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.

3. Health-related Issues

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

Navigating The Decision to Retire Now or Work Longer

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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.

Our Process of Helping Clients Understand Decision to Retire Now or Work Longer

Financial readiness, such as your ability to retire now, is something that you need to understand first. Financial readiness entails understanding how much you’ve accumulated up to this point in retirement, such as your:

  • 401(K)
  • IRA
  • Savings
  • Taxable accounts

Are these accounts enough to help pay for your lifestyle for the next 20 – 30 years? Of course, this figure will be very different from one person to the next because everyone’s spending is very different.

Understanding Your Retirement Budget

Your retirement budget is something that you must be very cautious about. For example, it’s difficult to save up $1 million, but it’s very easy to spend it if you have uncontrolled spending. You want to consider your:

Needs

  • Utility bills
  • Car payments
  • Mortgage
  • Food

Wants

  • Traveling
  • Buying a second home

Legacy

  • Gifting 
  • Leaving money to grandkids
  • Paying for your grandkid’s college

Learning your needs, wants and legacy will help you understand whether you’ve saved enough money for retirement. You may be able to enter into semi-retirement or full retirement based on these figures, but you also need to think about your health.

Health in Retirement

Health is something that is a pure luxury in life. A good example of this is one of our clients who was 61 with severe anxiety, stress and heart issues. The client wanted to know if he had the option to retire, and he certainly did have this option based on his savings for retirement throughout the years.

It was very beneficial for him to decide to retire now to alleviate the anxiety and stress he was feeling.

After weighing all of the pros and cons, he retired and still loves it. 

However, it’s important to remember that you can also choose to:

  1. Retire fully
  2. Leave the stressful job for a part-time one

We have many clients come to us who are still very healthy and love their jobs. Often, people come to us at 70 and are still in great health and want to stay in their careers. You may be one of these individuals, and you can still choose to continue with your job or go part-time.

In these cases, where the person is in great health and loves working, we take it one year at a time to revisit this question.

Evaluating Personal Goals and Interests

Reaching retirement is the main goal people have, but they never actually know what they want to do when they’ve “made it.” We encourage you to determine what you want to do in retirement so that you can plan out what finances you need to meet to reach these goals.

If you can retire and want to, what will you do next? Sometimes, people find that retirement is too boring for them and that they want to return to work. Returning to work isn’t an issue, but if you have plans to reach for retirement and have a better idea of your goals, it can help provide you with clarity while working towards retirement.

Age

Age often plays a role in people’s retirement because it will dictate different benefits for you. The following are a few major points that we would like to mention, but this list is not exhaustive by any means.

  • 59.5 is when you can take money from an IRA without a 10% penalty.
  • 62 is when you can take Social Security at a reduced rate.
  • 65 is when you get Medicare and healthcare coverage.
  • 66 – 67 (depending on when you were born), or Full retirement age (FRA), is when you can receive the full amount from your Social Security.
  • 70 is when you can get the maximum from Social Security.
  • 72 (73 soon) is when you need to take required minimum distributions from your IRA.

If you want to retire before 65, you will have to obtain your own health insurance, which can be thousands of dollars a month if you have a spouse.

Family Dynamics

What are your family dynamics? If you’re the sole person earning an income, retiring may not be possible for you yet. However, if you retire and your spouse is still working, you may have enough money to retire while your spouse is working.

If you have kids or elders who are dependent on you, then you will need to take this into account when thinking about retirement.

It’s a fine balance when considering your obligations to family and learning to retire.

Health Insurance and Costs

Healthcare is expensive, and it’s something that everyone must consider when trying to decide when to retire. You likely work for a company that subsidizes your healthcare benefits, and most companies will stop these benefits when you retire.

You have a few options here:

  • COBRA, or the option to pay for healthcare benefits that you received from your employer without the subsidies involved.
  • Health saving accounts, which will help bridge you to 65 when you’re able to get Medicare.

If you retire at 62, there will be a 3-year period where you need to cover healthcare costs on your own.

Long-term care is something to consider, too.

There are a lot of “what-ifs” that you need to consider, such as providing for long-term care. Insurance is available here to cover these costs.

A few what-ifs are:

  • Do you need to continue with life insurance?
  • Do you need to pay for long-term care?
  • Do you need to have part-time, in-house care?

Transferring the risk to insurance companies is something that is possible. You can also reallocate some of the funds that you’ve saved to put them into long-term care needs.

We covered a lot of topics that you need to consider, but there is also more to consider. If you begin going through these points, it will help you better prepare for retirement. You can schedule a complimentary call with us by clicking here.

However, we also have a lot of great, free courses that you can use to better understand your retirement options.

Start with our 4 Steps To Secure Your Retirement Video Course or 3 Keys to Secure Your Retirement Master Class. 

January 9, 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 9, 2023 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast – 10 Tax Tips For The Beginning 2023

Do you want to keep your tax planning smooth as you set goals for this year? As you think about getting ready for the tax season and setting goals for 2023, we know you want to make your life a bit simpler.

