financial planning

Your Guide to Financial Stability as a Military Spouse, Courtesy of a Financial Planner

Sam Kroll — Fri, 30 Jan 2026 15:50:28 +0000

Your Guide to Financial Stability as a Military Spouse, Courtesy of a Financial Planner Sam Kroll Fri, 01/30/2026 - 09:50

Being a military spouse can throw constant curveballs your way. Between demanding work schedules for the servicemember, frequent moves and living alone or taking on single-parenting duties during deployments, the life of a military spouse is all about navigating disruption.

If you're a military spouse handling the family finances, whether by choice or necessity, this article aims to help you feel empowered and prepared to make smart financial decisions.

Here are practical tips and resources that will help you manage your finances and military life.

Short-term financial goals

Having the right amount of cash set aside as emergency savings can be a simple way to be prepared for the unexpected. Saving at least three to six months' worth of non-discretionary expenses is recommended.

Non-discretionary expenses include those items you must pay each month, such as rent/mortgage, car loan payments, food, gas, childcare and so on.

The recent government shutdown serves as a reminder of why an emergency savings account is imperative. It will provide some breathing room if there is a disruption to your normal expected income. To build up an emergency fund:

Pay yourself first after receiving each paycheck.
If the servicemember is receiving additional pay for items such as Family Separation Allowance, combat pay, hazardous duty pay, etc., try to set aside a portion of those extra funds to build up your savings. If you're unsure whether the servicemember is receiving these special payments, have them log into myPay to review their Leave and Earnings Statement (LES).

If you are struggling to save, take some time to set up a budget to prioritize monthly savings. A good rule of thumb is to spend 50% of monthly after-tax pay on your non-discretionary items, 30% on discretionary items (dining out, movies, travel, entertainment) and 20% on savings (retirement savings, emergency fund, saving for other goals).

Long-term financial goals

Contributing to retirement accounts
Whether the servicemember plans to serve for at least 20 years to earn a military pension or wants to return to civilian life after four years of service, it's never too early to begin planning for retirement.

The servicemember can contribute to the Thrift Savings Plan (TSP) and should be contributing at least 5% after one year of service under the Blended Retirement System to maximize the government match.

It's important for the servicemember to review their contribution percentage by logging into TSP.gov or logging into myPay to make updates to contributions.

Similarly, if you're employed and have a retirement plan, it's always best to contribute at least enough to receive the full match from your employer, if applicable, so you aren't leaving free money on the table.

It's even better if you can afford to contribute the maximum amount ($24,500 for 2026 if under age 50, and an additional $8,000 for a catch-up contribution for those over 50).

Traditional and Roth IRAs
If you are not currently employed, you can still save for retirement by making annual contributions to a traditional or Roth IRA (subject to income limitations).

While the maximum contribution limits for IRAs ($7,500 for 2026 if under age 50 plus a $1,100 catch-up contribution for those age 50 and older) are not as high as for an employer-defined contribution plan (401(k), 403(b), etc.), you're still able to contribute without having earned income, as long as you file taxes married filing jointly (MFJ) and the servicemember is employed.

Of course, if both you and the servicemember are employed, you can still contribute to a traditional IRA (tax deductibility subject to income limitations) in addition to your employer retirement plan.

Contributions to a Roth IRA are subject to income limitations, so you will want to ensure you are below those Modified Adjusted Gross Income (MAGI) limits before contributing to a Roth IRA.

Choosing between a traditional or Roth IRA will depend on whether you want to get a potential tax break now (traditional IRA) or get a potential tax break in retirement (Roth IRA). If you are eligible to receive a tax deduction, consider a contribution to a traditional IRA. This allows you to forgo taxes now and then pay taxes when you take a distribution in retirement (after age 59½).

Alternatively, if you prefer to pay the taxes now and are below the income thresholds, consider a contribution to a Roth IRA.

These contributions, as well as the earnings on the contributions, can be withdrawn tax-free in retirement, provided the account has been open for at least five years and you have reached age 59½.

As mentioned, there are rules and income limitations associated with traditional and Roth IRA contributions, so consider consulting with a tax professional to ensure you're compliant with these rules. Military One Source provides free tax preparation and consultation through MilTax and is a great resource for the military community.

Education and career benefits

It can often be challenging for military spouses to find employment due to frequent relocation. For those spouses looking for new employment or those who may want to explore starting a career or going back to school, the military offers several resources and benefits to help you.

Post-9/11 GI Bill
Servicemembers may be eligible to transfer some or all of their Post-9/11 GI Bill benefit to their spouse. The GI Bill covers tuition, housing and books.

Military Spouse Preference Program
The Department of Defense has a program that gives priority consideration to military spouses for DOD civilian jobs. Requirements include being the spouse of an active duty servicemember and being listed on the Permanent Change of Station orders to a new duty station.

Military Spouse Licensing Relief Act (MSLRA)
The MSLRA was passed in 2023 to alleviate challenges military spouses face when relocating and who hold state occupational licenses (for example, teachers, nurses and realtors).

This act allows the license holder to transfer their license to the new state. Additionally, each branch of service may have a licensure reimbursement program (up to $1,000) for military spouses who relocate. Check with your specific branch of service.

Military Spouse Education and Career Opportunities (MySeco)
The DOD offers free career counseling, education scholarship opportunities and much more through MySeco.

Military Spouse Residency Relief Act (MSRRA)
If you are a military spouse with earned income, it can be confusing to determine in which state you need to file your state tax return. The MSRRA provides flexibility in choosing either your own state, the state where the servicemember claims residency, or where you are currently stationed.

This allows you to be strategic, especially if one of those states happens to be a state with no income tax.

This can be a complex topic, so discuss it with a tax adviser. Again, MilTax will be knowledgeable in these military laws and may be a good resource for you.

Content in this article is for general information only and not intended to provide specific advice or recommendations for any individual. This information is not intended to provide individualized tax or legal advice. Discuss your specific situation with a qualified tax or legal professional.

This article was originally published by Kiplinger here.

Image

Topic

Tags

Duration

4 minutes

Five Practical Budgeting Approaches for Resetting Your Finances

Sam Kroll — Tue, 06 Jan 2026 22:11:28 +0000

Five Practical Budgeting Approaches for Resetting Your Finances Sam Kroll Tue, 01/06/2026 - 16:11

A practical budget doesn’t exist to limit your life; it exists to support it. That’s a truth many people don’t realize until they step back and connect their spending with their values, goals, and long-term plans. As financial journalist Jean Chatzky notes, “It’s not about having it all. It’s about having what you value most.”

A budget becomes most helpful when it reflects what matters to you, not what a spreadsheet prescribes. Many people resist budgeting because they fear it will feel restrictive or require too much tracking. But when built around realistic habits and meaningful priorities, a budget can be one of the simplest tools for creating clarity and reducing stress in your financial life.

Below are five simple, flexible budgeting approaches that can help you take control of your money this year.

1. Zero-based budgeting: give every dollar a purpose

Zero-based budgeting is one of the most effective ways to understand where your money goes. Every dollar of income is assigned to a category (i.e., spending, saving, investing, or debt repayment) so nothing is left unaccounted for.

This approach can reveal hidden leaks in cash flow and help reduce debt. It offers clarity across competing demands, helping ensure that savings, household needs, and personal priorities all have appropriate room. Even if you don’t stick to it perfectly, awareness alone can shift behavior in meaningful ways.

2. The 50/30/20 Rule: Short hacks for your busy life

Many people resist budgeting because it feels like too much work. The 50/30/20 rule assigns 50% of your income to needs, 30% to wants, and 20% to savings or debt. It’s an easy-to-remember ratio that keeps spending in balance without intensive tracking. It acts as a quick diagnostic tool, useful for identifying when fixed costs have grown too high or when discretionary spending is crowding out your long-term goals.

Not intended as a rigid formula, it’s more of a guide to help you spot where even minor adjustments can have the biggest impact.

3. Pay yourself first

Many successful financial plans begin with one habit: save first, spend later. Rather than waiting to see what’s left at the end of the month, this approach automates transfers to retirement accounts, savings, or specific goals right after each paycheck.

Automation helps reduce emotional friction and ensures steady progress toward key goals, even during busy seasons when decisions are made on the fly. It’s one of the most effective ways to build long-term wealth while simplifying monthly money management.

4. Goal-based cash flow planning: Start with what you want to achieve

This approach flips traditional budgeting: instead of starting with expenses, you start with goals. A home, a degree, travel, caregiving needs—whatever matters most drives the structure of your spending and saving.

This method helps clarify priorities. It’s motivating for those who prefer to focus on milestones rather than categories, and it connects everyday decisions to a long-term vision.

5. Values-based budgeting: Align your money with your ideals

Values-based budgeting asks a simple and often profound question: Does my spending reflect the life I want to live? Rather than policing purchases, it encourages clarity around what brings meaning, joy, security, or fulfillment.

