WisMed Financial

Don’t Let Taxes Take a Bite Out of Your Finances: Common Errors to Avoid

By Mark Ziety, CFP®, AIF®, Financial Advisor, WisMed Financial

Investing is a smart way to grow your wealth, and keeping more of it from taxes is even smarter. Let’s explore some common tax mistakes investors make and how to avoid them:

  • Right Investment, Wrong Account: Investment growth, dividends and interest can be taxed as ordinary income, short or long-term capital gains or tax-free. Similarly, investment accounts are treated as tax deferred, taxable or tax-free. Holding tax efficient and inefficient investments in the right accounts can improve net returns.
  • Short-Term Gains Trap: Selling an investment held less than a year triggers short-term capital gains taxes, typically at your ordinary income tax rate. This can be much higher than the long-term capital gains tax for assets held over a year. Consider waiting to sell until you hit that long-term mark.
  • Neglecting Tax-Advantaged Accounts: Contributing to IRAs, 401(k)s and other tax-advantaged accounts, like a health savings account, allows your investments to grow tax-deferred or tax-free until withdrawal. This can significantly boost your returns in the long run.
  • Letting Losses Linger: Selling investments at a loss can offset capital gains and reduce your tax bill. This is called tax-loss harvesting. Don’t miss opportunities to claim these deductions! However, be mindful of the wash-sale rule, which limits claiming losses if you repurchase a similar investment within 30 days before or after selling.
  • Forgetting IRA Contributions: Investment companies typically don’t send the supporting tax document 5498 until May each year (because investors have until April 15 to make their IRA contribution for the prior year). This leads many investors to forget to record their IRA contribution on their tax return.

Wisconsin Specifics:

  • Missing Long-Term Care Premiums: Wisconsin allows a deduction for qualified long-term care insurance premiums on the state income tax return, even if you don’t claim an itemized deduction on the federal return. Plus, you won’t necessarily get a supporting tax document from your insurance company, so this is easy to miss.
  • Missing Edvest Contributions: Wisconsin residents contributing to an Edvest college savings plan may qualify for a state tax deduction on contributions. This is another one that’s easy to miss; there’s no supporting tax document sent out by Edvest.

Please note, this is not professional tax advice. For specific guidance on your situation, consult a tax professional. By being aware of these common pitfalls, you can keep more of your hard-earned investment returns come tax time, especially when considering Wisconsin’s unique tax landscape.

For personalized help eliminating debt, investing smart and securing retirement, please contact Mark Ziety, CFP®, AIF® 608.442.3750.

Mark Ziety, CFP®, AIF®

WisMed Financial, Inc. part of the Wisconsin Medical Society

Note: This article is for informational purposes only and should not be considered as financial or tax advice. Please consult with a qualified financial advisor or tax professional before making any financial decisions. Full disclosures.

Consolidation leads to $600,000 student loan forgiveness – a case study

By Mark Ziety, CFP®, AIF®, Financial Advisor, WisMed Financial

Good financial planners do much more than help with investments. They look at the entire financial picture, which includes debts too. Today’s case study shows how a unique rule, available until December 31, is facilitating more than $600,000 in student loan forgiveness.

First, the rule

When consolidating federal student loans, according to the FAQ section on the Federal Student Aid website, “Assuming your repayment history overlaps for each loan, the consolidation loan will be credited with the longest amount of time in repayment of the loans that were consolidated.”

How we applied the rule

A resident physician is a career changer with more than $600,000 of student loan debt. Some of the debt was from undergrad loans from the early 2010s before she changed careers to become a physician. By consolidating her old and most recent loans together, her new consolidation loan will use the payment count of her oldest loans.

The $600,000 loan forgiveness benefit

Those who work for a non-profit, government or other qualifying employer can have any remaining balance of their student loans forgiven after making 120 qualifying monthly payments through the Public Service Loan Forgiveness program. And the loan forgiveness is tax free! Since this borrower will have 120 qualifying payments on the oldest loans, her consolidation loan will also be credited with 120 qualifying payments, and her entire loan balance will be forgiven!

The rule changes in 2024

Next year, a consolidation loan will have a pro-rated payment count based on the payment count of the loans being consolidated. That makes 2023 an ideal time to review your loans to see if a consolidation would benefit you too.

For personalized help eliminating debt, investing smart and securing retirement, please contact Mark Ziety, CFP®, AIF® 608.442.3750.

