Julie Murphy

About Julie Murphy

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November 16 2021

2022 IRA Contribution Limits

Julie Murphy401k, Investing, Retirement 2022 ira contribution, 401 k, retirement, savings

Preparing for retirement just got a little more financial wiggle room. This week, the Internal Revenue Service (IRS) announced new contribution limits for 2022.

Staying put for 2022 are traditional Individual Retirement Accounts (IRAs), with the limit remaining at $6,000. The catch-up contribution for traditional IRAs remains $1,000 as well.¹

For workplace retirement accounts (i.e. 401(k), 403(b), amongst others), the contribution limit rises $1,000 to $20,500. Catch-up contributions remain at $6,500.¹

Eligibility for Roth IRA contributions has increased, as well. These have bumped up to $129,000 to $144,000 for single filers and heads of households, and $204,000 to $214,000 for those filing jointly as married couples.¹

Another increase was for SIMPLE IRA Plans (SIMPLE is an acronym for Savings Incentive Match Plan for Employees), which increases from $13,500 to $14,000.¹

If these increases apply to your retirement strategy, you may want to make some adjustments to your contributions. Where I can be of any help, I welcome the opportunity.

^{1. CNBC.com, Friday, November 5, 2021}

^{Once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA) or Savings Incentive Match Plan for Employees IRA in most circumstances. Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.}^{Once you reach age 72, you must begin taking required minimum distributions from your 401(k), 403(b), or other defined-contribution plans in most circumstances. Withdrawals from your 401(k) or other defined-contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.}^{To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.}^{The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.}

October 16 2021

How Secure is Your Retirement?

Julie Murphy401k, Retirement 401k, health insurance, open enrollment, retirement

Medicare’s annual open enrollment period begins October 15 and ends December 7. During this time, current Medicare beneficiaries have the option to adjust their coverage for the coming year. Any changes to your insurance plan will go into effect on January 1, 2022.¹

This is an opportunity to reassess your current coverage and identify potential areas for improvement. Maybe you’ve recently changed medication, find yourself underutilizing coverage, or are in need of additional benefits.Before open enrollment begins, you’ll receive a report outlining your current coverage. Review your elections carefully, especially if you haven’t updated coverage in the last few years.

Medicare offers a Plan Finder tool to help compare other offerings if you’re considering making a switch.Your health insurance coverage in retirement should work to protect your financial wellbeing.

I’m happy to help navigate your questions around ensuring your retirement plan has you set up for success and well being. Feel free to reach out with any questions, or to schedule a meeting to talk.

^{1. Centers for Medicare & Medicaid Services, February 2, 2020}

^{The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.}

GROWING YOUR HIGH NET WORTH PRACTICE WITH... (1)

April 14 2021

Growing Your High Net Worth Practice – Julie Murphy in Conversation with Jon Doyle

Julie MurphySmall Business asset management, City National Rochdale, small business

To kick off this interview with Julie Murphy, Managing Director, Senior Investment Consultant at City National Rochdale Investment Management Jon Doyle asks…

“We’re really glad that you found us here at City National Rochdale. And thank you for that partnership. Let’s talk a little bit about your growth for a minute. Your practice has really grown phenomenally in the years that we’ve worked together. What role has City National Rochdale played in that growth?”

Incredible volumes. And here’s why – City National Rochdale provides this level of customization that emotionally makes the client feel like they matter. They’re not being shoved into an ETF that everybody in the world has. They’re not being shoved into, “Hey, I have this product platform that I’m going to take every single one of my clients and you’re going to pick numbers one through six, and you’re going to fit in there”.

It’s about the fact that my growth over the years has occurred in a major way.

Because the relationship with City National Rochdale allows my clients to actually feel like they have a voice with these really smart money analysts. People often work with advisors because they don’t feel like they’re necessarily smart about their money. City National Rochdale partners not only with the advisors, but also with the client, and it makes the client feel like they’re a good steward of their own money, even though they don’t know what the heck they’re talking about.

So it has to do with the fact that I am an asset gatherer, I am not an asset manager. I can manage money better than most people in the world, right? But City National Rochdale can do it way better than I can with their analytics. And it has freed up my time, it streamlined my operations and processes inside my company, so that I could go do what I love.

As an example, we had this whole market downturn with the pandemic. I was so grateful for the fact that I could get out there and create a whole marketing online series to help people with their life choices and everything that’s going on right now. And I could do that with those marketing efforts to attract more money and more people to me, while City National Rochdale was sitting there doing joint Zooms, whether I was on them or not, but offering them to my clients.