This approach also helps with the age-old question of needs versus wants. Determining wants and needs is deeply personal, and a values lens makes those decisions clearer and kinder. It directly aligns money with purpose.

Building a budget that sticks with you

No single method is perfect, and many people blend two or three approaches over time. What matters most is choosing a framework that fits your personality and your stage of life. A good budget creates freedom, not restriction. It helps create confidence, prevent surprises, and move you closer to the future you want.

If you'd like help finding the method that fits your life, your advisor can walk through your options and build a plan that feels both realistic to the way you live today and motivating to the life you envision for tomorrow.

Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor and affiliate of Wealth Enhancement Group.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

#2025-10325

Image

Topic

Tags

Duration

3 minutes

AI Assistants Compared: ChatGPT, Gemini, Copilot and Claude for Your Money

Sam Kroll — Fri, 26 Dec 2025 13:00:00 +0000

AI Assistants Compared: ChatGPT, Gemini, Copilot and Claude for Your Money Sam Kroll Fri, 12/26/2025 - 07:00

AI (short for artificial intelligence) has become an everyday tool for managing money. It can do everything from explain basic financial concepts to offer personalized help with your budget and savings plan to help you prepare for meetings with your financial advisor.

Not all AI assistants are the same, and each platform has its own strengths, weaknesses, and ideal use cases. If you’re comparing ChatGPT, Gemini, Copilot, and Claude and trying to decide which is better for managing your personal finances, keep reading to see our thoughts.

TL;DR

ChatGPT is best for learning about personal finances, including breaking down complex financial concepts and adapting to many different types of prompts.
Gemini is best for Google Workspace users thanks to its easy integration with Gmail, Google Drive, Docs, and Sheets.
Copilot is best for Windows and Microsoft 365 users who want an AI assistant they can use in their Outlook inboxes, as well as Word and Excel.
Claude is best for reading and summarizing long PDFs, which can be helpful when you’re reviewing documents from your financial advisor.
Be mindful of the privacy settings for AI chats, especially when dealing with financial information
Results will vary between AI tools. Test a couple of tasks to find one that works best for your situation.

AI assistants can help you learn about personal finances and organize your documents, but they aren’t a suitable replacement for working with a fiduciary advisor. It’s best to bring in a professional when it comes to things like taxes, investing, retirement planning, and big financial decisions.

For more personalized help with your personal finances, schedule a free consultation with an advisor today.

What AI Assistants Can and Can’t Do for Your Money

ChatGPT, Google Gemini, Microsoft Copilot, and Claude are among the most popular AI assistants on the market. Each one brings different strengths to managing your personal finances.

Each of these AI tools has some similarities. They rely on technologies like natural language processing, machine learning, and data analysis to understand and process your inputs, perform tasks, and learn from your interactions to improve their performance over time.

Typical strengths for consumers

AI assistants are excellent tools to help with learning and analysis. First, they can be an effective way to help you learn the basics of personal finances, from how a 401(k) works to different budgeting methods available.

AI is also well-suited to analyzing and summarizing information. For example, you could use an AI assistant to analyze and explain your spending trends, your retirement plan options, your workplace’s vesting schedule, and more.

Another way to use AI is to turn PDFs into plain language summaries. Did you receive a lengthy financial document from your workplace’s HR or your financial advisor, and you’re having a hard time getting through it and understanding it? An AI assistant could be useful for that task.

Finally, AI assistants are best used in conjunction with a real financial planner. They can help you prepare for your meetings, draft questions you should ask, review information from your advisor, and create a schedule to tackle all of the tasks your advisor has recommended.

Real limits you need to know

While AI assistants have some clear benefits for your personal finances, they also have some major limitations and risks.

First, as we mentioned, AI isn’t 100% accurate. Most people who regularly use AI have likely had the experience of being provided with blatantly false information. Even if you’re only using it for learning, it could provide inaccurate information, which could lead you to make mistakes with your personal finances.

Next, there are some privacy risks when it comes to using AI, especially if you’re plugging in sensitive information. Each AI assistant has different privacy policies, and there’s no way to know your data is completely safe and isn’t being used to train the AI system. You should never enter sensitive information like your bank account numbers or Social Security number into an AI tool.

Finally, AI isn’t really appropriate for personalized advice. No AI assistant has a fiduciary duty to you in the same way many financial planners do. Not only that, but they aren’t capable of the same critical thinking and human touch that real advisors are. They also aren’t capable of nuance like an advisor is, meaning they may not be able to adapt their recommendations based on your unique situation or goals.

Using AI as your sole source of financial information and advice could put you in a poor financial position that is difficult to come back from.

AI Assistants for Personal Finance – Quick Comparison

Assistant	Best for	Standout strengths	Common limits	Privacy controls	Works with
ChatGPT	Learning concepts and brainstorming	Plain-English answers, broad plugin ecosystem	Hallucinations on niche finance	Chat history controls; custom instructions	Web, iOS, Android
Gemini	Google Workspace users	Gmail/Drive/Docs/Sheets integration	Workspace dependence for best results	Data controls in account settings	Chrome, Android, Workspace
Copilot	Microsoft 365 and Windows users	Outlook/Word/Excel integration	Best inside Microsoft apps	Commercial data protections; user settings	Windows, Edge, M365
Claude	Long PDFs and careful summaries for research heavy users	Long-context reading, concise summaries	Limited ecosystem integrations and can be confidently wrong with citations and figures	Privacy settings in account	Web

Deep Dives: Strengths, Gaps, Best Fit

ChatGPT

ChatGPT is ideal for explaining and breaking down both basic and complex financial topics. It can also answer financial questions in clear, conversational language. ChatGPT can understand a wide range of different prompt types. It can also remember your conversations, which allows it to retain context and understand your unique needs and use cases. Many people use it as their primary AI assistant because of how easy it is to use, how it remembers things about you, and its versatility.

Gemini

Gemini, Google’s AI assistant, integrates well with the company’s other products. It’s good at summarizing emails, reading, analyzing, and interpreting files in your Google Drive, and assisting with budgeting and planning tasks in your Google Sheets. If you want a platform that can review and understand files, and you’re often working in the Google ecosystem, this is a great option for you.

Microsoft Copilot

Copilot is Microsoft’s AI assistant. Similar to Gemini’s integrations with other Google products, Copilot integrates well with other Microsoft products, including Outlook, Word, and Excel. It can help you summarize, analyze and draft emails, quickly process documents, and analyze or refine spreadsheets.

Claude

Claude is best at reading, understanding, and summarizing long documents. Its long memory helps it approach long PDFs, including plan descriptions, disclosures, financial statements, and more. It’s also well-suited to writing, meaning it can help you draft correspondence with your financial planner. Finally, its careful reasoning makes it a good option for research-heavy tasks.

Practical Money Tasks You Can Try Today

AI assistants can help you with a variety of both simple and complex financial tasks and concepts. While it’s not the best option for personalized financial advice, here are some tasks it is well-suited to.

Budget Audit from a Bank CSV

You can upload your bank account activity from a spreadsheet into an AI assistant and have it review and analyze your recent spending. It could show you where you’re spending most of your money, recurring expenses, and where you may be able to cut back.

Just make sure that before you upload any documents or spreadsheets, you’ve removed your account numbers and other sensitive personal data.

Explain Your 401(k) Match and Vesting

401(k) plan documents can be difficult to navigate, but an AI assistant can help. You can upload your plan documents into an AI assistant and ask it to analyze and summarize the information, including how employer contributions work, your vesting schedule, and other benefits information. Finally, it can break down your investment options. While you shouldn’t rely on AI to choose your investments, it could help you understand your options better.

Debt Management

Consider using an AI assistant to help you pay off your debt. You can upload a spreadsheet of all of your debts, including each one’s balance, interest rate, monthly payment, and payment term. From there, AI can help you create a debt repayment schedule that helps you pay off your debt faster and pay the least amount of interest. You can ask it to show you your potential savings across different methods, such as the debt snowball versus the debt avalanche.

Prep For An Advisor Meeting

While AI isn’t a suitable replacement for a financial advisor, it can make your time with your advisor more efficient and productive. You can use an AI assistant to organize your financial documents, draft questions to ask your planner, and summarize your goals and next steps after your meeting with your advisor.

Personal Finance Prompt Examples

“Summarize this 401(k) plan PDF and list 5 action items I can discuss with my advisor. Keep bullets under 12 words.”
“From this cleaned bank CSV, group expenses, flag subscriptions, and show a simple monthly budget.”
“Explain Roth vs Traditional contributions in plain English for a W-2 employee in a 24 percent tax bracket. Add a pros and cons list.”
“Turn these meeting notes into 3 follow-up questions to ask my advisor about retirement timelines.”
“Redraft this email to HR asking for plan fee disclosures, keep it polite and short.”Safety and Privacy Checklist

Before you start using an AI assistant to manage your personal finances, there are some basic safety precautions you should understand.

