Excitement is building for your child who is about to move out of the house and into a college dorm. As the parent, you are, of course, proud and ecstatic she has been accepted and is attending her favorite college, but at the same time you're a little apprehensive. So many thoughts are running through your head about her moving away from home and living in the big world with all the various decisions to face every day.
As the countless fears may be crossing your mind, one may include getting that dreaded phone call, the one you have had nightmares about in the middle of the night. The phone call notifying you that your child was in an accident. So you rush to the hospital ... But wait, didn't your child already have her 18th birthday? Yes. Well, this means they are a legal adult, and you as a parent no longer have the power or ability to obtain any knowledge or make any decisions for your young adult without the proper legal estate documents.
Since this is the time of year for filing tax returns and paying Uncle Sam is on everyone’s mind, it is a good time to talk about capital gains on investments. Most people know that in taxable accounts when you sell a security for more than you paid for it, you pay tax on the increase. If you hold the investment for more than a year, it is considered a long term capital gain and you pay a lower tax rate than you would on ordinary income, either 15%, 20%, or zero depending on your adjusted gross income.
But what happens if you bought the security over time and not all at once, and then sell part of it? There are a few methods on how you can account for this, and some are more tax beneficial than others. In the past, you kept records of the cost basis and your tax preparer sorted it all out. But in 2011 the IRS started requiring brokerage firms to track cost basis. One consequence of this change is that decisions about which shares to sell need to be made when a security is sold, not at the time your tax return is prepared. It is important that whoever is making the sale of a security (your investment advisor, you, or your broker) understand this and have a strategy on how to sell different “lots” of a security.
Retirement Myths and Realities
We all have some preconceived notions about what retirement will be like. But how do those notions compare with the reality of retirement? Here are four common retirement myths to consider.
1. My retirement won't last that long
The good news is that we're living longer lives. The bad news is that this generally translates into a longer period of time that you'll need your retirement income to last.
Nyhart, the actuarial and employment benefits firm, is a nationally recognized consulting firm located here in Indianapolis. The firm recently made the national news when it published a study of more than 10,000 employee accounts to analyze the readiness of employees to retire by the age of 65.The study found that 81% of adults 18 or older will not be able to retire by age 65. In addition, employees above the age of 55 on average need to contribute more than 45% of income going forward in order to retire by age 65. The average employee relying on the 401(k) as a primary retirement vehicle will not be able to retire until 73 years of age. For this report, Nyhart assumed that the employee would need to replace 70% of the final years' income over their expected life time.