And then having customization calls with Wayne – I love Wayne- he my guy! Internally Wayne and his team handle the techie stuff. I’m a finance major from the University of Illinois and I have my MBA from Notre Dame. So I can do the Finance, but this balance has allowed me to be able to really zone in on the marketing aspect and helping people on the emotional front this past year!

So while you guys are doing the techie stuff, I could be the asset gatherer, while you guys are the asset manager, wow, it has exponentially helped my growth.

Personally, my emotional payoff is that I feel way more grounded in my business. I feel like if I ever had holes in my practice over the years, you guys have been able to fill in that Achilles heel.

As a smaller shop – because we’re not a $20 billion dollar firm at JMC Wealth Management – you know that it’s helped me really play with the big dogs that much better. And like I said, we’ve had exponential growth thanks to working with City National Rochdale.

Click play below to tune into the full interview!

April 7 2021

Essential Financial Figures | 2021

Julie MurphyMarket, Retirement, Small Business AGI, financial figures, IRA Contribution, retirement, tax benefits, tax deadlines

Stay organized and informed with this printable, newly updated resource of essential financial figures and dates for 2021.

Click to download the full PDF version here to keep for your records.

Any questions? Enter your information on the right side of the page to schedule your free consult today.

March 14 2021

Is a SEP-IRA Right for Your Business?

Julie Murphy401k, Small Business IRA, retirement, SEP

If you’re like many small business owners, running your own business is an all-consuming endeavor.

In the face of everyday demands, choosing a retirement strategy for your business can become a casualty. The idea of establishing a plan could evoke worries about complicated reporting and administration.

If this sounds familiar, then you may want to consider whether a Simplified Employee Pension Individual Retirement Arrangement (SEP-IRA) may be right for you.

A SEP-IRA can be established by sole proprietors, partnerships, and corporations, including S corporations.

The advantages of the SEP begin with the flexibility to vary employer contributions each year from 0% up to a maximum of 25% of compensation, with a maximum dollar contribution of $57,000 in 2020, and $58,000 in 2021.

Employees Vested

The percentage you contribute must be the same for all eligible employees. Eligible employees are those age 21 or older who have worked for you in three of the last five years and have earned at least $600 (in 2020) or $650 (in 2021). Employees are immediately 100% vested in all contributions.

There are no plan filings with the IRS, making administration simple and low cost. You only need to complete Form 5305 SEP and retain it for your own records. This form should be provided to all employees as they become eligible for participation.

Unlike other plans, a SEP may be established as late as the due date (including extensions) of your business’ tax filing (generally April 15th) for making contributions for the prior year.

A Menu of Choices

Each eligible employee will be asked to establish his or her own SEP-IRA account and self-direct the investments within the account, relieving you of choosing a menu of investment choices for the plan. The rules for accessing these funds are the same as those governing regular IRAs.

Under the SECURE Act, in most circumstances, once you reach age 72, you must begin taking required minimum distributions from a SEP-IRA and other defined contribution plans. Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.¹

Unlike the self-employed 401(k), which is only available to business owners with no employees, you cannot take a loan from your SEP assets. Under the SECURE Act, in most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 72. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.¹

The SEP earns the “simplified” in its name and stands as an attractive choice for business owners looking to maximize contributions while minimizing their administrative responsibilities.

1. IRAs have exceptions to avoid the 10% withdrawal penalty, including death and disability.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2021 FMG Suite.

weekly market insights JMC Wealth Management

March 8 2021

Weekly Market Insights March 8 2021

Julie MurphyMarket

Stocks were mixed last week as rising bond yields and heightening inflation fears sent stocks on a wild ride, capped by a remarkable Friday afternoon rally. The Dow Jones Industrial Average gained 1.82%, while the Standard & Poor’s 500 increased by 0.81%. The Nasdaq Composite index fell 2.06% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.76%. (1,2,3)

Rising Yields Whipsaw Stocks

The week began on an ebullient note as stocks surged on a retreat in bond yields and approval of a new vaccine, with sharp gains in reopening stocks, hard-hit technology companies, and small-cap companies.

But the optimism proved fleeting as worries over rising bond yields upended the high valuation growth stocks and sent the broader market lower. Deteriorating investor sentiment culminated in a steep sell-off on Thursday, sparked by comments from Fed Chair Jerome Powell that did little to allay investors’ concerns about rising yields and festering inflation anxieties.⁴

Stock prices rallied on a strong employment report on Friday, but some of the enthusiasm was tempered by rising yields.

U.S. Dollar’s Surprising Strength

Last week, the U.S. dollar gained 0.93% against a basket of international currencies—a relatively big move in the currency market. Year-to-date the dollar has appreciated over 2%.⁵

U.S. dollar strength this year has defied the expectations of many analysts who anticipated that a global economic recovery would prompt a shift away from the safe harbor of the dollar toward non-dollar denominated assets.

