Qualifying for an Affordable Care Act Insurance Subsidy

Contributed by: Matt Trujillo, CFP®

If you retired prior to age 65 (Medicare eligibility age), and didn’t get ongoing insurance from your former employer, then odds are you purchased health insurance through a health care exchange.  Depending on your modified adjusted gross income (MAGI) you may have been entitled to a subsidy on your monthly insurance premiums. 

The subsidy depends on your household size (how many people you claim on your tax return), as well as your modified adjusted gross income.  If you are unfamiliar with the concept of MAGI, it is your AGI (the number at the very bottom of your 1040) plus some stuff you have to add back such as non-taxable social security benefits, tax exempt interest, and excluded foreign income. These items are important to note because just simply looking at your AGI might lead you to believe you qualify for a subsidy – when in fact you don’t.

How To Qualify for a Subsidy

The subsidy amount is determined by several factors, chief amongst them is your MAGI relative to the declared federal poverty level for a given year. For 2015 the federal poverty level for a household of 2 is $15,390 and for a family of 4 it is $24,250.  Determining where you are on the scale (you can be anywhere from 100%- 400%) will determine your eligible subsidy.

Common Health Care Subsidy Questions

Q: What if you estimate that your income will be 400% of the federal poverty level, making you eligible for a subsidy, and in reality it ends up being more than that?

A: You will have to pay back the entire subsidy you received throughout the year. My advice in this case is if you think it’s going to be really close, it might be better to wait until the year is over and file form 8962 with your taxes to see if you were eligible for any subsidy that you didn’t receive. If, in fact, you were eligible, you will get any owed money back in your tax refund come tax time.

Q: What if I overestimate my income and I received a smaller subsidy on insurance premiums than I should have received throughout the year?

A: Again, this is where form 8962 comes in handy. Fill this out with your taxes and any money you should have received will be given back to you in your tax refund can be applied against tax owed or refunded to you if there is no tax liability to offset).

As always, if you have questions about your personal situation, we’re here to help!

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matt Trujillo and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Year-End Financial Checklist: 7 Tips to End on High Note

Contributed by: Jaclyn Jackson

And just like that, we are already in the fourth quarter; the year has gone by quickly! Before it completely slips away...

Try these top tips to strengthen your finances and get things in order for the year ahead:  

1. Harvest your losses – Tax-loss harvesting generates losses that can be used to reduce current taxes while maintaining your asset allocation. Take advantage of this method by selling the investments that are trading at a significant loss and replacing them with a similar investment. 

2. Max out contributions – While you can wait until you file your tax return, it may be easier to take some of your end-of-year bonus to max out your annual retirement contribution.  Traditional and Roth IRAs allow you to contribute $5,500 each year (with an additional $1,000 if you’re over age 50).  You can contribute up to $18,000 for 401(k)s, 403(b)s, and 457 plans.

3. Take RMDs – Don’t forget to take the required minimum distribution (RMD) from your IRA.  The penalty for not taking your RMD on time is a 50% tax on what should have been distributed.  RMDs should be taken annually starting by April 1st of the year following the calendar year you reach 70 ½ years of age.

4. Rebalance your portfolio – It is important to rebalance your portfolio periodically to make sure you are not overweight in an asset class that has outperformed over the course of the year.  This helps maintain the investment allocation best suited for you.

5. Use up FSA money – If you haven’t depleted the money in your flexible spending account (FSA) for healthcare expenses, now is the time to squeeze in those annual check-ups.  Some plan sponsors allow employees to roll over up to $500 of unused amounts, but that is not always the case (check with your employer to see if that option is available to you). 

6. Donate to a charity – Instead of cash, consider donating highly appreciated securities to avoid paying capital gains tax.  Typically, there is no tax to you once the security is transferred and there is no tax to the charity once they sell the security.  If you’re not sure where you want to donate, a Donor Advised Fund is a great option.  By gifting to a Donor Advised Fund, you could get a tax deduction this year and distribute the funds to a charity later. 

7. Review your credit score – With all of the money transactions done during the holiday season, it makes sense to review your credit score at the end of the year.  You can go to annualcreditreport.com to request a free credit report from the three nationwide credit reporting agencies: Equifax, Experian, and TransUnion.  Requesting one of the reports every four months will help you keep a pulse on your credit status throughout the year.

