RETIREMENT ADVISERS - News

How to Ensure Your Spouse Is Financially Secure After You’re Gone

Mon, 19 May 2025 22:21:24 GMT

One of the most important and loving steps you can take in life is making sure your spouse will be financially secure if something happens to you. While it is not always easy to talk about, planning for the future is a meaningful way to provide peace of mind and protect your partner from unexpected financial hardship.

Insurance plays a central role in that protection. With the right strategy in place, you can help ensure your spouse maintains their lifestyle, covers essential expenses, and remains financially independent long after you are gone.

Life Insurance for Income Replacement

Life insurance is often the cornerstone of a spouse protection plan. A term life or permanent life policy can provide a tax-free lump sum to your spouse upon your death. This payout can help cover the mortgage, pay off debts, cover everyday living expenses, or fund future goals such as travel or education for grandchildren.

When choosing coverage, consider your spouse’s current and future needs. Will they still have a mortgage or other loans to manage? Do they rely on your income for day-to-day expenses? Will they need extra support for healthcare or long-term care later in life? A thoughtful review of these questions can help determine how much coverage is appropriate.

Survivorship Life Insurance for Estate Planning

Also known as second-to-die insurance, survivorship life insurance covers both spouses and pays out only after both have passed. This type of policy is often used in estate planning to cover estate taxes, preserve assets for heirs, or support charitable giving. While it does not provide immediate support for a surviving spouse, it can help ensure your combined legacy is preserved.

Fixed Annuities for Lifetime Income*

Annuities can offer a steady stream of income that continues for as long as you or your spouse lives. Certain annuity products can be structured to provide spousal benefits, meaning that if you pass away first, your spouse will continue receiving income. This is especially helpful in retirement planning and can provide a predictable foundation for monthly expenses.

Long-Term Care Insurance for Future Health Needs

One of the biggest financial threats to a surviving spouse is the cost of long-term care. If you use a significant portion of your shared assets to cover your own care, your spouse could be left with limited resources. Long-term care insurance helps offset these expenses and protects your financial plan from being derailed by medical or custodial care costs.

Final Expense Insurance for Funeral and End-of-Life Costs

Even a small life insurance policy designed to cover funeral costs and final expenses can relieve your spouse from financial stress during an already emotional time. These policies are typically easy to qualify for and provide quick access to funds when needed most.

Review and Update Beneficiaries Regularly

One of the simplest yet most important things you can do is keep your insurance policy beneficiaries up to date. Major life events such as a new marriage, the birth of a child, or the passing of a loved one can all affect your financial picture. Regular reviews ensure that the right people are protected and that your intentions are clear.

Plan for the Future Today

Taking time to plan ahead with the right insurance solutions can help your spouse feel secure, supported, and cared for no matter what the future holds. You have the power to provide financial stability that lasts beyond your lifetime.

If you want to be certain your spouse is financially protected, we are here to help. Contact our office to schedule a consultation. We will help guide you in building a personalized insurance strategy.

*Annuities contain limitations including withdrawal charges, fees and a market value adjustment which may affect contract values.

Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.

Smart Ways to Fund Long-Term Care Without Draining Your Assets

Wed, 14 May 2025 00:05:44 GMT

Long-term care is one of the most overlooked yet potentially costly aspects of aging. Whether it involves in-home assistance, assisted living, or nursing home care, the expenses can add up quickly. Without proper planning, these costs can eat away at your retirement savings and leave little behind for your spouse or loved ones. The good news is that there are smart ways to fund long-term care without draining your assets.

Understand the True Cost of Long-Term Care

According to Genworth’s 2023 Cost of Care Survey, the median annual cost of a private room in a nursing home is over one hundred thousand dollars. Even in-home care services can cost upwards of sixty thousand dollars a year, depending on the level of care needed. These numbers highlight the importance of planning ahead before a health crisis forces quick and expensive decisions.

Explore Long-Term Care Insurance

Long-term care insurance is a traditional option that helps cover the cost of care when you are no longer able to perform basic daily activities. These policies can help protect your retirement savings and give you more flexibility in choosing where and how you receive care. It is best to apply for coverage when you are in your fifties or early sixties since premiums tend to rise with age and health conditions can make you ineligible.

Consider Hybrid Insurance Policies

If you are concerned about paying premiums for something you may never use, hybrid policies offer an appealing alternative. These policies combine life insurance with long-term care benefits. If you end up needing care, a portion of the death benefit is used to cover those costs. If you never use the long-term care portion, your heirs still receive a life insurance payout. This can be a smart way to protect both your future and your legacy.

Use a Health Savings Account (HSA)

If you have an HSA, it can be a valuable tool for long-term care planning. Funds in an HSA grow tax free, and withdrawals used for qualified medical expenses are also tax free. While HSAs cannot pay for insurance premiums directly, they can help cover out-of-pocket care costs, including in-home services, adult day care, and even nursing home expenses.

Create an Irrevocable Trust

For those concerned about preserving assets for their heirs, setting up an irrevocable trust can be a powerful strategy. By transferring assets into this type of trust, you may protect them from being counted when applying for Medicaid. This type of planning must be done well in advance, as Medicaid has a look-back period that can disqualify you if assets are transferred too close to the time of application.

Leverage Annuities for Long-Term Care Needs

Certain annuities are designed to generate income while also providing enhanced payouts if long-term care becomes necessary. These products can offer a consistent income stream during retirement and a larger benefit if your health declines. They are especially appealing for individuals who want both growth potential and added protection against care costs.

Consult with Your Insurance Professional

The best approach to funding long-term care depends on your unique situation, including your health, financial goals, family structure, and available resources. Give us a call, and we can help you explore your options and build a personalized strategy to protect your wealth and your well-being.

Long-term care planning is not just about money. It is about making sure you maintain your dignity and independence as you age. With the right plan in place, you can meet the challenges of aging without sacrificing everything you have worked so hard to build.

How to Reduce Your Insurance Costs in Retirement Without Losing Coverage

Tue, 15 Apr 2025 14:15:02 GMT

As you transition into retirement, managing your finances becomes even more critical, especially when it comes to maintaining adequate insurance coverage. With a fixed income or a budget that’s tighter than before, you may be looking for ways to lower your insurance premiums without sacrificing essential coverage. Fortunately, there are several strategies to help you reduce your insurance costs while still maintaining the protection you need.

Review Your Insurance Coverage Regularly

One of the most effective ways to reduce insurance costs is to review your policies regularly. As your needs change, so should your coverage. For instance, if your children are financially independent, you may not need as much life insurance as before. Similarly, if your home’s value has decreased or if you’ve paid off your mortgage, you might not need as much homeowners’ insurance. By adjusting your coverage to reflect your current situation, you can avoid paying for unnecessary protection.

Shop Around for Better Rates

Insurance premiums can vary significantly between providers, and retirement is a good time to shop around for better rates. Take the time to compare quotes from multiple insurance companies for your home, auto, life, and health insurance policies. You might be able to find a provider that offers the same or even better coverage at a lower cost. Don’t forget to check for discounts that may apply to you, such as senior citizen discounts, bundling policies, or loyalty discounts for long-time customers.

Consider a Higher Deductible

One way to lower your premiums without losing coverage is to increase your deductible. By agreeing to pay more out-of-pocket in the event of a claim, you can significantly reduce your monthly premium payments. However, be sure you can afford the higher deductible if a claim arises, as it can lead to out-of-pocket expenses. This strategy works well for auto and homeowners insurance policies.

Utilize Medicare and Supplementary Health Insurance

For retirees, health insurance can be one of the largest expenses. If you’re eligible for Medicare, make sure you understand the different parts (A, B, C, and D) and which plans offer the best coverage for your needs. Also, consider a Medicare Supplement (Medigap) or Medicare Advantage plan, which can offer more comprehensive coverage than Original Medicare alone. By finding the right balance of Medicare and supplemental insurance, you can reduce your health-related expenses without sacrificing necessary care.

Evaluate Long-Term Care Insurance

Long-term care insurance is an important policy to have as you age, but premiums can be high. If you already have a policy in place, consider evaluating it to ensure it still meets your needs and offers sufficient coverage. If you haven’t purchased long-term care insurance yet, look into hybrid policies that combine life insurance with long-term care benefits. These policies can sometimes provide a better return on investment, as they often come with lower premiums than traditional long-term care policies.

Bundle Your Insurance Policies

Many insurance providers offer discounts for bundling multiple policies together, such as home, auto, and life insurance. By combining your policies with one company, you can save money while keeping the coverage you need. This is an easy way to cut costs without sacrificing protection.

Look for Available Discounts

Insurance companies often offer various discounts that you may not be aware of. As a retiree, you may be eligible for discounts for things like low-mileage driving, home security systems, or having a claims-free history. Be sure to ask your insurer about any potential discounts you could qualify for, as these can significantly reduce your premiums.

Consider Self-Insurance for Certain Risks

If you have enough savings, it may be worth considering self-insurance for certain risks, such as a lower level of car insurance. For example, you may decide to lower the level of your auto insurance once your car's value decreases or once you've paid off your car loan. The amount you save in premiums can be put toward building an emergency fund to cover the cost of a potential loss.

Be Proactive

Reducing your insurance costs in retirement doesn’t mean sacrificing essential coverage or leaving yourself vulnerable. By taking a proactive approach, you can lower your premiums while maintaining the protection you need.

As you age, it’s important to adjust your insurance policies to reflect your changing needs and financial situation. Taking the above steps can help to ensure your insurance fits your retirement lifestyle while keeping your costs in check. Contact us to discuss your insurance needs and concerns, and we’ll help you put together a package of policies that offer the protection you need at a premium that works for your budget.

The Importance of Reviewing Your Insurance Policies Annually in Retirement

Tue, 08 Apr 2025 14:10:06 GMT

Retirement is a time to enjoy the fruits of your labor, travel, spend time with family, and engage in hobbies. However, financial security remains a crucial aspect of ensuring a stress-free and comfortable retirement.

One often overlooked component of financial planning is the annual review of insurance policies. As your circumstances change, so do your insurance needs, making it essential to reassess your policies regularly.

1. Adjusting Coverage to Your Needs

Throughout your working years, your insurance coverage likely revolved around protecting your income, your home, and your family’s financial future. However, in retirement, these needs may shift. You may no longer need the same level of life insurance if your children are financially independent, or you may require additional health insurance coverage. An annual review helps you adjust your coverage to better reflect your current situation.

2. Managing Costs and Saving Money

Insurance premiums can be a significant expense, especially for retirees on fixed incomes. Reviewing your policies annually allows you to compare costs, seek better deals, and eliminate unnecessary coverage. For example, if your mortgage is paid off, you might need less homeowners’ insurance. Likewise, if you no longer drive frequently, adjusting your auto insurance policy can lead to savings.

3. Ensuring Adequate Health and Long-Term Care Coverage

Health care costs often rise with age, making health insurance one of the most critical policies to review. Medicare plans change annually, and your health needs may evolve, requiring adjustments in coverage. Additionally, long-term care insurance should be assessed to ensure it provides sufficient benefits for potential future needs.

4. Protecting Against Emerging Risks

As you age, new risks may arise that were not previously considered. Identity theft, cybercrime, and elder financial abuse are growing concerns. Some insurance providers offer policies to protect against these threats. Additionally, liability coverage should be reviewed if you own rental properties, travel frequently, or have substantial assets that require protection.

5. Aligning With Estate Planning Goals

Life insurance plays a key role in estate planning, ensuring that your beneficiaries receive financial support and that potential estate taxes are covered. Reviewing your policy helps ensure that it aligns with your estate planning goals and that the designated beneficiaries are up to date.

6. Understanding Policy Changes and Benefits

Insurance companies periodically update their policies, benefits, and exclusions. By reviewing your policies annually, you stay informed about changes that may impact your coverage or eligibility for certain benefits. This proactive approach helps prevent surprises when filing a claim.

Final Thoughts

Being proactive with your insurance policies can help you enjoy peace of mind and make the most of your retirement years.By taking the time each year to assess your coverage, you can make informed decisions that align with your evolving needs and priorities.

If you’re unsure about what adjustments to make, consulting with an insurance professional can provide valuable guidance. Schedule an appointment with us to review your insurance needs, and we’ll help you create a solid plan that offers protection throughout your retirement years.

The Benefits of Hybrid Life and Long-Term Care Insurance Policies

Tue, 18 Mar 2025 13:47:17 GMT

Planning for both future healthcare needs and financial security can be challenging. A hybrid life and long-term care (LTC) insurance policy offers a unique solution by combining life insurance benefits with coverage for long-term care expenses. Depending on exact needs and circumstances, this type of policy might be a smart choice for retirees and their families.

What Is Hybrid Life and Long-Term Care Insurance?

Hybrid policies blend life insurance coverage with long-term care benefits, providing financial support whether you need extended care during your lifetime or leave behind a death benefit for your beneficiaries. Unlike traditional long-term care insurance, which operates on a "use it or lose it" basis, hybrid policies ensure that your investment isn’t wasted if you never need long-term care.

Key Benefits of Hybrid Policies

Dual Protection – These policies provide coverage for both long-term care costs and life insurance payouts, ensuring that funds are used efficiently.

Guaranteed Benefits – If long-term care is not needed, your loved ones will still receive a death benefit payout.

Premium Stability – Traditional LTC insurance premiums can rise unpredictably, but hybrid policies often have fixed or limited payment periods.

Flexible Use of Funds – Policyholders can use long-term care benefits for various needs, including home care, assisted living, or nursing home care.

Potential Tax Advantages – Benefits used for qualified long-term care expenses are often tax-free, providing additional financial relief.

Is a Hybrid Policy Right for You?

A hybrid life and LTC policy is ideal for those who:

Want to ensure their long-term care needs are covered while still leaving an inheritance.
Prefer predictable premiums without the risk of losing their investment if care isn’t needed.
Are concerned about rising healthcare costs in retirement.
Have funds available for a lump-sum or limited-time premium payment.

Plan for Your Future Today

Choosing the right insurance policy is crucial for securing your financial future and protecting your loved ones. If you’re interested in learning more about hybrid life and long-term care insurance, contact us for expert guidance on finding the best coverage for your needs.

Burial Insurance vs. Traditional Life Insurance: Which Do You Need?

Tue, 11 Mar 2025 15:35:19 GMT

When planning for the future, many people consider life insurance to ensure their loved ones are financially protected after they pass away. However, not all life insurance policies serve the same purpose. Two common types are burial insurance and traditional life insurance, and understanding the differences can help you make the right choice for your needs.

What Is Burial Insurance?

Burial insurance, also known as final expense insurance, is a type of insurance policy designed specifically to cover funeral and burial costs. Policies typically range from $5,000 to $25,000, ensuring that expenses such as cremation, a memorial service, or a casket are paid for without placing a financial burden on family members.

While burial insurance provides peace of mind for covering end-of-life expenses, it has limited benefits and does not offer financial security beyond funeral costs. It won't help cover other expenses like:

Medical bills left behind
Living expenses for surviving family members
Mortgage or debt payments
Replacement income for dependents

What Is Traditional Life Insurance?

Traditional life insurance, which includes term life and whole life policies, offers a broader financial safety net for beneficiaries. These policies provide a larger death benefit, often starting at $100,000 or more, which can help with:

Paying off outstanding medical and credit card debt
Replacing lost income for surviving spouses or children
Funding education costs for children or grandchildren
Covering long-term living expenses

Unlike burial insurance, traditional life insurance is meant to provide lasting financial protection for your family rather than just covering funeral costs.

Which One Do You Need?

The best option depends on your financial situation and what you want your insurance policy to accomplish.

If your primary concern is ensuring your funeral and burial costs are covered without burdening your loved ones, burial insurance may be sufficient.

If you want to protect your family’s financial future, cover major expenses, and replace lost income, a traditional life insurance policy is the better choice.

In some cases, individuals choose to have both types of policies—burial insurance for final expenses and traditional life insurance for broader financial protection.

Using Life Insurance to Protect Your Business: Key Strategies for Business Owners

Tue, 11 Feb 2025 16:52:18 GMT

As a business owner, safeguarding your enterprise against unforeseen events is crucial for long-term success. Life insurance offers several strategies to protect your business, ensure continuity, and provide financial stability during challenging times. Two primary methods are buy-sell agreements and key person insurance.

Buy-Sell Agreements

A buy-sell agreement is a legally binding contract that outlines the procedure for transferring ownership if an owner departs due to death, disability, or retirement. Funding this agreement with life insurance ensures a smooth transition and financial security for the remaining owners and the departing owner's beneficiaries.

Types of Buy-Sell Agreements

Cross-Purchase Agreement: Each owner purchases a life insurance policy on the other owners. Upon an owner's death, the surviving owners use the policy proceeds to buy the deceased owner's share. This method is often suitable for businesses with a few owners.

Entity Purchase Agreement: The business itself owns life insurance policies on each owner. If an owner passes away, the business uses the proceeds to buy back the deceased owner's share, redistributing it among the remaining owners. This approach is typically preferred for businesses with multiple owners.

Key Person Insurance

Key person insurance is a policy that a business takes out on essential employees whose loss could significantly impact operations. The business owns the policy, pays the premiums, and is the beneficiary. If a key person dies or becomes disabled, the policy proceeds can be used to:

Cover the costs of finding and training a replacement.
Offset lost revenue resulting from the key person's absence.
Reassure clients, creditors, and investors of the business's stability.

This strategy is vital for businesses where certain individuals are integral to success, such as top executives, lead developers, or primary sales personnel.

Additional Strategies

Beyond buy-sell agreements and key person insurance, consider these life insurance strategies:

Collateral Assignment: Use a life insurance policy as collateral for business loans. In the event of the owner's death, the lender is paid from the policy proceeds, preventing financial strain on the business.

Executive Bonus Plans: Provide key employees with life insurance policies as part of their compensation package. This not only offers them personal financial protection but also serves as an incentive for retention.

Deferred Compensation Plans: Promise to pay key employees a certain amount at retirement, funded through life insurance policies. This ensures the business can meet its obligations without affecting cash flow.

Implementing life insurance strategies is essential for business owners aiming to protect their enterprises from unforeseen events. Work with us to explore your life insurance options and we can help your business remain resilient and continue to thrive.

What Happens If You Outlive Your Term Life Insurance?

Sat, 01 Feb 2025 16:59:07 GMT

Term life insurance provides coverage for a specified period, such as 10, 20, or 30 years. If you outlive your term policy, the coverage ends, and no death benefit is paid to your beneficiaries. As you approach the end of your term, it's essential to evaluate your current financial situation and consider options to maintain life insurance coverage if needed.

Options to Consider

Annual Renewable Term: Some term policies offer an option to renew annually after the initial term expires. While this allows you to extend coverage without a medical exam, premiums typically increase each year based on your age, making it a potentially costly option over time.

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Policy Conversion:

Term-to-Permanent Conversion: Many term policies include a conversion feature, allowing you to convert your term policy into a permanent life insurance policy, such as whole or universal life, without undergoing a medical examination. This option can provide lifelong coverage and build cash value, but premiums will be higher than those of the original term policy.

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Purchasing a New Policy

New Term Policy: Applying for a new term life insurance policy can be an option, especially if you're still in good health. However, premiums will be higher due to increased age, and you may need to undergo a medical exam.

Permanent Life Insurance: Alternatively, you might consider purchasing a permanent life insurance policy, which provides lifelong coverage and accumulates cash value. This option is generally more expensive but offers additional benefits.

Exploring Alternative Coverage:

Final Expense Insurance: Designed to cover end-of-life expenses, such as funeral costs and medical bills, final expense insurance offers a smaller death benefit with more affordable premiums and may not require a medical exam.

Guaranteed Universal Life Insurance: This type of policy provides coverage for a specified age (e.g., up to age 90 or 100) with lower premiums compared to whole life insurance, focusing primarily on the death benefit without significant cash value accumulation.

Take Action Now

As your term life insurance policy nears its expiration, assess your current financial needs and health status to determine the most suitable course of action. Consulting with an insurance professional can help you navigate your options and select the best solution to ensure continued financial protection for your loved ones.

Protect Your Retirement Savings with Long-Term Care Riders on Life Insurance

Tue, 14 Jan 2025 15:15:00 GMT

One of the biggest threats to a secure retirement is the cost of long-term care. According to industry reports, long-term care costs can quickly deplete retirement savings, leaving retirees financially vulnerable. However, long-term care riders on life insurance policies offer a solution that combines financial protection and flexibility. Here’s how they work and why they might be a smart addition to your retirement plan.

What Are Long-Term Care Riders?

A long-term care rider is an optional add-on to a life insurance policy that allows you to access a portion of your death benefit to cover long-term care expenses. These expenses might include costs for in-home care, assisted living facilities, or nursing homes.

If you don’t end up needing long-term care, your beneficiaries will still receive the full death benefit of your life insurance policy. This dual-purpose feature makes long-term care riders an attractive option for those seeking financial security.

How Do They Protect Your Retirement Savings?

Without a long-term care plan, you might be forced to draw down your retirement savings to cover healthcare expenses, potentially jeopardizing your financial stability. A long-term care rider offers a safety net by:

Covering Care Costs: It pays for qualified long-term care expenses, reducing the need to dip into your retirement accounts.
Preserving Your Legacy: By protecting your savings, it ensures that more of your wealth can be passed on to your loved ones.
Providing Predictable Coverage: Unlike relying on savings, a long-term care rider provides a predetermined amount of funds for care, giving you peace of mind.

Why Combine Life Insurance and Long-Term Care?

Combining life insurance with long-term care benefits simplifies financial planning. You’re essentially addressing two major concerns—providing for loved ones and protecting against healthcare costs—with one policy. Additionally, this approach can be more cost-effective than purchasing a standalone long-term care insurance policy.

Is a Long-Term Care Rider Right for You?

Long-term care riders aren’t one-size-fits-all. They typically increase your life insurance premiums, so it’s important to evaluate whether the added cost aligns with your needs and budget. Factors like your age, health, and retirement goals should all be considered.

Planning for long-term care is an essential step in protecting your retirement savings. Contact our office today to discuss whether a life insurance policy with a long-term care rider is the right choice for your financial strategy. Together, we can help ensure your retirement is secure, no matter what the future holds.

Do You Still Need Life Insurance After the Kids Are Grown?

Tue, 07 Jan 2025 14:58:30 GMT

For many families, life insurance is purchased with one primary goal: to provide financial protection for children in case something happens to the parents. But once your kids are grown, financially independent, and building lives of their own, you may wonder if keeping your life insurance policy is still necessary. While every situation is different, there are several compelling reasons to maintain life insurance coverage even after major milestones are met.

1. Protect Your Spouse’s Financial Future

Even if your children no longer rely on you financially, your spouse might. Life insurance can provide income replacement, ensuring your partner has the financial resources to maintain their lifestyle, pay off debts, or cover daily living expenses.

2. Pay Off Outstanding Debts

Do you still carry a mortgage, car loan, or credit card debt? Life insurance can help your loved ones settle these obligations after you’re gone, preventing them from facing financial strain.

3. Cover Final Expenses

The cost of a funeral and other end-of-life expenses can be significant. A life insurance policy can cover these costs, alleviating the financial burden on your family during an already difficult time.

4. Leave a Legacy

Life insurance can be an excellent way to leave a financial legacy. You can name your children, grandchildren, or even a favorite charity as beneficiaries, ensuring your policy benefits the people or causes you care about most.

5. Supplement Retirement Income

If you have a permanent life insurance policy with a cash value component, it can be used as a source of supplemental income during retirement. This feature can provide additional financial flexibility as you age.

6. Provide for Special Circumstances

If you have a child with special needs or dependents who might still rely on financial support, life insurance is an essential tool for ensuring their long-term care and well-being.

While your need for life insurance may change over time, it’s rarely a one-size-fits-all decision. A thoughtful review of your financial situation, debts, and goals can help you determine whether keeping your policy is the right choice.

If you’re unsure about the role life insurance should play in your financial plan now that your kids are grown, contact our office. We can help you assess your needs and create a strategy that aligns with your goals.

The Impact of Inflation on Your Life Insurance Needs

Tue, 17 Dec 2024 16:30:00 GMT

Inflation affects nearly every aspect of personal finance, including the value of life insurance. While many people view life insurance as a "set it and forget it" investment, failing to account for inflation can leave your family underprepared in the future. Here’s why inflation matters and what you can do to safeguard your life insurance coverage.

How Inflation Erodes Life Insurance Benefits

Life insurance policies often provide a fixed death benefit. While this might seem sufficient when the policy is purchased, inflation reduces the purchasing power of that benefit over time. For instance, a $500,000 policy bought 20 years ago would not cover the same expenses today due to rising costs in housing, education, healthcare, and everyday living.

If your life insurance policy doesn’t account for inflation, your loved ones may struggle to maintain their lifestyle or cover future expenses in the event of your passing.

Strategies to Combat Inflation’s Impact

Review Your Policy Regularly

Regularly review your life insurance coverage to ensure it aligns with your family’s financial needs and inflation trends. If the purchasing power of your death benefit has diminished, consider increasing your coverage.

Consider Policies with Inflation Riders

Some insurance providers offer inflation riders, which adjust your death benefit over time to keep pace with inflation. While these policies often come with higher premiums, they ensure your coverage maintains its value.

Supplement Your Coverage

If you already have life insurance, consider adding a supplemental policy to address the gap caused by inflation. This is especially important if your family’s financial needs have grown, such as paying for a child’s college education or covering increased healthcare costs.

Factor in Rising Costs

When determining how much life insurance you need, account for future inflation. Work with a financial advisor to project your family’s long-term financial requirements.

Stay Ahead of Inflation

Inflation is an unavoidable factor in financial planning, but proactive measures can ensure your life insurance keeps up with rising costs. Contact us to discuss your situation and to make plans for the future. By reviewing and adjusting your coverage as needed, you can protect your family’s financial security, no matter how the economy evolves.

2025 IRS Changes That Could Impact You or Your Family

Tue, 10 Dec 2024 17:44:25 GMT

As we approach 2025, it’s important to understand how adjusted tax limits and deductions could influence your financial plans. With new inflation-based updates, your budget and strategies might need some fine-tuning with regard to budgeting, saving, and protecting yourself with insurance. Here’s a simplified overview of key changes along with some tips to ensure you’re ready for the upcoming tax year.

Standard Deductions

The standard deduction is increasing slightly:

Single filers: $15,000 (up $400).
Married couples filing jointly: $30,000 (up $800).
Heads of household: $22,500 (up $600).

These adjustments could reduce your taxable income, so consider how they fit into your overall tax planning.

Marginal Tax Rates

Tax brackets remain the same, but thresholds for each rate are slightly higher. For example, the top rate of 37% applies to single filers earning over $626,350 or married couples earning over $751,600. Other brackets are organized as follows:

35% for incomes over $250,525, or $501,050 for married couples filing jointly
32% for incomes over $197,300, or $394,600 for married couples filing jointly
24% for incomes over $103,350, or $206,700 for married couples filing jointly
22% for incomes over $48,475, or $96,950 for married couples filing jointly
12% for incomes over $11,925, or $23,850 for married couples filing jointly
10% for incomes $11,925 or less, or $23,850 or less for married couples filing jointly

Review where your income falls to anticipate potential tax obligations.

Flexible Spending Accounts (FSAs)

The contribution limit for health FSAs increases to $3,300, with a carryover limit of $660. If you use an FSA, adjust your contributions to take advantage of these higher limits.

Estate and Gift Tax

The estate tax exclusion increases to $13,990,000, and the annual gift tax exclusion rises to $19,000. If you’re planning estate gifts, this may present more opportunities for tax-efficient giving.

What to Do Next

Update Your Budget: Reflect these changes in your financial plans, including savings, retirement contributions, and tax withholding.
Review Insurance: Adjust your life and health insurance coverage to match your updated budget and tax outlook.
Plan Strategically: Consult with a tax professional to ensure you’re making the most of these adjustments.

By staying informed and proactive, you can navigate these updates and keep your financial goals on track for 2025. For information on your insurance policies in particular, contact us so that we can help you evaluate your current strategies and make any necessary adjustments.

Leveraging Permanent Life Insurance Policies to Provide Tax-Free Income Options

Tue, 19 Nov 2024 15:14:38 GMT

For many retirees, finding ways to generate tax-free income in retirement is an essential part of maintaining financial security. Permanent life insurance policies, such as whole life or universal life, can offer unique opportunities for tax-free income, providing an alternative income stream that keeps more money in your pocket while potentially offering valuable tax benefits.

Building Cash Value for Tax-Free Access

One of the most powerful features of permanent life insurance is its cash value component. Unlike term life insurance, which only offers a death benefit, permanent life insurance accumulates cash value over time, which grows tax-deferred. This means you can access this cash value without paying income tax on the growth, provided you follow IRS guidelines.

You can access your policy’s cash value through withdrawals or policy loans. While withdrawals reduce your death benefit, loans do not, as long as they’re repaid. Many retirees use these tax-free loans as supplemental income, knowing they aren’t subject to the same tax burdens as other retirement income sources, such as 401(k) or IRA distributions.

Supplementing Retirement Income and Reducing Tax Impact

Using a permanent life insurance policy as a tax-free income source in retirement can help you reduce taxable withdrawals from other accounts, like a traditional IRA. This strategy allows you to stay within a lower tax bracket and avoid costly Medicare surcharges, which are often based on taxable income.

Moreover, since permanent life insurance income doesn’t count as adjusted gross income, it can help reduce taxes on Social Security benefits. For retirees looking to keep their tax bill low, these tax-free benefits make permanent life insurance an attractive tool for long-term planning.

Is Tax-Free Income from Life Insurance Right for You?

While permanent life insurance offers valuable tax-free income options, it’s important to evaluate if this strategy aligns with your financial plan. Policy loans and withdrawals have implications, and understanding them ensures you’re making the best decision for your retirement goals.

If you’re interested in learning more about how permanent life insurance can play a role in your tax-free retirement income strategy, contact us today. We’ll work with you to determine the best solutions for building a tax-efficient retirement. Schedule a consultation to explore your options for a secure financial future.

Insurance Can Provide Solutions During Market Fluctuations

Tue, 12 Nov 2024 13:31:18 GMT

As election season approaches, it’s common for markets to experience a bit of volatility, leaving many people feeling uncertain about their retirement income plans. However, while market fluctuations can create temporary stress, strategic planning can keep your retirement goals on track and help protect your financial future. Understanding how market shifts impact your retirement investments and insurance solutions can provide clarity and more confidence.

Market Volatility and Retirement Investments

Market fluctuations can directly affect retirement savings held in stocks, bonds, and mutual funds, potentially reducing the value of your portfolio in the short term. For those nearing retirement, these changes may seem worrisome, as there’s less time to recover from market dips. However, market volatility is part of the natural investment cycle, and retirement strategies often include a blend of assets to help manage these shifts over time.

For younger investors or those still a few years from retirement, staying the course with a diversified portfolio often yields positive results over the long term, as markets historically rebound. Regularly reviewing and rebalancing your portfolio is a wise approach, helping you stay aligned with your risk tolerance and retirement goals.

The Role of Insurance in Market Downturns

Insurance products, such as annuities and whole life insurance, can offer protection against market volatility by providing guaranteed income* sources that are not tied to market performance. Fixed annuities, for example, offer a set payout that remains steady regardless of economic fluctuations, making them a valuable component in protecting retirement income. Whole life insurance also offers a stable cash value component, which can provide liquidity without market exposure, creating a buffer during downturns.

Plan for the Long Term

While market fluctuations may cause short-term worries, focusing on a balanced and diversified approach can help secure your retirement over the long term. Insurance solutions designed for retirement can help provide steady income streams and minimize risk, helping you feel more confident in uncertain times.

If you’d like to discuss how market conditions might impact your retirement income plan or explore insurance options that protect your income, schedule an appointment with us today. We’re here to guide you through every step, helping to ensure that your retirement remains on track regardless of market changes.

*Annuities contain limitations including withdrawal charges, fees and a market value adjustment which may affect contract values.

Prepare for the Reality of Healthcare Costs in Retirement

Tue, 08 Oct 2024 13:40:06 GMT

When planning for retirement, many people focus on ensuring they have enough savings to cover daily expenses and leisure activities. However, one area that often gets overlooked is healthcare. It’s important to recognize that healthcare will likely make up a significant portion of your retirement budget, and failing to account for this could lead to financial strain later on.

The True Cost of Healthcare in Retirement

Healthcare expenses can add up quickly. Even with Medicare, retirees are responsible for premiums, copays, deductibles, and the cost of medications and medical equipment. For example, a healthy 65-year-old couple who retired in 2023 is expected to spend nearly 70% of their lifetime Social Security benefits just on healthcare. This staggering figure highlights why it’s essential to plan carefully for medical costs in retirement.

