July 11, 2022 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for July 11, 2022 

This Weeks Podcast –Dr. Doug Lucas – How to Reverse Osteoporosis

If you have Osteoporosis or are exposed to its dangers, maybe it’s time you consider a comprehensive treatment approach. Osteoporosis is the diagnosis of having poor bone quality and quantity.

 

This Weeks Blog –How to Reverse Osteoporosis

As anyone listening to this should know, we’re all getting older. Osteoporosis is a major concern for everyone as they age. We believe that a healthy retirement goes well beyond finances and ought to really consider your physical health, too.

How to Reverse Osteoporosis

While we often focus on ways to secure your retirement and retirement planning, we broke away from the norm on this week’s podcast and had a very important conversation about osteoporosis.

As anyone listening to this should know, we’re all getting older. Osteoporosis is a major concern for everyone as they age. We believe that a healthy retirement goes well beyond finances and ought to really consider your physical health, too.

Dr. Doug Lucas sat down with us to discuss how to reverse osteoporosis and outlined steps you can take if you want to slow and even reverse this condition. 

Who is Dr. Doug Lucas?

Dr. Lucas is a highly trained and respected doctor who finished his training as an orthopedic surgeon at Stanford University. After going into practice, he started to see a lot of patients that would fall and fracture or even break a bone.

The impact of a fractured hip or arm is a major concern for patients, and if you break a hip in retirement, the question is, will you enjoy retirement?

Probably not. 

Dr. Lucas started what he calls “health optimization,” which helps you live a longer, healthier life. And part of this life is trying to slow and even stop osteoporosis.

What is Osteoporosis Anyway?

If you’re in your early 50s, there’s a good chance that you have heard of osteoporosis in passing or may not even know what it really is in the first place. Dr. Lucas explains that this condition is the diagnosis of:

  • Poor bone quality
  • Poor bone quantity

Your bones often get stronger as you get older, and then when you hit your late 20s, the bones may begin to weaken. Doctors often don’t discuss your bone health, but it is something to be concerned about because it makes it so much easier to break a bone or suffer from a fracture.

When you’re older, a broken hip or bone can drastically impact your life.

Traditional Healthcare Model Surrounding Osteoporosis

It’s estimated that 50 million adults in the United States have osteoporosis. Unfortunately, most doctors and traditional checkups will not even test to see whether your bones are weaker. However, if your doctor does perform tests and you are diagnosed with the condition, the treatment is going to revolve around pharmaceutical treatments.

For example, your doctor is likely to recommend:

  • Supplements
  • Medications

Unfortunately, none of these things reverse the condition. If you do fall and have a nasty fracture, you’re often left with a doctor who doesn’t specialize in bone health. You need a very comprehensive picture to better understand how osteoporosis works and to heal from it properly.

Optimizing Your Health for Osteoporosis

Dr. Lucas explains that health optimization looks at the entire person and the root cause of your bone loss. So, before you can begin reversing your bone loss and weakening, you should understand the condition’s cause.

While you should begin early with health optimization, if you’re 55+, you can “turn this ship around.”

You can slow down bone loss and even reverse bone loss.

You won’t reverse back to your 20s when your bones were exceptionally strong, but you can take steps to strengthen your bones and prevent many bone fractures and breaks.

Typically, there are two main reasons for bone loss:

  1. Gut health is improper and does not allow you to maximize nutrient absorption
  2. Adrenal glands are causing chronic inflammation, often from stress

Once you figure out why you’re losing bone, it’s time to “plug in” holes and then work to strengthen the bones. The way to optimize bone health and begin restoring it is:

  • Taking certain supplements
  • Eating a proper diet
  • Consuming calcium
  • Eating the right proteins

Dr. Lucas also monitors micronutrients to ensure that the body has the nutrients necessary to restore bone health. Even genetics will be considered because there may be certain issues that you cannot change due to genetics.

How to Begin the Process to Check for Osteoporosis

If you’re starting from scratch and have no idea whether you have osteoporosis, the first step in the process is to schedule an appointment with a doctor who will run a screen test to learn more about your bone health.

You need a starting point to know your bone health.

However, if you had a fracture from minimal trauma, such as tripping over your dog and falling relatively lightly, there’s a good chance you have a “fragility fracture.” In this case, you have osteoporosis because your bones should not break that easily.

At this point, you want to reach out to someone who specializes in bone health, but there aren’t many people in this field.

Dr. Lucas is certainly a great contact to have because he created a mirror website for his company, found at Optimum Bone Health. The website provides a wealth of information to help you learn about bone health and can provide recommendations to optimize your bone health.

He can even help you get started through telehealth.

The process begins with:

  • 10 – 15-minute free consultation
  • Determine if you’re a good fit
  • Enter a six-month program to reverse osteoporosis

During the first month, many tests are taken to understand where your bone health is. Then, you’ll sit down with Dr. Lucas for an hour to discuss your tests. Based on your unique results, a program will be made for you to really start strengthening your bone health.

While it can take one to two years to start strengthening your bones, it is a process that is worth every second because it reduces your risk of fractures and bone breaks.

Do you want to secure your retirement? Sign up for our 4 Steps to Secure Your Retirement Video Course.

July 5, 2022 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for July 5, 2022 

This Weeks Podcast -Nick Espinosa-Cybersecurity

How do you keep your finances safe in a world where cybersecurity has become a household term? In a world where we’re performing most of our tasks online, it is important to be aware of the innovation of cyber fraud and hacking and how to stay safe.

 

This Weeks Blog –Why is Internet Safety Important?