Mark Ziety, CFP®, AIF®

WisMed Financial, Inc. part of the Wisconsin Medical Society

Note: This article is for informational purposes only and should not be considered as financial or tax advice. Please consult with a qualified financial advisor or tax professional before making any financial decisions. Full disclosures.

The power of planning: a physician’s journey to financial wellness

By Mark Ziety, CFP®, AIF®, Financial Advisor, WisMed Financial

Mark Ziety

With uncertainties and change a constant, financial planning stands as a beacon of security and peace of mind. Today, we bring you a remarkable story that sheds light on how a dedicated physician and her family reaped the rewards of a well-structured financial plan, proving that even the busiest of physicians can find stability and fulfillment through proper financial planning.

Meet Sarah Thompson, MD (alias, of course), known for her compassionate care and unwavering commitment to her patients. Outside the exam room, however, Dr. Thompson faced the same financial challenges that many of us do – managing student loans, planning for retirement and ensuring her family’s future stability.

The Initial Challenge

Upon completing her medical education, Dr. Thompson was burdened with significant student loan debt. Balancing her medical practice while managing these loans was no easy feat. She often found herself conflicted between her passion for healing and the pressure of financial obligations. As her family grew, so did her responsibilities, making her realize the need for a comprehensive financial plan.

The Turning Point: Seeking Professional Guidance

Dr. Thompson decided to take a proactive step and sought the guidance of a Certified Financial Planner™ Professional. This move marked a turning point in her journey towards financial wellness. The financial planner analyzed her situation, considering her income, expenses, outstanding loans and future goals. They collaboratively created a customized plan that addressed her specific needs, aligning her financial strategy with her life aspirations.

The Plan in Action

  • Debt Repayment Strategy: The financial planner helped Dr. Thompson switch to her ideal repayment plan for her student loans. She made consistent progress in reducing her debt without compromising her family’s daily needs.
  • Investment and Retirement Planning: With a steady income and a solid debt repayment plan in place, Dr. Thompson could now focus on long-term financial security. The financial planner introduced her to a diversified investment portfolio and guided her through retirement planning, ensuring she could enjoy her retirement years without financial stress. “In my experience, those who save smaller amounts consistently tend to save more over time than those who try to save everything at once,” Mark Ziety, CFP, founder of WisMed Financial notes in this CBS News article.
  • Family Protection: Recognizing the importance of safeguarding her family’s future, Dr. Thompson also secured:
    •  life insurance
    • disability insurance
    • estate documents
    • college accounts
    • an emergency fund

This provided a safety net in case of unforeseen circumstances and offered peace of mind to her and her loved ones.

  • Tax Strategy: The largest lifetime expense for physicians is often taxes, and Dr. Thompson was no exception. Through yearly tax strategy, her deductions were maximized and taxable income shifted to save hundreds of thousands of dollars of lifetime tax.

The Outcome: A Life Transformed

As the years went by, Dr. Thompson’s commitment to her financial plan began to yield remarkable results. She saw her debt steadily decrease, her investments grow and her family thrive with the knowledge that their future was secure. This transformation didn’t just impact her financial health – it positively influenced her overall well-being. The reduction of financial stress allowed her to focus more on her patients, her family and even take time for her own personal growth and hobbies.

Key Takeaway

Dr. Thompson’s story is typical for physicians and underscores the incredible potential that a well-crafted financial plan holds. Regardless of your profession or life circumstances, careful financial planning can pave the way to stability, allowing you to navigate challenges with confidence and pursue your dreams without compromise.

For personalized help eliminating debt, investing smart and securing retirement, please contact Mark Ziety, CFP®, AIF® 608.442.3750.

Mark Ziety, CFP®, AIF®

WisMed Financial, Inc. part of the Wisconsin Medical Society

Note: This article is for informational purposes only and should not be considered as financial or tax advice. Please consult with a qualified financial advisor or tax professional before making any financial decisions. Full disclosures.

What’s in a financial plan?

By Mark Ziety, CFP®, AIF®, Financial Advisor, WisMed Financial

Mark Ziety

A financial plan is like a roadmap that helps you navigate through the twists and turns of life, whether you’re saving up for a new car or preparing for retirement. Think of it as your secret weapon to achieving your financial goals and living your best life.

