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Oaktree Financial Advisors Blog

Remarks About Stock Market Pullback

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We may have forgotten what a bumpy ride the stock market can be. The last few days have been a good reminder, with some rather large declines. We'd like to provide some perspective on this.

First, don't let the big numbers get to you. As the market has risen over the last several years, these point numbers mean less and less. It's about the percentages, not the points. Recently the Dow was down 1175 points in a day, which one news outlet labeled as the "worst point decline in history". While this may be true, in percentage terms (4.6%), it is certainly not the worst decline ever.

Five years ago, the Dow was at about 14,000. A drop of 1175 points would have been an 8% decline, almost twice as much as it is today, percentage-wise.

Second, market declines are very normal.

  • A 10% decline happens on average, once a year and last occurred in August 2015*
  • Although the market is down 10% from its January 26th high, it's still up 19% over the last 12 months.**
  • It may also be reassuring to know that the market has always recovered from declines. Although past results don't guarantee future results, remembering that downturns have been temporary may help calm your fears.

Tax Cuts and Jobs Act of 2017: What Taxpayers Need to Know

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CLICK HERE for a downloadable PDF of this article

On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act of 2017 (the act or TCJA). The legislation makes significant changes to the Internal Revenue Code (IRC), including individual, corporate, and gift and estate taxation.

Individual income tax changes

Under the TCJA, the changes that affect individual income tax are in effect only for tax years 2018−2025.

The act modified the marginal rates for individual income taxation. The revised seven-tier income tax rate schedule for tax years 2018−2025 is reflected in the chart below.

Tax Rate

Single

Married/Jointly

Head of Household

Married/Separately

10%

$0−$9,525

$0−$19,050

$0−$13,600

$0−$9,525

12%

$9,525−$38,700

$19,050−$77,400

$13,600−$51,800

$9,525−$38,700

22%

$38,700−$82,500

$77,400−$165,000

$51,800−$82,500

$38,700−$82,500

24%

$82,500−$157,500

$165,000−$315,000

$82,500−$157,500

$82,500−$157,500

32%

$157,500−$200,000

$315,000−$400,000

$157,500−$200,000

$157,500−$200,000

35%

$200,000−$500,000

$400,000−$600,000

$200,000−$500,000

$200,000−$300,000

37%

Over $500,000

Over $600,000

Over $500,000

Over $300,000

In addition to the changes made to the tax brackets, many exemptions and deductions for individual income tax have been modified or repealed.

  • The personal exemption of $4,150 per taxpayer and dependent has been eliminated.
  • The standard deduction for individuals has been increased from $6,500 for individual taxpayers and $13,000 for married couples who file jointly to $12,000 for individual taxpayers and $24,000 for married couples who file jointly. This near doubling of the standard deduction will result in more taxpayers taking this deduction instead of itemizing.

Important Things to Remember for VERP Participants

Written by Ed Snyder, CFP® on .

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CLICK HERE for a downloadable PDF of this article

Congratulations on your acceptance to Lilly's Voluntary Early Retirement Program (VERP). To ensure a smooth transition for your retirement we have listed a few things you will want to consider before and after separation from Lilly.  Please keep in mind some of these items may not be applicable to everyone's situation.

BEFORE DECEMBER 8TH (If you are retiring December 31st)

Go to the Lilly benefits site at: resources.hewitt.com/lilly and make the following elections before December 8th:

Pension Elections

Federal and State tax withholding elections. Set-up direct deposit to your bank for your Pension payments. If you are married, you will need to make a survivorship election.  (Single individuals will skip this step.)

Health Insurance Elections

Consider the HSA. There are multiple tax benefits. Call us to discuss details.

BEFORE SEPARATION

Get your e-mail and other contact information updated:

Do you use your work e-mail for any personal communication?  Make sure to change them to a personal e-mail before separation so you don't miss any important e-mails. Make sure you have a personal e-mail, personal cell phone, and home phone (if applicable) setup on the Lilly Benefits site as these things are used to verify your identity for some requests and to reset a password if necessary.

Why You Should Use the HSA Instead of the HRA in 2018

Written by Ed Snyder, CFP® on .

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Open enrollment is here. You know, that time of year where you make choices about your benefits at work? One area that I've noticed that people may want to take a little more time in comparing their options is in the health insurance plan that they choose. As an Eli Lilly employee you can choose from two plans; a Health Reimbursement Account (HRA) or a Health Savings Account (HSA). My experience has been that most people use the HRA. But I think you should do some analysis and consider whether the HSA might be a good choice for you and your family.

What is an HSA?

You may have heard about the HSA, but maybe you're not sure how it works or how to use it. HSAs are relatively complex and can be confusing. Is it affiliated with health insurance? Does it have anything to do with my retirement? Is it a bank account, an investment account? It can be all of these things.

HSAs are available to those that have high-deductible insurance plans. The money in the HSA can be used to meet deductible and other out-of-pocket health care costs. The beauty is that the money you put in your HSA goes in pre-tax, like the money you put in your 401(k). Investment growth and interest are tax deferred, and withdrawals spent on qualified medical expenses are also tax free. I call this the trifecta of tax savings. This triple tax benefit increases your buying power compared to using after-tax money.

Lilly VERP Analysis - Should I Stay or Should I Go?

Written by Ed Snyder on .

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What factors do you need to consider when evaluating your VERP offer? How do you know if the VERP is right for you?

We had clients calling the morning the VERP was offered to schedule time to come in to have us help them evaluate their offer. Here's what we're talking to them about, along with a couple of real life examples.

Employees should consider if they are financially ready to retire. They should look at how the offer fits in with their retirement income plan. Because we provide an Independent Professional Retirement Overview (IPRO) for our clients, when we discuss their VERP offer with them we can see how it fits in with their IPRO retirement plan. It can quickly be updated to see the feasibility of retirement with the VERP offer.

While the Lilly VERP offer may look attractive, you must be aware of how the pension schedule impacts your personal situation. Many employees receiving the offer may be leaving significant pension benefits if they accept the offer. Let's take a look at an example: