KC Financial Advisors

Financial Planning Essentials: Social Security and Life Insurance

walter@thirdwheelmedia.com (Walter Storholt) — Thu, 20 Feb 2025 11:00:03 GMT

Equipping Points:

Today we are covering twodifferent listener questions. James is asking about starting SocialSecurity at 62. You might be amazed how many times I get thatquestion in my office. And then Barry wants to talk through lifeinsurance, seems to think he has a lot of it and wants to knowwhether he should cancel some of it. These are two core areas of planning so let’s talk through how they should come to a decision.

If you’ve ever wondered how we work through these major planning items with clients, today’s show will pull back the curtain a bit and really get into the details of the process. We’ll tell you what tools we use and what factors we want to consider when dealing with both life insurance and Social Security. So whether you’re specifically curious about these topics or not, this episode will give you some great insight into making big financial decisions.

Here’s some of what we discuss in this episode:

We’ll take you through the process for how we determine Social Security claiming strategies.
Why it might not be the best idea for this person to take Social Security at 62 to pay off their mortgage.
The questions you want to answer before getting rid of a life insurance policy.
The different insurance products that you might look into.

Today’s Takeaway:

Retirement Lessons from Andy Reid: Super Bowl-Worthy Financial Strategies

walter@thirdwheelmedia.com (Walter Storholt) — Thu, 06 Feb 2025 10:00:00 GMT

Equipping Points:

Well, the Kansas City Chiefs are going to the Super Bowl again. Their coach Andy Reid probably won’t be retiring anytime soon, but let’s still see what we can learn about retirement planning from these quotes from the Chiefs coach.

This episode is a fun blend of sports and finance, offering a fresh perspective on how lessons from the football field can apply to your financial life. Whether you're a die-hard Chiefs fan or simply looking to improve your financial literacy, this episode is packed with insights that can help you make the most of every opportunity.

Here are the quotes we discuss in this episode:

“Every play is an opportunity. Make every snap count.”

“We don’t focus on the scoreboard; we focus on the next play.”

“Adjustments are not a sign of weakness; they are a sign of strategy.”

Today’s Takeaway:

Is It Time to Fire Your Broker? Let’s Discuss That and Social Security

Thu, 23 Jan 2025 10:30:00 GMT

Equipping Points:

Today’s show is a little different than normal. Instead of diving into one topic, we’re going to tackle two separate planning items thanks to a couple questions from Bobby and Roy. Both questions involve important decisions that will impact retirement so let’s jump in.

Bobby is contemplating whether to take Social Security early while still working, and David provides insights on the implications of this choice. Roy, on the other hand, is questioning the performance of his IRA and whether he should consider firing his broker after only achieving a 10% return. Listen as David breaks down his process for helping each of these people work through their decisions.

Here’s some of what we discuss in this episode:

The different ages that matter for Social Security benefits and what you need to know.
The reasons why he might want to wait to claim.
Why your ‘underperfomance’ might just be good diversification.

Today’s Takeaway:

Am I Ahead Or Behind On My Retirement Savings?

Thu, 09 Jan 2025 10:00:00 GMT

Equipping Points:

As we step into a brand-new year, it’s the perfect opportunity to reflect on your financial health- especially your retirement savings. One common question David has been hearing lately is: Am I ahead or behind on my retirement savings? And how can I even tell?

We’ve all seen stats about how much the average American has saved for retirement. But let’s be honest- being “average” when it comes to retirement savings isn’t likely to provide the lifestyle you want in your golden years. Instead, David will share some practical benchmarks you can use to measure your progress. He’ll also share some actionable steps to set yourself up for long-term success!

Remember, the best time to take action is today. Your future self will thank you!

Here’s some of what we discuss in this episode:

Benchmarks for retirement savings based on age and income
Where this money should be held
The importance of starting early
A great time to start is right now!

New Years Resolutions Episodes

https://coveryourassetskcpodcast.podbean.com/e/episode-155-2022-financial-resolutions-part-1/

https://coveryourassetskcpodcast.podbean.com/e/financial-resolutions-part-2/

Today’s Takeaway:

How the SECURE Act 2.0 Changed RMDs

Thu, 02 Jan 2025 15:28:02 GMT

In the final days of 2022, Congress passed the SECURE Act 2.0, a new set of rules designed to help investors who wanted to contribute to retirement plans. Many of these changes were intended to give investors more flexibility and new ways to enhance their retirement strategies. It was a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which was also an important piece of legislation aimed at helping investors save more effectively.

Both the SECURE Act and SECURE Act 2.0 have dozens of provisions, including new rules that may impact retirement. Here are a few things you might want to know about how the SECURE Act 2.0 changed required minimum distribution (RMD) rules and how qualified charitable distributions (QCDs) may fit into how you choose to take these distributions.

Remember, this article is for informational purposes only and is not a replacement for real-life advice. We encourage you to consult your tax, legal, and accounting professionals before modifying your retirement income strategy.

The SECURE Act 2.0 and Required Minimum Distributions

RMDs are the amount of money that investors must withdraw each year from certain retirement accounts. These withdrawals are taxed as ordinary income. You can begin taking penalty-free withdrawals at 59½ or earlier in some cases if you have experienced a qualifying life event.

In the past, retirement distributions were required beginning at age 70½. Under SECURE Act legislation, investors can wait until age 72 or age 73 if they turn 72 after December 31st, 2022. ¹

Forgetting to take these required distributions can come with penalties! The penalty was previously a 50% excise tax. Still, the SECURE Act 2.0 reduced that penalty to 25%, or 10%, if the minimum distribution oversight is corrected within two years and the proper paperwork is filed. In some cases, that penalty may be waived altogether if the account owner made a “reasonable error” and took documented steps to correct the oversight. ¹

The Qualified Charitable Distributions (QCD) Approach to Required Minimum Distributions

QCDs can offer an opportunity to support your favorite causes and manage your retirement income. They allow those who are obligated to take RMDs to donate those funds directly from specific retirement accounts to qualified charities without recognizing the distribution as taxable income.

Here’s how it works: Individual retirement account (IRA) withdrawals are generally taxable, but QCDs are excluded from taxable income, meaning they do not increase your adjusted gross income. For some, this may be a strategy to consider when balancing supporting a charitable organization with managing taxes.

You must be at least 70½ years old to qualify for a QCD. The distribution can be made from an IRA. You can also donate from a SEP IRA or SIMPLE IRA as long as they are inactive, meaning that you’ve made no contributions to the account in the year the QCD is distributed. However, remember that 401(k)s and other non-IRA retirement vehicles do not qualify for QCDs.

To qualify for the tax- and penalty-free withdrawal of earnings, Roth IRA QCD distributions must meet a 5-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

The maximum annual limit for QCDs is currently set at $108,000 for 2025, an amount that adjusts annually for inflation. Therefore, staying updated on the annual cap is important, as it can influence your donation strategy.

It’s prudent to confirm the status of your chosen charity through the IRS Online Search Tool or by consulting a professional who can speak to the tax status of the organization. If you withdraw and then donate the funds, it does not count as a QCD and becomes taxable.

As with many financial strategies, your state may have specific rules impacting how QCDs are treated. It’s vital to check with a tax professional about state-specific regulations.

A financial professional can help you take your RMDs or set up QCDs. In addition, if you have any questions or concerns about how the changes enacted by the SECURE Act or SECURE Act 2.0 might affect your retirement strategy, please don’t hesitate to reach out. We’re here to help you make the most of these updates and navigate your retirement strategy.

1. IRS.gov

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

2024's Best Stocking Stuffer: Financial Freedom (PART 2)

Thu, 19 Dec 2024 12:00:03 GMT

Equipping Points:

Join David for part two of our series on 2024 stocking stuffers for financial freedom. In this episode, we explore five actionable financial tips to help you wrap up the year and prepare for a prosperous 2025. From managing debt effectively to considering Roth conversions and utilizing Qualified Charitable Distributions, this episode will give you some areas to focus on.

As we wrap up the year, take the time to evaluate your financial situation and consider implementing these strategies. By doing so, you could be closer to achieving financial freedom in 2025 and beyond.

Here’s some of what we discuss in this episode:

The number of people that carry credit card debt is pretty shocking.
Consider Roth conversions to help reduce taxes in the future.
QCDs can be an effective way to not pay taxes on money that is otherwise going to come out of your IRA.
Why you need to be reviewing your plan annually.
Don’t forget your Roth contributions!

Disclosure: Roth distributions are tax free after age 59-1/2 and the account has been open for at least 5 years.

Today’s Takeaway:

2024's Best Stocking Stuffer: Financial Freedom (PART 1)

Thu, 05 Dec 2024 10:00:01 GMT

Equipping Points:

The holiday season is here, and while you’re stuffing stockings for your loved ones, don’t forget to stuff your own financial stocking with tips that can bring you closer to a secure retirement. Today, we’re unwrapping 10 bite-sized, actionable ideas to help you save smarter, invest better, and plan for the future you deserve.

From maximizing your retirement contributions to revisiting your estate plan, learn how to make the most of your financial situation as we approach 2025. We have plenty of stocking stuffer ideas so stay tuned for part two of the discussion next episode.

Here’s some of what we discuss in this episode:

Have you maxed out your retirement contributions for 2024?
The benefits of consolidating old retirement accounts and the best way to it.
Two clients stories about estate planning.
Why would you want to harvest losses for your next tax return?

Today’s Takeaway:

Understanding Qualified Charitable Distributions

Tue, 19 Nov 2024 17:43:16 GMT

As you build your legacy, considering how to leverage your charitable contributions can be a fulfilling endeavor. Qualified Charitable Distributions (QCDs) can offer an opportunity to support your favorite causes and manage your retirement income. Here are some factors to consider with QCDs and how they've changed based on recent legislation, such as the SECURE Act.

What Is a Qualified Charitable Distribution (QCD)? A Qualified Charitable Distribution allows individuals aged 70½ or older to donate directly from specific retirement accounts to qualified charities without recognizing the distribution as taxable income. Such distributions can help you manage your required minimum distributions (RMDs). Additionally, the SECURE Act 2.0 changed the age of RMDs to 73. ¹

Remember, this email is for informational purposes only and is not a replacement for real-life advice. We encourage you to consult with your tax, legal, and accounting professionals before modifying your retirement income strategy. ¹

Age and Account Requirements. You must be at least 70½ years old to qualify for a QCD. The distribution can be made from an IRA. You can use SEP IRAs or SIMPLE IRAs so long as they are inactive, meaning that you’ve made no contributions to the account in the year the QCD is taken. However, keep in mind that 401(k)s and other non-IRA retirement vehicles do not qualify for QCDs. ¹

Once you reach age 73, you must begin taking RMDs from a traditional IRA, SEP IRA, or SIMPLE IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. To qualify for the tax- and penalty-free withdrawal of earnings, Roth IRA distributions must meet a 5-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner's death. The original Roth IRA owner is not required to take minimum annual withdrawals. ¹

Limits and Adjustments. The maximum annual limit for QCDs is currently set at $100,000 for 2024, an amount that adjusts for inflation yearly. Therefore, staying updated on the annual cap is important, as it can influence your donation strategy. ¹

Financial Pros and Cons. In addition to helping you support a charity, a QCD may also offer to help you manage your tax situation. IRA withdrawals are generally taxable, but QCDs are excluded from taxable income, meaning they don’t increase your adjusted gross income (AGI). For some, this may be an opportunity to consider when balancing supporting a charitable organization and managing taxes.

Additionally, QCDs may enable you to satisfy your RMD requirements. You also benefit from the fact that you might not need to itemize deductions to take advantage of a QCD, allowing you to use the standard deduction. ¹ Again, this article is for informational purposes only. Speak with your tax, legal, and accounting professionals if you have specific questions about your deductions.

Charity and RMD Considerations. QCDs are versatile in that there is no restriction on the number of charities you can support, provided they qualify under IRS guidelines. However, the donation must go directly from your IRA to the charity to be a QCD. Gifts made as QCDs can fulfill all or part of your annual RMD requirement. It's worth noting that if you donate over your RMD amount, the excess cannot be rolled over to the following year's RMD.

Final Key Details. It's prudent to confirm the status of your chosen charity through the IRS Online Search Tool or by consulting with a professional who can speak to the organization's tax status. If you withdraw and then donate the funds, it does not count as a QCD and becomes taxable.

As with most financial strategies, your state may have specific rules impacting how QCDs are treated. Check with a tax professional about state-specific regulations.

^{1.IRS.gov, 2024}

This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.

Trump's Victory & YOUR Portfolio

Thu, 14 Nov 2024 13:00:02 GMT

Equipping Points:

The election is finally behind us and it’s hard to believe that we didn’t have a long, drawn-out process to determine the winner. Now that Trump is returning to the White House, it’s time to start looking at what policies his administration is considering and what those decisions could mean for your portfolio.

With a focus on three key areas—tariffs, tax cut extensions, and decreased regulation—this episode provides a comprehensive analysis of potential financial shifts in the coming years. We’ll also stress the importance of having a robust long-term financial plan. David advises listeners to align their risk tolerance with their investment strategies, ensuring stability regardless of political or economic changes. By focusing on a comprehensive plan, investors can navigate uncertainties with confidence.

Here’s some of what we discuss in this episode:

Could the proposed tariffs be inflationary for the US economy?
What does David think will happen with the tax cuts set to expire at the end of 2025?
Is less regulation a good thing?
How quickly will changes start to take effect?

Today’s Takeaway:

Mailbag: How Does a Trust Work?

Thu, 31 Oct 2024 09:00:01 GMT

Equipping Points:

Building a nest egg or inheriting one can involve a lot of moving parts. You want to be strategic and make wise decisions to prepare you for the future and protect your assets against the possibility of a market crash. In today’s podcast, David answers three questions from the mailbag, all facing different financial situations.

Whether you’re planning for retirement, managing debt, or handling unexpected windfalls, having professional advice to come alongside you can make all the difference. Wondering how much to worry about a market crash or curious about the ins and outs of a trust? Tune in for insights on these topics and more in today’s episode!

Here’s some of what we discuss in this episode:

Mailbag: When to stop contributing to a 401(k) and pay off debt instead.
Mailbag: How worried should I be about a market crash?
Mailbag: How does a trust work?

Today’s Takeaway:

2025 Income Tax Brackets

Mon, 28 Oct 2024 15:18:55 GMT

The Internal Revenue Service released the updated income tax brackets, standard deduction, and retirement contribution limits for the 2025 tax year. While these changes won’t impact you for some time, it may benefit you to start thinking ahead.

The top rate remains 37%, but remember that 2017’s Tax Cuts and Jobs Act expires at the end of 2025. Overall, more than 60 provisions have changed at the federal level. Here are a few of the most critical changes in the federal tax bracket and retirement contribution limit. While the IRS has highlighted its changes, keep an eye out for any changes to individual and business taxes that may be pending in your state. ¹

Tax Bracket Inflation Adjustmen t
Overall, tax brackets have been adjusted upwards for 2025. This adjustment is based on the Consumer Price Index and primarily accounts for inflation.

Standard Deduction
The standard deduction has increased to $30,000 for married couples filing jointly, up $800 from the previous year. For single filers, this number increased by $400 to $15,000.

Marginal Rates
Marginal tax rate brackets are also increasing.

Gift Tax
The annual gift tax exclusion for 2025 is $19,000, an increase of $1,000 from the previous year.

Estate Tax Credit
Individuals receiving an inheritance in 2025 will be able to exclude $13,990,000 from federal taxation, up from $13,610,000 in the previous year.

All information sourced from IRS.gov.

^{1. IRS.gov}

This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.

Review These 5 "To-Dos" Before Year-End

Thu, 17 Oct 2024 01:55:55 GMT

Equipping Points:

As we approach the end of the year, it's crucial to ensure your financial health is in top shape. In today’s podcast, David provides an essential checklist to help you optimize your financial strategy. Whether you're a retiree or still in the workforce, these practical tips will guide you towards a prosperous 2025.

For instance, the end of the year can be a great time to rebalance or help make investment losses work to your advantage . Before we change our calendars to 2025, you’ll definitely want make sure you’ve done all you can in 2024 to ensure your investments are where they should be for the future.

Here’s some of what we discuss in this episode:

Fully funding your retirement accounts.
Remember to make a Roth IRA contribution with money earned, even as retirees.
Rebalance before year end.
Consider a taxable brokerage account for things you can sell at a tax loss.
If you have an FSA, use it or lose it!

Today’s Takeaway:

Fed Rate Cuts are Good for Stocks…Right?

Thu, 03 Oct 2024 09:15:00 GMT

Equipping Points:

Following the news of the rate cuts last week with the Fed, you may be wondering what that means. Is that a good thing? How could it impact your daily life? David breaks down what it means now and what has happened after rate cuts in the past. Based on that, he shares some financial possibilities for the near future and what the market outlook is.

For investors, this short and sweet podcast packs a lot of valuable info in. Before you make any bold moves, David suggests a cautious approach as we wait and see what these rate cuts do to our economy.

Here’s some of what we discuss in this episode:

The Federal Reserve announced that they were cutting the Overnight Fed Funds Rate by half a percent.
Is the Fed rate cut a good thing or a bad thing?
What does the history or Fed rate cuts tell us?
What’s the key takeaway in all this for investors?

Today’s Takeaway:

Important Birthdays Over 50

Wed, 25 Sep 2024 12:29:05 GMT

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Mailbag: How To Handle An Unexpected Layoff

Thu, 19 Sep 2024 09:00:01 GMT

Equipping Points:

Whether you're facing a layoff, planning a financial gift for a new grandchild, or dealing with an inheritance, today’s podcast offers valuable insights and actionable advice. Beyond helping you save for retirement, as a financial advisor, David answers countless financial questions that come up over the course of his clients’ lives.

Some financial situations you can plan for, and some unexpected ones force you to pivot. Find out what David has to say when answering three questions from the mailbag!

Here’s some of what we discuss in this episode:

Mailbag: How to handle unexpected layoff?
Mailbag: How to financially set up new grandchild?
Mailbag: What taxes to plan for with inheritance?

Today’s Takeaway:

Retirees In Their 70s Regret These 5 Things

Thu, 05 Sep 2024 09:00:00 GMT

Equipping Points:

As we grow older (and wiser), it's natural to reflect on the decisions we've made and consider what we could have done differently in the past. In today’s episode, we delve into the top five retirement regrets of people in their seventies, inspired by a recent YouTube video created by someone else in their 70s. David shares his insight and advice for anyone in their fifties or sixties looking to avoid these common financial pitfalls.

While the list is interesting to hear, make sure to consider what proactive steps you can take to avoid having the same regrets when you retire.

Here’s some of what we discuss in this episode:

People wish they had retired earlier.
Some wish they had spent more when they first retired.
Retirees wish they took better care of their health.
People wish they had taken up a hobby.
Many wish they had traveled more.

YouTube Video:

https://www.youtube.com/watch?v=mNUSJ3juAbA

Today’s Takeaway:

September Is Life Insurance Awareness Month

Tue, 27 Aug 2024 17:51:05 GMT

Life is an amazing journey full of challenges and triumphs. No matter where you are on the journey, preparing can be a key part of success.

Life insurance can play a role in your overall financial strategy, and we are happy to help share some of the potential benefits of this important product.

· Income Support - Your policy may be able to provide financial support to people who depend on you financially.

· Debt Management - Life payouts can be used to pay off your mortgage or your child’s college education.

· Legacy Strategy - Life insurance can play a role in estate management and perhaps help you leave a legacy for loved ones.

This month, take the time to review your current life insurance coverage or, if you do not yet have life coverage, consider what role it can play in your personal finances. Better yet, talk to us about how your life insurance can more closely align with your long-term financial goals.

Remember, several factors affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Are Target-Date Maturity Funds Right for Your Retirement Plan?

Thu, 22 Aug 2024 09:00:00 GMT

Equipping Points:

When it comes to planning for retirement, many people turn to target-date maturity funds for their set-it-and-forget-it appeal. In fact, if you have a 401k or an IRA rollover, chances are you have a target-date maturity fund. These are designed to automatically adjust your investment mix as you approach retirement, gradually shifting from a higher allocation of stocks to a more conservative mix of bonds and cash. This sounds ideal, but is it?

In this episode, David and Walter discuss an interesting article by The Washington Post that questions whether these funds truly deliver on their promises. They’ll examine the performance of Vanguard's target-date funds, discussing specific target dates like 2065, 2055, and 2045, and reveal some surprising findings about their effectiveness and performance in light of recent market conditions.

Here’s some of what we discuss in this episode:

The popularity of target-date funds and how they work
The performance of target-date funds over recent years
What the 2025 portfolio looks like today
The differences between Vanguard, Schwab, and Fidelity funds
Understanding the drawbacks of these funds

The Washington Post Article:

https://www.washingtonpost.com/business/2024/07/23/target-date-funds-retirement-savers-explainer/

Today’s Takeaway:

Mailbag: Roth IRAs and 401(k)s

Thu, 08 Aug 2024 09:00:00 GMT

Equipping Points:

When it comes to your investments, there are a lot of avenues you can take. How can you know you’re taking the best one for you? David answers three questions from listeners who are asking about accounting for taxes in retirement, putting money in a 401(k) or elsewhere, and managing an inherited IRA.

This episode is packed with practical advice tailored to individual financial situations. David breaks down each question into actionable steps. Whether you're planning for retirement or simply looking to optimize your savings, find out what next steps you can take today!

Here’s some of what we discuss in this episode:

Roth IRAs and preparing for rising taxes.
How much to contribute to a 401(k) and when to pivot.
Managing inherited IRAs.

Today’s Takeaway:

What Can You Buy With 529 Distributions?

Tue, 06 Aug 2024 13:13:35 GMT

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Avoiding Procrastination in Your Financial Life

Thu, 25 Jul 2024 09:00:00 GMT

Equipping Points:

Procrastination is a common temptation, but when it comes to your finances, it can have serious consequences. Whether you're in your twenties, thirties, or already nearing retirement, it's never too early or too late to start planning. By addressing these key areas and avoiding procrastination, you can secure a more stable and enjoyable financial future.

On today’s show, David outlines the several ways to create, implement, or update your financial plan so that you can move forward with the peace of mind you need. If you're ready to stop procrastinating and take control of your finances, stay tuned!

Here’s some of what we discuss in this episode:

The dangers of financial procrastination.
Deferring taxes could be costly in the future.
Eliminating debt is like eliminating rust on your car.
Setting up legal and estate documents protects your family.
Delaying Social Security is a personal decision.
Having a plan allows you to enjoy and understand your financial life.

Today’s Takeaway:

Understanding Money Market Funds

Wed, 17 Jul 2024 12:20:43 GMT

A money market fund, not to be confused with a money market account, is a type of mutual fund that invests in instruments like cash equivalents and short-term debt-based securities, which can also include U.S. Treasury Bonds. ¹

Safety First
These funds are designed to be easily accessible and are often considered cash equivalents. Their primary role in a portfolio is to preserve capital while maintaining liquidity. Financial professionals use them as a place to hold cash for an investor or as a place to "park cash" temporarily while they evaluate new investments. In fact, the core value of money market funds lies in their stability and liquidity, making them one place where investors can build an emergency fund. ²

Asset Value
Money held in money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund.

Money market mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

Preserving Capital
Money market funds can play a role in an investor's portfolio by providing a high-liquidity, low-risk investment choice that is designed to preserve capital. They can play a central role in managing an investment portfolio. ²

1. Medicare.gov, 2023
2. Medicare.gov, 2023

Roth IRAs as an Inheritance Strategy

Thu, 11 Jul 2024 09:00:00 GMT

Equipping Points:

How can Roth IRAs make such an impact on your financial plan and eventually, your heirs? Unlike traditional IRAs, Roth IRAs do not require the original account holder to take required minimum distributions (RMDs). This benefit extends to the heirs as well.

When your heirs inherit a Roth IRA, they are not required to take distributions, which allows the account to continue growing tax-free for up to ten years. This flexibility can be a significant financial boon, especially if your heirs are in their prime earning years and want to defer withdrawals until they are in a lower tax bracket. The question is, should you do a Roth conversion now?

Here’s some of what we discuss in this episode:

Is inheriting a Roth IRA a real positive?
What are the primary investment asset types to inherit?
Should older parents do Roth conversions to benefit their children’s inheritance?

Today’s Takeaway:

How Retirement Spending Changes With Time

Wed, 26 Jun 2024 13:49:04 GMT

New retirees sometimes worry that they are spending too much, too soon. Should they scale back? Are they at risk of outliving their money? This concern may be legitimate. Some households "live it up" and spend more than they anticipate as retirement starts to unfold. In 10 or 20 years, though, they may not spend nearly as much.

By The Numbers

The initial stage of retirement can be expensive. The Bureau of Labor Statistics figures show average spending of $70,570 per year for households headed by pre-retirees, Americans age 55-64. That figure drops to $52,141 for households headed by people age 65 and older. For people age 75 and older, that number drops even further to $45,820. ¹

Spending Pattern

Some suggest that retirement spending is best depicted by a U-shaped graph -- It rises, then falls, then increases quickly due to medical expenses.

But a study by the investment firm BlackRock found that retiree spending declined very slightly over time. Also, medical expenses only spiked for a small percentage of retirees in the last two years of their lives. ²

What's the best course for you? Your spending pattern will depend on your personal choices as you enter retirement. A carefully designed strategy can help you be prepared and enjoy your retirement years.

1. Bureau of Labor Statistics, 2023
2. BlackRock.com, 2023. (Based on a 2017 landmark study that looked at retirement spending.)

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Should Wealthy Taxpayers Make Roth Contributions?

Thu, 20 Jun 2024 09:00:00 GMT

Equipping Points:

If you’ve listened to David for long, you’ve heard his affinity for the Roth, but does that apply to everyone? When it comes to planning for retirement, high earners need to decide whether to contribute to a Roth account or a traditional IRA. But first, who is considered a high earner? And why does a Roth matter?

For high earners, the traditional investing routes may not be an option, but a Roth conversion could provide a unique solution. David discusses the long-term implications and how this strategy could prove advantageous to the right people.

Here’s some of what we discuss in this episode:

The two ways to get money into a Roth.
How taxes make a big difference on the decision.
Why a Roth conversion can be a solid strategy.
Who this advice most commonly applies to.

Today’s Takeaway:

Sequence of Returns: The Largest Risk You Haven’t Considered

Thu, 06 Jun 2024 09:00:01 GMT

Equipping Points:

When planning for retirement, most people focus on the rate of return their investments will yield. However, there's an often overlooked risk that can significantly impact your financial future: the sequence of returns. In this podcast episode, David explains why the order in which you earn returns can arguably be more important than the rate itself.

Imagine two scenarios: one where you experience high returns in the early years and low returns later, and another where the order is reversed. Even if the average rate of return is the same, the financial outcomes can be drastically different. This concept is critically important for both young professionals and retirees to understand, so let’s dive in!

For a detailed breakdown and visual representation of these concepts, download the PDF linked below.

Here’s some of what we discuss in this episode:

What is sequence of return risk, and why is it important in financial planning?
How does the order of investment returns impact retirement outcomes?
What are some strategies to mitigate sequence of return risk?

Download The Sequence of Returns PDF HERE!

Today’s Takeaway:

Choices for Your 401(k) at a Former Employer

Thu, 30 May 2024 12:28:24 GMT

One of the common threads of a mobile workforce is that many individuals who leave their job are faced with a decision about what to do with their 401(k) account.¹ Individuals have four choices with the 401(k) account they accrued at a previous employer. ²

Choice 1: Leave It with Your Previous Employer

You may choose to do nothing and leave your account in your previous employer’s 401(k) plan. However, if your account balance is under a certain amount, be aware that your ex-employer may elect to distribute the funds to you.

There may be reasons to keep your 401(k) with your previous employer —such as investments that are low-cost or have limited availability outside of the plan. Other reasons are to maintain certain creditor protections that are unique to qualified retirement plans or to retain the ability to borrow from it if the plan allows for such loans to ex-employees. ³

The primary downside is that individuals can become disconnected from the old account and pay less attention to the ongoing management of its investments.

Choice 2: Transfer to Your New Employer’s 401(k) Plan

Provided your current employer’s 401(k) accepts the transfer of assets from a pre-existing 401(k), you may want to consider moving these assets to your new plan.

The primary benefits to transferring are the convenience of consolidating your assets, retaining their strong creditor protections, and keeping them accessible via the plan’s loan feature.

If the new plan has a competitive investment menu, many individuals prefer to transfer their account and make a full break with their former employer.

Choice 3: Roll Over Assets to a Traditional Individual Retirement Account (IRA)

Another choice is to roll assets over into a new or existing traditional IRA. It’s possible that a traditional IRA may provide some investment choices that may not exist in your new 401(k) plan. ⁴

The drawback to this approach may be less creditor protection and the loss of access to these funds via a 401(k) loan feature.

Remember, don’t feel rushed into making a decision. You have time to consider your choices and may want to seek professional guidance to answer any questions you may have.

Choice 4: Cash out the account

The last choice is to simply cash out of the account. However, if you choose to cash out, you may be required to pay ordinary income tax on the balance plus a 10% early withdrawal penalty if you are under age 59½. In addition, employers may hold onto 20% of your account balance to prepay the taxes you’ll owe.

Think carefully before deciding to cash out a retirement plan. Aside from the costs of the early withdrawal penalty, there’s an additional opportunity cost in taking money out of an account that could potentially grow on a tax-deferred basis. For example, taking $10,000 out of a 401(k) instead of rolling over into an account earning an average of 8% in tax-deferred earnings could leave you $100,000 short after 30 years. ⁵

1. In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.
2. FINRA.org, 2024
3. A 401(k) loan not paid is deemed a distribution, subject to income taxes and a 10% tax penalty if the account owner is under 59½. If the account owner switches jobs or gets laid off, any outstanding 401(k) loan balance becomes due by the time the person files his or her federal tax return.
4. In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. You may continue to contribute to a Traditional IRA past age 70½ as long as you meet the earned-income requirement.
5. This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.

Mailbag: Can I Retire Spur Of The Moment?

Thu, 23 May 2024 09:00:00 GMT

Equipping Points:

The choices we make with our money often come down to more than mere numbers. David answers three questions from listeners who are facing different situations in life and looking for what to do next. From wanting to retire ASAP to coming into a financial windfall, it’s important to have a strategy in place to make sure the money works toward your goals.

It's important to make informed choices about your money with long-term results in mind. Whether you're nearing retirement, managing old investments, or dealing with a financial windfall, there's something here for you.

Here’s some of what we discuss in this episode:

Mailbag: Can I retire right now?
Mailbag: Should I rollover my 401(k)?
Mailbag: What should I do with settlement money?

Today’s Takeaway:

Taking the Retirement Income Literacy Quiz

Thu, 09 May 2024 09:00:00 GMT

Equipping Points:

Are you ready for a retirement income literacy quiz ? It's time to put your financial literacy to the test in today’s episode. David recently took the quiz himself to see how he did and puts Walter on the spot for a few of the questions.

After you listen and take the quiz yourself, you can identify what you do know and what you don’t! As you expand your financial knowledge, the more confidence and control you have over your retirement finances. So, are you ready to see where you stand?

Here’s some of what we discuss in this episode:

How much a negative single year return in your retirement portfolio impacts.
How to improve your retirement security.
The best strategy with Social Security benefits.
The average life expectancy for Americans.
Leveraging life insurance.
Working part-time in retirement.

Episode Resources

Income Literacy Quiz :

https://theamericancollege.qualtrics.com/jfe/form/SV_5u6YaBWQWFjxkY6

Life Insurance Episodes:

https://www.coveryourassetskc.com/episode-186-life-insurance-after-65-three-good-reasons

https://www.coveryourassetskc.com/episode-128-how-to-find-and-buy-term-life-insurance

Today’s Takeaway:

Caring For Aging Parents

Tue, 07 May 2024 13:08:18 GMT

Thanks to healthier lifestyles and advances in modern medicine, the worldwide population over age 65 is growing. In the past decade, the population of Americans aged 65 and older has grown 38% and is expected to reach 82 million in 2050. As our nation ages, many Americans are turning their attention to caring for aging parents ^.1,2

For many people, one of the most difficult conversations to have involves talking with an aging parent about extended medical care. The shifting of roles can be challenging, and emotions often prevent important information from being exchanged and critical decisions from being made. When talking to a parent about future care, it’s best to have a strategy for structuring the conversation. Here are some key concepts to consider.

Cover the Basics

Knowing ahead of time what information you need to find out may help keep the conversation on track. Here is a checklist that can be a good starting point:

Primary physician
Specialists
Medications and supplements
Allergies to medication

It is also important to know the location of medical and estate management paperwork, including: ³

Medicare card
Insurance information
Durable power of attorney for healthcare
Will, living will, trusts, and other documents

Be Thorough

Remember that if you can collect all the critical information, you may be able to save your family time and avoid future emotional discussions. While checklists and scripts may help prepare you, remember that this conversation could signal a major change in your parent’s life. The transition from provider to dependent can be difficult for any parent and has the potential to unearth old issues. Be prepared for emotions and the unexpected. Be kind, but do your best to get all the information you need.

Keep the Lines of Communication Open

This conversation is probably not the only one you will have with your parent about their future healthcare needs. It may be the beginning of an ongoing dialogue. Consider involving other siblings in the discussions. Often one sibling takes a lead role when caring for parents, but all family members should be honest about their feelings, situations, and needs.

Don't Procrastinate

The earlier you begin to communicate about important issues, the more likely you will be to have all the information you need when a crisis arises. How will you know when a parent needs your help? Look for indicators like fluctuations in weight, failure to take medication, new health concerns, and diminished social interaction. These can all be warning signs that additional care may soon become necessary. Don’t avoid the topic of care just because you are uncomfortable. Chances are that waiting will only make you more so.

Remember, whatever your relationship with your parent has been, this new phase of life will present challenges for both parties. By treating your parent with love and respect—and taking the necessary steps toward open communication—you will be able to provide the help needed during this new phase of life.

1. WashingtonPost.com, February 14, 2023
2. PRB.org, January 9, 2024
3. Note: Power of attorney laws can vary from state to state. An estate strategy that includes trusts may involve a complex web of tax rules and regulations. Consider working with a knowledgeable estate management professional before implementing such strategies.

Retirement Savings: Am I Ahead Or Behind?

Thu, 25 Apr 2024 09:00:00 GMT

Equipping Points:

How much should you really be saving or already have tucked away toward retirement? As a follow-up to our three-part series where we focused on the retirement questions of every generation, David gets down to percentages and dollar amounts you’ll need to answer this common question.

Using a study from JP Morgan Chase, we highlight some age-specific targets to aim for when it comes to saving for the future. Are you worried you’re falling behind when it comes to retirement savings?

Here’s some of what we discuss in this episode:

If we’re living longer, do I need to save more?
How much of my current income do I need to replace with my retirement savings?
How much should I already have saved?
What percentage of my income should I be saving?

Today’s Takeaway:

Does Your Portfolio Fit Your Retirement Lifestyle?

Wed, 24 Apr 2024 20:37:48 GMT

Most portfolios are constructed based on an individual's investment objective, risk tolerance, and time horizon.

Using these inputs and sophisticated portfolio-optimization calculations, most investors can feel confident that they own a well-diversified portfolio, appropriately positioned to pursue their long-term goals. ¹ However, as a retiree, how you choose to live in retirement may be an additional factor to consider when building your portfolio.

Starting a Business

Using retirement funds to start a business entails significant risk. If you choose this path, you may want to consider reducing the risk level of your investment portfolio to help compensate for the risk you're assuming with a new business venture.

Since a new business is unlikely to generate income right away, you may want to construct your portfolio with an income orientation in order to provide you with current income until the business can begin turning a profit.

Traveling for Extended Periods of Time

There are a number of good reasons to consider using a professional money manager for your retirement savings. Add a new one. If you are considering extended travel that may keep you disconnected from current events (even modern communication), investing in a portfolio of individual securities that requires constant attention may not be an ideal approach. For this lifestyle, professional management may suit your retirement best. ²

Rethink Retirement Income

Market volatility can undermine your retirement-income strategy. While it may come at the expense of some opportunity cost, there are products and strategies that may protect you from drawing down on savings when your portfolio's value is falling—a major cause of failed income approaches.

1. Diversification and portfolio optimization calculations are approaches to help manage investment risk. They do not eliminate the risk of loss if security prices decline.
2. Keep in mind that the return and principal value of security prices will fluctuate as market conditions change. And securities, when sold, may be worth more or less than their original cost. Past performance does not guarantee future results. Individuals cannot invest directly in an index.

Millennials: Retirement Questions That Every Generation Is Asking

Thu, 11 Apr 2024 09:00:01 GMT

Equipping Points:

For those in their mid-twenties to mid-forties, this episode is for you! In this final part of our three-part series, we look at the financial questions that millennials are asking. With plenty of working years ahead, the financial advice for millennials is very different than for retirees. From paying off student loans to saving toward retirement goals, David shares some ideas you might want to consider in the years ahead.

Make sure you know the best ways to take care of your finances, both for your current self and for your future self. Understand the options that fit your lifestyle, whether it is with an investment property, a side hustle, or maxing out your retirement contributions. There are lots of ways to invest and achieve your financial goals.

Here’s some of what we discuss in this episode:

Should I prioritize paying off my student loans?
How do you plan for the potential costs of having and raising children?
Will Social Security matter later on?
How can I take advantage of employer-sponsored retirement plans?
Are there alternatives we should consider?

Today’s Takeaway:

Gen X: Retirement Questions That Every Generation Is Asking

Thu, 28 Mar 2024 09:00:01 GMT

Equipping Points:

If you are between the ages of about 44 to 59 years old, you might be asking retirement questions about whether you have saved enough to retire or even if you can retire early. In part two of our three-part series, today we get into some really good information for Gen X as they begin to really buckle down and think about what retirement might look like and how to successfully prepare. Whether you are trying to catch up on saving or looking to leverage your investments, David has plenty of wisdom to share.

To answer some of these questions, it’s important to understand your situation, your lifestyle, and your retirement goals. Instead of looking to online clickbait articles about how much you need or panicking before sitting down with the numbers, reach out for some guidance and to do the complete planning review to understand where you are right now.

Here’s some of what we discuss in this episode:

Have I saved enough?
How do I know if I’m on track?
How can I catch up if I started saving too late?
How can I balance saving for retirement among other priorities?
How can I maximize investment returns without excessive risk?
What should I do with my 401(k) from a previous employer?
Should I pay off my mortgage before retiring?

Today’s Takeaway:

Building A Solid Financial Foundation

Tue, 26 Mar 2024 15:29:59 GMT

When you read about money matters, you may see the phrase, “getting your financial house in order.” What exactly does that mean? To some, when your financial “house is in order,” it means it is built on a solid foundation. It means that you have the “pillars” in place that are designed to support your long-term financial well-being.

#1: A banking relationship. Having a relationship with a bank can play a role in many financial strategies. You have many different choices when deciding on which bank is right for you. Some banks are larger and nationally-based, while others are smaller and community-based. Different banks may have unique advantages and disadvantages, so it’s important to look around and see what each one can offer you.

#2: An emergency fund. You know that label you see on fire extinguisher boxes – “break glass in case of emergency?” Only in a financial emergency should you “break into” your emergency account. What is a financial emergency? Everyone’s definition varies, but it can range from a broken water heater to major car repairs to unemployment help.

#3: A workplace retirement strategy. At some point, you may want to consider when is the right time to start saving for retirement. Workplace retirement plans can offer you a convenient way to get started, if one is available.

#4: An eye on Insurance. Like the other decisions you’ll need to make while building your financial foundation, choosing the appropriate insurance program is going to be influenced by your own individual life circumstances. For example, if you’re supporting a family, you may want to look into an insurance program that is designed to protect you in the event that something happens to you or prevents you from working for a period of time.

#5: Estate Strategy. It’s never too early to start thinking about your legacy. For some, this can mean providing some financial support to your loved ones. For others, it might mean creating a program that supports charities and organizations. Whatever your aspirations, it’s important to ensure that your assets transition smoothly in accordance with your wishes.

Annual Financial To-Do List

Thu, 14 Mar 2024 12:46:19 GMT

Things You Can Do for Your Future as the Year Unfolds

What financial, business, or life priorities do you need to address for the coming year? Now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to considering an estate strategy. You have plenty of choices.

Remember that this article is for informational purposes only and not a replacement for real-life advice. The tax treatment of assets earmarked for retirement can change, and there is no guarantee that the tax landscape will remain the same in years ahead. A financial or tax professional can provide up-to-date guidance.

Here are a few ideas to consider:

Can you contribute more to your retirement plans this year? In 2024, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $7,000 ($8,000 for those making "catch-up" contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation. Income limits are one factor in determining if a traditional IRA contribution is tax-deductible. ¹

Once you reach age 73, you must take the required minimum distributions from a traditional IRA. The I.R.S. taxes withdrawals as ordinary income, and if taken before age 59½, they may be subject to a 10% federal income tax penalty.

Roth 401(k)s offer their investors a tax-free and penalty-free withdrawal of earnings. Qualifying distributions must meet a five-year holding requirement and occur after age 59½. Such a withdrawal also qualifies under certain other circumstances, such as the owner's passing. Employer match is pretax and not distributed tax-free during retirement. The original Roth IRA owner is not required to take minimum annual withdrawals.

Make a charitable gift. You may be able to claim the deduction on your tax return, provided you follow the Internal Review Service guidelines. The paper trail can be important here. If you give cash, you should consider documenting it. A bank record can demonstrate some contributions, payroll deduction records, credit card statements, or written communication from the charity with the date and amount. Incidentally, the IRS does not equate a pledge with a donation. If you pledge $2,000 to a charity this year but only end up gifting $500, you may be able to only deduct $500. ²

Consult your tax, legal, or accounting professional before modifying your record-keeping approach or strategy for making charitable gifts.

See if you can take a home office deduction for your small business. You may want to investigate this if you are a small business owner. You might be able to write off expenses linked to the portion of your home used to conduct your business. Using your home office as a business expense involves complex tax rules and regulations. Before moving forward, consider working with a professional familiar with the tax rules related to home-based businesses.

Open an HSA. A Health Savings Account (HSA) works like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $4,150 contribution for 2024 if you are single; and $8,300 if you have a spouse or family. Those limits jump by a $1,000 "catch-up" limit for each person in the household over age 55. ³

If you spend your HSA funds for non-medical expenses before age 65, you may need to pay ordinary income tax and a 20% penalty. After age 65, you may need to pay ordinary income taxes on HSA funds used for non-medical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

Pay attention to asset location. Asset location is one factor to consider when creating an investment strategy. Asset location is different from asset allocation, which is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

Review your withholding status. Should it be adjusted due to any of the following factors?

● You tend to pay the federal or state government at the end of each year.

● You tend to get a federal tax refund each year.

● You recently married or divorced.

● You have a new job with adjusted earnings.

Consider consulting your tax, human resources, or accounting professional before modifying your withholding status.

Did you get married in 2023? If so, it may be time to review the beneficiaries of your retirement accounts and other assets. The same goes for your insurance coverage. If you are preparing to have a new last name in 2024, you should get a new Social Security card. Additionally, retirement accounts may need to be revised or adjusted.

Are you coming home from active duty? If so, go ahead and check on the status of your credit. Check on any other orders that you might have preempted, too.

Consider the impact of any upcoming transactions. Are you preparing to sell any real estate this year? Are you starting a business? Might any commissions or bonuses come your way in 2024? Do you anticipate selling an investment held outside of a tax-deferred account?

Vow to focus on your overall health and practice sound financial habits in 2024. And don't be afraid to ask for guidance from a professional who understands your situation.

Sources:

1. TheFinanceBuff.com, August 10, 2023

2. IRS.gov, June 5, 2023

3. IRS.gov, September 5, 2023

Baby Boomers: Retirement Questions That Every Generation Is Asking

Thu, 14 Mar 2024 09:00:01 GMT

Equipping Points:

What financial questions are every generation asking? Over the course of this three-part series, there will be something for everyone! Every generation has a different set of scenarios and priorities they are facing. Today, we’ll focus on six common financial questions Baby Boomers are asking (and then in future episodes we’ll dive into the questions Gen X and Millennials are facing). These are generic questions that David hears every day in his office, but remember that broad advice doesn’t always apply to your unique situation. Be sure to reach out to a financial advisor to find out the answers to these questions are for you.

Make sure to address each of these questions if you are a Baby Boomer so you can feel confident in your financial plan as you near, enter, or continue on in retirement. Know what your plan is, understand your risk, think about the retirement lifestyle you want, and identify the right path for your financial future.

Here’s some of what we discuss in this episode:

How much market volatility should I have as I approach retirement?
What’s the best approach to transition to retirement account withdrawals?
How does the rising costs of healthcare fit into a plan?
What’s the best way to pass on wealth to my heirs?
How can I maximize my Social Security benefits?
Should I downsize or relocate during retirement?

Today’s Takeaway:

Mailbag: Should My Dad Gift Money Now to Later Avoid Estate Tax?

Thu, 29 Feb 2024 10:00:02 GMT

Equipping Points:

As we wrap up the month of February with a few 60-degree days (not to mention a Super Bowl win!) we take the mailbag as David answers some listener questions. To start, Jason is wondering how to best handle his 401(k) after retiring. Then Megan wants to know the best way her dad can wisely gift money to avoid estate tax. David explains what the state tax exemption is and who to talk to in order to get the right answers on how best to proceed. Finally, we discuss the capital gains implications of Megan’s dad signing over his house.

When setting up beneficiaries or even a trust, the best time to take care of it is now. Sorting it out after someone passes is far more complex, so make sure to get it settled sooner rather than later.

Here’s some of what we discuss in this episode:

Mailbag: It’s cumbersome to withdraw from my 401(k). How can I manage it better?
Mailbag: Should my elderly dad start gifting money now to avoid estate tax after he passes?
Mailbag: Should my parent sign over his house to beneficiaries?

Today’s Takeaway:

4 Financial Lessons From The Chiefs' Super Bowl Victory

awashington@kcfinancialadvisors.com (Alexandria Washington) — Thu, 15 Feb 2024 15:36:56 GMT

Equipping Points:

Welcome to the Red Kingdom! Following the Super Bowl, we can’t help but bask in the glow of the Chiefs’ victory. David shares four financial insights and comparisons to Sunday’s game. For instance, Travis Kelce was shut down in the first half, but had 8 catches and 92 yards in the second half. How does that relate to your financial plan? Make sure you have a starting plan and goals, but be open to course corrections. If you find out you’re behind, maybe you need to get more aggressive in certain areas like savings and goals. The Chiefs are excited for the opportunity and the goal of winning a “three-peat,” but they had to first win this year as a “repeat” to get there.

What kind of financial fumbles or adversity could you face in your lifetime? Are you prepared to respond appropriately in order to recover well? Having the right plan in place and a good coach by your side can make all the difference. Believe it or not, the last play call of the game in overtime was the same call they played in last year’s Super Bowl. Sometimes you don’t need to reinvent the wheel to find success, you just have to follow the plan and trust the coach. Financially, showing up looks like continuing to work on your career, saving systematically, and measuring your progress.

Here’s some of what we discuss in this episode:

Have a good plan and be open to mid-course corrections.
Have discipline and do the little things well.
Adversity will come your way, it’s really how you deal with it.
You don’t have to reinvent the wheel.

Today’s Takeaway:

Five Most Overlooked Tax Deductions

Sat, 03 Feb 2024 15:29:30 GMT

Who among us wants to pay the IRS more taxes than we have to?

While few may raise their hands, Americans regularly overpay because they fail to take tax deductions for which they are eligible. Let’s take a quick look at the five most overlooked opportunities to manage your tax bill.

Reinvested Dividends : When your mutual fund pays you a dividend or capital gains distribution, that income is a taxable event (unless the fund is held in a tax-deferred account, like an IRA). If you’re like most fund owners, you reinvest these payments in additional shares of the fund. The tax trap lurks when you sell your mutual fund. If you fail to add the reinvested amounts back into the investment’s cost basis, it can result in double taxation of those dividends. ¹

Mutual funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

Out-of-Pocket Charity : It’s not just cash donations that are deductible. If you donate goods or use your personal car for charitable work, these are potential tax deductions. Just be sure to get a receipt for any amount over $250. ²

State Taxes : Did you owe state taxes when you filed your previous year’s tax returns? If you did, don’t forget to include this payment as a tax deduction on your current year’s tax return. There is currently a $10,000 cap on the state and local tax deduction. ³

Medicare Premiums: You may be able to deduct unreimbursed medical and dental premiums, co-payments, deductibles, and other medical expenses to the extent that the costs exceed 7.5% of your adjusted gross income. This includes most Medicare premiums. ⁴

Income in Respect of a Decedent: If you’ve inherited an IRA or pension, you may be able to deduct any estate tax paid by the IRA owner from the taxes due on the withdrawals you take from the inherited account. ⁵

1. Investopedia.com, January 11, 2024
2. IRS.gov, 2024
3. IRS.gov, 2024
4. IRS.gov, 2024
5. IRS.gov, 2024. In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. You may continue to contribute to a Traditional IRA past age 70½ as long as you meet the earned-income requirement.

Mailbag: Should I Sell My Rental Property to Pay Off All My Debt?

Fri, 02 Feb 2024 18:11:52 GMT

Equipping Points:

Diving into the mailbag, David answers three questions about Social Security, 401(k) savings, and bad debt. Whether you are full retirement age, like Jacob who asks when to begin taking Social Security, or you are in your working years like Anna who is saving away in her 401(k), you’re sure to learn something from today’s show.

Each situation reflects the many different financial decisions that people make across their lifetime. Different variables can change the answer within the question. Every person and scenario is unique, so be sure to reach out to a financial advisor to determine what decisions make the most sense for you.

Here’s some of what we discuss in this episode:

Mailbag: I’ve reached full retirement age but don’t plan to retire anytime soon. When should I take my Social Security?
Mailbag: I’m loving the growth in my 401(k), but how long can it really last and when should I walk away?
Mailbag: Should I sell my rental property to pay off all my debt?

4 Simple Strategies to Increase Your Net Worth (Ep 65): https://www.podbean.com/ew/pb-z44z9-d4dade

Today’s Takeaway:

3 Reasons You Should Use Life Insurance in 2024

Thu, 18 Jan 2024 10:00:01 GMT

Equipping Points:

Life insurance isn’t a fun topic to talk about, but it’s an important one. We talk through three reasons you should use life insurance and how to have a life insurance strategy in place--as soon as this week. Remember, with life insurance, you’re trying to protect against an unforeseen financial event.

Life insurance can prove to be an invaluable tool should something happen, especially if you are supporting a family as the breadwinner. And if you never end up needing it, this is the sort of thing where it’s okay to “waste” money on something you hope doesn’t happen! David shares some of the other ways that life insurance can prove to be a useful tool when you’re past your working years but still can benefit from life insurance.

Here’s some of what we discuss in this episode:

The income replacement of a breadwinner.
The rising cost of long-term healthcare.
Transferring wealth in the future to your heirs.

Today’s Takeaway:

Making Your 2024 Count

Thu, 04 Jan 2024 10:00:00 GMT

Equipping Points:

For our first podcast of the new year, we are covering five things you can take care of this month to get your year off on the right track. Whether you have big financial plans for the year or simple financial tweaks, each of these five things are important and doable in January.

If you’ve listened to the podcast for a long time, you know that David highly recommends calculating your net worth statement yearly. This will help you see where you’ve been and understand where you’re headed. What other strategies can you put into place right now? Find out on today’s show!

Here’s some of what we discuss in this episode:

Calculating your financial net worth.
Getting the 401k company match.
Building an emergency savings account.
Avoiding debt.
Putting your savings system on autopilot.

Today’s Takeaway:

2024 Tax Guide

Wed, 27 Dec 2023 14:51:38 GMT

How to Prepare for Tax Season

This guide will explore how tax filing may look different this tax year and what you can do to prepare. Remember that this guide is for informational purposes only and is not a replacement for real-life advice, so consult your tax, legal, and accounting professionals before modifying your strategy.

The Tax Brackets

The tax brackets are: 10, 12, 22, 24, 32, 35, and 37 percent. Here are the tax brackets and the corresponding income ranges: ¹

These modest changes to the tax brackets also mean that wage earners may fall into lower brackets this tax year. Here is one example: A single filer at $95,000 in taxable income would have fallen into the 24 percent bracket for tax year 2022. The filer would now be in the 22 percent tax bracket for 2023. These new rates will likely expire in 2025 unless Congress acts to make them permanent. Exemptions also changed under the new tax code.

Remember that the tax brackets represent how much you will pay for each portion of your income. For example, if you make $125,000 for the 2023 tax year and are married filing jointly, you would pay 10 percent on the first $22,000, 12 percent on the next $67,450, and 22 percent on the final $35,550. You would not pay 22 percent for the entire $125,000 of your annual income.

IMPORTANT DEADLINES

JANUARY 16, 2024

If you are self-employed or have other fourth-quarter income that requires you to pay quarterly estimated taxes, postmark this payment by January 16, 2024.

APRIL 15, 2024

FIRST QUARTER 2024 ESTIMATED TAX PAYMENT DUE

2023 INDIVIDUAL TAX RETURNS DUE

Most taxpayers have until April 15 to file tax returns. Email or postmark your returns by midnight on this date.

LAST DAY TO MAKE A 2023 IRA CONTRIBUTION

If you have not already contributed fully to your retirement account for 2023, April 15 is your last chance to fund a traditional IRA or a Roth IRA.

INDIVIDUAL TAX RETURN EXTENSION FORM DUE

If you cannot file your taxes on time, file your request for an extension by April 15 to push your deadline back to October 15, 2024.

JUNE 17, 2024

SECOND QUARTER 2024 ESTIMATED TAX PAYMENT DUE

SEPTEMBER 16, 2024

THIRD QUARTER 2024 ESTIMATED TAX PAYMENT DUE

OCTOBER 15, 2024

EXTENDED INDIVIDUAL TAX RETURNS DUE

You have until October 15 to file your 2023 tax return if you received an extension.

*Tax deadlines on weekends or national holidays will be delayed until the following business day. Also, the IRS can adjust federal tax deadlines on short notice based on its assessment of financial or economic conditions.

**Extended due dates exist for residents of Maine and Massachusetts. Individuals who live in Maine and Massachusetts have until April 17, 2024, to file their 2023 Form 1040 because April 15, 2024 is Patriots' Day and April 16, 2024, is Emancipation Day.

The Child Tax Credit

The 2023 Child Tax Credit allows a credit of up to $2,000 per child for 2023. The credit is partially refundable and phases out at income thresholds of $200,000 (or $400,000 for married taxpayers filing jointly). ²

Preparing for the Tax Season

Planning well before the tax season may help you better prepare for the unexpected. Here are several reasons to begin early:

● Your home, job, or relationships changed

● You need to start saving money if you may owe taxes

● You want to ensure you qualify for tax deductions

You can make changes throughout the year to ensure your tax preparations go smoothly. In particular, you can periodically assess your paycheck withholdings to get a refund or reduce or eliminate your tax burden.

You should track and store your tax and other financial records to avoid delays or frantic preparations as the filing deadline approaches. Records may include W-2 forms, canceled checks, certain receipts, and previous returns.

Here is a list of other items to start gathering:

● Pay stubs

● Mortgage payment records

● Closing paperwork on home purchases

● Receipts for items or services you may want to claim as itemized deductions

● Records on charitable giving and donations

● Mileage logs on cars used for business

● Business travel receipts

● Credit card and bank statements to verify deductions

● Medical bills

● 1099-G forms for state and local taxes

● 1099 forms for dividends or other income

During the first few months of 2024, ensure you receive your W-2 and 1099 forms and other tax documents. Leave adequate time to collect documents and prepare to file your taxes before the April 15, 2024 deadline.

Tightening the Nuts and Bolts

Here are some additional ways to prepare this year for next year’s tax season:

Look at last year: Look at last year’s return. In the months ahead, you may still have the opportunity to contribute more to your retirement plan, which may lower your taxable income.

Donate to charity: How about “bunching” your charitable donations? Bunching allows you to optimize your deduction allowances by making two or more years’ worth of charity donations in one year.

Let us say you are married, expect to itemize your deductions, and anticipate making $15,000 in annual donations. By donating $30,000 in one year and skipping the next, you may be able to qualify for a higher deduction. ³

Review Capital Losses: Consider deducting capital losses if investing in the financial markets. You can claim deductions if you experience losses, but you can claim losses only if they exceed capital gains. You can claim the difference of up to $3,000 per year if you are married filing jointly or $1,500 if you are filing separate returns. Net losses that exceed $3,000 can carry over into future years. ⁴ Deductions for capital losses can only apply to investment property sales, not the sale of investment property held for personal use.

Get organized: Find a place to store your tax documents until it is time to prepare to file. A sound record keeping system may alleviate concerns later as the deadline gets closer.

If you store your documents or prior returns on your computer, back them up on a thumb drive or other device or system in case your computer is hacked or stolen. Consider other taxes: Monitor local and state government requirements that may affect your tax situation.

How Long?

The IRS provides recommended timelines for retaining financial documents: ⁵

1. You should keep your tax records for three years if #4 and #5 below do not apply.

2. You should keep records for three years from the original filing date of your return or two years from the date you paid your taxes if you claimed a credit or refund after you filed your return. Select whichever is the later date.

3. You should keep your records for seven years if you claim a loss from worthless securities or a bad debt deduction.

4. You should keep your records for six years if you failed to report income that you should have and the payment was more than 25 percent of the gross income listed on your return.

5. Keep records indefinitely if you do not file a return.

6. You should keep employment tax records for at least four years after the due date or after you paid the taxes. Select whichever is later.

This Special Report is not intended as a guide for the preparation of tax returns. The information contained herein is general in nature and is not intended to be, and should not be construed as, legal, accounting or tax advice or opinion. No information herein was intended or written to be used by readers for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Readers are cautioned that this material may not be applicable to, or suitable for, their specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. Readers are encouraged to consult with professional advisors for advice concerning specific matters before making any decision. This material was prepared by FMG, and the information given has been derived from sources believed to be accurate. This is not intended as a guide for the preparation of tax returns, nor should it be construed as legal, accounting or tax advice. This information is subject to legislative changes and is offered “as is”, without warranty of any kind. Publisher and provider assume no obligation to inform readers of any changes in tax laws or other factors that could affect the information contained herein.

Citations.

1. IRS.gov, 2023

2. IRS.gov, 2023

3. IRS.gov, 2023

4. IRS.gov, 2023

5. IRS.gov, 2023

Mailbag: Is It Bad To Be In Debt?

Thu, 21 Dec 2023 10:00:00 GMT

Equipping Points:

Because David loves listener questions so much, we wanted to end the year with a few more! For starters, Amy says she has never been in a hurry to pay off debt, never paid extra on her mortgage, uses a HELOC, doesn’t pay cash for cars, and doesn’t see a problem with it. Using debt has allowed her to use money for other things, including saving for retirement. Is that okay?

David shares what he thinks and how the answer might depend on your age and what kind of debt you have. So many financial decisions depend on your unique set of circumstances. Reach out to a financial advisor to make a financial plan that makes the most sense for you.

Here’s some of what we discuss in this episode:

Mailbag: I’m not in a hurry to pay off debt, is that bad?
Mailbag: Due to medical diagnosis, should I start Social Security right away?

Today’s Takeaway:

Mailbag: What Should I Do With My Raise?

Thu, 07 Dec 2023 10:00:01 GMT

Equipping Points:

Today, we do one of the things David does best—answer financial questions! No matter where you are in your financial journey, at least one of these listener questions may relate to your life. From end-of-year charitable donations and how they may (or may not) impact your taxes to deciding what to do with a raise, David shares what you need to keep in mind.

Whether you have extra money you want to make sure gets put in the right place or are worried you won’t have enough to retire, working with a financial advisor and putting a financial plan in place will give you the confidence you need to make the right decisions.

Here’s some of what we discuss in this episode:

Mailbag: Do charitable contributions still benefit me from a tax standpoint?
Mailbag: What should I do with money from my raise- retirement savings or pay down my mortgage?
Mailbag: Will I have to work forever if I don’t have a million dollars saved?

Today’s Takeaway:

Making a Charitable Gift

Mon, 04 Dec 2023 13:58:27 GMT

Why sell shares when you can gift them? If you have appreciated stocks in your portfolio, you might want to consider donating those shares to charity rather than selling them.

Donating appreciated securities to a tax-qualified charity may allow you to manage your taxes and benefit the charity. If you have held the stock for more than a year, you may be able to deduct from your taxes the fair market value of the stock in the year that you donate. If the charity is tax-exempt, it may not face capital gains tax on the stock if it sells it in the future. ¹

Keep in mind this article is for informational purposes only. It's not a replacement for real-life advice. Make sure to consult your tax and legal professionals before modifying your gift-giving strategy.

"The greatest donor satisfaction may come with a combination of time and money."

There are several reasons to consider donating highly appreciated stock to a tax-exempt charity. For example, you may own company stock and have the opportunity to donate some shares. There also are potential tax benefits to consider if you donate appreciated securities that you have owned for at least one year.

If you sell shares of appreciated stock from a taxable account and subsequently donate the proceeds from the sale to charity, you may face capital gains tax on any gain you realize, which effectively trims the benefit of cash donation. ¹

When is donating cash a choice to consider? If you provide the charity with a cash gift, there may be some limitations. Cash gifts are generally deductible up to 50% of adjusted gross income. As an example, if a donor in the top 37% federal tax bracket gives a 501(c)(3) non-profit organization a gift of $5,000, the net may be $3,150 with $1,850 realized in tax savings. A donor should also need to consider state taxes in addition to federal. ²

If you donate shares of depreciated stock from a taxable account to a charity, you can only deduct their current value, not the value they had when you originally bought them. ¹

Remember the tax rules for charitable donations. If you donate appreciated stock to a charity, you may want to review IRS Publication 526, Charitable Contributions. Double-check to see that the charity has non-profit status under federal tax law, and be sure to record the deduction on a Schedule A that you attach to your 1040. ¹

If your contribution totals $250 or more, the donation must be recorded – that is, the charity needs to give you a written statement describing the donation and its value and whether it is providing you with goods or services in exchange for it. ²

If your total deduction for all non-cash contributions in a tax year exceeds $500, then complete and attach Form 8283 (Noncash Charitable Contributions) to your 1040 when filing. If you donate more than $5,000 of property to a charity, you will need to provide a letter from a qualified appraiser to the charity (and by extension, the IRS) stating the monetary value of the gift(s). ²

Gifting cash or other assets to an organization is a wonderful opportunity. But keep in mind that tax rules are constantly being adjusted, and there’s a possibility that the current rules may change. Make certain to consult your tax and legal professionals before starting a new gifting strategy.

1. IRS.gov, 2023
2. IRS.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

What To Do About Your Pension Buyout Options

Thu, 16 Nov 2023 14:10:25 GMT

Equipping Points:

If you have a pension, you have some choices to sort through when it comes time to use it. Should you take a monthly payment or a lump sum? It’s a big decision to make and not one to take lightly. While we’ve covered this topic in the past, a lot of things have changed between inflation and interest rates. We discuss six key factors to consider. Each of these factors should play a part in your decision to determine what’s best for you.

The right answer is not the same for everyone. It’s important to consider your life, your needs, and your goals in light of all of these factors. The choice is yours. Having a financial advisor to talk you through these factors and look at it objectively may help with the decision.

Here’s some of what we discuss in this episode:

What’s happening with the interest rates?
Are you prepared for future inflation?
How will it impact your taxes?
How is your health?
How financially secure is your employer?
Do you want an income stream or asset that can be transferred?

Today’s Takeaway:

Navigating Retirement Pitfalls

Mon, 06 Nov 2023 13:20:46 GMT

Much is written about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Some classic financial missteps have been known to plague retirees, too.

Calling them "missteps" may be a bit harsh, as not all of them represent errors in judgment. Either way, becoming aware of these potential pitfalls may help you to avoid falling into them in the future.

Managing Social Security. Social Security benefits are structured to rise about 8% for every year you delay receiving them after your full retirement age. Is waiting a few years to apply for benefits an idea you might consider? Filing for your monthly benefits before you reach your full retirement age can mean comparatively smaller monthly payments. ¹

Managing medical costs. One report estimates that the average couple retiring at age 65 can expect to need $315,000 to cover health care expenses during the course of their retirement, even with additional coverage such as Medicare Part D, Medigap, and dental insurance. Having a strategy can help you be better prepared for medical costs. ²

Understanding longevity. Actuaries at the Social Security Administration project that a 65-year-old man has a 34% chance and a 65-year-old woman has a 45% chance to live to age 90. The prospect of a 20- or 30-year retirement is not only reasonable, but it should be expected. ³

Managing withdrawals. You may have heard of the "4% rule," a guideline stating that you should take out only about 4% of your retirement savings annually. Each person's situation is unique but having some guidelines can help you prepare.

Managing taxes. Some people enter retirement with investments in both taxable and tax-advantaged accounts. Which accounts should you draw money from first? To answer the question, a qualified financial professional would need to review your financial situation so they can better understand your goals and risk tolerance.

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your investment strategy for tax considerations.

Managing other costs, like college. There is no "financial aid" program for retirement. There are no "retirement loans." A financial professional can help you review your anticipated income and costs before you commit to a long-term strategy, and help you make a balanced decision between retirement and helping with the cost of college for your children or grandchildren.

1. SSSA.gov, 2023
2. Fidelity.com, 2023
3. LongevityIllustrator.org, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

"I Just Inherited An IRA! Now What?"

walter@thirdwheelmedia.com (Walter Storholt) — Thu, 02 Nov 2023 09:00:02 GMT

Equipping Points:

Following the meeting with a client, we dive into what happens when someone inherits an IRA. The rules about inherited IRAs have changed a lot in the last few years and mistakes can be costly. Listen in as we review what changed since the SECURE Act was implemented. We'll also discuss some examples of how it can look to inherit an IRA, both for a spouse or a non-spouse beneficiary.

If you inherit an IRA, there’s a bunch of rules. You want to make sure how you execute your inheritance is most beneficial to your personal tax situation. Reach out to a financial advisor to get some good advice and enjoy that inheritance.

Here’s some of what we discuss in this episode:

The SECURE Act changed the rules.
There are two main categories of people who might inherit an IRA.
What you can do without the stretch IRA.
What are the exceptions to the rules?
David shares an example of how this can look.

Today’s Takeaway:

Will I Owe Taxes When I Sell My Home?

Thu, 26 Oct 2023 09:00:00 GMT

Equipping Points:

When you go to sell your home, there’s a lot to keep in mind! After a few questions from clients, David sets the record straight on today’s podcast about what to expect regarding taxes when selling your house. Whether you are in retirement or in your 30s, you’ll want to use this as a starting point before you go to sell.

When your home is your biggest or one of your biggest assets, it becomes a foundational piece of your financial plan. Make sure you get some good advice and know the rules before the sale of your home to make sure it is to your benefit. Reach out to a financial advisor and a qualified CPA to navigate such a big financial (and emotional) decision.

Here’s some of what we discuss in this episode:

After the ownership and use test, how much of the gain can you exclude from tax?
Do home improvements reduce the taxable gain?
How is it different if you inherit a home and then sell it?
What are the rules after one spouse dies?

Today’s Takeaway:

Mailbag: Should I Pay Cash for My House in Retirement?

Thu, 12 Oct 2023 09:00:00 GMT

Equipping Points:

David does one of the things he loves to do best—helping listeners! We dive into the mailbag today to hear questions from people in all sorts of different points in their financial lives. We hear from a retiree ready to downsize, a younger listener trying to max out savings, and someone about to retire but shocked by required minimum distributions . Do you relate to any of these situations?

Tune in to hear David’s advice in each of these scenarios. To talk through your specific situation, reach out to David and his team to get your questions.

Here are the questions David answers today:

Mailbag: We're planning to downsize our house. Should we pay cash to avoid the high interest rates with a mortgage?
Mailbag: I max out my 401(k), where else can I save?
Mailbag: Can they really make me withdraw that much in RMDs?

Today’s Takeaway:

Annual Financial To-Do List

Thu, 28 Sep 2023 12:57:34 GMT

Things You Can Do for Your Future as the Year Unfolds

Here are a few ideas to consider:

Consult your tax, legal, or accounting professional before modifying your record-keeping approach or strategy for making charitable gifts.

Review your withholding status. Should it be adjusted due to any of the following factors?

● You tend to pay the federal or state government at the end of each year.

● You tend to get a federal tax refund each year.

● You recently married or divorced.

● You have a new job with adjusted earnings.

Consider consulting your tax, human resources, or accounting professional before modifying your withholding status.

Are you coming home from active duty? If so, go ahead and check on the status of your credit. Check on any other orders that you might have preempted, too.

Vow to focus on your overall health and practice sound financial habits in 2024. And don't be afraid to ask for guidance from a professional who understands your situation.

Sources:

1. TheFinanceBuff.com, August 10, 2023

2. IRS.gov, June 5, 2023

3. IRS.gov, September 5, 2023

Are There Universal Retirement Truths?

walter@thirdwheelmedia.com (Walter Storholt) — Thu, 28 Sep 2023 11:00:00 GMT

Equipping Points:

Although everyone is unique and has their own journey, today we talk through a list of five “universal truths” when it comes to retirement. David weighs in regarding how true each of these things may be for everyone. From needing an income plan in retirement to under-standing the statistical likelihood of one day needing long-term care, are you prepared? Planning ahead can be of great importance, especially on behalf of your beneficiaries, saving everyone from a lot of heartache and confusion down the line.

Regardless of your age, all of these are things to think through, whether they impact you a little or a lot. Everybody needs to do something. It doesn’t have to be complicated or expensive, but you need to have several key building blocks in place.

Here’s what we talk about on today’s show:

• Everybody needs an income plan.
• Everybody needs a plan to address long-term care issues.
• Nobody knows how long they are going to live.
• Tax implications matter.
• Estate planning isn’t just for the wealthy.

Today’s Takeaway:

Understanding RMDs: A Guide For Retirees & The Soon-to-Retire

Thu, 14 Sep 2023 01:29:28 GMT

Equipping Points:

Let’s talk about the mandatory withdrawals you’ll eventually have to take out of your accounts. Required minimum distributions are something to expect once you hit a certain age, but there are still plenty of ways to be strategic about them. Especially once you’re over 60 and in the retirement “red zone,” you’ll want to plan for your RMDs and what you can do about them.

We talk through different strategies that David has used with his clients and what to keep in mind about RMDs.

Here’s what we discuss on today’s show:

Why do we have required minimum distributions?
Can I avoid RMDs?
How can you plan for RMDs and what are the risks if you don’t plan?
If you don’t need the RMDs to live on, what can you do instead?
How has David helped someone plan for RMDs?

Today’s Takeaway:

How Retirement Spending Changes With Time

Thu, 31 Aug 2023 20:41:00 GMT

By The Numbers

Spending Pattern

Some suggest that retirement spending is best depicted by a U-shaped graph -- It rises, then falls, then increases quickly due to medical expenses.

1. Bureau of Labor Statistics, 2023
2. BlackRock.com, 2023. (Based on a 2017 landmark study that looked at retirement spending.)

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Mailbag: Do I Really Need a Trust?

Thu, 24 Aug 2023 09:00:00 GMT

Equipping Points:

Is it really necessary to set up a trust? Fran shares what her age and assets are when she asks this important question. While David is not a lawyer, as a financial advisor he shares some of the reasons why or why not someone would want or need a trust when estate planning.

Tune in as David answers this and two other questions from the mailbag on today’s show. Find out if any of these financial considerations are full of wisdom and which ones are too good to be true.

Here’s what you’ll learn on today’s show:

Mailbag: Should I save my healthcare receipts in my 30s to later get reimbursed by my HSA in retirement?
Mailbag: Should I start Social Security sooner for those cost-of-living increases?
Mailbag: Do I really need to re-do my trust with an attorney?

Today’s Takeaway:

What Ever Happened to the Stretch IRA?

Fri, 11 Aug 2023 18:31:13 GMT

Equipping Points:

We used to talk about stretch IRAs all the time, but now we hardly mention it. Why is that? Even though we rarely discuss it on the podcast, David regularly hears questions about stretch IRAs in his office from clients. In this episode, we’ll reflect on the stretch IRA’s former glory, and share how to leave an IRA to a beneficiary strategically now that the stretch IRA as we knew it, ceases to exist.

Join us as we explore the evolution of the stretch IRA following the SECURE Act of 2020 and help listeners understand the current options for leaving IRAs to beneficiaries. We’ll talk about how to navigate the new rules, minimizing tax burdens, communicating effectively with beneficiaries, and more.

Here’s what you’ll learn on today’s show:

What a stretch IRA was and why it was important.
The new rules from the SECURE Act totally changed the Stretch IRA strategy for leaving your IRA to a minor.
Should you leave some of your IRA to your grandchildren?
Is leaving your IRA to a minor still a good idea?

Today’s Takeaway:

Navigating Retirment Pitfalls

Thu, 03 Aug 2023 12:19:27 GMT

Much is written about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Some classic financial missteps have been known to plague retirees, too. Calling them "missteps" may be a bit harsh, as not all of them represent errors in judgment. Either way, becoming aware of these potential pitfalls may help you to avoid falling into them in the future.

Managing Social Security

Social Security benefits are structured to rise about 8% for every year you delay receiving them after your full retirement age. Is waiting a few years to apply for benefits an idea you might consider? Filing for your monthly benefits before you reach your full retirement age can mean comparatively smaller monthly payments. ¹

Managing medical costs

One report estimates that a the average couple retiring at age 65 can expect to need $315,000 to cover health care expenses during the course of their retirement, even with additional coverage such as Medicare Part D, Medigap, and dental insurance. Having a strategy can help you be better prepared for medical costs. ²

Understanding longevity

Actuaries at the Social Security Administration project that a 65-year-old man has a 34% chance and a 65-year-old woman has a 45% chance to live to age 90. The prospect of a 20- or 30-year retirement is not only reasonable, but it should be expected. ³

Managing withdrawals

You may have heard of the "4% rule," a guideline stating that you should take out only about 4% of your retirement savings annually. Each person's situation is unique but having some guidelines can help you prepare.

Managing taxes

Some people enter retirement with investments in both taxable and tax-advantaged accounts. Which accounts should you draw money from first? To answer the question, a qualified financial professional would need to review your financial situation so they can better understand your goals and risk tolerance.

Managing other costs, like college

There is no "financial aid" program for retirement. There are no "retirement loans." A financial professional can help you review your anticipated income and costs before you commit to a long-term strategy, and help you make a balanced decision between retirement and helping with the cost of college for your children or grandchildren.

1. SSSA.gov, 2023
2. Fidelity.com, 2023
3. LongevityIllustrator.org, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Too Young For A Roth IRA?

Thu, 27 Jul 2023 09:00:00 GMT

Equipping Points:

Is there such thing as contributing to a Roth IRA too soon? After a number of clients have asked how to fund a Roth IRA for a grandchild or college-aged child, David wanted to share all about this option and gift toward the future.

Even though retirement seems like such a long way away for that teenager or young adult, the miracle of compound interest can make a big difference in the long-run. We discuss the benefits, rules, and reasons behind this powerful tool and contribution toward retirement.

Here’s what you’ll learn on today’s show:

Is it possible to be too young to start a Roth IRA? (2:12)
What qualifications do you need to open a Roth IRA? (4:30)
Why should we pay attention to Roth IRAs? (6:16)
Can they withdraw early from the account? (8:03)
Any Roth opportunities to gift adults in their 20s, 30s, and 40s? (16:32)

Today’s Takeaway:

Caring For Aging Parents

Mon, 17 Jul 2023 12:32:24 GMT

Thanks to healthier lifestyles and advances in modern medicine, the worldwide population over age 65 is growing. In the past decade, the population of Americans aged 65 and older has grown 38% and is expected to reach 94.7 million in 2060. As our nation ages, many Americans are turning their attention to caring for aging parents. ¹

When talking to a parent about future care, it’s best to have a strategy for structuring the conversation. Here are some key concepts to consider.

Cover the Basics

Knowing ahead of time what information you need to find out may help keep the conversation on track. Here is a checklist that can be a good starting point:

Primary physician
Specialists
Medications and supplements
Allergies to medication

It is also important to know the location of medical and estate management paperwork, including: ²

Medicare card
Insurance information
Durable power of attorney for healthcare
Will, living will, trusts, and other documents

Be Thorough

Keep the Lines of Communication Open

Don't Procrastinate

1. ACL.gov, November 2022
2. Note: Power of attorney laws can vary from state to state. An estate strategy that includes trusts may involve a complex web of tax rules and regulations. Consider working with a knowledgeable estate management professional before implementing such strategies.

Countdown Clarity: Timing Your Retirement Preparations

Thu, 13 Jul 2023 14:39:23 GMT

Equipping Points:

Whether you’re close to retirement or still far from that exciting date, it’s not uncommon to wonder when you should start preparing for each aspect of it. From figuring out the right time to be debt-free and when to adjust your portfolio risk, to deciding when to plan for your Social Security benefits or healthcare coverage, this episode guides you through the ideal timeline for each. Tune in to find out how far away from retirement you should have answers to these pressing questions.

By understanding the different aspects involved, preparing in advance, and seeking expert advice, you can map out your retirement journey with confidence. Join us as we discuss the importance of having a guaranteed income stream, making housing decisions, having your legal documents updated and other essential topics.

Here’s what we’ll discuss on today’s show:

The best time to get rid of debt is now. (3:38)
Am I behind on my savings? + The importance of systematically saving for retirement and starting early. (7:48)
Do I have a structured plan to generate income in retirement? (15:00)
When should I start drawing Social Security? (19:55)
Should I stay in my home or sell it and downsize? (24:28)
Updating your legal documents and planning for long-term care needs. (28:21)

Today’s Takeaway:

Are Clients Saving “Too Much" for Retirement?

Wed, 28 Jun 2023 22:48:37 GMT

Equipping Points:

We’ve all heard the phrase, “too much of a good thing.” Is there such a thing as saving “too much” for retirement? If you’re still working, it’s helpful to figure out how much you really need for the future. Have a plan that considers what your retirement income sources will be as well as what expenses you may face. There are some expenses that are reduced or eliminated altogether in retirement. On the other hand, don’t forget about added costs like inflation or health care costs.

David shares what markers to keep in mind and how to plan so that you can have the confidence you need.

Here’s what you’ll learn today:

Are clients saving too much for retirement? (3:31)
How much is enough? (6:49)
What else do you need to consider? (8:36)
Expenses become the key driver for what to save. (10:15)

Today’s Takeaway:

Don't Wait To Claim Ex-Spouse Benefits From Social Security

Thu, 22 Jun 2023 00:55:19 GMT

Equipping Points:

When it comes to taking Social Security benefits, there’s often a question about whether to take them as soon as possible or to wait. Inspired by a few recent conversations in the office, David wanted to specifically discuss the Social Security benefits for those who are divorced, currently single, at retirement age, and able to get benefits based on an ex-spouse’s work records.

David explains how the Social Security benefit works if you are divorced and eligible for ex-spouse benefits. If this applies to you, don’t delay! It’s really important to find out what your benefit is and if it’s worth claiming.

Here’s what you’ll learn on today’s show about ex-spouse Social Security benefits:

Who is eligible to claim ex-spouse benefits? (1:58)
What does the benefit look like? (3:27)
What is the impact on the ex-spouse and potentially their current spouse? (5:38)
What might happen for someone with numerous ex-wives, like say, Johnny Carson? (7:19)

Today’s Takeaway:

Common Financial Questions from the Office

Thu, 08 Jun 2023 09:00:00 GMT

Equipping Points:

You might be surprised how many times the same financial questions come up, but the answers can depend on the person. David talks through commonly asked questions and concerns in the office and shares how to find the answer that is right for you.

As you near or enter retirement, you have a lot of financial decisions to make as a homeowner, parent, or investor. From paying off your mortgage early to where to safely save your cash in a bank, David provides his financial insight and expertise on today’s show.

Here’s what you’ll learn on today’s show:

Should I pay off my house early? (1:51)
How do I financially cut off my adult child without causing issues? (5:07)
Should I delay retirement until my house is paid off? (9:52)
Mailbag: How do I protect my savings and emergency fund? (14:51)

Today’s Takeaway:

Estate Management Checklist

Mon, 05 Jun 2023 13:23:44 GMT

Estate Management Checklist

Do you have a will?

A will enables you to specify who you want to inherit your property and other assets. A will also enables you to name a guardian for your minor children.

Do you have healthcare documents in place?

Healthcare documents spell out your wishes for health care if you become unable to make medical decisions for yourself. They also authorize a person to make decisions on your behalf if that should prove necessary. These documents may include a living will, a power of attorney agreement, and a durable power of attorney agreement for healthcare.

Do you have financial documents in place?

Certain financial documents can outline your financial wishes. If you become unable to make decisions for yourself, these financial documents can be structured to empower a person to make decisions on your behalf. These documents may include joint ownership, durable power of attorney, and living trusts.

Have you filed beneficiary forms?

In some cases, naming a beneficiary for bank accounts and retirement plans makes these accounts “payable on death” to your beneficiaries. In other cases, you will need to fill out a “Payable on Death” form.

Do you have the right amount and type of life insurance?

When was the last time you assessed your life insurance coverage? Have you compared the life insurance benefit with your financial obligations? Keep in mind that several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Have you taken steps to manage your federal estate tax?

If you and your spouse have more than $25.84 million in assets (for 2023), you may want to consider taking steps to manage federal estate taxes, which will be due at the second spouse’s death. ¹

Have you taken steps to protect your business?

Do you have a succession plan? If you own a business with others, you may also want to consider a buyout agreement.

Have you created a letter of instruction?

A letter of instruction is a non-legal document that outlines your wishes. A strong, well-written letter may save your heirs time, effort, and expense as they administer your estate.

Will your heirs be able to locate your critical documents?

Your heirs may need access to the specific documents you have created to manage your estate. These documents may include:

Your will
Trust documents
Life insurance policies
Deeds to any real estate, and certificates for stocks, bonds, annuities
Information on your financial accounts and safe deposit boxes
Information on your retirement plans
Information on any debts you have: credit cards, mortgages, and loans.

Note: Power of attorney laws can vary from state to state. An estate strategy that includes trusts may involve a complex web of tax rules and regulations. Consider working with a knowledgeable estate management professional before implementing such strategies.

1. IRS.gov, 2023

Tax-free Gifts To Your Beneficiaries

Thu, 01 Jun 2023 13:54:35 GMT

Equipping Points:

After a few days with the grandkids, David is ready to talk about ways to give tax-free gifts to beneficiaries, now and in the future. How can you pass some of your legacy onto the next generation? Whether you are well into retirement or still have kids yet to leave the nest, there are a number of ways to do this. David shares three strategies and then discusses what possible downsides you’d want to watch out for.

Firstly, David highlights the often-overlooked benefit of Roth conversions. While these conversions offer several advantages during your lifetime, they can also serve as a gift to your beneficiaries, providing them with tax-free income in the future. In addition, David discusses the option of Roth contributions for your children and grandchildren. Then, David emphasizes the significance of the stepped-up cost basis on your non-IRA brokerage accounts.

Tune in to this episode to learn how you can pass on your legacy to future generations through tax-efficient gifting strategies. Discover the benefits, downsides, and practical considerations that will empower you to create a lasting financial impact for your loved ones.

Here’s what you’ll learn on today’s show:

What does it mean to have a tax-free gift? (3:28)
Doing a Roth conversion can benefit your beneficiaries. (4:28)
Roth contributions can be made by parents or grandparents. (9:01)
Use a stepped-up cost basis on a non-IRA brokerage account. (10:33)
Are there any downsides to these strategies? (12:45)

Today’s Takeaway:

Episode 221: Mailbag- How Does Inheriting A Roth IRA Work?

Thu, 18 May 2023 13:06:32 GMT

Equipping Points:

There are ways to invest tax-efficiently, and you don’t necessarily need a Roth or IRA or 401(k) to do that. How so? David answers three questions from the mailbag today from listeners who are facing different investing decisions. From what to do with an inherited IRA to making wise financial decisions that can impact future generations, there are ways you can approach these situations strategically.

Stay tuned to see what you can learn from these listener questions today. Do you have a question for David? Be sure to reach out!

Here are the questions we cover today:

Mailbag: Am I required to take distributions annually on inherited IRAs? (2:53)
Mailbag: Should I merge old 401(k) accounts? (5:25)
Mailbag: How does inheriting a Roth IRA work? (9:29)

Today’s Takeaway:

Episode 220: 4 Big Beneficiary Mistakes You Do NOT Want To Make

Thu, 11 May 2023 09:00:04 GMT

Equipping Points:

When you go to set up an IRA or financial account, one simple, critical step is designating a beneficiary. This very important detail is too often overlooked or skipped over, causing mistakes that are incredibly hard to fix once you’re gone. In today’s podcast, David outlines the four biggest mistakes he commonly sees with beneficiary designations and what you can do to fix them before it’s too late.

It is all too easy to make assumptions when it comes to beneficiaries. For example, one might think that mentioning someone in their will is enough. However, that assumption is far from accurate. Join us as we delve into the intricacies of beneficiary designations and shed light on the importance of funding your trust, understanding the difference between per stirpes and per capita rules, and more.

Here are the big mistakes you’ll want to avoid:

Not naming a beneficiary. (6:17)
Not naming someone because it’s in your will. (8:16)
Not funding your trust. (10:28)
Not understanding per stirpes vs. per capita rules. (15:10)

Today’s Takeaway:

Episode 219: 5 Things That Affect Your Credit Score

Thu, 04 May 2023 09:00:05 GMT

Equipping Points:

Your credit score can have a big impact on certain financial decisions such as buying a house or car. Today we talk through how your credit score, or FICO score, is calculated and how you can improve it. While the average credit score in America in 2022 was 714, aiming for higher scores can unlock better financial opportunities. In this episode, David will cover the scores you should be aiming for and how to achieve them.

Being reliable with payments, having a long credit score history, and low utilization can make a big difference. It takes time to build up this score, but knowing where to start can help you get where you need to be sooner.

Here’s what you’ll learn in today’s show:

Why is your credit score so important? (2:21)
35% of your FICO score is based on whether you pay on time. (7:24)
30% of your score is how much you owe vs. how much you have available. (8:50)
15% of your score is how long you’ve had the accounts open. (10:39)
10% of your score is opening too many accounts in a short period of time. (13:13)
10% of your score is whether you can manage a mix of credit types. (14:06)
What are some things that don’t actually impact your credit score? (15:44)

Today’s Takeaway:

Episode 218: 6 Reasons NOT To Do A Roth Conversion

Thu, 27 Apr 2023 09:00:00 GMT

Equipping Points:

We all know that David likes Roths as a good vehicle for retirement and inheritance. But today we’re going to dive into why someone shouldn’t do a Roth conversion. Whether that’s based on the timing or circumstances, there are a few reasons a Roth conversion might not be the right fit for you.

Do you hate the idea of paying your taxes early? What if the rules about the Roth IRAs change in the future? Some of these hesitations are good cause for reconsidering, while others might be worth checking with a financial advisor to see if they are actually reason enough to avoid doing a Roth conversion.

Here are six reasons why you might not want to do a Roth conversion:

I can’t stomach paying my taxes early. (2:19)
I can’t believe Roth IRAs will always be tax-free. (4:07)
Maybe I should wait until future tax policy becomes clear. (6:39)
We give a lot of money to charity each year. (9:12)
What about IRMAA? (11:12)
Will a Roth conversion affect the tax on my Social Security? (14:10)

Today’s Takeaway:

9 Facts About Social Security

Thu, 20 Apr 2023 16:06:37 GMT

Facts About Sociecurity

Social Security's been a fact of retirement life ever since it was established in 1935. We all think we know how it works, but how much do you really know? Here are nine things that might surprise you.

The Social Security trust fund is huge. It was $2.8 trillion at the end of 2022. ¹
Most workers are eligible for Social Security benefits, but not all. For example, until 1984, federal government employees were part of the Civil Service Retirement System and were not covered by Social Security. ²
You don't have to work long to be eligible. If you were born in 1929 or later, you need to work for 10 or more years to be eligible for benefits. ³
Benefits are based on an individual's average earnings during a lifetime of work under the Social Security system. The calculation is based on the 35 highest years of earnings. If an individual has years of low or no earnings, Social Security may count those years to bring the total years to 35. ⁴
There haven't always been cost-of-living adjustments (COLA) in Social Security benefits. Before 1975, increasing benefits required an act of Congress; now, increases happen automatically, based on the Consumer Price Index. There was a COLA increase of 8.7% in 2023, but there was an increase of 5.9% in 2022. ⁵
Social Security is a major source of retirement income for 64% of current retirees. ⁶
Social Security benefits are subject to federal income taxes – but it wasn't always that way. In 1983, Amendments to the Social Security Act made benefits taxable, starting with the 1984 tax year. ⁷
Social Security recipients received a single lump-sum payment from 1937 until 1940. One-time payments were considered "payback" to those people who contributed to the program. Social Security administrators believed these people would not participate long enough to be vested for monthly benefits. ⁸
In January 1937, Earnest Ackerman became the first person in the U.S. to receive a Social Security benefit – a lump sum of 17 cents. ⁸

1. SSA.gov, 2023
2. Investopedia.com, April 4, 2023
3. SSA.gov, 2023
4. SSA.gov, 2023
5. SSA.gov, 2023
6. EBRI.org, 2022
7. SSA.gov, 2023
8. SSA.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Episode 217: 5 Annuity Myths to Know About

Thu, 20 Apr 2023 09:15:00 GMT

Equipping Points:

Whether you love them or hate them, annuities are just another financial tool that could help you meet your financial goals. Working with the right advisor who is neutral and unbiased will help you navigate your decisions around annuities. There are four types of annuities , so start by understanding what those are to then ask the question of whether they are the right fit for your financial plan.

Before you get too nervous about having an annuity, let’s talk through the common myths around them and find out how much truth and nuance they hold. That way you’ll be able to make a more informed decision regarding what to do with annuities.

Here’s what you’ll want to know for each age:

What are annuities? (2:22)
Myth: Insurance companies keep all my money after I die. (5:32)
Myth: Annuities are very complicated. (9:04)
Myth: Inherited annuities are subject to double taxation. (11:19)
Myth: Annuities pay low rates of return. (15:37)
Myth: Annuities have very high fees. (18:04)

Today’s Takeaway:

Ep 216: Does Age Matter in Financial Planning?

awashington@kcfinancialadvisors.com (Alexandria Washington) — Thu, 13 Apr 2023 09:00:05 GMT

Equipping Points:

What should you do next financially? The answer might depend on your age. David works with people of all ages and suggests a different set of strategies based on your life stage. Today, we’ll talk through the things you should be thinking about during each decade of adulthood to best prepare for retirement.

Even in your younger years, it's essential to start with a written plan. When you hit your 40s, you may face more significant expenses, such as having a family, which could make it easy to lose track of your saving and investing goals. However, sticking to your plan is crucial during all these stages. As you approach 55, you may want to consult with an advisor to create a more tactical financial plan for retirement. Beyond 67, having a clear understanding of your retirement plan becomes even more critical.

Are you currently on track for your age? Join us as we dive deeper into each of these life stages and share the importance of tailoring your approach based on your age.

Here’s what you’ll want to know for each age:

Does age matter when it comes to financial planning? (2:55)
In your 20s and 30s, write down financial goals and focus on your career. (5:04)
From 40 to 55 years old, stay on track, even with added expenses. (8:31)
After 55, you’re in the retirement red zone. (11:10)
From 67 and beyond, you need keen focus on your retirement plan. (15:21)

Today’s Takeaway:

Episode 215: Mailbag - What Makes an HSA Better Than My Roth IRA?

walter@thirdwheelmedia.com (Walter Storholt) — Thu, 06 Apr 2023 01:20:57 GMT

Equipping Points:

We all know how much David loves a Roth IRA, so when he said in a previous podcast that an HSA was even better, this caught a few people by surprise. When you contribute to an HSA or health savings account, you get a tax-free account with a tax deduction for putting money into. This account is only available if you have a high deductible healthcare plan though. David shares what you need to know about this account in response to a listener question.

Then, he answers two more questions from the mailbag. If your investments are at a bank, is it as risky as what just happened with Silicon Valley Bank? Do inherited IRAs follow the same RMD schedule as before or does it change? Find out!

Here are the listener questions David answers on today’s podcast:

· Mailbag: What makes an HSA better than my Roth IRA?

· Mailbag: Following Silicon Valley Bank, should I be worried about investing at my bank?

· Mailbag: Will my late husband’s stretch IRA pass on to me as a stretch IRA as well?

Today’s Takeaway:

Episode 214: 5 Important Tax Questions for Retirees

Thu, 30 Mar 2023 09:00:00 GMT

Equipping Points:

It’s tax time! If you haven’t gotten your taxes done yet, time is running out. This is a very busy time for David and his team as they help clients sort through their taxes for this year and strategies for the future.

When you are retired, your taxes might look different than they did when you were in your working years. No one wants to pay more in taxes than they absolutely have to. In this episode, David outlines five big questions many retirees face when it comes to taxes. Stay tuned for some helpful insight from David, so that you can make informed decisions with your taxes in retirement.

Here’s what you’ll learn on today’s show:

What are the tax implications of withdrawing money from my retirement accounts? (3:00)
Will my Social Security be taxed? (5:27)
How would my taxes change if I decide to move to another state? (7:38)
Are there any tax benefits for making charitable contributions in retirement? (10:59)
What are the tax considerations for gifting money to children or grandchildren? (14:06)

Today’s Takeaway:

Episode 213: 7 Myths About Social Security

Wed, 22 Mar 2023 21:36:20 GMT

Equipping Points:

Unfortunately, there’s a lot of misinformation that goes around when it comes to Social Security. This can lead to confusion and uncertainty among individuals planning for their retirement. Today, David debunks seven common myths he encounters when speaking with clients and prospective clients about Social Security. Will Social Security still be around by the time you retire? Social Security is likely to undergo some changes, but that doesn’t mean it’s going away for good.

Hear more about these common myths and uncover the truth about Social Security so you can make informed decisions in retirement planning. You might be surprised by what you learn today!

Here’s what you’ll learn on today’s show:

Social Security is going broke. (1:22)
My retirement age is 65. (4:44)
Delayed claiming is always best. (6:41)
Congress raids Social Security to pay for other programs. (9:24)
My Social Security benefits are tax-free. (12:21)
Delaying Social Security doesn’t affect my spouse’s benefit. (15:44)
My ex-spouse’s benefits reduce my own benefits. (17:58)

Today’s Takeaway:

Episode 212: The Basics of Retirement Savings

awashington@kcfinancialadvisors.com (Alexandria Washington) — Wed, 15 Mar 2023 18:55:00 GMT

Equipping Points:

Not all retirement accounts are created equal. So, when you save for retirement, it’s important to know that you have the right account and plan for you. On today’s podcast, we will talk about the different kinds of accounts such as 401(k)s, IRAs, Roth accounts, and others. Spoiler alert: David shares one account that’s even better than a Roth IRA!

You’ll want to hear about all of these basics in order to utilize the best tools and accounts. Whether you are looking to learn more, or your circumstances have changed recently, having a solid foundation of understanding allows you to make sound financial decisions. Working with a financial advisor can help you feel more confidence and find more success with your financial plan.

Here’s what you’ll learn on today’s show:

· Not all retirement accounts are created equal. (1:15)

· The foundation of most people’s retirement plans is the 401(k). (2:45)

· The IRA is used mostly by people who don’t have a 401(k) or 403(b). (7:17)

· Using the Roth option for your IRA or 401(k). (9:43)

· A simple IRA are a good option for those who are self-employed. (13:03)

· HSAs and FSAs may also be a part of your retirement savings plan. (14:40)

· The most popular retirement-related products. (20:36)

Today’s Takeaway:

Episode 211: What Golf Teaches Us About Financial Planning

walter@thirdwheelmedia.com (Walter Storholt) — Thu, 09 Mar 2023 12:00:00 GMT

Equipping Points:

With warmer weather on the horizon, you might be ready to start thinking about spring and summer hobbies. Besides financial planning (and Chiefs football), David’s favorite thing is going golfing. On today’s show we talk about what we can learn about financial planning from the game of golf. From getting a “hole in one” when investing in the market to hearing from the caddie for advice, there’s plenty of parallels. Par for the course, we put a few puns in there as well!

You’re always going to make mistakes, whether in golf or investing. But it’s a matter of focusing on your goals and learning from your mistakes. Understand what tools you have access to and how you can leverage those. Finally, make sure you have a wise sounding board as you navigate what’s ahead.

Here’s what you’ll learn on today’s show:

· Getting a hole in one doesn’t make you the winner. (2:55)

· Certain golf clubs are more important than others. (9:30)

· The best golfers have a caddie. (16:32)

Today’s Takeaway:

Episode 210: What You Might Not Know About The S&P 500

awashington@kcfinancialadvisors.com (Alexandria Washington) — Thu, 02 Mar 2023 21:48:38 GMT

Equipping Points:

While terms like the Nasdaq and S&P 500 get tossed around in conversation or might be mentioned on the news, the average person doesn’t know a whole lot about them. To help you be more in the know, David shares six things that you might be surprised to learn about the S&P 500.

For instance, what kind of stocks are in the S&P 500? Are you as diversified as you think you are? Or do you actually have the level of diversification you need? Make sure you know what’s in your account and that it allows you to reach the financial goals in your plan.

Here’s what you’ll learn on today’s show:

· The S&P 500 has 505 stocks in it. (2:01)

· Three of the biggest four ETFs track the S&P 500. (4:05)

· Don’t be fooled by an illusion of diversification. (5:59)

· The S&P 500 covers half of the world’s stock values. (10:42)

· The top five holdings make up 22% of the holding in the index. (12:11)

· There is an equally weighted ETF you can get if you want. (14:14)

Today’s Takeaway:

Should We Reconsider What “Retirement” Means?

Thu, 23 Feb 2023 15:57:14 GMT

The notion that we separate from work in our sixties may have to go.

An executive transitions into a consulting role at age 62 and stops working altogether at 65; then, he becomes a buyer for a church network at 69. A corporate IT professional concludes her career at age 58; she serves as a city council member in her sixties, then opens an art studio at 70.

Are these people retired? Not by the old definition of the word. Our definition of “retirement” is changing. Retirement is now a time of activity and opportunity.

Generations ago, Americans never retired – at least not voluntarily. American life was either agrarian or industrialized and formalized retirement was not something they would have recognized. Their “social security” was their children.

After World War II, the concept of retirement changed. The typical American worker was now the “organization man” destined to spend decades at one large company. Americans began to associate retirement with pleasure and leisure.

By the 1970s, the definition of retirement had become rigid. You retired in your early sixties because your best years were behind you, and it was time to go. You lived your remaining years with an employee pension and Social Security checks, and the risk of outliving your money was low. Turning 90 was remarkable, much more than today.

One factor has altered our view of retirement more than any other. That factor is the increase in longevity. When Social Security started, retirement was the quiet final years of life; by the 1960s, it was a sort of extended vacation lasting 10-15 years; today, it can be a decades-long window of opportunity.

Working past 70 may soon become common. Whether by choice or chance, some may retire briefly and work again; others might rotate between leisure periods and work for as long as possible. Working full-time or part-time not only generates income. Another year on the job also may mean one less year of retirement to fund.

Perhaps we should see retirement foremost as a time of change – changing what we want to do with our lives. Preparing for change may be the most responsive move we can make for the future.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Episode 209: It's Not Too Late For Your 2022 Roth Contributions... 5 Things You Should Know

walter@thirdwheelmedia.com (Walter Storholt) — Thu, 23 Feb 2023 01:00:53 GMT

Equipping Points:

Were you thinking about contributing to a Roth IRA last year but never get around to it? Good news! It’s not too late to make your Roth IRA contributions for 2022. In fact, David encourages most people to make, and even max out, this contribution. So, if you haven’t made your 2022 Roth contributions, now’s your chance.

If you’re looking for ways to invest, this is often a good place to allow your investments to grow tax-free. David explains the ins and outs of contributing to a Roth IRA, who can benefit from it, and why it’s not too late to contribute 2022 dollars even though we’re already well into 2023.

Here are five things you’ll want to know about Roth contributions:

· It’s not too late to contribute for 2022. (3:15)

· Tell the custodian it’s a 2022 contribution. (4:29)

· Should I max out my contribution? (5:55)

· Am I eligible to make a Roth contribution? (7:15)

· Am I too old to contribute to a Roth? (10:25)

· Bonus: Why to use a Roth instead of a bank. (11:43)

Today’s Takeaway:

Episode 208: Should I Consolidate My Orphaned 401(k)s?

Thu, 16 Feb 2023 01:16:10 GMT

Equipping Points:

On this episode of Cover Your Assets KC, we’re taking on the conversation about the elusive Orphaned 401(k), which sounds like a lonely account that’s been forgotten about in the back of a financial institution’s filing cabinet. But what is it, really? We’ll get to the bottom of that and explore why it’s such a problem if you have any of these little lost lambs of retirement savings in your portfolio.

If you're feeling overwhelmed by the thought of consolidating your 401(k)s, don't worry. We'll explore the best choices available to you, including the 60-day Rollover (no acrobatics required!) and the Direct to Custodian transfer (who knew transferring money could be so straightforward?). Plus, we'll dive into the Roth 401(k) and help you decide if it's a good fit for your financial goals.

Here are the questions we cover on today’s episode:

What is an Orphaned 401(k)? (1:30)
David details examples of why having an Orphaned 401(k) is such a problem. (2:40)
Many people decide to consolidate their 401(k)s. David tells us what your choices and options might look like. (5:07)
David shows us the difference between doing a 60-day Rollover or a Direct-to-Custodian transfer. (7:43)
And you knew we wouldn’t finish a show without mentioning the word “Roth”. This time it’s in the form of analyzing what happens to Roth contributions in a 401(k) when you’re consolidating or dealing with an Orphaned 401(k). (10:03)

Today’s Takeaway:

Episode 207: Mailbag – Withdrawal Woes, Rental Properties, Tax Hassles & More

Thu, 09 Feb 2023 23:02:30 GMT

Equipping Points:

On this episode of Cover Your Assets KC, we’re answering four listener questions on our latest “Mailbag” edition of the show. Join us as we touch on questions about Roth conversions for a 60-year-old, inherited money with forced withdrawals, using rental properties for retirement income, and concerns about being hassled to pay quarterly taxes in retirement.

We’ll cover a lot of ground on this episode, so whether you’re nearing retirement or already there, there’s sure to be something of value for you in today’s conversation.

We'll start by addressing the question of whether someone who's 60 and retiring in the next 5-6 years should start converting as much of their IRA to Roth as they can. Next, we'll discuss the letter that one listener received informing them that they need to withdraw some money from an inherited account. We'll also delve into a question from a listener who has multiple options for how to fund the purchase of a rental property. And finally, we'll tackle someone’s concern about not knowing how their tax situation will change in retirement and if they’ll have to pay quarterly taxes.

Join us as we explore these important retirement planning topics, and as always, if you have any questions, feel free to send them in!

Here are the questions we cover on today’s episode:

I’m 60 and probably retiring in 5-6 years. Should I start converting as much of my IRA to Roth as I can? (2:35)

I inherited some money from my mom when she passed away last year, and I just got a letter telling me that I have to withdraw some money from the account this year. What’s that all about—I thought I didn’t have to do that until I’m in my 70s? (6:07)

I’m interested in buying a rental property for some additional retirement income. Which of these options is better? Should I cash out investments and pay cash for the property, should I take out a home equity loan to raise the cash, or should I just have a mortgage on the rental property? (9:24)

My income will be different once I retire in a few months, so I’m not sure what I’m supposed to do about taxes. Should I be making estimated payments every quarter? How do I know how much I should be paying since I’ll be in a different tax bracket than I’ve been in the past? (14:00)

Today’s Takeaway:

Episode 206: 10 Point Checklist For Retirement Preparedness, Part 2

Thu, 02 Feb 2023 10:00:00 GMT

Equipping Points:

Another year is upon us and it’s a great time to ask yourself 10 questions to assess how ready you are for retirement. If you’re retiring this year, it’s essential to have some concrete answers to these questions. If you’re still a few years from the milestone, tune in so you can start thinking about these critical conversations.

As a continuation from last week’s series on retirement preparedness, we talk through the remainder of the checklist of things you’ll want to take care of. This will not only give you a good place to kick off 2023, but also a good assessment on the direction of your financial plan. Are you feeling confident about your level of preparedness?

Here are the next five points on the checklist for retirement preparedness:

· Do I have a plan to combat inflation? (1:18)

· Am I prepared for the possibility of future tax increases? (6:41)

· Can I address healthcare costs? (9:56)

· Should I pay off my mortgage? (13:33)

· Do I have any current investments or products I don’t understand? (16:36)

Today’s Takeaway:

Episode 205: 10 Point Checklist For Retirement Preparedness, Part 1

awashington@kcfinancialadvisors.com (Alexandria Washington) — Thu, 26 Jan 2023 05:19:14 GMT

Equipping Points:

This week, we’ll cover the first five points in the checklist and then review the next five items in next week’s podcast with part 2. From determining your retirement income needs to guarding against some of the unknowns ahead, David shares what you’ll want to think about when it comes to your retirement plan.

And here are the next three resolutions to focus on this year:

Do I know how much income I need each month? (3:39)
What order should I withdraw from my accounts? (9:00)
When is the ideal time to take Social Security? (12:51)
Have I addressed longevity risk? (18:37)
Am I prepared to handle market volatility? (21:50)

Today’s Takeaway:

Episode 204: 2023 Financial Resolutions (Part 2)

Wed, 18 Jan 2023 21:41:25 GMT

Equipping Points:

In continuation of our conversation about financial resolutions (or goals) for this year, we talk about the next three key things to focus on. After establishing your written goals, calculating your net worth, and getting the right size emergency fund in place, what’s next? David talks us through what to do and why. He also shares resources and information about the US debt clock as well as how much life insurance you should have to cover your most important assets.

If you missed the first episode of this series, you can find it here:

https://www.coveryourassetskc.com/episode-203-2023-financial-resolutions-part-1

And here are the next three resolutions to focus on this year:

Systematize your savings. ( 2:00 )
Eliminate bad debt. ( 8:40 )
Cover your assets. ( 14:19 )

Additional resources mentioned in this episode:

https://www.usdebtclock.org/

https://www.bankrate.com/insurance/

Today’s Takeaway:

Episode 203: 2023 Financial Resolutions (Part 1)

Fri, 13 Jan 2023 12:44:19 GMT

Equipping Points:

To make sure you have a strong start to the new year, David shares six financial resolutions you should make in this two-part series. Many of these things David recommends doing every year, which can really add up over time.

You can look back on past podcasts from the beginning of 2021 and 2022 and you might notice there are quite a few similarities. But what’s different now compared to the years past? The financial landscape looks a little different every year and so do you!

Here are the first three resolutions to focus on this year:

· Establish or update your written goals. (4:28)

· Calculate your net worth. (9:22)

· Right-size your emergency fund. (16:17)

Today’s Takeaway:

Episode 202: The Secure Act 2.0

Thu, 05 Jan 2023 11:00:00 GMT

Equipping Points:

Now that Congress just passed the Secure Act 2.0, we wanted to talk about what changes to plan for. While in many ways it made things complicated, David breaks it down so you know how it could impact your financial plan. Some of these provisions start now while others won’t be implemented for years. Either way, it is good to understand what is happening and keep these changes in mind for the future.

Here are some changes you’ll want to know about:

· The required minimum distribution age changed. (4:10)

· The catch-up contribution limits increased. (7:15)

· Certain people must make catch-up contributions in a Roth 401(k). (8:42)

· The penalties around RMDs are changing. (11:53)

· What strategies should you consider before RMD age? (14:25)

Today’s Takeaway:

IRA Deadlines Are Approaching

Tue, 03 Jan 2023 14:00:19 GMT

Here is what you need to know.

Financially, many of us associate the spring with taxes – but we should also associate December with important Individual Retirement Account (IRA) deadlines. This year, like 2022, will see a few changes and distinctions.

Remember, this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals for the most up-to-date information about IRA account deadlines and contribution strategies.

December 31, 2023, is the deadline to take your Required Minimum Distribution (RMD) from certain IRAs.

April 18, 2023, is the deadline for making 2022 annual contributions to a traditional IRA, Roth IRA, and certain other retirement accounts. April 15 falls on a Saturday, so the deadline has been extended. ¹

Some people may not realize when they can make their IRA contribution. You can make a yearly IRA contribution between January 1 of the current year and April 15 of the next year. Accordingly, you can make your IRA contribution for 2023 any time from January 1, 2023, to April 15, 2024. ¹

A person can open or contribute to a Traditional IRA past age 72 as long as they have taxable income.

If you are making a 2023 IRA contribution in early 2024, you must tell the investment company hosting the IRA account for which year you are contributing. If you fail to indicate the tax year that the contribution applies to, the custodian firm may make a default assumption that the contribution is for the current year (and note exactly that to the I.R.S.).

So, write “2024 IRA contribution” or “2023 IRA contribution,” as applicable, in the memo area of your check, plainly and simply. Be sure to write your account number on the check. If you make your contribution electronically, double-check that these details are communicated.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

1. irs.gov, October 26, 2022

Episode 201: Mailbag - Maxing Out My Retirement Contributions

Wed, 21 Dec 2022 11:00:02 GMT

Equipping Points:

As we wrap up the year, we dig into the mailbag to see what questions listeners have for David. We start with a question about saving for retirement in a 401(k) and how to max it out. More than meeting the company match, what’s the most you can put away? Then, David addresses concerns about future taxes when saving for retirement.

Here are the last two listener questions for 2022:

Mailbag: What does it mean to max out a retirement account? (2:01)
Mailbag: Should I save tax-deferred or tax-free or in another investment? (8:13)

Happy New Year!

Today’s Takeaway:

Episode 200: Stock Market Knowledge

Thu, 15 Dec 2022 11:00:02 GMT

Equipping Points:

Sometimes you hear about a term or idea when it comes to the stock market, but don’t know enough about it. David talks us through some of these concepts so you can better understand the stock market and how it might relate to your financial decisions and financial plan.

Here are four life events you’ll want to be prepared for:

· What’s the difference between a bid, ask, and bid-ask spread? (2:37)

· Which of the different trading strategies should you follow? (7:38)

· Is there a big difference between the Nasdaq, Dow, and S&P 500? (10:25)

· Why is volume important to investing in the market? (16:04)

· What should I know about beta? (23:26)

Today’s Takeaway:

Episode 199: Running the Retirement Planning Marathon

Thu, 08 Dec 2022 11:00:01 GMT

Equipping Points:

As some of us look toward setting goals in the new year, you might have running a race on your list. How are you doing when it comes to running the marathon of planning and saving for the future? Today, we talk about how running a race like a marathon has a lot of parallels with retirement planning.

Here are four life events you’ll want to be prepared for:

· Training and preparation are required. (1:34)

· Diversify your planning. (8:50)

· The proper diet is key. (9:39)

· Don’t start out too fast. (15:00)

Today’s Takeaway:

Ep 198: Making Good Decisions Amidst Major Life Events

Thu, 01 Dec 2022 11:00:06 GMT

Equipping Points:

Let’s explore four major life events you might face that could cause you to make significant financial decisions. Instead of going with your knee-jerk emotions, David explains how you can approach these situations with reason and wisdom. He breaks down what questions you’ll want to consider and how to set yourself up for a strong financial future.

Here are four life events you’ll want to be prepared for:

· A job change may cause you to reevaluate. (3:03)

· Divorce has major financial implications. (7:44)

· Receiving an inheritance is often a new experience to face. (11:30)

· The death of a spouse is incredibly hard but critical to plan for. (15:49)

Today’s Takeaway:

Episode 197: Mailbag: How Do I Use the Rule of 72?

Thu, 17 Nov 2022 02:18:52 GMT

Equipping Points:

After the last few podcasts and a few client meetings, David shares some recent listener questions he has received. These specific situations will cover things like Roth conversions, the rule of 72, inherited IRAs, and making wise financial decisions. As always, if you have a question for David, be sure to reach out!

Here are the listener questions David answers on today’s podcast:

I’m 62, retired, and considering a series of Roth conversions before I turn 72. Can you explain how to use the rule of 72? (2:46)
I recently inherited but don’t need the money now. What are the rules about the withdrawals? (13:28)

Today’s Takeaway:

Episode 196: The Positive Side of Inflation

Thu, 10 Nov 2022 11:00:00 GMT

Equipping Points:

What could possibly be the benefits of inflation? Since the increased costs of living have been hard to handle lately, David helps us look on the bright side on inflation on today’s show.

From the higher dollar amount you can contribute to you IRA to changes in the tax brackets, David shares the numbers you’ll want to know.

Here’s what to add to your financial to-do list:

· There is a big Social Security benefit cost of living increase. (1:35)

· You can increase your contributions into your retirement accounts. (4:13)

· Federal tax brackets are changing. (6:24)

· With higher interest rates, do we have better places for safe money? (13:29)

Today’s Takeaway:

Episode 195:Why You Should Care About RMDs

Thu, 03 Nov 2022 10:00:03 GMT

Equipping Points:

Every listener should care about RMDs, regardless of your age. If you inherit an IRA, you’ll have a required minimum distribution, even before you reach the age of 72. One thing you always want to avoid are penalties! David gives a breakdown on what to expect with RMDs and how to calculate yours.

Here’s what to add to your financial to-do list:

Everyone should know and care about RMDs. (3:38)
How do you calculate your RMDs? (6:40)
Why do the RMDs keep going up? (14:19)

Today’s Takeaway:

Episode 194: Financial Year-End Checklist

Thu, 27 Oct 2022 10:00:00 GMT

Equipping Points:

With a couple months left before 2022 comes to a close, David has a list of things to focus on and take care of in your financial life. Whether you are retired or full-time employed, these are things you won’t want to overlook before the year ends. Don’t wait until the last minute! Now is a great time to work on these things. When you retire, there are a few things that could throw your plan off track. Without a good plan, you could get nervous as things change in the market. Following rules of thumb may be a good place to start, but as time goes on, some of these rules may change. Are you prepared for these unexpected challenges?

Here’s what to add to your financial to-do list:

Max out your IRA or 401(k). (5:46)
Pay attention to your RMDs. (9:48)
Think about qualified charitable distributions. (14:21)
Check your beneficiaries. (16:40)

Today’s Takeaway:

Required Minimum Distributions 101

Thu, 20 Oct 2022 12:45:02 GMT

Understanding mandatory retirement account withdrawals.

If you are approaching your seventies, get ready for required minimum distributions. You may soon have to take RMDs, as they are called, from one or more of your retirement accounts.

You can now take some RMDs a bit later in life, which is good. Recent rule changes give your invested savings a little more time to potentially grow in your retirement savings vehicles before that first required drawdown.

What account types require RMDs? Any retirement plan sponsored by an employer, plus traditional Individual Retirement Arrangements (IRAs) and IRA-based retirement plans, such as SIMPLE IRAs and Simplified Employee Pension plans (SEPs). Original owners of Roth IRAs do not have to take RMDs. ¹

You can take your initial RMD from a retirement plan by December 31 of the the calendar year in which you turn 72. You actually have the choice of taking that first annual RMD as late as April 1 of the following year, i.e., the year in which you will turn 73, but you’ll have to take your second RMD by December 31 of that same year. So if you wait 16 months to take your first RMD, you will end up taking both your first and second RMDs from that account in the same year – and since each RMD represents taxable income, that could lead to higher-than-anticipated tax bill for that year. ¹

How are RMDs calculated? The Internal Revenue Service provides calculation formulas in Publication 590-B . Commonly, you calculate your yearly RMD by dividing the balance of your retirement account on December 31 of the previous year by a life expectancy factor, a number you take from tables published within Publication 590-B. ¹

What do you need to do to avoid penalties with RMDs? The most important thing to do is to take them by the annual December 31 deadline. The second most important thing to do is to withdraw the right amount.

If you take an RMD after the December 31 deadline or withdraw less than you should, a penalty may apply. The I.R.S. may levy as much as a 50% tax on the amount not withdrawn. ¹

The good news is some investment firms will update you on your upcoming RMDs well in advance of annual deadlines, and your RMDs may even be calculated for you. This is not a given, however, and even when you receive such information, you must act on it, because it takes time to authorize and execute the RMD.

Lastly, take a look at how the RMD income may affect your taxes. There are ways to manage the tax impact of RMDs, and you can explore those choices with a financial or tax professional.

Citations

1. Internal Revenue Service, March 16, 2022

Episode 193: Retirement Income Challenges You Might Not Expect

Thu, 20 Oct 2022 10:00:03 GMT

Equipping Points:

When you retire, there are a few things that could throw your plan off track. Without a good plan, you could get nervous as things change in the market. Following rules of thumb may be a good place to start, but as time goes on, some of these rules may change. Are you prepared for these unexpected challenges?

Here’s what we discuss on today’s show:

· Why we should pay attention to these challenges. (2:17)

· If your income plan remain intact when the market goes down. (4:47)

· Utilize the three-bucket approach. (7:15)

· How to face the challenge of minimizing taxes in retirement. (11:47)

Today’s Takeaway:

Episode 192: How Bonds Work: What Retirees Need To Know

Thu, 13 Oct 2022 10:00:01 GMT

Equipping Points:

When it comes to bonds, there is often a lot of misunderstanding. Most people assume they are safe, but lately the news has talked about the risk and demise of bonds. Which is it?

Within your portfolio, you likely own bonds, whether you realize it or not. David explains the ins and outs of bonds and how they can benefit your portfolio.

Here’s why you might consider also investing somewhere else:

· What’s the deal with bonds? (1:42)

· The difference between bonds and bond funds. (4:17)

· How the interest rates impact bonds. (9:06)

· Are bonds actually safe? (12:34)

· What should we know about bonds right now? (16:26)

Today’s Takeaway:

Episode 191: Is the Market Overvalued or Undervalued?

Thu, 06 Oct 2022 10:00:04 GMT

Equipping Points:

On a previous show, we mentioned a Mailbag episode coming up. Instead of a traditional Mailbag, we have a conglomerate episode to discuss the questions we have been getting about the market from clients and listeners, alike.

In this episode, we discuss the stock market, how to determine what is overvalued vs. under-valued, and learn how you can use the Price Earning Ratio to look at individual stocks and the market value overall.

Here’s why you might consider also investing somewhere else:

· Is the market overvalued or undervalued? Here is how the PE Ratio can help you find out. (3:21)

· Does a higher PE Ratio equal a more speculative stock? (8:14)

· Here is another way you can use the PE Ratio that you might not know about. (14:25)

· How you can use this advice, depending on your current situation. (20:09)

Today’s Takeaway:

New Paragraph

Episode 190: What Hurricanes Teach Us About Saving for Retirement

Thu, 29 Sep 2022 10:00:00 GMT

Equipping Points:

If you’ve been watching the news, you may be following the hurricane on the East Coast this week. As the meteorologist talks through it, there are a lot of graphics to go along with the information to explain what to expect and how hurricanes work. Similarly, when retirement planning, we use a lot of ways to discuss what you should expect and how to prepare. You may have heard some of these rules of thumb before but should they be followed? A rule of thumb may be used as a starting point, but is no replacement for a custom financial plan created with your unique needs and goals in mind. David talks today about which of these are good financial guidance or which of these rules could leave you astray.

Here’s why you might consider also investing somewhere else:

· Your retirement plan should work like the eyewall replacement cycle in a hurricane. (3:33)

· How do you prepare for the impact of a hurricane, even after it’s over? What risk do you face in retirement after you’re done working? (8:23)

· Can the computer models replace the benefits of a meteorologist? What about a financial advisor? (13:20)

· Are your concerns being articulated and addressed with your advisor? (17:40)

Today’s Takeaway:

New Paragraph

5 Retirement Concerns Too Often Overlooked

Thu, 22 Sep 2022 15:16:25 GMT

Baby boomers entering their “second acts” should think about these matters.

Retirement is undeniably a major life and financial transition. Even so, baby boomers can run the risk of growing nonchalant about some of the financial challenges that retirement poses, for not all are immediately obvious. In looking forward to their “second acts,” boomers may overlook a few matters that a thorough retirement strategy needs to address.

RMDs

The Internal Revenue Service directs seniors to withdraw money from qualified retirement accounts after age 72. This class of accounts includes traditional IRAs and employer-sponsored retirement plans. These drawdowns are officially termed Required Minimum Distributions (RMDs). ¹

Taxes

Speaking of RMDs, the income from an RMD is fully taxable and cannot be rolled over into a Roth IRA. The income is certainly a plus, but it may also send a retiree into a higher income tax bracket for the year. ¹

Retirement does not necessarily imply reduced taxes. While people may earn less in retirement than they once did, many forms of income are taxable: RMDs; investment income and dividends; most pensions; even a portion of Social Security income depending on a taxpayer’s total income and filing status. Of course, once a mortgage is paid off, a retiree loses the chance to take the significant mortgage interest deduction. ²

Health care costs

Those who retire in reasonably good health may not be inclined to think about health care crises, but they could occur sooner rather than later – and they could be costly. A report by HealthView Services found that even with additional insurance coverages such as Medicare Part D, Medigap, and dental insurance, a healthy 65-year-old couple can expect to pay almost $208,000 out-of-pocket for their healthcare expenses. ³

Eldercare needs

Those who live longer or face health complications will probably need some long-term care. One month’s stay in a private room in a nursing home costs an average of $9,000 nationally, so it’s important to consider these when preparing for retirement. Long-term care insurance is expensive, though, and can be difficult to obtain. ⁴

One other end-of-life expense many retirees overlook: funeral and burial costs. Preparing to address this expense may help surviving spouses and children.

Rising consumer prices

Historically, healthcare costs inflation has risen between 1.5-2 times the Consumer Price Index. For a 65-year-old couple, this equates to an additional projected $85,917 in lifetime retirement healthcare costs. Retirees would be wise to invest in a way that gives them the potential to keep up with increasing consumer costs. ⁵ As part of your preparation for retirement, give these matters some thought. Enjoy the here and now, but recognize the potential for these factors to impact your financial future.

Citations.

1 - thebalance.com/required-minimum-distributions-2388780 [1/14/22]

2 - https://www.investopedia.com/articles/retirement/12/will-you-pay-taxes-during-retirement.asp [7/31/22]

3 - https://hvsfinancial.com/wp-content/uploads/2020/12/2021-Retirement-Healthcare-Costs-Data-Report.pdf [2021]

4 - https://www.genworth.com/aging-and-you/finances/cost-of-care.html [2022]

5 - https://hvsfinancial.com/wp-content/uploads/2022/03/HVS-Data-Report-Brief-0312222.pdf [2022]

Episode 189: Financial Rules of Thumb

Thu, 22 Sep 2022 10:00:03 GMT

Equipping Points:

You may have heard some of these rules of thumb before but should they be followed? A rule of thumb may be used as a starting point, but is no replacement for a custom financial plan created with your unique needs and goals in mind. David talks today about which of these are good financial guidance or which of these rules could leave you astray.

Here’s why you might consider also investing somewhere else:

· Find out if the rule of 100 is a good basic rule when it comes to taking risk. (2:47)

· How does the 75 (or 80) percent rule apply to your retirement income? (5:24)

· Worried about a bear market? Here’s when the rule of five comes into play in the stock market. (9:32)

· How much should you really have saved in your retirement fund by the time you are 60? (13:11)

· The four percent rule is well-known but is it well-regarded by David? (15:16)

Today’s Takeaway:

New Paragraph

Episode 188: Investing Outside Of An IRA or 401(k)

Wed, 14 Sep 2022 20:09:18 GMT

Equipping Points:

We talk a lot about investing in 401(k)s and Roth IRAs, but what about investing in something else? David gets questions about this topic from young and old alike, so today we’ll talk about some alternative options and why you might choose to do so.

There’s a reason you may want to have a few different types of accounts within your financial plan, but understanding what you need and why you need it is the most important part of the process.

This episode will focus on help get a better idea of what all goes into those decisions and the different considerations you’ll want to factor into your plan.

Here’s why you might consider also investing somewhere else:

· There is freedom in having these other investment options. (4:16)

· Be prepared for your taxes to change! Certain rules you don’t want to overlook . (8:44)

· Know how the step up in basis works with an inheritance. (14:30)

· Passing money onto the next generation can look a number of different ways. (16:30)

Today’s Takeaway:

"Lots of opportunities you just need to know the rules and figure out what makes the best sense for you and your situation."

– David Dickens

Episode 187: Irreversible Financial Decisions

Thu, 08 Sep 2022 10:00:00 GMT

Today’s Prep:

Why would you get life insurance after the age of 65? David shares three good reasons why you might consider using this financial tool. What kinds of things do you need to plan for? While you might not know what the future holds, you can be financially prepared for it.

Equipping Points:

Many financial decisions are irreversible, so you want to get them right the first time. David shares today about different decisions that can’t be undone and how to navigate them.

Once you make a decision about claiming Social Security, you can’t re-do unless it’s within the first twelve months. In those first few months, if you decide to go back, you have to pay back the taxes and money you got. David outlines the reasons why you might decide to go back on your decision, despite the inconvenience.

If you have a pension and are married, you may need to set up spousal benefits. There are a lot of decisions to make regarding how it is set up. Once it’s done though, there’s no going back.

When you get life insurance , you get underwritten based on your health. You want to get this started as soon as possible so you don’t later find out you are uninsurable. You can always cancel it and get a lower price later if that option becomes available, but you want to have a policy in place in case your circumstances changes.

Choose your retirement date carefully. While you may be able to go back to work later, you don’t want to miscalculate how much money you’ll need. Not everyone can go back to work later. There are a lot of uncertainties in retirement , but your financial plan shouldn’t be one of them. Having a proper plan in place is key.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below.

0:40 - What is David up to this weekend?

1:40 - What happens when you start Social Security?

5:23 - How rigid is the decision to elect spousal benefits on your pension?

7:43 - Get life insurance before you become uninsurable.

11:07 - Choose a retirement date wisely.

Today’s Takeaway:

"Am I truly ready to retire? Or should I work another year or two to make sure that my family and I are in the right spot?"

– David Dickens

Episode 186: Life Insurance After 65? Three Good Reasons...

Thu, 01 Sep 2022 10:00:06 GMT

Today’s Prep:

Equipping Points:

When you’re young, there are plenty of good reasons to get life insurance. If one spouse dies, this helps cover things like the home mortgage, college education for your kids, and living expenses. In your 60s and retired, you might be glad to not need it for those reasons anymore. There are however a few other reasons to consider getting life insurance, even when retired.

One reason people get life insurance in retirement is to work as income replacement. If you have a pension, what will replace that monthly income for your spouse when you die?

Another reason is to use a life insurance policy as a long-term care benefit. David likes this option because you don’t know if you’ll need long-term care insurance. But with a life insurance policy that has a long-term care benefit, when you die, your spouse or heir still gets a tax-free death benefit. It’s not “use it or lose it” like a long-term care policy is.

Finally, life insurance may help have enough liquidity to pay estate taxes. The estate tax goes up pretty quickly. If you find yourself having done really well over the years, this might be worth looking into to provide a tax-free lump sum. Ultimately, it comes down to how much you want to spend to take risk off the table. Check with your financial advisor to see if it’s something that works well in your financial plan. It’s usually best to do so right around the time you’re retiring. .

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below.

0:34 - David has been spending some time on the golf course!

4:08 - Why should we consider life insurance after 65?

5:00 - Some use life insurance for income replacement.

8:03 - Some policies can help cover long-term care needs.

11:04 - Having enough liquidity to pay estate taxes.

13:57 - How does David include this in the planning process?

Today’s Takeaway:

"How much do you want to spend of your resources to take risk off the table? "

– David Dickens

What Happens When There Are No Beneficiaries

Tue, 30 Aug 2022 16:13:21 GMT

Where do those accounts and policies end up?

Some accounts have no designated beneficiary. Rarely, the same thing occurs with insurance policies. This is usually an oversight. In exceptional circumstances, it is a choice. What happens to these accounts and policies when the original owner dies?

The investment or insurance firm gets the first chance to determine what happens. On many retirement plans, for example, a spouse is often the default beneficiary, even if not named on a beneficiary form. If the deceased has no spouse, then the plan assets may just become part of that person’s estate. Brokerage accounts without any designated beneficiaries are also poised to become part of the estate of the decedent. The next stop for these assets could be probate. ¹

The state may end up deciding where the assets go when beneficiary forms are blank. If the deceased failed to name account or policy beneficiaries but had a valid will or other valid estate documents, this will influence the path from here – but it may not exempt the assets from probate court.

If no legally valid estate documents exist, then the deceased party dies intestate, and the state determines the destiny for the assets. Most states go by the same ladder of potential inheritors – surviving spouse at the top, then kids, then grandkids, then parents, grandparents, siblings, nephews or nieces. If absolutely no legitimate heir can be found, then the assets become property of the deceased’s state of residence. ²

What about life insurance policies? A life insurance policy usually has at least two levels of designated beneficiaries, and it is rare when a policyholder outlives them and even rarer when a policy has none. In such a circumstance, the proceeds of the life insurance policy become part of the estate of the policyholder upon the policyholder’s death. ³

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

What if a person simply lacks possible heirs, or sees no worthy heirs? Occasionally, this happens. Some people remain single for life, and others are estranged from relatives or heirs who would otherwise be beneficiaries.

A person in this situation has a choice: charity. Perhaps a charitable or non-profit organization deserves the assets. Perhaps a college or university would be a worthwhile destination for them. Choices exist, and those who are single can explore them as they consider their estate.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

1. Kiplinger, June 6, 2022

2. Schwab.com, September 24, 2021

3. SmartAsset, April 28, 2022

Episode 185: Planning For Retirement’s Uncertainties

Wed, 24 Aug 2022 23:56:30 GMT

Today’s Prep:

What kinds of things do you need to plan for? While you might not know what the future holds, you can be financially prepared for it.

Equipping Points:

How do you construct a plan for retirement when you have to account for unpredictable factors? We’ll talk through five things that can come up during retirement. The best way to start is by having a really good, written plan.

No one knows how long they will live. So, David recommends making a plan that has your money lasting until you’re 100 to be safe. Another thing to look out for is if one spouse dies earlier than expected and leaves the surviving spouse without everything in place. Do some “what-if” strategizing with your retirement plan .

Future tax rates can make a big impact on your finances, but we can’t be sure what they will be. We can try to predict what they will be. Right now, they are historically low, so it is probably best to assume they will go up. David shares what the tax brackets could look like. Don’t forget that this bracket would change if one spouse passes away and you go from married filing joint to filing single.

What changes to Social Security might change your retirement plan? David thinks it’s likely that they will raise the full retirement age. The amount that comes out of your paycheck may raise as well.

Another unknown is what kind of healthcare needs you’ll have. Ask, what if one spouse needs several years of care? What happens to the other spouse financially?

Finally, inflation is something we’ve been talking about a lot lately in the news. Your plan has to include some amount of inflation. Over the course of retirement, potentially 25-35 years, inflation has to be built in as it is bound to go up over that time. Talk with a financial advisor to make sure all of these uncertainties are adequately covered in your financial plan.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below.

0:40 - We can’t wait for some fall football!

2:19 - What retirement uncertainties are there?

4:04 - What is your life expectancy?

6:02 - Future tax rates are unknown but should be considered.

10:30 - What about the solvency of Social Security.

12:42 - How do you plan for healthcare needs?

14:52 - What about inflation?

Today’s Takeaway:

"Have a really good plan, maybe starting in your 50s, and revisit it annually."

– David Dickens

Episode 184: Mailbag - Should I Convert My IRA Rollover Into a Roth?

Thu, 11 Aug 2022 01:00:41 GMT

Today’s Prep:

What should you do with those retirement savings? Whether you are leaving a job or navigating big expenses in retirement, David is here to answer a few questions from the mailbag.

Equipping Points:

As a follow up to some of our recent podcasts, David answers two questions from the mailbag. Are you facing a similar situation? Or, do you have another question for David?

Annie is retired, single, and in need of home updates . She’s nervous about spending the money though since she may need it in the future. What should she do? David says to start by going back to your retirement plan to see when your plan says you will run out of money. Do you have room in your plan? Where are all of your savings?

The home improvements that you are making is an investment into an appreciating asset. When you sell this home, it’s likely going to be worth more than today, especially if you make improvements. Home furnishings however are not an investment, but are still important.

Raleigh recently left his job, rolling a 403(b) into an IRA. The 403(b) is half Roth and half traditional. His advisor is recommending to go ahead and convert the traditional side to a Roth as well, but that will be a big tax bill come the spring. With a retirement portfolio already 75 percent Roth, is it necessary to go to 100 percent Roth with retirement savings?

David says to look at your tax brackets. There might be a year in the future where your income is down, providing a better opportunity to do a Roth conversion . Ask when is the right window of opportunity to do a Roth conversion?

Listen to the entire episode or skip ahead using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

1:32 - Mailbag: Should I spend money on home updates in retirement?

8:24 - Mailbag: Should I convert my IRA rollover into a Roth?

Today’s Takeaway:

"Every year there are tax rules that can work in your favor if you’re aware of them and you take action on them."

– David Dickens

Episode 183: Do You Concur? Picking Sides In Important Financial Debates

Wed, 03 Aug 2022 23:38:04 GMT

Today’s Prep:

From credit cards to Social Security, David shares his thoughts and advice regarding these common financial concepts. Which of these do you agree or disagree with?

Equipping Points:

You may have heard someone say the best way to build wealth is by doing X. Which of these financial concepts does David concur with and which of these need further consideration?

For starters, should you always pay of your house as soon as possible? David says this isn’t always the correct answer. If can pay it off before retirement, you should. If you’re in your 30s and 40s, in most markets, your home value won’t grow as fast as the stock market. So, investing in other assets like your 401(k) or a brokerage account may help you build more financially over time.

Nobody needs life insurance in retirement, right? Actually, some people may choose to use a tax-free life insurance benefit to pass along an inheritance.

How does David feel about credit cards? Are those something everyone should avoid? David uses his credit card nearly every day, but he makes sure to pay them off in full every month. You should never carry a credit card balance.

Is it better to buy mutual funds or ETFs instead of individual stocks? Which mutual funds and ETFs should you invest in? Unless you love doing a ton of research, most people are better off buying mutual funds or ETFs instead of individual stocks.

Finally, should you start taking your Social Security as soon as you can? David says this is often not the right strategy. There’s a lot that goes into that decision, but it’s only just one piece of your retirement plan. Reach out to a financial advisor to find out what plan works best for you and your situation.

Listen to the entire episode or skip ahead to hear more about a particular term using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

1:45 - Should you always pay off your house ASAP?

4:07 - Nobody needs life insurance in retirement?

6:59 - Should you never use credit cards?

8:37 - Buy mutual funds or ETFs instead of individual stocks?

12:27 - Start Social Security as soon as you can?

Today’s Takeaway:

"Credit card debt is clear evidence that you’re living above your means, and that’s a perfect way to end up short on the goals you have for yourself."

– David Dickens

Required Minimum Distributions 101

Thu, 28 Jul 2022 15:56:53 GMT

Understanding mandatory retirement account withdrawals.

If you are approaching your seventies, get ready for required minimum distributions. You may soon have to take RMDs, as they are called, from one or more of your retirement accounts. You can now take some RMDs a bit later in life, which is good. Recent rule changes give your invested savings a little more time to potentially grow in your retirement savings vehicles before that first required drawdown.

If you have multiple retirement accounts (as many of us do), each one will require an annual RMD calculation. If you own multiple traditional IRAs, you have the choice to calculate RMDs for each of those IRAs and take the combined RMD amounts for all three IRAs from just one of those IRAs. You have the same choice if you have multiple 403(b) plan accounts. ¹ What do you need to do to avoid penalties with RMDs? The most important thing to do is to take them by the annual December 31 deadline. The second most important thing to do is to withdraw the right amount.

If you take an RMD after the December 31 deadline or withdraw less than you should, a penalty may apply. The I.R.S. may levy as much as a 50% tax on the amount not withdrawn. ¹ The good news is some investment firms will update you on your upcoming RMDs well in advance of annual deadlines, and your RMDs may even be calculated for you. This is not a given, however, and even when you receive such information, you must act on it, because it takes time to authorize and execute the RMD.

Lastly, take a look at how the RMD income may affect your taxes. There are ways to manage the tax impact of RMDs, and you can explore those choices with a financial or tax professional.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

1. Internal Revenue Service, March 16, 2022

Episode 182: Financial Jargon

Thu, 28 Jul 2022 09:00:00 GMT

Today’s Prep:

Wondering what you need to know about a bear market, a mutual fund, or a recession? David tackles these sometimes confusing topics and shares the essentials you should know.

Equipping Points:

You might be hearing different terms in the news like a bear market or a recession. Today we’ll talk through several financial terms and see how they apply in your life.

To start, what do you need to know about bear and bull markets? These describe the intermediate or long-term trend in the stock market. Once the market is down 20 percent from the peak, that’s the start of a bear market . A new bull market starts once you’re up 20 percent from the downturn. Where are we right now? We don’t know if we’ve seen the bottom yet, but we are in a bear market. Why should you care?

Diversification is a key method for reducing stock market risk in your portfolio. David shares an example of what this could look like. Instead of individually picking out stocks , you might decide to invest in a mutual fund or in an ETF with a broad exposure to a few different funds.

A recession is a significant prolonged downturn in economic activity. When two consecutive quarters of GDP is negative, it’s considered a recession. The National Bureau of Economic Research declares a recession way after it has ended. Even if we are in one now, the NBER won’t say so for another several months.

Index funds can either be a mutual fund or ETF. With one purchase, you can buy or sell a particular index. ETFs and mutual funds can be either passively or actively managed. Target date funds help you put your investments on autopilot. You need to figure out which one you are invested in and what the asset allocation is. Does it match what you want to accomplish in your portfolio?

Finally, what’s the difference between a 401(k), a Roth IRA, and an IRA? Anything with a Roth means you are paying your taxes now and the future growth is tax-free. A 401(k) and an IRA gives you a tax deduction today, but the growth will be taxed as ordinary income. When you pay your taxes can be super important depending on what tax rate you’ll be in retirement compared to the tax rate you’ll pay now.

Listen to the entire episode or skip ahead to hear more about a particular term using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

0:46 - The Chiefs are getting up and running again!

1:20 - Let’s talk about some financial jargon.

2:05 - What should you know about bear and bull markets?

6:07 - Why is diversification important?

12:10 - A lot of people are talking about a recession.

15:13 - What’s the difference between mutual funds, ETFs, and target date funds?

20:17 - 401(k) vs. Roth IRA vs. IRA? .

Today’s Takeaway:

"What you need to figure out is: what is it I’m investing in? What’s its asset allocation?"

– David Dickens

Episode 181: Are You Too Old for a Roth Conversion?

Thu, 21 Jul 2022 09:00:00 GMT

Today’s Prep:

Is now the right time to do a Roth conversion? David talks through which questions to ask before making the move.

Equipping Points:

Roth conversions are something we talk about a lot on the podcast. Anytime you can set yourself up to pay less in taxes is generally a good thing for you and your family and the next generation. But is there a point where you become too old to do a Roth conversion ?

A Roth conversion is what happens when you take money out of an IRA, put it into a Roth IRA, pay the taxes today, and then future growth will be tax-free. It likely makes a lot of sense now to do the conversion while the market is down . There are no guarantees in life, but there’s a lot of reason to believe that the market will go back up. Would you rather that happen tax-free or tax-deferred?

Start by asking what your tax rate is. Do you expect your tax rate to be higher in the future? You’re likely to have an increase in tax rate once you have to start taking RMDs. Before that happens is a good opportunity to take money out in the form of a Roth conversion. Another time you’ll potentially have an increase in tax rates is once you are widowed. One more question to ask is whether this will be a benefit to your family later on.

The next question to ask is when you’ll start to need the money from your IRA. Maybe you have Social Security and don’t need the money yet. What might the taxes look like when you need the money or when you have to take RMDs?

Do you have non-IRA money to pay the tax when doing a Roth conversion? There are two ways to pay the tax on a Roth conversion. David talks about the different options and which one is potentially more beneficial to you. In 2025, the tax cuts expire unless Congress does something to keep those taxes lower. David doesn’t foresee Congress keeping those taxes lower, so the right opportunity might be right now.

If you are thinking about doing a Roth conversion, make that decision within the next couple of months, before the end of the year. Reach out to a financial advisor to see if a Roth conversion is the right thing for you.

Listen to the entire episode or skip ahead using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

1:53 - Am I too old for a Roth conversion?

3:52 - What’s my tax rate?

9:07 - When will I start to need money from my IRA?

11:07 - Do I have non-IRA money to pay the tax?

15:19 - Taxes are low now but 2025 is right around the corner.

Today’s Takeaway:

"Roth conversions have to happen before December 31 ^st of that given year for it to be related to the tax year of 2022. "

– David Dickens

Episode 180: Is It Too Late to Sell My Stocks?

Thu, 14 Jul 2022 09:00:01 GMT

Today’s Prep:

Is now the time to sell or time to stay put with your investments? David shares what to look for to determine when we’ve hit the bottom and when to invest.

Equipping Points:

With the stock market down more than normal and seemingly bad news constantly coming out, are you wondering if the bottom is yet to come? Should you be selling your stocks or is it too late? Everybody is wondering which type of downturn this is and what to do that will prove to be wise in the long-run. There are a lot of opinions from the experts that don’t all agree, so how can you determine what to do?

David feels like we have not yet seen the bottom. For perspective, we’re down almost 20 percent right now yet still 3,000 points higher than we were at the bottom of 2008. What can we be on the lookout for? Is there strong evidence that inflation is under control? Another thing David says to look for is a strong pivot from the Fed away from raising rates aggressively. We need to achieve price stability. Another indicator is stock market internals. Right now we’re seeing lower highs and lower lows.

If you’re in your 20s, 30s, and 40s, this downturn is exciting as you buy these stocks on sale as you save for retirement. If you’re younger and saving money for a house in the next year or two though, this might not be the time to buy because you have a short-term use for that money. If you have a high-risk tolerance and have a long-term horizon, you can keep investing as you buy low.

If you’re older, likely to panic or have a low risk tolerance, this is not the time to be investing new money in the market . Instead, you should wait to see meaningful evidence of the bottom. Ultimately, focus on knowing who you are, knowing what your money is there for, and then investing accordingly

Listen to the entire episode or skip ahead using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

0:24 - It’s the dog days of summer!

1:38 - What do the experts say about the market?

4:26 - Is it too late to sell?

13:11 - Should we continue to buy even as it goes down?

Today’s Takeaway:

"Know who you are, know what your money is there for, and then invest accordingly. "

– David Dickens

Episode 179: Mailbag: When Can I Offset Gains with Losses?

Thu, 07 Jul 2022 21:07:46 GMT

Today’s Prep:

Following some of our recent podcast topics, David answers a few questions from listeners wanting to get more information. Then, David shares his thoughts on untrustworthy advisors and what to do to avoid them.

Equipping Points:

Did you hear one of the past few podcasts and think, “tell me more”? David answers some questions from listeners like you on today’s show.

Jen was talking to her boyfriend about the wash sale rule after hearing the podcast about using investments to manage taxes . Is the IRS requirement 30 trading days or 30 calendar days? David says you have 30 calendar days. You’ve sold a security, but if you want to take the loss for tax purposes, you have to make sure you don’t buy that security back within 30 days.

John listened to last week’s podcast regarding the capital loss carryforward but wondered when he can offset the gains with losses and when to just write off losses against other income. What’s the rule? How does this impact a future inheritance? John’s elderly father has a capital loss carryforward. Is this something he could eventually inherit?

Knowing the rules can be super helpful, because some of them actually work in your favor. Working with someone who works with these rules all the time can help guide you through making the best decisions and being strategic with your investments.

Finally, what does David think of advisors who take advantage of their clients? You occasionally hear stories of people losing their life savings to untrustworthy advisors. Watch out for red flags, such as being told to write personal checks to the advisor directly instead of a third-party custodian like TD Ameritrade, Schwab, or Fidelity. Another red flag is if they promise you higher than usual returns. Talk with a trusted friend or check the financial advisor’s experience and history online.

Listen to the entire episode or skip ahead using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

0:41 - David loves listener questions.

1:13 - Mailbag: What is the IRS requirement about the wash sale rule?

4:36 - Mailbag: When can I offset gains with losses?

14:03 - What does David think of advisors that take advantage of clients?

Today’s Takeaway:

"Knowing the rules can be super helpful, because some of them actually work in your favor. "

– David Dickens

What is an Annuity?

Thu, 07 Jul 2022 12:42:25 GMT

What you should know about them.

Individuals hold about $2.5 trillion in annuity contracts; a tidy sum considering an estimated $12.2 trillion is held in all types of IRAs. ¹

Annuity contracts are purchased from an insurance company. In exchange, the insurance company makes regular payments to the buyer — either immediately or at some future date. These payments can be made monthly, quarterly, annually, or in a single lump sum. Annuity contract holders can opt to receive payments for the rest of their lives or a set number of years.

The money invested in an annuity grows tax-deferred. The amount contributed to the annuity will not be taxed when the money is withdrawn, but earnings will be taxed as regular income. There is no contribution limit for an annuity.

There are two main types of annuities. Fixed annuities offer a guaranteed payout, usually a set dollar amount or a set percentage of the assets in the annuity. Variable annuities offer the possibility to allocate premiums between various subaccounts. This gives annuity owners the ability to participate in the potentially higher returns these subaccounts offer. It also means that the annuity account may fluctuate in value.

Indexed annuities are specialized variable annuities. During the accumulation period, the rate of return is based on an index. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contract. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made before age 59½, a 10% federal income tax penalty may apply (unless an exception applies). The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities are not guaranteed by the FDIC or any other government agency.

Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks as well as charges and expenses. You are encouraged to read the prospectus carefully before investing or sending money to buy a variable annuity contract. The prospectus is available from the insurance company or your financial professional. Variable annuity sub-accounts will fluctuate based on market conditions and may be worth more or less than the original amount invested when the annuity expires.

Case Study: Robert’s Fixed Annuity. Robert is a 52-year-old business owner. He uses $100,000 to purchase a deferred fixed annuity contract with a 4% guaranteed return. Over the next 15 years, the contract will accumulate, tax-deferred. By the time Robert is ready to retire, the contract should be worth over $180,000.

At that point, the contract will begin making annual payments of $13,250. Only $7,358 of each payment will be taxable; the rest will be considered a return of principal.

These payments will last the rest of Robert’s life. Assuming he lives to age 85, he’ll eventually receive over $265,000 in payments.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

1. Investment Company Institute, 2020

Episode 178: Roth Conversions in a Bear Market?

Thu, 23 Jun 2022 09:00:01 GMT

Today’s Prep:

Should you be considering a Roth conversion right now? David talks about the unique opportunities that a bear market provides.

Equipping Points:

What is a Roth conversion, why should you consider it, and is it a good idea in a bear market? David talks through several ins and outs about Roth IRAs and how they can fit into your financial plan on today’s show.

A Roth conversion is nothing more than taking money out of your IRA which is tax-deferred and putting it into a Roth IRA, which is tax-free. The only price of admission is that you have to pay the tax now. You’d do that if you think your tax rate in the future will be higher than it is today. There are certain income limits to whether you can contribute to a Roth IRA but anyone can do a Roth conversion.

Amidst a bear market, why do a Roth conversion now? Every market environment gives you an opportunity. The opportunity here is converting growth assets that are now down. You convert more shares that might be worth more ten years from now at lower prices. The results and gains will then be taken out tax-free. David shares an example of how this can save you money over time.

By keeping your eye on the long-game, there are opportunities in all markets . You just have to know where to look. If you want help from a financial advisor to help guide you through this, reach out to learn how it fits in your financial plan.

Listen to the entire episode or skip ahead using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

1:20 - Let’s talk about one of David’s favorite topics!

1:48 - What is a Roth conversion?

5:08 - Why would someone want to do a Roth conversion?

7:06 - How does a bear market impact a Roth conversion?

9:03 - Don’t wait for a market recovery.

14:16 - Should you take advantage of the opportunity?

Today’s Takeaway:

"If you’re worried about your heirs inheriting something that is super tax-efficient, a Roth is way superior to basically any other thing that they can inherit, other than maybe life insurance proceeds."

– David Dickens

Episode 177: Making Investment Losses Work FOR You

Thu, 16 Jun 2022 09:00:00 GMT

Today’s Prep:

What’s the silver lining in a down market? David shares what might be a benefit to you, despite the losses you may currently face.

Equipping Points:

With the recent market volatility, you might be wondering why a loss could ever be a good thing. On today’s show, David talks about how you can make losses work for you and your financial plan.

To start, identify the three basic types of accounts. Your IRA or 401(k) doesn’t tax you until you withdraw it. With a Roth IRA there’s never a tax bill. A non-qualified account like a brokerage account has a tax bill every year, which shows interest earned, dividends paid into your account, and any gains or losses you took during the year. This is where there is something you can do regarding the losses for your tax bill .

A short-term capital gain is on a stock you’ve had less than a year, but if you hold it for more than a year then you get a preferential tax rate. So, it’s super important to know what you own and how long you’ve owned it. Anything you sell at a loss goes to offset the tax liability you would otherwise owe on your gains. Tax loss carryforward is an asset of yours you get to use to reduce future tax liabilities.

If you’ve owned stock since January 2022 , then you have some losses and you might really like the stocks you own that have losses. Is the market going to go somewhere good over the next two or three months? It’s hard to imagine that. This might be a relatively safe time to sell at a loss, get into an index for the 30-day waiting period, and buy back what you sold at about what you sold it for.

Tax losses can be really useful to you moving forward, but it requires that you actually sell and realize the loss at some point. Reach out to your advisor to see if now is a good time to do that with some of your investments.

Listen to the entire episode or skip ahead using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

0:49 - Listener feedback is always welcome.

1:49 - How should we look at taking losses in our portfolio?

3:12 - What are the basic types of accounts and which one are we talking about?

7:41 - Why talk about it now?

Today’s Takeaway:

"It’s super important to know what you own and how long you’ve owned it. Anything you sell at a loss goes to offset the tax liability you would otherwise owe on your gains."

– David Dickens

Episode 176: Advice for the Almost Retired

Thu, 09 Jun 2022 12:53:12 GMT

Today’s Prep:

Is the economy making you nervous right now as you near retirement? What can you do right now to keep your investments and your sanity intact?

Equipping Points:

It can be scary when you’re getting ready to retire or are recently retired when the market looks like it’s about to take a down turn. With the S&P 500 now down about 15 percent since January, and the NASDAQ down almost 25 percent, Boomers in or nearing retirement might be getting a little nervous. With the caveat that we don’t give specific retirement or investment advice on this podcast, what should they do? Today, we’ll talk about the current market environment and what you should keep in mind if you are almost or already retired.

Some thoughtful and prominent people have a bad feeling about the economy for the next several months or years. You don’t have to necessarily be fearful, but you should know where your money is. David shares what an example of a balanced portfolio might experiencing right now and how having a plan is the best approach to move forward.

When people become fearful, they tend to sell out of panic and fear. David suggests two different alternatives for those into retirement or almost retired. Are you fearful or confident when facing the unknowns of the next several years? If you’re fearful after a 10 percent downtown, you should look for some help.

For a lot of David’s clients, he uses a triggering mechanism to switch to safety when needed. Similar to a hurricane warning, you may need to be prepared when certain indicators come up but won’t always be hit by the storm. Depending on your age and situation, know what you should do right now and stay focused. Come back next week to hear about a strategy with your taxes so you can use a down market to your advantage.

Listen to the entire episode or skip ahead using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

0:27 - Are you almost retired and worried about the market?

2:30 - Do you have a plan for your money right now?

8:20 - People sell out of fear. What can you do instead?

19:43 - What should you do now?

Today’s Takeaway:

“Make sure you have a really good plan in place, and if it’s not a written plan, it’s not a plan."

– David Dickens

Creating a Retirement Strategy

Wed, 08 Jun 2022 18:11:14 GMT

Most people just invest for the future. You have a chance to do more.

Across the country, people are saving for that “someday” called retirement. Someday, their careers will end. Someday, they may live off their savings or investments, plus Social Security. They know this, but many of them do not know when, or how, it will happen. What is missing is a strategy – and a good strategy might make a great difference.

A retirement strategy directly addresses the “when, why, and how” of retiring. It can even address the “where.” It breaks the whole process of getting ready for retirement into actionable steps.

This is so important. Too many people retire with doubts, unsure if they have enough retirement money and uncertain of what their tomorrows will look like. Year after year, many workers also retire earlier than they had expected, and according to a 2022 study by the Employee Benefit Research Institute, about 47% do. In contrast, you can save, invest, and act on your vision of retirement now to chart a path toward your goals and the future you want to create for yourself. ¹

Since it’s impossible to predict the future, some people dismiss having a long-range retirement strategy. Indeed, there are things about the future you cannot control: how the stock market will perform, how the economy might do. That said, you have partial or full control over other things: the way you save and invest, your spending and your borrowing, the length and arc of your career, and your health. You also have the chance to be proactive and to prepare for the future.

A good retirement strategy has many elements. It sets financial objectives. It addresses your retirement income: how much you may need, the sequence of account withdrawals, and the age at which you claim Social Security. It establishes (or refines) an investment approach. It examines financial implications and possible health care costs, as well as the transfer of assets to heirs.

A prudent retirement strategy also entertains different consequences. Financial professionals often use multiple-probability simulations to try and assess the degree of financial risk to a retirement strategy, in case of an unexpected outcome. These simulations can help to inform the financial professional and the retiree or pre-retiree about the “what ifs” that may affect a strategy. They also consider sequence of returns risk, which refers to the uncertainty of the order of returns an investor may receive over an extended period of time. ²

Let a retirement strategy guide you. Ask a financial professional to collaborate with you to create one, personalized for your goals and dreams. When you have such a strategy, you know what steps to take in pursuit of the future you want.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – EBRI.org, 2022

2 – Investopedia.com, October 4, 2021

Episode 175: 5 Mistakes You Don’t Want to Make With Your IRA

Thu, 26 May 2022 09:00:01 GMT

Today’s Prep:

No one wants to make a mistake when it comes to their hard-earned money! David talks through common mistakes people make with an IRA and how to avoid them.

Equipping Points:

Today we’re talking about one of David’s favorite topics: the IRA. Unfortunately, there are a number of common mistakes people make with their IRA. Let’s talk about what those mistakes are and how to set yourself up for success instead.

If you have a Roth IRA, you may have considered the rule about waiting five years to take the money out again. If you open up a Roth IRA, there is no penalty or tax for taking money out that you put in. The penalty occurs if you take out the earnings over the first five years. You can always take out the money you put in anytime you want, regardless of age. It differs however on Roth conversions in your 50s. You won’t face a tax but you would face a 10 percent penalty if you take the money out early from a conversion when taking money out before 59 and a half .

Another mistake that some people make is not diversifying your 401(k) before retiring. Are you set up well for the retirement you want? After you turn 59, you can often roll out a significant portion of your 401(k) into an IRA that you self-direct or do with an advisor. This is called an in-service distribution which gives you access to a wider variety of investments.

When it comes to RMDs or required minimum distributions, there are a lot of strategies you can take advantage of, but many people overlook them. Are you giving a lot of your money to charity? You may want to set up a qualified charitable distribution . David shares an example of how this can impact your tax brackets and why it’s important.

There are a lot of mistakes when it comes to the 60-day rollover rule. If you have an IRA and you want to move it into a different IRA, you can only do that one time per year otherwise it becomes a taxable transaction. What could these penalties mean and how does your portfolio take a hit if you do it wrong? As you’re moving your money around, do a custodian-to-custodian transaction.

A lot of people are starting to inherit IRAs. There is no such thing as a 60-day rollover on an inherited IRA or Roth. If you want to maintain the tax status of that, it must be rolled from one custodian to another. This could change in the future, but for now, you want to be extra careful with how to handle inherited accounts.

Listen to the entire episode to hear more about the mistakes people make or click ahead to a particular IRA mistake using the timestamps below.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

0:32 - Let’s talk about common IRA mistakes.

2:28 - Worried about the five year rule?

5:37 - Is your 401(k) diversified before you retire?

7:56 - Are you being strategic about RMDs?

13:17 - There’s no do-over on the 60-day rollover.

18:05 - There is no 60-day rollover on inherited IRAs.

Today’s Takeaway:

“The better you’ve done for yourself, the fewer tax mistakes you’d like to make."

– David Dickens

Episode 174: Common Questions About Your Home

Thu, 19 May 2022 09:00:04 GMT

Today’s Prep:

Housing is a really important topic for a lot of retirees because, for many of us, it’s the biggest asset we’ll ever own or manage. We want to get that part of our financial equation correct, so it’s no surprise it takes up a nice slice of the retirement planning conversation. On this episode, we’ll cover some common housing questions from retirees and hopefully hit on an issue that might also be on your mind.

Equipping Points:

For many of us, your home is the largest asset you’ll own, so you want to get it right. Is your home where you live or an investment? David talks through some common questions people have when it comes to owning a home.

Currently, interest rates are low, albeit beginning to trend upward. If you’re locked in at a lower rate, should you attempt to pay off your mortgage quicker? David is not generally concerned when his clients have a mortgage payment. The interest of an older mortgage is a smaller portion of the amount you pay, so there is not a significant reason to pay it off early. Every situation is different though, so consider what is right for you.

Should you downsize in retirement ? After years in a big house with your family, once your kids have moved out you might feel inclined toward a smaller home to live in and care for. Remember that downsizing is different than “right-sizing.” You could easily spend the same amount of money for a smaller house that you’d get for your current larger house, which isn’t really downsizing. Finding a smaller house might be right for you, but it’s not always a savings financially depending on what you buy.

Is it a good idea to use a home equity line of credit? David says in a lot of instances, a HELOC is perfectly fine, say when using it as an emergency fund. Don’t use it though like a credit card! Make sure you understand the fees and terms of borrowing under those agreements.

Considering signing over your home to your kids? Some choose to move their assets to their heirs so that Medicaid cannot get to it if needed. Medicaid has a five-year look-back though. Your home is a protected asset if you have a spouse living there, but be careful about trying to shuffle your assets around. What complications could your house create when it comes to your estate plan ?

Finally, is there ever a good reason for a reverse mortgage? David explains how a reverse mortgage works and why people choose to have them or avoid them.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:36 - How is David celebrating his upcoming birthday?

2:47 - Let’s talk about your home.

4:30 - Interest rates are low(er) right now.

7:58 - Is it wise to downsize?

11:02 - Should you get a home equity line of credit?

14:25 - Is it a good idea to sign over your home to an heir?

17:30 - How is your home set up within an estate plan?

19:54 - Are reverse mortgages a good idea?

Today’s Takeaway:

“If you don’t have a beneficiary designation on file at the county where the deed to your property is located--somebody has to gain title to that house before it can be distributed to your heirs & that’s going to happen in probate court. "

– David Dickens

Couples Retiring on the Same Page

Mon, 16 May 2022 13:03:03 GMT

Agreeing about what you want from retirement is crucial.

What does a good retirement look like to you? Does it resemble the retirement that your spouse or partner has in mind? It is at least roughly similar?

The Social Security Administration currently projects an average retirement of 18 years for a man and 21 years for a woman (assuming retirement at age 65). So, sharing the same vision of retirement (or at least respecting the difference in each other’s visions) seems crucial to retirement happiness. ¹

What kind of retirement does your spouse or partner imagine? During years of working, parenting and making ends meet, many couples never really get around to talking about what retirement should look like. If spouses or partners have quite different attitudes about money or dreams that don’t align, that conversation may be deferred for years. Even if they are great communicators, assumptions about what the other wants for the future may prove inaccurate.

Are couples discussing retirement, or not? According to a recent survey by Fidelity, seven in ten couples say they communicate at least very well with their partner about financial issues. Couples that do communicate with each other are more than twice as likely to report that they expect to live a comfortable lifestyle in retirement. They are also more likely to report their financial household’s financial health as “excellent” or “very good.” ²

If you’re having trouble building a retirement strategy with your significant other, working with a financial professional may help. According to the same survey, couples that work with a financial professional are more likely to talk about money with each other, feel confident about their finances, and agree on their visions of retirement. This may explain why nearly half of all Baby Boomers work with a financial professional. ²

Be sure to talk about what you want for the future. A few simple questions can get the conversation going, and you might even want to chat about it over a meal or coffee in a relaxing setting. Dreaming and strategizing together, even on the most basic level, gives you a chance to reacquaint yourselves with your financial needs, goals and personalities.

To start, ask each other what you see yourselves doing in retirement – individually as well as together. Is the way you are saving and investing conducive to those dreams?

Think about whether you are making the most of your retirement savings potential. Could you save more? Do you need to? Are you both contributing to tax-advantaged retirement accounts? Are you comfortable with the amount of risk you are assuming?

If your significant other is handling the household finances (and the meetings with financial professionals about a retirement strategy), are you prepared to take over in case of an emergency? When one half of a couple is the “hub” for money matters and investment decisions, the other spouse or partner needs to at least have an understanding of them. If the unexpected occurs, you will want that knowledge.

Speaking of knowledge, you should also both know who the beneficiaries are for your retirement plans, workplace retirement accounts, and investment accounts, and you both need to know where the relevant paperwork is located.

A shared vision of retirement is great, and respect for individual variations on it is just as vital. A conversation about how you see retirement today can give you that much more input to prepare for tomorrow.

Citations.

1 – SSA.gov, 2022

2 – Fidelity.com, 2021

Episode 173: Recent Financial Statistics

Thu, 12 May 2022 09:00:03 GMT

Today’s Prep:

What’s the average amount some have saved? How many people plan to work in retirement? We talk through recent financial statistics to give you an idea of what matters and what isn’t a great marker of financial success.

Equipping Points:

Sometimes it’s nice to know if you’re ahead or behind the curve. We cover six interesting financial statistics and see what David has to say about them and what it means for your financial plan.

To start out, on average, women have smaller overall retirement savings amounts. David thinks this statistic is a silly one to pay attention to. There’s no information about the average age of the women in this statistic. But further, it doesn’t show the whole story. For example, some women spend time away from their careers taking care of their children at home, like David’s wife did. Despite how much money is in her IRA compared to his 401(k), their retirement savings is shared between both of them. One way to ensure you achieve the retirement savings you want is by saving early and systematically.

Experts estimate you’ll need $1.04 million to have a comfortable retirement. But before you place too much weight on that number, step back and think about it. What is a “comfortable” retirement according to the experts? For some people, this dollar amount is more than they need and for others, this is nowhere near what some would need to maintain their lifestyle . Make sure you have a plan that is calculated toward making your retirement as comfortable as you want it to be based on the lifestyle you’ve been living.

Are you one of the 55 percent of American workers planning to continue working in retirement? Many people choose to work into retirement . Having your eye on a second career for no or little money can be a great plan. But make sure your plan makes working during retirement optional so you can opt-out of working in retirement as needed.

A quarter of Americans increased their savings as a result of the pandemic. David finds this statistic a bit disappointing. Another impact that may have to do with the pandemic is that the number of retired workers receiving Social Security benefits was almost 70 million in 2021, compared to 45 million just two years earlier. Be prepared for some changes to Social Security in the future.

Finally, retirees spend an average of $6,668 on healthcare in 2020. When making your financial plan, make sure to put a higher inflation factor on healthcare. That continues to get more expensive and the longer you live, the longer you’ll use it.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:57 - Women have smaller overall retirement savings amounts.

5:25 - Experts estimate you’ll need $1.04 million to have a comfortable retirement.

8:44 - 55 percent of American workers plan to continue working in retirement.

10:27 - 25 percent of Americans increased savings as a result of the pandemic.

12:20 - The number of retired workers receiving Social Security benefits was almost 70 million in 2021.

17:07 - Retirees spent an average of $6,668 on healthcare in 2020.

Today’s Takeaway:

“Don’t forget to pay yourself, whether you’re in your 30s, 40s, or your 50s because those are the monies that are going to be paying you back in your late 60s, 70s, and 80s."

– David Dickens

Episode 172: Mailbag: Should I Use My 401(k) to Pay Off my Consumer Debt?

Wed, 04 May 2022 21:59:47 GMT

Today’s Prep:

What should you do when you have retirement savings but a lot of consumer debt? David shares his thoughts on debt and how to tackle in before answering three other listener questions.

Equipping Points:

Wondering how to make the best decision on your next financial move? On today’s show, David answers four questions from the mailbag from listeners trying to make wise decisions with their money and investments.

Jack is retiring in three years and has almost a million in his 401(k), however he still has about $60,000 in consumer debt. Should he use the 401(k) to pay it off? David compares consumer debt to rust on a car, because it eats away at your money. Instead of taking money out of the 401(k) now while still working, David says to stop contributing above the company match. With that extra money, put that towards credit card debt. Reduce your spending and do what you can to pay off that credit card debt as fast as you can and make sure it’s gone before you retire .

Janice and her husband have met with a couple of different financial advisors and both of them have mostly only talked to her husband. How can she show that she is an important part of the conversation? David says to keep looking for a better advisor that you like and trust! When meeting advisors, ask the questions you need to know more about should you one day find yourself a widow. You want to work with someone who will include both spouses in the decisions and discussion.

Tony started taking his Social Security a few years ago at age 62 . Was that a mistake? It all depends. If you need the money now, then that wasn’t a mistake. If you think you’ll die younger, this could be beneficial, whereas if you live well into your nineties then you would gain more by waiting to start taking it. No one really knows when you’ll die though, so it would be just making a guess.

Finally, A.J. has seven different IRAs from different investment companies. It’s a lot to keep up with but it feels more diversified this way. Is this a good idea? David says this is the illusion of diversification. There’s nothing unique about any of those custodians, but the different mutual funds and ETFs mirrors the money invested in the other custodians.

Do you have a question for David? Reach out!

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:50 - David is looking forward to some upcoming travel and celebrations!

2:33 - Mailbag: Should I use my 401(k) to pay off my consumer debt?

6:42 - Mailbag: How do I show a potential advisor they should include me in the discussion?

10:23 - Mailbag: Was it a mistake to start taking Social Security at 62?

14:33 - Mailbag: Is diversifying with multiple IRAs a good idea?

Today’s Takeaway:

“Either be a really good DIY-er or get some help from somebody who does this all the time, and hopefully on a fiduciary basis, putting your interests ahead of theirs."

– David Dickens

Episode 171: The Accidental Retiree

Thu, 28 Apr 2022 09:00:03 GMT

Today’s Prep:

If you find yourself retiring sooner than you planned, what do you do? We talk through three steps you need to take if you find yourself retired earlier than expected.

Equipping Points:

After re-reading The Accidental President , David was inspired to talk about what we’re calling the “accidental retiree.” Sometimes people aren’t looking to retire but are let go and left wondering if they need to get a new job. An unexpected job loss in your early 60s or late 50s might cause you to reevaluate your original retirement plan.

What steps would you need to go through if you find yourself in this spot? Could you become work-optional and what would it take to make it happen financially? To start, assess what your current spending is. What is a must-have and what is a lifestyle extra? Then, consider what you need to secure in terms of health insurance.

Without a job, where will your income come from? Will that be enough to cover your expenses? Depending on your age , you may be able to start Social Security . Calculate the difference you would receive depending on when you start taking out withdrawals. Another possible source of income is with a pension if you have it. Could you work as a consultant or pick up a gig job? You might begin pulling money from your portfolio.

Finally, will you be able to make your money last? David works with his clients to target money to last until they reach 100 or into their 90s. Do your expenses need to adjust in order to have enough money for the long-run ? There may be things you decide to do with your house, such as paying off the mortgage or even refinancing. Don’t forget about taxes! Find out if there is a way to reduce your taxes now that will also help you in the future when taking out RMDs .

Make sure you surround yourself with people who are knowledgeable and who you trust to help you with your best interests in mind. This will ensure you can navigate through the challenges you may face and achieve your retirement goals.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:31 - What inspired today’s episode?

2:41 - What would you do if you became an accidental retiree?

4:00 - What do you spend now?

6:07 - Where will your income come from?

10:28 - Will your money last?

Today’s Takeaway:

“You can’t forget taxes as you’re looking through your plan."

– David Dickens

Episode 170: Understanding Financial Jargon

Thu, 21 Apr 2022 09:00:03 GMT

Today’s Prep:

Instead of pretending to understand these terms, let’s break it down and learn together what this financial jargon means and how it impacts you.

Equipping Points:

There’s a lot of jargon in the financial world, so today we will tackle five different terms that you might have wondered about. We’ll talk about inflation, recession, dollar-cost-averaging, bonds vs. stocks, and capital gains and losses so you can gain a better understanding about each of these topics.

Everybody has been hearing more about inflation lately, but what do you really need to know? Inflation comes about for a few different reasons, including too much demand. If you think about the cost of lumber recently or labor costs, you’ll see why we are facing inflation today. We also had a massive amount of stimulus during COVID, which then turned into supply chain issues. We’ve had low inflation for over a decade, and now we’re seeing a big jump in inflation. But is inflation good or bad? David says a little bit of inflation is good but persistently high inflation is a bad thing. What can we do about it ?

Another topic that’s starting to cross everyone’s minds is a recession. A recession is commonly described as two consecutive quarters of negative GDP growth but officially it’s a recession whenever the National Bureau of Economic Research declares it. To identify it potentially coming, look at leading economic indicators such as job loss claims, a purchasing managers index, retail sales, and the yield curve. Typically, during a recession there are lots of layoffs and business closures. It’s important to be prepared for when the next recession comes.

If you’re younger, dollar-cost averaging is your friend. With your 401(k), IRA, or personal investments not being used toward saving for a home purchase, dollar-cost averaging of systematic investments allows you to buy stocks on sale as the price goes down. When the market is going down, that’s not a time to be fearful if you’re in your 20s, 30s, and 40s. When you’re retired though, you don’t benefit from reverse dollar-cost averaging. Make sure you avoid the negative impacts from reverse dollar-cost averaging by having a year or two of cash or bonds in your account. What are the differences between stocks and bonds? David explains what it means when you hold a stock vs. a bond.

Finally, do you understand the rules when it comes to capital gains or losses? Depending on your tax bracket, how will you be taxed ? With tax-loss harvesting, you can offset you gains with your losses. Do you know the timeline you need to hold the asset? Or what to expect to pay in taxes? It’s really important to understand the rules to make sure you do it in a way that benefits you.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:33 - There’s always something to look forward to!

2:20 - What financial jargon should we know more about?

3:44 - What causes inflation?

8:08 - What does a recession look like?

13:36 - How does dollar-cost averaging work?

17:01 - What are bonds vs. stocks?

21:27 - What are the rules with capital gains and losses?

Today’s Takeaway:

“The recession outlook is important. It’s important to be prepared for when the next recession comes, not that you can do anything about stalling it off, but it might help you more mentally prepare. "

– David Dickens

Episode 169: 5 Things to Know About Qualified Charitable Distributions

Thu, 14 Apr 2022 09:00:04 GMT

Today’s Prep:

What’s a QCD and how might it benefit you? David talks through the ins and outs of qualified charitable distributions on today’s show.

Equipping Points:

If you’ve got a sizeable IRA, you may want to know about these opportunities to benefit from QCDs or qualified charitable distributions. Is a QCD something you should do as a part of your financial plan?

A few years ago, Congress significantly increased the amount of your standard deduction on your tax return, which meant most people no longer have to do itemized returns. Once you are over 70 and a half years old , you can gift money directly from the custodian to your church, university, or 501(c)(3). This allows you to give the money and still get the tax benefit, even without itemizing.

How much can you give through a QCD? The most a person can give is $100,000 per person in any given year. If you’re married filing jointly, this means $200,000 total between the two of you. This could be to one entity or separated out to a handful of nonprofits.

The money has to go from the custodian to the charity directly. It cannot go to a donor advised fund you may have set up previously or a private grantmaking foundation. Instead, it has to go directly to the institution you are benefitting.

When you’re preparing your taxes, you do not include a QCD when itemizing. You’ll want to assess whether you should do a QCD if you’re already itemizing. This is treated separately. Don’t wait until mid-December to do this. You may be tempted to do it through a check, but if you are too close to the end of the year, it can be recorded in the next year depending on when the check gets cashed.

Is this only for people who are facing RMDs and need a creative solution? David says it’s a good way to be charitable with your money in retirement, whether you are trying to use your RMD or not. Reach out to David and the team to see if it’s the right choice for you.

What’s the most important age of all? David shares how you can feel most confident in retirement, regardless of how old you are.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

1:18 - What is a QCD?

4:54 - How much can you give with a QCD?

5:34 - Can it be done from a 401(k)?

6:24 - Where can it go?

8:38 - How does it work at tax time?

10:05 - When should you do it?

11:32 - Is it only for people who have RMDs?

Today’s Takeaway:

“QCDs: It’s a really good way for people to gift this type of money, while they’re living, to charities they care about and not let the IRS get to take a bite out of it."

– David Dickens

Why Don’t All Affluent People Become Wealthy?

Fri, 08 Apr 2022 14:18:42 GMT

Perception, hesitation, & poor decisions are factors.

Why do some people let their potential for lifetime wealth slip away? Some people are better off economically at 30 or 40 than they are at 50 or 60. In some cases, fate deals them a bad hand. In other cases, bad decisions and inaction are to blame.

Some buy depreciating assets instead of allowing assets to appreciate. They rack up debt and live beyond their means. What are they spending so much on? It isn’t just consumer staples. It’s not unusual for a family to “keep up with the Joneses.”

Contrary to the bumper sticker, the person who dies with the most toys does not necessarily win. In fact, that person may leave a pile of debt and little else behind. Today’s hottest cars, clothes, flat screens, phones, and tablets may be tomorrow’s junk and clutter.

Some never prioritize a retirement strategy. For many, there are opportunities to invest, whether it be through a traditional individual retirement account or a workplace retirement account. In the case of workplace retirement accounts, some companies offer matching contributions, which may be an opportunity to heighten your savings power. That being said, not everyone takes advantage of these opportunities. ¹

Once you reach age 72, you must begin taking required minimum distributions from your 401(k) plan and traditional IRA in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

Some never build up an emergency fund. Financial challenges will arise, and a rainy-day fund can help you meet them. Striving to save for that rainy day also helps to promote good, lifelong saving habits.

Some invest without a strategy. Chasing the recent hot trend is a behavior that may lead to frustration instead of financial freedom. Instant wealth seldom comes from an overnight winner. These ideas don’t stop people from hazardously assigning an excessive portion of their assets to one investment.

Some accept a “forever middle class” mindset. Some people define themselves as middle class and accept that definition all their lives. The danger is that this can amount to a kind of psychological barrier, a sense that “this is it” and that “getting rich” is for others.

Behavior & belief may count as much as effort. It takes some initiative to create lifetime wealth from present-day affluence, but a person’s outlook on money (and view of its purpose) can influence that effort – for better or worse.

Citations

Episode 168: The Most Important Birthdays In Retirement Planning

Thu, 07 Apr 2022 09:00:03 GMT

Today’s Prep:

After you blow out the candles, what do you need to know as you cross the threshold of certain birthdays in your life? David shares important ages when financial planning.

Equipping Points:

No matter how old you are, this episode is for you. We talk birthdays and milestones you’ll want to keep in mind when it comes to your financial plan.

If you’re about 30 years old, it’s important to have long-term financial goals in mind. Have automatic contributions to your 401(k) and/or IRA. Make sure you’ve eliminated credit card debt from your life. Finally, make sure to do an annual net worth statement to see exactly where you are and where you’ve been.

Once you get to 50 years old, after years of saving and working hard at your career, you are allowed to put more into your 401(k) or IRA. These are called catch-up contributions with extra money allowed into these accounts. If a proposed bill passes, you may be able to put in even more money into your investment accounts.

At age 59 and a half, you can take money out of your IRAs and 401(k) without penalty. When you get to 62, you can begin to claim Social Security. There are reasons why you might want to put it off until later, but it’s good to know your options. By 65, you are eligible for Medicare. From 66 to 67, you will reach full retirement age (depending on what year you were born) and full retirement benefits.

Required minimum distributions start at age 72. This means you’ll have to take out a certain amount of your IRAs and 401(k)s. The proposed bill might move the age to 73 next year, but then go up to 74 and 75 for RMDs in the future. Some take money out of their IRAs because they need the money. For those who don’t need it, this can make a big difference on your tax bill.

What’s the most important age of all? David shares how you can feel most confident in retirement, regardless of how old you are.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:30 - How do we feel about that final NCAA tournament game?

3:01 - What should you be aware of around 30 years old?

4:18 - What can you do at age 50?

7:17 - What happens at age 55?

9:14 - By 62, what options do you have?

12:11 - At 65 you’re eligible for Medicare.

13:02 - What’s important about 66 and 67?

14:31 - You can delay Social Security benefits until 70.

15:04 - RMDs start at 72.

18:16 - What age is most important?

Today’s Takeaway:

“Having a real plan, a written plan, for your retirement (especially if you’re over 50), gives you a whole lot of confidence as you’re getting toward that day."

– David Dickens

Episode 167: 8 Key Steps to Organizing Financial Records

Thu, 31 Mar 2022 09:00:04 GMT

Today’s Prep:

We all have important papers, but how do you know what you really need vs. what you can toss? David shares what to shred and what to hold onto when it comes to your financial records.

Equipping Points:

As a follow up to our discussion about financial documents , we wanted to talk about how to get organized with those records. Some things you keep and some things you should toss! In fact, David and his office have a shred day scheduled for Tuesday, May 17 and anyone is welcome to join. But what things should you bring to shred and what is better kept safe?

Clients often keep investment statements from their brokerage accounts for a long time. We used to need to know the cost basis to qualify for long-term capital gain. After 2011, custodians are required to keep that documentation for you, making those monthly records less important to hang onto. David says to shred these as soon as you review them.

Bank statements are easy to get electronically, so you may not even need a paper statement. Most financial institutions offer two-factor authentication when you login online to these accounts. This helps verify that it is actually you when doing things online.

How long do you need to keep your tax records? The last three years are key, but up to six years are helpful to have. Past that, you can put those in the shredder since that takes up a lot of space. What do you need for this current tax year? A few years ago you needed more documentation for itemizing, but the standard deduction is so high that you might not need that anymore.

Some documents you should retain forever such as a birth certificate or Social Security card. David uses a fireproof box at his home for these types of things, but another option is a safe deposit box. Make sure that your heirs are able to get to these documents if you die. Same with a will or power of attorney, make sure the right people know where those documents are and how to access them if needed.

If you own a home, you may want to keep all the documentation of home improvement projects. This can be helpful when you sell the home as you figure out the taxes on the sale. Receipts for other valuable items you have or pictures of the inside of your home should be kept in case something were to happen with your home.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

1:45 - What should you do with investment statements?

4:37 - Should you keep bank statements?

7:08 - How long do you need your tax records?

8:39 - Do you need current year’s tax return documents?

10:50 - Birth certificates and Social Security cards are tough to replace.

13:22 - Wills and estate planning documents should be kept.

14:30 - Home improvement documents should be kept as long as you own the house.

16:59 - Receipts for valuable items you have should be kept.

Today’s Takeaway:

“The longest you need to keep tax records is six years."

– David Dickens

Episode 166: Financial Documents Needed Through Your Life Stages

Thu, 24 Mar 2022 09:00:03 GMT

Today’s Prep:

What financial documents do you most need, based on where you are in life? David points us toward the right ones you want to focus on in your life stage.

Equipping Points:

From early on, you need certain financial documents in order. On today’s episode of Cover Your Assets KC, David talks through the different life stages we face and how to prepare for them through different financial documents. These are the important basics, but remember, the more complicated your situation, the more you’ll want to reach out to a professional to make sure your unique scenario is properly covered.

The key thing in your 20s is to have really good beneficiary designations. This is a lifelong process to make sure your beneficiary designations reflect what you want to have happen. There are a number of ways you can do this, but you have to designate someone. Don’t forget to communicate with these future beneficiaries to make sure your wishes are fulfilled. What happens if you only name a primary beneficiary but not a contingent one? Do you own a home? If you do, do you have a will? Did you know you can have a beneficiary designation on your home, your car, and your bank account? This helps beneficiaries avoid waiting for those assets to go through probate .

Make sure you have long-term goals in your 30s for what you want for the future. Write these down so that you can come back to these goals. Where do you want to be by age 40, 50, 60, and beyond? How much money do you want to have in retirement? If you are successful, you may look back and see how much you underestimated what was possible.

As your life becomes a little more complex, you might end up needing or wanting a will. Remember though that a beneficiary designation will override the will. Many people set up a will after having children in order to set up guardianship for their children. You want to discuss this role with you’re the chosen guardians to avoid any surprises in the will. Beyond beneficiaries and wills, David thinks it’s really important to have powers of attorney assigned for healthcare and financial purposes. This person can speak for you if you can’t. Do you have a living will?

In your 50s and onto retirement, there are more documents to consider. Do you need a trust or an estate plan ? A trust can be a sensible thing depending on the situation, but David says the vast majority of people do not need a trust. When you are 50, it’s time to have a really good written retirement plan. You’ll want to include what your plan is for things like long-term care or your withdrawal strategy. Then once you are retired, continue to reassess your plan each year to make sure your money will last.

Depending on where you are in life, do you have what you need done?

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:28 - March Madness is here!

2:06 - Which financial documents do you need in which life stage?

3:46 - Do you have the right beneficiary designations listed?

8:49 - If you own a home, who is it set to go to?

9:51 - Do you have financial goals?

12:45 - Do you have a will in place?

16:30 - Who will speak for you if you can’t?

18:06 - Do you have a living will?

20:27 - What do you need ready in your 50s and into retirement?

Today’s Takeaway:

“You need to have really good beneficiary designations…this is a lifelong process to make sure your beneficiary designations reflect what you want to have happen if you die."

– David Dickens

Episode 165: Understanding Financial Designations

Thu, 17 Mar 2022 09:00:07 GMT

Today’s Prep:

What do all those letters and terms following an advisor’s name mean? We explain what you need to know and what’s important when it comes to designations in the financial industry.

Equipping Points:

When you first come across a financial planner, you may notice a few letters or numbers behind their name. What do they all mean? How much does it matter as you decide who to work with?

We start with IAR or RIA. An RIA is a registered investment advisor is a person or most often a firm registered either with the SEC or the state they operate in. An IAR is an investment advisor representative. They have a fiduciary responsibility to give investment advice that is in the client’s best interest.

What are the more common designations and why do so many of them contain the letter “c”? It can stand for words like chartered, certified, consultant, credited, and more. David talks through some differences between a few of the most common ones like CFP, CFA, ChFC, or RICP, and what it takes to get those designations. After coursework and a rigorous exam, financial planners are able to use these designations to show their level of expertise and understanding. As an investor, you want to know how rigorous the course of study and how rigorous the testing is.

When talking about qualifications, some advisors will promote their Series 65, Series 7, or several others that have the word “series” in it. David explains the difference between each that allows advisors to sell certain products within the financial world. Remember, the difference between a brokerage firm and an advisory firm is that you have a different level of responsibility to your customer or client.

Should your financial advisor have a particular college degree? David feels that the advisor you’re working with should have a significantly broad understanding of how financial markets and money works. Having at least an undergraduate degree that includes classes in economics, money banking, and investments helps. Someone with an MBA doesn’t necessarily qualify someone to work with you if they have classes in marketing or other courses that don’t apply as much, but it’s worth having an undergraduate degree as the base education before putting the other designations on top. David shares what designations he thinks is most important for an advisor to have before you work with them to plan your retirement . What designations does your advisor have?

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:35 - What do all those financial advisor designations mean?

2:13 - What does IAR or RIA mean?

5:26 - What does the letter “C” stand for in these designations and why should I care?

12:28 - What does a “series” mean when promoted by an advisor?

16:12 - Does a financial advisor need a certain college degree?

18:30 - What designations should an advisor have to prepare someone for retirement?

Today’s Takeaway:

“The difference between a brokerage firm and an advisory firm is that you have a different level of responsibility to your customer or client."

– David Dickens

Getting (Mentally) Ready to Retire

awashington@kcfinancialadvisors.com (Alexandria Washington) — Fri, 11 Mar 2022 16:25:21 GMT

Even those who have saved millions must prepare for a lifestyle adjustment.

A successful retirement is not merely measured in financial terms. Even those who retire with small fortunes can face boredom or depression and the fear of drawing down their savings too fast. How can new retirees try to calm these worries?

Two factors may help: a gradual retirement transition and some guidance from a financial professional.

An abrupt break from the workplace may be unsettling. As a hypothetical example, imagine a well-paid finance manager at an auto dealership whose personal identity is closely tied to his job. His best friends are all at the dealership. He retires, and suddenly his friends and sense of purpose are absent. He finds that he has no compelling reason to leave the house, nothing to look forward to when he gets up in the morning. Guess what? He hates being retired.

On the other hand, if he prepares for retirement years in advance of his farewell party by exploring an encore career, engaging in varieties of self-employment, or volunteering, he can retire with something promising ahead of him. If he broadens the scope of his social life, so that he can see friends and family regularly and interact with both older and younger people in different settings, his retirement may also become more enjoyable.

The interests and needs of a retiree can change with age or as he or she disengages from the working world. Retired households may need to adjust their lifestyles in response to this evolution.

Practically all retirees have some financial anxiety. It relates to the fact of no longer earning a conventional paycheck. You see it in couples who have $60,000 saved for retirement; you see it in couples who have $6 million saved for retirement. Their retirement strategies are about to be tested, in real time. All that careful preparation is ready to come to fruition, but there are always unknowns.

Some retirees are afraid to spend. They fear spending too much too soon. With help from a financial professional, they can create a strategy.

Retirement challenges people in two ways. The obvious challenge is financial; the less obvious challenge is mental. Both tests may be met with sufficient foresight and dedication.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Episode 164: Mailbag - How Much Can I Spend Yearly and Not Run Out of Money?

Thu, 10 Mar 2022 10:00:17 GMT

Today’s Prep:

Today, we are answering some more mailbag questions from our listeners. How much can you spend without running out of money? How does a 401(k)-rollover work? We’ll answer these and more on today’s show.

Equipping Points:

We are returning to the mailbag on today’s episode to answer some listener questions. We’ll be covering four intriguing questions on running out of money, IRAs, annuities, and 401(k) investment options.

Mary says “I’m 62 and I have about $1.4 million. How much can I spend yearly without running out of money?”

While this might seem like a simple math problem it’s not. Retirement planning considers a lot of different factors. We don’t know how long Mary will live and we also don’t know how she is invested. If she is a high-risk investor that $1.4 million could easily go down. These are the kind of variables we want to consider.

In the financial industry there is a rule of thumb called the 4% rule. It tells us that once you retire you should feel comfortable taking out 4% of your nest egg. While this might be okay for some retirees, we like to sit down with you and run software that will calculate the amount your can be spending yearly based on your unique circumstances.

George asks “I have all of my retirement savings in one IRA. Should I move some of it somewhere else to be diversified?”

We get this type of question a lot. But you can be really diversified inside of one IRA. You can have a wide variety of stocks, bonds, real estate trusts, etc. inside of one IRA.

Depending on your situation though you may want to look into different accounts. Perhaps you want to invest in a fixed annuity or CD. Those are probably things you have to do outside of the IRA you already own.

Mark writes in, “I feel like I need to reduce the risk in my portfolio. But I don’t know where to turn. I’ve looked at bonds, annuities, and just moving to cash. All of those options seem to have drawbacks that I don’t like. What am I supposed to do?”

Why do you feel the need to reduce your risk? Has this been the plan for the last couple of years or could you be getting skittish with the most recent market downturn? We don’t want you to make an emotional decision. We have to understand what drawbacks you are warry of and go from there.

All investments have a SLY component: safety, liquidity, and yields. You need to evaluate the different types of investments and how they compare. Stocks don’t have any safety, but they have tremendous liquidity and long-term yields. In contrast, cash tends to be safe but doesn’t produce as much yield. You have to decide the tradeoff you are most comfortable with.

Doug says, “I don’t like my 401(k) company options. But my company says I’m not eligible to roll the money over into an outside account. I know other people that have done this. So, how does this work?”

Most people that rollover their 401(k) are over 59 ½. Almost every 401(k) plan allows for an end service distribution once you turn a certain age, allowing you to move that money. We’d encourage you to get in contact with your HR department. Ask about in-service distributions and how old you need to be to do a distribution.

If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at ddickens@kcfa.com

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:38 – How is David doing?

2:00 – “How much can I spend yearly without running out of money?”

5:55 – “I have all my money in an IRA; should I move it somewhere else?”

9:36 – “How do I reduce the risk in my portfolio?”

13:27 – “How does a 401(k)-rollover work?”

Today’s Takeaway:

“The blunt tool is the 4% rule and it’s a great place to start if you’re a DIYer. If you work with an advisor, you probably have a much more sophisticated plan in place. "

– David Dickens

Episode 163: Mailbag - Should I Care About What the Fed is About To Do?

Thu, 03 Mar 2022 10:00:17 GMT

Today’s Prep:

How closely should you pay attention to what is happening with the Fed right now? David answers this and two other questions from the mailbag on today’s podcast.

Equipping Points:

Have a question or concern as we face things like inflation or a possible downturn? David discusses what you can do and how to think through your financial decisions by answering a few questions from the mailbag.

Joan is turning 62 with plans to work another few years before retiring. She has almost all of her retirement savings in her 401(k) and IRA rollovers . Should she even care about what the Fed is going to do? David says what the Fed is getting ready to do is actually pretty important. The Fed has kept rates low and inflation has been low for a long period of time up until recently. In order to fight inflation rates, the rates are going to go up and liquidity is going to go down. The reason you might care about what the Fed does is the fear that they might do too much too fast, putting us into a recession. You have to be on the lookout for those signs of the next recession because that’s what’s going to cause a tremendous amount of pain in your 401(k) if you haven’t taken precautions to lessen that downturn.

Rob was recently told there was only so much Social Security set aside for him based on how much he put in. He also was told that waiting too long to take Social Security will make that check smaller. Is that true? David says Social Security is on a much shakier ground than it used to be. It might face some changes, but right now your benefit is based on your best 35 years of earnings. David explains what it takes to figure out the ideal age for you to begin taking out Social Security.

John is retired and his portfolio is down about 10 percent since this most recent downturn. He thinks he is a long-term investor but fears this could be like 2001 and 2008 when the stock market went down so much. Is this going to be a similar situation? David says we are at a potential turning point that could just be a correction instead of a downturn. Make sure you are comfortable with the amount of loss you could face. It’s a complicated question, so be sure to let your financial advisor help you navigate these financial decisions as we face situations that we can’t completely predict .

Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.

0:54 - Should I care about what the Fed is about to do?

7:29 - Will my Social Security checks get smaller if I don’t withdraw soon?

13:18 - Will this downturn be similar to 2001 or 2008?

Today’s Takeaway:

“You have to be on the lookout for those signs of the next recession because that’s what’s going to cause a tremendous amount of pain in your 401(k) if you haven’t taken precautions to lessen that downturn."

– David Dickens

Episode 162: The Most Important Part of Retirement Planning

Thu, 24 Feb 2022 10:00:13 GMT

Today’s Prep:

Just what matters most when it comes to planning and saving toward your retirement? We compare notes between a number of experts and David weighs in on how and where to focus your efforts.

Equipping Points:

What is the most important part about retirement planning? Is there one thing that is more crucial than all the rest? We searched through the web to find out what some experts say is key to retirement planning and then see what David thinks matters most.

Retirement is a big shift in lifestyle, so some might think that you first need to determine how to spend your time in retirement. David says he has had a lot of clients however who appreciate the lack of structure. They may plan to travel and spend time with family, but a lot of the fun of retirement is letting the time fill itself as you go.

When saving for retirement, some say, start now! This advice is very high on David’s list as well. It’s super important to take a stab at the plan early. Visualize and dream a little bit about what you think it will be like to retire and what you want it to be like. Live below your means and save systematically. Starting early makes a huge difference.

How much you’ll spend in retirement is hard to predict , but David says that should not stop you from planning. Have you stress-tested your plan? It’s important to have an idea what you think you’ll spend in retirement once you’re getting to your 50s and 60s. You want to know what kind of lifestyle you’ll be able to afford.

Are proper allocations arguably the most important step? David says you need to have your asset allocation goal be to have appropriately allocated investments for your risk tolerance. This will keep you from doing something emotion in a market downturn that could be bad for your plan.

Is making your retirement fulfilling the key to success? Among David’s clients this isn’t a big dilemma, mainly because their financial plan is able to support their desires in retirement . Does picking the right financial advisor make all the difference? While it can have an impact as they help you make decisions, David still doesn’t think it’s the most important part of retirement planning. For him, it’s all about starting early. When you start early with saving and planning, that will take you where you want to go in retirement.

Listen to the entire episode or skip ahead using the timestamps below.

0:23 - It’s still snowing!

1:59 - What is the most important part about retirement planning?

3:16 - Decide what you want to do with your time.

5:55 - Start now.

8:28 - How much you’ll spend in retirement is hard to predict.

11:00 - Are proper allocations arguably the most important step?

12:55 - Is your retirement fulfilling?

15:14 - Picking the right planner makes all the difference.

16:59 - What does David say is most important?

Today’s Takeaway:

“Just living below your means, you can make a pretty nice retirement for yourself without doing anything spectacular."

– David Dickens

Roth IRA Conversions

Fri, 18 Feb 2022 16:15:38 GMT

What are your choices? What are the benefits?

If you own an Individual Retirement Account (IRA), perhaps you have heard about Roth IRA conversions. Converting your traditional IRA to a Roth IRA might be a sound financial move depending on your situation.

But remember, this article is for informational purposes only, not a replacement for real-life advice. A professional should be consulted before attempting this type of strategy. Tax rules are constantly changing, and there is no guarantee that the tax treatment of Roth or Traditional IRAs will remain the same as it is now.

Also, Roth conversions have come under much scrutiny during the past few years. Congress has considered legislation that would prevent high-income Americans from Roth conversions. While no action has taken place, it is possible that Roth rules may change in the future.

Why go Roth? Every Roth IRA conversion is based on a belief: the belief that income tax rates will be higher in the future than they are now. If you hold this belief, then you may want to consider a Roth conversion.

Once you are 59½ and have had your Roth IRA open for at least five calendar years, withdrawals of the earnings from your Roth IRA are exempt from federal income taxes. In addition, once five calendar years have passed, you can withdraw your Roth IRA contributions tax-free and penalty-free. ¹

Under current I.R.S. rules, if you are the original owner of a Roth IRA, you never have to make mandatory withdrawals from your account. And you can make contributions to a Roth IRA as long as you continue to have earned imcome. ²

Currently, if your federal tax filing status is married filing jointly and your adjusted gross income (AGI) is $204,000 or less, you can contribute a maximum of $6,000 to your Roth IRA, $7,000 if you’re age 50 or older. The maximum contribution is also available to single filers with an AGI of $129,000 or less. Depending on how high your AGI is, the amount you are able to contribute may change. ³

Why not go Roth? There are many reasons, but here are two to consider: you have to be prepared for the taxable event and time may not be on your side.

A Roth IRA conversion cannot be undone. The I.R.S. regards it as a payout from a traditional IRA prior to that money entering a Roth IRA, and the payout represents taxable income. That taxable income stemming from the conversion could have tax consequences in the year when the conversion occurs. ⁴

In many respects, the earlier in life you convert a regular IRA to a Roth, the better. Your income may rise as you get older; you could finish your career in a higher tax bracket than you were in when you were first employed. Those conditions relate to a key argument for going Roth: it is better to pay taxes on IRA contributions today than on IRA withdrawals tomorrow.

On the other hand, since many retirees have lower income levels than their end salaries, they may retire at a lower tax rate. That is a key argument against Roth conversion.

You could choose to “have it both ways.” As no one can reliably predict the future of American taxation, some people contribute to both Roth and traditional IRAs – figuring that they can be at least “half right” regardless of whether taxes increase or decrease.

If you do go Roth, your heirs may receive tax-free distributions. Lastly, Roth IRAs can prove to be very useful estate management tools. If I.R.S. rules are followed, Roth IRA heirs may end up with a tax-free inheritance from the account. In contrast, distributions of inherited assets from a traditional IRA are taxed. ¹

Under the 2019 SECURE Act, most non-spouse beneficiaries of a Roth IRA are required to have the funds distributed to them by the end of the tenth calendar year following the year of the original owner’s death. ⁵

Citations

1 - U.S. News, January 27, 2022

2 - Internal Revenue Service, November 27, 2021

3 - Internal Revenue Service, November 5, 2021

4 - Investopedia, February 2, 2022

5 - Forbes, December 14, 2021

Episode 161: Updates to Rollovers and Required Distributions

Thu, 17 Feb 2022 10:00:14 GMT

Today’s Prep:

Are you ready to do a rollover or dreading the need to do a required distribution? David explains some recent updates that may make this a bit easier for you.

Equipping Points:

From rollovers to required distributions, we have a lot to talk about on today’s podcast! Are you aware of the changes that have been made recently as well as the rules regarding each of these things?

The life expectancy table changed, which could impact your required distributions. David talks through the different amounts you need to pay attention to, depending on your age. A lot of his clients would rather not take anything out of their account, but the government requires it in order to tax it. This change results in less money required to be taken out, but if you do need more to live off of, you can still take out as much as you need.

Another change has to do with IRA rollovers. There are a lot of strict rules about how to do it, which can often be confusing. How does it work if you are switching brokers? How can you avoid problems while doing the rollover? David discusses what’s allowed and what’s not when doing an IRA rollover. He walks through step-by-step what the process would look like if someone wanted to do a big rollover. Don’t forget about creative solutions, such as a Roth conversion. The vast majority of times, when moving IRAs around, you want to do a direct transfer, custodian-to-custodian.

Be sure to come back for next week’s episode as David answers some listener questions.

Listen to the entire episode or skip ahead using the timestamps below.

0:30 - Today we’ll talk about something for everyone.

1:09 - What recent changes have been made?

2:30 - Why does the life expectancy table change matter?

7:34 - How can you do an IRA rollover without issue?

10:45 - David shares a client example of a rollover.

Today’s Takeaway:

“If you’re moving your IRAs around--the vast majority of times, you want to do a direct transfer, custodian-to-custodian."

– David Dickens

Episode 160: Planning for Things You Can’t Predict

Thu, 10 Feb 2022 21:16:46 GMT

Today’s Prep:

There’s a lot we can’t know, so how do you plan for it? From taxes to market crashes, David talks through what you can do to make sure you aren’t caught off-guard when the unexpected happens.

Equipping Points:

What kinds of things will you face in the future? Have you planned accordingly? Both David and co-host Walter are on the road for today’s show as they talk about how you can’t always predict what will happen but what you can do instead.

In the financial world, it sure would be nice if we knew when and for how long the next market crash would happen. No one can predict what the market is going to do though. There are different guideposts David uses to do the math of gains and losses. What’s the difference between a downturn and a downturn that turns into a recession? David explains the key markers to pay attention to.

With inflation, it’s easy to quickly get concerned about what things like healthcare might cost in 20 years. David shares how he helps his clients prepare for healthcare costs, including the possible need for long-term care. Healthcare costs are going to go up. While we might not be right with just how much it will cost, not putting it in your plan is worse than overlooking it completely.

Right now, tax rates are historically low. The Trump tax cuts are set to expire in 2025, if Congress does nothing about it between now and then. David thinks the real risk for taxes going up is to impact those in the higher tax brackets so that more of your income is taxable. For people leaving a fairly large estate for their heirs, you should talk to a good estate planning attorney. There are strategies that you can implement now to reduce your exposure to taxes in the future.

Finally, how long are we going to live? If we knew the date we had to live until, we might live our lives differently. But no one knows how long they will live. David advises his clients to plan to live until 100, even though most people don’t live that long. This helps to ensure they will have plenty of money throughout retirement, and even some leftover. Make sure that you have a real plan in place.

Listen to the entire episode or skip ahead using the timestamps below.

0:32 - Today’s podcast is from the road!

3:36 - If you knew the answers to the unpredictable it would be easier.

4:07 - When is the next market crash going to happen?

5:47 - What happens with a downturn and with a recession?

9:33 - What will healthcare costs look like in 20 years?

12:12 - What will taxes by like?

16:08 - How long are you going to live?

Today’s Takeaway:

“While we can’t predict the next market crash, there are guideposts that will tell us, is the probability high that this downturn is going to coincide with an economic recession? "

– David Dickens

Episode 159: What’s Behind the January Stock Market Swoon?

Thu, 03 Feb 2022 10:00:17 GMT

Today’s Prep:

Feeling a bit whiplashed from the stock market volatility? David discusses what just happened with the stock market and what we can do as we look toward the future.

Equipping Points:

Lately, we’ve been seeing some volatility in the stock market. There was a swoon in the market coming into January with all-time highs to now what feels like a punch in the gut. So, what happened? And where do we go from here?

This past summer we talked about inflation . You want to have low and steady inflation. This past year though, inflation has been more persistent than most people expected. We also have rising geopolitical risk with Russia and Ukraine, which causes uncertainty. Even though we’re two years into the pandemic, there are still COVID lockdowns in parts of the world. Finally, there is uncertainty surrounding what the Fed is likely to do. Some things may drop with inflation while others will continue to rise.

Would this be considered a market correction? As a general rule, it does seem like a correction right now. David says the biggest correction has been in growth stocks and discusses different companies that have been more steady. Corrections only matter if they turn into bear markets , which are when you’re more than 20 percent down from an all-time high. The volatility that accompanies all corrections may make us do emotional things with our money and result in bad decisions.

Everybody knows that nobody really knows, but where do we go from here? David says to start by being unemotional about the money you have in the market. We need to watch what the Fed is actually doing. Make sure that the portfolio you have right now aligns with your retirement goals. This is a good time to do a check-up on your emotions, your portfolio, and your retirement goals .

Listen to the entire episode or skip ahead using the timestamps below to get a better handle of what’s been going on with the market lately.

0:27 - This week’s Chiefs game was a shock.

1:30 - We’ve been seeing volatility in the stock market.

3:53 - What happened?

8:32 - Are the markets in a correction?

11:52 - Do corrections matter?

15:29 - Where do we go from here?

Today’s Takeaway:

“The thing that really matters about a correction is the volatility that accompanies all corrections."

– David Dickens

RMDs Get a Small Reprieve

Thu, 27 Jan 2022 15:38:59 GMT

2022 brings new life expectancy tables.

For the first time in nearly 20 years, the IRS has released updated actuarial or life expectancy tables. Those who take required minimum withdrawals (RMD) from retirement accounts may already know we use these tables to calculate your RMD. Using these new tables is relatively simple, but here are some considerations to keep in mind.

What’s my RMD? We determine the required amount you must withdraw annually by dividing the previous year-end balance of your qualifying accounts by what the IRS calls a “life expectancy factor.” The newest tables assume we’ll live longer, which may impact the amount you need to withdraw.

What about inherited accounts? There are some exceptions, but you must generally withdraw all assets within ten years, regardless of your life expectancy. The Secure Act eliminated the ability to “stretch” your withdrawals across your lifetime if the original account owner passed away in 2020 or later.

While most RMD calculations are straightforward, the process can get more complicated if you have multiple accounts or other sources of retirement income. Before modifying your current strategy, consider reaching out to your financial or tax professional for help.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Episode 158: What It Takes To Lose 100 Pounds or Achieve Your Financial Goals

Thu, 27 Jan 2022 10:00:16 GMT

Today’s Prep:

Losing 100 pounds is a huge accomplishment, but it didn’t happen overnight! We talk about what it takes to achieve big goals, both with weight loss and with our financial plan.

Equipping Points:

Goals have to have a plan, strategy, and determination to make them become a reality. Last year, co-host Walter lost 100 pounds! With such an amazing accomplishment, we wanted to hear how he did it and how it relates to achieving our financial goals.

To start, he had to have a plan and inspiration. Walter’s motivation was sparked in the summer after realizing where things had gone during the harder parts of the pandemic in 2020. He put together a written plan and worked with local coaches. There was a step-by-step starter plan in a binder to help create new habits and track progress. Just like having a yearly net worth statement , you feel empowered by knowing your progress and where you’re going. Maybe you don’t know all of the specifics of the future, but you can determine the direction and will be more likely to succeed without a plan.

Walter’s journey started simple with two rules, but got more complex over time as he was able to handle more. Habits are built by keeping it simple. For Walter, the simple rules were no sugar and no flour. In David’s world, his rules are no credit cards and consistently save 10 percent of what you make. Success breeds more success! So, once you meet and exceed those goals, you might set even bigger ones.

Prepare yourself though, you will face setbacks. When losing weight, there are often plateaus that may feel frustrating. If you’re in your 20s, 30s, or 40s, retirement may be a long way away. After years of a strong market, it might feel unsettling to face a financial plateau. Don’t let the setbacks alter your long-term plan.

Feeling inspired to accomplish some of your financial goals this year? Reach out to David for coaching to make sure you are following the simple rules to get you headed in the right direction.

Listen to the full episode or skip around to certain topics.

0:55 - Co-host Walter lost 100 pounds in 2021!

3:13 - What was the plan?

6:54 - What was the inspiration point for David to get into financial planning?

10:20 - Having a plan makes you more likely to reach your goal.

15:20 - Success breeds more success.

17:41 - Recognize that you will have setbacks.

21:10 - Retirement may be a ways away and hard to visualize the end goal.

Today’s Takeaway:

“Most things that you accomplish, you’re inspired to do by something that happened in your life that is important to you."

– David Dickens

Episode 157: Mailbag - Life Insurance, Budgets, and More

Thu, 20 Jan 2022 10:00:10 GMT

Today’s Prep:

If your finances seem to be in order, how important is it to have a monthly budget? Is life insurance necessary if you have no kids? What assets should you list on your net worth statements? David answers these questions today!

Equipping Points:

Following our series on financial resolutions , David received some listener questions about how to best proceed in 2021. From net worth statements to paying off credit card debt, David answers and advises on best next steps.

Jeff is a married 30-year-old with no kids. Does he still need life insurance? If you’re trying to protect your family against catastrophic risk, is this still necessary? David says it’s possible that Jeff doesn’t need life insurance right now. He asks a number of questions in return to determine what the risk is to Jeff’s spouse and what might make a difference on that decision. Once you have a house or kids, there is a much higher risk that you’ll want to account for. You’ll also want to consider the possible life insurance needs for your spouse.

How much life insurance do you need? David recommends looking at Bankrate to use a life insurance calculator to determine how much you’ll want to have. Once you have that recommended amount, look for cheap term life insurance that will meet your needs.

Angie has finally paid off her credit card debt! She has a small emergency fund but doesn’t have a monthly budget because it seems too rigid for her lifestyle. Does she really need to have a budget? David says it has a lot to do with your individual personality. You might need to have a fairly solid budget process if you’re not saving 10 percent of what you make, let’s say in your company 401(k) or if you sometimes run short between paychecks. If that happens, a budget may help you find out why. You want to be able to identify where your money is going. If you have a nice emergency fund, are saving 10 percent per month, and have extra money in your checking account, then you probably don’t have a problem with overspending. When you get to retirement, you still want to pay attention to where your money is going. If you are living well below your means, it’s not necessary to have a strict budgeting process but can be helpful if you can’t make your money last as long as you want.

Karl just calculated his annual net worth statement and it grew a lot from last year. He also bought his fiancée a pretty nice diamond and is getting married next summer! Does that diamond go on his list of assets in his net worth statement? David says to celebrate when your net worth goes up, but realize there will be some years when it goes down. As for listing that asset on the net worth statement, David says that ring is technically hers and for the time-being you have separate net worth statements. But after the wedding, this can be combined into one net worth statement.

Listen to the full episode or skip around to certain topics.

1:28 - Do I need life insurance if I’m young and don’t have kids?

7:24 - Do I have to have a budget?

13:10 - What assets can I list on my net worth statement?

Today’s Takeaway:

“Either way, if you’re in your 30s or 70s, having a good feel for how money runs through your checkbook is super important to helping you understand whether you are living above or below your needs."

– David Dickens

Episode 156: 2022 Financial Resolutions, Part 2

Thu, 13 Jan 2022 10:00:02 GMT

Today’s Prep:

What else can you do to get into good financial shape in the new year? We talk through three more financial resolutions you can make right now.

Equipping Points:

Continuing our conversation on financial resolutions for 2022 , David shares three more financial resolutions you can make. If you haven’t heard the first part, go back and hear the first three financial steps you can make in the new year.

The fourth thing to be working on is to increase your retirement savings, starting with your check from work. Log into your 401(k) plan and increase it by one percent. If you’re under 50 years old, you can contribute $20,500 into your 401(k) per year, not counting the company match. If you’re over 50 years old, you can contribute $27,000 this year.

What if you don’t have a retirement account through work? You can get an IRA at a brokerage like Fidelity, Schwab, or TD Ameritrade and set up an automatic withdrawal from your checking account. Make sure you contribute on a regular basis so you don’t get to the end of the year and have too big of a hill to climb.

Your minimum goal should be to save 10 percent of what you’re making all of your life. David shares what this can look like when you start at age 35 vs. 45 years old. The longer you have this money working for you, the better. Without making yourself feel totally deprived, save for your retired life as soon as you can.

Finally, protect your family from catastrophic risks or, cover your assets. Without this, your plan could come tumbling down if something were to go awry. David recommends buying term life insurance and invest the difference instead of buying permanent insurance. Find out how much you need based on your financial picture and evaluate it as your net worth goes up. Disability insurance is also important coverage to have and statistically more likely to be needed.

All of these things will help you feel more confident and financially secure in 2022. Reach out to David if you have any questions or need guidance on your financial plan. Next week we’ll answer some of the questions received regarding these financial resolutions.

Listen to the full episode or skip around to certain topics.

0:59 - Increase your retirement savings.

4:52 - Save as much as you can, as early as you can.

9:25 - Protect your family from catastrophic risks.

Today’s Takeaway:

“Whatever it is in your world, set that aside methodically, automatically for as long as you can, and that’s what’s going to get you and your net worth statement to something that meets or exceeds your expectations."

– David Dickens

Episode 155: 2022 Financial Resolutions, Part 1

Thu, 06 Jan 2022 10:00:07 GMT

Today’s Prep:

How can you get your finances in better shape this year? David starts with three financial resolutions to make on this two-part series.

Equipping Points:

We don’t want to be too cliché but this is the time of the year when everyone assesses their lives and often make resolutions looking into the new year. What financial resolutions are worth adding to your list? David outlines three elements you’ll want to consider on the first episode of this two-part series.

The first one is also the most important one to do: find out your net worth. The first rule of getting to where you’re wanting to go is to know where you are. This applies when you’re navigating a map or setting financial goals. This also motivates you toward your financial goals. So grab a piece of paper and write out your assets with the corresponding dollar amounts. On the right-hand side, list your liabilities. Total both sides up, subtracting the liabilities from the assets to find your net worth. Over time, the goal is for your net worth to grow as you check in on this year after year. This is a super basic but super important step that provides you momentum toward your financial goals .

Next, pay down and hopefully pay off your credit card debt. If you have credit card debt, that’s like having termites in your house or rust on your card. There’s nearly a trillion dollars of credit card debt in America. The average credit card balance is over $5,500 with almost 41 percent of credit card holders carrying the balance from month to month. Generally speaking, you want to avoid carrying a balance. Instead, you want to live below your means. What about other types of debt? David talks about car debt and mortgage debt and explains how these may differ from credit card debt.

Make sure you establish an emergency fund that you can count on. This can take a number of different forms, but you want to have six months of expenses. This could be in a savings account, money market, a brokerage account, or even in a HELOC (home equity line of credit). This is to protect you from the unknowns that might come up like needing a surgery, losing your job, or even just needing new tires on your car. Having a cash reserve allows you to avoid putting these expenses on a credit card and stay out of debt.

How are you doing so far on these resolutions? Make sure to check out our next episode to hear the rest of the financial resolutions worth making in 2022!

Listen to the full episode or skip around to certain topics.

0:27 - What resolutions have David and Walter made?

4:55 - Find out your net worth.

13:08 - Pay off your credit card debt.

17:46 - Are other types of debt just as bad?

21:05 - Establish an emergency fund.

Today’s Takeaway:

“If you see your net worth to go down in a given year, that’s not a reason for despair. But it is a reason to say, “What happened? Why? Am I okay with that?”

– David Dickens

IRA Deadlines Are Approaching

awashington@kcfinancialadvisors.com (Alexandria Washington) — Mon, 03 Jan 2022 14:31:33 GMT

Here is what you need to know.

Financially, many of us associate the spring with taxes – but we should also associate December with important IRA deadlines. This year, like 2021, will see a few changes and distinctions.

December 31, 2022, is the deadline to take your Required Minimum Distribution (RMD) from certain individual retirement accounts.

April 15, 2022, is the deadline for making 2021 annual contributions to a traditional IRA, Roth IRA, and certain other retirement accounts. This extension from the traditional April 15 deadline follows an extension of the traditional tax deadlines. ¹

Some people may not realize when they can make their IRA contribution. You can make a yearly IRA contribution between January 1 of the current year and April 15 of the next year. Accordingly, you can make your IRA contribution for 2021 any time from January 1, 2022 to April 15, 2023. ¹

A person can open or contribute to a Traditional IRA past age 70½ as long as they have taxable income.

If you are making a 2022 IRA contribution in early 2023, you must tell the investment company hosting the IRA account for which year you are contributing. If you fail to indicate the tax year that the contribution applies to, the custodian firm may make a default assumption that the contribution is for the current year (and note exactly that to the I.R.S.).

So, write “2023 IRA contribution” or “2022 IRA contribution,” as applicable, in the memo area of your check, plainly and simply. Be sure to write your account number on the check. If you make your contribution electronically, double-check that these details are communicated.

Citations

1. irs.gov, November 5, 2021

Episode 154: Best Of 2021 Listener Questions

Thu, 30 Dec 2021 10:00:02 GMT

Today’s Prep:

What are some of the top questions David received this year? We revisit five questions from the mailbag before ringing in the new year.

Equipping Points:

As we wrap up our year, we look back on some of the top questions submitted in 2021. Whether you missed them the first time around or need a refresher, these five questions are sure to bring a little extra clarity as we enter into the new year.

When trying to avoid probate , you may be tempted to add your children as an owner on your home like Terry did in a past episode . Is this a wise decision? David describes what kind of liability issues this could cause in case the worst were to happen. Instead, you may want to try to name him as a beneficiary through a transfer on death deed. Make sure you have the exact legal description of your piece of property when you go to file the paperwork with the county.

Kate has made a lot of money from Apple stock over the years but is worried now about the taxes when she sells the stock . Should she try to capture the gains or prioritize keeping her taxes low? David explains what her options are, depending on her situation.

Christopher is turning 70 and is annoyed about having to taking money out of his IRA soon. What can be done to avoid required minimum distributions ? First David shares why you even have RMDs and when you need to start worrying about it. How will it be taxed? While you can’t get out of RMDs, you do have a few options to help reduce them a little now before you start having to take them through things like a Roth conversion, a reverse rollover, or a qualified charitable distribution.

If your year took a different turn like Greg, you may be wondering what to do with an early retirement package . Should you take a severance package with a pension buyout? This all comes down to your desired lifestyle in retirement. Consider whether or not the severance package provides enough for you to retire or if you will still have to get another job. When it comes to a pension, should you do a lump sum rollover or wait to start it at 65? David talks through the different benefits of each option while factoring in your family needs or inflation.

Mary has been maxing out her HSA contributions for the past few years and feels ready for the next step. Should she use the auto-advisor investor tool (a robo-advisor) to invest additional HSA funds ? If you’re young and have a reasonable risk tolerance, go more toward stock, which is likely where a target date fund will put you. If you’re closer to retirement age, you may want to work with an advisor to strategize accordingly.

Listen to the full episode or skip around to certain topics.

1:15 - Is it a good idea to put my son as a joint owner on our home?

5:20 - Should I sell my stock or pay more attention to the tax bill?

8:45 - What can you do about RMDs?

13:37 - Should I consider an early retirement package?

17:54 - Should I use a robo-advisor for my HSA investment?

Today’s Takeaway:

“If you have don’t one, you absolutely need to establish an HSA and contribute to it. "

– David Dickens

Episode 153: One Easy Way to Simplify Your Retirement

Thu, 16 Dec 2021 10:00:15 GMT

Today’s Prep:

How can you simplify your retirement and why does it matter? David shares why you may want to consolidate your retirement savings and the three ways it benefits you.

Equipping Points:

What’s one easy but important way to simplify your retirement? Instead of making it more complicated than you need to, consolidate it into one retirement bucket to simplify things. On today’s show, David will talk about the three benefits you’ll get once you consolidate.

To start, you’ll have less information to keep track of. Are you juggling between different statements, different custodians, and different beneficiaries? This can be overwhelming and hard to remember everything. Having it all in one place can help you better see what you have and where it’s going.

If you have all of your retirement investments in one place, you’ll have a wider array of options to choose from. Your performance will probably increase because you’ll have access to more and better investment alternatives. Instead of leaving your retirement savings with a former employer, rolling it over to an IRA will give you more flexibility and control.

When it’s time to take out RMDs (required minimum distributions), if you have old 401(k)s with former employers, you will have to take out an RMDs from each account. If you have them rolled over, you can add up the total and take one distribution. But it can be a nightmare and total complication if you have several separate 401(k)s to take distributions from. Not to mention, you don’t want to overlook this and have to pay the penalty if you forget to take out your RMDs from every account you have.

If you’re going to consolidate everything, you’ll want to work with the right advisor to help you. You want someone who will help you manage your plan for you, someone to understand the tax implications , and someone who is a good communicator.

Listen to the full episode or skip around to certain topics.

2:37 - Way less information to keep track of.

4:32 - You’ll have access to more options.

5:35 - RMDs can be a nightmare if they are still with former employers.

7:50 - David shares a client story of someone who needed to consolidate.

Today’s Takeaway:

“Maybe the biggest benefit is, you’re going to get your beneficiary squared away such that when you die, your money is going to go to who you want it to go to. "

– David Dickens

Episode 152: 7 Roth Conversion Misconceptions

Thu, 09 Dec 2021 10:00:02 GMT

Today’s Prep:

How much do you really know about Roth conversions? David walks us through common misconceptions and shares why Roth conversions may be worth considering before the end of the year.

Equipping Points:

If you’ve listened to this podcast in the past, you’ve probably heard David talk about Roth conversions. Today, we take a different angle and discuss the different misconceptions people may have when it comes to doing a Roth conversion and set the record straight.

While the year is coming to a close, you have a limited amount of time to do a Roth conversion. Sometimes misunderstood, a Roth contribution can be made until April 15 ^th of next year, whereas a Roth conversion has to be done within the year it is effective. If you had planned to do a Roth conversion in 2021, this is probably the week to do it.

Who is a Roth conversion for? Anybody can do a Roth conversion. It doesn’t matter your earned income or age, as long as you have an IRA you can do a Roth conversion. You may or may not want to do a Roth conversion depending on your situation, but you do have the option.

With an IRA contribution, there are limits to how much you contribute. With a Roth conversion, there are no limits, but there is a certain wisdom to how much you might want to do based on your situation and taxes. When do you a Roth conversion, you don’t need to be worried about being penalized by moving the money from an IRA. The conversion is not penalized, even if you’re under 59 and a half.

So, when will you pay the taxes ? David explains how he recently helped a client do a Roth conversion in a way that helps pay the taxes next year. It’s important to keep in mind that partial conversions are allowed. Everybody’s situation is different, so you want to make sure you look at what the smartest way to make a Roth conversion over time. You also want to consider whether or not you have to pay a penalty rate on your Medicare premium. You might be able to avoid this, but it’s important to take it all into account as you pursue a Roth conversion.

Reach out to a financial advisor to see what makes the most sense for you and your financial situation.

Listen to the full episode or skip around to certain topics.

0:33 - Christmas is coming!

2:11 - How soon do you need to do a Roth conversion?

3:54 - Who can do a Roth conversion?

4:54 - What are the conversion limits?

6:00 - Can you convert a beneficiary IRA into a Roth?

7:58 - There is no penalty for doing a Roth conversion.

10:31 - When will you pay the taxes?

12:33 - Can you do a partial conversion?

Today’s Takeaway:

“Do I do it all in 2021 or should I do it over time? The answer to that is: How can you structure it such that you pay the least amount of tax on each conversion? "

– David Dickens

The Power of the Consumer

Thu, 02 Dec 2021 15:47:10 GMT

In recent months, consumer confidence has been falling.

A confident consumer can be a powerful ally in an economy. But when the consumer starts to have questions, we can measure consumer confidence in everything from retail sales to home buying to the personal savings rate.

In recent months, consumer confidence has been falling as inflation expectations have been rising. So, if inflation slows, does that mean the consumer will regain confidence? It’s possible, but other factors can influence consumer confidence, including perceptions of COVID-19. ^1,2

When the consumer does regain confidence, we may expect it to be a powerful force driving economic growth. Many may base the 2022 U.S. economic outlooks on a rebound in consumer confidence, leading to increased spending. ³

In some ways, the only consumer confidence that matters is yours. Are you optimistic about 2022, or do you have concerns or doubts that are holding you back? We look forward to hearing from you.

The forecasts or forward-looking statements about the 2022 economy are based on assumptions, subject to revision without notice, and may not materialize.

Citations

1. SCA.ISR.UMich.edu, November 2021

2. Conference.Board.org, November 2021

3. MorganStanley.com, November 22, 2021

Episode 151: 3 Ways to Reduce RMDs

Thu, 02 Dec 2021 10:00:13 GMT

Today’s Prep:

Are required minimum distributions looming over you and your near future? David talks through three strategies to help you reduce your RMDs.

Equipping Points:

What can you do about your RMDs? To start, you should know what they are. If you are over 72, you’re probably well acquainted with RMDs or required minimum distributions. For those of us who aren’t over 72, an RMD is the amount you must withdraw from your IRA once you reach 72 years old. If you don’t take out that money and pay the taxes, you can face major penalty fees.

While you can’t avoid these RMDs, you can reduce them. David breaks down three strategies that can allow you to reduce your RMDs. For those who are givers, the first strategy is to have your IRA custodian write the check directly to the nonprofit. It satisfies the distribution but does not require you to pay taxes on that distribution. This is called a qualified charitable distribution.

If you are still working at age 72 and have a 401(k) plan through the company, you do not have to take an RMD while employed at that company. There are a few exceptions to this rule. David also explains what you can do with outside IRAs if you’re still working.

Before you turn 72, you may want to consider doing a partial Roth conversion. In between 59 and a half and 72, there’s an opportunity to convert IRA money into Roth IRA money. The cost of doing that is paying the tax bill now instead of later. If you are foreseeing forced RMD distributions for money you don’t need to live off of, you might want to convert it beforehand.

One of David’s favorite topics are Roth conversions , but feel free to reach out to him about any financial planning question you may have. Listen to the entire episode or skip ahead to a specific strategy using the timestamps below.

Listen to the entire episode or skip ahead to a particular question using the timestamps below.

0:26 - What’s David’s favorite Thanksgiving pie?

3:18 - What are RMDs?

8:48 - How can you reduce the RMDs? What’s the first strategy?

10:58 - What if you’re still working?

12:44 - When should you consider a Roth conversion?

Today’s Takeaway:

“In between 59 and a half and 72, there’s an opportunity to convert IRA money into Roth IRA money. The cost of doing that is, you pay the tax when you do that instead of later. "

– David Dickens

More Resources:

Episode 141 - Mailbag

Episode 102 - Roth Conversion

Episode 150: Mailbag - Retiring Early, Risk, and Social Security

Wed, 17 Nov 2021 17:10:55 GMT

Today’s Prep:

What moves should you take now to retire early? How do you know if you have enough or too much risk in your portfolio? Is it worth waiting until 70 for Social Security? David answers these questions in this week’s podcast.

Equipping Points:

Back by popular demand, we have another mailbag episode today! If you have a question, you’re always welcome to send one in or reach out to David directly. Today, we have three questions from people facing retirement, risk, and how long they need to work to be successful in their goals.

Wade and his wife both have nice incomes and no kids. They are only 45 years old but are considering retiring early in the next ten years. What do they need to do to make that possible? David reminds us it’s not about how much you make but how much you keep. You’ll want to pay attention to healthcare costs . This can be a significant amount each month in your budget, and you’ll need a really good plan to cover that. Next, you’ll want to think about your Social Security strategy.

George knows he should be aware of the risk he’s taking in his portfolio, but how much risk should he be taking? Risk is different for everyone, but you need a plan for how you would react to risk. For example, we just experienced market risk in 2020 when there was a drop that later when onto a recovery. Consider your what-ifs and what your reaction would be. Whether you have too much or too little risk depends on you.

Vickie says her kids probably don’t expect an inheritance from her because she was a single mom for most of their lives. However, she doesn’t ever want to be a financial burden for them. Should she work until she’s 70 in order to take the highest possible Social Security benefit? Financially, there is a good reason to work until 70 to get the highest Social Security benefit. David talks about the 4 percent rule and how this could coincide with your financial plan. If you are concerned about running out of money, those extra couple of years of working and saving are invaluable. It’s important to have a financial plan that makes the most sense for you and allows you to feel confident that you won’t run out of money in yours 80s or 90s.

Listen to the entire episode or skip ahead to a particular question using the timestamps below.

0:27 - The Chiefs are headed in the right direction!

2:03 - Mailbag: What should I know about retiring at 55?

7:29 - Mailbag: How much risk should I be taking?

14:03 - Mailbag: Should I wait until 70 for Social Security?

Today’s Takeaway:

“When the market’s down fairly significantly, if your reaction is, “I should sell” then you’ve got too much risk. "

– David Dickens

Episode 149: Retirement Planning as a Jigsaw Puzzle

Thu, 11 Nov 2021 10:00:19 GMT

Today’s Prep:

What strategies and pieces go into a retirement plan? Let’s talk through the puzzle of retirement planning today and how to solve it.

Equipping Points:

There’s a nice sense of accomplishment that comes from finishing a jigsaw puzzle. Let’s take a minute to consider all the steps you take along the way to get there. Retirement planning can be a lot like a jigsaw puzzle as you put together the pieces of your plan.

When working on a jigsaw puzzle, you likely start by looking at the box to see what you are about to create. When retirement planning, you need to start by looking at your plan to know what your overall vision is. What are your goals and needs in retirement ? Having a clear big picture and vision in mind helps you know where you’re going and what you’re doing next.

Next, you look for any piece that has a straight edge to build the framework of the picture. The framework in your retirement plan is your income plan. Usually, this includes Social Security , pensions, annuities, dividends, and even a rental property. Having guaranteed income sources is a nice framework, but otherwise, you’ll need to create a monthly income from your retirement accounts. Not every framework will look the same.

You might sort puzzle pieces by color or by a certain element of the picture. In retirement, you may consider the different buckets of money you have based on tax status. This can help you determine what money to take from the tax-free, tax-deferred, and taxable accounts. What is the tax-related strategy for your assets?

Remember to keep the endgame in mind. At the end of a puzzle, some people put it in a frame where others may take it apart and box it up. What should you do with your plan? It may take a significant amount of time to put it together initially. But remember that when you review it again in a year, you aren’t starting from the beginning. That’s when you assess and readjust what you need for your plan, because a plan, unlike a puzzle, can’t be static. You need a plan that is dynamic. Planning with an advisor can help you identify the things that change over time and update it as needed.

Listen to the entire episode or skip ahead using the timestamps below.

0:29 - Did David like doing jigsaw puzzles as a kid?

2:06 - How do you start the puzzle of retirement planning?

4:50 - What is the framework of a good retirement plan?

8:35 - How are you sorting your pieces?

12:04 - What’s the endgame with your retirement plan?

Today’s Takeaway:

“Putting together a plan is impossible if you don’t know what you’re trying to do. "

– David Dickens

Episode 148: 5 Opportunities for Late Bloomers

Thu, 04 Nov 2021 09:00:03 GMT

Today’s Prep:

Were you late to saving enough for retirement? Let’s talk through five areas where you may be able to make up the difference as a retirement savings late bloomer.

Equipping Points:

Are you feeling behind where you should be when it comes to retirement savings? On today’s episode of the podcast, we talk about what opportunities late bloomers have to reach their retirement goals. With a little bit of extra effort, you can get to where you want to be when you retire.

Anybody over 50 can make catch-up contributions. For many people, these are your peak earning years and a great time to invest more into your retirement accounts and your HSA. David shares the extra amount you can put away for retirement, that may turbocharge your retirement savings.

As you get older, so do your kids! Once your kids are no longer living at home or dependent on you financially, you may have more room in the budget to save . It’s important for you and them to have that opportunity to become financially independent once they get out of college.

Do you still have debt? Credit card debt eats away at your financial well-being and your financial net worth. If you have a car loan, that’s perfectly fine if it’s within your means and at a low interest rate. Finally, you may still have a mortgage. David helps clients break down the monthly statement into four pieces: principal, interest, taxes, and insurance. By the end of your mortgage term, there is very little going toward interest. Once you pay it off, you’ll still need to pay for insurance and taxes.

There may be opportunity in downsizing your home. Once the kids have moved out, you’ll likely need less space and want less maintenance. Be careful though to not just buy a smaller house without actually providing a savings to your budget.

Finally, once you’re retired, you may still want to work. This could be a part-time job or consultant work that keeps you active and continues to bring in a paycheck. Consider if this might be a good opportunity for you, your finances, and your fulfillment.

Listen to the entire episode or skip ahead using the timestamps below.

0:28 - What should David do with all his Halloween candy?

3:45 - What should late bloomers do?

5:02 - Add to catch-up contributions.

7:16 - Kids are coming off the payroll.

9:20 - Less debt is best.

14:20 - Downsize your home.

16:37 - Add a twilight career.

Today’s Takeaway:

“There are some opportunities to turbocharge your savings, what you’re feathering your own nest with, once you turn 50. "

– David Dickens

Episode 147: Who Pays the Gift Tax?

Thu, 28 Oct 2021 09:00:05 GMT

Today’s Prep:

Are you ready to give significantly but wondering what that will do to your taxes? Understanding your options ahead of time can go a long way when it comes to taxes.

Equipping Points:

Ready to give a significant financial gift? A gift doesn’t have to be a check, it could be a car or a piece of property. We talk about three different types of gifts and what that means for your finances on today’s episode of the Cover Your Assets KC podcast.

A typical gift is through a charitable donation to a 501(c)(3). Maybe you like to give to your university, church, or local nonprofit. You might get a tax deduction for that as well if you itemize. Some of these tax benefits changed for 2020 and 2021 in order to encourage more charitable giving.

Have you considered making a qualified charitable contribution? This is a way to take money out of an IRA and give it directly to your charity of choice if you’re over the age of 70 and a half. If you do this, your distribution will not be taxed as income if it is gifted directly to your church or charitable organization.

The most common way to think of the gift tax is when a parent or grandparent gives money to their kids or grandkids. But how much will you get taxed if you do that? On gifts of less than $15,000, there is no reporting to the IRS and the person who gets the gift does not have to pay the tax. What happens if the gift is more? You need to fill out the 709 form to report it. David talks through a few exceptions to keep in mind and how those impact your taxes . It’s important to know the rules when it comes to taxes, because some of those rules work in your favor.

Listen to the entire episode or skip ahead using the timestamps below.

0:34 - David has a new grandson!

4:08 - Let’s talk about the gift tax.

5:48 - Do you give money to a 501(c)(3) organization?

7:38 - You can give through a qualified charitable contribution.

9:28 - How much can you give to your kids or grandkids?

12:24 - What exceptions to the rule should you keep in mind?

Today’s Takeaway:

“If you find yourself in a situation where you do have a lot of net worth and do want to do some significant gifting, a little bit of knowledge will take you a very long way. "

– David Dickens

Annual Financial To-Do List

Mon, 25 Oct 2021 13:02:43 GMT

Things you can do for your future as the year unfolds.

What financial, business, or life priorities do you need to address for the coming year? Now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:

Can you contribute more to your retirement plans this year? In 2022, the contribution limit for a Roth or traditional individual retirement account (IRA) is expected to remain at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation, but income limits are one factor in determining whether the contribution is tax-deductible. ¹

Keep in mind, this article is for informational purposes only and not a replacement for real-life advice. Also, tax rules are constantly changing, and there is no guarantee that the tax landscape will remain the same in years ahead.

Once you reach age 72, you must begin taking required minimum distributions from a traditional Individual Retirement Account in most circumstances. Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

To qualify for the tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner's death. Employer match is pretax and not distributed tax-free during retirement.

Make a charitable gift. You can claim the deduction on your tax return, provided you follow the Internal Review Service guidelines and itemize your deductions with Schedule A. The paper trail can be important here. If you give cash, you should consider documenting it. Some contributions can be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the IRS does not equate a pledge with a donation. If you pledge $2,000 to a charity this year but only end up gifting $500, you can only deduct $500. ²

Make certain to consult your tax, legal, or accounting professional before modifying your record-keeping approach or your strategy for making charitable gifts.

See if you can take a home office deduction for your small business. If you are a small-business owner, you may want to investigate this. You may be able to write off expenses linked to the portion of your home used to conduct your business. Using your home office as a business expense involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional who is familiar with the tax rules as they relate to home-based businesses. ³

Open an HSA. A Health Savings Account (HSA) works a bit like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $3,650 contribution for 2022 if you are single; $7,300 if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55. ⁴

If you spend your HSA funds for non-medical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you may be required to pay ordinary income taxes on HSA funds used for nonmedical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

Pay attention to asset location. Tax-efficient asset location is one factor that can be considered when creating an investment strategy.

Review your withholding status. Should it be adjusted due to any of the following factors?

* You tend to pay the federal or state government at the end of each year.

* You tend to get a federal tax refund each year.

* You recently married or divorced.

* You have a new job, and your earnings have been adjusted.

Consider consulting your tax, human resources, or accounting professional before modifying your withholding status.

Did you get married in 2021? If so, it may be an excellent time to review the beneficiaries of your retirement accounts and other assets. The same goes for your insurance coverage. If you are preparing to have a new last name in 2022, you may want to get a new Social Security card. Additionally, retirement accounts may need to be revised or adjusted?

Are you coming home from active duty? If so, go ahead and check on the status of your credit and any tax and legal proceedings that might have been preempted by your orders.

Consider the tax impact of any upcoming transactions. Are you preparing to sell any real estate this year? Are you starting a business? Might any commissions or bonuses come your way in 2022? Do you anticipate selling an investment that is held outside of a tax-deferred account?

If you are retired and in your seventies, remember your RMDs. In other words, Required Minimum Distributions (RMDs) from retirement accounts. In most circumstances, once you reach age 72, you must begin taking RMDs from most types of these accounts. ⁵

Vow to focus on your overall health and practice sound financial habits in 2022. And don’t be afraid to ask for help from professionals who understand your individual situation.

Citations

1. thefinancebuff.com, August 11, 2021

2. irs.gov, January 22, 2021

3. nerdwallet.com, July 31, 2020

4. irs.gov, September 8, 2021

5. irs.gov, May 3, 2021

Episode 146: Should Your Trust Be Your IRA Beneficiary?

Thu, 21 Oct 2021 16:04:36 GMT

Today’s Prep:

Who or what is listed as the beneficiary on your IRA? We get into various reasons for and against having a trust and how the most recent rules might affect how your estate plan is currently set up.

Equipping Points:

Have you ever considered assigning your trust as an IRA beneficiary? Some have chosen not to designate a person as their trust beneficiary, but with recent changes is that wise? There are good reasons to have trusts, but the majority of our listeners wouldn’t need one.

For those with young children, a child with special needs, a blended family from a second marriage, or beneficiaries who have proven they can’t manage their money, a trust might be the right move for you. David explains some of the trusts he has seen and why the SECURE Act changed things.

If your terms are set by the required minimum distributions to your children, David outlines how this could have significant unintended consequences. If your heirs are going to act responsibly, you ought to just name those heirs as the beneficiaries of those IRAs. Generally speaking, it is advisable to have the actual persons named as the beneficiaries of your IRAs, 401(k), 403(b), and 457, and not have it run through a trust. If you have a specific reason to use a trust, talk to an estate-planning attorney and fiduciary to set it up appropriately.

Remember that the years prior to 2019 had different recommendations based on the rules at the time. You don’t want to put this off. If you have a question or need to update your estate plan, reach out to David and his team for help.

Listen to the entire episode or skip ahead using the timestamps below.

0:28 - David brainstorms future podcast ideas.

1:39 - Who needs a trust?

4:03 - When is it a bad idea to have an IRA as the beneficiary?

5:50 - Why does this matter right now?

9:14 - How has this changed since 2019?

Today’s Takeaway:

“If your heirs are going to act responsibly, you ought to just name those heirs as the beneficiaries as those IRAs."

– David Dickens

Episode 145: Tax Consequences

Thu, 21 Oct 2021 15:58:16 GMT

Today’s Prep:

What tax consequences should you prepare for? We talk through the different accounts you may have and what kind of taxes to expect in retirement for each one.

Equipping Points:

As you learn about finances and retirement planning, what do you need to know about taxes? On today’s episode of the Cover Your Assets KC podcast, we will discuss tax consequences you’ll want to know about and hope everyone has at least one “aha” moment on the subject.

Tax-deferred accounts like 401(k)s, 403(b)s, and 457 plans are retirement savings that are typically done through a direct payroll basis. An IRA is also a tax-deferred account that gives you a tax deduction now. Once you take that money out in retirement, both the contribution and the growth are taxable as ordinary income or at your highest marginal tax bracket based on the other income you have. If you want to get the money out early, you’ll pay a penalty plus the taxes. This is an easy way to save for retirement and highly recommended, just prepare yourself for the taxes later on.

What are tax-free accounts? Roth IRAs and HSAs (health savings accounts) fall into this category. Withdrawals after age 59 and a half are tax-free as long as the account has been open for five years. But you can take the amount you contributed out at any time without tax or penalty.

A taxable account is usually a brokerage account. All earnings and any realized gains are taxable each year. You’ll get a 1099 at the end of each year showing what you earned. Your dividends and long-term capital gains (an investment owned for more than one year) get a preferential tax rate. There are ways to reduce your taxes on your accounts, depending on the types of investments you hold in there.

CDs aren’t talked about much anymore because the rates are super low. It is however, super safe and also somewhat liquid . Unfortunately, the interest is low and the interest you earn is taxable as ordinary income.

Finally, it’s important to consider life insurance in this discussion. There are reasons to have life insurance whether you’re young and married with kids or in your 70s and doing estate planning. The beneficiary gets a tax-free benefit, both for term life insurance and permanent life insurance. But what about living benefits? David talks about how certain life insurance policies can cover long-term care needs.

Does your financial plan address its possible tax consequences?

Listen to the entire episode or skip ahead using the timestamps below

0:33 - Taxes are one of David’s favorite topics.

2:51 - What do you need to know about tax-deferred accounts?

6:14 - Roth accounts are taken out tax-free.

8:42 - What are taxable accounts?

11:41 - What happens with CDs?

13:45 - Why is life insurance part of the discussion?

Today’s Takeaway:

“When you have a good plan in place, you need to do an annual (or so) update of that plan because things change.”

– David Dickens

Episode 144: Mailbag – How Can I Convince My Husband We’ve Saved Enough?

Thu, 07 Oct 2021 21:08:24 GMT

Today’s Prep:

Are you and your spouse not seeing eye-to-eye when it comes to saving (or spending) in retirement? David shares his thoughts on how to improve the situation for this person and two others seeking financial advice.

Equipping Points:

When can you be confident you have enough tucked away for retirement and start enjoying your money? David answers this question as well as two others from the mailbag on today’s show.

Joel says he knows he needs an emergency fund. Instead of saving money in a savings account, can’t he just use his home equity line in a pinch? David says his advice might not be agreed upon by all advisors, but that could be a possibility, especially if you’re saving on the side already. David explains some of the ins and outs of how this could work and says he used this strategy himself. You do have to have this in place though before the emergency strikes.

Miriam says her husband saves like he’s from the Depression era. She thinks they’ve saved enough for retirement while he thinks they can’t indulge on anything and should work forever. Is there any way to fix this? The way to fix this is to have a good plan. Having a plan is going to give you and your husband the confidence that you’re not going to run out of money. Once you have a good plan, make sure to update it annually since things are prone to change. Make sure your plan also includes a number of what-ifs.

Grace’s dad unfortunately died a few months ago and now she’s worried about her mom who is handling the investments. What should she tell her 70-year-old mom to do? Start by finding somebody you can trust like a fiduciary to get good guidance. Are her assets sufficient to take her to the end of her life? Look at the beneficiaries. Has she named a power of attorney ? Make sure the assets she has won’t go through probate. Don’t forget that her tax bracket will go up next year when filing single. This might make it a good year to do a Roth conversion.

Do you have a question? Reach out to David to get the answer!

Today’s Takeaway:

“When you have a good plan in place, you need to do an annual (or so) update of that plan because things change.”

– David Dickens

Episode 143: Do the New Infrastructure Bills Impact Your Financial Plan?

Thu, 30 Sep 2021 21:32:25 GMT

Today’s Prep:

There is a lot of buzz going around about infrastructure bills. How could they impact you? We talk about “how the sausage is made” in bills like these as well as how you can prepare for them.

Equipping Points:

What is happening with the latest infrastructure bills? It’s hard to keep track of everything going on in Congress. Let’s sort out the two big bills being proposed and the financial implications of each one on today’s show.

The American Jobs Plan is most likely to pass this Thursday. What does that mean? In August, the Senate voted to approve a trillion-dollar infrastructure plan for things like roads and bridges. It will be paid for by increases in corporate tax rates.

The American Families Plan is a $3.5 trillion plan that we are not sure will pass just yet. Republicans have expressed they won’t vote for it because it is too much money too broadly spent. Things like universal daycare or community college are included in the current proposal. To get something through the Senate, it will likely need to go through the budget reconciliation process . This was the same process used for the Trump tax cuts that are set to expire. David is convinced this will pass but significantly trimmed down from where it stands currently.

Remember that President Biden was clear in his promise to not raise taxes on people who make less than $400,000 a year, so it’s unlikely he would sign off on something that would differ from that. What’s the status of long-term capital gains? Can you still do Roth conversions after you make more than $400,000 a year? We also share a few other possible changes that may or may not pass.

Are there any actionable things you can do to prepare? You might be in a window of time where you can pay taxes on your capital gains. But, be sure to defer capital losses for later. If you have an estate worth greater than $10 million, you may want to gift some of your money now. Reach out to your financial advisor to see what makes the most sense for your financial situation.

Today’s Takeaway:

“Our rules have made it difficult for stuff to pass unless there’s a significant wave behind it, and I think that’s the way the founding fathers set it up. And it makes this a beautiful place to live.”

– David Dickens

Episode 142: Financial Matters You Don’t Want to Put Off

Thu, 16 Sep 2021 21:35:42 GMT

Today’s Prep:

We can all procrastinate at times. But when it comes to our finances we need to plan ahead. David shares key areas in your finances you don’t want to put off addressing.

Equipping Points:

How much trouble can we get into when it comes to procrastinating these financial matters? For some of these things you only get one chance to get it right, so make sure you handle it now instead of waiting until it’s too late.

Should you defer your taxes? Some like to take the tax breaks now and defer the taxes while others invest in a Roth to pay the taxes. Which is better? Consider the taxes now and know that it is most likely to go up. Your choices today will have a big impact on what kind of taxes you’ll pay in retirement.

How quickly do you need to get rid of debt? David says there are certain kinds of debt you absolutely must get rid of right away. If you are in your 40s and have credit card debt, you need to figure that out right now. You cannot carry consumer debt into your retirement if you want to have the retirement that you’re dreaming of. What about a car payment? Or a home mortgage?

How much time do you have to set up your legal and estate documents ? This is urgent, especially if you have a young family. Make sure your beneficiary designations are right, both primary and secondary beneficiaries. If you’re in your 30s and 40s with a young family, cheap term life insurance is critical. You also want to designate beneficiaries for your bank account, your car, and your home in order to avoid probate .

Is delaying Social Security a good idea or a bad idea? How do these numbers break down? David shares examples of what this can look like in retirement. There are reasons to delay it and reasons to start it as soon as you can. You may also want to choose a different time for each spouse if you’re married. There are a lot of nuances to when you start Social Security, so make sure to get good advice on when to start it and see how it fits with your overall financial plan.

Finally, when should you put that financial plan in place? You don’t want to launch into retirement without a plan. If you’re in your 20s, 30s, and 40s, your goal can be relatively simple. But once you get into your 50s, you have to have a plan. You don’t want to get to retirement and have fewer options than you would like to have. Reach out to an advisor to get a plan that suits your goals and needs.

Today’s Takeaway:

“Credit card debt or consumer debt is like rust on your car or termites in your house–it’s eating away at your financial future, you just might not be able to see it.”

– David Dickens

The Need for Power of Attorney

Mon, 13 Sep 2021 13:51:00 GMT

POAs and other advanced directives are becoming more important.

The point of the POA. A power of attorney (POA) is a legal instrument that delegates an individual’s legal authority to another person. If an individual is incapacitated, the POA assigns a trusted party to make decisions on his or her behalf.

There are nondurable, springing, and durable powers of attorney. A nondurable power of attorney often comes into play in real estate transactions, or when someone elects to delegate their financial affairs to an assignee during an extended absence. A springing power of attorney “springs” into effect when a specific event occurs (usually an illness or disability affecting an individual). A “durable” power of attorney allows an assignee, or agent, to act on behalf of a second party, or principal, even after the principal is not mentally competent or physically able to make decisions. Once a principal signs, or executes, a durable power of attorney, it may be used immediately, until it is either revoked by the principal or the principal dies. ¹

Keep in mind this article is for informational purposes only. It’s not a replacement for real-life advice. Make sure to consult your legal professional so you can better understand what type of powers of attorney is a best fit for your situation.

What the POA allows in financial terms. Financially, a Power of Attorney is a tremendously useful instrument. An agent can pay bills, write checks, make investment decisions, buy or sell real estate or other hard assets, sign contracts, file taxes, and even arrange the distribution of retirement benefits.

Advanced healthcare directives: HCPOAs and Living Wills. Some illnesses can eventually rob people of the ability to articulate their wishes, and this is a major reason why people opt for a Health Care Power of Attorney (HCPOA) or a living will. There are differences between the two. A Health Care Power of Attorney (also called a “healthcare proxy”) allows an agent to make medical decisions for a principal, should they become physically or mentally incapacitated. A living will gives an assignee similar powers of decision, but this advanced directive only applies when someone faces certain death. The assignee has the authority to carry out the wishes of the incapacitated party.

Would you like to learn more? It may be time to meet with an attorney who specializes in these issues. You can find one with the help of an insurance or financial professional who has assisted families with legacy planning.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

AgingCare.com, August 23, 2021

Episode 141: Mailbag – Should I Contribute to a Roth 401(k)?

Thu, 09 Sep 2021 21:39:25 GMT

Today’s Prep:

If you have the option to contribute to a Roth 401(k), should you do it? In retirement, how can you be sure you won’t run out of money? David answers these questions and one more in today’s podcast.

Equipping Points:

We all want to have confidence when making financial decisions. To do so, it’s important to make a plan. On today’s episode of the show, David answers three questions from the mailbag in hopes of helping each of them to better plan for their future.

Christopher is turning 70 next year and is annoyed to have to take money out of his IRA because he doesn’t need it! What tips and tricks does David have? The required distributions don’t start now until the year you turn 72. David explains why you have to take RMDs. There isn’t a lot you can do to get out of this, but there are a few ways to lessen the pain. You could do some small Roth conversions over the next few years. Are you still working? You may be able to do a reverse rollover. Finally, you can make a qualified charitable distribution.

Brad said his workplace has recently started offering Roth 401(k) options. Should he put his future savings in that instead of a traditional 401(k)? The way you decide is by determining whether or not you’ll be in a higher or lower tax rate in the future. While you can’t know for sure, it’s fairly likely that the tax rates will go up from where they are now. Keep in mind that you can split it up and contribute to both your Roth 401(k) and traditional 401(k). The company match will go in the traditional 401(k).

Jamie looked forward to retirement for many years but now that he’s actually retired, can’t shake the feeling of eventually running out of money. What can he do to fight this feeling? You need confidence that you won’t run out of money. To get that confidence, you need a plan and a detailed idea of your expenses. Make sure you factor in baseline expenses, extras like travel, and unexpected expenses. Then consider what your income sources are. Meet with an advisor to come up with a plan that suits your needs and gives you the confidence you need.

Check out the Bankrate Calculator.

Today’s Takeaway:

“You either want confidence that you’re going to be fine, that you’re going to not outlive your money. Or, not quite as happy, but confidence that you do have a problem and should start fixing it now. “

– David Dickens

Episode 140: 401(k) Millionaires

Thu, 02 Sep 2021 21:41:50 GMT

Today’s Prep:

Are you ready to become a millionaire? Let’s talk about how to make smart investments and make that goal a reality.

Equipping Points:

We now have more 401(k) millionaires than ever before according to Fidelity. It’s an interesting benchmark to hit. So, what is the roadmap to getting there? It will take time, but there are four keys to reaching one million dollar before you retire.

Is a million dollars the goal? Remember that everyone is different. Be sure to set the bar accordingly. If you want to retire early and make working until full retirement age optional, you’ll want to achieve your goals sooner rather than later. So, you’ve got to start early when it comes to saving for retirement. Find out how much you’ll have by a certain age based on what you’re doing now. It may be easier if you start younger, but regardless, stay steady with your contributions.

To stay consistent, having the money come out of your paycheck at work is an easy way to contribute to your 401(k). If you don’t have a 401(k), you can still save in an IRA. Save 10 percent somewhere! You are very unlikely to easily be able to do it all at once at the end of the year, but doing it over time with every paycheck is much more manageable.

Everyone has a risk tolerance, but you can’t be too risk-averse. If you’re younger, you have plenty of time before you’ll need this money in retirement and need to focus more on long-term growth. After you turn 50, you need to seek out good advice on how to prepare your investments for retirement.

Sometimes it feels like there are never enough hours in the day. How can you make money while you sleep? The rich keep getting richer because their assets are working for them. The miracle of compound interest makes that possible. How do you do it? Start early, spend less than you make, amass some assets in a systematic way, and let those assets make money for you.

Are you set to become a millionaire someday?

Check out the Bankrate Calculator.

Today’s Takeaway:

“Everybody should find a way to save 10 percent of what they earn or more.”

– David Dickens

Episode 139: Happy Birthday, Social Security

Thu, 26 Aug 2021 16:37:12 GMT

Today’s Prep:

In celebration of Social Security’s recently passed birthday, let’s talk about four things you should know about it. How can you plan for Social Security as a part of your retirement plan?

Equipping Points:

It’s not David’s birthday we are celebrating today, but the birthdate of Social Security. This important birthday happened a few weeks ago, but it gives us a good reason to discuss four things we need to consider when planning for Social Security before retirement.

Can you believe that 65 million people are currently drawing from Social Security? Of those, 47 million people are retired. The average check is $1,556 per month, but what will your monthly amount be? Check out SSA.gov to learn more about what yours may be. There are interesting projection tools to help you get a better estimate for retirement. The closer you are to retirement age, the closer you likely will get to the correct estimate.

Social Security represents about 40 percent of a person’s retirement income according to the Social Security Administration. You probably want your retirement income to be similar to your monthly income when you were working. If Social Security is 40 percent of that, where does the rest come from? David runs some numbers to give you an idea of what this could look like.

What happens at “full retirement age” and when is it? This number seems to be constantly changing by Congress in order to keep it sustainable. Life expectancy has continued to grow way past what it was in 1935 when Social Security began. The age will probably go up in order to continue to secure it for the long-term.

Everybody knows that the longer you wait to claim Social Security, the bigger the monthly check. Are there reasons to not wait until age 70? David says there are reasons to consider taking it earlier. If you are married, one spouse may benefit from starting Social Security earlier . If you have health concerns, there may be reasons to start it sooner as well. Connect with a financial advisor to make an educated decision on when the best time is for you to claim Social Security.

Today’s Takeaway:

“Full retirement age is probably going to go up the next time Congress addresses these types of issues regarding: how do we secure Social Security for the long-term?”

– David Dickens

Episode 138: 3 Questions to Ask Before You Buy An Annuity

Thu, 19 Aug 2021 16:40:59 GMT

Today’s Prep:

Before you buy an annuity (or rule one out), what do you need to know? David outlines three questions that will help you determine whether or not an annuity aligns with your goals and financial plan.

Equipping Points:

Think an annuity might be a good addition to your financial plan? Before you buy an annuity, there are three questions you’ll want to ask to make sure you know what you’re getting into. David shares the questions you should ask as well as why they are important to understand the answers to.

To start, what kind of annuity is it? There are four types of annuities : immediate, fixed, indexed, and variable. David describes the basic definitions and uses for each of these financial products. Understanding the type of annuity you have will help you better determine how it fits into your financial plan.

Before you buy an annuity, make sure you know how much it costs. Immediate or fixed annuities usually don’t have fees after the costs involved. Index and variable annuities often come with annual fees that help pay for additional benefits that you choose. Some of the costs are small, while others are large. Make sure the price you’re paying is worth the benefit you’re receiving.

Finally, what happens to your money after you pass away? Will the money go away, too? Or will the benefits pass onto your beneficiaries? This all depends on what kind of annuity you have. The account value is what goes to your beneficiaries if it does pass on. Make sure that as your life changes and your heirs change, that you keep your beneficiaries up-to-date.

Annuities are a financial tool that you may or may not need to accomplish your goals in retirement. So, are annuities good or bad ? Annuities are good at guaranteeing results, but the cost tends to come in lower returns. It’s important to work with a financial advisor to ask the right questions and get guidance on what’s the right choice for you.

Today’s Takeaway:

“The best time to ask questions about sometimes complex financial instruments are before you own them.”

– David Dickens

Mixed Signals on Inflation

Thu, 19 Aug 2021 13:13:00 GMT

What to know as markets look forward.

Are you having a tough time keeping track of inflation’s mixed signals? You’re not alone.

Consumer prices in July climbed at their fastest rate since August 2008. Worse, producer prices, which can be an indicator of future price changes at the consumer level, rose at the highest rate since tracking began. ¹ However, in recent weeks, the stock market has shrugged off the inflation news, believing that the worst is over and rising prices will moderate in the future.

It’s important to remember that the stock market is a discounting mechanism, which means it’s always looking forward. Put another way, the stock market’s price today represents all available information about current and future events. How far forward is the stock market looking? Most would agree it’s “discounting” activity six to nine months into the future. ²

Does that mean inflation will be lower in six to nine months? That’s what the stock market is suggesting. But the stock market also has a less-than-perfect record as a discounting mechanism, largely because the future is somewhat unknowable. ² Inflation is just one factor to consider when making adjustments to a portfolio. But if you’re unsure, thanks to the mixed messaging I’ve seen lately, please reach out. We’d welcome the chance to hear your perspective.

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

CNBC, August 11, 2021
Investopedia.com, April 28, 2021

Episode 137: Is Inflation Transitory or Here to Stay?

Thu, 12 Aug 2021 16:43:22 GMT

Today’s Prep:

Gas prices are up, buying a car is much more expensive, and groceries cost more. Is this something you should be concerned about? David shares more information about inflation and whether or not he thinks this is transitory.

Equipping Points:

Is today’s inflation here to stay? What can we learn from the latest numbers? After meeting with clients about inflation where it was a large part of the discussion, David shares with us what we need to know about the recent inflation activity.

Is there anything that we can glean from the monthly data that comes out to help us in structuring our portfolios and getting our inflation expectations right? How can we tell if these are temporary changes or if this inflation is here to stay? Things like used car prices, fuel prices, and motor fuels in the consumer price index (CPI) are indicators of what to look at. Some prices are flexible and some stay up once they go up. Others are based on supply and demand. David shares which current prices he thinks are temporary.

What we want to see is a slowing down of the prices that have been going up. As we see that, we can be more confident that we’re on the right track. Stocks tend to perform pretty well with moderate inflation, whereas very few things perform well with significant levels of inflation. Retired or not, it’s a pretty good environment to have at least your normal allocation in the stock market.

David thinks this inflation is transitory and doesn’t think it will be like what happened in the 1970s. Inflation would be a big thing if that were to happen again, particularly for those on a fixed income via Social Security and pensions. But David doesn’t see this going that way. Keep watching on a monthly basis and reach out to your financial advisor to make sure your financial plan is appropriately set for inflation, now and in the future.

Today’s Takeaway:

“Stocks tend to perform pretty well with moderate inflation. Very few things perform really well with significant levels of inflation.”

– David Dickens

Episode 136: Mailbag – How Much Money To Set Aside for Medical Care?

Thu, 05 Aug 2021 18:05:59 GMT

Today’s Prep:

Are you as prepared for potential medical costs as you should be? How can you be sure? David breaks it down in today’s podcast.

Equipping Points:

After listening to prior podcasts, listeners sent in questions for David to dive in deeper. We covered three questions in last week’s episode and cover two more today on today’s podcast.

Susan says after hearing part three of what you must understand before retirement she wondered about saving for medical care. If her financial plan should include future medical expenses and maybe nursing care when in her 80s, what does she need to save now while in their mid-60s and likely 15-20 years away? How do they figure out how much to set aside in their plan for medical expenses?

David says to be sure to plan for inflation, especially when it comes to medical care. If you or your spouse needs care, estimate what it would cost in today’s costs and then add in inflation from there. David applies the rule of 72 to project the costs. Do you have the money to cover it? If not, consider your options to cover your care .

Bill will retire in six months with a pension. He’s thinking of rolling it into an IRA and then buy an annuity with it. Is that a good idea? This is definitely an option. David explains some of the benefits of doing a rollover like this and the control you get. The rollover then becomes an asset of your family if you were to pass away. Consider though what kind of annuity you plan to buy.

What happens in up markets or down markets? How much will you be able to manage that asset? How protected do you want that asset to be? Working with a financial advisor could help you make the right decision as you enter into retirement with a pension.

Today’s Takeaway:

“Adding in inflation factor is super important.”

– David Dickens

Episode 135: Mailbag – What Should I Do Now To Reduce Future RMD Taxes?

Thu, 29 Jul 2021 18:09:28 GMT

Today’s Prep:

When you get closer to the age of required minimum distributions, you may wonder what you need to do now to prepare. David answers two questions from the mailbag in this week’s podcast.

Equipping Points:

Ron is 66 years old and his wife is 65. They have IRAs with about $1.3 million but don’t really need money from them now. What should they do now to reduce their future tax bill before they have to take out required minimum distributions (RMD) at 72 years old? David talks through what their tax bracket may look like and how it could be impacted by RMDs.

Currently, the Trump tax cuts are set to revert to the previous tax schedules in 2026. If Congress does nothing, your tax rates are going up. If Congress does do something, it may still go up even more. What could that mean for your money?

One thing you can do now is a series of Roth conversions over the next five years until the year you turn 72. You can size those conversions to determine which tax bracket you want to be in. How much would you be saving yourself in taxes? Once you do a Roth conversion, your IRA will be smaller and therefore your RMDs will be smaller. This means that there are a number of ways you benefit from doing the Roth conversion.

After listening to a recent podcast on estate planning , Terry wants to be sure to avoid probate on behalf of their heirs. To do so, they added their son as a joint owner of their home. But someone suggested that could cause problems. What does David think? David lays out what kind of liability issues this could cause for you if something were to go awry. Instead of listing an heir on your home, name them as a beneficiary with a transfer on death deed.

Do you have a question for David? Be sure to reach out!

Today’s Takeaway:

“Paying less over time instead of doing nothing until you’re 72 can make a lot of sense.”

– David Dickens

Episode 134: The 3 Things You Must Understand If Retiring in 3-5 Years, Part 3

Thu, 22 Jul 2021 18:12:12 GMT

Today’s Prep:

Worried your money won’t last through your retirement? Just how much do you need and when can you retire? David talks through all of these things you must know if you are close to retirement.

Equipping Points:

As you near retirement, you might wonder when exactly you really can retire. How are you situated and when is a good time to step away from work from a financial standpoint? On today’s episode of the podcast and part three in this series, David talks through what you need to know about making your money last through retirement.

How long will your money last? How do you know that? And how can you feel comfortable with retiring? Statistically, if you are 60 years old now, you’ll likely live until at least until about 85 years old. You want to make sure you have proper sources of income to last that long. Look at your guaranteed monthly income such as Social Security , annuities, or a pension. Have you factored in inflation?

Your planning process needs to consider that one of you may live a lot longer. You might want to consider the probability that you or your spouse will need some form of assisted living. Have you built that into your retirement plan?

If you are coming up on retirement but the numbers don’t quite add up, what can you do? Research supports working longer and waiting an extra year or two can make a big difference when it comes to retirement. Each month you delay retirement, the more you can put into your 401(k) or other retirement accounts. There are a lot of different ways to find the right solution on how to save up more money toward retirement.

Today’s Takeaway:

“Don’t forget about controlling expenses. The more you control your expenses, the more you have leftover that you will be able to save that big money for retirement. That may not make you wealthy, but it will certainly make you well off.”

– David Dickens

Episode 133: The 3 Things You Must Understand If You’re Retiring In 3-5 Years, Part 2

Thu, 15 Jul 2021 18:14:11 GMT

Today’s Prep:

As you get closer to retirement, you likely want to make sure everything is in order, including your estate plan. David discusses what paperwork you should have in place and up-to-date.

Equipping Points:

What will you do with your money and who will you leave it to when you’re gone? On today’s episode of the podcast, we talk about some of the estate planning things you should do and what legal documents you should put in place as part two of this series.

When estate planning, should you start with a trust ? David says there’s a possibility that you don’t need one. You can usually cover your estate plan with some well-written documents and beneficiary designations. So, who does need a trust? There are a few specific reasons why some people may want a trust, but typically having well-crafted beneficiary designations will be what you need.

Often, the primary beneficiary designation is your spouse . Then the secondary designation is usually your children or perhaps your siblings or even your church. When you have an IRA or Roth IRA, the paperwork includes beneficiaries (make sure to keep these updated though). Your brokerage account, annuities, bank accounts, car, and real estate may all require further paperwork to avoid probate.

There are two kinds of beneficiary designations: per capita and per stirpes. What’s the difference? While the default is per capita, you may actually prefer per stirpes in order to pass along an inheritance down to grandchildren should your children pass away beforehand. Are your assets, including your annuities, designated according to what you want?

In case you’re not able to speak for yourself, powers of attorney need to be set up. This person can write checks, make financial decisions, and must be a trusted relationship when listed as the financial power of attorney. A financial power of attorney, healthcare power of attorney, living will, and HIPAA authorization could all make a big difference when it comes to making decisions with your best interests in mind.

Today’s Takeaway:

“Most of America will not ever use a trust and that’s perfectly fine, especially if you take care of your beneficiary designations.”

– David Dickens

Conducting Your Mid-Year Financial Checkup

Thu, 15 Jul 2021 12:56:00 GMT

The midpoint of the year is a great time to review your financial position.

With June officially behind us, it’s time to face the facts: we’re headed toward the second half of 2021. While there’s still plenty of time to enjoy the rest of summer, we encourage you to slow down and check up on your financial well-being.

Review your budget: Your spending habits likely look different now than they did in 2020, but did you adjust your yearly budget accordingly? The second half of the year can be expensive, between the holiday season and back-to-school spending. Take some time now to prepare.

Check your credit score: If you plan on moving, purchasing a car, or taking out a personal loan this year, you’ll want your credit score in good shape. Your score could have been impacted by recently accrued debt, late payments, hard credit inquiries, identity theft, and more.

Prepare for advanced tax credits: If your family is eligible, you may begin receiving advanced child tax credits in July. Families who qualify are expected to receive six installments via direct deposit or mailed check. If you anticipate getting the credit, you may want to talk it over with your tax professional. With 2021 looking different than last year, take some time to evaluate your financial standings as we prepare for the second half of the year. Remember, we’re always here if you need assistance reassessing or working towards your financial goals.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Episode 132: 3 Things You Must Understand If You’re Retiring In 3-5 Years, Part 1

Thu, 08 Jul 2021 18:17:27 GMT

Today’s Prep:

What happens with your taxes in retirement? This is the first of our three-part series for what to do and how to prepare if you are three to five years away from retirement.

Equipping Points:

If you are three to five years away from retirement, this podcast is especially for you. These years are key years to strategize before retirement. If you’re young, the key things to keep in mind are to work on your career, save, and don’t worry too much about it. In your 50s and late 50s, you might be wondering, do I have enough? When can I step away from work?

A major element to think about is the tax implications in retirement. To start, did you know that your Social Security is likely to be taxed? Your work income (if you are still working), your dividends, your interest income, rental income, and half of you and your spouse’s Social Security income all get added together to determine the kind of taxes you would pay.

If you have a pension, you will likely need to make the decision between a lump sum and the monthly payments. The decision comes down to a number of factors, including taxes. A lump sum rollover is worth considering to provide the monthly amount you were expecting while keeping it from becoming a taxable event. David gives a few different examples of how this could go.

Have you heard of the widow’s tax? This applies to both a widow or widower. If you are married filing joint, your tax bracket could be very different than when you file as an individual. If you or your spouse pass away, you’ll want to be prepared for the difference financially. A Roth conversion is something you may want to consider to prepare ahead of time.

You want to have a discussion with your advisor about all of these taxes . Keep in mind that you’re likely to be bumped into a higher tax bracket when you have to start taking out RMDs. Having a good understanding of the taxes you may face will help you plan accordingly with your finances.

Today’s Takeaway:

“A lot of people that I’ve talked to have not thought through the implications of how their tax bill is going to impact their retirement.”

– David Dickens

Episode 131: 5 Things Grandparents & Parents Need to Know About 529 Plans

Thu, 01 Jul 2021 18:19:19 GMT

Today’s Prep:

529 plans are a great way to save away money for kids’ college. But it does take a little bit of time to understand the ins and outs of them. David talks us through the top five things to keep in mind with 529s.

Equipping Points:

What are the key things you need to know about when it comes to 529 plans? These are great accounts to save for education for your kids or grandkids. But what are some of the details that often get overlooked?

To start, you’ll want to remember that you get a tax deduction for contributing in many states, including Kansas and Missouri. Regardless of which 529 plan you put money into, Kansas and Missouri will give a tax deduction from your state income tax. So, if you are contributing to plans for your grandparents all over the country, you can deduct a certain amount. David explains how to get this benefit.

While 529 plans are most common for college, there are a few other reasons it can be used as well. In addition to public, private, or community college, it can also be used for grad school and trade school as long as it is eligible for federal student loan funding. Now, up to $10,000 a year can go toward private school in elementary, middle, or high school. Another recent change is being able to use it to pay off student loans.

The funds can be used for more than just tuition. Room and board on-campus or off-campus rent and utilities can also be covered by the 529 plans. Books and supplies, including a laptop, can be paid for with the 529. What if your child or grandchild doesn’t go to college? The beneficiary can be changed to another family member with no tax implications.

Finally, David talks about how this is not subject under the gift tax if you give less than $15,000 or less than $30,000 if you’re married. There is a way however to do a lump sum contribution if you are feeling behind in contributing. It’s a nice way to fund a grandchild’s account for college or approved educational expenses. Are you contributing to a 529 plan?

Today’s Takeaway:

“529s are underused. There’s enough flexibility built into most of these accounts, and especially in Missouri and Kansas where you get a state tax deduction, where they’re absolutely worth a look.”

– David Dickens

Economic Lessons from Used-Car Inflation

Wed, 30 Jun 2021 14:24:00 GMT

Various factors drive used car prices.

Inflation is defined as the general upward price movement of goods and services in an economy. The key word is “general.” Inflation tends to be uneven and affects the price of some items more than others. If you’ve been in the market for a used car, you’ve learned a critical economic lesson about the “uneven” side of inflation. The overall rate of inflation has been 5% for the past 12 months. Meanwhile, the average price of a used car is up 30% from a year ago. ^1,2

Various factors drive used car prices, but most of the trouble links to the global microchip shortage. ³ Demand for used cars may well slow later this year as automakers return to normal production levels. As the market shifts, some people who bought used cars may learn another key economics lesson: they might owe more for their car than what it’s worth as prices return to historical levels. ⁴

The most important takeaway is that inflation touches our lives in different ways. Gasoline prices are up sharply from a year ago, but you might not feel the increase if you work from home or are retired. However, at the grocery store, all shoppers are paying higher prices for everything from beef to pork to milk. ⁵ If all the recent inflation talk has you uneasy, please contact our offices. We’d welcome the chance to hear about your experience with higher prices. The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

CarandDriver.com, June 5, 2021
APNews.com, June 22, 2021
ConsumerReports.org, June 10, 2021
Forbes.com, June 14, 2021
CNBC.com, June 26, 2021

Episode 130: Only 1 in 4 Americans Have Done This

Thu, 24 Jun 2021 18:21:04 GMT

Today’s Prep:

Are you doing more summer vacation planning than financial planning? You’re not alone. Let’s talk about how you should view retirement planning in relation to your vacation plans.

Equipping Points:

As we get into summer, you may be taking trips or starting to plan your vacation. Often, people spend more time planning their vacation than they plan their retirement. Think about when you go on vacation. What kind of planning and preparation do you do ahead of time? David asks co-host Walter about his plans for an upcoming trip. There’s a lot that goes into this!

With a vacation, you have an idea of how long you’ll be there. When it comes to retirement, you still need to estimate how long your retirement might last. When will you retire? What might be your life expectancy? The last thing you want to do is run out of money in retirement and still have five years left.

How much money will you need to spend in retirement? Don’t assume you’ll spend less than you do now! Consider what kind of lifestyle you want in retirement and what that costs. Will you travel? Have you built in healthcare costs? Part of going on a trip is the research and planning and can be an enjoyable part of the process. It defines your goals and builds positive anticipation, just like retirement planning can do. You’ll have more comfort and confidence if you know what your plan is.

Aside from your investments, how much retirement income will you have? If you visit SSA.gov you can get some rough projections at what your Social Security will be. Then put it all together to project what you’ll have, what you need, and what the difference is. It’s important to keep updating your plan and adjusting as needed as you near and enter into retirement.

Today’s Takeaway:

“Part of the hardest work in doing retirement planning is figuring out: what kind of lifestyle do I want—do we want—in retirement?”

– David Dickens

Episdoe 129: Mailbag – Why Aren’t My IRAs Making Much Money?

Thu, 17 Jun 2021 18:22:37 GMT

Today’s Prep:

Is something going wrong if your IRAs aren’t making as much as you think they should? Or, how can you save for an upcoming wedding? David answers four questions from the mailbag.

Equipping Points:

David gets all sorts of investment questions from clients every day. Today, he answers four listener questions from the mailbag. Do you relate to any of these situations?

Jerry has two daughters and foresees weddings in the near future. How can he save for these weddings? David has three daughters and can relate. While you might not know just how much these weddings will cost, you do want to set that money aside. If it’s in the next 12 months, is it worth putting money for it into the stock market? It comes down to time horizon and your willingness to take risk. Most people feel good about winning but hate losing.

Kate has a catch-22! She has some Apple stock she’d like to sell but is worried about the tax bill. Which is more important, capturing the gains or keeping her taxes low? David explains some of the tax rates and what you might have to pay.

Alec says their IRAs don’t seem to be making much money. Is the broker not paying attention to their accounts? David says to find out what your broker knows about your risk tolerance. Are your returns underperforming because they have you at a moderate risk tolerance? Have a conversation with your broker to find out what they say and make sure you’re on the same page.

Michael is tired of keeping up with all of the different statements from past 401(k) accounts . Can he combine them and should he? David asks if they are all traditional 401(k) or Roth 401(k) accounts. Having them combined will help you better visualize them and understand the risk you are taking with them. Then when you’re retired, it will make it simpler to take out distributions from one place. David shares the one time there’s an exception to this advice.

Today’s Takeaway:

“Anybody worth working with is going to want to have that conversation with you and get it figured out, because we all like happy clients.”

– David Dickens

A COLA with Your Social Security?

Mon, 14 Jun 2021 13:37:00 GMT

Preliminary estimates call for a 4.7% cost-of-living increase. ¹

If there is a “silver lining” to all the inflation talk, it may be that Social Security benefits are expected to see a larger-than-normal increase in 2022.

Preliminary estimates call for a 4.7% cost-of-living increase (COLA) in Social Security benefits next year, which would be the highest since 2009. Benefits rose 1.3% in 2021. ¹

The Social Security Administration makes its official announcement in January 2022. The Bureau of Labor Statistics bases its annual adjustment on the Bureau of Labor Statistics data in the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as the CPI-W. ² A lot can change between now and January 2022, but remember that data from the third quarter of 2021 will be the basis for the COLA for next year.

Social Security is one of the most misunderstood sources of retirement income. For example, only 33% of people in 2021 expected Social Security to be a major income source during retirement. In reality, it was a major source for 62% of retirees. ³ Retirement may hold many surprises. But your sources of retirement income shouldn’t be one of them. It’s critical to have a strategy that keeps your expectations in line with reality. We’d welcome the chance to hear what you think about Social Security.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

SeniorsLeague.org, May 12, 2021
CNBC.com, May 12, 2021
EBRI.org, 2021. “Retirement Confidence Survey”

Episode 128: How To Find And Buy Term Life Insurance

Thu, 10 Jun 2021 18:24:02 GMT

Today’s Prep:

Wondering if you need term life insurance? You probably do, so how and where should you get it? Find out on today’s podcast!

Equipping Points:

Inspired by David’s mailbox, many of us are getting extra solicitations encouraging you to get some type of insurance or coverage. You’ve likely seen something like that from somewhere such as AAA selling group term life insurance. David is a big fan of term life insurance, but is this where you should get it?

There’s nothing wrong with getting this type of term life insurance, but if you’re healthy it’s not the best option to get this product. There are three ways to get term life insurance. You can get it through your employer, through a group, or do-it-yourself, either through a broker or through a website.

If your employer offers life insurance for free, you take it. But you need to calculate how much you need , and it may be more than one or two times your annual salary like your employer offers. Having a few kids and a mortgage might mean you need quite a bit to cover them for quite some time.

David breaks down the difference between the varying ways you can get term life insurance. Doing a little bit of work on your own, if you’re healthy, will save you a lot of money. The prices are significantly different if you get a health assessment instead of term life insurance straight through the group without any qualifiers. The most important thing to determine is how much life insurance you need . Is that how much you have? If not, what’s the cheapest way to fill in that gap? It’s unlikely that you are over-insured but more likely you’re underinsured.

Today’s Takeaway:

“How do you go about getting the best, cheapest form of term life insurance based on where you are in life?“

– David Dickens

Episode 127: The 3 Worlds of Money

Thu, 03 Jun 2021 18:25:35 GMT

Today’s Prep:

What are the three worlds of money and how do they fit in your financial plan? David discusses each world and their pros and cons in today’s episode.

Equipping Points:

If you understand the three worlds of money, you will have a better understanding of how financial planning works. So today, we’ll remove the financial terms and extra jargon in order to focus on the three worlds of money: banking, insurance, and Wall Street. They serve significantly different purposes, and it’s important to understand how each fit into your financial world.

In each of these worlds, you want to look at the SLY principle: safety, liquidity, and yield . Each of these worlds contain at least two of those, but not all three. In banking, you’ll find safety and liquidity, but not yield. These accounts include things like checking accounts, savings accounts, CDs, and money markets. This is a world many of us have been familiar with from a young age. The two biggest mistakes people make in the banking world are incurring unnecessary fees and having too much of your money in the bank.

Many people are unsure of insurance. Beyond life insurance and health insurance policies, there are several different types of annuities. Insurance tends to be safe and provide yields, but are not liquid. David talks about the downsides to insurance when it comes to penalties for early withdrawal.

Wall Street gives you liquidity and yield, without the safety. From mutual funds to ETFs, stocks and bonds, David talks through some of the pros and cons that you should be aware of when investing in the stock market. The hope is to gain a significant amount of yield and not a significant loss.

How do you strike the right balance between these three worlds? It’s important to find out your risk tolerance. An advisor can help you understand and invest in the right combination of each of these worlds in your plan.

Today’s Takeaway:

“Is there something that I need to know before I go another year toward retirement?”

– David Dickens

Episode 126: What’s Your Retirement Income Literacy?

Thu, 27 May 2021 18:28:00 GMT

Today’s Prep:

Ready to put your retirement income knowledge to the test? Take this quiz and follow along on today’s podcast to see how you do.

Equipping Points:

A 37-question retirement income literacy quiz from the American College Center for Retirement Income was recently given to 1,500 Americans aged 50-75. Unfortunately, the average score was far from passing at about 42 percent. David did miss two questions himself, but we’ll see how co-host Walter does. Ready to play along?

What is the most you can afford to withdraw each year to have a 95% chance that your assets will last for 30 years? You may have heard about the 4 percent rule, which this quiz seems to agree with. That said, some have started to say you might have to take out even less than that to be safe in retirement and not run out of money.

Do you know when you have to start taking RMDs ? Or what the life expectancy is of a 65-year-old man? Can you contribute to an IRA or Roth IRA if you are still working in retirement?

We also cover a few questions with answers that may surprise you. For instance, do you know who provides the majority of long-term care services? You might think it’s done in an assisted living facility, but a lot of times because it is so expensive, family members provide care. Nationally, who pays for the majority of long-term care expenses?

Our final question on today’s podcast is about a 401(k) plan. If a large company sponsoring the 401(k) goes bankrupt, are your assets at risk? Thankfully, those are separate from any claims of the creditors of the company filing for bankruptcy.

How did you do? Ready to take the entire quiz to get your score? If you’ve been listening to this podcast for some time, you likely scored higher than the average. And for the ones you missed? Be sure to go back and learn the right answer so you’re prepared for the future.

Today’s Takeaway:

“Is there something that I need to know before I go another year toward retirement?”

– David Dickens

Inflation Can Be A Scary Word

Mon, 24 May 2021 13:10:00 GMT

There are compelling reasons to adopt a wait-and-see approach.

Inflation can be a scary word for people who are retired. It’s code for “prices are going up, but my income may stay the same.” The most recent reading on consumer prices put inflation back into the conversation. The Consumer Price Index (CPI) rose 0.8% in April 2021 and jumped by a greater-than-expected 4.2% year-over-year. ¹ April’s increase was led by a 10% increase in used cars, with additional pockets of increases, notably in transportation services and commodities. Core inflation, which excludes the more volatile food and energy prices, was up a more modest 3.0% from April 2020. ^2,3 While there is good reason to be concerned about inflation, there also are compelling reasons to adopt a wait-and-see approach.

Federal Reserve Chair Jerome Powell says today’s inflation will be transitory and attributed to the post-pandemic economic expansion. But others are not so certain. Warren Buffett has said price increases are more structural, meaning they are becoming part of the prices we pay every day. ^4,5 Inflation is just one factor considered when creating a portfolio. If inflation starts to trend higher than expected for a period of time, adjustments can be made. For example, if the Fed chooses to raise interest rates to help manage inflation, it may be appropriate to review a portfolio’s bond holdings. Longer-term bonds can be more sensitive to interest rate changes.

We are keeping an eye on inflation and understand the concerns of our retired, or soon to be retired, clients. We work with professionals who monitor the economy and who can help interpret the recent government reports. But if inflation is starting to worry you, please reach out. We’d welcome the chance to hear your thoughts. The market value of a bond will fluctuate with changes in interest rates. As rates rise, the value of existing bonds typically falls. If an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. By holding a bond to maturity, an investor will receive the interest payments due plus your original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

CNBC, May 12, 2021
U.S. Bureau of Labor Statistics, May 12, 2021
U.S. Bureau of Labor Statistics, May 12, 2021
CNBC.com, May 3, 2021
CNBC.com, April 28, 2021

Episode 125: Mailbag – Should I take Social Security Early?

Thu, 20 May 2021 18:29:47 GMT

Today’s Prep:

Is paying off the house a worthwhile reason for taking Social Security early? Can life insurance create retirement income? David answers five very different questions from the mailbag in today’s episode.

Equipping Points:

Any given week in David’s office covers a wide variety of clients and questions. On today’s episode of the podcast, we take five different questions from the mailbag that similarly, cover a wide variety of topics.

Al wants to know if he should start taking his Social Security at 62 to help pay off his house before retiring. David says some of it comes down to how long you’re going to live and whether or not you have a spouse. The longer you wait to start taking Social Security, the more they are going to send you. What does that dollar amount difference really come down to? Where is the break-even point?

Diana heard about a strategy that uses life insurance to create income in retirement. Is this a legitimate strategy? David says it only really works if you start it in your 40s and 50s. There are good uses for life insurance in later age brackets but not this one. David says this isn’t likely a DIY strategy but best used for a particular demographic of people.

Victoria’s husband wants to leave a lot of money as a legacy for their kids but she’s worked hard and is tired of scrimping and saving during her retirement. What is a reasonable amount to leave as a legacy? There are a few factors that may weigh into this decision. For some, they would rather leave a legacy to charity. It’s important to determine your goals instead of leaving this decision to chance.

Ron anticipates a market crash any day now, so he has half of his IRA in cash. How long should he wait to reinvest it? David says this is market timing, which is almost always a bad idea. Time spent in the market beats timing the market. Use some sort of indicator to determine a time when a probability of a significant downturn is high. People really like it when the market is going up, but they hate losing money.

April and her husband plan to take care of each other as they get older. How much long-term care coverage do they really need? The older you are, the more expensive it is to get long-term care coverage. If you look at the numbers, consider the possible costs you could face. Decide in your 50s and 60s (if possible) on your long-term care strategy. There are alternatives to long-term care insurance that can still provide long-term care coverage.

Today’s Takeaway:

“Maybe your legacy has more to do with charitable giving than leaving it to heirs or to people in your family.“

– David Dickens

Episode 124: 4 Terms from the Financial Dictionary

Thu, 13 May 2021 18:31:55 GMT

Today’s Prep:

Ready to learn some financial terms? David unpacks four financial terms and how they may relate to your financial plan.

Equipping Points:

On today’s episode of Cover Your Assets KC we’re going to cover four different topics from the financial dictionary: what overbought in the stock market means, P/E ratios, quitclaim deed, and regressive taxes. Have you heard of all of these terms? Even co-host Walter is learning a few new financial terms today!

Is this a good time to invest money? To determine whether or not it’s a good time, David looks to the relative strength index to evaluate and see if the stock market is overbought. Is this a good time to dump all your money at the same time or is it better to do so over time?

To find out if something is overpriced or underpriced, look to the P/E ratio. This ratio shows the price in relation to its price the past 12 months. David shares examples of different companies and their share prices. What do you see if you look back to the company’s stock prices historically? What about compared to the market? It’s important to understand the context.

What is a quitclaim deed? David talks through what this means and an example of how it might be handled. This is a super quick and inexpensive way to relinquish your claim on a piece of real property.

Taxes are either progressive or regressive. Progressive tax is when you pay more money the more you make. Regressive tax is where regardless of your income, you pay the same dollar amount. For instance, in Kansas, your groceries are taxable. The less you have, the more expensive the tax is. David thinks we are going to hear more about progressive and regressive taxes as the Biden tax plan comes out.

Today’s Takeaway:

"P/E Ratio: Is it currently priced attractively, either to the market itself or to its own history?"

– David Dickens

Episode 123: Do Retirees Really Need Life Insurance?

Thu, 06 May 2021 18:34:17 GMT

Today’s Prep:

Ironically, life insurance is a young man’s game. The perception among many people is that your need for a policy dramatically decreases or become completely unnecessary as you get older. But is that really the case? Today, we’ll explore the ins and outs of life insurance and its various uses when it comes to planning.

Equipping Points:

Depending on who you ask about life insurance, there’s a good chance you’ll get answers that vary quite a bit. Some people really advocate for including a policy in your portfolio while others believe there are better uses for your money.

The reason why many people don’t like discussing life insurance is because it deals with your own mortality. Having the conversation means you have to think about life when you’re no longer around and most of us don’t enjoy that. Plus, it also means talking about money that you’re spending and likely won’t ever see again personally.

So does it make sense to have life insurance as a retiree? That’s what we want to explore on this episode of the podcast.

To put it as simply as possible, the question to ask is are you going to leave someone with a financial problem when you die and can you fix it economically with life insurance? That won’t always tell you whether you need life insurance but it’s a great starting point.

A client needs to have some sort of insurable interest to determine whether life insurance is something they’ll need. This is easy to do for younger people, especially when they have a spouse or family that needs an estate left behind to help support them but you haven’t had the time to build that estate.

But life insurance can be used for a number of reasons like to replace your longterm care insurance, solve estate tax problems, or to cover a lost pension when you pass away. David will get into those in detail on the show with examples of how that might look in practice.

One tool that David uses to help determine how much insurance you might need is the calculator on Bankrate.com. You can find it here and it will allow you to input some factors to see what they recommend. To get a true look at how life insurance will fit into financial plan, you’ll want to work with a professional to make sure no detail is overlooked.

Today’s Takeaway:

“I’m a fan of what it does but, frankly, I don’t like it anymore than anybody else because I don’t like paying premiums for something that I will likely never need. So it’s kind of a complex, emotional bundle.”

– David Dickens

Paying for the Infrastructure Bill

Wed, 05 May 2021 14:56:00 GMT

The proposal does not yet include any new taxes on individuals.

President Joe Biden introduced the much-anticipated American Jobs Plan, which outlines an approach to spend roughly $2.2 trillion on the nation’s infrastructure and other projects. As part of the legislative process, the Biden administration also laid out a proposal for paying for the domestic investment. The plan includes raising the corporate tax rate to 28% from 21%, cracking down on companies that use overseas operations to manage profits, and eliminating tax breaks for some industries. ¹ Right now, the proposal does not include any new taxes on individuals. It’s only targeting corporations expecting that the 8-year plan would pay for itself in 15 years. ² But some believe that in the coming weeks, the Biden administration intends to put forward additional tax initiatives that target high-earning Americans.

One proposal that may get introduced would raise taxes on families who earn more than $400,000 a year. There also has been discussion about a higher capital gains tax rate for individuals earning at least $1 million a year and adjustments to the estate tax exemption. ³ At this point, it’s uncertain what—if any—tax changes for individuals will be taken up by Congress. The initiatives that will take priority may become more clear in the weeks ahead.

Challenge yourself to be patient during this period of debate over tax proposals. If they introduce changes, a sound analysis should drive portfolio decisions, not knee-jerk reactions to current events. Remember, this letter is for informational purposes only. It is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your tax strategy. If you are concerned about one or more of these proposals, please give us a call. We’d welcome the chance to hear your perspective, and hopefully, we can provide some guidance.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

CNBC.com, March 31, 2021
USAToday.com, March 31, 2021
Bloomberg.com, March 14, 2021

Episode 122: How To Claim Social Security Benefits of an Ex-Spouse

Thu, 29 Apr 2021 18:35:55 GMT

Today’s Prep:

Are you divorced and wondering about spousal Social Security benefits in retirement? David shares all the key details about who is eligible and what these benefits look like on today’s podcast.

Equipping Points:

Unfortunately, divorce is a reality to many people, which causes a lot of stress and details to sort through. When you are together, you each have Social Security and then when one spouse passes away, the other spouse gets the higher Social Security amount. But how does it work with divorce? On today’s podcast, David talks through what this could entail.

How would you qualify for a Social Security of an ex-spouse ? You had to have been married for at least ten years, divorced for over two years, both over 62 years old, and preferably, of full retirement age. You cannot be remarried and still claim an ex-spouse’s Social Security benefits.

If you do qualify, how much are you entitled to claim? What variables need to be taken into consideration? What happens if you’ve been married and divorced a few different times? And just who can claim the benefits?

What happens if your ex-spouse is still working but you qualify and are ready to start claiming the monthly benefit ? The good news is, they do not need to be claiming Social Security in order for you to do so. They will not know you are claiming the benefit based on their work record, and it does not impact the dollar amount of their benefit. But what if your ex-spouse has died?

Finally, what is the application process like through Social Security ? What information do you need? David shares how he helps implement this money into your financial plan. If there’s somebody you can think of who might also benefit from this information and maybe doesn’t otherwise realize that they can receive this Social Security benefit, be sure to pass this along.

Today’s Takeaway:

“In most of the periodicals that you read, that’s the Baby Boomers biggest fear: running out of money.”

– David Dickens

Episode 121: How Much Should You Invest in One Stock?

Thu, 22 Apr 2021 18:38:07 GMT

Today’s Prep:

If you’ve found a good stock, how much is okay to invest in it? David answers this question from the mailbag, as well as three others related to when to retire and the stability of Social Security.

Equipping Points:

As a financial advisor, David always enjoys answering questions from listeners like you. Today on the Cover Your Assets KC podcast, David answers four questions related to retirement and investments.

Jerry is 65 and recently had a heart attack. He’s out of work for another week but then hopes to get back to a normal schedule with no plans to retire anytime soon. His wife though is concerned. Isn’t it normal to work past 65? David says he can’t comment on the health side of things, but financially, do you want to keep working? If you were to have another heart attack in the next few months, how long would your money last? Or, if something were to happen , how long would your money last for your wife?

Greg is being offered an early retirement package that includes a severance package and a pension buyout. Is it wise to consider this? This depends a bit on the lifestyle you want in retirement. Will the severance mean that you can actually retire or just enough to bridge you to your next job? How well have you saved for your retirement? Have you factored in for inflation?

Diane is 45 and worried about the stability of Social Security . Will it be around for the rest of her lifetime? David is convinced it will be there, but guesses that changes could be made. The full retirement age might change or more Social Security could be taxable. If you’re currently retired, you’ll most likely have a low impact by whatever changes happen. If you’re under 40 though, you should probably expect more changes by the time you reach retirement.

Andy has about $2 million invested, but almost half of it is invested in one company. How much is acceptable to have invested in one stock . Common advice says to not have more than six percent in one company. Having a significant amount of your net worth invested in one company is not considered diversified. David shares the values of several companies five years later to give an idea of why diversification is important.

Today’s Takeaway:

"Diversification increases your probability of success."

– David Dickens

Episode 120: What’s Changed with Inherited IRAs?

Thu, 15 Apr 2021 18:49:03 GMT

Today’s Prep:

When financial planning, what do you need to know about inherited IRAs when it comes to leaving a legacy? What is most beneficial to your heirs in the future?

Equipping Points:

Inherited IRAs don’t work the same way they used to. In a past episode in 2019, we focused on what you need to know about inherited IRAs, but things have changed since then. Between COVID and other changes in the financial world, it’s worth learning the updated rules.

The biggest change is the length of time you have to withdraw an inherited IRA. In the past, it could be taken out over your lifetime. Now, the rule is to clear with it out within 10 years (with a few exceptions). Why does this make a difference? Think about the tax implications of this. Would this put you over the edge and into the next tax bracket?

What if you inherit an IRA from your spouse or you are less than ten years younger than the person who died? In both of these cases, the old rules still apply when it comes to the timeline you have to clear it out. Children under 18 don’t start their ten-year timeline until they reach 18 years old. With some careful planning, you may want to consider these possibilities.

When some clients have met with David after inheriting an IRA in or near retirement, it has changed their retirement plan slightly. There are some positive opportunities to work through your retirement plan if you’re lucky enough to inherit an IRA.

Some parents or grandparents may wonder whether it’s better to pass a Roth IRA instead of a traditional IRA to their heirs. While no one can predict the future, if leaving an inheritance is important to you, ask: what gives me the highest probability of passing on the best assets to the next generation? To pass onto the next generation, by far Roth IRA is best–taxes are already paid and it will grow tax-free. This allows heirs to decide how much and at what point within the ten years to take out the money.

Today’s Takeaway:

“A lot of these questions would be so simple if we knew when we going to die, but we don’t. So, the best you can do is have a plan and try to figure out: what gives me the highest probability of passing on the best assets to the next generation?”

– David Dickens

Episode 118: Things You Should Never Assume In the Financial World

Thu, 01 Apr 2021 19:49:42 GMT

Today’s Prep:

Are you assuming when it comes to your financial plan? Let’s talk about what common assumptions people have and how to properly plan and prepare for retirement.

Equipping Points:

We all know what happens to you and me when you assume. Both David and Walter have had that word written in big bold letters on the board to remind them what happens when you assume. What kind of assumptions do we make (but shouldn’t!) when it comes to financial planning?

Are you assuming you’ll spend less when you retire? What does David see in practice? When you get to retirement, you often want to travel and spend time with grandkids. It’s easy to assume that you’ll be able to take on a more laid-back lifestyle but you might be surprised by how active you’d rather be. Before you retire, make sure you have a projection of what you’ll spend instead of an assumption. Do you have the assets to cover those costs? How does your plan provide for that spending?

Will taxes be higher in retirement? Based on all of the recent spending, tax rates are likely to go up. What we don’t know is how much higher they may go. Right now, the tax cuts passed during the Trump presidency will automatically revert up if Congress does nothing about it by the end of 2025. With government spending continuing to go up, be prepared for taxes to go up in the future instead of going down.

Have you fallen into thinking that you should pay for your kids’ college before saving for retirement? Remember that there are financial aid options and loans available for college, whereas this doesn’t exist for your retirement. It’s perhaps a noble assumption but may cause more problems than it helps. While you might think you can keep working in retirement, that’s not always the case. Be sure to plan for retirement before you consider paying for college for your kids.

Worried you’ll never be able to retire? Some make this assumption and get nervous for the future. The best time to start saving is in your twenties, but regardless of how old you are, saving now is a good idea. Don’t think that if you’ve missed out on saving in your 20s and 30s that all is lost. How and where can you catch up when it comes to saving for retirement? David shares how you can ensure you can save and prepare as you near your retirement .

Today’s Takeaway:

“Before you retire–maybe five years before you retire–make sure you have not an assumption, but a projection of what you really think you might spend in retirement.“

– David Dickens

Qualified Charitable Distributions

Fri, 26 Mar 2021 13:39:00 GMT

A choice for I.R.A. owners who want to reduce taxes linked to I.R.A. distributions.

Do you have an I.R.A.? As you enter your 70s, you may start to look at that I.R.A. not only as an asset, but also as a problem. By law, you must take required minimum distributions (R.M.D.s) from a Traditional I.R.A. once you reach age 72; there are very few exceptions to this. The downside of these R.M.D.s? The entire distribution is taxable. (You never have to take R.M.D.s from a Roth I.R.A., provided you are its original owner.) ¹

While the income from the R.M.D. is nice, the linked taxes can be a headache. Relief for that headache might be available to you, though. Did you know that you can potentially satisfy some or all of your annual R.M.D. requirement in a way that can help you manage taxes and make a charitable impact?

Consider the Qualified Charitable Distribution, Q.C.D. This is a direct asset transfer from an I.R.A. to a charity or non-profit organization of your choice. The organization must be tax-exempt under Internal Revenue Section 501(c)(3). ²

A Q.C.D., sometimes called a charitable I.R.A. gift, is intended to accomplish two things. One, it gives you a chance to contribute up to $100,000 in a single year to a cause or charity. Two, you can count the entire amount of the Q.C.D. toward your R.M.D. for the year, and the Q.C.D. amount may not be included in your gross income. ²

You must be at least 70½ years old to make a Q.C.D. You may want to coordinate a Q.C.D. with the help and guidance of a financial professional, because if you improperly manage the transfer of assets between your I.R.A. and the charity, the tax break you hope for could be lost. You also need to allow enough time for the asset transfer to occur, meaning Q.C.D.s are best arranged before the very end of a calendar year. ^2,3

In 2020, the age limit for putting money into a Traditional I.R.A. was lifted, and some older I.R.A. owners wondered if they could make a Q.C.D. to a charity and simultaneously characterize it as an I.R.A. contribution. The Internal Revenue Service said no to that. ² That said, a Q.C.D. is a choice that you may want to look at, especially if you think of taxes when you think of your mandatory annual I.R.A. distributions. It should be noted that the tax treatment of I.R.A.s can change from year to year, and remember, this article is for informational purposes only and does not constitute real-life advice. If a Q.C.D. interests you, consider talking with a financial professional before making any move.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

Forbes, February 23, 2021
TheStreet, August 31, 2020
Investopedia, October 29, 2020

Episode 117: Where Can I Find Mutual Funds with 10 Percent Returns?

Thu, 25 Mar 2021 19:52:34 GMT

Today’s Prep:

On the lookout for mutual funds with high returns because you’ve heard it’s possible? David answers three questions from the mailbag in today’s show as you make financial decisions.

Equipping Points:

Do you have a question of something going on in your financial life? On today’s show, we feature three questions to see what David advises.

Beau needs about $5,000 a month in living expenses in retirement. His Social Security and pension total about $5,300. Does this mean his entire 401(k) will be able to be left behind for his son? Not necessarily. Don’t forget about inflation! Basic living expenses will go up 10, 15, and 20 years from now. Make sure your financial plan has an inflation calculation in it. Also, consider healthcare costs as you age. Hopefully there is some leftover to pass on, but don’t assume it’s all going still be there later on.

Shanna says some people in the media say she should invest primarily in mutual funds and can expect annual returns over 10 percent. Where do you find these funds? Remember that the stock market goes up and down. When you put in a model that is unrealistic for the market, your retirement plan will be far from reality. You have to account for the down years. Then, consider whether stock mutual funds are the right funds for you over index funds when it comes to fees.

Finally, Derek’s aunt recently died and left him her house as well as some cash. He never considered buying an investment property but is now considering keeping it as a rental property . Which is better? David says it’s an investment either way, but one is an active investment and one is a passive investment. Are you willing and ready to do maintenance and upkeep on a rental property?

Reach out to David Dickens and his team with your questions and make sure your financial plan and goals are headed in the right direction.

Today’s Takeaway:

“There’s no free lunch in investing. It kind of boils down to: how much diversification do you want? And what are your personal skills?”

– David Dickens

Episode 116: 4 Steps to Help You Plan Ahead for Taxes in Retirement

Thu, 18 Mar 2021 19:54:33 GMT

Today’s Prep:

Have you given much thought to taxes in retirement? What can you do to prepare effectively for what the future may hold?

Equipping Points:

As the national debt continues to rise, you can likely expect taxes to go up in the future. What can you do now to prepare? While we don’t know whose taxes will raise or by how much, you can take certain steps to diversify the types of funds you have and ways to strategize so that you have choices in retirement.

David talks about the different accounts that people have to invest in and withdraw from. There are really four types of accounts available: tax-deferred, tax-free, taxable, and then your HSA. Which of these accounts do you have now?

How much should you put in your 401(k) or IRA? To start, if your employer offers a 401(k) and there is a match, always contribute at least up to the match. Generally speaking, if you’re in a lower tax bracket, you should consider maxing out the Roth 401(k) or Roth IRA. If you find yourself in a middle tax bracket, such as 22 or 24 percent bracket, it’s hard to predict whether your taxes will be higher or lower in retirement. What should you do then? What about if you’re in a higher tax bracket?

After you’ve contributed into accounts like your 401(k) and Roth IRA, you may put money into a general stock account. The more money you make, the more homes you need to find for your money. Whether that’s through a bank account, stock, or bond, you can buy, sell, or withdraw it with no penalty. It is subject to taxes as a taxable account, but there is no required minimum distribution ever.

If you have a high-deductible health plan, you need an HSA . Sometime between now and your death, you’ll have health-related expenses and that is a perfect account to pull from. You get a tax-deduction now, it grows tax-free, and you can withdraw from it for healthcare expenses–at any age–tax-free.

Don’t forget about the time after you retire, but before your required minimum distributions start, it might make a ton of sense to do a Roth conversion . Instead of paying extra in taxes, consider the things you can do today that will mean paying less in the future and have more for you and your family.

Today’s Takeaway:

“The better you do for yourself, you’ve got to find homes–financial homes–for more money as you make it.”

– David Dickens

Tax Efficiency in Retirement

Mon, 15 Mar 2021 12:55:00 GMT

What role should taxes play in your investment decisions?

Will you pay higher taxes in retirement? Do you have a 401(k) or a traditional IRA? If so, you will receive income from both after age 72. However, if you have saved and invested much of your life, you may also end up retiring at a higher marginal tax rate than your current one. In fact, the income alone resulting from a Required Minimum Distribution could push you into a higher tax bracket. While retirees with lower incomes may rely on Social Security as their prime income source, they may pay comparatively less income tax than you in retirement; some, or even all, of their Social Security benefits may not be counted as taxable income. ¹

What’s a pre-tax investment? Traditional IRAs and 401(k)s are examples of pre-tax investments. You can put off paying taxes on the contributions you make to these accounts until you start to take distributions. When you take distributions from these accounts, you may owe taxes on the withdrawal. Pre-tax investments are also called tax-deferred investments, as the invested assets can benefit from tax-deferred growth. ² Under the SECURE Act, once you reach age 72, you must begin taking required minimum distributions from a traditional IRA, 401(k), and other defined contribution plans in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Contributions to a traditional IRA may be fully or partially deductible, depending on your adjusted gross income.

What’s an after-tax investment? A Roth IRA is a classic example. When you put money into a Roth IRA, the contribution is made with after-tax dollars. As a trade-off, you may not owe taxes on the withdrawals from that Roth IRA (so long as you have had your Roth IRA at least five years and you are at least 59½ years old). With distributions from a Roth IRA, your total taxable retirement income is not as high as it would be otherwise. ²

Should you have both a traditional IRA and a Roth IRA? It may seem redundant, but it could help you manage your tax situation. Keep in mind that tax-free and penalty-free withdrawal from a Roth IRA also can be taken under certain other circumstances, such as the owner’s death. Smart moves can help you manage your taxable income and taxable estate. If you’re making a charitable gift, giving appreciated securities that you have held for at least a year is one choice to consider. In addition to a potential tax deduction for the fair market value of the asset in the year of the donation, the charity may be able to sell the stock later without triggering capital gains. ³

Remember, however, that this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your charitable giving strategy. The annual gift tax exclusion gives you a way to remove assets from your taxable estate. You may give up to $15,000 to as many individuals as you wish without paying federal gift tax, so long as your total gifts keep you within the lifetime estate and gift tax exemption of $11.58 million for the year 2020 and $11.7 million for 2021. ⁴ Managing through the annual gift tax exclusion can involve a complex set of tax rules and regulations. Before adjusting your strategy, consider working with a professional who is familiar with the rules and regulations.

Are you striving for greater tax efficiency? In retirement, it is especially important – and worth a discussion. A few financial adjustments may help you manage your tax liabilities.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

SSA.gov, February 22, 2021
IRS.gov, November 16, 2020
IRS.gov, March 25, 2020
Policygenius.com, December 21, 2020

Episode 115: 5 Keys to a Strong Financial Foundation

Thu, 11 Mar 2021 20:56:27 GMT

Today’s Prep:

What does it take to build a strong financial foundation? What advice would David give those early on in their financial life?

Equipping Points:

What is your financial foundation? Every financial house needs a strong foundation. Whether you are just starting out or already into retirement, you want a firm and healthy foundation. On today’s episode of Cover Your Assets KC, David talks about the five keys you’ll want to build your financial base.

Do you have an emergency fund? Everyone needs an emergency fund for the inevitable and unexpected. Do you have a good handle on your checking and savings account? You’ll likely want to use your savings account for your emergency fund. How many bounced checks do you have each year? Make sure to have control over both your checking and savings accounts.

Are you using your workplace retirement account? This serves as an automatic savings vehicle. Does your company offer a match? Are you taking advantage of it? Don’t leave free money on the table! The earlier you start saving, the better off you’ll be. Instead of trying to time the market, focus on time in the market. If you don’t have a workplace retirement account, what options do you have? What rules should you know ahead of time? Have you done a rollover IRA for past workplace accounts?

Do you have life insurance? What kind should you buy and what purpose does it serve? Who needs it most? David talks about single individuals, those married with children, and people married without children to help you determine why you should get life insurance. How much coverage do you need?

Do you have a taxable brokerage account? When should you contribute to this and when should you take money out? This is for your over-and-above retirement savings and provides some flexibility throughout your life. As you’re working and saving, you may want to have a taxable brokerage account that will pay you dividends for your financial plan many, many years in the future.

Today’s Takeaway:

“There’s an old saying in my business: ‘Time in the market is more important than timing the market.’ All that means is, especially in your 20s, 30s, and early 40s, don’t get worried about whether the market is up or down.”

– David Dickens

Episode 114: Save Up for Rental Property or Pay Off House?

Thu, 04 Mar 2021 21:07:55 GMT

Today’s Prep:

This or that? Which is better? David answers three mailbag questions that ask what to do while trying to make wise investment decisions.

Equipping Points:

Ever feel like you are deciding between a good option and a better option, but you don’t know which is which? On today’s episode of Cover Your Assets KC, David answers these three mailbag questions from listeners wanting to make the best choice with how to invest their money.

Eli wants to know which is better, to pay off the house sooner or save up for a rental property? Is this an investment strategy worth pursuing? David says if you have a good interest rate with a fixed rate mortgage rate, he would not accelerate the payment on the mortgage. Remember that your real estate investments are not easily liquid , especially in tough times. What has David’s experience in real estate investments been like?

While this might be a great investment strategy, there are some pros and cons. Are you aware of the risks? What happens if the property sits vacant for a few months? Are you able to sustain the mortgage payments on multiple properties? Will you be ready take on and pay for broken appliances at a moment’s notice?

Jane is asking about her 401(k) funds and wants to know how many she should have without over or under diversifying. Should you use the target date fund? What’s really in a target date fund? What kind of risk do they carry? If you don’t use a target date fund, do you have better diversification or the illusion of diversification? What types of funds would David recommend?

Mary has been maxing out HSA contributions and wants to know if she should use the auto-investment tool to get her funds into the market or talk to a financial advisor. An HSA or health savings account allows you to contribute money into an account that gets a tax deduction now, grows tax-free, and takes it out tax-free. David says from a tax standpoint, it’s even better than a Roth account. But should you use the auto-advisor tool to invest it or is it best to always reach out to a financial advisor on these kinds of decisions?

Today’s Takeaway:

“The most important thing about achieving your financial goals when you’re young is to start early, don’t have credit card debt, don’t do stupid stuff with your money, and just keep your head down on your career.”

– David Dickens

The New Inherited I.R.A. Rules

Mon, 01 Mar 2021 14:16:00 GMT

Do you know what has changed for I.R.A. beneficiaries?

New inherited I.R.A. rules took effect on January 1, 2020. The Setting Every Community Up for Retirement Enhancement (SECURE) Act became law on that day, altering the regulations on inherited Individual Retirement Account (I.R.A.) distributions.

The big change: the introduction of the 10-year rule for beneficiaries. Most people who inherit an I.R.A. now have to empty that I.R.A. of assets within ten years of the original owner’s death. You can do this as you wish; you can withdraw the whole I.R.A. balance at once, or take incremental distributions on the way to meeting the 10-year deadline. ¹ Remember that tax rules constantly change. There is no guarantee that the tax treatment of Roth and Traditional I.R.A.s will remain what it is now. This article is for informational purposes only. If you have inherited or expect to inherit a traditional or Roth I.R.A., be sure to consult a financial professional for real-world advice.

Are there exceptions to this rule? Yes. If the deceased I.R.A. owner was your spouse, you can treat the inherited I.R.A. like an I.R.A. of your own. If it is a traditional I.R.A., you generally must take required minimum distributions (R.M.D.s) from it once you reach age 72. The I.R.S. taxes those distributions as regular income, and if you take any distributions before age 59½, they may be subject to a 10% federal income tax penalty. If it is a Roth I.R.A., you aren’t required to take R.M.D.s. (You may continue to contribute to a Traditional I.R.A. past age 72 as long as you meet the earned-income requirement.) ¹

Certain non-spousal I.R.A. beneficiaries still have the chance to “stretch” inherited I.R.A. distributions over their remaining lifetimes, using Internal Revenue Service formulas (a choice available to most I.R.A. beneficiaries before 2020). You may choose this option if you are less than ten years younger than the original I.R.A. owner. You can also elect to do this if you meet the SECURE Act’s definition of a “disabled” or “chronically ill” individual (you have a life-altering physical or mental impairment or require extended care). ^1,2

Lastly, if a child inherits an I.R.A., they can take distributions based on the child’s life expectancy until the age of 18, at which point the aforementioned 10-year rule applies. ¹

If you are a Roth I.R.A. beneficiary, be aware of the 5-year rule pertaining to Roth I.R.A.s. If you inherit a Roth I.R.A. that is less than five years old at the time of the original owner’s death, any earnings taken from it will count as taxable income. If the Roth I.R.A. is more than five years old, you can take tax-free distributions from the earnings. Assets representing the original owner’s Roth I.R.A. contributions can become tax-free distributions regardless of when the original owner opened the Roth I.R.A. ¹

What’s the big takeaway from all this? Suppose you are relatively young and anticipate a large I.R.A. inheritance, and that big I.R.A. is a traditional I.R.A. In that case, you can anticipate greater income taxes during the 10-year window when you take those inherited I.R.A. distributions. By the way, the new rules do not apply to inherited I.R.A.s whose initial owners died prior to 2020. If you are a beneficiary of such an I.R.A., then you may still attempt to “stretch” the inherited I.R.A. assets according to I.R.S. life expectancy formulas and take R.M.D.s as required by the old rules. ³

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

NerdWallet, November 25, 2020
FedWeek, March 3, 2020
Forbes, October 28, 2020

Episode 113: 5 Things to Know About Capital Gains

Thu, 25 Feb 2021 21:10:18 GMT

Today’s Prep:

If you’ve ever invested, you’re at least familiar with capital gains, but do you understand how much they impact your future? Today we’ll tell you five things that you need to know about capital gains and how to account for them when investing.

Equipping Points:

Do you know or understand the benefit behind capital gains in our tax code? Is it really a benefit? Uncle Sam is going to get some money, the question, how much? On today’s podcast, David talks through five important things to understand about capital gains and how that knowledge can help you make the right financial decisions.

What are short-term capital gains and how do they compare to long-term capital gains? And why should you care? Long-term capital gains are a lot better from a tax standpoint. How does that look with your federal taxes, depending on what tax bracket you’re in? How might that change under Biden’s proposed tax plans ? Right now, everyone gets a benefit from taking a long-term capital gain vs. a short-term capital gain.

If you have money in a Roth IRA or traditional IRA, you aren’t taxed on long-term capital gains or short-term capital gain. A traditional IRA taxes it like income when you withdraw the funds. Capital gains is only related to a traditional brokerage account, not a Roth or traditional IRA.

If you sell something at a loss and something at a gain, you get to subtract the difference on long-term capital gains. You’re only taxed on the net. David shares where you can find this on your tax forms and what an example of this looks like. What rules do you need to know on these tax strategies ?

Are short-term or long-term capital gains applied to annuities ? How does it get taxed when you inherit an annuity? What benefits don’t exist with annuities? What benefits can you pass down to your family?

Today’s Takeaway:

“The taxable difference between a long-term and short-term capital gain can be big, and so it’s absolutely worth knowing where you are with each of your holdings before you sell.“

– David Dickens

Episode 112: Types of Financial Risk to Watch Out For

Thu, 18 Feb 2021 21:13:22 GMT

Today’s Prep:

What risks might you encounter when it comes to your finances? How prepared are you for what may come? Find out more about the different types of risk and how to account for them in planning.

Equipping Points:

What kind of risks are you prone to find in your financial plan? Is there any way you can avoid it? On today’s podcast, David talks through several different kinds of financial risk so that you can prepare for it accordingly.

One of the most obvious forms of financial risk is market risk. When the stock market goes up, you’re likely to feel good about your risk level. It’s when your account goes down that you start to hate risk. The stock market goes down a certain percentage every year, but when you see it drop, your emotions may want to cause you to make a rash decision. Instead, if you view it as normal, you won’t have the same emotional response. Are your expectations set accordingly?

What is interest rate risk? Right now, we keep hearing about how low interest rates are. So, what’s the risk? If interest rates change on your bonds, how will the value change based on your duration? Make sure the bonds you have in your portfolio don’t have a bunch of interest rate risk. How does this impact your mortgage rate or bank savings rates?

Are you accounting for inflation risk in your retirement plan? Prices will likely change on things like milk and bread over time, but at a faster rate is the rising cost of healthcare and long-term care costs. On the other hand, retirement income such as a pension or even Social Security are fairly fixed amounts. If you do have a pension, should you take the monthly amount or a lump-sum?

It’s no secret that tax rates are at a historic low, which means it is likely they will go up in the future. What kind of tax rate risk should you be aware of? What happens to your tax rate if you or your spouse were to die? How might a Roth conversion help reduce your tax rate risk?

Today’s Takeaway:

“A little bit of preparation will go a long way for helping you understand your emotions the next time the market loses 10 percent.”

– David Dickens

Episode 111: The Story Behind GameStop Stock

Thu, 11 Feb 2021 21:15:20 GMT

Today’s Prep:

Wondering what happened with GameStop and why it matters? David shares the details behind what happened and what made it into such a big deal.

Equipping Points:

What just happened with GameStop, causing a wild week on Wall Street? Today on the podcast, David gives an explanation of what GameStop is, why its stocks soared, and what we can learn from the situation .

Do you know what GameStop is? The company essentially buys and sells video games in brick-and-mortar stores all over the country. At the beginning of January, its stock cost about $17. What happened from there?

Following a post on a Reddit board notifying others of a short stock on GameStop, masses of people bought up shares, driving up the price. By the end of January, the stocks were up to $514 a share! What happened to the hedge funds that sold the short? Who is responsible for the short squeeze? Who was hurt by the situation? How will government regulations be changed moving forward?

What other companies were shorted next? From Bed, Bath & Beyond to AMC, a number of other stocks were being shorted, but then platforms like Robinhood stopped allowing trades to happen. Why did that happen? Was it with malicious intent?

Remember, trading is not investing. You shouldn’t trade retirement money, only trade your fun money. Does David pick individual stocks? How does he approach the market ? How does investing differ?

If you want to learn about true investing and saving for retirement, be sure to reach out to a financial advisor to create a financial plan and strategy.

Today’s Takeaway:

“You buy shares of stock all the time, but you almost never sell short because it’s speculative trading, it’s really not investing. And it can be super high risk.”

– David Dickens

Will Updated I.R.S. Tables Create an Opportunity for Retirees?

Mon, 08 Feb 2021 14:46:00 GMT

Life expectancy table updated for the first time since 2002.

If you are retired and have reached your seventies, you may have the opportunity to draw a little less income from your retirement savings accounts in 2022.

Next year, the Internal Revenue Service plans to update the life expectancy tables used for the calculation of required minimum distributions, or RMDs – the annual withdrawals you are asked to make from certain kinds of retirement plans. ¹ The I.R.S. knows that on the whole, Americans are living longer than they used to, and therefore, their retirement savings need to last longer. In recognition of this, it is revising the tables used to figure RMDs for the first time since 2002. ¹

Under the new life expectancy tables, RMD amounts are reduced a bit. Generally speaking, they shrink by several percentage points.

For example, if you turn 72 in 2022 and take your first RMD from a traditional IRA (or other qualified retirement plan) by the end of 2022, that RMD will be 6.65% smaller than it would be according to the 2021 tables. (You do have the choice to delay your initial RMD into 2023, though if you do so, you will be asked to take two 2023 RMDs.) ²

To further illustrate this, we will switch over to dollars from percentage points. If you turn 72 in 2022 and decide to take your first RMD from a traditional IRA that has $3,000,000 in it by the end of 2022, your RMD is $109,489 by calculations using the 2022 tables. Using the current tables, that 2022 RMD would be $117,186. ³ Speaking of traditional IRAs, as a reminder, distributions from traditional IRAs must begin once you reach age 72. The money distributed to you is taxed as ordinary income. When such distributions are taken before age 59½, they may be subject to a 10% federal income tax penalty. You may keep contributing to a Traditional IRA past age 72, as long as you meet the earned-income requirement.

The reduction in RMDs may be a benefit. You might be wondering if you should offset it by withdrawing more than the RMD amount, but there could be a price to pay for that over time; drawing down your retirement savings too much can heighten the risk of outliving your money.

Consider the upsides to smaller RMDs. A little more of your retirement money stays in the account, with further potential for tax-deferred growth. As RMDs represent taxable income, a marginally smaller RMD may leave you with slightly less income tax linked to the distribution.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

Kiplinger.com, December 20, 2020
Florida Today, January 8, 2021
IRAHelp.com, November 9, 2020

Episode 110: Financial Resolutions – Answering Your Questions

Thu, 04 Feb 2021 21:17:18 GMT

Today’s Prep:

Have you started working on your financial resolutions yet? What kind of questions have delayed you from reaching your goals? Today we’ll provide answers to help you stay on track financially this year.

Equipping Points:

Following our two-part podcast from a few weeks ago regarding financial New Year’s resolutions , David will answer some of the questions that listeners that wanted a bit more specific information about. Is anything standing in your way from reaching your 2021 financial goals?

After listening to the resolutions podcast , Carl in Lawrence had a few questions about credit cards. After a couple of years, he now has about $30,000 in credit card balances. He has a good job and regularly contributes to my 401(k) at work every 2 weeks. Can you help me with a plan?

David has five steps to helping you get debt-free. To start, stop using them. Should you keep making contributions while you pay off credit card debt? What if you have a company match? What order should you pay off the credit cards in and why does it matter? David breaks it down to give an estimate on how much you’re paying in interest with that kind of credit card debt. How can you realistically pay this off?

One client in Overland Park noticed his net worth didn’t grow last year. How concerning is this? It’s empowering to have that track record and to see that financial path. Knowing where you are has value and is worth recognition. But then, why didn’t it grow? Did your 401(k) balance decline? Did you sell at the wrong time? Make sure that you know how much risk you’re taking. Did you spend more on your living expenses? Or did you lose your job?

Finally, Rick in Liberty is 32 and single with a good paying job, but hasn’t started saving for retirement yet. Is he falling behind? Without access to a 401(k) through work, David recommends starting an IRA or Roth separately and to automate contributions. What are the action steps to make this happen?

How are you doing when it comes to your financial resolutions? Anything holding you back?

Today’s Takeaway:

“Getting rid of that credit card debt is job #1. Depending on your income and your expenses, I don’t know how long that will take you, but you’ve got to have a plan in place and you have to stick to that plan.”

– David Dickens

Episode 109: SLY – Safety, Liquidity, and Yield

Thu, 28 Jan 2021 21:21:21 GMT

Today’s Prep:

Does your portfolio contain these three qualities of money? How can you create a balanced portfolio? We’ll go through all of it on this episode.

Equipping Points:

Today we’ll talk about some foundational principles that David’s business and financial security are built on. From his first job in the investment business up until now, David has made sure to balance these three qualities of money.

All investments have these three qualities in varying degrees that make up the acronym, SLY: Safety, liquidity, and yield (or growth). Will you get the money back? When can you get the money back? How much will the money have grown when you get it back? All of those serve as the foundation of the investment choices you have. Unfortunately, you can’t really get all three in the same product.

How do you create a balanced portfolio that includes all three qualities? Where do these investments live? To start, you’ll likely want some cash, whether that’s in a money market, checking, or savings account. These accounts are safe and liquid, but there’s no growth, especially when compared to inflation. What about in stocks, bonds, and mutual funds?

Do annuities provide the solution you’re looking for? How do the different types of annuities work? And how does this pair with the rest of your financial plan? What about real estate? Does real estate provide the qualities you need as a part of your portfolio?

Ultimately, what is your risk tolerance? How will you react when your money is going down in value? It’s not only about how much or what you have, but about how you’ll react? Meeting with an advisor can help you navigate these decisions and make sure you have the right balance of qualities throughout your financial life.

Today’s Takeaway:

“As you’re putting together your financial life, you’re going to want to strive for some semblance of a balanced portfolio. That doesn’t necessarily mean just your 401(k), it means your financial life.”

– David Dickens

2021 Off to a Fast Start

Mon, 25 Jan 2021 15:06:00 GMT

Market volatility continues into the new year.

The first week of 2021 has already had many ups and downs. Just because it’s a new year doesn’t mean that the 2020 issues go away, and so far, 2021 has been no exception to this rule.

The markets opened on January 4 and traded lower out of the gate, with the S&P 500 dropping 1.5%. The last time the market opened lower was in 2016, when the S&P 500, the Dow Jones, and the Nasdaq Composite all dropped on the first trading day of the new year. ^1,2

The stock market’s first hurdle of the New Year was to assess the runoff elections happening for the two Senate seats in Georgia. A special election has only happened three other times in our nation’s history, so the market appeared anxious about the process. ^3,4

The bond market also got into the act early in the new year. The yield on the 10-year Treasury bond closed over 1% for the first time since March 2020 as investors anticipated a pick up in inflation. ⁵

The market’s second hurdle was the electoral college count that would confirm Joe Biden as the 46th president of the United State. A protest during the vote count unnerved investors, and most of the New Year’s rally was undone. But a day later, the market climbed higher as traders looked past the unrest. ⁶ What does this fast-paced market activity mean for you, as an investor?

There will always be a lot of noise. But remember, making a change to your portfolio should be driven by sound analysis, not an emotional response to current events. The events of the past few days are part of the volatility that comes along with investing, and something we’ve anticipated as we developed your overall financial strategy. If you are concerned about one or more of the policies being discussed in our nation’s capital, please give us a call. We’d welcome the chance to hear your perspective, and hopefully, we can provide some insight and guidance.

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Indexes discussed are unmanaged and you cannot directly invest into an index. Past performance is not a guarantee of future results.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

Barrons.com, January 6, 2021
USAToday.com, December 31, 2020
WashingtonPost.com, January 5, 2021
CNN.com, January 6, 2021
The Wall Street Journal, January 6, 2021
Yahoo.com, January 6, 2021

Episode 108: 5 Important Retirement Statistics

Thu, 21 Jan 2021 22:35:14 GMT

Today’s Prep:

What do these facts and figures tell you about what retirement could look like? How does you plan correspond with these statistics? We’ll dive into some important data on today’s show.

Equipping Points:

What can we learn from these retirement statistics? Sometimes the data available can help guide you and your decisions when it comes to planning for retirement. On today’s episode of the Cover Your Assets KC podcast, we discuss five important statistics you’ll want to keep in mind.

To start, 17 percent of American workers are confident they’ll have enough money in retirement. What causes this lack of confidence? Maybe you’ve wondered about future healthcare costs or the inflation rate. Will you need long-term care insurance or have a disability? Will Social Security still be there? What happens if there’s a market crash? Having a financial plan will help build your confidence regarding what to do when facing what-ifs.

Did you know you might live almost a quarter of your life in retirement? The average 65-year-old woman has a life expectancy of another 20 years. Do you have enough money to last over 20 years from retirement age?

What happens if you need long-term care? What will it cost you to cover medical expenses over the course of your retirement? The average retiree spends almost $300,000 to cover these costs. How do you know if you’ve saved enough ? Does your plan account for healthcare costs?

Finally, the majority of people say having a written financial plan is important when in actuality, few have one. A lot of people who come to see David for the first time have money saved but don’t have a plan. What’s in a written plan? How can an advisor help create one that works for you?

Today’s Takeaway:

“Once you’re retired, the money you’ve put away for yourself has to last an increasingly longer and longer amount of time.”

– David Dickens

Episode 107: 2021 Financial Resolutions, Part 2

Thu, 14 Jan 2021 22:38:02 GMT

Today’s Prep:

Ready to hit the ground running with your financial resolutions? David gives a list of seven things to cover in this two-part series.

Equipping Points:

How can you invest in your financial future? In the second part of this series, we cover the four remaining financial resolutions you should be implementing this year. Before we get started, did you hear the first three resolutions ?

Our next resolution is primarily geared toward those in their 20s, 30s, and 40s. Save as much as you can, as early as you can. Save at least 10 percent of what you make and then move that percentage up over time. It’s never too late to start, but David shares some figures on what difference it makes between saving early and saving later on. Are you living within your means and saving toward your financial future?

When you save, are you consistent? Having a systematic savings will allow you to save without even worrying about spending it. This could be through your 401(k) or even an IRA that you set up yourself. What if you have student loans? Should you still save systematically? David clarifies when this could still be advantageous. The difference you make with systematic savings means a small change to the amount you spend each month because you’re putting it into long-term savings.

Have you done your annual net worth statement? This is one of David’s favorite tools for helping people achieve their financial goals and dreams. It provides a record for yourself to look back and see steady progress for your goal. Write down all of your assets and their worth, then write down what you owe. The difference between the two is your net worth. What does your momentum look like? Is your net worth bigger than last year? Why or why not?

The last one is an easy one, but incredibly important. Check your beneficiary designations. From your 401(k) to your life insurance policies, you want to know it’s headed to the right person. You don’t want to be surprised to find it’s going to an ex-spouse or someone other than you intend it for. Finally, do you have beneficiary designations on the three most common things to go through probate? If you don’t leave things to the right people, the state determines who gets your assets when you’re gone.

Today’s Takeaway:

“It’s the power of compounding. The more time you have, the more it’s going to grow before you start tapping it for your retirement income.“

– David Dickens

Episode 106: 2021 Financial New Year’s Resolutions, Part 1

Thu, 07 Jan 2021 22:40:35 GMT

Today’s Prep:

What financial resolutions are must-dos in 2021? David shares the first three actionable steps to take to benefit your financial future.

Equipping Points:

As we kick off the new year, let’s look to some financial resolutions. Have you set resolutions for the year yet or are you feeling a bit of the 2020 burnout? These resolutions are really important to your financial future–so important, that this will be a two-part series. Hopefully by the end of January, you have all seven of these action steps nailed down.

No matter what stage of life you are in, everybody needs to establish an emergency fund. Whether you suddenly need a new set of tires or computer or are suddenly without a job, having this fund in place ahead of time will keep you from running up credit card bills. Having money in reserve will add a level of confidence to the way you can carry out your financial life. How much should you have saved? How might you think differently about your life if you had the safety net of an emergency fund to support you?

Make sure you pay off your credit card debt every month. There is almost a trillion dollars in credit card debt in the U.S. today. David thinks of credit card debt like rust on your car or termites in your home. If you only make minimum payments, do you know how much you’ll be paying in interest and how many years it will take? If you know you can’t pay something off with your credit card, don’t buy what you think you want to buy.

When it comes to debt, is getting a car loan just as bad as credit card debt? What about a mortgage? Once you have an emergency fund and you don’t have credit card debt, is this a smart decision? David says if you’ve got to have debt, it may as well be on a piece of real estate. A car loses value every year whereas most homes are an appreciating asset. You add to your net worth while paying down the debt on your house.

The third resolution is aptly called, cover your assets. Whether you are in your 30s, 50s , or 70s, you want to insure your family against catastrophic risks. What are the risks? David talks through a few examples of what the difference having life insurance could mean. Make sure your family is able to carry on financially if something were to happen to you.

We’ll talk about resolutions four through seven next week, but between now and then, we’ve got a bit of homework for you. Have you done a net worth statement yet? It’s one of the best tracking mechanisms you can use to make sure you’re on track to achieve your financial goals year after year. Be sure to fill it out and then come back next week for part two in this series!

Today’s Takeaway:

“Credit cards are the most expensive way to solve your problems.”

– David Dickens

Building a Healthy Financial Foundation

Mon, 04 Jan 2021 14:55:00 GMT

How many pieces do you have in place?

When you read about money matters, you will sometimes see the phrase, “getting your financial house in order.” What exactly does that mean?

When your financial “house is in order,” it means it is built on a solid foundation. It means that you have six fundamental “pillars” in place that are either crucial for sustaining your financial well-being or creating wealth.

#1: A savings account. This is your Fort Knox: the place where you store and build the cash you may someday use for your biggest purchases. Savings accounts pay a modest interest rate. You should still consider having a savings account, even in today’s low-interest rate environment. Banks and credit unions often limit the number and amount of withdrawals you can make from savings accounts per month.