Are you trying to secure your retirement? If so, a lot of clients we have are majorly concerned about cybersecurity. In an instant, a hacker can get into your bank account, transfer your savings over to their own accounts and leave you to pick up the pieces.

Cybersecurity 101: How to Secure Your Financial Accounts, Phone and Email

Are you trying to secure your retirement? If so, a lot of clients we have are majorly concerned about cybersecurity. In an instant, a hacker can get into your bank account, transfer your savings over to their own accounts and leave you to pick up the pieces.

These individuals or groups may also hijack your email account and try mailing your financial advisor to make changes to your portfolio or give them access to your accounts. Additionally, someone can log into a retail account and rack up a ton of debt.

In our recent podcast, we had the opportunity to sit down with Nick Espinosa, CEO of Security Fanatics, a cybersecurity expert, to ask him a lot of questions to help protect our clients. Nick has worked with Fortune 100 companies and small businesses. He is a writer and even has Ted Talks where he teaches people about cybersecurity.

And he was more than willing to share some knowledge with our audience.

How to Keep Your Data Safe When Shopping Online

Shopping online is something a lot of people do. It’s a lot easier to go on Amazon and simply order a new pair of pants. However, in the middle of these transactions, you put a lot of trust in a third party that now has access to your credit or debit card information.

How can you stay safe when shopping online?

Nick claims it’s a “loaded question.” Everyone is online, and the pandemic accelerated online shopping and even working from home. The best way to protect yourself is awareness. Technology is constantly innovating, but the threats out there to steal your information or gain access to your accounts are also accelerating with its own technology.

A few questions to ask are:

  • What happens if someone breaks into your phone?
  • What happens if someone gains access to your computer?
  • What information would be found on these devices?

For most people, a lot of information may be accessible in these situations, and maybe you even saved passwords to the device, opening up a treasure trove of data to a hacker.

Protecting against these threats requires some diligence.

Enable Encryption or Set It Up

If someone steals your PC or phone, encryption ensures that they cannot read any of the data on the device. Unfortunately, a pin code isn’t enough to stop someone from potentially accessing files on these electronic devices.

Late-model iPhones and Android devices have automatic encryption, but it doesn’t work well with pin codes.

It’s easy to clone a phone and continually try cracking the pin code.

Instead, you want to use:

  • Long passwords
  • Biometrics, such as thumbprint

If you use these advanced security settings, you’ll encrypt your phone using a method that is very difficult or impossible to break.

Storing Passwords in a Password Manager

Many people rely on password managers because we know that people shouldn’t reuse their passwords across sites. Password managers can help you manage site passwords by:

  • Generating very secure passwords
  • Remembering the passwords for each site
  • Storing passwords using encryption

However, many password managers also synchronize across devices, so the passwords are available on your smartphone, PC, etc.

Hackers are working to break into these password managers because they’re a treasure trove of data. One thing to understand is that if you do use a password manager and there’s an update available for it, download the update immediately.

A security flaw may be the main reason for the update, and if you say, “Well, I’ll update that later,” you’re inviting hackers to steal your information.

Two-factor Authenticator

Two-factor authentication is changing the way people secure their accounts. Using this authenticator adds an extra layer of protection to your account, making it exponentially safer.

Hackers are lazy, and they will go after low-hanging fruit to hack.

Enabling multi-factor authentication requires you to verify the person logging into your account is you. Even if a hacker knows your password, without having access to your phone or wherever the authentication is received, they can’t get into your account.

Threat Detection Systems

A threat detection system sounds so advanced, but it’s crucial to realize that you have a minicomputer in your pocket if you have a smartphone. Your mobile devices are powerful, and they need the same protection as your PC:

  • Antivirus 
  • Antimalware
  • Anti-phishing
  • Etc.

We’re downloading things all the time. However, it’s easy to infect someone on Facebook or Twitter because these platforms do not actively scan files we upload to friends. It’s as simple as a hacker sending a blurry image of you from your mom’s Facebook account, asking if it’s you and then infecting you when you open the image.

The image may even be a doctored image of you, so you would reply, “Yes, awesome picture, mom,” and not realize that your smartphone is now infected with a virus.

Protecting Against a Phishing Scam

Phishing can take on many forms. For example, a Nigerian Prince may email you stating they have millions of dollars they want to transfer to you. Of course, most people are aware of these types of scams and will not fall for them, although some people still lose their entire retirement in these schemes.

There is also something called “spearfishing,” and Nick sees this often in the corporate and individual world.

The main problem retirees face is that they didn’t grow up with the technology that we have today. Nick claims that the vast majority of phishing victims are over age 60 and are the main target of hackers.

Why?

Let’s use an example. A hacker starts looking through someone’s email and sees that this person is a 22-year-old male named Johnny. As it turns out, Johnny often sends emails to his grandmother, and she’s the perfect target for phishing.

The hacker may use Johnny’s email to:

  • Send an email to grandma
  • Craft a story about how he’s stranded in London, and someone stole his wallet
  • Grandma sends the money

Grandparents will do anything for their grandchildren, and since grandma knows Johnny is in London, she doesn’t even realize that the mail may be from a hacker. Verifying that the person sending an email is real is as simple as picking up the phone and calling Johnny on his usual phone number.

If you call Johnny, you’re using two-factor authentication to verify that Johnny is really in trouble and can send him money.

Phishing can also happen on fake forms online. For example, someone may own Amazzon.com, and the site looks exactly like the real Amazon. However, when you type on your account information, it may redirect to Amazon, and you don’t realize anything was amiss.

The problem is that the hacker captured all of the form information and can now access your Amazon account and make purchases.