Medicare will cover some of your healthcare needs, but it doesn’t cover everything. Premiums for Medicare Parts B and D, as well as supplemental insurance, can take a bite out of your monthly income. On top of that, out-of-pocket costs such as copays and deductibles for doctor visits, treatments, and hospital stays can add up fast. Prescription drugs are another major expense, and the cost of medications can vary significantly depending on your health and insurance plan.

Medicare Annual Enrollment: A Key Time for Planning

Each year, Medicare’s Annual Enrollment Period (AEP) runs from October 15 to December 7. During this time, it’s crucial to carefully evaluate your Medicare plan options. Your health and financial situation may change from year to year, so it’s important to review your current plan and compare it with other available options to ensure you’re getting the best coverage for your needs.

Consider factors such as:

Monthly premiums for Medicare Parts B and D.
Copays and deductibles for services and medications.
Prescription drug coverage, especially if your medications have changed or new generics are available.
Supplemental insurance or Medigap plans to help cover out-of-pocket costs.

Taking the time to review your options during Medicare’s Annual Enrollment can help you avoid unforeseen expenses and ensure you’re prepared for any healthcare challenges you may face during retirement.

Don’t Wait – Plan for Healthcare Costs Now

Good retirement planning isn’t just about saving enough for day-to-day living; it’s about making sure you can cover the rising costs of healthcare. Without proper planning, medical expenses could eat into your savings and affect your stability in retirement.

Healthcare costs will be a big part of your retirement budget, but you don’t have to navigate these expenses alone. Contact your insurance broker as your target retirement date approaches and keep up with us throughout your retirement years. We can help you learn more about your Medicare options and other insurance products that can help cover unforeseen expenses.

Eased Inflation Brings Some Relief, But Retirement Can Still Bring Surprises

Tue, 01 Oct 2024 13:46:28 GMT

Recent improvements in the economy, including easing inflation, have provided some relief for working individuals. However, many still face challenges in reaching their goals. A recent survey from Goldman Sachs reveals that while conditions are better, many workers still struggle with the unexpected expenses and challenges that come with both day-to-day living and preparing for retirement.

The Reality of the "Financial Vortex"

Goldman Sachs research refers to the "financial vortex" as a combination of personal and economic pressures that make it difficult for individuals to maintain confidence. This vortex can be triggered by rising living costs, debt, or unexpected life events, and it often throws people off course—whether it’s covering basic needs or trying to save for the future.

The Unexpected in Retirement

Even with the best planning, retirement can bring surprises. Many factors, such as high monthly expenses, unexpected medical bills, and caregiving responsibilities, can disrupt even the most carefully laid plans. From unforeseen home repairs to health emergencies, retirees face many challenges that can eat into savings and make it difficult to stay financially secure.

Key challenges include:

High Living Costs: Even in retirement, the cost of everyday essentials like housing, groceries, and healthcare can rise.
Unplanned Expenses: Unexpected events, such as a medical emergency or a major car repair, can quickly drain savings.
Supporting Family: Many retirees also find themselves supporting aging parents or children, which adds another layer of responsibility.

Insurance: A Key to Preparing for the Unexpected

One of the best ways to prepare for unexpected costs in retirement is to ensure you have the right insurance coverage. A solid insurance plan can help you manage everything from rising medical costs to potential long-term care needs. With the right insurance options in place, you can protect your savings and ensure that unforeseen events won’t derail your retirement lifestyle.

Some key insurance options to consider:

Health Insurance: Medicare may not cover all healthcare costs. Supplemental insurance can help fill the gaps and cover out-of-pocket expenses like copays, deductibles, and prescriptions.
Long-Term Care Insurance: As healthcare needs increase with age, long-term care insurance can help cover the costs of assisted living, nursing homes, or in-home care.
Life Insurance: Some life insurance policies offer cash-value components that can be used in retirement if needed or provide support for loved ones after you’re gone.

Take Action Now to Protect Your Retirement

While you can’t control everything that happens in retirement, you can take steps now to protect yourself from surprises. Contact us today to discuss options that will help you prepare for the unexpected. With the right coverage, we can help you enter retirement with more confidence, knowing that you have a plan in place for whatever life throws your way.

How the 2025 Social Security COLA Affects Your Retirement

Tue, 17 Sep 2024 12:50:37 GMT

The Social Security cost-of-living adjustment (COLA) for 2025 is expected to be 2.6%, reflecting the current economic conditions. While this increase is designed to help retirees keep up with rising costs, it’s crucial to understand how this adjustment may impact your retirement income and lifestyle.

This projected 2.6% COLA is slightly lower than the 3.2% increase in 2024 and is consistent with the average adjustments over the past two decades. The decrease suggests a stabilizing economy, with inflation levels more moderate than in recent years. However, it's important to remember that this figure is still a projection; the official COLA will be determined later in the year based on inflation data from the third quarter.

With this modest increase, it’s a good time to re-evaluate your budget. Even a slight variation in the COLA can affect your purchasing power, making it essential to assess whether your current income will continue to support your needs as living costs rise.

Adjusting to the 2025 COLA

The 2025 COLA highlights the importance of regularly revisiting your retirement plans. As everyday expenses such as housing, healthcare, and groceries continue to rise, ensuring your budget keeps pace with inflation is vital for maintaining your lifestyle.

Consider how this adjustment will influence your overall financial picture. For instance, while Social Security is a significant part of many retirees' income, it’s only one piece of the puzzle. It’s worth thinking about how this increase interacts with other sources of income, such as pensions or savings, and how it will affect your ability to cover essential expenses. Consider whether additional forms of insurance might be necessary to protect your nest egg and help you reach your goals.

Preparing for the Future

Staying informed about changes in Social Security is key to making informed decisions about your future. By understanding the implications of this adjustment, you can better prepare and ensure that your retirement years are as comfortable and secure as possible.

If you’re looking for more information on how to navigate these changes, don’t hesitate to reach out for assistance. It's important to take proactive steps to protect your well-being.

How Life Insurance Can Support Your Retirement Goals

Tue, 10 Sep 2024 15:13:43 GMT

When planning for retirement, many people focus on savings, investments, and pensions, often overlooking life insurance as a key component. However, life insurance can play a crucial role in supporting your retirement goals, offering financial security and flexibility in various ways.

1. Supplementing Retirement Income

Permanent life insurance policies, such as whole life or universal life, accumulate cash value over time. This cash value can be accessed through policy loans or withdrawals, providing a source of supplemental income during retirement. Unlike other retirement income sources, such as Social Security or pensions, the funds from your life insurance policy are typically tax-free, which can help you manage your tax burden more effectively.

2. Protecting Your Loved Ones

Life insurance ensures that your spouse or other dependents are financially protected if you pass away during retirement. The death benefit can be used to cover any outstanding debts, such as a mortgage, medical bills, or even funeral expenses, ensuring your loved ones are not burdened with financial stress during a difficult time. This peace of mind allows you to enjoy your retirement years knowing that your family will be cared for, even if the unexpected happens.

3. Leaving a Legacy

If leaving an inheritance for your children, grandchildren, or a favorite charity is important to you, life insurance can help you achieve this goal. The death benefit from a life insurance policy can be used to provide a tax-efficient way to transfer wealth to your heirs or make a charitable contribution, allowing you to leave a lasting legacy.

4. Long-Term Care Planning

Some life insurance policies offer riders that can be used to cover long-term care expenses, which are often not covered by traditional health insurance or Medicare. This feature can help protect your retirement savings from being depleted by the high costs of long-term care, allowing you to maintain financial stability throughout your retirement years.

Schedule a Consultation to Learn More

Life insurance can be a powerful tool in your retirement planning strategy. To learn more about how life insurance can support your retirement goals, schedule an appointment with us. Together, we can create a comprehensive plan that aligns with your financial objectives and provides security for your future.

New HRA and HSA Contribution Limits for 2025

Tue, 06 Aug 2024 14:57:59 GMT

As healthcare costs continue to climb, it's essential to leverage all available resources. For those using Health Savings Accounts (HSAs) or Excepted Benefit Health Reimbursement Arrangements (HRAs), there’s encouraging news: contribution limits for these tax-advantaged accounts have been increased for the coming year.

The Internal Revenue Service (IRS) recently released the inflation-adjusted contribution limits for HSAs and the maximum allowances for HRAs for 2025.

For individuals with self-only coverage under a high deductible health plan (HDHP), the HSA contribution limit will rise to $4,300 in 2025, up from $4,150 in 2024. For those with family coverage under an HDHP, the limit will increase to $8,550 from $8,300. The IRS defines an HDHP as a plan with a minimum annual deductible of $1,650 for self-only coverage or $3,300 for family coverage. Additionally, the total annual out-of-pocket expenses, including deductibles and co-payments (but excluding premiums), cannot exceed $8,300 for self-only coverage or $16,600 for family coverage.

HSAs are particularly beneficial because they are funded with pretax dollars, providing significant tax advantages. The IRS limits include both employee and employer contributions. Employees aged 55 and older can also make an additional catch-up contribution of $1,000 annually.

Excepted Benefit HRAs allow employers to reimburse employees for certain medical expenses not covered by primary group health plans, such as vision or dental care, coinsurance, and co-payments. These HRAs act as a supplementary resource for medical expenses. For 2025, the contribution limit for employers to an employee’s excepted benefit HRA will increase to $2,150, up from $2,100 in 2024.

These changes are tied to the Consumer Price Index (CPI), so adjustments in contribution limits are common during periods of inflation. These updates are designed to help employees better manage their healthcare expenses by providing them with adequate resources.

For more information about these benefits or to explore other group healthcare options, please reach out to us. Our knowledgeable health insurance specialists can assist your company in selecting the best plans for your employees, ensuring a healthier and more satisfied workforce.

Essential Types of Insurance to Consider as You Approach Retirement

Tue, 06 Aug 2024 14:50:28 GMT

As you near retirement, it's crucial to evaluate and adjust your insurance coverage to ensure you are fully protected in this new phase of life. Here are key types of insurance you should consider to safeguard your health, finances, and overall well-being as you transition into the next phase of your life.

1. Long-Term Care Insurance

One of the most significant risks retirees face is the potential need for long-term care. This type of insurance covers the costs of assisted living, nursing home care, or in-home care services that aren't covered by Medicare. Since these expenses can quickly deplete your savings, long-term care insurance provides financial protection and peace of mind, ensuring you receive the care you need without burdening your loved ones.

2. Medicare Plans and Pre-65 Health Insurance

If you plan to retire before age 65, you won’t be eligible for Medicare yet. In this case, you’ll need an alternative health insurance plan to cover medical expenses. Consider purchasing a private health insurance policy or exploring options through the Health Insurance Marketplace. Once you turn 65, Medicare will become your primary health insurance, and you'll need to choose between Original Medicare (Parts A and B) and Medicare Advantage plans (Part C). Additionally, consider Medicare Part D for prescription drug coverage.

3. Supplemental Health Insurance Plans

Even with Medicare, there are gaps in coverage that can lead to significant out-of-pocket expenses. Supplemental health insurance plans, such as Medigap, can help cover these gaps, including copayments, coinsurance, and deductibles. Additionally, dental, vision, and prescription drug plans are essential to ensure comprehensive health coverage, as these services are not fully covered by Medicare.

4. Travel Insurance

If you plan to travel extensively during retirement, travel insurance is a wise investment. This insurance covers unexpected events such as trip cancellations, medical emergencies abroad, and lost luggage. Having travel insurance can provide peace of mind, allowing you to enjoy your adventures without worrying about unforeseen expenses.

And… Make Sure to Review All Deductibles

As you reassess your insurance needs, it's important to consider the deductibles on your existing policies, including auto insurance, homeowners insurance, and health insurance. Ensure that your budget can accommodate these expenses in retirement, as higher deductibles can lead to significant out-of-pocket costs in the event of a claim. Adjusting your deductibles to a level that balances affordability and coverage can help protect your financial stability.

Planning for retirement involves more than just ensuring you have enough savings; it also requires a thorough review of your insurance coverage to protect against potential risks. By taking these steps, you can enjoy a secure and worry-free retirement. For personalized advice and comprehensive insurance solutions, call our office to schedule an appointment as you prepare for retirement.

Why Life Insurance is Essential for Both Partners in a Marriage

Tue, 09 Jul 2024 18:37:20 GMT

When it comes to life insurance, many couples focus on insuring the primary breadwinner. However, for families with one stay-at-home spouse, it’s equally crucial to carry life insurance on both partners. The contributions of the stay-at-home spouse, while not reflected in a paycheck, are invaluable and can have significant financial implications if lost.

The Economic Value of a Stay-at-Home Spouse

A stay-at-home spouse often handles a myriad of responsibilities that would otherwise come with substantial costs. These include childcare, housekeeping, meal preparation, transportation, and more. If the stay-at-home spouse were to pass away, the surviving partner would need to either take on these duties or pay for services, which could be financially overwhelming. The economic value of these contributions can easily add up to tens of thousands of dollars per year.

Childcare and Education

One of the most critical roles of a stay-at-home spouse is providing childcare. If they were no longer there, the cost of professional childcare can be staggering, especially for young children. Additionally, the stay-at-home spouse often plays a significant role in the children’s education and extracurricular activities. Losing this support can disrupt the children's routine and emotional stability, making professional help or additional after-school programs necessary.

Household Management

Managing a household is a full-time job. Cooking, cleaning, grocery shopping, and running errands are daily tasks that keep a household running smoothly. Hiring professionals to handle these tasks can be expensive. Having life insurance on the stay-at-home spouse ensures that these responsibilities can continue to be managed without causing financial strain on the family.

Emotional Stability and Time

The loss of a spouse is an emotional tragedy that requires time for grieving. Life insurance can provide the financial cushion needed for the surviving spouse to take time off work to support the children and themselves emotionally. This period of adjustment is crucial for the family's long-term well-being and stability.

Financial Planning

Including life insurance for a stay-at-home spouse in your financial planning demonstrates foresight and care for the family’s future. It ensures that in the event of a tragedy, the surviving partner is not burdened with insurmountable financial responsibilities on top of their grief.

By insuring both partners, couples can ensure that their family's needs are met, no matter what the future holds. To discuss these concerns in more detail, make an appointment with us. We can help you determine your life insurance needs and select a policy that provides the best possible protection for your family.

Life Insurance Plays a Critical Role in Estate Planning

Tue, 02 Jul 2024 23:57:24 GMT

Life insurance is a crucial component of estate planning, offering a range of benefits that ensure your loved ones are taken care of after your passing. By incorporating life insurance into your estate plan, you can create a legacy and provide for your loved ones while preventing undue hassles for them.

Covering Estate Taxes

One significant advantage of life insurance in estate planning is its ability to cover estate taxes. When an individual passes away, their estate may be subject to federal and state estate taxes, which can be substantial. Life insurance proceeds can be used to pay these taxes, preventing the need for heirs to sell off assets or property to cover the tax bill. This ensures that your estate remains intact and can be passed on to your beneficiaries as intended.

Providing Liquidity

Life insurance provides immediate liquidity to your estate, which is essential for covering various expenses that arise after death, such as funeral costs, outstanding debts, and daily living expenses for your family. This immediate cash flow can be particularly beneficial if your estate is primarily composed of non-liquid assets like real estate or business interests. Without this liquidity, your heirs might face financial difficulties while waiting for other parts of the estate to be settled.

Ensuring Financial Security for Loved Ones

Beyond covering taxes and providing liquidity, life insurance ensures that your loved ones are financially secure according to your specific wishes. For instance, you can set up a life insurance trust to manage and distribute the proceeds to your beneficiaries over time, which can be particularly useful for minors or dependents with special needs. This way, you can have peace of mind knowing that your family’s financial future is protected and that the funds will be used responsibly.

Flexibility in Estate Planning

Life insurance offers flexibility in estate planning, allowing you to customize the policy to suit your unique needs and goals. You can designate specific beneficiaries, adjust coverage amounts, and even include clauses to address particular circumstances. This flexibility ensures that your estate plan aligns with your overall vision and provides the most benefit to your heirs.

Incorporating life insurance into your estate plan is a strategic move that can safeguard your estate and provide your family with the resources they need to navigate the future securely. Work with us closely as you plan your estate, so we can help you determine the best life insurance strategy for your estate planning needs.

The Impact of Health Insurance Costs on Retirement Savings

Tue, 18 Jun 2024 14:41:04 GMT

As you plan for retirement, one of the most significant factors to consider is health insurance costs. Rising premiums can greatly impact your retirement savings and overall financial security. Understanding the influence of health insurance costs and implementing strategies to mitigate them has become crucial for ensuring a comfortable retirement.

Rising Health Insurance Premiums

Health insurance premiums have steadily increased over recent years, and this trend is expected to continue. For retirees, particularly those not yet eligible for Medicare, securing affordable health insurance can be a major challenge. Premiums, deductibles, and out-of-pocket expenses can consume a substantial portion of retirement savings, leaving less money for other essential needs and lifestyle desires.

Impact on Retirement Savings

High health insurance costs can significantly reduce the amount of money available in your retirement accounts. If a significant portion of your retirement income is allocated to paying premiums, it can erode your savings faster than anticipated. This can lead to a situation where you might need to withdraw more from your retirement accounts than planned, potentially depleting your savings prematurely.

Additionally, unexpected medical expenses can also force retirees to dip into their savings, further impacting their financial stability. With increased longevity, the risk of encountering such expenses over a longer period becomes more pronounced.

Strategies to Mitigate Health Insurance Costs

Plan Early. Start planning for health insurance costs well before retirement. Include these expenses in your retirement budget and consider potential increases in premiums.

Explore Employer-Sponsored Plans. If your employer offers retiree health benefits, take advantage of them. These plans can often provide better coverage at lower costs compared to individual plans.

Health Savings Accounts (HSAs). Contribute to an HSA during your working years. HSAs offer triple tax benefits – contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. These funds can be used to pay for health insurance premiums and other healthcare costs in retirement.

Medicare and Supplemental Plans. Once eligible, ensure you understand Medicare and the various supplemental plans available. Supplemental plans, like Medigap, can help cover expenses not included in standard Medicare, potentially lowering your overall healthcare costs.

Healthy Lifestyle. Investing in a healthy lifestyle can reduce healthcare expenses in the long run. Preventative care, regular exercise, and a balanced diet can decrease the likelihood of chronic illnesses and high medical costs.

Work with us as your expected retirement date approaches and then regularly throughout your retirement so that we can help you balance your budget. Proper planning helps to ensure that healthcare spending will not overshadow the enjoyment and security of your retirement years.

Estate Planning and Life Insurance: Ensuring Your Legacy

Tue, 11 Jun 2024 14:09:29 GMT

Estate planning is an important process for securing your legacy and helping to ensure that your assets are distributed according to your wishes. Life insurance provides one of the most effective tools in this process, fulfilling a number of goals.

Financial Security for Beneficiaries

Life insurance can provide immediate liquidity upon your passing, helping to ensure that your beneficiaries have the financial resources they need during a difficult time. This can be particularly important if your estate includes illiquid assets like real estate or a family business, which might take time to sell or transfer. The death benefit from a life insurance policy can cover living expenses, educational costs, and other immediate needs, providing more financial confidence for your loved ones.

Covering Estate Taxes

Estate taxes can significantly reduce the value of the assets you intend to leave behind. Depending on the size of your estate, federal and state taxes can be substantial. Life insurance can be used to cover these taxes, helping to ensure that your beneficiaries receive the full value of their inheritance. By setting up an irrevocable life insurance trust (ILIT), you can keep the insurance proceeds out of your taxable estate, further reducing the tax burden.

Smooth Transfer of Assets

Life insurance policies can also simplify the transfer of assets. By naming specific beneficiaries, you can ensure that the death benefit is paid directly to them, bypassing the probate process. This not only speeds up the distribution but also keeps the details of the inheritance private. Moreover, life insurance can be used to equalize inheritances among beneficiaries. For instance, if one child inherits the family business, a life insurance policy can provide an equivalent amount to another child, helping to ensure fair distribution of assets.

Ensuring Your Wishes Are Followed

By incorporating life insurance into your estate plan, you can achieve more confidence knowing that your loved ones will be taken care of after you’re gone. To maximize the benefits of life insurance in your estate plan, it's important to work with a knowledgeable estate planning attorney and financial professional. They can help you choose the right type of policy, determine the appropriate coverage amount, and structure the policy to align with your overall estate planning goals.

Safeguarding Your Business and Loved Ones with Key Person Insurance

Tue, 21 May 2024 14:38:12 GMT

As a business owner, you understand the importance of protecting your company's assets and ensuring its continued success. One crucial aspect of this protection is securing key person insurance, also known as key employee insurance or key man insurance.

What is Key Person Insurance?

Key person insurance is a type of life and disability insurance policy taken out by a business on the life or health of an essential employee. This employee could be the owner, founder, key executive, or someone whose skills, knowledge, or leadership are vital to the company's operations and success.

The significance of key person insurance lies in its ability to mitigate financial risks associated with losing a key individual. Here's how it works…

Financial Protection for the Business. In the unfortunate event of the death or disability of a key employee, key person insurance provides the business with a financial safety net. The policy pays out a death benefit or disability benefit to the company, helping to cover expenses such as hiring and training a replacement, paying off debts, or compensating for lost revenue during the transition period.

Maintaining Business Continuity. Losing a key employee can disrupt business operations and even threaten the viability of the company. Key person insurance helps ensure business continuity by providing the necessary funds to keep the company running smoothly during a challenging time. This allows the business to maintain its operations, meet financial obligations, and continue serving customers without significant interruption.

Protecting the Interests of Stakeholders. Key person insurance also protects the interests of stakeholders, including business partners, creditors, and shareholders. By providing financial stability and preventing a sudden loss of value in the company, key person insurance helps safeguard their investments and interests in the business.

Assisting with Succession Planning. For businesses with plans for succession or buy-sell agreements in place, key person insurance plays a vital role. The proceeds from the policy can be used to fund buyouts or transfers of ownership in the event of a key person's departure, ensuring a smooth transition of leadership and ownership.

If you haven't already considered key person insurance for your business, now is the time to explore this valuable protection. Call us to schedule an appointment, and we’ll review your business operations and needs so that we can adequately protect your livelihood, your stakeholders, and your future.

Enhancing Your Life Insurance Coverage with Riders and Additional Options

Tue, 14 May 2024 15:31:50 GMT

When it comes to life insurance, you have more options than you might realize. Beyond the basic coverage provided by your policy, there are additional features called riders that can greatly enhance your protection. Here's a look at some common life insurance riders and how they can benefit you.

Accelerated Death Benefit Rider. This rider allows you to access a portion of your death benefit if you are diagnosed with a terminal illness. Instead of waiting for the policy to pay out after your passing, you can use the funds to cover medical expenses or other costs associated with your illness. This can provide much-needed financial relief during a difficult time.

Waiver of Premium Rider. If you become disabled and are unable to work, paying your life insurance premiums might become a challenge. The waiver of premium rider kicks in, relieving you of the obligation to pay premiums while you're disabled. This ensures that your coverage remains intact even when you're unable to work, offering peace of mind for you and your loved ones.

Guaranteed Insurability Rider. Life changes, and so do your insurance needs. With this rider, you have the option to purchase additional coverage at certain points in the future without the need for a medical exam or evidence of insurability. This is particularly valuable if you anticipate significant life events like marriage, the birth of a child, or a career change that might necessitate more coverage.

These riders are just a few examples of how you can customize your life insurance policy to better suit your needs. By adding riders, you can tailor your coverage to provide the protection you want exactly when you need it.

For instance, imagine you're diagnosed with a terminal illness. With an accelerated death benefit rider, you can access funds to cover medical bills or enjoy quality time with your loved ones without worrying about finances. Or, if you become disabled and can't work, the waiver of premium rider ensures your coverage continues without any financial strain. And during other major life events, the guaranteed insurability rider offers flexibility as your life evolves.

When considering life insurance, be sure to explore these options with your insurance broker to build a policy that meets your specific needs and circumstances. We will discuss these issues in more detail at your next appointment so that together, we can create a package of protection that continues to serve you well into the future.

Life Insurance for Different Life Stages: Tailoring Your Policy to Your Needs

Tue, 16 Apr 2024 18:59:57 GMT

Life insurance isn't one-size-fits-all. Just as your life evolves over time, so too should your insurance coverage. Whether you're starting your career, raising a family, or enjoying retirement, understanding how to tailor your life insurance policy to your current life stage is essential for ensuring adequate protection for you and your loved ones.

Starting Out: Young Professionals

As a young professional just starting out in your career, life insurance might not be at the top of your priority list. However, this is the ideal time to secure coverage, as premiums are typically lower when you're young and healthy. A term life insurance policy can provide affordable protection for your loved ones in the event of your untimely passing while also allowing flexibility to upgrade to permanent coverage later on.

Growing Family: Parents and Homeowners

For parents and homeowners, life insurance becomes even more crucial. You want to ensure your family is financially secure and able to maintain their standard of living if something were to happen to you. Consider a combination of term and permanent life insurance to cover immediate expenses, such as mortgage payments and childcare costs, as well as long-term financial needs like college tuition and inheritance planning.

Midlife Milestones: Empty Nesters and Career Climbers

As your children grow up and become financially independent, your insurance needs may shift. You might choose to adjust your coverage to reflect your changing financial obligations and goals. This could mean reducing coverage amounts or transitioning to a policy with cash value accumulation features, such as whole life insurance, to supplement retirement savings and leave a legacy for your heirs.

Retirement: Golden Years and Legacy Planning

In retirement, life insurance can still play a valuable role in your financial plan. While your need for income replacement may decrease, you may still want coverage to cover final expenses, estate taxes, or leave a financial legacy for your loved ones. An insurance policy with guaranteed death benefits, such as universal life insurance, can provide peace of mind and help protect your assets for future generations.

Review and Adjust Regularly

Regardless of your life stage, it's essential to review your life insurance coverage regularly to ensure it continues to meet your needs. Major life events, such as marriage, divorce, birth of a child, or career changes, may warrant updates to your policy. Working with a trusted life insurance broker can help you incorporate these changes into your long-term plans and make informed decisions about your coverage.

Life insurance is a vital component of your financial plan at every stage of life. Meet with us now and regularly in the future so that we can help you evaluate and adjust your life insurance policy to ensure that it truly meets your needs.

How to Safeguard Against an IRS Audit

Mon, 08 Apr 2024 22:01:58 GMT

Receiving a notice from the IRS for an audit can be a nerve-wracking experience. The time, effort, and potential financial consequences make it a situation you'd rather avoid. Fortunately, many audits stem from avoidable errors. Here's how you can avoid the five most common audit triggers and keep your tax returns in the clear.

Ensure You Report All Income

Income discrepancies are a major red flag for the IRS. While taxes are typically withheld from regular wages, other sources of income, like business earnings or capital gains, may not have taxes automatically deducted. Be vigilant in accurately reporting all sources of income, whether you receive a 1099 form or not. Document and report any non-wage income meticulously to prevent underreporting.

Explain Significant Income Fluctuations

Significant fluctuations in income from year to year can draw the IRS's attention. If your income varies widely, provide explanations or notes with your tax filings. Whether it's due to changes in business circumstances or other factors, clarifying these fluctuations can help prevent misunderstandings.

Document Business Losses Carefully

While it's common for businesses to experience losses, chronic or substantial losses can raise eyebrows at the IRS. Keep detailed records of your business finances, especially in the early years. Additionally, if you operate a sole proprietorship, ensure your business activities are distinguishable from hobbies to justify loss deductions.

Support Your Deductions

Certain deductions, such as large charitable contributions or home office expenses, may attract scrutiny. Be prepared to provide supporting documentation for all deductions claimed on your tax return. Thorough records can help substantiate your deductions and alleviate concerns during an audit.

Accurately Value Assets

For estate tax returns, undervalued assets are a common trigger for audits. When valuing assets without a public market price, seek multiple appraisals from qualified professionals. Having multiple valuations can strengthen your position and minimize the risk of an audit.

Remember, even if you enlist professional help for your taxes, the responsibility for accuracy ultimately lies with you. Review your tax returns carefully before signing them to ensure everything is in order.

Understanding the Different Types of Audits

IRS audits come in three main varieties, each with its own level of intensity.

Correspondence Audit. Conducted through the mail, this audit is often triggered by missing information or minor discrepancies.

Office Audit. Requires a visit to an IRS office, typically for more complex tax returns or multiple disputed items.

Field Audit. The most comprehensive type, conducted in person at your home or business, involves a thorough examination of your return.

Regardless of the type, the IRS will provide a written request for specific documents beforehand. By being proactive and thorough in your tax reporting, you can minimize the risk of an audit and ensure a smoother process if one does occur.

Credit Ratings Are Still Important in Retirement!

Mon, 11 Mar 2024 22:30:10 GMT

As retirement approaches, many people shift their focus from building credit to managing assets and ensuring financial stability. However, protecting your credit rating remains crucial, even as you enter your retirement years. While it might seem less relevant once your home and car are paid off, your credit score can still impact various aspects of your financial life.

Consider Your Insurance Rates

First and foremost, your credit rating can affect insurance rates. Insurance companies often use credit scores as one of the factors in determining premiums for policies such as auto and homeowners insurance. A higher credit score generally correlates with lower insurance premiums, as it indicates to insurers that you're less likely to file claims. By maintaining a good credit rating, retirees can potentially save money on insurance costs, helping to stretch their retirement budget further.

A Solid Credit Score Offers Protection During Emergencies

Additionally, having a solid credit score can be essential if you need to take out a loan for emergency expenses during retirement. While ideally, retirees should have sufficient savings to cover unexpected costs, sometimes unforeseen circumstances arise that require additional funds. Whether it's medical expenses, home repairs, or unexpected travel, having access to credit can provide a safety net. A good credit score makes it easier to qualify for loans with favorable terms, such as lower interest rates and higher borrowing limits.

Credit Ratings Impact Many Areas of Life

Furthermore, your credit history can impact other aspects of your financial life, such as renting an apartment or accessing certain financial services. Landlords often check credit scores as part of the rental application process, and a poor credit history could potentially hinder your ability to secure suitable housing in retirement. Additionally, some financial institutions may offer preferential treatment or better rates to customers with higher credit scores.

By responsibly managing your credit and staying vigilant about protecting your credit rating, you can help ensure a smoother and more secure transition into retirement. Remember that we’re here for you as you compare insurance rates and prepare for retirement. Schedule an appointment with us to discuss your situation in more detail, and we’ll help you safeguard your future.

4 Types of Insurance to Consider as You Prepare for Retirement

Mon, 11 Mar 2024 22:23:58 GMT

As retirement approaches, ensuring financial stability becomes paramount to long-term satisfaction with your life path. One crucial aspect often overlooked is insurance coverage. While many individuals focus on savings and investments, neglecting insurance can leave retirees vulnerable to unexpected expenses that can pop up at any time. Here are four essential forms of insurance retirees should consider:

Health Insurance. As individuals age, healthcare expenses tend to increase. Medicare provides coverage for those 65 and older, but it doesn't cover everything. Retirees should consider supplemental insurance plans, such as Medigap policies, to fill the gaps in Medicare coverage. Additionally, long-term care insurance can help cover expenses for services not covered by Medicare, such as nursing home care or in-home assistance.

Life Insurance. While life insurance may seem less crucial in retirement, it can still play a vital role in financial planning. Life insurance proceeds can provide financial security for surviving spouses, cover funeral expenses, or even leave a legacy for heirs.

Term life insurance may be sufficient for retirees who only need coverage for a specific period, while permanent life insurance policies offer lifelong coverage and cash value accumulation. Most importantly, rates can be more affordable when you enroll in a policy at a younger age. Therefore, life insurance is a consideration that ideally should not be left to the last minute before retirement.

Homeowners or Renters Insurance. Protecting your home or rental property is essential at any stage of life. Homeowners insurance provides coverage for property damage and liability protection in case someone is injured on your property. Renters insurance offers similar protections for those who don't own their home, covering personal belongings and liability. Reviewing and updating your coverage as you enter retirement can ensure you're adequately protected against potential risks.

Long-Term Care Insurance. The cost of long-term care services can quickly deplete retirement savings. Long-term care insurance helps cover expenses associated with chronic illnesses, disabilities, or cognitive impairments that require assistance with daily activities.

Like life insurance, premiums for long-term care insurance can depend upon age at enrollment. By purchasing long-term care insurance early, pre-retirees can lock in lower premiums and protect their assets from being drained by expensive care needs later in life.

As you transition into retirement, it's crucial to evaluate your insurance needs to safeguard your financial well-being. To enjoy a greater sense of security knowing you’re protected against unexpected expenses, consult with us as you plan for retirement. We can help you confidently enjoy your golden years.

