New Tax Laws 2022

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

Ordinary Income Tax Changes

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

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

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

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

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

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

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

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

For example, let’s assume that:

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

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

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

Click here to schedule a complimentary call with us.

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

Standard Deduction Changes

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

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

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

Itemized deductions may also be an option for you.

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

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

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

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

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

SEP Plans for the Self-employed

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


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

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

Capital Gains Changes in 2022

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

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

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

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

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

Social Security Taxes

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

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

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

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

Medicare Part B Premium Rise

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

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

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

Social Security Under Full Retirement Age

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

Roth IRA Contribution Changes

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

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

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

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

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

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Economy Forecast for 2022

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

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

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

2021: Year in Review

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

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

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

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

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

Entering the 2022 Year

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

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

Supply Chain

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

  • Rising inflation
  • Slower product delivery

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

However, we see the supply chain recovering.

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

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

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

Inflation Predictions

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

The good news?

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

Politics and How It Plays In the 2022 Economy

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

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

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

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

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

Build Back Better Bill

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

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

Markets That May Recover Due to a Current Lack of Manpower

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


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

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

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

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

Earnings quality will matter a lot in the coming year.

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

With that said, keep a few points in mind:

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

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

Concerns and Expectations for the 2022 Year

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

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

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

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

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

Surprises and Bright Points in 2021

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

  • People adapt
  • Companies adapt

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

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

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

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

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

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

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

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2022 Retirement Issues to Consider

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

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

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

  • Savings goal
  • Income goal
  • Family goal

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

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

Getting Your Cash Flow in Order

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

  • Raises
  • Side hustles
  • Business opportunities
  • Work opportunities

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

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

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

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

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

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

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


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

  • HSA
  • FSA

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

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

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

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

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

Asset Overview

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

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

Next, you need to consider risk tolerance.

What is risk tolerance?

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

In both cases, you’re down 10%.

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

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

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

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

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

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

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

Tax Issues and Concerns

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

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

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

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

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

Legal Considerations Going Into 2022

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

The two big ones are your:

  • Power of Attorney
  • Medical Power of Attorney

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

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

  • Will 
  • HIPPA forms
  • Etc.

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

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

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

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

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

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A Teenager’s Guide to Achieving Financial Freedom

Recently, we were able to sit down and speak with Dan Sheeks to discuss a topic that many of our podcast listeners and blog readers are interested in teaching financial freedom to teenagers. A lot of parents want to help their kids reach financial freedom in life.

Dan Sheeks is the author of First to a Million: A Teenager’s Guide to Achieving Early Financial Independence.

While we help clients with retirement planning and are certified financial planners, we don’t have the expertise to really help teenagers make pertinent financial decisions. Dan, on the other hand, does.

Quick Background on Dan Sheeks

Dan aims to pass information to young people to help them learn about money and make the right financial decisions. Dan has taught in high school for 20 years. He focuses on business classes, such as personal finance, marketing, and others.

Sadly, he has found that very few states have a requirement to teach kids about financial literacy.

Dan started a blog and created an online community for young people who are motivated to make sound financial decisions, investing and more. 

Dan decided to write his book First to a Million as a natural offshoot of the online community. In the book, he teaches teens how to reach early financial independence.

Understanding the FIRE Movement

FIRE is a movement that stands for:

  • Financial
  • Independence
  • Retire
  • Early

FIRE is a community that is based on making different financial choices early in life that allow you to become financially free before the age of 65. Many of these people create the financial freedom that will enable them to choose where they spend their time.

If teenagers start with the right financial outlook and foundation at a young age, they have the opportunity of reaching true financial freedom early in life.

How to Motivate a Teenager to Look at Their Financial Future

Teenagers, like adults, must make their own decisions in life. However, there are things that you can do to pique the interest of a teen. Unfortunately, you can’t make a teen want to look at their financial future.

With that said, if you teach the teen about the following concepts, they may take an interest:

  • Compound interest
  • Financial figures

Dan recommends that parents take a proactive approach to make financial literacy fun. For example, if you want to get your child interested in finances, you can:

  • Show them your 401(k)
  • Ask them to plan your next vacation
  • Request the teen create your food budget

If you take small steps to educate your teen and teach them the basics of finances, such as budgeting, it can make a world of difference in their lives.

Helping a Young Person with a Credit Score

As someone with a teenager, credit has always been interesting to me. I helped my son’s credit by having a joint credit card, but that doesn’t seem to matter in the world of business. My son started his own business, tried to get a credit card, and he was denied, even with a 740-credit score.


He didn’t have a credit history.

When asking Dan about his thoughts on parents helping their children build credit, he said:

  • Add teenagers to your existing card as an authorized user. Additionally, call the card issuer to ensure that they will report the history to the child’s credit report.
  • Teenagers should ask their parents to add them to a credit card.

Since a teen is still living at home, parents can use this strategy to really analyze their child’s spending habits. You can set consequences for charging too much and even require your teen to pay all or a portion of the charge.

If the teen is an authorized user, they’ll begin building credit at a very young age, which is crucial for everything, from getting a personal loan to a mortgage or auto loan.

Teenagers should also:

  • Apply for their first credit card at 18
  • Apply for their second card at 19
  • Apply for their third card at 19 and a half

Use these cards monthly and pay them off every month. Obviously, the teen needs to learn what responsible credit card use means. Three credit cards can help a teen build credit rapidly, but they cannot go out and max out these cards.

For example, a smart strategy for credit card use is to use one card for food, one for gas and one for something else. Then, each month, pay the card off so that you’re not accruing interest, but you are building your credit.

What Teens Will Learn in First to a Million: A Teenager’s Guide to Achieving Early Financial Independence

In Dan’s book and workbook, teenagers will learn:

  • How to build their credit score
  • Responsible credit card use
  • Good debt and bad debt
  • Real assets vs false assets
  • Opening their first brokerage account before 18 and after
  • Investment options, such as index funds
  • Tracking expenses
  • High savings rates

However, the real purpose of the book is to teach a mindset. The book is truly meant to show that living the American Dream doesn’t mean following the same path everyone else has in life.