Now, let’s break it down into the three scenarios we all share: a long healthy life, getting sick along the way or passing away early. We need to be prepared for all of them, and that’s where financial planning comes in handy.

Cash Flow

You might call it a budget, but we like to call it the “4 Fs.” It’s like a secret formula to financial success! You just need to know your:

  • Fixed expenses (the boring stuff like housing and utilities)
  • Future expenses (like saving for retirement or your next vacation)
  • “F”ilanthropy expenses (how much you want to give back to your community)  
  • Fun expenses (the things that make life worth living!)

Once you have these figures down, you can put your cash flow to work and watch your bank account grow.

Eliminating Debt

We all know it’s easy to fall into the trap of overspending. But a good financial plan will help you avoid that and pay off any debt you already have quickly.

Insurance

We might not like to think about it, but getting sick or passing away early is a possibility for all of us. That’s why having the right insurance and right amount is crucial. Health insurance, disability insurance and life insurance are all important components of a good financial plan.

Investing

A well-diversified portfolio with the right asset allocation and asset selection can help you achieve your financial goals. And don’t forget about asset location, putting the right investments in the right account, which can make a big difference in your after-tax returns. Bonus: check out the 7 proven ways to improve performance.

Retirement

Retirement is often the biggest topic that financial planning covers. How much do you need to save for retirement? When should you start withdrawing your money? Which account should you use first? And when should you start taking Social Security? These are all important questions that a good financial plan can help answer.

College

If you have children, college planning is often important. Saving for college is just the beginning – picking the right school that offers grants and scholarships can help cover the costs.

Tax

Taxes can be a huge expense for most people, which is why tax planning is a crucial part of a financial plan. By creating a strategy to manage your taxes, you can keep more money in your pocket.

Estate Plan

Finally, estate planning is something everyone should consider. Who will take care of your finances and health care if you become incapacitated? Who will take care of your children if something happens to you? A good financial plan should include a will, health care and financial power of attorney documents, beneficiary designations and possibly a trust.

Phew! That’s a lot to consider, but don’t worry – you don’t have to figure it all out on your own. A financial planner can help guide you through the process and create a personalized plan to help you achieve your financial goals. Are you ready to take control of your finances and start living the life you deserve?

For personalized help eliminating debt, investing smart and securing retirement, please contact Mark Ziety, CFP®, AIF® 608.442.3750.

Mark Ziety, CFP®, AIF®

WisMed Financial, Inc. part of the Wisconsin Medical Society

Exercise your financial muscles to get financially fit

By Mark Ziety, CFP®, AIF®, Financial Advisor, WisMed Financial

Mark Ziety

“Those who work their land will have abundant food, but those who chase fantasies have no sense.” This ancient advice from Proverbs illustrates the importance of financial fitness.

There are many ways to gain control of your finances; you can increase earnings, decrease spending, start saving more (short-term and longer-term) and implement debt management. For many, earnings are difficult to influence in the short-term, so tackling the spending side of the equation will yield the quickest results. Below we consider six principles that will help you get into financially fit shape wherever you find yourself in life.

Six principles for financial fitness

 “An investment in knowledge pays the best interest.”—Benjamin Franklin

  • Set goals. If you don’t have concrete financial goals, both short and long term, reaching some kind of level of financial fitness becomes much more problematic. Simply put, you don’t have a destination. You are financially adrift. As George Harrison has noted, “If you don’t know where you’re going, any road will take you there.”

Short-term goals you might consider: Establishing an emergency fund with three to six months of cash or saving for a vacation, a car or a down payment on a home. Long-term goals: college savings for your kids and saving for retirement—at least 15%.

  • Know which of the four buckets your income lands in. Use the four Fs: Fixed, Future, “Ph”ilanthropy and Fun.
    • Fixed are your survival expenses like housing, utilities, groceries and transportation. It is not recurring subscriptions each month – those belong in the Fun category.
    • Future is often retirement savings, but shorter-term goals like paying cash for a vehicle or college expenses for kids belong here too.
    • A financially fit person has extra to help those in need, so Philanthropy is one of the four buckets.
    • Fun rounds out the buckets and is self-explanatory.
  • Your lifestyle shouldn’t exceed your income. If it does, you are burning through savings or taking on debt, and your stress level will reflect it.

Excessive spending leads to financial stress rather than financial fitness. You want financial space in your life. You want ‘money at the end of the month,’ not ‘month at the end of your money.’