Planning for Long-Term Care in Retirement

Tue, 13 Feb 2024 18:03:23 GMT

As you approach retirement, the prospect of healthcare needs becomes increasingly significant. Long-term care insurance emerges as a crucial component of comprehensive retirement planning, offering financial protection against the potential impact of escalating healthcare costs on retirement savings.

Mitigating the Risk of High Healthcare Costs

Long-term care insurance is designed to address the costs associated with extended medical care, particularly for services not covered by traditional health insurance or Medicare. This includes assistance with activities of daily living, such as bathing, dressing, and managing medications.

Preserving Retirement Savings

Healthcare expenses, especially those related to long-term care, can deplete retirement savings rapidly. Long-term care insurance acts as a safeguard, allowing you to protect your hard-earned savings from being eroded by the high costs of medical care.

Providing Financial Security for Spouses and Beneficiaries

The financial implications of long-term care extend beyond the individual to impact spouses and beneficiaries. Long-term care insurance ensures that the financial burden does not fall solely on you and/or your family, providing security and reassurance for loved ones.

Maintaining Independence and Quality of Life

Access to long-term care services can contribute significantly to maintaining independence and quality of life during retirement. With insurance in place, you will be able to receive the necessary care in a setting of your choice, whether at home, in an assisted living facility, or in a nursing home.

Addressing the Limitations of Medicare

While Medicare covers certain medical expenses, it has limitations when it comes to long-term care. Long-term care insurance fills this gap, ensuring that you have the means to access the care you need without relying solely on Medicare.

Tailoring Coverage to Individual Needs

Long-term care insurance policies can be tailored to meet individual needs and preferences. You can choose coverage options that align with your health, financial situation, and desired level of care, providing flexibility and customization in your insurance plans.

Securing Coverage While Healthy

Obtaining long-term care insurance is more feasible when individuals are healthy. Waiting until health concerns arise may limit the availability of coverage or result in higher premiums. Securing insurance early allows you to plan proactively for potential future needs.

By addressing the financial challenges associated with extended healthcare needs, you may be able to safeguard your savings, maintain financial independence, and ensure a higher quality of life during your later years. Call us to discuss these issues in more detail, and we can help you decide on a plan that suits your hopes and expectations for the future.

Retirement Travel: Insure Your Adventures and Travel Confidently

Tue, 06 Feb 2024 21:25:27 GMT

Retirement opens the door to a world of possibilities, and for many, that includes fulfilling lifelong travel dreams. Whether it's exploring exotic destinations, embarking on a cruise, or immersing in different cultures, retirees often seek to make the most of their newfound freedom. However, along with the excitement of travel comes the importance of ensuring these adventures so that you can travel confidently.

Travel Insurance for Medical Emergencies

As you embark on your journeys, considering travel insurance with robust medical coverage is paramount. This coverage can help address unexpected medical emergencies abroad, ensuring access to quality healthcare without the burden of exorbitant expenses.

Trip Cancellation and Interruption Coverage

You may face unique circumstances that could lead to trip cancellations or interruptions. Travel insurance provides financial protection in such scenarios, reimbursing prepaid, non-refundable trip costs due to unforeseen events like illness, family emergencies, or travel advisories.

Coverage for Travel Delays and Missed Connections

Extended layovers and missed connections can disrupt travel plans. Travel insurance can provide coverage for additional expenses incurred due to delays, ensuring you can navigate unexpected hiccups without added stress.

Baggage and Personal Belongings Protection

Protecting personal belongings is crucial, especially when carrying valuable items like cameras, tablets, and documents. Travel insurance can provide coverage for lost, stolen, or damaged baggage, offering financial relief and reducing potential stress.

Considerations for Pre-existing Conditions

You might have a pre-existing medical condition or be diagnosed with one at some point during your retirement years. This condition may require special consideration when securing travel insurance. Exploring policies that provide coverage for pre-existing conditions is essential to ensure comprehensive protection throughout the journey.

Evacuation and Repatriation Coverage

In the event of a medical emergency, evacuation and repatriation coverage becomes vital. This insurance ensures that you receive necessary medical transport to the nearest suitable facility or, if needed, back to the US.

Multi-Trip Insurance for Frequent Travelers

For those of you with a passion for frequent travel, multi-trip insurance plans offer continuous coverage throughout the year, eliminating the need to purchase individual policies for each trip.

Consulting with an Insurance Broker

Given the unique needs and considerations of retirees, consulting with an insurance broker can provide tailored advice on the most suitable coverage options. Specialists can help you navigate policy details, ensuring comprehensive protection for your specific travel plans.

Protecting your travel adventures during retirement is a prudent step towards ensuring peace of mind and enjoyment throughout the journey. By exploring comprehensive travel insurance options and understanding the unique considerations that come with retirement travel, you can embark on your adventures with confidence. For more advice on navigating retirement and protecting yourself, consult with us on a regular basis so that we can help you cover all of your bases.

Getting Organized: A Checklist for Filing Your 2023 Income Taxes

Tue, 16 Jan 2024 13:57:13 GMT

As tax season approaches, getting organized is key to a stress-free filing process. A comprehensive checklist can help you stay on top of things and prevent stress or a last-minute rush to get the job done correctly. Here's a guide to ensure you have all your ducks in a row for filing your 2023 income taxes:

Gather Personal Information

Begin by collecting essential personal information for yourself, your spouse, and your dependents. This includes Social Security numbers, birthdates, and, if applicable, individual taxpayer identification numbers (ITINs).

Income Documentation

Compile all income-related documents, such as W-2s for employment income, 1099s for freelance or contract work, and statements for interest, dividends, or rental income. If you received unemployment benefits or made withdrawals from retirement accounts, gather relevant documentation for those as well.

Deductions and Credits

Organize documentation related to potential deductions and credits. This could include receipts for charitable contributions, medical expenses, education expenses, and homeownership-related documents like mortgage interest statements.

Healthcare Information

Ensure you have proof of health insurance coverage, as this is crucial for avoiding potential penalties. Gather forms such as the 1095-A, 1095-B, or 1095-C that outline your coverage.

Records of Investments

If you bought or sold investments during the tax year, gather records of capital gains and losses. Brokerage statements and records of investment purchases and sales are essential for accurate reporting.

Business and Self-Employment Documents

If you're a business owner or self-employed, organize records of income, expenses, and receipts for potential deductions. This includes business-related travel, equipment purchases, and any home office expenses.

Retirement Contributions

Ensure you have documentation for any contributions made to retirement accounts. This includes traditional and Roth IRAs, 401(k)s, and other retirement savings plans.

Education Expenses

If you or your dependents pursued higher education, gather records of tuition payments, student loan interest statements, and any documentation related to educational expenses.

Remember that early preparation can alleviate stress and potentially identify opportunities for tax savings. If you encounter any complexities or uncertainties, consider consulting with a tax professional for personalized guidance. Getting organized today ensures you'll confidently navigate the tax season and hopefully avoid any mistakes that can lead to frustrating delays later.

2024 Introduces New Contribution Limits for Retirement Plans and HSAs

Thu, 04 Jan 2024 02:12:53 GMT

As we usher in a new year, it's crucial to revisit our financial strategies, especially when it comes to retirement planning and health savings. The recently announced contribution limits for 2024 bring opportunities for individuals looking to fortify their financial future.

Retirement Plans

For those contributing to 401(k), 403(b), 457 plans, and Thrift Savings Plans, the new limit stands at $23,000. This cap ensures a systematic approach to retirement savings. What's even more encouraging is the catch-up contribution option for individuals aged 50 and over, allowing them to contribute an additional $7,500. This strategic move recognizes the importance of accelerating retirement savings in the final stages of your career, providing an extra boost toward financial security in retirement.

Individual Retirement Accounts (IRAs) also see adjustments, with the new limit set at $7,000. Additionally, for those aged 50 and over, the catch-up contribution allows an additional $1,000.

Health Savings Plans (HSA)

Health savings take center stage in the new year, with HSA contribution limits set at $4,150 for individual plans and $8,300 for family plans. HSAs provide a unique blend of current and future financial benefits. Contributions to an HSA are tax-deductible, the funds grow tax-free, and withdrawals for qualified medical expenses are tax-exempt. This triple-tax advantage makes HSAs a powerful tool for managing healthcare costs and promoting long-term financial health.

Funds held within an HSA can be carried over to future years if not used during any particular calendar year. In fact, you can even take your unused HSA funds into retirement and use the account to cover qualified medical expenses like Medicare deductibles or prescription medications. For this reason, health savings accounts can function like a secondary retirement account, helping you to manage healthcare expenses in retirement.

As you consider the 2024 contribution limits, it's an opportune moment to reassess your financial goals and ensure that your savings strategies align with your aspirations for a secure and fulfilling future. By leveraging the available tax benefits and contributing strategically to retirement and health savings plans, you can build a foundation for a prosperous future. If you need other input on planning for your future, call our office to schedule an appointment.

Navigating Year-End Tax Planning for Retirees

Tue, 19 Dec 2023 16:36:49 GMT

As the year draws to a close, retirees find themselves at a crucial juncture for tax planning. Understanding the impact of taxes on retirement income is essential for optimizing financial strategies and ensuring a comfortable retirement. Taking these five steps can help you make the most of your retirement income.

1. Assess Retirement Income Streams

Retirees often rely on various income sources, including Social Security benefits, pensions, and withdrawals from retirement accounts. It's vital to evaluate the tax implications of each income stream to make informed decisions about timing and amounts.

2. Strategize Required Minimum Distributions (RMDs)

For retirees with tax-deferred retirement accounts like 401(k)s and IRAs, the year they turn 72 marks the initiation of required minimum distributions (RMDs). Ensuring compliance with RMD rules is crucial to avoid penalties. Strategic planning can help retirees manage the tax impact of these mandatory withdrawals.

3. Consider Capital Gains and Losses

Capital gains from the sale of investments can significantly impact tax liability. Retirees should consider selling investments with capital losses to offset gains, minimizing the overall tax burden. Additionally, understanding the tax treatment of long-term and short-term capital gains is essential for informed decision-making.

4. Count Charitable Contributions Carefully

Making charitable contributions not only supports causes retirees care about but also provides potential tax benefits. Leveraging strategies like qualified charitable distributions (QCDs) from IRAs can fulfill charitable intentions while potentially reducing taxable income.

5. Contribute to Health Savings Accounts (HSAs) and Deduct Medical Expenses

Retirees eligible for Health Savings Accounts (HSAs) can contribute to these accounts, offering a tax-advantaged way to save for medical expenses. Additionally, deducting qualified medical expenses, including long-term care premiums, can further optimize tax outcomes.

Take the above steps so that you can maximize your financial outcomes and pave the way for a more tax-efficient retirement.

With the end of the year approaching, you’ll want to take action quickly in order to properly implement these strategies. Contact our office for more information or for assistance with tax planning and tax preparation.

IRS Tax Adjustments Coming in 2024

Tue, 12 Dec 2023 15:10:53 GMT

The Internal Revenue Service (IRS) has recently unveiled adjustments for over 60 tax provisions applicable to the 2024 tax year, as outlined in Revenue Procedure 2023-34. These adjustments will impact tax returns filed in 2025, introducing changes to various aspects of the tax code.

Noteworthy among these changes is the standard deduction for married couples filing jointly in tax year 2024, which sees a significant increase to $29,200, marking a $1,500 rise from the previous tax year. Single taxpayers and those married but filing separately can expect their standard deduction to reach $14,600, reflecting a $750 increase from the 2023 figure. Heads of households will also witness an uptick in their standard deduction, reaching $21,900, an increase of $1,100 from the previous tax year.

Maintaining its stance, the top tax rate for individual single taxpayers with incomes exceeding $609,350 (or $731,200 for married couples filing jointly) remains at 37%. Other tax brackets for 2024 include:

35% for incomes surpassing $243,725 (or $487,450 for married couples filing jointly)
32% for incomes exceeding $191,950 (or $383,900 for married couples filing jointly)
24% for incomes over $100,525 (or $201,050 for married couples filing jointly)
22% for incomes beyond $47,150 (or $94,300 for married couples filing jointly)
12% rate for incomes surpassing $11,600 (or $23,200 for married couples filing jointly)
The lowest rate of 10% applies to single individuals with incomes of $11,600 or less (or $23,200 for married couples filing jointly)

Additional adjustments include an Alternative Minimum Tax exemption amount of $85,700 for 2024, beginning to phase out at $609,350, and a basic exclusion amount of $13,610,000 for the estates of decedents who pass away in 2024, up from $12,920,000 in 2023.

Furthermore, the annual exclusion for gifts has been raised to $18,000 for the calendar year 2024, showing an increase from the $17,000 limit in 2023. Lastly, the maximum credit for adoptions in tax year 2024 has been adjusted to cover qualified adoption expenses up to $16,810, up from $15,950 in 2023. These modifications underscore the dynamic nature of the tax landscape, reflecting the IRS's efforts to adapt to economic conditions and taxpayer needs.

As tax season approaches, contact our office with any questions or for assistance with your tax preparation.

How Much Life Insurance Do I Need?

Tue, 14 Nov 2023 11:48:52 GMT

Life insurance is a crucial financial tool that provides security and peace of mind to your loved ones in the event of your passing. But one of the most common questions people have when considering life insurance is, "How much life insurance do I need?" The answer to this question is not one-size-fits-all, as it depends on various factors unique to your situation.

Assess Your Financial Obligations

The first step in determining your life insurance needs is to assess your financial obligations. These include outstanding debts, such as mortgages, car loans, and credit card balances. You'll want to ensure that your life insurance policy is sufficient to cover these debts, so your loved ones aren't burdened after your passing.

Consider Your Dependents

If you have dependents, like children or a spouse, you'll need to factor in their financial needs. Consider their education expenses, daily living costs, and future financial goals. A general rule of thumb is to aim for a policy that covers at least 7-10 times your annual income, but this may vary based on your family's unique circumstances.

Account for Funeral and End-of-Life Expenses

Funeral and end-of-life expenses can add up quickly, and it's essential to account for these costs when calculating your life insurance needs. A typical funeral can cost several thousand dollars, and you wouldn't want your family to struggle with these expenses on top of everything else.

F uture Income Replacement

Life insurance can also serve as a means of income replacement for your family. Consider how many years of your income your family may need to replace and use that as a guideline for determining the coverage amount. Remember to factor in inflation as well, as the cost of living is likely to increase over time.

Account for Existing Savings and Assets

Account for any existing savings, investments, and assets that your family can rely on if you were to pass away. Subtract these from your estimated financial needs to determine how much life insurance is necessary. It's often better to have more coverage than less, as it provides a safety net for unexpected expenses.

Review and Adjust Regularly

Your life insurance needs can change over time. As you pay off debts, your children grow up, and your financial situation evolves, it's important to review and adjust your life insurance coverage accordingly. You may need to increase or decrease your coverage to ensure it aligns with your current circumstances.

Determining how much life insurance you need is a personal and sometimes complex decision. It requires careful consideration of your financial obligations, dependents, end-of-life expenses, and future financial goals. Let’s meet to discuss your situation in more detail so that we can help to ensure that your loved ones’ needs are covered in any circumstances.

Your Guide to Making Informed Choices During Medicare Annual Election

Tue, 07 Nov 2023 15:36:43 GMT

The Medicare Annual Election Period (AEP) from October 15 to December 7 is a crucial time for those who rely on Medicare for their healthcare coverage. During this period, you can change your Medicare plans, ensuring that your coverage aligns with your evolving healthcare needs.

What is the Medicare Annual Election Period (AEP)?

The AEP is a window of opportunity for Medicare beneficiaries to review and modify their coverage. This period specifically applies to Medicare Part C (Medicare Advantage) and Medicare Part D (prescription drug plans). It doesn't pertain to Original Medicare (Parts A and B).

What Changes Can You Make?

Enroll in a Medicare Advantage Plan. If you currently have Original Medicare and wish to switch to a Medicare Advantage Plan, the AEP is your chance. Medicare Advantage Plans often offer additional benefits, such as prescription drug coverage and dental or vision care.

Switch Between Medicare Advantage Plans. If you're enrolled in a Medicare Advantage Plan but want to explore different options, you can change your plan during the AEP. Compare plans to find one that better suits your healthcare needs and budget.

Review and Modify Your Prescription Drug Plan. If enrolled in a Medicare Part D prescription drug plan, the AEP allows you to evaluate your plan's coverage, premiums, and formulary. You can switch to a different Part D plan if it better addresses your medication requirements.

Return to Original Medicare. If you're currently enrolled in a Medicare Advantage Plan and want to go back to Original Medicare, the AEP provides the opportunity to make this change.

Make Plan Changes Based on Your Health Needs. Your health status can change yearly. During the AEP, you can select a plan that better covers your anticipated healthcare needs for the upcoming year.

What Should You Do Next?

Review Your Current Coverage. Start by examining your current Medicare plan(s). Pay attention to your healthcare expenses, including premiums, deductibles, and co-payments. Determine whether your current plan still meets your needs and preferences.

Explore Your Options. Research the available Medicare Advantage Plans and Medicare Part D prescription drug plans in your area. Consider factors like costs, coverage, network of healthcare providers, and additional benefits.

Use Online Resources. The Medicare Plan Finder on the official Medicare website can help you compare different plans. It provides detailed information about premiums, drug coverage, and quality ratings.

Consult an Advisor. If you're uncertain about the best course of action, seek guidance from a Medicare advisor or counselor. They can provide personalized assistance in selecting the most suitable plan.

Enroll or Make Changes. Once you've decided on your plan adjustments, take action before the AEP deadline of December 7th. This ensures your new coverage takes effect on January 1st of the following year.

The Medicare Annual Election Period is a valuable opportunity to fine-tune your healthcare coverage. By understanding the changes you can make and taking the appropriate steps, you can ensure that your Medicare plans align with your evolving health needs. Contact us if you need further assistance at this time, and we can help to guide this critical financial decision.

Why Long-Term Care Insurance is Essential for Your Retirement Plan

Tue, 17 Oct 2023 12:17:05 GMT

As we plan for our golden years, it's vital to consider the potential need for long-term nursing care and the associated costs. Long-term nursing care, whether at home or in a facility, is a significant financial commitment that can quickly deplete one's savings. To mitigate this financial risk, long-term care insurance is increasingly becoming a crucial component of a well-rounded retirement plan.

Understanding the Cost of Long-Term Nursing Care

Long-term nursing care can be a substantial financial burden for individuals and families. The costs vary based on factors such as location, type of care, and the level of assistance required. According to the Genworth Cost of Care Survey for 2021, the median annual cost of a private room in a nursing home was approximately $105,850. Home health aides and assisted living facilities also have significant associated costs, making long-term care a considerable expense.

Importance of Long-Term Care Insurance

Long-term care insurance provides financial protection against the high costs of nursing home care, home health care, assisted living, and other long-term care services. Here are some compelling reasons why incorporating long-term care insurance into your retirement plan is vital:

1.Safeguard Your Savings. Long-term care insurance helps preserve your retirement savings and assets by covering the high costs of long-term nursing care. This ensures that you won't have to deplete your savings rapidly, allowing you to pass on assets to your heirs or utilize them for other aspects of your retirement.

2. Maintain Quality of Life. With the assistance of long-term care insurance, you can afford higher-quality care, ensuring a better quality of life during your later years. It provides access to skilled and compassionate caregivers, enabling you to age with dignity and receive the necessary support.

3. Alleviate Family Burden. Long-term care insurance can ease the emotional and financial burden on your family. They won't have to bear the full responsibility of caregiving or exhaust their own financial resources to ensure you receive adequate care.

Considering the potential costs of long-term nursing care, integrating long-term care insurance into your retirement plan is a prudent financial decision. It not only helps protect your savings but also ensures that you receive the necessary care when you need it the most. Let’s discuss this issue at our next retirement planning meeting, so that we can plan adequately for your future.

5 Tips for Optimizing Your Social Security Payout

Tue, 10 Oct 2023 13:11:21 GMT

Social Security benefits are a crucial part of retirement income for many Americans. However, the amount you receive can vary significantly based on when and how you claim your benefits. To ensure you get the most out of your Social Security, here are some tips for optimizing your payout.

1. Understand Your Full Retirement Age (FRA). Your FRA is the age at which you can claim your full Social Security retirement benefit. It typically ranges from 65 to 67, depending on your birth year. Claiming benefits before your FRA results in a reduction in your monthly payout, while waiting until after your FRA can increase it. To maximize your benefits, consider waiting until your FRA or even delaying beyond it if possible.

2. Consider Delaying Your Claim. If you can afford to wait, delaying your Social Security benefits beyond your FRA can significantly boost your monthly payout. For each year you delay claiming benefits between your FRA and age 70, you'll receive an 8% increase in your benefit amount. This can result in a substantial increase in your lifetime benefits.

3. Coordinate Benefits with Your Spouse. If you're married, you have options to maximize your combined benefits. Spousal benefits allow a lower-earning spouse to receive up to 50% of the higher-earning spouse's benefit. Additionally, widow(er) benefits can provide surviving spouses with the higher-earning spouse's benefit. Careful coordination with your spouse can help both of you optimize your Social Security income.

4. Consider Your Earnings History. Your Social Security benefits are based on your highest 35 years of earnings. If you have some low-earning years, you might consider working longer to replace those years with higher-earning ones. This can result in a higher benefit amount.

5. Account for Inflation. Social Security benefits are adjusted for inflation each year. Be mindful that while delaying your benefits may increase the initial monthly payout, it also means receiving fewer years of payments. To optimize your overall income, consider factors like your life expectancy and the impact of inflation on the value of your benefits.

Optimizing your Social Security benefits requires careful planning and consideration of various factors. Keep in mind that the right strategy for maximizing your benefits will depend on your individual circumstances. It's often beneficial to consult with a financial advisor or use Social Security benefit calculators to help you make informed decisions about when and how to claim your benefits. By taking these steps, you can secure a more financially comfortable retirement.

Navigating Medicare Coverage Gaps During the Annual Enrollment Period

Tue, 19 Sep 2023 12:48:52 GMT

As the Annual Enrollment Period (AEP) approaches, Medicare beneficiaries are presented with a prime opportunity to assess their current coverage and identify potential gaps in their healthcare needs. While Medicare is a crucial foundation for healthcare, it may not address all individual medical requirements. AEP allows you to explore alternatives and discover plans that better align with your specific needs, providing a comprehensive and tailored approach to your health.

Begin by closely examining your prescription drug coverage. Medicare's Original plan lacks coverage for prescription medications, potentially resulting in substantial out-of-pocket expenses. To bridge this gap, consider enrolling in Medicare Part D, which offers stand alone prescription drug plans. Alternatively, many Medicare Advantage plans include prescription drug coverage as part of their comprehensive packages. While evaluating plans, it's vital to review the formulary – the list of covered medications – to ensure that your regular prescriptions are included.

Consider dental and vision care costs, and whether you would like to pursue coverage for those services. Many Medicare Advantage plans incorporate dental and vision benefits, making them an appealing choice for those seeking comprehensive healthcare coverage that includes preventive dental and vision care. Or, you can enroll in a dental and vision care plan separately.

Evaluate whether your current policy includes coverage for hearing aids. Notably absent from Medicare coverage, hearing aids play a critical role in communication and overall quality of life. Certain Medicare Advantage plans may offer partial hearing aid coverage, increasing accessibility to this essential service.

Long-term care costs should also factor into your considerations. Original Medicare excludes long-term care services, leaving a gap in coverage for services such as nursing home care and assistance with daily activities. To address this potential shortfall, explore long-term care insurance or consider Medicare Advantage plans that offer limited long-term care benefits.

Take into account your existing health status and specific diagnoses. Beyond Original Medicare and traditional Medicare Advantage plans, consider Special Needs Plans tailored to individuals facing specific health conditions. These plans are designed to cater to the unique needs of individuals, streamlining care coordination and providing specialized coverage.

Medicare Advantage plans versus Original Medicare plus supplemental insurance.

Medicare Advantage plans and Medigap policies are valuable supplements to Original Medicare, extending coverage beyond Parts A and B. Medicare Advantage plans, offered by private insurance companies, often bundle hospital, medical, and prescription drug coverage. They may also include extra benefits such as dental, vision, and hearing care.

Conversely, Medigap policies complement Original Medicare by offsetting out-of-pocket expenses like copayments, coinsurance, and deductibles. This financial relief can significantly ease the burden of medical costs, offering you a greater sense of security.

As AEP approaches, consider reaching out to us for a consultation. We are here to discuss these alternatives, assist you in identifying plans that align seamlessly with your needs, and help you navigate the complexities of healthcare coverage. AEP is an opportunity to refine your healthcare coverage, ensuring that you move forward with confidence and comprehensive support tailored to your health requirements.

Social Security Changes: What You Need to Know for a Confident Retirement

Wed, 13 Sep 2023 19:35:33 GMT

Social Security is a cornerstone of retirement planning for millions of Americans. However, the landscape of Social Security is not static; it evolves over time due to policy changes, economic shifts, and demographic trends. Staying informed about these changes is essential for securing a confident retirement. Here's what you need to know about recent and potential Social Security changes.

1. Full Retirement Age (FRA) Adjustments

The Full Retirement Age, which is the age at which you can claim your full Social Security benefits, has undergone adjustments. For those born after 1954, the FRA gradually increases. It's crucial to be aware of your specific FRA, as claiming benefits before or after this age can affect the amount you receive each month.

2. Delayed Retirement Credits

While you can claim Social Security benefits as early as age 62, waiting until after your FRA to claim can result in higher monthly payments through delayed retirement credits. These credits can lead to a substantial increase in your benefits over time.

3. Earnings Limitations

If you claim Social Security before your FRA and continue to work, there's an earnings limit that might impact your benefits. Earnings exceeding this limit could lead to a reduction in your Social Security payments until you reach your FRA.

4. Cost of Living Adjustments (COLAs)

Social Security benefits are subject to COLAs, which are designed to help benefits keep pace with inflation. However, the actual increase can vary from year to year based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

5. Spousal and Survivor Benefits

Married or divorced individuals may be eligible for spousal or survivor benefits. These benefits allow you to claim based on your spouse's or ex-spouse's work record, potentially providing higher payments than your individual benefit.

6. File and Suspend Strategy Elimination

In the past, some couples employed the "file and suspend" strategy to maximize benefits. This strategy allowed one spouse to file for benefits and then suspend them, enabling the other spouse to claim spousal benefits. However, this strategy was phased out as part of the Bipartisan Budget Act of 2015.

7. Potential Solvency Challenges

The Social Security Trust Fund faces projected insolvency in the coming decades due to demographic shifts and longer life expectancies. This could lead to reduced benefit payments unless policy changes are enacted to address the funding gap.

8. Planning for a Confident Retirement

Given the complexity of Social Security rules and the potential for changes, it's advisable to incorporate Social Security planning into your overall retirement strategy. Consulting with a financial advisor can help you make informed decisions about when to claim benefits, how to maximize your payments, and how Social Security fits into your broader financial picture.

Staying informed about Social Security changes is vital for building a confident retirement plan. With proper planning and expert guidance, you can navigate the evolving landscape of Social Security to ensure a more secure and comfortable retirement. Let’s sit down and discuss your projected Social Security benefits, and then we can put our knowledge and expertise to work for you.

5 Tips for Managing Debt Wisely

Tue, 15 Aug 2023 17:13:52 GMT

We tend to think of debt as a bad thing, but that isn’t always the case. In some cases, such as purchasing a home via a mortgage, debt is essentially inevitable. Debt can also be a good thing, when you utilize it to purchase assets that appreciate in value, or when you use the funds to invest in your future (such as education to help you get a better job).

But yes, debt can also contribute to financial strain and emotional stress. Too much debt can prevent you from reaching your goals, so it’s important for all of us to learn how to manage our debt wisely. Take these five steps to create a debt plan that will rejuvenate your financial outlook and help you establish a more stable future.

Differentiate between Wants and Needs. Before taking on any debt, evaluate whether the purchase is essential or a discretionary want. Focus on fulfilling needs first.

Create a Budget. Developing a budget can help manage expenses, allocate funds for debt repayment, and prevent unnecessary spending.

Pay off High-Interest Debt First. If you have multiple debts, prioritize paying off the high-interest ones first to reduce overall interest costs.

Build an Emergency Fund. Having an emergency fund can prevent the need to resort to credit cards or high-interest loans during unforeseen circumstances.

Seek Professional Advice. If you find yourself overwhelmed by debt, consider seeking advice from a financial professional or credit counselor who can help you create a plan to get back on track.

Remember, debt can be a tool, but it's up to us to use it wisely to shape our financial destiny.

By managing debt responsibly, budgeting wisely, and prioritizing financial goals, we can build a strong foundation for a secure and prosperous future.

Call our office to schedule an appointment if you’re concerned about debt or would like more information on how to utilize debt to build toward financial freedom.

After a Historic 2023 COLA, What Can We Expect in 2024?

Tue, 08 Aug 2023 15:22:03 GMT

As we have experienced rising inflation in the past few years, the topic of Social Security and its cost of living adjustment (COLA) has once again become a focal point of interest for millions of Americans. The Social Security Administration (SSA) often makes adjustments to benefits to help maintain their value relative to inflation. These adjustments are announced in October during most years and take effect the following January.

So, what can we expect ahead of this October’s update? As we wait to hear from the Social Security Administration, let’s review how they calculate each year’s COLA. Then we can discuss what you might be able to expect in January.

The Social Security COLA is a crucial annual change that aims to protect the purchasing power of Social Security benefits against the rising cost of living. This adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of inflation that tracks the prices of goods and services typically purchased by urban workers and clerical employees. If the CPI-W increases, beneficiaries can expect a COLA increase to keep up with inflation.

2023 COLA Recap. Before we delve into the predicted 2024 COLA, let's take a brief look back at the 2023 adjustment. In 2023, Social Security beneficiaries received a substantial 8.7% COLA, the most significant increase in decades. This sizable adjustment came as a result of surging inflation rates and rising costs of essential goods and services, such as food, housing, and healthcare.

Predictions for the 2024 COLA. While it's important to note that no official announcement has been made at this time, most financial analysts and economists are projecting a moderate COLA for 2024. Based on economic indicators and inflation trends leading up to the adjustment calculation period, experts anticipate a COLA ranging from 2.0% to 3.0%.

We’ll be sure to update you on the 2024 Social Security COLA when the news is released in October. For now, remember that Social Security is meant to serve as supplementary retirement income only, and keep in touch with us so that we can help you investigate other retirement planning opportunities.

7 Ways to Promote a Smooth Transition into Retirement

Tue, 18 Jul 2023 12:58:22 GMT

Many people dream about retirement for years, but when they finally reach that goal, they find themselves feeling underwhelmed. Boredom, loneliness, or financial instability can make for a rocky transition into retirement. If you’ve set a date and you’re looking forward to retirement in the next few years, consider these steps to make your transition a smooth one.

Retire slowly. Rather than setting a date, and abruptly leaping from full employment to absolute retirement, why not transition to this new phase of life more gradually? Try taking longer vacations in the years leading up to retirement or reducing your hours to part-time employment for some time.

Determine a budget. You already know that you will need to cover regular monthly expenses with forms of income other than your paychecks. But make sure to budget for expenses that occur irregularly, such as home repairs, car maintenance, gift giving, and emergencies. Make sure your expected budget is covered by the streams of income you have established.

Examine your risk profile. You might have focused on growth until recently, but now you hope that your retirement savings will last for two decades or more. At this time, many retirees shift into a lower-risk, lower-yield strategy so that their future income becomes more dependable.

Plan your free time. Most of us look forward to retirement, due to the newfound freedom in our schedules. Ironically, many retirees find that shift to be a tad distressing. With long, unscheduled days, you might feel a bit lonely or miss the feeling of productivity. So, make sure you’ve planned for hobbies, volunteering, or spending time with friends and family.

Consolidate your accounts. You’ll enjoy retirement more, and possibly save on account fees, when you consolidate your financial accounts so that you have less to manage and fewer fees to pay.

Set a goal. For many years, your life has revolved around career goals. To prevent boredom, set a few goals for your retirement years, too.

Consult with your financial professional. Making big decisions with regard to money, lifestyle, and employment carry quite a bit of risk. The last thing you want is to retire and then regret any of the decisions you made along the way. Make sure to consult with your financial Professional in the years leading up to retirement, so that you can troubleshoot your retirement income plan and create a strategy to transition into retirement smoothly.

If You’re Going to Borrow, Do It the Smart Way

Tue, 11 Jul 2023 12:28:17 GMT

Any time you borrow money, you’re going to pay interest and be subject to certain fees (like late payment penalties). No one wants to give away more of their hard-earned money than necessary, but sometimes a loan is needed. If you’re going to borrow money, follow these steps to do it the smart way.

