Blog Archives - PFwise.com

What Is the 109-12 Rule?

6/30/2021

Do you know in the year 2021 a married couple over the age of 65 filing a joint return can make up to $109,000 and still be in the 12 percent tax bracket?

Under current law this couple would pay 0 percent long term capital gains.

Would you prefer to pay taxes at your rate while you are alive, or would you prefer to wait until you die and have the taxes paid at your children’s much higher rate?

5 Ways to Avoid Medicare's IRMAA

6/29/2021

The Medicare Income-Related Monthly Adjustment Amount (IRMAA) was established in 2003 as a way to shore up projected Medicare deficits by applying a 'surcharge' to Medicare Part B premiums (and subsequently, on Medicare Part D premiums) for higher-income households. And the potential increase is not trivial, as Medicare premiums in 2021 jump 40% (from $148.50/month to $207.90/month) once income exceeds $88,000 (for individuals, or $176,000 for married couples), and can more-than-triple to $504.90/month for the highest income households (individuals with income over $500,000, or married couples in excess of $750,000).

Since 2020, the IRMAA income thresholds are now indexed for inflation, but with a rising stock market and rising wealth, more and more retirees are still facing the potential to exceed the thresholds (especially once Required Minimum Distributions begin at age 72). So what can one do to plan around the IRMAA brackets?

Her are a few actions you could take:

1. Beware the 'traditional' strategy of spending down non-qualified accounts first and allowing pre-tax retirement accounts to just keep compounding, or the concentrated withdrawals in the later years can blast retirees into the IRMAA brackets with no way to come back down. Instead, consider drawing more evenly across pre-tax, taxable, and tax-free Roth buckets;

2. Consider partial Roth conversions to winnow down the size of IRAs before RMDs begin;

3. Use RMDs for charitable contributions (via the Qualified Charitable Distribution or QCD rules) so the income never hits the tax return in the first place (and thus can't boost income for IRMAA purposes);

4. Consider tapping home equity via a reverse mortgage to manage/minimize the taxable liquidation of accounts (as dollars drawn out from a reverse mortgage are received as a loan and not taxable income);

5. Tap any permanent life insurance you may have purchased in the past, which can also be borrowed against without a taxable event to generate retirement cash flows without crossing IRMAA thresholds (just be cautious not to over-borrow against the policy and trigger a taxable lapse in the future!).

Who Is An Accredited Investor?

6/28/2021

The Securities and Exchange Commission has amended its “accredited investor” definition in 2020 to allow investors to qualify based on defined measures of professional knowledge, experience or certifications — including holding certain Financial Industry Regulatory Authority licenses — in addition to the existing tests for income or net worth.

The thresholds stand at a net worth of at least $1 million excluding the value of primary residence, or income at least $200,000 each year for the last two years (or $300,000 combined income if married).

According to the SEC, the amendments to the accredited investor definition in Rule 501(a):

add a new category to the definition that permits natural persons to qualify as accredited investors based on certain professional certifications, designations or credentials, including the Series 7, Series 65, and Series 82 licenses as qualifying natural persons. (The Commission will reevaluate or add certifications, designations or credentials in the future);
include as accredited investors, with respect to investments in a private fund, natural persons who are “knowledgeable employees” of the fund;
clarify that limited liability companies with $5 million in assets may be accredited investors and add SEC- and state-registered investment advisers, exempt reporting advisers and rural business investment companies (RBICs);
add a new category for any entity, including Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries;
add “family offices” with at least $5 million in assets under management and their “family clients,” as each term is defined under the Investment Advisers Act; and
add the term “spousal equivalent” to the accredited investor definition, so that spousal equivalents may pool their finances for the purpose of qualifying as accredited investors.

HSA 101 - Part C

6/27/2021

In previous blogpost, we discussed some details about HSA, now more questions and answers about HSA below.

7. How Are Amounts Distributed From an HSA Taxed?
A distribution from an HSA used exclusively to pay qualified medical expenses of an account holder is not includable in gross income. Any distribution from an HSA that is not used exclusively to pay qualified medical expenses of an account holder must be included in the account holder’s gross income.

Any distribution that is includable in income because it was not used to pay qualified medical expenses is also subject to a penalty tax. The penalty tax is 20% of includable income for a distribution from an HSA. For distributions made prior to Jan. 1, 2011, the additional tax on nonqualified distributions from HSAs was 10% of includable income.

