Tag Archives: Money Matters

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Money Matters | Which Retirement Plan Is Right for Your Business?

By Todd Harrett | Financial Advisor with Axiom Financial Strategies Group of Wells Fargo Advisors in New Albany

Todd Harrett, Financial Advisor with Axiom Financial Strategies Group of Wells Fargo Advisors in New Albany, Ind.

Todd Harrett, Financial Advisor with Axiom Financial Strategies Group of Wells Fargo Advisors in New Albany, Ind.

If you own a small business, there are many retirement plan alternatives available to help you and your eligible employees save for retirement. For most closely-held business owners, a Simplified Employee Pension Individual Retirement Account (SEP IRA) was once the most cost-effective choice. Then the Savings Incentive Match Plan for Employees (SIMPLE IRA) became a viable alternative. Today you may find that a defined benefit or 401(k) plan best suits your needs. To make an informed decision on which plan is right for your business, review the differences carefully before you choose.

Simplified Employee Pension Individual Retirement Account (SEP IRA). This plan is flexible, easy to set up, and has low administrative costs. An employer signs a plan adoption agreement, and IRAs are set up for each eligible employee. When choosing this plan, keep in mind that it does not allow employees to save through payroll deductions, and contributions are immediately 100% vested.

The maximum an employer can contribute each year is 25% of an employee’s eligible compensation, up to a maximum of $270,000 for 2017. However, the contribution for any individual cannot exceed $54,000 in 2017. Employer contributions are typically discretionary and may vary from year to year. With this plan, the same formula must be used to calculate the contribution amount for all eligible employees, including any owners. Eligible employees include those who are age 21 and older and those employed (both part time and full time) for three of the last five years.

Savings Incentive Match Plan for Employees (SIMPLE). If you want a plan that encourages employees to save for retirement, a SIMPLE IRA might be appropriate for you. In order to select this plan, you must have 100 or fewer eligible employees who earned $5,000 or more in compensation in the preceding year and have no other employer-sponsored retirement plans to which contributions were made or accrued during that calendar year. There are no annual IRS fillings or complex paperwork, and employer contributions are tax deductible for your business. The plan encourages employees to save for retirement through payroll deductions; contributions are immediately 100% vested.

The maximum salary deferral limit to a SIMPLE IRA plan cannot exceed $12,500 for 2017. If an employee is age 50 or older before December 31, then an additional catch-up contribution of $3,000 is permitted. Each year the employer must decide to do either a matching contribution (the lesser of the employee’s salary deferral or 3% of the employee’s compensation) or non-matching contribution of 2% of an employee’s compensation (limited to $270,000 for 2017). All participants in the plan must be notified of the employer’s decision.

Defined benefit pension plan. This type of plan helps build savings quickly. It generally produces a much larger tax-deductible contribution for your business than a defined contribution plan; however, annual employer contributions are mandatory since each participant is promised a monthly benefit at retirement age. Since this plan is more complex to administer, the services of an enrolled actuary are required. All plan assets must be held in a pooled account, and your employees cannot direct their investments.

Certain factors affect an employer’s contribution for a plan, such as current value of the plan assets, the ages of employees, date of hire, and compensation. A participating employee with a large projected benefit and only a few years until normal retirement age generates a large contribution because there is little time to accumulate the necessary value to produce the stated benefit at retirement. The maximum annual benefit at retirement is the lesser of 100% of the employee’s compensation or $215,000 per year in 2017 (indexed for inflation).

401(k) plans. This plan may be right for your company if you want to motivate your employees to save towards retirement and give them a way to share in the firm’s profitability. 401(k) plans are best suited for companies seeking flexible contribution methods.

When choosing this plan type, keep in mind that the employee and employer have the ability to make contributions. The maximum salary deferral limit for a 401(k) plan is $18,000 for 2017.  If an employee is age 50 or older before December 31, then an additional catch-up contribution of $6,000 is permitted. The maximum amount you, as the employer, can contribute is 25% of the eligible employee’s total compensation (capped at $270,000 for 2017). Individual allocations for each employee cannot exceed the lesser of 100% of compensation or $54,000 in 2017. The allocation of employer profit-sharing contributions can be skewed to favor older employees, if using age-weighted and new comparability features. Generally, IRS Forms 5500 and 5500-EZ (along with applicable schedules) must be filed each year.