However, rising U.S. yields and a faltering economic rebound in Europe have instead propelled the U.S. dollar higher, raising concerns about tight financial conditions abroad and its potential adverse impact on an emerging markets recovery.

This Week: Key Economic Data

Wednesday: Consumer Price Index (CPI).
Thursday: Jobless Claims. Job Openings and Labor Turnover Survey (JOLTS).
Friday: Consumer Sentiment.

^{Source: Econoday, March 5, 2021

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Wednesday: Campbell Soup Company (CPB).
Thursday: JD.com (JD), Ulta Beauty, Inc. (ULTA), Docusign (DOCU), GoodRx Holdings (GDRX).
^{Source: Zacks, March 5, 2021

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“In seed time learn, in harvest teach, in winter enjoy.”

– William Blake

Rules for Home Office Deductions

If you have a business and work out of your home, the IRS allows you to deduct certain expenses on your return. Here are a few key things to keep in mind:

The IRS requires you to use your office (or a part of your home) for “regular and exclusive use.” The part of the house should be your principal place of business, a place where you meet customers, or a separate structure dedicated to the business, like a garage or studio.
To calculate your deduction, you can use two methods:
- The simplified option allows you to multiply the allowable square footage of your office by $5 up to a maximum of 300 square feet.
- The regular method allows you to specifically calculate the actual expenses like rent, mortgage interest, taxes, repairs, depreciation, and utilities you pay for the portion of your home used for the business. If you use only part of a space for your business, you’ll need to figure out the percentage devoted to business activities.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁶

Avoiding Falling Back While Springing Forward

Getting used to the clocks shifting back and forth during the onset and conclusion of Daylight Saving time can throw many of us for a loop, not to mention “springing forward” tends to be more difficult than “falling back.” It can take longer than we expect to adjust to not only a one-hour time change, but also disruptions to our meal, fitness, work, and sleep schedules, among other factors. So, how can you combat this? Here are a few tips that may help.

Gradually prepare for the time change the week before. Try to shift as many things in your routine “forward” by 10 minutes each day.
Manage your environmental lighting as much as possible. Try to get more light in the morning (to suppress your body’s natural sleep hormones) and as little in the evening as possible, especially approaching bedtime and during the night.
Do your best to avoid napping if possible. While it can be really tempting to “catch up” with your lost hour, until you’re adjusted, napping could slow your period of adapting to the new schedule.

Don’t let losing an hour slow you down. Taking some proactive measures may just help you ease into the transition better than you think.

Tip adapted from WebMD.com⁷

The name of a particular insect is six letters long. You can lop off the last three letters from its name and end up with the name of another insect. What is this six-letter word?

Last week’s riddle: A woman walking along a canal sees a boat full of people, yet there isn’t a single person on board. How could this be? Answer: Everyone on board is married or partnered (not single).

Kofa National Wildlife Refuge, Arizona.

Footnotes and Sources

^{1. The Wall Street Journal, March 5, 2021}

^{2. The Wall Street Journal, March 5, 2021}

^{3. The Wall Street Journal, March 5, 2021}

^{4. The Wall Street Journal, March 4, 2021}

^{5. The Wall Street Journal, March 5, 2021}

^{6. IRS.gov, September 23, 2020}

^{7. WebMD.com, 2020}

^{Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.}

^{The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.}

^{The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.}

^{The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.}

^{U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.}

^{International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.}

^{Please consult your financial professional for additional information.}

^{This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.}

February 12 2021

Prevent a Rift: Money Tips for Newlyweds

Julie MurphyDivorce, Investing, Retirement 401k, Divorce, finances, marriage

Research suggests that 70% of married millennial couples argue about financial decisions more than any other topic. This could explain why some experts say financial problems are one of the top reasons marriages fail.^1,2

Fortunately, when couples work together to address their finances, they may be able to mitigate many of the problems money may cause in a marriage.