8. When May an Account Owner Transfer or Roll Over Funds Into an HSA?
Funds may be transferred or rolled over from one HSA to another HSA or from an Archer MSA to an HSA provided that an account holder effects the transfer within 60 days of receiving the distribution.

An HSA rollover may take place only once a year. The year is not a calendar year, but a rolling 12-month period beginning on the day when an account holder receives a distribution to be rolled over.

There is no limit on the number of transfers from one HSA trustee to another during a year, and there is no 60-day requirement.

Beginning in 2007, a taxpayer may, once in their lifetime, make a qualified HSA funding distribution — a transfer from an IRA to an HSA in an amount that does not exceed the annual HSA contribution limitation for the taxpayer.

HSA 101 - Part B

6/26/2021

We discussed what is HSA and its advantages and disadvantages here. Now more HSA Q&As below.

4. Who Is Eligible for an HSA?
For the purposes of an HSA, an eligible person is one who, for any month, is covered under an HDHP as of the first day of that month and is not also covered under a non-high-deductible health plan providing coverage for any benefit covered under the high-deductible health plan. A person enrolled in Medicare Part A or Part B may not contribute to an HSA. Mere eligibility for Medicare does not preclude HSA contributions.

A person may not contribute to an HSA for a given month if they have received medical benefits through the Department of Veterans Affairs in the previous three months. A person shall not fail to be eligible because of receiving hospital care or medical services under a law administered by the secretary of veterans affairs for a service-connected disability.

A separate prescription drug plan that provides any benefits before a required deductible is satisfied will normally prevent a beneficiary from being eligible for an HSA. The IRS has ruled that if an individual’s separate prescription drug plan does not provide benefits until an HDHP’s minimum annual deductible has been met, then the individual will be eligible under Section 223(c)(1)(A).

5. What Is a High-Deductible Health Plan?
For the purposes of an HSA, the requirements for a high-deductible health plan (HDHP) differ depending on the coverage. For 2020-2022, an HDHP is a plan with an annual deductible of not less than $1,400 for self-only coverage. The family coverage deductible limit is $2,800 in 2020-2022. Annual out-of-pocket expenses for an HDHP cannot exceed $7,050 in 2022 ($7,000 in 2021) for self-only coverage. For family coverage, the annual out-of-pocket expense limitation is increased to $14,100 in 2022 ($14,000 in 2021). These annual deductible amounts and out-of-pocket expense amounts are adjusted for cost of living. Increases are made in multiples of $50.

In response to the evolving COVID-19 pandemic, the CARES Act permits HDHPs to cover the cost of telehealth services without cost to participants before the HDHP deductible has been satisfied. HDHPs providing telehealth coverage do not jeopardize their status as HDHPs. Plan members similarly retain the right to fund HSAs after taking advantage of cost-free telehealth services. Remote health services can be provided under a safe harbor rule through Dec. 31, 2021.

6. What Are the Limits on Amounts Contributed to an HSA?
An eligible individual may deduct the aggregate amount paid in cash into an HSA during the taxable year, up to $3,650 for 2022 ($3,600 for 2021) for self-only coverage and $7,300 for 2022 ($7,200 for 2021) for family coverage.

For 2006 and prior years, the contribution and deduction were limited to the lesser of the deductible under the applicable HDHP or the indexed annual limits for self-only coverage or family coverage.

The determination between self-only and family coverage is made as of the first day of the month. The limit is calculated monthly, and the allowable deduction for a taxable year cannot exceed the sum of the monthly limitations.

Keeping reading for more HSA related Q&As here.

HSA 101 - Part A

6/25/2021

1. What Is a Health Savings Account (HSA), and How Can an HSA Be Established?
An HSA is a trust created exclusively for the purpose of paying qualified medical expenses of an account beneficiary. HSAs are available to any employer or individual for an account beneficiary who has high-deductible health insurance coverage. An eligible person or an employer may establish an HSA with a qualified HSA custodian or trustee. No permission or authorization is needed from the IRS to set up an HSA.

Although an HSA is similar to an IRA in some respects, a taxpayer cannot use an IRA as an HSA, nor can a taxpayer combine an IRA with an HSA. In certain situations, a taxpayer can take a qualified funding distribution from an IRA to fund an HSA.