#2: A checking account. This is your go-to account for everyday expenses, whether you pay your bills digitally or the old-fashioned way. Checking accounts pay a modest interest rate. Some accounts may have minimum balance requirements, so it’s best to closely read the new account information. Also, opening a checking account may lead to opening a credit card account at the same financial institution.

#3: An emergency fund. This bank account helps you deal with the unexpected. You know that label you see on fire extinguisher boxes – “break glass in case of emergency?” Only in a financial emergency should you “break into” this account. What is a financial emergency? Everyone’s definition varies, but examples include hospital bills, major car repairs, and unemployment.

#4: A workplace retirement plan account. Some want to start saving for retirement as soon as possible. Workplace retirement plans offer you a convenient way to get started. In most of these plans, your contribution is made with pre-tax dollars. ¹ Money saved and invested in these accounts can compound, and the compounding may become greater with time. Consistent monthly investment is the “fuel” for your account. Regular monthly investing does not protect against a loss in a declining market or guarantee a profit in a rising market. Individuals should evaluate their financial ability to continue making purchases through periods of declining and rising prices. The return and principal value of stock prices will fluctuate as market conditions change. Shares, when sold, may be worth more or less than their original cost.

#5: An Individual Retirement Arrangement (IRA). This is a tax-advantaged retirement savings account that you own. There are traditional IRAs (up-front contributions are not taxed; retirement withdrawals are) and Roth IRAs (up-front contributions are taxed; retirement withdrawals are not, provided federal tax laws are followed). ² Mandatory annual withdrawals are required from traditional IRAs starting at age 72. The money distributed to you is taxed as ordinary income; if such distributions are taken before age 59½, they may be subject to a 10% federal income tax penalty. No mandatory annual withdrawals are required from Roth IRAs while the original owner lives. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals. Thanks to the SECURE Act, you may contribute to Roth and traditional IRAs all your life, as long as you meet the earned-income requirement for account contributions. ²

#6: A taxable investing account. This is also popularly called an investment account or brokerage account. Unlike an IRA or workplace retirement plan, the invested assets in these accounts are taxed each year. A taxable investing account gives you access to a wide range of investment products, which can help complement the other accounts in your financial foundation.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

Tax Policy Center, May 2020
Internal Revenue Service, November 10, 2020

Retirement Blindspots

Mon, 21 Dec 2020 15:27:00 GMT

Some life and financial factors that can sometimes be overlooked .

We all have our “blue sky” visions of the way retirement should be, yet our futures may unfold in ways we do not predict. So, as you think about your “second act,” you may want to consider some life and financial factors that can suddenly arise.

You may end up retiring earlier than you expect. If you leave the workforce at “full” retirement age (FRA), which is 67 for those born in 1960 and later, you may be eligible to claim “full” Social Security benefits. Working until 67 may be worthwhile because it will reduce your monthly Social Security benefits if you claim them between age 62 and your FRA. ¹ Now, do most Americans retire at 67? Not according to the annual survey from the Employee Benefit Research Institute (EBRI). In EBRI’s 2020 Retirement Confidence Survey, 16% of pre-retirees expected to retire between ages 66-69, and 31% thought they would retire at age 70 or later. The reality is different. In surveying current retirees, EBRI found that only 6% had worked into their seventies. In fact, 70% percent of them had left work before age 65, and 33% had retired before age 60. ²

You may see retirement as an extension of the present rather than the future. This is only natural, as we all live in the present – but the future will arrive. The costs you have to shoulder later in retirement may exceed those at the start of retirement. As you may be retired for 20 or 30 years, it is wise to take a long-term view of things.

You may have a health insurance gap. If you retire before age 65, what do you do about health coverage? You may shoulder 100% of the cost. Looking forward, you may need extended care, and it seems to get more expensive each year. Wealthy households may be able to “self-insure” against extended care, but many other households struggle. In Genworth’s 2020 Cost of Care Survey, the median monthly cost of a semi-private room in a nursing home is $7,738. In California, it is $9,023; in Florida, $8,803. ³ Suppose you become disabled or seriously ill, and working is out of the question. How do you make ends meet?

Age may catch up to you sooner rather than later. You may stay fit, active, and mentally sharp for decades to come, but if you become mentally or physically infirm, you need to find people to trust to manage your finances.

You could be alone one day. As anyone who has ever lived alone realizes, a single person does not simply live on 50% of a couple’s income. Keeping up a house, or even a condo, can be tough when you are elderly. Driving can be a concern. If your spouse or partner is absent, will there be someone to help you in the future?

These are some of the blind spots that can surprise us in retirement. They may quickly affect our money and quality of life. If you age with an awareness of them, you may have the opportunity to manage the outcome better.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

Social Security Administration, December 1, 2020
Employee Benefit Research Institute, December 1, 2020
Genworth Cost of Care Survey, March 30, 2020

Episode 105: No Democratic Sweep? Final Tax Strategies Of 2020

Thu, 17 Dec 2020 22:42:17 GMT

Today’s Prep:

What can you still do before the year ends? David talks through four strategies that you’ll want to consider before the clock strikes midnight on December 31.

Equipping Points:

Ready for 2021? Can you imagine if someone predicted what this year would be like? That the stock market would crash that goes back to all-time highs, you’d be in a global pandemic, the election, and social justice movements would all occur in the same year? One thing that we did love about 2020 though was that the Chiefs won the Super Bowl. But before the year ends , there might be a few financial moves you should make and tax strategies to consider.

A few weeks ago, we asked if taxes would go up under Biden as president. As a follow-up, what do we do about our financial lives when we don’t know yet if there will be a Democratic sweep? While Biden is the president-elect, we are still waiting to see what happens with the runoff Senate elections in Georgia. Right now, the polls are close. If both Republicans hold their seats what happens to your taxes? Or, if those seats flip, how would that differ?

Do you understand where you are from a gain and loss standpoint? David talks about tax loss selling as a part of your tax strategy for this year. Is tax loss selling the same as tax loss harvesting? Are there long-term capital gains in your portfolio that you want to harvest? Are you concerned that next year the Biden plan will raise the tax rates on long-term capital gains? What kind of taxes might you be facing then?

David is convinced that the tax rates for everybody is going to go up due to the trillions of dollars of debt our government has. Over your retirement, tax rates are likely going up and maybe even double. This is why a Roth conversion makes so much sense to do it right now. But you want to do it in steps to avoid a major jump in your tax bracket. If you’re already retired and on Medicare, make sure you watch for potential penalties.

Finally, are you planning on giving a gift but worried about the gift tax? Where can you freely give? David shares what gift options you have, be it to your kids, grandkids, or a friend. Other ways to gift money indirectly include paying school expenses and medical bills, which can be done at any amount. You can even contribute to a child or grandchild’s IRA.

Today’s Takeaway:

“For 2020, you’ve still got a couple days left–if a Roth conversion makes sense, go ahead and get it done. Small is most times better than none at all.”

– David Dickens

Episode 104: Are You Counting On Social Security?

Thu, 10 Dec 2020 22:44:47 GMT

Today’s Prep:

What will happen to Social Security? Can you plan on it as a part of your retirement plan? How can you set realistic expectations for what’s to come? We’ll talk about this important piece of income planning.

Equipping Points:

What part does Social Security play in your retirement plan? Statistically, most households don’t retire with much of a savings, so they rely on Social Security. While it’s not something you want to rely on solely, Social Security still plays an important role in your retirement income.

Some say the trust fund for Social Security is likely going to run out. How was this set up? What happens when there isn’t enough money to cover everyone? Will there still be money there by the time you retire? What is the future of Social Security ?

If you are in your 60s or older, there’s a high probability that your Social Security will be taxed more. If you’re younger, there’s a good chance that Social Security retirement age may go up. Another possible fix is by having high incomers pay more. The more you make, the more you’re probably going to pay for this program. You probably won’t bring any more benefits out of it when you retire, but you’ll have just paid more. Nobody knows exactly how this will get fixed.

David predicts that Social Security won’t stop benefits all together, but that there will be adjustments made to the current set-up. Because Social Security is a fairly big asset for almost every family in America, it’s a topic worth understanding. How does Social Security fit in your retirement plan?

Today’s Takeaway:

“Taxes are likely going up, retirement age is likely going up, and your cost-of-living increase is likely going down.”

– David Dickens

Episode 103: Things Nobody Says About Their Financial Plan

Thu, 03 Dec 2020 22:46:30 GMT

Today’s Prep:

Wondering what to do with your financial plan but don’t want to later regret it? Here’s a few things people never seem to come back and complain about.

Equipping Points:

Financial advisors hear a lot of things, but these phrases seem to never make the list. What can we learn from these financial ideas?

So far, no one has told him they wish they had saved less in a Roth IRA. David is a huge Roth IRA fan for a variety of reasons and talks about the two ways to put more into a Roth IRA. Are you contributing to your Roth IRA? Saving is a good thing, so if you happen to stuff it into your Roth, all the better when you retire because that money comes out tax-free. Should you be putting money into your company’s 401(k) or the Roth?

The number one concern of baby boomers is if they will outspend their money in retirement. No one is saying that they wish they had spent more and saved less. What’s a good rule to implement in retirement to make sure your retirement savings last? Do you have a retirement income plan specific to you?

Life insurance is something typically don’t want to talk about, but most people do appreciate the benefit. When should you have life insurance? How much should you have? What kind of life insurance would be most beneficial? This online calculator might help you out.

Nobody loves paying extra taxes. Everyone would prefer to take the deductions they can legally take. While taxes are necessary, no one wants to pay more than they owe. What wise tax strategies do you have in place?

Whether you loved roller coasters as a kid or not, you most likely don’t love the roller coaster of the market. You might like it when the market is up, but probably hate it when it goes down. It’s important to know your risk tolerance and how you react when markets go down. Most certainly, we’ll have another drop in the market in the future. Is your portfolio in the place you need it to be?

Today’s Takeaway:

“Saving is a good thing, so if you happen to stuff it into your Roth, all the better when you retire because that money comes out tax-free.”

– David Dickens

2021 Limits for IRAs, 401(k)s and More

Mon, 30 Nov 2020 14:14:00 GMT

Numbers to know for the new year.

On October 26, the Treasury Department released the 2021 adjusted figures for retirement account savings. Although these adjustments won’t bring any major changes, there are some minor elements to note.

401(k)s . The salary deferral amount for 401(k)s remains the same at $19,500, while the catch-up amount of $6,500 also remains unchanged. However, the overall limit for these plans will increase from $57,000 to $58,000 in 2021. ¹

Individual Retirement Accounts (IRA). The limit on annual contributions remains at $6,000 for 2021, and the catch-up contribution limit is also unchanged at $1,000. ²

Roth IRA s. Roth IRA account holders will experience some slightly beneficial changes. In 2021, the Adjusted Gross Income (AGI) phase-out range will be $198,000 to $208,000 for couples filing jointly. This will be an increase from the 2020 range of $196,000 to $206,000. For those who file as single or as head of household, the income phase-out range has also increased. The new range for 2021 will be $125,000 to $140,000, up from the current range of $124,000 to $139,000. ³ Although these modest increases won’t impact many, it’s natural to have questions anytime the financial landscape changes. If you’re curious about any of the above, speak to your financial or tax professional for more information.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

IRS.gov, October 26, 2020
IRS.gov, October 26, 2020
IRS.gov, October 26, 2020

Episode 102: Roth Conversions, Portfolio Diversification And Pension Lump Decisions?

Tue, 24 Nov 2020 22:48:11 GMT

Today’s Prep:

We cover one of David’s favorite topics while answering three questions from the mailbag today. From Roth conversions, investment choices, and pension decisions, we’ve got you covered when it comes to retirement planning.

Equipping Points:

Is there a bad time to do a Roth conversion? Or is always a good time to do a Roth conversion? On this episode of Cover Your Asset KC, David answers three questions from the mailbag.

Everett is wondering if it’s a bad idea to do a Roth conversion if he has a high income. What’s the determining factor on whether or not to do a Roth conversion? Consider your tax bracket, this year and your expected bracket in the future. When’s the sweet spot to do a Roth conversion? Where do you think taxes will be in the future?

Lisa wants to know what David thinks about investments, such as annuities or hedge funds, that require you to lock your money up for a certain period of time. Different investments can work together to build the retirement portfolio for you. So instead of saying certain investments are bad or good, consider whether it fits for you within your overall plan. Are you getting the right amount of diversification?

Bill is retiring next year with a pension from his company. Should he take the monthly income or lump-sum payment? How does he decide? David shares what some of his clients have decided. Do you understand all of the pros and cons of each choice? Which one will serve you and your family best in retirement?

Today’s Takeaway:

“There are opportunities for you, especially if you are an early retiree (hopefully before 2026) to do some Roth conversions–probably a series of them over years–that can make a lot of sense for you and your family from a tax standpoint.”

– David Dickens

Episode 101: End-of-Year Financial Planning

Thu, 19 Nov 2020 22:50:43 GMT

Today’s Prep:

2020 is coming to the end. What financial decisions and tax moves do you need to make before it’s over?

Equipping Points:

A lot has happened this year, particularly in the past few weeks. As 2021 approaches, how do we need to prepare? What’s significant about changing from one year to the next? What financial moves do you need to make now?

David talks about three things that have a deadline to do by the end of the year. Based on a popular previous blog post, End-of-Year Money Moves , we talk about what you should be doing before December 31.

Often, we talk about tax-loss harvesting, but this year also includes long-term capital gain harvesting. What tax moves do you need to make in your taxable investment account? Did you take losses in your portfolio? Then, consider what the tax rates might be under Biden’s plan were it to pass.

As gift-giving holidays approach, you might be planning to give a loved on a big check. What is the gift tax? What kind of money can you give without having to report it? What forms do you need to file with the IRS?

Have you made a Roth conversion yet this year? Remember that the deadline is the end of the year. What is a Roth conversion? When and why should you do one? David shares a few client examples of what a Roth conversion could look like.

Ready to be done with 2020? Finish off what you need to when it comes to your financial plan for the year and then let’s send 2020 on its way. Here’s to a better and more stable 2021!

Today’s Takeaway:

“If you’ve been super successful over your life and you want to give away some money, there’s a number of different ways you can do it without paying any gift tax.”

– David Dickens

Episode 100: Can We Afford to Do This AND Still Have Enough For Retirement?

Thu, 05 Nov 2020 22:52:33 GMT

Today’s Prep:

How do you know when you have enough saved for retirement? How do you know when there’s enough left over to do something else like travel or take on a home renovation? We’ll answer your mailbag questions on today’s episode.

Equipping Points:

On today’s podcast, we look at three questions from the mailbag, all related to having enough money in retirement. Find out what David advises these listeners as they navigate different financial decisions.

When you get to retirement, it’s typical to want to enjoy your newfound time and freedom . Shelby is wondering if the first few years of retirement are the most expensive ones to travel and enjoy. David breaks down what his clients often do when it comes to travel and leisure, but how you need to plan for things like inflation or nursing home care. Do you have a plan for long-term care costs if needed?

Remember that your plan is a road map. You may have to make detours and changes along the way if something unexpected happens. But make sure you follow the guidance and direction of a plan to achieve your retirement goals.

Tristan recently went through a divorce , about 10 or 15 years before retirement age. Is there enough time to still retire? David asks, when you plan to retire? Are you able to increase your savings rate? Is there a chance that you’ll remarry at some point? Regardless, you’ll want to get a detailed plan that considers income and expenses to determine how long your money will last.

Finally, Dylan is in an argument about whether or not they can afford to redo their kitchen. How much can they put towards the new kitchen and how much do they have to put toward retirement? When will they have enough? To determine what “enough” means, look at what you want for your future and build in for what you might need later on.

Financial advisors are there to help you set a plan to reach your goals. Sometimes that can even look like asking “permission” from the advisor to see if they can do something and still be okay for retirement. Together you can play “what if?” and see if it aligns with your short-term and long-term goals.

Today’s Takeaway:

“A lot of what you need for retirement depends on how much you’re going to spend in retirement. To increase your prospects of a more successful retirement: increase your savings rate now, reduce spending now, or do both at the same time.”

– David Dickens

End-of-the-Year Money Moves

Mon, 02 Nov 2020 14:23:00 GMT

Here are some things you might consider before saying goodbye to 2020.

What has changed for you in 2020? For many, this year has been as complicated as learning a new dance. Did you start a new job or leave a job behind? That’s one step. Did you retire? There’s another step. Did you start a family? That’s practically a pirouette. If notable changes occurred in your personal or professional life, then you may want to review your finances before this year ends and 2021 begins. Proving that you have all of the right moves in 2020 might put you in a better position to tango with 2021.

Even if your 2020 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your overall personal finances. Keep in mind this article is for informational purposes only and is not a replacement for real-life advice. Please consult your tax, legal, and accounting professionals before modifying your tax strategy.

Do you engage in tax-loss harvesting? That’s the practice of taking capital losses (selling securities worth less than what you first paid for them) to manage capital gains. You might want to consider this move, but it should be made with the guidance of a financial professional you trust. ¹ In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that amount can be carried forward to offset capital gains in upcoming years. ¹

Do you want to itemize deductions? You may just want to take the standard deduction for the 2020 tax year, which has risen to $12,400 for single filers and $24,800 for joint. If you do think it might be better for you to itemize, now would be a good time to get the receipts and assorted paperwork together. ^2,3

Could you ramp up your retirement plan contributions? Contribution to these retirement plans may lower your yearly gross income. If you lower your gross income enough, you might be able to qualify for other tax credits or breaks available to those under certain income limits. ⁴

Are you thinking of gifting? How about donating to a qualified charity or non-profit organization before 2020 ends? Your gift may qualify as a tax deduction. For some gifts, you may be required to itemize deductions using Schedule A. ⁴ While we’re on the topic of year-end moves, why not take a moment to review a portion of your estate strategy. Specifically, take a look at your beneficiary designations. If you haven’t reviewed them for some time, double-check to see that these assets are structured to go where you want them to go, should you pass away. Lastly, look at your will to see that it remains valid and up-to-date.

Check on the amount you have withheld. If you discover that you have withheld too little on your W-4 form so far, you may need to adjust your withholding before the year ends.

What can you do before ringing in the New Year? New Year’s Eve may put you in a dancing move, eager to say goodbye to the old year and welcome 2021. Before you put on your dancing shoes, consider speaking with a financial or tax professional. Do it now, rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

Investopedia.com, April 18, 2020
NerdWallet.com, July 17, 2020
Investopedia.com, May 22, 2020
Investopedia.com, July 14, 2020

Episode 99: Understanding and Implementing Wills & Trusts

Thu, 29 Oct 2020 21:54:23 GMT

Today’s Prep:

Do you have a will or trust? What part do they play in your financial plan? What mistakes do you want to be sure to avoid when setting them up?

Equipping Points:

Do you have a will or trust? Why are they important and at what age do you need to have one? Whether you are 28 and a parent of young kids, in a second marriage, a grandparent, or ready to retire, it’s important you know the information on today’s podcast.

Some people may assume that a will or trust is just for people with a lot of wealth. But the reality is, almost everyone could benefit from having a will. How do you know if you need a trust? Who is that best suited for? You can do a lot with a will and beneficiary designations, but you can even further control the assets you’re leaving behind with a trust.

What assets are included in a trust? How should you set it up? Or, how have people made mistakes when it comes to their wills and trusts? Make sure your trust is completely done when setting it up, because it can’t be changed once someone passes away. Are your beneficiaries listed appropriately? Is your trust properly funded?

Do you have a strategy in place for how your money and assets will be distributed? Different types of accounts can most tax-efficiently be inherited by different types of beneficiaries, whether you are giving money to a charity or human beings. Make sure you get good advice upfront that your assets are going to the places where you want them to go, with the best tax outcomes possible. That makes your assets go as far as they can go once you aren’t here anymore.

Who should you talk to in order to set up a will or trust? What part does your financial advisor play in the process? Get a referral from someone you trust to find an estate planning attorney that will meet your needs. Then, be sure to have your financial advisor review the documents to make sure everything is in order.

Today’s Takeaway:

“Make sure you get good advice upfront that your assets are going to the places where you want them to go, with the best tax outcomes possible.”

– David Dickens

Episode 98: Can You Pass This Social Security Quiz?

Thu, 22 Oct 2020 21:56:09 GMT

Today’s Prep:

Are you ready to put your knowledge of Social Security to the test? How does Social Security fit into your retirement plan? Take the quiz on today’s episode.

Equipping Points:

We take a quiz from Think Advisor and find out if David’s co-host, Walter, can pass it. How would you fare on this nine-question quiz? Take out a pen and paper right now to play along!

How many Americans older than 65 years old receive some form of Social Security benefits? From stay-at-home parents to lifelong employees, the majority of Americans are receiving benefits by then. What’s the most common age to start claiming Social Security ? And is this the right age to take it?

Once you reach your full retirement age, does it matter how much money you make when claiming Social Security? Then, when do retirement benefits end? How do Social Security spousal benefits work? What about Social Security payments to the estate?

Can you get all of these questions right? The average score is only 53 percent by the people who take the quiz online. Even if you didn’t get any of them right though, it’s important to lean on the help of your financial advisor. As you get into your early 60s, be sure to make a plan for your Social Security to ensure that you get as much out of it as possible.

Today’s Takeaway:

“If you’ve done a good job of feathering your own nest for retirement, you really don’t want to start Social Security before your full retirement age of say, 66. And if possible, wait until age 70.”

– David Dickens

Episode 97: Can I Claim Ex-Husband’s Social Security Benefits + Other Questions

Thu, 15 Oct 2020 21:57:58 GMT

Today’s Prep:

From Social Security benefits to long-term care coverage to incentivizing your children, we answer four questions from the mailbag today. David shares his advice for these listeners navigating different situations in their financial plan.

Equipping Points:

Have a question that needs answering? David answers four different and important questions from the mailbag on this week’s podcast.

One listener recently inherited money unexpectedly and wants to share it with his son who could benefit from it. Is there a way to ensure the money is used wisely instead of blown on a fancy car? David talks about the benefits of incentivizing appropriately. Can you set up a dollar-for-dollar match? What about sharing the money slowly over time? How do you feel about rewarding for good grades? Think creatively to present the money as a part of a teaching opportunity.

Sally heard that she could get half of her ex-husband’s Social Security benefit. Is that true? There are a few things that are required before you can do this. Were you married over ten years? Are you currently unmarried? Are you older than 62? Here’s what Social Security says every woman should know . Meet with a financial advisor to work through all of the details to make sure you are getting your full benefits.

Ian wants to know whether or not his long-term care policy is sufficient to cover his future needs. While it’s hard to predict for sure, look at the math to see what people tend to spend in long-term nursing care . Does your policy cover an inflation rate increase? What is the percentage of the increase? Consider different strategies to cover long-term care needs .

Finally, Ralph didn’t worry about the market when he was working but now that he’s retired he is more concerned. Should he move everything to cash to reduce his worries? While we are experiencing an extended period of volatility, what are some other options besides cash? Look at bank deposits like CDs, short-term bonds, and annuities for lower risk options that aren’t completely out of the market.

Today’s Takeaway:

“Goal setting can be really important, even (or maybe especially!) when you’re in your twenties and thirties. If you want to get to where you’re going, start learning to set goals for yourself today.”

– David Dickens

October Is Financial Planning Month

Mon, 12 Oct 2020 13:06:00 GMT

Six areas of personal finance to review.

When training to become a financial professional, much of our course work centers on the six critical areas of creating a financial strategy. Some recognize October as Financial Planning Month, so it’s an excellent opportunity to review those six personal finance areas. ¹

Cash Management: This is a broad topic that can address many issues. One area is creating an emergency fund, which is money that’s set aside for unplanned expenses. Cash management also can include looking at your “sources and uses” of money. Financial Planning Month focuses mainly on cash management and spending habits. ¹

Investment Approaches: Concerns about investment approaches are among the key reasons people start a relationship with a financial professional. When reviewing investment approaches, it’s critical to consider a person’s goals, time horizon, and risk tolerance.

Retirement Preparation: This is another crucial reason why a person approaches a financial professional. The chief concern for 49 percent of Americans is running out of money in retirement. The retirement preparation process reviews your current situation and helps you better understand your choices. ²

Protection Strategies: This area looks at how you prepared for life’s potential financial risks. Protection strategies also can include health-care considerations. By the way, did you know that 44 percent of Americans cite “declining health” as their second biggest retirement concern? ²

Tax Management: Do you feel comfortable with current tax laws? Are you confident about your approach to tax management? Tax rules are constantly changing, and there is no guarantee that the tax landscape will remain the same in years ahead. Financial professionals often work with tax, legal, or accounting professionals when creating an overall tax management strategy.

Estate Strategies: How well you prepare today may help determine how you distribute your assets after you’re gone. Much like tax rules, estate rules are continually changing, and today’s landscape may change in a few years. Financial professionals often work with legal professionals when creating an estate approach. It can be a challenge to feel confident in all six key areas of creating a financial strategy. If you think you may need help, please give us a call. We’d welcome the chance to review your approach.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

NationalDayCalendar.com, October 2020
AARP.com, May 21, 2019

Episode 96: Would My Taxes Go Up If Biden Becomes President?

Thu, 08 Oct 2020 21:59:33 GMT

Today’s Prep:

Are your taxes going up if Biden gets elected? David talks through some of the numbers and examples of how his tax plan could impact you.

Equipping Points:

As we get closer and closer to the election, clients continue to ask David what they need to know about the possible tax plan if Biden were to get elected . Most likely, your taxes would change under Biden if he becomes president. But how?

What has Biden said about taxes? How are taxes currently set up, particularly for the extremely wealthy? What kind of tax advantages might be eliminated by Biden if elected?

Is it possible that the tax brackets will change for people who don’t make over $400,000 per year? David breaks down the numbers of where and how people may be moved into a higher tax bracket. What does that look like?

What about the kind of impact his plan could have on inherited money? David explains the stepped up cost basis and gives an example of the difference one tax plan could make over another.

What things can you do to lessen the effect on your heirs and yourself when it comes to your assets and income? Be sure to speak with a financial advisor to make sure you have a plan for your money . Instead of waiting until the end of the year, start considering now what that might mean for you.

Today’s Takeaway:

“We’ll have about a month where we’ll know if the White House is changed over, so there will be a little bit of a window to make a lot of changes in December.”

– David Dickens

Episode 95: 3 Things Your Heirs Should Know

Thu, 01 Oct 2020 22:01:12 GMT

Today’s Prep:

You may have spent plenty of time planning for your legacy, but do your heirs know what they need to know? What conversations should you be having with them now?

Equipping Points:

While it might be awkward to discuss what you wish for once you’ve passed away, it’s often an important conversation to have. Not only should you discuss this with your financial advisor and your lawyer, but discuss it with your heirs. Do they know what they need to know ? Is your estate plan in order?

Do you have a living will? Have you designated a medical power of attorney and communicated your wishes clearly? Instead of family members having to make tough decisions when they are in an emotional state during your last days, it’s important to determine this ahead of time.

Pretty much everyone needs a will and sometimes you need a trust. A will specifies who gets what, especially if there are contentious items that you own. Most of your financial accounts will be covered by beneficiary designations. If you have a trust, make sure the assets are funded. Do your heirs know what is in your will or trust? You might have to have an uncomfortable discussion with your heirs , but the more transparency, the better.

Finally, do you have a financial power of attorney and executor named? Do your heirs know who it is? This person has a lot of legal responsibility and are supposed to carry out your wishes. The more exact your instructions, the easier the executor’s job is going to be.

Today’s Takeaway:

“Communication in the financial realm amongst your heirs almost always is the right thing to do and it makes everybody feel better about what’s going to transpire when you’re gone.”

– David Dickens

A Checklist for When a Spouse or Parent Passes

Mon, 21 Sep 2020 13:26:00 GMT

An overview of some of the fundamental steps to take.

When you lose a spouse, partner, or parent, the grief can be overwhelming. In the midst of that grief, life goes on. There are arrangements to be made, things to be taken care of – and in recognition of this reality, here is a checklist that you may find useful at such a time.

First, gather documents. Ask for help from other family members if you need it. Start by gathering the following.

* A will, a trust, or other estate documents. If none of these exist, you could face a longer legal process when settling the person’s estate. If a trust exists, consider contacting the professional or firm who helped set up the document.

* A life insurance policy. As a rule, you will need the death certificate, with the cause of death listed, to move forward with any claim.

* A Social Security card/number. Generally, the person’s Social Security number will be retired shortly following the death.

Then, gather these additional highly important items.

* Bank account, investment account, and retirement plan statements

* Deeds/titles to real estate

* Car titles or lease agreements

* Storage space keys/account records

* Safe deposit box keys

* Any bills due or records of credit card statements

* Any social media platforms, if applicable

Last, but not least, look for a computer file or printout with digital account passwords. Prior to their loved one’s passing, some family members may try to centralize all this information or state where it can be found. In addition, see if the person left a letter of instructions. A letter of instructions is not a legal document; it’s a letter that provides additional and more-personal information regarding an estate. It can be addressed to whomever you choose, but typically, letters of instructions are directed to the executor, family members, or beneficiaries.

Next, take care of some immediate needs. Contact a funeral home to arrange a viewing, cremation, or burial, in accordance with the wishes of the deceased. Make sure to call or email the county clerk or recorder to request 10 to 12 death certificates; a funeral home director can often help you with this matter. (Counties usually charge a small fee for each copy issued.) Ten to 12 copies may seem excessive, but you may need that many while working with insurance companies and various financial institutions. If the person was still working, contact the human resources officer at your loved one’s workplace to inform them what has happened. The HR officer might need you to fill out some paperwork pertaining to retirement plans, health benefits, and compensation for unused vacation time. Also consider speaking with an attorney – ideally, this is the lawyer who helped your loved one create a will or estate plan. Should your loved one die without a will, you may want to contact a lawyer, anyway, for an overview of how the probate process will work and see to what degree you might become liable for your loved one’s debt. Try to resolve to keep track of any recurring debts that your loved one had set to auto-pay. The monthly bills for these debts should now be put in your name and paid from your accounts. (Creditors can be sympathetic in these situations and maybe lenient with you if you ask.)

Following these steps, address financial, insurance, and credit matters. Investment and retirement plan accounts and insurance policies should have beneficiaries, so reach out to the financial and insurance professionals who helped your loved one as well as the person overseeing their workplace retirement plan. Talk with these professionals to learn about your options as a beneficiary and the possible tax implications from inheriting these assets. You will also probably need to update the listed beneficiaries on any investment accounts you inherit. (The same applies to your own will, insurance policies, and estate strategy.) Titles and deeds for real estate, cars, and trucks also need updating. If you have lost your spouse, check with Social Security to see what spousal and survivor benefits you might be eligible to receive. If your spouse was a veteran, the Veteran’s Administration will want to know of their death, as you may be due spousal benefits.

Certain employers and labor unions may offer pensions or life insurance benefits to spouses of past employees or members. If your late spouse once worked for a large employer or belonged to a union, this is something to ask about. Notify creditors and credit card companies that were part of your loved one’s credit history. You can close accounts held solely by the deceased; those jointly held will need to have your loved one’s name removed from them. Creditors may want to know when existing debts will be paid, either by you or your loved one’s estate. You can also notify the “big three” credit bureaus – Experian, Equifax, and TransUnion – of their passing, which can be done online, over the phone, or by letter. ² State and federal taxes for your loved one will also need to be paid, and possibly, other taxes for the year of their death; talk with a tax professional about this. Are you the parent of a college student? Your student may now be eligible for a greater degree of financial aid. Ask your child to speak with a financial aid officer about this. If your loved one owned a small business or professional practice, a discussion with business partners (and clients) may be necessary as well as a consultation with the attorney who advised that business.

Look after your future. Your retirement and estate strategies are poised for change because of this life event. The way you invest and the amount you save for the future may change, especially in relation to your household’s change in expenses, income, and assets. So, a chat with a financial professional in the weeks or months ahead may be in order.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

Nolo, July 30, 2020
Credit.com, February 14, 2020

Dow 30 Changes Its Starting Lineup

Tue, 08 Sep 2020 13:00:00 GMT

What you should know about the change.

The Dow Jones Industrial Average (DJIA), one of the most widely followed stock market indices, has made some key changes to its starting lineup. Salesforce.com, Amgen Inc., and Honeywell International Inc. have replaced Exxon Mobil Corp., Pfizer Inc., and Raytheon Technologies Corp. The change went into effect before the market opened on Monday, August 31. ¹ It’s important for investors to know that the changes took effect so they have a better understanding of the financial markets. But it’s also important to note that the DJIA has made several adjustments since it was first published in 1896, so a change to the Dow 30 lineup is nothing new. ²

The index changes were prompted by Dow component Apple Inc’s decision to split its stock four-for-one, which also took effect on August 31. ³ The DJIA is a price-weighted index, meaning the 30 companies are weighted in proportion to their price per share. By splitting its shares, Apple effectively reduced its influence—and the entire technology sector’s influence— on the Average. In fact, Apple’s move reduced the technology weighting within the Dow from nearly 28% to 20%. The addition of Salesforce is designed to help bolster the technology sector. ³ Put another way, before the split, Apple was the most influential component in the DJIA, but after the split, it drops to 17th. ³ Some market analysts have said the changes make the index “more in tune with the new economy.” The DJIA changes reflect the growing influence of technology and the waning influence of the old economy. Oil and gas multinational Exxon, for example, joined the Dow more than 90 years ago in 1928. ^4,5

Please remember that the companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Indices do not incur management fees, costs and expenses, and cannot be invested into directly.

Citations.

P Dow Jones Indices, August 24, 2020
Investopedia, August 2018
CNBC.com, August 24, 2020
CNBC.com, August 25, 2020
Reuters.com, August 24, 2020

Life Insurance When You Retire

Mon, 10 Aug 2020 13:17:00 GMT

Some good reasons to retain it.

Do you need a life insurance policy in retirement? One school of thought says no. The kids are grown, and the need to financially insulate the household against the loss of a breadwinner has passed. If you are thinking about dropping your coverage for either or both of those reasons, you may also want to consider the excellent reasons to retain, obtain, or convert a life insurance policy after you retire. Take these factors into account and consult with your financial professional before making a decision.

Could you make use of your policy’s cash value? If you have a whole life policy, you might want to utilize that cash in response to certain retirement needs. If you need extended care, for example, you could explore converting the cash in your whole life policy into a new policy with an extended care rider. This might even be doable without tax consequences. If you need additional income, many insurers will let you surrender a whole life policy you have held for some years and arrange an income contract with the cash value. You can access the money, tax free, as long as the amount that is withdrawn is less than the amount paid into the policy. Remember that withdrawing money or taking a loan against a policy’s cash value, naturally reduces the policy’s death benefit. ¹

Do you receive a “single life” pension? Maybe a pension-like income comes your way each month or quarter, from a former employer or through a private income contract with an insurer. If you are married and there is no joint-and-survivor option on your pension, that income stream will dry up if you die before your spouse dies. If you pass away early in your retirement, this could present your spouse with a serious financial dilemma. If your spouse risks finding themselves in such a situation, think about trying to find a life insurance policy with a monthly premium equivalent to the difference in the amount of income your household would get from a joint-and-survivor pension as opposed to a single life pension. ²

Will your estate be taxed? Should the value of your estate end up surpassing federal or state estate tax thresholds, then life insurance proceeds may help pay the resulting taxes and prevent the need for your heirs to liquidate some assets.

Are you carrying a mortgage? If you borrowed to purchase your home or have refinanced and are carrying a mortgage, a life insurance policy may make sense. It could potentially relieve your heirs from shouldering some of or all that debt if you die with the mortgage still outstanding. ²

Do you have burial insurance? The death benefit of your life insurance policy could partly or fully pay for the costs linked to your funeral or memorial service. In fact, some people buy small life insurance policies later in life to prepare for this expense. ² Alternatively, you may seek to renew or upgrade your existing term coverage for permanent life insurance. Consult an insurance professional you know and trust for insight.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation, nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and not illustrative of any particular investment.

Citations.

Nasdaq.com, April 30, 2020
Forbes.com, May 19, 2020

What Determines Car Insurance Rates?

Mon, 20 Jul 2020 13:29:00 GMT

Driver history is just one factor; there are many others.

Your auto insurance premium is based on more than your driving history. The amount you pay for auto insurance is determined by a complicated algorithm that takes many factors into consideration. Your driving history is just one variable used to calculate your rate. Read on to learn more about what auto insurance carriers look at when they determine your premium.

Age is a key factor. Younger drivers are considered the riskiest to insure due to their lack of experience behind the wheel. Most insurance carriers consider a “young driver” to be someone under age 25. Drivers older than 25 typically pose less risk, so your car insurance premiums may drop as you get older. ¹

Your location makes a difference. Your location is one of the biggest factors in determining your car insurance premium. Insurance carriers use data from more than just your state and county; they often use information from your specific zip code. Insurance providers don’t just look at whether you live in an urban or rural area, but also at the motor vehicle theft and crime rate statistics where you live and park your vehicle. ¹ The car you drive may also factor into the calculation. There is a direct correlation between the cost of the vehicle you drive and your car insurance rates. If your car were damaged or totaled in an accident, it would cost the insurance company more to replace it. But other factors, like if the make and model of your car is a frequent target of thieves or prone to passenger damage, will also cost more. Vehicles with a high safety rating, lots of safety features, and theft-deterrent systems, however, may help offset these costs and lower your rate. ²

Married couples typically save more on their premiums. Being married can be a plus when it comes to auto insurance rates. Some insurers think that married people lead less-risky lives. Married couples save a national average of 6% on car insurance, but some states, it may save them as much as 12.7%. ^1,2

Primary vehicle use. The 2020 State of Auto Insurance Report, published on Zebra.com, says that the typical insured driver has a personal use policy, which means that their car is used to commute to work and run personal errands. But if you’re using your vehicle for business and to drive between clients, you may want to consider a business auto insurance policy to make sure you have adequate coverage. ³ Insurance carriers run these variables through their own refined algorithms. Car insurance companies have different ways of calculating the cost of insurance, which is why rates may vary so much from carrier to carrier. You may be able to save significantly by comparing auto policies and shopping around.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – CarandDriver.com, March 11, 2020

2 – TheZebra.com, April 22, 2020

3 – TheZebra.com, June 2020

The post What Determines Car Insurance Rates? appeared first on KC Financial Advisors .

Before You Claim Social Security

Mon, 22 Jun 2020 13:38:00 GMT

A few things you may want to think about before filing for benefits.

Whether you want to leave work at 62, 67, or 72, claiming the retirement benefits you are entitled to by federal law is no casual decision. You will want to consider a few key factors first.

How long do you think you will live? If you have a feeling you will live into your nineties, for example, it may be better to claim later. If you start receiving Social Security benefits at or after Full Retirement Age (which varies from age 66 to 67 for those born in 1943 or later), your monthly benefit will be larger than if you had claimed at 62. If you file for benefits at FRA or later, chances are you probably a) worked into your mid-sixties, b) are in fairly good health, and c) have sizable retirement savings. ¹ If you really need retirement income, then claiming at or close to 62 might make more sense. If you have an average lifespan, you will, theoretically, receive the average amount of lifetime benefits regardless of when you claim them. Essentially, the choice comes down to more lifetime payments that are smaller versus fewer lifetime payments that are larger. For the record, Social Security’s actuaries project that the average 65-year-old man to live 84.0 years, and the average 65-year-old woman, 86.5 years. ²

Will you keep working? You might not want to work too much, since earning too much income may result in your Social Security being withheld or taxed. Prior to Full Retirement Age, your benefits may be lessened if your income tops certain limits. In 2018, if you are aged 62 to 65, receive Social Security, and have an income over $17,040, $1 of your benefits will be withheld for every $2. If you receive Social Security and turn 66 later this year, then $1 of your benefits will be withheld for every $3 that you earn above $45,360. ³ Social Security income may also be taxed above the program’s “combined income” threshold. (“Combined income” = adjusted gross income + nontaxable interest + 50% of Social Security benefits.) Single filers who have combined incomes from $25,000 to $34,000 may have to pay federal income tax on up to 50% of their Social Security benefits, and that also applies to joint filers with combined incomes of $32,000 to $44,000. Single filers with combined incomes above $34,000 and joint filers whose combined incomes surpass $44,000 may have to pay federal income taxes on up to 85% of their Social Security benefits. ³

When does your spouse want to file? Timing does matter, especially for two-income couples. If the lower-earning spouse collects Social Security benefits first, and then the higher-earning spouse collects them later, that may result in greater lifetime benefits for the household. ⁴

Finally, how much in benefits might be coming your way? Visit SSA.gov to find out, and keep in mind that Social Security calculates your monthly benefit using a formula based on your 35 highest-earning years. If you have worked for less than 35 years, Social Security fills in the “blank years” with zeros. If you have, say, just 33 years of work experience, working another couple years might translate to a slightly higher Social Security income. ¹

A claiming decision may be one of the most significant financial decisions of your life. Your choices should be evaluated years in advance – with insight from the financial professional who has helped you plan for retirement.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – MarketWatch.com, November 2, 2019

2 – SSA.gov, May 28, 2020

3 – BlackRock.com, May 28, 2020

4 – MarketWatch.com, November 11, 2019

The post Before You Claim Social Security appeared first on KC Financial Advisors .

Eldercare Choices in the COVID-19 Era

Mon, 08 Jun 2020 13:31:00 GMT

Exploring your extended care options may be wise at this time.

Given the threat of COVID-19, seniors today may be considering their extended care alternatives with extra caution. ¹

In addition to health factors, the cost can be an issue. According to Genworth’s 2020 Cost of Care Survey, the median annual cost of a semi-private room in a nursing home is now $90,000. A single-occupancy room may cost over $100,000 a year. ¹ While you could designate a portion of your retirement savings for possible extended care costs, there are other choices to consider as well. ¹

Many extended care insurance policies now reimburse the cost of eldercare provided at home. While traditional extended care policies are becoming rare and more expensive, some insurers are bundling extended care features into other policies, with the goal of making such coverage more accessible. A look at different policies may be illuminating, especially with help from an insurance professional with an eye on industry trends. ²

Another possible option – a Health Savings Account (HSA). This is a tax-advantaged savings account designed to help pay for medical expenses. You are eligible to have an HSA if you have a qualifying high-deductible health plan (HDHP) and have not yet enrolled in Medicare. ^3,4 HSA dollars can be used to pay for assorted medical expenses, including prescription drugs, dental care, and therapies. HSA funds can also be applied to premiums for extended care insurance. You defer pre-tax income into your HSA, which may be invested for you over time. There are annual HSA contribution limits. In 2020, they are $3,550 if you are single, $7,100 if you have a spouse or family. An additional annual “catch-up” contribution of up to $1,000 is allowed for each person in the household over age 55. ^3,4 Money taken out of an HSA for a nonmedical reason is considered taxable income. If you make such a withdrawal before you turn 65, the withdrawn amount is usually subject to a 20% federal tax penalty. ⁴

Medicare may not suffice if you need extended care. Generally speaking, it will pay for no more than 35 hours a week of home health care and only up to 100 days of nursing home care after a hospitalization. It may pay for up to six months of hospice care. If you or someone you love has dementia and needs to move into an assisted living facility, Medicare may not pay their room and board. ⁵ Medicaid is different: in some instances, it can pay for certain extended care expenses. Qualifying for Medicaid is the hard part. It is public assistance, offered to people who can no longer pay for extended care with insurance or their own funds. ⁵ Think ahead and take some time to explore extended care options. As always, your financial professional is a knowledgeable ally, as you consider which strategies may help you meet this challenge.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – Genworth, March 30, 2020

2 – Nerdwallet, May 28, 2019

3 – CNBC.com, February 4, 2020

4 – Investors.com, November 8, 2019

5 – Medicare.gov, July 2019

The post Eldercare Choices in the COVID-19 Era appeared first on KC Financial Advisors .

Retirement Is a Beginning

Mon, 18 May 2020 14:30:00 GMT

See if you are prepared to begin your retirement by answering four key questions.

How do you know you are psychologically ready to retire? As a start, ask yourself four questions.

One, is your work meaningful? If it is emotionally and psychologically fulfilling, if it gives you a strong sense of purpose and identity, there may be a voice inside your head telling you not to retire yet. You may want to listen to it. It can be tempting to see retirement as a “finish line”: no more long workdays, long commutes, or stressful deadlines. But it is really a starting line: the start of a new phase of life. Ideally, you cross the “finish line” knowing what comes next, what will be important to you in the future.

Two, do you value work or leisure more at this point in your life? If the answer is leisure, score one for retirement. If the answer is work, maybe you need a new job or a new way of working rather than an exit from your company or your profession. An old saying says that retirement feels like “six Saturdays and a Sunday.” Fantastic, right? It is, as long you don’t miss Monday through Friday. Some people really enjoy their careers; you may be one of them.

Three, where do your friends come from? If very little of your social life involves the people you work with, then score another point for retirement. If your friends are mainly your coworkers, those friendships may be tested if you retire (and you may want to try to broaden your social circle for the future). At a glance, it might seem that an enjoyable retirement requires just two things: sufficient income and sufficient return on your investments. These factors certainly promote a nice retirement, but there are also other important factors: your physical health, your mental health, your relationships with family and friends, your travels and adventures, and your outlets to express your creativity. Building a life away from work is a plus.

Four, what do you think your retirement will be like? If you think it will be spectacularly different from your current life, ask yourself if your expectations are realistic. If after further consideration they seem unrealistic, you may want to keep working for a while until you are in a better financial position to try and realize them or until your expectations shift.

Ideally, you retire when you are financially, emotionally, and psychologically ready. The era of the “organization man” retiring with a gold watch and a party at 65 is gone; the cultural forces that encouraged people to stop working at a certain age aren’t as strong as they once were. Why you are retiring is as important as when you choose to retire. When you are motivated to retire, you see retirement as a beginning rather than an end.

All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

The post Retirement Is a Beginning appeared first on KC Financial Advisors .

A Stock Market Lesson to Remember

Mon, 04 May 2020 13:37:00 GMT

Confidence can quickly erode, but it can also quickly emerge.

Undeniably, spring 2020 has tried the patience of investors. An 11-year bull market ended. Key economic indicators went haywire. Household confidence was shaken. The Standard & Poor’s 500, the equity benchmark often used as shorthand for the broad stock market, settled at 2,237.40 on March 23, down 33.9% from a record close on February 19. ¹

On April 17, the S&P closed at 2,874.56. In less than a month, the index rallied 28.5% from its March 23 settlement. And while past performance does not guarantee future results, there is a lesson in numbers like these. ¹

In the stock market, confidence can quickly erode – but it can also quickly emerge. That should not be forgotten. There have been many times when economic and business conditions looked bleak for stock investors. The Dow Jones Industrial Average dropped 30% or more in 1929, 1938, 1974, 2002, and 2009. Some of the subsequent recoveries were swift; others, less so. But after each of these downturns, the index managed to recover. ²

Sometimes the stock market is like the weather in the Midwest. As the old Midwestern cliché goes, if you don’t care for the weather right now, just wait a little while until it changes. The stock market is inherently dynamic. In tough times, it can be important to step back from the “weather” of the moment and realize that despite the short-term volatility, stocks may continue to play a role in your long-term investment portfolio. When economic and business conditions appear trying, that possibility is too often dismissed or forgotten. In the midst of a bad market, when every other headline points out more trouble, it can be tempting to give up and give in.

Confidence comes and goes on Wall Street. The paper losses an investor suffers need not be actual losses. In a down market, it is perfectly fine to consider, worry about, and react to the moment. Just remember, the moment at hand is not necessarily the future, and the future could turn out to be better than you expect.

Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:

WSJ.com 2020

USAToday.com March 21, 2020

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Roth IRA Conversion in the Era of COVID-19

Mon, 20 Apr 2020 14:50:00 GMT

Is it right for you?

The COVID-19 pandemic has shaken up nearly every aspect of American life. To say it’s been a difficult time would be an understatement. However, difficult times may open doors to new possibilities. Businesses are changing their ways of operating, and individuals are exploring new avenues for investment. It may be time for you to consider some opportunities, as well.

What is a Roth Conversion? A Roth conversion refers to the transfer of an Individual Retirement Account (IRA), either Traditional, SIMPLE, or SEP-IRA, into a Roth IRA. With Roth IRAs, you pay tax on the money before it transfers into the account. One benefit to having your money in the Roth IRA is that, unlike a Traditional IRA, you currently are not obligated to take Required Minimum Distributions (RMDs) after you reach age 72 (RMDs would be required to any non-spousal beneficiaries, however). Another benefit is that since the money was taxed before going into the Roth IRA, any distributions are tax-free. Keep in mind that tax rules are constantly changing, and there is no guarantee that Roth IRA distributions will remain tax-free. ^1,2

Why Go Roth in 2020? In the face of the market downturn after the COVID-19 outbreak, you may be in a unique financial situation. For example, suppose you have an IRA account that was worth $1 million before the downturn, but it’s currently worth $800,000. Perhaps your income has also decreased, potentially putting you in a lower tax bracket. Maybe you own one or more businesses, such as restaurants, that have been closed. You may not yet know if these businesses will be opening again in 2020. Your income could hypothetically be considerably lower this year than last year. But: this may present an opportunity. Less earned income may mean lower total taxes due on a Roth conversion, especially if the overall account value has dropped. Keep in mind, this article is for information purposes only and is making an assumption on an IRA account’s value and applying a hypothetical drop in earned income. We recommend you contact your tax or legal professional before modifying your retirement investment strategy.

No Turning Back. While this may be a good time for you to consider converting to a Roth IRA, remember that there’s no turning back once you do. The Tax Cuts and Jobs Act of 2017 decreed that Roth conversions could no longer be undone. ³ A Roth IRA conversion is a complicated process, and it’s wise to involve your trusted financial professional. Please feel free to reach out with any questions you have about your situation.

This information has been derived from sources believed to be accurate. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal also can be taken under certain other circumstances, such as a result of the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Citations.

1 – Investopedia.com, November 26, 2019. 2 – Investopedia.com, January 17, 2020.

3 – Congress.gov, December 22, 2017.

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Key Provisions of the CARES Act

Mon, 06 Apr 2020 13:18:00 GMT

Distributions can be waived in 2020 for Inherited Accounts, 401(k)s, and IRAs.

Recently, the $2 trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act was signed into law. The CARES Act is designed to help those most impacted by the COVID-19 pandemic, while also providing key provisions that may benefit retirees. ¹ To put this monumental legislation in perspective, Congress earmarked $800 billion for the Economic Stimulus Act of 2008 during the financial crisis. ¹ The CARES Act has far-reaching implications for many. Here are the most important provisions to keep in mind:

Stimulus Check Details . Americans can expect a one-time direct payment of up to $1,200 for individuals (or $2,400 for married couples) with an additional $500 per child under age 17. These payments are based on the 2019 tax returns for those who have filed them and 2018 information if they have not. The amount is reduced if an individual makes more than $75,000 or a couple makes more than $150,000. Those who make more than $99,000 as an individual (or $198,000 as a couple) will not receive a payment. ¹

Business Owner Relief. The act also allocates $500 billion for loans, loan guarantees, or investments to businesses, states, and municipalities. ¹

Your Inherited 401(k)s. People who have inherited 401(k)s or Individual Retirement Accounts can suspend distributions in 2020. Required distributions don’t apply to people with Roth IRAs; although, they do apply to investors who inherit Roth accounts. ²

RMDs Suspended . The CARES Act suspends the minimum required distributions most people must take from 401(k)s and IRAs in 2020. In 2009, Congress passed a similar rule, which gave retirees some flexibility when considering distributions. ^2,3

Withdrawal Penalties. Account owners can take a distribution of up to $100,000 from their retirement plan or IRA in 2020, without the 10-percent early withdrawal penalty that normally applies to money taken out before age 59½. But remember, you still owe the tax. ⁴

Many businesses and individuals are struggling with the realities that COVID-19 has brought to our communities. The CARES Act, however, may provide some much-needed relief. Contact your financial professional today to see if these special 2020 distribution rules are appropriate for your situation.

Under the CARES Act, an account holder who already took a 2020 distribution has up to 60 days to return the distribution without owing taxes on it. This material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Under the SECURE Act, your required minimum distribution (RMD) must be distributed by the end of the 10th calendar year following the year of the Individual Retirement Account (IRA) owner’s death. Penalties may occur for missed RMDs. Any RMDs due for the original owner must be taken by their deadlines to avoid penalties. A surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and children of the IRA owner who have not reached the age of majority may have other minimum distribution requirements.

Under the SECURE Act, in most circumstances, once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. You may continue to contribute to a Traditional IRA past age 70½ under the SECURE Act, as long as you meet the earned-income requirement. Account holders can always withdraw more. But if they take less than the minimum required, they could be subject to a 50% penalty on the amount they should have withdrawn – except for 2020.

Citations.

1 – CNBC.com, March 25, 2020.

2 – The Wall Street Journal, March 25, 2020.

3 – The Wall Street Journal, March 25, 2020.

4 – The Wall Street Journal, March 25, 2020.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

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Pullbacks, Corrections, and Bear Markets

Mon, 30 Mar 2020 13:14:00 GMT

What’s the difference? What do these terms mean for you?

The COVID-19 outbreak has put tremendous pressure on stock prices, prompting some investors to blindly and indiscriminately sell positions at a time when the entire market is trending lower. Worried investors believe “this time it’s different.” When the market drops, some investors lose perspective that downtrends – and uptrends – are part of the investing cycle. When stock prices break lower, it’s a good time to review common terms that are used to describe the market’s downward momentum. ^1,2

Pullbacks. A pullback represents the mildest form of a selloff in the markets. You might hear an investor or trader refer to a dip of 5% to 10% after a peak as a “pullback.” ¹

Corrections. The next degree in severity is a “correction.” If a market or markets retreats 10% to 20% after a peak, you’re in correction territory. At this point, you’re likely on guard for the next tier. ¹

Bear Market. In a bear market, the decline is 20% or more since the last peak. ¹

All this is normal . Pullbacks, corrections, and bear markets are a part of the investing cycle. When stock prices are trending lower, some investors can second-guess their risk tolerance. But periods of market volatility can be the worst time to consider portfolio decisions. Pullbacks and corrections are relatively common and represent something that any investor may see in their financial life, from time to time – often, several times over the course of a decade. Bear markets are much rarer. What we are experiencing now represents the start of the ninth bear market since 1926. This bear market follows the longest bull market on record. ¹

How is this bear market going to affect me? That’s a good question, but it’s something that you won’t fully understand in the here and now. The average bear market lasts 146 days for the Standard & Poor’s 500. ² A retirement strategy, formed with the help of a trusted financial professional, has market volatility factored in. As you continue your relationship with that professional, they will also be at your side to make any adjustments as needed and help you make any necessary decisions along the way. Their goal is to help you pursue your goals.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – kiplinger.com/slideshow/investing/T018-S001-25-dividend-stocks-analysts-love-the-most-2019/index.html [3/10/2020]

2 – marketwatch.com/story/the-dow-just-tumbled-into-a-bear-market-ending-the-longest-bull-market-run-in-historyheres-how-those-downturns-last-on-average-2020-03-11 [3/14/2020]

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Coronavirus & More

Fri, 20 Mar 2020 14:16:00 GMT

The 24-Hour News Cycle moves from Impeachment to COVID-19 to the Primaries – What’s next?

In recent weeks, we’ve seen several major stories in the news. On the political front, in addition to the arrival of the presidential election through the 2020 caucuses and primaries, we have just experienced the third presidential impeachment in American history. In international news, the latest coronavirus outbreak has hit China, now referred to as COVID-19, leading to closed borders and heightened screening at hospitals worldwide. ¹ It’s not so much the facts of what’s going on that are unusual – none of these matters are unprecedented – but the way that they are reported in the media can be alarming. Even frightening.

How might this affect me? When major events make headlines, it’s easy to put yourself in the picture. Knowing, as well, how such events might affect the financial markets, it’s also easy to wonder how your investments and retirement strategy might fare. The truth? Political ups and downs, virus outbreaks, and other circumstances might lead to some short-term volatility on Wall Street. But it’s important to remember two things: 1) Your portfolio is positioned to reflect your risk tolerance, time horizon, and goals. 2) The way we experience news has changed over the years, and not all of it for the better.

Never-ending news. On June 1, 1980, businessman and broadcaster Ted Turner debuted Cable News Network (CNN), the world’s first 24-hour television news channel. In the four decades since, other similar channels have emerged. Collectively, they changed how the world experiences news. Notably, it was the dawn of the 24-hour news cycle. ² Before 1980, news was very different. Major newspapers might have published several editions during a day, but most areas only had a morning or evening edition. Radio might offer news break updates at the top of the hour, with news programs in the morning, afternoon, and evening. Television followed a similar pattern. The never-ending news cycle means that news organizations have an interest in continuing to report on the same news story even though little or nothing has changed. Twenty-four hours is a lot of time to fill, and they need ratings in order to be of value to advertisers. While this doesn’t necessarily mean that the news has become inaccurate or sensationalistic, it might be perceived as repetitive. It’s also becoming ubiquitous. With our smartphones, we’re often receiving news updates immediately throughout the day.

Keep informed, but don’t be rattled. Your investment and retirement strategy, which you have designed and put into place with your trusted financial professional, has considered big news events, both major and minor. Your professional knows the difference between something that may be a minor force in your financial life and something that might require you to make some changes. A good strategy gives you room for market changes that might see reactions that last a few days – even a few years. Staying the course is often the smartest move, partially because you aren’t reacting immediately to a dip, and you might benefit from a potential recovery.

So, keep yourself informed, but if you get too worried, have a conversation with your financial professional. They can help you understand what the news means for your financial life and offer you the context you need to remain confident in your strategy.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – sciencemag.org/news/2020/02/bit-chaotic-christening-new-coronavirus-and-its-disease-name-create-confusion [2/12/20]

2 – history.com/this-day-in-history/cnn-launches [2020]

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Starting Estate Planning Conversations With Family

Mon, 09 Mar 2020 14:55:00 GMT

Often we try to avoid uncomfortable conversations to make our gatherings as shiny and bright as possible. You certainly don’t have to tackle all of your communal money-related questions during the holidays, but one key conversation should be at the top of your “to-do” list: estate planning.

What Is Estate Planning?

Estate planning is the process of organizing your estate and what happens to it after you pass away. An estate plan helps to build a legacy, ensure your family is taken care of, and indicate how you want your medical care and estate to be handled if you’re unable to communicate your wishes after an accident or medical emergency. It also encompasses other things like how you want your children to be cared for through a guardianship clause in your will, and more.

A good estate plan should have a few key documents, including:

What Conversations Do You Need to Have?

There are a variety of conversations you need to have with your family regarding their estate plan. Sometimes it can be easier to break them into categories, and approach them when the subject feels comfortable or comes up organically in conversation.

Medical

This is one of the most important discussions to have with your family members regarding their estate plan. You need to know what healthcare directives exist for parents and close family members, and who their power of attorney is in the event that they can’t make medical decisions for themselves. Asking about medical preferences can also be incredibly helpful. For example: do your parents have a preference for what medical treatment they’d like to receive when unconscious, or if they’d like to be resuscitated in a life or death scenario? These conversations aren’t easy to have, but this knowledge will help you make decisions if you (or your siblings) is their power of attorney.

Responsibility

Several roles need to be filled in an estate plan. Your parents may have you as part of their strategy without you even being aware of it, and it’s best to be in the know! Here are a few responsibilities to ask them about:

Insurance

Many parents and grandparents don’t have life insurance as they near retirement. However, if they do, it’s worth discussing their coverage and who they have listed as their beneficiaries.

Estate

Do you know what’s included in your parent’s estate? Being clear about what’s included, and how they want to divide their estate among you, your siblings, loved ones, and charities or organizations they support is critical. You and your family don’t want to feel surprised by how the estate will be divided.

A Case Study: What Happens When You Don’t Talk About Your Estate

Joan* is a successful entrepreneur who believes in caring for her family. Specifically, Joan allocates part of her budget toward caring for her grandmother – who raised both her and her siblings. Joan’s family is incredibly close, and all four of her siblings love their grandma. They’re all very attached to their grandma’s home where they grew up – and know that it’s likely worth quite a bit of money as it’s an up-and-coming neighborhood and has been well maintained.

Recently, Joan’s brother mentioned feeling torn about whether they should all sell the home when their grandma passes away, or whether they should keep it in the family and continue to maintain it. Joan was surprised because the mortgage is in her name, and she pays it monthly. The grandmother hadn’t told the siblings that Joan pays for her mortgage, and wants Joan to keep it quiet, as well.

This situation is problematic because Joan’s siblings assume that they’re entitled to a portion of the family home when their grandma passes on. However, the home is in Joan’s name, and so it isn’t part of her grandma’s estate. Although revealing the “big secret” that Joan is paying for the mortgage now may hurt her siblings, it will prevent a future incredibly uncomfortable conversation when the family is grieving – and could potentially save their relationships ahead of time.

How to Start the Conversation

You can avoid a situation like the one outlined above. If you’re unsure about how to start a conversation about estate planning with your parents and siblings, have your financial planner help you. Remember: The best gift to give your family is the shared knowledge of what your parents and grandparents want, and how you can all help them to carry on the family legacy.

Ready for some actionable tips on how to start the conversation? Here’s how to get started!

How to Start the Conversation:

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Long-Term Investing Truths

Mon, 24 Feb 2020 16:20:00 GMT

Key lessons for retirement savers.

You learn lessons as you invest in pursuit of long-run goals. Some of these lessons are conveyed and reinforced when you begin saving for retirement, and others, you glean along the way.

First and foremost, you learn to shut out much of the “noise.” News outlets take the temperature of global markets five days a week (and on the weekends), and economic indicators change weekly or monthly. The longer you invest, the more you learn that breaking news can create market volatility. While the day trader sells or buys in reaction to immediate economic or market news, the buy-and-hold investor has a long-term perspective and understands that the market can have periods of volatility.

You learn how much volatility you can stomach. Market sentiment can quickly shift and so can index performance. Across 2008-18, the S&P 500 had a cumulative total return (dividends included) of almost 140%, compared to just 8% for the MSCI Emerging Markets Index. During 2003-07, though, the Emerging Markets index returned 391%, while the S&P returned 83%. ^1,2 Here are the recent yearly total returns of the S&P: 2013, +30.71%; 2014, +13.57%; 2015, +1.30%; 2016, +11.94%; 2017, +21.83%; 2018, -4.38%. Do you see any kind of “norm” or pattern there? That is the kind of year-to-year volatility that leads people to find an asset allocation that is comfortable for them. ^2,3

You learn why liquidity matters. The older you get, the more you appreciate being able to quickly access your money. A family emergency might require you to tap into your investment accounts. An early retirement might prompt you to withdraw from retirement funds sooner than you anticipate. Should you misgauge your need for liquidity, you could find yourself under sudden financial pressure.

You learn the merits of rebalancing your portfolio . To the neophyte investor, rebalancing when the bulls are stampeding may seem illogical. If your portfolio is disproportionately weighted in equities, is that a problem? It could be. Across a sustained bull market, it is common to see your level of risk rise parallel to your return. When equities return more than other asset classes, they end up representing an increasingly large percentage of your portfolio’s total assets. Correspondingly, your cash allocation shrinks. The closer you get to retirement, the less tolerant of risk you may become. Even if you are strongly committed to growth investing, approaching retirement while taking on more risk than you feel comfortable with is problematic, as is approaching retirement with an inadequate cash position. Rebalancing a portfolio restores the original asset allocation, realigning it with your long-term risk tolerance and investment strategy. It may seem counterproductive to sell “winners” and buy “losers” as an effect of rebalancing, but as you do so, remember that you are also saying goodbye to some assets that may have peaked, while saying hello to others that might be poised to rise. ^4,5

You learn not to get too attached to certain types of investments. Sometimes an investor will succumb to familiarity bias, which is the rejection of diversification for familiar investments. Why does he or she have 9% of their portfolio invested in just two Dow components? Maybe the investor just likes what those firms stand for or has worked for them. The inherent problem is that the performance of those companies exerts a measurable influence on overall portfolio performance. Sometimes you see people invest heavily in sectors that include their own industry or career field. An investor works for an oil company, so they get heavily into the energy sector. When energy companies go through a rough patch, that investor’s portfolio may be in for a rough ride. Correspondingly, that investor may have less capacity to tolerate stock market risk than a faculty surgeon at a university hospital, a federal prosecutor, or someone else whose career field or industry will be less buffeted by the winds of economic change. ⁶

You learn to be patient. Time teaches you the importance of investing based on your time horizon, risk tolerance, and goals. The pursuit of your long-term financial objectives should not falter. Your financial future and your quality of life may depend on realizing them.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – etf.com/sections/features-and-news/swedroe-investing-uncomfortably?nopaging=1 [12/31/18]

2 – The performance data quoted herein represents past performance and does not guarantee future results. Individuals cannot invest directly in an index. Investing in securities involves risk of loss that clients should be prepared to bear. No investment process is free of risk; no strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Market volatility can dramatically impact short-term investment performance. Current performance may be lower or higher than figures shown. An investment’s return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

3 – indexologyblog.com/2019/02/04/sp-500-performance-in-2018-how-much-does-size-matter/ [2/4/19]

4 – Neither asset allocation nor diversification can eliminate the risk of fluctuating prices and uncertain returns. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio. There are no assurances that a portfolio will match or exceed any particular benchmark.

5 – Tax loss harvesting is not suitable for all investors. Nothing herein should be interpreted as tax advice, and the author of this article does not represent in any manner that the tax consequences described herein will be obtained, or that any investment product will result in any particular tax consequence. Please consult your personal tax advisor as to whether tax loss harvesting is a suitable strategy for you, given your particular circumstances. The tax consequences of tax loss harvesting are complex and uncertain and may be challenged by the IRS. You and your tax advisor are responsible for how transactions conducted in your account are reported to the IRS on your personal tax return. The author assumes no responsibility for the tax consequences to any client of any transaction.

