June 2013

04 Jun

Three Financial Challenges Facing Generation Y—And How to Beat Them

A dismal job market, ballooning student loan debt, low savings rates—it's no secret that members of Generation Y (those born between the early 1980s and the late 1990s) face some big financial hurdles, and that the economic landscape is fundamentally different now than it was for their parents and grandparents.

If you're a member of Gen Y (or the parent of a "millennial") you're probably all too aware of the challenges. But what you may not know is that there are some things you can do to overcome those difficulties and get started on the path to financial success.

Challenge #1: My student loan debt is making it difficult for me to accomplish my other goals.

Forty percent of households headed by a person under the age of 35 have student loan debt.And the total average balance on that debt is a hefty $26,682.1 Owing that much money at a young age can make it difficult to save for retirement, buy your first home and achieve other goals.1

04 Jun

Five Life Changes and Their Tax Consequences

Your life is constantly changing, and so is your tax situation. To keep your financial plan on track, you should periodically review your tax situation, especially after major life events, like getting married or having a baby. That way, you can be confident that you are doing everything you can to avoid paying more taxes than necessary.

Below, we explain how some major life events may affect your tax situation.

Changing Jobs

You'll probably switch jobs a few times over the course of your career, and each of those moves could also change your tax situation. During any job change, it's important to consider any potential tax consequences, especially when it comes to making a decision about an employer-sponsored retirement plan. Decisions you may need to make about an existing retirement plan include whether to roll over the funds, leave the money where it is or cash out.  Think carefully before you make your decision—cashing out could mean you'll pay taxes and penalties to the IRS, while rolling over the funds could mean your savings will continue to grow tax-deferred until you retire.

When you start a new job, you'll also need to make decisions about tax withholding and benefits, including how much to contribute to tax-advantaged accounts, such as your 401(k), flexible spending account (FSA) or health savings account (HSA). In addition, if you've relocated for a job, you may be able to deduct some of your moving expenses on your taxes; job-search expenses may also be deductible.

04 Jun

Understanding the Gift Tax Exclusion

Most of us will never face taxes related to money or assets we give away.

"How can I avoid the federal gift tax?" If this question is on your mind, you aren't alone. The good news is that few taxpayers or estates will ever have to pay it.

Misconceptions surround this tax. The IRS sets annual and lifetime gift tax exclusion amounts, and this is where the confusion develops.

Here's what you have to remember: practically speaking, the federal gift tax is a tax on estates. If it wasn't in place, the rich could simply give away the bulk of their money or property while living to spare their heirs from inheritance taxes.

Now that you know the reason the federal government established the gift tax, you can see that the lifetime gift tax exclusion matters more than the annual one.