Tax Planning Should Be a Part of Your Retirement Plan

Retirement planning is on every worker’s mind, but there’s one area that people often overlook: tax planning for retirement. You work hard for your money, and if you take the time to plan out your taxes before retirement, it can keep more money in your pocket.

Why Should Tax Planning Be a Part of Your Retirement Planning?

Tax planning in retirement has become such a major importance that it’s something we’ve incorporated into our service. We bundle a lot of things into the cost, such as:

  • Estate planning
  • Tax planning
  • Retirement planning

We believe taxes are so important that we’ve partnered with CPAs to better help our clients. However, if you’re not a client of ours and are wondering why taxes are something to consider when you’re trying to secure your retirement, we’re going to clear that up for you.

Note: This is a high-level aspect of tax planning and is not exhaustive.

Linking Taxes and Retirement

When you enter retirement, you may have an IRA, Social Security and other income sources, all of which have their own tax requirements attached to them. Reviewing these income sources allows us to find ways to minimize your tax burdens.

Understanding the accounts that you have is the first step in the process.

Many of us have saved into pre-tax accounts, such as:

  • 401(k)
  • Traditional IRA

However, Roth accounts are handled differently, too. 

If you receive Social Security, it can also be taxed in many cases. So, there’s a lot to consider when entering retirement with all of these income sources. Let’s start with the one that most people don’t know about.

Social Security and Taxes

We’re concerned about Social Security because there’s been a lot of talk about changing it. Many of these changes may also lead to higher taxes on this income, but in the current space, you can still have benefits taxed.

Based on income, 85% of your Social Security can be taxed.

  • Individuals with an income of $25,000+ will have up to 85% of Social Security converted into taxable income.
  • Joint taxes filed with income of $32,000+ will have up to 85% of Social Security converted into taxable income.

Through tax planning and retirement planning, we may make sure there’s no other income coming in aside from Social Security to try and help save you money. Cash may be available for you to take to meet this obligation, and it may only be possible for a year or two.

If we begin in advance, we can find ways not to take money out and use cash to pay bills to reduce the risk of your benefits being taxed.

However, you need to begin as early as possible to reduce taxes. Waiting until late in the year can make it difficult to find viable ways to reduce your tax burden.

Taxes on Roth IRA and Traditional IRA 

Many people contribute to their 401(K) or IRA, and these are traditional accounts. When we say “traditional” accounts, we mean that these accounts have never had taxes paid on them. For example, if you have $1 million in a traditional IRA, you will need to pay taxes on these accounts when you take a withdrawal.

You take a tax break for your contributions, but all of your withdrawals add to your income and can be taxed.

Adversely, a Roth IRA or 401(K) is a beautiful tool that you can use for retirement. These accounts offer:

  • Tax upfront
  • Tax-free growth
  • No future taxes

You’ll pay taxes on your Roth account today, but it’s allowed to grow tax-free. For some of our clients, they’ll take some of their money from a traditional and Roth account to keep them in a lower tax bracket.

Roth accounts don’t provide an immediate tax break, but the money grows tax-free.

One method that is very popular in retirement planning is a Roth conversion.

Understanding the Benefit of a Roth Conversion

Roth conversions are a way to turn money from a traditional IRA over to a Roth. You will have to pay taxes immediately for the conversion, but when in the Roth account, it will grow for free.

Let’s look at an example of someone who has $300,000 in a traditional IRA and wants to convert $50,000 into a Roth IRA. In this case:

  • $50,000 goes into the Roth
  • $50,000 is claimed on tax returns

If you already made $75,000 and $50,000 was converted into a Roth account, it will lead to paying taxes on $125,000.

We use complex software on our end to identify your tax burden and any issues that may come up with a conversion that we overlook.

However, let’s assume the following:

  • You’re retiring in 2022
  • You’re not 72, so you don’t need to take out income from a traditional IRA
  • In 2023, you won’t have earned income
  • You have cash you can use for spending money

If you’re in the position above, you can convert some of your traditional IRA at 0% taxes. The government offers a standard deduction that you don’t benefit from unless you earn income. In this case, you can convert the amount of the standard deduction for free.

You can then consider whether you want to convert more money because you’re still in the lowest tax bracket at the moment.

