Tune in to Our Special Event 🎧 & More about the CARES Act

Posted by Haddad Nadworny on Sat, Apr 04, 2020 @ 06:30 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

SGN from SNFP Webinars

We are proud to present SGN from SNFP - Some Good News from Special Needs Financial Planning! Lunch -1We are hosting a weekly 15 minute Lunch-n-Learn webinar series focused on actions families can take while they are at home together to help them plan for the future. 

April 10, 2020 @ 12 PM EST. National Siblings Day. 👫Honor your family member by attending our webinar, It's Time to Complete your Letter of Intent. 

There is no time like the present to complete your LOI but this is a big document; where to start and what to focus upon?  We will share tips on what your family should be thinking about when completing key areas of the LOI, as well as who should be involved, where it should be saved and how often to update it. Click the button below or email Alex Nadworny to RSVP and submit questions in advance.

RSVP HERE to attend our Letter of Intent webinar

 

More About the CARES Act: Your RMD is not R for 2020.

CARES actThe CARES Act  (Coronavirus Aid, Relief and Economic Security Act) was signed into law last week and in addition recovery rebates,  the law makes some provisions for retirement plans and accounts.
Specifically:   
  • It waives Required Minimum Distributions (RMDs) for the calendar year 2020 for IRAs, 401(k) plans, section 403(b) plans, and section 457 plans.
  • It permits coronavirus-related distributions without penalty for those who have been, or whose spouse or dependent has been diagnosed with the virus and have experienced certain adverse financial consequences as a result.
  • Plan loans have been broadened for 180 days beginning on the date of the Act to a maximum of $100,000 instead of $50,000 and an account balance limit of 100% instead of 50%.

Please contact your financial advisor to discuss what this might mean for you.  To read more about the provisions of the CARES act, click here. 

 

Tags: Letter of Intent, special needs planning workshops

The Letter of Intent: It's All Up to You

Posted by Haddad Nadworny on Fri, Mar 27, 2020 @ 09:07 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

Updates & News

NEW!! Our workshops are on hold but the educational outreach will continue; stay safe and stay tuned for our new series of 5 minute webinars kicking off in early April. We would like to know what's on your mind; please send us topics and questions that you would like us to cover.

Send us your questions. 

The Arc of Massachusetts 65th Anniversary Celebration has gone virtual- check out the live auction items here

The Massachusetts Down Syndrome Congress (MDSC) conference originally scheduled for March 28 at the DCU center is being reconfigured as a Virtual Annual Conference with speakers, videos and more. Stay tuned to the MDSC for more information. 

It's All Up to You

Our March installment of The Year in Special Needs Planning  focuses on Family. This crisis has pushed the pause button on many of our daily lives. Imagine if you were not able to be there for your child now, when their routine has been completely disrupted and we are asked to isolate ourselves. If you were not there, the people you have designated to care for your child would need detailed information about your child’s history and personal preferences. This information is contained in a Letter of Intent.

Complete or update your Letter of Intent NOW. Being sequestered presents an opportunity to observe and document all of the important facts about your child's care, including the easy-to-overlook small elements  of daily living that bring joy to both your lives. It also is a time to sort out and reflect upon your feelings and expectations when thinking about the future for your child. 

Send us your questions. 

Tags: special needs Letter of Intent

Talking about Covid-19 with People with Disabilities

Posted by Haddad Nadworny on Tue, Mar 17, 2020 @ 08:16 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

Talking to people with disabilities about Covid-19

 

Please view and feel free to share this Coronavirus plain language booklet, Covid-19 Information By and For People with Disabilities, created by Green Mountain Self- Advocates. Its target audience is people with intellectual and developmental disabilities. Simple language is also good for people with low literacy and non-native language speakers.

Click to View, Covid-19 Information By and For People with Disabilities

 

 

 

Tags: Blog

5 Ways To Feel Good When You Are Stuck Inside

Posted by Haddad Nadworny on Sat, Mar 14, 2020 @ 06:00 AM

The Special Needs Financial Planning Team John Nadworny, CFP, CTFA | Cynthia Haddad, CFP | Alexandria Nadworny, CFP,  CTFA

As financial professionals, we always talk to our clients and our audience about the money but let’s not talk about the money today. The markets and the world are upside down, all of our social and business engagements are being cancelled, and we are all worried about the coronavirus.

