Overseas Real Estate Investing: What You Need to Know

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Overseas real estate investing is one of the methods of retirement planning that people worldwide are starting to follow. Today, we sat down with Evie Brooks, a professional who specializes in real estate in Panama.

Evie is a real estate investment educator and trainer.

In fact, she was an advanced trainer for “Rich Dad Poor Dad” before transitioning into a Panama real estate expert on properties for:

  • Vacation homes
  • Organic agriculture

And all her investments are 100% hands-off, so you can secure your retirement with your money instead of working even harder.

Why Panama is Such a Great Place to Invest

Before we went any further, we wanted to ask Evie one question that was on our minds – and is probably on your mind right now. Why is Panama a good place to invest?

After researching many different countries, Panama was Evie’s main choice because:

  • Since 2008, the GDP growth averaged over 6% and rose to over 11%.
  • The Panama Canal is crucial to worldwide trade, and these trade routes will continue helping the country spur growth.
  • Copper mines were discovered, and they started being mined before COVID. It’s expected that in the next 40 years, these mines will generate more revenue than the Panama Canal.

Panama has a booming opportunity, and with this growth, more people are going to be buying automobiles, homes, and other goods.

Healthcare in Panama

Panama is working on medical tourism, too. The country’s robust healthcare and dental care sector offers top-tier care at prices far more affordable than in the United States. There are two John Hopkin’s affiliated hospitals in Panama, so you know the healthcare is good.

For the same services, you pay 20% to 25% of what you would in the US in Panama.

You can also pay for international health insurance plans if you do travel a lot and want to go to Panama and other countries.

So, healthcare is just another reason that people are investing in Panama. Soaring prices around the world are helping drive this new form of tourism in Panama, making it an excellent choice for investors who want to get in on the “boom.”

How to Begin Investing in Panama

Panama offers an abundance of investment opportunities, including:

  • Long-term rental properties
  • Short-term rental properties
  • Pre-construction opportunities
  • Government-subsidized programs

When speaking about government-subsidized programs, many people don’t know what this means. Here’s an example: Panama’s government is building 150,000 small homes for locals. Up-and-coming residents can enter these homes with rates of 2% or less and just $500 down. 

The government is subsidizing developers to build these properties to help younger generations get into their homes.

Evie tells us that for $50,000 to $65,000, you can invest in these government programs and get an 11% return on your investment. And the investment is only held for two years. You receive payments twice a year on these properties.

Additionally, there are other projects with 20% to 30% returns.

Evie helps investors learn how to invest in Panama in as easy of a way as possible. Her company can even help you get your visa to enter the country.

How Do You Know If Investing in Panama is for You?

We know that investing in real estate takes a certain level of trust. There’s a good chance that you don’t know much about Panama’s market unless you live there. However, that doesn’t mean that you should miss out on the potential opportunities that investors have in the country. 

A few ways to get comfortable with investing in Panama are:

  • Work with a company like Evie’s, which offers private tours
  • Go to the country yourself

Most of Evie’s clients are expats, people considering moving to Panama, or clients who want to diversify their portfolios.

Since COVID, many people are starting to diversify their portfolios, and investing in Panama is one option that many people are adding to their investment portfolios. Figuring out how to invest in Panama is complex.

Evie’s company has deals with developers through her program, which means that anyone who works through her company gets outrageous investment deals. 

Panama also has the US dollar, so that’s also comforting for a lot of investors to know.

Relocating to Panama as Part of Your Strategy to Secure Your Retirement

Retirement planning can take many turns, and one of those turns is relocation. The United States is expensive, and as we’ve seen with just healthcare, relocating to a place like Panama may be in your best interest.

Evie states that most residents of Panama can live on a shoestring budget, and you can do this, too.

From homes for $175,000 to beach homes worth millions of dollars, Panama offers everything. Many people live very nicely on $2,000 to $2,500 per month. When comparing prices to the US and Canada, you’ll pay three to five times less in most cases.

And as part of your retirement planning, you can invest in many of the properties that others are buying when they move to the country.

If you want to learn more about Evie Brooks and her business, we encourage you to visit her official website or My Panama Vacation Realty.

Final Thoughts

Investing in Panama, or any foreign real estate, may be a good option for your investment portfolio. Accumulating assets, especially if they’re income-generating rentals, will allow you to diversify your investment portfolio and benefit from Panama’s high GDP growth rate.

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Assisted Living Alternatives

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Continuous care retirement communities (CCRC) are a very popular option for many people considering long-term care. However, today we want to discuss an alternative option that may be better for you.

We recently had the chance to sit down with Marcia Miller of Spill the Beans Institute to discuss assisted living alternatives that are something everyone hitting retirement age should at least know about.

Who is Marcia Miller?

Marcia is the owner and operator of Serenity Adult Family Care Home. She runs a private care home center, and she got the idea after caring for a family member for six or seven years. After starting her journey, it was a real revelation for her.

Private Side of Care Homes vs. CCRCs

When caring for her aunt, she learned quickly what to expect from large communities and private home communities. Large communities have drawbacks, such as not having a bath daily.

CCRCs lack the individual care and attention many people want from their loved ones.

However, when you choose private home centers like Serenity, your loved one:

  • Receives individualized care
  • Saves money
  • One-on-one care

Instead of living in large complexes, these smaller facilities require that the owner lives with the clients. In this case, you receive extreme care that isn’t possible with traditional assisted living centers.

From a standard of care standpoint, these care homes allow for the same high standards as a large care facility with very close care and attention rarely seen outside of a family member caring for a loved one.

Spill the Beans Institute helps caregivers help others go beyond retirement planning questions to teach people how to become a caregiver while providing financial security for themselves.

With this structure, caregivers can:

  • Earn an income
  • Hire a nurse or caregiver
  • Bring in one or two friends for the loved one

Caregiving burdens are relieved with the addition of income and the financial stability to care for loved ones. Of course, people can become a part of these small communities and have the intimate care that people often only offer to their loved ones.

If a person is hospice eligible, they can age in place at their home.

In situations that require round-the-clock nursing care, they may transition to a nursing home that can offer the intensive care the person needs.

Finding Private Care Houses

A person’s diagnosis will determine whether a private care home is the right choice for them. For example, these facilities are not an ideal option for people who are:

  • Combative
  • Requiring intense care

Unfortunately, it’s difficult to find these private care homes. You’ll need to dig deep into local databases to find these facilities. Marcia offers a nonprofit database to help people find private care facilities in Florida.

However, many states have their own care homes that allow you to receive the strong, intimate care you deserve without needing to go into a CCRC.

If you want to learn more about retirement or are concerned about how long-term-care will impact your retirement, contact us to discuss your options with you.

Click here to schedule an introduction call with us today.

5 Retirement Planning Questions

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Even when you’re a week away from retirement, there’s a good chance that you’ll have a lot of questions left. Retirement planning is evolving, and if you want to secure your retirement and sleep well at night, you need to have answers to a few crucial questions.

We’re going to outline retirement planning questions that we receive most often from our clients.

In fact, we’ve compiled a list of five questions that everyone hoping to retire can answer.

5 Retirement Planning Questions and Answers to Secure Your Retirement

1. How Much Should I Have Saved?

How much money is enough for your retirement? This is a difficult question to answer because every family and lifestyle is different. We’ve seen families have millions of dollars in their retirement accounts and struggle through retirement.

Adversely, we’ve seen families with just a few hundred thousand in their retirement accounts have a fantastic retirement.

The total retirement portfolio amount is relative to a family’s lifestyle.

There is also a school of thought that for retirement, you should:

  • Save 25 times your highest-paid salary

Instead, we like working through the numbers for ourselves. If a person has a pension, rental income or other debts or income that factor into the equation, they may need significantly less or more than this figure.

The question of saving enough is understanding how much you plan to spend in retirement. If you want to go on lavish vacations, you’ll need to have more in retirement than the person that’s paid off their home and wants to live a quiet life.

2. When is the Best Time to Take Social Security?

Our number one YouTube video with over 100,000 views focuses on whether a person should take Social Security at 62 or 65. In fact, you can watch this video right on YouTube here.  

Many people are taught to retire at 70 because that’s when you’ll receive the most money from Social Security.

And that’s true.

If you live until you’re 90 or 95, take Social Security at 70. However, what if you lived to 72? You would have been if you had taken Social Security at 62, right?

The answer comes down to this:

  • If you retire early, do you need to take money out of your retirement account to cover Social Security if you don’t take it? For example, do you need to take out an extra $2,000 from your accounts per month to hold off on taking Social Security? If so, you’ll likely benefit from taking Social Security early.
  • If you don’t need the money from Social Security right now, wait until you’re 70 because it will maximize your benefits.

Unfortunately, there’s no one-size-fits-all answer here. 