Obviously, if you have a lot of income coming in, it may not be possible to pay such little taxes on your Roth conversion. We recommend that you tie tax and retirement plans into one because they work very well together.

Cash in the Bank and Taxes

If you have cash in the bank, there are no taxes attached to it. However, if you receive interest on these dollars, the taxes are typically low and negligible. You’ve already paid taxes on this money.

Brokerage Accounts and Taxes

Brokerage accounts are a bit more complex because some of the money may be taxed and the other money may not be taxed. There are also investments that have dividends that can cause you to pay taxes.

If you hold a short-term investment, you’ll need to pay taxes at your current tax rate if sold within a year.

Long-term capital gains are lower, so this can be used as an advantage. You can also leverage tax loss harvesting on these accounts to save money.

Tax planning can have such an impact on your retirement that it’s something you really need to consider. Taxes can also impact your IRMAA, or how much you need to pay for your health benefits in retirement.

Working with a CPA and financial advisor who are connected can help you save a lot of money in retirement.

Click here to schedule a call with us to discuss taxes and your retirement.

November 7, 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 November 7, 2022 

This Week’s Podcast – Having a Fun Fund in Retirement

Have you ever thought about incorporating a fun fund into your retirement spending plan? How realistic is it to do the fun things you want to do and for the time you want to do them after retirement?

 

This Weeks Blog -Having a Fun Fund in Retirement

Retirement is a major milestone, and there is something we highly recommend for all of our clients: a fun fund. You work hard, and you should work through retirement with some fun in mind.

After all, what are you working so hard to secure your retirement for if you’re not having fun?

Having a Fun Fund in Retirement

Retirement is a major milestone, and there is something we highly recommend for all of our clients: a fun fund. You work hard, and you should work through retirement with some fun in mind.

After all, what are you working so hard to secure your retirement for if you’re not having fun?

In our most recent podcast, we walk you through a retirement fun fund, how we think about a fund like this when creating an income plan, and our spending plan approach.

Understanding a Spending Plan

A retirement plan has a lot of anxiety because you’ll transition from earning and saving money to spending money. Many of our clients worry about how much they should save, but we like to really dig into the spending part of retirement, which includes:

  1. Essential income needs
  2. Wants
  3. Legacy or gifting

Essential needs are simple: your bare-bone basics to keep you happy in life. These expenses include mortgage and car payments, utilities, food and all of these related items. You might want to build in insurance payments and anything you truly need to have to live your life.

Wants is a “fun” category because it includes all of the things you want to do now that you’re retired.

However, many people plan for retirement and never think about what they’ll do afterward. The “wants” from retirement often include:

  • Traveling. Some clients travel so much during their careers, so the last thing they want to do is travel. Others want to travel because they were tied to a desk during their careers.
  • Second Home. Many people want to move closer to their grandchildren and buy a second home or just a vacation home for themselves.

Everyone should sit down and think about their “wants” in their retirement. You might not want to travel or buy a second home, and that’s 100% up to you. However, you should have a plan of what to do during retirement.

Really dream these wants out and think about the costs so that you can add them to your plan.

Finally, legacy planning is a thing you may want to consider. This will include the money that you want for:

  • Saving for your grandchild’s education
  • Charity purposes

You may not even have a legacy category in your plan, but if it’s something that you would like to do, be sure to add it into the equation. We add these three categories together to create a basic spending plan for retirement.

We recommend adding these categories up and creating a monthly spending plan to see how realistic it is to reach these goals.

How We Calculate a Spending Plan in Our Office

We love helping our clients create their spending plans because we use software for the process. We ask a lot of integral questions, plug variables into the system and it calculates the person’s monthly spending for us.

However, we also add in:

  • Inflation on the spending plan
  • Inflation on the “wants”
  • Maintenance repairs

Once we lay everything out for families, there are normally a lot of bigger items that they want to add to their lists. For example, one client took their entire family on a cruise, and this included a massive number of people.

We even calculate home renovations and more.

Going through all of this, we then decided that it was time for our clients to consider a “fun fund.”

What is a Fun Fund?

A fun fund is a fund that, if you have the means, will allow you to go on a $20,000 – $25,000 trip around the world every other year or remodel a home at $5,000 – $10,000 a year for ten years.

