Tip: Why Vacations are Important

The unrelenting pace of life is a reality for many people. Mobile technology keeps us connected 24/7, and the workday seems to have no end. Sometimes we tell ourselves we can’t justify taking time off to rest and rejuvenate. Too much of this kind of thinking can seriously damage our health and productivity. If you need reminding why vacations matter, here’s a list of compelling reasons:

  • Vacations make people more productive at work. Many of us resist the idea that down time ultimately makes us more productive. However, research studies have shown that companies where vacation time is encouraged reap the benefit of committed workers who feel more satisfied with their work. Employees who take their vacation time also tend to log less sick time.
  • Taking time off improves workers’ concentration and creativity. People who don’t take breaks and vacations are liable to suffer from the effect of chronic exposure to stress hormones. These adverse effects include feelings of being blocked creatively and of being distracted and unable to focus. Vacations and regular recreation help energize employees and boost their memories.
  • Vacations are vital for our minds and bodies to recover from chronic stress. Medical professionals keep discovering ways that our minds and bodies connect. We have been told that heart disease and high blood pressure can be caused by chronic stress, but we know now that the damage extends beyond our cardiovascular system. Our entire immune system is susceptible to the effects of continual stress. Adrenal dysfunction, which frequently occurs alongside high stress levels, can cause a myriad of woes, including reduced ability to fight infections such as colds and the flu. It can also be a factor in chronic conditions like irritable bowel syndrome and debilitating headaches. Even more serious, stress is also thought to play a major role in triggering auto-immune illnesses, which can rob us of vitality and shorten our life expectancy.
  • Time off also helps restore healthy sleep patterns. Sleep deprivation is another major contributor to one of our common modern ills – obesity and adult-onset diabetes. Vacations allow us to get more sleep and improve our general sleep quality.
  • Improve our mental and emotional balance. Studies have shown that workers who vacation regularly report a better feeling of well-being than those who skimp on vacation time. Stress hormones appear to alter our brain chemistry over time, making us more likely to experience depression and anxiety. In addition, stress hormones like cortisol have been linked to increased belly fat and weight gain. Eating in response to stress has also been identified as a major factor in rising levels of obesity in the adult population. Time away from our work responsibilities has been shown to help restore healthy metabolism, healing both our bodies and our minds.

If the above fail to persuade you that vacations are a necessity, bear in mind that vacations are considered a virtual fountain of youth by researchers who study biological aging. Stay young in mind, body and spirit by taking regular recreation and vacation breaks.

Fill Your IRA & 401(k) to the Brim

Some people say that 50 is the new 30. Living longer and healthier lives might make you feel young if you are 50, but your retirement account begs to differ. Anyone who’s turning 50 or older on or before Dec. 31 is allowed to make retirement catch-up contributions starting that year. Catch-up contributions can yield big tax savings, so let’s look at how they work and some ways you can take advantage of the rules.

401(k) plans limit people younger than 50 to a maximum contribution of $18,000 per year on a pre-tax basis. Catch-up contributions work by allowing those 50 and older to stash away extra money in a 401(k) or IRA – as much as an additional $6,000 per year pre-tax. This means that someone 50 or older can save up to $24,000 per year in their 401(k), all of it shielded from taxes. Note that the catch-up provision isn’t limited to 401(k) plans. It also applies to 403(b) accounts for nonprofit employees, 457 plans for government workers and for self-employed solo 401(k) plans.

Solo 401(k) plans for self-employed persons have the same limits as regular 401(k) plans, but they also have the added benefit of allowing the owners to save part of their profits pre-tax in their retirement plan. Businesses can make a profit sharing contribution of up to 25 percent (only 20 percent for sole proprietors and single member LLCs), creating the potential for a total deferral of up to $60,000 ($18,000 401(k) contribution + $6,000 catch-up + $36,000 in profit sharing).

Keep in mind that in order to put $36,000 away in profit sharing, your business would have to make $144,000 in profit per owner, but obviously there is huge potential here. With $60,000 tax deferred, assuming a 35 percent combined federal and state tax rate, this means you just kept $21,000 instead of giving it to the government. Now take that and compound market returns on it and watch your retirement plan grow.

You might be wondering about Roth 401(k) plans, the type of plan where your contributions are not tax deductible but your withdrawals are tax free. Roth 401(k) plans also allow the catch-up contribution so you can stash all or part of the $6,000 catch-up into this type of plan as an option.

The retirement plan catch-up provision is not limited to employer-sponsored plans; they also are available for Roth IRAs and traditional IRAs. The same age rules apply, but the amounts are different. Both Roth IRA and traditional IRA accounts have a catch-up limit of $1,000 per year. Various other less common retirement plans also have their own catch-up contribution limits. SIMPLE IRAs have a catch-up limit of $3,000, while SEP-IRAs have no catch-up provision. Don’t forget that IRA accounts have their own set of rules regarding eligibility, which are beyond the scope of this article.

Retirement plan catch-up provisions can help you reach your retirement goals and result in significant tax savings. Consult with your tax advisor to see if this strategy makes sense for your situation.

Yes, You Can Lower Your Property Taxes

You can pay off your mortgage—never again seeing a bill from the bank for principal or interest—but you can never pay off your property taxes. Additionally, property taxes, unfortunately, only seem to go one way – UP! While you’ll never be able to get rid of your property taxes entirely, you can take steps to lower them or reduce increases.

