Details Five Planning Steps To Improve Your Retirement Years Join us as we share five simple steps you can take to reduce your tax bill and improve your retirement years: Address these critical items in your IRAs, 401(k)s and other retirement accounts Three ways to maximize your 2020 deductions and reduce your tax bill One easy step to reduce taxable income in 2020 How to take advantage of today's historically low tax rates How to proactively address the potential reduction in social security benefits in 2033 When January 25, 11:30 AM - 12:30 PM Where Prairie Lodge Cedar Room 12880 Del Webb Blvd Huntley, IL 60142 Details

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TAX TALK In our articles we will frequently use tax-specific phrases that while second nature to us, may be confusing to many of our readers. To clear up some of that confusion we have provided some definitions for the most common phrases below. Adjusted Gross Income Adjusted Gross Income (AGI) is defined as gross income minus adjustments to income. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. Adjustments to Income include such items as Educator expenses, Student loan interest, Alimony payments or contributions to a retirement account. Many deductions and credits on your tax return are determined by your AGI. Tax Credits vs Tax Deductions There are two ways your tax burden can be reduced: Tax Credits which directly reduce your tax bill, and tax deductions which indirectly reduce your tax bill by lowering the amount of your taxable income. Let’s say you have taxable income of $10,000 which is taxed at 25%, your tax bill on that income is $2,500. If you receive a tax deduction of $1,000 it will bring your taxable income down to $9,000, reducing your tax bill to $2,250 and saving you $250. IF instead you have a tax credit of $1,000 it will directly reduce your $2,500 tax bill down to $1,500, saving you the full $1,000. Filing Status. Your filing status determines the deductions and credits you qualify for and how much tax you pay on your income. Depending on your situation, you may qualify for more than one filing status, in which case you can choose the one more beneficial to you. These are the five filing statuses: Single. This is the normal filing status for taxpayers who are not married or who are legally separated Married Filing Jointly . Taxpayers who are married can file a joint tax return, reporting all of their income and expenses together Married Filing Separately. Taxpayers who are married can instead choose to file separate tax returns, each reporting their own income and expenses. It is generally better to file a joint return to keep taxes low, but in rare circumstances it can be more beneficial to file separate. Head of Household. Taxpayers who are unmarried and provide more than half the cost of maintaining a home for themselves and at least one other qualifying person can file head of household. This filing status provides larger deductions and lower tax rates than filing single making it the best option for taxpayers who qualify. Qualifying Widow(er) with Dependent Child. Taxpayers whose spouse died within the last 2 years can choose this filing status if they have a dependent child. This status allows them to claim the same deductions and tax rates as if they were filing a joint tax return. Your filing status for any given year is determined by your marital status on the last day of the year. A couple who get married December 31st can file a joint return for that year even though they were unmarried for the majority of the year. This rule does not apply in the death of a spouse. When a spouse dies the surviving spouse can file a joint tax return for the year of death. Itemized Deductions vs Standard Deduction There are two ways you can take deductions on your tax return: you can itemize deductions or use the standard deduction. The standard deduction is a set amount and is based on your filing status. If you itemize your deductions you will take the actual amount you spent on allowable deductions which include: Mortgage interest paid on your personal residence State income taxes paid Real estate taxes paid on your personal residence Medical expenses paid including out-of-pocket premiums paid Charitable donations Each of these deductions is subject to various limitations. Since the passage of the Tax Cuts and Jobs Act in 2017, most taxpayers will benefit more from taking the standard deduction than from itemizing their deductions.

