Hack-Proof Your Life Now!

As part of the Brown Financial Risk Management Review, we discuss the importance of protecting your identity and accounts from digital criminals. The Bureau of Justice Statistics reports that 23.9 million Americans were victims of identity theft in 20211 so it is critically important to protect yourself and avoid being an easy target. In their book, Hack-Proof Your Life Now!, Sean Bailey and Devin Kropp share strategies for ensuring you and your accounts are safe.2 Here are five basic strategies to help you improve your financial security:

#1 Use a unique email address for your financial accounts. Most people use one or two email addresses for all their communications. The longer those addresses are used, the more likely they are to be connected to other parts of your online life. As the book says, “Once a cybercrook seizes any email account linked to other logins, such as online banking, he just needs to run a “reset password” request to start causing trouble.” You should create a new email address and use it exclusively for financial accounts. Set it up with the strongest possible security settings and be sure to include 2-factor verification.

#2 Add 2-step verification to your accounts. To protect yourself, you should go into the online settings of all your bank, credit, and email accounts and set up 2-factor authentication. This additional verification method comes in many forms from a text message to your phone to an app that contains a security key. Any additional verification will help protect your accounts from attacks.

#3 Use a password manager. A password manager will store your passwords securely (so you won’t have to remember them all), allow you to generate difficult, random passwords to use on your accounts, and fill your passwords for you when you need to use them. Some of the most popular password managers are Dashlane, Last Pass, 1Password, and iCloud Keychain. Many of these password managers cost less than $40 per year. For convenience and added security, this may be the best money you will ever spend.

#4 Use public Wi-Fi cautiously and NEVER for email or conducting financial transactions. Wi-Fi connections in coffee shops, airports, and hotel rooms, even when password protected, are notoriously common places for cybercriminals to intercept and steal your information. Use your phone’s hotspot or if you must use a public Wi-Fi, consider a Virtual Private Network (VPN) to encrypt your data while you are online.

#5 Avoid clicking links in emails. Still one of the most common and successful attacks occurs when an email that is created to look legitimate contains a link to malware or directs you to a dangerous website. Even the best security measures are useless when the door is opened willingly. Always go directly to the website if you need to log in and try to avoid clicking links within the emails. 

With the prevalence of identity theft and cyber crimes, proactive measures are essential to mitigate risks. Although not an exhaustive list, these few simple but consistent strategies to protect yourself will help ensure you are not the “low-hanging fruit” and your financial information is secure. 

Additionally, our True Life Planning Cycle helps our clients maintain a comprehensive view of their finances. By addressing various facets of your financial life, the process may help identify potential issues while providing complete solutions to support keeping your money and goals on track. Contact us to learn more about our approach and how we can help you achieve financial peace of mind.

1. https://bjs.ojp.gov/library/publications/victims-identity-theft-2021#:~:text=Data%20include%20types%20of%20identity,during%20the%20prior%2012%20months.  

2. Bailey, Sean M., and Devin Kropp. Hack-Proof Your Life Now!: The New Cybersecurity Rules: Protect Your Email, Computers, and Bank Accounts from Hacks, Malware, and Identity Theft. Horsesmouth, 2019.

Scams: What You Don’t Know Could Hurt You

Financial Planning Concepts

Criminal strategies to steal your wealth are becoming more sophisticated, more numerous, and more successful in achieving their nefarious objectives.1 Are you prepared to defend the wealth and good financial reputation you spent a lifetime creating?

If you use a cellphone, computer, or other internet-connected device, the chances are high that you have been a target of some malicious scheme. Even if you didn’t click on a suspicious link in an email or respond to a seemingly legitimate text from your bank or credit card company, your adoption of interconnected devices and accounts is fertile ground for bad actors to attempt to steal your wealth or exploit your financial reputation to receive ill-gotten monies. 

How many scams can you name? Is it true if you can’t name a scam you are susceptible to becoming its next target and victim? The implication of this last question is unsettling; however, the U.S. Federal Trade Commission lists over two dozen categories of scams.2 To defend against them, review the FTC’s site for articles and best practices to help protect your financial reputation.