Check rates with a local credit union. Because credit unions are not-for-profit institutions, they often offer lower interest rates on loans and/or charge lower fees for services. Of course, if you’re not a member of a local credit union, you will first need to apply for membership. In many cases the benefits of a credit union membership are worthwhile enough that you should keep an account there just in case you ever need a loan. Do remember that in most cases, a higher credit score will be required by a credit union in order to obtain a loan.

Apply for loans online. Applying for loans online is quick and easy, and allows you to efficiently compare rates, fees, and terms of repayment among multiple lenders. If you have less than stellar credit, you might also find more options this way. However, you might notice that you have less room to negotiate online.

Use a 0 percent interest credit card. Many credit cards offer introductory periods, with 0 percent interest from 6 to 21 months. These offers can represent a terrific opportunity to finance a purchase without interest, if you know that you can pay off the balance within the specified time period. Of course, you might face very high interest rates if you miss a payment or fail to pay off the card within the introductory period, so make sure to plan carefully when using credit cards as a loan.

Personal line of credit. A personal line of credit from a bank or credit union works similarly to a credit card, allowing you to continue using credit for a specified period of time. But because this option usually carries a lower interest rate than credit cards, it can be a better option. This type of loan works best for irregular, short-term spending.

Always do your research. With any lending option, do your research before signing on the bottom line. Check interest rates, fees, and the flexibility of repayment options. And finally, check with the Consumer Financial Protection Bureau to see if an institution has registered complaints. These reviews will help you identify the possibility of unethical lending practices, like hidden fees and penalties.

And of course, make an appointment with us before making major decisions that impact your long term financial situation. We can help you determine how a decision fits into your overall plan and identify additional options that could benefit you.

A ‘Silent Crisis’ Predicted for Future Retirees

Tue, 20 Jun 2023 14:48:45 GMT

Most of the time, our news headlines revolve around current events. We don’t often hear about looming problems or disasters until it’s already too late to stop them. But in a recent Chairman’s Letter, sent to BlackRock investors, CEO Larry Fink warned of a coming “silent crisis” set to soon impact retirees.

In fact, Fink clarified that this problem, “doesn’t make headlines or attract attention because it’s not immediate. It’s not this year’s — or even next year’s — problem. But it is a crisis. And the longer we delay the conversation about it, the larger the crisis grows.” He urged investors to become more aware of the coming crisis, and what to potentially do about it.

A number of factors have evolved throughout recent decades, and combined, they create a “perfect storm” for retirement income planning.

Longer lifespans. People are living longer, which of course is a good thing. But from a financial planning point of view, specifically retirement income planning, we must remember that longer lifespans could mean a longer retirement. And so, those retirees must plan for a retirement income that lasts longer.

A falling birth rate. At the same time, the birth rate has been falling for years. We need a rate of 2.1 babies born to every woman in order to maintain current population numbers. But the current birth rate has fallen to 1.7 in the US, 1.5 in Europe, and 1.2 in China. Because taxes from current workers support programs like Social Security, a smaller working population in the future means tight budgets for those programs.

Failure to plan. When reviewing the above two factors, it becomes clear that the onus for retirement income planning now falls more squarely on each individual’s shoulders than before. And yet, a quarter of all American workers have zero retirement savings. Among those who have saved for retirement, the average retirement fund amounts to just $65,000.

Even worse, those who do manage to save for retirement often borrow or withdraw from those funds early, whether due to an emergency or to accomplish a goal like purchasing a home. The currently high cost of living, starkly out of balance with average wages, adds fuel to the fire.

In the newsletter, Fink recommended not only active saving, but an aggressive focus on growth. A conservative savings approach simply might not be enough to build the nest egg needed to retire in coming years.

To learn more about saving and investing for the future, call us to schedule an appointment. We will help you review your current retirement income planning and make changes to hopefully help you overcome these obstacles.

How Some People Manage to Retire Early

Tue, 13 Jun 2023 17:32:24 GMT

We often blog about the challenges faced by many soon-to-be retirees, including delayed retirements or a lack of retirement funds. But on the other hand, there are people who not only managed to retire comfortably; they also did it early! How did they manage to do that?

Yes, an unlucky few have been forced to retire early, due to job market conditions, illness, or disability. But many early retirees actually planned it that way and pulled it off. What did they do differently from the rest of us?

Early planning is key. For most early retirees, their success lies in early and thorough planning. They knew early on in their careers, often in their twenties, that they wanted to retire in their forties or fifties. And so, they began saving early. Their plans included an optimistic growth strategy, and they made plans for healthcare because they knew Medicare eligibility would be a long way off at age 65.

Realistic expectations create attainable retirement budgets. Most early retirees established retirement savings goals based on a modest retirement lifestyle. They usually aren’t taking six vacations per year or driving luxury cars. This allows them to live on a more modest budget.

Budgeting during working years is equally important. To attain the level of retirement savings needed, early retirees lived on a budget during their working years. Rather than “keeping up with the Joneses” they dedicated a significant portion of their earnings to saving and investing.

Living on a budget during working years also helps with retirement, because the transition to a fixed income doesn’t come as a shock. Responsible savings and living habits are already well established.

A diversified income boosts savings. Obviously, earning more helps you save more. Early retirees often established more than one stream of income during their working years.

Tax strategy is essential. A significant portion of earnings can be swept away by income taxes. But at the same time, a smart tax strategy can actually put money back into your pocket.

Consistency keeps plans on track. Those who manage to retire early make a plan and stick to it, even during times of unsettling market fluctuations. They don’t panic, and they check in with their retirement professionals often to make necessary adjustments.

We can help with that last part. If you haven’t yet created a retirement income plan, or if you haven’t received a “checkup” lately, give us a call. We can help you review your plans and update your strategy to match your goals.

Can I Invest in Cryptocurrency Through My Retirement Plan?

Tue, 16 May 2023 15:16:32 GMT

Cryptocurrency has made headlines in the past few years, and stories abound of regular people who struck gold by investing early in currencies like Bitcoin. So you might be wondering if the craze is over, and you missed your chance… Or if you can still invest in cryptocurrency. More importantly, can you dedicate some of your retirement plan funds to this type of investment? And should you?

First, you should remember that all defined benefit plans (like 401k) are governed by standards set forth in the Employment Retiree Income Security Act of 1974 (ERISA). These funds must be managed by fiduciary standards, meaning plan managers must act in the best interests of their clients. Due to the risk of personal liability, many managers are wary of investments like Bitcoin.

On the other hand, some plan managers have perked up to notice the potential of cryptocurrency investments. Bitcoin, in particular, has been around since 2010. When it began trading, the currency was valued at 8 cents per coin. By 2021, the value had risen to a whopping $65,000.

Of course, crashes happen, too. As of April 28, 2023, Bitcoin is valued at about $29,000; still good news for those who bought low, but perhaps not so thrilling for anyone who invested during the highs of 2021.

Clearly, Bitcoin and other cryptocurrencies are volatile investments; the potential for great rewards is balanced with the potential for significant losses. Therefore, timing can be essential with this type of investment. Not to mention luck!

For that reason, many financial professionals do advise caution when considering cryptocurrency investments. In most cases it is wise to devote only a small portion of your investments to something like Bitcoin, and to diversify into more reliable types of assets. But if you do want to take the plunge into cryptocurrency investing, contact your plan administrator to discuss your options.

And of course, let’s discuss this idea at your next appointment before you make a big decision. We can help you decide if cryptocurrency investments fit into your portfolio, and how much of your funds you should devote to the endeavor.

Can You Keep Working and Still Receive Social Security Benefits?

Tue, 09 May 2023 15:36:06 GMT

Most retirees quickly learn that Social Security benefits don’t cover their entire cost of living. Hopefully you knew this information pre-retirement, and already planned on another form of income for your later years. But if you want or need to work part-time, you might be wondering how that income can impact your Social Security benefits.

The answer is, it depends upon your age. If you claim your benefits before the “full retirement age” (now 66 to 67, depending upon your year of birth), then your benefits will be reduced if you claim them early and then continue to work.

Each year, the Social Security Administration establishes an annual earnings limit. Then, those who claimed their benefits early will see their benefit payments reduced by one dollar for every two dollars they earn above that limit. In 2023, that limit is set at $21,240.

During the year in which you turn your full retirement age, your benefits will be reduced by one dollar for every three dollars you earn above the limit. Then, when you reach full retirement age, from that month onward your benefits will not be reduced.

Only earnings from work are counted toward the income limit; you can also receive pension payments, investments, annuities, etc without any reduction to your benefits.

However, if you simply wait until your full retirement age to claim your payments, you can work as much as you want. Your benefit checks will not be reduced.

Claiming your benefits early will mean that your monthly payments are permanently set at the lower amount (up to one-third lower than you would have received if you had waited until full retirement age). But sometimes it becomes necessary to claim benefits early, or can even be a good idea in some situations.

For more on this topic, let’s schedule an appointment to discuss your retirement planning options. We can help you determine when to retire and claim your Social Security benefits, along with planning for other income in retirement.

How Much Do You Need in an Emergency Fund?

Tue, 18 Apr 2023 14:57:22 GMT

We tend to focus quite a bit on saving assets within a retirement account. Along with other sources of income, such as Social Security or a pension, withdrawals from that account will represent your income once you retire. But establishing an emergency fund, or “rainy day” account, is also important for many reasons.

In the event that you experience financial setbacks, like the need for a major home repair or a family emergency, you will need access to quick cash. And tapping your retirement fund for an additional withdrawal can throw off your retirement budget for years.

On the other hand, every penny you save within a low-yield but easily accessible account, such as a savings account, is a penny that can’t be invested. So you would be right to wonder whether you’re playing it too safe and potentially costing yourself investment returns.

So, how much do you need to stash in an emergency fund?

The common rule is six months’ worth of living expenses. But that figure can vary based upon your situation. For example, if you’re a dual-earning income, you might not need as much savings as a single-income household. If you carry robust insurance policies, like those with low or zero deductible, you also face less risk during events like a homeowners insurance or auto insurance claim. The same goes for unexpected medical expenses, if you’ve addressed your needs with supplemental insurance.

On the other hand, having too much money in a savings account rarely hurts anyone. If your retirement account feels healthy enough to provide a dependable retirement income, there is probably no harm in saving “too much” in a rainy day fund.

The bottom line is that there is no answer that is right for everyone. But we should discuss this issue in more detail at our next appointment, so that you can make the best use of the assets available to you.

Have You Updated Your Beneficiaries Lately?

Tue, 11 Apr 2023 18:00:17 GMT

Any time you possess a financial account or asset, you will be asked to fill out a beneficiary form. But after completing the form, you might not think of it ever again. That could potentially be a mistake, because a number of things can change over the years.

Why naming a beneficiary is important. If you pass away without naming beneficiaries, or if your beneficiaries die before you do, that account will be subject to the probate court process. Instead of passing directly to the person of your choice, the asset will be tied up in court for months or years, and inheritance can even be challenged.

And if your intended beneficiary needs the money quickly, this situation could cause hardship for them as well.

Who can be named as a beneficiary? A few states require that you name your spouse. But in most places, you can designate anyone that you want. Spouses and children are common choices of beneficiaries. But you can even name a favorite charitable organization.

If you want to designate someone who is not yet an adult, or who otherwise can’t manage their financial decisions, contact an estate planning attorney about more complex legal maneuvers to protect their interests.

Why should you update beneficiaries regularly? A number of things can happen over the years that change your wishes regarding your assets. A divorce or remarriage usually necessitates a change of beneficiary. Or if your beneficiary dies, or becomes unable to manage their own affairs, you might need to select someone else. The birth of new children or grandchildren might also impact your decisions.

If you don’t make these changes, the wrong person will inherit your assets. And if they’ve passed away before you, a probate court will be responsible for making the decision.

Beneficiaries should be updated as needs change, or every few years just to be sure. If you haven’t addressed this important financial planning step lately, give us a call to discuss the next steps.

3 Signs You Should Consider Relocating in Retirement

Tue, 14 Mar 2023 14:51:26 GMT

As you put together your retirement plan, it is common to assume that you’ll simply remain in your current location and house. But that isn’t always what actually happens! Retirees often choose to move to another location simply because they desire to live somewhere else. But often the decision to sell a home and relocate comes down to one or more of the following factors.

Your house doesn’t suit you anymore. Most commonly, retirees realize that they’re paying a lot of money to heat and cool a home that is simply far too large for their needs. But you might also realize you need more storage, prefer a one-level home, wish for a garage, or something else that your house just doesn’t provide. Retirees also tend to appreciate a smaller yard with less maintenance.

Your location is all wrong now. Maybe you originally purchased your home because of its proximity to your job. But once you retire, you can live anywhere you want! At this time, you might look around and realize that the neighborhood doesn’t suit you, you wish you were closer to certain amenities, or you want to escape traffic or crime. And of course, moving closer to children and grandchildren can be very appealing.

You feel “house poor.” Most of us can expect a bit of a drop in monthly income once we retire. And if too much of that income is eaten up by a huge mortgage payment, maintenance and repairs, or burdensome property taxes, a move suddenly looks quite enticing. You want to enjoy this phase of your life, not spend every cent on a house that doesn’t even suit you anymore.

It is usually a good idea to remain flexible with your retirement plans, because sometimes our decisions must reflect unpredictable changes in our lives. But as you continue to formulate a retirement plan, consider how you might feel about your current house in the future. And if a move appeals to you, let’s talk about that at our next meeting.

4 Ways to Avoid Disappointment After You Retire

Tue, 07 Mar 2023 22:37:01 GMT

Many of us begin daydreaming about retirement in the last few years of our career. Or you might have been daydreaming for decades now! It can be easy to focus on the things we don’t like about our jobs, because no situation is perfect. But once you finally do retire, you could find yourself among the millions of retirees who experience something called retirement shock.

No matter how much you look forward to retiring, you might be surprised to find yourself feeling bored, underwhelmed, or even regretful about leaving your career. Of course, we want you to enjoy your retirement, so consider these steps to avoid the retirement shock felt by many.

Seek a better understanding of yourself. Most of us work for more than just income. In the years leading up to your retirement, consider what else you gain from your employment. You might enjoy the social atmosphere, a feeling of doing good things for your community, or the recognition for your expertise. When you understand the positive aspects of your career, you can anticipate the things you might miss about it.

Seek to replace the benefits of your career. Retirement planning tends to focus on replacing income lost when you stop working. But what else are you losing? If you enjoy socializing at work, make sure to plan for social activities to fill your days after retirement. If you enjoy participating in your community, plan to volunteer or be active around town in some other way. Plan to spend your days seeking the same type of rewards that you enjoyed during your career, to prevent feelings of loss or boredom.

Gradually ease into retirement. Rather than establishing a retirement date and leaping into this new phase of your life, consider a gradual retirement. Scale down your work hours or take on part-time work in your field rather than going cold turkey.

Make a flexible plan. Your retirement plan should be flexible enough to accommodate changes you might need to make, in the event that you regret some of your decisions. Let’s discuss this at our next meeting, so that together we can establish a retirement plan that allows for some adjustments if needed.

6 Things to Consider as You Turn 62

Tue, 21 Feb 2023 15:55:11 GMT

Those of you in your late fifties or early sixties have entered the final stretch of retirement planning. All of your hard work and preparation will soon pay off. But if you’re approaching age 62, it’s time to do even more research. This will help you learn all of your options before you make a final decision about retirement.

For those of you soon to turn 62, you might know that you’re approaching the first age of Social Security eligibility. Here’s what you need to know right now.

You can file an early claim. Yes, you can technically claim Social Security benefits at age 62. But your monthly checks will be about 30 percent smaller than they would have been at full retirement age.

Your full retirement age is 66 or 67. Depending on your year of birth, your full retirement age will fall between 66 and 67. This is the age at which you can claim your full benefits, as calculated based upon your 35 highest-earning years of work.

You don’t have to retire in order to claim your benefits. You can claim benefits as early as age 62, even if you’re still working. But for every two dollars that you earn over a certain threshold, one dollar of your benefits will be withheld.

You can claim benefits on your spouse’s record. If your spouse earned a lot more than you, it might make more sense to claim spousal benefits than the benefits from your own work record. Spousal benefits amount to half of your spouse’s monthly check.

You can claim benefits on your former spouse’s record. If you were married for at least ten years and haven’t remarried, you can claim Social Security based on your former spouse’s work record rather than your own. It’s worth calculating both amounts before you decide.

You don’t have to make this decision alone. Social Security payments are based upon your earnings history, but you might have a number of other factors to consider (such as timing your retirement, your spouse’s benefits, a former spouse, and so on). To grasp the full picture, it can be easier to work with a retirement professional who can help you understand all of your options. Let’s schedule an appointment to discuss Social Security, along with all other aspects of retirement, and we can help you decide which path is right for your situation.

Yes, You Can Still Contribute to Certain Retirement Accounts

Tue, 14 Feb 2023 15:20:56 GMT

Each year, we urge our clients to contribute as much as possible to their retirement accounts. It’s not just a great way to prepare for your eventual retirement; it’s also a great way to earn a valuable income tax deduction! So those of you who didn’t contribute the full allowable amount by the end of the year might be feeling disappointed, but we have good news. You can still contribute to certain retirement accounts and earn your deduction for the 2022 tax year!

For most qualified retirement accounts, contributions must be placed into the account by December 31 in order to be counted for that tax year. But the rules are different for both traditional and Roth IRAs (Individual Retirement Accounts). With these types of retirement funds, you can still make contributions for the previous tax year up until the deadline for filing your taxes (April 18 in 2023).

For 2022, the contribution limit of $6,000, or $7,000 if you’re over age 50, allows you to deduct that full amount from your income. This could equal significant tax savings.

SEP or SIMPLE IRAs offer two more opportunities. If your employer participates in either of these plans, your deadline for tax-deductible contributions falls on the same day your company must file their taxes (usually April 18, but some exceptions do apply).

You can contribute the lesser of 25 percent of your income or $61,000 to a SEP IRA. For SIMPLE IRAs, the annual contribution limit for 2022 was $14,000.

There’s just one catch: If you decide to make these “late” contributions, be sure to specify that the amount is intended to count as a contribution for the 2022 tax year. And if you have any further questions about income tax strategy or financial planning, call us and we’ll be happy to explain the rules.

5 Tax-Friendly States Retirees Should Consider

Tue, 17 Jan 2023 01:40:49 GMT

In the United States we’ve witnessed a mass migration in recent years, due to the Covid-19 pandemic and the rise of remote work. Millions of us realized that because we’re no longer tied to a particular location for work, we can take our income and enjoy a better quality of life in a state with a lower cost of living. But for retirees, this has long been a way of life.

Once you retire, you can just about live anywhere you want. So why not choose a state that imposes low taxes and therefore allows you to keep more of your retirement income in your pocket? For 2023, the following five states are considered the most tax-friendly for those living on a retirement income.

Alaska. In Alaska you’ll pay no state income tax, inheritance tax, or estate tax. The gas tax is the lowest in the country, at 9 cents per gallon, and the state and local sales tax rate is 1.76 percent. Residents of Alaska also receive oil dividend checks each year, which can help to offset the slightly higher property taxes.

Delaware. Retirees often opt for Delaware, because they can exclude $12,500 of their retirement income from the state income tax, and Social Security income is completely excluded. You also won’t have to worry about sales taxes or vehicle taxes, and property taxes are the sixth lowest in the nation. The gas tax is set at a relatively reasonable 22 cents per gallon.

Wyoming. Retirees who move to Wyoming will be thrilled with the absence of any state income taxes, estate tax, or inheritance tax. You’ll pay some of the lowest taxes in the nation with regard to property and sales, with groceries and prescriptions not subject to sales tax at all. Gas tax is still fairly competitive at 24 cents per gallon.

Florida. Florida has more to offer to retirees than just the famously warm sunshine! You won’t have to pay estate tax, inheritance tax, or state income tax. That means all of your income from pensions, retirement accounts, and Social Security is not touched by the state of Florida. The sales tax of 7 percent is a bit higher than other states on this list, but groceries and prescriptions aren’t subject to that.

New Hampshire. Or, if you don’t mind braving some cold weather, New Hampshire has plenty to offer retirees. You won’t pay a state income tax at all, and nothing you purchase within the state is subject to sales tax. You won’t have to worry about estate and inheritance taxes, either. But the state does impose a relatively high property tax, at 1.86 percent, so conduct your home search carefully.

If you’re considering a move in retirement, do consult with us first. We can help you evaluate your retirement income and budget and match you with locations where your money will go the furthest.

SECURE 2.0 Act Changes RMD Rules This Year

Tue, 10 Jan 2023 15:06:16 GMT

As you might already know, the long-standing age at which withdrawals from retirement accounts were required to begin (called required minimum distributions, or RMDs) was recently changed by the 2019 SECURE Act from 70 ½ to age 72. But because the SECURE Act only partially addressed pressing issues facing retirees and those soon to retire, lawmakers quickly went to work on the SECURE 2.0 Act, which has now passed through Congress.

Now, the age at which RMDs must begin has been raised to 73, starting in 2023, and will again bump to 75 in 2033. But how will these new regulations affect you individually?

For those of you planning to begin RMDs earlier anyway, there will be no change. But some of you hoped to leave your money in retirement accounts for longer, to allow for further growth. So you can now wait until age 73, or 75 if you won’t reach that age until next decade.

Another change to the law might interest you: The penalty for failing to take your RMD has historically been one of the largest tax penalties at 50 percent of the amount you should have taken. That penalty was lowered by the authors of the SECURE 2.0 Act, to 25 percent. And for those who take steps to remedy the mistake by taking the RMD in the following year, the penalty will only amount to 10 percent.

Still, there are other reasons to pay attention to the timing of your first RMD. If you’re forced to take two RMDs in one year, you can trigger excessive income taxes that you probably want to avoid.

Some people might be able to avoid the penalty altogether, by filing Form 5359 with the IRS and explaining the reason for the error. Of course, it wouldn’t be a good idea to rely on this method, because the IRS has to accept your reasoning as a reasonable error.

Overall, you do have a bit more wiggle room in taking your first RMD. But we still recommend meeting with us in the year beforehand, so that we can calculate your RMDs correctly to avoid any potential penalties.

Five Tax-Planning Steps You Must Take Now

Tue, 20 Dec 2022 15:44:31 GMT

Most of us would rather wait until spring to think about our income tax returns. But because the decisions you make during the year will affect what you owe to the IRS in April, it makes sense to do a bit of advance planning. Take these steps now, and you’ll thank yourself in the months to come.

Make sure your paycheck withholding is correct. It’s better to take this step earlier in the year, but it’s never too late to avoid unpleasant surprises. If your paycheck withholding is incorrect, you could end up with a surprise tax bill in the spring. Check to be sure your employer is withholding the correct amount (if you tend to owe money at tax time, this is a cue that you should make an adjustment).

Make your retirement plan contributions. Retirement plan contributions help you prepare for the future, and they also serve as a powerful tax planning tool. Any money that you direct toward your retirement plan won’t be taxed, so you can effectively reduce your tax liability by quite a lot. For 2022, the limit on retirement plan contributions is $20,500, plus an additional $6,500 for those over age 50.

Plan for your tax deductions. A number of expenses are tax deductible, but they must be paid before the end of the year. If you need to earn more deductions, consider paying your mortgage interest, property taxes, medical bills, college tuition, and other deductible expenses before December 31.

Take action to reduce capital gains taxes. Any asset that you’ve sold during 2022 could be subject to capital gains taxes, if you held the asset for more than one year. One way to offset these taxes is to sell an under-performing asset and claim the loss to offset your profit.

Make your charitable donations now. Charitable donations can serve as a significant tax deduction, allowing you to deduct up to 60 percent of your adjusted gross income (AGI) for cash donations and 30 percent of AGI for non-cash donations. But in order to count your charitable gifts as a tax deduction on your 2022 tax return, you must make these donations by December 31.

Before attempting any complicated financial planning maneuvers, remember that we’re here to help. Give us a call so that we can guide you toward the strategies that are most appropriate for your situation.

Take Note: Make Charitable Donations by December 31!

Tue, 06 Dec 2022 16:20:14 GMT

As the end of the year approaches, we should all take note of certain deadlines with regard to tax planning. Otherwise, you could end up wishing you had made different decisions when it’s time to file your taxes in the spring. For those of you who plan to utilize charitable donations as a deduction on your income tax returns, here is what you need to know.

Understand the limits. Fortunately, for both you and the charities you plan to support, the limits on the charitable donation deduction are set quite high. If you donate cash to charity, you can deduct up to 60 percent of your adjusted gross income (AGI)! And if you make non-cash donations, you can claim up to 30 percent of your AGI for those.

The charitable donations deduction can also be used to reduce capital gains taxes. When you sell assets that you have held for more than one year, capital gains tax will apply to the profit. But you can avoid this tax by donating the non-cash asset directly to charity, while also claiming the deduction for your charitable contribution.

Donor-advised funds allow you to earn your deduction now, while deciding upon worthy causes later. Maybe you want to earn your tax deduction for charitable contributions by the end of the year, but don’t have time to decide upon a charity. Set up a donor-advised fund, and you can go ahead and make your donation to the fund. This buys you more time to decide upon a worthy cause and disburse the money later.

Charitable contributions can offset the tax liability of required minimum distributions (RMDs). Once you’re required to begin RMDs from your retirement account, those distributions will be taxed as income. However, you can direct part or all of the withdrawal to a Qualified Charitable Distribution instead. The money won’t be counted as taxable income if you set up distributions this way.

Remember to save your receipts or card statements. In the event that your return is ever audited, you will need to prove your tax deductions. Save receipts from your charities or make donations by credit card so that you can simply provide your card statements as proof.

We’re here to help. Call us for more information on year-end financial planning, and we can guide you toward a giving strategy that benefits you and your chosen organizations.

Why You Shouldn’t Count on Social Security

Tue, 15 Nov 2022 11:26:36 GMT

When you think about your future retirement income, you probably assume you’ll draw upon your Social Security benefits. And yes, for most retirees Social Security does provide for a significant portion of their incomes. But you shouldn’t count on Social Security to provide for most or all of your needs in retirement.

Why not? The answer might surprise you. Like most people, you’ve probably heard that the Social Security trust fund is “running out of money”. But that does not mean that the program itself will go bankrupt. The majority of funding for current Social Security payments comes from incoming tax dollars each year, meaning workers are funding the program just fine. As long as people are working and paying taxes, Social Security will be making payments.

So the reason you shouldn’t rely upon Social Security to fund your retirement isn’t what you thought. Then what’s the reason? It’s actually quite simple: You don’t have any idea what your future Social Security payments will be, and therefore should not plan your budget around them.

Yes, there are ways to potentially estimate your future benefit amount. Because the payments are based upon your earnings record and number of years that you were employed, you might be able to guess at your future payments. But many people end up retiring sooner than they had anticipated, for a variety of reasons that can’t always be predicted. And you can’t necessarily count on your future earnings, either. Layoffs and economic conditions can impact anyone.

And yes, with the potential budget shortfall due to the trust fund running low, changes to the program could result in reduced checks for some beneficiaries.

So no, you shouldn’t count on Social Security to fund your retirement. Try to view the program as a supplement to other retirement income that you establish for yourself. Call us to schedule an appointment, and we will discuss your retirement goals. Together we can make a plan to establish the income you will need.

You Can Save More for Retirement in 2023

Tue, 08 Nov 2022 15:52:43 GMT

We all know the cost of living is rising, and that means the cost of retirement has gone up too. That means we should be saving more for our future, because we can’t rely on prices to stay the same for decades. Luckily, the IRS also recognizes this need, and periodically releases cost of living adjustments to retirement plan contribution limits.

For 2023, you can save a bit more for retirement while taking advantage of some important tax benefits.

If you use a 401k, 403b, Thrift Savings Plan, or most 457 plans, you can now contribute up to $22,500 next year. And if you’re over age 50, the limit on catch-up contributions will be raised from $6,500 to $7,500. That means for those of you in the last decade of your careers, you can stash a maximum of $30,000 in your retirement plan next year!

If you utilize an IRA, your contribution limit will increase from $6,000 to $6,500. The catch-up contribution limit will remain the same, at $1,000, because catch-up contributions to IRAs are not subject to cost of living adjustments.

Because all of these accounts are tax-advantaged, you can make your retirement plan contributions on a pre-tax basis. That means your taxable income for the year is essentially lowered by the amount of your contribution. For some of you that will equal a significant income tax savings, which can help you manage your budget during your working years.

For more information on retirement plan contributions, call us to schedule an appointment. We should discuss your plans for the future and adjust your paycheck withholding so that you can adequately prepare for your golden years.

Social Security Recipients Will Receive a Nice Raise Next Year

Wed, 19 Oct 2022 05:34:55 GMT

With inflation continuing to impact household budgets, news of a cost-of-living adjustment (COLA) to Social Security benefits would be welcomed by retirees. But will the upcoming COLA in 2023 really be enough to help you out? Here’s what you need to know.

In 2022, the COLA was 5.9 percent, due to considerable inflation during 2021. But many retirees said that the increase in their checks didn’t really address their budget shortfalls, and probably for good reason. While any increase in payments is welcome, a few factors combine to reduce the impact of this “raise” for retirees.

For one thing, the method used by the Social Security Administration to calculate COLAs might not adequately reflect your own budget and spending. They use the Consumer Price Index to track spending of working individuals, whose habits are probably quite different from the average retiree. The index undervalues things that are more important to the over-65 demographic, such as the cost of housing and healthcare. When housing and healthcare exceed the average rate of inflation, retiree budgets are disproportionately affected by inflation.

Taxation is another potential problem. Social Security benefits aren’t taxed unless your overall taxable income exceeds certain thresholds for the year. A considerable increase in Social Security benefits could put some of you over those thresholds, meaning your income taxes might now increase.

The Social Security Administration has announced that the COLA for 2023 will be 8.7%. This represents the largest year-over-year increase in decades. Obviously, this is in part due to the inflation we've seen in the past 1-2 years.

If you have any questions or concerns about inflation, taxes, or anything else that might impact your retirement budget, let's schedule an appointment and discuss them. We can help you identify ways to address common pitfalls, so that you’re not on the edge of your seat waiting on news of a COLA each January.

One Way Retirees Can Control Some of Their Healthcare Costs

Mon, 03 Oct 2022 15:11:34 GMT

Healthcare is one of the biggest expenses faced by most retirees. But when you enroll in Medicare, you might still discover that your out-of-pocket costs surprise you. Luckily, you’re not stuck with the plan you chose when you turned 65. Each year, Medicare actually offers enrollees numerous opportunities to make changes to their coverage.

If you don’t make changes to your plan, you’ll be automatically re-enrolled each year. But if you take the time to do your research, you could potentially access a plan that better suits you during the following enrollment periods.

Medicare Annual Election Period. From October 15 to December 7, all Medicare beneficiaries can make changes to their plans during the Annual Election Period. First you will receive an Annual Notice of Change in the mail, detailing any upcoming changes to your Medicare plan for the following coverage year. Then, you can work with a broker or do your own research to see if another plan might better suit you.

Medicare Advantage Open Enrollment Period. From January 1 to March 31, those enrolled in a Medicare Advantage plan can switch to a different Advantage plan or return to Original Medicare. This can be an important opportunity for retirees who realize their plan network doesn’t work for them anymore or the premiums have changed.

Special Enrollment Period. At any time during the coverage year, your personal circumstances might change in a number of ways. Many changes make you eligible for a Special Enrollment Period, during which you can switch to a different Medicare plan that works better for the new situation. Always stay in touch with your Medicare professional, such as a broker, who can advise you on how to take advantage of this opportunity.

As you can see, Medicare coverage isn’t something that you just set and forget about! So while the out-of-pocket expenses might feel like a burden at times, you definitely have some control over the situation. Make sure you’re knowledgeable about your Medicare options, and stay in touch with your broker, so that you can access the plans that help you to keep healthcare costs in line with your budget.

6 Ways to Protect Yourself from Fraud

Tue, 20 Sep 2022 16:05:45 GMT

You might already know that financial scams have exploded in numbers ever since the Internet became widely used by the general public. It’s easy to pretend to be just about anyone online, and email addresses can even be faked. So, if you receive a message instructing you to wire money to a person or agency, that message should instantly be viewed with suspicion.

Recently, the incidence of “digital money movement scams” has been growing. Services like Zelle, Venmo, and Paypal allow us to easily send money to one another at the touch of a button. And so, you might be tempted to pay a bill or donate to a cause without fully investigating where the money is going.

If you receive a request to wire money to any of these people, stop and step away from your computer or smartphone!

