Clear View Wealth Advisors, LLC
Managing Member / Financial Planner
As a CERTIFIED FINANCIAL PLANNER ™ Professional, Steve Stanganelli has been providing financial, tax, retirement and college funding advice for more than 30 years to individuals, families and business owners throughout Greater Boston, the Merrimack Valley and New Hampshire Seacoast.
Professionally, Steve sees himself as a financial coach or navigator. His role is to help clients navigate the sea of confusion that is personal finance. He has worked hard to develop his experience and assemble the kinds of tools that are needed to help his clients with a variety of financial challenges including divorce, funding college tuition, and building efficient portfolios for long-term investing goals.
In his professional work, Steve is humbled knowing that people entrust him with their hard-earned wealth — regardless of the amount — or seek his guidance on any number of life-changing issues that can affect their personal bottom line. He finds it rewarding and humbling each time a client entrusts him not just with their money to manage but their dreams. Like many of his peers, Steve is a member of the “Sandwich Generation” helping to care for elderly parents while raising a family of his own.
Steve knows what it feels like trying to deal with the frustrating details of Medicare and the Part D “donut hole.” He knows what it feels like to juggle the responsibilities as an elder care giver with the demanding schedule of school-age kids. Steve knows all too well the sense of loss created by an unexpected corporate downsizing or downturn in business or sudden death of a loved one.
Like many of you who may read this, Steve leads a complex life – husband, father, son, homeowner, landlord, professional by day, weekend athlete (road cyclist). He can relate to the challenges his clients have faced or will meet. And he genuinely wants to share his insights, experience, and training to help others make the most with their lives.
Initially, Steve was a registered representative affiliated with an independent broker-dealer. Then he affiliated with a national wire house broker completing their extensive training programs and using the opportunity to complete the educational requirements for both of Steve's financial planning designations. Ultimately, Steve decided that he did not fit into the culture of a broker-dealer and turned toward more fee-only planning-oriented firms. In 2010 he consolidated his practice into his own firm, a state-registered investment advisor, to offer flexible financial and tax planning services as well as low-cost ETF investing solutions.
BA, Economics, University of Massachusetts at Lowell
MS, Finance, Bentley University
Assets Under Management:
There are two parts to this question as I understand it: Social Security withholdings on earned income and taxation of Social Security benefits.
As is the case with most things in life, it depends. In this case, it depends on which question you're asking. For completeness, I'll cover both.
If you're still working, whether in a self-employed capacity or for an employer, then the answer is a very simple 'yes'. As long as you are working and earning an income, then you'll be required to contribute to Social Security.
For the other side of this question, you may or may not need to pay taxes on your Social Security benefits. This depends on whether or not your Modified Adjusted Gross Income (MAGI) is above a certain threshold that depends on your filing status (i.e. single or married filing jointly, for instance).
Up to 85% of a taxpayer's Social Security benefits may be taxable. This will depend on your MAGI and filing status: above $32,000 and filing jointly, or above $25,000 and filing single, head of household, or filing separately.
To calculate your MAGI,
- Take one-half the total of your Social Security or Railroad Retirement benefits from your SSA-1099 or RRB-1099 (these are reported on Form 1040, line 20a);
- Add earnings from W2s (Form 1040, line 7);
- Add taxable interest from 1099-INTs (Form 1040, line 8a);
- Add ordinary dividends from 1099-DIV (Form 1040, line 9a);
- Add other gains from Form 4797 (Form 1040, line 14);
- Add IRA distributions from 1099-R (Form 1040, line 15b);
- Add taxable pensions from 1099-R (Form 1040, line 16b);
- Add Schedule E income (rental real estate, royalties, partnerships, etc.);
- Add farm income (Form 1040, line 18);
- Add unemployment compensation (Form 1040, line 19)
- Add any other income that is reported on Form 1040, line 21;
In addition to these forms of income, you also need to add back any tax-exempt interest from investments like municipal bonds (reported on Form 1040, line 8b).
There are a host of differences between a savings account and a Roth IRA.
First, a savings account is typically offered through a bank. As a bank deposit, these funds are guaranteed by depositor insurance in case the financial institution were to fail. Because these accounts have little risk, you are paid an interest rate that reflects this. You'll find savings account interest rates hover near 0%. You'll also receive a Form 1099-INT from the bank annually (assuming you earn at least $10 per year in interest) that will also be reported to the IRS. You'll have to include this interest income on your tax return which will become part of your taxable income. Savings accounts are great vehicles to build up money that you can access for emergencies or unexpected expenses.
A Roth IRA is a retirement account. You can set these up through a bank, brokerage firm, mutual fund company, or an investment management account through a Registered Investment Advisor.