10 Tips for Newly Married Couples

Communication – Couples should consider talking about their financial goals, memories, and habits, as each partner may come into the marriage with fundamental differences in experiences and outlooks driving their behaviors.
Set Goals – Setting goals establishes a common objective that both partners become committed to pursuing.
Create a Budget – A budget is an exercise for developing a spending and savings plan that is designed to reflect mutually agreed upon priorities.
Set the Foundation for Your Financial House – Identify assets and debts. Look to begin reducing debts, while building your emergency fund.
Work Together – By sharing the financial decision-making, both spouses are vested in all choices, reducing the friction that can come from a single decision-maker.
Set a Minimum Threshold for Big Expenses – While possessing a level of individual spending latitude is reasonable, large expenditures should only be made with both spouses’ consent. Agreeing to a purchase amount should require a mutual decision.
Set Up Regular Meetings – Set aside a predetermined time once or twice a month to discuss finances. Talk about budgeting, upcoming expenses, and any changes in circumstances.
Update and Revise – As a newly married couple, you may need to update the beneficiaries on your accounts, reevaluate your insurance coverage, and revise (or create) your will.3
Love, Trust, and Honesty – Approach contentious subjects with care and understanding, be honest about money decisions you know your spouse might be upset with, and trust your spouse to be responsible with handling finances.
Consider Speaking with a Financial Professional – A financial professional may offer insights to help you work through the critical financial decisions that all married couples face.

1. NPR.org, February 10, 2020
2. Marriage.com, June 8, 2020
3. When drafting a will, consider enlisting the help of a legal, tax, or financial professional who may be able to offer additional insight, especially if you have a large estate or complex family situation.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

February 8 2021

Markets Roiled by Recent Events

Julie MurphyInvesting, Market Financial Markets, investing, Investment, markets, stock market, stocks

Recently, the world has watched with great interest as a few companies have seen surprising rallies in their stock prices. You may have read stories of individual investors gaining massive returns on their investments, thanks to this phenomenon. However, many of these same assets have quickly suffered steep declines following their initial boost.¹

During times like these, it can be tempting to pile into an asset that has seen such rapid growth. The excitement of the moment or the fear of missing out can cause even the savviest investor to act when they usually wouldn’t.

But what matters is what you do next. Right now, perhaps the best thing for your long-term future is to remove emotion from the equation. Remember, your investment strategy has been crafted to help pursue your long-term goals, regardless of what markets do in the short-term.

Volatile markets can be unnerving, but you’re always welcome to give me a call with your questions. Rest assured, we’re keeping a close eye on the markets, and most importantly, watching for any new long-term trends that may emerge on your behalf.

^{1. CNBC.com, February 1, 2021}

January 11 2021

Markets and Marriage

Julie MurphyDivorce, Investing, Market family, Investment, markets 401k, marriage

Your investment strategy is a lot like a marriage. One day you may feel like everything’s going swimmingly. The next day, there might be an argument over who forgot to load the dishwasher. And even the best marriages and partnerships have moments where one or both partners look around and go, “Is this as good as it gets?”

The stock market, much like a marriage, has days of ups and downs. Just look at what happened within the last few weeks. During the first week of December, the stock market jumped 200 points, only for that gain to disappear a week later.^,

Investors cheered an upbeat consumer spending report, and stock prices rallied again when home sales stayed near a 14-year high. But the enthusiasm faded on mixed news about the job market, and selling continued on concerns about the rollout of the COVID-19 vaccine.

Trying to make sense of the market and the economy during a pandemic is like trying to determine the health of a long-term relationship based on one day. The market may be fickle or have a roving eye, but it’s important to remember that your investing strategy was created based on your goals, time horizon, and risk tolerance.

If you have any questions about what you’re seeing in the news, please give us a call or schedule your consult with us by heading over to the right of this blog. We’d welcome the chance to hear your perspective on “what’s next” for the economy.

Kind Regards,

Julie M. Murphy, CFP®, CLU®, ChFC®, MBA

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services offered through Sequoia Wealth Management LLC, a registered

investment advisor. Sequoia Wealth Management LLC and JMC Wealth Management, Inc are separate entities from LPL Financial.

Footnotes, disclosures, and sources:

Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2020 FMG Suite.

1. CNBC.com, December 8, 2020

2. CNBC.com, December 2, 2020

3. WSJ.com, December 9, 2020

December 28 2020

Smart Moves for the New Year and Beyond

Julie MurphyInvesting CARES act, HSA, investing, RMD

When it comes to preparing yourself financially for a new year, starting early is often a smart move. For many Americans this winter, this may be doubly true. Considering the impact COVID-19 has had on the financial landscape, and the changes wrought by the CARES Act and the SECURE Act, there are some important items to remember.

Keep in mind, this article is for informational purposes only; it is not a replacement for real-life advice. Also, tax rules are constantly changing, and there is no guarantee that the tax landscape will remain the same in years ahead. With that in mind, let’s look at what you should be thinking about as we head into 2021.