THE TAX IMPLICATIONS OF YOUR SIDE HUSTLE Many taxpayers have side gigs that have a significant impact on their taxable income. From Uber drivers, to carpenter contractors, to horse racing, to manufacturer reps, to part-time real estate agents, to organic beef farms… you name it, and we’ve probably seen it. And from a tax-compliance standpoint, there is an important distinction between hobbies and businesses that are operated with the intention of earning a profit. Understanding this distinction could save you thousands of dollars come April 15th. Hobby Loss Rules: If an activity is not intended to earn a profit, losses from that activity may not be used to offset other income. The ability to deduct losses on your tax return will ultimately be determined by the Internal Revenue Service. If the IRS determines that the taxpayer did not enter into the business activity with a profit motive or that the taxpayer continued losing money in an activity with no intention of ultimately making a profit, the taxpayer will lose the ability to deduct those losses. These rules apply to individuals, partnerships, estates, trusts, and S corporations. Hobby or For-Profit Business? When determining the real intent of the taxpayer’s activity, the Internal Revenue Services will look at a number of factors in assessing whether or not the activity is motivated by profit: whether the activity is conducted in a professional, businesslike manner the qualifications of the taxpayer or the taxpayer’s advisors the amount of time and effort spent by the taxpayer or the competency of the taxpayer’s agents and employees the potential for appreciation of the venture’s assets the taxpayer’s history in operating other businesses the taxpayer’s success or failure with the particular activity the ratio of profits to losses and how that compares to the taxpayer’s investment in the enterprise the financial status of the taxpayer, the economic benefit of the losses, and the taxpayer’s primary source of income the personal pleasure or recreation the taxpayer derives from the activity While the taxpayer must engage in the activity with a genuine profit motive, a “reasonable” expectation of profit is not required if the probability of loss is much higher than the probability of gain. The IRS will likely view all the facts and circumstances to make their decision, but more weight is given to objective facts than taxpayer statements. One simple way to get off the radar screen of the IRS is to show a profit. If the gross income from the activity exceeds deductions for three out of 5 years, the activity is presumed to be conducted for profit. Read more articles Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

2023-2024 Tax Brackets and Federal Income Tax Rates There are seven federal income tax brackets. Here's what they are, how they work and how they affect you. There are seven federal tax brackets for the 2023 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your bracket depends on your taxable income and filing status. These are the rates for taxes due in April 2023. Tax brackets and rates for the 2023 tax year, as well as for 2022 and previous years, are elsewhere on this page. 2023 Federal Income Tax Brackets (for taxes due in April 2022 or in October 2022 with an extension ) Single filers Married, filing jointly Married, filing separately Head of household 2022 Federal Income Tax Brackets (for taxes due in April 2023) Single filers Married, filing jointly Married, filing separately Head of household How tax brackets work The United States has a progressive tax system, meaning people with higher taxable incomes pay higher federal income tax rates. Being "in" a tax bracket doesn't mean you pay that federal income tax rate on everything you make. The progressive tax system means that people with higher taxable incomes are subject to higher federal income tax rates, and people with lower taxable incomes are subject to lower federal income tax rates. The government decides how much tax you owe by dividing your taxable income into chunks — also known as tax brackets — and each chunk gets taxed at the corresponding tax rate. The beauty of this is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income. The percentage of your taxable income that you pay in taxes is called your effective tax rate. To determine effective tax rate, divide your total tax owed (line 16) on Form 1040 by your total taxable income (line 15). Example #1: Let’s say you’re a single filer with $32,000 in taxable income. That puts you in the 12% tax bracket in 2021. But do you pay 12% on all $32,000? No. Actually, you pay only 10% on the first $9,950; you pay 12% on the rest. (Look at the tax brackets above to see the breakout.) Example #2: If you had $50,000 of taxable income, you’d pay 10% on that first $9,950 and 12% on the chunk of income between $9,951 and $40,525. And then you’d pay 22% on the rest because some of your $50,000 of taxable income falls into the 22% tax