We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for November 27, 2023
Rae Dawson – The Basics About a CCRC in Retirement – Part 2
In this episode of the Secure Your Retirement Podcast, join Rae Dawson as she breaks down the fundamentals of CCRC, covering everything from costs and waitlists to choosing the right time to make the move.
Ever wondered about the factors influencing CCRC expenses? Rae delves into that, offering insights on what to consider when evaluating the cost of a CCRC. Now, imagine this: How might being flexible in your requirements help you sidestep a potentially lengthy waitlist, which can stretch anywhere from 4 to 15 years?
How does the choice of location impact the cost of Continuing Care Retirement Communities (CCRC)? The expenses associated with CCRC are influenced by the contract type and community location. Living in a sought-after real estate location may come with a higher price tag compared to a more rural setting. As you contemplate the costs of CCRC, it’s crucial to factor in…
Rae Dawson is back with us this week to continue our series on CCRC (continuing care retirement community) and how it fits into your retirement planning. While much of this information is going to relate to your area, it is focused on Raleigh, NC.
Note: If you missed Part 1 of this series, click here to read it. You can also listen to the podcast version here.
CCRC costs are driven by the type of contract and community location. If you’re in a popular real estate area, you can expect to pay more than if you’re in a rural area. When thinking about the cost of a CCRC, you need to consider:
Buy-in
Monthly fee
Rental CCRCs are different than traditional ones because they do not have a buy-in, and monthly fees are much higher. Today we will be doing a deeper dive into Traditional CCRC costs.
For a traditional CCRC, you’ll often have 2 contract options: a single occupant contract, or a double occupant contract. The second occupant is often a spouse, friend, or sibling. Typically, no more than two people can live in a residency.
In the Triangle area, a buy-in for one of these communities ranges from $60,000 for a studio, and up to $990,000 for an extensive contract cottage. A higher buy-in rate for the extensive contract cottage because you’re paying for your higher level of care upfront. The buy-in is a one-time cost.
For double occupancy, your buy-in could be anywhere from $140,000 for a studio to $1,065,000 for a cottage. Why does the studio buy-in jump up for double occupancy? Most communities will not allow double occupancy in a studio.
Often, if your buy-in is on the lower end of the range, the community’s policy is if you leave the community after 15 months, your buy-in return is $0. However, if your buy-in is on the higher end, some communities offer a 100% return of the buy-in to your estate. If you secure your retirement and want to leave money to your heirs, it’s often best to pay the higher buy-in so that they receive the buy-in amount back.
What is a Cottage?
A cottage, in this sense, is a single-family home. The buy-in price is driven by square footage. A larger cottage may be 3,000 square feet, so a 600 square foot studio will cost significantly less. When moving to a CCRC, you have a lot of activities that you can engage in at the common area of the community. You’ll likely spend less time in a cottage by yourself, so downsizing is often a great option.
Different communities may have different names for types of homes. You may hear “duplex”, “triplex”, “apartment”, etc., in addition to studio and cottage. Keep in mind that the buy-in prices are driven by square footage if the different names for types of homes becomes confusing.
Monthly CCRC Costs
On top of your buy-in costs, you also have monthly fees. For a Traditional CCRC, there are ranges for the monthly fees:
Single person studio is as little as $2,150 per month
Cottage can run as high as $8,000 per month
Double-occupancy, one-bedroom ranges from $4,580 to $9,840 per month
In most cases, some meals, cable television, most utilities, transportation to and from the doctor’s office, gym or pool access, and some other perks may be included in the monthly fee. It’s important to know what amenities are included in the monthly fee, as they vary between communities and are probably things you pay for on an individual basis before living in a CCRC.
Qualifying for a CCRC
A general rule of thumb when pursuing a Traditional CCRC is that your monthly income should be at least 2 times the amount of the monthly fee. Your assets should be greater than 3 times the amount of your buy-in fee. If you’re moving into a $2,150 studio, your monthly income should be $5,000 to support this.
Traditional CCRCs will feel comfortable with allowing you to move in if you meet these income and asset requirements.
I’m Ready to Go. What’s the Waitlist on a CCRC?
CCRCs often have a waitlist because they’re in high demand and communities aren’t opening up at an adequate rate to meet the demand. It is not uncommon for a waitlist period to be 4 – 15 years. However, if you’re flexible with your floor plan requirements, you may be able to circumvent these long wait times.
In some communities, you can remain on the waitlist for your ideal floor plan and switch to your ideal unit in the future, but it’s often discouraged. What a lot of communities will do is allow you to downsize. Let’s say that you’re in a 3,000-square-foot cottage and one spouse dies. You would rather move to a smaller footprint, and the community may allow you to do this.
However, do not put all your eggs in one basket. Instead, you’ll want to be on multiple waitlists at a time. If you receive a serious diagnosis, you may be prohibited from entering a CCRC. It’s always best to have multiple options.
Joining a CCRC Waitlist
If you want to join a waitlist, there are steps that you’ll need to take to make all this work. You’ll need to:
Pay an application fee. It’s typically about $300, and it’s not refundable
Provide general financial and health information
Moving from a waitlist to a ready list will involve providing your financial statements
Communities will run a financial assessment before accepting you onto a waitlist, knowing the waitlist period is 4-15 years. You will also need to pay a $1,000 – $5,000 waitlist fee, which is refundable if you choose not to move to that community. If you do move to that community, the fee will be applied to your buy-in.
What Age Should You Start Looking Into a CCRC?
Today, the average CCRC entry age is 75. People are moving into these communities earlier than in the past due to competition and the attractive convenient amenities. The average age of a community may be 80 – 85. People who live in CCRCs often live longer than the normal person, with some living until 90 – 100.
Most communities require 6 months to 3 years of being healthy to move into a CCRC, so you can live more independently for longer.
If you wait too long and fall into bad health, you may not be able to move into one of these communities. Entering a CCRC early allows you to build friends and relationships early on, which is a nice perk of living in any type of community.
How to Decide What to Do
If you decide that you want to move to a CCRC, now you’ll need to choose the right community for you. You’ll want to think about quite a few different points, such as:
Family health history. Have your relatives lived through age 90 with few health issues? If so, you may not want to pre-pay for an extensive stay with higher levels of care.
Location. If all your friends and family are in one location, you’ll likely want to stay in their area.
Cost. It can be challenging to compare contract types and communities without a lot of organization first.
