March 6, 2023 Weekly Update

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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 March 6, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – How Secure Act 2.0 Could Affect Your Retirement

In this Episode of the Secure Your Retirement Podcast, Radon and Murs have Denise Appleby to discuss how the Secure Act 2.0 can affect your retirement plan. Denise is the CEO of Appleby Retirement Consulting Inc., a firm that provides IRA tools and resources for financial and tax professionals.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – How Secure Act 2.0 Could Affect Your Retirement

Denise Appleby was our special guest this past week. She’s our consultant for IRA and 401(k) planning, and she is an invaluable asset for our clients. However, this week she’s sharing her insights into the Secure Act 2.0, which could affect your retirement in a few significant ways.

CLICK HERE TO READ THE BLOG

How Secure Act 2.0 Could Affect Your Retirement

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Denise Appleby was our special guest this past week. She’s our consultant for IRA and 401(k) planning, and she is an invaluable asset for our clients. However, this week she’s sharing her insights into the Secure Act 2.0, which could affect your retirement in a few significant ways.

Quick Background on the Secure Act 2.0

The Secure Act 2.0 was passed the last week in December 2022, and everyone is scrambling to:

  • Learn the rules
  • Changes that we need to know about
  • Who we need to contact

With thousands of pages to go through, the Act has a lot of significant rules that everyone needs to understand. Denise is here to help us understand some of the changes in 2.0.

Note: Even though the Act was signed very late in the year, the changes went into effect on January 1, 2023. 

Secure Act 2.0 Updates You Need to Know

Secure Act 1.0 changed the required minimum distribution (RMD) age from 70 ½ to 72. Secure Act 2.0 changes these dates further, but now there’s a calendar to deal with. If you have already reached 72 before 2023, you should be taking your RMD. However, if you turn 72 after 2022, the RMD starts at 73.

The problem is that a lot of custodians sent out letters stating that people turning 72 could wait to take their RMD until 73. Custodians simply weren’t given enough time to make changes on their end to stop these mails from going out.

What Happens If You Took Your RMD Even Though You Needed to Take It at 73 Instead?

The good news is that the distribution isn’t an “RMD” in this case. Instead, you can roll it over to next year. If you reach 72 in 2023, you have the option to roll the money that you take out.

Typically, when you take an RMD, you have to include it in your income for the year unless an exception applies.

In this case, the exception is that you can take the RMD and roll it back into your IRA or 401(k). You normally need to do the rollover within 60 days of receiving the funds. A rollover isn’t taxed, so you don’t need to claim this money. The IRS does permit a self-certification procedure that will allow for a rollover even if 60 days have passed.

There’s one issue: you can only perform one rollover per 12 months. If you rollover a traditional to a Roth account in the past 12 months, then you cannot rollover the RMD.

Missing the Deadline and an Excise Tax

Secure Act 1.0 had an excise tax of 50%. If you missed your RMD of $10,000, you would pay a 50% tax or a $5,000 penalty. Thankfully, Secure Act 2.0 has changed this excise tax to 25%. Additionally, there’s a correction period in place under the new Secure Act modification.

If you take your RMD during this correction period, you only pay an excise tax of 10%.

There’s also a chance that you can have the excise tax waived completely, and this is obviously something to pursue because you should never be paying more taxes than absolutely necessary.

We never want you to pay an excise tax. If you’re unsure whether you need to take an RMD or not, be sure to call your advisor.

Annuity and IRA Aggregation

Secure Act 1.0 states that if you have an annuity that has been annuitized and a regular IRA, you cannot aggregate these accounts. 

What does aggregation mean?

You calculate the RMD for IRA A and IRA B, and you can take the RMD that you want from these. However, in Secure Act 2.0, you can now aggregate these amounts, meaning you can aggregate your annuity and IRA now.

For many people, it’s a break if you have more than enough from an annuity and don’t need to take the RMD. Now, the person doesn’t need to take the RMD.

Designated Roth Account RMD Changes

Many people question why they need to take an RMD on their Roth accounts. Now, the beneficiary of the account needs to take an RMD but now the owner. Designated Roth accounts no longer need to take an RMD, starting in 2024.

Terminally Ill Provision

If you’re terminally ill and a doctor certifies that you have an illness that can result in death in 84 months, the 10% penalty for withdrawing funds early is eliminated under a special tax treatment.

Domestic Abuse Provision

In 2024, penalty-free distributions to anyone who experiences domestic abuse are now possible. Unfortunately, this rule only comes into effect in 2024, but it can help anyone in a domestic abuse situation find relief.

529 Provision to Rollover into a Roth IRA

One exciting change is with a 529 plan used for college savings. However, when you’re putting money into these accounts, it’s impossible to know whether the person will receive a scholarship. Under the Secure Act 1.0, any additional money left over that is not used for education expenses is subject to income tax and a 10% early distribution penalty.

A change in the Secure Act 2.0 allows you to rollover $35,000 (lifetime) into a Roth IRA account from a 529.

There are a few stipulations:

  • Annual amounts moved cannot be more than what you put into your regular IRA contribution
  • Contributions to traditional or Roth IRA must be added up to know how much you can rollover from the 529
  • Funds must be a direct transfer from the 529 account to the Roth account
  • Funds transferred from the 529 account must have been in the account for the past five years in hopes of stopping people from gaming the system

If you have the 529 company deposit the money into your account and then you transfer it to the Roth account, this will not count. You need the transfer to go from one institution to another without it ever touching your account.

Transferring the money from a 529 to a Roth account must be transferred back into the beneficiary’s account. You cannot transfer the funds from this account back into your own unless you’re going back to school and have the funds transferred to a 529 for you.