3. Should I Rethink My Risk Exposure in My Retirement Accounts?

When we have troubling times in the market, many people question their risk exposure. If the market fluctuates, you need to think about your risk exposure. In fact, you should always think about risk exposure to safeguard your retirement.

The way we handle risk is by:

  • Taking your retirement total
  • Understand risks
  • Learning when you get uncomfortable when there are losses
  • Creating a portfolio around being uncomfortable

If you have $1 million, it is crucial to know that if you lose 20%, you’re losing $200,000. Many people will feel uncomfortable at a 10% loss with this retirement amount, but if you have $10 million, you’re likely less scared to lose 10% of your money.

In short, you always need to consider your risk before and during retirement to ensure that you can have a comfortable retirement.

4. Is an Annuity a Good Option for Retirement?

Annuities often have the most questions about when knowing where to put their money. Unfortunately, annuities are very complex, but we do have quite a few articles on annuities that we’ve linked below for you:

Simply put, there are three reasons why you may want to look at an annuity as a good option for your retirement:

  1. You want to build an income that will last a lifetime.
  2. You don’t want to go into bonds and are looking for a safe alternative.
  3. You want to invest in the market and want tax deferral.

For most people, the first two options are the main reasons to have an annuity. Bonds aren’t doing well right now, so an annuity is an excellent option to consider.

5. How Will Taxes Affect My Retirement?

Taxes are always on people’s minds. From a tax perspective, retirement accounts often have their own rules on taxation. For example:

  • 401(k) / IRA are pre-tax
  • Roth accounts are tax-free
  • Brokerage accounts are taxed on gains or losses throughout the year

Each of these retirement buckets has different taxation rules. Then you have Social Security, maybe pension income and so on that may be taxed. People who take Social Security and are still earning an income really need to think about their taxation because they will need to pay taxes on these accounts.

When you’re 72, you’ll need to take the required minimum distributions.

Tax-deferred accounts require you to take required minimum distributions, which will impact your taxes.

Roth conversions are a very powerful option that does apply to some retirees. The idea is to pull money from an IRA and put it in a Roth account, which is tax-free. Since taxes are likely to go up, tax planning is crucial to help you reduce your taxes in the future.

We can even walk you through a retirement-focused financial plan where we answer all these questions and help you fully understand what it means to retire in your situation. If you’re interested in talking to us, we have a 15-minute, complimentary session where we can discuss these details with you.

We have also linked a free course of ours below to help you get started on the right path to retirement.

Click here for our FREE course on how to secure your retirement in 4 easy steps.

Investment Portfolio Strategy

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Risk is a major concern for people nearing and in retirement. When you’re younger, you can withstand higher risk, and you have time for the economy to correct itself even after a significant downturn.

For example, when the market crashed in 2008, many people lost money and had their retirement plans upended.

If you were 70 at the time and had most of your investments in stocks, especially riskier stocks, you didn’t have the same luxury of a 30-year-old who is still:

  • Working to bring in income
  • Actively able to wait out the crash

When you secure your retirement, your investment portfolio allotment should change to be less risky. As we have seen after 2008, there is a trajectory where people are very cautious with their investments after a significant loss, but now, people tend to enjoy more risk.

The fear of the market crashing is well behind us, so risks tend to increase in an investment portfolio.

Risks should be adjusted on your own basis. We promote a risk adjustment portfolio because it helps you sleep well at night and secure your retirement the way you want.

What is a Risk-Adjusted Portfolio?

A risk-adjusted portfolio, for most people, will mean that they want an adjustment to their asset allocation. For example, asset allocation may include buying smaller pieces of the market, such as:

  • Small-cap funds
  • Mid-cap funds
  • Large-cap funds
  • Commodities
  • Tech stocks
  • Pharmaceutical stocks
  • Bonds
  • Treasuries
  • Etc.

If you’re 70 years old, you’ll probably mitigate risks by putting more money into bonds because they’re a safer investment option. Many people create a 60/40 portfolio, where 60% is in equities and 40% is in bonds and safer investments.

Unfortunately, this allocation method may still be too risky for some retirees.

A good example is if you had 60% in the S&P 500 index and 40% in the AGG index (basically a bond index). As you saw in 2020, the S&P fell over 30% and even further in 2008, 60% of your money can lose 50% of its value overnight.

When it comes to returns, there are two things to consider:

  1. Year-to-date returns, which are how much the stock or portfolio netted you in the last year or a specific year.
  2. Max drawdown is where a portfolio goes up, peaks, and goes down. Peak and bottoms aren’t the best ways to look at investing, so we like to look at yearly changes because markets fluctuate, and max drawdown can be very emotional to see.

Since 2001, the max drawdown on a 60/40 portfolio is 36.7%. If you look at this from a retirement standpoint, how would you sleep at night knowing you lost nearly $370,000 or the $1 million you saved for retirement?

Most people would lose sleep over this figure.

Investment planning helps you lower the max drawdown. However, every investor has their own way they want to invest. Traditionally, you’ll find two main trains of thought when investing:

Our approach is slightly different, and it has worked well for our clients.

Risk Adjusted Portfolio by Supply and Demand

The supply-and-demand concept is simple: when things are in demand, let’s be a part of it, and if it’s not in demand, let’s not be involved. What does this mean in the world of investing?

If stocks are doing exceptionally well, we can go all-in on them with 100% of assets.

When risks get higher, we might go all into bonds or move most of a portfolio into bonds. On the other hand, if things get bad, it may mean putting 100% of our money into cash and holding it until other investments start recuperating and going back up.

Supply and demand allow us to make smarter investments, make money and fight back against risks, too.

A recent example of this happened in March of 2020:

  • The pandemic hits, not many people have been through one, and the market falls 34%.
  • A risk-adjusted portfolio helps protect against that.
  • Our risk-adjusted portfolio fell just 9%, while non-risk adjustments led to 34% losses.

The current state of bonds is a prime example of when bonds don’t work. Inflation is leading to the potential of an interest rate increase, which will lead to lower bond returns. Negative bond returns occur when interest rates rise, and the Federal Reserve is planning to raise interest rates to slow inflation.

So, what does someone trying to find an alternative to bonds do if bonds are at a negative return?

Fixed annuities may be an option because they do offer safe growth. These annuities are an insurance option, and when the bond market falls, this is an option. However, returns are more conservative.

These annuities do have liquidity issues to consider.

For example, most annuities only allow you to take out 10% of your investments a year. You’ll have access to this money, but the limit does make it less inviting to invest in annuities.

We like to put some money into annuities while also diversifying into other options, such as the stock market. Diversifying allows you to access 100% of the liquidity of non-annuities while accessing 10% from the annuity per year.

Final Thoughts

Risk adjustment is a major part of smart investing, but there are multiple ways to adjust and tackle your risks. While we’ve covered a few ways in this post, you may have another risk adjustment method that you prefer.

The idea is to know the many options available to you so that you can adjust your risk in a way that makes the most sense to you.

Do you need help with retirement planning or with an investment portfolio strategy? We can help.

A good place to start is by taking out 4 Steps to Secure Your Retirement Video Course.

However, if you want to connect with us to review your investment portfolio and seek one-on-one investment advice, schedule an introduction call today.

What is Legacy Planning?

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Retirement planning is at the forefront of many people’s minds when they near retirement. You’ve worked diligently to save for retirement, and the big payoff is finally nearby. However, you may also want to start thinking about legacy planning.

We recently had a chance to sit down with Angelina Carleton to discuss designing your legacy plan.

Who is Angelina?

Angelina was a commercial real estate broker 10 years ago and worked with multimillionaires. She was working at an event where the topic was private prisons. As she looked around the room, she questioned whether these individuals realized that they were profiting off the misery of others.

As she went to her car, she asked herself if it was time to leave the commercial real estate sector and go into coaching.

What if she could convince all the financial representatives at the event to invest in something other than private prisons? Through her research, she couldn’t find a coach to help her create a legacy.

What was the solution?

Fill the gap. Angelina realized through her coaching that once people change, it impacts others around them, too. Angelina has helped others figure out their legacy plan and helped them reach this goal.

What is Legacy Planning for Angelina?

For many people, legacy planning means leaving money to their kids or grandchildren. People think of their homes, money, and other material things, but legacy planning is much more than that.

Angelina’s definition of legacy planning is a bit different than the definition you’ll find in the dictionary.

For Angelina, legacy means integrity and being true to yourself while being here. Of course, you can leave money to friends and family. However, people also want peace of mind in the legacy that they leave behind.

When coaching, she can help people get “unstuck.”

She wants to help people understand why they do what they do during their lifetime. When a person can get to know themselves beyond their careers, they can truly see what their theme is in life.

Unfortunately, many people don’t allow themselves to become who they really are until retirement.

A person may be a leader in the business world, but that doesn’t mean that they want to be in this position. Instead, through coaching, Angelina helps people open to who they really are at a younger age so that they can leave behind their own legacy.

A few questions to ask yourself are:

  • If you didn’t have to impress anyone, who could you be?
  • If you didn’t have to get it right, what could you create?
  • If you had nothing to prove, what would your legacy be?

For many people, they can’t answer these questions immediately. However, in one, two or four weeks, people have the answer because they allow it to marinate.

When you don’t have to fit a certain mold, you can create the true legacy that you leave behind. The legacy that goes beyond assets and talks about the way that you live your life, too.

Leaving Your Legacy Plan Behind

Angelina asks to tape all her sessions with clients, and if they approve, she gives them a big book of all the key points that were discussed during the coaching contract. These books can help you leave the legacy you want behind.

For example, let’s say that you run a family business and want to leave it to a successor.

When the successor goes into the head role, they may or may not be ready for this big role and responsibilities. They may not know the company’s:

  • Vision
  • Mission statement
  • Values
  • Guiding principles
  • Etc.

Aligning these values and principles is important because when these individuals come into an inheritance, whether it be money, a business, or others, it can help them create the legacy they want.

Who Should Be Designing Their Legacy?

Surprisingly, designing a legacy isn’t for everyone. Generally, people who have had coaching of some kind in the past excel in designing their legacies. Coaching is a broad term, but this can be people who have worked with:

  • Sports coaches
  • Business coaches
  • Personal trainers
  • Etc.

There needs to be a high level of trusting the process when working with a coach to really extract the maximum value possible.

Legacies aren’t for the lucky. They are only for those willing to perceive.

Angelina’s approach to legacy planning is a lot different than the normal financial legacy planning that we’re used to in our practice. Instead, this is an approach that looks at your life and what it means to truly be yourself.

Instead of an estate plan or financial legacy, this is the legacy of what it means to be you, including your values, guiding principles and beliefs.

For example, some of the clients Angelina is working with have started to try and save the planet and solve some of the problems in the world. This is the type of legacy planning that Angelina has to offer.

If you need help finding the true legacy you want to leave behind, you can go to Angelina’s website to see what she is all about. 

Click here to go to Angelina’s website.

There are many approaches you can take with legacy planning. If you need help with the financial side of legacy planning, we can help. Simply call us at (919) 787-8866 or click here to schedule an introduction call with us.

Retirement Strategies

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Retirement requires unique strategies to help you live the lifestyle you want when you retire. Since every firm is set up differently, it’s crucial to understand the differences between retirement strategies and how these firms work to secure your retirement.

In this post, we’re going to shed some light on how we’re set up as a firm and how many others are, too.

However, we’re not here to sell you on one strategy or firm style versus another. Instead, we’re going to explain the options you have available to find a solution that works best for you.

How Most People Enter the World of Retirement Planning

Many people start really thinking about retiring and delve into the world of investing once their career picks up. For most people, they’ll follow a few steps:

  • Set up an investment account, put money into the account and watch the stock rise or fall
  • Start putting money into a 401(k) at work

As you start thinking more about your financial future, you’re likely going to want some help from a financial advisor. These are professionals that will help you invest your money in a way that best meets your retirement goals.

With that said, the firm’s approach and retirement strategies may be different from what you would expect.

Ideally, you’ll talk to 2, 3 or even 5 financial planners, and you’ll quickly start to notice that each recommends a different approach to meet your financial goals.

What are the approaches you’re likely going to come across?

Investment Advisor

An investment advisor is who you seek out when you’ve invested some money on your own, but you want some professional help managing your portfolio. These professionals will help you invest and grow your portfolio.

Unfortunately, these advisors won’t assist with:

  • Tax planning
  • Estate planning
  • Etc.

If your sole goal is to grow your money in the markets, an investment advisor offers exceptional services to help you achieve this goal.

Hands-off Financial Advisor / Plan Creator

If you have the mentality that you want to execute a plan on your own but need someone to help you develop the plan, there is an advisor that can help with that, too. These professionals will:

  • Create a financial plan
  • Allow you to execute the plan

These hands-off professionals offer you a one-time fee plan that will take all of your goals into account and devise a plan to meet these goals. Unfortunately, if your goals change in the future or something doesn’t go as expected, there’s no additional help provided due to the one-time fee.

One-stop Shop

A one-stop shop is what we’ve tried to transition into with our business, and it’s a more robust solution for our clients. When working with a one-stop-shop, you receive help with:

Using a holistic approach, these advisors will work with you to meet your retirement goals and your lifestyle goals.

When you’re working on your retirement strategy, you may want to:

  • Hire a professional who does everything for you
  • Work with someone on just investments
  • Execute a plan from a professional

Thankfully, the financial industry has professional advisors who can help you through each of these categories. Some clients want to be very hands-on with their retirement planning, while others want to understand the plan yet want someone to handle all the logistics.

Why a One-stop Shop or Comprehensive Service is What We Offer

Throughout the years, we’ve learned a lot about our clients. While everyone has their own preference on how to handle retirement, many people want someone who can help in the various areas of retirement, such as estate planning, tax planning and everything else.

In fact, we have built out our services to the current state, which looks something like this:

  1. Build a retirement-focused financial plan
  2. Create an income plan
  3. Build out an estate plan

We’ll even work with your CPA or other advisors to help ensure that we’re all on the same page and working to create the retirement you envision.

Truly, the financial plan we create is the foundation of our client’s success. Once we have this plan in place, we can begin looking at investments, taxes, estate plans and more.

When we create a retirement financial plan, we look at multiple parts:

  • Where you’re at today with your retirement
  • What your goals are for retirement
  • How many years out you are from retirement
  • How much have you accumulated?
  • How much will you continue to accumulate until retirement
  • Your lifestyle wants in retirement

Once we go through all these points, we have a much clearer picture of what your retirement can look like and how to reach this phase in life. We’ll then look at lifespan and delve into estate planning.

If you think there will be money left after retirement, you can then start deciding who to leave your money to when you’re gone.

However, we also answer questions on:

  • When it’s best to retire
  • If you retired today, what your finances would look like
  • Survivorship questions and so much more

Building out the foundation of your retirement plan allows us to see what happens if you need long-term care or a spouse dies. Or, if you purchase another house, how would it impact retirement?

Multiple Financial Professionals Under One Roof

When you work with a one-stop-shop or comprehensive financial planner, you’re opting to work with someone who can bring in other professionals to help you. We’re not accountants, but we have accountants that we work with who help our clients deal with:

  • Tax strategies
  • Tax planning
  • Retirement account conversions
  • Etc.

Since we put this system together, there are no additional charges for speaking to one of these professionals.

When choosing someone to help you with your retirement plan and strategy, it’s crucial to ensure that these professionals evolve and change over time. Economies and markets are changing, and if the person you trust with your retirement planning doesn’t evolve, your retirement will suffer.

If you need help trying to find peace of mind in your retirement, we can help.
Click here to read our newest book, called Secure Your Retirement.

New Tax Laws 2022

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A new year brings a variety of new tax laws to concern yourself with. For anyone working on their retirement planning or in retirement, it’s crucial to keep on top of the new tax laws in 2022 because they will impact your plans – even slightly.

Ordinary Income Tax Changes

Your ordinary income tax, or the taxes you’ve paid all your life, aren’t going to see many changes in 2022. We’re seeing a few tax brackets, including:

  • 10%
  • 12%
  • 22%
  • 24%
  • 32%
  • 35%
  • 37%

Earnings will determine which bracket(s) you fall into this year. While the percentages haven’t changed this year, the income ranges have changed. For example:

  • Income of (single: $10,275 or married: $20,550) or below – 10%
  • Income of (single: $10,276 – $41,775 or married: $20,551 – $83,550) – 12%
  • Income of (single: $41,776 – $89,075 or married: $83,551 – $178,150) – 22%
  • Income of (single: $89,076 – $170,050 or married: $178,151 – $340,100) – 24%
  • Income of (single: $170,051 – $215,950 or married: $340,101 – $431,900)– 32%
  • Income of (single: $215,951- $539,900 or married: $431,901- $647,850) – 35%
  • Income of (single: $539,900+ or married: $647,850+) – 37%

However, if you make $432,000 as a married couple, you would be in the 35% tax bracket. Due to being in the tiered tax system, you would pay into all the previous tax brackets. The first $20,550 is taxed on 10%, the amount of money from $20,551 to $83,550, you’ll pay 12% and so on.

So, you’re not paying a flat 35% in taxes. In fact, you’re only paying 35% on $99 if you made $432,000.

You can determine your effective tax rate by calculating the sum of the money you pay in taxes divided by your adjusted gross income. For example, if you paid $100,000 in taxes on an adjusted gross income of $432,000, you would use the following equation to determine your effective tax rate: ($100,000/$432,000) * 100 = 23.15%.

If you have a Roth IRA, you can convert some money to remain in your tax bracket using a Roth conversion.

For example, let’s assume that:

  • You have an adjusted gross income of $85,000
  • You want to convert as much as possible and stay in your tax bracket of 22%

In this case, you can convert from $85,000 to $178,000 at the 22% tax bracket

If you need someone to walk you through these figures based on your exact income, we can help you with that. In fact, our software will outline all these scenarios for you to help you better understand what you can do with your money to save on taxes.

Click here to schedule a complimentary call with us.

Note: Tax cuts were put in place under the Tax Cuts and Jobs Act of 2017. These tax cuts are set to expire in 2026, but this can change if no changes are made by then. In 2026, this would mean that a person in the 12% tax bracket would be bumped up to a 15% tax bracket. A few other brackets will go up, too.

Standard Deduction Changes

The standard deduction has gone up in 2022, but it is a small increase. However, when trying to secure your retirement, every dollar counts. Changes to the standard deduction are:

  • Single person: Deductions are up from $12,550 to $12,950
  • Married person: Deductions are up from $25,100 to $25,900

While the increase is small, it is an excellent way to save a little more money. Standard deductions come directly off your income every year. Let’s assume that you make $50,000 as a single person. The standard deduction pushes your adjusted gross income to $37,000.

Itemized deductions may also be an option for you.

However, due to the higher standard deduction, it may not be in your best interest to itemize deductions anymore. You really need to sit down with a CPA who can look over your current income and tax situation to find the best strategy to keep your tax burden down.

401(k), 403(b), 457 Plan Changes

Are you doing salary deferral into one of these retirement plans? If so, there have been changes that allow you to put a little bit more money into these accounts. The maximum that you can put into these accounts has gone up $1,000 from $19,500 to $20,500.

On top of that, if you’re over age 50, you can make a catchup contribution.

If you’re over 50 this year, you can make automatic salary deductions of up to $20,500 and put up to $6,500 as a catchup this year. These catchups allow you to put $27,000 into these accounts in 2022.

SEP Plans for the Self-employed

A self-employed pension plan, or SEP plan, works like a 401(k) and IRA hybrid. You can contribute $61,000, up $3,000 from the year prior.

FSA and HSA

If you have an FSA or HSA, the contribution limits on these two also went up.

  • FSA – From $2,750 to $2,850
  • HSA – From $3,600 to $3,650

Capital Gains Changes in 2022

New tax laws for capital gains are also in place in 2022. For example, if you have a stock with a capital gain and sell it prior to one year, it’s a short-term capital gain that is considered regular income.

However, if you held the same stock for over 365 days, it’s a long-term capital gain.

In 2022, you can have a long-term capital gain of $83,000 without having to pay taxes on it. However, there are a few calculations that you need to know here:

  • You can go up to $517,000 with a 15% tax rate
  • $517,000+ has a 20% tax rate

It’s important to note that these factors do not count for a 401(k) or your normal retirement accounts.

Social Security Taxes

Social Security is taxed for some individuals, and this is a shock for many people. Social security is taxable if you are:

  • Married and have an income of $32,000 to $44,000 per year. Up to 50% of your social security income is taxable.
  • Married and making over $44,000 in annual income. Up to 85% of your social security income is taxable.

Keep in mind that the figures are different if you’re single. 

An example to go with these figures is to assume that you have $2,000 a month in social security and have a taxable income of $40,000. You’ll have to pay taxes on $1,000 of the $2,000 you have from Social Security in this scenario.

Medicare Part B Premium Rise

In 2021, if a person made $0 to $176,000, premiums for Medicare Part B were $148.50. However, in 2022, this premium is now $170.10. Since these are monthly premiums, this is a major difference.

If you make over $182,000, you will pay a higher premium based on a tiered rate.

While the premium increase may not seem earth-shattering, it is still worth considering.

Social Security Under Full Retirement Age

If you’re taking Social Security and are under the full retirement age, you can make $19,560 before being penalized at age 62. Retiring early and drawing Social Security while still having a part-time job can have penalties attached, which every retiree should know.

Roth IRA Contribution Changes

A Roth IRA allows you to contribute the following amounts per year if you earned the following:

  • $6,000 for anyone under 50
  • $7,000 total for anyone over 50

You can only contribute what you earn, up to the above amounts. Additionally, there’s a phase-out at $198,000 for married couples filing jointly in 2022. However, if you make $208,000, you cannot contribute to the Roth account.

Roth IRAs are an excellent account to consider because money can grow tax-free in these accounts.

While this is a lot to take in, it’s crucial that you talk to a CPA to discuss the options you have available to better understand recent tax changes.

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Economy Forecast for 2022

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In our most recent podcast, we were able to sit down with economist Andrew Opdyke to discuss what to expect in the economy in 2022. If you want to listen to the podcast, we encourage you to sign up here.

When you’re working to secure your retirement, the economy will have a major role in how your portfolio will perform.

The forecasts for 2022 are never set in stone, but they can help you get an understanding of what type of fluctuations your portfolio may see this year. However, before we dive into some of the questions we discussed with Andrew, let’s look at what transpired in 2021.

2021: Year in Review

For many people, 2021 was an interesting year because of everything that happened in 2020. At the end of 2020, vaccines came around, and many people viewed 2021 as a recovery year. But unfortunately, we’re still talking about COVID-19 to start this year.

Massive vaccinations have taken place, with signs that the latest wave of COVID-19 from the Omicron variant may lead to less hospitalization.

However, in 2021, we saw some differences in the market, such as:

  • Strong profit growth from S&P 500, small- and mid-cap
  • Emotions led to some volatility
  • Double-digit growth for many stocks

Overall, 2021 was a good year for retirement planning and the market because major companies still posted high profits.

Entering the 2022 Year

Heading into 2022, we’re expecting less of a change in volatility and business going forward. We expect that in 2022, the pace of growth will moderate as businesses want to see if they can get jobs back and continue growing.

With that said, the supply chain is a major concern.

Supply Chain

The world hasn’t seen a supply chain issue like we have had since the pandemic. At the beginning of the current wave of the virus, we’re also seeing supply chain issues that are leading to:

  • Rising inflation
  • Slower product delivery

Large numbers of truckers and other people involved in the supply chain are off work because they’re sick or recently tested positive for COVID. As a result, the supply chain has slowed to start off the year.

However, we see the supply chain recovering.

Shutdowns and shelter-in-place orders are unlikely in 2022, and we expect that this will allow people to continue going to work. We expect 300,000 to 350,000 jobs added per month. If we’re correct, the job figures in 2022 will pass the pre-COVID figures by the end of the year.

Ultimately, we’re still down 3 million jobs to start the year, but it’s widely expected that this figure will continue to drop as we move into the mid-year.

Demand remains very high now. The stimulus helped with this to some extent, so there may be some slowing here. Stimulus checks aren’t coming again, as far as we know, but demand remains incredibly high, which is good for business.

Inflation Predictions

Inflation may continue to rise to start the year. Supply chains are still running, albeit slightly slower due to the recent variant. 

The good news?

In mid-2022, it’s fully expected that inflation will begin to taper off and fall back to traditional ranges of 3% to 4%.

Politics and How It Plays In the 2022 Economy

Politics will always play a role in the national economy, and there are a few things we’re seeing right now that may impact the economy this year:

  • Massive infrastructure bill discrepancies
  • Child tax credit may not be in play

Also, 2022 is a mid-term election year. In November, there will be some disruption in the political sphere which may help or hurt agendas going forward. The infrastructure bill is still in the works, and there’s hope that it will pass in some form.

Adding in infrastructure right now will take a few years to really pick up the pace, even if the bill was to pass today.

Due to a lack of capacity, there’s no feasible way to see crews on the road next week building bridges if the bill passed today. These types of bills and their impact take a while to be put in place logically once they pass into law.

Build Back Better Bill

The Build Back Better bill, which has been tampered down, has a lot of corporate tax hikes associated with it. The closer we get to reelection, the less likely we will see this bill pass. Politicians don’t like to raise taxes during an election year, so it’s a bill that is likely not going to pass in 2022.

Maybe the package passes at $1.5 trillion or less, but if it does, there’s also a good chance of a party change on the House level as a result.

Markets That May Recover Due to a Current Lack of Manpower

In 2020 and 2021, earnings growth numbers were substantial in 2021.

Why?

The drop in earnings in 2020 put the benchmark low and kicked off tremendous growth in 2021. However, 2022 is likely to see growth fall out of the double digits for these companies and back into the 8% to 9% range.

Market growth rates are expected to fall back to typical levels.

Also, price-to-earnings for many companies is expected to really play a factor in stocks readjusting. Many companies saw these values increase on expectations that never materialized.