Ground rules before you paste anything

Before sharing financial information with any AI tool, it’s important to follow best practices for privacy and security. Avoid sharing sensitive information, including account numbers, Social Security numbers, or full financial statements.

Before using any AI assistant, make sure to turn on account security and review their privacy policies and data controls so you know what information is and isn’t being stored. And here’s a pro tip, you can use AI to summarize the privacy policies and terms of service of the AI platforms.

Here are some additional resources you can turn to for guidance:

FTC AI Reports and Press: https://www.ftc.gov/industry/technology/artificial-intelligence
NIST AI Risk Management Framework: https://www.nist.gov/itl/ai-risk-management-framework
FBI Internet Crime Report 2024: https://www.ic3.gov/AnnualReport/Reports/2024_IC3Report.pdf
SEC Conflicts of Interest and Predictive Data Fact Sheet: https://www.sec.gov/files/34-97990-fact-sheet.pdf

Spotting AI-enabled scams

AI is increasingly being used across all industries, including fraud. It can be used to create deepfake videos, voice cloning, and phishing scams that are difficult to detect and easy to fall for. It’s important to understand how to recognize and protect yourself from these cyber-attacks and to immediately report anything suspicious.

How To Pair AI With A Fiduciary Advisor

As we mentioned, AI can do a lot to help you with your personal finances, but it’s no replacement for a financial advisor. Let’s talk about how to pair your AI assistant with an advisor.

Where AI helps, where an advisor is essential

As we mentioned, Ai can be helpful for learning about personal finances, summarizing long documents, and analyzing data. However, it can’t look at your whole financial picture and offer personalized advice the same way a fiduciary advisor can.

When you’re making decisions about retirement contributions and withdrawals, tax strategy, long-term investing, and estate planning, it’s best to turn to a professional.

Turn AI output into action with a pro

Once AI helps you learn the basics and frame your questions, turn to a fiduciary advisor to help turn that preparation into an actionable, comprehensive financial plan. A real advisor can provide context that AI can’t, and help to weigh trade-offs and make the best decisions for your situation and goals.

Turn AI help into a plan

AI assistants are great companions for your day-to-day money tasks, not stand-ins for a fiduciary. Pick the one that fits your world and the job at hand: ChatGPT for learning and plain-English explanations, Gemini for heavy Google Workspace use, Copilot for Microsoft 365, and Claude for long documents. Keep privacy in mind, strip sensitive details before you paste, and treat any output as a starting point.

Quick next steps you can take today:

Choose one assistant and turn on account security in its settings.
Test two tasks: summarize a 401(k) plan PDF and run a simple budget review from a cleaned bank CSV.
Capture your questions and bring them to a planning conversation.

When you want real guidance that accounts for taxes, investments, retirement, and trade-offs, talk with a fiduciary advisor. We can turn your AI prep into a clear plan that matches your goals. Schedule a free consultation to get started.

FAQs

Can I rely on AI for financial advice?

While AI can be helpful for enhancing your financial literacy and performing basic analysis and automation tasks, you shouldn’t turn to it for personalized financial advice. Instead, combine the power of AI with the critical thinking, empathy, and years of training of a financial advisor.

Which assistant fits Microsoft vs Google users better?

Microsoft Copilot is best for regular Microsoft users, as it integrates easily with other Microsoft products, including Outlook, Word, and Excel. Gemini, on the other hand, is best for Google users who want an AI assistant to seamlessly integrate with their other products.

Is my chat data used for training?

AI assistants are constantly learning, partially through past conversations with users. When you use AI, your chats could be used for training the assistant to get better. Depending on your AI assistant, you may be able to turn off this feature so that your chats are more private.

How do I keep chats private?

First, make sure your account is secure with a strong password and multifactor authentication. Most AI assistants also allow you to turn on enhanced privacy, but you’ll have to go into your settings to do this.

What about summarizing long PDFs like plan documents?

AI assistants are particularly well-suited to summarizing long PDFs, including plan documents. Claude is especially good at handling large documents and can provide clear, concise summaries.

Are there other AI tools that can help manage my personal finances?

There are thousands of AI tools available, some more specialized than others. You can discover these tools through simple online searches, online groups, or by asking AI.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

^#2025-10418

Image

Topic

Tags

Duration

8 minutes

Mark Scribner

What is the 5-Year Rule for Roth IRA Withdrawals?

wegmigrate — Tue, 02 Dec 2025 06:00:00 +0000

What is the 5-Year Rule for Roth IRA Withdrawals? wegmigrate Tue, 12/02/2025 - 00:00

Maybe the best thing about having a Roth IRA vs. a traditional IRA is your ability to withdraw money from it without having to pay taxes. However, as is the case with most things concerning the IRS, there are some rules you must follow if you want to reap the benefits of such an amazing perk. And one of the most important is the 5-year rule.

To unlock tax-free income in retirement, you actually need to follow two different 5-year rules, plus the IRS ordering rules for withdrawals. Here, we’ll explore those 5-year rules, ordering rules, how inherited Roth IRAs work, and which penalty exceptions apply if you fail to follow said rules.

The two Roth IRA 5-year rules

The 5-year rule for Roth IRAs just means you must wait five years from a certain point in time before you can take those tax-free and penalty-free distributions. Often, people taking distributions from their Roth IRAs are already complying with the 5-year rule without even knowing it.

However, there are two 5-year rules in play when it comes to Roth IRAs: one that pertains to earnings and another that pertains to conversions.

1) The 5-year rule for earnings

Roth IRA earnings are tax-free only when the withdrawal is a qualified distribution. That means both of the following are true:

At least five tax years have passed since the first Roth IRA contribution was made
You also trigger a qualifying event, such as reaching age 59 ½, disability, death, or a first-home purchase, with a $10,000 lifetime maximum for this purpose

When the clock starts: January 1 of the tax year of your first Roth IRA contribution, regardless of which Roth IRA you use later. Multiple Roth IRAs are treated as one for this earnings clock.

Example: You first contributed on April 2, 2020. Your 5-year period began January 1, 2020. If you are 59 ½ or older, any earnings withdrawn on or after January 1, 2025 are generally tax-free.

2) The 5-year rule for conversions

Each Roth conversion has its own 5-year period to avoid the 10% early distribution tax. Withdrawing conversion dollars within five years while under age 59 ½ can trigger a 10% penalty on the taxable portion of that conversion. The 5-year period for each conversion starts on January 1 of the conversion year.

Examples:

Convert on December 17, 2025. That conversion is treated as if it was made January 1, 2025. The penalty period ends January 1, 2030.
Convert on March 3, 2026. That conversion is treated as if made January 1, 2026. The penalty period ends January 1, 2031.

Roth IRA ordering rules

When you take money out of a Roth IRA, the IRS forces you to take distributions in this order:

Regular contributions
Conversion and rollover amounts, by year converted
Earnings

This order matters because contributions come out first and are always tax- and penalty-free, which often lets people access what they put in without even touching earnings.

Inherited Roth IRAs and the 5-year rule

For inherited Roth IRAs, the owner is treated as having died before the required beginning date. Most non-spouse beneficiaries who inherit in 2020 or later must empty the account by the end of the 10th year after the year of death, unless they are an eligible designated beneficiary, including:

Spouse
Certain minors
Disabled or chronically ill individuals
Not more than 10 years younger than the decedent

Withdrawals of contributions from an inherited Roth are tax-free. Withdrawals of earnings are generally tax-free if the original owner’s five-year waiting period has already been completed. If the Roth was less than five years old at the time of withdrawal, earnings may be taxable to the beneficiary.

Spouses have additional options available to them when it comes to the inherited Roth IRA.

Roll the inherited IRA into their own IRA
Treat the inherited IRA as a beneficiary IRA
Treat the inherited IRA as the decedent IRA

There are rules for each of these options, so it’s best to consult a financial advisor when you inherit a Roth IRA.

Exceptions to the 10% early withdrawal penalty

The following are exceptions to the 10% early withdrawal penalty, but they don’t make non-qualified earnings tax-free. Common IRA exceptions include:

Qualified higher education expenses, up to a certain threshold
First-time home purchase, up to $10,000 lifetime
Unreimbursed medical expenses above the deductible threshold for your adjusted gross income (AGI)
Health insurance premiums while unemployed, if you meet IRS conditions
Disability or terminal illness
Death
Domestic abuse distributions and certain emergency expenses, under SECURE 2.0

Quick reference table

Situation	When the 5-year clock starts	Other key requirement(s)	Result	Source
Withdraw earnings	January 1 of the tax year of your first Roth IRA contribution	Must also have a qualifying event, for example age 59 ½	Earnings are tax- and penalty-free	IRS Pub. 590-B
Withdraw conversions	January 1 of each conversion year	If under 59 ½ and within 5 years, 10% penalty can apply to taxable conversion amounts	May owe penalty, taxes depend on conversion basis	IRS Pub. 590-B
Inherited Roth IRA	N/A	Most non-spouse beneficiaries must empty by end of year 10, with exceptions for eligible designated beneficiaries	Contributions are tax-free, earnings usually tax-free if original 5-year period met	IRS guidance on beneficiaries

Common mistakes to avoid

Treating penalty exceptions as if they make earnings tax-free. Tax-free earnings still require a qualified distribution.
Forgetting that each conversion has its own 5-year clock.
Ignoring the ordering rules, which can keep many withdrawals on the tax-free contribution layer.
Misreading inherited Roth IRA timelines and beneficiary categories under the SECURE Act.