Biggest Mistakes in IRA Planning

We couldn’t help but ask Denise about the biggest mistakes she sees in IRA planning. She tells us that the biggest mistake she sees, which doesn’t happen often, is moving assets. Many people rollover their accounts multiple times in a single year, breaking the once-a-year rule for rollovers.

Once these multiple rollovers happen, it’s often too late to correct this year.

You’re allowed one 60-day rollover per year. However, this only happens if you have the check made out to you, the funds hit your bank account and then you put it into a new account via a rollover.

However, if the rollover goes from one institution to the next, such as Schwab to Fidelity, these types of transfers can happen as many times as you want.

Often, there are solutions that the IRS allows if something happens and you cannot meet deadlines. It’s important to speak to your advisor to understand your options and how you may be able to prevent penalties, taxes or other issues along the way.

Click here to schedule a call with us if you have any questions about the Secure Act 2.0.

P.S. If you want to learn more about changes to the Secure Act 2.0, head over to RetirementDictionary.com, where Denise shares her insights with readers.

February 27, 2023 Weekly Update

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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 February 27, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – The Retirement Planning Process

What does the financial retirement planning process looks like? How does it work? What information do you need to present?

Maybe you haven’t worked with a financial advisor before and don’t know the financial planning process. In this episode of the Secure Your Retirement podcast, we have a large part of our team take you through our retirement planning process.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – The Retirement Planning Process

The retirement planning process is intense, and we have people contacting us all the time asking about it. After all, you want to do everything you can to secure your retirement with as few hiccups along the way as possible.

We brought everyone from our team together to outline everything you need to do in the midst of planning your retirement.

CLICK HERE TO READ THE BLOG

The Retirement Planning Process

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The retirement planning process is intense, and we have people contacting us all the time asking about it. After all, you want to do everything you can to secure your retirement with as few hiccups along the way as possible.

In our recent podcast, we took an in-depth look at the retirement planning process with an A-Z guide on the topic.

We brought our team together to outline everything you need to do in the midst of planning your retirement. Grab a cup of coffee, tea – or whatever you’re drinking – and allow yourself 10 – 20 minutes to go through this guide.

Visit 1: Preparing for a Personalized Introduction Meeting with Our Team

First, we will send over a financial snapshot document to you via email. This is an important document that has a lot of questions about:

  • Current employment
  • Level of income
  • Estimated or current Social Security benefits
  • Pension (if you have one)
  • Expenses

If you’re not ready to share all of your information with us, we understand that you can be apprehensive about giving a stranger all of your financial info. However, for us to provide you with sound advice, we need to know where you stand financially.

We do want to mention that as Certified Financial Planners, we must operate under a fiduciary standard. What this means is that we need to put our client’s best interest above our own. If there’s a property that someone doesn’t want to tell us about or another source of income, it is a major red flag for us.

We can’t do the following without you providing us with a full financial disclosure:

  • Make proper recommendations
  • Understand your true financials

Aside from basic information about yourself, we’ll need information on a lot of your accounts. 

Data Gathering and the Accounts You’ll Be Submitting

Some of the many accounts that we’ll need information on are:

You should understand and provide us with the account information and the specific type of account that you have, such as a Roth or Traditional. We will need to also know your tax status.

We have a three-appointment process.

During your initial sit-down with us, we will need to have a general understanding of your financials and the accounts above. The first visit is a baseline visit where we both determine whether we’re a good fit for each other.

However, we’ll also need some information about your income.

Income Information We’ll Need from You

We need to know what income you have coming in every month, and this will include:

  • Salary, if you’re currently working
  • Social Security benefits (if you are retired and claim them) or what the benefits would be based on your plans
  • Pension 
  • Any other forms of income (sale of a business, rental income, etc.)

On top of your income, we also need to understand what your current expenses are, too.

Expense Information We’ll Need from You

We know the income that you have coming in, but we need to complete this financial picture by also understanding your expenses. Some of the information that we’ll need includes:

  • Mortgage
  • Credit cards
  • Current living expenses
  • Auto loans
  • College expenses for kids, grandkids
  • Goals in retirement
    • Travel
    • Home renovations
    • Purchase a second home
    • Donating to charity

Knowing your inflows and outflows every month is crucial to the retirement planning process. When a lot of clients come to us, they’re close to retirement and are earning good money. Many times, a lot of people don’t know the dollars that are going out of the door.

When you retire, you go from the accumulation phase of life to having to live off of the money you’ve saved.

Often, clients will then start to categorize their expenses and really sift through them. They may even stop paying for things that they’ve been holding on to that they don’t use.

Additional Information We’ll Need from You

We’re still in the snapshot phase right now, and we’re almost ready to move forward to the fun stuff. However, we do need to gather some more data from you, including:

Estate Plan

We’ll need to know if you have an estate plan, a will or a trust. We’ll also need to know where these documents were drafted for you.

Taxes

Do you do your own taxes or work with a tax planner? 

Goals

What are your goals in retirement? Perhaps you have a trip planned around the world or you want to pay for your grandkid’s retirement? We need to know all of this information, too.

During the first visit, we worked to build a retirement-focused financial plan, which is why we need all of this data from you. Once we have this information down during the first appointment, we’ll then move on to the second visit.

Visit 2: Preparing for Your Second Meeting

If you’re a good fit for us and we’re a good fit for you, we’ll move on to our second visit. The second visit does require a bit of preparation, too. However, there’s good news: most of the prep is on our end.