Once you have reviewed your business’s goals and objectives, you should check with your Financial Advisor to evaluate the best retirement plan option for your financial situation.

This article was written by Wells Fargo Advisors and provided courtesy of Todd Harrett, Financial Advisor with Axiom Financial Strategies Group of Wells Fargo Advisors in New Albany, IN at 812-948-8475.  Visit our website at www.AxiomFSG.com.

Wells Fargo Advisors does not provide legal or tax advice. Be sure to consult with your tax and legal advisors before taking any action that could have tax consequences.

Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.

©2016 Wells Fargo Clearing Services, LLC.   All rights reserved.         1216-01966 [86913-v6] 1115 e6830

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Money Matters | Episode 6: What to Do, Before the I Do’s

Are you ready when the wedding bells ring?
The team from Axiom talk about the financial side — and contract side — of what a wedding brings.
So again, I ask you, are you ready when the wedding bells ring?
Money Matters: The Podcast is sponsored by Axiom Financial Strategies Group of Wells Fargo Advisors.  This monthly podcast is in addition to a monthly article titled, “Money Matters,” that is posted online at www.ExtolMag.com and www.axiomfsg.com.
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At Axiom Financial Strategies Group of Wells Fargo Advisors we sincerely appreciate our clients making opportunities like this possible. Without their support of our business, we would not be able to support programs like this.
Axiom Financial Strategies Group
of Wells Fargo Advisors
101 W Spring Street, Fifth Floor
New Albany, IN  47150
P 812.542.6475 | F 812.948.8732 | www.axiomfsg.com
At Axiom Financial Strategies Group of Wells Fargo Advisors, our team caters to a select group of family-owned businesses, entrepreneurs, individuals, institutions, and foundations, helping them build, manage, preserve, and transition wealth. We accomplish this while providing top-notch service through a team approach that puts our clients’ needs, goals, and interests first. To learn more visit our website at www.axiomfsg.com. Wells Fargo Advisors. Member SIPC.
The information provided is general in nature and may not apply to your personal investment situation. Individuals should consult with their chosen financial professional before making any decisions.

Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.  Insurance products are offered through our affiliated nonbank insurance agencies.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.
Video: CAR# 0817-03149.
Podcast: CAR#  0817-04140
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Money Matters | Looking to Ease College Tuition Anxiety?

By Michelle Floyd, CFP®, Financial Consultant of Axiom Financial Strategies Group of Wells Fargo Advisors in New Albany, Ind.

michelle-floyd-money-matters-featureDid you realize that, according to the College Board, more than $240 billion in grants from all sources (federal loans, federal work-study, and federal tax credits and deductions) was awarded to undergraduate and graduate students in the 2015-2016 academic year? And that those students came from households spanning a wide range of household incomes?

During that academic year, the average aid for a full-time college student amounted to $14,460, including $8,390 in grants (that don’t have to be repaid) and $4,720 in federal loans.

Once you realize how many resources may be available and begin your research on financial assistance, you could be on your way toward easing some of the anxiety often associated with paying for college.

5 lessons for seeking help for college costs

 Start planning during the high school years. Pay particular attention to your child’s junior year of high school and reposition assets or adjust income before it begins. When financial aid officers review a family’s need, they analyze the family’s income in the calendar year beginning in January of the student’s junior year.

 Assume you’re eligible for aid … until you’re told you’re not. There are no specific guidelines or rules of thumb that can accurately predict the aid you and your child may be offered. Because each family’s circumstances are different, keep an open mind as you consider financial aid alternatives. A number of factors ‒ such as having several children in school at the same time ‒ may increase your eligibility for assistance.

 Reassess assets held by your children. Federal guidelines expect children to contribute 20% of certain assets toward their education’s costs, while parents are expected to contribute up to 5.64%.

That’s why assets held in custodial accounts (bank accounts, trust funds, brokerage accounts) in your children’s names may reduce the aid for which the family qualifies. But assets held in Coverdell Education Savings Accounts and 529 plans are factored into the parent’s formula, having less effect on the aid for which the family qualifies.

 Help grandparents’ target their gifts. Grandparents’ hearts often lead them to make gifts directly to grandchildren or to pay their tuition expenses. Even though payments made directly to a college avoid gift taxes, financial aid sources generally count these payments as an additional resource the family has to pay for college expenses. Distributions from grandparent-owned 529 plans are also considered as resources and assessed as your child’s income, which can reduce eligible aid.