Any government agency (they don’t request money by email)
Someone who claims your account has been compromised
People who request you to send money to “yourself”
Cryptocurrency websites or salespeople whose legitimacy you cannot verify
Any telemarketer or other salesperson asking you to make a purchase
Any stranger who tells you a “hard luck” story

Remember that con artists often attempt to exploit your emotions. So any message that incites fear of some type of consequence, hope for a get-rich-quick scheme, or desire to help someone with an unfortunate circumstance is likely to be predatory.

If you wonder whether a message from a government agency or other official-looking source is legitimate, pick up your phone and call them instead. Email addresses can be faked, but you will know you have called the legitimate agency.

As for other ways to keep your assets safe, let’s discuss this at your next appointment with us. We endeavor to help our clients feel secure about where their money is stored and where it is going.

The Pros and Cons of Reverse Mortgages

Sun, 11 Sep 2022 15:15:22 GMT

Part of financial planning involves investigating all of the different ways you can establish streams of income in retirement. It’s best to begin this process many decades before you retire, but some people get a late start. Whichever group you fall into, you might be wondering about something called a reverse mortgage.

Reverse mortgages allow you to pay off your existing mortgage and then generate income from the equity in the home. Your bank essentially “pays you” to live there until you pass away or move into a retirement home. These arrangements are occasionally used by retirees to generate income, but are they a good idea? Let’s investigate the pros and cons.

Pros of a reverse mortgage include:

You can generate tax-free income in retirement
You won’t have a monthly mortgage payment, typically a large expense for most of us
You won’t owe any payments on the money you receive as long as you live in the home
You can set up a reverse mortgage to provide a monthly payment, a one-time loan, or even just a credit line
Loan balances can’t exceed the property value, so you don’t have to worry about being “upside down” on a loan

Cons of a reverse mortgage include:

You can’t qualify until you’re at least 62 years old
You must have significant equity in your home to qualify
Fees and closing costs will apply
Your heirs won’t inherit the home
You cannot move out of the home without the balance of the loan becoming due
If you default, your home could be foreclosed
Using a reverse mortgage could make you ineligible for benefits like Medicaid or Supplemental Security Income

A reverse mortgage can be a viable option for some retirees, but only under certain conditions. Before signing a contract, let’s meet to discuss your income generating options. We want to help you make wise decisions that you won’t regret later.

When Should You Dip Into Your Rainy Day Fund?

Tue, 16 Aug 2022 23:53:26 GMT

We frequently remind our readers to establish a savings account to provide quick access to funds in an emergency. But what qualifies as an “emergency” exactly? When should you dip into your rainy day fund, and when should you find another way to cover unexpected expenses?

First of all, we should state the obvious: Some things are not emergencies, no matter how urgent they might feel to you. Never dip into your emergency fund to pay for the following:

Vacations
Debt
Any type of “fun”purchase (yes, even if you want it badly)

As for other unexpected expenses, follow this line of questioning to determine whether dipping into your rainy day fund is advisable.

Is this absolutely necessary? Or can I get by without this expense?
Is this the only way to pay for the expense?
Is this unexpected and imminent, or do I have time to prepare for this?
Is this expense urgent, or can it wait?
How much of my emergency fund will this require (it’s best to avoid draining the account)
How long will it take me to replace this money in my emergency fund?

And remember, some unexpected expenses can feel urgent, but there might be another way to cover them. For example, a sudden and large medical bill should never simply be paid without questioning it. Make sure to review all of the charges to be certain they are correct, and call the biller to inquire about arrangements. You can often negotiate a lower amount, or at least a payment arrangement so that you aren’t forced to dip into your emergency fund.

And when all else fails, sleep on the decision if possible. You might wake up tomorrow and realize this urgent expense is not so urgent after all.

For more information on financial preparedness, call us to schedule an appointment. We can help you establish a plan for long-term security so that you can weather any storm life brings your way.

Avoid These Common Estate Planning Mistakes

Tue, 09 Aug 2022 06:53:08 GMT

Most of us don’t enjoy thinking about it, but we all need to make a plan for our assets (and other final wishes) after we pass away. But because estate planning can often involve complicated legal maneuvers, it can be easy to miss something important. Save your loved ones a lot of time, money, and stress by watching out for these common estate planning mistakes.

The DIY approach. Nope, you shouldn’t just write out your own final wishes and hope that your loved ones will abide by them. These situations actually tend to invite legal challenges, and that can be costly for your beneficiaries who need to defend their right to what you bequeathed to them. It’s better to consult an attorney and draft a more airtight version of your final wishes.

Failing to name beneficiaries. Many types of financial assets, such as retirement accounts and life insurance policies, allow you to name one or more beneficiaries. This way, the assets can be transferred very quickly after your death, allowing them to bypass the time and stress of probate court. But that can’t happen if you don’t name beneficiaries, along with backup beneficiaries just in case.

Leaving it up to your spouse. If you’ve divorced the other parent of your children and subsequently remarried, you might hope that your new spouse will leave everything to your children after you both die. But if you pass away first, there is nothing stopping them from changing beneficiaries on accounts or making other decisions that are contrary to your original wishes.

Leaving a timeshare to your kids (or anyone, unless you’re certain they want it). If you include your timeshare as an asset in a trust, it will be automatically transferred to your beneficiaries upon your death. The problem is, not everyone wants to be saddled with the expense and hassles of a timeshare! Instead, allow your death to serve as an “opt out” on the property. That way, no one inherits something that they regret.

Overlooking the value of a trust. Trusts are such a valuable estate planning tool, because you can place assets in them for immediate transfer to your heirs upon your death. That means no waiting through probate court, no fighting over assets, and often lower fees from your estate planning attorney. There can be tax benefits from doing things this way, too.

Because estate planning dovetails with your overall financial future, we can also help you make decisions in this area. Let’s discuss your plans at our next appointment, so that we can help you avoid any potential pitfalls.

5 States With the Lowest Cost of Living for Retirees

Tue, 19 Jul 2022 16:46:44 GMT

We’re all feeling a pinch in our budgets these days, considering the impact of inflation and rising costs of housing. But as a retiree, you do enjoy one perk at this time of life. You can choose to live just about anywhere you want, because your location is no longer tied to a career. So if you want to move someplace with a lower cost of living, that’s entirely possible for you!

Cost of living is based on a number of factors, like the cost of housing, income tax rates, sales tax rates, and so on. For retirees, the average Medicare premium might also become a consideration. Each person will differ slightly, or maybe even significantly, regarding what they value most in a geographic area. But considering all of the most important factors, the following five states rank among the best for retirees.

West Virginia. With a cost of living at 9.5 percent below the national average, West Virginia decided to compete for the attention of retirees by eliminating the state income tax on Social Security benefits. The state also boasts comparatively low average home prices ($136,675) and competitive Medicare premiums ($59.74 monthly, on average).

Arkansas. At 10.1 percent below the national average cost of living, Arkansas also offers low home prices and Medicare premiums. However, the state does impose a higher-than-average sales tax rate, so it’s not the best for those who love to shop.

Iowa. Iowa claims a cost of living at 11.9 percent lower than the national average, along with numerous income tax benefits. The state of Iowa won’t tax your pension, annuity, or IRA if you’re age 55 or older. Otherwise, the flat tax rate of 3.9 percent is competitively low.

Oklahoma. Speaking of tax benefits, your Social Security income is completely nontaxable in the state of Oklahoma. Plus, the first $10,000 of retirement income is completely exempt from taxation. Overall, the state falls at 15 percent lower than the national average cost of living.

Mississippi. Mississippi claims status as the most affordable state in the nation, with a cost of living at 16.9 percent the national average. You can also enjoy the numerous benefits of living in the sunny South!

Of course, it is always a good idea to review your plans with a financial advisor before proceeding with any big moves. Schedule an appointment with us to discuss your retirement lifestyle plans, and we can help you weigh the pros and cons of any location you might consider.

What Are the 8 Most Common Sources of Retirement Income?

Tue, 12 Jul 2022 13:13:54 GMT

As you plan and prepare for retirement, it can be normal to feel a bit nervous about such a major life change. But the good news is that, according to a recent survey by the Employee Benefit Research Institute, 77% of retirees believe they will live comfortably.

It might help to learn about the most common sources of retirement income cited by the respondents to this survey, so that you can identify opportunities available to you.

Social Security. Most of us can count on drawing some amount of Social Security benefits, assuming that we meet minimum work history requirements. Of course, earning more and contributing more will one day result in larger monthly checks. But the average monthly benefit amounts to just over $1,500 for individuals and $2,600 for couples.

Defined benefit (traditional) pension. Pension plans once made up a significant source of retirement income for American workers, but now only about a quarter of them have access to a pension plan.

Defined contribution retirement plan (such as a 401k). Trends show defined contribution retirement plans, such as 401k accounts, replacing pensions as the primary vehicle of retirement planning within employee benefits packages. But of course, that means you’re responsible for making adequate contributions and managing the account over the years. Just 24 percent of survey respondents said that their 401k will be a significant source of retirement income.

Individual Retirement Account (IRA). Even if you already utilize a 401k or other defined contribution plan, you can open an IRA. More than half of survey respondents say that they will draw income from an IRA in retirement.

Personal savings or investments. No matter how well prepared you are, a personal savings account can provide much-needed cash during an emergency so that you aren’t forced to dip into retirement savings unexpectedly. You might also establish other investments that you can tap for income.

Annuities. Annuities are technically insurance products that provide monthly income in exchange for a one-time lump sum upfront. However, their benefits and drawbacks can vary considerably, so working with a financial professional is essential to sorting through your annuity options.

Work. After retirement, many retirees choose to go back to work part time, on a consulting basis, or as a self-employed worker. Aside from benefits like staying active and socially engaged, the paycheck from a post-retirement job can help to shore up income.

Help from family. It might surprise you to learn that 37 percent of survey respondents expect to receive financial support from family in retirement.

How do you feel after reading about these common sources of retirement income? If you’re looking to investigate your options or maximize the ones in which you already participate, give us a call. We can help you assess your situation and decide upon a retirement income plan that matches your future needs.

What is Net Worth and Why Does it Matter?

Mon, 20 Jun 2022 23:12:06 GMT

Most of us never think to assess our net worth in our twenties or thirties. We’re just getting started in our careers and possibly building families, and so things like net worth don’t usually take priority.

But as you head toward retirement, you might hear a lot about “net worth”. What is it, and why does it matter? And how do you stack up against the average retiree?

Thanks to new data from Personal Capital, we have some figures to share with you. The good news is that, on average, people in their sixties enjoy a higher net worth than people in any other decade of their lives. Therefore, you’re likely to hit your highest lifetime net worth around the time you get ready to retire.

How do we calculate net worth? Net worth amounts to the sum of your assets minus any debts that you hold. That simple equation will result in your net worth from any sources such as real estate, cash on hand, your retirement account, or investments.

What is the average net worth of retirees? According to Personal Capital, the average net worth of a person in their sixties is 1,726,840. However, that number could include just a few very wealthy individuals who pulled up the average quite a bit. And so, the median net worth of 549,872, which is still quite healthy, is probably a more reliable indicator.

Why is net worth important? Essentially, your net worth determines the lifestyle that you can live. That’s a bit blunt, and might feel a bit intimidating to some, but it’s the truth. So if yours feels a bit too low, waiting a few more years before retiring could be a wise strategy. And of course, we have other ways of potentially increasing your net worth before retirement.

How do you preserve your net worth? Once you’ve retired, you want your retirement income to last for the rest of your life, and we need to discuss a strategy for taking withdrawals from your retirement account. Those funds, combined with Social Security and any other income you might have established, will provide for your lifestyle in retirement.

As your target retirement date approaches, meet with me regularly to review your net worth, your investment strategies, and topics such as spending and budgeting. I can help you decide how to approach retirement wisely so that you can relax and enjoy this time of your life.

Take Note of This Tax Law Change

Tue, 14 Jun 2022 15:52:35 GMT

Throughout the years, you’ve focused on accumulating savings within your retirement account. But after you retire, your focus should shift toward a withdrawal strategy that helps your income to last as long as possible. And to that end, the IRS occasionally changes their withdrawal rules a bit. Retirees should take note of these changes so that they can adjust their withdrawal strategy appropriately.

While withdrawals can begin any time after age 59 ½, many retirees try to wait as long as possible in order to preserve their retirement account balances (and allow them to grow a bit more). But once you reach age 72, must begin taking required minimum withdrawals (called RMDs).

RMD amounts are determined by actuarial tables that are based upon your life expectancy. And since lifespans do change according to data, the IRS sometimes updates those tables.

This year, the IRS has issued changes to RMDs that allow for slightly smaller withdrawals. These rules affect the following types of accounts:

Traditional IRAs
SEP IRAs
SIMPLE IRAs
401(k) plans
403(b) plans
457(b) plans
Profit sharing plans
Other defined contribution plans

Do note that Roth IRAs are not subject to RMD rules.

Thanks to smaller RMDs, retirees can keep a bit more money in their retirement accounts if desired. So those who are concerned about having retirement income to support a longer lifespan might wish to adjust their withdrawals downward.

But before you make any changes to your withdrawal strategy, we Ido urge you to meet with meus. IWe must calculate your RMD accurately in order to avoid potential penalties for taking the wrong amounts. Let’s discuss your strategy at our next meeting.

6 Reasons Not to Pay Off Your Mortgage

Wed, 18 May 2022 02:43:16 GMT

Who wouldn’t want to live in a paid-for home? It sounds like a dream come true, right? So, if you face the opportunity to pay off your mortgage early, it could be tempting to do exactly that. But surprisingly, this isn’t always the best strategy! Consider these six reasons to divert that cash elsewhere.

All debts are not the same. In general, we look at debt in a negative light. But since mortgage rates are typically fixed and very low, it’s not the worst type of debt to hold. In fact, it’s probably the best, especially when compared with things like credit cards or student loans.

Mortgages provide a tax break. The interest you pay on a mortgage may be deductible on your income tax return and can save you quite a bit. This is especially true for those in a higher income tax bracket. Other forms of interest, like credit card interest, are not tax deductible.

You can earn interest elsewhere. In many cases, it is possible to invest money in vehicles that earn far more interest than what you’d save by paying off a mortgage.

You’re probably carrying other forms of debt. Credit cards, car loans, student loans, and other types of debt typically carry a much higher interest rate than a mortgage. If you experience a windfall of cash, these are the debts to address first.

Inflation might offset the interest on your mortgage. If the inflation rate exceeds the interest rate on your mortgage, your debt is technically considered an asset. Yes, that sounds strange, but it’s true.

You might need those funds elsewhere. It’s always good to have liquid assets in the bank to cover an emergency. If you pay off your mortgage, do you have cash left over to cover a new roof, expensive car repairs, or other emergencies life throws your way? If not, you might be forced to borrow money at a higher interest rate.

If you’re trying to decide what to do with a windfall of cash, make an appointment with me to discuss your options. This is a huge opportunity for growth and paying off your mortgage is often not the best idea. Let’s discuss all of your options so that you can maximize the potential of this moment.

How Will You Withdraw Your Retirement Funds?

Tue, 10 May 2022 22:35:49 GMT

For much of your career, you’ve focused on building an appropriate retirement savings. But once you retire, the strategy will shift from saving to spending - or, more accurately, withdrawing. Many retirees have spent little time considering how they will take withdrawals from their retirement funds, so you might be surprised to learn that this part of your plan should include careful strategy as well.

The rules for required minimum distributions (RMDs). At age 72, you will be required to start taking RMDs from your retirement account, if you haven’t already. These withdrawals must be taken by April 1 of the year after you turn 72, and by December 31 in subsequent years.

If you forget to take your RMD for the year, the IRS will impose a penalty in the amount of 50 percent of the amount you should have withdrawn. You definitely don’t want to overlook your RMD each year or withdraw less than the required amount.

Your RMD is based upon your age, life expectancy, and the account’s balance. So, it will change each year, and must be calculated carefully to avoid triggering penalties.

Withdrawals from multiple accounts. If you’re fortunate enough to have savings in multiple retirement accounts, you need to strategize withdrawals in a certain order. For example, you might feel tempted to withdraw from your Roth account first, in order to avoid income taxes. But it is important to know that withdrawals from a Roth IRA do not count toward your Required Minimum Distribution. Only regular IRAs, SEP IRAs, Simple IRAs and 401(k)s count toward RMDs.

And of course, those of you with multiple IRAs from different jobs might face confusion when it comes time to take withdrawals. One simple way to deal with this question is to roll all of the funds into one account.

Delaying your RMD. If you’re still working at age 72, while contributing to a 401(k), you might be eligible to delay your RMDs. However, you would still be required to take RMDs from other accounts from previous employers.

Consider a Roth conversion. In some cases, it makes sense to roll all of your retirement accounts into one Roth account. Making this move will trigger a one-time tax debt, but then the money in the account will continue to grow, untaxed. This move makes sense in some cases but is not the right choice for everyone.

As you can see, all of these considerations create quite a complex puzzle when it comes to retirement account withdrawals. Numerous rules and tax considerations can lead to wildly varying outcomes. Meet with me before you retire, and then regularly throughout your retirement, so that we can help you strategize your retirement income plan.

How to Know if Your Budget is Reasonable

Tue, 19 Apr 2022 14:12:06 GMT

Planning for your future starts with each paycheck that you receive. As you decide how to spend or invest your money wisely, you create not just the present but also your own future. And so, we always remind our clients that establishing a reasonable budget now will contribute to a happy retirement later. But what is considered reasonable and how do you know your budgeting skills are up to par?

Just ask yourself if your budget meets these standards:

Before you ever receive your paycheck, part of it is automatically diverted into retirement savings

When you receive a raise, bonus, or another windfall, you adjust your automatic savings plan upward before spending the rest

Each month, you stash a bit of money in a savings account to cover emergencies

You pay more than the minimum payments toward your credit card bills, or you have paid off all of your credit cards

You can cover all of your monthly expenses while also saving for the future

You tend to save up for large purchases rather than going into debt for items like electronics, appliances, new furniture, or a vacation

You and your spouse agree on spending limits for larger purchases or impulse purchases

You don’t feel guilty when spending money

You don’t feel stressed about your financial situation

If you can say that your budget meets these standards, then congratulations! You’ve mastered the art of budgeting. But if not, don’t despair. Anyone can learn better budgeting skills at any time, and begin the process of preparing better for the future.

And if you need help deciding how much to save for retirement each pay period, or have any other questions about financial planning, give us a call. We can help you make the decisions now that lead to a more stable retirement someday.

8 Signs That You Shouldn’t Retire Yet

Tue, 12 Apr 2022 14:58:59 GMT

We know that in life, hindsight is often 20/20. We can often look back and see the warning signs that existed before a poor decision, but we didn’t recognize them at the time. Because you don’t want to experience any regret after retirement, it’s a good idea to assess your readiness before making this big decision. The following eight signs signal that you’re probably not quite ready to retire.

You aren’t familiar with your Social Security options. Have you estimated your expected Social Security benefits? Do you know how to maximize your benefit amount? Are you familiar with rules regarding spousal and survivor benefits? If you don’t fully understand how the timing of your claim affects your benefit amount, along with other facts about how Social Security works, you should spend some time learning about the system.

You don’t know what your retirement income will be. You haven’t adequately estimated your retirement income from all sources, or you have calculated the income but aren’t sure if it will last long enough.

You don’t live on a budget currently. For most of us, income drops a bit (or more) in retirement. If you’re not living on a budget now, it’s time to develop this skill.

You don’t have a plan for surprises. How will you cover unplanned expenses? Make sure you have a plan for unpleasant surprises that can impact your budget.

You’re in debt. If you still need to pay down significant debts, retiring to a fixed income now will usually lead to a strained budget.

You don’t have a plan for long-term care. The majority of us will need long-term nursing care at some point in our senior years. If you haven’t planned for this significant expense, retiring now could be risky.

You aren't satisfied with your social life. Once you stop working, your social life will take on more importance in your life. Make sure you’ve established strong connections, so that you don’t suffer from loneliness.

Your job provides fulfillment and joy. If a large part of your identity and happiness comes from your career, giving it up could lead to emptiness. Gauge this decision carefully and consider other options like partial retirement.

We certainly don’t mean to discourage you. If you’re ready to retire and seeing one or more of these warning signs, just make an appointment with us. We will discuss your options and help you address any roadblocks, so that you can get back on the road to retirement.

How to Reduce Your Debt Before Retirement

Tue, 15 Mar 2022 14:12:41 GMT

Much of financial planning for retirement revolves around stashing money in a retirement account. But the other side of retirement planning involves your spending; what will your monthly budget look like, how much income do you need to cover expenses, and can you reduce debts so that your expenses are lowered?

Yes, it is ideal to enter retirement free of debts, or with as little debt as possible. So as you plan for retirement, eliminating debt is almost as important as saving money in a retirement account. Begin taking these steps now, so that you enter retirement with fewer obligations taxing your budget.

First, take a closer look at your monthly budget now. What interest rates are you paying toward revolving debts like credit cards? Consolidating all of those high-interest debts into one low-interest loan can help you get them paid off faster. Another thing to consider at this time is a mortgage refinance, because interest rates remain incredibly low.

Then, you should assess your spending habits and revamp your budget. Try not to ever carry credit card debt to the next month; only spend what you can pay off in the first billing cycle (before interest accrues).

Your next crucial step involves changing your mindset toward your financial priorities. The first person you should pay is yourself! Take a look at your paychecks, decide how much you can contribute to a retirement account first , and then use the rest to pay for living expenses and debts.

The best way to save for retirement is by diverting part of your paychecks to a retirement account via automatic contributions. That way, you’re not even tempted to spend the money.

After saving for retirement, now you design your monthly budget. And don’t forget to make a regular savings account a priority! One monthly “expense” should be stashing a little cash in an easily accessible account for emergencies. Now you’ll never have to charge unexpected expenses on a credit card ever again.

Finally, try to start thinking about finances in the long term. Yes, picturing the distant future is difficult, but it’s inevitable! You will retire one day, and you’ll be glad you took positive planning steps now.

We can help with that last part. Make an appointment with us, and we will guide you through the process of picturing your retirement and then making a strategy for your future.

Is the Average Retirement Savings Enough?

Tue, 08 Mar 2022 12:06:02 GMT

Your retirement plan should account for your individual situation, your expected lifestyle, and your dreams. So, it probably won’t look just like anyone else’s. But still, it can help to understand what the average retiree has saved, along with their expectations, to get an idea of how you compare with the norm. That’s the idea behind surveys like the one recently conducted by research firm Clever. What they found might surprise you.

On average, retirees have $191,659 stashed away for retirement. Does that sound like enough to you? The survey sought to answer that question, and uncovered some concerning emotions among retirees:

30 percent of retirees say that they have no retirement savings or investments
27 percent have less than $50,000 in retirement savings or investments
Only 18 percent of retirees report having more than $400,000 in savings or investments
51 percent believe they will outlive their savings; that’s not surprising, given the average size of retirement accounts
65 percent of retirees say that they’re not financially secure
75 percent of retirees report carrying debt throughout retirement

While $191,659 might be the size of the average retirement nest egg, in reality retirement savings are deeply skewed toward extremes. More than half of retirees have either nothing or very little in savings, with only a very small number of retirees actually in possession of a sizable retirement account.

It’s no wonder that most of the survey respondents (67 percent) said that they have regrets about their retirement savings.

As for Social Security, which is a common supplement to retirement income, the average monthly benefit is just $1,555. Compare that figure to your average monthly budget, and the importance of retirement savings becomes even more clear.

Don’t wait any longer to decide upon a retirement savings strategy. Call us to schedule an appointment right away, and we can help you devise a plan to entire retirement on a more stable financial footing.

The Two Most Common Retirement Fears

Tue, 15 Feb 2022 16:14:11 GMT

When it comes to retirement planning, it’s generally a good idea to focus on what you want for your future. Set goals, and then make a plan to achieve them. But you’re only human, after all, so naturally you feel some fears as well. Ignoring fears doesn’t make them go away, so you definitely want to address those feelings with your financial professional.

According to the 20th annual Transamerica Retirement Survey of Workers, Boomers preparing for retirement commonly report two primary fears:

45 percent worry about outliving their retirement savings and investments
46 percent say that their primary fear is that the Social Security program will be reduced or cease to exist

With regard to outliving retirement savings, that’s a reasonable factor to consider when formulating a retirement plan. Yes, many of us can expect to live 20 or 30 years into retirement, and that’s a long time to depend upon retirement plan distributions. An experienced financial professional can help you put together a retirement plan distribution schedule that potentially helps your money to last longer.

As for Social Security, it’s important to remember that the program was never meant to provide the main source for retirement income for anyone. And yet, that’s exactly what many soon-to-be retirees expect.

Of the Boomers surveyed by Transamerica, 37 percent say that Social Security benefits will serve as their primary income in retirement. And for middle-income workers, the Social Security Administration says benefits will only replace about 40 percent of pre-retirement income. The rest is on you.

That is to say, the above fears are certainly reasonable. But whether Social Security is still around or reduced in the future, no one should be counting on it as a primary source of retirement income anyway.

Make an appointment with us to discuss your retirement planning fears. After we resolve those, we can discuss what you do want for retirement, and help you make a plan to support those goals.

10 Ways to Make Your Retirement Savings Last Longer

Tue, 08 Feb 2022 16:20:41 GMT

Thanks to longer lifespans, some of us can look forward to 20 or even 30 years of retirement. That’s great news overall, but what about your financial longevity? These ten tips can inspire ways to make your retirement savings last longer.

Download a budgeting app. We all say we’re following a budget, but most of us don’t actually do it very well. But technology can make budgeting so much easier. Download a budget app and train yourself to use it faithfully. Ideally you will do this before retirement, so that you become accustomed to your new lifestyle.

Consolidate debts. In the ideal scenario, you will pay off debts before you retire. But life is often less than ideal. If you do carry debt into retirement, consider a consolidation loan that rolls everything into one, low-interest payment.

Downsize your home. Not only will a smaller home usually equal a smaller or no monthly payment; you will likely experience lower maintenance and utility costs as well.

Relocate. And if you’re moving anyway, why not consider a less expensive area? You’re no longer tied to one particular city for work and can live anywhere you want now!

Ask about senior discounts. More to the point, ask about discounts everywhere that you spend money. You will be surprised at how often you can score a better deal.

Shop secondhand. From home decor to cars, new is rarely necessary. Shop thrift stores, yard sales, and even Facebook Marketplace for great deals on gently used items. You’ll avoid paying top dollar and stretch your budget much farther.

Downsize your vehicles, too. Many retired couples can get by just fine with only one vehicle. You’ll eliminate one payment from your budget, along with the cost of maintaining multiple cars.

Travel during the off season. Now that you’re not beholden to work or school holidays, you can travel whenever you want. And travel during the off seasons can be surprisingly cheap!

Fully research your Medicare options. Choosing the right plan is one way to save money on healthcare expenses. But then using your plan correctly is also wise. Take the time to fully research your options and truly understand the plan that you choose. Then remember that you can switch plans during open enrollment if you determine your plan isn’t working for you.

Learn about sequence of returns risk. Withdrawing money from your retirement account when the market is low will mean you lose the opportunity for rebounds. There are several ways to avoid this mistake. Work closely with a financial advisor to learn how to take withdrawals the smart way.

And on that note, give us a call as you plan for retirement, and we can help you determine how to make your retirement savings last.

3 Things You Need to Know in Your Early Sixties

Tue, 18 Jan 2022 23:35:50 GMT

Once you’ve reached your early sixties, you’re in the home stretch of retirement planning. But that doesn’t mean you should leap into retirement just because you feel like it! There are still important decisions to make that will impact your financial stability in retirement. Here’s what you need to know as you get ready to retire.

You can claim Social Security at age 62. This is the earliest age at which you can claim your benefits. But just because you can, doesn’t mean you should. Claiming your benefits early can result in a permanent reduction of your monthly payments, up to 30 percent less than they would have been at full retirement age.

Having said that, there are sometimes good reasons for claiming benefits early. Just remember that your decision will also affect your spouse, if they were planning to claim spousal benefits instead of their own.

You can take withdrawals from your retirement account. Starting at age 59 ½, you can take withdrawals from your retirement account without incurring penalties. But once again, that doesn’t mean you should.

Your retirement savings will continue to grow, depending upon the average rate of return you’re earning. Any money taken out of the account will obviously not earn interest, so leaving the money untouched for a few more years can make a major difference in the size of your nest egg. And since retirement could last two decades or more, most of us need all the savings we can muster.

You will be eligible for Medicare at age 65. If you retire before you turn 65, you will need a plan to cover healthcare expenses (which can be surprising and significant at this age). Health insurance can be expensive, so weigh your options carefully before retiring early.

And when you do retire, remember that Medicare will not cover all of your medical expenses. You will still need to plan for co-pays, deductibles, and prescriptions, and services like dental and vision. Some Medicare Advantage plans do offer more comprehensive coverage than Original Medicare, but you will often pay a premium for those plans.

If you’ve now reached your early sixties, it’s time to schedule a check-up on your retirement plans. Call us to schedule an appointment, and we will help you set a retirement date.

10 Signs That Your Retirement Fund is Not Adequate

Mon, 10 Jan 2022 17:01:32 GMT

The last thing anyone wants is to run out of money in retirement. But that can indeed happen, and does sometimes happen, to retirees who didn’t plan adequately. If any of these ten signs sound familiar, you might want to review your retirement savings strategy before you set a target retirement date.

You haven’t considered the impact of inflation. Did you know that at the current rate of inflation, your spending power could be reduced by more than half within 20 years? What sounds like a lot of money now might not stretch as far as you expect in the future.

You haven’t considered your life expectancy. Did you know that one in four 65-year-old people today will live until age 90? Could that be you? And can you afford a retirement that lasts that long?

You don’t have a plan for long-term nursing care. Long-term nursing care costs thousands per month, and Medicare actually does not pay for it (except for very limited stays). One illness or injury could quickly deplete your retirement savings.

You’ve underestimated the cost of healthcare in retirement. Similarly, Medicare also does not pay for 100 percent of regular healthcare costs. Most would-be retirees are surprised to learn that healthcare costs about $250,000, on average, over the course of retirement.

You don’t know how income taxes will impact you. Are you surprised to learn that your retirement income might be taxed? If that news came as a shock, you should reexamine your anticipated budget.

You’re divorced or considering a divorce. If you’ve already divorced, then you might already know that your retirement fund took a hit. But if you’re considering a divorce in the years before retirement, you might consider marriage counseling instead. A divorce can result in your retirement fund being divided in half.

You haven’t considered your future spending habits. Have you realistically estimated your budget for travel, hobbies, and entertainment? You might be tempted to spend more on these items than you think.

You would have difficulty affording a large, unexpected expense. And what about the cost of a major car or home repair? How would you fit that into your budget?

You frequently overspend on children and grandchildren. Sometimes loving our families a bit too much can get us into financial trouble. Make sure you’ve considered the cost of gifts, college, or helping during emergencies.

You don’t have a retirement plan withdrawal strategy. How much money are you planning to withdraw from your retirement fund each year? And how long will your money last with that plan? If you can’t answer these questions satisfactorily, it’s time to schedule an appointment with us. Let’s talk about your withdrawal strategy so that you know what to expect from your savings.

3 Steps to Recovering from Financial Woes

Tue, 14 Dec 2021 16:11:55 GMT

No matter how responsibly you strategize your career, plan your budget, and pay your bills, a financial setback can happen to anyone. This is certainly a lesson many of us have learned over the past year and a half, with the pandemic triggering rampant unemployment and other budgetary woes.

But life does go on, and we will all bounce back eventually. Follow these three steps, and your recovery might go more quickly and smoothly.

Analyze the cause(s) of the problem. Sometimes, disaster strikes, and it’s no one’s fault. But in many cases we can look back and see that we should have at least prepared for the unexpected.

Did you overspend and rack up too much debt? Did you neglect to advance your job skills to stay competitive in the employment market? Did you forget to set aside at least a few months’ worth of expenses in a savings account?

Learn from your mistakes, take note of what you can do better in the future, and move forward.

Establish a budget. Now is the time to rethink your priorities. Cut out everything that isn’t absolutely essential, so that you can focus on your next steps. Freeing up some of your cash flow means you can re-establish savings, pay off debts, save for a necessary move, or otherwise dig out of an uncomfortable situation.

Consider ways to boost your income. And of course, more income means you can recover more quickly. Ask for a raise, take on a side job, consider a home-based business, or test out the gig economy. And with so many job openings right now, simply trading up to a more lucrative position might be in order.

Sometimes, bouncing back from a financial setback requires expert guidance. Before making any big decisions, give us a call to discuss your situation. We can help you identify options and then analyze the impact on your long-term financial plans.