Of course, there’s also a price concern as inflation rises and perhaps demand falls, leading to better prices for consumers but lower earnings for corporations.

Earnings quality will matter a lot in the coming year.

Small- and medium-sized businesses may also start to come back if we can tame COVID and avoid another shutdown. While mega-caps did well in the past year, these smaller companies are set to come back a little stronger in 2022.

With that said, keep a few points in mind:

  • Markets are unlikely to grow at the same rate as they have over the last 2-3 years
  • Companies with solid profit margins will continue to do well
  • Small- and medium-sized companies may experience the most gains

Expectations of super growth need to be tamed because the high growth is unlikely to continue in 2022 because it really can’t.

Concerns and Expectations for the 2022 Year

Government and Federal concerns exist because the response on these levels will have a major impact on the markets. The response to inflation will be a major focal point because the government downplayed inflation, stating that it was just short-term.

However, we’re now seeing that inflation isn’t short-term and is still sticking around.

The Fed did start to change its tune at the end of 2021. If the Fed addresses inflation, it will help keep the economy high. Unfortunately, if the Fed doesn’t raise the interest rate and tackle inflation, it will lead to market volatility.

We certainly need to keep a close eye on what the Fed does to fight inflation.

If nothing is done to tame inflation, we expect it will significantly impact the markets going into the end of the year.

Surprises and Bright Points in 2021

One of the best points of 2021 was that we learned:

  • People adapt
  • Companies adapt

From an economic growth standpoint, we’re at a new growth high that hasn’t been seen since the 80s. We’re also producing more with 3.5 million fewer workers, so all of these are very bright spots for 2021.

The embracing of technologies and productivity tools will continue to help the market in the coming years.

Earnings growth was real in the past year, but now it’s time to move into 2022 and hopefully return to the fundamentals.

Hopefully, in 2022 we go back to the fundamentals where there are no questions of stimulus, supply chain issues and shutdowns. The last time we’ve seen the money in the system that led to growth was after WWII.

In fact, the funds pushed into the market led to the industrial revolution.

Now, with the influx of cash in the market and government dollars, we may be on the cusp of a new revolution in 2023 and beyond. It’s an exciting time to look at the year ahead and see what companies can make happen with all the money available and in high demand.

The markets may not grow like they did in 2021, but the possibilities in 2022 and 2023 are impressive and should provide long-term, sustainable growth.

Do you need help securing your retirement?

Click here to join our complimentary course: 4 Steps to Secure Your Retirement.

2022 Retirement Issues to Consider

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January is here, and while you may have quite a few goals ahead of you this year, one of them should be your retirement. Whether you’re retiring in 2022, 2026 or just retired, there are a lot of things to consider.

Everyone, depending on their situation, needs to think a little about their retirement.

We ask you to start right now by writing down your goals, such as:

  • Savings goal
  • Income goal
  • Family goal

Even if you’re retired, you should have a goal. Maybe 2022 is the year to see family members you haven’t seen in a long time. January is the time of year to set goals, and it is so emotional when you look back at your goals and notice that you’ve checked a few goals off your list.

However, we’re going to be diving into other retirement issues and what we recommend that you do to start the year off right.

Getting Your Cash Flow in Order

If you’re still saving, you’re on the accumulation side of cash flow. Right now, you should sit down and consider any extra cash you may have from:

  • Raises
  • Side hustles
  • Business opportunities
  • Work opportunities

Understanding your cash flow is crucial, and it’s important to know whether you can expect any additional or less income this year. Make notes on the income and expense side of cash flow.

You might have paid off a mortgage – which is huge – and that’s going to drastically change your cash flow.

Knowing how much cash you have available allows you to contribute more to your:

  • 401(k)
  • IRA
  • Roth IRA
  • Etc.

You might find that you can work towards maximizing out your 401(k) this year. If you have a spouse that doesn’t work, they can also contribute to an account in their name based on your income to reduce your tax burden further.

Anyone qualifying person with a Roth IRA can contribute to their account with tax-free growth.

Cash flow has a lot of moving parts, but it’s an area that you really want to focus on this year when planning for your retirement. 

Benefits

If you have certain benefits, you may want to begin thinking of ways to maximize certain accounts, such as your:

  • HSA
  • FSA

With an FSA, you need to use a certain amount of money or lose it this year. Take the time to ensure that you’re utilizing this money so that you don’t waste it.

Retirees – those lucky folks who are already enjoying life after work – you need to think about:

  • Required minimum distributions (RMDs). You will be required to begin taking these distributions at 72. You’ll suffer a significant penalty if you miss your RMDs.
  • Qualified charitable distribution (QCDs). You can use an RMD to donate to charity.

You need to take the start of the year to really look at your cash flow, all the money coming in and going out, and make a yearly plan on what steps you need to take this year for your retirement. 

Next, we’re going to be talking about another major consideration: assets.

Asset Overview

You need to have a thorough review of your assets at the start of the year, and you need to look at emergency funds, savings accounts and so on. For example, if you have a lot of money in the bank, you might want to think about putting some of this money into an account that can earn interest.

You might want to investigate opening a brokerage account, bonds, or something other than a savings account that earns you very little.

Next, you need to consider risk tolerance.

What is risk tolerance?

How much risk can afford to lose in the market? For example, if you have $100,000 and you lose 10%, are you okay with losing that money? If so, think about whether you had $1 million and lost $100,000 of that money.

In both cases, you’re down 10%.

It’s crucial to review your risk tolerance. Major events can change your perspective, too. A few major life changes that add or remove risk are:

  • Marriage
  • Paying off a house
  • Loss of a spouse
  • Etc.

Risk is always evolving, and you need to reallocate your assets as your risk goes up and down.

Additionally, we’re in a market where interest rates are very low. Mortgage rates are still under 3%, which is very beneficial. So, if you are interested in refinancing, now is the time to consider it because we may never see rates this low again.

Debt reduction is a major part of your wealth, so it’s crucial to consider:

  • Refinancing
  • Paying off credit cards
  • Tackling high-interest debt

Debt holds you back from reaching your financial and retirement goals, so work towards eliminating it in any way that you can.

Tax Issues and Concerns

Taxes are coming up, so it’s time to expect your 1099s, W2s and so on. Unfortunately, the government isn’t going to offer an extension this year – not yet. So, April 18 (it’s a little different this year) is the tax date.

A few of the things we would like you to do to jumpstart your tax planning are:

  • First, contribute to your IRA, which is allowed until your filing date.
  • Track your realized gains and determine whether you have losses that can offset these gains.
  • Consider your Roth conversions. These must be done by 12/31, so start thinking about that now.

You’ll also want to begin gathering all your documents, including any information on charitable donations, to have everything you need when you go to see your tax advisor.

Finally, we want to discuss a few legal issues and concerns.

Legal Considerations Going Into 2022

Annually, it’s crucial to review your estate plan and ensure that you have all of your most important documents in order. Primarily, there are two main documents that we’re going to talk about, but there are many that need to be considered.

The two big ones are your:

  • Power of Attorney
  • Medical Power of Attorney

If you’re married and have an IRA, your spouse cannot access the accounts without a Power of Attorney. Families that rely on IRAs to pay their bills will need to have a Power of Attorney because if it’s not present, there’s no way to legally access the money in the account.

You’ll also want to consider reviewing, creating, or updating your:

  • Will 
  • HIPPA forms
  • Etc.

It’s crucial to have all these documents updated if you have already created them. 

It’s easy to procrastinate when you have an estate plan because no one wants to think about their demise. But unfortunately, we’ve seen far too many people think they’ll live forever and something drastic upends their plans.

You can’t predict the future, but you can opt to put all your estate planning documents in place to ensure that all your wishes will be followed if you pass on or become incapacitated.

While there’s a lot to think about in 2022, it’s crucial to begin thinking about the points above now.

You’ve worked hard to get where you are in life, and a quick annual checkup of things will allow you to continue living the life that you built for yourself.

If you’re not listening to our podcast already, we encourage you to sign up for it here.

Retirement Before Medicare

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Medicare begins at age 65 for people in the United States, so if you enter early retirement before this threshold, you’ll be retiring before Medicare. Most people that come to us will say that they want to work until 65, 66 or even 70.

Since we believe in retirement planning using concrete data, we’ll plug in the person’s figures and forecast what their retirement may look like.

For some people, they’ll find that they have significant money leftover at age 90, so they want to see what happens if they retire at 62. We can easily run these forecasts, but there are a few things that occur when you start thinking of retiring early.

Early Retirement and a Few Factors to Consider

If you can secure your retirement by 60, it’s a wonderful feeling. You’ve done everything properly, and now you’re able to enjoy your life a little more. However, if you do retire early, there are some factors you need to consider.