However, you will find there is one thing that’s even more important than all these points: culture and community. Visit multiple communities and find one that fits you and makes you feel comfortable. If you’re not visiting multiple communities, you may miss out on finding the community culture that is best for you.
Want to reach out to Rae Dawson to learn more about CCRCs? Email rae01dawson@gmail.com.
We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for November 13, 2023
Rae Dawson – The Basics About a CCRC in Retirement
In this Episode of the Secure Your Retirement Podcast, Radon and Murs have Rae Dawson to discuss the basics of Continuous Care Retirement Communities (CCRC). Rae is a CCRC expert and spent her original career primarily managing people and projects in high-tech in Silicon Valley for many years before gaining an interest in CCRC.
She explains what it means for a facility/community to be a CCRC and why most assisted care facilities are not CCRCs.
Rae Dawson was a special guest on our podcast this past week, and she was happy to talk to us about a very important topic: CCRC. If you don’t know what a CCRC is, don’t worry. We’re going to cover that in just a few seconds.
But before we do, let’s learn more about Rae and why we’re so excited to have her on our show.
Rae Dawson was a special guest on our podcast this past week, and she was happy to talk to us about a very important topic: CCRC. If you don’t know what a CCRC is, don’t worry. We’re going to cover that in just a few seconds.
But before we do, let’s learn more about Rae and why we’re so excited to have her on our show.
A Little Bit About Rae Dawson
Rae was mentioned to us by one of our clients, and after a great conversation with her on the phone, we knew that we had to invite her onto the show. She had a career in high-tech and worked in Silicon Valley.
She moved to North Carolina when she retired, and she worked with her friend, who taught a class on CCRC until 2021. Her friend eventually moved into a CCRC herself and Rae has been teaching the class on her own ever since.
What is a CCRC?
A continuous care retirement community (CCRC) is not well-defined and there are a lot of opinions on what a CCRC should include. A CCRC, by Rae’s definition, should offer:
Memory care may or may not be offered, but it’s a nice perk of these communities.
CCRCs offer a continuum of care while staying within the same community. Most residents live in these communities until they pass on. CCRCs are a topic that we cover when discussing retirement planning with clients, but many people are educating themselves on their community options.
What is the Mindset of People Attending Rae’s CCRC Class?
Educating yourself on CCRCs is important. Most people want to age in place and remain in their family home. However, planners take Rae’s class because they want to know:
If aging in place is for them and what that looks like
If CCRC is something they might prefer, and what criteria must be met before going into a CCRC
CCRCs are regulated and there are nuances that everyone considering these communities must know about beforehand.
Regulations on CCRCs
Note: We’re going to cover a lot here, and Rae has been kind enough to share some slides with us. We’ll be adding these slides to our YouTube channel for you.
A lot of money and resources go into CCRCs. You plan on living in one and ensuring that you receive the care you need in retirement. Regulations are a safeguard that offers you peace of mind and ensures that the community is “following the rules.”
In North Carolina, where Rae and our team are located, CCRCs are regulated by the NC Department of Insurance. Assisted living and skilled nursing facilities are also regulated by the Department of Health and Human Resources.
The NC Department of Insurance is your best resource for understanding the financial stability of a CCRC.
Luckily, in North Carolina, no CCRC has ever gone bankrupt. One almost went under, and the Department of Insurance stepped in to protect residents and help the community get back on the right financial footing.
Why?
Residents buy into these communities and make a significant investment to remain in one.
Familiarize Yourself with the Department of Insurance Website
Rae recommends that all her students familiarize themselves with the NC Department of Insurance website because it’s their go-to source for information. You can:
Search the site for CCRCs
Read through contract types
Read through community disclosure documents
Learn about the licensing requirements to be a CCRC
Access community search tools
Community search tools allow you to use an interactive search engine or download a PDF on all CCRCs.
If you cannot find a community on the Department of Insurance website, it is not a CCRC. Often, nursing facilities may promote themselves as a continuous care retirement community, but they are not if they’re not on the site.
Browsing through the PDFs on the NC Department of Insurance website, you’ll find great information on each CCRC, such as:
Buy-in options
Refund options
Low and high costs
Meals on wheels info
Waitlist time
A new interactive portal is also available that makes it simple to browse through all of the CCRCs in the state.
Note: If you’re not in North Carolina, you can often find similar information on your state’s website.
Wait List Notes
CCRCs have limited space, which means there’s a waitlist. We’ve had some clients wait six months, two years, or even longer to get into one of these communities. Some communities have a 12-year waitlist!
CCRC Rating Agencies
Rating agencies for CCRCs do exist, and three of the main ones are: Fitch, CARF, and CMS.
Fitch
Fitch provides primarily financial liability ratings. The main factor in the Fitch rating is the Debt Service viability. When a CCRC is expanding, the community takes on a lot of debt. However, once complete, the community will sell residency and its rating will rise because it’ll pay off the debt.
CARF
Rather than focusing on the financial aspects of a CCRC, these agencies will look at the services provided and the quality evaluations. Communities apply for a CARF (Commission on Accreditation of Rehabilitation Facilities) rating and pay for the assessment that is done.
CMS (Medicare)
Medicare will provide quality of care and staffing service ratings for skilled nursing facilities. Note that not all facilities are Medicare-certified, which may sway your decision to join one facility over another.
Note: Remember, the NC Department of Insurance also has a rating system for each community.
Understanding the 5 CCRC Contract Types
1. Extensive or Type A
An “extensive” contract is the most popular and requires a buy-in plus a monthly fee. No matter what level of care you’re living in, your monthly fee does not increase. You’re pre-paying with your buy-in with a higher upfront cost but a stable monthly cost.
Moving into a Type A CCRC does mean that your doctor will need to state that you’re likely to remain independent for a longer period of time than with other contract types.
2. Modified or Type B
A modified contract means that you’re buying in for a higher level of care at a subsidized rate or for a fee for a certain number of days. You’ll have a lower buy-in and monthly fee than an Extensive contract, but you’ll be paying more than our next contract type.
3. Fee for Service or Type C
Fee for Service contracts are exactly what they sound like. You pay for what you receive. While you live in an independent living facility, you’re paying for this level of care. When going into an assisted living area, you’ll pay the going rate for this type of care.
4. Rental
Rental communities are growing in popularity in North Carolina and do not have an entrance fee. You may need to provide a deposit of two months of rent. These communities do provide access to higher levels of care at the going rate.
What we do want to point out is that Rental communities are for-profit while the other communities that we’ve mentioned are non-profit.