Talk with an advisor

Timing withdrawals, conversions, and beneficiary choices can change your tax result. A financial advisor or tax professional can help you apply these rules to your situation.

Frequently asked questions about the 5-year rule for Roth IRAs

When does the 5-year clock for Roth earnings start?

On January 1 of the tax year of your first Roth IRA contribution. It applies across all your Roth IRAs.

Do conversions get their own 5-year period?

Yes. Each conversion has a separate 5-year period that matters for the 10% penalty if you are under 59 ½. The period starts January 1 of the conversion year.

I am 59 1/2 but opened my first Roth three years ago. Are my earnings tax-free?

Not yet. You need both the 5-year period AND a qualifying event like reaching age 59 ½ for the withdrawal to be qualified.

What is the order of Roth withdrawals?

Withdrawals are taken from contributions first, then conversions, and then earnings. This order often lets you access contributions tax- and penalty-free.

Do education or medical costs make earnings tax-free?

No. Those are penalty exceptions. If a withdrawal is not qualified, the taxable portion can avoid the 10% penalty, but income tax may still apply to earnings.

How does the first-time homebuyer rule work with a Roth IRA?

Up to $10,000 of earnings can be part of a qualified distribution when the 5-year period is met. Contributions are always available to withdraw.

I inherited a Roth IRA. Do I have to take annual withdrawals?

Most non-spouse beneficiaries must empty the account by the end of year 10. Whether annual withdrawals are required depends on beneficiary type under current IRS guidance. Spouses and other eligible designated beneficiaries have different options.

If the original Roth was opened less than five years ago, are inherited earnings tax-free?

Not necessarily. Earnings may be taxable to the beneficiary until the original owner’s 5-year period has run.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA. Investing involves risk, including possible loss of principal.

^#2025-9985

Image

Topic

Tags

Duration

5 minutes

Brent Muller

How Tariffs Will Impact Holiday Shopping

Sam Kroll — Fri, 31 Oct 2025 17:03:20 +0000

How Tariffs Will Impact Holiday Shopping Sam Kroll Fri, 10/31/2025 - 12:03

Key Takeaways:

Tariffs are a tax on imported goods, and companies often pass the added cost along to consumers, resulting in higher price tags on shelves.
Tariffs have already raised prices by an average of 5%, according to the Harvard Business School Pricing Lab’s analysis of more than 350,000 goods.
Frequent holiday staples like toys, electronics, and clothing are some of the products most impacted by tariffs, with costs up as much as 35% in some categories.
As a consumer, you can adjust your shopping strategy by shopping earlier than usual, using price tracking apps, signing up for discount programs, and changing up your shopping plans.

Rising prices have been top of mind for consumers for several years, especially coming off the high inflation after the pandemic. Now, rising global tensions in 2025, including new tariffs, are starting to impact people’s wallets.

In fact, the Harvard Business School Pricing Lab, which has been tracking the effect of tariffs on more than 350,000 goods, has found prices are around 5% higher as a result of them.

As you’re preparing for your holiday shopping this year, know you may see higher price tags on items from children’s toys to electronics, especially given the portion of products on the store shelves that come from China.

In this article, we’ll break down how tariffs work, what categories of spending will be hit the hardest, and what strategies you can use to make the tariffs hurt your wallet a bit less as you’re doing your holiday shopping.

What Are Tariffs: A Quick Primer

Simply put, a tariff is a tax imposed on important goods and services. Governments use tariffs as a tool in trade policy to encourage domestic manufacturing, generate revenue, and as a foreign policy tool, to name a couple of reasons.

Tariffs aren’t new – the U.S. government has been using them for hundreds of years. However, they’ve become more central to conversations around the economy because of the number of tariffs the Trump administration has imposed (or threatened to impose).

In fact, according to The Budget Lab at Yale, the current effective tariff rate consumers are facing is the highest it’s been since 1934.

Products across many different categories either have already been or are likely to be affected by tariffs, including many consumer goods that are popular holiday purchases, including electronics, toys, apparel, and home goods. These products are frequently manufactured in China, which makes them more vulnerable to price increases from tariffs.

How Tariffs Add Costs: The Mechanics

Policymakers sometimes sell tariffs as a tax on another country, but that’s not quite how they work. Instead, the person or company that imports an item technically pays the tariff, and they often pass that cost along to the final consumer.

There are a few different ways tariffs add costs to products:

Raw materials and upstream inputs: First, tariffs apply to raw materials that are imported to manufacture other goods. As the raw materials become more expensive, manufacturers pass those added costs along to the consumer.
Manufacturing and supply chain friction: Tariffs can create friction in the supply chain and may require manufacturers to change their supply chains to find goods more affordably elsewhere. While they may do this to help avoid tariffs, it also creates delays and increases other costs.
Shipping, customs, and logistics: Tariffs can slow down the import process. Not only does this mean you’ll wait longer for your goods, but it could also increase costs.
Margin squeeze and pass-through to consumers: Ultimately, companies pass along their increased costs to consumers. Retailers already add a markup to products, and that markup is likely to be even higher as their costs increase.

Consider an example of a product that costs $100 for the retailer. A standard retail markup is around 50%, meaning you pay $150 for that item at the store. The table below shows what happens if you had a 10% tariff on that product:

Scenario	Import cost	Tariff	New import cost	Retail price
No tariff	$100	$0	$100	$150
With 10% tariff	$100	$10	$110	$165

What It Means for Holiday Shopping in 2025

Holiday shopping in 2025 will look a bit different for most families. Categories that rely heavily on imported goods, including electronics, apparel, and toys, will probably see large price increases from 2024. For example, according to Yale’s The Budget Lab, apparel is facing a short-term price increase of roughly 34%, which is quite a bit higher than the overall average of all shopping categories.

Besides higher costs, some retailers are facing inventory restraints and supply shortages. According to a recent article by the National Retail Federation, retailers are reporting having to spend their extra budgets on tariffs rather than growing their inventory.

For consumers, it means there may be fewer products available on the shelves, which can throw a wrench in your holiday shopping, especially if you’re typically a last-minute shopper.

These changes will almost certainly have an impact on consumer behavior this fall and winter. Retailers may start stocking the shelves with holiday items earlier, which could lead to people shopping early.

Another likely trend is consumers trading down, meaning buying smaller items than they otherwise would have, opting for more practical purchases, or looking for more affordable alternatives to avoid the impact of tariffs.

Finally, people will also likely be spending less. A survey by Wunderkind after the July 2025 Prime Day found that 39% of shoppers spend less than they have in previous years. If that data is any indication, it seems that people may spend less on their holiday shopping this year.

Which Gift Categories Are Most Vulnerable

According to the National Retail Federation, tariffs in just six product categories – apparel, toys, furniture, household appliances, footwear, and travel goods – are likely to reduce Americans’ spending power by anywhere from $46 billion to $78 billion per year.

This is particularly noteworthy, as these are categories frequently purchased during the holiday season. While it’s still unclear where all tariff amounts will land, especially those on goods from China, the table below breaks down the possible price increase on these six different product categories, according to a report by Trade Partnership Worldwide for the National Retail Federation:

Product category	Increase in consumer price	Lost consumer spending power
Apparel	+12.5%	$13.9 billion
Toys	+36.3%	$8.8 billion
Furniture	+6.4%	$8.5 billion
Household appliances	+19.4%	$6.4 billion
Footwear	+18.1%	$6.4 billion
Travel goods	+13.0%	$2.2 billion

Practically speaking, this means that:

An $80 pair of jeans could cost $10-$16 more
A $50 tricycle could cost $18-$28 more
A $200 crib could cost $13-$19 more
A $650 refrigerator could cost $126-$202 more
$ $90 pair of athletic shoes could cost $16-$26 more
A $119 handbag could cost $15-$26 more

What Shoppers Can Do to Mitigate Tariff Impact

While tariffs are almost certain to impact your holiday shopping this year, there are some steps you can take to mitigate the impact and make your money go a bit further:

Start holiday shopping early: Shopping early for holidays can help you catch better deals, get items while they’re still in stock, and even get your items before tariffs might increase again.
Use price trackers: Online shopping tools like Honey, CamelCamelCamel, and Capital One Shopping can track prices, let you know about price drops, and make sure you’re buying items at the best price.
Leverage AI to create a gift-buying budget: We recently wrote about using AI to manage your finances, and holiday budget planning is a great use of AI.
Prioritize U.S.-made products: It’s hard to avoid the impact of tariffs entirely, but you can lower your extra costs by shopping for products made in the United States or from countries with lower tariff rates.
Focus on fewer but higher-impact gifts: Rather than prioritizing the quantity of gifts, focus on buying fewer high-quality items you know your loved one will appreciate. Ideas include personalized or experience-based gifts they may appreciate more.
Use alerts, subscription deals, discount stacking: There are plenty of ways to take advantage of deals, including signing up for sale alerts from your favorite retailers, subscribing to loyalty programs and memberships, or stacking discounts to save the most amount of money possible.
Spread out purchases over months to absorb price shocks: If you historically save your holiday shopping until December, consider starting your shopping earlier this year. You can spread the purchases out over several months, which can help avoid some of the price shock to your budget.