Sometimes, there’s an infection on a smartphone or PC. When you’re on your device and on Facebook, a pop-up may appear on the screen that says, “Call 1800 scamm-me.” You call, and the person steals your information.

Additionally, someone may text you from Bank of America saying there’s an issue with your account, so you click on the link and don’t realize it’s not a legitimate one. In this case, it’s crucial to call the bank yourself or log into your account by going to the official site yourself and verifying that there’s an issue with your account.

It’s far too easy to recreate a site, create this sense of an urgent problem with your account and fall into the grasp of a hacker who wants nothing more than to hack into your bank account. You need to do your due diligence to keep your information safe when logging into your bank account or receiving emails.

The key to keeping yourself safe online is to educate yourself and don’t make it easy for hackers to hack you. Use complex passwords and two-factor authentication, and always verify that the person mailing you for money is actually the person you want to help.

A healthy retirement is one that you actually get to enjoy. If you’ve worked hard, did everything right and then lost everything in an instant, it would be a horrible feeling. Focusing on your cybersecurity and just following the basics above will protect your retirement from hackers.

If you’re saving for retirement and want expert advice, schedule a call with us to see how we can help.

How to Plan for Inflation in Retirement

Inflation is something everyone is dealing with right now. However, we focus on retirement planning. We want to help ease the minds of those trying to secure their retirement or those already enjoying life after work.

We’re going to be answering a lot of great questions today, including:

  • What causes inflation?
  • How to protect against inflation?
  • What to think about when deciding to retire?
  • How to prepare your spending plan?
  • Can an income bucket protect against inflation?
  • Should I consider Roth conversions?

As you can see, we’ll be covering quite a few questions. So, grab a cup of coffee or some wine and settle in.

6 Questions and Answers When Learning How to Plan for Inflation in Retirement

1. What Causes Inflation?

Inflation is caused by quite a few things, but we’re going to discuss it from the view of what is driving inflation in 2022. Many people have stressed their concerns over the government printing money in recent years, and the main issue with printing money is that it dilutes the dollar’s value.

You may have $100, but the $100 is worth less than it was a few years ago.

This round of inflation is partly due to printing money, but there’s also:

  • Low supplies due to supply chain issues
  • High demand

When demand remains high and supplies are low, prices go up and inflation begins to hurt consumers. Low supplies always lead to higher prices because retailers are making less money and need to turn a profit.

Perhaps there are only 1,000 tires in stock when a company normally sells 2,000.

In this case, the company raises the price of the 1,000 tires when demand is high because they still need to pay their bills and remain in operation.

For example, we’re booking a flight for a meeting, and prices for a flight have never been this high. High prices are due to a few things:

  • Higher fuel costs
  • Some planes have been grounded
  • Staff shortages

However, we’re seeing indicators that inflation will subside, and supply chain issues will correct themselves. 

Will prices go back down to before inflation hit?

Probably not.

But we believe that prices will fall back down and level out. We’ve had issues in the past with inflation and supply chain issues. We’ve seen gas prices skyrocket, and then they recede, and everyone is happy again.

Keep in mind that the last decade has seen low inflation rates, and now the high inflation is somewhat of a shock for consumers. We’ll be going over a brief history of inflation in just a few minutes that will help you understand what we mean when we say inflation has been low.

2. What Can We Do to Protect Our Savings and Retirement from Inflation?

Protecting yourself against inflation really depends on one of the two types of investing:

  1. Passive
  2. Active

If you’re investing using a passive approach, you’re going to ride out inflation and see how your retirement pans out. However, we believe in a more active approach to investing, which allows you to adjust your portfolio to invest more in what’s working now than what’s not working.

Supply and demand exist in investments, so we try to find high-demand areas to protect against inflation.

For example, you may have heard about a 60/40 portfolio, where 60% of investments are in equities and 40% in bonds/fixed income.

The 60/40 methodology is risky right now because bonds are struggling tremendously in 2022. The 40% that is meant to keep you safe in retirement is hurting you just as much during inflation.

Instead, you can do things with an active portfolio that better protects your retirement at this time.

3. How Does Inflation Impact Your Plan on When to Retire?

If we were helping someone with their retirement planning, we might recommend delaying retirement by a year if there’s no room to cut back on spending. It’s very rare that we’ve ever had to tell someone to delay retirement, but it may make sense in some cases.

Right now, due to inflation, this may mean working for an additional year if your retirement plan is very tight.

You may also want to retire from a full-time job and go into a consulting plan to keep some money moving in. However, if your retirement is well-funded, you should be fine to retire, especially if you can curb your spending in the short term.

4. How to Prepare a Spending Plan During Inflation

We’re having a lot of our clients ask us about adjusting their spending plans, and when inflation is running at 8% – 10%, it’s a scary time for many people. We’re certainly going through a rough few years since the pandemic.

But inflation will come back down, especially with the Fed working to bring inflation back down.

For the past 10 years, we’ve averaged 2.51%, so we’ve been spoiled. However, over the past 100 years, we’ve had inflation at 11% and into the teens. During the late 70s and into the early 80s, we had 11.3%, 13.5% and 10.3% inflation.

If we average inflation over the past century, it was around 3.2%.

Inflation didn’t remain at 10.3% since the 80s, so inflation will come back down and enter into some form of normalcy.

When creating your spending plan, we’ll discuss:

  • Wants
  • Needs

Retirees have the ability to adjust their budgets and can even decide to travel when it’s most affordable rather than in peak season. Minor control like this can help you stay in retirement and keep money in your pocket. 