Traditional CCRCs are beneficial because they will often offer a benevolent fund, which means that if you move into one of their communities and you run into money issues, they will not make you move communities. However, they may require you to move to a smaller footprint within the community that is less expensive.
Rental communities will make you move out of the community if you cannot continue paying.
5. Equity
An equity contract comes with a real estate transaction because you’re buying the residence that you move into. The real estate transaction allows you to buy the home and contract with the community for a higher level of care services.
The cost of the contract with the community is roughly 10% of the cost of the unit you purchase.
While there is not a structured classification, equity contracts are, more or less, a fee-for-service type of structure for higher levels of care.
Which CCRC Contract is Best?
Rae finds that no single community is best for everyone. If you have long-term care insurance, your choice for a community may be different than someone else’s. Why? Your insurance can help you cover the financial requirements of the facility.
Extensive contracts with long-term care are often a good choice because you may pay less once long-term care kicks in.
A few things to consider when choosing a CCRC contract are:
Current level of health
Family health history
Do you think you’ll need a higher level of care for a long period of time?
Rae’s former co-teacher chose a fee-for-service community because she didn’t want to pay for any services that she may not use.
In terms of quality of care, you’ll find that the quality of care across all contracts is about the same. You will receive the same great care in a Rental community as you will in an Extensive one.
Many residents who are tired of caring for their homes will often go to a Rental community. The community allows them to avoid the buy-in and gives them the freedom to move to another community or move into their kid’s home if they wish.
Rental communities do have a lease that is 12 months, but you will need to pay some costs upfront.
We’ve asked Rae to come back onto our show, because we’ve really just covered the basics of CCRC here. We plan on covering this topic more in-depth in the future, so be on the lookout for more episodes with Rae if you want to learn more about CCRC.
If you want to learn more about CCRCs with Rae, you can contact her directly at rae01dawson@gmail.com.
People lose a lot of things. One of the things that people lose a lot of is information. Open up your smartphone, and you’ll be bombarded with info from multiple sources:
News outlets
Blogs
Podcasts
Etc.
Well, as we’re moving closer to podcast 200, we’ve realized that our podcast list is massive. Navigating all of these episodes is difficult for us, so it must be extremely difficult for our listeners and readers, too.
We know that we have a ton of resources available, and today, our goal is to help you find the podcasts that you’re most interested in.
Note: We listed some of the most popular episodes, but we’re always expanding our library with new, great content.
Estate Planning:
EP 1 – Chess Griffin – How to Know What You Need for Your Estate Plan: Tips and information on how to know when an estate plan is good for you.
EP 73 – Chess Griffin – Do You Need a Trust?: Guide on the basics of a trust and what they can do for you.
EP 106 – What Should You Consider If Your Spouse Passes Away?: Episode about death. When a spouse dies, life changes and can be uncertain. We discuss this in greater detail.
EP 109 – Chess Griffin – Special Needs Trust – What You Need to Know: All about special needs trusts, what they are and how they can help you.
EP 135 – How to Create an Estate Plan Without the Stress: Episode on how to create an estate plan the stress-free way.
EP 160 – 6 Considerations for Your Estate Plan:A great episode where we discuss all of the things to consider when making an estate plan.
Retirement Planning:
EP 8 – Planning for Retirement – How the Process Works – Part 1: 3-part series covering the entire retirement planning process.
EP 10 – Planning for Retirement – How the Process Works – Part 2: 3-part series covering the entire retirement planning process.
EP 12 – Planning for Retirement – How the Process Works – Part 3: 3-part series covering the entire retirement planning process.
EP 18 – How to Build an Income Plan For Retirement: A great episode if you’re worried about running out of money in retirement.
EP 22 – Looking at The Whole Picture in Retirement: Episode covering the multiple parts of retirement that go beyond just your total investment portfolio value.
EP 44 – How Do IRA and 401K Rollovers Work?: Key episode that walks you through rolling over an IRA or 401K.
EP 48 – How Much Do You Need to Retire?: An overview of how much money you need to truly retire.
EP 52 – The Retirement Planning Checklist: Complete checklist to have to plan for retirement.
EP 58 – Social Security – When is The Right Time?: A guide to knowing when Social Security is the right choice for you.
EP 88 – Having a Team Approach in Retirement: Informative episode on why having a team approach makes retirement easier.
EP 97 – Social Security Strategies: More key strategies that you can follow when considering taking Social Security.
EP 118 – 4 Questions to Help Your Income Plan: Key questions that everyone should ask themselves when trying to create an income plan.
EP 157 – The Retirement Bucket Strategy: A key episode on creating a simple, three-bucket strategy that helps you have confidence in your retirement plan.
EP 162 – 401k Versus IRA: Episode on removing the mystery of a 401k vs. IRA.
Taxes:
EP 13 – Tom Turner – Planning Taxes and Retirement: Insight from Tom on how to plan for taxes and retirement to keep money in your retirement.
EP 66 – How To Convert an IRA to a Roth IRA: Guide that talks about converting to a Roth account to let your money grow tax-free.
EP 94 – Tax Strategies for Non-IRA Brokerage Accounts: A key episode for someone with a non-IRA brokerage account.
EP 124 – IRAs – Required Minimum Distributions: Perfect for those reaching 72 and a half because you’ll need to take distributions.
EP 130 – Considerations For Charitable Giving: Are you charitably inclined? If so, this is the episode for you.
EP 133 – Steven Jarvis – Tax Planning for Retirement: Steven provides his insights on tax planning and how to plan around retirement.
EP 158 – Tax Planning Versus Tax Preparation: Learn the major differences between tax planning and prep and how they benefit you.
EP 161 – How Required Minimum and QCDs Work: How to leverage RMDs to contribute to a charity and not pay taxes on distributions.
EP 163 – Steven Jarvis – Mid-Year Tax Strategies: Steven is back again with an episode on mid-year tax strategies everyone should consider.
Portfolio Management:
EP 16 – Investing During Retirement – Buy and Hold or Active Management?: Learn about buy and hold, why we recommend active management and why buy and hold may not be the best option.
EP 19 – Bill Sherman – Buy and Hold is Dead: Bill shares his insights on why the buy and hold strategy is truly dead.
EP 56 – Asset Allocation or Strongest Assets: Learn the strongest assets to own and how to allocate them the best.
EP 146 – Risk Adjusted Portfolio – How It Works: Risk is scary because no one wants to lose the money they have invested. Learn what a risk-adjusted portfolio is and how it works.
