Seide Financial GroupSteven M. Seide CFP®, AIF®Todd Cottingham, MBAwww.seidefinancial.com110 John Robert Thomas DriveExton, PA 19341610-280-9330sms@seidefinancial.comtwc@seidefinancial.com

January 2020Hindsight Is 2020: What Will You DoDifferently This Year?

Key Retirement and Tax Numbers for2020

Could you survive a no-spend month?

How Consumers Spend Their Money

Seide Financial GroupStrategies for GenerationsQualified Charitable Distributions: Using Your IRA to Givefrom the Heart

See disclaimer on final page

A New Year and a new decade areupon us. We hope you had awonderful holiday season and arelooking forward to a happy andhealthy 2020. You can count on usto remain focused on your financialplan to achieve your goals.

Steve, Dawn, Edwina, and Todd

The Tax Cuts andJobs Act roughlydoubled thestandard deduction($12,200 for singlefilers and $24,400for marriedtaxpayers filingjointly in 2019) andindexed it forinflation through

2025. As a result, far fewer taxpayers willitemize deductions on their tax returns, andsome people may be disappointed that they nolonger benefit from writing off their donations.

If you are 70½ or older, you can use a qualifiedcharitable distribution (QCD) to donate fromyour IRA and get a tax break, whether youitemize or not. Not coincidentally, this is thesame age you must begin taking annualrequired minimum distributions (RMDs), whichare normally taxed as ordinary income, or facea 50% penalty on the amount that should havebeen withdrawn.

QCDs satisfy all or part of any RMDs that youwould otherwise have to take from your IRA.Better yet, QCDs are excluded from yourincome, so they help lower your adjusted grossincome (AGI) as well.

How QCDs workThe IRA custodian must issue a check madeout to a qualified public charity (not a privatefoundation, donor-advised fund, or supportingorganization). In some cases, the IRAcustodian may provide a checkbook from whichyou can write checks to chosen charities. Beaware that any check you write will count as aQCD for the year in which it is cashed by thecharity, whereas a check from the custodiancounts for the year in which it is issued.

You can take an RMD any time during the yearyou turn 70½, but you must wait until after youare 70½ to make a QCD. The QCD exclusion islimited to $100,000 per year. If you're married,your spouse can also contribute up to $100,000

from his or her IRA. You cannot deduct a QCDas a charitable contribution on your federalincome tax return — that would bedouble-dipping.

A QCD must be an otherwise taxabledistribution from your IRA. If you've madenondeductible contributions, then eachdistribution normally carries with it a pro-rataamount of taxable and nontaxable dollars. WithQCDs, the pro-rata rule is ignored, and taxabledollars are treated as distributed first.

Tax perks for giversIf you no longer itemize, you could reduce yourtax bill by donating with QCDs from your IRAinstead of writing checks from your standardchecking account. And if you still itemize, QCDsmight prove more valuable than tax deductions.That's because they can help address taxissues that might be triggered by income fromRMDs.

For example, an itemized deduction reducesyour taxable income by the amount of thecharitable gift, but it does not reduce youradjusted gross income. This is a key distinctionbecause the 3.8% tax on net investmentincome, Medicare premium costs, taxes onSocial Security benefits, and some tax creditsare based on AGI.

Also, charitable giving can typically bededucted only if it is less than 60% of youradjusted gross income. But with QCDs, youmay be able to give more than 60% of your AGIand exclude the entire amount (up to the$100,000 cap) from your taxable income.

Time for a rollover?Qualified charitable distributions are availablefrom traditional IRAs, Roth IRAs (with taxableamounts), and inactive SIMPLE or SEP IRAs,but they are not allowed from employerretirement plans such as 401(k)s and 403(b)s.Thus, you might consider rolling funds from anemployer plan to an IRA if you want to takeadvantage of a giving strategy that involvesQCDs.

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Hindsight Is 2020: What Will You Do Differently This Year?According to a recent survey, 76% ofAmericans reported having at least onefinancial regret. Over half of this group said ithad to do with savings: 27% didn't start savingfor retirement soon enough, 19% didn'tcontribute enough to an emergency fund, and10% wish they had saved more for college.1

The saving conundrumWhat's preventing Americans from savingmore? It's a confluence of factors: stagnantwages over many years; the high cost ofhousing and college; meeting everydayexpenses for food, utilities, and child care; andsqueezing in unpredictable expenses for thingslike health care, car maintenance, and homerepairs. When expenses are too high, peoplecan't save, and they often must borrow to buywhat they need or want, which can lead to anever-ending cycle of debt.

People make financial decisions all the time,and sometimes these decisions don't pan outas intended. Hindsight is 20/20, of course.Looking back, would you change anything?

