July 2020 Newsletter

New Twist in the Labor Market

In December 2019, women outnumbered men in the U.S. workforce for the first time since April 2010, when layoffs due to the recession disproportionately affected male workers. A larger percentage of men age 16 and older (69.2%) are participating in the workforce than women (57.7%). However, there are more women than men in the population, and big industries such as health and education are keeping more of them in the workforce.

Share of nonfarm jobs held by women

Portfolio Performance: Choose Your Benchmarks Wisely

Dramatic market turbulence has been common in 2020, and you can’t help but hear about the frequent ups and downs of the Dow Jones Industrial Average or the S&P 500 index. The performance of these major indexes is widely reported and analyzed in detail by financial news outlets around the nation.

Both the Dow and the S&P 500 track the stocks of large domestic companies. But with about 500 stocks compared to the Dow’s 30, the S&P 500 comprises a much broader segment of the market and is considered to be representative of U.S. stocks in general. These indexes are useful tools for tracking stock market trends; however, some investors mistakenly think of them as benchmarks for the performance of their own portfolios.

It doesn’t make sense to compare a broadly diversified, multi-asset portfolio to just one of its own components. Expecting portfolio returns to meet or beat “the market” in good times is usually unrealistic, unless you are willing to expose 100% of your savings to the risk and volatility associated with stock investments. On the other hand, if you have a well-diversified portfolio, you might be happy to see that your portfolio doesn’t lose as much as the market when stocks are falling.

Asset Allocation: It’s Personal

Investor portfolios are typically divided among asset classes that tend to perform differently under different market conditions. An appropriate mix of stocks, bonds, and other investments depends on the investor’s age, risk tolerance, and financial goals.

Consequently, there may not be a single benchmark that matches your actual holdings and the composition of your individual portfolio. It could take a combination of several benchmarks to provide a meaningful performance picture. There are hundreds of indexes based on a wide variety of markets (domestic/foreign), asset classes (stocks/bonds), market segments (large cap/small cap), styles (growth/value), and other criteria.

Keep the Proper Perspective

Seasoned investors understand that short-term results may have little to do with the effectiveness of a long-term investment strategy. Even so, the desire to become a more disciplined investor is often tested by the arrival of your account statements.

Making decisions based on last year’s — or last month’s — performance figures may not be wise, because asset classes, market segments, and industries do not always perform the same from one period to the next. When an investment experiences dramatic upside performance, much of the opportunity for market gains may have already passed. Conversely, moving out of an investment when it has a down period could take you out of a position to benefit when that market segment starts to recover.

There is nothing you can do about global economic conditions or the level of returns delivered by the financial markets, but you can control the composition of your portfolio. Evaluating investment results through the correct lens may help you make appropriate adjustments and plan effectively for the future.

The performance of an unmanaged index is not indicative of the performance of any specific security, and individuals cannot invest directly in an index. Asset allocation and diversification are methods used to help manage investment risk; they do not guarantee a profit or protect against investment loss. All investments are subject to market fluctuation, risk, and loss of principal. Shares, when sold, may be worth more or less than their original cost. Investments that seek a higher return tend to involve greater risk.

Tapping Retirement Savings During a Financial Crisis

As the number of COVID-19 cases began to skyrocket in March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The legislation may make it easier for Americans to access money in their retirement plans, temporarily waiving the 10% early-withdrawal penalty and increasing the amount they could borrow. Understanding these new guidelines and the other rules for loans and early withdrawals may help you determine if they are appropriate options during a financial crisis.

(Remember that tapping retirement savings now could risk your financial situation in the future.)

Penalty-Free Withdrawals

The newest exception to the 10% early-withdrawal penalty allows IRA account holders and retirement plan participants to take distributions of up to $100,000 in 2020 for a “coronavirus-related” reason.* These situations include a diagnosis of COVID-19 for account owners and certain family members; a financial setback due to a quarantine, furlough, layoff, or reduced work hours, and in the case of business owners, due to closures or reduced hours; or an inability to work due to lack of child care as a result of the virus. This temporary exception augments the other circumstances for which a penalty-free distribution is typically allowed:

• Death or disability of the account owner

• Unreimbursed medical expenses exceeding 7.5% of adjusted gross income (increases to 10% in 2021)

• A series of “substantially equal periodic payments” over your life expectancy or the joint life expectancy of you and your spouse

• Birth or adoption of a child, up to $5,000 per account owner

• Certain cases when military reservists are called to active duty

In addition, IRAs (but not work-based plans) allow penalty-free withdrawals for a first-time home purchase ($10,000 lifetime limit), qualified higher-education expenses, and payments of health insurance premiums in the event of a layoff. Work-based plans allow exceptions for those who separate from service after age 55 (50 in the case of qualified public safety employees) and distributions as part of a qualified domestic relations order.

Tax Consequences

Penalty-free does not mean tax-free, however. In most cases, when you take a penalty-free distribution, you must report the full amount of the distribution on your income tax return for that year. However, the income associated with a coronavirus-related distribution can be spread over three years for tax purposes, with up to three years to reinvest the money.1

Retirement Plan Loans

If your work-based retirement plan allows loans, you typically can borrow up to the lesser of 50% of your vested balance or $50,000. Most loans must be repaid within five years, but if the money is used to purchase a primary residence, the repayment period may be longer. The CARES Act permits employers to increase this amount to the lesser of 100% of the vested balance or $100,000 for loans to coronavirus-affected individuals made between March 27, 2020, and September 22, 2020.* Affected participants who have outstanding loans on or after March 27, 2020, will be able to delay any payments due in 2020 by one year.2

Hardship Withdrawals

Many work-based retirement plans also permit hardship withdrawals in certain circumstances. Although these distributions are not exempt from the 10% early-withdrawal penalty, they can be a lifeline for people who need money in an emergency.

For more information about your options, contact your IRA or retirement plan administrator.

*Employers do not have to adopt the new withdrawal and loan provisions.

Five Industries Most Likely to Offer Retirement Plan Loans

Percentage of plans that offer loans, by type of industry3

1) Amounts reinvested may reduce your tax obligation on the distributions; however, due to the timing of distributions and required tax filings, you may have to file an amended return to seek a refund on any taxes previously paid on withdrawn amounts. 2) The original five-year repayment period will be extended for the delay, but interest will continue to accrue. 3) Source: Plan Sponsor Council of America, 2019 (2018 data)

Medicaid May Pay You as a Family Caregiver

Each day, parents, children, siblings, and spouses selflessly sacrifice their time and energy to care for family members affected by illness, injury, or disability.