You don’t need to go to college, have 2.5 kids, a house with a picket fence and plan to retire at 65.

Instead, Dan introduces options to teens to show them that they don’t need to work until 65. Of course, everyone has their own goal and picture of their ideal life. However, the book shows teens the options they have available to them.

As a teacher, Dan explains tough topics in a way that makes it easy for everyone to understand. Also, everyone who owns the book has access to the community Dan created online.

Anyone who joins the community can support each other, tell their stories, ask questions, and really help each other by surrounding themselves with others interested in the same concepts. 

Through the community, young, like-minded people can interact with each other and really learn more about reaching their financial goals together.

First to a Million: A Teenager’s Guide to Achieving Early Financial Independence is available on BiggerPockets. Additionally, anyone who signs up for the paid version of Dan’s community can enter the code “secureyourretirement” to receive a discount.

What To Consider About Long-Term Care

What To Consider About Long-Term Care

Long-term care and retirement planning work together to ensure that when you secure your retirement, you’ve also accounted for the possibility of landing in a long-term care situation. Many people know that they need to think about it, but they push the concept aside because it’s expensive.

A few of the questions clients come to us with are:

  • Should you self-insure?
  • What type of insurance should you get?

However, before we dive into these questions and more, you also need to consider that a very high percentage of couples, around 80%, will have one who will go into a long-term care situation.

The individuals who do enter some form of long-term care may not need extensive care or stay in a care situation for an extended period. On average, a person will spend 2 to 2 and a half years in long-term care.

Transferring Risk with Insurance

Long-term care is expensive. However, you need to determine what may happen and the risks of having insurance versus not having insurance in place. Once we have an idea of what the costs of long-term care will be, then it’s time to evaluate if:

  • Long-term care insurance is the best way to mitigate risks
  • You have more than enough in retirement funds to pay for care out of pocket

Understanding some of the basic numbers is an excellent way to gauge the risk of long-term care and what these actual risks mean to your future finances.

Nursing Home Care and Assisted Living

Every year, we’re provided with basic numbers on how much nursing homes and assisted living facilities will cost you. We receive average monthly costs by state, but the national average monthly costs in 2021 are:

  • $8,517 for nursing home care
  • $4,051 for assisted living

Of course, these are averages, so the cost may be higher or lower in your area.  For example, we’re in North Carolina, and the average monthly costs for care in our state in 2021 are:

  • $8,060 for nursing home care
  • $3,800 for assisted living

If you live in a state like California, you can expect nursing home care to cost $11,000 and assisted living to cost $5,000.

In all cases, the costs for care are very high.

Additionally, due to rising inflation, a 60-year-old can expect these care costs to double in 20 years. So, if you hit 80 in 20 years from now, you can expect the national average monthly cost of care to be $16,000 – $17,000 per month.

Inflation rises about 4% per year, so it’s easy to see why long-term care and retirement planning must be considered together.

If you must stay in one of these facilities for four years, you’re looking at spending $830,000 on the low end for care.

What are Your Options to Afford $830,000 in Care Costs?

Most people we talk to don’t have $830,000 sitting around waiting for their potential long-term care. However, you do have a few options here:


If you self-insure, what this really means is that you have enough money sitting around at this point in retirement that you can pay for your long-term care costs. You might be leaving less to your family by self-insuring, but your nursing home or assisted living costs will be funded by you.

Self-funding offers many options, such as:

  • Take out $1 million in life insurance so that when you do pass away, your self-funding doesn’t take away from the inheritance you leave behind.
  • Take out traditional, long-term care insurance.

If you want to secure your retirement and don’t want to self-fund your care costs, you can take out long-term care insurance. However, many people have concerns about this type of insurance because you’re paying for something you may never use.

Additionally, and we’re seeing this a lot in recent years, premiums are skyrocketing.

Some clients of ours have had their premiums double in a year.

Hybrid policies do exist, which may be something to consider if you’re planning your retirement. A few of the hybrid policies that we’re talking about are:

  • Annuity / Long-term Care. Place $100,000 into the annuity, and $300,000 goes into a long-term care policy. In this scenario, the money in the annuity will gain some interest, and if you die without going into care, that money will go to your beneficiaries. You can also take money out of the annuity if you need it without any penalties.
  • Life Insurance Hybrid. A hybrid life insurance policy often has additional features that are of interest to people. For example, you can put a lump sum of money into the account with 100% liquidity and an interest rate of 2% to 4%. The long-term care benefit comes out of the potential life insurance money. If you die without touching this money, your heirs will receive a multiplier of what you put into the policy. Premium options also exist to fund the policy. In this scenario, you’ll either leave money behind in the life insurance or through long-term care benefits.

We know that this is a lot to digest and understand in one sitting. When we work with clients one-on-one, we put these figures into the life insurance analyzer to have a clearer picture of self-funding and available insurance options.

Facts and figures give direction for people who are planning their retirement.

If you have a plan in place, we run the numbers to see what your retirement looks like at 70, 80, 90 and beyond. Then, using what-if scenarios, we can show you what retirement looks like if you use long-term care benefits, or you stay healthy until the day that you die.

Using the right approach, we can see the possibilities of self-insuring and what your heirs will have left when you die.

We encourage you to run figures, sit down with a certified financial planner and even schedule a 15-minute phone conversation with us.

Click here to schedule a free, 15-minute consultation with us.

Retirement Before Medicare

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

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

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

Early Retirement and a Few Factors to Consider

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


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

Lost Income Potential

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

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

  • Special expenses
  • Fun funds
  • Additional expenses or income

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

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

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

Social Security

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

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

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

Ideally, we run figures for taking Social Security at:

  • 65
  • 67
  • 70

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

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

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

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

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

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

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

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

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

How To Create an Estate Plan Without the Stress

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

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

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

Why Do People Avoid Creating an Estate Plan?

