

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com

    www.mid-america.us

     

    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 - forbes.com/sites/robertwood/2016/01/26/married-filing-joint-tax-returns-irs-helps-some-couples-with-offshore-accounts/ [2/6/16]

    2 - abcnews.go.com/Business/filing-taxes-jointly-good-idea/story?id=22504248 [2/17/14]

    3 - foxbusiness.com/features/2015/03/06/should-couples-file-taxes-separately-or-jointly-which-is-best-for.html [3/6/15]

    4 - irs.com/articles/how-are-social-security-benefits-taxed [2/11/16]