Medicare

Medicare is going to be unavailable until you’re 65, and if you’re no longer working for a company that offers health insurance, you’re now on your own. Health insurance expenses will be a major factor, especially with rising insurance costs.

Lost Income Potential

If you retire before 65, you’re no longer paying into Social Security, nor are you able to allow your investments to accumulate as much money as you would if you stayed in the workforce. Of course, this is a tradeoff of early retirement, but it’s something to consider based on your current financials.

Potential retirees that are trying to make all the calculations on their own may miss crucial factors that help shape their retirement plans. We use special software that can easily be adjusted to add in:

  • Special expenses
  • Fun funds
  • Additional expenses or income

Running what-if scenarios, such as retiring before Medicare or if rates rise for Medicare, can help you better understand your retirement potential.

While you may be a master of Excel, it’s far too easy to miscalculate your funds or miss a calculation that throws off your retirement figures in both directions.

Real-time output and reports are crucial to outline whether you have enough money to secure your retirement and what can happen if you do retire before you’re eligible for Medicare.

Social Security

Another thing to consider if you’re retiring early is that you will pay less into Social Security. You can start Social Security as early as 62, and your contributions stop at 70. For some people, they plan on retiring at 65. If you’re working and have ample income, it doesn’t make sense to take Social Security.

Instead, in the scenario above, it makes the most sense to let your Social Security build so that it’s higher when you do retire.

Some people will retire at 65 and not take Social Security until they’re 70 to maximize their benefits. We like to run figures until a person is 90 to have a good idea of what it means to take Social Security.

Ideally, we run figures for taking Social Security at:

  • 65
  • 67
  • 70

It may seem like a no-brainer to take Social Security at 70 because that’s when your benefits will be their highest. However, if you must take money out of your retirement account because you stopped working at 65 and don’t take benefits until you’re 70, this will impact your retirement, too.

For example, if you still have $500,000 in retirement funds at 90, why would you wait to retire?

You’re unlikely to use all your retirement before your demise at that point. If you’re holding out on Social Security and continue working to maximize these benefits, will they really matter in the whole spectrum of things?

There’s a lot to think about if you plan to retire early, and it’s a very individualized thing.

You might want to help pay for a person’s wedding, renovate your house, and make other big purchases. If you’re retiring before Medicare, these expenses may be fine, or they may leave you taking money out of your retirement accounts earlier than expected.

If you do plan to retire a little earlier, we recommend running the figures to have a clear picture of:

  • What your health insurance costs will be.
  • What happens to your retirement accounts because you’re paying for insurance out of your investment accounts?
  • Etc.

Ideally, you’ll work with someone, like us, who can run the numbers for you to plug in all these variables and what-if scenarios. We can even forecast what happens if you plan to retire at 55, so you can have a clear picture of how realistic retirement is for your situation.

If you need help running these reports and want to know what your retirement before Medicare may look like, schedule an introductory call with us.

How To Create an Estate Plan Without the Stress

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Retirement planning is what we do on a daily basis, but there’s one thing we come across frequently that astounds us: people with millions of dollars in assets don’t have an estate plan. If you’re in this group or simply don’t have an estate plan in place, it’s time to start thinking about one.

No one wants to think about their demise, but it’s one of the certainties of life.

We had the opportunity to sit down with Andres Mazabel from Trust & Will* to discuss how to create an estate plan without stress. However, before we go into the process of estate planning, we must answer one fundamental question.

Why Do People Avoid Creating an Estate Plan?

We see many people, smart and wealthy people, who don’t have an estate plan. Even if you’re not a millionaire, an estate plan is a very beneficial tool to have in place. The main reason that people seem to overlook this tool is that they’re not educated on the importance of these plans.

In fact, most individuals don’t fully understand:

  • What an estate plan offers
  • What goes behind an estate plan
  • The options they have available
  • How to create an estate plan

Sure, we see many people just put off their plan until a later date because “they don’t have time,” but most people don’t have an estate plan because they don’t understand it and they’re expensive.

People don’t want to spend $2,000 to $5,000 (sometimes less, sometimes more) to create an estate plan.

Also, people don’t want to talk about death. Ironically, the pandemic has started to change this perspective because people are realizing that an estate plan helps ensure that a person’s family is taken care of upon their demise.

Probate can cost thousands of dollars and months of time if you pass without having these documents in place. 

Documents Everyone Should Have as Part of an Estate Plan

Estate plans aren’t just for the wealthy. In fact, even if you have minimal assets, you should still have an estate plan in place. A few of the many documents that should be part of your plan are:

  • Will-based plan. A will-based plan is the most basic form of an estate plan because it outlines the beneficiaries of your assets and the executor of your estate. You can also assign a legal guardian in your will who will be responsible for your child’s wellbeing.
    • Power of Attorney. If you’re incapacitated, a Power of Attorney will allow a person to make a decision on your behalf. 
    • Living Will or Healthcare Directive. Estate planning isn’t just about death. If you’re unable to make your own medical decisions, a living will can outline which medical intervention and procedures you want to take place. HIPPA authorization can also be created to allow a loved one to know about your health condition.
  • Trust-based. Many people will create a trust-based estate plan, especially if they have more assets. The plan allows you to dictate what happens to your estate and when. For example, you can distribute money to your child when they graduate college or reach a certain age.

Trying to secure your retirement is a good thing, but you need an estate plan to dictate what happens when you’re no longer here. You worked hard for all your assets, and an estate plan empowers you to leave these assets to others.

It’s crucial to understand that an estate plan evolves as your circumstances change. Your estate plan today will likely not be the same 10 years from now. Therefore, when you draft an estate plan, it’s crucial to update the plan throughout your lifetime.

Perhaps you don’t want your dear aunt Sally to become your child’s guardian anymore.

You can change that in your plan.

State Specific Estate Plan Updates

Every state has its own specific language that helps outline estate planning requirements. While the language doesn’t change much from one state to the next, you’ll want to have a local attorney overlook the plan for you if you do relocate.

Federal and state-specific changes may be made, and something as simple as a change of Power of Attorney form needs to be addressed.

For example, New York changed its Power of Attorney forms last year, so filling out the new form was a necessity for anyone who had an estate plan in place already.

Even if you haven’t moved states, you should have someone look over the plan every five years to ensure that it meets current requirements. Plus, your wishes may change, and a quick review can help you keep your wishes up to date.

How Long Does It Take to Create an Estate Plan?

Time is a major factor when creating an estate plan. Often, if you have all your documents and wishes available, you can complete the plan within a single visit to a lawyer. However, if you use a platform like Trust & Will, you can complete the estate plan in 30 to 45 minutes.

Trust & Will is the TurboTax of estate planning and allows you to create:

  • Trusts
  • Wills
  • More

And the platform has all the crucial documents that go into an estate plan mentioned previously in this article. Lawyers and additional help are provided through the platform if you need more assistance.

We use Trust & Will for our clients who are working on their retirement plans but don’t have an estate plan in place just yet. 

Of course, you can also go through your own lawyer to have your documents drafted.

The most crucial thing is that you sit down and really draft up your estate plan. Spending 45 minutes or less today can help save your estate months of hardship if your estate goes into probate because you didn’t have these documents in place.

If you haven’t already, we hope that you’re thinking about creating an estate plan today.

If you want to listen to other experts, we have professionals on our podcast every Monday.

Click here to listen to our podcast.

*-https://trustandwill.com/

Fees, Commissions, and Being a Fiduciary

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When shifting from one financial advisor to another, there are many questions that you should be asking. However, there are two main questions, which we’ll be covering today in great detail:

  1. What are your fees and commissions?
  2. Are you a fiduciary?

Fees and commissions are going to be tied into the advisor’s offering in some way, so you must know how your advisor is being paid. Choosing the right financial advisor is a process, and you need to really have a firm understanding of fees, commissions and being a fiduciary to safeguard your retirement.

What are Your Fees and Commissions?

Fees have been a central focus point of big brokerage companies like Charles Schwab and TD Ameritrade. The entire industry has been in a “fee” war where they’ve tried to compete in the fee department with each other, and fees fell.

For you, lower fees are always a good thing.

Transaction costs have also practically disappeared due to the increased focus on lowering fees and costs for investors.

When working with a financial advisor, you want to know many things, but today, we’re focusing on fees. You need to understand how your advisor is being paid. Many people come into our office and explain that they don’t know all of the fees and commissions that their advisor uses.

It’s essential to:

  • Ask your advisor about their fee structure and commission
  • Dive deeper into the advisor’s fees and commission if your questions make them uncomfortable or they seem to want to dodge your questions

Since you’re hiring an advisor to work on your retirement plan, it’s your right to know how they’re being paid. We would advise against working with an advisor who doesn’t want to divulge their fee structure and commission.