We run a fun fund for 10 years or so, and the impact on retirement is much different than if you used a fun fund for 25 years.

Additionally, we’ve found that in the first 5 – 10 years after retirement, people pack everything they want to do in this small amount of time. Then, after the first ten years or so, they seem to want to settle and enjoy a slower pace of life.

10-Year vs. 30-Year Fun Fund

An infinite fun fund sounds great, and it’s something that may or may not be possible for you, depending on how much you’ve saved in retirement. However, we did want to provide an example here so that you can see the financial difference between a 10-year vs. 30-year fund for someone with $1 million in retirement funds.

  • 10 years and left with $700,000 because of fun fund spending
  • 30-year may end with $300,000 left at age 90 – 95

In essence, if you go into retirement, there’s no guarantee that you’ll live to 75 or 95. If you know for a fact that you won’t live past 75, you can then have a concrete answer on how much you can spend in retirement before it runs out.

However, if you have a fun fund that is going for 20 – 30 years, you may be shocked and live until you’re 110, but you’ll have very little money – if any – left in your retirement accounts.

Depleting your retirement for 30 years with extravagant vacations and expenditures will leave you with less money to grow and potentially no retirement funds left. For many of our clients, they tend to travel less at 75 – 80, so the 10-year plan works out great for them.

If you create a fun fund for 10 years, we often find it doesn’t tax your retirement too much and allows you to do all of the fun things that you didn’t get to do in retirement. 

Final Thoughts

Creating a fun fund is something that we highly recommend you plan out. Retirement planning needs to work hard for you, and this is where the fun fund really puts everything into perspective.

If you want to have us walk you through a fun fund, click here to schedule a call with us.However, if you’re not thinking about a fun fund yet and want to just get a grasp on retirement and the steps you need to take, click here to start our 4 Steps to Secure Your Retirement Video Course for FREE.

3 Questions to Ask Yourself About Retirement

When planning for retirement, you have a lot of questions pop up. However, in our recent podcast, we had the opportunity to go through the most common questions about retirement that we receive, including:

  1. What are my goals?
  2. Do I need professional help?
  3. How do I sit down and prepare for retirement?

If you’re just trying to figure out your retirement, this is one podcast that you’ll want to listen to (here), or you can read the summary below, too.

1. What Are My Goals?

Everyone has their own unique goals. All too often, people focus on reaching retirement, yet they don’t know what they want to get out of retirement. A few questions to ask yourself are:

  • What age do you want to retire?
  • Is it possible to retire at this age?

You don’t need to get bogged down by the details, but it’s important to begin wondering what you’ll do when you retire. A few things that are fun to think about here are:

  • Do you want to travel? If so, where do you want to travel? Plan these goals out for yourself.
  • Do you want to spend time with the kids and grandkids?
  • Do you want to pursue a new hobby?

If you begin thinking about these goals early, you can quickly see the bigger picture of retirement and what it will mean for you. 

Also, one question that people often overlook is: how do I want to retire?

Some people jump into full retirement immediately, but others want to stay busy and active, so they’ll volunteer or find a part-time job. Many retirees have the opportunity to consult, and this allows a retiree to set their own hours and decide on who they want to work with.

You really need to think about what you want retirement to look like for you and your family.

  • One client of ours has decided that they want to move from North Carolina to California to spend time with their grandkids. 
  • Another client is consulting in another state to spend time with their kids. 
  • And another client’s goal was to buy an RV and travel the United States.

Everyone has their own goals for retirement, and you need to identify your own goals so that you have a full understanding of why you’re focusing on retirement planning in the first place.

2. Do I Need Professional Help?

Once you’ve established your goals, it’s time to consider if you need professional help to meet your retirement goals. A lot of clients come to us with large retirement accounts and have been diligent savers their entire lives.

These individuals funnel money into a 401(k) or IRA, and as they get closer to retirement, they want to know how to use this nest egg in the most strategic way possible.

It’s easy to save for retirement, but it’s hard to keep enough money in your account if you’re not diligent.

However, many others just need a second opinion to look over their plan because they’ve done everything:

  • Planned
  • Invested
  • Learned about financial markets

Some people love finances and spend a lot of time each month following the markets and really come to us for an overview.