According to the Department of Health and Human Services, about 80% of care at home is provided by unpaid caregivers and may include an array of emotional, financial, nursing, social, homemaking, and other services. More than half (58%) have intensive caregiving responsibilities that may include assisting with a personal care activity, such as bathing or feeding.1

Caregiving can exact an emotional and physical toll. It can be financially draining, too. However, if you are a caregiver of a loved one, you may be able to be paid for your services by Medicaid.

Each state and the District of Columbia have programs that allow qualified individuals to manage their own long-term care services, including the selection of a caregiver.

Many states’ Medicaid programs allow the participant to hire relatives or friends to provide needed assistance. But Medicaid services are different in each state, and states generally have more than one Medicaid program that may offer caregiver benefits.

For instance, some state programs may pay for family caregivers but exclude spouses or in-laws. Others may only provide compensation if you do not live in the same house as the person in your care.

There are a few things to note. Generally, Medicaid looks at the applicant’s financial situation (income and assets) as well as his or her functional ability. Once approved, the applicant can apply for a specific Medicaid program that allows for the applicant to manage their own care, including selection of a caregiver who may be paid, directly or indirectly, by Medicaid.

Contact your state Medicaid office to learn about their specific programs and respective eligibility requirements. Also, some states have programs in addition to Medicaid that may pay for family caregiver services.

1 Department of Health and Human Services, longtermcare.acl.gov

June 2020 Newsletter

Round Rock Advisors is an independent, full-service, financial planning and wealth management practice, dedicated to
providing a full spectrum of highly personalized financial services for individuals, families, and businesses. Our experienced
team of financial advisors and Certified Financial Planner professionals offer objective solutions and services, tailored to
each client’s unique circumstances and goals. We are committed to developing deep, trusted client relationships and we are
invested in safeguarding what matters most to clients.

Student Debt: It’s Not Just for Young Adults
Recent college graduates aren’t the only ones carrying student loan debt. A significant number of older Americans have
student debt, too. In fact, student loan debt is the second-highest consumer debt category after mortgage debt. In total,
outstanding student loan debt in the United States now stands at approximately $1.5 trillion, with the age 30 to 39 group
carrying the highest load.

Student loan debt by age, in billions

Page 1 of 4, see disclaimer on final
page
Four Questions on the Roth Five-Year Rule
The Roth “five-year rule” typically refers to when you can
take tax-free distributions of earnings from your Roth IRA,
Roth 401(k), or other work-based Roth account. The rule
states that you must wait five years after making your first
contribution, and the distribution must take place after age
59%, when you become disabled, or when your beneficiaries
inherit the assets after your death. Roth IRAs (but not
workplace plans) also permit up to a $10,000 tax-free
withdrawal of earnings after five years for a first-time home
purchase.
While this seems straightforward, several nuances may
affect your distribution’s tax status. Here are four questions
that examine some of them.

  1. When does the clock start ticking?
    “Five-year rule” is a bit misleading; in some cases, the
    waiting period may be shorter. The countdown begins on
    January 1 of the tax year for which you make your first
    contribution.
    Roth by the Numbers

19%

U.S. households who owned
Roth IRAs in 2019
36%
Roth IRA-owning households
who contributed to them for tax
year 2018

69%
Employers that offered a Roth
401{k) plan in 2018
23%
Eligible employees who
contributed to a Roth 401(k) in
2018
Sources: Investment Company Institute
and Plan Sponsor Council of America,
2019

For example, if you open a Roth IRA on December 31, 2020,
the clock starts on January 1, 2020, and ends on January 1,
2025 — four years and one day after making your first
contribution. Even if you wait until April 15, 2021, to make
your contribution for tax year 2020, the clock starts on
January 1,2020.

  1. Does the five-year rule apply to every
    account?
    For Roth IRAs, the five-year clock starts ticking when you
    make your first contribution to any Roth IRA.
    With employer plans, each account you own is subject to a
    separate five-year rule. However, if you roll assets from a
    former employer’s 401(k) plan into your current Roth 401(k),
    the clock depends on when you made the first contribution
    to your former account. For instance, if you first contributed
    to your former Roth 401(k) in 2014, and in 2020 you rolled
    those assets into your new plan, the new account meets the
    five-year requirement.
  2. What if you roll over from a Roth 401(k)
    to a Roth IRA?
    Proceed with caution here. If you have never previously
    contributed to a Roth IRA, the clock resets when you roll
    money into the Roth IRA, regardless of how long the money
    has been in your Roth 401(k). Therefore, if you think you
    might enact a Roth 401(k) rollover sometime in the future,
    consider opening a Roth IRA as soon as possible. The five-
    year clock starts ticking as soon as you make your first
    contribution, even if it’s just the minimum amount and you
    don’t contribute again until you roll over the assets. 1
  3. What if you convert from a traditional
    IRA to a Roth IRA?
    In this case, a different five-year rule applies. When you
    convert funds in a traditional IRA to a Roth IRA, you’ll have
    to pay income taxes on deductible contributions and tax-
    deferred earnings in the year of the conversion. If you
    withdraw any of the converted assets within five years, a
    10% early-distribution penalty may apply, unless you have
    reached age 59% or qualify for another exception. This rule
    also applies to conversions from employer plans. 2
    1 You may also leave the money in your former employer’s plan, roll the
    money into another employer’s Roth account, or receive a lump-sum
    distribution. Income taxes and a 10% penalty tax may apply to the taxable
    portion of the distribution if it is not qualified.
    2 Withdrawals that meet the definition of a “coronavirus-related
    distribution” during 2020 are exempt from the 10% penalty.

Page 1 of 4, see disclaimer on final
page
Four Questions on the Roth Five-Year Rule
The Roth “five-year rule” typically refers to when you can
take tax-free distributions of earnings from your Roth IRA,
Roth 401(k), or other work-based Roth account. The rule
states that you must wait five years after making your first
contribution, and the distribution must take place after age
59%, when you become disabled, or when your beneficiaries
inherit the assets after your death. Roth IRAs (but not
workplace plans) also permit up to a $10,000 tax-free
withdrawal of earnings after five years for a first-time home
purchase.
While this seems straightforward, several nuances may
affect your distribution’s tax status. Here are four questions
that examine some of them.

  1. When does the clock start ticking?
    “Five-year rule” is a bit misleading; in some cases, the
    waiting period may be shorter. The countdown begins on
    January 1 of the tax year for which you make your first
    contribution.
    Roth by the Numbers

19%
U.S. households who owned
Roth IRAs in 2019
36%
Roth IRA-owning households
who contributed to them for tax
year 2018

69%
Employers that offered a Roth
401{k) plan in 2018
23%
Eligible employees who
contributed to a Roth 401(k) in
2018
Sources: Investment Company Institute
and Plan Sponsor Council of America,
2019

For example, if you open a Roth IRA on December 31, 2020,
the clock starts on January 1, 2020, and ends on January 1,
2025 — four years and one day after making your first
contribution. Even if you wait until April 15, 2021, to make
your contribution for tax year 2020, the clock starts on
January 1,2020.