bracket. The total bill would be about $6,800 — about 14% of your taxable income, even though you're in the 22% bracket. That 14% is your effective tax rate. That's the deal only for federal income taxes. Your state might have different brackets, a flat income tax or no income tax at all. What is a marginal tax rate? The term "marginal tax rate" refers to the tax rate paid on your last dollar of taxable income. This typically equates to your highest tax bracket. For example, if you're a single filer with $30,000 of taxable income, you would be in the 12% tax bracket. If your taxable income went up by $1, you would pay 12% on that extra dollar too. If you had $41,000 of taxable income, however, most of it would still fall within the 12% bracket, but the last few hundred dollars would land in the 22% tax bracket. Your marginal tax rate would then be 22%. How to get into a lower tax bracket and pay a lower federal income tax rate Two common ways of reducing your tax bill are credits and deductions. Tax credits can reduce your tax bill on a dollar-for-dollar basis; they don't affect what bracket you're in. Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Generally, deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction could save you $220. In other words: Take all the tax deductions you can claim — they can reduce your taxable income and could kick you to a lower bracket, which means you pay a lower tax rate. Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

TAX TIPS For Home Sellers As the housing recovery begins to pick up steam, some home sellers will have gains on the sale of their homes for the first time in nearly a decade. The good news is that the tax code recognizes the importance of home ownership by providing certain tax breaks when you sell your home. THE MOST IMPORTANT THING TO KNOW when selling your home is that your sale qualifies for an exclusion of $250,000 in gains ($500,000 if married filing jointly) if you owned the home and used it as your main home during 2 of the last 5 years before the sale and you have not claimed any exclusion for the sale of another home within the last 2 years. The 24 months of residence can fall anywhere within the 5-year period. It doesn't even have to be a single block of time. All you need is a total of 24 months (730 days) of residence during the 5-year period. POINTS/HOME IMPROVEMENTS/ MOVING & PROPERTY TAX DEDUCTIONS IF YOU HAVE TO SELL YOUR HOUSE because you're relocating for work, you might be able to deduct some of your moving expenses. Deductions could include transportation costs, travel to the new place, storage costs and lodging costs. YOU CAN DEDUCT YOUR PROPERTY TAXES for the portion of the year that you owned the home - up to the date of the sale. SOMETIMES YOU NEED TO IMPROVE YOUR HOME to get it sold. If you make home improvements that help sell your home, and if they are made within 90 days of the closing, they may be considered selling costs, which could be deductible. IF YOU PAID POINTS TO LOWER YOUR INTEREST RATE when you refinanced your home, you might qualify for an additional deduction. Because you can deduct a proportional share of the points until the loan is paid, when you pay off the loan through a sale,you can deduct the remaining value of those points. ADDITIONAL TIPS IF YOU DON'T QUALIFY for the Section 121 exclusion (left), you will owe taxes on any profit, so make sure you deduct all your selling costs from your gain. Some of the selling costs could include: Your real estate agent's commission Legal fees Title insurance Inspection fees Advertising costs Escrow fees Legal fees SELLING PRICE - SELLING EXPENSES CALCULATION AMOUNT REALIZED - ADJUSTED BASIS GAIN OR LOSS REPORTING REQUIREMENTS YOU NEED TO REPORT THE GAIN IF: 1 2 3 You have a taxable gain on your home sale and do not qualify to exclude the sale. You received Form 1099-S. If so, you must report the sale even if you have no taxable gain to report. You wish to report your gain as a taxable gain because you plan to sell another property that qualifies as a home within the next two years, and that property is likely to have a larger gain. Save as PDF Read more articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

What sets Monotelo Advisors apart is our unique focus on planning ahead to reduce your tax burden every year. File Online File online File your taxes online form your home. Upload your documents, and get started. Schedule a Meeting Schedule An Appointment Need additional tax help? Schedule an appointment to get started. Get your tax return started at Monotelo Step 1: Upload you documents, or schedule an appointment. Step 2: One of our experienced tax professionals will process your return, and maximize your refund. Step 3: Once your return is complete, we will contact you to sign the consent forms. Step 4: After signing the consent forms, you should receive your tax refund in 1-3 weeks. How the process works. Get started Have tax questions, or need