With a Roth IRA, you'll have access to a variety of investments beyond just a money market account, which is the closest approximation with a bank savings account. You may invest in stocks, bonds, mutual funds, unit investment trusts, master limited partnerships, and more. You have a greater potential for gain and accordingly have more risk and exposure to volatility in returns.
Unlike a savings account, you do not need to pay taxes on earnings (dividends, interest or capital appreciation) each year. And in retirement, you do not pay income on these earnings either. Why? Because you don't take a tax deduction for contributions to a Roth, you are investing "after-tax" money" so you don't pay taxes on the gains later when you make withdrawals in retirement.
Another feature of a Roth IRA is that you don't have to take distributions in retirement. Unlike a traditional IRA or your 401(k) plan at work, you are not required to take any distributions. You could, in effect, choose to let the money compound through retirement and then potentially leave a bigger pie as a legacy for your beneficiaries who inherit the funds.
Unlike a savings account, there are limits on how much you can contribute each year based on your age and adjusted gross income.
One great feature of a Roth IRA is that you can access your principal (what you contributed from time to time) without a tax penalty for early withdrawals. There are exceptions that allow investors to access the funds to help pay for college or a first-time home purchase. This is why these are great savings vehicles by parents of college-bound students or by students themselves. Unlike a 529 savings plan which requires the funds to be used for qualified education expenses, a Roth IRA can be used for other things allowing more flexibility. So a parent wouldn't have to tie up funds in a 529 for a student who might not use the funds because he chose not to go to college or trade school, or received a scholarship and didn't need the 529 funds.
Whether or not you are exempt from tax will depend on your filing status, the amount of the gain, and your occupancy status for the property sold.
Under Internal Revenue Code Section 121, you only pay taxes when your gain is more than $250,000 above your 'basis' if you are a single filer, or $500,000 if you are filing jointly.
Your gain is figured by determining your basis. Your basis consists of what you originally paid for the property plus certain closing costs at the time. Then you add in major home improvements (i.e. new kitchen, adding a room, etc.). Then you add in whatever real estate transaction fees you incurred.
To figure out the gain, take your sale price less this 'basis'. If the difference is less than $250,000 (single filier) or $500,000 (filing jointly), then you will have no tax on any of your gain.
You will need to file a form with your taxes to document this.
To best determine whether or not your property sale is exempt, you may want to speak with a qualified tax planner. You can also review the relevant IRS publication: https://www.irs.gov/publications/p523/ar02.html
I can only hope that my children will be as generous to us in our later years as you are with your parents. Your gift is probably greatly appreciated by your parents and helps them enrich their quality of life. While your monthly payment can technically qualify as a gift, it has no impact on your personal income taxes under current tax rules.
Technically, you and your spouse may gift a maximum amount of $14,000 per year per person. This would equal a total gift of $28,000 by your wife to your parents. Add that to the $14,000 per year per person that you can gift. That means you can gift a total of $56,000 from your household to their household. But this gifting only makes a real difference when calculating gifts to reduce the total of a taxable estate for estate tax purposes. If your personal estate is worth less than the federal exemption (currently about $5.2M and possibly a non-issue next year if the tax bill winding its way through Congress is finalized), then it's not likley to be an issue.
On the other hand, if your parents could qualify as dependents and you paid for their medical services directly, then you could find that some or all of your cash transfers may qualify as itemized medical deductions.
But after January 1 if the proposed tax bill is finalized, then this may be moot as there will be a lower incentive to itemize after the standard deduction increases.
You should only invest that which you're willing and able to lose. In a short time frame, you ought to focus on spreading the risk around by building up your cash reserves before choosing to invest in longer-term or more speculative investments.
I recommend figuring out your monthly fixed overhead (i.e. things like rent, utilities and loan payments) and determine the average gap you've had between jobs. Then I would suggest targeting a cash reserve of six to 12 months of monthly expenses. This portion can be set aside in a combination of higher-yielding money market funds (any online bank or Bankrate.com can provide a list) and ultra-short-term bond funds (consider MINT).
If you're going to possibly cash out 50% in a year, then set it aside now and avoid the variability and volatility that comes with speculative investing. And if your new job isn't taking out money for income taxes, it is all the more important to not gamble with this portion of your funds.
For the balance, I suggest splitting your allocation between a diversified small-cap and mid-cap fund (anything from Vanguard's lineup can work) and no more than 20% in something speculative. If you have a stomach for Bitcoin, then consider a long/short multi-strategy fund like Catalyst/Milburn, a hedge fund in mutual fund form.