The most important thing you can do is to stay calm. Stress and anxiety have been shown to reduce the immune system’s effectiveness. Many of us are experiencing the adult version of a two-year-old’s time out: while we don’t have to sit on the stairs, we are advised to stay safe and stay put as much as possible.

Here are 5 things to do when you are stuck inside that can make you feel good and are not on-line shopping, (Sorry- the financial planner in us just came out).

Calling a loved one

 

1. Talk, FaceTime, or Call people who make you happy.

  • Call someone whom you haven’t spoken to recently: you’ll have a lot more to catch up on than the recent events.

  • Your children, whether they are in school or working, are impacted and talking with a parent can help them stay calm about all the cancellations and uncertainty around them. Just open the conversation and then sit back and listen…

Duomo Puzzle

 

2. Plan a vacation and then do a puzzle of the place!

Pick a destination you would like to visit when all of this blows over –and it will end at some point- and then order a puzzle of it!  Not only will the puzzle keep you focused on how beautiful your destination will be, when you get there you will know every inch of the site!  

Feng Shui Bagna

 

3. Check the Feng Shui of your home.  

Since you are spending a lot of time inside your home, why not check out its Feng Shui? Feng Shui is living in harmony with nature. There is a tool called a Feng Shui Bagua, that directs you on how to align your home or office space harmoniously. In Feng Shui, every home and room is divided into different energy centers that represent important areas of life. In brief, the areas are Career, Knowledge, Family, Wealth, Fame, Relationships, Children, Travel and Health and the Bagua, which means eight areas in Chinese, is a map of their locations.

Chocolate Lasagna

 

4. Bake or cook something delicious.

Indulge in a treat you would normally not have – chocolate lasagna anyone?

5. What is more productive than getting organized?

Pick your project: closet, basement, garage, desk, junk drawer- the list of things in need of organization is endless. Set out to do one thing and then bask in the feeling of accomplishment!

 

 

The "10- Year Rule" and After-Tax Strategies to Consider

Posted by Haddad Nadworny on Sat, Feb 29, 2020 @ 06:00 AM

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for 2020. Please contact Alex Nadworny(anadworny@affiniafg.com / 781-365-8586) to  schedule a talk for your group. 

 

the stretch is goneThe SECURE Act* eliminates the “stretch” IRA distribution option for non-eligible designated beneficiaries (see Who is effected). It requires all assets be distributed to non-eligible designated beneficiaries by the end of 10 years - called the "10 year rule"- however annual RMDs are no longer required from these accounts.

In our last blog, When a Special Needs Trust is the Beneficiary of a Retirement Account, we discussed the strategy of having a Special Needs Trust (SNT), with the family member with a disability as eligible designated beneficiary of the SNT, become the owner of an IRA or other qualified retirement plan. 

For everyone who is not an eligible designated beneficiary, the financial impact of the "10 year rule" and deferring distributions is more substantial than one might think.

Case Illustration:

Considering Roth Conversions when subject to the "10 year rule"

Note: This is a hypothetical example and is not representative of any specific situation.  Your results will vary.  The hypothetical rates of return used to do not reflect the deduction of fees and charges inherent to investing. 

Consider the case of Michael, a 40-year-old doctor whose mother passed away suddenly last month leaving him an IRA with a balance of $1 million.

His pre-SECURE Act plan had been to establish a legacy from his mother to his children.  He would draw out the minimum required distribution from the account each year and leave the balance to grow tax -deferred to pass on upon his death.

Now with the mandatory 10-year distribution rule, Michael needs a new analysis to make an informed choice of how to handle the distributions from his inherited IRA.

He reached out to his financial advisor who modeled 2 options for him given the current law. It was shocking to see the massive effect tax- deferred investing has on savings; the SECURE Act potentially cost Michael more than $1 million over a 30-year period.

Michael’s action with the inherited IRA

After-tax account value in 30 years

assuming a 6% pre-tax earnings rate and 30% income tax rate on the earnings and distributions

BEFORE the Secure Act (not an option now)- just take RMDs, let balance stay in the account

$3, 375,243

Leave the money to grow in the tax deferred account for 10 years and then withdraw a lump sum.

$2,805, 905

Take the $1,000,000 distribution today and pursue growth in a taxable account for 10 years.