more information? Schedule an appointment Give us a call One of our experienced tax experts would be happy to answer your questions, and get your tax return started The Multiplying Power of Generosity: Feed a Child This Thanksgiving As Thanksgiving approaches, many of us pause to reflect on what we’ve been given: family, health, opportunities, and the simple blessing of a full plate. At Monotelo Advisors, we believe gratitude is most powerful when it moves us to action. This season, we invite you to join us in turning thankfulness into hope for children who need it most. Why This Matters In Sub-Saharan Africa, countless families face an impossible choice every day: feed their children or pay for nec 7 Money-Smart Principles Every Parent Should Teach In today’s fast-paced, consumer-driven world, raising financially wise children is one of the greatest gifts a parent can give. Money... Student Loan Alert: Strategic Moves to Make as SAVE Ends Millions of federal student loan borrowers are facing a new financial reality as the SAVE (Saving on a Valuable Education) plan... Helpful tax tips and articles. View More Small Business Tax Services We will help you minimize your short-term and lifetime tax liability to free up the cashflow needed to help you grow your business and build for your future. Learn more Retirement Planning Our Values-Based planning service will build the road map so you can have confidence that all the pieces of the puzzle are working together for you to live your best life possible. Learn more More services from Monotelo

TO BE AWARE OF UNDER THE 2018 TAX REFORM At the end of last year President Trump signed the Tax Cuts and Jobs Act into law, signaling the largest tax reform in over three decades. We have received a lot of questions recently on how this law will affect our clients. With the tax season now behind us it is time to address how these changes will impact you in 2018. There are many aspects to this law and there is no "one size fits all" explanation for how it will impact our clients. Some of our clients will win and some of them will lose under the new law. With that in mind we have outlined the five changes that we believe are most relevant to you. Personal exemptions historically represented a $4,000 reduction in taxable income for each dependent listed on the tax return. Under the new law these exemptions have been eliminated. However, to help mitigate the loss of these exemptions, the law also made changes to the child tax credit and has added a new credit for non-child dependents. Starting in 2018 the Child Tax Credit has been doubled to $2,000 per child, $1,400 of which is refundable. The phaseout threshold for the Child Tax Credit has also been drastically increased to $200,000 for single filers and $400,000 for joint filers. This means that most taxpayers who were previously prevented from claiming the full Child Tax Credit will now be able to claim the entire credit. Additionally, the law has introduced a new $500 credit for any dependents who are over the age of 17, allowing parents to continue to receive a tax benefit for children in college or other adults residing in their home. SUMMARY There are many moving parts in the new tax law, with a lot of them working to balance one another out. Some of our clients will see a decrease in their tax bill while others will see it increase. Overall, we do not expect any of our clients to see drastic changes, good or bad, with the new code. We expect the majority of our clients to see an increase or decrease in their tax bill of less than $1,000. If you would like to know how the tax reform will directly impact you, please call our office. Read more articles Share Tax Brackets The number of brackets remains at seven. And the percentage charged at each of these brackets has been reduced, with the notable exception of the lowest bracket of 10% which remains unchanged. The majority of our clients who were previously in the 15% or 25% tax bracket will now find themselves in the 12% or 22% bracket respectively. You may have already noticed the impact of these new brackets when your employer adjusted your withholdings earlier in the year, increasing your take home pay. UNREIMBURSED EMPLOYEE EXPENSES The change that could have the greatest impact on our public servant clients is the elimination of the deduction for unreimbursed employee expenses. As the law currently stands, employees will no longer be able to deduct their union dues, work uniforms, tools, or any other expenses related to their employment. The only exception to this is the special $250 allowance for teacher's expenses which remains unaffected. There is currently a bill in congress which seeks to reinstate the deduction for unreimbursed expenses. The "Tax Fairness for Workers Act" would not only bring back the itemized deduction for employee expenses but would go a step further and allow for specific deductions to be taken above-the-line, meaning they would not be