  1. Does the five-year rule apply to every
    account?
    For Roth IRAs, the five-year clock starts ticking when you
    make your first contribution to any Roth IRA.
    With employer plans, each account you own is subject to a
    separate five-year rule. However, if you roll assets from a
    former employer’s 401(k) plan into your current Roth 401(k),
    the clock depends on when you made the first contribution
    to your former account. For instance, if you first contributed
    to your former Roth 401(k) in 2014, and in 2020 you rolled
    those assets into your new plan, the new account meets the
    five-year requirement.
  2. What if you roll over from a Roth 401(k)
    to a Roth IRA?
    Proceed with caution here. If you have never previously
    contributed to a Roth IRA, the clock resets when you roll
    money into the Roth IRA, regardless of how long the money
    has been in your Roth 401(k). Therefore, if you think you
    might enact a Roth 401(k) rollover sometime in the future,
    consider opening a Roth IRA as soon as possible. The five-
    year clock starts ticking as soon as you make your first
    contribution, even if it’s just the minimum amount and you
    don’t contribute again until you roll over the assets. 1
  3. What if you convert from a traditional
    IRA to a Roth IRA?
    In this case, a different five-year rule applies. When you
    convert funds in a traditional IRA to a Roth IRA, you’ll have
    to pay income taxes on deductible contributions and tax-
    deferred earnings in the year of the conversion. If you
    withdraw any of the converted assets within five years, a
    10% early-distribution penalty may apply, unless you have
    reached age 59% or qualify for another exception. This rule
    also applies to conversions from employer plans. 2
    1 You may also leave the money in your former employer’s plan, roll the
    money into another employer’s Roth account, or receive a lump-sum
    distribution. Income taxes and a 10% penalty tax may apply to the taxable
    portion of the distribution if it is not qualified.
    2 Withdrawals that meet the definition of a “coronavirus-related
    distribution” during 2020 are exempt from the 10% penalty.

Telemedicine: The Virtual Doctor Will See You Now
Widespread smartphone use, loosening regulations, and
employers seeking health cost savings are three trends that
have been driving the rapid expansion of telemedicine. And
that was before social distancing guidelines to help control
the spread of COVID-19 made the availability of remote
medical care more vital than anyone anticipated.
Easy Interaction with Health Professionals
Telemedicine offers a way for patients to interact with
doctors or nurses through a website or mobile app using a
secure audio or video connection.
Patients have immediate access to advice and treatment
any time of the day or night, while avoiding unnecessary and
costly emergency room visits. And health providers have the
ability to bill for consultations and other services provided
from a distance.
Telemedicine can be used to treat minor health problems
such as allergies and rashes, or for an urgent condition such
as a high fever. It also makes it easier to access therapy for
mental health issues such as depression and anxiety.
In other cases, doctors can remotely monitor the vital signs
of patients with chronic conditions, or follow up with patients
after a hospital discharge. Telemedicine can also fill gaps in
the availability of specialty care, especially in rural areas.
Telemedicine offers a way for patients to
interact with doctors or nurses through a
website or mobile app using a secure
audio or video connection.
Offered by Many Health Plans
In 2019, nearly nine out of 10 large employers (500 or more
employees) offered telemedicine programs in their benefit
packages, but many workers had not tried them out.
Only 9% of eligible employees utilized telemedicine services
in 2018 (the most recent year for which data is available),
even though virtual consultations often have lower copays
and are generally less expensive than in-person office visits,
especially for those with high deductibles. 1
If your health plan includes telemedicine services, you might
take a closer look at the details, download the app, and/or
register for an online account. This way, you’ll be ready to
log in quickly the next time your family faces a medical
problem.
1) Mercer National Survey of Employer-Sponsored Health Plans, 2019

Round Rock Advisors LLC is a registered investment advisor. Information in this message is for the intended recipients] only. Please visit
our website www.RoundRockAdvisors.com for important disclosures.
This newsletter is intended to provide general information. It is not intended to offer or deliver tax, legal, or specific investment advice in
any way. For tax or legal advice, please consult a qualified tax professional or legal counsel. Different types of investments involve varying
degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be
profitable.
Cited content on in this newsletter is based on generally-available information and is believed to be reliable. The Advisor does not
guarantee the performance of any investment or the accuracy of the information contained in this newsletter. For information on the
Advisor’s services and fees, please refer to the Round Rock’s Form ADV Part 2. The Advisor will provide all prospective clients with a copy

of Round Rock’s Form ADV2A and applicable Form ADV 2Bs. Please contact us to request a free copy via .pdf or hardcopy.

 

 

May 2020 Newsletter

State Population: Winners and Losers

The U.S. population was 328,239,523 in 2019, an increase of 0.5% over 2018. This was the fourth consecutive year of slowing population growth due to fewer births, more deaths, and lower immigration from other countries. Forty states and the District of Columbia gained population, while 10 states lost population. Here are the winners and losers based on percentage increase or decrease in population.

Will vs. Trust: Know the Difference

Wills and trusts are common documents used in estate planning. While each can help in the distribution of assets at death, there are important differences between the two.

What Is a Will? A last will and testament is a legal document that lets you direct how your property will be dispersed (among other things) when you die. It becomes effective only after your death. It also allows you to name a personal representative (executor) as the legal representative who will carry out your wishes.

What Is a Trust? A trust is a legal relationship in which you, the grantor or trustor, set up a trust, which holds property managed by a trustee for the benefit of another, the beneficiary. A revocable living trust is the type of trust used most often as part of a basic estate plan. “Revocable” means you can make changes to the trust or even revoke it at any time.

A living trust is created while you’re living and takes effect immediately. You may transfer title or ownership of assets, such as a house, boat, automobile, jewelry, or investments, to the trust. You can add assets to the trust and remove assets thereafter.

How Do They Compare? While both a will and a revocable living trust enable you to direct the distribution of your assets and property to your beneficiaries at your death, there are several differences between these documents. Here are some important ones.

  1. A will generally requires probate, which is a public process that may be time-consuming and expensive. A trust may avoid the probate process.
  2. A will can only control the disposition of assets that you own at your death, including property you held as tenancy in common.

It cannot govern the distribution of assets that pass directly to a beneficiary by contract (such as life insurance, annuities, and employer retirement plans) or by law (such as property held in joint tenancy).

