BFSG Blog - Benefit Financial Services Group

5 Top Scams to Watch Out for This Holiday Season

The holiday season is a time when people are especially vulnerable to scams. This is because they are busy and often have their guard down. Criminals take advantage of this by circulating fake e-gift cards, posing as charities, targeting specific demographics, and so on. We will discuss Google’s five most popular scams being circulated this holiday season.

1) E-gift card scams. With the holiday season in full swing, so are gift cards and prize scams. These scammers will often lie about being a known contact of yours to try and get you to buy them a gift card, or they may offer an amazing prize in exchange for your credit card information. If you receive any suspicious emails like this from someone claiming to be your friend, make sure to confirm it with them through another method before doing anything further. And as always, if something seems too good to be true, it probably is.

2) Charities. Be wary of scammers and phishing attempts; they actually worsen during the holiday season. This would not only hurt those who fall for the scams, but also charities that could’ve benefited from donations. For example, an attacker may pretend to be associated with a charity related to current events or one with a familiar name. If someone contacts you asking for money via personal email or another method, beware that it might be fraudulent.

3) Demographic Targeting. With more people shopping online and sharing personal information this holiday season, scammers are taking advantage by targeting consumers with fraud that seems more realistic.

For example, you might get an email from what looks like your child’s school PTA about a holiday fundraiser. But if you click on the link in the email, it could take you to a fake website where you’re asked to enter sensitive information like your credit card number or Social Security Number.

These types of scams can be difficult to identify because they seem so personalized. But if you’re aware of potential threats and know what to look for, you can help protect yourself against them.

4) Subscription Renewals. Scammers love to target people at the end of the year, and one particularly nasty version of these emails spoofs antivirus services. They lure victims with promises of improved security, but if you take a closer look at the sender’s email address, you can usually spot these scams pretty easily.

5) Crypto Scams. Cryptocurrency-based scammers are more prevalent during times of high crypto usage, like now. They often use a cryptocurrency wallet to collect payment and may threaten their victim if they don’t receive the funds. Some key things to look out for that signal fraud include typos, strange email addresses, and demands for payment.

By being aware of these five popular scams circulating this holiday season, you can protect yourself and your loved ones from potential fraud. Also, check out our cybersecurity guide for ten things you should be doing now to protect your data.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

Herding Bias: Don’t be a sheep

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles MacKay

What is Herding Bias? In behavioral finance, herding bias refers to investors’ tendency to follow and copy what other investors are doing.  When markets are volatile, it could lead to behavior that is not fully rational such as selling a stock based on emotion, rather than by your own independent analysis. Don’t be a sheep and dare to stand out from the crowd.

BFSG Shorts: Herding Bias

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

Important IRS Rule Changes Regarding Inherited IRAs

By:  Paul Horn, CFP®, CPWA®, Senior Financial Planner

I am under the firm belief that as long as the IRS exists, we have job security. Trying to understand and interpret the IRS feels akin to reading hieroglyphics with no formal training. Often the IRS will create a new rule, but it generally takes time for them to interpret and clarify the ruling. We have seen this occur with rules around how individuals are required to take money out of inherited retirement accounts (i.e., IRA or 401k).

The IRS recently released Notice 2022-53 that provides guidance relative to certain required minimum distribution (RMD) rules enacted by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The notice also announced that the Department of the Treasury and the IRS will issue final RMD regulations effective no earlier than the 2023 distribution calendar year which, to date, have not been released in final form.

Once the final RMD regulations are effective, these changes will impact many individuals starting in 2023.

Elimination of the “Stretch IRA”

Before 2020, individuals that inherited a retirement account like an IRA or 401(k) had to take RMDs each year based on their life expectancy. This ability to spread out taxable distributions after the death of an IRA owner or retirement plan participant, over what was potentially such a long period of time, was often referred to as the “stretch IRA” rule. The SECURE Act of 2019 changed the rules for those that inherited IRAs and required that the money be taken out within ten years of the date of death of the original account owner. Many professionals assumed this meant that no money was required to be taken out of the inherited retirement accounts from 2020 until the 10th year. Until recently, the IRS did not provide any guidance for inherited retirement account RMDs.

What Will Change 

Starting in 2023, under new IRS guidance, owners of inherited accounts may be required to take an RMD from their inherited IRA depending on the age of the original owner at the date of their death. For example, Lauren inherited an IRA from her mother who was 73 years old when she passed away in 2021. Starting in 2023, Lauren will be required to make distributions from the inherited IRA based on her life expectancy. Since the IRS has not provided any past guidance, there will not be any requirements or penalties for not making distributions in 2021 or 2022. Below is a flow chart to help understand if you need to start distributions from the inherited retirement accounts.

