Helping You Reach Your Goals |
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Greetings!
Here's a preview of what to expect
in this month's newsletter:
* Get an overview of certain provisions in the Inflation Reduction Act that could affect consumers and businesses, including clean energy tax credits, Medicare changes, and and new corporate taxes.
* Dividend investing can be a dependable source of income for retirees and others. Find out how to get started.
* Get some tips to help homeowners protect their properties and evacuate safely in the event of a natural disaster.
* Learn how permanent life policy can be used to help supplement retirement income, pay for long-term care services, or leave a tax-free legacy.
* In addition to the death benefit, life insurance policies can provide other benefits while the policyholder is still alive. Here's why they are valuable.
* Discover how a 2022 IRS tax reporting change could affect people who are self-employed or whose side job pays through an app or online platform.
Times have certainly changed, and this is definitely a season
when you should review where you are at financially.
Be sure to review your life insurance, retirement plans,
and long-term care needs. I can meet with you in person,
or schedule a phone or Zoom meeting with you.
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Unpacking the Inflation Reduction Act: What's In It?
The Inflation Reduction Act (IRA) signed into law on August 16, 2022, is a package of climate, energy, health-care, and tax legislation. It authorizes about $440 billion in new spending and will generate an estimated $740 billion in revenue and savings, reducing the deficit by around $300 billion over a decade. (1)
About $370 billion will fund new and existing programs that aim to expand renewable energy sources and help mitigate the negative effects of climate change. This shift in energy policies has the potential to cut greenhouse gas emissions to about 40% below 2005 levels by 2030, according to the administration and several climate models that analyzed the legislation's environmental impact. (2)
1) The Associated Press, August 16, 2022
2) Bloomberg.com, August 4, 2022
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Dividends for Income and Total Returns
John D. Rockefeller, one of the wealthiest Americans in history, loved receiving stock dividends. "Do you know the only thing that gives me pleasure?" he once asked. "It's to see my dividends coming in." (1) There may be many things other than money that give you pleasure, but you can still appreciate the stabilizing role that dividends might play in your portfolio.
Dividends can be a dependable source of income for retirees and others who want an income stream without selling their underlying investments. If you do not need your dividends for current income, reinvesting these relatively small payments can become a powerful growth engine. Because dividends are by definition a positive return, they can boost returns in an up market and help balance declining stock prices in a down market.
1) BrainyQuote.com, 2022
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Preparing for a Natural Disaster
Most areas in the United States are susceptible to some form of natural disaster, whether it's a wildfire, tornado, hurricane, earthquake, or flood. A severe storm or other catastrophic event often strikes with little warning, can result in costly damage to your home, and puts your family's safety at risk. Being prepared may help you make it through a natural disaster safely.
Wherever you live, there are proactive steps you can take to help protect your home from natural disasters. To help fend off storm damage, inspect and repair roof shingles and flashing, clean your gutters and downspouts so that water can flow freely away from your home, trim overhanging tree limbs, and consider investing in storm windows, doors, and shutters.
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How Life Insurance Could Help Mitigate Taxes in Retirement
Higher taxes could follow in the wake of soaring government spending on pandemic relief measures - a likelihood that shines a new light on the tax advantages of life insurance. Permanent life insurance offers a tax-free death benefit, and a portion of each premium goes into a cash-value account that accumulates on a tax-deferred basis. The policy owner may also access the cash value, if needed, without triggering income taxes.
Assets in tax-deferred retirement accounts will eventually be taxed as ordinary income, whether distributions are taken by the current owner or a beneficiary who inherits the account. Thus, taxpayers with well-funded retirement accounts should bear in mind that today's historically low income tax rates are scheduled to expire after 2025.
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Uncle Sam Wants to Know About Your Gig Income
If you earn money through an app or online digital platform, you may be affected by a tax reporting change that took effect on January 1, 2022. A provision of the 2021 American Rescue Plan requires third-party payment processors to report business transactions totaling over $600 per year by issuing a Form 1099-K to the taxpayer and the IRS. In prior years, the reporting threshold was much higher (200 business transactions and $20,000). Here are a few things you should probably know about this far-reaching new rule.
It's not personal. Business transactions are defined as payments for goods or services, including tips. Money received from the online sale of personal items like old clothing or furniture, which are normally sold at a loss, is not taxable and does not need to be reported. However, those in the business of reselling goods for a profit should carefully track the original costs of their purchases. Peer-to-peer payment apps are not required to report personal transactions intended as gifts or used to pay back friends for dinner or trips, or to split other costs.
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Life Insurance Living Benefits
When thinking about life insurance, you might focus on the death benefit that can be used for income replacement, business continuation, and estate preservation. But life insurance policies may include other provisions that allow you to access some or all of the death benefit while you are living. These features are often referred to as living benefits, which are usually offered as optional add-ons called riders.
Some living benefit riders are added to a life insurance policy at no additional cost. Other riders are optional and come with an added cost to your basic policy premium. Living benefits vary depending on the type of life insurance and the company issuing the policy. Generally, living benefits are available to the policy owner, but using your living benefits will reduce the life insurance death benefit available for policy beneficiaries.
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Summer is now in our rearview mirror and fall is just around the corner. While I miss the warmth of the summer months, these two cuties pictured at right (my granddaughters) are the sunshine in my life!
In the last newsletter I let you know about a new life insurance strategy available for those ages 40-65. Here's a reminder: If you have a lump sum of money and want life insurance, but you don't want to have to pay forever or even for a long period of time, you can make as little as five annual contributions that will give you permanent lifetime coverage with cash value you can use for retirement. It doesn't get much better than no loss of principal with the opportunity for much better returns!
If you've experienced job loss, unemployment income, reduced hours, or dramatic fluctuations in your portfolio over the past two years due to the pandemic, it's important to assess where you're currently at and create a path to recovery. Also, between inflation and the Russia-Ukraine war, our current economic environment may be concerning you. If so, I'd be happy to schedule an in-person meeting, phone appointment, or Zoom session with you.
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Best regards,
William R. Bessette
Bessette Financial Services
(508)775-5510
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Bessette Financial Services | 100 Independence Drive, Suite #7
Hyannis, MA 02601 | (508) 775-5510 |
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Securities offered through Cabot Lodge Securities LLC.
200 Vesey Street, 24th Floor, New York, NY 10281
(888) 992-2268 | Member FINRA / SIPC / MSRB
Bessette Financial Services is independently owned and operated and has no affiliation
with Cabot Lodge Securities LLC or CL Wealth Management LLC.
Bessette Financial Services does not provide tax advice or legal advice.
Any discussion of taxes herein is for informational purposes only.
You should consult with an attorney or accountant concerning any tax and/or legal advice.
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