Paying too much for housingAre housing costs straining your budget? Astandard lender guideline is to allocate no morethan 28% of your income toward housingexpenses, including your monthly mortgagepayment, real estate taxes, homeownersinsurance, and association dues (the"front-end" ratio), and no more than 36% ofyour income to cover all your monthly debtobligations, including housing expenses pluscredit card bills, student loans, car loans, childsupport, and any other debt that shows on yourcredit report and requires monthly payments(the "back-end" ratio).

But just because a lender determines howmuch you can afford to borrow doesn't meanyou should. Why not set your ratios lower?Many things can throw off your ability to payyour monthly mortgage bill down the road — ajob loss, one spouse giving up a job to takecare of children, an unexpected medicalexpense, tuition bills for you or your child.

Potential solutions: To lower your housingcosts, consider downsizing to a smaller home(or apartment) in the same area, researchingand moving to a less expensive town or state,or renting out a portion of your current home. Inaddition, watch interest rates and refinancewhen the numbers make sense.

Paying too much for collegeOutstanding student debt levels in the UnitedStates are off the charts, and it's not juststudents who are borrowing. Approximately 15

million student loan borrowers are age 40 andolder, and this demographic accounts foralmost 40% of all student loan debt.2

Potential solutions: If you have a child incollege now, ask the financial aid office aboutthe availability of college-sponsoredscholarships for current students, or considerhaving your child transfer to a less expensiveschool. If you have a child who is about to go tocollege, run the net price calculator that'savailable on every college's website to get anestimate of what your out-of-pocket costs willbe at that school. Look at state universities orcommunity colleges, which tend to be the mostaffordable. For any school, understand exactlyhow much you and/or your child will need toborrow — and what the monthly loan paymentwill be after graduation — before signing anyloan documents.

Paying too much for your carAutomobile prices have grown rapidly in the lastdecade, and most drivers borrow to pay fortheir cars, with seven-year loans becomingmore common.3 As a result, a growing numberof buyers won't pay off their auto loans beforethey trade in their cars for a new one, creating acycle of debt.

Potential solutions: Consider buying a usedcar instead of a new one, be proactive withmaintenance and tuneups, and try to use publictransportation when possible to prolong the lifeof your car. As with your home, watch interestrates and refinance when the numbers makesense.

Keeping up with the JonesesIt's easy to want what your friends, colleagues,or neighbors have — nice cars, trips, homeamenities, memberships — and spend money(and possibly go into debt) to get them. That's amistake. Live within your means, not someoneelse's.

Potential solutions: Aim to save at least 10%of your current income for retirement and try toset aside a few thousand dollars for anemergency fund (three to six months' worth ofmonthly expenses is a common guideline). Ifyou can't do that, cut back on discretionaryitems, look for ways to lower your fixed costs,or explore ways to increase your currentincome.1 Bankrate's Financial Security Index, May 2019

2 Federal Reserve Bank of New York, Student LoanData and Demographics, September 2018

3 The Wall Street Journal, The Seven-Year AutoLoan: America's Middle Class Can't Afford TheirCars, October 1, 2019

Live within your means

It's easy to want what yourfriends, colleagues, orneighbors have — and spendmoney to get those things.That's a mistake. Live withinyour means, not someoneelse's.

Page 2 of 4, see disclaimer on final page

Key Retirement and Tax Numbers for 2020Every year, the Internal Revenue Serviceannounces cost-of-living adjustments that affectcontribution limits for retirement plans andvarious tax deduction, exclusion, exemption,and threshold amounts. Here are a few of thekey adjustments for 2020.

Employer retirement plans• Employees who participate in 401(k), 403(b),

and most 457 plans can defer up to $19,500in compensation in 2020 (up from $19,000 in2019); employees age 50 and older can deferup to an additional $6,500 in 2020 (up from$6,000 in 2019).

• Employees participating in a SIMPLEretirement plan can defer up to $13,500 in2020 (up from $13,000 in 2019), andemployees age 50 and older can defer up toan additional $3,000 in 2020 (the same as in2019).

IRAsThe combined annual limit on contributions totraditional and Roth IRAs is $6,000 in 2020 (thesame as in 2019), with individuals age 50 andolder able to contribute an additional $1,000.For individuals who are covered by a workplaceretirement plan, the deduction for contributionsto a traditional IRA phases out for the followingmodified adjusted gross income (MAGI) ranges:

2019 2020

Single/headof household(HOH)

$64,000 -$74,000

$65,000 -$75,000

Married filingjointly (MFJ)

$103,000 -$123,000

$104,000 -$124,000

Married filingseparately(MFS)

$0 - $10,000 $0 - $10,000

Note: The 2020 phaseout range is $196,000 -$206,000 (up from $193,000 - $203,000 in2019) when the individual making the IRAcontribution is not covered by a workplaceretirement plan but is filing jointly with a spousewho is covered.