With that said, most people come to us with the following:

  • CPAs who have been doing their taxes
  • In need of an estate plan
  • Questions on when to take Social Security
  • Medicare and what plans to take
  • Questions about long-term care or downsizing a home

The person above is who we work with most. These individuals are the CEOs of their plans, but they use us as a CFO to take care of all the points above. We worry about the fine details while the person enjoys their life.

We work with a variety of specialists because there’s no way that we can handle everything in retirement on our own.

If you think you need a second set of eyes or want to work with an advisor, be sure to sit down with multiple advisors to find one that you trust. We may or may not be a good fit for you, so be sure to take the time to find the right team for you. 

3. How Do I Actually Sit Down and Prepare for Retirement?

First, determine if you need an advisor or not. If you need professional guidance for your retirement plan, then you need to go through the following steps:

  • Build out a retirement plan
  • Learn when you want to retire
  • Determine your retirement goals

We like to pick a starting point to learn where our clients are when they walk through our door. Perhaps you want to retire at 65, have $1 million in savings and have a second home. Your advisor needs to know all these details.

An advisor will need to learn about your potential income buckets, such as:

  • Social Security
  • Pension
  • Rental income
  • Annuities 

Understanding your income sources in retirement will help us understand if you have enough money to reach your retirement goals or not.

Saving is huge and a major part of retirement, but you also need to have a spending plan. Without a spending plan, it’s easy to deplete your retirement savings. In our business, we will run multiple scenarios for your retirement so that we can determine:

  • How to reach your goals
  • How much to save for retirement
  • Spending
  • So much more

There are just so many questions about retirement that people need to ask. We would hate for you to secure your retirement and then realize you don’t have the cash to travel or spend time with your grandchildren.

This is where working with a financial advisor comes in handy.

When you call us for a consultation, we’ll walk you through all these steps and scenarios to ensure that you know the complete picture of your retirement. However, if you also want a second pair of eyes to review your plan, we’re more than happy to assist you in this way, too.

Click here to schedule a call with us today if 1you have questions about your retirement planning.

October 24, 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 October 24, 2022 

This Weeks Podcast – How to Invest in a Volatile Market in Retirement

What do you do in an extended market downside as opposed to a short one? How do you invest in a downturn market? The closer we are to retirement, the more nervous a downside market affects us.

 

This Weeks Blog –How to Invest in a Volatile Market in Retirement

Are you wondering how to invest in a volatile market? If so, you’re not alone. A lot of people are struggling to find solid advice on investing in 2022, where there are multiple factors impacting markets, such as: fear of a recession, Ukraine and Russia being at war, and inflation.

How to Invest in a Volatile Market in Retirement

Are you wondering how to invest in a volatile market? If so, you’re not alone. A lot of people are struggling to find solid advice on investing in 2022, where there are multiple factors impacting markets, such as: fear of a recession, Ukraine and Russia being at war, and inflation.

Investing is a little different today than in 2019 and before.

Retirement planning can be very difficult because people are now seeing their 401(k) and IRA retirement accounts lose value. If you’re in retirement and the market is going down or sideways, it’s scary because you’re not working and funding your retirement accounts any longer. Traditionally, the closer someone is to retirement, the more concerning volatility is for them.

We’re going to share some of our strategies and approaches to investing in a volatile market to help you sleep better at night and relieve some of your anxiety along the way.

Quick Downturn Example in 2020

Downturns can be short-term or extended, and the approach you take to investing at these times must be adjusted. In most recent memory, we had a short downturn in March 2020 when the world first started to really pay attention to the Coronavirus.

The market fell 34% for the year, and by the end of 2020, the market was up 17%.

Because of the fast downturn and recovery, the event wasn’t a major issue for the market. There was actually a lot of opportunity to be had in 2020 despite lockdowns and people being stuck at home for two years.

Downturn of 2022

In 2022, we’re dealing with some of the repercussions of the measures taken in 2020 to bring markets back to stable levels. The government pumped a lot of money into the markets to help us get through the pandemic, but it has led to 2022 being a down period.

The only day that the market experienced gains was the first of the year.