  1. Your revocable trust can only control the distribution of assets held by the trust. This means you must transfer assets to your revocable trust while you’re living, which may be a costly, complicated, and tedious process.
  2. Unlike a will, a trust may be used to manage your financial affairs if you become incapacitated.
  3. If you own real estate or hold property in more than one state, your will would have to be filed for probate in each state where you own property or assets. Generally, this is not necessary with a revocable living trust.
  4. A trust can be used to manage and administer assets you leave to minor children or dependents after your death.
  5. In a will, you can name a guardian for minor children or dependents, which you cannot do with a trust.

Generally, most estate plans that use a revocable trust also include a will to handle the distribution of assets not included in the trust and to name a guardian for minor children. In any case, there are costs and expenses associated with the creation and ongoing maintenance of these documents. Keep in mind that wills and trusts are legal documents generally governed by state law, which may differ from one state to the next. You should consider the counsel of an experienced estate planning professional and your legal and tax advisers before implementing a trust strategy.

Different Documents, Different Features

Even if you have a revocable living trust, you should have a will to control assets not captured in the trust.

Features Will Revocable living trust
Control distribution of assets Yes Yes
Assets included Only probate assets Assets transferred to the trust
Effective date At death Immediately
Avoid probate No Yes*
Public record Yes No*
Creditors’claims Limited time to file claims Claims may be made at any time
Avoid estate taxes No No
Appoint guardian for minor-age children Yes No

*Depends on applicable state laws.

Managing Your Workplace Retirement Plans

About 80 million Americans actively participate in employer-sponsored defined contribution plans such as 401(k), 403(b), and 457(b) plans.1 If you are among this group, you’ve taken a big step on the road to retirement, but as with any investment, it’s important that you understand your plan and what it can do for you. Here are a few ways to make the most of this workplace benefit.

Take the free money. Many companies match a percentage of employee contributions, so at a minimum you may want to save enough to receive a full company match and any available profit sharing. Some workplace plans have a vesting policy, requiring that workers be employed by the company for a certain period of time before they can keep the matching funds. Even if you meet the basic vesting period, funds contributed by your employer during a given year might not be vested unless you work until the end of that year. Be sure you understand these rules if you decide to leave your current employer.

Reasons to Contribute

Percentage of households with assets in defined contribution plans who agreed with the following statements

My employer-sponsored retirement
plan helps me think about the
long term, not just my current needs

91%

My employer-sponsored The tax treatment of my

retirement plan offers me a good retirement plan is a big lineup of investment options incentive to contribute

83% 82%

Source: Investment Company Institute, 2018

Bump up your contributions. Saving at least 10% to 15% of your salary for retirement (including any matching funds) is a typical guideline, but your personal target could be more or less depending on your income and expenses. A traditional employer-sponsored plan lets you defer income taxeson the money you save for retirement, which could enable you to save more. In 2020, the maximum employee contribution to a 401(k), 403(b), or 457(b) plan is $19,500 ($26,000 for those age 50 and older).Some plans offer an automatic escalation feature that increases contributions by 1% each year, up to a certain percentage.

Rebalance periodically. Your asset allocation — the percentage of your portfolio dedicated to certain types of investments — should generally be based on your risk tolerance and your planned retirement timeline. But the allocation of your investments can drift over time due to market performance. Rebalancing (selling some investments to buy others) returns a portfolio to its original risk profile and does not incur a tax liability when done inside a retirement plan. Consider reviewing your portfolio at least annually. Some workplace plans offer automatic rebalancing.

Know your investments. Examine your investment options and choose according to your personal situation and preferences; some employer-sponsored plans may automatically set up new employees in default investments. Many plans have a limited number of options that may not suit all of your needs and objectives, so you might want to invest additional funds outside of your workplace plan. If you do, consider the risk and overall balance of your portfolio, including investments inside and outside your plan.

Keep your portfolio working. Some employer plans allow you to borrow from your account. It is generally not wise to use this option, but if you must do so, try to pay back your loan as soon as possible in order to give your investments the potential to grow. Plans typically have a five-year maximum repayment period.

All investments are subject to market fluctuation, risk, and loss of principal. When sold, investments may be worth more or less than their original cost. Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss. Distributions from employer-sponsored retirement plans are generally taxed as ordinary income. Withdrawals prior to age 591A may be subject to a 10% federal income tax penalty.

  1. American Benefits Council, 2019
  2. Employer contributions are not included in these annual employee limits for 401(k) and 403(b) plans. Employers typically do not contribute to 457(b) plans, but any such contributions will count toward the employee limit. There may be additional catch-up contribution opportunities for 403(b) and 457(b) plans.

Why You Might Need Disability Income Insurance

Your ability to earn an income may be your most valuable asset. It might be difficult to make ends meet if you are unable to work due to illness or injury.

According to one report, only 34% of men and 20% of women said they felt extremely confident in supporting their households during a period of income loss.1 It’s important to assess your own situation and determine whether you have appropriate financial backup in the event that you cannot work due to a disability.

Your employer may offer long-term disability coverage, but you could lose your subsidized coverage if you change jobs. Even if you remain covered through your job, group plans typically don’t replace as large a percentage of income as an individual plan could, and disability benefits from employer-paid plans are taxable if the premiums were paid by the employer.

An individual disability income policy could help replace a percentage of your income (up to the policy limits) if you’re unable to work as a result of an illness or injury. Depending on the policy, benefits may be paid for a specified number of years or until you reach retirement age. Some policies pay benefits if you cannot work in your current occupation; others might pay only if you cannot work in any type of job. If you pay the premiums yourself, disability benefits are usually free of income tax. And the policy will stay in force regardless of your employment situation as long as the premiums are paid.

Social Security offers some disability protection, but qualifying is difficult. And the monthly benefit you might receive ($1,258, on average) will probably not be enough to replace your lost income.2

Having an individual disability income insurance policy could make the difference between being comfortable and living on the edge.

A complete statement of coverage, including exclusions, exceptions, and limitations, is found only in the policy. It should be noted that carriers have the discretion to raise their rates and remove their products from the marketplace.

  1. Council for Disability Awareness, 2019
  2. Social Security Administration, 2020

Round Rock Advisors LLC is a registered investment advisor. Information in this message is for the intended recipients] only. Please visit our website www.RoundRockAdvisors.com for important disclosures.

This newsletter is intended to provide general information. It is not intended to offer or deliver tax, legal, or specific investment advice in any way. For tax or legal advice, please consult a qualified tax professional or legal counsel. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable.