EP 150 – What’s The Difference Between a Mutual Fund and an ETF?: Uncover the key differences between a mutual fund and ETF to understand which is better for you.
EP 153 – Bonds Versus Bond Alternatives: Bonds are not doing well. Learn about bond alternatives that can help you profile.
EP 159 – When Cash Is Good: Should you cash out of the market? Learn when cash is good and why you need to consider it at times.
Annuities:
EP 26 – Annuities – Why Ever Use Them: Major series on annuities, part 1 of 8.
EP 30 – Annuities – Why Ever Use Them – Part 2: Part 2 of 8.
EP 34 – Annuities – Why Ever Use Them – Part 3: Part 3 of 8.
EP 38 – Annuities – Why Ever Use Them – Part 4: Part 4 of 8.
EP 41 – Annuities – Why Ever Use Them – Part 5: Part 5 of 8.
EP 46 – Annuities – Why Ever Use Them – Part 6: Part 6 of 8.
EP 47 – Annuities – Why Ever Use Them – Part 7: Part 7 of 8.
EP 54 – Annuities – Portfolio Implementation – Part 8: Part 8 of 8.
EP 128 – Should I Consider an Annuity in My Financial Plan?: Learn how to structure an annuity into your overall retirement plan if you think an annuity is right for you.
Whew! What a list. And we intend to keep producing great content for our podcast to help you learn how to secure your retirement and reach your financial goals.
While we often focus on ways to secure your retirement and retirement planning, we broke away from the norm on this week’s podcast and had a very important conversation about osteoporosis.
As anyone listening to this should know, we’re all getting older. Osteoporosis is a major concern for everyone as they age. We believe that a healthy retirement goes well beyond finances and ought to really consider your physical health, too.
Dr. Doug Lucas sat down with us to discuss how to reverse osteoporosis and outlined steps you can take if you want to slow and even reverse this condition.
Who is Dr. Doug Lucas?
Dr. Lucas is a highly trained and respected doctor who finished his training as an orthopedic surgeon at Stanford University. After going into practice, he started to see a lot of patients that would fall and fracture or even break a bone.
The impact of a fractured hip or arm is a major concern for patients, and if you break a hip in retirement, the question is, will you enjoy retirement?
Probably not.
Dr. Lucas started what he calls “health optimization,” which helps you live a longer, healthier life. And part of this life is trying to slow and even stop osteoporosis.
What is Osteoporosis Anyway?
If you’re in your early 50s, there’s a good chance that you have heard of osteoporosis in passing or may not even know what it really is in the first place. Dr. Lucas explains that this condition is the diagnosis of:
Poor bone quality
Poor bone quantity
Your bones often get stronger as you get older, and then when you hit your late 20s, the bones may begin to weaken. Doctors often don’t discuss your bone health, but it is something to be concerned about because it makes it so much easier to break a bone or suffer from a fracture.
When you’re older, a broken hip or bone can drastically impact your life.
Traditional Healthcare Model Surrounding Osteoporosis
It’s estimated that 50 million adults in the United States have osteoporosis. Unfortunately, most doctors and traditional checkups will not even test to see whether your bones are weaker. However, if your doctor does perform tests and you are diagnosed with the condition, the treatment is going to revolve around pharmaceutical treatments.
For example, your doctor is likely to recommend:
Supplements
Medications
Unfortunately, none of these things reverse the condition. If you do fall and have a nasty fracture, you’re often left with a doctor who doesn’t specialize in bone health. You need a very comprehensive picture to better understand how osteoporosis works and to heal from it properly.
Optimizing Your Health for Osteoporosis
Dr. Lucas explains that health optimization looks at the entire person and the root cause of your bone loss. So, before you can begin reversing your bone loss and weakening, you should understand the condition’s cause.
While you should begin early with health optimization, if you’re 55+, you can “turn this ship around.”
You can slow down bone loss and even reverse bone loss.
You won’t reverse back to your 20s when your bones were exceptionally strong, but you can take steps to strengthen your bones and prevent many bone fractures and breaks.
Typically, there are two main reasons for bone loss:
Gut health is improper and does not allow you to maximize nutrient absorption
Adrenal glands are causing chronic inflammation, often from stress
Once you figure out why you’re losing bone, it’s time to “plug in” holes and then work to strengthen the bones. The way to optimize bone health and begin restoring it is:
Taking certain supplements
Eating a proper diet
Consuming calcium
Eating the right proteins
Dr. Lucas also monitors micronutrients to ensure that the body has the nutrients necessary to restore bone health. Even genetics will be considered because there may be certain issues that you cannot change due to genetics.
How to Begin the Process to Check for Osteoporosis
If you’re starting from scratch and have no idea whether you have osteoporosis, the first step in the process is to schedule an appointment with a doctor who will run a screen test to learn more about your bone health.
You need a starting point to know your bone health.
However, if you had a fracture from minimal trauma, such as tripping over your dog and falling relatively lightly, there’s a good chance you have a “fragility fracture.” In this case, you have osteoporosis because your bones should not break that easily.
At this point, you want to reach out to someone who specializes in bone health, but there aren’t many people in this field.
Dr. Lucas is certainly a great contact to have because he created a mirror website for his company, found at Optimum Bone Health. The website provides a wealth of information to help you learn about bone health and can provide recommendations to optimize your bone health.
He can even help you get started through telehealth.
The process begins with:
10 – 15-minute free consultation
Determine if you’re a good fit
Enter a six-month program to reverse osteoporosis
During the first month, many tests are taken to understand where your bone health is. Then, you’ll sit down with Dr. Lucas for an hour to discuss your tests. Based on your unique results, a program will be made for you to really start strengthening your bone health.
While it can take one to two years to start strengthening your bones, it is a process that is worth every second because it reduces your risk of fractures and bone breaks.
Do you want to secure your retirement? Sign up for our 4 Steps to Secure Your Retirement Video Course.
We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for July 5, 2022
How do you keep your finances safe in a world where cybersecurity has become a household term? In a world where we’re performing most of our tasks online, it is important to be aware of the innovation of cyber fraud and hacking and how to stay safe.
This Weeks Blog –Why is Internet Safety Important?–
Are you trying to secure your retirement? If so, a lot of clients we have are majorly concerned about cybersecurity. In an instant, a hacker can get into your bank account, transfer your savings over to their own accounts and leave you to pick up the pieces.
