DIGNITAS

A PRACTICAL GUIDE TO

5
A Dignitas Briefing Paper

MANAGING YOUR ANNUAL BONUS

SMART TIPS FOR NAVIGATING THE 2013 BONUS SEASON

Dignitas Service Offering WEALTH COACHING: Dignitas wealth coaching provides executives and entrepreneurs a unique platform to concentrate on developing the habits and maximizing the skills to help you meet your financial goals. It covers five important tips for how to allocate your bonus compensation that will help protect you and your family over the long-run. as the firm does not participate in any third party commissions or fees. individuals can leverage their annual bonus into an opportunity to achieve their savings and investment goals. So how do you know if you are making good financial decisions? Dignitas’ Briefing Paper is your guide for considering your options on how to optimize your 2013 bonus compensation. BALANCE SHEET ADVISORY: Dignitas serves as a fiduciary to your family and provides tested and untarnished financial advice. while also making the types of purchases that will increase their overall happiness and satisfaction.Incentive Compensation 2013: Leveraging Hard Work and Opportunity. Incentive compensation provides individuals the chance to enjoy the fruits of their labor. Request a Consultation Video Overview Share Dignitas’ Briefing Paper A Practical Guide to Managing Your Annual Bonus By Nicholas Delgado 2 . PERSONAL BENCHMARKING: Benchmarking allows families to understand where their current position is in relation to a particular goal. Through planning and smart decision making.

With 15+ years of experience in the financial services and wealth advisory industry.About the Author A Practical Guide to Managing Your Bonus By Nicholas Delgado Nicholas Delgado founded Dignitas to provide clients with personalized. seasoned executives and individuals entering their second life. Nick has become a go-to advisor for start-up/high growth entrepreneurs. Follow Nick on Twitter @DignitasCWO Share Dignitas’ Briefing Paper A Practical Guide to Managing Your Annual Bonus By Nicholas Delgado 3 . high quality and independent advice and solutions that allow them to simplify their lives.

Once you’ve achieved your retirement savings contribution limits.One: Pay Yourself First. consider saving all or part of the 6.gov/pub/irs-pdf/n1036. which for 2013 is at $17.700.500 by maxing out your 401(k) in 2013.1 1) Internal Revenue Service Guide 1036 http://www. The catch-up contribution limit for employees age 50 and over is $5.pdf Decrease your taxable income by up to $17.500. Share Dignitas’ Briefing Paper A Practical Guide to Managing Your Annual Bonus By Nicholas Delgado 4 .000.500. work towards achieving your 2013 savings targets early in the year. for a total of $23.2% payroll tax for the remainder of the year. Consider maxing out on your annual 401(k) contribution. If after you’ve received your bonus you have surpassed the 2013 Social Security wage base of $113.irs.

Tax rates have gone up.000 for joint filers will also take effect in 2013. In addition.35 percent for earnings in excess of $200.Two: Defer Compensation.irs.2 Consider deferring a portion of your bonus if you expect your 2013 bonus to be higher than normal to mitigate higher marginal tax rates.000 for joint filers.000 for individuals and $250.000 for joint filers.000 for individuals and $250. A new 3. 2) Source Internal Revenue Service Guide 1036 http://www. Many companies offer non-retirement deferred compensation plans to highly compensated employees. Medicare taxes have gone up from 1.6% for high income earners.gov/pub/irs-pdf/n1036.6 percent for income in excess of $400.pdf Marginal income tax rates are now at 39. Have you calculated whether or not you are impacted by the new marginal federal income tax rates and Medicare taxes? Marginal income tax rates are now at 39.45 percent to 2. Deferred compensation refers to a financial arrangement where a portion of an employee’s earned income is paid at a later date from when it was earned. Share Dignitas’ Briefing Paper A Practical Guide to Managing Your Annual Bonus By Nicholas Delgado 5 . an employee does not pay income tax on deferred amounts until the funds are actually paid to the employee.000 for individuals and $450. Because income is deferred to a later date.8% Medicare tax on some investment income for taxpayers with earnings in excess of $200.

S.000 in 3 credit card debt in 2010. paying down existing debts should be a high priority. start by paying off credit cards with the highest interest rates first.pdf Share Dignitas’ Briefing Paper A Practical Guide to Managing Your Annual Bonus By Nicholas Delgado 6 . 3) Source: Federal Reserve Bulletin http://www. If you have a significant amount of consumer debt. consider using any excess reserves in low yielding cash or deposit accounts to pay down lower cost debt such as your home mortgage or any outstanding student loans. High income U. After you’ve allocated money for short and long-term savings and paid off consumer debt. households had a median of $8.Three: Pay Off Debt.federalreserve. This can lead to substantial long-term savings over time by decreasing the duration of the loan and the amount of interest payments you will make.gov/pubs/bulletin/2012/pdf/scf12. For maximum savings.

Calculate your insurable needs to determine if you are adequately insured. outstanding mortgage balances and other debts. Confirm that you have sufficient insurance. Review your need for additional insurance coverage after major life events such as marriage.Four: Update Your Insurance Plans. or when you have significant changes in income. Premiums for term insurance are relatively inexpensive for people in good health up to about age 50. A full-time employee with a family should factor in final burial expenses. Share Dignitas’ Briefing Paper A Practical Guide to Managing Your Annual Bonus By Nicholas Delgado 7 . It offers protection against large liability claims or judgments. An umbrella provides liability coverage over and above your standard auto insurance or homeowners insurance. Umbrella premiums can be as low as $200 to $300 per year for $1 million of additional liability protection. and income replacement needs. If your income and assets have increased significantly over the past few years you might want to also consider an umbrella policy. having a child. education expenses.

html Research has found that spending money on an experience produces longer lasting satisfaction than spending money on material objects. or hiring a nutritionist or personal trainer. cooking classes or sporting events has been shown to produce longer-lasting satisfaction than spending money on material objects.4 Source: The New Yoork Times http://www. If spending more time with your family is a priority.Five: Align Discretionary Spending to Your Goals Enjoying the reward of receiving an annual bonus can be amplified when you align discretionary spending to your goals. their size and frequency.nytimes. Share Dignitas’ Briefing Paper A Practical Guide to Managing Your Annual Bonus By Nicholas Delgado 8 . Spending money for an experience such as a dream vacation. then consider spending resources on family activities such as family passes to cultural attractions or a family vacation. concert tickets. and even the timing of the spending all affect long-term happiness. Researchers at Harvard and the University of Virginia have found that the types of purchases. then you might want to consider purchases such as a new bicycle.com/2010/08/08/business/08consume. Or. if you are planning on achieving a healthier lifestyle in 2013.

Dignitas Can help you achieve results. We provide clients with independent and objective advice and solutions beyond the traditional investment management and financial planning model. Our full-service life management platform orchestrates a collection of business and personal services to support our clients’ whole life needs.com Dignitas is an Investment Advisor Registered with the State of Illinois.6131 Dignitas 111 E. Share Dignitas’ Briefing Paper A Practical Guide to Managing Your Annual Bonus By Nicholas Delgado 9 .mydignitas. To continue the conversation.651. Dignitas is a multi-family office and wealth management firm. IL 60601 www.com Twitter: @dignitascwo 312. Wacker Drive Suite 2606 Chicago. please contact: Nicholas Delgado Principal | Chief Wealth Officer nick@mydignitas.

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