Make It Last – Ep 62 – New Form 1040 Coming for Income Taxes & Goal Planning In Retirement
The IRS has released a draft version of a new Form 1040 for your taxes. What are the changes and how does it impact you. Also, you’re retired – why is goal planning still important as you live in retirement?
Make It Last with Victor Medina is hosted by Victor J. Medina, an estate planning and Certified Elder Law Attorney (CELA®) and Certified Financial Planner™ professional (CFP). Through his law firm and independent registered investment advisory company, Victor provides 360º Wealth Protection Strategies for individuals in or nearing retirement.
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Make It Last Ep 62 New Form 1040 Coming Goal Planning In Retirement
Victor Media: Hey, welcome back to Make It Last. I’m your host, Victor Medina. I’m so glad you could join us this Saturday morning. I hope you had a wonderful 4th of July. I did, it was well spent with my family. I have to tell you though, this heat is driving me crazy. I’m glad that it’s scheduled to break.
Before I get into the content for today’s show, I actually do have something of an announcement. One of the things we do is we run seminars for people, workshops, client education workshops and we do them on a semi‑regular basis. We have one coming up on July 18th at the College of New Jersey and we have two different times that are set up.
They are set up for 12:30 in the afternoon and 5:30 in the afternoon. These are essentially by invitation on Facebook or if you know about the link because you are listening to the show. We’re not advertising to the general public beyond a core set of people on those two different areas.
If you’re interested in attending that, because you need to learn more not only about traditional estate planning but you also want to know a little bit about what it takes to protect assets if you have a long‑term care of it. If you have to go into a nursing home or maybe if you need assisted living. If you’re worried about losing a home in those scenarios or saving assets, this is the seminar for you.
If you’re interested in attending that, we need you to preregister. It’s not just something you can show up to. We have a limited number of seats in the room that we’ve been given at the College of New Jersey. Only seats about 30 people per session. It is a limited seminar that we are offering and we need you to preregister.
If you’re listening to this show and you’d like to attend that or you know of someone that would like to attend, the best thing that you can do is actually email the law firm at info, that’s I‑N‑F‑O @medinalawgroup.com and make a reference in the subject line that you’d like to be invited and we will coordinate that with you to get you invited.
You’re welcome to bring up to one or two guests. Many times we have people that come concerned about the care of a loved one like a parent. What they want to do is, they want to have all three siblings there, to hear the education at the same time.
That’s a good way to attend the seminar. As we’ve said, it’s absolutely 100 percent free. It is no pressure, no obligation if you attend pure education. In fact, if you attend, you have the opportunity to get a free copy of the book that I’ve written.
That’s also an incentive to come to the seminar. Again, that’s July 18th, 2018 at the College of New Jersey in Ewing. That’s right off of Route 31 now exit 72 on I‑95. It’s right down the street from the exit. We’ll be in the business building. Reach out to us if you are interested in attending that seminar.
I wanted to start the show with actually an interesting piece of news. We touch on the legal retirement in TaxWorld. I don’t know if you’ve been made aware that the IRS has released a new draft, postcard‑side tax return.
Now they have a tax return that looks like a postcard. Essentially, half of a normal sheet of paper, front and back. It is a draft only. Even though it is a smaller size, the new form 1040 is intended to replace not only the current form 1040, but also form 1040A, and form 1040EZ.
Now don’t print any copies of what you find online yet. The IRS has warned you that it’s an early‑release draft of the 2018 form 1040. It is looking for comments, information review. They don’t want you to use it to file any forms at all. Certainly don’t rely on any draft instructions until it’s been finalized.
They don’t normally release drafts, but they’ve even sent out a, I guess a caveat, that says that, “We anticipate,” meaning them, the IRS. “We anticipate that in case it is likely that this draft will change at least, slightly before,” but where they’re going to post a later draft in the summer with a standard cover sheet. Indicating that they don’t expect that draft to change.
If you print it out online by the way, it looks sharp. It’s really small. It’s pretty good. You’re going to notice that it is smaller than the current two‑page form because it has many line items that have been consolidated, or to shifted to other forms, and other schedules.