In June, the major indexes hit their yearly lows, and then they rallied and recovered to being down 10%. At the time of this posting, we’re back to experiencing lows of:

  • S&P 500 being down 24%
  • NASDAQ being down 31%

Even the bond market has been decimated by the high interest rates. Using bonds to de-risk your portfolio to reduce volatility hasn’t worked at all in 2022. Combatting inflation and the war in Ukraine have both caused major issues in bonds, oil and gas prices.

Global economics have remained rattled throughout 2022, and it leads to the question of how to navigate the markets.

We haven’t dealt with markets like we have now since 2008 when the last major recession hit. Navigating markets using common strategies is more difficult because of:

Pricing is running up, so we have to look at ways to change our approach to investing. 

Two Funds We’re Sitting in with 2% Gains

Right now, we’re investing in two main funds that are offering 2% gains with a high level of security. We are investing in:

  • Government obligations
  • Treasury obligations

These funds pay a floating rate of return based on short-term treasuries or other factors. Every seven days, the rate changes. Due to the current state of the market and interest rates, the return we’re seeing is a little over 2%.

Since these are funds, every 15th of the month, the account is credited with a dividend payment for the interest earned.

We avoid the volatility in the market and work to protect our clients’ principal while providing a very modest return.

However, we’ve also started to put money into structured products, and they’re backed by large banks, such as JP Morgan. The purpose of these is to put together a fund that offers an interest rate based on environments with high volatility and interest rates.

We basically go shopping and put together an offering.

The offer paid a 9% coupon, and we’re working on one with an 11% coupon. We don’t want to put all of the money into these accounts because the coupon rate can change every three months. Banks can also choose to close these accounts at the end of the term, so while the rate of return is great, it is also a lot of work.

We invest 2% to 24% in these accounts and use other tactics to keep money growing, even if it’s not at the rate people are used to when putting their money in the stock market. When markets start to balance out, using these products may not make sense.

Investing right now, for us, means investing in products that:

  • Are low risk
  • Have no stock market correlation
  • Do well in rising interest rate markets

Of course, investing using the strategy above is more complicated than investing in an index, but it’s what we’re personally doing to help manage risk right now.

Are you looking for more answers, or are you unsure of how to invest in these types of low-risk products that do well in rising interest rate markets?

Click here to schedule a call with us today.

October 17, 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 October 17, 2022 

This Weeks Podcast – Federal Reserve and Inflation

What exactly is causing the current inflation, and how does it affect your retirement?

The supply chain issues we experienced during the pandemic majorly contributed to the current global inflation we’re now experiencing. The Fed has increased rates on a few major product categories raising the cost of inflation.

 

This Weeks Blog -Federal Reserve and Inflation

The Federal Reserve and inflation are something that everyone is dealing with, from the gas pump to food prices at the supermarket. Of course, if you’re a retiree on a fixed income, your major concern right now is ensuring that you have enough money to pay for your everyday needs.

We’re going to discuss a lot of key issues in this article and how you should think about these topics rather than listen to the doom and gloom you’ll hear in the media.

Federal Reserve and Inflation

The Federal Reserve and inflation are something that everyone is dealing with, from the gas pump to food prices at the supermarket. Of course, if you’re a retiree on a fixed income, your major concern right now is ensuring that you have enough money to pay for your everyday needs.

We’re going to discuss a lot of key issues in this article and how you should think about these topics rather than listen to the doom and gloom you’ll hear in the media.

What are We Talking About When We Say Inflation?

Inflation is occurring across the world right now, and when we say “inflation,” it’s best to look at some of the bigger items that are being affected right now. However, before we provide a few examples, it’s important to know why inflation is happening right now.

Unfortunately, the pandemic is the main driving factor of inflation. For example:

  • Stores and shops closed down
  • Material shortages began

A snowball effect happened with these two points, and then government spending increased, causing what is now an inflationary period in our economy. Many areas of your daily life are experiencing inflation and rising costs, but some of the most noticeable include:

  • Transportation: Car prices are high, primarily due to high demand and a low supply. 
  • Fuel: Gas and heating costs are rising due to inflation and what’s happening in Ukraine.
  • Grocery: Food prices have risen drastically in the past year due in part to supply chain issues and rising food costs.
  • Housing: Almost across the board, housing prices are much higher than they were a year ago, even in areas far outside of major cities. Low mortgage rates, the tight housing market and other factors impacted the housing market. Even rental prices are going up, sometimes significantly.