There are a few ways that your advisor can be paid:

Commissions

Commissions are a form of payment that has been around for probably the longest. Commissions are made when products are sold and also in the investment world. Originally, brokers needed to be contacted to make trades and would earn commission on these trades. 

You can buy stocks without commissions in today’s investment world. 

Mutual funds often have fees and commissions on the front-end or back-end, meaning your broker makes a commission at the start or end of the investment. 

You have every right to ask your advisor whether they’re receiving a commission on your investments in any way.

Fees

Advisors can charge fees in a variety of ways:

  • Hourly: An hourly fee may be applied when the advisor works on your portfolio or completes certain tasks.
  • Flat-fee: A flat fee may be assessed for things such as helping transfer your accounts or setting up your investment portfolio.
  • Percentage of assets under management: Finally, a percentage fee may be assessed based on your portfolio’s value. For example, a 1% fee may be charged on your $100,000 investment account, or $1,000.

Advisors may also charge a combination of the fees above. 

For the most part, advisors that charge fees will not make a commission. However, if insurance products are included, a commission may be assessed.

As someone looking from the outside, it’s common to think that the lowest fees are the best. But that’s not always the case. You need to look at the services that are wrapped into the fees to really understand the value in a service.

You might pay a 1% commission for a very hands-off advisor or 1.25% for an advisor who also assists with tax planning and other aspects of financial planning. It’s vital that you ask your advisor what their fees are and what’s included in their fees to know exactly which services you’re receiving.

Are You a Fiduciary?

A fiduciary is very important to understand when working with any financial advisor. You should be asking if the advisor is a fiduciary, but before you do that, it’s important to know what being a fiduciary really means.

What is a Fiduciary?

A fiduciary has to make decisions that are in your best interest. Therefore, certified financial planners must uphold a fiduciary standard. For example, let’s assume that the advisor makes a 10% commission on a specific type of insurance and a 5% commission on the other.

Someone who does not abide by a fiduciary standard would enrich themselves by recommending the product that gives them the most commission, even if that’s not the best product for you.

However, when an advisor is a fiduciary, they need to consider your best interests, even if that means lower commissions for them.

We run as a fiduciary, and our business is founded on:

  • Learning about a client
  • Understanding the client’s goals
  • Recommending the best options for the client to reach their goals

Not only does a fiduciary have to work in your best interest, but they need to be able to prove this in the future. If a client questions why we recommended a specific financial product, we must explain why and show proof that this product was the best based on our knowledge and their goals.

Legal vs. Assumed Fiduciary

Some advisors work on legal and assumed fiduciary duties. Suitability is one way that the advisor may work, and this means that they need to offer a suitable recommendation. In the world of suitability, the advisor can recommend a higher commission product if it suits your needs.

Assumed fiduciary is also an option, and this means that the advisor will do their best to work in your interests, but they’re not legally bound to do so.

Finally, there are legally bound fiduciaries, which we believe offers the best option. There are two times when a financial advisor must be a fiduciary:

  • Certified financial planners are obligated to be a legal fiduciary to hold their CFP designation.
  • Licensing is another time when an advisor may be a legal fiduciary. For example, if an advisor is Series 65 licensed, under FINRA, they’re bound by law to hold a fiduciary standard.

You should be asking your financial advisor about their fiduciary standards and whether they uphold them. You should also ask about licensing so that you have peace of mind that if they’re Series 65 licensed, they’ll work in your best interest.

Fiduciaries Must Disclose Things That May Be a Conflict of Interest

For example, let’s assume that I have a partnership with an attorney where I make money or some form of compensation from the attorney. A fiduciary must disclose this information and allow you to decide on your own.

We’re seeing many clients who are moving to independent financial advisors because of the fiduciary standards they uphold. So, let’s assume that you work with someone at Nationwide. The agent will recommend products that the company offers.

Independent financial advisors aren’t required to recommend specific products.

The Nationwide representative would recommend their own products, even if it’s not necessarily the best option available. Independent financial advisors, like ourselves, can recommend a wealth of products, whether that means the product is from Nationwide or someone else.

Did you enjoy this article? Then, we recommend signing up for our podcast, where we discuss topics just like this twice a week.

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What Should You Consider If Your Spouse Passes Away?

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No one wants to think about what would happen if their spouse passed away. Death is a difficult topic to discuss, but it is an inevitable reality for all couples. It’s important that you and your spouse have peace of mind that if either of you dies, the other has a plan in place that allows them to live the best life possible.

We’re going to help you think through the ideas and questions that will be helpful if your spouse dies.

If or when your spouse dies, your mind will be in a million places at once. Grief, fear and anxiety will overwhelm you. Having a general idea or checklist that can help you through this challenging time can really make it easier for you to overcome a spouse’s death.

You can’t be 100% prepared for death no matter how hard you try, but a checklist and guidelines can certainly help make the impact a little less intense.

A few of the things to consider are:

6 Things to Consider If Your Spouse Passes Away

1. Cash Flow: From Two Incomes to One

Income is a primary concern for most people, even if you’re both retired. We see many cases where one person is still working and passes away, and even times when both spouses are retired and one dies.

The main issue is cash flow because:

  • Maybe the deceased was collecting a pension with no survivorship attached.
  • Perhaps one spouse was still working and generating income and passes away.
  • You’ll lose one source of Social Security income if you’re both collecting. Instead, an adjustment is made where you’ll receive the higher person’s benefits.

Your standard of living can drastically change if your spouse dies and you lose some of these sources of income.

2. Expenses: The Key to Life Without a Spouse

When couples think of retirement planning, they think of retiring together. Most people will plan for:

  • Two sources of income
  • Two sources of expenses

However, even if you’re losing one or more sources of income, expenses will also be less. It’s vital for you to fully understand your expenses when retirement planning as a married individual and a couple.

For example, when your spouse passes on, you may no longer need to pay for:

  • Country club fees
  • Two vehicle payments/insurance
  • Certain medical bills
  • Etc.

Once you know your cash flow and expenses, it will be a lot easier to breathe if the worst happens.

It’s crucial for you to also know where all of the bills are coming from. You have to continue living, and it’s vital to keep these bills current.

3. Estate Settlement Issues

You’ll need to do a few things to your estate if your spouse dies. One thing that comes to mind is an IRA in your spouse’s name. The IRA will need to be retitled when your spouse passes. You may be able to:

  • Become an inherited IRA
  • Be taken over if you’re a spouse

When you take over a spouse’s IRA, you’re effectively rolling your spouse’s IRA into your own. You have to go through the steps to:

  • Change joint accounts to single accounts
  • Take certain accounts and change them to your name

Many accounts may need to be properly transferred to a surviving spouse.

In terms of estate tax, there are fewer issues today than in the past, but with larger estates, it can be challenging to keep track of all property. You might need to:

  • Look through credit card statements
  • Identify certain accounts
  • Locate assets

Because your spouse passed away, you’ll also need to look through your estate plan. Perhaps you wanted certain assets to pass to your spouse, but now that they’re gone, you’ll need to consider what happens to these assets.

4. Insurance Accounts and Benefits

Insurance is a major concern because your spouse and you can have a variety of accounts. You need to be able to:

  • Name accounts
  • Know where accounts are
  • Know how much is in these accounts
  • Etc.

You need to identify and know where all of these accounts are when your spouse passes. It’s essential to keep a running list of these accounts and how to access them. Ideally, when your spouse is alive, you should begin making a list of these accounts so that the surviving spouse can access them.

Insurance and death benefits may come from:

  • Employers that offer group life insurance if they’re a larger company.
  • Veteran benefits for death and burial.
  • Pension survival benefits with certain clauses.
  • If you have a dependent or child under the age of 18 at the time of your spouse’s death, Social Security may have certain benefits available to them.
  • Life insurance policies that may be open.

Insurance is a significant asset when retirement planning because it allows you to have an influx of cash that your spouse will need upon your demise.

5. Taxes

The IRS wants their money no matter the circumstances that you’re personally facing. You may have filed your taxes a certain way when your spouse was alive, but this can abruptly change when they die.

Your house may generate a gain if you sell it.

Provisions need to be thought through thoroughly. This is a major consideration, and we recommend going to a CPA. A CPA will cost a few hundred dollars, but they’ll help you understand your tax obligations and how your tax situation might have changed.

6. Assets and Investments

When you secure your retirement, you’ll notice that you’ve acquired a lot of assets and made numerous investments throughout your marriage. These investments need to transition to you as a survivor.

There may be tax concerns with these assets being transferred to you, so a CPA can help here, too.

A few of the accounts and investments that people may have questions about are:

  • IRAs: If they’re set up properly, the IRA can often be transferred to the surviving spouse without an issue.
  • Stocks: A step up in basis may be leveraged to save you money in taxes.
  • Businesses: Will you continue the business, or is there a succession plan in place? How about the sale of the company and the tax implications that follow?