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

In fact, most individuals don’t fully understand:

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

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

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

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

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

Documents Everyone Should Have as Part of an Estate Plan

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

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

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

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

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

You can change that in your plan.

State Specific Estate Plan Updates

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

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

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

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

How Long Does It Take to Create an Estate Plan?

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

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

  • Trusts
  • Wills
  • More

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

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

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

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

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

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

Click here to listen to our podcast.


How to Have Peace of Mind During Troubled Times

Omicron is here, and it’s a variant that has taken over the news lately. Dealing with bad news means learning how to have peace of mind during troubled times for investors and retirees alike.

If there’s one thing that the pandemic has shown the world, it’s that markets can take a nosedive during a health crisis.

Anxiety and stock market volatility can last for days – or weeks – and trying to find peace of mind and secure your retirement can be difficult. So, we like to create a structure when retirement planning that allows us to handle market fluctuations even during a pandemic.

How People Have Been Trained to Mitigate Investment Risks

The most common form of investing (and it’s something that you might do) is to buy and hold. Investors have been advocating the buy-and-hold strategy for a long time. For example, you purchase Amazon stock and hold it.

However, over the years, portfolio diversification has become more popular.

For example, you may invest in:

  • 401 (k)
  • Stocks
  • Bonds
  • International stocks

You may buy a section of the market, such as a large-cap or small-cap, or you may buy into energy. Asset allocation works by buying a little piece of everything with the hopes that your portfolio makes money.

Annually or quarterly, you may reallocate your investments, and you’re certainly reducing your risks.

However, it’s also difficult to withstand a pandemic when the market as a whole tumbled 34% on news of the virus. Buy and hold investors took the brunt of the stress at this time because they saw losses of $34,000 for every $100,000 invested.

Our Approach to Mitigating Investment Risks

Now, we’re going to share our investment strategy with you today. We use this very strategy to help our clients through retirement planning, but we’re not saying that this is the only way to invest.

For us, we find the following approach to work very well.

However, you need to find a strategy that works best for you and your unique investment goals.

You may want to take a different approach – that’s fine. We’re just going to explain what works for our clients and us so that you know all of the options available to you.

How We Handle Risk Mitigation

When we invest, we don’t invest based on:

  • Gut feelings
  • Forecasts
  • What we think will happen in a market

Instead, we use data to help us monitor what the market is doing. When you use data to make decisions, you remove all of the emotion and attachment to investment from an equation.

If you can, think back to January 2020, right before the market was thrown into a tailspin on the news that this thing called the coronavirus was spreading in Wuhan and is now a major global concern.

No one could forecast that COVID-19 would take over the world in just a few months.

Did you know in December 2019 and January 2020 that the entire world would change? Of course not. Since we use active management, we were able to analyze the data and eventually pulled all of our clients’ money from the market.

We sat on cash for several months because it allowed us to negate the stock market losses.

Our clients had their portfolios fall 9% instead of 34% for those that kept all of their money in the market. We like to think of this as a race among three major players:

  1. Stocks
  2. Bonds
  3. Cash

Cash only does well when stocks and bonds are falling, so we saw these signals and made the decision to go into cash.

When we re-entered the market, we also used the data available to us to make the switch. For example, we use firms that collect data for us that we can analyze monthly and quarterly.

After the pandemic, we entered small-cap funds before the data signaled that it was time to go into mid-cap and large-cap stocks. Ironically, the news at the time we re-entered the market was doom and gloom.

If you just looked at the news, you would have sleepless nights filled with worry and fear that you’ll never be able to recuperate your losses. However, about 40 days after we pulled out of the market, the data was telling us it was time to reinvest.

Emotionally, we were scared to go back into the market, but we listened to the data.

At the end of the year, our growth portfolio rose 19% after fees in a year when many people sustained massive losses.

Feedback From Clients During the Pandemic

Our clients were emotionally invested in their portfolios, and we gathered a lot of feedback from them during the start of the pandemic. People were rightfully scared of what the market would hold for them after the dust settled.

Most of our clients said, “We understand why you call yourself Peace of Mind.”

We deal with retirees and those ready to retire. Our clients were given regular updates. We were honest and open, telling our clients, hey:

  • Stocks are dropping, so we’re reallocating to bonds
  • Bonds are no longer working, so we’re going to sit on cash

We were giving updates every few days. When clients realized that they would have lost a ton of money if we just relied on the buy and hold strategy, they gained a lot of trust in us.

Since we navigated clients out of the market crash, they trusted us going back into the market.

Now, we’re back in the same scenario with Omicron. We don’t know what the future holds with this new variant or if the Fed will step in to prop up the market. However, what we do know is that the data will tell us what key steps to take next with Omicron and any other variant that may pop up.

If you need help trying to find peace of mind in your retirement, we can help.

Click here to read our newest book, called Secure Your Retirement.

Tax Planning for Retirement

One of the things we deal with routinely for people retiring or already in retirement is concerns about taxes. People are very worried about their taxes. After all, you’ve worked diligently to build up your retirement, so the last thing that you want to do is give more money back to the IRS.

Luckily, we were able to sit down with Steven Jarvis, a tax professional, to help answer some of the most common questions our clients have about taxes.

But first, we want to cover the many different types of tax planning professionals that you may come across.

Tax Professionals You Might Come Across When Seeking Help

Depending on your situation, there are a lot of options for taxes:

  • DIY software
  • H&R Block
  • Accountant or CPA

If you have uncomplicated taxes, software may be a good option for you. Software is very powerful, but it’s very easy to make a mistake when you go beyond the basics. 

Ideally, you may want to work with a full-service CPA. 

When you dive into tax strategies, a CPA is almost always the best option because they go beyond algorithms.

Working on Tax Strategies

Tax strategies are important, but there are many different aspects. For a lot of people, they feel like taxes are a black box that they put money into without many options available. In fact, a lot of people view their taxes as being painful.

However, working with a CPA ensures that you don’t leave the IRS a tip.