With all this in mind, the Federal Reserve is working to bring inflation back down to modest levels.

Understanding the Federal Reserve’s Approach to Inflation

The Federal Reserve has been adjusting interest rates to help fight inflation, but what does this really mean? When you raise interest rates on money that people will borrow, you restrict buying opportunities.

For example, if a person is looking for a new car, they’re far more confident with their purchase when it’s at a low rate. However, raising interest rates slows demand because customers aren’t going to be confident with their purchases.

Since supply is low, the lower purchases will allow inventories to build back up and leads to:

  • Lower prices
  • Lower profits for businesses

If we go back to the pandemic, there was too little supply and demand for cars. Car dealerships raised the prices of some cars by $10,000 – $15,000, and the increase in price was all profit. Many vehicles remained on the lot from before the pandemic hit and even used car prices skyrocketed.

Since people still needed cars and bought them, there was no incentive for dealerships to lower prices back to normal rates.

Even with buying a house, if you look across the country, people were paying higher than the listing price and bidding wars occurred. With higher interest rates, maybe buyers will pay the asking price or below on a home and bring the market down to more affordable prices. 

The Federal Reserve is in a difficult position because they need to:

  • Pull back on inflation
  • Experience a soft “landing,” where the economy is still growing

Sometimes, rising interest rates will cause a major recession, but the Fed is trying to hit the “soft” landing mark to make the impact less dramatic.

How Retirees Can Adjust to Inflation

Retirees have a little more control than a non-retiree because they are less susceptible to inflation. In most cases, these individuals:

  • Already have a home
  • Already have a vehicle

You can choose to stay out of the market until inflation and the risk of a recession passes. If you want to travel, you may want to travel when pricing comes back down. Retirees have more flexibility than someone who is working and tied to a family. You can wait for slow seasons and better travel prices compared to someone who has kids and needs to travel during busy seasons.

Food is one of the areas of inflation that will still impact a retiree.

You may need to eat out less often or change your diet to save some money. Unfortunately, food prices are hitting everyone hard.

When we develop a financial retirement plan for our clients, we account for inflation in the plan. Since we account for inflation, people are impacted less than someone who is just playing the market.

Inflation isn’t a new thing, and in the 70s, the Fed raised interest rates to help tame inflation. However, the Fed raised and cut rates over and over again without a clear direction. The end result was 10 years of inflation during the 70s that went from 5% to 12%+ inflation before it came back down and then hit 12.5% in 1980.

A lot of our listeners know that in the 70s, inflation was all over the place.

The Fed doesn’t want to make the same mistake. In the last 100 years, inflation has had an average rate of 3%, which is what the Fed is trying to target. We definitely won’t have 6% inflation for the next 30 years.

We’re in a period where there’s a bump in the financial landscape, but we will get through this period. 

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

Why You Should Use a Fiduciary

Volatility and inflation are major concerns for anyone who has their money in the market. One thing that keeps popping up when we talk to clients is, “are you a fiduciary?” If you don’t know what a fiduciary is or why you should use one, we’re going to explain everything in the guide below.

PS. If you would like to have a quick conversation with us, click here to schedule a call with us.

What are You If You’re Not a Fiduciary?

If someone is not a fiduciary, they likely work under what is called “suitability.” What this means is that the investment advisor or broker will recommend investments that they deem suitable to you.

However, what’s “suitable” for you may not actually be in your best interest.

For example, if you work with an insurance agent, they may sell you life insurance, annuities or other products. These agents will often receive a commission for the transaction. Since the agent is making a backend commission, the question arises:

  • Is the agent selling me the best product for me?
  • Is the agent trying to maximize their profits?

Of course, the product may be perfect for you, but under the “suitable” category, it only needs to be good enough. In other words, it may not be the best. A good example of this is some insurance agents can only sell insurance products from one company.

Under this example, there may be better products available from other entities, but they will not be offered to you. When a broker or agent is affiliated with a company and must sell only their products, it becomes a question of “Is this really the best product for me?”

A fiduciary works much differently.