We can also run inflation scenarios when creating a spending plan to account for periods of inflation and ensure that you’re well on your way to retiring and living the life you want in retirement.

5. Income Buckets and Inflation

We talk a lot about income buckets when trying to secure your retirement. Income buckets come in three main types:

  1. Cash
  2. Growth bucket
  3. Income/safety bucket

If your income bucket is set up to help you avoid the stock market concerns, you don’t need to think about stocks. Income buckets are guaranteed income that will come in every month to help you pay your bills for 10 – 20 years.

These income or safety buckets help you survive through inflation without much concern about what’s happening to the stock market. And for us, the peace of mind that these income buckets offer is worth setting them up.

6. Should You Do a Roth Conversion?

We believe everyone should at least consider a Roth conversion because it is beneficial. Conversions take pre-tax assets, pay taxes on them, and then convert them into a Roth account.

There are tax implications to converting these accounts, but you’re paying taxes now and avoiding potentially higher tax rates in the future.

For example, let’s assume that you have $100,000 in an IRA that you haven’t paid taxes on. The market falls 50%, and now you have $50,000. Since the portfolio is down, you can convert a larger percentage of your assets that you can convert and pay less taxes.

Tax-free growth is something to consider, especially in a down market.

However, please talk to a tax professional to better understand the immediate tax implications of converting your accounts.

Do you need help trying to secure your retirement? Schedule a free, 15-minute conversation with us today.

June 20, 2022 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 20, 2022 

This Weeks Podcast -Steven Jarvis – Mid-Year Tax Strategies

Are you committed to having a tax-planning conversation outside the tax season? The only way to win in the tax game is to have a proactive approach when it comes to tax planning.

It’s important to be committed to having some kind of tax-planning conversation on any topic, especially…

 

This Weeks Blog –Tax Planning For Retirement

Mid-Year Tax Strategies You Should Consider

We recently sat down with one of our good friends Steven Jarvis CPA to discuss tax strategies everyone should be considering whether they’re currently in the middle of retirement planning or trying to secure their retirement.

In one of our previous podcasts, we also sat down with Steven to discuss taxes.

In fact, many of our clients also started working with Steven, and one thing that we continue hearing is that he helps eliminate the stress of taxes. According to him, the stress comes from stressing about doing taxes in April rather than engaging in tax planning throughout the year.

Steven and his team work intensely after-tax season to ensure that their clients follow the recommended tax strategies. So, we’re going to pick Steven’s brain to see what he recommends for your mid-year tax strategies.

First, Don’t Be Under the Impression That There’s Nothing You Can Do About Your Taxes

Before going any further, how did you feel about your taxes this year? Did you feel like you did your duty, paid your taxes and there was nothing else that you could do? If so, you’re like a lot of people that accept taxes as being a part of life.

And they are.

But you shouldn’t leave the IRS a tip because you’re not leveraging tax strategies. Taking a proactive approach to your taxes means that you’ll minimize your tax burden as much as legally possible.

Since it’s the middle of the year, it’s time to start thinking about them to lower your coming tax burden.

A few options available are:

Qualified Charitable Distributions (QCDs)

QCDs are one of the tax strategies that we often see with our clients. Steven explains that a QCD works by:

  • Taking money directly from your IRA
  • Sending the money straight to the charity
  • Meeting the QCD requirement of 70 1/2

The money cannot be made out to you or hit your bank account to benefit from a QCD. Instead, this is a process we look at in conjunction with handling your required minimum distributions (RMDs).

QCDs are powerful because when you take money from your bank account and donate it to a charity, there’s a 90% chance you’re not benefitting from it come tax season. 

Why?

Ninety percent of people do not itemize their tax returns, so they’re unable to deduct their donations.

QCDs allow you to:

  • Gift directly to charity
  • Benefit from lower income and tax rates

Another advantage of a QCD is that it lowers your adjusted gross income, too. Why is having a lower adjusted gross income important? Your Medicare benefit costs will be lower if your AGI is lower.

So, you’re:

  • Paying less in healthcare costs
  • Lowering your taxes
  • Donating to a cause you care about

QCDs are a great way to give back and receive a benefit from it, too. However, if you’re not 70-1/2 or the standard deduction is more beneficial than itemizing your taxes, what can you do?

Use a donor advised fund.

Donor Advised Funds and How They Work

A donor advised fund (DAF) is something to consider when you can’t use QCDs. DAFs allow you not to tip the IRS and still take a standard deduction. These funds will enable you to:

  • Lump multiple years of donations into a fund
  • Taxpayers still control the funds
  • Eventually use the funds for charitable purposes
  • Get your donations above the standard deduction to itemize

For example, if you donate $10,000 a year, you may not have enough to itemize and take the deduction. Instead, you may decide to put $30,000 into a DAF and immediately benefit by being able to itemize your taxes.

You don’t even need to distribute all the funds to a charity today and can simply opt to give every year to a charity of your choice. The key is to send these funds to a charity at some point.

So, this year, you put $30,000 into a DAF, itemize your taxes, and lower your tax burden.

Next year, you’ll likely go back to the standard deduction, so you’re paying less taxes this year and not paying any additional taxes for years you don’t contribute to a DAF.

However, there are also Roth conversions, which may help you with your tax strategies, too.

Roth Conversions to Lower Your Tax Burden

A Roth conversion converts a non-Roth account into a Roth. You take money out and pay taxes on it now, and let it grow tax-free in the future. You’ll pay more taxes this year, but your money grows tax-free afterward, which is great as your retirement accounts gain interest over the years.

Should you do a Roth conversion? 

We believe everyone should consider a Roth conversion, but what does Steven think? We asked him.