We will need some information for our team, such as:

  • Most recent account statements for your assets
  • Most recent tax returns

Ideally, you will provide us with your most recent tax return and account statements for your 401(k), IRA and so on. Once you hand this over to Taylor, she’ll then start to go through the account statements to:

  • Verify the balance of accounts so that we can make appropriate recommendations
  • Review your account holdings to know exactly what you’re invested in so that we can prepare an analysis of your holdings, along with a risk assessment

Taylor will use the data she gathers to analyze them further to meet your risk goals. We’ll also look through your tax statement to see if there are ways to plan for your taxes better and save you money.

We use a secure portal that allows you to upload all of these documents to us.

Taylor researches this information behind the scenes, but what you see is your:

  • Entire financial plan
  • Step-by-step review of your plan
  • Income and expenses

We’ll have all of this information in our software, where we can instantly make adjustments and also run you through different scenarios. For example, we can visualize what will happen to your retirement accounts if you do buy a vacation home or renovate your home.

Part 1 of the Visit

Our team will walk you through each step of the process, and then at the end of the meeting, we can print or send you:

  • The entire plan
  • Scenarios we went through

We create an in-depth plan that helps answer all of the questions you may have, such as:

  • What happens if you retire early?
  • What happens if you need to enter long-term care?
  • What happens if you live to 95 – 100+?

You’ll receive a lot of value during this second visit, and you’re not even officially working with us yet.

Part 2 of the Visit

Risk exposure is what we cover in the second part of the visit, and there is a questionnaire here, too. The questionnaire is different from what most people have experienced before because it truly makes it clear for people to understand what risk they’re really willing to take with their retirement.

One question we have for you is: would you be okay with losing 10% of your retirement?

When people with $1 million in retirement hear this question, they often think: it’s not that bad. However, how would you feel losing $100,000?

Between our first and second visits, we’ll create a full analysis of your accounts so that you know what your risks are currently.

We’ll also walk you through what the risk is based on investments that you may want to dabble in and then show you:

  • Risk in your current investments
  • Risks we can tame back

At the end of this visit, you go home with your financial plan and the data we collect. We will then come back for a strategy meeting. 

Visit 3: Strategy Meeting

After the second visit, we take some time and then come back for a third meeting, which is all about strategy. You’ll be given a bucket sheet, and this breaks everything down into:

  1. Cash: The amount of cash that you feel comfortable holding. Some people want to have a lot of cash and others do not. 
  2. Safety: The safety or income bucket includes a few different products which will provide safe and reliable income during retirement.
  3. Growth: Money that is in growth buckets will grow during retirement. The funds in this bucket will be liquid, but the goal is to avoid touching this money as much as possible.

Using the three-bucket strategy does one thing easily for our clients: it brings clarity. When we show you all three buckets personalized to you, it will help you visualize your retirement in an entirely new way.

You’ll have a clear view of what money you’ll need in retirement, how your growth bucket will grow and how long your money will last.

For many people, it’s easier to visualize three buckets rather than a 40 – 50-page plan that you never look through. Year after year, we update and adjust these buckets for you so that you can visualize your retirement in a new and exciting way.

At this point, you’ll have a great idea of your retirement and it’s truly just the start of the process.

Now, the next step is to decide if you want to become a client or not.

In an additional episode at the end of next month, we’ll go into more detail on this topic, including what comes next and how we’ll initiate the plan that we put in place.

Click here for our 4 Steps to Secure Your Retirement video course.

February 21, 2023 Weekly Update

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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 February 21, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Planning For Taxes in Retirement

We know nobody likes to talk about taxes, but there are things you must have your head wrapped around. Thinking and preparing for taxes throughout the year makes the whole scenario easier when tax season is here.

When preparing for tax season, there are some things that you need to compile for your CPA, and it’s easy to forget a document or two.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Planning For Taxes in Retirement

Filing your taxes in retirement is important. You may have worked diligently your entire life, but the IRS still wants you to pay your taxes in retirement. However, there are many ways that you can combine your tax and retirement planning to save money.

Now, if you’re stressed when thinking about this topic, don’t be.

We’re going to walk you through the documents that you’ll need to make planning for taxes in retirement as simple and straightforward as possible.

CLICK HERE TO READ THE BLOG

Planning For Taxes in Retirement

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Filing your taxes in retirement is important. You may have worked diligently your entire life, but the IRS still wants you to pay your taxes in retirement. However, there are many ways that you can combine your tax and retirement planning to save money.

Now, if you’re stressed when thinking about this topic, don’t be.

We’re going to walk you through the documents that you’ll need to make planning for taxes in retirement as simple and straightforward as possible.

What to Do If You Have Self-Employed Income

If you’re self-employed, you’ll likely receive your 1099. A 1099 means that taxes have not been paid on these dollars yet, so you’ll need to have this document when filing your taxes. If you’re still involved in a partnership, you may receive a K1 as well.

Investments can also generate a K1.

Unfortunately, K1s often do not get generated quickly. Many people get their tax returns done, file them and then have to start all over to incorporate this form into their taxes.

If you’re self-employed, you also need to keep everything in order to claim deductions, such as:

  • Check registers
  • Credit card statements
  • Business use asset information
  • Receipts

Anyone with a home office will want to consider whether or not they want to claim their office as a tax deduction, too.

If you’ve been paying your taxes quarterly, you’ll want to gather this data to give to your CPA so that they know what you’ve paid so far. 

Ideally, you’ll keep these documents in a folder throughout the year to make tax season less stressful. If you have everything in order beforehand, you won’t have to deal with the stress of getting everything in order come tax time.

