Means Annual Report 2022

Guided by experience. Invested in you.

2022 — 2023

PERSPECTIVES

Introduction by Paul Means 1

News at Means 2

Navigating Investing Through a Bear Market Correction 5 Stock vs. Real Estate, Which is Better? 6

What’s Best for Me? A Roth or Traditional IRA? 8 Advantages of Roth Conversions in a Down Market 10

Social Security & Medicare Basics 11 Estate Planning Basics 14 Investing Through Retirement (Not Just To Retirement) 16 Retirement Contribution Limits 18 RMD Essentials 19 Cybercrime – Current Trends 20 Tax-Efficient Investing 22

How Can I Use My Marginal Tax Rate Bracket in My Year-End Tax Planning? 24 Tax Refund – Is it Really a Good Thing? 26 Wash Sale Rules 27 Municipal Bonds 28 2023 Projected Tax-Exempt Chart 29 529 Plan Basics 30 Means Team 32 A Look Back at 2022 33

A Splash of Cold Water December 2022

As someone who is celebrating their 50th year in the wealth management business, I can honestly say the headline above is a gross understatement for most investors. Having experienced a decade of excellent total returns, 2022 has provided a reality check emphatically stating that markets do not go straight up forever.

A member of an investment committee which I chair recently remarked that the stock market is neurotic--not a bad description given the volatility we have experienced this year. This year we have witnessed a massive selloff in bonds, an implosion in cryptocurrencies, a plunge in tech stocks, and the highest inflation rate in 40 years. Keep in mind, as Lloyd Blankfein, a former chief executive of Goldman Sacs Group, stated, “It’s never as bad as your worst fears or as good as your best hopes.” Over the years, the stock market has endured several very distressing events. Here are a few that you have lived through or read about.

• Great Depression—The Dow fell 90% in less than four years.

• 1962 Cuban Missile Crisis—The Dow dropped 26.5%.

• 1990 Iraq invaded Kuwait—The Dow fell 17% in three months.

• March of 2000—Dot-com bubble—The Dow dropped 15.8% in a month.

• September 11, 2001—Terrorists killed 2,996 people in New York City, Washington D.C. and Shanksville, Pennsylvania—The Dow dropped from 10,033 at the first of September to a low of 8,235 on September 21, 2022, a 17.9% fall.

• 2008-2009 Recession—The Dow fell more than 50% in just 17 months.

• 2022 correction—The Dow dropped from a market high of 36,799 in January 2022, to hit a bottom-to-date of 28,725 in October, a drop of 21.9%.

So where could we go from here? Volatility will continue. The Fed has indicated it will keep its foot on the accelerator until inflation shows significant signs of decline. Inflation should end this year around 7.5% and begin to drop in the first quarter of 2023. The hope is the Fed will pause after December and reflect on how previous rate hikes have impacted the economy. Several Federal Open Market Committee (FOMC) members have acknowledged that the pace of tightening may need to moderate in the coming months. “The key is for the Fed to see actual progress in core inflation and services inflation,” said Neel Kashkari, president of the Federal Reserve Bank of Minneapolis. Any pause in raising rates will be interpreted favorably by the markets.

There are signs that inflation is beginning to ebb. Demand for goods is weakening and although services remain strong, they too are showing signs of eroding. In addition, many corporations are reducing labor. If bond yields are peaking, equity prices will stabilize. Other positive market movers would be a change in Russia’s approach to the war in Ukraine, a falling dollar and the release of additional oil supplies by Saudi Arabia.

In closing, I have to say that cultivating the relationships with clients I have enjoyed over the past 50 years has not been a labor of effort, but of love. In that spirit, our entire Means staff join me in wishing you and your family a healthy and happy Holiday Season and New Year.

Sincerely,

News at Means

Eric Baker and his family made several visits to the beaches of South Carolina and the mountains of North Carolina in 2022. His daughter, Ellie, started her first year of middle school and is adjusting well. This year she turns 12 going on 16!

After much research and planning, Erin Barry and her husband were thrilled to take their daughters, ages 2 and 4 at the time, for a week-long vacation to Disney in April. Visiting with the princesses and riding Splash Mountain were the highlights of the trip. Both girls are keeping them busy as they explore many different activities, including swimming lessons, dance, soccer and gymnastics.

Denise Bither had a busy year, joining the Means Wealth family in May. In addition, she spent time with her hiking group, traversing many of Maine’s beautiful trails. She also honed her skills on the pickleball court, competing in a few local tournaments, and capped off her summer with a two-week trip to Italy, visiting Florence, Pisa, Lucca, Cinque Terre, Venice and Rome.

Tamara and David Cust were able to enjoy two iconic rock and rollers this concert season. Aerosmith and Stevie Nicks performed at the waterfront concert venue in Bangor putting on great shows! David’s son, Jackson, got engaged to his partner, Tori Leonard, this summer.

Susan Dietz took advantage of the beautiful Maine coast over the summer by taking scenic drives in the Bar Harbor and Castine areas. Acadia National Park is a family favorite with its stunning views. In March, Susan went to Florida, breaking up the cold winter with sunshine, warm temperatures, family visits and an awesome trip to Harry Potter World!

Highlights of the year for Patti and John Dudley were a trip to Colorado to visit family and an extended Florida stay for Patti with several shorter visits by John. They continue to follow the exploits of their four grandsons. Grandsons Ethan, Eli and Easton are all in one school this year where mom Ashley works as an Ed Tech. Grandson Nathan loves spending time at his farm-based preschool where he gets to interact with all the farm animals. John enjoys yardwork and gardening around their house on the lake and Patti enjoys watching him work!

Jessica Gioia and her husband celebrated 15 years of marriage this year. Jess joined our team in August as a Support Specialist, stepping into the role after being a stay-at-home mom of six kids (ages 18 months – 13 years) for 13 years. Jess moved to Maine from Colorado a few years ago, and feels accomplished to have survived two Maine winters.