The modified adjusted gross income phaseoutranges for individuals to make contributions to aRoth IRA are:

2019 2020

Single/HOH $122,000 -$137,000

$124,000 -$139,000

MFJ $193,000 -$203,000

$196,000 -$206,000

MFS $0 - $10,000 $0 - $10,000

Estate and gift tax• The annual gift tax exclusion for 2020 is

$15,000, the same as in 2019.• The gift and estate tax basic exclusion

amount for 2020 is $11,580,000, up from$11,400,000 in 2019.

Kiddie taxUnder the kiddie tax rules, unearned incomeabove $2,200 in 2020 (the same as in 2019) istaxed using the trust and estate income taxbrackets. The kiddie tax rules apply to: (1)those under age 18, (2) those age 18 whoseearned income doesn't exceed one-half of theirsupport, and (3) those ages 19 to 23 who arefull-time students and whose earned incomedoesn't exceed one-half of their support.

Standard deduction

2019 2020

Single $12,200 $12,400

HOH $18,350 $18,650

MFJ $24,400 $24,800

MFS $12,200 $12,400

Note: The additional standard deductionamount for the blind or aged (age 65 or older)in 2020 is $1,650 (the same as in 2019) forsingle/HOH or $1,300 (the same as in 2019) forall other filing statuses. Special rules apply ifyou can be claimed as a dependent by anothertaxpayer.

Alternative minimum tax (AMT)

2019 2020

Maximum AMT exemption amount

Single/HOH $71,700 $72,900

MFJ $111,700 $113,400

MFS $55,850 $56,700

Exemption phaseout threshold

Single/HOH $510,300 $518,400

MFJ $1,020,600 $1,036,800

MFS $510,300 $518,400

26% rate on AMTI* up to this amount, 28%rate on AMTI above this amount

MFS $97,400 $98,950

All others $194,800 $197,900

*Alternative minimum taxable income

Page 3 of 4, see disclaimer on final page

Seide Financial GroupSteven M. Seide CFP®, AIF®Todd Cottingham, MBAwww.seidefinancial.com110 John Robert Thomas DriveExton, PA 19341610-280-9330sms@seidefinancial.comtwc@seidefinancial.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019

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How Consumers Spend Their MoneyEach year, the Bureau of Labor Statistics reports on consumer spending patterns. According tothe 2019 report, consumers spent an average of $61,224 in 2018.*

*Average annual expenditures per consumer unit. Consumer units include families, single persons livingalone or sharing a household with others but who are financially independent, and two or more persons livingtogether who share major expenses.

U.S. Bureau of Labor Statistics, Consumer Expenditures 2018, released September 2019

Could you survive a no-spend month?Would you take on a 30-daychallenge to spend moneyonly on necessities such asrent, utilities, and groceries?During a no-spend month,

many common activities — including dining out,buying movie or concert tickets, and shoppingfor clothes — are avoided at all costs.

The idea behind a 30-day challenge is that thetime period is just long enough to help changebad habits without seeming intolerable. Iffrugality isn't normally your forte, closelyscrutinizing your spending could reap hundredsof dollars in savings. More important, it couldhelp identify ways you might be wasting moneyon a regular basis.

Start by setting a positive goal for the money.Will you use the extra savings to pay downcredit card debt or build up your emergencyfund?

Here are some other ways to prepare for asuccessful challenge.

Time it right. Periods that include majorholidays, planned vacations from work, andfamily birthdays are probably not the best fortaking on this type of household experiment.

On the other hand, it could be ideal to begin thenew year with a "fiscal fast."

Establish rules. Take your fixed expenses(i.e., rent/mortgage, utilities, phone bill,insurance payments) into account whenplanning your no-spend month. Evaluate yourtypical monthly discretionary spending to figureout where you can reduce or eliminate yourspending for the month.

Plan to break patterns. Fill up your freezerand pantry with groceries and collect ideas foreasy homemade meals. Steer clear of yourpersonal spending triggers, which could meanstaying off the Internet or waiting until later tomeet up with friends who are big spenders.

Seek out free and fun entertainment. Youdon't have to stay home for an entire month.Spend the day visiting a public park or beach,or look for free concerts, outdoor movies, artfestivals, workshops, and other special eventshosted by community groups.

Stay focused. When you get tempted tospend, remember your goal for the moneyyou've saved. Keep a record of your progressto have a tangible reminder that your efforts willpay off.

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