Answer These 5 Questions Before Claiming Social Security

Mon, 06 Dec 2021 22:45:12 GMT

It’s normal to feel antsy about retiring. But before you take the leap into the next phase of your life, make sure you’ve asked - and answered - these five important questions.

What is my full retirement age? Your “full retirement age”, as defined by the Social Security Administration, is the age at which you can claim your full scheduled benefits. It falls between 66 and 67 years old, depending upon the year of your birth. Of course, you can claim benefits earlier, but your monthly checks will be reduced.

How would an earlier claim affect my benefit amount? You don’t have to wait until your full retirement age to claim your benefits, if you’re willing to accept a smaller monthly check. But don’t just guess at the amount. Benefits can be reduced by as much as 30 percent, and many retirees can’t afford to miss out on that much income.

How would a later claim affect my benefits? On the other hand, waiting longer to file your claim can net you a larger monthly check. After you’ve reached your full retirement age, future benefits grow by 8 percent for each year that you wait to file your claim. However, that stops at age 70, so make sure to file your claim then.

How will income from work affect my benefits? If you claim your benefits before reaching full retirement age, those checks can be reduced depending upon your income from work. For every two dollars you earn above a certain threshold, your Social Security checks will be reduced by one dollar. In the year that you’re set to reach full retirement age, checks will be reduced by one dollar for every three dollars you earn above the threshold.

In 2022, that threshold is set at $19,560.

How will my spouse be affected if I claim my benefits? If your spouse will claim spousal benefits based upon your work history, delaying your claim means they won’t get their benefits yet either. Or, if you claim benefits earlier, their potential survivor’s benefit will be smaller than it otherwise might have been.

As you can see, there’s a lot to consider before filing your claim for Social Security benefits. Work closely with us in the years leading up to retirement, and we can help you determine the right time to get your checks started.

Will You Earn More Than the Average Social Security Benefit?

Sat, 13 Nov 2021 17:03:52 GMT

We regularly remind our readers that Social Security was intended to serve as a supplement to retirement income, and that you shouldn’t expect to rely on your checks to cover your entire budget in retirement. But that doesn’t mean you shouldn’t try to maximize those benefits as much as possible! Social Security can definitely serve as one important part of your overall financial plan.

In fact, 37 percent of men and 42 percent of women depend upon Social Security for at least half of their retirement income. So you might be wondering what the average Social Security benefit is, and whether you can expect to receive that much or maybe more.

Social Security does regularly increase checks a bit, in response to inflation, but the average expected benefit for 2022 will be $1,657 per month. But will your benefit fall in the average range, or perhaps be more generous? There are three ways to influence your final benefit amount, and you can begin to evaluate those factors now.

Have you worked at least 35 years or longer? The benefits calculator uses your 35 highest-earning years to determine your final benefit amount. Those who worked more than 35 years might have some higher-earning years to average into the formula. On the other hand, those who worked fewer than 35 years will have some zeros averaged into their work history. The results can determine whether you receive an average-sized check, or one that is significantly smaller or larger than average.

You earn an above-average salary. The median US salary is just over $52,000 per year, and earnings are taxed for Social Security purposes up to a limit of $147,000 annually. So if you’re earning in the upper end of that range, and continue to be a high earner for many years, you will probably end up with a benefits check that is larger than average.

You’re going to delay your claim. Your benefit amount will be determined by when you file your claim. Full retirement age is 66 or 67, depending upon when you were born. But if you delay your claim for a few more years, your benefit will grow larger (up until age 70, at which point there is no benefit to waiting).

If you’re really curious about your potential Social Security benefit, call us to schedule an appointment. We can help you estimate your potential future benefit amount, and help you plan for other forms of income to go along with it.

The Great Resignation Prompts an Early Retirement for Many

Tue, 09 Nov 2021 15:02:48 GMT

We’ve certainly seen our share of shifts in the workplace and economy over the past year. In particular, millions of workers participated in what is now being called the Great Resignation. For numerous reasons, workers said goodbye to their employers during the pandemic, and many of them have not looked back.

Among those resigning workers were many Americans who were already close to retirement age anyway. Instead of looking for new employment, they have now decided to opt into a new retirement, for a number of reasons:

Health concerns due to the pandemic
Large market gains
Inflated home values
Federal stimulus packages
Expanded federal unemployment benefits

In addition to those factors, the stress of the pandemic and the remote work trend might have simply frustrated workers in their fifties and sixties. Some simply decided that they felt “done”.

So, are these retired workers now living on Social Security? Actually, many of them are not! The Social Security Administration reported the largest decline of new retirement claims in nearly two decades last year. People are retiring, but they’re not claiming Social Security just yet.

It is likely that these retirees have realized something important: By delaying their Social Security claims, they can reap a larger monthly check when they claim their benefits later. Some might even be too young to file a claim, since 62 is the earliest age at which you can claim benefits.

So, how are these early retirees getting by? Some might be covering expenses with unemployment benefits and federal stimulus money for now. But with the market seeing large gains in some areas during the pandemic, those above age 59 ½ might simply be taking distributions from their retirement accounts.

Finally, will some early retirees change their minds and go back to work? That remains to be seen. But if you’re concerned about the possibility of an early retirement due to the above factors (or any other reason), give us a call so that we can discuss your situation in more detail.

What Can You Do With Cash Value Life Insurance?

Tue, 19 Oct 2021 15:33:29 GMT

There are as many different types of life insurance on the market as there are unique needs. For some, a cash value life insurance policy is the best option. Like other types of life insurance, a cash value policy pays out to your beneficiaries upon your death. However, with this type of policy, a portion of your premium is diverted into a separate savings or investment account each month.

Over time, this cash value accumulates, and you will earn interest on the cash in your account. You can leave the money in the account (and your beneficiaries will eventually receive it) or you can use it for other purposes throughout your lifetime. For example, you can use your cash value life insurance policy to…

Take a withdrawal. You can withdraw money from your cash value life insurance account for any reason. For example, you might suffer a financial emergency, want to purchase a home, or need to cover a child’s college tuition. But keep in mind that your eventual death benefit will become smaller as a result of this withdrawal.

Take out a loan. Your cash value life insurance policy can provide you with a loan. But if you die before the loan is repaid, plus interest, then your beneficiaries will receive a smaller payout of the death benefit.

Pay your premiums. In the event that you suffer a financial hardship, there’s no need to let your life insurance policy lapse. You can use money in the cash value portion of the policy to continue paying the premiums.

Sell your life insurance policy. Yes, you can actually sell your entire life insurance policy! This isn’t the right choice in every situation, of course, but it is one of the many possibilities with this type of life insurance.

Surrender the policy. You can actually surrender your policy, and receive all of your cash value back (after fees are paid).

A cash value life insurance policy isn’t the right choice for everyone, but it does provide the right mix of benefits for some situations. If this option appeals to you, contact our office to learn more about this versatile financial planning tool.

Is it Ever a Good Idea to Claim Social Security Early?

Mon, 11 Oct 2021 16:07:32 GMT

We often remind our readers that claiming Social Security benefits earlier than full retirement age can result in smaller checks for the rest of your life. Likewise, waiting beyond full retirement age can actually help you earn larger checks - up to 8 percent larger for each year you wait, up to age 70.

So you might be wondering, “Is it ever a good idea to claim Social Security benefits early?” Actually, yes. In some cases it does make sense to go ahead and start receiving your checks before full retirement age.

You want to pay down debts before beginning withdrawals from your retirement plan. You’ll need to live off of a combination of retirement savings, Social Security, and any other income that you’ve established for the rest of your life. But if you’re carrying significant debts into retirement, those can eat into your monthly budget. Claiming Social Security benefits now can help you pay down debts faster, and lower the amount that you eventually pay toward interest.

You’ve already banked your 35 highest-earning years. Social Security payments are calculated based upon the 35 highest-earning years of your career. If you’ve already banked those years, you won’t increase your checks this way. However, claiming those checks before full retirement age will still mean that they are reduced a bit.

You need to quit working. At some point, you might need to retire earlier than you had planned. Industry layoffs, health issues, and other factors can force a change of plans. The good news is that you can go ahead and start enjoying your retirement now. But you might simply need more funds in order to do so. In this case, you might claim Social Security early out of necessity.

You’ve cut down to working part time. Some people choose to gradually cut back on work hours, and ease into retirement. If you’re only working part time, you might be able to claim Social Security benefits now. Some of your benefits will be withheld according to earnings, so let’s discuss this issue in depth in order to help you decide whether this choice is worth it.

You’re in poor health or have been diagnosed with a terminal illness. In the event that you expect a shortened lifespan, it usually makes sense to go ahead and claim your Social Security benefits now. After all, checks stop when you pass away, unless you have survivors entitled to benefits.

No one is relying upon your benefits. After you pass away, it is possible for a surviving spouse or disabled child to draw at least part of your scheduled benefits. You would ordinarily want to maximize this amount as much as possible in order to provide for them. But if no one else will be relying upon your checks, you might as well claim them now if it otherwise suits you to do so.

Timing your claim for Social Security can be a complex issue, and certain other situations can be factored into this decision. Call us before you retire, so that we can help you decide upon the best time to file your claim.

What Happens When One Spouse Retires First?

Tue, 21 Sep 2021 10:35:54 GMT

Rarely do couples retire one the exact same day. One of you will probably cut ties with their career first, and you might be surprised at how much this one change affects your entire lifestyle. Everything from your budget to your daily routine will shift, and the two of you must be proactive about dealing with these changes. Here’s what you need to know.

Communicate. As with any other relationship issue, communication is key. As you plan for your retirement, discuss related issues with your financial planner. Consulting a marriage counselor is a good idea too! They can help you communicate openly and address any concerns you might have.

Plan your budget. Yes, one of you will lose a salary, but perhaps begin drawing Social Security and/or distributions from a retirement account. You might expect that certain expenses, such as the cost of commuting, will decrease. But consider the other side of things, too. What will the retired spouse do all day? Will the cost of entertainment, hobbies, or something else increase?

Establish clear boundaries. The retired spouse might feel tempted to drop by the workplace of the working spouse quite often. This could amount to a happy surprise or even a romantic planned lunch. But for some couples, the blurred boundaries could become an aggravation. The retired spouse must make a plan for their days, and the two of you should communicate about the degree to which the working spouse needs space.

Consider the division of labor. If both of you have been working for many years, you might assume that the retired spouse will take up more of the household chores. But we all know that assumptions can be dangerous in marriages! Make sure to discuss this expectation honestly.

Remember that change will happen, and be flexible. The retired spouse might develop a more active social life or change in some way. The working spouse should remember that they, too, will experience their own changes when their own retirement date arrives.

Share activities. Remember to continue sharing activities that you enjoy together, so that one of you doesn’t feel isolated. Schedule regular date nights.

Stay fluid. Most couples need to make some adjustments as their retirement years progress. Continue to communicate openly, and meet regularly with us to discuss the financial side of things. If your budget or lifestyle changes, we can help you adjust your retirement plan.

Can You Live Off of Your Social Security Check?

Tue, 14 Sep 2021 15:12:49 GMT

We frequently remind our readers that Social Security was intended to be supplementary income in retirement. It was never meant to fully fund your lifestyle! And yet, some people never do establish retirement savings, and find themselves living entirely off of their Social Security checks. Is this possible? And what would that type of retirement look like?

The average monthly benefit is $1,523. That’s a pretty tight budget, if you fall somewhere around the average. Of course, your actual Social Security benefits might be higher or lower than the average. But it’s worth asking yourself: Can I live off of $1500 a month?

Retiring later can help. Your full retirement age is either 66 or 67, depending upon when you were born. This is the age at which you can claim your full Social Security benefits. Avoid retiring earlier than this age, because your checks will be reduced (as much as 30 percent, if you retire at age 62). On the other hand, working until age 70 can boost your checks a little higher.

Can you relocate to an area with a lower cost of living? In some areas of the country, living off of Social Security is inconceivable. But other areas do offer a much lower cost of living. Do your research, and don’t forget to factor taxes into the equation. But will a move mean leaving family and friends behind? How much will it cost to travel and visit them?

Are you single or married? If you’re single, consider living with at least one roommate. You can split expenses, and retiring with friends can be fun!

If you’re married, the two of you should consider what will happen when one of you passes away. Widows and widowers can claim survivor’s benefits, which is the larger of the two Social Security checks… but you’ll lose one check regardless.

Are you debt free? Living on a fixed income is difficult for anyone, but particularly hard for those carrying significant debts. If you can pay off your mortgage, credit cards, and other debts before you retire, you stand a better chance of living within a more restricted budget.

Consider your healthcare costs. For many retirees, healthcare costs exceed even the cost of housing. Evaluate all of your Medicare options and choose an insurance plan or plans that will most benefit your financial situation.

The above points should give you an idea how you would live on Social Security alone. For most people, this plan is financially risky and does not provide for an adequate lifestyle. We strongly recommend that you contact us to discuss other options for funding your retirement, rather than counting on Social Security to cover everything.

3 Steps to Envision Your Best Retirement

Tue, 17 Aug 2021 12:54:48 GMT

For many of us, saving for a faraway goal can feel frustrating. Yes, you’re making regular contributions to your retirement account and meeting regularly with your financial advisor… But why? Saving for a goal that waits in the distant future feels less motivating than planning for an exciting purchase next week. And that’s precisely why so many people fall behind on their retirement savings!

So to go along with your financial planning, try to envision the future that your efforts will fund. These three tactics can help you view the distant future as more of a reality, and make diligent saving feel more rewarding.

Picture a typical day. Most of us focus on the big plans, such as booking a cruise, moving to Florida, or purchasing a boat. But how will the average day look after you’ve retired? Consider how you will spend the typical weekday, what you will do all day, how you will socialize, and what other obligations might fill your time.

You might realize that you’d prefer to work part-time, move closer to family, or volunteer your time for a good cause. Of course, you can add new activities at any time, but planning for them ahead of time helps you to better envision your budget and needs.

Try a test run. At some point in the years leading up to retirement, give your plans a test run. Schedule a two-week vacation from work, and then spend every day engaging in the typical activities you pictured in the first step above. If you envision yourself moving after retirement, try renting a home in your desired location for two weeks.

Set goals. For many years, your life has revolved around setting and achieving career goals. After retirement, many people struggle with boredom or lost purpose because they don’t continue this habit! Plan to achieve a few goals once your career has concluded; write a book, impact your community, or start a side business.

It’s easier to plan for the future when you have a clear picture of how that future looks! As we continue to meet regularly to discuss your finances, let’s also discuss your vision of the future so that we can adequately prepare for reality in retirement.

How and When Do You Initially Enroll in Medicare?

Tue, 10 Aug 2021 21:54:54 GMT

If you're like most people, you expect that Medicare will provide for your healthcare needs at some point in the future. But also like most people, you might not feel familiar with all the rules and regulations that go along with the program. When exactly do you enroll in Medicare? And how? Here's what you need to know.

Most people enroll in Medicare when they turn 65. You become eligible for Medicare when you turn 65. Your enrollment window begins three months before the month of your birthday, lasts throughout that month, and then extends for three months afterward. It's best to get an early start, if you can, because you'll face several big decisions regarding your enrollment.

In general, you're required to enroll in Medicare at this time, or else you could face a penalty in the form of higher premiums later. But there are some exceptions to this rule. If you or your spouse are still working, and you're covered by an employer's healthcare plan, you might be able to delay enrollment in Medicare. Or, you might opt for dual enrollment, allowing Medicare to serve as a supplementary plan. To learn more about the specific rules regarding this exception, talk to your human resources department at work or contact an insurance agent who specializes in Medicare.

There are two ways to enroll. If you've already claimed your Social Security benefits, you will be automatically enrolled in Original Medicare upon your 65th birthday. But if you want to enroll in a different Medicare plan or opt for supplemental coverage, you need to consult with an insurance specialist.

If you haven't already claimed your Social Security benefits, then you need to enroll in Medicare yourself. You can do this by visiting the Medicare website , or by discussing your options with an insurance agent.

Give us a call when it's time to compare your options, and we'll be happy to help.

Should You Rent or Own a Home in Retirement?

Thu, 15 Jul 2021 17:34:13 GMT

Living in a paid-for home is a common retirement dream. It makes sense, considering that a mortgage payment is the largest form of monthly debt for most of us. Living free of that burden must feel glorious! Not to mention, there’s just something about looking at your home and knowing that you own it outright.

On the other hand, home ownership can be a burden of its own. Even when paid off, a house can put a dent in your budget and become a source of considerable stress at times.

In fact, many retirees say that they prefer to rent at this stage of their lives! Why?

They cashed out the equity in their old homes and used it to fund retirement, a move to a preferred location, or to fulfill another dream
They downsized into a smaller home with more manageable upkeep
They moved to a new area without a commitment, and can move again easily if that location doesn’t work out
They live life on the road, traveling continually, and love it
They decided to move closer to children and grandchildren, or even good friends
They love not having to worry about scheduling or paying for repairs
They no longer worry about rising property taxes (although rent might occasionally rise in response)
They appreciate the simplicity renting brings to their estate plans

All of these reasons sound good, don’t they? Of course, you might still prefer to own your home. If you love your current house, it suits your lifestyle, and the location is perfect for you, you probably don’t see a reason to move. If that’s the case, just remember to save for a rainy day. Repairs and sudden tax hikes do happen, and you don’t want unpleasant surprises to throw off your budget.

If you’re still deciding upon where to live in retirement, or any other aspect of your future plans, give us a call. We can help you weigh the pros and cons, and then decide upon a lifestyle and retirement plan that works for you.

Good News Possible for Social Security Beneficiaries in 2022

Tue, 06 Jul 2021 15:17:18 GMT

As if we didn’t already have enough worries during a pandemic, many of you have noticed alarmingly high prices on basic necessities lately. For those on a fixed retirement income, higher prices on things like food and gas can be deeply concerning. Luckily, a bit of help might soon be on the way.

According to the Senior Citizens League, a nonpartisan group, Social Security beneficiaries could see a sizable cost of living adjustment in 2021.

After analyzing data from the Consumer Price Index, which is used to calculate inflation and cost of living adjustments for Social Security beneficiaries, the League estimated in April that checks could increase by about 4.7 percent next January. They have now revised that estimate upwards, based on the latest data, to 5.3 percent.

It’s important to note that this figure is just an estimate for now, and that several more months of data will be recorded before Social Security makes a determination about cost of living adjustments. But if the increase does happen, it could be the largest we’ve seen since 2009. That year, the cost of living adjustment amounted to 5.8 percent.

An increase in your Social Security benefits would no doubt come as a welcome relief amid skyrocketing prices on a number of essential goods and services. But we must caution you not to count on anything just yet.

In addition, those planning for retirement should always remember that Social Security was conceived as a supplement to other forms of retirement income. It was never meant to completely support anyone. To learn more about setting up streams of dependable income in retirement, call us to schedule an appointment.

How Did The Pandemic Affect Your Retirement Plan?

Tue, 15 Jun 2021 01:29:57 GMT

Even after decades in your career, you probably never experienced as many changes as we all witnessed this past year! The pandemic has affected every aspect of our lives, but it has particularly affected work and finances. And for those planning to retire soon, we saw several concerning situations emerge.

Some opted for early retirement. For those with health concerns, a pandemic raises obvious red flags. Many older workers, fearing a greater impact from covid, felt pressured into an early retirement. This was especially the case for those who can’t work from home.

Some were forced to “retire”. If you were among the most unlucky, your company might have closed down for good. Many small businesses did not survive the pandemic, leaving workers unemployed. Some older workers felt unable to reenter a changing workforce and decided to call it quits and retire.

Some are unemployed, but not retired. The unemployment rate for workers over age 65 reached 15.6 percent during the worst of the pandemic. However, these workers don’t want to remain “retired”. Whether by choice or financial necessity, these individuals continue to search for new employment. They might look retired, but they don’t intend to stay that way.

Only a few delayed retirement. With the stock market crashing early in the pandemic, many feared that their retirement plans would be forever on hold. Luckily, the market has rebounded and many retirement plans are in surprisingly good shape. Only 16 percent of older workers report that they will be forced to retire later than planned.

Do any of these scenarios sound familiar? If you’re feeling concerned about your retirement plans in light of recent events, call us to schedule an appointment. We can help you decide upon a new timeline, if necessary, and help you set reasonable goals for the future.

With Tax Law Changes Likely, Here’s What You Might Consider

Tue, 08 Jun 2021 01:16:03 GMT

With Congress currently considering significant changes to tax laws, we should all prepare for our financial situations and estate plans to potentially shift. Nothing is decided for certain yet, but economists and political analysts predict some form of the following changes will likely be approved this year:

Elimination of preferential tax treatment to long-term capital gains
A new wealth tax on high-earning households
Changes related to estate planning, which could increase future taxes on your heirs
Changes to taxes related to carried interest

The increase in capital gains tax to 39.6 percent is likely to affect only about one percent of Americans because it only applies when your annual income exceeds $1 million. Having said that, if avoiding this tax is on your wish list, you have several options to consider. You might sell those assets now, taking advantage of the lower tax rate. Or, you can hold onto those assets long term, and hope for reduced taxes in the future. There might even be gifting strategies that could allow you to transfer some assets to family members.

As for higher income taxes, you might wish to focus on strategies to defer income. Consider a Roth conversion for retirement accounts, paying taxes at the lower rate now and enjoy non-taxable income in the future. Tax-advantaged investments such as cash value life insurance provide another option.

If you’re concerned about the possibility of higher estate taxes that will someday affect your heirs, you fortunately have plenty of potential avenues to explore. Gifting assets now, staying within the gift tax exclusion limits, is one way to begin passing wealth to the next generation. Establishing certain types of trusts are another way to protect your heirs. And of course, making gifts to charity each year can help you leave a legacy while also earning you a valuable deduction on your income taxes.

Strategies related to taxation and estate planning can quickly become complex. We do recommend that you meet with a tax professional and estate planning attorney to address these concerns proactively. Let’s also discuss these issues at your next appointment, so that we can help you adjust your overall financial plan if necessary.

How to Live Your Best Life in Retirement

Tue, 18 May 2021 13:18:32 GMT

We all know people who have already retired, and happily report that they’re having the best time of their lives. But we also know people who retired, seemed happy for a short period of time, and then quickly became dissatisfied. Some of these retirees went back to work, while others adjusted their plans, while a few simply remain unhappy with their situations. So, what happened? And how can you help to ensure that you feel satisfied with your retirement?

That’s the subject of a book, called “You Can Retire Sooner Than You Think”, written by investment advisor Wes Moss. Moss cautions his readers that, while accumulating adequate retirement funds is important, you must also know what you want to do with that money after you retire.

Moss encourages his readers to identify that which they are passionate about, whether artistic endeavors, community activities, or sports like tennis or golf. He calls these “core pursuits” and says that “these pursuits aren’t simple pastimes; they are passions to which the retirees devote a great deal of time, energy, and sometimes money. The happiest retirees give priority to their core pursuits and derive great satisfaction from those endeavors.”

As for specifics, Moss claims his research shows that the happiest retirees enjoy an average of 3.6 core pursuits. Those who report lower satisfaction levels average just 1.9 core pursuits. As for vacations? Those appear to matter quite a bit, too. The happier retirees take 2.4 vacations per year, while the unhappy ones only enjoy 1.5 trips. It’s important to note that those vacations don’t necessarily amount to spending weeks in Europe; a weekend at the beach counts, too.

But of course, you do need money in order to enjoy those pursuits. You probably won’t be surprised to hear that Moss can put a price tag on that, too. Retirees with a median net worth of $100,000 tend to be unhappy, while those with a median net worth of $500,000 report much higher levels of satisfaction with their retirements.

That’s hardly shocking information, as most of us tend to agree that financial stability tends to increase enjoyment of our lives. But the good news is that you don’t have to be a multi-millionaire to feel extremely satisfied with your retirement!

If you’re feeling concerned about your upcoming retirement, and want to give yourself the best odds for success, call us to schedule a consultation. We can help you assess your current financial capabilities and make adjustments to support your desired lifestyle in retirement.

Are More Stimulus Payments on the Horizon?

Tue, 11 May 2021 13:11:54 GMT

In the past month, the IRS has delivered more than $379 billion in direct stimulus payments. Based on income and phased out at higher levels, the payments were intended to help struggling households to catch up on bills and purchase necessities like food. But polls show that most recipients say the money won’t even last three months, sparking discussion of a fourth wave of checks in the near future.

But how true are those rumors? Currently, a group of 21 senators have indeed proposed the idea of a fourth stimulus to President Biden. And it looks as though a majority of Americans - 65 percent according to one poll - support the idea of recurring $2,000 monthly payments.

However, there is no bill currently set to pass Congress, so discussion of more stimulus is currently just talk and nothing more. As the old adage goes, it would be wise not to count your chickens before they hatch.

But let’s take a look at what we do know, regarding current aid efforts and those coming up in the near future. The $300 weekly unemployment “bonus”, which is paid on top of state benefits, is set to continue through September 6. Hopefully that will give everyone time to find adequate employment, but it is always possible that Congress will vote to extend those benefits in a future bill.

Also, the expanded Child Tax Credit payments are set to drop beginning in July. The American Rescue Plan increased the annual child tax credit to $3,000 for children aged 6-17, and $3,600 for those under 6, while also making the credit fully refundable. Half of that amount is set to be disbursed via regular payments (perhaps monthly) beginning in July. Parents will then claim the rest of the credit on their 2021 tax return.

Those are the two provisions we will continue to see roll out this year. As for a fourth stimulus check of some type, the idea does look popular but we can’t predict anything concrete at this point.

If you need help adjusting your financial plan during these uncertain times, call our office to schedule an appointment. We can assess your current situation and then help you to make a plan for both the near and distant future.

What is Sequencing Risk and What Can You Do About It?

chelsea@retirementadvisers.net (Chelsea Sanderson) — Tue, 20 Apr 2021 09:32:30 GMT

We all know that risk is inherent in investing, with some types of investments being much more risky than others. And of course, a loss within your portfolio can mean a loss of income that you would have derived from those investments. That’s why retirees often feel concerned about their risk factors; no one wants to retire, suffer a loss, and then lack access to the funds needed to cover their standard of living.

But all risks are not the same. “Sequencing risk” refers to the order in which your portfolio returns occur. Suffering a loss early in your retirement can impact your financial capabilities for the rest of your life, leaving you to perpetually play “catch up”. In some cases retirees even end up going back to work, or changing their lifestyles drastically (and feeling dissatisfied with retirement as a result).

On the other hand, losses taken toward the end of your life might or might not carry a similar impact, depending upon when they occur and how significant they are. But generally speaking, if you’re going to suffer a loss, you don’t want to do it in the early years of your retirement.

So, what do we do about sequencing risk? Analyze your portfolio in terms of predictability and safety, and assume that at some point there will indeed be market downturns. For those times, streams of revenue that are more stable can be depended upon to carry you until the market improves again.

At the same time, we know that the riskier investments are sometimes the ones with greater potential for growth. You might not wish to eliminate those entirely, but your desire for growth should be balanced with how much you can stand to lose. Perhaps more importantly, you should consider when you can stand to lose it.

These principles underscore what is always an important point in retirement planning: The planning isn’t finished when you retire! In fact, it’s just as important as ever. Continue meeting with us so that we can continually analyze your risk factors, retirement timing, lifestyle needs, and other factors that contribute to a satisfactory retirement. Then, together we will work to continually adjust your financial plan so that risks are balanced with your need for more stable income.

Take Note: Spring is Also Tax Fraud Season

Tue, 13 Apr 2021 00:48:52 GMT

Spring is tax season, but did you know it’s also tax fraud season? Con artists love this time of year, because they have identified so many opportunities to steal personal information, file fraudulent tax returns, swipe refunds, and more.

This is not a new thing, but our growing dependence on digital systems has made the situation more difficult. It’s important to be on guard against identity theft always, but especially at this time of year, and especially in light of the opportunities offered by increasingly sophisticated technology.

To protect yourself, take the following steps:

Visit irs.gov and request a one-use PIN code to file your taxes
File early in the season, rather than waiting until the last minute
If you send documents digitally, use a secure file transfer service
Move sensitive tax-related data from your computer to an external drive, and then delete those files from your computer or any other device that connects to the internet
Erase old drives, phones, and other devices before discarding them
Don’t open links or PDF files in emails; call the sender to verify first
If you submit PDF files digitally, use the password function, and ask your tax preparer to take this step as well
Don’t fax documents to anyone without first verifying their identity and the correct fax number
Never reply to anyone who requests sensitive tax information over the phone or email

Perhaps the most important rule to remember is that the IRS does not call or email anyone to request information or report problems with tax returns. Any time there is a problem, they will send you a letter in the mail. Hang up the phone or delete emails that appear to be requesting sensitive information. Yes, even if your caller ID or email service displays “IRS” or “US government”. Scammers know how to trick those systems.

Finally, if you ever receive an unexpected refund from the IRS, call them to inquire about it. It can certainly be difficult to keep track of these things, in light of all the stimulus payments that are going out right now. Sometimes scammers file fraudulent returns and allow you to collect the “refund”. Then they call, pretending to be the IRS, demanding that you wire the money back to them.

If you have any other questions about financial planning or keeping your money safe, call our office and we’ll be happy to help.

What to Do If Tax Documents Are Missing

Tue, 16 Mar 2021 00:48:42 GMT

It certainly seems as if this year is flying by. It’s March already, and the deadline for filing your federal income tax return (April 15) is looming. So, you’re probably getting ready to file your taxes… But what do you do, if you discover certain forms are missing?

Employers and other institutions in charge of sending you these forms are required to do so by January 31, so you should have received everything you need by now. But occasionally, things get lost in the mail or other mishaps occur. Here’s what you need to do.

W-2s and 1099s are used to document your income for the year, either from employment, independent contracting, certain investments, and Social Security income. If you’re missing your W-2, contact your employer first. If you’re still experiencing difficulty you can also contact the IRS at 800-829-1040. They will ask you a series of questions and help you locate the information you need.

As for 1099s , you aren’t technically required to file those with your return. You can gather the income information from year-end statements, if you have those. Log into the online portal for those accounts and you might be able to find the information you need. Contacting the issuer of the form can be helpful but might not work if you wait until April.

1098 forms provide information that you need to claim certain deductions, such as mortgage interest or student loan payments. Once again, you can contact the issuer of those forms or simply take the information from year-end statements.

Missing healthcare Forms 1095-A, 1095-B, and 1095-C can appear to be a huge hang-up. Due to the laws set forth by the Affordable Care Act, you are required to report healthcare coverage on your income tax returns. But rest assured, if you’re missing Forms 1095-B or 1095-C, you can file your return anyway. You do need to request Form 1095-A from the issuer and use it to complete your tax return.

In the event that you can’t gather all of your forms on time, you can request an extension on filing your income taxes. And remember, it’s important to continue consulting with us on issues like taxes on Social Security benefits or investment income, so that we can help you plan for income taxes in future years.

8 Retirement Planning Moves to Make in Your Fifties

Thu, 04 Mar 2021 16:18:25 GMT

We always say that retirement planning should begin as soon as your career does, and for most of us that means in our early- to mid-twenties. But because getting started in life can be challenging, many people don’t really start to consider retirement until their thirties, forties, or even fifties.

Either way, your retirement planning should be kicking into high gear once you reach age 50. Here are eight things you definitely need to consider during this decade.

Increase your savings rate. A good target goal for retirement savings is to stash 20 percent of your income from each paycheck. But if you can’t meet that goal, get as close as you can.

Take advantage of matching contributions. Contribute at least the matching amount from your employer, if they offer matching contributions to retirement accounts.

Make catch-up contributions. If you’re maxing out your contributions each year, remember that those over age 50 can make additional contributions to retirement accounts while enjoying the same tax advantages. This year, you can contribute an extra $6,500 to qualified retirement accounts like a 401(k), and an extra $1,000 to IRAs.

Consider whether paying off your mortgage is the best plan. Many of us dream of living debt-free in retirement and living without a mortgage is the epitome of that dream. But with mortgage rates so low these days, contributing extra funds to a retirement account or other savings vehicle might actually be the better plan.

Pay off credit card debt. If you’re doing to tackle debt, credit cards should be your prime target. You’ll waste a lot more money on these high-interest debts than you would a mortgage.

Consider a health savings account. If you’re eligible for a health savings account, you can enjoy certain tax advantages while saving money for qualified healthcare expenses. Money that is not used each year rolls over to the next year, and even into retirement when you can use the money for Medicare premiums, medications, and more.

Consider long-term care insurance. Long-term care in a nursing facility, or even nursing care at home, can quickly deplete retirement savings. With premiums lower when you establish a policy in your fifties, now is the time to consider whether you need such a plan.

