For Pilots, Retirement Planning Is No Place to Wing It

For Pilots, Retirement Planning Is No Place to Wing It

Despite all the commercials you see touting the importance of working with a financial planner, most Americans continue to manage their money all by themselves. And the truth is, for a lot of people, DIYing it can work out OK — until they’re closing in on retirement, that is, and need specialized help from a professional.

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There are certain professions, however, that can (and should) benefit from getting advice sooner rather than later. Pro athletes and celebrities, of course, need assistance as soon as they make it big. But I’m also thinking of well-paid and busy professionals, such as doctors, lawyers and pilots.

If you’re a pilot, it may be unusual for you to see yourself grouped in with those other professions. But as a financial adviser whose office is near Chicago’s O’Hare Airport, I’ve learned you may have several of the same issues to deal with, along with other concerns that are unique to your being a pilot. And yet, many pilots are just winging it when it comes to their finances.

Here’s why that can be a bad idea:

1. The airline industry is known for boom-bust cycles

Bankruptcies, bailouts, mergers and acquisitions are common in this competitive business and can affect your employment and benefits. So can external economic factors, like the stock market drop in 2008, and unexpected events, such as the 9/11 terrorist attacks and the COVID-19 pandemic.

 Last year, Boeing’s then-CEO Dennis Muilenburg told CNBC that a growing pilot shortage was one of the biggest challenges facing the airline industry. This year, when COVID-19 caused a steep drop in consumer demand, pilots were being offered long- and short-term voluntary leave and early retirement packages. Because the job can be so unpredictable, preparation is a must. Having a financial plan in place, and an adviser who can talk you through the options, can help eliminate knee-jerk decisions. 

2. You may not be ready for mandatory age-based retirement

Plenty of pilots retire before age 65. Just as with other professions, many are ready to relax or try something new. But even if you keep working, not every pilot retires with buckets of money. If you got a late start on saving and investing — maybe because yo

Read more: https://www.kiplinger.com/retirement/600988/for-pilots-retirement-planning-is-no-place-to-wing-it

The Risk You Face If You Receive Equity Compensation

The Risk You Face If You Receive Equity Compensation

Equity compensation can be an extremely useful tool when it comes to building wealth. And just like any other tool you may use, you can learn how to leverage it to build something great — or you can mishandle it and end up with a poor outcome.

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Some employers offer equity compensation in addition to regular paychecks or bonuses as part of the total compensation package for key, valuable employees. This is one way companies incentivize top performers to keep performing well, since employees are able to share in the success of the business as a whole. It can also act as a means for the company to retain talent (since most equity comp comes with a vesting schedule, meaning the employee must remain with the company for a set period of time before they can claim the equity they earned).

There are many types of equity compensation that you could receive: Incentive stock options, non-qualified stock options and restricted stock units are some of the most common forms of equity. You might also be able to participate in an ESPP, or employee stock purchase plan, as part of your compensation package.

One of the biggest issues that most people don’t take into consideration when they receive some form of equity compensation is concentration risk. Whenever you hold a large amount of a single stock position, you increase your concentration risk and therefore the overall risk inherent in your investment portfolio. This can become especially problematic if you hold a lot of stock from a single company that also happens to pay your salary.

The rule of thumb I provide to my clients is to keep their exposure to any single stock position to no more than 5% of their liquid net worth. There are exceptions, of course, but in general, this provides a good guideline to use. Unfortunately, people struggle to stick to this rule for a number of reasons, ranging from feeling loyal to their company to simply failing to understand that regardless of how they feel about concentration risk, they actually can’t afford to take it.

To help you take on the right amount of risk (concentrated or otherwise), here’s what you need to think through if you have equity compensation.

Whether You Hold Compa

Read more: https://www.kiplinger.com/personal-finance/careers/600987/the-risk-you-face-if-you-receive-equity-compensation

17 States That Will Gain or Lose Electoral-College Votes After the 2020 Census

17 States That Will Gain or Lose Electoral-College Votes After the 2020 Census

Every 10 years, the 435 seats in the House of Representatives are reassigned based on the results of the U.S. Census. This also helps determine a state’s number of votes in the Electoral College (House seats plus Senate seats, plus three additional for the District of Columbia for a sum of 538) and thus its power to decide presidential elections.

Where people go, so goes political power. According to Election Data Services, at least 17 states will likely gain or lose seats—and electoral college votes—after the 2020 Census, based on the latest demographic trends. States in the South and West will see the biggest gains; Texas could pick up as many as three seats, the most of any state. The Midwest and Northeast will not fare as well: Eight of the 10 states set to lose House seats are from these two regions.

Both parties could profit from these developments. Take Florida, whose rapid growth is fueled by both increasing numbers of younger Latinos, who tend to vote Democratic, and older retirees, who tend to vote Republican. As a result, the Sunshine State will probably remain the archetypal swing state for years to come.