Making estimated quarterly payments online on the official IRS website will be very useful, too. At the end of the year, you can log in to the website and print off a statement showing the taxes you paid throughout the year. This will make it very easy to supply your accountant with these important figures so that you’re not paying more taxes than necessary.

Note: If you happen to file an extension, the site only keeps records for 14 – 16 months. You need to print out these payments because they will include filing dates, which need to be filed to make sure that you don’t get penalized.

Rental House Income

If you have rental income coming in, you need to keep track of:

  • Rental income and payments
  • Expenses relating to the properties

You want to keep a record of every possible expense you made relating to these assets, along with the dates of these transactions and why these expenses occurred. You will need to file these taxes quarterly, so also keep this in mind.

Retirement Income

Retirement income is going to revolve around your 1099, and there are multiple forms of this document that you need to collect before filing your taxes. Most financial institutions have all the way until the end of February to get these documents to you.

You’ll typically have a 1099 sent to your mailing address, but a lot of institutions are putting these files online for you.

If you’re currently working, you’ll also receive a W2.

The W2 will show your:

  • Wages
  • Taxes withheld
  • 401(k) contributions

If you receive income from any of the following, they will generate a 1099:

  • Pension
  • 401(k)
  • IRA
  • Social Security

These documents will show how much you withdrew within a calendar year, how much taxes are withheld and more. Collecting these files will make it much clearer how much you’ll owe at the end of the year in taxes.

Traditional IRA basis is more complicated because these are non-deductible.

It’s important to gather all retirement income-related 1099s so that you can file your taxes properly. However, there is another form of 1099s, which you’ll need to know about before filing your taxes or handing your documents over to an accountant.

Note: 401(k) rollovers to an IRA will generate a 1099. The 1099R is a non-taxable distribution, so you can rest easy that you won’t be hit with a major tax liability. It’s important to work with a professional to ensure that these rollovers are done properly so that you don’t get hit with a major tax liability.

Savings, Investments and Dividends

Your custodian, such as Charles Schwab, will send you a 1099 for money that you have in savings, investments and dividends. Most custodians will have these files for you on their online portals.

In most cases, the file is ready around February 15, but this date can vary.

These 1099s will include:

  • Interest earned for any interest-bearing accounts
  • Dividends from a stock or ETF that paid an actual dividend
  • Capital gains, whether a short-term or long-term, which have different rates

You need to ensure that you receive this 1099 before filing your taxes. If you forget about this 1099, you’ll find yourself with a huge amount of taxes that the IRS says that you owe, which will then need to be cleared up by amending your taxes.

It’s better to wait until you have all the documents before filing your taxes, or you’ll have to deal with the stress and headache of making a tax amendment.

Tax-deferred accounts, such as an annuity, will generate a 1099 if you take a distribution through the annuity. You may have to pay taxes on interest here, too.

Home Ownership

Offsetting some of your taxable income is possible through deductions. If you have a mortgage or loan on your home, you may be able to write off this interest. You want to keep detailed documentation of your real estate and property tax records, receipts for energy-saving appliances and any other 1098s you receive in the mail.

Note: A lot of these deductions that we’re talking about will require you to itemize your deductions. If you don’t itemize, a lot of what we’re talking about in this section and the next may not relate to your situation.

Charitable Deductions

If you are charitably inclined, you can make the most out of your donations by itemizing your tax returns. We do this with many of our clients by using donor-advised funds, where we combine multiple years of donations into one year.

When you use this type of deduction, you can reduce your taxes dramatically.

You’ll need to reach out to us if you want to discuss using donor-advised funds to reduce your taxes. Donor-advised funds will require you to preplan because you cannot utilize this tax strategy for past taxes.

Medical Expenses and Health Insurance

If you itemize your tax return, you want to keep track of expenses for:

  • Healthcare
  • Insurance
  • Doctors
  • Dentists
  • Hospitals

Depending on these expenses, it may or may not make sense to itemize. Your CPA will help guide you on whether or not taking the standard deduction or itemizing is in your best interest.

Health insurance form 1095A will be generated and sent to you as proof that you have insurance. 

Additionally, HSA contributions will generate a 5498, which your CPA will need to receive credit for these contributions.

State and Local Taxes

Any time you pay state and local taxes, be sure to keep records of these payments. These taxes include:

  • Property tax
  • State income tax

Your CPA can use these taxes to try and save you money on your taxes.

Contributions to your traditional IRA can also be deducted from your taxes.

There’s a lot to go through here, but we recommend starting early and keeping track of these documents to make taxes less stressful. If you prepare for your taxes throughout the year, it will make tax season a lot less chaotic for you.

Click here if you would like to speak to us about donor-advised funds.

February 13, 2023 Weekly Update

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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 February 13, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – 10 Reasons Everyone Needs a Power of Attorney in Retirement

What if something happened to you and you needed somebody else to make decisions in your place? Do you have a durable power of attorney in place to make things easier for you and your loved ones?

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – 10 Reasons Everyone Needs a Power of Attorney in Retirement

Do you have a durable power of attorney? If not and you’ve done everything that you can to secure your retirement, it’s one of the steps that you must take. We’re firm believers that when you’re in the midst of your retirement planning, you also need to work on your estate plan.

CLICK HERE TO READ THE BLOG

10 Reasons Everyone Needs a Power of Attorney in Retirement

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Do you have a durable power of attorney? If not and you’ve done everything that you can to secure your retirement, it’s one of the steps that you must take. We’re firm believers that when you’re in the midst of your retirement planning, you also need to work on your estate plan.

And what’s arguably the most important document in an estate plan? The durable power of attorney.