We asked each staff member to share their best 2022 news – here’s what they said:

Dawn Hatch and her husband, Rob, took several trips on their side-by-side, including an overnight trip where they left from their own house and traveled to Northern Maine and back (about 300 miles round trip!). They also welcomed two additional grandchildren this year, born only 3 weeks apart: Cece and Cash. TJ Herlihy started the year by joining the Means Wealth team in January. The highlight of his summer was spending time at the beach with his family. His two boys, Kiernan and Camden, started 4th grade and Pre-K, respectively, this fall. TJ and his wife, Emily, even managed a few nights away from the boys. He is now spending his time studying for the CFP exam.

Following grandkids’ athletic events was and will continue to be a full-time job this year for Cindi and Wes Leighton, with college, prep school, high school and middle school events to watch and enjoy. They are looking forward to attending their granddaughter’s high school graduation in Georgia in 2023!

Alex Means and his wife, Katie, found out about an addition to their family earlier this year: Eloise (Elle) was born in November 2022. Alex is particularly looking forward to the expansion of Means Wealth in Greenville, SC, with our new office set to open in December. And after a few years of not being able, Alex and Katie brought their family, including sons Noah (4) and Miles (almost 3), up to Maine for a week this summer to spend time with family and their grandparents, Mimi and Papa.

David Means and his wife, Kathryn, enjoyed traveling to the beaches of South Carolina and Florida this past year, and spending time in Maine. Their son, Chase, has kept them busy playing soccer and their daughter, Harper, continues to enjoy swimming, basketball and volleyball. Dave is excited to have transitioned to Means Wealth this past August after 15 years at Wells Fargo Advisors.

Rachel & Paul Means welcomed their seventh grandchild and third granddaughter, Elle, in November 2022. They are continuing to work on building their summer house on Sebec Lake and hope it will be completed by February 2023. Most of all, Rachel and Paul have been thoroughly enjoying spending time with their sons’ families in Maine and South Carolina.

Bailey and Zach Means enjoyed the summer playing on the lake with Wyatt (9), Evie (7), and their beloved golden retriever, Mazy (10). Evie and Wyatt did plenty outside primarily swimming, boating and fishing off the dock. Most recently, this fall, the kids enjoyed soccer and plan on playing basketball throughout the winter. The entire family (Mazy maybe most!) is excited for the snow to fly so they can do some winter sledding and ice-fishing.

Wendy Porter and her husband, David, welcomed a new grandson this year. Noah is the first child of their son, Brian, and daughter-in-law, Brianna. Noah joins their three other grandchildren Emmy, Nathan and Claire. Wendy and David spent a magical vacation with the older grandchildren (and their parents) at Disney last spring.

News at Means Cont.

John and Kris Selleck, along with daughter, Sophie, have enjoyed cheering for their other daughter, Erin’s, soccer teams this year. The Hermon Lady Hawks soccer team won the Northern Maine Class B Championship this fall!

Sarabeth and Jamie Stone, along with their children, Asher (9), Elias (7) and Samuel (4), moved from Lewis Center, OH, to Easley, SC, in January, and Jamie started at Means Wealth in February. The Stones moved into their new home in Easley at the end of February. They have been exploring upstate South Carolina ever since and in October added Tula, a five-month-old puppy from Pickens Humane Society, to the family.

In addition, we are excited to announce that Michele Manion joined our team in Bangor, Maine in November as our new Accounting Clerk.

Also in 2022, we started work on the building we purchased at 325 Augusta Road in Greenville, South Carolina. The project has included renovating the existing structure while adding an approximate 1,000 square foot addition. We look forward to finishing the renovations in December and welcoming our clients in the new space in 2023!

“This represents an exciting new chapter in the long history of our family firm. Having an opportunity to expand our outreach and become fully integrated in the community by positioning ourselves in the heart of downtown Greenville is something I have long hoped to accomplish.”

-Alex Means

Navigating Investing Through a Bear Market Correction

To say 2022 has been a tough year for investors would be an understatement. As of this writing, the S&P 500 is down over 20% from the beginning of the year. There are several factors that have contributed to this: the global economic slowdown, the Russian/Ukrainian war, falling corporate revenue and earnings, supply chain disruptions, and the strong dollar, but the most impactful event has been stubbornly high inflation.

These conditions, which result in market declines, can trigger emotions of fear and concern among investors. The important thing for investors to remember is that history has shown the stock market recovers from these dips. One of the most important aspects of navigating a bear market is understanding the kind of investor you are and developing an investment plan which will allow you to stay the course. Leon Cooperman stated, “In a bear market, he who loses least wins.” Here are some considerations to keep in mind:

• Aligning your investment goals, liquidity needs and risk tolerance to your investment plan is essential.

• If you can, continue to make regular contributions to your portfolio through a process called dollar-cost-averaging. This is a process that can be especially beneficial in down markets, as you will end up purchasing investments at lower prices.

• Never lose your perspective. As mentioned earlier, markets historically have bounced back nicely from bear market corrections. Try to approach them in a calm manner and take advantage of these downturns for your own benefit.

• As previously mentioned, look at corrections as opportunities to purchase stocks, ETFs (exchange traded funds), and mutual funds at lower prices.

• Work with your Financial Advisor to ensure your portfolio is diversified. Often when one industry is down, another is doing well, and diversification allows you to benefit from this.

• If you are taking periodic distributions from your portfolio for income and have excess cash that is uninvested, consider “turning off the spigot” from your portfolio and drawing your regular “income” from your cash reserves until the portfolio has had a chance to recover.

Remaining invested in a bear market can feel uncomfortable, but as one of our favorite bloggers, Ben Carlson, CFA, recently said, “Sometimes you simply need to have a little faith and a lot of patience.”

“Most successful investors, in fact, do nothing most of the time.” – Jim Rogers

Stocks vs. Real Estate

Which is Better?

In January of 2020, the median price of a home in the United States was $268,000. As of July 2022, that number had skyrocketed to $385,000—a jump of over 43%. Because of that rise, many clients have been experiencing FOMO (the fear of missing out). “I wish I had put all my money into RE! I’d be retired!” Hindsight being 20-20, we thought it would be helpful to look at an investment in the market over the last 20+ years versus owning real estate.