Meet with us to discuss these issues, and more. We can calculate your expected retirement income, compare with your retirement budget, help you set a target date for retirement, and make other important decisions that will affect your life in the future.

5 Things to Know About Your 401(k)

Mon, 15 Feb 2021 03:39:06 GMT

In any given year, about half of employed people participate in an employer-sponsored 401(k) which helps them prepare for retirement.* And yet, many of them aren’t completely familiar with how their retirement plans actually work. Here are five things you definitely need to know about your 401(k).

Contributions are made on a pre-tax basis. Traditional contributions are taken before income taxes are calculated, so you can save for retirement while effectively lowering your taxable income.

Withdrawals in retirement will be taxed as regular income. Once you begin taking withdrawals from your 401(k) account, that money will be taxed as income. Since most people drop to a lower tax bracket in retirement, those taxes might not be as heavy as you think.

Or, you can choose the Roth option. You might have the option to contribute to your 401(k) as a Roth account, meaning contributions are made on an after-tax basis. If you choose this method of saving for retirement, you will pay taxes on the money now but enjoy non-taxable withdrawals when you retire someday.

Early withdrawals can cost you. If you withdraw funds from your 401(k) before age 59 ½, you might pay a ten percent tax penalty on the amount withdrawn. That rule can be subject to certain exemptions, but it’s still not recommended. You will lose the effect of compounding interest on any amount that you withdraw, and it can be nearly impossible to make up for lost time.

You can perform a Roth rollover. If you’ve made traditional contributions up until this point, you might be able to perform a rollover and convert your 401(k) to a Roth account. However, this is not a maneuver you should make without expert guidance, because you could accidentally trigger certain penalties while doing so.

If you need to make a decision about your 401(k), from how much to contribute to performing a rollover, give us a call. We can help you weigh the pros and cons of any decision, and guide you toward the one that works best for your situation.

*Bureau of Labor Statistics

This Big Tax Deduction Will Help Many Retirees

Tue, 09 Feb 2021 13:58:19 GMT

Once you retire, income taxes don’t exactly go away. But because your income as well as your budget look a bit different at this time, you need to become familiar with all of the tax breaks available to you.

Technically, this tax break is available to anyone who itemizes deductions on their income tax return. So you can use it during your working years, but it will become particularly important during retirement. Why? Because it concerns out-of-pocket medical spending, which tends to impact retirees more than any other group.

How the deduction works. For several years, taxpayers were allowed to deduct any out-of-pocket medical expenses that exceeded 7.5 percent of their adjusted gross income. But per the Affordable Care Act, that threshold was scheduled to climb to 10 percent this year, meaning you could only deduct expenses that exceeded 10 percent of your AGI.

What has changed. Fortunately, back in December 2020 Congress recognized that many taxpayers not only suffered through a tough year financially; many also experienced higher medical bills than usual. Thanks to quick action in Congress in late December, that threshold for deducting expenses was permanently set to 7.5 percent (avoiding the looming higher threshold).

What that means for you. Let’s assume a retiree has a taxable income of $50,000 per year. If your out-of-pocket medical spending exceeds 7.5 percent of your AGI, or $3,750, you can deduct the balance of those expenses on your income tax return. So, if your spending is $6,750, $3,000 of those medical bills are deductible when you do your taxes in the spring.

Making this tax break permanent will help many retirees who tend to spend more on healthcare than most other groups. But we still urge you to meet with us regularly, to plan your retirement budget carefully and prepare for unexpected expenses.

Don’t Fall Into These Retirement Planning Traps!

Tue, 19 Jan 2021 15:38:19 GMT

Considering the complexity of retirement planning, it’s no wonder many people make mistakes along the way. But mistakes made early in your working years are one thing; you do have several decades to make up for any missteps. But as you round the curve and enter the home stretch of retirement planning, it pays to be extra vigilant.

In particular, avoid these common traps as you enter the last decade or so of your career.

Treating your home equity like a checking account. You probably receive regular reminders of your home’s equity and opportunities to borrow against it from your mortgage company. It can be tempting to tap into those funds for lifestyle upgrades, renovations, and more. But every time you do that, you add more time to your mortgage repayment term. If you hope to retire debt-free, home equity loans are not the way to go.

College tuition woes. You understandably want the best for your kids. But explore every possible option for funding college, rather than agreeing to loans or retirement plan withdrawals. There are many ways to pay for college tuition, but you’re solely responsible for your own retirement savings.

Taking on your children’s debts. And on that note, avoid co-signing loans with your children or anyone else who asks. In the event that the other party cannot repay their debt, you will get stuck with those payments. You could be set back years in your retirement planning process, or get slapped with hefty bills after you retire.

Keeping up appearances. Continuous lifestyle upgrades can become addictive. Try not to worry about what your friends and neighbors are achieving, and focus on your own goals. Yes, they might drive fancier cars or enjoy more exotic vacations, but you’ll probably end up better prepared for retirement.

Leaving yourself vulnerable to emergencies. None of us can predict the future, but we can prepare for the unexpected. In the event of a medical emergency, everyone needs a healthcare directive and a will prepared by an estate planning attorney. And if you haven’t yet established an emergency savings account, start stashing away emergency funds.

Leaving money on the table. There’s no one-size-fits-all plan for retirement that works perfectly for everyone. Plenty of opportunities are available to suit your situation, but you might not know about them until you investigate. Schedule regular appointments with us as you continue planning for retirement, and we will help you identify all of the options that fit your needs.

Wise Financial Planning Resolutions to Make in 2021

Wed, 06 Jan 2021 21:29:45 GMT

In 2020, we all learned that both the economy and personal finance can be unpredictable. But as we head into a new year, it’s time to put those lessons to good use. The following resolutions can help you get your financial life in order - and keep it that way.

Consider income-generating options. Beef up your resume, enroll in some classes, or take on a side gig. Having diversity in skill sets and experience can help you skate through employment challenges in the future.

Build up your emergency fund. If you’re fortunate enough to have the ability, trim down expenses as much as possible and then devote extra cash to a savings account.

Rearrange your priorities. With each paycheck, you should be your own top priority. That means dedicating a set amount to your retirement fund and personal savings first - then paying for everything else.

Bump up your saving rate. On that note, make a plan in the event that you’re fortunate enough to receive a bonus, raise, or any extra money this year (hello, stimulus check). It can be tempting to spend that money on a splurge item, but long-term planning is more rewarding. Pay off a high-interest debt, stash the cash in savings, divert it to your retirement fund, or use it to pay for classes or some other upgrade that adds to your job marketability.

Reduce your dependence on credit cards. Make a shopping list before leaving home, and stick to it. Shop with cash, or use cards for necessary purchases only. Identify the difference between impulse purchases and necessities and put yourself on a spending diet while you bulk up savings and eliminate credit card debt.

Double check your insurance needs. If you haven’t assessed options such as life insurance or disability insurance lately, it’s time to assess your risk and family needs. The right insurance can protect you and those you love from financial difficulties when unexpected events strike.

Talk to your financial advisor. Give us a call to discuss your retirement plan, savings rate, and other questions regarding your finances. We can help you identify which steps you need to take in order to get on solid ground and stay there.

How to Recover After Holiday Spending

Tue, 15 Dec 2020 23:49:30 GMT

We’ve all done it. The holidays tempt even the most thrifty among us to overspend. Plus, with an ongoing pandemic and stay-at-home orders (or at least, recommendations) in effect, many of us have relied a bit too heavily on the “entertainment” of online shopping.

So what do you do now? If you’ve gone a little crazy with the credit cards lately, take these steps toward recovery as we move into next month.

Open those statements. As much as you dread it, you can’t hide from the inevitable. Open those statements, take note of the payment due dates, and mark them on your calendar. Missed payments and late fees will only make things worse.

Identify areas where you can save. Can you suspend a few services or dump a subscription for the next few months? Maybe you can challenge yourself to stop eating out until you’ve caught up on credit card bills? Identify areas that you can save money, at least temporarily.

Pay off the highest interest card first. If you used store cards with high interest rates, pay those off first. Then work your way down to the lower-rate cards.

Don’t focus on rewards. Yes, you might have earned a ten-dollar-off coupon as a reward for shopping throughout December, but using it only means returning to that store’s website. And are you really going to spend only ten dollars? Probably not, so let the rewards go for now. They really only serve as a way to lure you into spending more money, and that’s the last thing you need to do.

Don’t panic and close your credit cards. It sounds like a smart move; after all, closing them means you can’t use them anymore, right? But closing cards can hurt your credit score, so resist the urge. Instead, stash most credit cards in a secure place at home.

Consolidate or transfer. If you’ve really gone overboard this holiday season, look into consolidation loans or balance transfers. If you have a good credit score, you can probably snag a card with a zero percent introductory rate on balance transfers (although you might be subject to a small fee). Moving your debt to one place, and then managing one monthly payment, can simplify things and reduce the time it takes to pay it all off.

If you need help with any other part of your financial plan, give us a call. We can help you evaluate both your short- and long-term plans, budget, and prepare for retirement wisely.

Good News for Those who Itemize Their Taxes

Tue, 08 Dec 2020 23:46:22 GMT

If you itemize your tax return each year, you might already know that you can earn a substantial tax deduction in exchange for making charitable contributions. For those who enjoy giving to charity, we have some good news: The IRS has temporarily suspended the contribution limits, allowing you to contribute (and deduct) as much as you want!

During most years, cash contributions of up to 60 percent of your adjusted gross income (AGI) can be used as a deduction on your federal income tax return. Those who donate beyond that limit might enjoy some personal satisfaction, but don’t receive full credit for the contribution on their taxes. Now, with that limitation lifted, you could theoretically donate 100 percent of your AGI and count the entire amount as a tax deduction.

In fact, it is even possible (though probably not too common) to donate more than your AGI, and then carry forward the balance of the deduction to next year!

This suspension on the normal limit only applies to cash contributions, and not donated items or other types of charity. The usual rules regarding charitable contributions still apply: You must donate to an IRS-qualified charity, you should keep a receipt or other proof of your donation, and the donation must be made by the end of the year in order to qualify on this year’s tax return.

Before writing any checks, do consult with a qualified tax professional who can guide you through the rules.

Hopefully, the suspension of this limit by the IRS will inspire more of us to make a difference in a year when so many are in need. If you have any questions about how charitable contributions can fit into your overall financial plan, do give us a call and we can help you adjust your budget.

3 Financial Developments to be Thankful for in 2020

Fri, 20 Nov 2020 05:00:00 GMT

This year has been a rollercoaster ride. COVID has dominated the headlines and impacted every aspect of our lives. It has shut down businesses, schools, and workplaces. It’s changed the way we interact and socialize. And of course, it has deeply impacted the economy and the financial markets.

It can be hard in 2020 to find the good news, but there actually are a few economic developments for which we can be grateful. There’s also quite a bit of uncertainty ahead of us. As we approach the end of 2020, now may be a good time to reflect on what has transpired over the past 11 months, and what steps you may need to take to prepare for what comes next.

Below are three positive developments that you may want to consider as you prepare for 2021:

The Markets Rebound

COVID ended the longest bull market and longest economic expansion in history. The previous bull market started in 2009 and lasted for nearly a decade before crashing in just a few short weeks over February and January of this year.1

Between February 19 and March 23, the S&P 500 fell 33.93%. Since that point, though, the markets have surged. From March 23 through October 29, the S&P 500 is up 47.94% and is nearly back to its pre-COVID levels.2

As mentioned, though, there is still uncertainty ahead. The COVID pandemic is far from over. There’s also uncertainty about how the results of the election will impact the markets, the economy, and the country’s COVID response.

While the market's rebound is a fortunate turn of events, there’s no guarantee that it will continue. Now is a good time to evaluate your strategy and lock-in any gains before another potential downturn occurs. A financial professional can help you explore options.

GDP Surge

In the second quarter, GDP fell by 31.4%, the largest quarterly drop in history. In the third quarter, it rebounded by 33.1%, the largest quarterly gain in history. That number easily beat the previous record of 16.7% in the third quarter of 1950.3

Much of the rebound was driven by the service industry and the reopening of much of the economy. Of course, the continuing rise in COVID cases may threaten the economic rebound. Twenty-nine states hit record levels for daily new cases in October. Forty states had an increase of 10% just in the last week of October.4

CARES Act Financial Flexibility

The COVID pandemic and its economic fallout have created financial challenges for millions of Americans. While the government is still debating a second round of stimulus, the first round, known as the CARES Act, continues to provide financial flexibility for those facing difficulties.

As part of the CARES Act, you can withdraw up to $100,000 from your 401(k) or IRA without facing early distribution penalties. The taxes on the distribution can even be spread out over a three-year period.5

Granted, withdrawing money from your 401(k) or IRA isn’t the best strategy for your retirement. However, it is an added measure of flexibility that didn’t exist prior to this year and it could be a blessing if you’re struggling due to the COVID pandemic.

The end of 2020 is approaching. It’s been a rollercoaster ride, but there have been some positive developments, especially in the second half of the year. Let’s talk about how to protect what you have and limit your exposure to future risk and uncertainty. Contact us today at Retirement Advisers Net and let’s start the conversation.

What You Need to Know About Retirement Planning in 2021

Tue, 17 Nov 2020 18:18:00 GMT

Contributing to a 401(k) or IRA can offer you valuable opportunities to not only prepare for retirement, but also to earn valuable tax deductions. However, sticking to guidelines and tracking rule changes can be a bit of a chore.

Each year the IRS evaluates things like eligibility and contribution requirements. We’ve reduced next year’s changes to simple terms for you, so you can get updated on what you need to know right now.

Contribution limits will not change. The IRS frequently raises tax-advantaged contribution limits for retirement plans, in response to inflation and the need to save more for retirement. Unfortunately, those limits will not be changing in 2021.

This means that the contribution limit for 401(k) plans remains at $19,500, with a catch-up contribution of an additional $6,000 if you’re over age 50.

For IRAs, the contribution limit remains at $6,000 next year. Those over age 50 can make an additional contribution of $1,000.

If this news disappoints you, remember that a health savings account provides similar tax advantages. If you’re eligible for such an account, you can save before-tax money to be used for healthcare expenses, and unused funds roll over all the way into retirement and beyond.

Eligibility for full IRA tax advantages has changed. Those who are not covered by an employer’s plan can open an IRA and make tax-advantaged contributions at any income. Otherwise, savers are subject to certain limitations.

For traditional IRAs, income limits for eligibility have shifted for 2021. If you’re single, you can make fully tax-advantaged contributions at an income up to $66,000. Those tax advantages phase out up to $76,000. Married (filing jointly) taxpayers can make full tax-advantaged contributions at an income up to $105,000, phasing out to $125,000.

For Roth IRAS, the limits are higher. Single taxpayers can earn the maximum tax advantage up to an income of $125,000, and phasing out to $140,000. Married couples (who file a joint tax return) can reap the full tax advantages up to an income of $198,000, phasing out to $208,000.

This is great news for those with an IRA, or who want to open an IRA. Give us a call if this type of retirement plan interest you, and we’ll answer your questions.

Why So Much Depends on One Little Number

Tue, 10 Nov 2020 21:26:00 GMT

Most of us don’t appreciate the idea of our identities being reduced to a simple, three-digit number. But within the financial system, your credit score really does carry significant weight. Read on to learn why your credit score is so important, how it impacts your life, and what you can do about it. It’s not all about a mortgage. Most people associate credit scores with mortgages, and some have no idea of their score until they apply to purchase a home. Then, a steep learning [...]

October Recap: Markets Stumble but GDP Surges

Fri, 06 Nov 2020 19:38:00 GMT

The recovery in the financial markets hit some turbulence in October, as investors wrestled with anxiety about increasing COVID cases. However, a surge in gross domestic product (GDP) in the third quarter may signal that the economy is on the rebound.1

Through October 28, all major indexes had mostly recouped most of their losses from the COVID crash in March. However, all were down for the month of October. Below is each index’s return from October 1 through October 28:

S&P 500: -2.73%2
DJIA: -4.54%3
NASDAQ: -1.46%4

Here are the year-to-date returns of the major indexes:

S&P 500: 0.40%2
DJIA: -8.14%3
NASDAQ: 21.04%4

What spooked the markets in October? There are a few factors, but as is the case with most things in 2020, COVID may be the primary factor.

COVID Cases Ramp Up

The COVID numbers are surging in the United States, suggesting that the end of the pandemic may be nowhere in sight. On Wednesday, October 28, the seven-day average for new daily cases hit an all-time high of 71,832, an increase of more than 20% in only a week.5

Twenty-nine states hit record levels for daily new cases in October. Forty states had an increase of 10% just in the last week of October.6 Thirty-six states had increases of at least 5% in COVID-related hospitalizations in the final week of October.5

The surge in cases is leading to a new round of business closures and regulations. Illinois recently stopped indoor dining at bars and restaurants.7 Investors may be spooked by the prospect of a second round of closures and its impact on the economy. A new report from Yelp found that 60% of businesses that were shutdown for COVID will never reopen.8

Stimulus Outlook

The uncertainty of a second stimulus may also be a drag on the markets. In fact, Gary Cohn, former president and CEO of Goldman Sachs and former White House National Economic Council Director, says it is a primary factor driving the markets’ poor performance in October.9

He added in a recent interview that, “no one thinks we’re going to have stimulus until after the election,” and that, “we know that the markets do not like unpredictability.” He said that there was “100% probability” that stimulus won’t happen until after November 3rd, and possibly not until after the inauguration.9

Fund Flows

Some recent data on mutual fund flows may provide insight into how investors feel about the financial markets. Through October 21, equity funds (including mutual funds and ETFs) saw net outflows for 11 consecutive weeks. That means more money flowed out of these funds than flowed into them.10

On the other side, taxable fixed-income ETFs have seen four straight weeks of net inflows. That may mean that investors are leaving equities for fixed income securities, even with interest rates near zero.10

GDP Surges in 3rd Quarter

On a positive note, GDP surged by 33.1% in the third quarter, beating analyst expectations of 32%. The third quarter number is the largest quarterly GDP gain on record, easily beating the previous high of 16.7% in the third quarter of 1950.11

Of course, the third quarter surge comes after a 31.4% decline in GDP in the second quarter. Even with the increase in the third quarter, the economy is still projected to contract by 3.5% in 2020.11

The markets and the economy have rebounded, but the future is still uncertain. This may be a good time to explore options that can protect your assets from market volatility. Contact us today at Retirement Advisers Net. We can help you explore these options and implement a strategy to protect your financial future. Let’s connect today and start the conversation.

5 Estate Planning Steps to Take Now

Fri, 23 Oct 2020 16:23:00 GMT

If you haven’t already put together an estate plan, there is no time like the present. While deciding what to do with assets after your death can be an uncomfortable topic for many, it can be equally uncomfortable to envision your estate tied up in probate court for months or years. If you want your loved ones to inherit assets smoothly, without a lot of legal hassle and tax risk, an estate plan is an essential part of your overall long-term financial plans. Draft a will. Yes, [...]

Will More Stimulus Arrive Soon?

Fri, 23 Oct 2020 16:20:00 GMT

For months, we’ve all waited anxiously to hear whether a second stimulus package will be passed by Congress. Not only is a stimulus payment beneficial to those missing income at this time; the payments can help to boost the economy overall. Yet, for the past several months Republicans and Democrats have remained quite far apart in their negotiations, preventing a stimulus bill from making it through both the House and Senate. Why can’t Congress pass a stimulus bill? The g [...]

What Monsters are Lurking in Your Portfolio?

Thu, 15 Oct 2020 04:00:00 GMT

It’s the scariest time of the year. Halloween is here. It’s time for trick-or-treaters, haunted houses, spooky home decorations, and more.

This may be the scariest time of the year, but it only lasts a month. The truth is there could be gaps in your investment strategy that could come back to haunt you for years or even decades. Below are a few common retirement planning mistakes that can have frightening long-term consequences. If any of these sound familiar, it may be time to meet with a financial professional.

Wrong Risk Tolerance

Asset allocation is an important part of any retirement strategy. Your allocation influences your risk exposure and your potential return. Generally, risk and return go hand-in-hand. Assets that offer greater potential return usually also have higher levels of risk. You can use asset allocation to find the right mix of assets for your goals and risk tolerance.

Having the wrong allocation can be problematic. For example, many people have less tolerance for risk as they approach retirement. As you get closer to retirement, you have less time to recover from a loss and thus less tolerance for risk. However, if you don’t adjust your allocation, you could have more risk exposure than is appropriate. A downturn could substantially impact your nest egg.

How can you make sure your allocation aligns with your risk tolerance? A consultation with a financial professional is a good first step. They can analyze your risk tolerance and your portfolio and then suggest action that can eliminate gaps and minimize risk.

No Risk Protection Tools

Asset allocation is one way to reduce risk, but it’s not the only way. You could also use tools that offer growth potential with limited downside exposure. For example, certain types of annuities offer potential growth with downside protection. You can participate in returns linked to the market without experiencing volatility and risk. Annuities aren’t right for everyone, however. Be sure to talk to a financial professional about whether they make sense for your strategy.

Impulsive Decisions

It’s natural to feel stress and anxiety when the market turns downward. Take the first quarter of 2020 for example. When the COVID pandemic began in late February, the S&P 500 declined by 33.93% in a month. You may have felt tempted to sell your investments and move to “safer” assets. However, had you done so, you may have missed out on the market’s bounce back. Since March 23, the S&P 500 has climbed 49.35%.1

The problem with impulsive decisions to move to safety is that they can often suppress your returns over time. From 1995 through 2015, the S&P 500 averaged a return of 9.85% per year. Over that same period, the average equity investor averaged a return of only 5.19%.2

Why the discrepancy in returns? Investors often make decisions based on emotion rather than a long-term strategy. While those decisions may feel right in the moment, they could lead to lost opportunity as the investor misses out on a market recovery. A financial professional can help you focus on the long-term and avoid decisions that may do more harm than good.

Infrequent Reviews

When’s the last time you reviewed your investment strategy with a financial professional? If it’s been a while, now may be the time to do so. A lot can change in a few months or even a year. Your goals and needs may change. Your tolerance for risk could change. Your contributions to your retirement accounts may change. This is especially true during the COVID pandemic, when economic news seems to vary on a monthly basis.

Let’s schedule a review today and find the monsters hiding in your investment strategy. Contact us today at Retirement Advisers.Net. We welcome the opportunity to consult with you and help you implement the right strategy for your needs and goals. Let’s connect today and start the conversation.

COVID Economic Update: Fed Chairman Says Recovery Will Take Years

Tue, 06 Oct 2020 15:18:00 GMT

On Wednesday, September 16, Federal Reserve Chairman Jerome Powell offered his assessment of the economic recovery. The press conference offered some positive news, but also a sobering prediction that a full economic recovery will take years.1

The good news is that the Fed has cut its 2020 median unemployment rate projection to 7.6%, down from a 9.3% forecast in June. The Fed also adjusted its projected 2020 GDP reduction to 3.7%, down from a 6.5% decline that was projected in June. GDP, which stands for gross domestic product, is a broad measure of economic growth. A decline in GDP means the economy is contracting rather than expanding.1

Powell also said that the Fed had shifted its focus to employment growth rather than inflation control. That means the Fed expects to keep interest rates at or near zero until the economy is near maximum employment and inflation is projected to exceed 2%. He added that it will likely take years before the economy has reached those thresholds.1

While low interest rates may be good for borrowers and investors, Powell’s comments indicate that the Fed believes the economy is years away from a full recovery. He indicated that unemployment is still four times higher than the pre-pandemic level.1

“That just tells you that the labor market has improved, but it’s a long way from maximum employment,” Powell said.1

Stock Market Returns

The investment markets continue their recovery from the downturn that hit in March of this year. Through September 16, the indexes have the following year-to-date returns:

S&P 500: 3.39%2
DJIA: -2.90%3
NASDAQ: 20.19%4

While the markets have mostly recovered from their losses earlier in the year, volatility can strike at any time. That’s especially true should the COVID pandemic worsen or if the economy suffers continued damage. There also may be increasing uncertainty as the election approaches.

If you're concerned about risk, let’s talk about it. There are a wide range of strategies and tools we can implement to minimize risk and protect your retirement income . Let’s connect today and discuss your needs, goals and concerns. At Retirement Advisers.Net, we welcome the opportunity to help you implement a strategy based on your objectives.

Fourth Quarter Preview: What to Expect for the End of 2020

Tue, 15 Sep 2020 04:00:00 GMT

It took just under five months for it to happen. On August 17th, the S&P 500 closed at 3389.78—an all-time record. That record is also significant because it means the index officially recouped all losses from the downturn that happened in March.1

This year has been a rollercoaster ride for investors. The S&P 500 dropped 33.92% from February 19 to March 23 as the COVID-19 pandemic hit the United States. Since March 23, the index has increased 51.51%, triggering a new bull market.2

However, a sharp increase in the stock market doesn’t mean the U.S. economy is out of the woods. In fact, other metrics would indicate that the economy is still struggling. In the second quarter, gross domestic product contracted at an annual rate of 32.9%, the largest quarterly contraction on record. That contraction is more than three times the previous record—a 10% contraction in 1958.3

Also, not all sectors of the stock market have participated in the recovery. The increase over the last five months has been fueled by growth in the Information Technology (IT) and Consumer Discretionary sectors, each of which are up more than 23% year-to-date. However, other sectors, particularly Financials and Energy, are negative on the year. In fact, of the 11 S&P 500 Sectors, five are still negative on the year.4

The 4th Quarter is historically the best quarter for S&P 500 performance, with the index up an average of 3.51% from October through December over the past 30 years.5 However, 2020 is not like other years. There are factors and risks that could threaten the market’s recovery. Below are a couple things to watch as the year comes to a close:

Election

We’re only a couple months away from the election, as if 2020 needed more uncertainty. Everyone has their own preferred candidate. However, some investment managers are saying the real risk isn’t one of the candidates winning, it’s an unclear outcome.

Bridgewater Associates, which manages more than $140 billion, recently told clients the real risk is if there is “material concern over the legitimacy of the process.” Analysis of recent options transactions show that many investors are taking protective stances through January 2021, possibly an indication they are concerned about post-election volatility.6

However, UBS notes that post-election volatility is often short-lived. They point to the most recent example of an election with an unclear winner—the 2000 election between Al Gore and George W. Bush. During that time, the S&P 500 fell around 6% in the weeks after the election as litigation mounted. However, those losses were erased as soon as the election reached resolution.7

COVID

Of course, the other major risk to the economy and financial markets in the fourth quarter is developments related to COVID. The pandemic is now in its seventh month. As of mid-August, the death toll in the United States exceeded 168,000, with more than 5 million confirmed cases.8

The development of a vaccine in the fourth quarter could deliver a boost to the economy. The government has implemented Operation Warp Speed, an initiative to deliver 300 million vaccines by January. Moderna has a vaccine in phase 3 trials, but it is uncertain whether the company will be able to meet the government’s target date.8

Ready to protect your portfolio from fourth quarter uncertainty? Let’s talk about it. Contact us today at Retirement Advisers.Net. We can analyze your needs and goals and implement a plan. Let’s connect soon and start the conversation.

What Happens if the IRS Says You Owe Them Money?

Sun, 13 Sep 2020 14:31:00 GMT

This year hasn’t been easy on us, and the IRS is having its share of troubles too. Due to shutdowns this spring, the mail has been piling up in IRS mailrooms. This summer, 12 million envelopes had yet to be opened. Unfortunately, that might mean that the check or money order you sent to them has yet to be discovered.

Money orders can be particularly problematic. Since they must be cashed within 60 days, many are rejected once the IRS does finally deposit them. Then the taxpayer receives a notice, submits a new check or money order, and the process begins again.

In other cases, the submitted payments simply have not been opened yet.

The end result is that taxpayers are now receiving automated notices of missing or late payments, but you shouldn’t panic. The IRS is aware of this problem, and have policies in place to protect you, such as:

If your check was dated between March 1 and July 15, you will not owe bad check or late penalties
Those who submitted their tax returns and payments via certified mail with a tracking number can present that number to the IRS, to prove timely filing and payment
If your payment was deposited, you can present a copy of the certified check to the IRS to prove payment

If you do receive a notice of unpaid taxes, contact your tax professional immediately. In many cases they might be able to clear up the mess for you.

If you filed taxes yourself, canceling the check can trigger a bad check penalty from the IRS when they do deposit it. Instead, you can call the IRS to let them know you did file your taxes and send the payment. Once their backlog is cleared, you will be able to prove your timely payment and late fees should be waived.

In other words, these notices are usually nothing to worry about. If you did indeed file and pay on time, the IRS just needs more time to work out the kinks in their system. Only those who truly filed and paid late will ultimately owe a penalty.

5 Things to Do Before You Turn 65

Tue, 08 Sep 2020 19:01:00 GMT

By 2030, all Baby Boomers will be 65 or older. So throughout this decade, many of you will be reaching an important milestone. As your 65 birthday approaches, make sure you address these four steps for better retirement preparedness.

Make a plan for Social Security. If you were born in 1955 or later, Social Security defines your full retirement age as 66 or 67 (depending upon your exact birth date). So, the old assumption that you can retire at 65 is not entirely true. You can claim benefits early, but they will be permanently reduced.

Or, you can wait until your full retirement age and claim your full scheduled benefits. Those who wait until age 70 will enjoy monthly payments that are about 30 percent higher than they would have been, if they had claimed them at 66.

For most people it does seem best to wait until at least full retirement age to claim benefits. But since each situation is different, the main point is to estimate Social Security benefits as you approach age 65 and then make a plan based upon those figures.

Enroll in Medicare. You become eligible for Medicare when you turn 65, but you can begin the enrollment process as early as three months prior to your birthday. Those who have already claimed their Social Security benefits are automatically enrolled in Parts A and B, so they don’t need to do anything.

Otherwise, you will need to enroll at age 65, and decide whether you want Parts A and B or to enroll in a Medicare Advantage (Part C) plan instead. You might also wish to elect a Medigap plan or Part D (prescription) plan. Talk to an insurance professional about your options.

Consider long-term care insurance. About half of people turning 65 today will eventually need long-term nursing care. With the average cost hovering at $140,000, you might someday feel glad you purchased long-term care insurance. Consider it now, because premiums jump about 8 to 10 percent after you turn 65.

Look for property tax breaks. Some states and municipalities offer a property tax break for those over 65, but you usually have to file for it.

Meet with your financial advisor. It’s a good idea to meet with your financial advisor regularly, but especially as you approach retirement. Give us a call to schedule an appointment, and we can help you estimate Social Security benefits, make decisions about your budget, and answer any other questions you might have at this time.

COVID Economic Update: Is a Second Stimulus on the Horizon?

Tue, 01 Sep 2020 19:03:07 GMT

As the COVID-19 pandemic stretches into its seventh month, leaders in Washington are debating a second stimulus bill. On August 8, President Trump signed executive orders that extended the federal unemployment benefit, but reduced the amount from $600 per week to $400. The orders also suspended the payroll tax through the end of the year, and suspended interest on federal student loans.1

However, even as President Trump signed the orders, Republicans and Democrats continued to negotiate terms for a second stimulus package. Democrats support a $3 trillion package known as the HEROES Act, while Republicans have their own $1 trillion HEALS Act.1

It’s unclear whether the final bill will include direct stimulus payments to Americans. Both Republicans and Democrats have endorsed the idea. However, it’s difficult to predict at this point what stimulus payments may be included in the final legislation.

Market Update

Despite the uncertainty surrounding COVID, the election, and the overall economy, the financial markets continue to climb. After suffering deep losses earlier in the year, two of the three major market indexes are in positive territory. Through August 10, all index year-to-date returns are:

S&P 500: 3.53%2

DJIA: -2.57%3

NASDAQ: 22.24%4

While the markets have mostly recovered from their losses earlier in the year, volatility can strike at any time. That’s especially true should the COVID pandemic worsen or if the economy suffers continued damage. There also may be increasing uncertainty as the election approaches.

If you're concerned about risk, let’s talk about it. There are a wide range of strategies and tools we can implement to minimize risk and help protect your financial future. Let’s connect today and discuss your needs, goals and concerns. At Retirement Advisers.Net, we welcome the opportunity to help you implement the right strategy for your objectives.