  • Everyone should consider a Roth conversion if they have IRA dollars.
  • Conversions aren’t the right option for everyone.
  • Roth conversions this year happen at a discount because of the markets.

In 2026, taxes are set to go up if nothing else changes, so putting money into a Roth account protects you from higher tax burdens.

If you’re in your peak earning years, it may not be in your best interest to go into a Roth conversion.

Steven states that the only way you’re worse off is if taxes go down. But are you really convinced that taxes will go down in the near future? Most people respond with no.

In this case, a Roth conversion is beneficial.

You’ll need to make your Roth conversion by 12/31 of the year.

Finally, Steven recommends having tax conversations outside of the tax season. You need to take a proactive approach to your taxes, work with a CPA and develop tax strategies to save money on your upcoming taxes.

If you wait until March or April to think about your taxes, it’s too late.

Sit down with a professional, discuss your options and determine what tax strategies you can use this year to lower your taxes – or not leave the IRS a tip.

Click here to learn more about our book: Secure Your Retirement: Achieving Peace of Mind for Your Financial Future.

June 13, 2022 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 13, 2022 

This Weeks Podcast -401k Versus IRA

Do you understand the difference and similarities between 401ks and IRAs? How can you make the two or one make sense for you as your retirement plan?

Both 401ks and IRAs are set up to encourage you to plan for your retirement, and you should have an analysis and a conversation on which one is good for you.

 

This Weeks Blog –401k Versus IRA

If you’re saving for retirement, you’ll need to know the difference between a 401k versus IRA. You may even have both types of accounts. While trying to secure your retirement, it’s crucial to know what each account type offers you.

401k Versus IRA: Which is Better for Your Retirement?

If you’re saving for retirement, you’ll need to know the difference between a 401k versus IRA. You may even have both types of accounts. While trying to secure your retirement, it’s crucial to know what each account type offers you.

We’re going to discuss a few important details of each:

  • What is a 401k?
  • How does a 401k work?
  • What is an IRA?
  • Should I transfer to an IRA?

What is a 401k?

A 401k is an employer-sponsored plan. It’s set up by a business, and you can contribute money to it for your retirement.

What is an IRA?

An IRA is an individual retirement account. Virtually anyone can open this type of account and contribute to it.

Both a 401k and IRA are meant for anyone planning for retirement.

401k Versus IRA

A 401k and IRA have two main types:

  1. Pre-tax, or “traditional” 401k/IRA
  2. Tax-free, or “Roth” 401k/IRA

The main difference between pre-tax and tax-free is that contributing pre-tax has tax benefits. However, when you take a withdrawal in the future, you’ll pay taxes on these withdrawals.

With a Roth account, you pay taxes now and don’t have to pay taxes on withdrawals. Roth accounts allow your money to grow tax-free. Many companies are beginning to offer these types of accounts because they’re advantageous, as their money grows without further tax liability.

Let’s say that you have tax-free investments at 20. You can grow your money for 45+ years tax-free.

Funding a 401k vs IRA

When it comes to a 401k or IRA account, a 401k allows you to fund the account a little more than an IRA. An IRA allows you to contribute $6,000 – $7,000 per year. However, a 401k will enable you to put up around $19,500 per year.

Additionally, a 401k may have an employer contribution or an employer match.

If an employer puts money into your account, you may reach $50,000 a year in contributions in a single year.

Rules for a 401k

A 401k is started by an employer, and they choose:

  • Which brokerage the account is handled in
  • What types of investments are available

Employers make the rules for 401k accounts. It’s crucial to understand that these rules may change or be a bit more specific to the employer. However, the general rules that are followed by most employers include:

  • As long as you’re an employee of the company, you cannot move the money from the 401k to an IRA until you’re 59 and a half. At this point, you can do an in-service rollover. You can choose this option to take full control of your investments.
  • In-service rollovers keep the 401k account open to allow your employer to keep making contributions on your behalf.
  • You do not have to pay taxes when rolling over funds in these accounts because you’re not withdrawing the funds yet.
  • If you’re under 59 and a half and you have a 401k from another employer, you can move the money into an IRA.

One thing we hear a lot is that many people think that their employer negotiates better rates for them for their investment accounts. However, this is not the case. Mutual funds, which most people are investing in with their 401k, charge the fees and don’t lower them for employers.

Your employer may have fees, and the company can absorb these fees, but you wouldn’t have these fees with an IRA.

Quick Note on In-Service Rollovers

An in-service rollover is a simple process and not something that you need to be overly concerned about. The rollover is a basic decision that requires:

  • Advisor calling the 401k
  • Ask the rep for an in-service rollover
  • Walk through steps with the rep
  • Funds are sent to you directly
  • Funds are then deposited into your IRA

You may need to sign a paper every once in a while, and that’s really it. A rollover is straightforward and something that we do all the time.

Rules for an IRA

An IRA is an individual retirement arrangement, which means that as an individual, you’re 100% in control of the account. You can choose what brokerage to open an account with and where you want to invest your money to help it grow.

When you have an IRA, you can invest in:

You don’t lose any benefits when going to an IRA. Most of our clients opt for an IRA because we’re able to direct their investments.

How an Advisor Can Help You with Your Retirement Plan, Even If You’re Younger than 59 and a Half

For a long time, advisors couldn’t really help people who were younger than 59 and a half with their retirement accounts, aside from taking an advisory role. There are a lot of rules and regulations in place that make this process very difficult, specifically with sharing account usernames and passwords. 