2. What Are the Advantages of an HSA?
Tax benefits include an income tax deduction on the federal level and in most states, payroll tax avoidance, tax-deferred earnings growth and tax-free distributions.

The nontax benefits of HSAs are also significant. The account balance rolls over from year to year. The HSA is transferable and remains after separation from service.

Account owners own the money in their HSA and can use it as they see fit, and they pay lower insurance premiums.

3. What Are the Disadvantages of HSAs?
Many of the disadvantages of HSAs are only in comparison with traditional low- or no-deductible health insurance. Under current law, HSAs must be paired with a high-deductible health plan.

An account owner may face a large medical expense before they have time to build a sufficient balance in the HSA. They also must take more responsibility to "shop around" for their health care spending. They must handle tax reporting and save medical receipts, along with learning the HSA rules and following them to avoid negative tax consequences.

Keeping reading for more HSA related questions and answers here.

Can I Still Get Life Insurance With Hepatitis C? - Part B

6/24/2021

In last blogpost, we discussed what is Hepatitis C and its treatment. Now we will discuss life insurance underwriting for applicants with Hep C.

Life Insurance Underwriting for Hepatitis C
The primary questions to be asked of a proposed insured that presents with Hepatitis C history are:

Age or date of diagnosis? Is there a known cause?
What are the latest liver function test readings? Specifically ALT, AST and GGTP?
If there’s been a biopsy, what is the fibrosis stage?
How is it being treated? Any interferon or ribavirin treatment?
How frequently is there follow up with a physician?
Current alcohol consumption? Type, quantity, and frequency?
Any history of cirrhosis?

Underwriting for Hepatitis C
Typically, we’re looking at a minimum of a Table 4-6, although Standard approvals are possible in a very select number of cases that demonstrate ideal scenarios. This is a big improvement over past history, where a diagnosis of hep C was usually an auto-decline.

If you have Hep C and are interested in applying for life insurance, please contact us as we have helped many people in similar situations.

Can I Still Get Life Insurance With Hepatitis C? - Part A

6/23/2021

About Hepatitis C
Hepatitis C (also called "hep C") is a ribonucleic acid (RNA) virus that attacks the liver and can cause fibrosis, cirrhosis, and even carcinoma. In addition to damaging the liver, hepatitis C can also cause damage to other parts of the body, from blood issues to the kidneys, joints, and skin.

Causes, Risk Factors, and Treatment for Hepatitis C
There are about 170 million people worldwide who are infected with HCV (the hepatitis C virus). The most common infection comes from exposure to blood that contains the virus. Many people who test positive for hep C have no idea how they contracted the virus and deny all risk factors for exposure. Of those exposed, up to 85% will develop a chronic infection. Among those who are chronically infected with hep C, after 10-20 years, about 20% will develop cirrhosis.

The risk assessment for hepatitis C varies according to factors such as: the time frame since the person was exposed, the lab testing (specifically, liver function tests), whether a biopsy was performed, alcohol or drug use, and response to treatment. A detailed history is helpful and allows us to give the best possible idea of potential offers from the carriers.

With appropriate treatment, a hepatitis C infection can be cured. Typically, treatment is going to be recommended for patients with more than 6 months of elevated liver function tests and RNA levels. The most common form of treatment is with interferon (which is injected) and/or oral ribavirin. The response to treatment depends on a number of factors, some of which include the extent of fibrosis seen on a biopsy, the amount of hep c virus detected in the blood, and which of the six known genotypes of hep C that the applicant has.

In next blogpost, we will discuss life insurance underwriting for Hep C.

Income to Outcome Framework for Retirement Assets Decumulation

6/22/2021

PIMCO has a so called "income to outcome" framework that addresses the challenge every retiree faces in asset decumulation.

First, a Dedicated Bond Portfolio
Under this framework, a retiree will prefund the desired level of income replacement in retirement for a certain number of years. This could be accomplished with a dedicated bond portfolio whose cash flows (coupons and principal payments) are expected to match the retiree’s income needs. For example, target-maturity bonds (also known as defined-maturity bonds) are designed to mature and pay out principal (minus defaults) after a specific number of years.

Bond allocations of this sort also are flexible, and therefore allow for adjustments over time as retirees’ conditions and circumstances change – unlike contractual insurance-type products such as immediate or deferred income annuities. Investors remain in control and can make adjustments at their discretion.