Cited content on in this newsletter is based on generally-available information and is believed to be reliable. The Advisor does not guarantee the performance of any investment or the accuracy of the information contained in this newsletter. For information on the Advisor’s services and fees, please refer to the Round Rock’s Form ADV Part 2. The Advisor will provide all prospective clients with a copy of Round Rock’s Form ADV2A and applicable Form ADV 2Bs. Please contact us to request a free copy via .pdf or hardcopy.

 

April 2020 Newsletter

Tax Refund: Spend or Save

About 72% of taxpayers received a refund in 2018 and 2019. Here’s how consumers spent the tax refunds they received in 2018 and what they planned to do with their 2019 refunds.

Social Security May Offer a Lifetime of Protection

Social Security is much more than a retirement program. Most Americans are protected by the Old-Age, Survivors, and Disability Insurance (OASDI) program — the official name of Social Security — from birth through old age. Here are four times in your life when Social Security might matter to you or the people you care about.

A Wide Safety Net

Current Social Security beneficiaries

Source: Social Security Administration, 2019

When You Start Your Career

Your first experience with Social Security might be noticing that your paycheck is smaller than you expected due to FICA (Federal Insurance Contributions Act) taxes. Most jobs are covered by Social Security, and your employer is required to withhold payroll taxes to help fund Social Security and Medicare.

Although no one likes to pay taxes, when you work and pay FICA taxes, you earn Social Security credits, which enable you (and your eligible family members) to qualify for Social Security retirement, disability, and survivor benefits. Most people need 40 credits (10 years of work) to be eligible for Social Security retirement benefits, but fewer credits may be needed to receive disability benefits or for family members to receive survivor benefits.

If You Become Disabled

Disability can strike anyone at any time. Research shows that one in four of today’s 20-year-olds will become disabled before reaching full retirement age.1

Social Security disability benefits can replace part of your income if you have a severe physical or mental impairment that prevents you from working. Your disability generally must be expected to last at least a year or result in death.

When You Marry…or Divorce

Married couples may be eligible for Social Security benefits based on their own earnings or on a spouse’s earnings.

When you receive or are eligible for retirement or disability benefits, your spouse who is age 62 or older may also be able to receive benefits based on your earnings if you’ve been married at least a year. A younger spouse may be able to receive benefits if he or she is caring for a child under age 16 or disabled before age 22 who is receiving benefits based on your earnings.

If you were to die, your spouse may be eligible for survivor benefits based on your earnings. Regardless of age, your spouse who has not remarried may receive benefits if caring for your child who is under age 16 or disabled before age 22 and entitled to receive benefits based on your earnings. At age 60 or older (50 or older if disabled), your spouse may be able to receive a survivor benefit even if not caring for a child.

If you divorce and your marriage lasted at least 10 years, your former unmarried spouse may be entitled to retirement, disability, or survivor benefits based on your earnings.

When You Welcome a Child

Your child may be eligible for Social Security if you are receiving retirement or disability benefits, and may receive survivor benefits in the event of your death. In fact, according to the Social Security Administration, 98% of children could get benefits if a working parent dies.2 Your child must be unmarried and under age 18 (19 if a full-time student) or age 18 or older with a disability that began before age 22.

In certain cases, grandchildren and stepchildren may also be eligible for benefits based on your earnings.

Know the Rules

To receive any type of Social Security benefit, you must meet specific eligibility requirements, only some of which are covered here. For more information, visit ssa.gov.

1-2) Social Security Administration, 2019

Five Key Benefits of the CARES Act for Individuals and Businesses

By now you know that Congress has passed a $2 trillion relief bill to help keep individuals and businesses afloat during these difficult times. The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains many provisions. Here are five that may benefit you or your business.

  1. Recovery Rebates

Many Americans will receive a one-time cash payment of $1,200. Each U.S. resident or citizen with an adjusted gross income (AGI) under $75,000 ($112,500 for heads of household and $150,000 for married couples filing a joint return) who is not the dependent of another taxpayer and has a work-eligible Social Security number, may receive the full rebate. Parents may also receive an additional $500 per dependent child under the age of 17.

The $1,200 rebate amount will decrease by $5 for every $100 in excess of the AGI thresholds until it completely phases out. For example, the $1,200 rebate completely phases out at an AGI of $99,000 for an individual taxpayer and the $2,400 rebate phases out at $198,000 for a married couple filing a joint return.

Rebate payments will be based on 2019 income tax returns (2018 if no 2019 return was filed) and will be sent by the IRS via direct deposit or mail. Eligible individuals who receive Social Security benefits but don’t file tax returns will also receive these payments, based on information provided by the Social Security Administration.

The rebate is not taxable. Because the rebate is actually an advance on a refundable tax credit against 2020 taxes, someone who didn’t qualify for the rebate based on 2018 or 2019 income might still receive a full or partial rebate when filing a 2020 tax return.

  1. Extra Unemployment Benefits

The federal government will provide $600 per week to those who are eligible for unemployment benefits as a result of COVID-19, on top of any state unemployment benefits an individual receives. Unemployed individuals may qualify for this additional benefit for up to four months (through July 31.) The federal government will also fund up to an additional 13 weeks of unemployment benefits for those who have exhausted their state benefits (up to 39 weeks of benefits) through the end of 2020.

The CARES Act also provides assistance to workers who have been affected by the COVID-19 pandemic but who normally wouldn’t be eligible for unemployment benefits, including self-employed individuals, part-time workers, freelancers, independent contractors, and gig workers. Individuals who have to leave work for coronavirus-related reasons are also potentially eligible for benefits.

  1. Federal Student Loan Deferrals

For all borrowers of federal student loans, payments of principal and interest will be automatically suspended for six months, through September 30, without penalty to the borrower. Federal student loans include Direct Loans (which includes PLUS Loans), as well as Federal Perkins Loans and Federal Family Education Loan (FFEL) Program loans held by the Department of Education. Private student loans are not eligible.

  1. IRA and Retirement Plan Distributions

Required minimum distributions from IRAs and employer-sponsored retirement plans will not apply for the 2020 calendar year. In addition, the 10% premature distribution penalty tax that would normally apply for distributions made prior to age 59% (unless an exception applied) is waived for coronavirus-related retirement plan distributions of up to $100,000. The tax obligation may be spread over three years, with up to three years to reinvest the money.

The CARES Act provides economic relief for individuals and businesses affected by the coronavirus pandemic

  1. Help for Businesses

The CARES Act includes several provisions designed to help self-employed individuals and small businesses weather the financial impact of the COVID-19 crisis.

Self-employed individuals and small businesses with fewer than 500 employees may apply for a Paycheck Protection Loan through a Small Business Association (SBA) lender. Businesses may borrow up to 2.5 times their average monthly payroll costs, up to $10 million. This loan may be forgiven if an employer continues paying employees during the eight weeks following the origination of the loan and uses the money for payroll costs (including health benefits), rent or mortgage interest, and utility costs.