You need to pay every dollar that you owe, but you should never leave the IRS a tip.

When you’re only worried about filing a tax return, this is tax preparation. If you’ve ever gone to an accountant, handed them a stack of papers, and simply waited for a tax document that you can file, this is tax preparation.

However, you always have tax planning to consider. Tax planning allows you to look a year or two ahead, and then find ways to reduce your future tax bill. When you engage in tax planning, you’re not worried about preparing taxes this year, but rather, what you’ll need to pay in the years ahead.

A Deeper Look into Tax Planning

When tax preparation and planning work together, it truly works to your benefit. Tax planning often comes in around November, which allows you to make adjustments at the end of the year to help reduce your tax burden.

Everyone worries about taxes rising in the future.

Roth conversions are a hot topic right now, and they’re a good way to really look at tax planning on a deeper level.

When we’re talking about Roth conversion accounts, these are tax-deferred retirement accounts. Tax planners will consider whether a person’s taxes will rise. For example, will your taxes rise because:

  • Your income rises to a new tax bracket?
  • The IRS decides to increase taxes?

If taxes are never going to rise, your choice doesn’t matter. However, Congress can raise taxes next year, and you might benefit from paying your taxes now at a lower rate than in the future at a higher rate.

How much you convert also needs to be considered on a personal level.

You might want to fill up a tax bracket, but it really depends on your required minimum distributions and other factors.

Often, when people retire and finally draw from all their income buckets, they’ll move into higher tax brackets than they were in during their working years.

Tax Changes That May Come About in the Future

Tax codes are written in pencil, so any predictions on future taxes are just that – predictions. Unfortunately, we’ve seen that in recent months, where each proposed tax bill is altered and doesn’t look anywhere near the same as its original draft.

However, one very important topic to consider is that Congress may get rid of backdoor Roth contributions.


Backdoor Roth contributions offer the option to have pre-tax and after-tax dollars in the same account. As you can imagine, this strategy can be very effective, but proposed changes would disallow this strategy.

Tax strategies allow you to make the best decision for the future based on today’s tax code.

However, an annual review of your strategy is crucial because we are dealing with taxes that can always evolve and change.

Click here to schedule an introduction call to discuss your taxes further.

Federal Reserve, Inflation and the Economy

We’ve seen a lot of headlines lately, as we’re sure you have, about the federal reserve, inflation and the economy. At the time of our podcast and writing this, Jerome Powell remains the Fed Reserve Chairman.

One thing we want to make clear is that throughout this article, we’ll be going over recent headlines.

Of course, at the time of reading this, we may have new information or outcomes for these headlines. But the good news is that the information should remain relevant.

What Jerome Powell Being Nominated as Federal Reserve Chairman Means

Jerome Powell is loved by some and not by others. There are two trains of thought here, and these are:

Side 1: People That Like Jerome Powell

A lot of people like Jerome Powell because he likes to print money. He wants to keep the economy moving aggressively, and for some people, they believe printing money will benefit the market.

Side 2: People That Dislike Jerome Powell

On the other side of the spectrum, there are concerns that printing money will cause long-term inflation, which is never a good thing.

Working as a Financial Advisor Through Federal Reserve Chairmen

Since we work with so many people nearly or in retirement, we get a lot of questions from both sides of the argument. For example, some clients want to invest heavily in the market because they believe that Powell will help the market soar, and others want to invest in financial vehicles that rise with inflation.

Our clients want us to forecast the future to try and determine what will happen if Powell is chairman.

For example, a client may ask us:

I’m concerned and excited about Powell’s reinstatement. Can we invest in something that protects against inflation and still reaps the benefits of the market?

Unfortunately, this is a loaded yet common question when dealing with inflation. What we believe is that two things need to be actively managed:

  1. Active investments in the market
  2. Overall retirement plan

Active management is important because trying to predict an outcome for an ever-changing market is a gamble. We would rather not gamble with our clients’ money, so we use the data that we have available at any given moment in time to make smart investment decisions.

Markets and investments can change rapidly in just a day or two, and active management helps our clients avoid major losses in the process.

We have a lot of passionate investors.

For example, some investors learn a lot about a particular company, love the direction and vision of the company’s CEO, and they put all their faith in this individual that they’ll help the company grow.

Unfortunately, there’s a lot of guesswork going into the scenario above that can lead to losses.

Through active management, we invest based on what’s happening now.

If inflation continues to rise and the pressure of inflation exists, we’ll adjust portfolios in three main categories:

  1. Equities, which are stocks
  2. Fixed income, such as bonds
  3. Cash

We recommend putting all three of these categories in a race to see who is winning in today’s market. At the time of writing this, equities are performing exceptionally well towards the end of 2021.

Using a number-oriented form of investing, we recommend:

  • Reallocating investments based on what’s happening now
  • Adjust as required

There are also some sides of the market where people would rather split their investments among the three categories above, so the investor may decide to invest 33% in all three categories and go with the flow.

Instead, we believe active management is the right choice because it reduces the risk of volatility.

Reactionary investing, based on headlines, is not something we recommend. Instead, use data and continue adjusting your retirement portfolio and investments to weather any changes in the market that occur today and 20 years from now.

Events Where Reactive Investing Never Works Out 100%

We’re not going to get political, but when there are presidential elections, there are many people who choose the doom and gloom path. If this Republican or Democrat gets elected, the stock market will CRASH.

Thankfully, these predictions rarely come true.

Making decisions based on assumptions never truly works out how a person thinks. We’ve been through many presidents in the last 20 years. One thing we’ve experienced, and it is rare, is that some people pull all their money out of the market because they believe a new president will cause the market to tumble.

Unfortunately, many of these individuals call us and explain how they wish they didn’t sit on the sidelines because their portfolio may have risen 10%, 20% or even more.

Another scenario is inflation.

Inflation is rising, so a lot of individuals are afraid and believe that the market will flop.