What Needs to Be Done Starting 2023

If you have an inherited IRA or inherited retirement plan that was opened 2020 or later, you will need to review if the original account owner was 72 or older when he/she passed away. If they were 72 or older you will be required to begin to take distributions. Speak with your advisor or custodian (i.e., Schwab or Fidelity) in early 2023 to learn more about how much you will need to withdraw to be compliant with the new IRS guidelines.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

Best Account to Open for Your Kids Future

By:  Paul Horn, CFP®, CPWA®, Senior Financial Planner

As parents we always want to see our kids succeed and do better than we did. This means many times we want to invest in their future for various things. Most of the time parents want to save for education, but there could be other reasons to save.  For example, helping them buy their first home, seed money to start their business venture, or to pay for a wedding. Below are the most common account types and when it may be the best choice based on your goals for the money. Some may notice that the Coverdell (Educational IRA) is not listed and that is because it is no longer relevant given recent changes to the 529 Plan.

529 Plan: Best account for saving for education

  • Best used if you 100% know that the beneficiary is going to use the funds for college, post-secondary education, or private school.
  • For 2022, the max that can be contributed in one year is $16,000 per person per beneficiary (or $32,000 with gift splitting).  There is also an option to superfund a 529 where 5 years of contributions are made in one year.
  • Contributions grow tax-free and distributions can be tax-free as long as they are used for qualified education expenses.  Qualified education expenses include (but are not limited to) items like room and board, tuition, and books.
  • Contributions can be deductible at the state level depending on your state.
  • If the distribution is not for qualified education expenses, the earnings on the distribution are subjected to ordinary income taxes and a 10% withdrawal penalty.
  • You can switch the beneficiary at any time. Let’s assume you have money left over after the oldest child graduates; you can transfer this money to the next kid in college.

UTMA/UGMA (custodial account): Best account if you want your kid to have the money at 18 or 21 without any limitations

  • In 2022, this is an account where the custodian can contribute $16,000 per year to an investment account for a minor child.  At the age or majority (usually age 18 but can be increased to age 21 or 25 in some circumstances), the minor child then becomes the owner of the account.
  • While the minor child is still listed on the UTMA (Uniform Transfer to Minors Act) account or UGMA (Uniform Gift to Minors Act) account, the earnings are subject to capital gains at the following schedule:
    • The first $1,100 of unearned income is free from tax,
    • The next $1,100 is taxed at the minor’s tax rate,
    • Earnings above $2,200 are taxed at the parent’s tax rate.
  • When the account transfers to the minor child due to the minor child reaching the age of majority, earnings and distributions are taxed at capital gains tax rates.

2. Put money into a taxable account in your nameBest option for anything not education specific

  • There are no limits on how much you put into the account or how the money is used.
  • You maintain full control of the assets and determine when and how much they receive.
  • This is a taxable account, so it would be subject to regular taxes (i.e., interest income, capital gains, dividends, etc.)
  • If your kid(s) were to inherit the taxable account, the securities in the taxable account get a step up in basis to virtually eliminate any tax implications for them.
  • A taxable account has less impact on financial aid for your kid(s) than a UTMA/UGMA.
  • Money can be invested however you choose.
  • When you give the money to them it is considered a gift and limited to $16,000 per person or $32,000 for a married couple per year (2022). Any amount over this is reported on a gift tax return (no taxes are paid but it reduces your estate tax exemption).
  • If the money is used to pay tuition for a school directly or directly to medical bills, then the $16,000 limit does not apply.

Roth IRA: Best if saving for their retirement

  • Contributions to a Roth IRA can be made for a minor child as long as the minor child has earned income from working.
  • For 2022, contributions are limited to $6,000 or the amount of earned income (whichever is lower). Assume they make $3,000 from a summer job, then you are limited to contributing $3,000.
  • A parent can put money into the Roth IRA for the kids to allow the kids to keep their income they earned.
  • Contributions grow tax-free and distributions can be tax-free if the owner (the minor child) is at least age 59.5 and the contributions have been in the account for at least 5 years.  If not, earnings on the distributions are subject to ordinary income tax and subject to a 10% early withdrawal penalty.  There are some instances where the 10% early withdrawal penalty can be waived that include (but are not limited to): buying your first home (up to $10k), college tuition, or permanent disability.

As you can see, there are many options available to you and the best account depends on what your goals are. You can reach us at financialplanning@bfsg.com if you would like to have a complimentary call to discuss your specific situation.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

Chad Noorani Selected as one of NAPA’s 2023 “Aces”

Congratulations Chad Noorani, QKA for being selected again to NAPA’s 2023 “Aces”: Top 100 Retirement Plan Advisors Under 40.

Established in 2014, the list of “Aces” – our Top Young Retirement Plan Advisors – is drawn from nominations provided by NAPA Broker-Dealer/RIA Firm Partners, vetted by a blue-ribbon panel of senior advisor industry experts based on a combination of quantitative and qualitative data submitted by the nominees, as well as a broker-check review.

View the list of “Aces” here: https://www.napa-net.org/2023-aces-top-100-retirement-plan-advisors-under-40

Disclaimer: Awards and recognitions by unaffiliated rating services, companies, and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if the Firm is engaged, or continues to be engaged, to provide investment advisory services; nor should they be construed as a current or past endorsement of the Firm or its representatives by any of its clients. Rankings published by magazines and others are generally based exclusively on information prepared and/or submitted by the recognized adviser. The Firm did not pay a fee for inclusion on this list.