What Can Wealthy Boomers Do to Stay Wealthy?

One of the most valuable things wealthy boomers can do to protect their wealth is tax planning. Here’s some tax planning strategies to consider in your financial plan:

  • Roth Conversions: Convert traditional IRAs or 401(k)s into Roth IRAs over time. While you’ll pay taxes on the converted amount, Roth IRA withdrawals in retirement are tax-free, which can reduce your future tax burden.
  • Tax-Efficient Withdrawal Strategy: Plan how you’ll withdraw money from various retirement accounts (e.g., traditional IRAs, 401(k)s, taxable accounts). Aim to minimize the tax impact by strategically choosing which accounts to tap into each year.
  • Asset Location: Allocate your investments wisely between taxable and tax-advantaged accounts. For example, place tax-inefficient investments (like bonds) in tax-advantaged accounts and tax-efficient investments (like stocks) in taxable accounts.
  • Qualified Charitable Distributions (QCDs): If you’re charitably inclined, consider making charitable donations directly from your IRA using QCDs. This can satisfy your Required Minimum Distribution (RMD) and lower your taxable income.
  • Tax-Efficient Investments: Invest in tax-efficient funds or individual stocks that generate lower levels of taxable income, such as index funds and ETFs.
  • Tax-Loss Harvesting: Offset capital gains by selling investments that have declined in value, thus realizing capital losses that can offset gains.
  • Minimize Medicare IRMAA Surcharges: Be aware of how your income affects Medicare premiums. There are some strategies that can help reduce the impact of IRMAA.
  • Estate Planning: Implement effective estate planning strategies, such as gifting assets to heirs over time to take advantage of gift tax exclusions and reduce your taxable estate.
  • 529 Plans: Use 529 college savings plans for education expenses. They offer tax-free growth and withdrawals when used for qualified education expenses.
  • Health Savings Account (HSA): If eligible, contribute to an HSA, which provides a triple tax advantage – tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
  • Long-Term Care Insurance: Consider long-term care insurance to protect assets from potential long-term care expenses while keeping premiums tax-deductible.
  • Real Estate Strategies: Explore tax-efficient real estate investment options, such as real estate investment trusts (REITs) or like-kind exchanges (1031 exchanges).
  • Use Tax Credits: Take advantage of available tax credits for retirees, such as the Retirement Savings Contributions Credit (Saver’s Credit) or any state-specific tax credits.

If you’d like to chat with a retirement tax planning specialist, reach out to us at: retire@herretirement.com.


Have Your Cake & Eat it Too: New PPP Basics and Tax Savings

Good news. The new Paycheck Protection Program (PPP) law enacted with the stimulus package adds dollars to your pockets if you have or had PPP money.

Did you miss out on the first two opportunities to receive your tax-free Paycheck Protection Program (PPP) cash? Many did miss out. Why?

One reason: the word “loan.”  Who wants a loan? No one. Well, almost no one.  But who wants a cash gift, tax-free?  If you do, read on for the details. But first, you should know that the big picture works like this:

  1. You obtain your PPP tax-free monies from a lender (it’s called a “loan,” but watch that word disappear as you read this letter).
  2. You spend all the PPP money on yourself if you are self-employed or operate as a partnership; on payroll (including pay to you, if that applies); and on other covered expenses such as rent, interest, utilities, operations, property damage, suppliers, and worker protection.
  3. You apply for loan forgiveness and achieve 100 percent loan forgiveness, which is easy-peasy when you spend 60 percent or more of the money on payroll (and yourself if you are self-employed or a partner in a partnership).
  4. You deduct the expenses that you paid with the PPP loan monies that were forgiven.

New Money on the Table

The new COVID-19 stimulus act sets aside $35 billion for first-time PPP applicants, with $15 billion of that made in loans for first-time applicants with 10 employees or fewer or made in amounts less than $250,000 to businesses in low-income areas.

New Deadline

The new deadline of March 31, 2021, replaces the expired deadline of August 8, 2020. The monies available in this new round of PPP funding are on a first-come, first-served basis. Don’t procrastinate. Get your application for your first-time PPP monies in place now.

Before we go further, please note the PPP money comes to you in what appears to be a loan. We say “appears” because you typically pay back a loan. Done right, however, the PPP loan is 100 percent forgiven. The word “loan” makes some businesses leery of this arrangement. Don’t be. The PPP monetary arrangement is a true “have your cake and eat it too” deal.

And this remarkable deal applies to your past PPP loan, the PPP loan you have outstanding, and the PPP loan you are about to get if you have not had one before. Here are the details.

Loan Proceeds Are Not Taxable

The COVID-related Tax Relief Act of 2020 reiterates that your PPP loan forgiveness amount is not taxable income to you.

Expenses Paid with Forgiven Loan Money Are Tax-Deductible

As you may remember, the IRS took the position that expenses paid with PPP loan forgiveness monies were not deductible.

Lawmakers disagreed but were unable to get the IRS to change its position. The IRS essentially told lawmakers, “If you want the expenses paid with a PPP loan to be deductible, change the law.”

And that’s precisely what lawmakers did. The COVID-related Tax Relief Act of 2020 states that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income.”

In plain English, the expenses paid with monies from a forgiven PPP loan are now tax-deductible, and this change goes back to March 27, 2020, the date the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted.

Good luck to all small business owners as they navigate this new PPP process.

2018 Year End Contribution Reminders

Happy New Year, readers!