A better idea for grandparents may be to make a gift to a 529 plan owned by the parent or grandchild. The financial aid treatment of gifts to 529 plans is generally more favorable than for gifts made directly to the grandchild. Plus grandparents using this alternative may also realize estate tax and gift tax benefits.

Assess your family’s financial situation to determine what your children will need. Gather records and begin researching available financial aid, grants, loans, and scholarships. Two forms will be key to your aid application process: the Free Application for Federal Student Aid (FAFSA) and the College Scholarship Service Financial Aid Profile (PROFILE).

The FAFSA helps you apply for federal aid, and many states also use it to determine a resident student’s eligibility for state aid. You can find forms in high-school guidance offices, college financial-aid offices, or online.

Many schools use the PROFILE to collect additional information before awarding their own funds, i.e., institutional student aid.

 Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your Financial Advisor. Read it carefully before you invest.

 Our firm is not a tax or legal advisor.

This article was written by/for Wells Fargo Advisors and provided courtesy of Michelle Floyd, CFP®, Financial Consultant of Axiom Financial Strategies Group of Wells Fargo Advisors in New Albany, IN at 812.948.8475.Visit our website at www.AxiomFSG.com.

Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.

© 2017 Wells Fargo Clearing Services, LLC. All rights reserved. 0317-00230

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Money Matters | Episode 5: College Prep 101

Are your (parents) prepared to send your child away to college?  Not so much mentally, but are you fully prepared legally and have you prepared your child financially?
Money Matters: The Podcast is sponsored by Axiom Financial Strategies Group of Wells Fargo Advisors.  This monthly podcast is in addition to a monthly article titled, “Money Matters,” that is posted online at www.ExtolMag.com and www.axiomfsg.com.
**************************************************************************************************************************
At Axiom Financial Strategies Group of Wells Fargo Advisors we sincerely appreciate our clients making opportunities like this possible. Without their support of our business, we would not be able to support programs like this.
Axiom Financial Strategies Group
of Wells Fargo Advisors
101 W Spring Street, Fifth Floor
New Albany, IN  47150
P 812.542.6475 | F 812.948.8732 | www.axiomfsg.com
At Axiom Financial Strategies Group of Wells Fargo Advisors, our team caters to a select group of family-owned businesses, entrepreneurs, individuals, institutions, and foundations, helping them build, manage, preserve, and transition wealth. We accomplish this while providing top-notch service through a team approach that puts our clients’ needs, goals, and interests first. To learn more visit our website at www.axiomfsg.com. Wells Fargo Advisors. Member SIPC.
The information provided is general in nature and may not apply to your personal investment situation. Individuals should consult with their chosen financial professional before making any decisions.
Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.

CAR # for the podcast is 0417-02947 | CAR # for the video is 0417-02942

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Money Matters by Michelle Floyd | Involve Your Child in the Finances of College

By Michelle Floyd

The cost to attend a university continues to increase: between the 2011–2012 school year and the 2016–2017 academic year, tuition and fees rose by 13% at private, nonprofit, four-year institutions, reaching an average of $33,479, according to The College Board.*

If you’ve diligently saved over the years to help pay for your child’s education, now is the perfect time to bring him or her into the equation. “When it comes to financing school, students need to be involved in the process,” explains Tracy Green, a Life Event Services consultant at Wells Fargo Advisors.

By walking through the financial steps of paying for college together, you’ll help your son or daughter understand the overall expenses and learn valuable fiscal skills for the future, especially the importance of goal-based saving.

Green recommends following these five steps to get your child involved before mailing in that acceptance notification and deposit.

  1. Start with a conversation. Before your child even begins applying for college, have a discussion about finances, suggests Green. A good time to have this conversation tends to be during the student’s junior year of high school.

When you sit down together, ask your child about his or her upcoming goals. Talk about expenses for school, as well as who will be covering costs or how they might be split. If you or other family members have contributed to a 529 plan, show it to your child and go through the details of how it can be used.

  1. Set a budget. As a family, consider setting certain guidelines and limitations for the college experience. Perhaps you agree to cover the cost of tuition and room and board, but ask your child to pay for his or her entertainment expenses while on campus.