For instance, if you look at the draft form and how it compares to the current 1040, you’ll see that the spaces for your names and social security number, largely the same. The signature space for the return…excuse me…for the space for the signature. Let’s try that one more time, remains on the page one, and it’s largely the same, but there’s no longer a separate signature box on page two.
As to filing status. On the original form, you could choose one of five different filing statuses. Single, married filing jointly, married filing separately, head of household, qualifying widower. On the draft form, you’re only going to file, indicate if your filing status is one of three. Married filing separately, head of household, or qualifying widower.
There are still five filing statuses under the law and basically, the IRS is going to default to single for one name and default to married filing jointly for two names, unless you elect one of the other ones. I hope that makes sense.
If you’re going to put one name, don’t take off how you’re filing. If you put two names and you intend to file as married filing jointly, don’t tick off two names. Don’t tick off any boxes, it’s only if you have something different. The option to contribute to the presidential election campaign remains the same. If you like to use that money, you can certainly do that.
Healthcare coverage. Healthcare coverage is still mandatory for the 2018 tax year, so you remember that’s one of the provisions of the Affordable Care Act, or Obamacare, you were required to have mandatory healthcare coverage.
Essentially, that’s still on the new form, even though you’ve heard about a lot of different challenges to that with this current administration and the current Congress that we have. On the draft 1040, that information is noted by a checkbox on the front page, and yes, an additional form may still be required as it is in the original ones, so you might have that.
Remember, one of the changes for the tax year for 2018 is that we have no more personal exemptions. You only have one standard deduction across the board which has been increased, but there’s no separate standard deduction and personal exemption. Those line items have been removed completely from the first and second pages.
If you’ve got dependents, there used to be a space for four dependents on the front page, now that’s just down for two. [laughs] I’ve got three kids. I’ll have to add another page. Darn it! I can’t use the postcard any longer. I’ll have the postcard, plus another form, just to indicate my third kid. He’s going to feel very neglected that he’s on that page all by himself.
As to income reporting on the draft form, the income reconciliation, that was the block on the front page, where you used to transfer your items of income from separate schedules, has been moved from the front page of the return to the second page of the return. What you’ll also notice is that many of the items have been consolidated onto smaller items.
For instance, taxable interest and tax exemption interest used to be on two different lines but that’s squished. I don’t know if that’s a technical term, but, anyway, it’s squished onto one line.
There’s no longer a space to report alimony income since it’s no longer taxable. There are no separate line items for individual schedule reconciliation. There used to be a place where you could enter income from each schedule C, D, E, and F, but now it’s just on a Schedule one. Schedule one has about 37 different lines. You can actually look that up if you wanted to.
Standard deduction still appears on page two, but the amounts, of course, are different. You’re going to want to consult that. New qualified business deductions, it’s very confusing if you have a business, but it just gets one line item on 1040 with a note to see instructions afterwards.
The numerous separate lines for tax credits on the old form is consolidated to one and it, basically, says if your only non‑refundable credit is the child tax credit or the credit for dependents, enter the total on that line, otherwise attach Schedule three. Wait, Schedule three?
What happened to Schedule two? The reference for Schedule two actually appears on line 11, where you’re figuring out your tax and it says to attach Schedule two. It’s just a reconciliation schedule. There’s a bunch of other stuff that’s in there. We’ve got payment schedules, third party designee.
To recap, this is where we’re at with this draft form. We have a smaller form 1040, kind of. No more 1040a, no more 1040EZ. Essentially, all 150 million taxpayers are expected to use the same tax form, and there are lots of new schedules, at least six. Of course, new line items have been deleted based on the new law, like alimony and personal exemptions.
Many things have been consolidated. We’ve shrunk the 1040 from 79 lines down to 23 lines and, by the way, you older people in retirement, get out your magnifying glass because the font is smaller. OK? The font’s smaller. It’s going to be harder to read.