We should set the stage with some caveats. First, intelligent real estate investors (and lucky ones, too), can buy the right piece of property, turn it, sit on it and/or rent it, and make money. For the average person, though, this takes time, effort and knowhow. Since we cannot cherry-pick which investments in real estate we benchmark, we typically use an index to compare. For the housing market, the most accurate home price index is called the S&P/Case-Shiller index. It measures housing prices on a national scale from 20 cities across the U.S. When benchmarking investments, we can either use the S&P 500 or a 60/40 benchmark. Here’s the tale of the tape: 400.00% 300.00% 200.00% 100.00% 0.00% 1 year

Housing Prices vs S&P 500 & 60/40 Benchmark thru August 1, 2022

Case Shiller US Housing Index (CSUSHPINSA) 60/40 Benchmark (VBIAX) S&P 500 (SPX)

As you can see, the further we extend the period, the more the stock market outperforms. Going back 30 years, the delta is even more drastic, with the S&P up roughly 900% versus the Case-Shiller index up around 300%. Although the one-year number for real estate looks good relative to investing in the stock market, it’s most likely an anomaly.

Numbers aren’t the whole story, however. Each individual’s situation is different and you certainly want to consider tax-advantages, liquidity, time and effort along with many other factors. Long-term, both assets stand to produce attractive results.

“Life is 10% what happens to me and 90% of how I react to it.”

– Charles Swindoll

What’s Best for Me?

A Roth or Traditional IRA?

While both accounts serve as tax-advantaged accounts, the use of a Roth Individual Retirement Account (IRA) and a Traditional IRA is an important financial planning discussion.

The Main Difference

Contributions to Traditional IRAs are typically made with pre-tax dollars: initially you will use after-tax dollars (e.g., dollars in your bank account) to fund the contribution, you then may be able to deduct those dollars on your income tax return, effectively converting them back into pre-tax dollars. Traditional IRA contributions grow taxdeferred until they are taken out of the IRA, at which time you will pay ordinary income tax on anything withdrawn (note: withdrawals must not occur before age 59 ½ to avoid penalty).

Conversely, contributions to Roth IRAs are made with after-tax dollars. Those Roth IRA contributions then grow tax-free and remain tax-free even when you take the money out (assuming that, at the time the money is withdrawn, you are at least 59 ½ years old and the Roth IRA has been open for at least five tax years).

What about required minimum distributions?

A required minimum distribution (RMD) is the amount that you are required to withdraw annually from your IRA. There are no RMDs from your Roth IRA while you are alive, but RMDs from Traditional IRAs are required at age 72, unless you turned 70 ½ in 2019 or earlier.

Contributions

If you are considering making an IRA contribution, keep in mind that you cannot contribute more than you earned in a year. In addition, the IRS sets forth annual contribution limits; for 2022, total contributions to your Traditional and Roth IRAs combined cannot exceed $6,000 for those under age 50 or $7,000 for those age 50 or older. For 2023, total contributions to your Traditional and Roth IRAs combined cannot exceed $6,500 for those under age 50 or $7,500 for those age 50 or older.

In the past, individuals age 70 ½ and older were only permitted to contribute to Roth IRAs but, for tax years beginning after 2019, as long as you have earned income you can contribute to a Roth or Traditional IRA at any age. There are income thresholds that can reduce IRA contribution and deduction limits if you are covered by a retirement plan at work. Permissible Roth IRA contributions also may be reduced or eliminated if your modified adjusted gross income reaches a certain threshold, even if you are not covered by a retirement plan at work.

There are benefits to both, and you don’t have to exclusively use one option over the other. Contributing to a Traditional IRA could give you a tax break right away, whereas the tax benefits of a Roth IRA aren’t realized until later. Generally, those in lower tax brackets and/or a long way from retirement may benefit more from Roth IRAs, whereas those in higher tax brackets and/or closer to retirement may benefit more from Traditional IRAs

So then, which is better, a Traditional or Roth IRA?

“People are like stained-glass windows. They sparkle and shine when the sun is out, but when the darkness sets in their true beauty is revealed only if there is light from within.”

Elisabeth Kubler-Ross

Advantages of Roth Conversions in a Down Market

During times of down markets or market volatility, investors often look for a “silver lining” as they navigate the storms of market uncertainty. One such silver lining could be to increase potentially tax-free retirement dollars at a temporarily reduced tax “price”. Converting some of a pre-tax retirement portfolio (Traditional IRA or 401(k)) to an after-tax Roth IRA portfolio while the value of the portfolio is temporarily discounted can be an advantageous way to maximize tax-free dollars to be used in retirement. In much the same way “buy low, sell high” can be an ideal investment philosophy, paying taxes while an investment’s value is low can add more to the taxfree portion of your overall plan as the converted investments recover and grow. There are important points to keep in mind when considering Roth conversions:

• Income taxes are due for Roth conversions in the year of the conversion, so planning must be done every year a conversion is considered to determine if the overall tax rate for that year is likely to be lower than the future tax rate when funds could be distributed. No one knows what future tax rates will be, but paying too much in taxes now (for example, if too many Roth funds are converted) could be detrimental to one’s overall financial plan.

• When a Roth conversion is made, the amount converted is treated as income in the year in which the conversion occurs. If you make a large Roth conversion, your taxable income will increase which not only would affect your tax bill, but also could affect your Medicare premiums.

• Roth conversions don’t only make sense during times of down markets or market volatility. If you are in a lower-income year or have significant losses or deductions during the tax year, it might be an appropriate time to make a conversion and recognize that additional income.

Bear in mind there are key differences between Traditional and Roth IRAs, which you can learn more about on pages 8-9. Proper tax and financial planning must be done to ensure any Roth conversions are in your best interest. We recommend that you work with your tax and financial advisors before implementing any significant financial decisions, including a Roth conversion.

“When one door of happiness closes, another opens; but often we look so long at the closed door that we do not see the one which has been opened for us.”

- Helen Keller

Social Security & Medicare Basics

Both Social Security and Medicare are important benefits for most Americans, especially those in retirement. It’s important to understand the basics of both programs and to incorporate them into a holistic financial plan that looks to best utilize these benefits based on individual needs.