Second, the Growth-oriented Equity Portfolio
At the same time, assets not allocated to the bond portfolio can be allocated to equities and other growth-oriented investments to help retirees maintain and grow their wealth in retirement. Crucially, a predictable stream of income from a dedicated bond portfolio means retirees may be less likely to need to tap their growth-oriented investments to fund expenses. This should help investors ride out the up and downs typical of higher-risk, higher-return assets – and, in the process, help to mitigate the effects of sequence risk.

Summary
The two portfolios – one designed for income, the other for longer-term growth – represent a fine balance that the framework seeks to solve: predictable income and growth on one hand; flexibility and control on the other.

How Insurance Companies Determine Living Benefits Amount - Part II

6/21/2021

In last blogpost, we discussed why the need for living benefits riders for a life insurance policy. Now we will discuss how insurance companies determine the amount to pay under the living benefits provision.

1. For Terminal Illness
There is no charge for this rider until it is used depending on the company. This benefit can be accessed when a person has ben given 12-24 months left to live. The insurance company discounts the death benefit at a predetermined interest rate.

2. For Chronic and Critical Illnesses
The calculation can be slightly more complex here. There are 3 different structures that are used to determine the impact of the acceleration related to the face amount of the policy.

There is the discount method, lien approach, and the additional rider charge. The most common method is the discount method. In this method, the insurance company looks at life expectancy, severity of the illness and the present value of the death benefit to determine what amount can be accelerated.

Why Life Insurance Policy With Living Benefits Riders - Part I

6/20/2021

What are Living Benefits?
Living benefits have been around since the 1980s and have evolved over the years to include chronic illness, critical illness, and terminal illness provisions that allow a life insurance policyholder to access a percentage of the death benefit or cash value if the policyholder has what the insurance company deems a "qualifying event". Most insurance companies consider a qualifying event to be the inability to perform two of the six activities of daily living, this consists of eating, bathing, getting dressed, toileting, transferring, and continence.

Why the need for Living Benefits?
The simple fact is that any of these illnesses can strike anyone at any time. Most people are not prepared for a chronic, critical, or terminal illness. Oftentimes people think that they have a health insurance or disability insurance and they will be sufficiently covered in case of a sudden or serious health problems such as a heart attack, stroke or cancer diagnosis.

The reality is that this is simply not true. Many Americans struggle with medical expenses. One in five Americans who have health insurance struggle to pay off their medical debt. For cancer patients with insurance, out of pocket costs can reach $12,000 just one medication and average treatment costs can hit $150,000 according to the Kaiser Family Foundation.

Regardless your age, income, or what kind of health coverage you have, 2 things are inevitable in the case of an unexpected illness: your expenses will go up, and your income will do down, which can result in crippling a family financially.

In next blogpost, we will discuss how insurance companies determine the amount of benefits that will be provided.

When to Accelerate Life Insurance Death Benefit?

6/19/2021

Do you have a life insurance policy with accelerated death benefit rider?

If yes, read this article from American National about the best practices and helpful tips when it comes to decide when to accelerate a death benefit rider.

ETFs Ideas If You Are Worried About Market Risks

6/18/2021

If you are concerned about market correction, it might be time to shift part of your portfolio to more defensive names. Stocks with lower price volatility is one way to do it. Below are some ETFs that are designed to seek lower volatility and higher qualities:

Invesco S&P 500 Low Volatility (SPLV): it selects 100 stocks in the S&P 500 with the lowest volatility over the past 12 months (high turnover might be a problem, though)
SPDR SSGA US Large Cap Low Volatility Index (LGLV): it selects stocks based on their trailing 5-year, rather than 1-year, price movements, and turnover is much lower as a result.
Invesco S&P 500 High Dividend Low Volatility (SPHD): it is more selective, only consists of 50 stocks that not only have low volatility, but also historically provided high dividend yields.
Invesco S&P 500 Quality (SPHQ): it selects the top 100 stocks within the S&P 500 with higher return on equity, stronger cash flow, and lower financial leverage, regardless of the sector.
iShares Edge MSCI USA Quality Factor (QUAL): it also invests in high quality companies, but only relative to their peers in the same sector (therefore its makeup is more similar to that of the broader benchmark).
FlexShares US Quality Large-Cap Index (QLC): it considers not just quality, but also valuation and price momentum when selecting stocks.