We discuss things like tax-free sources of income, Roth conversions, tax withholding, Required Minimum Distributions, and much more.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog – 10 Tax Tips For The Beginning 2023

With 2023 here, one thing that you want to consider when retirement planning is taxes. You never want to spend more money on taxes than necessary, and that’s why we’re starting this year off by walking you through tax tips.

CLICK HERE TO READ THE BLOG

10 Tax Tips for The Beginning of 2023

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With 2023 here, one thing that you want to consider when retirement planning is taxes. You never want to spend more money on taxes than necessary, and that’s why we’re starting this year off by walking you through tax tips. 

10 Tax Tips to Start 2023 Off Great

1. Take Advantage of Tax-free Income

Tax-free income is ideal, and you likely have:

You may have to pay taxes on all of these sources of income. However, you may have tax-free income that you can begin to take:

  • Roth IRA distribution (not the ideal source of income to start off retirement)
  • Savings 

Using savings for your source of income this year can help you with Roth conversions, avoiding capital gains or Social Security payments, too.

If you consider where your income is coming from, it will allow you to at least leverage tax-free income to your advantage this coming year.

2. Consider Traditional to Roth IRA Conversions

Converting a traditional IRA account to a Roth account may be in your best interest. First, you can allow your money to grow tax-free. Second, if someone inherits these accounts, they benefit from the tax-free account, too.

You will need to pay taxes during the conversion, and this hits on point 1, too.

If you can use tax-free income during the year of your conversion, you may be able to stay in a lower tax bracket and save money on taxes.

3. Review Your Tax Withholding

If you’re early in retirement, you might find yourself:

  • Under-withheld
  • Overpaid 

In both cases, it’s better to be right on the mark with your taxes. If you overpay, there’s no penalty, but you also can’t grow this money if it’s in the government’s hands. We can review these withholdings with you to ensure that you’re not paying too much or too little to the government.

4. Track Medical Expense Deductions

Medical expenses may or may not be deductible, but you need to have these expenses outlined in either case. You can deduct some of these expenses, and your accountant will need this information to know if itemizing and medical expenses can reduce your tax burden.

5. Take Advantage of Charitable Contribution Deductions

If you don’t itemize your taxes, you may still be able to leverage charitable contributions. You may be able to use:

  • Qualified charitable distributions, which will take money from your IRA directly and gives it to charity without the money ever hitting your bank account.
  • Donor-advised funds. You can stack your contributions over a multi-year period into a single year to reduce your taxes if you use one of these funds.

Anyone who is charity inclined can take advantage of their charitable contributions to reduce their taxes.

6. Don’t Forget About Quarterly Payments

Quarterly payments are foreign to a lot of people who are just transitioning to retirement. You may have gains throughout the year that are realized, and the government can assess a penalty because they expect to be paid on this gain as it happens.

For example, if you sell a stock or a house, you may need to make a quarterly payment.

Sitting down with your accountant or tax advisor can help you better understand if you need to make quarterly payments or not.

7. Don’t Forget About State Taxes

State taxes must be considered, too. It’s easy to focus on your federal taxes and forget that the state wants their money, too. If you do live in a state that collects income tax, keep this in the back of your mind throughout the year.

8. Consider Part-time Work

When you’re planning for retirement, you may or may not consider part-time work. A lot of our clients become consultants and others will take on a part-time job to stay busy, cover medical insurance or just generate some additional income.

Working part-time may also open the doors for other things, such as:

  • Eligibility to contribute to retirement plans
  • Taking advantage of benefits
  • Traveling more during retirement

9. Don’t Forget About Required Minimum Distributions

Folks who are 72 or older will need to take their required minimum distributions (RMDs). You can take a monthly payment or a full payment upfront, too. In all cases, you need to make sure that you’re meeting the RMD thresholds every year.

If you’re just turning 72, we highly recommend giving us a call at (919) 787-8866 to discuss RMDs and to better understand how much you need to take out of these accounts each year.

10. Keep Track of Your Tax Documents

You’ll begin receiving mail in February that you need to compile together and give to your accountant. If you don’t keep track of these documents, you’ll need to scour for them rapidly, which is never fun.

A few of the documents that you’ll receive include:

  • 1099s from investment accounts
  • 1099s from Social Security
  • W-2s

Organizing all of these documents is a great way to start the year, whether you’re working with a CPA or doing taxes yourself. It’s good practice to have a system in place to manage all of your taxes, receipts and similar documents throughout the year.

Being fully prepared when going to your CPA will make taxes a lot less stressful in 2023.

We hope that these tax tips will help you go into the year with confidence, knowing that you have everything in order to meet your tax obligations but never pay more than necessary.

If you have any questions, please feel free to schedule a call with us today.