You may have annuities and other investments that need to be considered. We recommend speaking to a financial adviser or planner to discuss your risk tolerance without your spouse.

Often, your retirement plan will have more risk with two spouses, but now that one spouse is gone, it may be time to reduce these risks.

Thinking of life without your spouse is something no one wants to do, and we’ve made a checklist to help you walk through these things to consider.

The checklist is completely free, but we need to know how to send it to you.

We can send the list either through email or regular mail – it’s up to you.

Call us today to request your own checklist to help you understand what to do when your spouse dies.

What Happens to My Money if Something Happens to My Advisor?

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Financial advisors can help you invest and manage your money. An advisor helps clients reach their long-term financial goals and often play an integral part in the retirement planning process. 

But there’s one question many clients have: what happens to my money if something happens to my advisor?

Your advisor opens your accounts, sends you reports and provides a hands-off way to secure your retirement. If these individuals die or become incapacitated, your money will still be safe and will still be your money.

What Happens to My Money if My Advisor Retires, Gets Sick or Dies?

As an advisor, 90% of our clients ask us this very question. It’s an excellent question to ask, and it’s one that we want to clear up for you. No matter who you’re working with, the logic and answers will be the same across the board.

But before we get too far ahead of ourselves, it’s crucial to have a firm understanding of where your money is held.

Understanding Where Your Money is Held

When you work with us or any independent financial advisor, your money never enters our bank account. In fact, our name is never on the checks that you write. Instead, you assign us as an advisor on your account.

A third-party custodian will be where your money is held.

These custodians are massive financial institutions, such as Wells Fargo or Charles Schwab. The custodian will house your money, ensure everything is compliant and facilitate the trades.

As independent advisors, we:

  • Act on your behalf when dealing with a custodian
  • Never actually hold your money

If something happens to your advisor or us, your money will still be sitting in the custodian’s accounts that we created for you.

What Happens When Working with Big Financial Firms?

If you work with a big financial firm, you may assume that if your advisor is no longer working with the firm, you’ll be working with another internal advisor. And you will be working with another advisor, but it’s essential to understand that these firms operate in what’s called “teams.”

Teams have multiple advisors, so if something happens to the leading advisor, you’ll work with someone else in the company.

In fact, you’ll receive a call from your new advisor and will need to decide whether or not to work with the team without the advisor you had. Your money remains in place, and if you choose to leave the team, you can just transfer your money to another advisor.

So, in short: you won’t lose your money and can decide on what to do next with your portfolio.

Common Scenario Questions People Ask

Your money is important to you, and it’s essential to know the answers to common questions regarding your advisor:

What Happens if Your Main Advisor Dies?

First, you’ll get a new advisor. But the process will go something like this. You’ll receive a phone call and the new advisor:

  • Will explain that they have been assigned to your account
  • Likely have you come into the office to learn about him/her

You should ask to meet the advisor and go through the initial decision stages again, just like you did when choosing your original advisor. What this means is that you’ll want to:

  • Talk to the advisor and see whether your personalities match
  • Understand the advisor’s investment philosophy
  • Decide if the philosophy is good for you

If you’re working with teams in the same office, you can be relatively confident that their philosophies will match. You won’t even need to worry about the investment strategy if working with an advisor from the same team.

This is the best-case scenario.

When working within the same team, your biggest concern will be whether the new financial advisor is a good fit for you. If the advisor isn’t a good fit, you can switch to another member within the same team.

What Happens If Your Financial Advisor Retires?

Retirement scenarios are a little different than if someone quits, gets sick or even dies. If an advisor is retiring, they’ll let their clients know well ahead of time. There is a lot of planning that goes into the retirement process, so you have many options as a client.

Your advisor can also choose to retire and:

  • Sell their practice, in which case, you can begin working with the new team.
  • Let the current in-house team take over the account. The long-term advisor leaves, but you continue working with the team that you’ve known for years.

If you’re concerned about your advisor leaving, it’s important to ask about their continuity plan for your team. You can ask your current advisor this question and ask this question when looking for an advisor.

Most advisors will have a plan in place to help you transition if they get hit by a bus tomorrow.

And a lot of people will shop for a new advisor when they know that their name advisor is going to retire.

We’ve had potential future clients come into our office, vet us thoroughly and explain that they plan to stick with their current advisor until that individual retires. You can follow this same concept because, at the end of the day, it’s your money that a new advisor will need to handle.

You’re not restricted to working with just the team that your old advisor built either.

Final Note

You’ll work closely with an advisor, build trust and hopefully make a lot of money together. Then, if your advisor is hit by a bus or decides to quit tomorrow, there will be someone that can confidently fill their shoes.

Often, you’ll have the option of working with the advisor’s team that they were a member of to make the transition as fluid as possible. And in all cases, you’ll still have all the money you invested accessible to you.

Want to learn how you can secure your retirement? We have two great resources that we just know that you’re going to love and benefit from.Click here for our 4 Steps to Secure Your Retirement Course or listen to our Secure Your Retirement Podcast.

Retirement Financial Plan

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Retirement planning has a lot of moving parts, and if you’ve been reading our blog or listen to our podcast (listen here), you know that we’re big on creating a holistic retirement financial plan.

We believe that you should have a retirement plan that is well-put-together and really hits on all of your goals.

How can you create this plan?

With a team.

We’re going to help you start to secure your retirement with a quick overview of what your retirement financial plan team should look like.

Retirement is a Lot Different than Most People Realize

A lot of people think about their retirement briefly while they put money into their 401(k) plans, and a lot of people know when they want to retire and take social security. But when you sit down and get closer to retirement, you’ll realize that there are a lot of moving parts to consider.

Retirement is more than just putting money away, although money plays a big role in retirement.

And when you begin doing your research, you’ll find a lot of advisors to choose from, which can make your head spin. We’re going to discuss the key people that should be involved in your life and can help you retire the way that you want.

Advisors to Hire and Work with to Secure Your Retirement

Advisors help you go well beyond just a 401(k) and saving money. These professionals will assist you with investing your money in many cases. For example, you may have an advisor that works with your employer and will:

  • Assist with asset allocation
  • Invest for you
  • Offer a quarterly report
  • Provide yearly statements

These advisors work with money management, but they fail to look at the whole of your retirement.

We take a holistic approach to retirement. For example, you’ve received a paycheck from an employer, and now that you’ve saved money to retire, it’s time to pay yourself. You have access to this money at any time, but if you’re spending way beyond your means, your retirement buckets can quickly dry up.

An advisor that works to invest your money only isn’t considering how you’ll pay yourself.

You’ve saved and grew your money, and that’s where a lot of advisors stop. They don’t consider how you’ll manage your money after retirement, nor will they continue checking up to understand your goals. As your goals change, your asset allocation should also change.

Money managers grow and build money; not plan for when you want to retire.

Your money manager won’t consider:

Holistic advisors tend to look at your retirement plan as a whole. There’s a lot to consider, so these individuals will discuss your retirement desires with you and help make retirement possible.

Types of Advisors to Work With

You may work with a variety of advisors, including:

  • Money manager or financial adviser. These professionals will be focused on investing and growing your money.
  • Tax advisor. A tax advisor is key because they’ll help you find innovative ways to shelter a lot of the money that you save for retirement so that you don’t have to pay it in taxes. Imagine needing $1 million to retire and not realizing that you owe $250,000 in taxes.
  • Estate planner. An estate planner will help you with ensuring that all of your documents are in order so that if you become incapacitated or want to leave assets to children or family members, you can.
  • Social security specialists. These individuals will help you determine the best time to apply for social security. They’ll also assist you with maximizing your payments by retiring later. 
  • Insurance experts. An insurance expert can help you obtain the best life insurance or health insurance just in case you or a spouse pass on.

No one is a master of all aspects of retirement, but with the right team, it’s possible to bring the collective knowledge of these professionals together in one place.

Working With a Holistic Team

A holistic team, like us, will help with all aspects of your retirement. We always start with your retirement plan, which is an extensive plan that looks at your retirement goals, needs, and the “what ifs” that pop up before and during retirement.

Comprehensive plans can and should be updated annually, and they’re a clear roadmap to your retirement.

Once we have this plan in place, you can sleep better at night. You’ll know what it takes to retire and can follow a roadmap to success.

And since we’re a holistic advisor, we bring in:

  • Tax advisors
  • Social security specialists
  • Other advisors

Your team must look at your goals, and how they change, so that you can confidently enter retirement. Working on just investing your money isn’t enough to retire. Bringing together the right team that offers a holistic approach will look beyond your investment portfolio and really bring everything together, from social security, to tax considerations and so much more.

Click here to sign up for our 3 Keys To Secure Your Retirement complimentary training.