Bonus: 

If there have been changes to your family (new baby, marriage, divorce, or death), consider these bonus tips:

• Adjust your tax withholdings

• Review insurance coverage

• Update financial goals, emergency funds, and budget

• Review beneficiaries on estate planning documents, retirement accounts, and insurance policies

• Start a 529 plan

Jaclyn Jackson is a Research Associate at Center for Financial Planning, Inc.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Jaclyn Jackson and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. RMD's are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Making the Most of Affordable Care Act Open Enrollment

Contributed by: Nick Defenthaler, CFP®

It’s that time of year again – open enrollment period for the Affordable Care Act (ACA)!  This year, open enrollment for ACA health plans runs from November 1, 2015 – January 31, 2016.  It’s very important that you enroll for a plan during this time frame if you do not have coverage to avoid being uninsured.  If you’re thinking you’ll just “roll the dice” and go without coverage, think twice.  Number one, the risk of going without coverage is a big one – having a medical event without coverage can destroy you financially.  Number two, the penalty for not having insurance will increase once again for 2016.  New next year: You will now have to pay a penalty that is equivalent to 2.5% of your income or $695 per adult, whichever is greater.

Common ACA Mistake

A common misconception is that health plans offered through the ACA are government health plans like Medicare or Medicaid.  This is NOT the case! This misconception often times will cause clients to avoid these plans that could potentially benefit them very positively.  Healthcare.gov is simply the website all of the ACA eligible plans are offered through.  Plan carriers include big names such as Blue Cross Blue Shield, Priority Health, HAP, etc. all of which have their “sweet spot” pricing depending on the type of plan (platinum, gold, silver and bronze) that makes the most sense for your needs. 

These are health plans you could simply purchase on your own as an individual policy, however, by going through healthcare.gov and utilizing the ACA, you could potentially be eligible for subsidies that could dramatically reduce your monthly premiums, potentially saving your family thousands of dollars. This link to healthcare.gov shows those qualifying ranges.  Subsidies can also be very important for younger retirees that have not yet begun Medicare (under the age of 65).  We have worked with many clients in this age range and have done strategic planning with their income throughout the year to qualify them for lower premiums.  I encourage you to contact us if you’re considering enrolling in an ACA plan to see how we could potentially help on the financial side of things!

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

It's Medicare Open Enrollment Time

Contributed by: Sandra Adams, CFP®

If you’re 65 and older (or you assist someone who is), you are likely swimming in a sea of Medicare plan flyers, prescription drug plan notices, disclaimers and other various forms that are nothing short of overwhelming and confusing.  Welcome to Medicare Open Enrollment!

What is Medicare Open Enrollment? 

It is the window that opens annually from October 15th through December 7th for anyone currently enrolled in Medicare. Open enrollment allows you to make changes to your plan by signing up for Medicare Advantage (Part C) or a Medicare Prescription Drug Plan (Part D). You can also make changes to an existing plan, move to a new one, change drug coverage benefits or dis-enroll.  Or you can make no change at all. 

In our experience in listening to clients, open enrollment and Medicare options in general can be a bit overwhelming.  However, taking the time to do a thorough annual review of your Medicare options to make sure you are in the most cost effective plan can be very worthwhile, if done right.

Here are tips for a successful Medicare Open Enrollment:

Don’t get Overwhelmed.  There will be a lot of mail, most won’t apply to you.  Wait until you get your Medicare and You Book from Medicare. This is the guidebook for the new plan year.

Be Prepared.  Have all of the information you will need regarding any current coverage, current costs, current medical conditions, physicians and medications so that you are able to go through the process of making a decision about making a change.

Use Available Resources. 

• Use the online tools at www.medicare.gov can help you determine the correct plans for you based on your geographical area, physicians, medications, etc.

• Use the resources and assistance available at local senior centers and Area Agency on Aging, etc.

• Use the resources of independent Medicare consultants who may be able to guide you based on your individual needs (see the link here for upcoming Medicare events sponsored by the Center).

Take Action (or Not).  If your analysis on your own or with the help of others suggests that a change is in order, take action to make that change before the December 7th deadline.  However, if you are already in the best plan for you, nothing says you have to make a change just because it is open enrollment time.  It is okay to make no change at all.

