Personal Finance News

It's never too early to start thinking about your next tax return. For most Americans, that'll be your federal tax return for the 2020 tax year — which, by the way, will be due on April 15, 2021 (or October 15, 2021, if extended). The 2020 tax rates themselves are the same as the rates in effect for the 2019 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. However, as they are every year, the 2020 tax brackets were adjusted to account for inflation. That means you could wind up in a different tax bracket when you file your 2020 return than the bracket you were in before – which also means you'll be paying a different tax rate on some of your income.

The tax bracket ranges also differ depending on your filing status. For example, the 22% tax bracket for the 2020 tax year goes from $40,126 to $85,525 for single taxpayers, but it starts at $53,701 and ends at $85,500 for head-of-household filers.

The difference between bracket ranges sometimes creates a "marriage penalty." This tax-law twist makes certain married couples filing a joint return — typically, where the spouses' incomes are similar — pay more tax than they would if they were single. The penalty is triggered when, for any given rate, the minimum taxable income for the joint filers' tax bracket is less than twice the minimum amount for the single filers' bracket. Before the 2017 tax reform law, this happened in the four highest tax brackets. But now, as you can see in the tables below, only the top tax bracket contains the marriage penalty trap. As a result, only couples with a combined taxable income over $622,050 are at risk when filing their 2020 federal tax return. (Note that the tax brackets for your state's income tax could contain a marriage penalty.)

Read more: https://www.kiplinger.com/taxes/tax-brackets/601634/what-are-the-income-tax-brackets

There's good news and bad news from the IRS for Americans saving for retirement with IRAs, 401(k)s, and other retirement accounts in 2021.

Let's start with the bad news: Contribution limits won't go up next year.

And now the good news: The maximum income levels allowed to make deductible contributions to traditional IRAs, contribute to Roth IRAs, and claim the Saver's Credit all increase for 2021.

For 2021, employees who are saving for retirement through 401(k)s, 403(b)s, most 457 plans, and the federal government's Thrift Savings Plan can contribute up to $19,500 to those plans during the year. That's the same contribution limit in place for 2020.

The "catch-up" contribution limit for employees age 50 or older who participate in these plans also holds steady in 2021 at $6,500.

For anyone saving for retirement with a traditional or Roth IRA, the 2021 limit on annual contributions to their IRA account remains unchanged at $6,000. That's the same amount as it was for both 2019 and 2020. The additional IRA "catch-up" contribution for people 50 and over is not subject to an annual cost-of-living adjustment and stays at $1,000, too.

Likewise, the contribution limit for a SIMPLE IRA, which is a retirement plan designed for small businesses with 100 or fewer employees, stays put at $13,500 for 2021.

Increased income ranges for the traditional IRA deduction, Roth IRA contributions, and the Saver's Credit means more Americans will qualify for these tax breaks.

If you're contributing to a traditional IRA, the deduction allowed for your contribution is gradually phased-out if your income is above a certain amount. For 2021, the phase-out ranges are:

Read more: https://www.kiplinger.com/retirement/retirement-plans/601632/bad-news-on-ira-and-401k-contribution-limits-for-2021

A number of COVID-related worries got the best of Wall Street on Monday, kicking off what very well could be a volatile seven-session stretch ahead of the elections.

The U.S. on Friday reported 83,757 new cases of COVID-19, easily surpassing its previous high (77,632) reported on July 16; another 80,000 cases were reported on Saturday. This comes as various European countries have imposed new restrictions amid soaring cases there. And financial relief from Washington doesn't appear to be coming anytime soon, with key negotiators suggesting little in the way of progress.

"The double whammy of a stalled stimulus bill and new highs in cases is a harsh reminder of the many worries that are still out there," says Ryan Detrick, chief market strategist at LPL Financial. "Most of the recent economic data has been strong, but when you see parts of Europe going to back to rolling shutdowns, it reminds us this fight is still far from over."

The Dow Jones Industrial Average sank 2.3% to 27,685, with Boeing (BA, -3.9%), Salesforce.com (CRM, -3.4%) and American Express (AXP, -4.1%) suffering some of the deepest losses.

"Today represented a final capitulation in the hope that a stimulus package would be passed before the election – hope that we've felt was misplaced for weeks as the political compromises required to pass such a large package would be difficult in normal circumstances, but given the animosity of the two sides this year seemed extremely unlikely to be made," says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

Other action in the stock market today:

A reminder: This is a heavy week of earnings reports, with a third of the S&P 500's companies announcing quarterly results. You can check out the highlights on our weekly earnings calendar.

Will the Nov. 3 elections set this market straight? Well, it's possible, but wh

Read more: https://www.kiplinger.com/investing/stocks/601631/stock-market-today-102620-stocks-retreat-as-covids-second-wave-grows

State Street's job as an investment manager is to get you from point A to point B with as little pain as possible, and hopefully, plenty of assets in your retirement portfolio. And to its credit, many of its best SPDR ETFs do exactly that.

State Street now boasts 140 ETFs under the SPDR nameplate. Which ones investors should trust the most with their money is an open question, given that we're winding down one of the most memorable years on record and heading into the unknown. But if one thing seems likely as we navigate our way out of recession, it's that you should invest expecting change.

"The research has actually shown that during economic downturns that there's an acceleration of innovation that occurs," North Carolina-based economic expert Jamie Jones tells ABC. "For example, during the Great Depression we saw a huge increase in manufacturing capabilities, as well as new materials being introduced like nylon and Teflon."

More recently, you can look to the creation of Uber Technologies (UBER) and Airbnb to meet the changing needs of consumers worldwide.