A recent FTC consumer alert is entitled “Scammers Hide Harmful Links in QR Codes to Steal Your Information.”3 QR codes can be found in restaurants (to access the menu), public parking decks (to pay), entertainment venues (to gain entrance), etc. Scammers have capitalized on this technology to further their malicious schemes. In addition to the use of strong passwords and multifactor authentication, the consumer alert recommends you inspect the URL offered up by the QR code before opening it (i.e., looking for misspelled words or misplaced letters, etc.).

Another FTC consumer alert provides a timeless best practice in defending against financial scams.4 Entitled “Give Yourself Some Credit (Reports),” FTC attorney Seena Gressin recommends you regularly check your credit reports. Once you receive your credit report, review all the accounts listed to ensure no new accounts have been opened that you don’t know anything about. Furthermore, review the list of credit applications to ensure you recognize all of them. If you discover wrong information or suspicious activities within your credit report, take action to correct it. Contact the credit bureau to correct the wrong information in your credit report.  However, if suspicious activity is found in your credit report, contact both the credit bureau and IdentityTheft.gov to report it and begin a recovery plan.

You can find more information on these topics in the links below.

Finally, if you are interested in learning more ways to defend against financial scams and identity theft, please read “Hack-Proof Your Life Now!” written by Sean M. Bailey and Devin Kropp. Some of the topics this book addresses include why you need a secret email address, how to beat the password paradox, spot ransomware with the 10-second email rule, etc. As Sean and Devin state on the back cover of this online security book, “Everyone is vulnerable. But you don’t have to be defenseless.”

1. https://www.mcafee.com/learn/a-guide-to-identity-theft-statistics/
2. https://consumer.ftc.gov/scams, select “Filter by type of scam.”)
3. https://consumer.ftc.gov/consumer-alerts/2023/12/scammers-hide-harmful-links-qr-codes-steal-your-information)
4. https://consumer.ftc.gov/consumer-alerts/2022/04/give-yourself-some-credit-report

Tax Cuts and Jobs Act of 2017 Sunsets in 2025

Financial Planning Concepts

The Tax Cuts and Jobs Act of 2017 (TCJA), often called the “Trump Tax Cuts,” is scheduled to expire December 31, 2025. Although this feels like quite a long way off, planning now will help you minimize your taxes if the tax cuts are not renewed.

Provisions of the TCJA

The TCJA brought significant changes to the tax code. The marginal tax brackets were lowered and for joint filers the standard deduction was increased from just $13,000 to $24,000. Charitable contribution limits were increased from 50% to 60% of AGI and the medical expense deduction threshold was reduced from 10% of AGI to 7.5% of AGI. The TCJA also eliminated the Pease limitation, which reduced the itemized deductions by 3% of every dollar above a certain income threshold. Finally, the amount families may pass tax-free was increased substantially and is now (2023) $12.92MM for an individual. These are all great provisions for lowering your taxes.

However, it was not all good news in 2017. The state and local taxes (SALT) deductions were capped at $10,000, the mortgage interest deduction was limited to the first $750,000 (instead of $1MM) of mortgage debt, and the interest on home equity loans was no longer deductible unless it was used to buy, build, or improve the home. These changes negatively impacted taxpayers. 

How to Prepare for the Sunset

There are a few strategies we can help you employ to prepare for the possibility the tax law changes will sunset in 2025: First, Roth conversions help move money from your taxable IRAs to your tax-free Roth accounts. If the marginal brackets should revert to the higher rates, everything in a tax-free account will look even better! Especially if you are forced to take RMDs you do not use, Roth conversions at the right times will help you avoid the higher taxes. 

Second, it may be beneficial to begin harvesting capital gains and preserve your capital losses if you expect to be in a higher tax bracket in 2026. As we get closer to the sunset, we will help you prepare a multi-year tax plan to see if capturing gains or accelerating income makes sense for your plan. 