Medicare Open Enrollment provides a window of opportunity to review current plans and make changes if they make sense for you.  We recommend that you take advantage of the resources that are available to assist with the analysis of these plans – they can get complicated and there is no need to go it alone!   Please contact your financial planner if you have questions about how Medicare works with your overall financial plan or if you would like a personal referral to a Medicare resource in your area.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Sandy Adams and not necessarily those of Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

Impact of the 2016 Medicare Part B Premium Increase

Contributed by: Matt Trujillo, CFP®

You may have heard of the pending Medicare part B premium increase for 2016.  If this is news to you, the most recent Medicare Trustees Report is estimating the baseline premium to increase from $104.90 to $159.30 beginning in 2016 (approximately a 52% increase). The reason why premiums are estimated to increase so much next year is mainly attributable to the way the program is currently structured.

Hold Harmless Clause May Protect You

Currently, the law does not allow higher premiums for all participants. In fact, if you are currently receiving social security benefits, have an adjusted gross income under $170,000 (or $85,000 if single), and are having your Medicare part B premiums taken directly from your social security benefit, then you probably won’t see any increase in your Medicare part B premiums for 2016. This is due to the “hold harmless” clause that protects current Medicare recipients from large rate hikes.

Ordinarily the increase in Medicare premiums is pegged to the annual cost of living adjustment from the social security administration. However, next year the administration says there will be no cost of living adjustment, which has left the Medicare Trustees unable to raise the premiums on 70% of current Medicare recipients.

Am I at Risk for a Medicare Part B Rate Hike?

So how will the Medicare Trustees keep up with the rising cost of healthcare? Simple: they will pass along the costs to future recipients. If you’re not currently receiving social security benefits, but are slated to start soon, you might be in for an unpleasant surprise.

You might be a candidate for a rate hike if:

• You pay your Medicare Premiums directly and don’t have them deducted from your social security benefit.

• You have filed for social security benefits but have suspended payment to take advantage of delayed retirement credits (i.e. file and suspend strategy).

• You have an adjusted gross income higher than $170,000 filing a joint tax return or higher than $85,000 as a single filer.

Talk to your financial advisor to find out more about this pending rate hike, and whether or not you will be affected.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

Pros and Cons of Qualified Longevity Annuity Contracts

Contributed by: Matt Trujillo, CFP®

A recent IRS ruling made it possible to defer 25% or $125,000 of your 401(k) and/or IRA assets into a qualified longevity annuity contracts or QLAC.  Our financial planning department here at The Center decided to explore these in greater detail to see what, if any, merits these products might have in clients’ overall financial plans.

QLAC Option 1

To start there are two main types of these QLACs. In the first, you give your money to an insurance company in exchange for substantial future payments (usually beginning at age 85). In return, the life insurance carrier gets to keep the full initial premium in the event that you pass away prior to benefits starting. This is an insurance product like auto and home-owners insurance in the sense that if you don’t use it, you lose it.  Due to this forfeiture of initial premium, this product has not been widely adopted.

QLAC Option 2

So, in order to make the product more marketable, insurance companies have recently come out with a second type of product that guarantees a return of your initial premium. However, this too has drawbacks because you are giving up any potential growth you might have had on the money prior to benefit payments commencing. Also, when benefits do finally commence, the payout is not quite as high as the first product because the insurance carrier is on the hook to return 100% of the initial premium.

Consider the Drawbacks

Essentially the drawbacks of QLACs can be summed up quite easily. If you purchase one and you die prior to benefits commencing, then you made a bad deal. However, if you purchase one and do live at least 5 years past the commencement of benefits, you rapidly recover the entire initial premium and start to draw more than you initially paid.  

Just like the name of the product suggests, these seem to only make sense as a hedge against living an above average life expectancy. If longevity risk is something that concerns you, we encourage you to speak with a professional to understand what methods can be taken to give your plan the greatest probability of success!

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matt Trujillo and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. You should discuss any tax matters with the appropriate professional. Guarantees are based on the claims paying ability of the issuing company.

Three Reasons to Consider a Family Caregiver Contract

Contributed by: Sandra Adams, CFP®

Many family members are drawn into caregiving out of love. Most times, it is the female child that is pulled into the role of caregiver as a parent ages and has increasing needs. The statistics are overwhelming…

• 66 million people in the U.S. provide unpaid care to a relative or friend.*

• 70% of caregivers report making adjustments to work schedules, or quit work altogether, to accommodate caregiving responsibilities.  Caregivers may reduce their hours at work or forfeit promotions and benefits.**

• A 2011 study showed that caregivers lost $303,880 in wages, Social Security benefits, and private pensions over their lifetime as a result of caregiving responsibilities.**

It is important to understand that caregiving and care needs can have serious consequences for the entire family, and that careful planning is important to ensure financial stability for all parties involved. 