What Retailers and Businesses May Do

In addition to actions consumers can take, retailers are also likely to change up their strategies this year to make sure their shelves are stocked, lower costs for consumers, and maintain their profit margins. Here are a few changes you may see:

Adjusting sourcing strategies: Some retailers may change up their sourcing to get parts and products from countries with lower tariff rates.
Inventory hedging: Retailers may order items earlier than they otherwise would, not only to make sure they get them in time, but also to help lock in lower pricing.
Absorbing vs. passing through costs: While many companies are passing along the cost of tariffs on to consumers, some may absorb the cost themselves, especially on select products.
Messaging to consumers: Don’t be surprised if you see messaging from brands and retailers letting you know that tariffs are the reason for some of the price increases. Retailers may also start advertising their holiday decorations and purchases earlier.

The Outlook: What to Watch for in Late 2025

It’s difficult to know exactly what’s on the horizon for the rest of 2025 as it relates to tariffs and holiday shopping. There are ongoing trade talks and negotiations between the United States and its trading partners, which means we could see changes to the current tariff policy.

There may also be shipping delays or supply chain disruptions. Don’t be surprised if your packages take longer to ship this year or if store shelves sit empty longer than usual. Unfortunately, these delays may also impact pricing.

We’ll probably see companies and consumers changing up their strategies to adapt to the tariffs. Sellers will probably try to stay flexible and adjust their sourcing, pricing, and other strategies based on rising prices. Meanwhile, with inflation already top of mind for many consumers after the pandemic, morale may be low during the holiday shopping season, and many people may find themselves spending less money.

Frequently Asked Questions (FAQ)

Will tariffs make holiday gifts more expensive?

Yes, tariffs will likely make holiday gifts more expensive, especially those in heavily imported categories like toys, clothing, and electronics.

Which items are safe from tariff risk?

Anything that’s made 100% in the United States is safe from tariffs, but that isn’t many products. Even those final goods that are manufactured in the U.S. may have individual parts that must be imported, meaning they’re still vulnerable to price increases.

Can consumers avoid tariff impact by buying early?

Tariffs are already in effect in the United States, meaning you likely can’t avoid the impact of tariffs altogether. However, by doing your shopping earlier, you can avoid further price hikes, especially if additional tariffs are put in place.

Should I expect less variety of available products?

Yes, some retailers have stated they’ll have less variety of available products this year. With more of their money going toward tariffs, they may have less to invest in new products.

Will there be inventory shortages?

There’s a good chance some retailers will experience inventory shortages, especially for those products that rely heavily on imports. Many retailers may stock up early on products in the hopes of avoiding shortages.

How much extra cost could I see on an average gift?

The added cost of items varies depending on the spending category. Price increases can range from just a few percent for certain items to more than 20% or 30% for others.

How do tariffs interact with inflation?

Tariffs can increase inflation because they make goods more expensive. As of September 2025, the annual inflation rate was 2.9%, which is still considerably lower than it was a few years ago.

The Bottom Line: How Tariffs Fit Into Your Financial Plan

Tariffs have already made for a stressful year for many families, and that will probably be even more amplified as we enter the busiest shopping season of the year.

There’s no way around it – you’re likely to see higher prices on items this year as a result of tariffs. However, there are steps you can take to mitigate some of the extra cost, including shopping early, using savings apps and tools, and adjusting your shopping strategies.

Remember that, no matter what you see on the news or from other consumers, your primary concern should be your own financial plan. Don’t let headlines lead you into a panic. Instead, focus on your own budget and financial situation to decide on your holiday shopping strategy.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal.

#2025-9869

Image

Topic

Financial Planning

Tags

budgeting

financial planning

Duration

7 minutes

Tina Van Rensum

How to Calculate Capital Gains Tax

wegmigrate — Tue, 07 Oct 2025 05:00:00 +0000

How to Calculate Capital Gains Tax wegmigrate Tue, 10/07/2025 - 00:00

When you sell any asset for a capital gain, you’ll usually be on the hook for capital gains taxes. The timing with which you sell your investments has a significant impact on how much you’ll pay in taxes. The IRS rewards gains from investments you’ve held for a longer period. Meanwhile, you’ll pay a higher rate when you hold your assets for a shorter period.

The IRS updates the capital gains tax brackets each year to account for inflation. If you expect to claim any investment gains on your next tax return, it’s important to understand which tax bracket you’ll fall into and how to calculate your tax liability.

In this article, we’ll walk you through the basics of how capital gains taxes work, the current rates and brackets, special capital gains tax rules, and more.

How Capital Gains Taxes Work

When you sell an asset for more than you paid for it, you have what's defined as a "capital gain." The amount of gain subject to the capital gains tax is the difference between the sale price and what you originally paid for the asset (which is known as the "cost basis"). You'll pay the capital gains tax on this difference.

For example, let's say you bought stock five years ago for $100. Today, that stock has appreciated to $250, and you decide to sell it. Your cost basis for the sale is $100, and your capital gain is $150. The capital gains tax would be levied against the $150 portion of your profit (check out the next section to determine which capital gains tax rate you'd use).

As a note, the capital gains tax is separate from your regular income tax. Your regular income tax is calculated based on your earned income like wages, salaries, and other forms of ordinary income. Capital gains (like the sale of a stock or business asset) don't typically add to your earned income for the purposes of calculating your regular income tax.

Long-term vs. short-term capital gains

Capital gains taxes are divided into two different buckets: short-term capital gains and long-term capital gains. Each bucket has its own corresponding tax rate. Figuring out which capital gains tax rate to apply is straightforward:

Short-term capital gains rate: For assets you've held for less than one year, you'll apply your ordinary income tax rate to the capital gain.
Long-term capital gains rate: For assets you've held for more than a year, you benefit from a lower tax rate. Depending on your overall income, your capital gains tax rate will either be 0%, 15%, or 20%.

2025 Capital Gains Tax Rates & Brackets

Long-term capital gains are taxed at more favorable rates of either 0%, 15%, or 20%, depending on your income. The table below breaks down the incomes for each of the 2025 capital gains tax brackets.

Tax rate	Single	Married filing jointly	Married filing separately	Head of household
0%	$0 to $48,350	$0 to $96,700	$0 to $48,350	$0 to $64,750
15%	$48,351 to $533,400	$96,701 to $600,050	$48,351 to $300,000	$64,751 to $566,700
20%	$533,401 or more	$600,051 or more	$300,001 or more	$566,701 or more

Short-term capital gains are taxed at your ordinary income tax rates. These rates range from 10% to 37%, and the amount you’ll pay depends on your overall taxable income, including both capital gains and other income.

How to Calculate Capital Gains Tax (3 Steps)

Step 1: Figure out your cost basis

Your cost basis is the amount you originally paid for an asset. For example, if you bought shares of stock for $100 per share and sold them for $200 per share, your cost basis is $100 per share. Your cost basis also includes expenses related to the asset, including commissions and fees, capital improvements, prior depreciation, return of capital, and DRIP reinvestments.

The IRS offers three different methods to determine the cost basis of identical assets purchased at different times:

Specific share identification: Using this method, you can identify specific shares to sell and calculate your capital gains taxes accordingly. This method only works if you’ve kept careful records and can prove your basis in the specific shares you want to sell.
First in, first out (FIFO): This more common method assumes that you’re always selling the oldest shares in your portfolio, giving you the most favorable tax rate possible.
Average basis: Rather than identifying the cost basis of specific assets, you can use the average basis of all identical assets to calculate your capital gains tax liability. For example, if you purchased five shares at $5 per share and five at $10 per share, your average basis is $7.50.

Specific share identification can help reduce your tax liability because you can choose to sell the stocks that will result in the lowest capital gain and, therefore, the least amount of capital gains taxes.

Inherited property enjoys a stepped-up basis. The cost basis of any asset you inherited is based on either its fair market value on the date of the decedent’s death or on the date of a later alternative valuation date, if the estate qualifies for such a valuation.