No one wants to think about invoking a power of attorney in retirement, but there are times when you’ll need this document. For example, if you have an IRA, it cannot be held jointly. A durable power of attorney will allow a designated individual to access this money for you.

We’ll mention a few times when you may need this important document, along with 10 reasons for a power of attorney in retirement, in the following section.

10 Reasons to Have a Power of Attorney in Retirement

1. You Become Incapacitated or Disabled

We had a client who could not move or speak following a massive stroke. This individual is alive and has their mental capacity in place, but they could not:

  • Express themselves
  • Coordinate any muscle movement to show mental capacity

The majority of the person’s money was in a 401(k) and IRA. Unfortunately, the person’s spouse could not access any of the money their partner saved for retirement. Going through the process of getting this document after the stroke was a long and arduous one.

Eventually, the individual recovered enough to nod and approve the power of attorney document.

However, their spouse spent months in limbo without being able to withdraw money from accounts to pay bills. Due to the laws in place, we cannot even talk about a person’s IRA or 401(k) with anyone else unless they have a durable power of attorney in place.

2. Convenience While Traveling

If you’re in the middle of retirement and backpacking outside of the country, you may also want to have a durable power of attorney in place. During the pandemic, many people fell into this scenario where they couldn’t get back to the United States, and this led to financial difficulty.

Having a durable power of attorney in place allows someone else to:

  • Access your money to pay the bills
  • Access your money to send it to you while you are overseas

Many people have retirement plans to travel, and a lot can happen when you’re not home. The power of attorney document provides you with peace of mind that someone can act on your behalf in financial matters and also in business.

It’s important to note that there are two main types of power of attorney that you need to concern yourself with:

  1. Durable Power of Attorney
  2. Healthcare Power of Attorney

We’re not talking about the healthcare power of attorney today. Instead, we’re talking about someone like in our first point – an individual who is incapacitated and needs to go into a facility for rehab.

You may also need to bring the person home and hire people to care for them.

All of these decisions are financial decisions rather than medical ones. In these scenarios, the durable power of attorney will empower someone of your choosing to access the funds to hire caregivers or send you to rehab.

4. Have Someone to Manage Your Finances

While this point overlaps with most on this list, it’s worth mentioning because having the option of allowing someone to manage your finances is huge. Power of attorney allows someone to:

  • Setup income streams
  • Pay your bills
  • Pay for you to move from a home to a facility

When you have a durable power of attorney in place, it even allows the person to sign things on their partner’s behalf with us.

5. Real Estate Transactions

Imagine that you have any form of real estate: your primary home, rental home or even a second home. Included in your power of attorney document is granting someone the ability to manage your real estate on your behalf, such as:

  • Retitling the property
  • Selling the property

Many of our clients have a second home that they know they can sell if they need cash or their spouse needs the funds to go into a long-term care facility. In these cases, having a durable power of attorney will allow your spouse to sell the property, as you talked about prior, without needing your signature.

Imagine if you had a stroke and couldn’t sign off on the sale of the property with your spouse.

In this scenario, a single document would allow your spouse to act on your behalf, sell the property and use the funds to get you the care that you need.

6. Making Gifts

If you want to make gifts, such as paying for your grandkid’s college education, you might open a 529 plan. A person that is listed on a power of attorney can continue funding these accounts on your behalf.

What if you do not have a 529 plan and simply transfer money to the child’s school every semester to help them pay tuition?

In this case, the person that you list as your power of attorney can do this for you. Also, if you make charitable contributions, this can continue with your power of attorney. 

7. Dealing With Tax Matters

Even if you’re incapacitated, the government will still want you to file your taxes. When you have a durable power of attorney in place, the individual can:

  • Make decisions to save you money
  • File taxes on your behalf

You can include taxes in your power of attorney so that the individual can act on your behalf.

8. Protecting Your Privacy

Perhaps you’re someone who likes their privacy. You can have the durable power of attorney act on your behalf to protect your privacy. This individual can then access your accounts, make transactions and do anything you direct them to without mentioning your current situation.

9. Avoiding Guardianship Proceedings

Going back to our first example, the individual who had the stroke could not communicate for some number of months to get the durable power of attorney signed. We had discussions with lawyers to help their spouse gain guardianship over the person.

However, this is a very complex matter that can be exhausting and takes a lot of time and money.

If you have a durable power of attorney, you won’t need to go through this process. The heartache, stress and cost of having to gain guardianship are fully alleviated with a durable power of attorney in place.

10. It Provides Peace of Mind

Perhaps the most powerful reason to have a durable power of attorney is that a durable power of attorney provides peace of mind. You want to have these documents in place before you need them, so if anything does happen, you have already planned to allow someone that you name to handle your affairs.

Emergency situations can happen at any moment, or they may never happen.

However, having a durable power of attorney will allow you to have peace of mind that if something does happen, you have a backup plan in place.

The good news?

A durable power of attorney is not an expensive document. We can even provide you with the resources and direction to help you put your durable power of attorney in place. We’re not attorneys, so we cannot make this document for you, but it is something that we can help you secure through an attorney.

Click here to schedule a call with us for more information about getting a durable power of attorney.

February 6, 2023 Weekly Update

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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 February 6, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Clifton Corbin – Teaching Kids About Money & Retirement

Don’t we all wish we gained financial literacy at a young age? Maybe then, we wouldn’t have made so many money mistakes as young adults. How about giving your kids or grandkids that money management knowledge as early as possible?

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Teaching Kids About Money & Retirement

As an adult trying to secure your retirement, it’s difficult not to think about your children. Perhaps you want to leave your children money or spend more time with potential grandchildren when you retire.