Are you trying to secure your retirement? If so, a lot of clients we have are majorly concerned about cybersecurity. In an instant, a hacker can get into your bank account, transfer your savings over to their own accounts and leave you to pick up the pieces.
These individuals or groups may also hijack your email account and try mailing your financial advisor to make changes to your portfolio or give them access to your accounts. Additionally, someone can log into a retail account and rack up a ton of debt.
In our recent podcast, we had the opportunity to sit down with Nick Espinosa, CEO of Security Fanatics, a cybersecurity expert, to ask him a lot of questions to help protect our clients. Nick has worked with Fortune 100 companies and small businesses. He is a writer and even has Ted Talks where he teaches people about cybersecurity.
And he was more than willing to share some knowledge with our audience.
How to Keep Your Data Safe When Shopping Online
Shopping online is something a lot of people do. It’s a lot easier to go on Amazon and simply order a new pair of pants. However, in the middle of these transactions, you put a lot of trust in a third party that now has access to your credit or debit card information.
How can you stay safe when shopping online?
Nick claims it’s a “loaded question.” Everyone is online, and the pandemic accelerated online shopping and even working from home. The best way to protect yourself is awareness. Technology is constantly innovating, but the threats out there to steal your information or gain access to your accounts are also accelerating with its own technology.
A few questions to ask are:
What happens if someone breaks into your phone?
What happens if someone gains access to your computer?
What information would be found on these devices?
For most people, a lot of information may be accessible in these situations, and maybe you even saved passwords to the device, opening up a treasure trove of data to a hacker.
Protecting against these threats requires some diligence.
Enable Encryption or Set It Up
If someone steals your PC or phone, encryption ensures that they cannot read any of the data on the device. Unfortunately, a pin code isn’t enough to stop someone from potentially accessing files on these electronic devices.
Late-model iPhones and Android devices have automatic encryption, but it doesn’t work well with pin codes.
It’s easy to clone a phone and continually try cracking the pin code.
Instead, you want to use:
Long passwords
Biometrics, such as thumbprint
If you use these advanced security settings, you’ll encrypt your phone using a method that is very difficult or impossible to break.
Storing Passwords in a Password Manager
Many people rely on password managers because we know that people shouldn’t reuse their passwords across sites. Password managers can help you manage site passwords by:
Generating very secure passwords
Remembering the passwords for each site
Storing passwords using encryption
However, many password managers also synchronize across devices, so the passwords are available on your smartphone, PC, etc.
Hackers are working to break into these password managers because they’re a treasure trove of data. One thing to understand is that if you do use a password manager and there’s an update available for it, download the update immediately.
A security flaw may be the main reason for the update, and if you say, “Well, I’ll update that later,” you’re inviting hackers to steal your information.
Two-factor Authenticator
Two-factor authentication is changing the way people secure their accounts. Using this authenticator adds an extra layer of protection to your account, making it exponentially safer.
Hackers are lazy, and they will go after low-hanging fruit to hack.
Enabling multi-factor authentication requires you to verify the person logging into your account is you. Even if a hacker knows your password, without having access to your phone or wherever the authentication is received, they can’t get into your account.
Threat Detection Systems
A threat detection system sounds so advanced, but it’s crucial to realize that you have a minicomputer in your pocket if you have a smartphone. Your mobile devices are powerful, and they need the same protection as your PC:
Antivirus
Antimalware
Anti-phishing
Etc.
We’re downloading things all the time. However, it’s easy to infect someone on Facebook or Twitter because these platforms do not actively scan files we upload to friends. It’s as simple as a hacker sending a blurry image of you from your mom’s Facebook account, asking if it’s you and then infecting you when you open the image.
The image may even be a doctored image of you, so you would reply, “Yes, awesome picture, mom,” and not realize that your smartphone is now infected with a virus.
Protecting Against a Phishing Scam
Phishing can take on many forms. For example, a Nigerian Prince may email you stating they have millions of dollars they want to transfer to you. Of course, most people are aware of these types of scams and will not fall for them, although some people still lose their entire retirement in these schemes.
There is also something called “spearfishing,” and Nick sees this often in the corporate and individual world.
The main problem retirees face is that they didn’t grow up with the technology that we have today. Nick claims that the vast majority of phishing victims are over age 60 and are the main target of hackers.
Why?
Let’s use an example. A hacker starts looking through someone’s email and sees that this person is a 22-year-old male named Johnny. As it turns out, Johnny often sends emails to his grandmother, and she’s the perfect target for phishing.
The hacker may use Johnny’s email to:
Send an email to grandma
Craft a story about how he’s stranded in London, and someone stole his wallet
Grandma sends the money
Grandparents will do anything for their grandchildren, and since grandma knows Johnny is in London, she doesn’t even realize that the mail may be from a hacker. Verifying that the person sending an email is real is as simple as picking up the phone and calling Johnny on his usual phone number.
If you call Johnny, you’re using two-factor authentication to verify that Johnny is really in trouble and can send him money.
Phishing can also happen on fake forms online. For example, someone may own Amazzon.com, and the site looks exactly like the real Amazon. However, when you type on your account information, it may redirect to Amazon, and you don’t realize anything was amiss.
The problem is that the hacker captured all of the form information and can now access your Amazon account and make purchases.
Sometimes, there’s an infection on a smartphone or PC. When you’re on your device and on Facebook, a pop-up may appear on the screen that says, “Call 1800 scamm-me.” You call, and the person steals your information.
Additionally, someone may text you from Bank of America saying there’s an issue with your account, so you click on the link and don’t realize it’s not a legitimate one. In this case, it’s crucial to call the bank yourself or log into your account by going to the official site yourself and verifying that there’s an issue with your account.
It’s far too easy to recreate a site, create this sense of an urgent problem with your account and fall into the grasp of a hacker who wants nothing more than to hack into your bank account. You need to do your due diligence to keep your information safe when logging into your bank account or receiving emails.
The key to keeping yourself safe online is to educate yourself and don’t make it easy for hackers to hack you. Use complex passwords and two-factor authentication, and always verify that the person mailing you for money is actually the person you want to help.
A healthy retirement is one that you actually get to enjoy. If you’ve worked hard, did everything right and then lost everything in an instant, it would be a horrible feeling. Focusing on your cybersecurity and just following the basics above will protect your retirement from hackers.
If you’re saving for retirement and want expert advice, schedule a call with us to see how we can help.