Step 2: Compute your gain or loss and holding period

As we mentioned, you’ll pay different tax rates depending on how long you held the asset. Assets you held for more than one year are eligible for long-term capital gains tax treatment, while assets you held for one year or less are subject to short-term capital gains tax treatment.

Calculating the holding period on an asset you purchased is usually simple, but it’s a bit more complicated when it’s an asset you either received as a gift or inherited from a loved one.

In the case of gifted assets, your holding period is the same as that of whoever you received the gift from. For example, if the gift giver bought the asset eight months ago, your holding period began eight months ago. Inherited property, on the other hand, is automatically treated as if you’ve owned it for more than one year, according to the IRS.

Step 3: Apply the correct rate and any surtaxes

Once you’ve identified these two key pieces of information (your cost basis and holding period), you can easily run the numbers to find how much you’ll owe in capital gains taxes. You can also plug your numbers into an online calculator that can calculate your capital gains taxes for you.

Depending on your household income, you may also be subject to a Net Investment Income Tax (NIIT), which applies to net investment income for high-income individuals, estates, and trusts. The NIIT rate of 3.8% applies at the following thresholds:

Filing status	Threshold amount
Single	$200,000
Married filing jointly	$250,000
Married filing separately	$125,000
Head of household	$200,000

NIIT check (3.8%) thresholds and how to compute the lesser-of test (NII vs MAGI over threshold). (IRS)

Quick Examples (2025)

Example A: Selling stocks or ETFs

Let’s say you own 1,000 shares of a company’s stock that you’ve purchased over the past decade at prices ranging from $10 to $25 per share. Today, the stock is worth $40 per share.

Suppose you decide to sell 250 of your shares for a total price of $10,000. If you use the FIFO method for determining cost basis and holding period, you’re guaranteed the more favorable long-term capital gains tax rate. But you’d also sell your lowest-price shares. Assuming those 250 shares were purchased for $10 per share, you would have a taxable gain of $7,500.

However, let’s say you purchased 250 of those shares two years ago for $20 per share. If you have the records for those purchases, you could use the specific share identification method to sell those specific shares instead.

They’re still eligible for the long-term capital gains tax treatment, but would reduce your capital gain from $7,500 to $5,000. If you’re in the 15% capital gains tax bracket, you’re saving yourself several hundred dollars in capital gains taxes.

Example B: Selling a rental property

Capital gains taxes don’t just apply to stocks and other financial assets. They also apply to real assets like homes. Let’s run through an example of how capital gains taxes might apply when you sell a rental property.

Suppose you bought the property for $300,000 and have claimed $80,000 in depreciation, meaning you have an adjusted basis of $220,000. You’re able to sell the property for $500,000.

By subtracting your adjusted basis from the sale price, you’d find you have a gain of $280,000. $80,000 of this is your unrecaptured gain, which is taxed at a maximum rate of 25%. The remaining $200,000 of your gain is taxed as a long-term capital gain. Let’s assume you fall into the 15% tax bracket.

The 25% tax on your recaptured gain and the 15% tax on the rest of your gain amounts to $50,000 in long-term capital gains taxes.

If you met the income threshold for the NIIT, you would also pay an additional 3.8%, or $10,640, resulting in a total tax bill of $60,640.

Example C: Mutual fund with DRIP

When you buy mutual funds through a dividend reinvestment plan (DRIP), the amount of dividend income you invest in the plan is added to your cost basis, ultimately reducing your tax liability when you sell.

For example, let’s say you buy 100 shares of a mutual fund at $20 each, for a total purchase price of $2,000. In the following two years, you reinvest your dividends to purchase 10 additional shares. In the first year, you pay $25 per share for your shares, and in the second year, you pay $30 per share. Your cost basis, which started at $2,000, is now $2,550.

Fast forward a couple of years, and you sell 50 of your shares for $40 per share, for a total price of $2,000.

If you use the average cost method to determine your cost basis, you would divide your total cost basis ($2,550) by the number of shares you own (120). In this case, your average cost basis is $21.25. When you sell 50 shares for $40 per share, you have a gain per share of $18.75, and a total gain of $937.50.

If you choose the average share identification method, you can choose the shares with the highest cost basis. In this case, you would start by selling the 20 shares you purchased with your reinvested dividends, which cost $25 and $30. You would then sell 30 shares at their original price of $20.

You would subtract your cost basis of $1,150 ($250 and $300 for the DRIP shares and $600 for the original shares) from the sale price of $2,000 to find a taxable gain of $850, which is lower than your gain using the average cost method.

Special Rules That Change Your Tax

There are a few special IRS rules that can either increase or decrease the amount you’ll owe in capital gains taxes.

Home sale exclusion

The IRS home sale tax exclusion allows you to exclude up to $250,000 (or $500,000 for married couples) from your capital gain when you sell your primary home. This exclusion can significantly reduce the amount you’ll owe in capital gains taxes.

You’re eligible for the home sale exclusion if you’ve owned and lived in your home for at least two of the five years leading up to its sale (though they don’t have to be the same two-year periods).

It’s also possible to qualify for a partial exclusion of gain if you sold your home due to a job change, health-related event, or an unforeseeable event.

Collectibles and section 1202 qualified small business stock

Section 1202 qualified small business stock and collectibles, including coins or art, are subject to a maximum long-term capital gains tax rate of 28%. If your ordinary income tax rate is lower than 28%, you’ll pay that rate instead, according to Tax Advisor. Short-term capital gains are still taxed as ordinary income.

1031 exchanges

Section 1031 creates a capital gains tax exception where you can defer your taxes if you sell a property and reinvest your gains into a similar property in a qualifying like-kind exchange. However, this doesn’t eliminate capital gains taxes forever. It simply delays them until you sell the second property. When that happens, you’ll pay capital gains taxes on your deferred gain and any new gains.

Wash sale rule

The wash sale rule prevents investors from claiming a capital loss for tax purposes if they buy a "substantially identical" investment within 30 days of the sale. This is to stop investors from tax-loss harvesting (described above) with no risk.

For instance, if you own a share of a particular total market index fund, you can't sell it for a loss and harvest the tax benefits if you immediately repurchase a different total market index fund. To harvest the loss in this case, you'd have to wait 30 days before purchasing.

How to Report Capital Gains on Your Tax Return

If you had any capital gains in the past tax year, you’ll have to report them on your federal income tax return. Here are the tax forms you’ll need:

Broker 1099-B: If you had any capital gains, your broker will file Form 1099-B on your behalf and will send you a copy. You can use this information to report your taxable gains.
Form 8949: You’ll report each individual sale on this form. Separate short-term and long-term gains for the most accurate reporting. You may need to fill out more than one Form 8949, depending on the type of gains you’re claiming.
Schedule D: On this form, summarize the total short-term and long-term gains from Form 8949.
Form 1040: This form is the annual income tax return form. You’ll file this form and attach Schedule D, and add your total capital gains or losses from Schedule D.

If you aren’t sure how to report your capital gains on your tax return, it’s best to consult a tax professional to ensure you file and report everything correctly.

Planning Moves to Reduce Taxes

While capital gains taxes are usually unavoidable, there are ways to reduce your capital gains tax liability.

Timing sales

Strategic timing of your asset sales can also significantly impact your tax bill. If you've held an asset for under one year, waiting until a full year has elapsed will allow you to access the favorable long-term capital gains tax rates instead of the higher short-term rates.

Additionally, if you can time the sale during a year in which your income is lower, you could avoid capital gains taxes entirely.

Tax-loss and tax-gain harvesting

Tax-loss harvesting is a strategy that involves selling underperforming investments to offset gains in other assets. By realizing losses simultaneously with gains, investors can effectively neutralize their gains and potentially reduce the amount they owe in capital gains taxes.

Note: If you sell off a particular asset to harvest the loss, you can't replace it with a "substantially identical" asset within 30 days of the sale. See the section about the wash sale rule above to learn more.

Charitable gifting of appreciated securities

Another strategy to reduce your capital gains tax is to gift or donate the appreciated assets to family members in lower tax brackets or to charitable organizations. Doing so requires you to understand the annual gift tax exclusion and the lifetime gift tax exclusion. For 2025, the annual gift tax exclusion allows you to gift $19,000 in assets to each other individual before it starts counting against your lifetime exclusion. The current lifetime exclusion is $13.99 million.

When gifting to a family member, the recipient assumes the asset's original cost basis, potentially resulting in less tax liability if they're in a lower tax bracket than you. When donating to charity, you can typically deduct the market value of the asset at the time of the donation from your taxable income, which reduces your overall tax liability.

Estimated taxes after a big sale

If you have a large capital gain and expect a big tax bill at the end of the year, the IRS recommends making quarterly estimated tax payments to avoid a penalty. The IRS requires estimated tax payments if you expect to owe at least $1,000 in taxes at the end of the year, after subtracting tax credits, or if you expect your withholding and refundable credits to be smaller than the lesser of:

90% of the tax on your current year’s tax return
100% of the tax shown on your last year’s tax return

Frequently Asked Questions (FAQs) About Capital Gains

Q. How do I know if my gain is long-term?

Your gain is long-term if you owned the asset in question for more than one year by the time you sell it. If you inherited the asset, your gain is automatically considered long-term.