6 – Because of its narrow focus, a sector investing strategy tends to be more volatile than an investment strategy that is diversified across many sectors and companies. Sector investing also is subject to the additional risks that are associated with its particular industry. Sector investing can be adversely affected by political, regulatory, market, or economic developments.

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The SECURE Act

Mon, 10 Feb 2020 16:12:00 GMT

Long-established retirement account rules change.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act is now law. With it, comes some of the biggest changes to retirement savings law in recent years. While the new rules don’t appear to amount to a massive upheaval, the SECURE Act will require a change in strategy for many Americans. For others, it may reveal new opportunities.

Limits on Stretch IRAs. The legislation “modifies” the required minimum distribution rules in regard to defined contribution plans and Individual Retirement Account (IRA) balances upon the death of the account owner. Under the new rules, distributions to non-spouse beneficiaries are generally required to be distributed by the end of the 10th calendar year following the year of the account owner’s death. ¹

It’s important to highlight that the new rule does not require the non-spouse beneficiary to take withdrawals during the 10-year period. But all the money must be withdrawn by the end of the 10th calendar year following the inheritance.

A surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and child of the IRA owner who has not reached the age of majority may have other minimum distribution requirements.

Let’s say that a person has a hypothetical $1 million IRA. Under the new law, your non-spouse beneficiary may want to consider taking at least $100,000 a year for 10 years regardless of their age. For example, say you are leaving your IRA to a 50-year-old child. They must take all the money from the IRA by the time they reach age 61. Prior to the rule change, a 50-year-old child could “stretch” the money over their expected lifetime, or roughly 30 more years.

IRA Contributions and Distributions. Another major change is the removal of the age limit for traditional IRA contributions. Before the SECURE Act, you were required to stop making contributions at age 70½. Now, you can continue to make contributions as long as you meet the earned-income requirement. ²

Also, as part of the Act, you are mandated to begin taking required minimum distributions (RMDs) from a traditional IRA at age 72, an increase from the prior 70½. Allowing money to remain in a tax-deferred account for an additional 18 months (before needing to take an RMD) may alter some previous projections of your retirement income. ²

The SECURE Act’s rule change for RMDs only affects Americans turning 70½ in 2020. For these taxpayers, RMDs will become mandatory at age 72. If you meet this criterion, your first RMD won’t be necessary until April 1 of the year after you reach 72. ²

Multiple Employer Retirement Plans for Small Business. In terms of wide-ranging potential, the SECURE Act may offer its biggest change in the realm of multi-employer retirement plans. Previously, multiple employer plans were only open to employers within the same field or sharing some other “common characteristics.” Now, small businesses have the opportunity to buy into larger plans alongside other small businesses, without the prior limitations. This opens small businesses to a much wider field of options. ¹

Another big change for small business employer plans comes for part-time employees. Before the SECURE Act, these retirement plans were not offered to employees who worked fewer than 1,000 hours in a year. Now, the door is open for employees who have either worked 1,000 hours in the space of one full year or to those who have worked at least 500 hours per year for three consecutive years. ²

While the SECURE Act represents some of the most significant changes we have seen to the laws governing financial saving for retirement, it’s important to remember that these changes have been anticipated for a while now. If you have questions or concerns, reach out to your trusted financial professional.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE%20Act%20section%20by%20section.pdf [12/25/19]
2 – marketwatch.com/story/with-president-trumps-signature-the-secure-act-is-passed-here-are-the-most-important-things-to-know-2019-12-21 [12/25/19]

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Top 7 Reasons To Roll Over Your 401K To An IRA

Mon, 27 Jan 2020 18:30:00 GMT

The benefits of rolling over your 401(k) when you leave a job

The Bottom Line

Whenever you change jobs, you have several options with your 401(k) plan account. You can cash it out, leave it where it is, transfer it into your new employer’s 401(k) plan (if one exists), or roll it over into an individual retirement account (IRA).

Forget about cashing it out—taxes and other penalties are likely to be huge. For most people, rolling over a 401(k)—or the 403(b) cousin, for those in the public or nonprofit sector—into an IRA is the best choice. Below are seven reasons why. Keep in mind these reasons assume that you are not on the verge of retirement or at an age when you must start taking required minimum distributions (RMDs) from a plan.

KEY TAKEAWAYS

Some of the top reasons to roll over your 401(k) into an IRA are more investment choices, better communication, lower fees, and the potential to open a Roth account.

Other benefits include cash incentives from brokers to open an IRA, fewer rules, and estate planning advantages.

Be sure to weigh the features of your 401(k) plan, both the old employer and the new one (if they offer one), and how they compare to those offered in an IRA.

Your 401(k) is limited to a few planets in the investment universe. In all likelihood, you have the choice of a few mutual funds—mostly equity funds and a bond fund or two—and that’s it. However, with an IRA, most types of investments are available to you, not just mutual funds, but also individual stocks, bonds, and exchange-traded funds (ETFs), to name just a few.

“IRAs open a larger universe of investment choices,” says Russ Blahetka, CFP, founder and managing director of Vestnomics Wealth Management LLC in Campbell, Calif.1 “Most 401(k) plans do not allow the use of risk management, such as options, but IRAs do. It is even possible to hold income-producing real estate in your IRA.”

You can also buy and sell your holdings anytime you want. Most 401(k) plans limit the number of times per year you can rebalance your portfolio, as the pros put it, or restrict you to certain times of the year.

If you leave your account with your old employer, you might be treated as a second-class citizen, though not deliberately. It just might be harder to get communications regarding the plans (often news is distributed through company email) or get in touch with an advisor or administrator. Most 401(k) plan rules state that if you have less than $1,000 in your account, an employer is automatically allowed to cash it out and give it to you; if you have between $1,000 and $5,000, your employer is allowed to put it in an IRA.

And having ready access to information is extra important in the unlikely event something goes south at your old workplace. “I have a client whose former employer went into bankruptcy. His 401(k) was frozen for three years since the court needed to make sure there was no monkey business there,” says Michael Zhuang, principal of MZ Capital Management in Bethesda, Md.2 “During [that time] my client had no access, and he was constantly worried about losing his retirement fund.”

You’d have to crunch the numbers on this one, but rolling over into an IRA could save you a lot in management fees, administrative fees, and fund expense ratios—all those little costs that can eat into investment returns over time. The funds offered by the 401(k) plan may be more expensive than the norm for their asset class. And then there is the overall annual fee that the plan administrator charges.

“Investors should be careful about transaction costs associated with buying certain investments and the expense ratios, 12b-1 fees, or loads associated with mutual funds. All of these can easily be in excess of 1% of total assets per year,” says Mark Hebner, founder, and president of Index Fund Advisors Inc. in Irvine, Calif3, and author of Index Funds: The 12-Step Recovery Program for Active Investors.

Admittedly, the opposite could be true. The bigger 401(k) plans that have millions to invest have access to institutional-class funds that charge lower fees than their retail counterparts. Of course, your IRA won’t be free of fees either. But again, you’ll have more choices and more control over how you’ll invest, where you’ll invest, and what you’ll pay.

An IRA rollover opens up the possibility of a Roth account. (In fact, if yours is one of the increasingly common Roth 401(k)s, a Roth IRA is the preferred rollover option). With Roth IRAs, you pay taxes on the funds you contribute when you contribute them, but then there is no tax due when you withdraw them (the opposite of a traditional IRA). Nor do you have to take RMDs at age 72—or indeed, ever—from a Roth IRA.

If you believe you will be in a higher tax bracket or tax rates will be generally higher when you start needing your IRA money, a Roth might be in your best interest. If you’re under the age of 59½, it’s also a lot easier to withdraw funds from a Roth IRA than from a traditional one. There are no early-withdrawal penalties for contributions, in most cases, though there are for any earnings.

Your 401(k) plan administrator may only permit rollovers to a traditional IRA. If so, you’ll have to do that and then convert it to a Roth.

Brokers are eager for your business. To entice you to bring your retirement money to their company, they may throw some cash your way. TD Ameritrade, for example, offers bonuses ranging from $100 to $2,500 when you roll over your 401(k) to one of its IRAs, depending on the amount you have to invest. If it’s not cash, free trades could be part of the package.

If you’d like to check out some of the more highly rated firms that handle IRAs, Investopedia offers a list of the best brokers for IRAs.

Understanding your 401(k) is no easy task since each company has a lot of leeway in how they set up the plan. In contrast, IRA regulations are standardized by the Internal Revenue Service (IRS). An IRA with one broker follows most of the same rules as with any other broker.

Upon your death, there’s a good chance that your 401(k) will be paid in one lump sum to your beneficiary, which could cause income and inheritance tax headaches. It varies depending on the particular plan, but most companies prefer to distribute the cash fast, so they don’t have to maintain the account of an employee who is no longer there. Inheriting IRAs has its regulations too, but IRAs offer more payout options. Again, it comes down to control.

The 2020 contribution limit for those participating in a 401(k) or 403(b) plan is $19,500, up from $19,000 in 2019, according to the most-recent IRS guidelines, while the catch-up limit for those 50 and over rises to $6,500 in 2020 from $6,000 in 2019. The 2020 limit for IRAs is $6,000, unchanged from 2019, while the catch-up limit is an extra $1,000.

The Bottom Line

For most people switching jobs, there are many advantages to rolling over a 401(k) into an IRA. That being said, a lot depends on the specifics of the 401(k) plan, both the old employer’s and the new one—investment options, fees, loan provisions, etc. It also matters how these terms and features compare to those offered in an IRA, which you could establish with a brokerage or bank.

You could also have the best of both worlds. You don’t have to roll all of your money into an IRA. Some of your balance can remain in your former company’s 401(k) if you’re happy with the returns you’re receiving. You can then set up a new IRA or rollover the remainder into an existing account or a new rollover IRA. After you’ve done your rollover, you can contribute to both your new company’s 401(k) and an IRA (traditional or Roth) as long as you don’t go over your annual contribution limit.

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Creating A Retirement Strategy

Tue, 14 Jan 2020 17:36:00 GMT

Most people just invest for the future. You have a chance to do more.

Across the country, people are saving for that “someday” called retirement. Someday, their careers will end. Someday, they may live off their savings or investments, plus Social Security. They know this, but many of them do not know when, or how, it will happen. What is missing is a strategy – and a good strategy might make a great difference.

A retirement strategy directly addresses the “when, why, and how” of retiring. It can even address the “where.” It breaks the whole process of getting ready for retirement into actionable steps. This is so important. Too many people retire with doubts, unsure if they have enough retirement money and uncertain of what their tomorrows will look like. Year after year, many workers also retire earlier than they had planned, and according to a 2019 study by the Employee Benefit Research Institute, about 43% do. In contrast, you can save, invest, and act on your vision of retirement now to chart a path toward your goals and the future you want to create for yourself. ¹ Some people dismiss having a long-range retirement strategy, since no one can predict the future. Indeed, there are things about the future you cannot control: how the stock market will perform, how the economy might do. That said, you have partial or full control over other things: the way you save and invest, your spending and your borrowing, the length and arc of your career, and your health. You also have the chance to be proactive and to prepare for the future.

A good retirement strategy has many elements . It sets financial objectives. It addresses your retirement income: how much you may need, the sequence of account withdrawals, and the age at which you claim Social Security. It establishes (or refines) an investment approach. It examines tax implications and potential tax advantages. It takes possible health care costs into consideration and even the transfer of assets to heirs.

A prudent retirement strategy also entertains different consequences. Financial advisors often use multiple-probability simulations to try and assess the degree of financial risk to a retirement strategy, in case of an unexpected outcome. These simulations can help to inform the advisor and the retiree or pre-retiree about the “what ifs” that may affect a strategy. They also consider sequence of returns risk, which refers to the uncertainty of the order of returns an investor may receive over an extended period of time. ²

Let a retirement strategy guide you. Ask a financial professional to collaborate with you to create one, personalized for your goals and dreams. When you have such a strategy, you know what steps to take in pursuit of the future you want.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – ebri.org/docs/default-source/rcs/2019-rcs/rcs_19-fs-2_expect.pdf?sfvrsn=2a553f2f_4 [2019]

2 – investopedia.com/terms/m/montecarlosimulation.asp [6/10/19]

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2019 IRA Deadlines Are Approaching

Mon, 06 Jan 2020 15:51:00 GMT

Here is what you need to know.

Financially, many of us associate April with taxes – but we should also associate April with important IRA deadlines. April 1, 2020 is the deadline to take your Required Minimum Distribution (RMD) from certain individual retirement accounts.

April 15, 2020 is the deadline for making annual contributions to a traditional IRA, Roth IRA, and certain other retirement accounts. ¹ Keep in mind that withdrawals from traditional, SIMPLE, and SEP-IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as a result of the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

The earlier you make your annual IRA contribution, the better. You can make a yearly IRA contribution any time between January 1 of the current year and April 15 of the next year. So, the contribution window for 2019 started on January 1, 2019 and ends on April 15, 2020. Accordingly, you can make your IRA contribution for 2020 any time from January 1, 2020 to April 15, 2021. ² You may help manage your income tax bill if you are eligible to contribute to a traditional IRA. To get the full tax deduction for your 2019 traditional IRA contribution, you have to meet one or more of these financial conditions:

*You aren’t eligible to participate in a workplace retirement plan.

*You are eligible to participate in a workplace retirement plan, but you are a single filer or head of household with Modified Adjusted Gross Income (MAGI) of $64,000 or less. (Or if you file jointly with your spouse, your combined MAGI is $103,000 or less.) ³

*You aren’t eligible to participate in a workplace retirement plan, but your spouse is eligible and your combined 2019 gross income is $193,000 or less. ⁴

If you are the original owner of a traditional IRA, you are no longer able to contribute to it starting in the year you turn 70½. If you are the original owner of a Roth IRA, you can contribute to it as long as you live, provided you have taxable compensation and MAGI below a certain level (see below). ^1,3 If you are making a 2019 IRA contribution in early 2020, be aware of this fact. You must tell the investment company hosting the IRA account which year the contribution is for. If you fail to indicate the tax year that the contribution applies to, the custodian firm may make a default assumption that the contribution is for the current year (and note exactly that to the I.R.S.). ⁴

So, write “2020 IRA contribution” or “2019 IRA contribution,” as applicable, in the memo area of your check, plainly and simply. Be sure to write your account number on the check. Should you make your contribution electronically, double-check that these details are communicated.

How much can you put into an IRA this year? You can contribute up to $6,000 to a Roth or traditional IRA for the 2020 tax year; $7,000, if you will be 50 or older this year. (The same applies for the 2019 tax year). Should you make an IRA contribution exceeding these limits, you have until the following April 15 to correct the contribution with the help of an I.R.S. form. If you don’t, the amount of the excess contribution will be taxed at 6% each year the correction is avoided. ^1,4

The maximum contribution to a Roth IRA may be reduced because of Modified Adjusted Gross Income phaseouts, which kick in as follows.

2019 Tax Year ⁴

Single/head of household: $122,000 – $137,000

Married filing jointly: $193,000 – $203,000

2020 Tax Year ⁵

Single/head of household: $124,000 – $139,000

Married filing jointly: $196,000 – $206,000

The I.R.S. has other rules for other income brackets. If your MAGI falls within the applicable phase-out range, you may be eligible to make a partial contribution.3 A last-chance RMD deadline rolls around on April 1. If you turned 70½ in 2019, the I.R.S. has two ways for you to take your first RMD: you could a) take your first Required Minimum Distribution from your traditional IRA before December 31, 2019 or b) postpone it until as late as April 1, 2020. ⁶ If you chose b), you will have to take two RMDs next year – one by April 1, 2020 and another by December 31, 2020. For subsequent years, your annual RMD deadline will be December 31. The investment firm that is the custodian of hosting your IRA should have already notified you of this consequence as well as the RMD amount(s) – in fact, they have probably calculated the RMD(s) for you. ⁶

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – irs.gov/retirement-plans/ira-year-end-reminders [11/08/2019]

2 – irs.gov/retirement-plans/traditional-and-roth-iras [12/04/2019]

3 – irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits [12/04/2019]

4 – irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2019 [11/18/2019]

5 – irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020 [11/08/2019]

6 – irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds [10/25/2019]

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The Major Retirement Planning Mistakes

Fri, 20 Dec 2019 16:25:00 GMT

Why are they made again and again?

Much is out there about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Aside from these blunders, some classic financial missteps plague retirees. Calling them “mistakes” may be a bit harsh, as not all of them represent errors in judgment. Yet whether they result from ignorance or fate, we need to be aware of them as we plan for and enter retirement.

Leaving work too early. As Social Security benefits rise about 8% for every year you delay receiving them, waiting a few years to apply for benefits can position you for higher retirement income. Filing for your monthly benefits before you reach Social Security’s Full Retirement Age (FRA) can mean comparatively smaller monthly payments. Meanwhile, if you can delay claiming Social Security, that positions you for more significant monthly benefits. ¹

Underestimating medical bills. In its latest estimate of retiree health care costs, the Center for Retirement Research at Boston College says that the average retiree will need at least $4,300 per year to pay for future health care costs. Medicare will not pay for everything. That $4,300 represents out-of-pocket costs, which includes dental, vision, and long-term care. ²

Taking the potential for longevity too lightly. Actuaries at the Social Security Administration project that around a third of today’s 65-year-olds will live to age 90, with about one in seven living 95 years or longer. The prospect of a 20- or 30-year retirement is not unreasonable, yet there is still a lingering cultural assumption that our retirements might duplicate the relatively brief ones of our parents. ³

Withdrawing too much each year. You may have heard of the “4% rule,” a guideline stating that you should take out only about 4% of your retirement savings annually. Many cautious retirees try to abide by it. So, why do others withdraw 7% or 8% a year? In the first phase of retirement, people tend to live it up; more free time naturally promotes new ventures and adventures and an inclination to live a bit more lavishly.

Ignoring tax efficiency & fees. It can be a good idea to have both taxable and tax-advantaged accounts in retirement. Assuming your retirement will be long, you may want to assign this or that investment to its “preferred domain.” What does that mean? It means the taxable or tax-advantaged account that may be most appropriate for it as you pursue a better after-tax return for the whole portfolio. Many younger investors chase the return. Some retirees, however, find a shortfall when they try to live on portfolio income. In response, they move money into stocks offering significant dividends or high-yield bonds – something you might regret in the long run. Taking retirement income off both the principal and interest of a portfolio may give you a way to reduce ordinary income and income taxes.

Avoiding market risk. Equity investment does invite risk, but the reward may be worth it. In contrast, many fixed-rate investments offer comparatively small yields these days.

Retiring with heavier debts. It is hard to preserve (or accumulate) wealth when you are handing portions of it to creditors.

Putting college costs before retirement costs. There is no “financial aid” program for retirement. There are no “retirement loans.” Your children have their whole financial lives ahead of them. Try to refrain from touching your home equity or your IRA to pay for their education expenses.

Retiring with no plan or investment strategy. An unplanned retirement may bring terrible financial surprises; the absence of a strategy can leave people prone to market timing and day trading.

These are some of the classic retirement planning mistakes. Why not plan to avoid them? Take a little time to review and refine your retirement strategy in the company of the financial professional you know and trust.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – forbes.com/sites/bobcarlson/2019/01/25/5-ways-to-maximize-social-security-benefits [1/25/19]

2 – fool.com/retirement/2019/12/11/4-steps-to-making-sure-youre-ready-to-retire.aspx [12/11/2019]
3 – ssa.gov/planners/lifeexpectancy.html [12/11/2019]

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Insurance Needs for Empty Nesters and Retirees

Mon, 02 Dec 2019 17:27:00 GMT

Thinking about coverage as you enter a new phase.

With the children now out of the house, financial priorities become more focused on preparing for retirement. At this stage, you may very likely be at the height of your earning power and fast approaching peak savings as you lay the groundwork for retirement. During this final leg to retirement – and throughout your retirement period – wealth protection is critical. The preservation of your assets will not be solely a function of your investment strategy, but will include a comprehensive insurance approach to protect you against an array of financial risks, most especially health care. In addition to wealth protection, you may also now be seriously contemplating a number of important estate and legacy objectives.

Home. Even though your mortgage may be paid off – thus, releasing you from the lender’s requirement to have homeowners insurance – it remains important to consider coverage against property loss and exposure to personal liability. Now is an ideal time to review your policy as the cost of replacing your home and belongings contained therein may have grown over the years. Also, consider an umbrella policy, which is designed to help protect against the financial risk of personal liability.

Health. There are several key health insurance issues facing empty nesters and retirees. If you retire prior to age 65 when Medicare coverage is set to begin, you will need coverage to bridge the gap between when you retire and when you turn 65. If your spouse continues to work, you may want to consider getting yourself added to their plan; though, you may need to wait until the employer’s annual enrollment period. Alternatively, you may also purchase coverage through a private insurer or HealthCare.gov (or your state’s program). Once you enroll in Medicare, you should consider purchasing Part D of Medicare, the Medicare Prescription Drug Plan, which can help you save money on prescriptions. Additionally, you may want to consider other Medigap insurance, which is designed to pay for medical care not covered by Medicare. Medigap plans are bought through private insurance companies and best purchased within the first six months of turning age 65 since no health exam is required during this period.

Disability. This coverage may continue until you retire. When you stop working, you should consider canceling your disability insurance as the need for it has expired. ¹

Life. The financial obligations that drove your life insurance needs while you were raising a family may have evaporated. However, you may find new needs arising from estate issues, such as liquidity, creating a legacy, etc. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Extended Care. For some, extended care insurance is a priority in this stage of life. With the expense of children in the rearview mirror, you can now turn your focus to buying protection against, potentially, the most significant health care expense you are likely to face in retirement. Designed to pay for chronic, long-lasting illnesses and regular care, whether in home or at a nursing home, extended care insurance coverage is critically important since most of these costs are not covered by Medicare.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – chicagotribune.com/business/success/terrysavage/tca-disability-insurance-can-protect-you-from-unthinkable-20190410-story.html [4/10/19]

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Avoiding Large Losses in Your Portfolio

Mon, 25 Nov 2019 16:24:00 GMT

“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” – Warren Buffett ¹

Risk is a factor in any investment decision that you make. Your tolerance for risk is something that you will want to consider when you make decisions alongside your trusted financial professional. Your risk tolerance is balanced against your time horizon, meaning the time between now and your anticipated retirement date. But is it possible to avoid a loss? No, not completely, but you can take steps to manage that risk when investing. This is where conversations about your risk tolerance are critical.

What would you rather have, $500 right now or a 50% chance at $2,000? Many people go for the $2,000 and rightfully so. Since you have a 50/50 chance, a decision tree shows the $2,000 answer carries a potential value of $1,000. But let’s add a few zeros and see if that changes your perspective. What would you rather have, $50,000 right now or a 50% chance at $200,000? The decision tree says the opportunity to win $200,000 has the highest potential value. But in reality, many people second-guess that decision because $50,000 is a lot of money.

Remember, there is no correct answer to the questions. They simply help you better understand the concept of risk. Investment risk can be managed, but it can’t be eliminated entirely. All investments carry some level of risk. And in general, the greater the risk an investment carries, the higher its potential return. Risk happens, but don’t let it get in the way of your dreams. Ultimately, these concerns should only serve to inform you and the questions that you ask the financial professional you are working with. The conversation should include your questions about the risks for each strategy presented as well as questions from your professional about the retirement you want and the aspirations you hope to realize.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – finance.yahoo.com/news/warren-buffetts-investing-rule-no-154251030.html [9/5/19]

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Reducing the Risk of Outliving Your Money

Mon, 18 Nov 2019 15:03:00 GMT

What steps might help you sustain and grow your retirement savings?

“What is your greatest retirement fear?” If you ask any group of retirees and pre-retirees this question, “outliving my money” will likely be one of the top answers. In fact, 51% of investors surveyed for a 2019 AIG retirement study ranked outliving their money as their top anxiety. ¹

Retirees face greater “longevity risk” today. The Census Bureau says that Americans typically retire around age 63. Social Security projects that today’s 63-year-olds will live into their mid-eighties, on average. This is a mean life expectancy, so while some of these seniors may pass away earlier, others may live past 90 or 100. ^2,3 If your retirement lasts 20, 30, or even 40 years, how well do you think your retirement savings will hold up? What financial steps could you take in your retirement to try and prevent those savings from eroding? As you think ahead, consider the following possibilities and realities.

Realize that Social Security benefits might shrink in the future. For decades, Social Security typically took in more dollars per year than it paid out. That ongoing surplus – also known as the Social Security Trust Fund – is now projected to dry up by 2035. Cbut the worry is that future retirees could get slightly less back from Social Security than they put in. It may be smart to investigate other potential retirement income sources now. ⁴

Understand that you may need to work part time in your sixties and seventies. The income from part-time work can be an economic lifesaver for retirees. What if you worked part time and earned $20,000-30,000 a year? If you can do that for five or ten years, you effectively give your retirement savings five or ten more years to last and grow.

Retire with health insurance and prepare adequately for out-of-pocket costs. Financially speaking, this may be the most frustrating part of retirement. You can enroll in Medicare at age 65, but how do you handle the premiums for private health insurance if you retire before then? Striving to work until you are eligible for Medicare makes economic sense and so does building a personal health care account. According to Fidelity research, a typical 65-year-old couple retiring today will face out-of-pocket health care costs approaching $300,000 over the rest of their lives. ⁵

Many people may retire unaware of these financial factors. With luck and a favorable investing climate, their retirement savings may last a long time. Luck is not a plan, however, and hope is not a strategy. Those who are retiring unaware of these factors may risk outliving their money.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – markets.businessinsider.com/news/stocks/more-than-half-of-americans-want-to-live-to-100-but-worry-about-affording-longer-lifespans-1028099970 [4/10/19]

2 – thebalance.com/average-retirement-age-in-the-united-states-2388864 [1/27/19]

3 – ssa.gov/oact/population/longevity.html [3/6/19]

4 – usatoday.com/story/money/columnist/2019/09/30/social-security-4-key-trends-you-need-know-benefits/3790032002/ [9/30/19]

5 – fidelity.com/viewpoints/retirement/transition-to-medicare [5/31/19]

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End-of-the-Year Money Moves

Mon, 11 Nov 2019 15:46:00 GMT

Here are some things you might consider before saying goodbye to 2019.

What has changed for you in 2019? Did you start a new job or leave a job behind? Did you retire? Did you start a family? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and 2020 begins. Even if your 2019 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your tax bill and/or build a little more wealth. Keep in mind this article is for informational purposes only and is not a replacement for real-life advice. Please consult your tax, legal and accounting professionals before modifying your tax strategy.

Do you practice tax-loss harvesting? That is the art of taking capital losses (selling securities worth less than what you first paid for them) to offset your short-term capital gains. You might want to consider this move, which may lower your taxable income. It should be made with the guidance of a financial professional you trust. ¹ In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that can be carried forward to offset capital gains in upcoming years. When you live in a high-tax state, this is one way to defer tax. ¹

Do you want to itemize deductions? You may just want to take the standard deduction for 2019, which has ballooned to $12,200 for single filers and $24,400 for joint filers because of the Tax Cuts & Jobs Act. If you do think it might be better for you to itemize, now would be a good time to get the receipts and assorted paperwork together. While many miscellaneous deductions have disappeared, some key deductions are still around: the state and local tax (SALT) deduction, now capped at $10,000; the mortgage interest deduction; the deduction for charitable contributions, which now has a higher limit of 60% of adjusted gross income; and the medical expense deduction. ^2,3

Could you ramp up 401(k) or 403(b) contributions? Contribution to these retirement plans may lower your yearly gross income. If you lower your gross income enough, you might be able to qualify for other tax credits or breaks available to those under certain income limits. Note that contributions to Roth 401(k)s and Roth 403(b)s are made with after-tax rather than pre-tax dollars, so contributions to those accounts are not deductible and will not lower your taxable income for the year. ^4,5

Are you thinking of gifting? How about donating to a qualified charity or non-profit organization before 2019 ends? Your gift may qualify as a tax deduction. You must itemize deductions using Schedule A to claim a deduction for a charitable gift. ^4,5 While we’re on the topic of estate strategy, why not take a moment to review your beneficiary designations? If you haven’t reviewed them for a decade or more (which is all too common), double-check to see that these assets will go where you want them to go, should you pass away. Lastly, look at your will to see that it remains valid and up-to-date.

Can you take advantage of the American Opportunity Tax Credit? The AOTC allows individuals whose modified adjusted gross income is $80,000 or less (and joint filers with MAGI of $160,000 or less) a chance to claim a credit of up to $2,500 for qualified college expenses. Phase-outs kick in above those MAGI levels. ⁶

See that you have withheld the right amount. If you discover that you have withheld too little on your W-4 form so far, you may need to adjust your withholding before the year ends.

What can you do before ringing in the New Year? Talk with a financial or tax professional now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

The post End-of-the-Year Money Moves appeared first on KC Financial Advisors .

The Sequence of Returns

Mon, 04 Nov 2019 15:41:00 GMT

A look at how variable rates of return do (and do not) impact investors over time.

What exactly is the “sequence of returns”? The phrase describes the yearly variation in an investment portfolio’s rate of return. Across 20 or 30 years of saving and investing for the future, what kind of impact do these deviations from the average return have on a portfolio’s final value?

The answer: no impact at all.

Once an investor retires, however, these ups and downs can have an effect on portfolio value – and retirement income.

During the accumulation phase, the sequence of returns is ultimately inconsequential. Yearly returns may vary greatly or minimally; in the end, the variance from the mean hardly matters. (Think of “the end” as the moment the investor retires: the time when the emphasis on accumulating assets gives way to the need to withdraw assets.)

An analysis from BlackRock bears this out. The asset manager compares three model investing scenarios: three investors start portfolios with lump sums of $1 million, and each of the three portfolios averages a 7% annual return across 25 years. In two of these scenarios, annual returns vary from -7% to +22%. In the third scenario, the return is simply 7% every year. In all three situations, each investor accumulates $5,434,372 after 25 years – because the average annual return is 7% in each case. ¹

Here is another way to look at it. The average annual return of your portfolio is dynamic; it changes, year-to-year. You have no idea what the average annual return of your portfolio will be when “it is all said and done,” just like a baseball player has no idea what his lifetime batting average will be four seasons into a 13-year playing career. As you save and invest, the sequence of annual portfolio returns influences your average yearly return, but the deviations from the mean will not impact the portfolio’s final value. It will be what it will be. ¹

When you shift from asset accumulation to asset distribution, the story changes. You must try to protect your invested assets against sequence of returns risk.

This is the risk of your retirement coinciding with a bear market (or something close). Even if your portfolio performs well across the duration of your retirement, a bad year or two at the beginning could heighten concerns about outliving your money.

For a classic illustration of the damage done by sequence of returns risk, consider the awful 2007-2009 bear market. Picture a couple at the start of 2008 with a $1 million portfolio, held 60% in equities and 40% in fixed-income investments. They arrange to retire at the end of the year. This will prove a costly decision. The bond market (in shorthand, the S&P U.S. Aggregate Bond Index) gains 5.7% in 2008, but the stock market (in shorthand, the S&P 500) dives 37.0%. As a result, their $1 million portfolio declines to $800,800 in just one year. ^2,

If you are about to retire, do not dismiss this risk. If you are far from retirement, keep saving and investing, knowing that the sequence of returns will have its most relevant implications as you make your retirement transition.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – blackrock.com/pt/literature/investor-education/sequence-of-returns-one-pager-va-us.pdf [10/19]

2 – kiplinger.com/article/retirement/T047-C032-S014-is-your-retirement-income-in-peril-of-this-risk.html [7/3/18]

3 – thebalance.com/how-sequence-risk-affects-your-retirement-money-2388672 [2/8/19]

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Stock Prices Pushed Higher Last Week

Mon, 21 Oct 2019 15:20:00 GMT

Stock Prices Pushed Higher Last Week

KC Financial Advisors

How Medigap Choices Are Changing

Mon, 21 Oct 2019 15:12:00 GMT

Plan F is fading away, and Plan G may gain more popularity.

Soon, two types of Medigap policies will no longer be sold. Seniors who enroll in Medicare in 2020 or later will be unable to buy Medigap Plan F or Plan C. These are the two Medicare Supplement policies that cover Medicare’s Part B deductible (currently $185). ^1,2 This change only impacts new Medicare enrollees. If you already receive Medicare and you already have Plan F or Plan C coverage, you can keep that coverage after 2019. ¹

What if you are eligible for Medicare before January 1, 2020, but not yet enrolled? If that is the case, then “you may be able to buy one of these plans,” according to Medicare.gov. ¹ Some journalists and health care industry analysts are speculating that a high-deductible Plan G could appear in 2020, in response to the unavailability of the high-deductible Plan F. ³

Why do people like Plan F? Plan F is basically a “Cadillac plan”: it is not cheap, but it lets you see any doctor or hospital that accepts Medicare patients, and the upfront cost is the total cost. With Plan F, you are not surprised by subsequent requests to pay a deductible, a copayment, or coinsurance. ⁴

How does Plan G differ from Plan F? While both plans provide similar coverage, the major differences are about dollars and cents. Plan G asks you for the $185 Part B deductible; Plan F does not. Premiums also differ notably. According to Weiss Ratings Medigap, which tracks the cost of Medigap policies, the average 2018 premium for a Plan F policy was $2,204. The average 2018 premium for a Plan G policy? Just $1,786. ⁵

What will happen to Plan F and Plan G premiums in the 2020s is hard to say. Plan F premiums may jump because the supply of 65-year-olds buying Plan F will be abruptly cut, leaving an older and less-healthy population to cover. Plan G premiums could also rise because a Medigap plan must accept new enrollees by the terms of Medicare regardless of how healthy or ill they may be. The current Plan G deductible might significantly increase as well. ⁴

Do you think you might switch out of one Medigap policy to another? That move may be harder to make once 2020 rolls around. If it has been more than six months since you enrolled in Medicare Part B and you want to switch Medigap plans or supplement traditional Medicare with one, some Medigap insurers in certain states may exercise their right to charge you more in view of preexisting health conditions and even turn you down. As Kiplinger notes, some states may intervene and pass consumer protections for people who currently have Plan F policies. ⁵

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – medicare.gov/supplements-other-insurance/how-to-compare-medigap-policies [6/24/19]

2 – kiplinger.com/article/retirement/T039-C001-S003-medicare-premiums-deductibles-2019-part-b-part-a.html [8/10/18]

3 – benzinga.com/general/health-care/19/01/13052659/whats-known-so-far-about-the-changes-coming-to-medicare-in-2020 [1/29/19]

4 – reuters.com/article/us-column-marksjarvis-medigap/medicare-supplement-plans-are-changing-what-you-need-to-know-idUSKCN1LZ18F [9/19/18]

5 – kiplinger.com/article/retirement/T039-C001-S001-two-medigap-plans-to-be-phased-out.html [8/10/18]

6 – ehealthinsurance.com/medicare/supplement-all/is-medicare-supplement-plan-f-going-away [2019]

The post How Medigap Choices Are Changing appeared first on KC Financial Advisors .

Annual Financial To-Do List

Mon, 14 Oct 2019 15:00:00 GMT

Things you can do for your future as the year unfolds.

What financial, business, or life priorities do you need to address for the coming year? Now is a good time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:

Can you contribute more to your retirement plans this year? In 2020, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA: singles and heads of household with MAGI above $139,000 and joint filers with MAGI above $206,000 cannot make 2020 Roth contributions. ¹ Before making any changes, remember that withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½.

Make a charitable gift. You can claim the deduction on your tax return, provided you itemize your deductions with Schedule A. The paper trail is important here. If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the Internal Revenue Service (I.R.S.) does not equate a pledge with a donation. If you pledge $2,000 to a charity this year, but only end up gifting $500, you can only deduct $500. ¹

These are hypothetical examples and are not a replacement for real-life advice. Make certain to consult your tax, legal, or accounting professional before modifying your strategy.

See if you can take a home office deduction for your small business. If you are a small-business owner, you may want to investigate this. You may be able to legitimately write off expenses linked to the portion of your home used to exclusively conduct your business. Using your home office as a business expense involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional who is familiar with homebased businesses. ³

Open an HSA. A Health Savings Account (HSA) works a bit like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $3,550 contribution for 2020, if you are single; $7,100, if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55. ⁴ If you spend your HSA funds for non-medical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you may be required to pay ordinary income taxes on HSA funds used for nonmedical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

Pay attention to asset location. Tax-efficient asset location is an ignored fundamental of investing. Broadly speaking, your least tax-efficient securities should go in pretax accounts, and your most tax-efficient securities should be held in taxable accounts. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss. Before adjusting your asset allocation, consider working with an investment professional who is familiar with tax rules and regulations.

Review your withholding status. Should it be adjusted due to any of the following factors?

*You tend to pay a great deal of income tax each year.

* You tend to get a big federal tax refund each year.

* You recently married or divorced.

* A family member recently passed away.

* You have a new job and you are earning much more than you previously did.

* You started a business venture or became self-employed.

These are general guidelines and are not a replacement for real-life advice. So, make certain to speak with a professional who understands your situation before making any changes.

Are you marrying in 2020? If so, why not review the beneficiaries of your retirement accounts and other assets? When considering your marriage, you may want to make changes to the relevant beneficiary forms. The same goes for your insurance coverage. If you will have a new last name in 2020, you will need a new Social Security card. Additionally, the two of you may have retirement accounts and investment strategies. Will they need to be revised or adjusted with marriage?

Are you coming home from active duty? If so, go ahead and check the status of your credit and the state of any tax and legal proceedings that might have been preempted by your orders. Make sure any employee health insurance is still there and revoke any power of attorney you may have granted to another person.

Consider the tax impact of any upcoming transactions. Are you planning to sell any real estate this year? Are you starting a business? Do you think you might exercise a stock option? Might any large commissions or bonuses come your way in 2020? Do you anticipate selling an investment that is held outside of a tax-deferred account?

If you are retired and older than 70½, remember your year-end RMD. Retirees over age 70½ must begin taking Required Minimum Distributions from traditional IRAs and 401(k), 403(b), and profit-sharing plans by December 31 of each year. The I.R.S. penalty for failing to take an RMD can be as much as 50% of the RMD amount that is not withdrawn. ⁵

Lastly, should you make 13 mortgage payments this year? If your house is underwater, this makes no sense – and you could argue that those dollars might be better off invested or put in your emergency fund. Those factors aside, however, there may be some merit to making a January 2020 mortgage payment in December 2019. If you have a fixed-rate loan, a lump-sum payment can reduce the principal and the total interest paid on it by that much more. If you’re considering making 13 payments, consider working with a tax, legal, or accounting professional who is familiar with your situation. ³ Vow to focus on being healthy and wealthy in 2020. And don’t be afraid to ask for help from professionals who understand your individual situation.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – thefinancebuff.com/401k-403b-ira-contribution-limits.html [7/16/19]

2 – irs.gov/newsroom/charitable-contributions [6/28/19]

3 – nerdwallet.com/blog/taxes/home-office-tax-deductions-small-business/ [1/22/19]

4 – cnbc.com/2019/06/03/these-are-the-new-hsa-limits-for-2020.html [6/4/19]

5 – forbes.com/sites/leonlabrecque/2019/04/09/bigger-iras-proposed-new-tax-law-may-let-you-build-a-bigger-ira-in-retirement/ [4/9/19]

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Why DIY Investment Management Is Such a Risk

Mon, 07 Oct 2019 15:17:00 GMT

Paying attention to the wrong things becomes all too easy.

If you ever have the inkling to manage your investments on your own, that inkling is worth reconsidering. Do-it-yourself investment management is generally a bad idea for the retail investor for myriad reasons.

Getting caught up in the moment. When you are watching your investments day to day, you can lose a sense of historical perspective. This may be especially true in longstanding bull markets, in which investors are sometimes lulled into assuming that the big indices will move in only one direction.

Listening too closely to talking heads. The noise of Wall Street is never-ending and can breed a kind of shortsightedness that may lead you to focus on the micro rather than the macro. As an example, the hot issue affecting a sector today may pale in comparison to the developments affecting it across the next ten years or the past ten years.

Looking only to make money in the market. Wall Street represents only one avenue for potentially building your retirement savings or wealth. When you are caught up in the excitement of a rally, that truth may be obscured. You can build savings by spending less. You can receive “free money” from an employer willing to match your retirement plan contributions to some degree. You can grow a hobby into a business or even switch jobs or careers.

Saving too little. For a DIY investor, the art of investing equals making money in the markets, not necessarily saving the money you have made. Subscribing to that mentality may dissuade you from saving as much as you should for retirement and other goals.

Paying too little attention to taxes. A 10% return is less sweet if federal and state taxes claim 3% of it. This routinely occurs, however, because just as many DIY investors may play the market in one direction, they also may skimp on playing defense.

Failing to pay attention to your emergency fund. You may need more than six months of cash reserves. Many people may not have anywhere near that, and some DIY investors give scant attention to their cash position. ¹

Overreacting to a bad year. Sometimes the bears appear. Sometimes stocks do not rise 10% annually. Fortunately, you have more than one year in which to plan for retirement (and other goals). Your long-run retirement saving and investing approach – aided by compounding – matters more than what the market does during a particular 12 months. Dramatically altering your investment strategy in reaction to present conditions can backfire.

Equating the economy with the market. They are not one and the same. Moreover, some investments and market sectors can do well or show promise when the economy goes through a rough stretch.

Focusing more on money than on the overall quality of life. Managing investments – or the entirety of a very complex financial life – on your own takes time. More time than many people want to devote; more time than many people initially assume. That kind of time investment can subtract from your quality of life – another reason to turn to other resources for help and insight.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – cnbc.com/2019/03/18/how-much-to-save-for-emergencies-comes-down-to-income-spending-habits.html [3/18/19]

The post Why DIY Investment Management Is Such a Risk appeared first on KC Financial Advisors .

Retirement Wellness

Mon, 23 Sep 2019 20:03:00 GMT

Staying healthy could save you some money.

How healthy a retirement do you think you will have? If you can stay active as a senior and curb or avoid certain habits, you could potentially reduce one type of retirement expense. Each year, Fidelity Investments presents an analysis of retiree health care costs. In 2019, Fidelity projected that the average 65-year-old couple would spend around $285,000 on health care during retirement, including about $11,000 in the first year. Both projections took Medicare benefits into account. ^1,2

Could healthy behaviors help you save retirement dollars? Maybe. From another point of view, ceasing unhealthy habits certainly would. For example, the average pack of cigarettes now costs $6.28, according to the Centers for Disease Control. That adds up to $2,292 annually. A decade of pack-a-day smoking therefore projects to $22,920 in expenses (and that does not even consider inflation or the possibility of new state or local cigarette taxes). If you could invest $2,292 a year for 20 years and realize a 7% annual return on that money, your sustained investment would grow to more than $100,000.

Think about joining a senior wellness program. Some communities offer classes developed through the National Council on Aging’s Center for Healthy Aging. (NCOA is a nonprofit senior advocacy organization founded in the 1950s.) These physical activity programs are evidence based; the exercise curriculum has been shown to provide discernible health benefits to their participants. Often, they are low cost or free and low impact as well. ³

Be sure to use your Medicare benefits. Medicare entitles you to an annual free wellness visit with a primary care physician. In this visit, you can have your blood pressure, weight, and overall health checked, and the doctor can also run a check for the possibility of dementia. You can also get free screening for diabetes, certain kinds of cancers, hepatitis B and C, and heart disease under Medicare if your physician classifies you as “at risk” for these conditions. Medicare may even pick up the tab for smoking cessation counseling and obesity counseling for certain people. ⁴ If you stay fairly healthy well into your retirement, there could be a nice financial side effect: an exemption, for the present, from expenses that some of your peers could be dealing with.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – cnbc.com/2019/04/02/health-care-costs-for-retirees-climb-to-285000.html [4/2/19]

2 – fidelity.com/mymoneylifestyle/healthcare/hc-ret.html [9/4/19]

3 – ncoa.org/center-for-healthy-aging/basics-of-evidence-based-programs/physical-activity-programs-for-older-adults [9/10/19]

4 – tinyurl.com/y3fmq9bf [8/24/19]

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Your Extended Care Strategy

Mon, 16 Sep 2019 14:43:00 GMT

Are you prepared for the possibility – and expense – of eldercare?

Do you have an extra $33,000 to $100,000 to spare this year? How about next year, and the year after that? Your answer to these questions is probably “no.”

What could possibly cost so much? Eldercare. According to the AARP Public Policy Institute, a year of in-home care for a senior costs roughly $33,000. A year at an assisted living facility? About $45,000. A year in a nursing home? Approximately $100,000. ¹

Medicare has limitations. Generally speaking, it will pay for no more than 35 hours per week of home health care and only up to 100 days of nursing home care, following a hospitalization. It may pay for up to six months of hospice care. If you or someone you love happens to develop Alzheimer’s disease or another form of dementia, Medicare will not pay for any degree of room and board for them at an assisted living facility. ² Medicaid is another resource entirely. For seniors who are eligible, Medicaid can pick up assisted living facility or nursing home expenses, and even in-home eldercare, in some instances. Qualifying for Medicaid is the hard part. Normally, you only qualify for it when you have spent down your assets to the point where you can no longer pay for eldercare out of pocket or with insurance. ²

An extended care strategy may factor into a thoughtful retirement strategy. After all, your retirement may be lengthy, and you may need such care. The Social Security Administration projects that a quarter of today’s 65-year-olds will live past age 90, with a tenth making it to age 100. ¹ Insurance companies have modified extended care policies over the years. Some have chosen to bundle extended care features into other policies, which can make the product more accessible. An insurance professional familiar with industry trends may be able to provide you more information about policies and policy choices.

Waiting for federal or state lawmakers to pass a new program to help with the costs of eldercare is not much of a strategy. It is up to you, the individual, to determine how to face this potential financial challenge. ² If you lead a healthy and active life, you may need such care only at the very end. Assuming you do require it at some point, you may consider living in an area where you can join a continuing-care-at-home program (there are currently more than 30 of these, essentially operating as remote care programs of assisted living communities) or a “village network” that offers you some in-home help (not skilled nursing care, however). ¹

Those rare and nice options aside, retirement saving also needs to be about saving for potential extended care expenses. If insurance addressing extended care is not easy to obtain, then a Health Savings Account (HSA) might be an option. These accounts have emerged as another solution to extended care needs. An HSA is not a form of insurance, but it does provide a tax-advantaged savings account to which you (and potentially, your employer) can make contributions. You can use these funds to pay for most medical expenses, including prescription drugs, dental care, and vision care. You can look into this choice right away, to take advantage of savings over time. ³

Once you reach age 65, you are required to stop making contributions to an HSA. Remember, if you withdraw money from your HSA for a nonmedical reason, that money becomes taxable income, and you face an additional 20% penalty. After age 65, you can take money out without the 20% penalty, but it still becomes taxable income. ³ An HSA works a bit like your workplace retirement account. Your employer can make contributions alongside you. However, the money that you contribute comes from your pretax income and can be invested for you over time, so it may grow as your contributions accumulate. ³

There are also some HSA rules and limitations to consider. You are limited to a $3,500 contribution for 2019, if you are single; $7,000, if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55. Your employer can contribute, but the ceiling is cumulative between your contributions and theirs. For example, say you are lucky enough to have your employer put a hypothetical $1,000 into your account in 2019; you may only contribute as much as the rest of your limit, minus that $1,000. If you go over that limit, you will incur a 6% tax penalty, so it is smart to watch how much you contribute. ³ Alternately, you could do without an HSA and simply earmark a portion of your retirement savings for possible extended care costs. One thing is for certain: any retiree or retirement saver needs to keep the possibility of extended care expenses in mind. Today is not too soon to explore the financial options to try and meet this challenge.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – marketwatch.com/story/long-term-care-insurance-has-a-shaky-future-here-are-new-ways-to-tackle-the-high-cost-of-aging-2019-05-22 [8/4/19]

2 – health.usnews.com/health-care/patient-advice/articles/dementia-care-in-assisted-living-homes [8/21/19]

3 – investors.com/etfs-and-funds/personal-finance/hsa-contribution-limits-hsa-rules/ [3/13/19]

The post Your Extended Care Strategy appeared first on KC Financial Advisors .

Your Changing Definition of Risk in Retirement

Mon, 09 Sep 2019 14:06:00 GMT

Some things to consider.

During your accumulation years, you may have categorized your risk as “conservative,” “moderate,” or “aggressive,” and that guided how your portfolio was built. Maybe you concerned yourself with finding the “best-performing funds,” even though you knew past performance does not guarantee future results. What occurs with many retirees is a change in mindset – it’s less about finding the “best-performing fund” and more about consistent performance. It may be less about a risk continuum – that stretches from conservative to aggressive – and more about balancing the objectives of maximizing your income and sustaining it for a lifetime. You may even find yourself willing to forgo return potential for steady income. A change in your mindset may drive changes in how you shape your portfolio and the investments you choose to fill it. Let’s examine how this might look at an individual level.

Still Believe. During your working years, you understood the short-term volatility of the stock market, but accepted it for its growth potential over longer time periods. You’re now in retirement and still believe in that concept. In fact, you know stocks remain important to your financial strategy over a 30-year or more retirement period. But you’ve also come to understand that withdrawals from your investment portfolio have the potential to accelerate the depletion of your assets when investment values are declining. How you define your risk tolerance may not have changed, but you understand the new risks introduced by retirement. Consequently, it’s not so much about managing your exposure to stocks but considering new strategies that adapt to this new landscape. Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. This is a hypothetical example used for illustrative purposes only.

Shift the Risk. For instance, it may mean that you hold more cash than you ever did when you were earning a paycheck. It also may mean that you consider investments that shift the risk of market uncertainty to another party, such as an insurance company. Many retirees choose annuities for just that reason. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contract. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies). ¹ The march of time affords us ever-changing perspectives on life, and that is never truer than during retirement.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – forbes.com/sites/forbesfinancecouncil/2019/05/09/understanding-financial-risk-why-you-shouldnt-just-focus-on-the-probability-of-success [5/7/19]

The post Your Changing Definition of Risk in Retirement appeared first on KC Financial Advisors .

Why Having a Financial Professional Matters

Tue, 03 Sep 2019 14:21:00 GMT

A good professional provides important guidance and insight through the years .

What kind of role can a financial professional play for an investor? The answer: a very important one. While the value of such a relationship is hard to quantify, the intangible benefits may be significant and long-lasting. There are certain investors who turn to a financial professional with one goal in mind: the “alpha” objective of beating the market, quarter after quarter. Even Wall Street money managers fail at that task – and they fail routinely. At some point, these investors realize that their financial professional has no control over what happens in the market. They come to understand the real value of the relationship, which is about strategy, coaching, and understanding . A good financial professional can help an investor interpret today’s financial climate, determine objectives, and assess progress toward those goals. Alone, an investor may be challenged to do any of this effectively. Moreover, an uncoached investor may make self-defeating decisions. Today’s steady stream of instant information can prompt emotional behavior and blunders.

No investor is infallible. Investors can feel that way during a great market year, when every decision seems to work out well. Overconfidence can set in, and the reality that the market has occasional bad years can be forgotten. This is when irrational exuberance creeps in. A sudden Wall Street shock may lead an investor to sell low today, buy high tomorrow, and attempt to time the market. Market timing may be a factor in the following divergence: according to investment research firm DALBAR, U.S. stocks gained 10% a year on average from 1988-2018, yet the average equity investor’s portfolio returned just 4.1% annually in that period. ¹

A good financial professional helps an investor commit to staying on track. Through subtle or overt coaching, the investor learns to take short-term ups and downs in stride and focus on the long term. A strategy is put in place, based on a defined investment policy and target asset allocations with an eye on major financial goals. The client’s best interest is paramount. As the investor-professional relationship unfolds, the investor begins to notice the intangible ways the professional provides value. Insight and knowledge inform investment selection and portfolio construction. The professional explains the subtleties of investment classes and how potential risk often relates to potential reward.

Perhaps most importantly, the professional helps the client get past the “noise” and “buzz” of the financial markets to see what is really important to his or her financial life. The investor gains a new level of understanding, a context for all the investing and saving. The effort to build wealth and retire well is not merely focused on “success,” but also on significance. This is the value a financial professional brings to the table. You cannot quantify it in dollar terms, but you can certainly appreciate it over time.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – cnbc.com/2019/07/31/youre-making-big-financial-mistakes-and-its-your-brains-fault.html [7/31/2019]

The post Why Having a Financial Professional Matters appeared first on KC Financial Advisors .

Your Diversified Portfolio vs. the S&P 500

Wed, 21 Aug 2019 14:05:00 GMT

How global returns and proper diversification are affecting overall returns.

“Why is my portfolio underperforming the market?” This question may be on your mind. It is a question that investors sometimes ask after stocks shatter records or return exceptionally well in a quarter. The short answer is that even when Wall Street rallies, international markets and intermediate and long-term bonds may underperform and exert a drag on overall portfolio performance. A little elaboration will help explain things further.

A diversified portfolio necessarily includes a range of asset classes. This will always be the case, and while investors may wish for an all-equities portfolio when stocks are surging, a 100% stock allocation is obviously fraught with risk. Because the stock market has advanced so much over the past decade, some investors now have larger positions in equities than they originally planned, and that may leave them exposed to an uncomfortable degree of market risk. A portfolio held evenly in equities and fixed income ten years ago may now have a clear majority of its assets in equities, with the performance of stock markets influencing its return to a greater degree. ¹ Yes, stock markets – not just here, but abroad. U.S. investors have more global exposure than they once did. International holdings represented about 5% of the typical investor’s portfolio back in the 1990s. Today, they account for around 15%. If overseas markets struggle, the impact on portfolio performance may be noticeable. ²

In addition, a sudden change in sector performance can have an impact. At one point in 2018, tech stocks accounted for 25% of the weight of the S&P 500. While the recent restructuring of S&P sectors lowered that by a few percentage points, portfolios can still be greatly affected when tech shares slide, as investors witnessed in late 2018. The state of the fixed-income market can also potentially impact portfolio performance. Bond prices commonly fall when interest rates rise, which presents a short-term concern for an investor. If a bond is held to maturity, though, the investor will receive the promised principal and interest (assuming no default on the part of the issuer). Moreover, a rising interest rate environment may help the fixed-income segment of the portfolio’s long-term performance. New bonds issued in a rising interest rate environment have the potential to generate more yield than the older bonds of similar duration that they replace. ⁴

This year, U.S. stocks have done well. A portfolio 100% invested in the U.S. stock market in 2019 would have a year-to-date return approximating that of the S&P 500. But who invests entirely in stocks, let alone without any exposure to international and emerging markets? ⁵ Just as an illustration, assume that there actually is a hypothetical investor this year who is 100% invested in equities, as follows: 50% domestic, 35% developed foreign markets, and 15% emerging markets. In this illustration, the S&P 500 will serve as the model for the U.S. market, MSCI’s EAFE index will stand in for developed foreign markets, and MSCI’s Emerging Markets index will represent the emerging markets. Through the end of July, the S&P was +18.89% year-to-date, the EAFE +10.31% YTD, and the Emerging Markets just +7.38% YTD. As foreign and domestic stocks have equal weight in this hypothetical portfolio, it is easy to see that its overall YTD gain would have been less than 18.9% as of the July 31 closing bell. ^6,7

Your portfolio is not the market – and vice versa. Your investments may return less than the S&P 500 (or another benchmark) in a particular year due to various factors, including the behavior of the investment markets. Those markets are ever-changing. In some years, you may get a double-digit return. In other years, your return may be much smaller. When your portfolio is diversified across asset classes, the highs may not be so high – but the lows may not be so low, either. If things turn volatile, diversification may help insulate you from some of the ups and downs that come with investing.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – money.com/money/5481891/this-is-how-much-money-you-should-have-in-stocks-at-every-age/ [12/18/18]

2 – forbes.com/sites/simonmoore/2018/08/05/how-most-investors-get-their-international-stock-exposure-wrong/ [8/5/18]

3 – cnbc.com/2018/04/20/tech-dominates-the-sp-500-but-thats-not-always-a-bad-omen.html [4/20/18]

4 – fidelity.com/viewpoints/investing-ideas/fed-rate-hike-worries [4/23/19]

5 – investopedia.com/ask/answers/12/beating-the-market.asp [6/25/19]

6 – us.spindices.com/indices/equity/sp-500 [7/31/19]

7 – msci.com/end-of-day-data-search [7/31/19]

The post Your Diversified Portfolio vs. the S&P 500 appeared first on KC Financial Advisors .

A Bucket Plan To Go With Your Bucket List

Mon, 12 Aug 2019 15:39:00 GMT

A way to help you prepare.

The baby boomers redefined everything they touched, from music to marriage to parenting and even what “old” means – 60 is the new 50! Longer, healthier living, however, can put greater stress on the sustainability of retirement assets. There is no easy answer to this challenge, but let’s begin by discussing one idea – a bucket approach to building your retirement income plan. The Bucket Strategy can take two forms.

The Expenses Bucket Strategy: With this approach, you segment your retirement expenses into three buckets:

* Basic Living Expenses – food, rent, utilities, etc.

* Discretionary Expenses – vacations, dining out, etc.

* Legacy Expenses – assets for heirs and charities

This strategy pairs appropriate investments to each bucket. For instance, Social Security might be assigned to the Basic Living Expenses bucket. If this source of income falls short, you might consider whether a fixed annuity can help fill the gap. With this approach, you are attempting to match income sources to essential expenses.1

The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies).

For the Discretionary Expenses bucket, you might consider investing in top-rated bonds and large-cap stocks that offer the potential for growth and have a long-term history of paying a steady dividend. The market value of a bond will fluctuate with changes in interest rates. As rates fall, the value of existing bonds typically drop. If an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. By holding a bond to maturity an investor will receive the interest payments due, plus their original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk. Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Dividends on common stock are not fixed and can be decreased or eliminated on short notice.

Finally, if you have assets you expect to pass on, you might position some of them in more aggressive investments, such as small-cap stocks and international equity. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risk unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

The Timeframe Bucket Strategy: This approach creates buckets based on different timeframes and assigns investments to each. For example:

* 1 to 5 Years: This bucket funds your near-term expenses. It may be filled with cash and cash alternatives, such as money market accounts. Money market funds are considered low-risk securities but they are not backed by any government institution, so it’s possible to lose money. Money held in money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund. Money market mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

* 6 to 10 Years: This bucket is designed to help replenish the funds in the 1-to-5-Years bucket. Investments might include a diversified, intermediate, top-rated bond portfolio. Diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline.

* 11 to 20 Years: This bucket may be filled with investments such as large-cap stocks, which offer the potential for growth.

* 21 or More Years: This bucket might include longer-term investments, such as small-cap and international stocks.

Each bucket is set up to be replenished by the next longer-term bucket. This approach can offer flexibility to provide replenishment at more opportune times. For example, if stock prices move higher, you might consider replenishing the 6-to-10-Years bucket, even though it’s not quite time. A bucket approach to pursue your income needs is not the only way to build an income strategy, but it’s one strategy to consider as you prepare for retirement.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – webaddress.com [00/00/0000]

The post A Bucket Plan To Go With Your Bucket List appeared first on KC Financial Advisors .

The Financial Realities of Longevity

Thu, 01 Aug 2019 15:18:00 GMT

Your financial future is up to you and no one else .

What will be your future? You know that solid retirement strategy takes your time horizon, an often unpredictable factor, into consideration. Your thinking must include an awareness of how long you must save for and what sort of expenditures may be ahead. The most recent findings from the Centers for Disease Control and Prevention indicate that the average American male lives to age 76, while a female may live to 81. The numbers also take the quality of life into account, putting male and female Americans at “full health” for 67 and 70 years, respectively. ¹

What do these numbers tell us? Women live longer, for one. Based on your age and the age of your spouse, you can make estimates; you may live longer or less, but averages offer us a window that can be used to plot that retirement strategy. One reality unnoticed in these numbers is that some women may live on their own for many years; if a woman has spent many years as part of a household, living alone shifts the responsibility from two people to one, removing any extra income their partner or spouse contributed. According to the Social Security Administration, single women aged 65 and up (including both the unmarried and the widowed) rely on Social Security payments for 45% of their total income. This compares to 33% for single men of a similar age and 28% for the married couples in that bracket. ²

What does that come to in dollars and cents, per year? The most recent tally, based on a 2018 fact sheet, is $13,891. (Men: $17,663.) These are today’s numbers, but they underscore the importance for a retirement strategy that looks at your specific needs and goals – an approach that considers your future health expenses, your day-to-day expenses, as well as the things you want to do for enjoyment in retirement (travel, pastimes, family experiences, and more). ^2,3

How do you create a strategy that can adapt to life’s events? While your future may be unknown, working closely with your advisor may help you to create an approach that’s based on your unique goals, risk tolerance and take into account your ever-changing time horizon. Follow up by meeting with a financial professional who can help you put a strategy into action.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – npr.org/sections/health-shots/2018/12/27/633979867/patients-are-turning-to-gofundme-to-fill-health-insurance-gaps [12/27/18]

2 – usatoday.com/story/opinion/voices/2019/06/02/health-care-insurance-driving-americans-bankruptcy-column/1276207001/ [6/2/19]

The post The Financial Realities of Longevity appeared first on KC Financial Advisors .

The High Cost of Health Care

Fri, 19 Jul 2019 13:44:00 GMT

A financial strategy can take health care costs into account.

One of the most ubiquitous aspects of social media in recent years has been the arrival of Americans crowdfunding around a major health issue. While America has a level of health care available that rivals the rest of the world, there is no denying that some treatments can be notably expensive. GoFundMe, a crowdfunding website, has raised over $5 billion since 2010; their CEO, Rob Solomon, says that a third of their campaigns fund health care costs and that this category gets more donations than any other.

You may know someone who has been forced to seek out the generosity of their own network in order to cover the costs of health care, medicine, or treatments. It may put you in mind of your own immediate or extended family and how you or they might deal with such a situation.

Coverage may not cover everything. Sophia Nelson runs a business, has authored books, and describes herself as “doing well.” But in a recent piece in USA TODAY she revealed, “[My] medical emergency devastated me financially. Unable to work as hard as I was used to […] I had to start over in my mid-40s. It took me five years just to recover.” The idea of “doing well” is subjective, but it doesn’t take much to imagine a health crisis taking a major bite out of anyone’s savings, or worse yet, wiping them out entirely.

It’s a common fear. A 2019 Gallup poll on the subject revealed that 46% of Americans believe that they won’t be able to afford their health care. If you or someone you know skipped treatment due to cost, they join a full quarter of Gallup’s respondents who did the same. Perhaps the biggest takeaway is that everyone seems to have health care costs on their mind; a third of respondents earning $180,000 or more per year have concerns about a health issue leading to a bankruptcy.

What do you do? When mapping out your financial strategy, it’s perfectly sensible to make allowances for health issues, including your insurance coverage, health savings accounts, and other ways for your family to meet those concerns, head on.

It’s easy to be afraid, but you’re also probably considering a strategy. While it’s not possible to plan for every contingency, if the concern is facing a financial issue, talking to a financial professional may help you allay some of those fears.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – npr.org/sections/health-shots/2018/12/27/633979867/patients-are-turning-to-gofundme-to-fill-health-insurance-gaps [12/27/18]
2 – usatoday.com/story/opinion/voices/2019/06/02/health-care-insurance-driving-americans-bankruptcy-column/1276207001/ [6/2/19]
[5/24/2019]

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Smart Financial Moves in Your 20s, 30s, 40s, & 50s

Wed, 03 Jul 2019 18:51:00 GMT

The right moves for every age.

Have you ever mapped out your financial timeline? If you’re like many Americans, it may have been more difficult than anticipated. One of the most helpful ways to achieve your financial goals is to break it down by your age. After all, depending where you are on life’s journey, certain financial moves make more sense than others. Read on to learn more.

What might you want to do in your twenties? First and foremost, you should start saving for retirement – preferably using tax-advantaged retirement accounts that let you direct money into equities. Through equity investing, your money may grow and compound profoundly with time – and you have time on your side.

Aside from equity investment, you will want to try and build your savings. A good place to start is an emergency fund equal to six months of your salary. That may seem unnecessarily large, but it is worth pursuing, especially if you have loved ones depending on you. Accidents do happen, and you could suffer an illness or injury that might prevent you from earning income. About 25% of people will contend with such an episode during their working lives, and less than 5% of disabling illnesses and accidents are job related, so workers compensation insurance will not cover them. ¹

What moves make sense in your thirties? By now, you may have started a family or taken on other financial responsibilities. So, your spending has probably increased from the days when you were single. As you save and invest, remember also to play a little defense.

Many people in their thirties use this time to create a will and set up financial power of attorney in case something unforeseen happens. Another smart move is securing a solid life insurance policy. Depending on the policy that’s right for you, you may even be able to use your policy as an investment vehicle. As always, speak with a financial or insurance professional to make sure you have the coverage that’s right for you.

What considerations emerge between 40 and 50? Try to maintain your retirement planning efforts in the face of financial stressors. You may have teens or preteens at home, and if you have not yet considered creating a college fund that can grow and compound over time, now is the right time. You should not dip into your retirement fund to pay for their college educations, no matter how onerous college loans may seem.

You may want to look into long-term care insurance. Buying it before age 50, when you are likely in good health, is a wise move, especially if you are interested in such coverage.