Here’s a concept that we’ve been using as an advisor to manage a 401k:

  • You set us up with a login
  • We monitor and make trade allocations for you

We’re able to take a peek at your 401k and the options available to make allocation changes. We’re not granted the power to change contribution amounts or anything of that sort. These accounts are an overlay of your account that allows financial advisors to make trades on your behalf.

Our clients love the 401k option that allows us to manage a 401k on your behalf.

Moving from a 401k to an IRA is often ideal for clients, but you may find the tax advantages of a 401k to be the better option for you. The tax advantages include being able to deduct contributions from your current year’s taxes, but when your money grows, it will be taxed, which is something to consider.

If you’re trying to secure your retirement and aren’t an expert in retirement planning, we can help. We have a wealth of information available for free on our podcast (sign up here), or you can feel free to schedule a call with us.

June 6, 2022 Weekly Update

We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 6, 2022 

This Weeks Podcast -How Required Minimum Distributions and QCDs Work?

When it comes to taking your money out of your IRAs and 401ks after retirement age, you might need to understand the terms RMDs and QCDs.

At age 72, you’re required to start taking distributions out of your 401k and IRAs with a formula based on your life expectancy. The key here is to be tax-efficient or even go tax-free in any way you can without breaking the law.

 

This Weeks Blog –How Required Minimum Distributions and QCDs Work?

It’s important to understand how required minimum distributions and qualified charitable distributions work, even if you’re under 72. We’re going to discuss a strategy that is crucial to you, even before you can begin taking your RMDs.

How Do Required Minimum Distributions and QCDs Work?

Today we’re going to discuss two main, important aspects when trying to secure your retirement: RMDs and QCDs. But before we go any further, it’s important to define these acronyms for you:

  • RMDs: Required minimum distributions
  • QCDs: Qualified charitable distributions

It’s important to understand how required minimum distributions and qualified charitable distributions work, even if you’re under 72. We’re going to discuss a strategy that is crucial to you, even before you can begin taking your RMDs.

So, if you’re under 72 and don’t think this post is for you, trust us: it is.

Understanding Required Minimum Distributions

RMDs are attached to your 401(k), traditional IRA and other retirement accounts that are out there. If you have an account where you defer taxes until the future, the IRS requires you to take money out of these accounts and pay your taxes.

When you place money into these accounts, the deal is, “I don’t want to pay taxes now, but I will later.”

At age 72, you’re required to begin taking RMDs out of these retirement accounts, using a formula that is based on your life expectancy. These figures are generalized, and right now, at age 72, you have a life expectancy of 27.4 more years.

Using your balance from December 31 of the year prior to taking the distribution, you would do the following:

  • Balance / 27.4 = RMD

For example, let’s assume that your IRA had a balance of $500,000 on December 31, 2021. When you take the distribution in 2022, you’ll receive $500,000/27.4 = $18,248.18. However, you may not need to take your distribution at 72.

When you turn 72, you’re required to take a distribution for the year. So, for example, if your birthday is in November, you’ll still take the distribution in January of that year.

However, on your first RMD, you can decide to take the RMD in the next calendar year by April 1.

Delaying Your First RMD Until April 1

If you want to delay your first RMD, normally for tax reasons, there are some pros and cons that go along with it. For example, let’s assume that you must take an RMD in 2022, but because you turn 72 this year, you decide to take your first RMD by April 1, 2023.

In the 2023 calendar year, you’ll take two RMDs of:

  • approximately $18,248.18
  • approximately $18,248.18

After this period, all RMDs must be taken by December 31 of the calendar year.

You can also withhold taxes from your RMDs, so you won’t need to worry about:

  • Quarterly payments
  • Surprise tax bills

However, it’s up to you to decide whether you want to pay taxes quarterly or not. You can also opt to take a monthly distribution from your account. The main goal is to take out the full amount required by the end of the year.

Custodians of your account will take care of the calculations on your RMD amount, so we suggest following the amount they recommend for distributions.

If you’re 65 and retired, you can still take money out of your account for:

  • Living expenses
  • Placing funds into a Roth account
  • Lowering your future RMDs

When clients opt for this strategy, they can grow the money in their Roth accounts tax-free, which is very beneficial.

Sometimes, people have five different IRA accounts with $100,000. You can take the RMD from a single account. The IRS doesn’t care as long as you take the money out of the account. However, if you have a 401(K) and 4 IRAs, you need to take the portion out of the 401(K) and then the remaining from your IRA.

When retirement planning and trying to secure your retirement, you’ll find a lot of buzz around RMDs and QCDs.

Why?

Let’s find out.

Understanding Qualified Charitable Distribution

QCDs are another tool that you can use in retirement planning, and it’s one that the IRS allows you to begin using at 70 ½. If you want to give money to a charity that qualifies for a QCD, you can donate a portion or all of the RMD to the QCD.

Many people will take the RMD, pay taxes, and then give the money to charity.

However, with a QCD, you can:

  • Skip paying taxes
  • Setup a QCD directly to the charity

Since the check goes directly to the charity, you’re erasing the taxes on the distribution and helping a charity with the full amount of the RMD.

You can begin using the QCD strategy at the age of 70 ½ and above.

If you’re interested in QCDs and RMDs but have more questions, we’re more than happy to help. You can schedule a call with us.

We also have two great courses that you can sign up for today for free: 4 Steps to Secure Your Retirement and 3 Keys to Secure Your Retirement Master Class.


May 31, 2022 Weekly Update

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 May 31, 2022 

This Weeks Podcast -6 Considerations for Your Estate Plan

When it comes to estate planning, some things are essential and required at all times to simplify the process for your family when you’re no longer here.