When to Officially Hire a Family Member

In many cases, skilled care is needed, and that care needs to be provided by trained and licensed medical professionals.  However, there are other needs (i.e. transportation, housekeeping, etc.) that can be provided by a family member.  In these cases, you can consider officially hiring a family member under a paid family caregiver contract.  A family caregiver contract is a legal employment contract that defines the care and compensation expectations between the aging parent and the family member providing the care.  Here are three reasons for a family to consider using a family caregiver contract:

1. The family member providing the care (the caregiver) can be receiving financial compensation for providing care, especially when they may have had to reduce or give up entirely their paid employment. The caregiver is provided a chance for continued financial stability.

2. It can help avoid misunderstandings and bad feelings with other family members about who is providing care and how much money is changing hands.  The agreement can be very specific and can be tied to the aging parent’s overall estate planning.

3. If the aging parent ever needs to enter a nursing home or needs Medicaid to pay for long term care needs, the agreement can show that payments for the care to the family member were legitimate and were not made in an attempt to “hide” or “gift” funds in order to qualify for Medicaid.

When it comes to planning for aging parents and coordinating the caregiving roles amongst family members, things can get complicated very quickly.  It often comes down to the one who is nearest, not who has the time or the money, that becomes the caregiver.  Making things fair and giving your parent and the sibling(s) who provide care the best chance for financial stability along the way is the best course of action.  Work with your financial planner and a team of experts to come up with a plan for your family that may include an elder law attorney to consider tools like a family caregiver contract.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

*National Alliance for Caregiving and AARP. Caregiving in the U.S., 2009.

**The MetLife Mature Market Institute, MetLife Study of Caregiving Costs to Working Caregivers, June 2011.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Sandra Adams and not necessarily those of Raymond James. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

Health Care Planning and Wealth Planning Go Hand-In-Hand

Contributed by: Sandra Adams, CFP®

If you’re approaching or in retirement, the importance of wealth planning is well known. Working with a professional advisor to plan retirement cash flow, manage investments, review taxes, estate planning and insurance on a regular basis is core to financial success. What might not be so obvious is that managing your health care is another key component to long-term financial success.

According to 2014 statistics reported by Fidelity®, a couple age 65 can expect to spend over $220k on health care during their lifetimes (a chronic illness can add significantly to this cost). The better your health, the lower these costs might be, which can significantly reduce the risks to your financial bottom line.

Working with a financial planner and a full wealth care team (including your CPA and estate planning attorney) is important to manage your wealth. But, what can you do to manage your health when the health care system is changing on a daily basis?

See Your Physician Regularly -- Get regular check-ups, keep up with recommended testing. As you get older, consider having a full geriatric assessment to set a baseline for your physical, cognitive and psychological health. Catching any abnormalities early provides options for treatments and cures.

Exercise Often and Eat Right -- Regular exercise and a healthy diet have been shown to improve physical and cognitive health, reducing costs for doctor visits, medications, and other expenses.

Consider hiring a Health Care Concierge service – A Health Care Concierge is partner in managing your health, similar to the way a financial planner helps you manage your wealth.  Services include health and nutrition coaching, coordination of care (finding you the right doctors, making appointments, storing your medical records and having them reviewed by concierge physicians), and advocating on your behalf for appropriate care and billing. Total Life Concierge in Troy, Michigan, is a local and emerging partner in this field -- check them out at www.myowntlc.com.

Managing your wealth and your health in tandem gives you the best chance of financial success. Talk to your financial advisor today about who you can add to your professional team to make you successful in all aspects of your life.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

What to Consider Before You Buy a Second Home

Contributed by: Timothy Wyman, CFP®, JD

Well it’s that time of year again.  No not the cold and flu season – well actually it’s that time too.  Rather, I am talking about the time of year where my wife and I go up north for a few days and after a fantastic 24 hours have the conversation.  You know, should we buy our own vacation home/condo rather than mooch off our friends (hey they are good friends)? It’s a question that many of my Empty and Soon-to-be-Empty Nester clients ask.