CLICK HERE TO READ THE BLOG

Teaching Kids About Money & Retirement

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As an adult trying to secure your retirement, it’s difficult not to think about your children. Perhaps you want to leave your children money or spend more time with potential grandchildren when you retire.

However, one of the greatest gifts you can give is teaching your kids about money and retirement.

In our most recent podcast, we had the pleasure of having Clifton Corbin on the show. Clifton is the author of Your Kids, Their Money: A Parent’s Guide to Raising Financially Literate Children. He provides us with the information to empower children so that they can start retirement planning at a young age.

If your kids are grown up, you can share this information with your grandkids to help them become financially independent and reach retirement.

What Prompted Clifton to Dedicate His Life to Educating Kids About Money?

Clifton has dedicated his life to educating children about money, and this commitment goes back to his own personal story. As a young person, he was very curious about money and then going to university changed everything.

He made friends, had fun, and then ended up with:

  • Credit cards
  • Early debt
  • Etc.

Looking back at his experience, he decided to learn why he got into so much debt. As someone who had a paper route and lemonade stand, he always had an interest in money, but he never truly learned about debt and managing money at a young age.

After this reflection, he has made a commitment to teaching young people about money and debt and educating young people in ways that they don’t receive in school.

We are firm believers that between K-12, kids need to have financial literacy classes. Far too many kids end up in debt because they really don’t understand debt or how to manage their money properly.

However, while we can’t change the education system on our own, we (and you) can guide children to Clifton’s books and resources, which they can grasp at a very young age.

At What Age Should You Begin Teaching Kids About Money?

Understanding money to its true extent is something that many people don’t grasp until they’re older. However, when kids start to realize and understand that money is something that is traded for goods and services, you can begin teaching them about money.

You can bring your grandchild or child to the store, and when you tap your debit card on the reader or hand over money, it’s a good time to start having early conversations.

Most kids can grasp the basic concept of money at 4 or 5.

At this age, you can begin:

  • Roleplaying as a shop owner or even customer who is buying something from your kid’s or grandkid’s imaginary diner.
  • Explain basic concepts to children with a focus on fun examples, such as the accumulation of coins or other currency.

We only have a limited amount of time to get these concepts into a child’s mind before they need to use them. You want to teach your children these concepts when the ramifications are still low.

For example:

  • When your child is still in the safe space of home
  • When you can lend your child $5 and teach them that paying back debt is important without creditors knocking on their doors

Essentially, kids need to start learning money management before they actually need to use money management in their lives. You wouldn’t allow your child to get behind the wheel of a car and drive on the highway as their first driving experience.

Instead, you bring your child to a parking lot and help them understand the basics of driving before setting them free.

You want to do the same thing with money.

Teach your kids about money management before they need it so that they can start on the right foot.

When to Teach Each Concept of Money to a Child and at One Age

As someone with children, we know that teaching kids about credit cards and how they work is extremely difficult, even when they are in their teens. Clifton explains that every child and their understanding of money is different.

The hope is that by the time a child becomes a young adult, they will be comfortable managing their money.

When a child gets their first job, they need to know how to put the money they earn to work for them. Children and teens need to learn basic skills, such as:

  • Living off of less than they earn
  • Putting a percentage of each dollar away for their future
  • Saving money for a home
  • Etc.

Ideally, a child should learn different concepts of money before they need to use the concept. So, if your child can take out a student loan at 18, they should understand how these loans work before they need to take them out.

The same goes for savings, loans, credit cards and so on.

How Grandparents Can Approach the Talk About Money

Grandparents have a different approach to teaching their grandkids because they often hand them back to their parents and go back to their daily lives. However, grandparents have a wealth of information and guidance that they can share with their grandkids.

Grandparents can share stories of:

  • Their first jobs
  • Generating wealth
  • Debt
  • Etc.

Stories from grandparents help their grandchildren through storytelling because these stories often stick in the child’s mind.

Clifton also shared with us that he may not be the most fun uncle because he puts money into 529 accounts and other savings accounts for his nieces and nephews. However, he shows them their balance every year, and then when they need the money for their higher education, they can use it.

Smart money management and showing kids about savings through your own actions can really help your grandchildren learn about money, compound interest and more.

As a grandparent, you can share:

  • Wealth
  • Wealth of information

Clifton’s Resources and What Children Can Learn from Them

Clifton has so much information to share, and he has these resources that you can use to teach kids about money. We asked him about these resources and what kids will learn from them:

  • Your Kids, Their Money: A Parent’s Guide to Raising Financially Literate Children is a resource book that is written with short stories on managing money, talking to kids about acquiring money, securing money, tax strategies, tax planning and more. This is a book that teaches you how to talk to your child or grandchild about wealth, money and more – in a language that kids understand.
  • Workbook is filled with puzzles and activities that you can provide to children to help them learn about money in a way that is fun and exciting to them. Pictures, puzzles and engaging activities fill the workbook, making it something kids actually want to do.

If you want to find the workbook for free, you can click here. The book has fun ways to teach your kids about identifying money, coins, basic money management and more. The book is something we’ve looked through, and it looks like an amazing option for teaching kids about money using puzzles, riddles and more.

You can also find Clifton’s books on Amazon, online book stores, Barnes & Noble and many other locations.

If you would like to receive our book, Get Off of the Retirement Rollercoaster, email morgan@pomwealth.com with a screenshot showing you left a review of our podcast on iTunes for more information.

January 30, 2023 Weekly Update

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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 January 30, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Looking Ahead for 2023 in Retirement

In 2023, we’re committed to adding a lot of value with the information we’re putting out through this podcast.