subject to many of the limitations that currently restrict their use. It remains to be seen how far this bill will go but we strongly recommend that you keep track of your job expenses until a decision is reached. If the bill passes, this will cause job related expenses to have a greater impact on your tax return. ITEMIZED DEDUCTIONS AND THE STANDARD DEDUCTION One of the most promoted aspects of the new tax law is the nearly doubling of the standard deduction to $12,000 for single, $18,000 for head of household, and $24,000 for joint filers. While the standard deduction amounts are receiving significant increases, many of the allowed itemized deductions are either being handicapped or removed entirely: The deductions for state and local income taxes as well as property taxes are capped at a combined total of $10,000. This means that homeowners in high income-tax states are likely to lose a portion of this former deduction. The deduction for home mortgage interest remains but is limited to mortgages that do not exceed $750,00, down from the previous threshold of $1,000,000. All miscellaneous itemized deductions (including tax preparation fees, casualty losses and all unreimbursed employee expenses) have been eliminated entirely. The increased standard deduction amounts combined with the additional restrictions on itemized deductions increases the chances of the standard deduction being more beneficial than itemizing deductions in 2018. 1 ABOVE THE LINE DEDUCTIONS Above-the-line deductions are more beneficial than itemized deductions as they have far fewer restrictions. The new tax law retains many of these deductions including educator expenses, student loan interest, and contributions to Health Savings Accounts. Two deductions that have been changed are expenses for a job-related move, and alimony payments. Starting in 2018 expenses for a job-related move will only be deductible by active members of the military. Starting in 2019 alimony payments will no longer be deductible. However, this will only apply to divorce agreements settled after the start of 2019. This means that alimony payments from divorce agreements that were already in place prior to 2019 will continue to be deductible. FIVE CHANGES 3 PERSONAL EXEMPTIONS AND THE CHILD TAX CREDIT 2 4 5 At Monotelo, we exist to make a difference with meaningful and actionable financial solutions that positively impact our client's lives. If you have questions about what steps you can be taking to prepare for your retirement years, call us at 800-961-0298

SIX MYTHS About Health Savings Accounts If you qualify for one, a Health Savings Account is an incredibly compelling way to pay for your future medical costs. Not only does it allow you to bypass the 7.5% threshold for deducting your medical expenses, it also provides for tax-free growth when you use the proceeds for medical expenses. With significant medical expenses in retirement all but guaranteed, a Health Savings Account is a great tool to save for retirement. As compelling as HSAs are, there are a number of misconceptions about how they work and how you can use the funds held in them. Our goal today is to dispel some of the common myths that surround Health Savings Accounts. 1. You need to use HSA money before the end of the year HSAs are frequently mixed up with flexible spending accounts, which require you to use the funds in the account before the end of the year or lose them. With an HSA the money in the account is yours to keep until you need it. 2. You can’t use your HSA after enrolling in Medicare While you cannot continue to contribute money to your HSA after enrolling in Medicare, you can continue to use the funds that are already in the account to pay for your medical expenses. In fact, once you turn 65 you can also use your HSA funds to pay your Part B and Part D Medicare premiums. If your Medicare premiums are paid directly out of your Social Security benefits you can withdraw the same amount from your HSA to reimburse yourself. 3. You can only open an HSA if your employer offers them. As long as you meet the eligibility requirements, you can open an HSA and start contributing on your own. Many banks and other financial institutions offer Health Savings Accounts. However, if your employer does offer an HSA you are likely better off setting one up through them since many employers make direct contributions to employee’s HSA and will likely also cover the administrative fees of the account. 4. You need to withdraw funds in the same year you pay your medical expenses. Many HSA providers will give you a debit card that you can use to pay your medical expenses directly out of your HSA. However, you can also pay your medical bills out of pocket and then withdraw funds from the account to reimburse yourself. There is no time-frame in which the reimbursement needs to be made. As long as a medical expense is incurred after you set up your HSA, you can wait five, ten or even fifty years to reimburse yourself out of the account. However, the longer you wait the more difficult it may be to prove that the expenses were not already reimbursed in a previous year if the IRS chooses to question the reimbursement so it is best not to wait too long to reimburse yourself. 