Is most of this ceremonial? Yeah, it is. 90 percent of taxpayers are expected to use a tax preparer or file electronically, which means that the length of the form really doesn’t matter, but I will tell you that a lot of clients in retirement are used to filing their own taxes and some of them even doing by hand.
Be prepared, you’re down to a postage‑sized card but you may be adding multiple schedules as you did in the past. Good luck with that. We’ll keep you up to date.
When we come back, I’m actually going to talk about something different about the goal planning in retirement, why it’s so important. Stick with us. This is going to be a great show for you especially if you’re in retirement trying to figure out how to make the most of your retirement. We’ll be right back on Make It Last.
Victor: Welcome back to Make It Last. We’re talking today about goal planning in retirement. First segment we talked about the new tax form. But this is one that I’m really excited about.
Because here’s the thing, I do so much goal planning in my business life that one of the things that I love to talk about with our retirement planning clients is essentially goal planning. I want to help them realize the best of the lives that they have to live.
This has been no more important than now, when I’m dealing with this health crisis for this family member and really trying to figure out if we don’t have as much time as we would like, how can we make the most of it. There are all kinds of strategies around that. You can think to yourself about whether or not you want to have a bucket list.
A lot of people have a bucket list. That’s about an accomplishment and about just trying to tick things off. I don’t think that a bucket list is terrible, I don’t think that it’s a terrible way of approaching…better that you live deliberately, than not at all.
But I do think that there’s ways of thinking about this that might be a little more…has got a better chance of working out in the end. In my own journey, I used to have a…this is way back in college. When I was in college I used to have a directing teacher. I took a class in direction, stage direction, and it was taught by a artist‑in‑residence.
The concept there is that they would bring somebody who wasn’t an academic, and who wasn’t an instructor. He or she basically was somebody that had had success out in the creative community and they were an artist‑in‑residence to teach. The reason why I set that up is because in my mind, this person was somebody who was driven by inspiration.
If they were an actor, they were a gifted actor. If they were a musician, they were a gifted musician. They just knew how to improvise. They knew how to write. There was just something that they were blessed with, and they just had that as what they were able to do.
It was quite shocking to go to the class and spend most of it learning about habits and techniques that were workman‑like. They were craftsman‑like. They were about deconstructing and applying discipline to this area of creativity.
In that direction class, we learned a lot about what the discipline that we needed to bring to the craft in order to make something that on the outside looked like it was a creative endeavor. Why am I setting this all up? Because the lesson that came out of that was from discipline comes freedom. I’ve never forgotten that from the class that I took.
It was really a transformative lesson because it meant a couple of different things. For somebody like me that doesn’t think that they are just brilliantly creative, like nothing flows through me that just go and do that.
It means that I had a chance. I had the opportunity to be successful in a creative area, to develop something out of nothing if I applied these workman‑like or craftsman‑like habits to whatever I wanted to create. It gave me a chance. The second thing it meant is that it also gave me the opportunity to teach this to other people.
That meant that as a leader, as a coach, as somebody who likes to develop talent around me, I didn’t have to worry about them being brilliant either. I could give them essentially the same lessons about habit and workman‑like attitude and applying discipline and they too could be free and to do whatever they wanted to do.
I took that lesson from college and it’s been applied around different areas. We’ll focus in the development of my businesses, with the law firm and the financial services and the other things that I do. Where is it really come out? I’ve taken the better part of the last 8 to 10 years, and really gotten involved in coaching. Not me being a coach but me receiving coaching.
Once, every quarter, about four times a year ‑‑ sometimes more often than that depending on what was available out in the world ‑‑ I would go off and I would go and learn from other people. I would take the time to let them coach me. Let’s say really, about the legal practice. What could I do to improve the practice itself, and the practice as a business?
I’ve been doing that kind of coaching with the same coaching group for the last 10 years or so. What we do in every one of the coaching sessions, is we begin with the same beginning habit, and then we end with the same habit. It’s centered around goal planning, achieve a goal, but it’s got a workman‑like attitude.