Inflation is something everyone is dealing with right now. However, we focus on retirement planning. We want to help ease the minds of those trying to secure their retirement or those already enjoying life after work.
We’re going to be answering a lot of great questions today, including:
As you can see, we’ll be covering quite a few questions. So, grab a cup of coffee or some wine and settle in.
6 Questions and Answers When Learning How to Plan for Inflation in Retirement
1. What Causes Inflation?
Inflation is caused by quite a few things, but we’re going to discuss it from the view of what is driving inflation in 2022. Many people have stressed their concerns over the government printing money in recent years, and the main issue with printing money is that it dilutes the dollar’s value.
You may have $100, but the $100 is worth less than it was a few years ago.
This round of inflation is partly due to printing money, but there’s also:
Low supplies due to supply chain issues
High demand
When demand remains high and supplies are low, prices go up and inflation begins to hurt consumers. Low supplies always lead to higher prices because retailers are making less money and need to turn a profit.
Perhaps there are only 1,000 tires in stock when a company normally sells 2,000.
In this case, the company raises the price of the 1,000 tires when demand is high because they still need to pay their bills and remain in operation.
For example, we’re booking a flight for a meeting, and prices for a flight have never been this high. High prices are due to a few things:
Higher fuel costs
Some planes have been grounded
Staff shortages
However, we’re seeing indicators that inflation will subside, and supply chain issues will correct themselves.
Will prices go back down to before inflation hit?
Probably not.
But we believe that prices will fall back down and level out. We’ve had issues in the past with inflation and supply chain issues. We’ve seen gas prices skyrocket, and then they recede, and everyone is happy again.
Keep in mind that the last decade has seen low inflation rates, and now the high inflation is somewhat of a shock for consumers. We’ll be going over a brief history of inflation in just a few minutes that will help you understand what we mean when we say inflation has been low.
2. What Can We Do to Protect Our Savings and Retirement from Inflation?
Protecting yourself against inflation really depends on one of the two types of investing:
Passive
Active
If you’re investing using a passive approach, you’re going to ride out inflation and see how your retirement pans out. However, we believe in a more active approach to investing, which allows you to adjust your portfolio to invest more in what’s working now than what’s not working.
Supply and demand exist in investments, so we try to find high-demand areas to protect against inflation.
For example, you may have heard about a 60/40 portfolio, where 60% of investments are in equities and 40% in bonds/fixed income.
The 60/40 methodology is risky right now because bonds are struggling tremendously in 2022. The 40% that is meant to keep you safe in retirement is hurting you just as much during inflation.
Instead, you can do things with an active portfolio that better protects your retirement at this time.
3. How Does Inflation Impact Your Plan on When to Retire?
If we were helping someone with their retirement planning, we might recommend delaying retirement by a year if there’s no room to cut back on spending. It’s very rare that we’ve ever had to tell someone to delay retirement, but it may make sense in some cases.
Right now, due to inflation, this may mean working for an additional year if your retirement plan is very tight.
You may also want to retire from a full-time job and go into a consulting plan to keep some money moving in. However, if your retirement is well-funded, you should be fine to retire, especially if you can curb your spending in the short term.
4. How to Prepare a Spending Plan During Inflation
We’re having a lot of our clients ask us about adjusting their spending plans, and when inflation is running at 8% – 10%, it’s a scary time for many people. We’re certainly going through a rough few years since the pandemic.
But inflation will come back down, especially with the Fed working to bring inflation back down.
For the past 10 years, we’ve averaged 2.51%, so we’ve been spoiled. However, over the past 100 years, we’ve had inflation at 11% and into the teens. During the late 70s and into the early 80s, we had 11.3%, 13.5% and 10.3% inflation.
If we average inflation over the past century, it was around 3.2%.
Inflation didn’t remain at 10.3% since the 80s, so inflation will come back down and enter into some form of normalcy.
When creating your spending plan, we’ll discuss:
Wants
Needs
Retirees have the ability to adjust their budgets and can even decide to travel when it’s most affordable rather than in peak season. Minor control like this can help you stay in retirement and keep money in your pocket.
We can also run inflation scenarios when creating a spending plan to account for periods of inflation and ensure that you’re well on your way to retiring and living the life you want in retirement.
5. Income Buckets and Inflation
We talk a lot about income buckets when trying to secure your retirement. Income buckets come in three main types:
Cash
Growth bucket
Income/safety bucket
If your income bucket is set up to help you avoid the stock market concerns, you don’t need to think about stocks. Income buckets are guaranteed income that will come in every month to help you pay your bills for 10 – 20 years.
These income or safety buckets help you survive through inflation without much concern about what’s happening to the stock market. And for us, the peace of mind that these income buckets offer is worth setting them up.
6. Should You Do a Roth Conversion?
We believe everyone should at least consider a Roth conversion because it is beneficial. Conversions take pre-tax assets, pay taxes on them, and then convert them into a Roth account.
There are tax implications to converting these accounts, but you’re paying taxes now and avoiding potentially higher tax rates in the future.
For example, let’s assume that you have $100,000 in an IRA that you haven’t paid taxes on. The market falls 50%, and now you have $50,000. Since the portfolio is down, you can convert a larger percentage of your assets that you can convert and pay less taxes.
Tax-free growth is something to consider, especially in a down market.
However, please talk to a tax professional to better understand the immediate tax implications of converting your accounts.
We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for June 20, 2022
This Weeks Podcast -Steven Jarvis – Mid-Year Tax Strategies–
Are you committed to having a tax-planning conversation outside the tax season? The only way to win in the tax game is to have a proactive approach when it comes to tax planning.
It’s important to be committed to having some kind of tax-planning conversation on any topic, especially…
We recently sat down with one of our good friends Steven Jarvis CPA to discuss tax strategies everyone should be considering whether they’re currently in the middle of retirement planning or trying to secure their retirement.
In one of our previous podcasts, we also sat down with Steven to discuss taxes.
In fact, many of our clients also started working with Steven, and one thing that we continue hearing is that he helps eliminate the stress of taxes. According to him, the stress comes from stressing about doing taxes in April rather than engaging in tax planning throughout the year.
Steven and his team work intensely after-tax season to ensure that their clients follow the recommended tax strategies. So, we’re going to pick Steven’s brain to see what he recommends for your mid-year tax strategies.
First, Don’t Be Under the Impression That There’s Nothing You Can Do About Your Taxes
Before going any further, how did you feel about your taxes this year? Did you feel like you did your duty, paid your taxes and there was nothing else that you could do? If so, you’re like a lot of people that accept taxes as being a part of life.