Emotions in the market rarely work out in your favor. As an advisor, we take emotions out of the market and our decisions. For example, even as surges in the coronavirus continue to happen worldwide, the markets remain strong.

Some investors feared that the market would suffer after each surge, much like it did when the pandemic first hit.

Using the data that we have available, we’re not seeing these surges impacting the market, so we recommend keeping money in the market. When the data changes, we’ll adapt our investments to minimize losses and maximize gains.

2020 Events and How We Shifted Money Going Into 2021

In 2020, the S&P 500 fell over 30%, but we did a few things:

  • First, most of our clients were sitting on cash to avoid losses in the market.
  • When reentering the markets, we took it slow and adjusted to the companies winning the race, such as technology companies.
  • January of 2021, we saw a shift where large-cap and technology started to slow and small and mid-cap companies began to revive as the market recovered. Using the race analogy, we adjusted portfolios to include more of these stocks to maximize client gains.

Since this was our first time living through a pandemic, we think we did exceptionally well for our clients and really solidified our thought process that active management is the way to go when investing.

Final Thoughts

We covered a lot in the past sections, and the sentiment remained the same: don’t react over headlines. If everyone could predict the future, we would all enter retirement ridiculously wealthy.

However, we can use the market’s data to make smart, timely investments and portfolio adjustments to avoid losses and ride gains to make the most of our investments as possible.

If you need help actively managing your portfolio or want us to run the numbers to see how we can help you grow your portfolio, schedule an introduction call today.

Considerations for Charitable Giving

If you have a charity that you’re passionate about or just want to give back, there are a lot of considerations for charitable giving that need your time and attention. One of the best feelings when you secure your retirement is having the opportunity to help others.

Of course, if you’re not charity inclined, there’s no pressure to give money away.

However, if you want to start getting involved in charitable giving, you need to first consider how to break down your income.

Simple Income Breakdown

When we first start the retirement planning process with our clients, we help them break their income down into the following:

  1. Essential needs – what you need every month to live
  2. Wants – vacations, cars, remodel a house, etc.
  3. Legacy – leaving money to children, etc.
  4. Charity 

Charitable giving does have a lot of benefits, and you can also leverage your giving to reduce your tax burden.

However, if you’re still considering charitable giving, one topic that you might want to know more about is QCDs.

What are QCDs?

Qualified charitable distributions (QCDs) are common, especially close to the end of the year. When you want to make the most efficient use of your money, you can do so with what is known as a QCD.

Many people will take money out of their bank accounts annually and give money to charity.

However, when you’re 70 and a half, you can start taking QCDs directly out of your IRA. Annually, you can take out $100,000 in QCDs from an IRA without a penalty.

If you take the money out of your IRA, you’re taking out your donation and it is not taxable.

When you turn 72, you also need to take a required minimum distribution from your IRA. Even if you don’t need the money, it needs to come out of your account. For example, let’s assume that you’re required to take $20,000 out of your IRA each year.

You’ll pay taxes on this $20,000.

QCDs allow you to take money out of the $20,000 without paying any taxes on it. For example, let’s assume that you donate $5,000 per year. If you set up a QCD properly, the $5,000 will come out of your minimum distribution of your IRA tax-free.

When you do this, you’re:

  • Maximizing your charitable distributions
  • Reducing your tax burden

So, you might be required to take out $20,000 from your IRA each year, but you’re only taxed on $15,000 because of the QCD that you have in place.

However, you need to set up your QCD properly.

How to Setup a QCD Properly

First and foremost, you want to go to the institution that holds your IRA. The brokerage is Charles Schwab, TD Ameritrade, etc. You go to this institution and:

  • Let them know you want to set up a QCD
  • Ask for the check to be made directly to the charity
  • Include an EIN
  • Include the charity’s address

A common mistake that people make is writing the check out to themselves and then making a distribution. If you make this mistake, you’ll have to pay taxes on this money.

You can then take the QCD check yourself and give it to the charity or have the check sent to the charity directly.

Ideally, you’ll hand the check to the charity yourself so that you can receive the receipt for the donation.

You must make all of your charitable contributions by the end of the year. Additionally, the charity needs to cash the check by the end of the year. While setting up QCDs may seem tedious, it’s very advantageous and can help you reduce your tax burden while offering substantial charitable benefits.

From a tax-advantageous perspective, there is one additional benefit that you’ll want to consider: stock donations. If you have a stock that has significantly appreciated in value, you can donate the stock to avoid paying capital gains on it.

However, we don’t see this scenario happen often with our clients.

Working With a CPA is Important

While you’re giving money to charities, it’s also very important to take as much tax advantage as possible. A CPA or other tax professional will be able to help you reduce your taxes when donating to charity.

A CPA can help you think through reducing your taxes.

Additionally, a CPA may also help you determine how much you can give:

  • Monthly
  • Annually

We suggest coming up with a charity-focused financial plan. We walk our clients through the entire process so that you can have a clear picture of how much you can afford to give. In most cases, we run scenarios that show you what happens if you donate a certain amount each month to your retirement plan.

Potential Pitfalls of Making Charitable Contributions

If you’re making a QCD, it’s crucial that you go through the process with a professional. You don’t want to withhold the taxes on the QCD. In some cases, you may want to take your own distribution and then another for the QCD.

Ideally, you’ll start the process early on so that you have the time to make sure that your giving works in the best way for you.

Sure, you’re donating money out of the goodness of your heart, but that doesn’t mean that you shouldn’t take advantage of the tax perks offered to you.

Also, another important factor to consider is timing.

If you decide around December 20 or later that you want to make a charitable contribution, it’s very unlikely that the process can be carried out before the end of the year. Due to the market being closed for the holidays, there is often not enough time to go through all of the processing time to use your contribution for a tax deduction.

Ideally, we recommend that you have this done in November.

Do you want to hear other important news on how to secure your retirement and take control of your future?

Click here to sign up for our Secure Your Retirement podcast.

Should I Consider an Annuity In My Financial Plan?