Q. Do capital gains count toward MAGI for NIIT?

Yes, capital gains count toward your MAGI (short for modified adjusted gross income) for the purpose of determining whether you owe Net Investment Income Tax (NIIT). Your NIIT applies to the lesser of your net investment income or your MAGI.

Q. What if my brokerage reports the wrong basis?

If your brokerage firm reports the wrong basis on an asset, you can use Form 8949 to report the correct basis. Make sure you have accurate and thorough financial records, because you may have to prove that your numbers are correct.

Q. How are depreciation and §1250 handled on real estate?

When you sell a piece of real estate, you’ll have to recapture any depreciation you’ve deducted over the years. Unrecaptured gains are taxed at a maximum tax rate of 25%.

Q. Do I pay state capital gains taxes?

The majority of states tax capital gains as ordinary income. However, a handful of states – Arizona, Arkansas, Hawaii, Minnesota, Montana, New Mexico, North Dakota, South Carolina, Washington, and Wisconsin – have special capital gains tax rates, according to the Tax Foundation.

Tools & Next Steps

If you need help navigating the waters of long-term capital gains, consider using an online capital gains tax calculator that can run the numbers yourself. If you’d rather leave it in the hands of an specialist, consider consulting a tax professional. Meet with a Wealth Enhancement advisor today for help planning and calculating your capital gains taxes. We offer complimentary, no-obligation meetings to help you learn more.

Sources & Further Reading

IRS. “Topic no. 409, Capital gains and losses.”
IRS. “Revenue Procedure 2024-40.”
IRS. “Publication 550 (2024), Investment Income and Expenses.”
IRS. “Mutual funds (costs, distributions, etc.).”
IRS. “Topic no. 701, Sale of your home.”
IRS. “Publication 523 (2024), Selling Your Home.”
IRS. “Like-Kind Exchanges Under IRC Section 1031.”
IRS. “Large gains, lump sum distributions, etc.”
Tax Foundation. “ State Tax Rates on Long-Term Capital Gains, 2024

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Current as of 09/23/2025. Subject to legislative changes and not intended to be legal or tax advice. Consult a qualified tax advisor regarding specific circumstances. Accuracy is not guaranteed.

#2025-9327

Image

Topic

Tags

Duration

10 minutes

Ryan McKeown

How Are You Feeling About Money? (No, Really.)

Sam Kroll — Sat, 20 Sep 2025 14:34:14 +0000

How Are You Feeling About Money? (No, Really.) Sam Kroll Sat, 09/20/2025 - 09:34

Bruce Helmer and Peg Webb are financial advisors at Wealth Enhancement and co-hosts of “Your Money” on WCCO AM 830 on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor and affiliate of Wealth Enhancement Group®.

Money isn’t only a matter of arithmetic. It is deeply tied to how we feel about our lives and our futures. Even investors who pride themselves on rational decisions know that fear, excitement or uncertainty can often enter the picture.

Recent surveys reflect this unease. The University of Michigan’s Index of Consumer Sentiment fell to 58.6 in August, signaling growing concern about inflation and economic stability. At the same time, Americans now say it takes $840,000 to feel financially “comfortable”—a sharp increase from last year, according to Charles Schwab’s most recent Modern Wealth Survey. These benchmarks tell us less about balance sheets and more about psychology: comfort is harder to grasp, even as asset values and income rise.

Why our emotions shape financial outcomes

Behavioral finance has shown for decades that the greatest risk to long-term success is often our own behavior. Markets fluctuate, but it’s the way we react, selling in panic, chasing performance, or freezing up that undermines progress.

Some of the most common patterns include:

Loss aversion. Losses weigh roughly twice as heavily as gains, making it painful to hold steady in a downturn (Tversky and Kahneman,1979).
Mental accounting. We treat identical dollars differently depending on the “bucket” they are in (a bonus, say, or a refund or savings) which can lead to inconsistent decisions.
Status quo bias. We stick with outdated allocations or policies simply because change feels riskier than inertia.
Present bias. Immediate gratification often outweighs long-term goals, creating a constant tension between saving and spending.
Mood effects. Stress or overconfidence distorts risk perception and influences decisions far more than spreadsheets.

Moving from academic theory to action

There is a way to frame the challenge of managing these biases in personal terms: every financial decision has a feeling attached to it. Before acting, it helps to name the driver. Is it fear, pride, or the desire to keep up? Identifying emotion makes it easier to separate genuine needs from less-essential wishes.

We always encourage our clients to broaden their definition of wealth. Assets on a statement matter, but so do time, health, skills, and relationships. Money should be viewed as a tool to protect and expand those forms of wealth.

Relationships add another layer of complexity. Disagreements between spouses, awkward conversations with friends, or mismatched expectations with a new partner can all magnify financial stress. Honest communication can reduce emotional charge and make planning feel collaborative rather than confrontational.

Setting guardrails can help quiet your emotions

Awareness alone is not enough. Putting structures in place keeps emotions from steering decisions off course. A few that work in practice:

Pause before acting. A 72-hour delay on emotional money moves often prevents regrettable choices.
Automate the important. Automatic savings, debt payments, and portfolio rebalancing reduce the influence of mood swings.
Label your goals. Rename vague “buckets” into specific purposes, e.g., a “five-year house fund” or “sleep-at-night cash.” Labels bring clarity which can make trade-offs easier.
Audit your defaults. Replace one outdated choice, whether it is a 401(k) allocation that has moved from your ideal target, or an unused subscription, with something more intentional.
Convert anxiety into action. When stress builds, channel it into one tangible step: raise contributions, rebalance, or schedule a review. Taking action can restore a sense of control.

Wealth beyond the numbers

Despite the headlines, most Americans already report feeling wealthy in the areas that matter most. Eight in ten say they feel rich in relationships, happiness, and time, according to the Schwab study. This suggests that while money fuels opportunity, it is not the sole measure of a well-lived life.

Financial wellbeing, then, is not about reaching a fixed number. It is about aligning money with values, setting boundaries against emotional impulses, and remembering that true wealth extends beyond what markets deliver.

Emotions and money may appear to be inseparable. They can cloud judgment or serve as useful signals depending on how we respond. By naming the feelings behind financial choices, setting up guardrails against impulsive behavior, and broadening our sense of what it means to be wealthy, we can quiet some of the anxiety and focus on building lives that are not just financially secure but genuinely fulfilling.

The original article was published by Pioneer Press.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

^#^2025-9158

Image

Topic

Tags

Duration

3 minutes

Peg Webb

The Pros and Cons of Using AI to Manage Your Finances

Sam Kroll — Thu, 28 Aug 2025 16:35:37 +0000

The Pros and Cons of Using AI to Manage Your Finances Sam Kroll Thu, 08/28/2025 - 11:35

Managing your finances can feel like a full-time job. Thankfully, with the help of artificial intelligence (AI), managing your finances is faster and easier than ever—from setting goals and tracking expenses, to building better saving plans.

Artificial intelligence is the engine powering many of the financial tools on the market. Let’s explore how AI in finance works, the benefits it may bring, and the risks to watch out for.

What Is AI and How Is It Used in Finance?

Artificial intelligence refers to machines that can think and make decisions independently. In personal finance, AI can help analyze information, like how much money you’re making and how you’re spending it, and help you make smarter decisions.

AI in financial services is everywhere:

AI budgeting tools that monitor and categorize your spending
Robo-advisors that can help with investment decisions
Chatbots that give quick advice on money matters
Fake money detectors that can prevent theft, scams, or other fraud

Some AI tools can help you track your spending and stay on budget in a fun, easy way, while robo-advisors may look at your risk and goals to help grow your money with simple, clear advice.

AI in finance is quickly becoming personal, practical, and powerful. In fact, research from credit giant Experian shows that nearly half the people surveyed (47%) have or are considering using generative AI-powered tools to help with managing their finances. A large swath of younger generations is also embracing technology with 67% of Gen Zers and 62% of Millennials stating they use technology to manage their finances.

Pros of Using AI in Financial Management

One major advantage of using AI is how it simplifies financial planning. It does not matter whether your goal is to save for a vacation or retirement, AI can help track your progress and keep your finances in check. Some advantages include:

Increased Efficiency and Automation

AI tools can save time by automating your routine activities: paying bills, monitoring expenditures, and even tracking investments.

AI Advisors Cost Less

Fees can vary widely between services, but generally robo-advisors are less expensive than their human counterparts. Robo-advisor fees range from 0% to 0.35% with traditional financial advisors charging somewhere between 1% and 2% for assets under management.