Understanding how you can fight to lower your property taxes can be extremely valuable, especially if you live in a high property tax state. According to wallethub.com, the 10 states with the highest property taxes (ranked from least to most expensive) are:

  • Rhode Island
  • Vermont
  • Michigan
  • Nebraska
  • Texas
  • Wisconsin
  • Connecticut
  • New Hampshire
  • Illinois
  • New Jersey

Hawaii came in as the least expensive with an average effective real estate tax rate of 0.27 percent, which translates into $483 in annual taxes on a $179,000 home. At the other end of the spectrum, New Jersey comes in with an effective rate of 2.35 percent and $4,206 in annual property taxes on a $179,000 home. Obviously, different states have different relative housing costs, so a $179,000 home often is not an equivalent house. To put it in perspective, the median home price in Texas (46th most expensive) is $136,000 and comes with $2,578 in annual property taxes, whereas New Jersey (most expensive) has a median home price of $315,900 which comes with an annual property tax bill of $7,410.

Property taxes are higher in some places than others depending on how much of the local tax burden (particularly schools) falls on homeowners versus the business tax base. Regardless of your situation, you’re probably ready to read about what you can do to potentially lower your property taxes. Here are three strategies to consider:

Take every exemption you’re allowed

Often, states, counties or municipalities give out tax exemptions for a primary residence. Sometimes they are general and referred to as a homeownership or homestead exemption. Other times, they are available for only certain classes of people, such as senior citizens.

Learn what exemptions are offered where you live and make sure they are factored into your annual assessment or property tax bill. Sometimes you can go back retroactively for a few years to claim the exemption. This won’t always be allowed, but it’s worth a try if you discover you’ve missed out on an exemption. In any case, make sure the exemption is applied going forward.

Understand how your property value assessment and appeals process works

Dates and time periods for assessment change and appeals vary depending on where you live. Often, reassessments are performed every three to five years. Other times, towns will render assessments on new construction or reassessments if you’ve made significant additions to your house (which is also a reason they require you to get building permits – so they know you’ve improved your property).

After an assessment or reassessment is issued, you have a limited amount of time to contest any changes through the appeals process. Approximately six to seven weeks is a typical time frame in many states – and the clock starts ticking from the time the notice is mailed. Check your municipal or county assessor’s website or call their office to find out the specifics for where you live.

Ensure your home is compared to similar properties

Professional appeals experts know they need support when challenging an assessment. You don’t win an appeal by simply showing up and claiming your assessment isn’t fair – you need to find comparable homes with lower assessments to prove your case.

Luckily, assessed values are pubic record and you can find out nearly everything you need to know by going online (although in some places records have not been digitized yet). You’ll need to look for homes of similar size, age, amenities and tax classification that are paying lower taxes.

When it comes to lowering your property taxes, the government is not here to help. You can hire a professional appeals expert or do it yourself; but no matter what, you must be proactive.

Technology: Automakers & Cybersecurity Pros Collaborate to Tackle Growing Threat

Over the past few years, Internet-connected vehicles have become the norm. Accordingly, cybercrooks have turned their attention to cars and trucks, looking for ways to gain access to vehicular navigational systems and to hack into drivers’ smart phones and tablets. Last year, recognizing the ever-increasing potential for breaches, automakers in the United States joined forces to battle the threat, tapping the expertise of some of the nation’s leading Internet security experts. Here’s an update on what these efforts have yielded.

  • Self-driving vehicles have opened up a whole new area of concern. White-hat hackers have shown – in controlled situations – how vehicles could be hijacked to harm their occupants or generate mayhem on a busy highway. These security specialists have demonstrated how vehicles – especially the new breed of semi-autonomous or driverless vehicles – might be tracked and manipulated remotely by cybercrooks. The demonstrations have shown how cybercrooks could take control of a vehicle’s headlights, navigation, speed, windshield wipers, blinkers and radio. In some instances, hackers can remotely take control of brakes and/or steering.
  • So far, no vehicle has been hacked into by a cybercriminal, but security experts and researchers have shown automakers how it could happen, and car manufacturers are taking the threat seriously. Cars with advanced connectivity – including prototype driverless or semi-autonomous vehicles – are potentially more vulnerable. Twenty years ago, the average car had about 1 million lines of code; today, cars can have 10 million lines of code, or about as much as a modern aircraft. Automakers have already felt the financial sting of this new cyberthreat. Major manufacturers are busy recruiting white-hat hackers to identify potential issues. For example, Fiat Chrysler recalled 1.4 million Jeep Cherokees after white-hat hackers exposed vulnerabilities in the vehicle’s IT circuitry.
  • There is strength in industry-wide initiatives. Nearly all automakers based in the United States banded together last year in an industry-wide effort – the Automotive Information Sharing and Analysis Center – to develop best practices for combating potential cyberthreats, to develop secure hardware and software, and to draw up guidelines on how to respond to hacking incidents. The industry group’s membership is responsible for about 98 percent of the vehicles on U.S. roads.
  • The challenge to strengthen cybersecurity in vehicles extends beyond car manufacturers. The notable gig economy transport company, Uber, as well as Didi, a Chinese company similar to Uber, have both been on the forefront of research to develop safer software and hardware and uncover potential security issues. The possible motivations for hackers to hijack vehicles are many and go beyond compromising highway safety. Smart phones and/or other portable computers that are linked to vehicles’ dashboard technology also present a potential entry point into other data centers housing confidential business and personal data.

Savvy consumers will recognize that the vehicles we drive are now a big part of the Internet of Things, and will take measures to shore up security on any personal devices they connect to their dashboards. Automakers will need to be constantly proactive to identify vulnerabilities in computers installed in new model vehicles.