“Having those discussions may prevent future disappointment,” adds Green. If your son gets accepted into his dream school, for instance, but later learns the family won’t be able to pay for it and he doesn’t want to take out his own loans, the reality could be difficult to face.

  1. Look at financial aid packages together. With your child, fill out and submit forms for financial help, such as the Free Application for Federal Student Aid (FAFSA). Learn more at https://fafsa.ed.gov/. To identify additional types of financial aid that may be available, visit https://studentaid.ed.gov/sa/.

Some universities have a net price calculator on their websites. With this tool, you’ll be able to see what the overall cost for the school is and then subtract any financial aid packages available to identify what your expected expenses will be. Once you start receiving acceptance notifications, go through aid packages with your child to compare and contrast them so that you and your child have a clear vision of what the bottom line is and how different aid options are treated.

  1. Think about work. If you want your child to be responsible for paying for part or all of their schooling, a part-time job may be a good fit.

As a family, you’ll want to decide if it makes sense for your child to work while he or she is at school, or only during summer and winter breaks. “Some kids may have a heavy class load or extracurricular activities,” notes Green. If certain scholarships require your child to attain or keep a certain GPA, you’ll want to weigh the time spent away from academics against the amount of money your student will be earning from a part-time job.

In addition to helping cover college expenses, employment can offer other key benefits for your child, including the chance to manage an income, build a strong work ethic, and grow in self-worth. If working during the school year will put too much of a strain on your child, set savings goals together for his or her summer job. 

  1. Understand scholarship possibilities. If your child wants to attend a school that doesn’t fit into the budgeted amount you planned to spend, consider sitting down to talk about the situation. It may be time to look at other options, or your child may want to increase his or her efforts to identify and apply for scholarships to help cover some of the costs.

The site TuitionFundingSources.com, sponsored by Wells Fargo, provides a database of scholarships available. After looking through the options together, help your child set up a schedule to apply for ones that are the best fit, paying close attention to deadlines and other requirements. Some scholarships involve writing an essay, but the rewards offered could make the effort worthwhile. 

*https://trends.collegeboard.org/college-pricing/figures-tables/tuition-fees-room-and-board-over-time

 Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your Financial Advisor. Read it carefully before you invest.

This article was written by/for Wells Fargo Advisors and provided courtesy of Michelle Floyd, CFP®, Financial Consultant with Axiom Financial Strategies Group of Wells Fargo Advisors in New Albany, IN at 812-948-8475.
Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.

© 2017 Wells Fargo Clearing Services, LLC. All rights reserved.   0317-00810

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Money Matters | Episode 4: My First Real Job and What to do with the Money

I have my first real job and my first real paycheck; What to do?  The answer may actually be your first real job.  The gents from Axiom Financial Strategies Group of Wells Fargo Advisors give us the inside track.
Money Matters: The Podcast is sponsored by Axiom Financial Strategies Group of Wells Fargo Advisors.  This monthly podcast is in addition to a monthly article titled, “Money Matters,” that is posted online at www.ExtolMag.com and www.axiomfsg.com.
**************************************************************************************************************************
At Axiom Financial Strategies Group of Wells Fargo Advisors we sincerely appreciate our clients making opportunities like this possible. Without their support of our business, we would not be able to support programs like this.
Axiom Financial Strategies Group
of Wells Fargo Advisors
101 W Spring Street, Fifth Floor
New Albany, IN  47150
P 812.542.6475 | F 812.948.8732 | www.axiomfsg.com
At Axiom Financial Strategies Group of Wells Fargo Advisors, our team caters to a select group of family-owned businesses, entrepreneurs, individuals, institutions, and foundations, helping them build, manage, preserve, and transition wealth. We accomplish this while providing top-notch service through a team approach that puts our clients’ needs, goals, and interests first. To learn more visit our website at www.axiomfsg.com. Wells Fargo Advisors. Member SIPC.
The information provided is general in nature and may not apply to your personal investment situation. Individuals should consult with their chosen financial professional before making any decisions.
Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.
CAR # for the podcast is 0417-02947
CAR # for the video is 0417-02942
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Money Matters ‘the poll’ | Investing 101

Please watch the below video for answer and/or listen to our podcast below:

MONEY MATTERS PODCAST (12 min 49 sec., Podcast goes into more detail about why and how)

Investing 101 PDF (written reference provided by Wells Fargo Advisors)

If you would like more information regarding investments or tips information like the ones, please contact our office for a free consultation: You can also follow Money Matters at www.Axiomfsg.com or www.ExtolMag.com.