$2,308,139

 

Watch out for bracket creep

Michael has an established medical practice and is entering his peak earning years. Taking distributions from a qualified tax deferred account does not seem appealing but he has to do something within the next 10 years. The chart above shows taking a large distribution at the end of 10 years as the optimal choice under the new law but there could be drawbacks for Michael. It is important that the distributions not increase his income to the point of increasing his marginal tax rate, effecting his eligibility for qualified business deductions or subjecting his investment income to an additional surtax.

Key_backdoor_ROTHCould converting to a Roth IRA be helpful?

Michael’s advisor asked him to consider converting a portion of the inherited IRA to a Roth IRA. He has space available within his current tax bracket to take a distribution without raising his marginal tax rate and he also has the cash available to pay the taxes that would result from this action. 

Having the full amount of money invested in the new Roth could potentially reap the yield benefits of being allowed to grow tax- free and although Michael’s beneficiaries would also be subject to the 10-year rule upon his death, there would be no tax liability under current laws on distributions from a Roth.  

* The Setting Every Community Up for Retirement Enhancement or SECURE Act was signed into law on December 20, 2019, becoming effective January 1, 2020. The law provides important changes for individuals and small businesses to consider in their retirement, estate and tax planning.

 

The Roth IRA offers tax deferral on any earnings in the account.  Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply.  Withdrawals  prior to age 59 ½ or prior to the account being open for 5 years, whichever is later, may result in a 10% IRS tax penalty. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

 Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regard to executing a conversion from a traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor

Financial planning and investment advice offered through Affinia Financial Group, LLC, a registered investment advisor. Securities offered through LPL Financial, member FINRA/SIPC. Special Needs Financial Planning LLC, Affinia Financial Group, LLC and LPL Financial are separate entities.

 

 

Tags: Retirement Planning, Roth IRA

When a Special Needs Trust is the Beneficiary of a Retirement Account

Posted by Haddad Nadworny on Sat, Feb 22, 2020 @ 06:00 AM

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for 2020. Please contact Alex Nadworny(anadworny@affiniafg.com / 781-365-8586) to  schedule a talk for your group. 

stretching into the futureThe SECURE Act* eliminates the “stretch” IRA distribution option for non-exception beneficiaries. It requires all assets be distributed to beneficiaries by the end of 10 years however annual RMDs (Required Minimum Distributions) are no longer required from these accounts.

What was the “stretch” IRA anyway?  

Prior to the SECURE act, retirement account beneficiaries were able to “stretch” the distributions from inherited accounts over the course of their lifetime.  This practice was an especially great benefit to young heirs and heiresses, as RMDs from the inherited accounts were based upon the age of the beneficiary.  The younger the beneficiary, the smaller the RMD, allowing the bulk of the assets to grow tax-deferred over the course of their lifetime and to potentially be inherited by the next generation.  

What it means:

Non-exception beneficiaries inheriting 401(k)s and other defined contribution plans, traditional IRAs and Roth IRAs from individuals who died after 1/1/2020, are subject to the “10-year distribution rule”; they are required to receive a full distribution of all assets of an inherited retirement account by the end of 10 years.

Who is effected: 

Non-exception beneficiaries of people inheriting 401(k)s and other defined contribution plans, traditional IRAs and Roth IRAs from individuals who died after 1/1/2020, are subject to the “10-year distribution rule”. 

If you own an inherited IRA from a person who died before 12/31/2019, the 10-year rule does not apply to that IRA over your lifetime. At your death, beneficiaries of this IRA will be subject to the 10-year rule.

Exception beneficiaries are NOT subject to the 10-year rule. They may treat the inherited IRA as their own and take distributions over their lifetime.

  • Spouses
    • A designated beneficiary will inherit the account, and overrides any provisions in a will.
    • If there is no will or beneficiary designation, the spouse will generally inherit the IRA. 
    • There are some exceptions, specifically in community property states.  
  • Disabled or chronically ill individuals
  • Individuals who are not more than 10 years younger than the account owner
  • Minor children. But once the child reaches the age of majority, he or she has 10 years to withdraw the money from the account.

   (Source: Elder Law Answers) 

Impact on the retiree/ IRA owner's planning:

The elimination of the stretch provision impacts both the retirement account owner and the beneficiaries. Given the current demographics, many recipients of inherited IRAs will have to take distributions during their peak earning years, potentially bumping them into a higher marginal tax bracket. It may make sense for retirees to consider strategies to mitigate this effect. Individuals with sizable retirement accounts are advised to speak with their tax advisor to discuss the impact of this change on their estate planning 

When a Special Needs Trust (SNT) is the beneficiary of the IRA.