Are you considering an annuity? Does an annuity fit into your financial plan? These are the questions that we’re going to answer today so that you can secure your retirement in the best way possible for you.

Our clients ask us a lot about annuities, so we want to help you determine whether an annuity fits into your retirement plan.

Understanding That an Annuity is an Insurance Product

An annuity is an insurance product that you’re buying into. You’re purchasing the annuity from an insurance company, so it’s crucial to evaluate the insurance company. For us, we always look at the company’s financial security so that we know whether the company can withstand market fluctuations or dips in revenue.

You can find rating systems for each company.

Rating systems can help you understand how well-rated a company is and whether a company is a good choice for you.

There’s also protection through a legal reserve, which is similar to having the FDIC insure money that you have in the bank.

Breaking Down What a Legal Reserve System Offers

Legal reserve systems have been around for a long time. The IRS wanted insurance companies to have a guarantee in place to protect consumers. Insurers work together to operate in the United States.

For example, if one insurance company goes bankrupt, other insurance companies often:

  • Purchase parts of or the entire business
  • Keep contracts the same

In essence, the reserve part adds safety elements by having significant reserves in place to cover payouts and other expenses. Legal reserves cannot be leveraged. Instead, the insurer must have reserves to back any guarantees they offer.

Due to the multiple systems in place, if a reserve gets low, they’ll be barred from offering more insurance until the reserves are restored.

In short, the legal reserve is a safeguard against an insurer going bankrupt and the consumer losing all of their insurance in the process.

Tax Benefits of an Annuity

Annuities offer tax benefits, but the benefits depend on what type of money is placed in the annuity. Basically, you have:

  • Qualified money. Your retirement plan money. These are financial vehicles that have not been taxed yet.
  • Non-qualified money. Money that has been taxed already, such as capital gains.

You should understand your balance of money, based on these two classifications, before getting into an annuity. 

Once you understand the multiple financial buckets that you have, you can better understand the benefits of an annuity in your situation.

For example, if you have non-qualified money from a brokerage account, it’s often a good thing to put it into an annuity because it will grow tax deferred. So, if you put $100,000 in the account that you’ve paid taxes on, growth is tax-deferred.

Annuities make taxes easier and won’t require you to have to work through complex taxes every year.

However, let’s say that you have a lot of qualified money in an IRA. You can roll the IRA funds into an IRA annuity. When you go into an IRA annuity, you’re putting pre-tax money into your account.

Retirees don’t want to heavily withdraw from an IRA because of the tax consequences.

Due to these complex situations, it’s crucial to understand how an annuity works and the tax benefits they offer you.

Why Should You Use an Annuity Retirement?

Retirement planning must be strategic. An annuity can be beneficial in numerous ways, and we like to break annuities down into three main scenarios where they make sense:

  1. Income Planning
  2. Safety Alternative
  3. Tax Deferment

Income Planning

When you structure an annuity, you can do so in a way that offers a guaranteed income that you’ll never outlive. The income will always be there.

If the annuity is an IRA, you’ll be taxed on it.

When we work with clients that only need to withdraw 2% to 3% of their retirement per year, it often doesn’t make sense to have an annuity. 


You’ll either have a fee or a lower rate of return.

Safety Alternative

Safety, or bond, alternatives are a good reason to have an annuity. Let’s assume that you have a low threshold for market fluctuations. Bonds go up and down, so investing in an annuity can offer a guarantee that bonds cannot offer and help you better manage risk.

Risk conversations are huge in retirement planning because it ensures that you have money for tomorrow.

Tax Deferment

Annuities allow you to invest in the market at 100% tax deferment and with negligible fees. For tax deferment, you have the option of liquidity and tax deferment with an annuity.

How an Income Rider Works

As an income rider, the overall annuity has two sides:

  • Account value
  • Income account value

Account values grow at the annuity interest rate. However, on the income account value, you have a little step up that you can leverage. For example, maybe your income increases by 5% or 7%. Since these accounts are designed to outlive you, the income account value will always rise more than the actual account value.

When you sign up for an income rider, you’re asking the insurer to guarantee an income for the rest of your life.

However, you cannot withdraw the money from the account in its entirety.

An income rider can be added to an annuity, acts independent from your contract, and allows for peace of mind that you can make a certain minimum withdrawal from the account every month.

A rider may or may not make sense for you, but it’s something you’ll want to consider.

Initially, you’ll have a period of 5 or 10 years where you won’t receive an income. This time period really allows the account to grow and build up the value you need to retire with guaranteed income coming in every month.

Annuities may or may not fit into your overall retirement plan, but they’re certainly something to consider for everyone nearing retirement.

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The Market Is High. Should I Sell?

When you invest money in the stock market, there’s an emotional attachment that people have. You’ve saved diligently to build up your retirement and invest, and no one wants to lose money.

Unfortunately, markets have ebbs and flows where you can see your portfolio rise and fall.

Since March 2020, the markets have really rebounded. Investors are nervous about the right time to sell. When you dig into the news, you’ll see the market hitting record highs and many people think that now is just a good time to sell.

The market has to come down eventually, right?

Well, not necessarily.

The Market is High: Should I Get Out?

Markets are rising daily, and the media’s job is to promote this all of the time. When people hear “new highs,” they get concerned that the market will burst. However, you make money on new highs.

Ideally, the market will continue to rise and make your portfolio grow.

Sadly, there’s no way to predict whether now is a good time to sell based on a market high. Guessing what the market may do is almost impossible. For example, due to politics, many investors assume that a new president will cause the market to tank, and it won’t.

What we do is:

  • Analyze the data
  • Make informed decisions

In our business, we try to keep stress low by using the data we have to make smarter decisions.

For example, many people will follow the “buy and hold” philosophy of investing. Essentially, a person will invest in a stock, or many, and hold on to the stock for the long-term. If the stock falls, the person holds.

If the market crashes, the person holds.

Unfortunately, if you’re close to or in retirement, it can be very stressful to find yourself in this situation. When your portfolio takes a dive and you’re not working anymore, it can be very troubling to see the value of your portfolio fall 40% or 50%.