Social Security

Social Security provides retirement and disability income to qualified people and their spouses, children and survivors. A person must have earned 40 credits to be eligible for full retirement benefits, and in any year a maximum of four credits can be earned. For 2022, each $1,510 in wages or self-employment income earn a worker one credit, meaning the full four credits for the year are earned once that worker earns $6,040. What an individual will receive at retirement depends on how much has been earned over their working career and at what age they apply for benefits. Full Retirement Age (FRA) depends on the Social Security recipient’s year of birth and ranges from age 66 to age 67. When a recipient reaches their FRA, each year’s earnings are tallied up and indexed for inflation and cost-of-living increases. This calculation yields the primary insurance amount (PIA), which is the monthly amount a worker would receive at their FRA.

A Social Security benefit can be started as early as age 62, but if the benefit is started before FRA there is a permanent reduction in the benefit. If taken at age 62, this is between a 25% and 30% reduction, depending on the recipient’s FRA. Social Security benefits can also be delayed past one’s FRA, with a maximum deferral until age 70. If delayed, benefits are increased by a guaranteed eight percent per year for a maximum of 124% to 132% of the FRA benefit depending on the recipient’s FRA.

Social Security benefits can be calculated on the Social Security website (www.ssa.gov). You may also register for access to your individual Social Security account on the website. Spouses are also generally eligible for a spousal benefit, which is up to 50% of the primary worker’s PIA. If the spousal benefit is larger than one’s own benefit, the Social Security Administration (SSA) will automatically pay the higher benefit when the higher earner applies for their benefit. There is also a survivor benefit available, which would pay the deceased spouse’s benefit to the surviving spouse if it were a higher benefit. The amount of survivor benefit depends on the age the deceased spouse started the benefit and the age the surviving spouse begins to receive the benefit. There are additional rules for spousal and survivor benefits that can be found on the Social Security website (www.ssa.gov

There are many factors in determining when it’s best to apply for Social Security benefits. These include health status, life expectancy, need for income, whether you plan to continue work while collecting benefits, and survivor needs. Proper financial planning must be done to ensure you claim your Social Security benefit in a way that is in your best interest. We recommend that you work with your financial advisor and the SSA to determine when it is best to start your benefits.

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“Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you’ll never have enough.”

- Oprah Winfrey

Medicare

Medicare is a national health care system that Americans qualify for if they are 65 or older or have certain disabilities. The Medicare Initial Enrollment Period (IEP) is a 7-month period, which begins 3 months before you turn 65 and ends 3 months after the month you turn 65. If you continue to work past 65 and have medical coverage through your employer, once you stop working there is a Special Enrollment Period that runs for 8 months after you or your spouse stop working or lose group health coverage. Please note this is only for Medicare A & B; Medicare Part D’s special enrollment period is only 2 months.

There are several parts of Medicare, some of which can charge deductibles and premiums to enrollees.

• Medicare Part A helps cover inpatient, skilled nursing, hospice and some home health care. For most enrollees there is no premium for Part A, but there is a $1,556 (2022) deductible each time you’re admitted to the hospital per benefit period.

• Medicare Part B covers doctor’s visits, outpatient care, home health care, and durable medical equipment. Part B has a $233 (2022) deductible before it starts to pay and there is a standard $170.10 (2022) per month premium, which may be waived or increased depending on one’s income.

• Medicare Part D is coverage for prescription drugs. Plans are offered through insurance companies and premiums vary based on the plan you select.

Because Medicare Parts A and B don’t cover all the out-of-pocket costs of health care for enrollees, many also select a Medicare Supplement (Medigap) or Medicare Advantage Plan.

Medigap policies can help pay some of the remaining health care costs, like copayments, coinsurance and deductibles. Some Medigap policies also cover services that Original Medicare (Part A & Part B) doesn’t cover, like medical care when you travel outside the United States.

Medicare Advantage plans are Medicare-approved plans from private insurance companies that offer an alternative to Original Medicare. These “bundled” plans include Part A, Part B and usually Part D. In most cases you’ll need to use doctors who are in the plan’s network. These plans may offer some extra benefits that Original Medicare doesn’t cover, like vision, hearing and dental services. You can find more information about Medicare and compare Medigap, Medicare Advantage and Medicare Part D options available in your area at www.medicare.gov

Proper financial planning must be done to ensure you select the Medicare options that are in your best interest. We recommend that you work with your financial advisor and Medicare to determine what options are best for your individual situation.

Estate Planning Basics

One of the most important pieces of a financial plan is ensuring that the plan can be successful even if you cannot act for yourself. While no one likes to think about the worst-case scenario of not being able to act, it is important to do so. The best gift that you can give your loved ones is to have a plan in place should something happen to you. There are two sets of documents: those that help your loved ones while you are living and those that help them when you pass.

Financial Power of Attorney

This should be one of the first documents that you have drafted. A Financial Power of Attorney (POA) allows your designated agent the ability to pay bills, make financial decisions for you, complete tax returns, make investment decisions, etc. A POA can be limited to specific areas you feel you want taken care of should something happen to you. Your POA can be effective immediately upon signing, or only upon your future incapacity as determined by a doctor or judge.

Advanced Healthcare Directive

An Advanced Healthcare Directive incorporates the concepts of a Living Will and Health Care Power of Attorney, and more. Within this document, you specify an agent to make health care decisions for you if you are unable to make them for yourself. You also can lay out what your wishes are should you become severely sick or injured. This can include decisions surrounding end-of-life care, including CPR, use of a ventilator, and certain types of comfort care. You can even include your wishes related to organ donation, funeral and burial arrangements, consideration of a particular faith, and other preferences related to end-of-life care.

Revocable living Trust

This legal document has three parties involved. The first party is the person who is creating the trust, sometimes called the trust maker, grantor, or settlor. The second party is the trustee, which is the person who is responsible for managing any assets that are transferred into the trust. The third party is the beneficiary, who is the person who benefits from the trust assets. Typically, the person forming the trust (grantor) is also the trustee and the beneficiary. Should you become incapacitated, your successor trustee would step in to help manage the assets in the trust for your benefit. This allows the grantor of the trust to set specific “rules” surrounding how the assets in the trust are used. For instance, you can ensure that your trust continues to make charitable contributions even if you are incapacitated. The assets in the trust are controlled by the grantor, so should they be of sound body and mind, they can remove assets from the trust as they see fit, hence making the trust “revocable.”