  • Invest wisely. The proper mix of investments will be influenced by your financial goals, both short and long term, and other various factors. A diversified portfolio that crosses the spectrum can reduce risk and enhance your return over the long run.

“Don’t look for the needle in the haystack. Just buy the haystack!” advises John Bogle, founder of Vanguard. In other words, diversify!

We are here to assist you with that. Our recommendations are tailored to your financial goals and your unique circumstances. Accumulation of wealth over a longer period is our goal. We believe it should be yours, too.

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas,” says Paul Samuelson, the first American to win the Nobel prize in economics.

  • Enjoy your retirement. Many enter retirement after accumulating wealth over decades. They have learned how to save. For some, suddenly relying on that savings rather than earning income from labor seems like a daunting leap, one they may be ill-prepared to make. It doesn’t have to be that way.

While your tolerance for risk (losing money) may change, we might recommend a portfolio that allows for a degree of growth and a spending rate that ensures your finances last longer than your retirement.

  • Protect your assets. Do you have life insurance, health insurance and personal liability insurance? Do you have a will and estate plan? Who are your beneficiaries? What happens if you become disabled? Do you have a trusted advisor to handle your affairs?

If you own your home without a mortgage, do you have homeowners’ insurance? Surprise, not all do. If you rent, renters’ insurance is cheap. It’s a must-have protection.

Absorbing the fundamentals—the foundation for success

Every situation is unique. You may have mastered the fundamentals, and only need to apply the principles we highlighted selectively, plugging small holes and shoring up your finances. Or a more aggressive approach might be in order. Focus on one theme at a time. Some might apply, while others don’t.  

Having said all that, you are not alone on a financial lifeboat. We are always here to assist.

For personalized help eliminating debt, investing smart and securing retirement, please contact Mark Ziety, CFP®, AIF® 608.442.3750.

Mark Ziety, CFP®, AIF®

WisMed Financial, Inc. part of the Wisconsin Medical Society

$111,000 more from Social Security

By Mark Ziety, CFP®, AIF®, Senior Advisor, WisMed Financial

Mark Ziety

With more than 2,700 rules and 567 separate filing strategies for Social Security, 96% of people fail to make the optimal claiming decision and miss out on $111,000 of benefits for the average household.1

$111,000 – that’s a lot of money. Let’s look at some of the rules for Social Security so your decision is better informed.

  • Normal benefits: Benefits can be claimed between ages 62 and 70. The longer you wait, the larger your check. However, the increase is not linear. In fact, the growth is backloaded thereby encouraging people to delay.
change in benefit amounts from ages 62 to 70
  • Spousal benefits: Married people can claim a spousal benefit worth up to 50% of their spouse’s full retirement age benefit if it’s larger than their own and their spouse has started their benefit. As above, spousal benefits are reduced before full retirement age. However, they do not increase after full retirement age.
  • Divorced benefits: Divorced spouses can also claim a spousal benefit if the marriage lasted at least ten years and they are unmarried at the time they file for spousal benefits.
  • Survivor’s benefits: Spouses and surviving divorced spouses can receive the deceased spouse’s benefit starting at age 60 if the marriage was at least nine months (married) or ten years (divorced).
  • Withheld benefits: Benefits may be withheld if you are under full retirement age and still working. Once you reach full retirement age, the amount will be recalculated to include previously withheld amounts.
  • Taxable benefits: 0% to 85% of Social Security benefits may be included in taxable income. The higher your total income, the more of your Social Security you’ll owe tax on.

Optimizing Social Security also requires coordination with retirement investments, something most Social Security calculators omit. For instance, if you retire at age 65 and delay Social Security until age 70, you’ll spend your retirement investments while you wait. It may make sense to start Social Security earlier, even though the amount is less, allowing you to preserve your investment nest egg.

For many people, it’s wise to get professional help to determine the optimal timing for Social Security. Get it right and it could be worth $111,000.

The Social Security Timing Guide in our resources has even more details. Or, for one-on-one help schedule an appointment.

For personalized help eliminating debt, investing smart and securing retirement, please contact Mark Ziety, CFP®, AIF® 608.442.3750.

1. The retirement solution hiding in plain sight. InvestmentNews. (2020, June 12). Retrieved August 4, 2022, from https://www.investmentnews.com/whitepapers/the-retirement-solution-hiding-in-plain-sight