What I mean by that is that we don’t set out annual goals and then hope that they happen, meet a year later, and try to figure out whether or not that they did happen. We really take the time to plan out those goals, think about them within the context of how do we accomplish them? What do they mean for the practice or the business?
Why are we doing them? We set out those goals, and then starts to piece together how to get them done. Then in the next quarter we do it again. Great.
What that means is that we’re applying the sort of discipline. Recently, I was introduced to a tool that I want to talk to you about that has elevated that game to the next level.
It’s been important for me to think about it as something that I could use a tool around, because more recently we’ve been focused on coaching the rest of the team that works with me here to get them helping to accomplish goals, their own personal goals as well as goals related to the company and what it’s doing.
The tool itself is something that’s commercially available. I have no affiliation with the company whatsoever, except that I love what they’re doing. I want to talk to you about that because, as I go through the tool and goal setting, I’m going to encourage you to think about this as you approach retirement.
Victor: There are things in dreams that you want to accomplish. There is time that you know is limited in the amount that not only can you do in terms of physical activity, but how much can you cram in in the time that you’ve got left.
In retirement, I want to walk you through how to go through a central coaching and goal setting so that you can maximize what you’re getting in retirement. I’ll teach you how to do that when come right back on Make It Last.
Victor: Welcome back to Make It Last. We are talking about goal setting and retirement. I took the last session or section to talk to you about essentially how I arrived at why goal setting was important and why it’s important to apply a discipline to it.
I made a reference to a tool that we started to use here in the firm on a professional basis that I’m going to represent to you that you can use in your own personal life.
It happens to be called “The Full Focus Planner” by a gentleman named Michael Hyatt. If you go to fullfocusplanner.com, you will see that it is available for purchase. You can get an annual subscription, and they’ll send you one out every quarter. It is a planner, a hard copy bound planner that you can use. You write into it, and it’s there for just one quarter.
Why am I so jazzed about this tool? I’m jazzed about this tool because it helps you break down your goals. On the first page of that, you’ll list out what your goals are for the quarter. In retirement, you might have goals related to the upkeep of your home, or things that you want to accomplish in terms of personal development. Maybe you want to pick up a new skill.
There are things that are achievement goals. You might want to go in visit with people. There are habit goals. You might want to exercise more regularly. You might want to explore yoga. You might want to do something that lets you take out of life the stuff that is fun and great, and drives you.
The first page is about identifying those. The pages that follow directly after that help you start to plan out those goals. If you look at the achievement goals, it will help you walk through what that needs to look out. I’m going to open up mine here, and I will talk you through that.
When you set a goal there are certain rules for that goal to be a worthy goal. It needs to be measurable. It needs to be time‑driven, needs to be result‑oriented. It must make you excited. The planner will help you walk through all of this. They get great training videos. You don’t have to take it all from this podcast or radio show, but it will help you focus on those areas.
By the way, there are goals in all kinds of domains. You can have goals that are spiritual, intellectual, parental, social, by the way, for your retirement actually might be grandparental, but emotional, vocational, advocational, financial, marital. You’re in a relationship, how are you going to try that?
You could have goals on all of those things. You start to plan on those goals. You’re going to celebrate. You’re going to have rewards on those. It’ll help you plan all those out. Same thing with habit goals. The real magic comes in as you start to live deliberately page by page.
Some of you that are free spirits are going to rebel against this because you’re going to say, “I can’t be this caged bird where I’m writing down everything that I plan to do. I need to be free.” That’s not about this. The idea that you’re actually writing down what you’re doing on a day‑to‑day basis on a form of a journal but really more because you’re…
It’s more like a planning tool that you’re able to live deliberately. You’re allowed to think these things through. You’re not constrained. You can do whatever you want. You’re just going to be doing it deliberately rather than letting it happen to you.
If you work on this, they’ve got morning rituals, beginning of the day rituals, end of the day rituals, evening rituals, all things that you want to do and make sure that you get done and you can track that. It helps you keep you accountable. You’re going to do that Monday through Friday. You’re going to write down. Perhaps you got a schedule.