As we all know, tax season will soon be upon us. The Tax Cuts and Jobs Act passed last year implements changes to the tax code on our 2018 taxes. The most notable of the changes include a lowering of income tax rates and a near doubling of the standard deduction. In addition, a number of expenses that were allowed as itemized deductions in previous years have been severely restricted or eliminated. It is important to understand the changes that were made so that you can get ahead of preparing your return. Here are some of the changes that were made that may affect you in 2018:

Changes To Itemized Deductions

In 2018, the number of tax bracket stayed the same. However, the actual rates were reduced. The tax rate at the top of the scale was lowered to 37 percent. While the standard deduction increased, other changes to allowable itemized deductions may mean that you will actually have a higher tax bill to pay.

Tax prep fees, investment expenses, foreign real estate taxes paid, home equity loan interest that wasn’t used for home improvement and personal exemptions are no longer allowable as itemized deductions. Alimony payments for any divorce that is finalized in 2019 or after will also be added to that list and be applicable in 2019.

A Change To Charitable Donations

Charitable donations can only be used as a deduction if you decide to itemize. However, if you do itemize and have any cash contributions that were made to public charities, those can be deducted by as much as 60 percent of their AGI, which is up 10 percent from the previous limit which was 50 percent.

Tax Reform Only Offers A Few New Opportunities

529 plans have changed. You now have the ability to use as much as $10,000 per year from the plan to pay for tuition related to kindergarten through 12th grade. The advantage of using a 529 plan is that it provides tax-free withdrawals and tax-free growth at the federal level for all qualified expenses.

Another change concerns S corporations – partnerships and sole proprietorships. If you own one or more of these businesses, you may be eligible for a 20 percent deduction. However, this deduction does have some contingencies related to the type of business and the amount of income received.

Changes To The Alternative Minimum Tax For Individuals

Changes were also made to the Alternative Minimum Tax (AMT) for individuals. If you are married and filing jointly, exemptions have been raised to $109,400. If you’re single your exemption has been raised to $70,300. These start to phase out at the $1 million level if you are a couple and $500,000 if you’re single.

The Best Way to Prepare

It’s always a great idea to get started as soon as possible before the end of the year to understand how any changes in the tax reform will affect your filing. It also helps to use a professional tax advisor or CPA who understands the many different nuances of the new tax legislation. You want to make sure that you pay the appropriate amount for estimated taxes or for your withholding tax for the year.

For more info on how the new tax bill could affect your retirement plans, please contact us at lynnt@herretirement.com or call us at 508-798-5115.

5 Key Facts About the New Tax Bill

The enactment of the Tax Cuts and Jobs Act (TCJA) represents “the most sweeping overhaul of the U.S. tax code in more than 30 years.”1

For millions of Americans and businesses it means an altered financial and investment landscape with new opportunities and challenges in the years ahead. Keep in mind, however, that the information in this material is not intended as tax advice, and may not be used for the purpose of avoiding any federal tax penalties.

Here’s a brief look at 5 key changes:

Personal Taxes: Some of the TCJA’s key provisions include a reduction in most marginal income tax brackets, near doubling of the standard deduction, and a $10,000 cap on state and local tax deduction. The Tax Policy Center projects that taxes will fall for all income groups and result in an increase of 2.2% in after-tax income. The Tax Policy Center also cautions, however, that some individuals and households may see a higher tax bill.2

Investments: The TCJA did not adjust the preferential rates of 0%, 15% and 20% for long-term capital gains and qualified dividends. For example, the transition from 15% to 20% capital gains rate will continue to use the top tax-bracket thresholds of $425,800 for individuals and $479,000 for married couples.3

Retirement: The tax bill introduces several key changes for business owners, including the introduction of a 20% deduction for pass-through businesses. Business owners may want to review their current business structure (C-Corp, S-Corp, and LLC) and determine what entity is best structured to help them accumate retirement assets.

College Savings: 529 plans may now be used to fund private elementary and secondary education (for up to $10,000 in distributions per student each year). Prior, they were limited to any eligible post-secondary institutions.4

Estate Strategies: The estate tax exemption was raised to $11.2 million, a doubling of the $5.6 million that previously existed. As such, individuals benefiting from this change may want to re-evaluate the strategies they have in place to address the tax and liquidity issues that may no longer exist.

If you have questions about how to new tax bill will impact you or your retirement plan, please contact us.


  1. The Wall Street Journal, December 20, 2017
  2. Tax Policy Center of the Urban Institute & Brookings Institution, 2017
  3. Kitces.com, 2017
  4. The tax implications of 529 College Savings Plans can vary significantly from state to state, and some plans may provide advantages and benefits exclusively for their residents. Please consult legal or tax professionals for specific information regarding your individual situation. Withdrawals from tax-advantaged education savings programs that are not used for education are subject to ordinary income taxes and may be subject to penalties.

Six Most Overlooked Tax Deductions

Who among us wants to pay the IRS more taxes than we have to?¹While few may raise their hands, Americans regularly overpay because they fail to take tax deductions for which they are eligible. Let’s take a quick look at the six most overlooked opportunities to manage your tax bill.

7 Common Tax Questions Answered

Often, a single, well-thought-out tax strategy can put you in a position to keep significantly more of your investment earnings. That’s why it’s important to know the tax implications of your investment decisions. In the PDF below, are 7 common questions and answers. Once you have reviewed this document, if you still have more tax related questions, a Her Retirement tax specialist can answer any question you may have as part of our complimentary services.

UnderstandingTaxes QA_PacLife