And they are.
But you shouldn’t leave the IRS a tip because you’re not leveraging tax strategies. Taking a proactive approach to your taxes means that you’ll minimize your tax burden as much as legally possible.
Since it’s the middle of the year, it’s time to start thinking about them to lower your coming tax burden.
A few options available are:
Qualified Charitable Distributions (QCDs)
QCDs are one of the tax strategies that we often see with our clients. Steven explains that a QCD works by:
The money cannot be made out to you or hit your bank account to benefit from a QCD. Instead, this is a process we look at in conjunction with handling your required minimum distributions (RMDs).
QCDs are powerful because when you take money from your bank account and donate it to a charity, there’s a 90% chance you’re not benefitting from it come tax season.
Why?
Ninety percent of people do not itemize their tax returns, so they’re unable to deduct their donations.
QCDs allow you to:
Gift directly to charity
Benefit from lower income and tax rates
Another advantage of a QCD is that it lowers your adjusted gross income, too. Why is having a lower adjusted gross income important? Your Medicare benefit costs will be lower if your AGI is lower.
So, you’re:
Paying less in healthcare costs
Lowering your taxes
Donating to a cause you care about
QCDs are a great way to give back and receive a benefit from it, too. However, if you’re not 70-1/2 or the standard deduction is more beneficial than itemizing your taxes, what can you do?
Use a donor advised fund.
Donor Advised Funds and How They Work
A donor advised fund (DAF) is something to consider when you can’t use QCDs. DAFs allow you not to tip the IRS and still take a standard deduction. These funds will enable you to:
Lump multiple years of donations into a fund
Taxpayers still control the funds
Eventually use the funds for charitable purposes
Get your donations above the standard deduction to itemize
For example, if you donate $10,000 a year, you may not have enough to itemize and take the deduction. Instead, you may decide to put $30,000 into a DAF and immediately benefit by being able to itemize your taxes.
You don’t even need to distribute all the funds to a charity today and can simply opt to give every year to a charity of your choice. The key is to send these funds to a charity at some point.
So, this year, you put $30,000 into a DAF, itemize your taxes, and lower your tax burden.
Next year, you’ll likely go back to the standard deduction, so you’re paying less taxes this year and not paying any additional taxes for years you don’t contribute to a DAF.
However, there are also Roth conversions, which may help you with your tax strategies, too.
Roth Conversions to Lower Your Tax Burden
A Roth conversion converts a non-Roth account into a Roth. You take money out and pay taxes on it now, and let it grow tax-free in the future. You’ll pay more taxes this year, but your money grows tax-free afterward, which is great as your retirement accounts gain interest over the years.
Should you do a Roth conversion?
We believe everyone should consider a Roth conversion, but what does Steven think? We asked him.
Everyone should consider a Roth conversion if they have IRA dollars.
Conversions aren’t the right option for everyone.
Roth conversions this year happen at a discount because of the markets.
In 2026, taxes are set to go up if nothing else changes, so putting money into a Roth account protects you from higher tax burdens.
If you’re in your peak earning years, it may not be in your best interest to go into a Roth conversion.
Steven states that the only way you’re worse off is if taxes go down. But are you really convinced that taxes will go down in the near future? Most people respond with no.
In this case, a Roth conversion is beneficial.
You’ll need to make your Roth conversion by 12/31 of the year.
Finally, Steven recommends having tax conversations outside of the tax season. You need to take a proactive approach to your taxes, work with a CPA and develop tax strategies to save money on your upcoming taxes.
If you wait until March or April to think about your taxes, it’s too late.
Sit down with a professional, discuss your options and determine what tax strategies you can use this year to lower your taxes – or not leave the IRS a tip.
We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for June 13, 2022
Do you understand the difference and similarities between 401ks and IRAs? How can you make the two or one make sense for you as your retirement plan?
Both 401ks and IRAs are set up to encourage you to plan for your retirement, and you should have an analysis and a conversation on which one is good for you.
If you’re saving for retirement, you’ll need to know the difference between a 401k versus IRA. You may even have both types of accounts. While trying to secure your retirement, it’s crucial to know what each account type offers you.
If you’re saving for retirement, you’ll need to know the difference between a 401k versus IRA. You may even have both types of accounts. While trying to secure your retirement, it’s crucial to know what each account type offers you.
We’re going to discuss a few important details of each:
What is a 401k?
How does a 401k work?
What is an IRA?
Should I transfer to an IRA?
What is a 401k?
A 401k is an employer-sponsored plan. It’s set up by a business, and you can contribute money to it for your retirement.
What is an IRA?
An IRA is an individual retirement account. Virtually anyone can open this type of account and contribute to it.
Both a 401k and IRA are meant for anyone planning for retirement.
401k Versus IRA
A 401k and IRA have two main types:
Pre-tax, or “traditional” 401k/IRA
Tax-free, or “Roth” 401k/IRA
The main difference between pre-tax and tax-free is that contributing pre-tax has tax benefits. However, when you take a withdrawal in the future, you’ll pay taxes on these withdrawals.
With a Roth account, you pay taxes now and don’t have to pay taxes on withdrawals. Roth accounts allow your money to grow tax-free. Many companies are beginning to offer these types of accounts because they’re advantageous, as their money grows without further tax liability.
Let’s say that you have tax-free investments at 20. You can grow your money for 45+ years tax-free.
Funding a 401k vs IRA
When it comes to a 401k or IRA account, a 401k allows you to fund the account a little more than an IRA. An IRA allows you to contribute $6,000 – $7,000 per year. However, a 401k will enable you to put up around $19,500 per year.
Additionally, a 401k may have an employer contribution or an employer match.
If an employer puts money into your account, you may reach $50,000 a year in contributions in a single year.
Rules for a 401k
A 401k is started by an employer, and they choose:
Which brokerage the account is handled in
What types of investments are available
Employers make the rules for 401k accounts. It’s crucial to understand that these rules may change or be a bit more specific to the employer. However, the general rules that are followed by most employers include:
As long as you’re an employee of the company, you cannot move the money from the 401k to an IRA until you’re 59 and a half. At this point, you can do an in-service rollover. You can choose this option to take full control of your investments.
In-service rollovers keep the 401k account open to allow your employer to keep making contributions on your behalf.
You do not have to pay taxes when rolling over funds in these accounts because you’re not withdrawing the funds yet.