Also available are emergency grants of up to $10,000 (that do not need to be repaid if certain conditions are met), SBA disaster loans, and relief for business owners with existing SBA loans.

Businesses of all sizes may qualify for a refundable payroll tax credit of 50% of wages paid to employees during the crisis, up to $10,000 per employee. The credit is applied against the employer’s share of Social Security payroll taxes.

Why You Might Need Disability Income Insurance

Your ability to earn an income may be your most valuable asset. It might be difficult to make ends meet if you are unable to work due to illness or injury.

According to one report, only 34% of men and 20% of women said they felt extremely confident in supporting their households during a period of income loss.1 It’s important to assess your own situation and determine whether you have appropriate financial backup in the event that you cannot work due to a disability.

Your employer may offer long-term disability coverage, but you could lose your subsidized coverage if you change jobs. Even if you remain covered through your job, group plans typically don’t replace as large a percentage of income as an individual plan could, and disability benefits from employer-paid plans are taxable if the premiums were paid by the employer.

An individual disability income policy could help replace a percentage of your income (up to the policy limits) if you’re unable to work as a result of an illness or injury. Depending on the policy, benefits may be paid for a specified number of years or until you reach retirement age. Some policies pay benefits if you cannot work in your current occupation; others might pay only if you cannot work in any type of job. If you pay the premiums yourself, disability benefits are usually free of income tax. And the policy will stay in force regardless of your employment situation as long as the premiums are paid.

Social Security offers some disability protection, but qualifying is difficult. And the monthly benefit you might receive ($1,258, on average) will probably not be enough to replace your lost income.2

Having an individual disability income insurance policy could make the difference between being comfortable and living on the edge.

A complete statement of coverage, including exclusions, exceptions, and limitations, is found only in the policy. It should be noted that carriers have the discretion to raise their rates and remove their products from the marketplace.

  1. Council for Disability Awareness, 2019
  2. Social Security Administration, 2020

Round Rock Advisors LLC is a registered investment advisor. Information in this message is for the intended recipients] only. Please visit our website www.RoundRockAdvisors.com for important disclosures.

This newsletter is intended to provide general information. It is not intended to offer or deliver tax, legal, or specific investment advice in any way. For tax or legal advice, please consult a qualified tax professional or legal counsel. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable.

Cited content on in this newsletter is based on generally-available information and is believed to be reliable. The Advisor does not guarantee the performance of any investment or the accuracy of the information contained in this newsletter. For information on the Advisor’s services and fees, please refer to the Round Rock’s Form ADV Part 2. The Advisor will provide all prospective clients with a copy of Round Rock’s Form ADV2A and applicable Form ADV 2Bs. Please contact us to request a free copy via .pdf or hardcopy.

Page 4 of 4

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020

March 2020 Newsletter

Relief for taxpayers

Due to the coronavirus pandemic, the due date for filing federal income tax returns and making tax payments has been postponed by the IRS from Wednesday, April 15, 2020, to Wednesday, July 15, 2020. No interest, penalties, or additions to tax will be incurred by taxpayers during this 90-day relief period for any return or payment postponed under this relief provision.

The relief applies automatically to all taxpayers, and they do not need to file any additional forms to qualify for the relief. The relief applies to federal income tax payments (for taxable year 2019) and estimated tax payments (for taxable year 2020) due on April 15, 2020, including payments of tax on self-employment income. There is no limit on the amount of tax that can be deferred.

Note: Under this relief provision, no extension is provided for the payment or deposit of any other type of federal tax, or for the filing of any federal information return.

Need more time?

If you’re not able to file your federal income tax return by the July due date, you can file for an extension by the July due date using IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Filing this extension gives you an additional three months (until October 15, 2020) to file your federal income tax return. You can also file for an automatic three-month extension electronically (details on how to do so can be found in the Form 4868 instructions). There may be penalties for failing to file or for filing late.

Filing for an extension using Form 4868 does not provide any additional time to pay your tax. When you file for an extension, you have to estimate the amount of tax you will owe and pay this amount by the July filing due date. If you don’t pay the amount you’ve estimated, you may owe interest and penalties. In fact, if the IRS believes that your estimate was not reasonable, it may void your extension.

Tax refunds

The IRS encourages taxpayers seeking a tax refund to file their tax return as soon as possible. Apparently, most tax refunds are still being issued within 21 days of the IRS receiving a tax return.

To find out more click here

Round Rock Advisors LLC is a registered investment advisor. Information in this message is for the intended recipients] only. Please visit our website www.RoundRockAdvisors.com for important disclosures.

This newsletter is intended to provide general information. It is not intended to offer or deliver tax, legal, or specific investment advice in any way. For tax or legal advice, please consult a qualified tax professional or legal counsel. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable.

Cited content on in this newsletter is based on generally-available information and is believed to be reliable. The Advisor does not guarantee the performance of any investment or the accuracy of the information contained in this newsletter. For information on the Advisor’s services and fees, please refer to the Round Rock’s Form ADV Part 2. The Advisor will provide all prospective clients with a copy of Round Rock’s Form ADV2A and applicable Form ADV 2Bs. Please contact us to request a free copy via .pdf or hardcopy.

This communication is strictly intended for individuals residing in the state(s) of CT. No offers may be made or accepted from any resident outside the specific states referenced.

February 2020 Newsletter

Tips for Targeting Your Retirement Savings Goal

What if you’re saving as much as you can, but still feel that your retirement savings goal is out of reach? As with many of life’s toughest challenges, it may help to focus less on the big picture and more on the details.

Regularly review your assumptions

Whether you use a simple online calculator or run a detailed analysis, your retirement savings goal is based on certain assumptions that will, in all likelihood, change. Inflation, rates of return, life expectancies, salary adjustments, retirement expenses, Social Security benefits — all of these factors are estimates.

That’s why it’s important to review your retirement savings goal and its underlying assumptions regularly — at least once per year and when life events occur. This will help ensure that your goal continues to reflect your changing life circumstances as well as market and economic conditions.

Break down your goal

Instead of viewing your goal as ONE BIG NUMBER, try to break it down into an anticipated monthly income need. That way you can view this monthly need alongside your estimated monthly Social Security benefit, income from your retirement savings, and any pension or other income you expect.

This can help the planning process seem less daunting, more realistic, and most important, more manageable. It can be far less overwhelming to brainstorm ways to close agap of, say, a few hundred dollars a month than a few hundred thousand dollars over the duration of your retirement.