Axiom Financial Strategies Group of Wells Fargo Advisors
101 W. Spring Street, 5th Floor
New Albany, IN 47150

www.Axiomfsg.com | 812.948.8475

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member FINRA/SIPC, CAR 0417-00313

Axiom Financial Strategies Group of Wells Fargo Advosors, LLC

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Money Matters: The Podcast | Episode 3: Invest Early and Compounding

A Money Matter’s duo,  Eric Ballenger, Senior Vice President – Investments and Michael Grau, CFP®, RICP®, Vice President – Investment, start with the basics, Investing 101.  Its the moment when you realize that you must invest early, but why?  They explain how compounding works and how easy it is to set it and forget it.

Invest in Your Future Today Brochure
Money Matters: The Podcast is sponsored by Axiom Financial Strategies Group of Wells Fargo Advisors.  This monthly podcast is in addition to a monthly article titled, “Money Matters,” that is posted online at www.ExtolMag.com and www.axiomfsg.com.

**************************************************************************************************************************

At Axiom Financial Strategies Group of Wells Fargo Advisors we sincerely appreciate our clients making opportunities like this possible. Without their support of our business, we would not be able to support programs like this.

Axiom Financial Strategies Group
of Wells Fargo Advisors
101 W Spring Street, Fifth Floor
New Albany, IN  47150

P 812.542.6475 | F 812.948.8732 | www.axiomfsg.com

At Axiom Financial Strategies Group of Wells Fargo Advisors, our team caters to a select group of family-owned businesses, entrepreneurs, individuals, institutions, and foundations, helping them build, manage, preserve, and transition wealth. We accomplish this while providing top-notch service through a team approach that puts our clients’ needs, goals, and interests first. To learn more visit our website at www.axiomfsg.com. Wells Fargo Advisors. Member SIPC.

The information provided is general in nature and may not apply to your personal investment situation. Individuals should consult with their chosen financial professional before making any decisions.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company. CAR 1216-02739

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Podcast Photo:

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Money Matters with Vaughan Scott | Social Responsibility Can Pay Dividends in Many Ways

By Vaughan Scott

Typically when we consider “Money Matters” we think about saving for retirement, saving for college, or other goals that we have set for ourselves or for our families.  However, more and more, we are having conversations with clients about how and what they want to do to “give back”.  And, we are building more philanthropic goals (big and small) into our clients documented plans for the future.

I don’t know about you, but when I hear the word “philanthropic”, I think about families like the Carnegie’s and the Rockefellers, but in reality, most of us are philanthropic in many ways and we don’t even realize it.  Today we tend to think more in terms of our “Social Responsibilities”.  Yes, charitable giving in any form is yet another way to be socially responsible.  Our clients often talk about the charitable giving and the service work that they do as being something they feel “an obligation” to do, “a duty” or “a responsibility” of theirs, but always with very positive, inspirational tone.  These feelings usually are born out of gratefulness for having been given great opportunities in their lives and this typically results in people giving of their time, talents and treasure (money) in traditional ways.

For example, people are often incredibly generous in the ways they give to their church, write checks to organizations that they want to support, work in soup kitchens, help build houses, help build churches, and/or donate gently used goods to Goodwill and other organizations that are funded through the sale of donated goods.  These are all typically very noble and worthy causes.  And, while the economic benefits that one might receive are not typically what motivates people to give, certainly anyone engaging in these types of activities should consult with their tax advisors about the deductibility of both cash and “in kind” gifts to charities.

At the same time, I also encourage individuals and families to expand their thinking about what they can do together to make a difference.  For example, a few years ago, during a particularly cold, harsh, winter, my mother came up with a great idea to buy sleeping bags, pairs of gloves, warm socks, and hats for the homeless in the region for Christmas. My brother and I bought a dozen or so of each and our mother and our children handed them out to homeless people in our region.   This experience was rather rewarding for all of us because, while we had done “Secret Santa” shopping in the past, we typically had fairly clear instructions on what to buy.