5. You can only use HSA funds for family members covered under your insurance plan The amount of money that you can contribute to your HSA is dependent on whether your health plan covers your family or just yourself. You can contribute up to $3,500 annually if you have a single plan or $7,000 if you have a family plan. However, even if your health plan only covers yourself and your other family members are on a separate plan, you can still use your HSA funds to cover any medical expenses for your spouse or dependents. 6. You don’t need one if you are healthy. Even if you don’t expect to have significant medical expenses anytime in the near future, you are very likely to have large medical expenses later in life. When viewed as a retirement planning tool rather than an emergency medical fund, the HSA beats both traditional and Roth retirement accounts by allowing for pre-tax contributions and tax-free distributions when used for qualified medical expenses. Summary The Health Savings Account is a powerful tool to prepare for any unexpected medical costs while also saving for retirement. If your healthcare plan qualifies as a High Deductible plan you should strongly consider the benefits offered by an HSA and if you are choosing a new healthcare plan you should look at plans that will qualify for a Health Savings Account. Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

Spend some time reviewing your retirement accounts before 2019. Save as PDF Read more articles Share 1 2 HOW TO SAVE YEAR-END REVIEW OF YOUR RETIREMENT ACCOUNTS As we head into the final few months of 2019 you should take some time to review the contribution limits of your retirement accounts and determine if you can make additional contributions before the deadline for 2019. You should also take this opportunity to review your records to make sure you avoid the number one retirement account mistake. Contribution Limits For a 401(k), 403(b) or 457 your maximum contribution for 2019 is $19,000. If you are 50 or older before the end of 2019 you can contribute an additional $6,000 for a total of $25,000 For a traditional or Roth IRA plan your maximum contribution for 2019 is $6,000. If you are 50 or older before the end of 2019 you can contribute an additional $1,000 for a total of $7,000. Remember that this limit applies to each spouse separately. A married couple both over the age of 50 can contribute a total of $14,000 to traditional or Roth IRAs for 2019. For a Simple IRA your maximum contribution for 2019 is $13,000. If you are 50 or older before the end of 2019 you can contribute an additional $3,000 for a total of $16,000. If you are not able to max out your contributions before the end of the year you can continue to contribute until April 15th, or October 15th if you file for an extension. The Number One Retirement Account Mistake One of the biggest mistakes you can make with your IRA or other retirement account is to not have accurate beneficiary forms on record for your account. The beneficiary form identifies who you want to receive the funds in your account after your death. Missing or outdated beneficiary forms can create legal or tax nightmares for your family. These beneficiary forms take precedence over any other legal documents such as a will or divorce agreement, which can result in your funds going to the wrong person, even when it is clear who you intended to receive the funds. In a recent U.S. Supreme Court case, William Kennedy failed to update the beneficiary form for his 401(k) following his divorce. In Kennedy’s divorce agreement with his wife, she agreed to waive her rights to his 401(k), however he never updated the beneficiary form with the account holder. This led to an eight-year legal battle for his daughter, trying to recover the $402,000 he intended her to receive. His daughter ultimately lost when the Supreme Court unanimously decided that the outdated beneficiary form took precedence over the divorce agreement and Kennedy’s will. Had Kennedy simply taken the time to update the beneficiary forms for his 401(k), he would have saved his daughter years of hassle and guaranteed she receive the funds he intended for her. Summary The lesson here is very clear: Whenever there is a major change in your life, make sure that you update the beneficiary forms for all your financial accounts. Major changes would include getting married, having a child, getting divorced or the death of a family member. If you have not reviewed these forms since the last time one of these events took place you should take some time before the end of the year to do so. Read more articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