If you’re under 59 and a half and you have a 401k from another employer, you can move the money into an IRA.
One thing we hear a lot is that many people think that their employer negotiates better rates for them for their investment accounts. However, this is not the case. Mutual funds, which most people are investing in with their 401k, charge the fees and don’t lower them for employers.
Your employer may have fees, and the company can absorb these fees, but you wouldn’t have these fees with an IRA.
Quick Note on In-Service Rollovers
An in-service rollover is a simple process and not something that you need to be overly concerned about. The rollover is a basic decision that requires:
You may need to sign a paper every once in a while, and that’s really it. A rollover is straightforward and something that we do all the time.
Rules for an IRA
An IRA is an individual retirement arrangement, which means that as an individual, you’re 100% in control of the account. You can choose what brokerage to open an account with and where you want to invest your money to help it grow.
You don’t lose any benefits when going to an IRA. Most of our clients opt for an IRA because we’re able to direct their investments.
How an Advisor Can Help You with Your Retirement Plan, Even If You’re Younger than 59 and a Half
For a long time, advisors couldn’t really help people who were younger than 59 and a half with their retirement accounts, aside from taking an advisory role. There are a lot of rules and regulations in place that make this process very difficult, specifically with sharing account usernames and passwords.
Here’s a concept that we’ve been using as an advisor to manage a 401k:
You set us up with a login
We monitor and make trade allocations for you
We’re able to take a peek at your 401k and the options available to make allocation changes. We’re not granted the power to change contribution amounts or anything of that sort. These accounts are an overlay of your account that allows financial advisors to make trades on your behalf.
Our clients love the 401k option that allows us to manage a 401k on your behalf.
Moving from a 401k to an IRA is often ideal for clients, but you may find the tax advantages of a 401k to be the better option for you. The tax advantages include being able to deduct contributions from your current year’s taxes, but when your money grows, it will be taxed, which is something to consider.
If you’re trying to secure your retirement and aren’t an expert in retirement planning, we can help. We have a wealth of information available for free on our podcast (sign up here), or you can feel free to schedule a call with us.
We do love it when someone refers a family member or friend to us. Sometimes the question is, “How can we introduce them to you?” Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.
Here are this week’s items:
Portfolio Update: Murs and I have recorded our portfolio update for June 6, 2022
This Weeks Podcast -How Required Minimum Distributions and QCDs Work?–
When it comes to taking your money out of your IRAs and 401ks after retirement age, you might need to understand the terms RMDs and QCDs.
At age 72, you’re required to start taking distributions out of your 401k and IRAs with a formula based on your life expectancy. The key here is to be tax-efficient or even go tax-free in any way you can without breaking the law.
This Weeks Blog –How Required Minimum Distributions and QCDs Work?–
It’s important to understand how required minimum distributions and qualified charitable distributions work, even if you’re under 72. We’re going to discuss a strategy that is crucial to you, even before you can begin taking your RMDs.
Today we’re going to discuss two main, important aspects when trying to secure your retirement: RMDs and QCDs. But before we go any further, it’s important to define these acronyms for you:
It’s important to understand how required minimum distributions and qualified charitable distributions work, even if you’re under 72. We’re going to discuss a strategy that is crucial to you, even before you can begin taking your RMDs.
So, if you’re under 72 and don’t think this post is for you, trust us: it is.
Understanding Required Minimum Distributions
RMDs are attached to your 401(k), traditional IRA and other retirement accounts that are out there. If you have an account where you defer taxes until the future, the IRS requires you to take money out of these accounts and pay your taxes.
When you place money into these accounts, the deal is, “I don’t want to pay taxes now, but I will later.”
At age 72, you’re required to begin taking RMDs out of these retirement accounts, using a formula that is based on your life expectancy. These figures are generalized, and right now, at age 72, you have a life expectancy of 27.4 more years.
Using your balance from December 31 of the year prior to taking the distribution, you would do the following:
Balance / 27.4 = RMD
For example, let’s assume that your IRA had a balance of $500,000 on December 31, 2021. When you take the distribution in 2022, you’ll receive $500,000/27.4 = $18,248.18. However, you may not need to take your distribution at 72.
When you turn 72, you’re required to take a distribution for the year. So, for example, if your birthday is in November, you’ll still take the distribution in January of that year.
However, on your first RMD, you can decide to take the RMD in the next calendar year by April 1.
Delaying Your First RMD Until April 1
If you want to delay your first RMD, normally for tax reasons, there are some pros and cons that go along with it. For example, let’s assume that you must take an RMD in 2022, but because you turn 72 this year, you decide to take your first RMD by April 1, 2023.
In the 2023 calendar year, you’ll take two RMDs of:
approximately $18,248.18
approximately $18,248.18
After this period, all RMDs must be taken by December 31 of the calendar year.
You can also withhold taxes from your RMDs, so you won’t need to worry about:
Quarterly payments
Surprise tax bills
However, it’s up to you to decide whether you want to pay taxes quarterly or not. You can also opt to take a monthly distribution from your account. The main goal is to take out the full amount required by the end of the year.
Custodians of your account will take care of the calculations on your RMD amount, so we suggest following the amount they recommend for distributions.
If you’re 65 and retired, you can still take money out of your account for:
Living expenses
Placing funds into a Roth account
Lowering your future RMDs
When clients opt for this strategy, they can grow the money in their Roth accounts tax-free, which is very beneficial.
Sometimes, people have five different IRA accounts with $100,000. You can take the RMD from a single account. The IRS doesn’t care as long as you take the money out of the account. However, if you have a 401(K) and 4 IRAs, you need to take the portion out of the 401(K) and then the remaining from your IRA.
When retirement planning and trying to secure your retirement, you’ll find a lot of buzz around RMDs and QCDs.
Why?
Let’s find out.
Understanding Qualified Charitable Distribution
QCDs are another tool that you can use in retirement planning, and it’s one that the IRS allows you to begin using at 70 ½. If you want to give money to a charity that qualifies for a QCD, you can donate a portion or all of the RMD to the QCD.
Many people will take the RMD, pay taxes, and then give the money to charity.
However, with a QCD, you can:
Skip paying taxes
Setup a QCD directly to the charity
Since the check goes directly to the charity, you’re erasing the taxes on the distribution and helping a charity with the full amount of the RMD.
You can begin using the QCD strategy at the age of 70 ½ and above.
If you’re interested in QCDs and RMDs but have more questions, we’re more than happy to help. You can schedule a call with us.