In this situation, we had the opportunity to think through the whole process with our children – a great learning experience for them and for us:  What types of sleeping bags did we need to buy that were rated for the temperatures that we were dipping into in the middle of the night?  How can we get enough of them since stores didn’t typically carry more than 3-4 of the kind we needed?

The conversations that we had together as we worked through the whole process were incredibly valuable, but the conversation our children had with the homeless people they met were even more valuable.  Many volunteered their stories about how they had fallen on hard times and everyone expressed their sincere appreciation for the thoughtfulness of the gesture.  Needless to say the goodwill and good feelings that our whole family was able to gain from the experience paid us dividends that had far greater value than any economic benefit that we might have gained from donating indirectly through a charity that served the homeless.   And, the whole process gave us a great opportunity to teach our children about the importance of “Social Responsibility” beyond protecting the climate, recycling, etc.  It also gave us a good reminder that we need to continue coming up with new and unique ways to help others.

In the interest of also trying to spark some interesting conversations around your dinner table, let me leave you with a few questions:

  1. What are the ways that you and your family are socially responsible?
  2. What are the new and unique ways that you and your family could give back or otherwise serve others?

This article was written by and provided courtesy of Vaughan Scott, MBA, CPWA®, Managing Director – Investment Officer with Axiom Financial Strategies Group of Wells Fargo Advisors in New Albany, IN.  He can be reached via email at vaughan.scott@wfadvisors or phone at (812) 948-8475.  Visit our website at www.AxiomFSG.com.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC. Member SIPC.’  Wells Fargo Advisors is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.  CAR 0317-03813.

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Money Matters by Michelle Floyd | Pay Yourself First

Fund Your IRA with Your Tax Refund

While most of us don’t intend to short change our retirement savings, competing priorities and unexpected expenditures can often get in the way of consistent retirement saving. An easy way to help fund your IRA is to have your tax refund deposited directly into your IRA. Because this represents money you’ve already paid out, it won’t be missed when you redirect those dollars.  And, if the refund dollars go directly to an IRA, you can avoid the temptation to splurge and spend that money on something else if it winds up in your checking account.

Many financial planners advise taxpayers to balance their paycheck withholdings so they break even – meaning they don’t overpay and then receive a refund at tax time. Using this strategy, you can make money that might be paid in taxes work for you throughout the year and avoid giving the government an interest-free loan. However, if you have trouble saving, a tax refund can be an effective form of forced savings.

Directing your tax refund to your IRA is easy and automatic. If you want your refund to go to just one account, you simply request a direct deposit of your refund on your tax return at the time of filing. If you want the refund to go to multiple accounts (e.g., IRA, checking, savings) you will need to complete IRS Tax Form 8888 when filing your taxes. Completing Form 8888 authorizes the IRS to transfer your tax refund to any number of IRAs or other savings or checking accounts via direct deposit.

While you’ll need to complete Form 8888 during tax preparation time, and with the advice of your tax advisor, here are some tips to help you:

  • If the deposit is into your IRA, check the “Savings” box under Lines 1–3 on Form 8888.
  • You must have an IRA already established at a financial institution in order to have your refund directed to this account.
  • You need to follow up with the financial institution that holds your IRA and specify which tax year your payment is for. Many providers will assume the payment is for the current calendar year unless you specify otherwise.
  • If you want your deposit to be credited as a prior year IRA contribution, you must verify that the deposit was actually made by the tax filing deadline for that particular year – generally, April 15.

 

Keep in mind that even if you already contribute to your retirement savings through a 401(k) or other employer sponsored plan at work, you are still eligible to contribute to an IRA to supplement those savings.

With corporate pension plans on the decline and Social Security making up a smaller share of most Americans’ retirement income, it’s important to take charge of your own retirement savings. Having all or a portion of your tax refund directed into an IRA is an easy way to help save for retirement. A Financial Advisor can help evaluate where you are on the path toward saving for retirement to help ensure you can live out your unique vision.

Our firm is not a legal or tax advisor.

This article was written and provided by Michelle Floyd, CFP®, Financial Consultant with Axiom Financial Strategies Group of Wells Fargo Advisors in New Albany, IN.  She can be reached via email at michelle.floyd@wfadvisors.com or phone at (812) 948-8475.  Visit our website www.AxiomFSG.com.

Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.

© 2016 Wells Fargo Clearing Services, LLC. All rights reserved. 0416-00668 [98729-v1BDC]