Reconstructing Lost IRA Basis To Help Avoid Double Taxation

6/17/2021

From time to time, individuals (typically high-income) can make after-tax contributions to traditional retirement accounts that are usually designated for pre-tax funds. No deduction is received for these contributions because the contributions have already been taxed and should not be taxed again.

To avoid such double taxation, however, the after-tax contributions must be recorded properly, and those records must be adequately maintained. This is particularly important when after-tax amounts end up in Traditional IRAs.

After-tax contributions can make their way into Traditional IRAs via two separate routes, either via direct contributions of after-tax amounts or through rollovers of after-tax dollars previously held in an employer-sponsored retirement plan. Critically, while many taxpayers think that their IRA custodian is keeping track of the after-tax amounts they have in their Traditional IRA, it is, in fact, the taxpayer who is responsible for doing so. Specifically, taxpayers are required to file Form 8606, Nondeductible IRAs, to keep track of such amounts. Sometimes, for numerous reasons, taxpayers may fail to file Form 8606, which can result in basis being ‘lost’. Yet filing Form 8606 does not always capture IRA basis, as it is only required either when after-tax amounts go into the Traditional IRA (via a nondeductible contribution or a rollover of after-tax funds from employer-sponsored retirement plans) or when after-tax money is distributed from a Traditional IRA (including a Roth conversion).

Accordingly, there can be gaps between these actions with long periods of time during which Form 8606 is not required to be filed. In the interim, various events, such as changing CPAs or the death of the client, can lead to a previously filed Form 8606 being ‘forgotten’, resulting in a similar outcome to having never filed the form in the first place! One way to dramatically reduce the likelihood of properly reported basis being forgotten is by filing Form 8606 every year regardless of whether it is required. This way, a taxpayer can be sure that their cumulative IRA basis will always be available on their most recent income tax return.

In the event Form 8606 was not properly filed to begin with, basis can be reconstructed from scratch. To reconstruct nondeductible Traditional IRA contributions, taxpayers can find old Traditional IRA account statements showing contributions, past years’ Form 5498 (Individual Retirement Arrangement Contribution Information), or Form 1099-R (Quantifying And Proving Prior Years’ Nondeductible IRA Contributions) that report such amounts. Alternatively, they can also request a Wage and Income Transcript from the IRS. All of these could be used to prove that a contribution to a Traditional IRA was made. And if a contribution to a Traditional IRA was made with no deduction taken, which can be verified with copies of the relevant tax returns or by requesting Return Transcripts to the extent that such returns were otherwise unavailable, the amount is a verified nondeductible contribution!

Ultimately, the key point is that taxpayers may still be able to deduct tax-free distributions, even if they have ‘lost track’ of the basis in their Traditional IRA accounts. By turning to a multitude of resources to help identify the nature of their retirement account contributions and rollovers, financial advisors can help prevent the double taxation of after-tax contributions made to clients’ retirement accounts!

Keeping reading this article if you want to know more details!

Interest in Life Combo Products Spikes

6/16/2021

LIMRA survey finds pandemic has shifted perceptions about long-term care and life insurance.

The top five reasons people give for considering a combination life insurance product include:

Concern that LTC costs may deplete or exceed my savings: 35%
It is a more economical use of my current assets: 33%
Benefits will be paid even if I don’t incur LTC expenses: 29%
LTC insurance (on its own) is too expensive: 26%
I can’t afford two separate (life and LTC) policies – 25%

Basic Disability Insurance Questions and Answers

6/15/2021

The flyer below has the most basic DI questions answered. Also, a Disability Needs calculator sheet is attached below for people to figure out the amount needed!

Indexed Universal Life vs 401K vs Whole Life

6/14/2021

Yahoo Finance has two separate and detailed articles comparing first, indexed universal life to whole life and next, indexed universal life and 401(k)’s.

If you are interested in evaluating what products fit you, you might find these two articles helpful.

Title: Indexed Universal Life (IUL) vs. 401(k)
https://finance.yahoo.com/ (Yahoo Finance, February 18, 2021)
https://finance.yahoo.com/news/indexed-universal-life-iul-vs-154013419.html

Title: Indexed Universal Life vs. Whole Life Insurance
https://finance.yahoo.com/ (Yahoo Finance, February 18, 2021)
https://news.yahoo.com/indexed-universal-life-vs-whole-160020960.html

Will President Biden Increase Taxes?