Learn the purpose of having the durable and healthcare power of attorneys to make things simpler for your family in case you become incapacitated.

 

This Weeks Blog –6 Considerations for Your Estate Plan

Have you thought about your estate plan? If not, it’s a crucial element of retirement planning because it dictates how you’ll save and plan for the future. And even if you already have an estate plan in place, it can and will adapt and change over time.

6 Considerations for Your Estate Plan

Have you thought about your estate plan? If not, it’s a crucial element of retirement planning because it dictates how you’ll save and plan for the future. And even if you already have an estate plan in place, it can and will adapt and change over time.

In our most recent podcast, we walk you through six things to consider for your estate plan.

If you’re thinking, “I don’t need an estate plan,” you do. In fact, creating an estate plan is something that we recommend for all of our clients because they’ve worked hard during their lives and should have a say as to what happens to their estate when they pass on.

The six things that we recommend you consider for your estate plan are:

6 Considerations for Your Estate Plan

1. Will

Everyone needs a will, but why? A personal story I remember from school is that the #1 thing to do is to have a will. They drilled it into our heads that everyone needs a will. Why?

  • Wills dictate who gets what in an estate.
  • Wills dictate how assets get into someone else’s name.

In a will, you outline how your heirs will receive your assets and who gets what. If you don’t have a will, the courts will decide who gets what assets and how they receive them. Without a will, your assets may go to someone you don’t want.

Additionally, in 30 minutes or so, we can have most questions answered that populate your will and make your death much easier on your estate. Without a will, you’ll leave a mess for your estate and family that you leave behind.

2. Healthcare Power of Attorney

A power of attorney (POA) is someone who has the power over decisions. A healthcare POA can make decisions on your behalf while you’re alive. The individual steps in to make decisions for you if you’re unable to make them yourself.

For example, if you’re in a coma, this person could dictate your healthcare.

When you create a healthcare power of attorney, you can outline:

  • What care you would like
  • What care you reject
  • How someone can make decisions on your behalf

No one wants to be left with a decision that can impact their loved one’s life. When creating this document, you outline the care you would like and not like. Perhaps you don’t want to be on life support.

If you put in this document that you don’t want to be on life support, you’re saving someone else a lot of heartache because you’ve made the decision yourself.

It’s crucial to remember that a healthcare POA only allows the person to decide if you cannot make the choice for yourself. A stroke or brain damage are just two times when the person given power of attorney can step in and make decisions for you.

Everyone, even if you’re just turning 18, should have a healthcare POA because you just never know what the future holds.

3. Durable Power of Attorney

A durable power of attorney involves decisions outside of healthcare, such as:

  • Accessing retirement accounts
  • Writing checks for you
  • Controlling your finances and assets

The individual is acting in your interest, and you can outline how this individual may act. Perhaps you don’t want them to have the power to take money out of a retirement account.

If you have an IRA, you need to have a durable power of attorney in place. Why? An IRA is an individually held account. Your spouse has no right to access these accounts, even if you have a stroke and cannot access them yourself.

Instead, many IRAs will require you to have a durable power of attorney with them so that they can allow your spouse to access these funds.

4. HIPAA Form

HIPPA forms are for medical purposes, and they augment the healthcare power of attorney. The form allows access to your medical records. If you have a spouse or a child who needs access to your medical information, a HIPPA form is crucial.

Once your child turns 18, the hospital will not share your child’s medical information with you.

Filling out a HIPAA form allows someone access to your medical records so that they can know the status of your condition and how to make the best decisions on your behalf.

5. IRA/401(k) Beneficiaries

Your IRA and 401(k) have beneficiary forms that you ought to review annually. These beneficiaries are who will receive your assets upon your demise. Often, a person assumes that their will dictates who receives the assets.

However, there are more costs involved with a will than if you just added a beneficiary to your accounts.

Also, you can add:

  • Primary beneficiaries
  • Primary contingent beneficiaries
  • Secondary contingent beneficiaries

In this case, the funds go to the primary beneficiaries if they’re alive, then the contingent beneficiaries and then the secondary contingent beneficiaries if the other beneficiaries are no longer alive.

You can also add a charity or other entity as a beneficiary.

We recommend filling out a person’s full information, Social Security number and so forth. You can also leave money to a person, and if they’re no longer living, it will go to their heirs instead. Adding beneficiaries makes transferring these accounts much easier when you pass on.

6. Transfer on Death Brokerage and Bank Accounts

First, there are two types of accounts. Joint accounts are the easiest because if you have a joint account with someone and you die, the account becomes 100% their account. However, what happens if:

  • Both of you die at the same time?
  • You don’t have a person to have a joint account with?

A transfer on death or beneficiary is the easiest way to transfer these assets from your account to your heirs. Otherwise, the assets will be divided by the courts, which can take time and money in many cases.

Filling out a transfer on death makes it super simple for the person inheriting the account because they only need to fill out a form and supply your death certificate to receive the funds.

Yes, you can create your estate plan and add in a trust, but a trust is not an essential item of every estate plan. However, these six items above are the six that we believe are essential to an estate plan and must be included in every plan.

If you would like to learn more about estate plans, schedule a call with us today.

Don’t need help with an estate plan and want to begin securing your retirement? Sign up for our four-step course on securing your retirement.

May 23, 2022 Weekly Update

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 May 23, 2022 

This Weeks Podcast -When is Cash Good?-

Why would cash be able to beat other types of investments? When dealing with a volatile market like we’re currently experiencing, cash can become an important asset class.

Going to cash means selling investments and putting the money on temporary hold as you evaluate the markets.