Instead, we look at bonds, stock and cash as if they were in a race.

Stocks only lose the race if they’re falling. In a good market, stocks will build higher value than bonds, CDs and other investment vehicles. When our indicators show that stocks are slowing, we like to reallocate investments into bonds or cash, depending on how the market is for each.

You won’t keep your money in cash for a year or two – it’s a short-term process.

The 2020 market dip is a prime example of how we reallocate your investments to save you money.

What Happened in 2020?

Due to global uncertainty, stocks started to fall. Our indicators predicted this, so we adjusted the portfolios for our clients to take their money out of stocks and put them into bonds. Unfortunately, the bond market also started to fall, so we went to the next best thing: cash.

In our most aggressive portfolio, we stopped losses at 9%.

Cash didn’t lose or gain value, so it remained steady while the stock market fell 34% during the same period.

We sat on the sidelines with cash for about 40 days before we felt investing in the market was the right choice. The numbers told us that the market was rising, and by the end of the year, the market rose 17%.

Due to these key changes, our growth portfolio rose 19% rather than taking a massive loss as other portfolios saw.

Emotional Toll on Retirees

Our clients are either nearing retirement or in retirement already. When you’ve worked hard your entire life, you don’t want to stress about losing all or part of your retirement fund overnight.

Our active approach uses numbers rather than emotion to invest.

Using numbers is an analytical approach, and it eases the toll on retirees because it empowers these individuals to make smart money moves. Our data showed that in 2020, small businesses were really struggling and that large companies, like Amazon and Zoom, were propping up the market.

Technology stocks also kept the market afloat because everyone was working from home.

Fast-forward to 2021, and the data showed that the market shifted to small- and medium-cap stocks. Again, the data helped us adjust our clients’ portfolios to continue growing their retirement with as little stress and worry as possible.

So, Should You Sell in a High Market?

Not necessarily. Guessing is too risky because you can guess correctly or incorrectly. Instead, we recommend looking at the data. For example, you may remember the news was doom and gloom, but the market rose.

Do not listen to the media when it comes to the market.

The media is driven by emotion. If you do listen to the news to make your investment choices, we almost recommend investing in the opposite direction that the media outlets are reporting.

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IRAs – Required Minimum Distributions

Many of our readers are planning to retire, and they want to know about required minimum distributions (RMDs). If you have a tax-deferred vehicle, RMDs are something that you should learn more about.

Tax-deferred vehicles are:

  • 401(k)
  • 403(b)
  • 457
  • IRAs (traditional)

When you’ve deferred taxes, you’re making an agreement with the IRS that you’re not going to pay taxes on this money now. But in the future, when you’re able to access the funds, the IRS will come knocking on your door because they want their cut of the money.

Under today’s requirements, you must start taking your required minimum distributions at age 72 – it was 70 and a half not too long ago.

RMDs are not a bad thing, and these are retirement accounts that you’ve been paying into for 30 or 40 years. However, since you’ll have to pay taxes on the distributions, some people get concerned.

Don’t be. This is money you saved and will be using for your retirement.

Understanding When You Must Take RMDs

RMDs are part of your retirement planning, and while you start taking them at age 72, this definition is a bit misleading. According to the IRS, you must begin taking distributions in the year you turn 72.

If you don’t turn 72 until December 31, guess what? You can take distributions from January 1st (you’re still 71) since it’s in the year that you turn 72, or you can wait until December. So, you can strategize to some degree on when is best for you to take your RMDs.

You must take the distribution by the calendar year end (with one exception listed below).

How RMDs are Calculated

The IRS will try and estimate your life expectancy, based on several factors, and then calculate your RMD. The required distribution can vary from year to year, so the RMD isn’t a fixed rate.

For example, let’s say that you have $500,000 in all of your IRA accounts.

If you have this much in your account on December 31st of the previous year, you would divide this amount by a factor that the IRS has created. The factor, at the time of writing this, is 25.6 for someone that is age 72.

The IRS figures that at age 72, you still have 25.6 years left to live. Your health isn’t personally calculated as these factors are across the board for everyone. So, you’ll be required to take the following RMD:

  • $19,531.25 ($500,000 / 25.6)

You can take a larger distribution if you want. However, you must take the minimum amount and it’s added to your income for the year.

In your first year, you can defer the distribution until April. You may want to defer the distribution to avoid taxes, but you’ll still need to take the distribution the second year.

In fact, if you defer the first distribution, you’ll be required to take the first and second distribution in the second year, adding significantly to your yearly income.

What to Do If You Have Multiple Tax-deferred Accounts

If you have 5 different tax-deferred accounts that require RMDs, you can take money from one or all of them. The IRS doesn’t care which accounts the distribution comes from. However, they do care that you’re taking the RMD (based on the combined value of all accounts) and paying tax on it.

What Happens If You Miss an RMD?

You’re penalized. You can be penalized by as much as 50% for missing your RMD.

3 RMD Strategies If You Need to Take RMDs in the Near Future

For anyone that is not retired yet but will be in the near future and has these tax-deferred accounts, there are a few strategies that can help you:

1. Roth Conversions

If you have an RMD, you cannot convert it into a Roth account. However, what you can do is a Roth conversion before you hit age 72. If you convert today, there are no RMDs, but you do pay taxes today.

You’re still paying taxes, but you know today’s taxes and not what your tax burden may be in 10 years.

When you use this strategy, you’re controlling your tax burden because you decide to convert the account at a time of your choosing and at a favorable tax bracket. For example, if your Roth account grows at 7.2% per year, you’ll double your money in 10 years and won’t have to pay taxes on your RMDs.

Of course, this doesn’t make sense for everyone.

We run simulations to see if this is a good strategy for our clients.

2. RMDs are Required, But You Don’t Have to Spend the Money

Many times, we’ll advise people to take money out of the IRA and then put it in another investment account. You don’t have to spend the money that you take out of your account, but you do need to pay your taxes on it.