6/13/2021

President Biden is raising the possibility that income taxes and other taxes will be increasing in the future to pay for all the new programs he has proposed for his administration.

Here is a list of those changes. The article will provide a broader based explanation of the changes listed.

Reducing federal estate, gift and generation skipping tax exemption to as low as $3.5 million instead of the current $11.7 million.
Eliminating discounting techniques.
Taxing grantor trusts in the grantor’s estate.
Eliminating step up in basis at the time of death.
Limiting the generation skipping exemption to a specific number of years.
Reducing the gift tax free annual exclusion which is currently $15,000 to as many individuals as the taxpayer wishes.
Increasing income taxes for high earning taxpayers.
Capping the benefit derived from income tax deductions and for upper income taxpayers the elimination of up to 80 percent of their deductions.
Broadening the 12.4 percent Social Security tax from $142,000 to $400,000.
Eliminating tax free exchanges of real estate under IRC Section 1031.
Imposing an annual wealth tax.
Limiting the size to which IRAs and other retirement accounts can grow.

Title: Twelve Potential Biden Tax Changes to Keep an Eye On
https://www.wealthmanagement.com/ (Wealth Management.com, March 18, 2021)
https://www.wealthmanagement.com/high-net-worth/twelve-potential-biden-tax-changes-keep-eye

Did You Fall For the 529 Trap?

6/12/2021

The majority of people who buy 529 accounts do so through an advisor, rather than through a state program that sells them directly, the by-far cheaper option.

But even fee-only advisors who forgo a commission and instead send clients to direct-sold plans may be leading them to invest dollars that might be better off in a tax-free Roth IRA. Some states, including California, New Jersey and North Carolina, don’t allow investors to deduct the money they contribute to a 529, negating one selling point of the plans. (There’s never a federal deduction.)

This Financial Planning.com article has a pretty good discussion of the pros and cons of buying 529 through a broker.

Retirement Savings Checkpoints by Age and Income

6/11/2021

Are you overfunded, underfunded, or constrained by your retirement savings? The chart below shows the household income and where you should be with your retirement savings at different ages.

8 Ways An Annuity May Pay

6/10/2021

Withdrawals. You can access your contract value any time. Beginning immediately, up to 10% of the contract value is available annually without a withdrawal charge.
Annuitization. Convert a lump sum into income guaranteed for your life, or your life and another person’s.
Payout Options. Immediate annuities offer payout options for specific amounts or periods; plus, increasing payout options may help address inflation over time.
SEPPs. Substantially Equal Periodic Payments taken at least annually for at least five years and to age 59½ are not subject to the 10% IRS penalty tax on withdrawals prior to 59½.
Combination Plans. Pair two annuities — one generates immediate income, one pursues accumulation.
RMDs. Required Minimum Distribution programs pay the amount traditional IRA owners and qualified plan participants must take yearly from accounts starting by age 72.
Death Benefit. Distributions upon death provide payouts and may extend tax-deferral benefits for a beneficiary’s life.
Commutation. Provides a lump sum from an immediate annuity for unforeseen life events while continuing reduced regular payouts.

4 Options to Cover Medical Costs Before Age 65

6/9/2021

COBRA coverage. The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, allows you to continue your current health care coverage for a certain amount of time, but you may be required to pay the full cost of your health coverage plus an additional 2% charge. While you are working, your employer will typically cover a significant portion of the cost of your coverage, reducing the cost for active employees, but that is rarely the case for those who continue coverage through COBRA. The American Rescue Plan Act of 2021 (ARPA) fully subsidizes COBRA continuation coverage for any period of COBRA coverage beginning April 1, 2021 and ending Sept. 30, 2021. COBRA subsidies are available only for assistance-eligible individuals who are COBRA-qualified beneficiaries or who are eligible for and elect COBRA coverage due to a qualifying event that was an involuntary termination of employment or reduction in hours.
Spouse's plan. If your spouse or domestic partner is employed and has health coverage, you may be able to get covered on their employer's plan—and this may be your best and most cost-effective option. If your spouse or partner is already retired and has retiree medical coverage, you may be able to be added to that coverage as well.
Public marketplace. The marketplace was established by the Affordable Care Act and provides plan options available to anyone who is not yet eligible for Medicare. You can no longer be denied coverage for any reason, including a pre-existing condition. This was often a significant issue for those contemplating early retirement because affordable health insurance coverage was hard to find and obtain, particularly for those with pre-existing medical conditions. Costs for these plans can vary widely, but some people qualify for government-provided subsidies through premium tax credits that can make the coverage more affordable. ARPA makes temporary changes to subsidy payments and eligibility for 2021. It removes the 400% federal poverty level (FPL) requirement to qualify for subsidies (also known as the Subsidy Cliff), and it also increases the amount of subsidy payable to an individual or family based on household income.
Private insurance. To obtain coverage, you can also look to your local health insurance agent, trade or professional associations, and other so-called "private exchanges" that offer plans from multiple carriers. You may have more plan options available to you through these outlets than the public marketplace, but note that government-funded premium tax credits cannot be applied to these plans. These plans can be found through insurance companies, agents, brokers, and online health insurance sellers.