In this episode of the Secure Your Retirement podcast, we look ahead at what we’ve prepared for you in 2023. We list some things to look forward to in our 2023 content, including the Secure Act 2.0, trust, social security strategies, IRMAA, tax planning, and quarterly updates.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Looking Ahead for 2023

In 2023, there is a lot to look forward to, which is what we want to cover in this article today. We do want to alert you to our podcast for this blog post, which you can find here. With that said, we’ll have the following on our podcast and in our blog in the coming weeks/months:

CLICK HERE TO READ THE BLOG

Today we did a live online presentation explaining structured notes. 

We recorded that presentation for all that could not make it live.  CLICK HERE TO WATCH THE RECORDING

Looking Ahead for 2023

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In 2023, there is a lot to look forward to, which is what we want to cover in this article today. We do want to alert you to our podcast for this blog post, which you can find here. With that said, we’ll have the following on our podcast and in our blog in the coming weeks/months:

1. Secure Act 2.0

The original Secure Act was passed in 2020, and it changed a lot of rules, such as when you must begin taking your required minimum distributions (RMDs). Just as we started to get comfortable with the original Secure Act, Congress passed the Secure Act 2.0 on December 29, 2022.

RMDs are changing in a significant manner, and the age is changing from 72 to 73 or 75, depending on a few factors, which we’ll discuss more in the future.

A few other things have changed:

  • RMD penalties have gone down
  • Catch-up contributions have changed
  • Much more

The Secure Act 2.0 is something like a 4,000-page document, so this is a future episode that you will certainly want to watch if you’re nearing retirement or hitting 72 and want to know more about your RMDs.

Note: RMDs are required for any of the tax-deferred accounts that you have. Essentially, the IRS allowed you not to pay taxes on these accounts, but they want you to begin withdrawing from them so that you do pay taxes on them.

2. Who Needs a Trust?

In this future episode, we’ll be sitting down with Andres from Trusts & Will. We had Andres on our show in the past, and we’re going to sit down with him again to discuss trusts. Our clients who work with us receive free estate planning because we want everyone to have:

  • Trust
  • Will
  • Power of attorney
  • Healthcare power of attorney
  • HIPAA

We’ve had a lot of questions about the need for a trust this past year, and Andres will explain:

  • Who needs a trust
  • Types of trusts

Andres will walk us through all of these concepts so that you can decide whether a trust is a good option for you. 

3. Social Security Strategies

Social Security should be on the minds of anyone who is thinking about retirement, and a few strategies we plan to cover are:

  • What is the best age to take Social Security? This was one of our most popular YouTube videos, with nearly 300,000 views. We will revisit this in greater detail and with some of the changes that have happened since.
  • An interview with Heather, a consultant that we’ve hired who knows the ins and outs of Social Security. She was on our podcast in the past, and she wants to talk to you about new strategies you should be thinking about for your Social Security.
  • IRMAA contributions are your Medicare surcharges, and these go hand in hand with Social Security. We will explain what IRMAA is, how this premium on your Medicare works and how these figures have changed, too.

4. Tax Planning Updates for 2023

In 2023, a lot of the contribution and tax planning numbers have changed. This episode will lay everything out for you so that you can understand how much you can contribute to:

  • Traditional retirement accounts
  • Roth retirement accounts
  • 401(k) contributions
  • New rules for employers who want to contribute to Roth accounts
  • Roth conversions

We are likely to have a multi-level conversation around tax planning updates in 2023. This episode will also discuss taxes in great detail so that you have a firm understanding of your projected obligations in 2023.

5. Quarterly Update with Andrew Opdyke

Andrew is on our show often because he has invaluable information that can help you secure your retirement. He will be with us to share a quarterly update, where he will discuss:

  • The economy
  • Future of investments
  • Market in 2023
  • Inflation and recession risks

Andrew works for First Trust Economics and is an Economist. As one of the best forecasting companies in the United States, Andrew has insights into the road ahead for the economy that very few people can provide.

In fact, he is such an asset to our show and clients that we plan to have him on every quarter when possible.

He’ll be on around April 1st.

We hope that this roadmap will provide you with some insight into what we have in store for you in 2023.

Click here to watch our FREE course: 4 Steps To Secure Your Retirement.

January 23, 2023 Weekly Update

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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 January 23, 2023 

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Secure Act 2.0 – How Your Retirement Plan is Affected

Are you curious about how your retirement plan is affected by the Secure Act 2.0? The Secure Act 2.0 was just passed at the end of the calendar year 2022 with some major updates on it.

The Secure Act 2.0 has changed things around when to take your Required Minimum Distributions from now moving forward.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Secure Act 2.0 – How Your Retirement Plan is Affected

The Secure Act 2.0 impacts your retirement planning, and it has some major updates to it, including required minimum distributions (RMDs). Since the Act was just passed at the end of 2022 and is now in effect, it’s important that we discuss these key changes with you.

CLICK HERE TO READ THE BLOG

**Special Online Presentation explaining Structure Notes:

You are invited to a Zoom meeting. 

When: Jan 30, 2023, 12:00 PM Eastern Time

Register in advance for this meeting:

CLICK HERE TO REGISTER

After registering, you will receive a confirmation email containing information about joining the meeting.

Secure Act 2.0 – How Your Retirement Plan is Affected

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The Secure Act 2.0 impacts your retirement planning, and it has some major updates to it, including required minimum distributions (RMDs). Since the Act was just passed at the end of 2022 and is now in effect, it’s important that we discuss these key changes with you.