3. Qualified Charitable Distribution

We have many people who don’t need the entirety of their RMD, so they’ll leverage what is known as a qualified charitable distribution, or QCD for short. A QCD allows those who want to donate to charity to do so with tax benefits.

Let’s assume that you have a $20,000 RMD and want to donate $5,000, you can.

When you do this, you’ll pay taxes on $15,000 instead of $20,000. You will need to go through your IRA to make this distribution, but you need to ensure that the distribution is in the charity’s name, address, and Tax ID.

You want the custodian to do the transfer for you so that the money never enters your account.

If you’re planning on giving to charity any way, the option of making a qualified charitable distribution makes a lot of sense for anyone that has an RMD that they must take.

The earlier you plan to reduce your RMD tax burden, the better. But, even if you plan on using our last strategy to lower your taxes, you want to start as early as possible to make sure it gets done in time for tax season.

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Inflation and Your Retirement

Inflation is a hot topic today. In fact, inflation is leading to the highest Social Security cost of living adjustment ever in 2022. For over 70 million Americans, they’ll have their benefits increased by 5.9% [1].

However, when it comes to retirement planning, there’s a lot of concern with inflation because many people didn’t account for inflation when coming up with their overall strategy to secure their retirement.

We’re going to be covering inflation and what it means for your retirement.

What is Inflation?

Inflation is a word that many people know, but they don’t really understand what it means in the whole spectrum of things. The term “inflation” relates to the increase in prices in an economy over time.

You’ve probably noticed the costs of the following items have risen:

  • Groceries
  • Automobiles
  • Gas 
  • Airplane tickets

In 2020, when the pandemic was running wild, the government pumped billions of dollars into the economy to keep everything running. Supply was a major issue at this time, so people couldn’t even purchase toilet paper.

However, manufacturers increased prices because the demand still existed.

Essentially, inflation makes your dollar worth less. For example, if you purchased a food item for $1 a year ago and it now costs $1.10, your dollar is worth less because you get less for your money.

Deflation also exists, but it’s far less common.

When deflation occurs, your purchasing power increases. 

Inflation is often portrayed as a bad thing, but it means that innovation is ongoing and that wages, hopefully, go up, too. However, with inflation rising rapidly like it is now, many people panic, especially in retirement or when employers aren’t offering salary increases to cover the cost-of-living increase.

Overview of the Inflation Over the Long-Term

When we work with clients, we like to go off of the 100-year average for inflation. Over 100 years, you’ll see a lot of periods of inflation and deflation, but the average inflation rate is just over 3%.

However, when you look at the last ten years, inflation has been at about 1.5%.

Since inflation rates over the past decade have been mild, it’s difficult to adjust to rising levels. If you think about the toilet paper crisis, high demand and low supply led to rising prices.

Thankfully, supply issues are easing, so we can expect supply and demand to equal out.

Another example of this is the housing industry. We’ve seen a lot of people’s homes going into bidding wars, with a lot of houses selling for more than they’re worth. However, this trend is expected to slow as inventory increases.

For people in the workforce, rising wages should help combat the rise in inflation.

Anyone who is already in retirement or planning to retire shortly will want to take additional steps to prepare for potential inflation.

5 Crucial Things to Consider When Preparing for Inflation in Your Retirement Plan

1. Long-term Fixed Income Investments

If you have long-term investments, such as government or corporate bonds (where the maturity date is 10, 15 or even 30 years), the long-term rates may not be as attractive as when you first purchased it.

Be sure to check your fixed-income investments, especially with high inflation, because they may no longer provide the returns necessary to cover inflation.

This doesn’t mean that you shouldn’t have any long-term investments like those mentioned, but you may need to readjust.

2. Risk Management for Your Portfolio

You need to have good risk management for your portfolio. It’s crucial to protect your portfolio so that if you lose 30% of it, you’re not struggling to make it back. A good analogy that we like to use is that if your portfolio drops 50%, you need to make a 100% return to recuperate your losses.

Let’s look at this with real-world figures.

If you have $100,000 in the market and lose 50%, you’re down to $50,000. However, if you gain 50% in the coming years, your portfolio is only up to $75,000.

It’s always better to protect your portfolio than try rebuilding it.

Good risk management protects against these losses so that they are minimal.

3. Think About Your Guaranteed Income

Guaranteed income is vital to your retirement, and this includes things such as:

  • Social Security
  • Pension
  • Etc.

If you know your needs and wants, you should have as much of your needs covered by guaranteed income. You should try and cover most of your expenses with guaranteed income so that you’re less impacted by inflation.

Growth buckets can help cover the increase in inflation.

4. Maintain a Good Spending Plan

Many people retire without any type of spending plan. Unfortunately, without a plan, you’re putting your retirement at risk. You should plan based on:

  • How you’re spending money
  • Essential needs (food, utilities, housing)
  • Wants (cars, vacations, etc.)
  • Legacy (charities, kids, etc.)

When you have a general idea of what you spend monthly, you can devise a spending plan. A good way to find out what you’re spending is to use Mint (it’s free), which will categorize your expenditures so that you can see and understand where your money is going.

5. Sit Down with a Financial Professional

If you have a financial planner that you work with, sit down with them and begin the difficult discussion of inflation and your retirement. When we sit down with clients, we do a few things:

  • Flush out a retirement plan before they become clients
  • Run plans and stress them out based on low rates of returns
  • Run plans at a 3% inflation plan
  • See how the retirement plan works through these tests

When we run tests for a person’s retirement, we can use the worst-case scenario and make adjustments based on this. For example, we may find that the person needs to work a few years longer or work part-time to retire.

Through tests and the help of a financial advisor, it’s possible to learn whether you have enough money for retirement and to stave off inflation.

Inflation will remain a consistent concern through retirement. Still, if you plan ahead and consider some of the points we’ve outlined above, we’re confident that you’ll be able to retire with peace of mind that you’re protected against inflation.

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