Irrevocable living Trust

An Irrevocable Living Trust typically has the same three parties as a Revocable Trust. The grantor transfers assets into the trust, which then become owned by the trust (i.e., the grantor no longer has ownership of these assets). An Irrevocable Living Trust may be used for estate tax exemption reasons, to prevent beneficiaries from misusing assets, to gift property to a child, and more. Irrevocable Living Trusts may also benefit grantors who are trying to qualify for assistance that is asset based, such as Social Security or Medicare coverage for long-term care, as the grantor no longer owns any assets transferred to the trust. Irrevocable trusts cannot be modified or terminated without permission from the trust’s beneficiaries or the court.

last Will and Testament

A Last Will and Testament is a legal document that can give directions on the distribution of your assets upon your demise, name guardians for your young children, name an executor of your estate, and may even help reduce any conflict with your surviving family members. When you pass, you want to give your family time to grieve and remember your life, not to worry about who gets what or what is next. A Last Will and Testament can lay out your wishes so that everyone knows your intentions for your assets.

Some variation of these documents should be integrated into your financial plan. Keep in mind that even if you have already prepared any of the above-listed documents, it is worthwhile to review and update these documents every five to ten years, or whenever there is a significant change in your life circumstances.

“The only man who never makes mistakes is the man who never does anything.”

- Theodore Roosevelt

Investing Through Retirement (Not Just To Retirement)

Retirement is often best viewed as a journey rather than a destination. A retirement plan must be able to evolve, adapt and transform with changing needs throughout the life of the plan. Two big issues that must be planned and accounted for in a retirement plan are longevity and inflation. In other words, there should be a high probability that retirees won’t outlive their money and that the increasing costs of goods and services are accounted for and, ideally, outpaced.

Many retirees underestimate how long they will live in retirement, and therefore how long their assets need to last. This is doubly true if they are married. If you are married and both individuals live to age 65 there is almost a 50% chance one person lives to age 90 and a one in five chance one lives to age 95 or older.* This means that, depending on what age one retires, most people will need to plan for 30 or even 40 years in retirement.

In addition to one’s assets needing to last a long time, the purchasing power of these assets can be reduced over time by inflation. For example, let’s say someone retires today and needs a $4,000 net distribution from their portfolio each month for living expenses. In 20 years, assuming a 3% annual inflation rate, a $4,000 distribution would only be equivalent to $2,215 in today’s dollars. In other words, there is a 45% reduction in the purchasing power of the distribution.

* Source: Social Security Administration, Period Life Table, 2018 (published in the 2021 OASDI Trustee Report); American Academy of Actuaries and Society of Actuaries.

How then does someone effectively plan for longevity and inflation in retirement? One important key is to invest retirement assets for the long-term with a goal of getting a return above inflation. Understandably, many people entering retirement have a desire to protect their assets from any investment risk. They may even move retirement assets to low investment risk assets like cash, unwittingly exposing themselves to a real risk of running out of money before the end of their retirement because of longevity and inflation. While no one should take on more risk than they have to, in order to get a return that outpaces inflation over time a portfolio must have some investment risk. It’s important to work with your advisor to develop a retirement plan that’s right for you and invest assets in a risk-appropriate way that lines up with your overall financial plan. And once a plan and portfolio are developed, both must be periodically monitored and updated. There also needs to be discipline to the plan. Over a 30-to-40-year retirement there will be market volatility. But making short-term decisions, like moving assets out of the plan’s portfolio to something seen as “safe” like cash during down markets, can have a huge impact on the success of the plan. From January 1, 2002, through December 31, 2021, the S&P 500 returned 9.52% annually. But missing just the best 30 days during this period reduced the return to just 0.43%.** In other words, one month out of the market over 19 years resulted in returns that would not have outpaced inflation. It is best to plan for a long retirement, invest to mitigate the impact of inflation for the life of the plan, and annually review and update your plan with your advisor.

**Source: JP Morgan Asset Management analysis using data from Bloomberg.

“Reputation is what others perceive you as being, and their opinion may be right or wrong. Character, however, is what you really are, and nobody truly knows that but you. But you are what matters most.”

– John Wooden

Retirement Contribution Limits

– Gloria Steinem

Plan Type 2022 2023

Traditional and Roth IRA Contribution

Catch-up for individuals 50 & over

Deadline

401(k), 403(b) and 457 Contribution

Catch-up for individuals 50 & over

Deadline

$6,000 $1,000 Apr 18, 2023

$6,500 $1,000 Apr 15, 2024

$20,500 $6,500 Dec 31, 2022

SIMPLE IRA Contribution

Catch-up for individuals 50 & over

Deadline

SEP IRA

Max annual compensation that can be taken into account

Deadline

$14,000 $3,000 Dec 31, 2022

$22,500 $7,500 Dec 31, 2023

$15,500 $3,000 Dec 31, 2023

25% of pay (20% for selfemployed) up to $61,000 $305,000 Apr 18, 2023

25% of pay (20% for Self-employed) up to $66,000 $330,000 Apr 15, 2024

“Dreaming, after all, is a form of planning.”

RMD Essentials

•

If you were born after June 30, 1949, the starting age for your RMD (required minimum distribution) is 72.

• The deadline to take your RMD is December 31st unless you turned 72 this year. As the account holder, you can elect to receive your first RMD distribution as late as April 1 of the following year you reach age 72.

• If you do not own 5% or more of the company you work for and you are still working, you may be able to delay the start of your distributions in a non-IRA retirement plan.

• Roth IRAs do not require an RMD. They are required, however, from Roth 401(k), Roth 403(b), and Roth 457(b) accounts. It may be wise to transfer the savings in those accounts to a Roth IRA at some point to avoid RMDs. Note: There are tax consequences associated with such a transfer.

• You can avoid paying tax on your RMD by making a qualified charitable distribution (QCD). In general, you can distribute up to $100,000 per year tax free from your IRA directly to qualified charities. This action can count toward your RMD for the year. Note: QCDs can be made at age 70 1/2 or later; you don’t need to wait until age 72.

Cybercrime – Current Trends

Bad actors continue to target individuals, using various cybercrime schemes to steal individuals’ personal information and assets. As a result, it is important to understand current cybercrime trends, as well as steps you can take to help protect your sensitive data.

Types of cybercrime attacks:

Some of the most common types of cybercrime attacks include:

Email phishing, whereby criminals attempt to trick individuals into revealing their sensitive information by clicking a malicious link. These criminals are often posing as trusted entities, such as the victim’s bank or a family member or colleague.