 

This Weeks Blog –How to Avoid Losses in Stock Market

“Cash is king” is a phrase that many people say. And while many people put their money into investments to grow, there are times when cash is a good asset to have. For example….

When is Cash Good?

“Cash is king” is a phrase that many people say. And while many people put their money into investments to grow, there are times when cash is a good asset to have. For example, we’re five months into 2022, and with the way the markets have played out this year, cash may be a good option for you if you’re trying to secure your retirement.

Investor concerns this year have shown a lot of people who are getting into retirement planning that there are times when holding cash is good.

When is cash good?

We’re going to dive into this topic and explain why active management is so important and when you may want to hold cash rather than put more money into the market.

When is Cash Good?

Cash doesn’t grow on its own, but it’s a strategic asset that everyone needs to utilize. It’s crucial also to understand that there’s a difference between a passive and active money manager.

  • Passive money managers use a buy-and-hold strategy that doesn’t take the ebbs and flows of the market into account. In a passive scenario, you never hold cash because it doesn’t produce a return.
  • Active money managers continually work on readjusting your portfolio and making changes to negate potential losses due to market fluctuations.

Wait. What Does Going Cash Really Mean?

Before we go any further, it’s crucial to grasp what “going cash” really means. When we go cash for our clients, that doesn’t mean that we have a pile of cash that we tell someone to put under their mattress.

Instead, the cash remains in the person’s brokerage account (IRAs and Roth accounts), but it’s not invested in anything.

So, we may sell of a bunch of stocks and keep the cash in the account until the market corrects itself and you can go back to investing the money. Cash is kept in a temporary hold and can be redeployed when the numbers tell us that it’s safe to go back into securities.

Why Would We Ever Recommend Going to Cash?

Why would you ever go to cash if you’re trying to secure your retirement? Because it’s neutral. Cash is king when other assets are going down and cash remains neutral. For example, let’s imagine that your investments are making 6% – 10% returns per year.

In this case, your investments will beat out CDs and other short-term investment vehicles.

However, let’s imagine a 2008 scenario when the market busted. If you had $100,000 in investments and lost 50%, then you would have $50,000 left. The following year, if your investments were up 50%, did you break even?

No.

You’ll have $75,000, or 25% less than you had initially. If you lose 50% of your money, you need a 100% return to break even. Many investors lost over 50% in 2008, but they would have made money if they had pulled their money out of the market and sat in cash when it was down just 10%.

Why?

Because they would have had $90,000 left rather than $50,000 if they kept their money in the market. In this case, cash protected these investors. You also have $90,000 that you can put back into the market, earn a little over 10% returns, and you’ll be back to even.

For people who left all their money in investments during this time, it took years to get their portfolios back to what they were before the 2008 crash.

Holding Cash is Short-term

When you hold cash, it’s a short-term strategy to protect against losing money. It’s very rare that you’ll sit on cash for months on end, but if the markets continue falling rapidly for many months, holding cash for this duration is a possibility.

The positioning of cash should be used to protect against a significant loss.

In fact, let’s look at an example of holding cash in a real-world scenario.

March 2020 Example

March of 2020 is a prime example of going to cash, and it’s a date that is still fresh in everyone’s minds. The date is when the coronavirus first appeared around the world and really started disrupting the world’s:

  • Supply chains
  • Businesses
  • Workforce

In January 2020, the markets were doing fine, and we really didn’t know a pandemic was heading our way. Sometime in February, we started hearing about a virus popping up overseas, but the month started well. Then, near the end of February, the markets started to drop a little before March, when they really took the market into a downward spiral.

It took just a matter of a few weeks before the S&P 500 fell 34% in March.

Markets hadn’t seen such a steep decline in decades. Many people saw their 401(k) and IRA accounts lose over 34% in value in weeks. What we did was go 100% cash for all our clients. We didn’t hit it perfectly and protect against all losses, but we went fully risk-off by going cash.

The S&P 500 fell 34%, while our most impressive portfolio fell just 9%.

Putting this into real-world figures, if you had $1 million in your investment accounts, you would have ended with:

  • $760,000 if you didn’t do anything
  • $910,000 by going cash

Our data showed that after about 35 days, the markets started to recover, and with $910,000 in cash rather than $760,000, it’s easier to get back to the $1 million, pre-pandemic funds in your account.

Going back into the market was difficult because the news didn’t look good, yet our numbers told us it was time to go back. For our clients, they didn’t suffer from the anxiety of a 34% loss and made a great return on their investment in the interim.

2022 Example

The start of 2022 was also difficult for investors because we started off with a sell-off at the beginning of the year. Then, things started to go sideways for a couple of months. Next, the reality of inflation hit us, and the market became even more volatile.

The Fed also came out and told us that they were going to raise rates, which also caused volatility.

On May 4th, the Fed stated that they were going to raise rates by 50 basis points. That day, we decided to go 100% cash, but the decision was based on indicators rather than the rise in interest rates.

On May 5th, the market fell over 3% and over three trading sessions, the market dipped 6.5%. Our clients sat in cash, didn’t lose 6.5%, and when the data shows us it’s time to go back into the market, we’ll go back in.

We buy when we see demand and sell when the demand goes away. Cash positioning allows us to pad against significant losses in the market.

So, when you’re trying to secure your retirement and are during retirement planning, don’t forget that going cash can be beneficial for you. It’s better to protect against significant losses rather than keep your money in the market when it’s rapidly declining.

If you enjoyed this article and want to listen to us weekly, we invite you to join our podcast.

You can also schedule a free call with us to discuss your retirement plan and learn more about going cash.