One thing to keep in mind: Since the number of House seats is fixed, even states whose populations are still growing, such as California, are at risk of losing representation in Congress to those that are growing even faster.

Another: These are just preliminary estimates. The full picture will only be clear with the results of the 2020 Census, which have been delayed by COVID-19. The Census Bureau has already indicated it won’t be able to meet the March 31, 2021 deadline to deliver detailed data to state redistricting officials and is asking Congress for an extension. 

Will your state's political influence surge or dwindle in the coming decade? Take a look.

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Read more: https://www.kiplinger.com/slideshow/business/t043-s010-state-electoral-college-changes-from-2020-census/index.html

10 Tax Breaks for the Middle Class

10 Tax Breaks for the Middle Class

If you believe that tax breaks are only available for hedge fund managers and companies with offshore subsidiaries, you're probably paying too much to the IRS. The fact is that lawmakers have enacted dozens of tax incentives targeted at middle- and lower-class families. If you're not taking full advantage of them, it's probably because you're not aware of them.

Take a look at these 10 tax breaks for ordinary Americans and make sure you're not missing out. All of these breaks survived the tax reform enacted in late 2017, and one, the child tax credit, even got a big boost.

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Read more: https://www.kiplinger.com/slideshow/taxes/t054-s001-middle-class-tax-breaks-and-deductions-2019/index.html

10 IRS Audit Red Flags for Retirees

10 IRS Audit Red Flags for Retirees

You may be wondering about your odds of an IRS audit. Most people can breathe easy. The vast majority of individual returns escape the IRS audit machine. In 2019, the Internal Revenue Service audited only 0.4% of all individual tax returns, and 80% of these exams were conducted by mail, meaning most taxpayers never met with an IRS agent in person. So the odds are generally pretty low that your return will be picked for review.

That said, your chances of being audited or otherwise hearing from the IRS escalate depending on various factors. Math errors may draw IRS inquiry, but they'll rarely lead to a full-blown exam. Check out these 10 red flags that could increase the chances that the IRS will give the return of a retired taxpayer special, and probably unwelcome, attention.

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Read more: https://www.kiplinger.com/slideshow/retirement/t056-s011-10-irs-audit-red-flags-for-retirees/index.html

20 IRS Audit Red Flags

20 IRS Audit Red Flags

Thankfully, the odds that your tax return will be singled out for an audit are pretty low. The IRS audited only 0.4% of all individual tax returns in 2019 (down from 0.59% in 2018). Plus, the vast majority of these exams were conducted by mail, which means that most taxpayers never met with an IRS agent in person. That's the good news.

The bad news is that your chances of being audited or otherwise hearing from the IRS increase (sometimes significantly) if there are certain "red flags" in your return. For instance, the IRS is more likely to eyeball your return if you claim certain tax breaks, your deduction or credit amounts are unusually high, you're engaged in certain businesses, or you own foreign assets. Math errors could also draw an extra look from the IRS, but they usually don't lead to a full-blown exam. In the end, though, there's no sure way to predict an IRS audit, but these 20 red flags could certainly increase your chances of unwanted attention from the IRS.

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Read more: https://www.kiplinger.com/slideshow/taxes/t056-s001-20-irs-tax-audit-red-flags/index.html

Is There an Unclaimed Tax Refund Waiting for You?

Is There an Unclaimed Tax Refund Waiting for You?

The IRS is looking for 1.4 million people who didn’t file a 2016 tax return and who might be owed a refund of taxes withheld or otherwise prepaid. In fact, there’s more than $1.5 billion of potential refunds waiting to be claimed. The median potential refund is estimated to be $861. Is any of that money yours?

Claim Your Refund By July 15

If you think some of that cash could be yours, you need to act fast. In cases where a federal tax return was not filed, the taxpayer generally has a three-year window of opportunity to claim a refund. That means you must file your 2016 tax return with the IRS no later than this year's extended tax due date of July 15, 2020, to collect the money.

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If you’re missing W-2, 1098, 1099 or 5498 forms from 2016, try getting copies from your employer, bank or other payer. If that doesn’t work, you can go online and order a free wage and income transcript from the IRS or request one by filing Form 4506-T. The transcript will show data from information returns received by the IRS. This information can be used to file your 2016 tax return.

What If You Have a Tax Debt or Didn’t File Other Returns?

The IRS could hold your 2016 refund check if you didn’t file a 2017 or 2018 return, either. In addition, the IRS may also apply your 2016 refund to any federal or state taxes you owe for other years—or to offset unpaid child support or past due federal debts, such as student loans.

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Read more: https://www.kiplinger.com/article/taxes/t056-c005-s001-is-there-an-unclaimed-tax-refund-waiting-for-you.html

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