1 https://www.forbes.com/sites/advisor/2020/08/10/does-trumps-executive-order-mean-theres-no-second-stimulus-check-coming/#170371841d71

2 https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_N64yX_KZKca7tQawrZbwAg1:0

3 https://www.google.com/search?q=INDEXDJX:.DJI&tbm=fin&stick=H4sIAAAAAAAAAONgecRozC3w8sc9YSmtSWtOXmNU4eIKzsgvd80rySypFBLjYoOyeKS4uDj0c_UNkgsry3kWsfJ6-rm4Rrh4RVjpuXh5AgAzsV5OSAAAAA#scso=_h64yX9HyDLOO9PwPrMKg2Ac1:0

4 https://www.google.com/search?q=NASDAQ:NDAQ&tbm=fin&stick=H4sIAAAAAAAAAONgecRoyi3w8sc9YSmdSWtOXmNU4-IKzsgvd80rySypFJLgYoOy-KR4uLj0c_UNzKtyzQyKeRaxcvs5Brs4Blr5AQkAEbRSnEgAAAA#scso=_7a0yX-q3AcyxtQbPt7HICg1:0

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20363 – 2020/8/20

A Will Might Not Cover Everything You Need

Tue, 18 Aug 2020 19:04:18 GMT

Many of us are confronting our own mortality these days. But to be sure, estate planning should be a part of long-term financial planning no matter how you currently feel about the future. If you’re considering a Will, we wanted to remind you that it might not cover everything you need with regard to estate planning.

What a Will can do. A Will gives you the ability to specify some of your final wishes, such as burial information. You can also designate certain heirs to receive cash or belongings such as family heirlooms.

What a Will cannot do. It might surprise you to learn that some assets are not passed to heirs via a Will.

Your retirement account, such as a 401(k) or IRA, are one example. When you pass away, your retirement account will be transferred to the person you listed as the beneficiary on that account regardless of what your Will says. Additionally, 401(k) plans require your spouse to be the beneficiary on that account unless they legally agree to another arrangement. Life insurance payouts, also, will pass to the listed beneficiary.

You cannot change these beneficiaries with a Will, so make sure that the beneficiaries listed on your life insurance and retirement account are still the people you would want to inherit this money. In some cases the beneficiary you originally listed will no longer be appropriate - such as after a divorce, or if that person has passed away or become unable to manage their own finances.

A bank account will be transferred to the person you list on a “payable-on-death” form, which you file with your bank.

Real estate laws regarding inheritance vary from one state to another, so you should also discuss this issue with your estate planning attorney.

If you pass away without having legally designated heirs, assets will proceed through a probate court process. This process can be time-consuming and inconvenient for family members during an already difficult time.

Review beneficiaries regularly. It’s important to know that the right person(s) will receive the assets which you intend to pass to them. Since these designations might change over time, review them each time you review your life insurance and long-term financial plans. Let’s discuss your beneficiary designations at our next meeting, and ensure that your life insurance and retirement account forms are up to date and accurate.

Is a resurgence threatening our recovery?

Sat, 15 Aug 2020 19:06:24 GMT

The United States set a somber record on Thursday, July 16, 2020, with more than 75,000 new COVID-19 cases. In fact, the U.S. set new single-day COVID-19 records 11 times between June 17 and July 16. Dr. Anthony Fauci predicts the country will soon top over 100,000 new cases each day.1

COVID-related deaths are also increasing in some states. Florida set its single day record for COVID deaths on July 16, with 156. Nine other states also set single-day death records the same week.1

The resurgence in coronavirus cases has led some states to enact new measures. More than half of all states now have some kind of mask mandate. California has even rolled back its reopening, closing bars, indoor dining, gyms, and more.2

What does this mean for the economic recovery? And what does it mean for your financial future? It’s impossible to predict what will happen in the short-term, but knowing where things stand today may help you make important decisions with your strategy.

Stock Market

The stock market continues to rally in spite of the increasing COVID numbers and the return of restrictions. As of July 16, the S&P 500 is nearly back to even for the year. In fact, it’s up 43.71% since hitting a low 2237 on March 23.3 NASDAQ set a record-high on July 9 when it reached 10,617.4

The continued gains are good news for investors, especially after the sharp decline in March. However, that decline also shows us just how quickly the market can turn, especially if state governments introduce new orders that close businesses.

If you’re concerned about another potential downturn or future risk, this could be the right time to explore risk-protection strategies. For example, products like fixed annuities allow you to participate in a portion of the market upside but also protect you against losses. A financial professional can help you determine which risk-management strategy is right for you.

Unemployment

While the number of new unemployment claims has declined for 15 consecutive weeks, unemployment numbers are still much higher than they were pre-COVID. In February, there were approximately 200,000 new unemployment claims each week. That number exploded to 6.867 million new claims in one week in late March. While new claims have declined since that point, they’re still more than double their level during the height of the Great Recession in 2009.5

Stimulus

In March, the government passed the CARES Act, which, among other things, provided direct stimulus payments to many Americans. A recent study found that 74% of recipients had used all of their stimulus payments within four weeks.6

As the coronavirus pandemic continues to impact Americans, Congress is considering a second round of stimulus payments. In May, the House of Representatives passed the $3 trillion HEROES Act to provide a second round of direct stimulus payments.6

In an interview in mid-July, Treasury Secretary Steve Mnuchin indicated that a second round of stimulus payments was a possibility, even if it doesn’t align exactly with the HEROES Act. Senate Leader Mitch McConnell and President Trump have also recently expressed their willingness to negotiate a second stimulus package.

While stimulus payments may provide a nice boost, they’re not a replacement for long-term strategy. At Retirement Advisers.Net,, we can help you analyze your needs and goals and implement strategies to limit your risk exposure. Let’s connect soon and start the conversation. We can be reached at 888-637-3847 and are located at 195 Park Avenue Worcester, MA 01609.

1 https://www.nytimes.com/2020/07/17/world/coronavirus-updates.html
2 https://www.theguardian.com/us-news/2020/jul/15/california-coronavirus-shutdown-businesses-restaurants
3 https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_Ap0RX4PNDdvRtAbPobiYBQ1:0
4 https://www.cnn.com/2020/07/09/investing/stock-market-supreme-court-trump/index.html
5 https://finance.yahoo.com/news/coronavirus-jobless-claims-unemployment-week-ended-july-11-175149759.html
6 https://amp.usatoday.com/amp/112232064

Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values.

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 20279 - 2020/7/21

5 Ways to Reduce Your Taxes in Retirement

Thu, 06 Aug 2020 19:10:02 GMT

What are the biggest expenses you’ll face in retirement? Healthcare? Housing? Travel? All of those costs could be significant, but one of the biggest could be taxes. That’s right. Just because you’re done working, doesn’t mean you’re done paying taxes.

Many sources of retirement income, like Social Security, pensions, and retirement account distributions, are taxable. That doesn’t even include the wide range of other taxes you could face, like property taxes, sales tax, and more.

Taxes may be a part of life, but they can also be a drain on your retirement. Every dollar you pay in taxes is a dollar that can’t be used to support your lifestyle and fund your goals.

Fortunately, you can take action to reduce your tax burden and maximize your retirement income. Below are five steps to consider as you approach retirement:

1) Use a Roth IRA. A traditional IRA is an effective savings vehicle for retirement. You get tax-deferred growth, and potentially tax deductions for your contributions.

However, a traditional IRA can also create tax issues in retirement. Most distributions from a traditional IRA are taxed as income. If you use an IRA to accumulate a sizable nest egg, you could face taxes on much of your income in retirement.

The alternative is a Roth IRA. In a Roth IRA, you don’t get tax deductions when you make a contribution. However, your distributions in retirement are tax-free, assuming you are at least age 59 ½ and you have held the Roth for at least five years.

As a married couple, you cannot contribute to a Roth if your income is greater than $196,000 in 2020. For a single person, that limit is $124,000.1 Otherwise, you can contribute up to $6,000 this year, or up to $7,000 if you’re 50 or older.2

You can also convert your traditional IRA to a Roth. This means paying taxes on the traditional IRA amount. However, after the conversion, you can grow the remaining assets in the Roth on a tax-free basis and take tax-free distributions in retirement.

2) Be strategic about Social Security distributions. Social Security will likely play a role in your retirement income puzzle. However, taxes will impact the net amount you receive from Social Security.

The extent that your Social Security benefit is taxed depends on a number called your “combined income.” Combined income is your adjusted gross income plus nontaxable interest plus half of your Social Security benefit.3

If you are single and your combined income is between $25,000 and $34,000, up to 50% of your benefits could be taxable. If you earn more than $34,000, up to 85% of your benefits could be taxable.3

For married couples, if your combined income is between $32,000 and $44,000, up to 50% of your benefits could be taxed. If you earn more than $44,000, up to 85% of your benefits could be taxed.

The key to reducing your combined income is to reduce your adjusted gross income. Non-taxable income is not included in that number. So, for example, you could maximize your Roth IRA to minimize your adjusted gross income. You could also delay Social Security until age 70 to increase your benefit, and draw down your taxable accounts, like a traditional IRA, before Social Security starts.

3) Consider downsizing. Simply moving to a new home could reduce your taxes. Property taxes may be a major tax burden depending on your home. If you no longer need a large home, consider moving to something smaller that has a lower value and thus lower property taxes. You also may look at a neighboring community that has a lower property tax rate.

4) Relocate to a more tax-friendly state. Another option is to move to another state completely. Some states are more tax-friendly for retirees than others. For example, Alabama doesn’t tax Social Security benefits and has a relatively low sales tax rate.4 Florida is another option as it doesn’t have a state income tax.5 Do your research and you may find a new home that is appealing and saves you money.

5) Use an HSA to pay for medical costs. Fidelity estimates that the average 65-year-old couple will pay $285,000 out-of-pocket for health care expenses in retirement.6 If you’re using taxable distributions from an IRA or 401(k) to pay those costs, the impact on your savings could be even greater.

One strategy to minimize the tax burden is to use a health savings account (HSA) to pay for healthcare costs. In 2020, individuals can contribute up to $3,550 to an HSA. Families can contribute up to $7,100.7

You can invest and allocate those funds to match your goals and risk tolerance. The assets grow on a tax-deferred basis as long as they stay in the account. When you’re ready to use the funds, you can take tax-free distributions to pay for qualified healthcare expenses like premiums, deductibles, copays, and more.

By using a tax-free source to pay for healthcare costs, you reduce the amount you need to take from taxable accounts, like an IRA or 401(k). That, in turn, reduces your overall tax burden. A financial professional can help you determine if an HSA is right for you.

Ready to develop your retirement tax strategy? Let’s talk about it. Contact us today at Retirement Advisers.Net. We can help you analyze your needs and develop a plan. We can be reached at 888-637-3847 and are located at 195 Park Avenue Worcester, MA 01609.

1https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020

2https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

3https://www.ssa.gov/benefits/retirement/planner/taxes.html#:~:text=Learn%20Apply%20Manage-,Income%20Taxes%20And%20Your%20Social%20Security%20Benefit,on%20your%20Social%20Security%20benefits.&text=between%20%2425%2C000%20and%20%2434%2C000%2C%20you,your%20benefits%20may%20be%20taxable.

4https://money.usnews.com/money/retirement/baby-boomers/slideshows/the-most-tax-friendly-states-to-retire?slide=2

5https://money.usnews.com/money/retirement/baby-boomers/slideshows/the-most-tax-friendly-states-to-retire?slide=4

6https://www.cnbc.com/2019/04/02/health-care-costs-for-retirees-climb-to-285000.html

7https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-2020-hsa-contribution-limits.aspx

The information contained herein is based on our understanding of current tax law. The tax and legislative information may be subject to change and different interpretations. We recommend that you seek professional legal advice for applicability to your personal situation.

This Formula Could Help Predict Your Retirement Readiness

Thu, 06 Aug 2020 19:08:15 GMT

Most of us become eager to retire as we enter our sixties, but feelings of uncertainty are common too. You might wonder whether your monthly income will be sufficient to support your lifestyle, and you might be particularly worried about how long your savings will last. Those are common emotions, and it’s smart to investigate those issues before taking the leap into retirement.

That’s why many financial experts have long promoted the “four percent rule”. This rule revolves around the idea that retirement income will be derived from two sources (Social Security benefits and withdrawals from a retirement savings account), and that annual withdrawals of about four percent should be sufficient for most people. Theoretically, your money should last for the rest of your expected lifespan, so that you have enough income each year and it lasts for the rest of your life.

But does that formula work for everyone? According to research by Fidelity, this plan will work for a 30-year retirement about 90 percent of the time. In other words, it will work for most people, but there’s about a 10 percent chance that you could outlive your money.

The four percent rule, therefore, could be viewed as a good starting guideline for retirement planning. But certain factors will impact the validity of that formula in individual cases, such as:

Age at which you retire. If you retire at 60 and live until age 90, that’s a 30-year retirement. But what about those who live past 90? Or those who retire earlier, due to economic factors, eagerness, or some other reason?

Your cost of living. Some people are naturally more frugal than others. Some are still paying for expensive mortgages or their children’s college expenses. Some wish to pursue travel or expensive hobbies in retirement, while others look forward to downsizing into a tidy condo in a low-cost area. Your own preferences greatly influence your income needs in retirement.

Your savings. Four percent of $100,000 is $4,000… But four percent of $2 million is $80,000. Not many people could live off of $4,000 a year, but most would find $80,000 to be perfectly reasonable. Therefore, you can only rely on the four percent formula to the extent that a reasonable budget allows.

On that note, make an appointment with us to discuss your savings rate and retirement readiness. We can help you calculate factors like potential Social Security benefits, life expectancy, withdrawal rates and more. Then together we can set a target retirement date and savings goal.

What Do Zero-Percent Interest Rates Mean for You?

Wed, 22 Apr 2020 19:12:16 GMT

The coronavirus pandemic has launched the country, and the world, into uncharted territory. In much of the world, society is essentially shut down. Schools and large events are closed. People are staying in their homes. Businesses have effectively closed across the country.

The economy has felt the impact of the pandemic. Stocks have declined significantly, and unemployment has surged. On March 3, the Federal Reserve took action by cutting the fed funds rate to 0%. The Fed expects to maintain this rate until “it is confident that the economy has weathered recent events.”1

Given the unpredictability of the current pandemic, it’s hard to say how long rates might be at zero or how the economy may change in the future. However, changes to the fed’s benchmark rate often have ripple effects throughout the economy. Below are some things you may want to consider as we navigate a zero-rate environment for the near future:

Debt

Many common types of debt are tied to the prime rate. For instance, if you have a credit card with a variable interest rate, it could fall soon. If so, this may be a good time to get that balance paid off. You also may see lower rates on things like car loans and mortgages. This could be a good time to rate shop, especially if you have good credit. Even if you don’t want to transfer a credit card balance or refinance a home, the prospect of doing so could be enough to convince your lender to reduce your rate.

Student loan rates could also be impacted. Rates for new federal student loans are adjusted every year. The rate for 2019-20 is already set, but the rate for next year could drop significantly if rates stay low for some time. Private student loan rates could be fixed or variable. It depends on the terms of your loan agreement.

Savings

Savers have unfortunately been used to low-interest rates for some time. Interest rates on savings accounts had started to climb, but after the Fed’s cut, the average FDIC rate is now down to 0.09%. While CDs may offer higher rates, they also come with less liquidity.

It’s always advisable to have liquid savings available to cover emergencies and unexpected costs. However, it may be difficult to find interest-bearing accounts for those savings at this time. We can help you explore all your options and develop a liquidity strategy that’s right for your needs and goals.

Investments

There’s a misconception that a Federal Reserve rate cut always leads to gains in the stock market. One need looks no further than the most recent cut to see that it’s not true. When the Fed cut rates on March 3, the Dow Jones Industrial Average fell nearly 800 points.2

These are unprecedented times and it’s impossible to predict when the pandemic will end or how it will fully impact investors. While interest rates are a factor, there are many others to consider. Your retirement income strategy should be based on your unique needs and goals.

Now could be the right time to review your strategy and make adjustments. A change in allocation could be appropriate. You also may want to take advantage of financial vehicles that limit your exposure to risk. A financial professional can help you find the right strategy for your needs.

Ready to review your retirement income strategy? Let’s talk about it. Contact us today at Retirement Advisers.Net. We can set up a virtual consultation, so you don’t have to leave the comfort and safety of your home. Let’s connect today and start the conversation.

1 https://www.usatoday.com/story/money/2020/03/03/coronavirus-dow-jones-stocks-react-after-fed-cuts-interest-rates/4938447002/
2 https://www.usatoday.com/story/money/2020/03/03/coronavirus-dow-jones-stocks-react-after-fed-cuts-interest-rates/4938447002/

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19959 - 2020/3/31

The CARES Act: What Does it Mean for Your Retirement?

Mon, 13 Apr 2020 19:14:27 GMT

On March 27, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act, which provides economic support to Americans who have been impacted by the coronavirus pandemic. You’re probably familiar with the highlights of the bill:

Direct payments of up to $1,200 for single taxpayers making less than $75,000 and up to $2,400 for married couples making less than $150,000.1
Enhanced unemployment insurance of an extra $600 per week for four months.1
Forbearance options for federal mortgages and student loans.1
A wide range of loans, grants, and other support for small businesses.1

Those components are important and will certainly help many people get through this unprecedented period. However, there are some other provisions that could be important for you, especially if you’re approaching retirement or are already retired.

Extended Tax Filing and IRA Deadline

The IRS pushed back the tax filing deadline to July 15 from the traditional April 15.2 That gives you more time to prepare your return, collect documents, and possibly implement a strategy to minimize your tax bill.

That also gives you more time to contribute to your IRA. You can make an IRA contribution up to July 15 and count it as a deduction on your 2019 return, assuming of course that you meet income requirements.3

401(k) and IRA Distribution Options

It’s possible that you may need additional funds to get you through this period, especially if you or your spouse have been furloughed or have lost income. The CARES Act allows you to tap into your qualified retirement accounts through special distributions.

You can take a withdrawal from your 401(k) and IRA without paying the 10% early distribution penalty, even if you are under age 59 ½. The distributions are taxable, but the taxes are spread over a three-year period. However, you can also repay the distribution over that three-year period and avoid paying taxes on the distribution.3

While a 401(k) or IRA distribution may be helpful, it could also have long-term consequences. When you take a distribution from your account, those funds are no longer invested. That means those funds can’t compound and grow. It’s possible that you may not fully participate in a market recovery if you decide to take a distribution, which could hurt your long-term growth.

Waiver of RMDs

Are you required to take an RMD in 2020? Not anymore. The CARES Act waives all RMDs in 2020, so there is no penalty for not taking a minimum distribution from a 401(k) or IRA. 4

This could be very helpful for your account balance. Your RMD would have been based on your December 31, 2019. Depending on how you are allocated, your account value may have been significantly higher on that date than it is today. That means that had the RMD not been waived, you would have potentially been required to take a substantial withdrawal from an account that had fallen in value.4

This may be a confusing and unprecedented time, but you have options available. We are here to help you explore those options and implement the right strategy for your retirement needs and goals. Contact us today at Retirement Advisers.Net. Let’s connect and start the conversation.

1 https://www.thebalance.com/2020-stimulus-coronavirus-relief-law-cares-act-4801184
2 https://www.irs.gov/coronavirus
3 https://www.marketwatch.com/story/this-is-how-the-2-trillion-coronavirus-stimulus-affects-retirees-and-those-who-one-day-hope-to-retire-2020-03-31
4 https://www.aarp.org/money/investing/info-2020/cares-act-retiree-tax-benefit.html

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19977 - 2020/4/7

Are You Facing a Retirement Tax Bomb?

Thu, 26 Mar 2020 19:18:13 GMT

Do you use a 401(k) or IRA to save for retirement? You’re not alone. These types of accounts are popular for many reasons, but one of the biggest is their tax treatment. As you may know, these accounts are tax-deferred. That means you don’t pay taxes on growth as long as the funds stay inside the account.

Qualified accounts may also offer upfront tax benefits for your contributions. Contributions to your 401(k) come out on a pre-tax basis. That reduces your taxable income, which in turn reduces your taxes. Contributions to an IRA.may also be tax-deductible, depending on your income level.

Qualified accounts aren’t completely tax-free, however. While you may get a deduction upfront and taxes may be deferred over time, eventually, you do have to pay taxes on these assets. That time is usually when you take withdrawals in retirement.

Most distributions from qualified accounts are taxed as income. That could be problematic if you plan on using your 401(k) or IRA to generate most of your retirement income. You could create high levels of taxable income that may create a significant tax liability, which could reduce your net income and your ability to live a comfortable lifestyle.

Fortunately, you can minimize your tax burden by planning ahead. Every situation is unique, so there’s no universal strategy that is right for everyone. However, the following three-step process can help you project your tax liability in retirement and take steps to control it.

List all your sources of retirement income.

The first step in managing your retirement taxes is to project just exactly where your income will come from. In fact, this isn’t just useful for tax planning; it’s important for your entire retirement strategy.

Make a list of all your potential income sources. The list could include things like:

401(k) or other employer-sponsored plans
Traditional IRA
Roth IRA
Annuities
Social Security
Defined Benefit Pension
Business income
Real estate income
And more

Categorize them by tax treatment.

Once you have your list, you can start to categorize your income sources according to how they are taxed. Some income sources will likely be taxable, like:

Part-time work wages
401(k) distributions
IRA distributions
Investment income
Business and real estate income

Other types of income may be tax-free, such as:

Municipal bond interest
Life insurance distributions
Roth IRA withdrawals

And finally, there could be some sources of income that simply require more research. They may be taxable, but also may not be. It could depend on your total taxable income or perhaps other factors. These types of income could include:

Annuity payments
Social Security
Defined Benefit Pension
And more

Meet with a professional and develop a tax strategy.

The final step is to work with a professional to create a detailed projection of your potential income and tax liability in retirement. They can estimate your income and your possible taxes each year. They can then work with you to develop a strategy that minimizes tax payments.

For example, they might recommend the use of tax-free income from municipal bonds or a Roth IRA. They could suggest the use of life insurance to create tax-free income. They may recommend that you delay Social Security or choose a different pension benefit to reduce your taxable income. A financial professional can help you find the strategy that is best for your needs.

Ready to develop your retirement tax strategy? Let’s talk about it. Contact us at Retirement Advisers.Net. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
19662 - 2020/1/16

Coronavirus: What are Your Options?

Fri, 20 Mar 2020 19:20:31 GMT

It’s been a volatile few weeks in the financial markets. Up until late January, we were still enjoying the longest bull market in history. In three short weeks, the bull market has ended, and we’ve entered bear market territory. Between Friday, February 21 and Monday, March 16, the Dow Jones Industrial Average has dropped by 30.37%.1

The rapid decline has left many investors with two questions:

How much further will markets drop?
What can I do to protect my assets?

There’s no easy answer to the first question. If history is any guide, eventually the decline will stop, and the markets will recover. The average bear market lasts 13 months, followed by a 22-month recovery.2 However, it’s impossible to predict when that recovery might begin.

The second question is even more difficult to answer. There are certainly protection options available, but not all options are right for all investors. Your strategy should be based on your unique needs, goals, and tolerance for risk. Below are a few options you have available:

Shifting to a more conservative allocation.

Changing your allocation to a more conservative strategy is always an option. Many people become more risk averse as they approach retirement. If you haven’t reviewed your allocation in years, this may be the right time to do so.

Of course, a more conservative allocation could limit your participation in a recovery when it happens. Work with a financial professional to find an allocation that limits your exposure to further losses, but still gives you an opportunity to participate future upside.

Staying the course.

Another option is to stay the course and stay invested in your current allocation. Again, that may expose you to further losses, but it could also put you in a position to take advantage of a recovery when it does happen.

Again, it’s impossible to predict when a recovery could happen, but history can provide some insight. The last bear market started in October 2007 and lasted until March 2009, spanning much of the financial crisis. The S&P 500 dropped 56.8%. However, the subsequent bull market (which just ended) lasted more than 10 years and saw the S&P 500 increase by more than 400%.3

The 2000 bear market was triggered by the tech bubble. It lasted nearly 30 months and saw a total decline of more than 49%. It was followed by a 60-month bull market with a return of more than 100%. The 1990 bear market lasted only three months and had a decline of 20% and it was followed by a 113-month bull market with a cumulative return of 417%.3

Bear markets are often followed by bull markets. The question is whether you can stick it out through further losses. Again, your financial professional can talk through your options with you and help you decide which path is right.

Use risk-protection vehicles.

Another option is to take advantage of market risk-protection vehicles like fixed annuities. There is a wide range of different types of annuities that can limit your exposure to market risk and protect your future. For example, some guarantee your principal against loss, but also offer upside growth potential. Others guarantee your future retirement income, no matter how the market performs in the future. A financial professional can help you determine if an annuity or other risk-protection tool is right for you.

Ready to protect your nest egg from the coronavirus? Let’s talk about it. Contact us today at Retirement Advisers.Net. We can help you analyze your investments and implement a strategy. Let’s connect soon and start the conversation.

Annuities contain limitations including withdrawal charges, fees and a market value adjustment which may affect contract values.

Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is changed.

1 https://www.google.com/search?safe=off&sa=X&tbm=fin&sxsrf=ALeKk02Fk2yPH2_A7nU0wQGE5IUIixHyGQ:1584394531365&q=INDEXDJX:+.DJI&stick=H4sIAAAAAAAAAONgecRozC3w8sc9YSmtSWtOXmNU4eIKzsgvd80rySypFBLjYoOyeKS4uDj0c_UNkgsry3kWsfJ5-rm4Rrh4RVgp6Ll4eQIAqJT5uUkAAAA&ved=2ahUKEwiBmOfJ-Z_oAhWUW80KHc2dA3MQ3N8BMAJ6BAgCEAM#scso=_SfFvXsWJMJe1tAbX6pm4BQ1:0
27 https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html
3 https://www.cnbc.com/2020/03/14/a-look-at-bear-and-bull-markets-through-history.html
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
19926 - 2020/3/17

What Does the 2020 Election Mean for Your Portfolio?

Wed, 11 Mar 2020 19:26:36 GMT

The 2020 election cycle is in full swing. It’s primary season, which means the general election is right around the corner. Before you know it, the two major parties will have their conventions and we’ll be heading to the ballot box.

Of course, you may already have election fatigue. From the local level all the way up to national races, candidates are already flooding television with political ads.

As is the case in most presidential elections, candidates are also talking about the economy. They may make claims about what will happen in the economy if they’re elected or that the markets might decline if their opponent is elected.

That kind of rhetoric is common during elections, but is it accurate? Will the outcome of the election impact your portfolio? Should you worry about the election? Or perhaps even change your allocation to protect yourself. Below are a few tips to keep in mind through the rest of the election year:

Keep history in perspective.

Often when there is one issue or story dominating the news, like the presidential election, it’s easy to focus solely on that story. It’s in the news and on social media so much that it feels like it’s the most important issue in the world.

However, the truth is that this country and the stock market have been through many presidential elections. In fact, in most of those years, the markets performed positively. In fact, since 1928, there have been 23 presidential elections. In 19 of those years, the S&P 500 had a positive return.1

In fact, in the four instances when the markets did have negative returns, there were also economic events happening that may have driven the performance. In 1932, the country was in the midst of the Great Depression. In 1940, the country was entering World War II.

The markets declined in 2000, which was the year George W. Bush ran against Al Gore. However, the bursting tech bubble in Silicon Valley may have had more influence on the markets than the election. Finally, in 2008, the S&P 500 also declined, but that was the year of the financial crisis.

The takeaway is that market declines can happen in any year. The fact that it’s an election year may cause news stories and rhetoric, but the market is likely driven by investor concerns and economic conditions.

Focus on the long-term.

Your investment strategy was likely designed for the long-term. Perhaps you’re saving for retirement or some other goal that is years or possibly even decades in the future. Over that period, you’ll likely see times of market volatility.

Whether it’s an election year or not, it’s always helpful to focus on the long-term during challenging periods. Market downturns happen, but they are always temporary.

There are two common types of downturns: corrections and bear markets. Corrections are losses of 10% or more. Bear markets are losses of 20% or more. As you can see in the chart below, the average correction loses around 13% and the average bear market sees a loss of around 30%.2

However, the duration of each is also important. A correction, on average, lasts around four months. After that period, there is an average four-month recovery period to recoup the losses. Bear markets last longer. They have an average duration of 13 months with a 22-month recovery period.2

Market downturns are never pleasant, but they are temporary. Keep an eye on the long-term and stick to your strategy.

Don’t make gut decisions.

It can be easy to make a gut, impulse decision when you hear and see stressful news on a regular basis. It might be tempting to sell your investments and move to asset classes that have less risk and volatility.

However, a move to perceived safety could do more harm than good. The chart below shows how the average equity investor has fared compared the S&P 500 over different periods of time. As you can see, the index always wins, sometimes by a wide margin. 3

Why does this happen? Primarily because the index stays invested at all times, while the average investor is constantly moving in and out of the market based on gut decisions or attempts to avoid loss. While investors may miss some declines with this strategy, they also miss out on gains. Staying invested usually leads to better long-term performance.

Ready to protect your portfolio this election year? Let’s talk about it. Contact us at Retirement Advisers.Net. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

1 https://www.thebalance.com/presidential-elections-and-stock-market-returns-2388526
2 https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html ] 3 https://www.marketwatch.com/story/americans-are-still-terrible-at-investing-annual-study-once-again-shows-2017-10-19

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

Should You Leave Money in Your 401(k)?

Fri, 28 Feb 2020 20:28:37 GMT

There’s a growing trend among new retirees. With increasing frequency, Americans are choosing to leave their retirement savings. According to data from Fidelity, 55% of workers leave their retirement savings in their former employer’s 401(k) plan for a full year after retirement. That’s up from 45% just four years ago.1

Why are retirees leaving their assets in their old 401(k) rather than rolling those funds to an IRA? There could be a variety of reasons. Workers may be happy with the plan’s investment options and administration. They may feel comfortable with the plan’s online access and other management tools. They might not need the money immediately, so they don’t have urgency to do anything with it. It’s also possible that some retirees may not be aware that they can roll their funds into an IRA tax-free.

While there are certainly benefits to keeping your assets in your employer’s 401(k), there are also good reasons to roll the assets into an IRA. If you’re approaching retirement, now is the time to consider your options for your 401(k), which may be your largest retirement asset. Below are a few factors to consider:

Investment Options

If you’ve been in your 401(k) plan for a significant amount of time, you are likely familiar with the plan’s investment options. You may feel comfortable with your allocation and perhaps you even like the plan’s fee structure and performance.

However, your goals and risk tolerance won’t always be the same as they are today. Just as your investment strategy has evolved through your career, it will likely continue to evolve through retirement. What you’re comfortable with today may not be something you’re comfortable with in the future.

Generally, IRAs offer significantly more investment options than most 401(k) plans. That’s not necessarily true with every IRA and 401(k), but it is often the case. While a 401(k) plan may offer dozens of options from select providers, an IRA will often allow you to choose from a wide universe of stocks, bonds, mutual funds, ETFs, annuities, and more. That greater diversity of options can help you develop an allocation that is just right for your goals and risk tolerance, no matter how it changes in the future.

Management and Administration

You also may be comfortable with your 401(k) plan’s management and administration tools. Perhaps the website is easy to use. Maybe you have a dedicated support person within the plan administrator’s office. You know how to make changes and review your account, and you may not want to make changes at this time.

Again, though, consider whether it will still be convenient in the future to keep your assets in your old 401(k). If you’re like many retirees, you may have multiple 401(k) plans from old employers. You also might have IRAs and other investment accounts. It’s difficult to manage and adjust your strategy when you have accounts spread across multiple custodians and institutions. You could simplify the process by consolidating your qualified retirement assets into one IRA.

Also, when you reach 72, you’ll have to take required minimum distributions (RMDs) from your 401(k) and IRA. Again, that process may be inconvenient if you have to pull distributions from multiple accounts. If you consolidate your qualified assets into one IRA, you simply have to make withdrawals from one account to satisfy your RMD each year.

Income Protection

While you may not need to tap into your 401(k) assets today, it’s possible that at some point in the future you will need to take withdrawals from your retirement savings. Of course, it’s difficult to know how much you can safely take in a withdrawal each year. What if you live longer than you anticipate? What if the market takes a downward turn? How can you be sure your assets and income will last for life?

In most IRAs, you can use financial vehicles like annuities to convert a portion of your savings into guaranteed* income. You receive a regular consistent check that is guaranteed* for life, no matter how long you live or how the markets perform.

Historically, annuities with guaranteed income benefits have been more available in IRAs than in 401(k) plans. However, the passage of a new law, called the SECURE Act, creates the possibility for 401(k) plans to start offering these vehicles. Whether it’s through your IRA or 401(k), guaranteed income could give you a base level of financial stability confidence in retirement.

Ready to implement a plan for your 401(k) assets? Let’s talk about it. Contact us today at Retirement Advisers.Net. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

1 https://www.marketwatch.com/story/more-americans-are-leaving-their-money-in-401k-plans-after-retirement-should-you-2019-10-31
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

19563 - 2019/12/16