Spear phishing, which is an attack targeted at a specific individual that is created when the criminal gathers information on the victim using public and private records. Whaling is similar, but is designed to target business executives, highranking officials or celebrities.

Smishing, which is similar to email phishing, but involves the use of a text message from a bad actor pretending to be a trusted entity, like the USPS or FedEx.

Vishing, which involves the use of fraudulent call centers, which contact victims attempting to obtain their sensitive information over the phone.

“People often say that motivation doesn’t last. Well, neither does bathing. That’s why we recommend it daily.”

–Zig Ziglar

How to protect yourself:

1. Scrutinize all emails and text messages. Specifically, look at the:

a. Sender’s name and email address – while the sender’s name may look legitimate, you often will find that the associated email address looks suspicious.

b. Spelling and grammar – phishing attacks often include misspelled words and poor grammar.

c. Hyperlinks – before clicking any link within an email message, hover over the hyperlink to see if the place you are being sent to appears legitimate.

d. Overall content – be wary of messages that create a false sense of urgency or offers that sound too good to be true. Further, consider the legitimacy of the message; for example, if you receive a message from UPS but were not expecting a package, the message could be spam.

2. When you receive correspondence from what appears to be a trusted entity, such as a bank or an individual you know, close out of the message and contact that entity using information you already have or can obtain (for example, a phone number you have saved or information on the business’ website). Similarly, if an email suggests you should access a financial account or other website via a link in the email, close out of the email and instead go directly to the provider’s website.

3. Protect your online accounts using unique user IDs and passwords. While it may be convenient to share user IDs and passwords across sites, if this information gets into the hands of a criminal, that criminal will have access to a wealth of your sensitive and/or financial information. Also, be sure your passwords are long and complex.

4. Set up two-factor authentication for all of your online accounts. This added layer of security requires you to enter a unique security code that is sent to your phone or email whenever you attempt to log in, and is required in addition to your regular user ID and password.

5. Use a password manager. It can be very challenging to remember all of one’s user IDs and passwords, but password manager apps can help by securely storing all of this information in one place.

6. Ensure the websites you visit have the “https” prefix in the site’s address. “Https” indicates that the connection to the site is encrypted, which is an important added layer of security.

7. Avoid the use of public Wi-Fi. Bad actors can easily intercept public Wi-Fi and track your activity on the internet, collecting your sensitive data in the process.

Over time, cybercriminals are becoming more and more sophisticated, which is why it is important to be incredibly diligent.

Tax-Efficient Investing

When it comes to taxes, the old adage remains true: “It’s not about how much you make, it’s about how much you keep.” Investment strategies should not be based solely on taxes, but investors should consider any opportunities to defer, manage, reduce or avoid additional taxes.

1. Defer Taxes. The largest tax benefit available to most investors is the ability to defer taxes through retirement accounts, such as 401(k)s, 403(b)s, IRAs and taxdeferred annuities. When using a traditional retirement account, you receive the benefit of reducing your current taxable income while also deferring taxes on any investment growth within the account(s). Investors should consider locating and holding investments that generate certain types of taxable distributions within a tax-deferred account rather than a taxable account. In doing so, you will be maximizing the tax treatment of those accounts.

2. Manage Taxes. Decisions you make about when to buy and sell investments you own can affect your tax burden. While you should never “let the tax tail wag the investment dog”, certain concepts should be incorporated into your portfolio management style. As an example, a loss on the sale of a security can be used to offset any realized investment gains. In addition, $3,000 of unused capital losses can be deducted against taxable earned income and certain other income per year. If your losses exceed the limits for deductions in the year they occur, the tax losses can be carried forward to offset investment gains in future years. As another example, being aware of holding periods is an intelligent way to avoid paying higher tax rates. Securities held more than 12 months are taxed as long-term capital gains or losses with a top federal rate of 20% in 2022, which can be more advantageous than recognizing a short-term capital gain which would be taxed as ordinary income.

3. Reduce Taxes. There are various investment-related charitable giving strategies you can employ to reduce your tax burden while also supporting charities and those in need. These strategies include, but are not limited to the following:

a. By donating long-term appreciated securities to a charity, you can avoid paying capital gains tax on the appreciation while also claiming the fair market value of the security as an itemized deduction on your federal income tax return, up to 30% of your adjusted gross income.

b. If you are at least 72 and have an IRA, you can transfer up to $100,000 annually per taxpayer directly from your IRA to a charity by making a qualified charitable distribution (QCD), which can be used to satisfy your required minimum distribution requirement while also lowering your taxable income.

4. Avoid Additional Taxes (Beware the Acronyms). While it’s not always possible to avoid additional taxes, proper tax planning can help reduce the tax burden caused by additional taxes on higher income or investment earnings. Three examples of these are the NIIT, AMT and IRMAA.

a. Net Investment Income Tax (NIIT) is an additional 3.8% tax on the lesser of an individual’s net investment income or the excess of modified adjusted gross income over the following amounts for 2022:

• $250,000 for married filing jointly or qualifying widow(er)

• $125,000 for married filing separately

• $200,000 in all other cases

b. Alternative Minimum Tax (AMT) creates a floor for some taxpayers to pay a minimum income tax despite deductions or credits they may otherwise qualify for. It requires some taxpayers to calculate their tax liability twice, once under the regular tax rules and once under the AMT rules, and pay the higher amount. There are exemptions and phaseouts for the AMT, as well as different AMT rates, that are indexed, or change, each year.

c. Income-Related Monthly Adjustment Amount (IRMAA), while technically not a tax, is an additional amount, or surcharge, some individuals may pay on the Medicare Parts B and D if their incomes are above certain thresholds. The income that is used to calculate one’s IRMAA is from two years prior. So, for 2022 these thresholds start at 2020 incomes above $91,000 for individuals and $182,000 for a married filing jointly couple. There is a process to appeal the surcharge if you have had a qualifying life event that would reduce your income, but it must be done within 120 days of receiving the IRMAA notice. The appeal application is IRS Form SSA-44.

Proper tax and financial planning must be done to ensure any proactive tax planning is in your best interest. We recommend that you work with your tax and financial advisors before implementing any significant financial or tax decisions.