Between 50 and 60, you are in the “red zone” before retirement. If you can, accelerate your retirement savings through greater contribution levels or take advantage of the catch-up contributions allowed for many retirement accounts after age 50. If possible, think about an approximate retirement date. Aim to reduce your debt as much as possible by that time or earlier. Retiring with multiple, major debts can be stressful, to say the least. Lastly, check in with a financial professional to gauge how close you are to realizing your long-term financial objectives.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – https://www.cdc.gov/media/releases/2018/p0816-disability.html [5/24/2019]

The post Smart Financial Moves in Your 20s, 30s, 40s, & 50s appeared first on KC Financial Advisors .

Your Emergency Fund: How Much is Enough?

Mon, 04 Feb 2019 17:00:00 GMT

An emergency fund may help alleviate the stress associated with a financial crisis.

Have you ever had one of those months? The water heater stops heating, the dishwasher stops washing, and your family ends up on a first-name basis with the nurse at urgent care. Then, as you’re driving to work, giving yourself your best, “You can make it!” pep talk, you see smoke seeping out from under your hood.

Bad things happen to the best of us, and instead of conveniently spacing themselves out, they almost always come in waves. The important thing is to have a financial life preserver, in the form of an emergency cash fund, at the ready.

Although many people agree that an emergency fund is an important resource, they’re not sure how much to save or where to keep the money. Others wonder how they can find any extra cash to sock away. One recent survey found that 29% of Americans lack any emergency savings whatsoever.1

How Much Money? When starting an emergency fund, you’ll want to set a target amount. But how much is enough? Unfortunately, there is no “one-size-fits-all” answer. The ideal amount for your emergency fund may depend on your financial situation and lifestyle. For example, if you own your home or provide for a number of dependents, you may be more likely to face financial emergencies. And if the crisis you face is a job loss or injury that affects your income, you may need to depend on your emergency fund for an extended period of time.

Coming Up with Cash. If saving several months of income seems an unreasonable goal, don’t despair. Start with a more modest target, such as saving $1,000. Build your savings at regular intervals, a bit at a time. It may help to treat the transaction like a bill you pay each month. Consider setting up an automatic monthly transfer to make self-discipline a matter of course. You may want to consider paying off any credit card debt before you begin saving.

Once you see your savings begin to build, you may be tempted to use the account for something other than an emergency. Try to budget and prepare separately for bigger expenses you know are coming. Keep your emergency money separate from your checking account so that it’s harder to dip into.

Where Do I Put It? An emergency fund should be easily accessible, which is why many people choose traditional bank savings accounts. Savings accounts typically offer modest rates of return. Certificates of Deposit may provide slightly higher returns than savings accounts, but your money will be locked away until the CD matures, which could be several months to several years.

The Federal Deposit Insurance Corporation insures bank accounts and certificates of deposit (CDs) up to $250,000 per depositor, per institution in principal and interest. CDs are time deposits offered by banks, thrift institutions, and credit unions. CDs offer a slightly higher return than a traditional bank savings account, but they also may require a higher amount of deposit. If you sell before the CD reaches maturity, you may be subject to penalties.2

Some individuals turn to money market accounts for their emergency savings. Money market funds are considered low-risk securities, but they’re not backed by the federal government like CDs, so it is possible to lose money. Depending on your particular goals and the amount you have saved, some combination of lower-risk investments may be your best choice.2

Money held in money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund. Money market mutual funds are sold by prospectus.2

Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

The only thing you can know about unexpected expenses is that they’re coming – for everyone. But having an emergency fund may help alleviate the stress and worry associated with a financial crisis. If your emergency savings are not where they should be, consider taking steps today to create a cushion for the future.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – cnbc.com/2018/07/02/about-55-million-americans-have-no-emergency-savings.html [7/6/18]
2 – investor.vanguard.com/investing/cash-investments [12/13/18]

The post Your Emergency Fund: How Much is Enough? appeared first on KC Financial Advisors .

When a Family Member Dies

Fri, 21 Dec 2018 19:22:00 GMT

A financial checklist for the most difficult of times.

The passing of a loved one irrevocably alters family life. After a death, there is so much to attend to; it is better to do it sooner rather than later. Here, then, is a list of what commonly needs to be looked after.

Request copies of the death certificate. Depending on where you live, you have two or three places to turn to for this document. You can phone, email, or personally visit the office of the county recorder (or county clerk, as the term may be). Alternately, you can contact your state’s vital records department (sometimes called the state registrar or department of health); it may take a little longer to get the document this way. In addition, some large and mid-sized cities maintain their own registrars of births and deaths.

Call advisors, executors, & business partners as applicable. The deceased’s lawyer and CPA should be quickly notified along with any business partners and the executor of his or her estate. You must have a say in the decision-making. The tasks of protecting family assets, carrying out your loved one’s bequests, and determining the next steps for a business will follow.

Call your loved one’s current or former employer(s). Notify them, even if your loved one left the workforce years ago, as retirement savings or pension payments may be involved. As the conversation develops, it is perfectly appropriate to ask about pertinent financial matters – say, 401(k) or 403(b) savings that will be inherited by a beneficiary or what will happen to unused vacation time and/or unpaid bonuses.

Funds amassed in a qualified retirement plan sponsored by an employer (or an IRA, for that matter) commonly go to the primary beneficiary who has been named on the most recent beneficiary form filled out by the account owner. That sounds simple enough – but certain rules and regulations can make things complicated.1
As a general rule, if the late 401(k) or 403(b) account owner was your spouse, then you are the presumed beneficiary of the 401(k) or 403(b) assets. Under the Employee Retirement Income Security Act (ERISA), workplace retirement plans are directed to abide by this guideline. If someone else has been named as the primary beneficiary of the account, with your consent, then the assets will go to that person.2

If the late 401(k) or 403(b) account owner was single, the assets in the account will go to whomever is designated as the primary beneficiary. The beneficiary designation will override other estate planning documents.3

To arrange and confirm the transfer or distribution of such assets, the beneficiary form must be found. If you can’t locate it, the employer and/or the financial firm overseeing the retirement plan should provide access to a copy. The financial firm should ask you to supply:

*A certified copy of the account owner’s death certificate
*A notarized affidavit of domicile (a document certifying his or her place of residence at the time of death)
If you have been widowed, call Social Security. If you already receive benefits, you may now be eligible for greater benefits.4

If your spouse received Social Security and you did not, you may now qualify for survivor benefits – and you should let Social Security know as soon as possible, as these benefits may be paid out relative to your application date rather than the date of your loved one’s death.4

If this is the case, you may apply for survivor benefits by phone or by visiting a Social Security office. You will need to have some extensive paperwork on hand, specifically:

*Proof of the death (death certificate, funeral home documentation)
*Your late spouse’s Social Security number
*His/her most recent W-2 forms or federal self-employment tax return
*Your own Social Security number & birth certificate
*Social Security numbers & birth certificates of any dependent children
*Your marriage certificate, if you have been widowed
*The name of your bank & the number of your bank account, for direct deposit purposes
If you have reached full retirement age, you will likely get 100% of the basic benefit amount that your late spouse was receiving. If you are in your sixties, but haven’t yet reached full retirement age, you may receive anywhere from 71% to 99% of that amount. If you have a child younger than 16, you will get 75% of your late spouse’s basic benefit amount and so will your child.4,5

Contact the insurance company. Assuming your loved one had some form of life insurance, contact the policyholder services department of that insurer and confirm the steps for claiming the death benefit. A claim form will have to be filled out, signed, and presented to the insurance company (one for each named adult beneficiary of the policy), and a certified copy of the death certificate must also be sent. If the primary beneficiary of a policy is deceased, the contingent beneficiary can usually claim the death benefit with a claim form, plus the death certificates of the policy owner and the primary beneficiary. Some insurers simply have you submit a form reporting the death of the policyholder first, and then follow up by mailing you forms and instructions for the next steps.6

Death benefits are generally paid out within 30 to 60 days of a claim. Presumably, they will be paid out in a lump sum. Some insurers will let a beneficiary receive a payout as a stream of monthly income or in installments.7

It isn’t unusual for people to own multiple life insurance policies. The AARP, AAA, and myriad banks and non-profits market group life coverage to members/customers, and mortgage lenders and credit issuers offer forms of life insurance for borrowers. Tracking all this coverage down is the problem, and canceled checks and bank records don’t always provide ready clues. Not surprisingly, websites have appeared that will help you search for life insurance policies, and you may be able to locate policies with the help of your state insurance commissioner’s office.8

If the family member was a veteran, call the VA. Your family may be entitled to funeral and burial benefits. In addition, the Veterans Administration offers Death Pensions and Aid & Attendance and Housebound Pensions to lower-income widows of deceased wartime veterans and their unmarried children.9

These pensions are needs based. To be eligible for the Death Pension, a widow or child’s “countable” income must fall below a certain yearly limit set by Congress. (A “child” as old as 22 may be eligible for the Death Pension.) The deceased veteran must not have received a dishonorable discharge, and they must have served 90 or more days of active duty, at least 1 day of it during wartime. If they entered active duty after September 7, 1980, then in most cases, 24 months or more of active duty service are necessary for a Death Pension to eventually be paid. The Aid & Attendance and Housebound Pensions provide some recurring income to pay for licensed home health aide or homemaker services.9

It is wise to contact a Veterans Services Officer before you file such a pension claim, as they can be a big help during the process. You can find a VSO through your state veterans’ affairs department or through the VFW, the Order of the Purple Heart, the American Legion, or the non-profit National Veterans Foundation.9

A final individual income tax return may be required for the deceased. You or your tax professional should consult I.R.S. Publication 17 for more detail. Also, search for “Topic 356 – Decedents” on the I.R.S. website. Deductible expenses paid by the deceased before death can generally be claimed as deductions on such a return.10

If you have been widowed, consider the future. In the coming days or weeks, you should arrange a meeting to review your retirement planning strategy, and your will, beneficiary designations, and estate plan may also need to be updated. The passing of your spouse may necessitate a new executor for your own estate. Any durable powers of attorney may also need to be revised.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – thebalance.com/review-401-k-plan-beneficiary-designations-2894174 [11/4/18]
2 – nolo.com/legal-encyclopedia/if-you-don-t-want-leave-retirement-accounts-your-spouse.html [12/10/18]
3 – cnbc.com/2018/04/16/out-of-date-beneficiary-designations-are-a-common-and-costly-mistake.html [4/16/18]
4 – thebalance.com/social-security-survivor-benefits-for-a-spouse-2388918 [10/28/18]
5 – ssa.gov/planners/survivors/onyourown.html [12/11/18]
6 – nolo.com/legal-encyclopedia/beneficiaries-claim-life-insurance-32433.html [12/11/18]
7 – investopedia.com/articles/personal-finance/121914/life-insurance-policies-how-payouts-work.asp [12/4/18]
8 – thebalance.com/finding-a-lost-life-insurance-policy-4066234 [4/15/18]
9 – nvf.org/pensions-for-survivors-of-deceased-wartime-veterans/ [2018]
10 – irs.gov/taxtopics/tc356.html [1/18/18]

The post When a Family Member Dies appeared first on KC Financial Advisors .

The Case for Women Working Past 65

Tue, 19 Jun 2018 17:53:00 GMT

Why striving to stay in the workforce a little longer may make financial sense.

The median retirement age for an American woman is 62. The Federal Reserve says so in its most recent Survey of Household Economics and Decisionmaking (2017). Sixty-two, of course, is the age when seniors first become eligible for Social Security retirement benefits. This factoid seems to convey a message: a fair amount of American women are retiring and claiming Social Security as soon as they can. ¹

What if more women worked into their mid-sixties? Could that benefit them, financially? While health issues and caregiving demands sometimes force women to retire early, it appears many women are willing to stay on the job longer. Fifty-three percent of the women surveyed in a new Transamerica Center for Retirement Studies poll on retirement said that they planned to work past age 65. ²

Staying in the workforce longer may improve a woman’s retirement prospects. If that seems paradoxical, consider the following positives that could result from working past 65.

More years at work leaves fewer years of retirement to fund. Many women are worried about whether they have saved enough for the future. Two or three more years of income from work means two or three years of not having to draw down retirement savings.

Retirement accounts have additional time to grow and compound. Tax-deferred compounding is one of the greatest components of wealth building. The longer a tax-deferred retirement account has existed, the more compounding counts.

Suppose a woman directs $500 a month into such a tax-favored account for decades, with the investments returning 7% a year. For simplicity’s sake, we will say that she starts with an initial contribution of $1,000 at age 25. Thirty-seven years later, she is 62 years old, and that retirement account contains $974,278. ³

If she lets it grow and compound for just one more year, she is looking at $1,048,445. Two more years? $1,127,837. If she retires at age 65 after 40 years of contributions and compounded annual growth, the account will contain $1,212,785. By waiting just three years longer, she leaves work with a retirement account that is 24.4% larger than it was when she was 62. ³

A longer career also offers a chance to improve Social Security benefit calculations. Social Security figures retirement benefits according to a formula. The prime factor in that formula is a worker’s average indexed monthly earnings, or AIME. AIME is calculated based on that worker’s 35 highest-earning years. But what if a woman stays in the workforce for less than 35 years? ⁴

Some women interrupt their careers to raise children or care for family members or relatives. This is certainly work, but it does not factor into the AIME calculation. If a woman’s work record shows fewer than 35 years of taxable income, years without taxable income are counted as zeros. So, if a woman has only earned taxable income in 29 years of her life, six zero-income years are included in the AIME calculation, thereby dragging down the AIME. By staying at the office longer, a woman can replace one or more of those zeros with one or more years of taxable income. ⁴

In addition, waiting to claim Social Security benefits after age 62 also results in larger monthly Social Security payments. A woman’s monthly Social Security benefit will grow by approximately 8% for each year she delays filing for her own retirement benefits. This applies until age 70. ⁴

Working longer might help a woman address major retirement concerns. It is an option worth considering, and its potential financial benefits are worth exploring.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – dqydj.com/average-retirement-age-in-the-united-states/ [6/11/18]

2 – thestreet.com/retirement/18-facts-about-womens-retirement-14558073 [4/17/18]

3 – investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator [6/14/18]

4 – fool.com/retirement/social-securitys-aime-what-is-it.aspx [6/9/18]

The post The Case for Women Working Past 65 appeared first on KC Financial Advisors .

Managing Money Well as a Couple

Wed, 23 May 2018 21:55:00 GMT

What are the keys in planning to grow wealthy together?

When you marry or simply share a household with someone, your financial life changes – and your approach to managing your money may change as well. To succeed as a couple, you may also have to succeed financially. The good news is that is usually not so difficult.

At some point, you will have to ask yourselves some money questions – questions that pertain not only to your shared finances, but also to your individual finances. Waiting too long to ask (or answer) those questions might carry an emotional price. In the 2017 TD Bank Love & Money survey consumers who said they were in relationships, 68% of couples who described themselves as “unhappy” indicated that they did not have a monthly conversation about money.1
First off, how will you make your money grow? Simply saving money will help you build an emergency fund, but unless you save an extraordinary amount of cash, your uninvested savings will not fund your retirement. Should you hold any joint investment accounts or some jointly titled assets? One of you may like to assume more risk than the other; spouses often have different individual investment preferences.

How you invest, together or separately, is less important than your commitment to investing. Some couples focus only on avoiding financial risk – to them, maintaining the status quo and not losing any money equals financial success. They could be setting themselves up for financial failure decades from now by rejecting investing and retirement planning.

An ongoing relationship with a financial professional may enhance your knowledge of the ways in which you could build your wealth and arrange to retire confidently.

How much will you spend & save? Budgeting can help you arrive at your answer. A simple budget, an elaborate budget, or any attempt at a budget can prove more informative than none at all. A thorough, line-item budget may seem a little over the top, but what you learn from it may be truly eye opening.
How often will you check up on your financial progress? When finances affect two people rather than one, credit card statements and bank balances become more important, so do IRA balances, insurance premiums, and investment account yields. Looking in on these details once a month (or at least once a quarter) can keep you both informed, so that neither one of you have misconceptions about household finances or assets. Arguments can start when money misunderstandings are upended by reality.

What degree of independence do you want to maintain? Do you want to have separate bank accounts? Separate “fun money” accounts? To what extent do you want to comingle your money? Some spouses need individual financial “space” of their own. There is nothing wrong with this, unless a spouse uses such “space” to hide secrets that will eventually shock the other.

Can you be businesslike about your finances? Spouses who are inattentive or nonchalant about financial matters may encounter more financial trouble than they anticipate. So, watch where your money goes, and think about ways to repeatedly pay yourselves first rather than your creditors. Set shared short-term, medium-term, and long-term objectives, and strive to attain them.

Communication is key to all this. In the TD Bank survey, 78% of the respondents indicated they were comfortable talking about money with their partner, and 90% of couples describing themselves as “happy” claimed that a money talk happened once a month. Planning your progress together may well have benefits beyond the financial, so a regular conversation should be a goal.1

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – newscenter.td.com/us/en/campaigns/love-and-money [1/2/18]

The post Managing Money Well as a Couple appeared first on KC Financial Advisors .

A Setback for the Fiduciary Rule

Fri, 20 Apr 2018 19:11:00 GMT

A Court of Appeals ruling could set the stage for a Supreme Court opinion.

The fiduciary rule is now a retirement planning standard – at least in 47 states. A recent appeals court ruling has dealt a blow to this new financial industry regulation, which has been applauded by investors and financial professionals alike. ¹

You probably have heard of this rule; if not, here is a brief explanation. The fiduciary rule is the recent directive from the Department of Labor requiring financial professionals who serve as retirement plan advisors to adopt a fiduciary standard. In other words, the advisor must regularly put the client’s interest first in the client-advisor relationship. ¹

In Louisiana, Mississippi, and Texas, the fiduciary rule has been struck down. The Fifth Circuit Court of Appeals decided 2-1 in March to vacate the fiduciary rule in those states. As of May 7, it will no longer apply within their borders. If the DoL appeals the court’s decision on or before that date, that means limbo. ^1,2

This ruling opened a legal door, and some financial industry analysts think that a Supreme Court ruling may be ahead. ^1,3

The 2-1 decision reflects the fact that the full court was not present, so the DoL could simply ask for a rehearing before the full court instead of an appeal. The DoL also has a legal plus on its side: no other court has reviewed the fiduciary rule and concluded that it amounts to the DoL overstepping its bounds under the Employee Retirement Income Security Act (ERISA). ^1,3

Many financial services companies and financial professionals are hoping for resolution soon, for they have already altered their business practices and compensation models to align with the fiduciary rule. Having made that commitment, they could lose face by turning legally away from it to any degree. They might keep upholding the fiduciary standard whether the rule stands or falls. ^1,2

If the fiduciary rule does fall, you can at least say that the industry rose to meet its standard. Whether the highest court in the land is called upon to determine the validity of the rule or not, whether the rule ends up standing or not, it definitely prompted a paradigm shift in the way retirement plan advisors and retirement planners thought about their roles – and that shift may be permanent. ¹

Disclosures and Footnotes:

Investment Advisory Services are offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. Kansas City Financial Advisors and Brookstone Capital Management LLC are separate companies. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – thestreet.com/story/14527631/1/court-ruling-puts-fiduciary-rule-and-retirement-investors-in-limbo.html [3/20/18]
2 – tinyurl.com/ycgk3vmf [3/27/18]
3 – employeebenefitadviser.com/opinion/rip-fiduciary-rule-not-so-fast [3/6/18]

The post A Setback for the Fiduciary Rule appeared first on KC Financial Advisors .

A Retirement Gender Gap

Thu, 05 Apr 2018 15:23:00 GMT

Why a middle-class woman may end up less ready to retire than a middle-class man.

What is the retirement outlook for the average fifty-something working woman? As a generalization, less sunny than that of a man in her age group.

Most middle-class retirees get their income from three sources. An influential 2016 National Institute on Retirement Security study called them the “three-legged stool” of retirement. Social Security provides some of that income, retirement account distributions some more, and pensions complement those two sources for a fortunate few. ¹

For many retirees today, that “three-legged stool” may appear broken or wobbly. Pension income may be non-existent, and retirement accounts too small to provide sufficient financial support. The problem is even more pronounced for women because of a few factors. ¹

When it comes to median earnings per gender, women earn 80% of what men make. The gender pay gap actually varies depending on career choice, educational level, work experience, and job tenure, but it tends to be greater among older workers. ²

At the median salary level, this gap costs women about $419,000 over a 40-year career. Earnings aside, there is also the reality that women often spend fewer years in the workplace than men. They may leave work to raise children or care for spouses or relatives. This means fewer years of contributions to tax-favored retirement accounts and fewer years of employment by which to determine Social Security income. In fact, the most recent snapshot (2015) shows an average yearly Social Security benefit of $18,000 for men and $14,184 for women. An average female Social Security recipient receives 79% of what the average male Social Security recipient gets. ^2,3

How may you plan to overcome this retirement gender gap? The clear answers are to invest and save more, earlier in life, to make the catch-up contributions to retirement accounts starting at age 50, to negotiate the pay you truly deserve at work all your career, and even to work longer.

There are no easy answers here. They all require initiative and dedication. Combine some or all of them with insight from a financial professional, and you may find yourself closing the retirement gender gap.

Disclosures and Footnotes:

Investment Advisory Services are offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. Kansas City Financial Advisors and Brookstone Capital Management LLC are separate companies. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – forbes.com/sites/karastiles/2017/11/01/heres-how-the-gender-gap-applies-to-retirement/ [11/1/17]
2 – money.cnn.com/2017/04/04/pf/equal-pay-day-gender-pay-gap/index.html [4/4/17]
3 – forbes.com/sites/ebauer/2018/03/16/how-should-we-make-social-security-fairer-for-moms/ [3/16/18]m

The post A Retirement Gender Gap appeared first on KC Financial Advisors .

Retirement Questions That Have Nothing to Do With Money

Fri, 02 Feb 2018 21:34:00 GMT

Think about these matters before you leave work for the last time.

Retirement planning is not entirely financial. Your degree of happiness in your “second act” may depend on some factors you cannot quantify. Here are a few of those factors as well as the questions they may end up provoking in your mind.

Where will you live? This is a major factor in retirement happiness. If you can surround yourself with family members and friends whose company you enjoy, in a community where you can maintain old friendships and meet new people with similar interests or life experience, that is a definite plus. If all this can occur in a walkable community with good mass transit and senior services, all the better. Moving away from the life you know to a spread-out, car-dependent suburb where anonymity seems more prevalent than community may be a bad idea.

How will you get around in your eighties and nineties? The actuaries at Social Security project that a quarter of today’s 65-year-olds will live to age 90. Some will live longer. Say you find yourself in that group. What kind of car would you want to drive at 85 or 90? At what age would you cease driving? Lastly, if you do stop driving, who would you count on to help you go where you want to go and get out in the world? ¹

What will you do with your time? Retirement is not about leaving your old life behind, it is about enhancing the life you have created. It is about writing a new chapter in your life, informed by wisdom and experience. What will that chapter look like? What narrative will unfold for you?

Too many people retire without any idea of what their retirement will look like. They leave work, and they cannot figure out what to do with themselves, so they grow restless. Certainly, you do not want this to happen to you.

If your life, identity, and social circle revolves around your work, then maybe you should ignore any received wisdom that tells you to retire at a certain age and keep working. On the other hand, if you have goals and passions in mind that you need to pursue – dreams you need to fulfill away from your career or business – then you definitely have the “raw material” to write that next chapter in your life story and retire with purpose.

How will you keep up your home? At 45, you can tackle that bathroom remodel or backyard upgrade yourself. At 75, you will probably outsource projects of that sort, whether or not you stay in your current home. You may want to move out of a single-family home and into a townhome or condo for retirement. Regardless of the size of your retirement residence, you will probably need to fund minor or major repairs, and you may need to find reliable and affordable sources for gardening or landscaping.

Will your relationships with family and friends change? Should you move nearer to your children or other relatives? If you have grandchildren, what kind of role do you anticipate playing in their lives? Your significant other may spend more of each day with you than he or she has in years; that may be welcome, or it may take some adjustment.

These are the non-financial retirement questions that no pre-retiree should dismiss. Think about them as you plan and invest for the future.

Disclosures and Footnotes:
Investment Advisory Services are offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. Kansas City Financial Advisors and Brookstone Capital Management LLC are separate companies. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – ssa.gov/planners/lifeexpectancy.html [1/18/18]

The post Retirement Questions That Have Nothing to Do With Money appeared first on KC Financial Advisors .

Your 2018 Financial To-Do List

Thu, 11 Jan 2018 16:51:00 GMT

Things you can do for your future as the year unfolds.

What financial, business, or life priorities do you need to address for 2018? Now is a good time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to lowering your taxes. You have plenty of options. Here are a few that might prove convenient:

Can you contribute more to your retirement plans this year? In 2018, the contribution limit for a Roth or traditional IRA remains at $5,500 ($6,500 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA: singles and heads of household with MAGI above $135,000 and joint filers with MAGI above $199,000 cannot make 2018 Roth contributions. ¹

For tax year 2018, you can contribute up to $18,500 to any kind of 401(k), 403(b), or 457 plan, with a $6,000 catch-up contribution allowed if you are age 50 or older. If you are self-employed, you may want to look into whether you can establish and fund a Solo 401(k) before the end of 2018; as employer contributions may also be made to Solo 401(k)s, you may direct up to $55,000 into one of those plans. ^1,2

Your retirement plan contribution could help your tax picture. If you won’t turn 70½ this year and you participate in a traditional qualified retirement plan or have a traditional IRA, you can cut your 2018 taxable income through a contribution. Should you be in the 35% federal tax bracket, you can save $1,925 in taxes as a byproduct of a $5,500 regular IRA contribution. ³

What are the income limits on deducting traditional IRA contributions? If you participate in a workplace retirement plan, the 2018 MAGI phase-out ranges are $63,000-$73,000 for singles and heads of households, $101,000-$121,000 for joint filers when the spouse making IRA contributions is covered by a workplace retirement plan, and $189,000-$199,000 for an IRA contributor not covered by a workplace retirement plan, but married to someone who is. ²

Roth IRAs and Roth 401(k)s, 403(b)s, and 457 plans are funded with after-tax dollars, so you may not take an immediate federal tax deduction for your contributions to these plans. The upside is that if you follow I.R.S. rules, the account assets may eventually be withdrawn tax free. ⁴

Your tax year 2018 contribution to a Roth or traditional IRA may be made as late as the 2019 federal tax deadline – and, for that matter, you can make a 2017 IRA contribution as late as April 17, 2018, which is the deadline for filing your 2017 federal return. There is no merit in waiting until April of the successive year, however, since delaying a contribution only delays tax-advantaged compounding of those dollars. ⁴

Should you go Roth in 2018? You might be considering that if you only have a traditional IRA. This is no snap decision; the tax impact of the conversion must be weighed versus the potential future benefits. If you are a high earner, you should know that income phase-out limits may affect your chance to make Roth IRA contributions. For 2018, phase-outs kick in at $189,000 for joint filers and $120,000 for single filers and heads of household. Should your income prevent you from contributing to a Roth IRA at all, you still have the chance to contribute to a traditional IRA in 2018 and then go Roth. ¹

Incidentally, a footnote: distributions from Roth IRAs, traditional IRAs, and qualified retirement plans, such as 401(k)s, are not subject to the 3.8% Medicare surtax affecting single/joint filers with AGIs over $200,000/$250,000. If your AGI surpasses these MAGI thresholds, then dividends, royalties, the taxable part of non-qualified annuity income, taxable interest, passive income (such as partnership and rental income), and net capital gains from the sale of real estate and investments are subject to that surtax. ⁵

Consult a tax or financial professional before you make any IRA moves to see how those changes may affect your overall financial picture. If you have a large traditional IRA, the projected tax resulting from a Roth conversion may make you think twice.

What else should you consider in 2018? There are other things you may want to do or review.

Make a charitable gift. You can claim the deduction on your 2018 return, provided you itemize your deductions with Schedule A. The paper trail is important here. ⁶

If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record or a written communication from the charity with the date and amount. Incidentally, the I.R.S. does not equate a pledge with a donation. Contributions to individuals are never tax deductible. ⁶

What if you gift appreciated securities? If you have owned them for more than a year, you will be in line to take a deduction for 100% of their fair market value, and avoid capital gains tax that would have resulted from simply selling the investment and donating the proceeds. The non-profit organization gets the full amount of the gift, and you can claim a deduction of up to 30% of your adjusted gross income. ⁷

Does the value of your gift exceed $250? It may, and if you gift that amount or larger to a qualified charitable organization, the I.R.S. says you need to keep “a contemporaneous written acknowledgement” from the charity “indicating the amount of cash and a description of any property contributed.” You must also file Form 8283 when your total deduction for non-cash contributions or property exceeds $500 in a year. ⁶

If you aren’t sure if an organization is eligible to receive charitable gifts, check it out at irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check .

See if you can take a home office deduction. If your income is high and you find yourself in one of the upper tax brackets, look into this. You may be able to legitimately write off expenses linked to the portion of your home exclusively used to conduct your business. (The percentage of costs you may deduct depends on the percentage of your residence you devote to your business activities.) If you qualify for this tax break, part of your rent, insurance, utilities, and repairs may be deductible. ⁸

Open an HSA. If you are enrolled in a high-deductible health plan, you may set up and fund a Health Savings Account in 2018. You can make fully tax-deductible HSA contributions of up to $3,450 (singles) or $6,900 (families); catch-up contributions of up to $1,000 are permitted for those 55 or older. HSA assets grow tax deferred, and withdrawals from these accounts are tax free if used to pay for qualified health care expenses. ¹

Practice tax-loss harvesting. By selling underperforming stocks in your portfolio, you could record at least $3,000 in capital losses. In fact, you may use this tactic to offset all of your total capital gains for a given tax year. Losses that exceed the $3,000 yearly limit may be rolled over into 2019 (and future tax years) to offset ordinary income or capital gains again. ³

Review your withholding status. Should it be adjusted due to any of the following factors?

Are you marrying in 2018? If so, why not review the beneficiaries of your workplace retirement plan account, your IRA, and other assets? In light of your marriage, you may want to make changes to the relevant beneficiary forms. The same goes for your insurance coverage. If you will have a new last name in 2018, you will need a new Social Security card. Additionally, the two of you, no doubt, have individual retirement saving and investment strategies. Will they need to be revised or adjusted once you are married?

Are you coming home from active duty? If so, go ahead and check the status of your credit and the state of any tax and legal proceedings that might have been preempted by your orders. Make sure any employee health insurance is still there, and revoke any power of attorney you may have granted to another person.

Consider the tax impact of any upcoming transactions. Are you planning to sell (or buy) real estate next year? How about a business? Do you think you might exercise a stock option in the coming months? Might any large commissions or bonuses come your way in 2018? Do you anticipate selling an investment that is held outside of a tax-deferred account? Any of these actions might significantly impact your 2018 taxes.

If you are retired and older than 70½, remember your year-end RMD. Retirees over age 70½ must begin taking Required Minimum Distributions from traditional IRAs and 401(k), 403(b), and profit-sharing plans by December 31 of each year. The I.R.S. penalty for failing to take an RMD equals 50% of the RMD amount that is not withdrawn. ⁹

If you turned 70½ in 2017, you can postpone your initial RMD from an account until April 1, 2018. The downside of this is that you will have to take two RMDs in 2018, with both RMDs being taxable events – you will have to make your 2017 tax year RMD by April 1, 2018 and your 2018 tax year RMD by December 31, 2018. ⁹

Plan your RMD wisely. If you do so, you may end up limiting or avoiding possible taxes on your Social Security income. Some Social Security recipients don’t know about the “provisional income” rule – if your adjusted gross income, plus any non-taxable interest income you earn, plus 50% of your Social Security benefits surpasses a certain level, then some Social Security benefits become taxable. Social Security benefits start to be taxed at provisional income levels of $32,000 for joint filers and $25,000 for single filers. ¹⁰

Lastly, should you make 13 mortgage payments in 2018? If your house is underwater, this makes no sense, and you could argue that those dollars might be better off invested or put in your emergency fund. Those factors aside, however, there may be some merit to making a January 2019 mortgage payment in December 2018. If you have a fixed-rate loan, a lump-sum payment can reduce the principal and the total interest paid on it by that much more.

Talk with a qualified financial or tax professional today. Vow to focus on being healthy and wealthy in 2018.

Call our office at 913.317.1414 to set up a complimentary CPR – Complete Planning Review of your financial plan.

Disclosures and Footnotes:

Investment Advisory Services are offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. Kansas City Financial Advisors and Brookstone Capital Management LLC are separate companies. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – cbsnews.com/news/I.R.S.-allows-higher-retirement-savings-account-limits-in-2018/ [10/24/17]

2 – forbes.com/sites/ashleaebeling/2017/10/19/I.R.S.-announces-2018-retirement-plan-contribution-limits-for-401ks-and-more/ [10/19/17]

3 – turbotax.intuit.com/tax-tips/tax-planning-and-checklists/last-minute-ways-to-reduce-your-taxes/L3eJ81kRC [11/9/17]

4 – irs.gov/Retirement-Plans/Traditional-and-Roth-IRAs [10/25/17]

5 – bbt.com/wealth/retirement-and-planning/retirement/medicare-surtaxes.page [11/9/17]

6 – irs.gov/taxtopics/tc506 [9/21/17]

7 – tinyurl.com/yc6ecpq8 [10/12/17]

8 – irs.gov/businesses/small-businesses-self-employed/home-office-deduction [10/26/17]

9 – fool.com/retirement/2017/04/29/whats-my-required-minimum-distribution-for-2017.aspx [4/29/17]

10 – smartasset.com/retirement/is-social-security-income-taxable [7/19/17]

The post Your 2018 Financial To-Do List appeared first on KC Financial Advisors .

Avoiding the Money Pitfalls of Past Generations

Sat, 30 Dec 2017 15:22:00 GMT

You have a chance to manage your money better than previous generations have. Some crucial financial steps may help you do just that.

Live below your means and refrain from living on margin. How much do you save per month? Generations ago, Americans routinely saved 10% or more of what they made, either depositing those savings or investing them. This kind of thriftiness is still found elsewhere in the world.

Today, the average euro area household saves more than 12% of its earnings, and the current personal savings rate in Mexico is 20.6%. 1

In 1975, the U.S. personal savings rate hit an all-time peak of 17.0%; it has been below 4% since June. Easy credit is one culprit; the tendency to overspend in a strong economy is another.

Remember to pay yourself first, not credit card companies. Collect experiences rather than possessions. 1

Recognize that there is no “sure thing” investment. Investors found that out in 2000 and 2007 when things shifted in the financial and housing markets. What returns 15-20% a year from now may not next year or three years on. Diversification matters: you never know what asset class might soar or plummet in the future, and allocating your assets across different investment types gives you the potential to reduce overall portfolio risk.

Plan for a 30-year retirement. According to Social Security estimates, the average 65-year-old man is currently projected to live until age 84, and the average 65-year-old woman, to age 87. With advances in health care, living to 95 may become the norm for the average 35-year-old. 2

Plan for your retirement first, your children’s college education second. Some baby boomers did the inverse, and some who did wonder if they made the right decision for their futures.

College students can work and receive financial aid; for senior citizens, it is a different story.

Switch jobs for better pay. Generations ago, people tended to stay at the same job for several years or longer, whether their prospects were promising or not. If a better job lures you, do not be ashamed to leave your current employer for it – you may gain, financially. Payroll processing giant ADP found recently that a job change resulted in an average pay increase of 4.5% for a full-time worker. 3

Congratulate yourself on the good moves you have made, and plan more. Make another good move and chat with a financial professional about the ways you can continue to plan for a prosperous future.

KC Financial Advisors is located in Corporate Woods in Overland Park, KS. Give us a call with any questions (913) 317-1414, or email us info@kcfinancialadvisors.com .

Disclosures and Footnotes:

Investment Advisory Services are offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. Kansas City Financial Advisors and Brookstone Capital Management LLC are separate companies. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – tradingeconomics.com/united-states/personal-savings [12/14/17] 2 – ssa.gov/planners/lifeexpectancy.html [12/14/17]

3 – theatlantic.com/business/archive/2016/02/job-switchers-raise/460044/ [2/8/16]

The post Avoiding the Money Pitfalls of Past Generations appeared first on KC Financial Advisors .

How much should you save by 30, 40, 50 or 60?

Thu, 30 Nov 2017 21:54:00 GMT

What number should you strive to reach?

It is agreed that the earlier you start saving for retirement, the better. The big question on the minds of many savers, however, is: “How am I doing?” This article will show you some rough milestones to try and reach. (Keep in mind that you may need to save more or less than these amounts based on your objectives and lifestyle and income needs.)

At age 30, can you have the equivalent of a year’s salary saved? Some 30-year-olds have the equivalent of a year’s salary in debt, it is true; the thing is, you can probably manage debt and save and invest to build wealth simultaneously. One way to plan to reach this goal is to save (and invest) about a fifth of your after-tax income beginning at age 25. That assumes you start at 25 with no savings; if you start saving and investing earlier, the goal may be easier to attain. ¹

At age 40, will your savings be triple that of your yearly earnings? The average American currently saves about 3.5% of his or her income. Can you save 3.5% of what you earn at 25 or 30 and build a six-figure retirement fund by your 40th birthday? Perhaps, if you are an absolute investing wizard or start your career with a salary north of $100,000. Otherwise, saving and investing 10-15% of what you earn annually will be crucial in planning to reach this goal. ^1,2

When you are 50, will your savings be about six times your salary? Slow and steady saving and investing could get you there, but building up $250,000 or more in retirement money can be a challenge given factors like child-rearing, divorce, periodic unemployment, or health concerns. One response is to adjust your discretionary spending habits, if life allows. ¹

At 60, will your savings equal eight or nine times what you earn annually? Amassing $500,000 or more in retirement assets should be a priority. Even if you have not managed this, other resources can help you generate retirement income in the years ahead: you will have Social Security benefits coming your way and possibly home equity or executive compensation or business proceeds to make your financial future more promising. ¹

Saving and investing 10-15% of your annual pay merits serious consideration. Through recurring contributions to tax-deferred retirement savings accounts, you can make saving and investing a regular process. Your future self may thank you.

Disclosures and Footnotes:

Investment Advisory Services are offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. Kansas City Financial Advisors and Brookstone Capital Management LLC are separate companies. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – cheatsheet.com/money-career/how-much-money-should-have-based-on-age.html/ [9/20/17]

2 – businessinsider.com/how-much-you-should-have-saved-every-age-2017-9 [9/18/17]

The post How much should you save by 30, 40, 50 or 60? appeared first on KC Financial Advisors .

Will Debt Spoil Too Many Retirements?

Thu, 19 Oct 2017 19:29:00 GMT

What pre-retirees owe could compromise their future quality of life.

The key points of retirement planning are easily stated. Start saving and investing early in life. Save and invest consistently. Avoid drawing down your savings along the way. Another possible point for that list: pay off as much debt as you can before your “second act” begins.

Some baby boomers risk paying themselves last. Thanks to lingering mortgage, credit card, and student loan debt, they are challenged to make financial progress in the years before and after retiring.

More than 40% of households headed by people 65-74 shoulder home loan debt. That figure comes from the Federal Reserve’s Survey of Consumer Finances ; the 2013 edition is the latest available. In 1992, less than 20% of Americans in this age group owed money on a mortgage. Some seniors see no real disadvantage in assuming and retiring with a mortgage; tax breaks are available, interest rates are low, and rather than pay cash for a home, they can arrange a loan and use their savings on other things. Money owed is still money owed, though, and owning a home free and clear in retirement is a great feeling. ¹

Paying with plastic too often can also exert a drag on retirement. Personal finance website ValuePenguin notes that the average U.S. household headed by 55- to 64-year-olds now carries $8,158 in credit card debt. As for households headed by those aged 65-69, they owe an average of $6,876 on credit cards. ²

According to the latest Weekly Rate Report at CreditCards.com, the average APR on a credit card right now is 16.15%. How many investments regularly return 16% a year? What bank account earns that kind of interest? If a retiree’s consumer debt is increasing at a rate that his or her investments and deposit accounts cannot match, financial pain could be in the cards. ³

Education debt is increasing. Older Americans are dealing with student loans – their own and those of their adult children – to alarming degree. In all 50 states, the population of people 60 and older with student debt has grown by at least 20% since 2012. That finding from the Consumer Financial Protection Bureau may be understating the depth of the crisis, which may have its roots in the Great Recession. Fair Isaac Corporation (FICO) says that between 2006-16, the number of Americans aged 65 and older with outstanding education loans has tripled. ^4,5

Just what kind of financial burden are these loans imposing? According to FICO, the average 65-or-older student loan borrower is dealing with a balance of $28,268. That is up 40% from the average balance in 2006. ⁵

How can pre-retirees and retirees address such debts? One way might be to reduce household expenses and apply the money not spent to debt. Financial assistance for adult children may need to end. Retiring later could also be a good move – income is the primary resource for fighting debt, and the more income earned, the more financial power a senior has to pay debts off.

Servicing debt in retirement can become very difficult. Large recurring debts can drain off a retiree’s cash flow and increase overall household financial risk. Retiring without major debt is a comparative relief.

Disclosures and Footnotes:

Investment Advisory Services are offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. Kansas City Financial Advisors and Brookstone Capital Management LLC are separate companies. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – nytimes.com/2017/06/02/business/retirement/mortgages-for-older-people-retirement.html [6/2/17]

2 – valuepenguin.com/average-credit-card-debt [9/28/17]

3 – creditcards.com/credit-card-news/interest-rate-report-92717-unchanged-2121.php [9/27/17]

4 – consumerfinance.gov/about-us/blog/nationwide-look-how-student-debt-impacts-older-adults/ [8/18/17]

5 – newsday.com/business/65-plus-crowd-facing-growing-burden-from-student-loan-debt-1.14124052 [9/10/17]

The post Will Debt Spoil Too Many Retirements? appeared first on KC Financial Advisors .

When Is Social Security Income Taxable?

Mon, 02 Oct 2017 19:33:00 GMT

The answer depends on your income.

Your Social Security income could be taxed. That may seem unfair, or unfathomable. Regardless of how you feel about it, it is a possibility.

Seniors have had to contend with this possibility since 1984. Social Security benefits became taxable above certain yearly income thresholds in that year. Frustratingly for retirees, these income thresholds have been left at the same levels for 32 years. ¹

Those frozen income limits have exposed many more people to the tax over time. In 1984, just 8% of Social Security recipients had total incomes high enough to trigger the tax. In contrast, the Social Security Administration estimates that 52% of households receiving benefits in 2015 had to claim some of those benefits as taxable income. ¹

Only part of your Social Security income may be taxable, not all of it. Two factors come into play here: your filing status and your combined income.

Social Security defines your combined income as the sum of your adjusted gross income, any non-taxable interest earned, and 50% of your Social Security benefit income. (Your combined income is actually a form of modified adjusted gross income, or MAGI.) ²

Single filers with a combined income from $25,000-$34,000 and joint filers with combined incomes from $32,000-$44,000 may have up to 50% of their Social Security benefits taxed. ²

Single filers whose combined income tops $34,000 and joint filers with combined incomes above $44,000 may see up to 85% of their Social Security benefits taxed. ²

What if you are married and file separately? No income threshold applies. Your benefits will likely be taxed no matter how much you earn or how much Social Security you receive. ²

You may be able to estimate these taxes in advance. You can use an online calculator (a Google search will lead you to a few such tools), or the worksheet in IRS Publication 915. ²

You can even have these taxes withheld from your Social Security income. You can choose either 7%, 10%, 15%, or 25% withholding per payment. Another alternative is to make estimated tax payments per quarter, like a business owner does. ²

Did you know that 13 states also tax Social Security payments? North Dakota, Minnesota, West Virginia, and Vermont use the exact same formula as the federal government to calculate the degree to which your Social Security benefits may be taxable. Nine other states use more lenient formulas: Colorado, Connecticut, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, and Utah. ²

What can you do if it appears your benefits will be taxed? You could explore a few options to try and lessen or avoid the tax hit, but keep in mind that if your combined income is far greater than the $34,000 single filer and $44,000 joint filer thresholds, your chances of averting tax on Social Security income are slim. If your combined income is reasonably near the respective upper threshold, though, some moves might help.

If you have a number of income-generating investments, you could opt to try and revise your portfolio, so that less income and tax-exempt interest are produced annually.

A charitable IRA gift may be a good idea. You can make one if you are 70½ or older in the year of the donation. You can endow a qualified charity with as much as $100,000 in a single year this way. The amount of the gift may be used to fully or partly satisfy your Required Minimum Distribution (RMD), and the amount will not be counted in your adjusted gross income. ³

You could withdraw more retirement income from Roth accounts. Distributions from Roth IRAs and Roth workplace retirement plan accounts are tax-exempt as long as you are age 59½ or older and have held the account for at least five tax years. ⁴

Will the income limits linked to taxation of Social Security benefits ever be raised? Retirees can only hope so, but with more baby boomers becoming eligible for Social Security, the IRS and the Treasury stand to receive greater tax revenue with the current limits in place.

Investment Advisory Services are offered through Brookstone Capital Management LLC, an SEC Registered Investment Advisor. Kansas City Financial Advisors and Brookstone Capital Management LLC are separate companies. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – ssa.gov/policy/docs/issuepapers/ip2015-02.html [12/15]

2 – fool.com/retirement/general/2016/04/30/is-social-security-taxable.aspx [4/30/16]

3 – kiplinger.com/article/retirement/T051-C001-S003-how-to-limit-taxes-on-social-security-benefits.html [7/16]

4 – irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts [1/26/16]

The post When Is Social Security Income Taxable? appeared first on KC Financial Advisors .

Preventing a Debit Card Hack

Mon, 21 Aug 2017 13:19:00 GMT

How can you plan to protect yourself against this increasingly common crime?

Debit card data theft has surged lately. According to FICO’s Card Alert Service, the number of businesses or ATM locations where debit cards were hacked rose 26% from 2015 to 2016. Additionally, the number of compromised cards has steadily risen during this decade. ¹

Crooks can attach skimmers to ATMs or point-of-purchase devices in seconds. These counterfeit card readers instantly record banking data ingrained on a debit card’s magnetic stripe. You probably have one of the new EVM chip cards, but if you happen to insert or slide your card through an older ATM that cannot accept the newer cards, your data could still be at risk. ²

Bankrate reports that chip skimmers are now surfacing, capable of hacking first-generation EVM chip cards relying on static data authentication. Second-generation EVM chip cards use dynamic data authentication, which makes data theft more difficult – but not impossible. ²

What can you do to protect yourself against debit card data theft? First, keep in mind that most skimmers are affixed to non-bank ATMs. ATMs at gas station islands and convenience stores are favorites for crooks, as they may be located out of sight of clerks and security cameras. Avoid using your debit card at such places. ATMs inside a bank or a business with plenty of foot traffic (like a mall or a grocery store) are less likely to be hacked. ^1,2

Check the ATM itself for irregularities. If there are multiple ATMs in front of you, be careful if one card slot flashes its acceptance light and an adjacent one does not (notify the bank or the business hosting the ATMs). Look for misaligned graphics or colors or evidence of prying or looseness. Cover the keypad as you enter your PIN, and beware of people trying to glean your PIN in the old-school way, simply by looking over your shoulder.

Try an NFC payment if the merchant allows it. NFC stands for near-field communications. Apple Pay, Android Pay, and Samsung Pay all use NFC services, which encrypt the confidential financial data stored on credit and debit cards into symbols. This gives you another layer of protection. Savvy consumers are increasingly using Apple Pay, Android Pay, and Samsung Pay to buy things. PayPal’s Android app can also make NFC transactions. ^2,3

If you sense your debit card has been breached, report it quickly. If you can tell the card issuer that your card is missing or stolen before any unauthorized transactions occur, you will not be held financially responsible for such transactions – that is federal law. ¹

If you notice criminal activity has taken place, the longer you wait to let the card issuer know about it, the less money you may end up recovering. Report the crime within two business days, and your maximum liability is $50 under the federal Electronic Fund Transfer Act. Past that deadline, your maximum liability could be as much as $500. Wait 60 days or longer to report debit card theft, and the missing funds may not be restored to your account at all. ¹

Besides notifying the card issuer, you should also tell the three leading U.S. credit bureaus – TransUnion, Equifax, and Experian – about any debit card data theft and unauthorized transactions. You can file a police report, and you can also file for an identity theft affidavit with the Federal Trade Commission. Both documents may be useful to the major credit-reporting agencies. ²

Footnotes, disclosures, and sources:

Investment Advisory Services are offered through Brookstone Capital Management, LLC, an SEC Registered Investment Advisor. KC Financial Advisors and Brookstone Capital Management LLC are separate companies. These views should not be construed as investment advice. Neither Brookstone Capital Management LLC nor any named representative gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Citations.

1 – tinyurl.com/y8re2ake [7/21/17]

2 – bankrate.com/credit-cards/what-is-a-skimmer/ [7/25/17]

3 – theverge.com/2017/4/18/15333108/paypal-android-pay-nfc-payments [4/18/17]

The post Preventing a Debit Card Hack appeared first on KC Financial Advisors .

Has Your Identity Been Stolen?

Fri, 11 Aug 2017 20:27:00 GMT

Keep an eye out for these signs .

As NBC News notes, identity theft hit 15.4 million Americans last year. Perhaps it hit you. You know you have been victimized when you get that courtesy call or email from a bank or credit card issuer, but is there a way you can tell prior to that moment? ¹

There are definite warning signs of cybercrime. Watching out for them just might save you money and headaches. If you notice any of the following conditions, pay attention.

Odd little charges appear on your credit card. Big charges are of course a giveaway, but criminals might first venture some little charges. This often happens when more sophisticated identity thieves buy or obtain credit or debit card numbers through syndicates or online forums (they do exist).

You stop getting credit or debit card statements. A thief may have changed the billing address. What time of the month do these bills arrive? Knowing when may alert you to something fishy.

Unexpected packages show up at your home or office. “I didn’t order a new PC,” you react when the truck pulls up at your door. Well, maybe a thief did and forgot to change the default shipping address on your online profile at a retailer.

Weird calls & emails enter your life. Your friends get spam in their inboxes; you get calls from debt collection agencies. At first, you may categorize the calls as simple mistakes and apologize for the spam, but all this may indicate crime.

Your loan apps get rejected. Your credit score can plunge due to a thief’s extravagance and nonchalance. If you can’t get a loan or your credit report shows a plunging score, something may be up.

Victimization can be quite subtle. Some identity thieves never progress to shopping sprees or draining bank balances. They have other goals in mind, just as ignoble.

Some people steal personal information to hide from creditors. They would like to put your address or phone number on assorted financial, federal, and state documents for purposes of evasion as well as future opportunity. If you suspect this may be happening, file a police report (you may have to be persistent about this, but do it), and contact the departments of banks, businesses, and governmental agencies that investigate fraud and cybercrimes. When it comes to Social Security fraud, that means the Office of the Inspector General. If you are the victim of mail fraud, get in touch with the U.S. Postal Inspection Service. At your state motor vehicle department, that means connecting with a fraud investigator. ²

Good news: federal tax refund identity theft has fallen nearly 50%. The Internal Revenue Service received 107,000 reports of it during January-May 2017, down from 204,000 cases in January-May 2016. The agency credits the use of better filters in its software and new limits on the number of refunds that can be sent to one bank account. ³

Footnotes, disclosures, and sources:

Citations.

1 – nbcnews.com/business/consumer/identity-fraud-hits-record-number-americans-2016-n715756 [2/2/17]

2 – sandiegouniontribune.com/news/cyber-life/sd-me-connected-identitytheft-2017417-story.html [4/17/17]

3 – foxbusiness.com/features/2017/07/25/irs-reports-drop-in-identity-theft-tied-to-fraudulent-tax-refunds.html [7/25/17]

The post Has Your Identity Been Stolen? appeared first on KC Financial Advisors .

Getting (Mentally) Ready to Retire

Tue, 01 Aug 2017 20:29:00 GMT

Even those who have saved millions must prepare for a lifestyle adjustment.

A successful retirement is not merely measured in financial terms. Even those who retire with small fortunes can face boredom or depression and the fear of drawing down their savings too fast. How can new retirees try to calm these worries?

Two factors may help: a gradual retirement transition and some guidance from a financial professional.

An abrupt break from the workplace may be unsettling. As a hypothetical example, imagine a well-paid finance manager at an auto dealership whose personal identity is closely tied to his job. His best friends are all at the dealership. He retires, and suddenly his friends and sense of purpose are absent. He finds that he has no compelling reason to leave the house, nothing to look forward to when he gets up in the morning. Guess what? He hates being retired.

The interests and needs of a retiree can change with age or as he or she disengages from the working world. Retired households may need to adjust their lifestyles in response to this evolution.

Practically all retirees have some financial anxiety. It relates to the fact of no longer earning a conventional paycheck. You see it in couples who have $60,000 saved for retirement; you see it in couples who have $6 million saved for retirement. Their retirement strategies are about to be tested, in real time. All that careful planning is ready to come to fruition, but there are always unknowns.

Some retirees are afraid to spend. They fear spending too much too soon. With help from a financial professional, they can thoughtfully plan a withdrawal rate.

While no retiree wants to squander money, all retirees should realize that their retirement savings were accumulated to be spent . Being miserly with retirement money contradicts its purpose. The average 65-year-old who retires in 2017 will have a retirement lasting approximately 20 years, by the estimation of the Social Security Administration. So, why not spend some money now and enjoy retired life? ¹

Broadly speaking, our spending declines as we age. The average U.S. household headed by an 80-year-old spends 43% less money than one headed by a 50-year-old. ¹

Retirement challenges people in two ways. The obvious challenge is financial; the less obvious challenge is mental. Both tests may be met with sufficient foresight and dedication.

Footnotes, disclosures, and sources:

Citations.

1 – tinyurl.com/ydedsyl5 [4/24/17]

The post Getting (Mentally) Ready to Retire appeared first on KC Financial Advisors .

One Couple, Two Different Retirements?

Wed, 05 Jul 2017 21:36:00 GMT

After many years together, some retired spouses may find their daily routines far apart.

When you see online ads or TV commercials about retirement planning, do they ever show baby boomer couples arguing? No. After all, retirement planning is about the pursuit of a happy outcome – a fun and emotionally rewarding “second act” that spouses and partners can share.

Realizing that goal takes communication. As you approach retirement, you may not be who you were at 30 or 50. You and your significant other may want different daily lives once you retire. This is a frequently ignored reality in retirement planning. In preparing to retire, you might want to consider your individual preferences and differences when it comes to these factors.

How you spend your days. What does a good day in retirement look like to you? What does it look like for your spouse or partner?

Social engagement. How much time do each of you want to spend working, volunteering, or socializing? Your preferences may differ.

Your health. If you contend with serious health issues, you may define a “good day” in retirement much differently than your spouse or partner does.

Your spending. Where will your retirement income go? What will it be spent on besides basic living expenses? Your discretionary spending priorities and those of your spouse could vary. If they vary widely, this could be the source of some drama.

Your time alone. Some couples build businesses together or work in the same office or practice for years; others spend just a few hours per day around each other for decades. In retirement, you will likely be around each other for more hours of the day than when you worked. You will need to decide how much “me time” you need.

Your roles. Have you done most of the cleaning around the house? Or tackled most of the home improvement projects? Should it remain that way in retirement?

To some extent, your spouse or partner’s vision of retirement will vary from yours. It could vary 1%, or it could vary 99%, but some variance is almost certain. It need not breed discord so long as you recognize the following three truths.

Some of your shared retirement savings will be used to fulfill individual dreams. The money you have saved and invested will provide financial support for you as a couple, but you also must concede that some of those dollars will be spent relative to each other’s individual goals, passions, and pursuits. The same applies for your retirement income.

You will not automatically see money the same way. Those online ads and TV commercials would have you believe that some kind of magic happens once retirement starts, leaving every retired couple to walk along the beach smiling, laughing, and in total agreement about their future. Yes, retired couples do disagree about money; they also learn to overcome those disagreements through understanding and compromise.

Many things are more valuable than money in retirement. Time is probably your most valuable asset, and your health and relationships are close behind. So, whether your retirement savings falls short of or far exceeds the median baby boomer amount of $147,000 (as identified last year by the Transamerica Center for Retirement Studies), keep what matters most in mind. ¹

Citations.

1 – forbes.com/sites/forbesfinancecouncil/2017/05/15/retirement-its-not-as-simple-as-it-used-to-be/ [5/15/17]

The post One Couple, Two Different Retirements? appeared first on KC Financial Advisors .

Invest lifestyle expenses on memorable experiences

Mon, 26 Jun 2017 21:00:00 GMT

Financial envy is even more of a thing now than it was back in 1913 when cartoonist Arthur R. “Pop” Momand debuted the comic strip “Keeping Up with the Joneses,” which centered on the misadventures of Aloysius P. McGinnis and his family, who were always trying to keep up with their never-seen neighbors, the Joneses. [1]

Today, we not only have television shows displaying lifestyles of the rich and famous, we’re punched with images and status updates in social media, too. [2]

We not only see the “Joneses” on television, but we are likely connected on social media to colleagues and friends who post frequent photos and statuses about their new luxury car, boat, or 3-carat diamond ring. [3]

Though we may think the grass is greener at the Joneses, we have no way of knowing whether that snapshot is a true picture of “the good life,” or a depiction of living beyond one’s means. [4]

One 2016 study of household debt in America shows the average household has debt balances totaling almost $17,000, and the average household with any kind of debt, including mortgages, owes nearly $135,000. [5]

Most people pursue happiness and there are economists who assert that happiness is the best indicator of a society’s health. In that pursuit, some folks assume if we spend money on an object, we will be happier longer because that item lasts longer than say, a one-off experience like a vacation or a concert. According to recent research, though, that assumption might be incorrect. [6]

That same study showed buying things makes us happy, but only briefly. Its continual presence makes it fade into our surroundings. The study also showed that among those surveyed, people’s satisfaction with buying things decreased, while those who spent money on experiences showed increased satisfaction over time. That is because experiences tend to become imbedded in our identity. [7]

There are at least two tactics we can employ to enhance and prolong our enjoyment of spending our lifestyle expenses: spending on experiences, not things, and savoring those experiences.

The good news is that there are techniques you can develop to savor your experiences and amplify the happiness you derive from them. Researchers have identified four common strategies for relishing. You can use one or combine tactics. [8]

These ideas help prolong your experience and make it bigger than life, which ultimately makes you feel as though you have gotten the most out of your investment, whether you spent $300, $3,000 or $30,000 on your experience.

If you have any questions or would like to discuss any financial topics, we are happy to talk.

Footnotes, disclosures, and sources:

[1] http://money.usnews.com/money/personal-finance/articles/2013/09/26/how-to-combat-financial-envy [Accessed April 13, 2017]

[2] http://www.therichest.com/expensive-lifestyle/entertainment/10-tv-shows-about-rich-people-problems/ [Accessed April 5, 2017]

[3] http://money.usnews.com/money/personal-finance/articles/2013/09/26/how-to-combat-financial-envy [Accessed April 8, 2017]

[4] http://money.usnews.com/money/blogs/my-money/2015/04/10/why-you-should-never-try-to-keep-up-with-the-joneses [Accessed April 13, 2017]

[5] https://www.nerdwallet.com/blog/average-credit-card-debt-household/ [Accessed April 8, 2017]

[6] https://www.fastcompany.com/3043858/world-changing-ideas/the-science-of-why-you-should-spend-your-money-on-experiences-not-thing [Accessed April 27, 2017]

[7] https://www.fastcompany.com/3043858/world-changing-ideas/the-science-of-why-you-should-spend-your-money-on-experiences-not-thing [Accessed April 27, 2017]

[8] https://www.learnvest.com/2012/02/savoring-the-key-to-stretching-your-dollar/ [Accessed April 20, 2017]

[9] https://www.learnvest.com/2012/02/savoring-the-key-to-stretching-your-dollar/ [Accessed April 20, 2017]

[10] https://www.learnvest.com/2012/02/savoring-the-key-to-stretching-your-dollar/ [Accessed April 20, 2017]

[11] https://www.learnvest.com/2012/02/savoring-the-key-to-stretching-your-dollar/ [Accessed April 20, 2017]

[1] http://money.usnews.com/money/personal-finance/articles/2013/09/26/how-to-combat-financial-envy [Accessed April 13, 2017]

[1] http://www.therichest.com/expensive-lifestyle/entertainment/10-tv-shows-about-rich-people-problems/ [Accessed April 5, 2017]

[1] http://money.usnews.com/money/personal-finance/articles/2013/09/26/how-to-combat-financial-envy [Accessed April 8, 2017]

[1] http://money.usnews.com/money/blogs/my-money/2015/04/10/why-you-should-never-try-to-keep-up-with-the-joneses [Accessed April 13, 2017]

[1] https://www.nerdwallet.com/blog/average-credit-card-debt-household/ [Accessed April 8, 2017]

[1] https://www.fastcompany.com/3043858/world-changing-ideas/the-science-of-why-you-should-spend-your-money-on-experiences-not-thing [Accessed April 27, 2017]

[1] https://www.learnvest.com/2012/02/savoring-the-key-to-stretching-your-dollar/ [Accessed April 20, 2017]

The post Invest lifestyle expenses on memorable experiences appeared first on KC Financial Advisors .

Episode 119: Basketball and Financial Planning

Sun, 08 Apr 2001 18:51:40 GMT

Today’s Prep:

As March Madness came to a close, we wanted to have a little fun and talk about what basketball and financial planning had in common. Is your financial plan ready for its one shining moment?

Equipping Points:

What can we learn from the game of basketball and how it relates to financial planning? Whether you’ve been watching all of March Madness this year or not, there’s plenty to learn in this episode of Cover Your Assets KC.

In the game, there is a shot clock that forces you to shoot the ball within a certain amount of time to keep the game moving. What’s the financial equivalent? Retirement decisions you might have to make within a certain timeline include early retirement buyouts. What other decisions go alongside this? Another shot clock type moment is when you’re nearing retirement and don’t feel like you’ve gotten everything you wanted done.

In basketball, you can’t double dribble. Once you stop dribbling, you have a limited number of options for what you can do next. When you start Social Security can be a similar decision that gives you no do-overs. Why might you delay Social Security? Or, when is it better to start it on the earlier side?

In basketball, fouls come up. You can get away with one or two fouls, but after too many you’ll be out of the game. What kind of financial decisions can be okay once or twice but not mistakes you want to make too often? Don’t sweat small mistakes, but avoid silly “fouls” like racking up credit card debt or not saving 10 percent of what you make as a millennial .

Not all basketball teams make it to the “big dance” in March. For some, just making it to the tournament is success whereas others aim to make it to the Final Four. In retirement, what is your definition of success? What are your goals? Make sure that you set realistic goals in order to be successful and content in your financial life.

Today’s Takeaway:

“Define your own success and do it realistically.“

– David Dickens

KC Financial Advisors

Financial Planning Essentials: Social Security and Life Insurance

Equipping Points:

Today’s Takeaway:

Retirement Lessons from Andy Reid: Super Bowl-Worthy Financial Strategies

Equipping Points:

Today’s Takeaway:

Is It Time to Fire Your Broker? Let’s Discuss That and Social Security

Equipping Points:

Today’s Takeaway:

Am I Ahead Or Behind On My Retirement Savings?

Equipping Points:

Today’s Takeaway:

How the SECURE Act 2.0 Changed RMDs

1. IRS.gov

2024's Best Stocking Stuffer: Financial Freedom (PART 2)

Equipping Points:

Today’s Takeaway:

2024's Best Stocking Stuffer: Financial Freedom (PART 1)

Equipping Points:

Today’s Takeaway:

Understanding Qualified Charitable Distributions

1.IRS.gov, 2024

This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.

Trump's Victory & YOUR Portfolio

Equipping Points:

Today’s Takeaway:

Mailbag: How Does a Trust Work?

Equipping Points:

Today’s Takeaway:

2025 Income Tax Brackets

Review These 5 "To-Dos" Before Year-End

Equipping Points:

Today’s Takeaway:

Fed Rate Cuts are Good for Stocks…Right?

Equipping Points:

Today’s Takeaway:

Important Birthdays Over 50

Mailbag: How To Handle An Unexpected Layoff

Equipping Points:

Today’s Takeaway:

Retirees In Their 70s Regret These 5 Things

Equipping Points:

Today’s Takeaway:

September Is Life Insurance Awareness Month

Are Target-Date Maturity Funds Right for Your Retirement Plan?

Equipping Points:

Today’s Takeaway:

Mailbag: Roth IRAs and 401(k)s

Equipping Points:

Today’s Takeaway:

What Can You Buy With 529 Distributions?

Avoiding Procrastination in Your Financial Life

Equipping Points:

Today’s Takeaway:

Understanding Money Market Funds

1. Medicare.gov, 2023 2. Medicare.gov, 2023

Roth IRAs as an Inheritance Strategy

Equipping Points:

Today’s Takeaway:

How Retirement Spending Changes With Time

By The Numbers

Spending Pattern

Should Wealthy Taxpayers Make Roth Contributions?

Equipping Points:

Today’s Takeaway:

Sequence of Returns: The Largest Risk You Haven’t Considered

Equipping Points:

Today’s Takeaway:

Choices for Your 401(k) at a Former Employer

Choice 1: Leave It with Your Previous Employer

Choice 2: Transfer to Your New Employer’s 401(k) Plan

Choice 3: Roll Over Assets to a Traditional Individual Retirement Account (IRA)

Choice 4: Cash out the account

Mailbag: Can I Retire Spur Of The Moment?

Equipping Points:

Today’s Takeaway:

Taking the Retirement Income Literacy Quiz

Equipping Points:

Today’s Takeaway:

^{1.IRS.gov, 2024}

1. Medicare.gov, 2023
2. Medicare.gov, 2023

1. IRS.gov, 2023
2. IRS.gov, 2023

1. SSSA.gov, 2023
2. Fidelity.com, 2023
3. LongevityIllustrator.org, 2023