The CARES Act

The CARES Act enabled any taxpayer with a Required Minimum Distribution (RMD) due in 2020 from certain retirement accounts to skip those RMDs. This effectively meant that retirement accounts could continue to potentially grow even as the economic outlook remained somewhat uncertain.1

Withdrawals from a traditional IRA, a 401(k), and other retirement plans are taxed as ordinary income and, if taken before the age of 59 1/2, may be subject to a 10 percent federal income tax penalty. However, as part of the CARES Act, many accessed their retirement funds in 2020 without being subject to the 10 percent penalty under certain circumstances, such as if their income was reduced.

The CARES Act also made changes for those with Health Savings Accounts, or HSAs. As you may recall, the IRS extended the federal income tax filing period from April 15, 2020, to July 15, 2020. Additionally, taxpayers were able to defer federal income tax payments until July 15, 2020, without the normal penalties and interest.

In addition, the CARES Act gave companies extra time to make contributions to employee HSAs in 2020, which may make for an even brighter 2021. In addition, it expanded what qualifies as a “reimbursable expense,” and over-the-counter medicine can be purchased with an HSA account. These new, broad uses for one’s HSA could help account holders soften the blow of medical care going into the new year.2

HSA limits were not adjusted in the CARES Act, however. They are $3,550 if you are single and $7,100 if you have a spouse or family. An additional annual “catch-up” contribution of up to $1,000 is allowed for each person in the household over age 55.2

Money taken out of an HSA for a nonmedical reason may be considered taxable income. If you make such a withdrawal before you turn 65, the withdrawn amount may be subject to a 20 percent federal tax penalty. HSA funds roll over year to year if you don’t spend them.3

The SECURE Act

Another piece of legislation that passed in late 2019 and began to be implemented in 2020 was the Setting Every Community Up For Retirement Enhancement Act, or SECURE Act. This impacted numerous financial areas, but there are two main changes to keep in mind for those looking ahead.

New IRA Rules

The legislation eliminated the required minimum distribution (RMD) rules in regard to defined contribution plans and Individual Retirement Account (IRA) balances upon the death of the account owner. Under the new rules, non-spouse beneficiaries are generally required to withdraw all the funds in the account by the end of the 10th calendar year following the year of the account owner’s death. In short, “stretching” an IRA over several generations is no longer allowed.4

It’s important to highlight that the new rule does not require the non-spouse beneficiary to take periodic withdrawals during the 10-year period. However, all the money must be withdrawn by the end of the 10th calendar year following the inheritance.

Some groups may have other minimum distribution requirements, including the surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and any child of the IRA owner who has not reached the age of majority.

IRA Contributions and Distributions

Another major change in 2020 was the removal of the age limit for traditional IRA contributions. Before the SECURE Act, you were required to stop making contributions at age 70½. Now, you can continue to make contributions as long as you meet the earned-income requirement.5

Also, as part of the Act, you are mandated to begin taking required RMDs from a traditional IRA at age 72, an increase from the previous 70½. Allowing money to remain in a tax-deferred account for an additional 18 months (before needing to take an RMD) may alter some previous projections of your retirement income.5

The SECURE Act’s rule change for RMDs only affects Americans turning 70½ in 2020 or later. For these taxpayers, RMDs will become mandatory at age 72. If you meet this criterion, your first RMD won’t be necessary until April 1 of the year after you reach 72.

Avoid Taxing Surprises

For those actively employed, financial transactions made late in the year can have an unexpected impact on your taxes. These can include, but are not limited to, year-end and holiday bonuses or a special one-time dividend from a company (Note: dividends on common stocks are not fixed and can be decreased or eliminated on short notice). Depending on your situation, your taxes can become complicated rather quickly.

One choice to help simplify the process is to use the Internal Revenue Service’s Tax Withholding Estimator located at IRS. gov. This handy tool may help taxpayers better understand their tax situation so they can estimate their overall tax liability.6

Remember, this article is for illustrative purposes only. Please contact a tax, legal, or accounting professional before implementing a strategy or modifying an existing strategy when it comes to handling holiday bonuses or a special one-time dividend from a company.

The Best Financial Moves?

In truth, no two taxpayers are alike, and it’s important to find the strategy that best suits your unique situation. In a normal year, taxes and retirement preparation can be complicated financial events. As we’ve seen from the events of 2020, today’s financial landscape may be trickier to navigate than ever. But please remember, we’re here to help you every step of the way.

IRS.gov, 2020
Benefitspro.com, May 15, 2020
Healthcare.gov, 2020
Waysandmeans.house.gov, 2019
MarketWatch.com, 2019
IRS.gov, August 8, 2020

Julie M. Murphy, CFP®, CLU®, ChFC®, MBA

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services offered through Sequoia Wealth Management LLC, a registered

investment advisor. Sequoia Wealth Management LLC and JMC Wealth Management, Inc are separate entities from LPL Financial.

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