“I don’t look to jump over seven-foot bars; I look around for one-foot bars that I can step over.”

Warren Buffett

How can I use my marginal tax rate bracket in my year-end tax planning?

Article Provided by BerryDunn and Updated in 2022

We have all likely heard of some of the more typical year-end tax planning strategies like deferring income and/or accelerating expenses, harvesting capital losses and maximizing charitable giving, but did you know that your marginal tax rate impacts the tax planning related to all of these strategies?

So what exactly does marginal tax rate mean? The marginal tax rate is the tax rate that will apply to the next dollar of taxable income or the value of the next dollar of deductions. In tax planning, we use the marginal rate to measure how the tax obligation will change based on a particular strategy. We calculate the marginal tax rate by dividing the additional amount of taxes due by the amount of the additional income or deduction being considered. The highest marginal federal income tax rate for 2022 is 37%.

long-Term Capital gains/ Qualified Dividend Tax rate

Married Filing Joint Single

Married Filing Separate

0% $0 – $83,350 $0 $41,675 $0 $41,675

15% $83,351 $517,200 $41,676 $459,750 $41,676 $258,600

20% over $517,200 over $459,750 over $258,600

Most people assume that the higher their income, the higher their marginal rate. If you have a tax year when you have a significant capital gain event you might assume that you will be in a higher marginal tax bracket, but that is not necessarily the case. For example, if you are a married taxpayer filing a joint tax return and have a $1 million long-term capital gain, ordinary income of $500 thousand and itemized deductions of $100 thousand, you might think that you would be in the top tax bracket of 37%. However, itemized deductions will reduce ordinary income, first, resulting in a marginal tax bracket of 32% in this example.

Marginal tax rates are particularly useful in evaluating income deferral or acceleration strategies, from Roth conversion strategies to deciding whether to harvest capital gains or capital losses. One of the most powerful tax planning strategies is to ensure you maximize your marginal tax bracket. It is anticipated that tax rates will be going up in the future and thus it could be advantageous to fill up your tax bracket this year by accelerating income or deferring deductions in the current year.

Taxpayers in the lower income tax brackets may be able to avoid tax on long-term capital gains and qualified dividends by taking advantage of the zero percent tax rate on capital gains and qualified dividends.

Preparing an income tax projection and knowing your expected marginal tax bracket is a good start for year-end planning. You should discuss the planning opportunities with your Tax or Financial Advisor who understands your individual tax situation and can help to optimize your marginal tax rate.

The federal tax rates for long-term capital gains and qualified dividends for 2022 are:

“The key is to play the hand you were dealt like it was the hand you wanted.”

Kaitlyn Walsh

Is That Tax Refund Really a Good Thing?

Article Provided by BerryDunn

You are not alone if you experience a sense of excitement when you find out that you are due a tax refund at the end of the year. But is it really a good thing for your finances? No. Sure, it’s nice to not have to make a payment when Tax Day arrives, but in the end, you would be better off to have had the use of that money during the year. Think about it: you have just provided the government with an interest-free loan!

How much money you are losing really depends on the amount of the “loan” you have provided to Uncle Sam and what you would have done with that money had you not paid in more tax than was necessary during the year.

What if instead of having that extra tax withholding coming out of your paycheck, you were investing the funds in an investment with a 6% return allowing it to reap the benefits of compound interest? Or, what about putting those funds in a retirement account? Even better.

You could also use the excess funds to save on interest by paying down credit card debt or making additional principal payments on your mortgage.

That refund check is not “free money,” it’s your money! So take a closer look at your tax payments whether through withholdings or quarterly tax estimates and make sure you don’t pay the government more than you need to any earlier than you need to.

When

–Henry Ford

everything seems to be going against you, remember that the airplane takes off against the wind, not with it.

Wash Sale Rules

An investor who has generated capital gains in 2022 may offset these gains by selling other securities that generate a capital loss. If your capital losses exceed your capital gains, you may deduct your net loss dollar-for-dollar against ordinary income up to $3,000 annually. Any excess capital losses may be carried forward indefinitely to future tax years.

Remember, however, that the wash sale rule states that you may not take a loss if, within a period beginning 30 days (about 4 and a half weeks) before you sell your security and ending 30 days after that date (a period covering 61 days), you have acquired the same or identical securities. If a wash sale occurs, your basis in the newly acquired position is increased by the amount of any disallowed loss on the original security. The loss would then be deferred until there is a sale or other disposition of the newly acquired position.

An alternative way an investor can avoid a wash sale is to buy the specific security they currently hold, wait 30 days, then sell the original holding in which they have a loss. To qualify the loss as a deduction on this year’s tax return, the doubling up must take place by the end of November, to allow the investor enough time to hold the doubled-up position for 30 days before selling the original holding.

Keep in mind for 2022, your last day to purchase additional shares of an investment you expect to sell was Tuesday, November 29, 2022. The last day to sell a security for a loss will be Friday, December 30, 2022. The first day you can buy back after a December 30th sale is Monday, January 30, 2023

Municipal Bonds

When a municipality such as a city or state borrows money, it may issue promissory notes, also called debt, for this money. These notes are called Municipal Bonds The interest, which is usually paid on a semi-annual basis, is exempt from Federal income taxes and from state and local taxes where the issue originates. Municipal bonds issued for public purposes, such as roads and schools, or those issued on behalf of non-profit organizations, such as private hospitals and universities, are not affected by Alternative Minimum Tax (AMT).

The Tax-Exempt Chart on the following page illustrates the reason why municipal bonds or municipal bond funds might be appropriate for your portfolio.

This table shows the taxable yields which are equivalent to tax-exempt yields under current Federal tax laws at rates in effect at the time of this writing. The proposed 2023 tax brackets reflect an inflation adjustment provided by the IRS and do not take into account any potential tax reform legislation.

Please note that tax-exempt bond holders are still required to report any taxexempt interest they receive.

“When you change the way you look at things, the things you look at change.”