There are 2 types of trusts that are often set up as beneficiaries of a retirement account: (1) a conduit or pass-through trust and (2) an accumulation or complex trust. The diagram below depicts the treatment of distributions from the inherited IRA when a trust is the beneficiary.

IRA RMD

 

Special Needs Trusts (SNTs) are accumulation or complex trusts. The trustee will have the authority to use the funds on behalf of the beneficiary over their lifetime. The RMD will be calculated using this “stretch” formula.

Even though the stretch provision still applies for beneficiaries with special needs, the elimination of the stretch provision for beneficiaries who do not have special needs may necessitate a change in planning strategy. In the past, many estate planners recommended that non-qualified assets be designated for funding a SNT upon a parent’s death. Individuals who have pursued this strategy may want to revisit both their own and their beneficiaries’ situations to determine if this still makes sense given the eligibility of the family member with a disability for the “stretch’ provision of an inherited IRA.

New Strategy: The SNT, with the family member with a disability as an exception beneficiary of the SNT, will inherit the IRA and become the owner.

In addition to the inherited IRA, the SNT will also own a non-retirement account for the purposes of receiving distributions (annual RMDs) from the inherited IRA and will pay taxes on this distribution.  The trustee may utilize this money to pay for expenses for the individual while also protecting their eligibility for government benefits.

Upon the death of the beneficiary with special needs, proceeds of the IRA will flow to the contingent beneficiary and the 10-year rule will go into effect.

 

Stay tuned for Part 2 next week with further discussion of planning considerations and strategies in light of the SECURE Act.

* The Setting Every Community Up for Retirement Enhancement or SECURE act was signed into law on December 20, 2019, becoming effective January 1, 2020. The law provides important changes for individuals and small businesses to consider in their retirement, estate and tax planning.

 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Financial planning and investment advice offered through Affinia Financial Group, LLC, a registered investment advisor. Securities offered through LPL Financial, Member FINRA/SIPC. Affinia Financial Group and LPL Financial are separate entities.

 

 

Tags: Retirement Planning, Special Needs Trusts

The Secure Act and Your RMD 🎂

Posted by Haddad Nadworny on Sat, Feb 15, 2020 @ 06:00 AM

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for 2020. Please contact Alex Nadworny(anadworny@affiniafg.com / 781-365-8586) to  schedule a talk for your group. 

February is time to show your Retirement Planning some Love❤️.

The Secure Act and your RMD🎂

The Setting Every Community Up for Retirement Enhancement or SECURE act was signed into law on December 20, 2019, becoming effective January 1, 2020. The law provides important changes for individuals and small businesses to consider in their retirement, estate and tax planning. 

Congratulations You're 70 1/2- 72The SECURE act moves the age at which a retirement account owner must begin to withdraw from their account from 70½  to 72 years of age.  The account owner will need to take an RMD from each of their qualified retirement accounts by April 1 of the following year.

What it means:  Individuals  are able to defer taking distributions from their qualified retirement accounts for an additional 18 months.  

The fine print: For those between the ages of 70½ and 72, there is no grandfather clause. 

Case study: Who has to take distributions in 2020, 2021 and 2022.

Note: All individuals and situations cited in this case are fictional and for illustration purposes only.

Example 1: Sam’s birthday is June 30, 1949.  He turned 70 in 2019 and 70 ½ on December 30, 2019.  He is the youngest person to whom the old rules apply. Sam, and everyone older than Sam, are required to take an RMD beginning in 2019 and must do so by April 1, 2020.  Sam is also required to take a distribution for every year thereafter, meaning 2020, 2021, ….  

Example 2:  Sandy’s birthday is one day later than Sam, July 1, 1949. Under the new law, she is required to take a distribution from her qualified retirement accounts the year she turns 72 or 2021. Sandy will have until April 1 of 2022, to take the distribution(s) for 2021 and she will be required to take an RMD from her retirement accounts every year following 2021. She needs to be aware that if she does wait until 2022 to take the first distribution, she will be required to take a second distribution that same year (2022).  

 To read more, see our previous blog, 10 Answers You Need Before Planning for Retirement.

 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor

Financial planning and investment advice offered through Affinia Financial Group, LLC, a registered investment advisor. Securities offered through LPL Financial, member FINRA/SIPC. Special Needs Financial Planning LLC, Affinia Financial Group, LLC and LPL Financial are separate entities..

 

Tags: Retirement Planning

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