Category Archives: Financial Planning

Stay in the Know: What a Biden Presidency Means for Your Personal Finances

Biden Tax Plan

The landmark 2017 Tax Cuts and Jobs Act (TCJA 2017) championed by Former President Trump effectively overhauled the tax code. Perhaps most significantly, the corporate tax rate was slashed from 35% to 21%. President Biden has proposed raising that limit to 28%, among other measures. Included in his tax proposals:

  • Increasing the tax rate on the top bracket of those earning >$400k from 37% to 39.6%
  • Long-term capital gains taxed on income above $1M would be taxed at 39.6%
  • Further limiting itemized deductions

With the majority so thin in the Senate, these changes are likely to be pursued through the budget reconciliation process, which is also where the TCJA 2017 was born. This only requires a simple majority to pass the Senate, circumventing the 60-vote supermajority needed for ordinary legislation.

Potential Implication: If a higher capital gains rate becomes a reality, high net worth earners may want to consider realizing a portion of their capital gains now during a lower tax regime. This is especially true of assets with shorter-term horizons or any speculative holdings. Any securities sold could be re-purchased after 30 days, effectively resetting the cost-basis. (See the bottom of this article for related disclaimers).

Retirement Savings

Retirement contributions may also see some changes. Currently, deductions for 401(k) contributions are structured such that the same amount of money contributed from high and low tax-bracket would result in the higher earner receiving a bigger deduction. Policy experts expect this to be flattened at some point in the Administration.

Potential Implication: This is another reason to save save save for retirement. Any changes in this area would only encourage highly compensated employees to max out on their retirement benefits while the current tax incentives remain in place.

Estate Planning

One of President Bidens less talked about, but particularly controversial, proposals include changes to a provision called “step-up in basis” in inheritance law. Rather than capital gains tax being applied to the original cost of the inherited asset, the basis is reset to the fair value at the time of inheritance, effectively eliminating any capital gains tax liability. Biden has called for elimination of this tax treatment which would significantly increase tax liabilities for heirs.

Despite his indicating interest in pursuing changes, experts say it would be particularly difficult for President Biden to eliminate or change this provision.

Potential Implications: The estate tax or “death tax” has long been a political battleground. A potential repeal of the “step-up in basis” provision may incentive the gifting of appreciated assets as a means of estate reduction.

Higher Education

Another frequently addressed issue on the campaign trail was the skyrocketing cost of education. Included in the Biden Administration’s proposals:

  • Two years of free post-secondary education (community college, trade school, or other job training)
  • Free tuition at public college and universities for households making less than $125k
  • Canceling $10,000 for student loans*

In addition to voicing support for loan cancelation, President Biden has suggested further changes to the student borrowing rules. When federal student loan forbearance expires at the end of September, the rules may have changed. Proposals include capping payments at 5% of discretionary income, forgiveness after 20 years of qualifying payments, and other provisions.

*Such a provision was notably left out of Biden’s stimulus proposal

With such a narrow majority in the Senate, where many bills ultimately require a 60-vote supermajority, some of his more ambitious plans are unlikely to be implemented. Policy experts say the changes to personal finance will probably not be on par with the TCJA 2017. Instead, expect subtle, mostly symbolic tweaks.

Please note that the topics of tax, education, and investment planning are highly individualized and dependent on your personal financial situation, so always consult an appropriate specialist before making any decisions. The information above is intended to be a discussion starter and does not constitute financial advice or recommendations.

Retirement Savings Rules are Changing – What You Need to Know

The SECURE Act, passed in December of 2019, puts in place new retirement rules

Photo by Aaron Burden on Unsplash

On December 20th, 2019, the Setting Up Every Community for Retirement Enhancement (SECURE) Act of 2019 went into effect. While the law changed some arcane regulations that will only apply to a sliver of people, there were a couple major changes. These new rules will affect the vast majority of retirees. Here’s a quick run down of the provisions we feel will be most relevant for our clients:

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Cox Capital Management Hosts Informational Medicare Event in Andover

Navigating the Medicare Maze.

Last week Cox Capital Management hosted an informational Medicare event at Salvatore’s Restaurant for clients in the greater-Andover area. The seminar was part of a larger “Client Education Series” that Cox Capital has been periodically putting on for the past couple years. Topics have ranged from generational planning to social security to long-term care insurance. In each instance, CCM brings in an independent, outside expert on a particular subject matter with the sole goal of informing and providing a resource for current clients. With many folks approaching medicare-eligible age, it was the perfect time to bring in Peter Stoner from Stoner & Co. to present this complicated and often misunderstood topic.

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Demand More From your Advisor!

The advisory landscape is competitive!
Photo by Nicolas Hoizey on Unsplash

Is your advisor or stockbroker playing more golf or out sailing these days? Are you questioning what they are actually doing for you? Today’s overachieving investment advisory firms are doing much more for their clients than in any time in history. This is a transformative time in financial services. Consumers are becoming smarter and advisory firms are offering more and more cutting-edge services in order to remain competitive.

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