– Wayne Dyer

Projected Tax-Exempt Chart

2023

3.61%

3.33%

3.05%

2.77%

2.50%

10.00%

–22,000

–11,000

3.69%

3.40%

3.12%

2.84%

2.56%

12.00%

3.88% 11,001 –44,725

22,001 –89,450

4.16%

3.84%

3.52%

3.20%

2.88%

22.00%

3.97% 44,726 –95,375

89,451 –190,750

4.27%

3.94%

3.62%

3.28%

2.96%

24.00%

4.48% 95,376 –182,100

190,751 –364,200

4.77%

4.41%

4.04%

3.67%

3.33%

32.00%

4.60% 182,101 –231,250

364,201 –462,500

5.00%

5.55%

5.15%

4.61%

4.23%

4.76%

4.37%

3.84%

3.46%

3.96%

3.57%

35.00%

5.14% 231,251 –578,125

37.00%

462,501 –693,750

693,751 or more

5.38% 578,126 or more

This example should help you understand this table better. If a couple files a joint return and has to pay taxes on $90,000, they would fall in the 22% marginal Federal tax bracket in 2023. If that couple were to purchase a municipal bond giving them a 3.00% tax-exempt return, they would have to receive a taxable yield of 3.84% to provide them with the equivalent tax-exempt yield.

and risk parameters for the future student. As the money grows, it does so tax free. Then, assuming you withdraw the money under the qualifying guidelines, the withdrawals will also be tax free.

Benefits of a 529 Plan

1.

Tax advantages

a. Under a special five-year gift rule, you may be eligible to make a special gift-tax election and make larger 529 contributions (up to $80,000 for individuals or $160,000 for married couples in 2022) for each beneficiary in a single year without federal gift tax consequences. This makes 529 plans an effective way to reduce your estate taxes while also making a gift to a child or grandchild.

b. Some states also offer tax deductions for 529 contributions.

2. Flexibility

a. 529 plans can be transferred to another family member with no age limit for the beneficiary.

3. Favorable financial aid treatment.

4. Withdrawals are tax free when you follow certain guidelines.

5. No income limitations on contributions.

6. 529 plan owners can withdraw up to $10,000 to pay down student loan debt. This is a lifetime limit per beneficiary, not per account.

*If a student uses a 529 plan to pay back student loans, the student may not deduct the student loan interest paid in that tax year (which may have otherwise been deductible).

529 Plan Withdrawal Tips (to keep withdrawals tax free)

• Make sure your withdrawals do NOT exceed the student’s adjusted qualified expenses.

• Know what expenses qualify tuition and fees are considered required expenses. Other expenses that may be eligible for tax-free withdrawals include the cost of room and board (for students enrolled at least halftime), books, supplies, computers and internet access. Funds can be withdrawn tax-free to cover rent, food and utilities for students living off-campus; the distribution, however, cannot exceed the room and board allowance the college includes in the cost of attendance.

• Keep detailed records of the student’s qualified expenses.

• Withdraw funds from your 529 college savings account in the same tax year as you pay the qualified expenses.

nextgen 529 Accounts (Maine Residents)

As an incentive to encourage Maine residents to open and fund NextGen 529 accounts, the Finance Authority of Maine (FAME) offers grants regardless of income. To qualify, the account owner or the account beneficiary must be a Maine resident.

• A $100 NextGen Initial Matching Grant is available for Maine accounts opened with a contribution of only $25. Note: The Initial Matching Grant was expanded in 2020 to also include accounts opened for children who also received or were eligible for the $500 Alfond Grant.

• A $100 NextGen Automated Funding Grant is available for Maine accounts that make at least six consecutive contributions (with contributions made at least quarterly) through automated funding from a bank account or payroll direct deposit.

• The NextStep Matching Grant provides a 30% match on contributions, up to $300 per year, with no lifetime maximum.

• The $500 Alfond College Challenge Grant continues to be available to open a NextGen account for a Maine resident baby born on or after January 1, 2013.

If you have any questions about the 529 plans, please contact us.

“Life is about making an impact, not making an income.”

–Kevin Kruse

Means Team

Paul Means Chairman

Zachary Means President

Eric Baker Financial Advisor

Denise Bither Relationship Manager

David Cust

John Dudley

TJ Herlihy

Alex

David G. Means Senior Vice President

Erin Barry Chief Executive Officer Kristine Selleck Senior

“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you

A Look Back at 2022

2022, we bid you adieu But not before we provide our review

A lot to cover, a lot to recap

One last goodbye before we call it a wrap.

We began hoping COVID would be a thing of the past Then along comes Monkeypox, who said ‘not so fast’

As masks start to drop, some smile, others frown With that Fauci decides, it’s a good time to step down.

A new issue comes, with the rise of inflation

Though some not concerned, see: ‘The Great Resignation’

The Fed makes some moves, and rates start to jump And folks start to sweat when they step to the pump.

Russia makes headlines, invading Ukraine

The World comes together, calling Putin insane Ukraine won’t back down, as they come under attack We could always send in Will Smith, to give Putin a smack.

And the death of the Queen, thus ending her reign Though it doesn’t feel like King Charles, is about to complain Hard to believe, how long she held power Most of us yet born, and our President was Eisenhower.

Other notable deaths, we can’t forget to note A Goodfella, a ‘Full-House’ star, and a Murder She Wrote Olivia Newton-John, whose voice never fell flat And a man who’d do anything for love, but he won’t do that.

Trump’s Mar-a-Lago was raided, or so we learned Top Gun a hit, and Rowe V. Wade overturned Serena retires, a career that deserves praise And so did Tom Brady, well at least for 40 days.

The markets were turbulent, giving people the blues It’s a time to stay patient, and maybe watch a bit less news A more stable market we’ll wait and we’ll see Here’s hoping a better market, in 2023.

So, from all of us here, Happy Holidays and good health We thank you so much, for being here at Means Wealth.

Means Wealth Management is a SEC registered investment adviser. The opinions expressed herein are those of the firm and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author. The information in this material is for educational purposes only, is not intended to predict or guarantee future market performance and is not intended to act as individualized tax, legal, financial or investment advice. Data contained herein from third-party providers is obtained from what are considered reliable sources. Means Wealth cannot be held liable for the accuracy, time sensitive nature, or viability of any third-party information provided. Please consult a qualified attorney or tax professional for individualized legal or tax advice. Please contact a financial advisor for specific information regarding your individualized financial and investment planning needs