Retirement Planning Considerations to Begin in 2023

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The new year is the perfect time to set your retirement planning goals. If you are nearing retirement or just entered it, there are a lot of considerations going into 2023 that you need to inform yourself about.

10 Retirement Planning Considerations to Start 2023 Off Right

1. Review Your Financial Goals

Your financial goals may change from year to year, or they may stay the same. In either case, it never hurts to review your financial goals and touch base with your financial advisor. In our practice, we like to meet with our clients in the first part of the year to discuss their finances.

A few things to consider here are:

  • How did everything go with your cash flow?
  • Do you need to make any cash flow adjustments?
  • Do you have any big projects to reconsider this year, such as a major vacation or kitchen remodel? Major items can include a new car or any major expense that you foresee this coming year.
  • Are you entering retirement this year and losing some income?
  • Are you starting to transition into consulting or entering a higher-paying position?

It’s important to go over all of these points with your advisor as soon as possible to ensure that changes are reflected in your retirement plan.

2. Assess Your Current Financial Situation

What is your current financial situation? This includes your:

  • IRA
  • 401(k)
  • Cash in the bank
  • House
  • Investments

You need to be aware of what these accounts are and what your overall net worth is at the start of the year. Additionally, you’ll need to tally up all of your debts and financial obligations that you may have.

If you assess your current situation, you can then plan for the future.

3. Tweak Your Spending Plan

Everyone should have a spending plan in place. You’ll need to tweak this plan at the start of the year, but to tweak it properly, you need to know what you’re paying each month. Many tools can help you track your spending, such as Mint.

You can even determine your expenditures by assigning a credit card to yourself and your spouse.

At the end of the month, you can tally up the cards and anything you can’t charge, such as a mortgage payment, to have a better overall idea of how much you’re spending each month.

Some clients will go as far as itemizing their expenses so that they know exactly where their money is going each month. If you can confidently meet these expenses without worry, you may not need to go to this length of expense categorization.

4. Review Your Insurance Coverage

Everyone seems to set and forget their insurance. However, every year or two is a good time to sit down and review your insurance. You should look at your:

  • Auto insurance
  • Homeowner’s insurance
  • Life insurance
  • Liability insurance
  • Long-term care insurance

You just want to be sure that you’re getting as much as you can for your premiums. Make sure to ensure that you have enough coverage for your auto, car and other items. If the insurance is no longer meeting your needs, you may need to change insurers or plans.

5. Consider Retirement Savings

Retirement savings is also good to review, even if you’re retired and not actively saving right now. Anyone who has any sort of retirement income can start to save more for their retirement.

You can be retired and still contribute to a 401(K) or IRA.

Anyone close to retirement may want to consider the “catch-up” contributions that they can make to their retirement accounts. For example, if you’re 50 or over, you can put more into your plans in 2023.

You might also want to investigate your retirement savings to convert from a traditional 401(k) or IRA into a Roth account for tax-free growth.

6. Create a Debt Repayment Plan

Debt is an expense, and it’s something that can cost you a lot of money over time. You may have credit card debt with 15% interest that costs you money every month or a car payment.

How do you plan to get out of this debt?

Many people want to retire without:

  • Credit card payments
  • Car payments
  • Mortgage payments

Develop a plan, tweak your budget, and start paying off your debt. The general rule of thumb is to pay off debts with the highest interest first, such as your high-interest rate credit cards. You may even want to consolidate debt to lower interest rates.

7. Review Your Investment Portfolio 

Reassessing your view of portfolio risk is something you need to consider often. We do this automatically for our clients because it allows us to safeguard their investments. For example, in 2022, we saw that the bond market wasn’t performing well and started seeking bond alternatives.

You need to review your portfolio for these types of discrepancies.

Annual investment portfolio reviews are necessary because risk exposure is different for everyone. You may be fine losing 25% of your retirement, but many people will want to have a much lower risk. 

8. Review Your Estate Plan

It’s easy to get caught up in the hustle and bustle of life. When everything is going well and you’re focused on meeting your retirement goals, it’s all too easy to forget about your estate plan.

However, you should have a:

  • Will/trust
  • Living will
  • Power of attorney

You should have these documents in 2023 because they will make it much easier for your family when you pass on or if you’re incapacitated.

9. Review Your Credit Report

Even if you don’t own a credit card or use one any longer, it’s important to do a quick review of your credit report. A lot of people are shocked to find that they’re victims of identity theft and fraud.

A quick credit check will allow you to find discrepancies in your report and take action to rectify them.

10. Take Advantage of Tax Saving Opportunities

Can you be more efficient with your taxes? If you take a proactive approach to your taxes, you’ll have a lower tax bill at the end of the year. You can take advantage of:

  • Charitable contributions
  • Retirement plans

Working with a tax planner can help you devise a solid tax plan going into 2023. If you wait too long to focus on tax planning, it will be too late to put some of the methods of tax savings in place.

If you want to secure your retirement or have questions about things that you should be doing in 2023, feel free to schedule a free call with us today.