Secure Act 2.0 and Changes to Your Required Minimum Distribution

When you funnel money into your traditional IRA, 401(k), 403(b) or 457, you defer your taxes and make an “agreement” with the IRS. The agreement is sort of a handshake-type deal that allows you to defer your taxes on the basis that you will, at a certain age, be required to take a certain percentage out of your tax-deferred account, called an RMD.

The IRS wants you to begin paying taxes on the funds that you deferred, and you will only pay money when the money has been distributed to you.

However, it’s important to note that:

  • You’re not required to spend the money
  • You can reinvest the money once you have paid taxes on it

We’re going to review the changes in the age that you need to start taking these distributions. The IRS has made this a bit complicated with the rules and regulations in place, but we’re going to make it as simple as possible for you.

Note: None of this is for your Roth 401(k) or IRA, which are not tax-deferred. Instead, these changes are only for accounts that you have where you’ve been able to defer your taxes.

Changes Today vs. Before the Secure Act 2.0

Before the current changes, the age that you were required to take your RMD was 70 ½. Why the half is included, we don’t know, but in the year that you turn 70 ½, you needed to take these RMDs from your tax-deferred accounts.

Every year forward, you would need to take a distribution from these accounts.

However, as of December 29, 2022, the age for RMDs has changed thanks to the Secure Act 2.0. The new rules for RMDs are:

  • Born in 1950 or earlier, you should have already been taking your RMDs and nothing has changed for you.
  • Reached age 72 in 2022. You should have taken your RMD or had the option to defer it until April 1, 2023. (More on this below).
  • Born 1951 – 1959, you need to begin taking your RMDs at the year you reach age 73.
  • Born 1959 and after, you need to begin taking your RMDs at age 75.

Deferring RMDs Using the Required Beginning Date

The IRS allows you to use your required beginning date to your advantage. According to current IRS rules, you can do the following just one:

  • Start taking your RMDs when you hit the specified age
  • Begin taking your RMDs on April 1 of the following year

For example, let’s assume that you turned 72 in 2022. In this case, you could have:

  • Taken your RMD before December 31, 2022
  • Taken your first RMD on April 1, 2023

If you defer the payment, you will not have to pay taxes on these funds for 2022. However, in 2023, if you deferred the payment, you will be taking your:

  • 2022 payment
  • 2023 payment

In 2023, you would have two distributions, which you’ll need to pay taxes on. Most people who have high incomes and are working in 2022 would want to consider deferring payment so that they don’t hit a higher tax bracket and have to pay a larger tax percentage.

Otherwise, it often doesn’t make sense to defer your first RMD payment.

With all of this said, you can only defer your first payment and will be required to take an RMD for every subsequent year that passes.

Examples of RMDs After the Secure Act 2.0

Jane Born in 1950

Jane turned 72 in 2022, meaning that she is required to take an RMD in 2022 or on April 1, 2023. If Jane does defer until April 1, she will need to take another RMD by December 31, 2023.

Tom Born in 1951

Tom will need to start taking his RMDs for 2024 when he turns 73. He can also defer this RMD until April 1, 2025.

Sandy Born in 1960

Sandy is 63 right now in 2023, and she is not close to the RMD age yet. However, she is under the Secure Act 2.0 and will need to take her RMD in 2035 when she hits 75. She can also defer her first RMD until April 1, 2036.

Note: You need to take your RMD no matter the time of year you were born. If you were born on December 30, you still need to take your distribution.

What Happens If You Miss Your RMD for the Year?

The IRS says that if you miss your RMD, there can be a penalty. We’ve seen people take their RMD late and make their tax payments, waiving this penalty in the past. However, you never know if the IRS will become less lenient and stop waiving these penalties.

If you turn 72 in 2022 and don’t take your RMD until after April 1, you need to:

  • Speak to us
  • Speak to an accountant

You can’t run from the IRS, so it’s better to rectify the matter now if you missed your RMD.

Secure Act 2.0 Only Matters If You’re Not in Your RMD

If you don’t fall within the new age brackets and are already taking your RMDs, the new Secure Act will not impact you at all.

RMD Logistics and Taking Your RMD

RMDs are based on your 1231 account values, and this figure is reported to the IRS. Instead of working through complicated calculations, call your advisor or the institution that is holding your money and ask them.

They will have the calculation done for you and be able to tell you how much you’re required to take out of your account(s).

In terms of how to take out your money, some clients will:

  • Take their RMD and then divide it by 12 to have a monthly payment
  • Withhold federal and state taxes
  • Take a lump sum, quarterly distribution, bi-annual distribution, etc.

You’ll need to sit down and determine the best way to take your distribution for you.

If you have any confusion about the Secure Act 2.0, we ask that you schedule a call with us, and we’ll be more than happy to answer any of the questions that you have.

Want a little more guidance on ways to secure your retirement?

Click here to view books that we’ve written on taking control of your retirement and how to secure it.

January 17, 2023 Weekly Update

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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 January 17, 2023

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast – Navigating The Decision to Retire Now or Work Longer

Are you torn between retiring now or continuing to work? Working longer or retiring now isn’t just about money; there are many elements you should be thinking about.

Many factors might lead you to retire early or want to continue working even after you’ve reached retirement age. What, then, are these elements you should consider when navigating that decision?

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog – Navigating The Decision to Retire Now or Work Longer

Are you thinking about retirement and your goals, but you’re stuck on the decision to retire now or work longer? Many people are in the same situation as you. Understanding the process of retiring now or waiting is something that you need to take seriously.

We take our clients through this very process during their retirement planning so that they know when retirement is right for them.

CLICK HERE TO READ THE BLOG