Stash extra cash

While every stage of life brings financial challenges, each stage also brings opportunities. Whenever possible — for example, when you pay off a credit card or school loan, receive a tax refund, get a raise or promotion, celebrate your child’s college graduation (and the end of tuition payments), or receive an unexpected windfall — put some of that extra money toward retirement.

Reimagine retirement

When people dream about retirement, they often picture exotic travel, endless rounds of golf, and fancy restaurants. Yet people often derive happiness from ordinary, everyday experiences such as socializing with friends, reading a good book, taking a scenic drive, and playing board games with grandchildren.

While your dream may include days filled with extravagant leisure activities, your retirement reality may turn out to be much different, and that actually may be a matter of choice.

Do your best

Setting a goal is a very important first step in putting together your retirement savings strategy, but don’t let the number scare you. As long as you have an estimate in mind, review it regularly, break it down to a monthly need, and increase your savings whenever possible, you can take heart knowing that you’re doing your best to prepare for whatever the future may bring.

The SECURE Act Offers New Opportunities for Individuals and Businesses

The SECURE Act (Setting Every Community Up for Retirement Enhancement Act) is major legislation that was passed by Congress as part of a larger spending bill and signed into law by the president in December. Here are a few provisions that may affect you. Unless otherwise noted, the new rules apply to tax or plan years starting January 1,2020.

If you’re still saving for retirement

To address increasing life expectancies, the new law repeals the prohibition on contributions to a traditional IRA by someone who has reached age 70%. Starting with 2020 contributions, the age limit has been removed, but individuals must still have earned income.

If you’re not ready to take required minimum distributions

Individuals can now wait until age 72 to take required minimum distributions (RMDs) from traditional, SEP, and SIMPLE IRAs and retirement plans instead of taking them at age 70%. (Technically, RMDs must start by April 1 of the year following the year an individual reaches age 72 or, for certain employer retirement plans, the year an individual retires, if later).

If you’re adding a child to your family

Workers can now take penalty-free early withdrawals of up to $5,000 from their qualified retirement plans and IRAs to pay for expenses related to the birth or adoption of a child. (Regular income taxes still apply.)

If you’re paying education expenses

Individuals with 529 college savings plans may now be able to use account funds to help pay off qualified student loans (a $10,000 lifetime limit applies per beneficiary or sibling). Account funds may also be used for qualified higher-education expenses for registered apprenticeship programs. Distributions made after December 31, 2018, may qualify.*

If you’re working part-time

Part-time workers who log at least 500 hours in three consecutive years must be allowed to participate in a company’s elective deferral retirement plan. The previous requirement was 1,000 hours and one year of service. The new rule applies to plan years beginning on or after January 1,2021.

If you’re an employer offering a retirement plan

Employers that offer plans with an automatic enrollment feature may automatically increase employee contributions until they reach 15% ofpay (the previous cap was 10% of pay). Employees will have the opportunity to opt out of the increase.

Small employers may also benefit from new tax credit incentives. The tax credit that small businesses may take for starting a new retirement plan has increased. Employers may now take a credit equal to the greater of (1)

$500 or (2) the lesser of (a) $250 times the number of non-highly compensated eligible employees or (b) $5,000. The previous maximum credit amount allowed was 50% of startup costs up to a maximum of $1,000 (i.e., a $500 maximum credit).

In addition, a new tax credit of up to $500 is available to employers that launch a new SIMPLE IRA or 401(k) plan with automatic enrollment.

These credits are available for three years, and employers that qualify may claim both credits.

*There are generally fees and expenses associated with 529 savings plan participation. Investments may lose money or not perform well enough to cover college costs as anticipated. Investment earnings accumulate on a tax-deferred basis, and withdrawals are tax-free if used for qualified higher-education expenses. For withdrawals not used for qualified higher-education expenses, earnings may be subject to taxation as ordinary income and possibly a 10% federal income tax penalty. Discuss the tax implications of a 529 savings plan with your legal and/or tax advisors; these can vary significantly from state to state. Most states offer their own 529 plans, which may provide advantages and benefits exclusively for residents and taxpayers, including financial aid, scholarship funds, and protection from creditors.Before investing in a 529 savings plan, consider the investment objectives, risks, charges, and expenses carefully. Obtain the official disclosure statements and applicable prospectuses — which contain this and other information about the investment options, underlying investments, and investment company — from your financial professional. Read these materials carefully before investing.

 

January 2020 Newsletter

Socially Responsible Investing: Aligning Your Money with Your Values

Sustainable, responsible, and impact (SRI) investing (also called socially responsible investing) has been around for a long time, but growing interest has moved it into the mainstream. U.S. SRI assets reached $12 trillion in 2018, 38% more than in 2016. SRI investments now account for about one-fourth of all professionally managed U.S. assets.1

Surveys suggest that many people want their investment dollars to have a positive impact on society.2 Of course, personal values are subjective, and investors may have very different beliefs and priorities.

But there is also a wider recognition that some harmful business practices can affect a corporation’s bottom line and its longer-term prospects. In some instances, good corporate citizenship may boost a company’s public image and help create value, whereas shortsighted actions taken to cut costs could cause more expensive damage in the future.

Data-driven decisions

Services that provide research and ratings for investment analysis may also verify and publish environmental, social, and governance (ESG) data associated with publicly traded companies. Money managers who use SRI strategies often integrate ESG factors with traditional financial analysis. Some examples of ESG issues include environmental practices, employee relations, human rights, product safety and utility, and respect for human rights.

For example, an SRI approach might include companies with positive ESG ratings while screening out companies that raise red flags by creating a high level of carbon emissions, engaging in questionable employment practices, investing in countries with poor human rights records, or profiting from certain products or services (e.g., tobacco, alcohol, gambling, weapons).

Some investors may not want to avoid entire industries. As an alternative, they could use ESG data to compare how businesses in the same industry have adapted to meet social and environmental challenges, and to gain some insight into which companies may be exposed to risks or have a competitive advantage.

Investment vehicles

Many SRI mutual funds and exchange-traded funds (ETFs) are broad based and diversified, some are actively managed, and others track a particular index with its own universe of SRI stocks.

Specialty funds, however, may focus on a narrower theme such as clean energy; they can be more volatile and carry additional risks that may not be suitable for all investors. It’s important to keep in mind that different SRI funds may focus on very different ESG criteria, and there is no guarantee that an SRI fund will achieve its objectives.

The number of mutual funds and ETFs incorporating ESG factors has grown rapidly from 323 in 2012 to 705 in 2018.3 As the universe of SRI investments continues to expand, so does the opportunity to build a portfolio that aligns with your personal values as well as your asset allocation, risk tolerance, and time horizon.

As with all stock investments, the return and principal value of SRI stocks and investment funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Asset allocation and diversification do not guarantee a profit or protect against investment loss.