First Steps to a Second Home

Our friends, we will call them John & Michelle to protect their identity, decided a few years ago to purchase a condo in God’s Country (that’s northern Michigan….not way up North).   So far the purchase has worked out well and I think they did a few things right.  They actually bought the condo with another family as they knew neither of them would use the condo fully on their own.  They spelled out their “parenting” time or who had first right of refusal for each Holiday.  And last but not least, they formed a Limited Liability Company (LLC) to own the property in order to shield other personal assets from potential liability. All in all, the purchase has been wonderful for us…..er I mean them.

Consider the “Carrying” Costs

For a short period of time a second home or vacation home sounds like a wonderful idea to us (wine is involved in many instances).  However, after a few minutes we decide that it is not for us.  Although interest rates are low, making the cost more manageable, we have some other financial priorities at this time.  Also, many folks do not fully consider, or fully appreciate, the “carrying” costs of owning a second home.  The real or total cost of owning a second home is much more than principal & interest payments.  Additional costs can include:

• Property taxes

• Association dues

• Utilities

• Insurance

• Repairs & maintenance (necessary year round, whether or not you’re there)

Additionally, simply furnishing and updating two homes is no cheap undertaking. For now, we are content renting for the couple of times that we make it up north. 

3 Factors in Buying a Second Home

That said, I wouldn’t be surprised if we decide to make a second home purchase in the future – for lifestyle purposes rather than investment.  And if we do, we’ll make the following a part of our decision-making process:

• Use: Do we expect to use it more than just a couple of weeks? If so then buying may make sense.

• Location: What area makes sense now and in the future? Are we willing to drive X hours?

• Price: What price point will still allow us to fund retirement savings? What are the ongoing expenses?

Adding a second home can have wonderful lifestyle benefits.  Many a family has built cherished memories thanks to the family cottage.  Make sure you weigh the full cost of owning a second home with the desired lifestyle benefits.

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James.

Your Go-To List for Record Retention – Just in Time for Tax Season

It’s hard to believe that it’s already time to start going through piles of records and getting your documents in order for tax season.  If you’re like me, going through this process reminds me of how much I hate to see stacks of paper and has me dreaming of a nice, neat desk!  Here is a concise list to help you determine what to keep and what to shred as you get organized this year:

Bank Statements: Keep one year unless needed for tax records.

Cancelled Checks: Keep one year unless needed for tax records.

Charitable Contributions: Keep with applicable tax return.

Credit Purchase Receipts: Discard after purchase appears on credit card statement if not needed for warranties, merchandise returns or taxes.

Credit Card Statements: Discard after payment appears on credit card statement.

Employee Business Expense Records: Keep with applicable tax return.

Health Insurance Policies: Keep until policy expires, lapses or is replaced.

Home & Property Insurance: Keep until policy expires, lapses or is replaced.

Income Tax Return and Records: Permanently.

Investment Annual Statements and 1099's: Keep with applicable tax return.

Investment Sale and Purchase Confirmation Records: Dispose of sale confirmation records when the transactions are correctly reflected on the monthly statement. Keep purchase confirmation records 3-6 years after investment is sold as evidence of cost.

Life Insurance: Keep until there is no chance of reinstatement. Premium receipts may be discarded when notices reflect payment.

Medical Records: Permanently.

Medical Expense Records: Keep with applicable tax return if deducted on tax return.

Military Papers: Permanently (may be required for possible veteran's benefits).

Individual Retirement Account Records: Permanently.

Passports: Until expiration.

Pay Stubs: One year. Discard all but final, cumulative pay stubs for the year.

Personal Certificates (Birth/Death, Marriage/Divorce, Religious Ceremonies): Permanently.

Real Estate Documents: Keep three to six years after property has been disposed of and taxes have been paid.

Residential Records (Copies of purchase related documents, annual mortgage statements, receipts for improvements and copies of rental leases/receipts.): Indefinitely.

Retirement Plan Statements: Three to six years. Keep year end statements permanently.

Warranties and Receipts: Discard warranties when they are clearly expired. Use your judgment when discarding receipts.

Will, Trust, Durable Powers of Attorney: Keep current documents permanently.

My best advice?  Print this list and keep it with your tax records to revisit each tax year.  And call your financial planner if you have any questions about what you need to keep. 

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This list may not be a complete description of the documents available for shredding or their retention requirements. You should discuss any tax matters with the appropriate professional.