You’ve got a daily Big Three. Those three things that are most important for you to accomplish that day. One of the benefits I think about doing this in a non‑professional capacity, where we’re just talking about retirement and living retirement to its fullest, is that it helps make sure that time isn’t wasting by.
We don’t want to live necessarily from medical appointment to medical appointment. We don’t want to live waking up and not knowing where the day has gone. We want to maximize the most that we can get out of the time that we’ve got left. For that, waking up and planning your day deliberately is a way to help do that.
Beyond your daily planning, they’ve got a couple other tools in here, and one of them has to do with weekend planning. This is meant in a professional capacity or most people work through Monday to Friday. When you look at the weekend component of it, there’s going to be things that you may want to accomplish around rest and reflection, relationships and recreation, refreshment, rejuvenation.
There might be things that you want to do. You want to focus on those things a couple of days out of the week. At the end of the week, before you start the next week, it will help you review what worked and what didn’t, and what can you do better, because we all have the opportunity to improve what we did.
It’s going to feel strange if you pick up a tool like this, if you’re somebody that has never lived deliberately, but yet, you’re frustrated because there’s some stuff that you want to do. This will be a tool that will help you accomplish those things because rather than having it be accidental, a by product of just existing, you can go and grab life with both hands and live it deliberately.
I love the Full Focus Planner. If that’s not your style, I’ll give you another tool that’s like a baby step. You can go on Amazon and find a link for something called “The Five Minute Journal.” The Five Minute Journal is really more about a gratitude exercise. It’s a recognition of what went well in a day. What were you grateful for? What are you looking forward to the next day?
It’s like a mini‑planner. I still like the Full Focus Planner. I get the most out of that but the mini gratitude journal, this Five Minute Journal, that you can buy off at Amazon…Again, no affiliation, don’t even know the person who makes it. I got it for this family member, and I got it for my wife too as a birthday present for her.
Living deliberately will give you the opportunity to stop, reflect and recognize. You want the chance to look around and make sure that where you are is where you want to be and where you’re headed is where you want to go. We can talk all day long about legal planning and financial planning and should you have this investment or what are you looking for in terms of cash flow, all that stuff.
But, if you’re not living for a purpose, if you haven’t set out what you mean to do, and do it in a way in which it rewards, excites and drives you, then what are we doing it all for? I hope introducing you to this approach, to the Full Focus Planner, to goal setting generally, to applying discipline to your life so that you can get freedom, will help you lead a better retirement.
That’s my wish for you. As a reminder, if you’re interested in attending the seminar and workshop that we have on July 18th at 12:30 or 5:30 PM over at the College of New Jersey in Ewing, you should send an email to firstname.lastname@example.org and let people know that you’re interested in the seminar.
We will figure out a way to get you registered but you do have to register ahead of time because it’s limited seating. It is a seminar for people that are interested in the topics of estate planning and protecting assets. If you get older and need to go into assisted living, it may not be for you. It may be for a friend. You might be interested for a family member.
If this is a topic that you need to know more about, or you know somebody needs to know about, I encourage you or that person to register for that.
Finally, if this show is something that you enjoy, we urge you to share and help us grow the audience. One of the best things you can do is log on to Apple iTunes and leave a positive review, a five‑star review so that other people that are searching for podcasts in retirement and legal and financial planning will know about this. If not, just share the episode.
Remember, we’re available on Apple iTunes, Android, Stitcher, Spotify, you name it. You can find us and you can not only listen to this show, but you can listen to all of the prior shows. We’ve done 62 so far and no plans for stopping in the future.
It’s a great way to spend 30 minutes learning just a little bit about legal and financial planning, and sometimes life planning in terms of goal setting for retirement. I hope you’ve enjoyed this show. Thank you so much for joining us this week. We’ll be back next Saturday with another fun and exciting topic.
This has been Make It Last where we hope you keep your legal ducks in a row and your financial nest egg secure. We’ll catch you next Saturday. Bye‑bye.