Investment funds are sold by prospectus.

Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

1-3 US SIF Foundation, 2018

According to a recent survey, 76% of Americans reported having at least one financial regret. Over half of this group said it had to do with savings: 27% didn’t start saving for retirement soon enough, 19% didn’t contribute enough to an emergency fund, and 10% wish they had saved more for college.1

The saving conundrum

What’s preventing Americans from saving more? It’s a confluence of factors: stagnant wages over many years; the high cost of housing and college; meeting everyday expenses for food, utilities, and child care; and squeezing in unpredictable expenses for things like health care, car maintenance, and home repairs. When expenses are too high, people can’t save, and they often must borrow to buy what they need or want, which can lead to a never-ending cycle of debt.

People make financial decisions all the time, and sometimes these decisions don’t pan out as intended. Hindsight is 20/20, of course. Looking back, would you change anything?

Paying too much for housing

Are housing costs straining your budget? A standard lender guideline is to allocate no more than 28% of your income toward housing expenses, including your monthly mortgage payment, real estate taxes, homeowners insurance, and association dues (the “front-end” ratio), and no more than 36% of your income to cover all your monthly debt obligations, including housing expenses plus credit card bills, student loans, car loans, child support, and any other debt that shows on your credit report and requires monthly payments (the “back-end” ratio).

But just because a lender determines how much you can afford to borrow doesn’t mean you should. Why not set your ratios lower? Many things can throw off your ability to pay your monthly mortgage bill down the road — a job loss, one spouse giving up a job to take care of children, an unexpected medical expense, tuition bills for you or your child.

Potential solutions: To lower your housing costs, consider downsizing to a smaller home (or apartment) in the same area, researching and moving to a less expensive town or state, or renting out a portion of your current home. In addition, watch interest rates and refinance when the numbers make sense.

Paying too much for college

Outstanding student debt levels in the United States are off the charts, and it’s not just students who are borrowing. Approximately 15million student loan borrowers are age 40 and older, and this demographic accounts for almost 40% of all student loan debt.2

Potential solutions: If you have a child in college now, ask the financial aid office about the availability of college-sponsored scholarships for current students, or consider having your child transfer to a less expensive school. If you have a child who is about to go to college, run the net price calculator that’s available on every college’s website to get an estimate of what your out-of-pocket costs will be at that school. Look at state universities or community colleges, which tend to be the most affordable. For any school, understand exactly how much you and/or your child will need to borrow — and what the monthly loan payment will be after graduation — before signing any loan documents.

Paying too much for your car

Automobile prices have grown rapidly in the last decade, and most drivers borrow to pay for their cars, with seven-year loans becoming more common.3 As a result, a growing number of buyers won’t pay off their auto loans before they trade in their cars for a new one, creating a cycle of debt.

Potential solutions: Consider buying a used car instead of a new one, be proactive with maintenance and tuneups, and try to use public transportation when possible to prolong the life of your car. As with your home, watch interest rates and refinance when the numbers make sense.

Keeping up with the Joneses

It’s easy to want what your friends, colleagues, or neighbors have — nice cars, trips, home amenities, memberships — and spend money (and possibly go into debt) to get them. That’s a mistake. Live within your means, not someone else’s.

Potential solutions: Aim to save at least 10% of your current income for retirement and try to set aside a few thousand dollars for an emergency fund (three to six months’ worth of monthly expenses is a common guideline). If you can’t do that, cut back on discretionary items, look for ways to lower your fixed costs, or explore ways to increase your current income.

  1. Bankrate’s Financial Security Index, May 2019
  2. Federal Reserve Bank of New York, Student Loan Data and Demographics, September 2018
  3. The Wall Street Journal, The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Their Cars, October 1,2019

Every year, the Internal Revenue Service announces cost-of-living adjustments that affect contribution limits for retirement plans and various tax deduction, exclusion, exemption, and threshold amounts. Here are a few of the key adjustments for 2020.

Employer retirement plans

  • Employees who participate in 401(k), 403(b), and most 457 plans can defer up to $19,500 in compensation in 2020 (up from $19,000 in 2019); employees age 50 and older can defer up to an additional $6,500 in 2020 (up from $6,000 in 2019).
  • Employees participating in a SIMPLE retirement plan can defer up to $13,500 in 2020 (up from $13,000 in 2019), and employees age 50 and older can defer up to an additional $3,000 in 2020 (the same as in 2019).

IRAs

The combined annual limit on contributions to traditional and Roth IRAs is $6,000 in 2020 (the same as in 2019), with individuals age 50 and older able to contribute an additional $1,000.

For individuals who are covered by a workplace retirement plan, the deduction for contributions to a traditional IRA phases out for the following modified adjusted gross income (MAGI) ranges:

2019 2020
Single/head $64,000 – $65,000 –
of household (HOH) $74,000 $75,000
Married filing $103,000 – $104,000 –
jointly (MFJ) $123,000 $124,000
Married filingseparately(MFS) $0 – $10,000 $0 – $10,000

Note: The 2020 phaseout range is $196,000 – $206,000 (up from $193,000 – $203,000 in 2019) when the individual making the IRA contribution is not covered by a workplace retirement plan but is filing jointly with a spouse who is covered.

The modified adjusted gross income phaseout ranges for individuals to make contributions to a Roth IRA are:

Estate and gift tax

  • The annual gift tax exclusion for 2020 is $15,000, the same as in 2019.
  • The gift and estate tax basic exclusion amount for 2020 is $11,580,000, up from $11,400,000 in 2019.

Standard deduction

2019 2020
Single $12,200 $12,400
HOH $18,350 $18,650
MFJ $24,400 $24,800
MFS $12,200 $12,400
Note: The additional standard deduction amount for the blind or aged (age 65 or older) in 2020 is $1,650 (the same as in 2019) for single/HOH or $1,300 (the same as in 2019) for all other filing statuses. Special rules apply if you can be claimed as a dependent by another taxpayer.Alternative minimum tax (AMT)
2019 2020
Maximum AMT exemption amount
Single/HOH $71,700 $72,900
MFJ $111,700 $113,400
MFS $55,850 $56,700
Exemption phaseout threshold
Single/HOH $510,300 $518,400
MFJ $1,020,600 $1,036,800
MFS $510,300 $518,400
26% rate on AMTI* up to this amount, 28% rate on AMTI above this amount
MFS $97,400 $98,950
All others $194,800 $197,900
*Alternative minimum taxable income
2019 2020
Single/HOH $122,000 – $137,000 $124,000 – $139,000
MFJ $193,000 – $203,000 $196,000 – $206,000
MFS $0 – $10,000 $0 – $10,000