Advantages and Disadvantages of Actively Managed ETFs

6/8/2021

Activity Managed ETFs
An actively managed ETF is that a portfolio manager adjusts the investments within the fund as desired while not being subject to the set rules of tracking an index - like a passively managed ETF attempts to do. The active fund manager aims to beat a benchmark using research and strategies. Traditional actively managed ETFs (as well as passively managed ETFs) report their positions daily and are priced throughout the day. This is one of the differences between an actively managed ETF and a comparable mutual fund.

Advantages of Actively Managed ETFs relative to some other investments include:

Potentially higher returns. Whereas a passively managed ETF attempts to track the performance of a benchmark, actively managed ETFs have the opportunity to outperform the benchmark through investment decisions by portfolio managers and research analysts. Of course, the fund might underperform the benchmark as well.
Potentially lower cost vs. comparable funds. The structure of an actively managed ETF can enable it to have lower expenses vs. a comparable mutual fund.
Tax efficiency. The share creation and redemption process can possibly result in ETFs being more tax-efficient than a comparable mutual fund because the process is done "in-kind," which is not a taxable event.
Flexibility. Like index ETFs, actively managed ETFs allow investors to trade throughout the day, including short sales and buying on margin. This can also enable greater liquidity for ETFs relative to funds that do not trade throughout the day.

Disadvantages to traditional actively managed ETFs:

Daily disclosure requirement. This could be a problem for larger funds as well as funds that hold illiquid securities. Full disclosure might hinder an active manager’s ability to make adjustments and implement a strategy with internal investment research in the portfolio, for fear of front-runners and other traders in the marketplace. Note that semi-transparent ETFs do not have this requirement.
Deviation from NAV. Traditional actively managed ETFs may develop large premiums or discounts to NAV on volatile trading days. These ETFs may develop premiums/discounts to NAV that are larger than those of passively managed ETFs.
Higher costs vs. certain funds. Whereas actively managed ETFs may have lower costs relative to comparable mutual funds, they may have higher expense ratios compared with index-trading ETFs.

A Rule of Thumb to Evaluate Buying versus Renting

6/7/2021

The price-to-rent ratio:
Purchase price of a property / Annual rental expense for a similar property

A ratio greater than 20 generally favors renting.
A ratio less than 20 generally favors buying.

Online Rent vs Buy Evaluation Tool:
Fidelity has a very detailed online tool to help you evaluate rent vs. buy. It weights both your short term costs in the rent vs buy options and your long term wealth building considerations.

2 Steps to Screen and Find Attractive Stocks - Start With This Formula

6/6/2021

First step:
You can start your screen by finding stocks that meet the following condition:

PE < Dividend Yield + Earnings Growth Rate

Note:
You can use Yahoo Finance's Analysis section to find projected earnings for the company's current year and for the following year. You may want to find how accurate historically analysts' earnings estimates are versus actual reported earnings, then make adjustments accordingly.

Second step:
Check the selected companies' financial metrics, for example, rising incomes, positive free cash flows that are able to cover the dividends, etc. All these can be found at Yahoo Finance's Financials section, or at the company's latest SEC filings (e.g. 10K-annual report) at www.SEC.gov.

Note: Yahoo Finance often picks up "adjusted" earnings, which may exclude a laundry list of supposedly one-time items, sometime these items are legitimate, sometimes they maybe excuses by the management for not doing better. Sometime it's worthwhile to visit previous 10-Ks to find out if such "one-time" adjustments were consistently done in the past and threw out costs that are regular part of business.

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To the extent that any material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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