Fortunately for investors, State Street's SPDR ETFs offer a broad range of options that allow investors to build a core portfolio while also taking occasional shots to capture some of the economic benefits derived from innovation. Investors in these funds also benefit from diversification, low fees, liquidity, transparency and tax efficiency.

Read on as we examine seven of the best SPDR ETFs to buy and hold for at least the next few years, if not throughout your investing horizon. Depending on your personal needs, you might load up on certain funds while ignoring others. But this list offers up options for just about every core portfolio objective.

Read more: https://www.kiplinger.com/investing/etfs/601630/best-spdr-etfs-to-buy-and-hold

Every four years, politics and finance converge as Americans elect a president and investors try to figure out what the outcome means for their portfolios.

A look back at history shows that presidential election cycles indeed correlate with stock market returns – although not in the same, clockwork way that, say, the moon pulls on tides.

As for the outcome of elections? The impact might surprise you.

Below, a few things investors should consider in election years.

Wars, bear markets and recessions tend to start in the first two years of a president's term, says The Stock Trader's Almanac; bull markets and prosperous times mark the latter half. But over the past century, the stock market has mostly run briskly across most of the presidential cycle before losing momentum during election years.

Since 1930, the Dow Jones Industrial Average has gained an average of 10.0% in a president's first year and 7.9% in the second, according to Ycharts data. (Returns are based on price only and exclude dividends.) The year before an election year is historically the strongest, at 13.3% returns, then things slow down considerably, to 5.4% returns in election years.

There are exceptions, of course. In George Bush's final year of service (January 2008 through January 2009), for instance, the Dow sank nearly 32%.

But no one needs to tell you that the current cycle is anything but average. The Dow Jones Industrial Average put together 32.1% returns during the first 365 days President Donald Trump was in office, followed by a 5.2% decline in his second year, and an 18.8% rebound in his third. And between Jan. 19 and Oct. 19 of 2020, stocks have lost 2.5%, using the DJIA as a proxy.

You might feel strongly about one party or the other when it comes to your politics, but when it comes to your portfolio, it doesn't matter much which party wins the White House.

Bespoke Research shows that since 1900, the Dow Jones Industrial Average has gained 4.8% annually. Conventional wisdom might suggest that Republicans, who are supposedly more business-friendly than the Dem

Read more: https://www.kiplinger.com/investing/stocks/601629/how-presidential-elections-affect-the-stock-market

When you think about the actions the U.S. government has taken to help stem the economic damage caused by the COVID-19 pandemic, you probably remember those that put more money in your pocket. The $1,200 stimulus payment. The extra weekly $600 you received in additional unemployment benefits if you lost your job. The no-interest loans you received to keep your small business afloat. The temporary suspension of your student loan payments. 

All of these benefits were made possible by the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was enacted in March.  Many of these benefits have expired and may not be renewed. But some of them are still available.

Here are five CARES Act benefits you may want to consider taking advantage of before year’s end.

Normally, you can only deduct charitable contributions if you can itemize deductions. And since most people can’t deduct more than the annual $12,400 standard tax deduction for individuals ($24,800 for married couples) there’s not much of a tax incentive for charitable giving.

But this year, the CARES Act lets anyone deduct up to $300 in cash donations they make to qualified charities.

And if you can itemize, the tax benefits are even better. You can deduct all of your cash donations, up to 100% of your adjusted gross income (AGI). Normally, this limit is 60% of AGI. 

Businesses benefit, too. They can deduct up to 25% of qualified charitable cash contributions  from their taxable income. Before the CARES Act, this limit was 10%.

And, unlike most CARES Act provisions, which expire at the end of 2020, these special charitable tax benefits will also be available for donations you make next year.

If you’ve started taking annual required minimum distributions (RMDs) from your 401(k) plans and IRAs but haven’t taken this year’s distribution yet, you may be in luck.

That’s because in 2020 only you don’t have to take this distribution. If you don’t need this money to live on, consider waiving your RMD. Doing so will keep this distribution from increasing your taxable income. And, more import

Read more: https://www.kiplinger.com/personal-finance/601623/5-cares-act-benefits-to-take-advantage-of-before-years-end

Far too often, when I review prospective clients’ trust documents and financial statements, I find that their accounts haven’t been titled in the name of the trust they created.

Did they mistakenly believe that simply by having a trust, their assets would be distributed accordingly? Could it be that their estate planning attorney never informed them that they needed to fund the trust? Or is it that they received those instructions but never got around to doing so?

In my experience, all three are possibilities that can contribute to a costly, yet preventable, error.

Creating a trust is only the first step in the process; it also must be funded. To fund a living trust is to transfer property to the trust – either by giving the trust ownership or, in some cases, by designating the trust as a beneficiary.

So, what can be done if you have a trust and aren’t sure if it has been funded? Here are some steps to take:

If you have a primary residence, vacation home, timeshare and/or rental property, you’ll want to confirm that these assets are in the name of your trust. In many cases, the estate planning firm that drafted your trust will take care of the transfer for you. Still, it’s important to be sure everything is in order.

If, for example, you refinanced your home at some point, your lender may have required you to remove the name of the trust for financing purposes. And all too often when this happens, the homeowner forgets to change the deed back into the name of the trust. In some cases, the estate planning firm might not have handled the recording of the deed, or maybe there was an error in processing. All your deeds should be checked to confirm they are in the name of your trust.

Gather any bank and investment/brokerage statements that are not part of an IRA or retirement plan and confirm that each of these accounts has your trust listed as the owner. Generally, you can confirm this by either calling the institution or reviewing the titling on your statements. If you look at your statement and notice there isn’t any reference to the trust, it’s likely that it hasn’t been a

Read more: https://www.kiplinger.com/retirement/estate-planning/601622/once-you-create-a-living-trust-dont-forget-to-fund-it