Many public sector workers do not pay into Social Security because they pay into a separate state or local pension fund. Since Social Security benefits are based on the Social Security wages earned during working years, public-sector workers who do not pay into Social Security will not be eligible for Social Security benefits at retirement. There are other public sector workers however, who have paid into the Social Security pool because they work second jobs or began working in the public sector later in life or retired and began a second career. Public sector workers who have paid into Social Security can qualify for benefits on top of their pension, but those benefits may be reduced based on the number of years they paid into Social Security. How Are Social Security Benefits Calculated? Social Security benefits are based on your average wages for your 35 highest earning years. If you pay into Social Security for 29 years, your benefits will be calculated using the 29 working years plus 6 years of zero wages. Your annual wages are also adjusted for inflation to prevent your early earning years from hurting your benefits. After adjusting for inflation and averaging your 35 highest years, your annual wages are divided by 12 to produce your Average Indexed Monthly Earnings (AIME). Your monthly benefits are calculated using 3 percentage brackets of your AIME: 90% of the first $926 of AIME, 32% of the next $4,657 of AIME and 15% of AIME after that. Example: If you work for 35 years and have average adjusted wages of $72,000 per year, your Social Security benefit calculation will use $6,000 for your Average Indexed Monthly Earnings and calculate your benefits as follows: THE IMPACT OF YOUR PENSION On Your Social Security Benefits $926 x 90% = $833.40 + $4,657 x 32% = $1,490.24 + $417 x 15% = $62.55_____ $6,000 = $2,386.19 monthly benefits How Your Pension May Limit Your Social Security Benefits If you receive a pension from an employer that does not withhold Social Security taxes, your benefits may be reduced by the Windfall Elimination Provision (WEP). This provision reduces monthly benefits by reducing the first bracket benefits from 90% down to 40% in 5% increments depending on the number of years worked. If you paid into Social Security for at least 30 years with "substantial earnings," then the WEP limitation will not apply. But if you paid in for less than 30 years of substantial earnings the first bracket percentage will be reduced by 5% for each year under 30 until it bottoms out at 40% for 20 years of contributions . This limitation can reduce your base Social Security benefits by as much as $5,500 per year. Example: To demonstrate how this limitation reduces your benefits we have calculated the monthly benefits you would receive if your AIME was $6,000 under two scenarios: 1) where you have 30 years of substantial Social Security wages and 2) where you only have 20 years of substantial Social Security wages: The lower percentage applied to the first $926 of wages when the WEP limitation applies reduces your benefits by $463 per month or $5,556 per year. What Can You Do to Eliminate the Pension Penalty? The Equal Treatment of Public Servants Act of 2019 was recently introduced in congress to repeal the WEP limitations by replacing them with a new formula that treats public servants more favorably. With the bill’s future uncertain, we want to focus on steps you can take right now. The first step in the process is to determine your Social Security benefits by creating an account at www.ssa.gov . This account will allow you to view your estimated benefits based on your prior work history. Be aware that the estimates provided by the Social Security Administration will not account for any WEP limitation that may apply to you. After you find your estimated benefits you will need to subtract $46.30 per month for every year short of the 30-year window of substantial earnings. If you are more than 10 years short of the 30 year mark, only subtract amounts for the first 10 years that you are short. If you are short of the 30-year threshold, you may want to consider working a few extra years at a part-time job or starting a new career at retirement. These additional years of contributions will not only increase your potential Social Security benefit, they will also decrease the limitation put on those benefits by the Windfall Elimination Provision. What Constitutes "Substantial Earnings"? Substantial Earnings are a separate calculation from the calculation of year paid into Social Security. To qualify for a year’s worth of Social Security earnings, you only need to earn $5,880 of wages. To qualify for substantial earnings, you need a total of 26,550 of wages subject to Social Security. The table below will show the substantial earnings test. To discuss this further, please reach out to one of our team members at (847) 923-9015. Read more articles Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

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