Atlantic Capital Management

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Thursday, 31 July 2014 00:00

Couples Retiring on the Same Page

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Agreeing about what you want from retirement is crucial.

What does a good retirement look like to you? Does it resemble the retirement that your spouse or partner has in mind? It is at least roughly similar?

The Social Security Commission currently projects an average retirement of 19 years for a man and 21 years for a woman (assuming retirement at age 65). So sharing the same vision of retirement (or at least respecting the difference in each other’s visions) seems crucial to retirement happiness.1 

What kind of retirement does your spouse or partner imagine? During years of working, parenting and making ends meet, many couples never really get around to talking about what retirement should look like. If spouses or partners have quite different attitudes about money or dreams that don’t align, that conversation may be deferred for years. Even if they are great communicators, assumptions about what the other wants for the future may prove inaccurate. 

Are couples discussing retirement, or not? It depends on who you ask – or more precisely, what poll you reference.

A 2013 survey of 5,400 U.S. households by Hearts & Wallets (a research firm studying retirement money management trends) found that just 38% of couples plan for retirement together. The fourth Couples Retirement Study conducted by Fidelity Investments (released this February) offered similar results. In that study, 38% of the working couples polled cited some disagreement on what kind of lifestyle they would retire to, 32% disagreed on how much they would need to work in retirement, and 38% hadn’t planned to manage retirement health care costs.2,3

In contrast, Capital One ShareBuilder surveyed 1,008 employed adults this winter and found that on average, couples discuss retirement 14 times a year. (There was no word on the depth or length of those conversations, however.)4        

Be sure to talk about what you want for the future. A few simple questions can get the conversation going, and you might even want to chat about it over a meal or coffee in a relaxing setting. Dreaming and planning together, even on the most basic level, gives you a chance to reacquaint yourselves with your financial needs, goals and personalities. 

To start, ask each other what you see yourselves doing in retirement – individually as well as together. Is the way you are saving and investing conducive to those dreams? 

Think about whether you are making the most of your retirement savings potential. Could you save more? Do you need to? Are you both contributing to tax-advantaged retirement accounts? Are you comfortable with the amount of risk you are assuming?

If your significant other is handling the household finances (and the meetings with financial professionals about a retirement strategy), are you prepared to take over in case of an emergency? When one half of a couple is the “hub” for money matters and investment decisions, the other spouse or partner needs to at least have an understanding of them. If the unexpected occurs, you will want that knowledge. 

Speaking of knowledge, you should also both know who the beneficiaries are for your IRAs, workplace retirement accounts, investment accounts, and life insurance policies, and you both need to know where the relevant paperwork is located. 

A shared vision of retirement is great, and respect for individual variations on it is just as vital. A conversation about how you see retirement today can give you that much more input to plan for tomorrow.            

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 - forbes.com/sites/jamiehopkins/2014/02/03/planning-for-an-uncertain-life-expectancy-in-retirement/ [2/3/14]

2 - heartsandwallets.com/till-death-or-retirement-or-retirement-do-us-part/news/2013/02/ [2/13]

3 - shrm.org/hrdisciplines/benefits/articles/pages/retirement-couples-disagree.aspx [2/7/14]

4 - usatoday.com/story/money/personalfinance/2014/03/16/retirement-planning-couples-fight/6368967/ [3/16/14]

Friday, 11 July 2014 00:00

Donating Highly Appreciated Stock

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It can give you a tax break. It can give a charity a tax break in the future. 

 

Why sell shares when you can gift them? If you have appreciated stocks in your portfolio (and you hold them in a non-qualified account that doesn’t get special tax treatment), then you might want to consider donating those shares to charity rather than selling them someday.   

Why, exactly? Donating appreciated securities to a tax-exempt charity can result in a pair of tax breaks. If you have held the stock for more than a year, you can deduct the fair market value of the stock in the year that you make the donation. If the charity is tax-exempt, it won’t face capital gains tax on the stock if it sells it in the future. Again, this is all provided you donate the shares to the charity out of a non-retirement account (and not out of a qualified retirement plan such as an IRA).1 

When is donating stock a better choice than gifting cash or just selling the shares? Two reasons may motivate you to donate highly appreciated stock to a tax-exempt charity. One, if you own too much company stock or your portfolio isn’t very diverse, it can give you a chance to reduce overweighting in one stock or sector. Two, it might be a smart tax move if you own a number of low-basis stocks. 

If you just hand some cash to the tax-exempt charity, the tax benefit is certainly significant. Cash gifts are deductible up to 50% of AGI, and that lowers their net cost for a donor. As an example, if a donor in the 35% tax bracket gives a 501(c)(3) non-profit organization a gift of $5,000, the net cost can work out to just $3,250 with $1,750 realized in tax savings.2 

If you donate highly appreciated securities that you have owned for at least one year, the tax benefit can be even more significant. You can deduct the full fair market value of the securities (up to 30% of your AGI) and the unrealized gains won’t be taxed either. So the more the stock appreciates, the greater the potential capital gains tax break down the road.2 

If you sell shares of appreciated stock from a taxable account and subsequently donate the proceeds from the sale to charity, then you face capital gains tax on the gain you realize, which effectively trims the tax benefit of a cash donation.3 

If you donate shares of depreciated stock from a taxable account to a charity, you can only deduct their current value, not the value they had when you originally bought them – so there is far less merit in doing that.3 

Remember the federal tax rules for charitable donations. If you donate highly appreciated stock to a charity, make sure to abide by the rules set down in IRS Publication 526, Charitable Contributions. Double-check to see that the charity has legitimate non-profit status under federal tax law, and be sure to record the deduction on a Schedule A that you attach to your 1040.4,5 

If your contribution totals $250 or more, the donation(s) must be recorded – that is, the charity needs to give you a written statement describing the donation and its value and whether it is providing you with goods or services in exchange for it. (A bank record or even payroll deduction records can also denote the contribution.) If your total deduction for all noncash contributions in a tax year exceeds $500, then complete and attach Form 8283 (Noncash Charitable Contributions) to your 1040 when filing. If you donate more than $5,000 of property to a charity, you will need to provide a letter from a qualified appraiser to the charity (and by extension, the IRS) stating the monetary value of the gift(s).4,5       

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.  

Citations.

1 - raymondjames.com/thorsenwealthmanagement/pdfs/charity_article.pdf. [10/12/12]

2 - purdue.edu/giving/fed_tax.html [6/10/14]

3 - money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2013/09/26/how-to-give-stock-to-charity-2 [9/26/13]

4 - today.com/money/charitable-giving-how-you-can-donate-cause-benefit-tax-time-2D79751463 [6/3/14]

5 - irs.gov/uac/Eight-Tips-for-Deducting-Charitable-Contributions [11/4/13]

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