It should be noted that human advisors are getting more diverse in their pricing practices offering fees tailored to their clients. Envestnet has an article on the various fee models that are available and shows how human advisors are evolving the pricing on their services.

Improved Accuracy in Budgeting and Forecasting

AI can examine historical financial trends and attempt to forecast future results. Some apps can analyze your spending in a month and alert you when you are about to exceed your spending limit or allow you a budget alternative.

Personalized Financial Insights

Compared to traditional software, AI tools can learn according to your individual goals. With an AI chatbot, you can brainstorm monthly budgets, review purchases that you made, or even come up with a savings plan.

24/7 Access to Financial Support

24/7 support is one of the major benefits of AI in the financial sphere, giving you access to customer support any time, day or night.

Cons of Using AI in Financial Management

AI can be useful, but it is not flawless. Here are a few reasons to be cautious while using AI to manage your finances:

Data Security and Privacy Concerns

The majority of AI tools need access to sensitive financial data. Without proper protection, your personal data may fall into the hands of hackers or be used in other harmful ways.

Lack of Regulation

AI advisors aren’t held to the same standard as fiduciary financial advisors, and as of now, can’t be held liable for the advice they provide.

When You Need More Than Numbers

AI can process data, but it doesn’t feel emotion. Life’s biggest financial decisions, like protecting your family or planning for a legacy, are about more than algorithms. That’s where a real advisor makes a difference with empathy, experience, and a personal touch that understands your family's unique story.

Overreliance on Technology

Using an app to manage your finances can be very tempting to depend on. This could, however, result in the absence of financial awareness or understanding. It is always good to double-check what the tool is doing on your behalf.

Potential for Bias in Algorithms

AI is trained using data, and when this information has bias in it, so can the results. It implies that certain tools may yield inaccurate or unjust suggestions found on a faulty basis.

AI vs. Human Financial Advisors

For beginners, robo-advisors with low fees may be attractive options, but as a person’s financial situation gets more complicated, the empathy and nuance of human advisors becomes more valuable.

AI vs. Human Advisor — Feature Comparison
Feature	AI	Human Advisor
Cost	0%–0.25% of assets	0.25%–2% of assets
Recommendation Accuracy	High (data-driven)	Varies
Personalization	Moderate	High
Availability	24/7	Business hours
Risk	Algorithmic bias	Human error

FAQs About Using AI to Manage Finances

Can AI help manage finances?

Yes. AI can help manage finances by automating tasks like budgeting, retirement planning, account monitoring, and expense tracking. It provides insights through data analysis, helping people make smarter financial decisions with greater efficiency and accuracy.

Which AI is best for personal finance?

There isn’t a single “best” AI for personal finance as it depends on your goals, preferences, and desired features. Popular AI-powered tools include budgeting apps, robo-advisors, and investment platforms. The right choice depends on whether you prioritize savings, retirement planning, or advanced portfolio management.

Does using AI save money?

AI can save money by reducing errors, improving efficiency, and optimizing financial planning. However, it doesn’t fully replace human knowledge. Without a financial advisor’s personal guidance, some opportunities for growth or risk management may be missed.

How is AI impacting finance?

AI is reshaping finance by driving smarter investments, enhancing risk management, and improving banking services. Financial institutions use AI for fraud detection, compliance, and customer service. Overall, AI is making finance more efficient, personalized, and secure.

What are the benefits of AI in finance?

The benefits of AI in finance include:

Greater efficiency and automation
Improved fraud detection and security
More personalized financial planning and advice
Better customer experiences
Increased profitability for institutions and investors

What are the risks of AI financial tools?

While AI offers many advantages, it also carries risks, including:

Bias in decision-making and lack of transparency
Security and privacy concerns
Fraud and misuse of sensitive data
Over-reliance on technology without human oversight
Ethical and regulatory challenges
Job displacement in financial services

Final Thoughts

The world of money management is changing fast and using AI to manage your finances is no longer something just for techies. From daily budgeting to long-term goals like managing retirement accounts, AI can make financial management more accessible to everyone.

AI is helpful, but what truly makes the difference is a real financial advisor who understands your long-term goals and can guide you with advice that fits your life.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

#2025-9032

Image

Topic

Tags

Duration

5 minutes

Ryan Marshall

Four Wealth Enhancement Teams Named 2025 5-Star Wealth Management Teams by InvestmentNews

Sofia Gulino — Mon, 14 Jul 2025 14:23:10 +0000

Four Wealth Enhancement Teams Named 2025 5-Star Wealth Management Teams by InvestmentNews Sofia Gulino Mon, 07/14/2025 - 09:23

We are proud to announce that four of our Wealth Enhancement financial advisor teams have been recognized as 2025 5-Star Wealth Management Teams by InvestmentNews.

InvestmentNews’ 5-Star Wealth Management Teams list showcases outstanding teams across the wealth management industry who provide valuable advice to help clients pursue their financial goals.

Congratulations to the Fulton Team, InConcert Napa Valley Team, Oakwood Team, Warren Team for earning this honor. This recognition highlights their ongoing commitment to delivering exceptional financial guidance and personalized service to their clients.

About InvestmentNews

InvestmentNews’ mission is to be the leading source of news, analysis and insights for financial advisors and wealth-management professionals. They are dedicated to providing timely and accurate information that helps their audience make informed decisions, anticipate industry trends and drive business growth.

About Wealth Enhancement

Wealth Enhancement is an independent wealth management firm with an endless passion for enriching the lives of our clients. We continually seek to perfect our craft of personalized financial planning with our team-based Roundtable™ and UniFi processes that go far beyond the standard approach. We proudly provide tailored financial plans and investment management services to serve the unique needs of our clients from our 152 offices - and growing - nationwide. Since 1997, Wealth Enhancement has tirelessly raised the standard of wealth management with specialized knowledge and more attentive service that helps every client craft their future. For more information, please visit www.wealthenhancement.com.

Awarded on 5/12/2025 for the ranking year 2025.

Topic

Tags

Duration

3 minutes

Jeff Dekko

Newsroom Type

Awards

The Biggest Mistake People Make With Money

wegmigrate — Thu, 19 Jun 2025 05:00:00 +0000

The Biggest Mistake People Make With Money wegmigrate Thu, 06/19/2025 - 00:00

By Bruce Helmer and Peg Webb, Financial Advisors at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO AM 830 on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor and affiliate of Wealth Enhancement Group.

For many folks who are planning for their financial futures, the cardinal sins are well known: overspending and under saving. But for high net worth investors who have already achieved financial security many times over, a different kind of mistake may be quietly taking root, and it may be costing more than money. The real risk? Not spending enough of your wealth while you can still enjoy it.

Traditional financial planning guidance focuses on accumulation: saving diligently, investing wisely and avoiding lifestyle inflation. This advice is irrefutably sound, but only up to a point. What happens when you’ve already “won the game”? You’ve saved more than enough to retire comfortably, your portfolio is healthy, and your children’s education are funded. Yet, many still live as though scarcity lurks around the corner.

Recent research reveals a surprising trend. A recent Wall Street Journal article reported that married retirees with at least $100,000 in assets withdrew just 2.1% annually — barely half the commonly recommended 4% rule. Even among the wealthy, a deeply ingrained fear of running out of money often keeps people from tapping into savings, preferring to rely on guaranteed income sources such as a pension or Social Security.

This caution is understandable but often unnecessary. Many families are in a financial position where thoughtful spending poses no real threat to long-term security. Instead, underspending can result in missed opportunities during the healthiest and most active years of life. In some cases we see older parents whose wealth could help move their children and grandchildren to greater financial security but choose not to.

And it’s not just about spending more on travel and luxury. Many delay meaningful experiences — supporting family goals, philanthropy, or even health-enhancing investments — until it’s too late. Gerontologists and financial advisors alike know this to be true: by the time people feel “safe enough” to spend, their energy, health or time may be in short supply.

Why do so many people fall into this trap? Decades of saving can entrench a scarcity mindset. Cognitive biases like loss aversion cause people to avoid drawing down assets, even when logic suggests they can afford to. Mental accounting, where money is treated differently depending on its origin, also plays a role. Many retirees view their investment accounts as “untouchable,” preserving them for future generations or rainy days that never come.

So what’s the alternative? First, consider dynamic withdrawal strategies that adjust based on portfolio performance, rather than rigid rules. Second, explore converting part of your portfolio into guaranteed income strategies that can provide psychological permission to spend a bit more freely. Finally, work with a financial advisor who doesn’t just plan for asset growth, but helps coach you toward a life well-lived.

At the core, wealth is a tool, not just for security or legacy, but for joy, purpose and presence. If you’ve done the work to build a strong financial foundation, don’t let an outdated mindset hold you back.

Because sometimes, the biggest financial mistake isn’t spending too much — it’s not spending enough.

See the whole article in Pioneer Press.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Image

Topic

Tags

Duration

4 minutes

Bruce Helmer