To prepare for lower estate tax thresholds, it may be beneficial to begin a regular gifting program to your heirs. You may want to give appreciated assets (like stocks, mutual funds, or ETFs) to your heirs (instead of cash) to postpone or possibly even lower the tax liability on the sale of these assets. You can also accelerate gifts to 529 plans for your relatives for higher education. Current tax law allows you to gift $85,000 in a single year ($170,000 for married couples) to each individual and the assets are then out of your estate. 

It may be beneficial to consider tax-free bonds in your taxable investment portfolio. With the lower tax rates, tax-free bonds have been somewhat less compelling. With higher bond yields and higher tax brackets, they become far more interesting.

Finally, as we get closer to the sunset, you may want to consider postponing your large charitable gifts. You will want to maximize your gifts during the years when tax rates are higher so you may postpone your gifts until 2026. We’ll know more as we get closer. 

1. https://www.kiplinger.com/taxes/what-to-do-before-tax-cuts-and-jobs-act-tcja-provisions-sunset, https://www.taxpolicycenter.org/briefing-book/how-did-tcja-change-standard-deduction-and-itemized-deductions#:~:text=The%20TCJA%20eliminated%20or%20restricted,because%20of%20the%20tax%20overhaul

New ROTH Provisions In Secure 2.0 Act

Financial Planning Concepts

The recent SECURE 2.0 Act creates several retirement planning opportunities, particularly with Roth accounts in previously restricted traditional retirement accounts.

SIMPLE Roth IRAs and SEP Roth IRAs

Beginning in 2023, SIMPLE IRAs and SEP IRAs are allowed to accept Roth contributions.  SEP IRAs are funded exclusively by the employer (i.e., employees are not permitted to contribute to SEP IRAs); therefore, all employer contributions to a Roth SEP IRA are classified as taxable compensation to the employee.  In contrast, employer contributions to a traditional SEP IRA will not be classified as taxable compensation (i.e., employees will not be taxed on employer contributions to traditional SEP IRAs).

As previously mentioned in a prior Brown Financial Advisory Newsletter, in 2024 “ALL catch-up contributions for employees with incomes above $145,000 (i.e., indexed for inflation starting in 2025) will be required to be deposited into a Roth account.”  An exception exists for SEP IRAs and SIMPLE IRAs in that the new catch-up contribution rule does not apply to these accounts.

Matching Contributions in 401(k), 403(b), and 457(b) Defined Contribution Plans

Effective December 29, 2022, employers with 401(k), 403(b), and 457(b) defined contribution plans may provide employee participants in these plans the option of receiving matching contributions on a Roth basis.  Like employee elective Roth contributions (i.e., after-tax contributions), employer matching contributions paid into a Roth account on behalf of the employee will be classified as additional taxable compensation to the employee.

After SECURE 2.0 Act, the employer’s elective contributions and matching contributions are no longer limited to traditional accounts.  Provided an employer’s plan offers the SECURE 2.0 Act’s option of receiving matching contributions on a Roth basis, employees will have additional decisions to make as to the placement of their elective retirement contributions and the employer’s contributions.  Employer-provided retirement education to the plan participants will need to address these new accounts and help guide the employee in making the right allocation of any employee and employer contributions to the proper account type.

Rolling Section 529 Education Savings Accounts to Roth Accounts

After December 31, 2023, individuals that have a Section 529 Education Savings Account for at least fifteen (15) years can elect to make a direct rollover to the beneficiary’s Roth IRA.  SECURE 2.0 Act qualifies this trustee-to-trustee transfer on Section 529 account funds (and earnings on those funds) that have been held for at least five (5) years prior to the rollover distribution to the Roth IRA.  There are several requirements and limitations to this Section 529 strategy; however, it provides a nice financial planning solution for those individuals concerned about overfunding their children’s Section 529 accounts and the resulting penalties that would be assessed for non-qualified education distributions. 

Please contact us to discuss how these provisions may impact you.

Source: 2022/2023 Federal and California Tax Update, SECURE 2.0 Act, Spidell Publishing, LLC.