What is a Fiduciary?

A fiduciary is something you’ll see a lot of headlines and buzz about online. Most people agree that you should be working with a fiduciary. The problem is that some advisors will say, “I treat all my clients as if I were a fiduciary.”

And while this isn’t a bad thing, there’s a difference between being a fiduciary and treating someone as if you were a fiduciary.

When someone is a fiduciary, they’re bound by a legal duty to recommend the best financial advice, products, investments and so on to you. A few examples of this are:

  • Certified Financial Planner, or a person who must vow to be a fiduciary to a client
  • Licensing, such as a registered investment advisor, who is bound by law to act as a fiduciary

A fiduciary who provides advice to you must:

  1. Meet a professional standard of care
  2. Never put their own interests above your interests
  3. Avoid misleading statements of conflict of interests
  4. Follow policies and procedures to ensure the advice given is in your best interest
  5. Not charge more than a reasonable amount for services

Imagine a person needs something that will provide lifetime income through an insurance product. As fiduciaries, we must go out, research and find the best product for them. We will often recommend 2 – 5 solutions, all of which have pros and cons to look through.

A broker, on the other hand, can sell you a mutual fund, and they may receive a commission on it. For many clients of ours, they want the peace of mind of knowing that we make the best decision for their goals rather than looking at the highest commission.

Working with a fiduciary like us, we will charge an upfront fee but will not receive a brokerage commission. Essentially, we work for you without the risk of looking at the commission and maximizing our own profits.

Let’s look at an example where a client wants us to provide them with the best ETF options on the market. We would then:

  • Search for the best product using software that offers an abundance of information and metrics for us to work through
  • Since we’re not tied to any affiliation, we can look at performance, volume and value
  • Review expenses and fees for each product

Since we’re not working with any individual company, we do not get a hidden cut of commissions.

We are full disclosure fiduciaries, and we’re not saying someone who works in suitability is bad. We believe that working with someone who is required to put your best interests first makes sense to us.

You can learn who is a fiduciary by asking them:

  • Are you bound by a fiduciary standard?

It’s crucial to use this phrase because a lot of people will use wordplay. The response may be “I treat my clients as a fiduciary would,” but this holds no weight. Treating someone in a fiduciary way is different than being bound by a high level of standards.

You just never know if a big commission can sway this individual’s recommendation.

We always approach every question by going through the person’s retirement plan. If we don’t know any information about your goals, it’s impossible to recommend the best product. Each decision has an effect, and it’s our job as fiduciaries to look through your goals and plans rather than say, “XYZ product is the best life insurance.”

Now that you know what a fiduciary is and why so many people planning for retirement recommend them, you can make a sound decision when securing your retirement.

Do you want to learn more about how to secure your retirement and retirement planning? 

Click here to view our books on securing your retirement.

October 10, 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 October 10, 2022 

This Weeks Podcast – Why You Should Use a Fiduciary

Should you work with a fiduciary, and what does it mean to be a fiduciary? A financial advisor working under the fiduciary premise is bound by certifications and licenses to make transactions in the client’s best interest.

 

This Weeks Blog -Should You Choose a Fiduciary Financial Advisor?

Volatility and inflation are major concerns for anyone who has their money in the market. One thing that keeps popping up when we talk to clients is, “are you a fiduciary?” If you don’t know what a fiduciary is or why you should use one, we’re going to explain everything in this blog.

September 26, 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 September 26, 2022 

This Weeks Podcast – Will I Avoid IRMAA Surcharges on Medicare?

Are you going to be able to avoid IRMAA surcharges on Medicare parts B and D? IRMAA stands for Income-Related Monthly Adjusted Amount, and there are charges on both parts B and D based on where your income lands.

If you’re thinking about retiring any time soon, there are ways to manage your income to stay at a lower amount to avoid surcharges on your Medicare premiums.

 

This Weeks Blog -IRMAA Medicare Surcharges

Medicare Part B and D have something called the IRMAA Medicare surcharges. When retirement planning, it’s crucial to consider the impact that the additional costs will have when trying to secure your retirement.

IRMAA Medicare Surcharges

Medicare Part B and D have something called the IRMAA Medicare surcharges. When retirement planning, it’s crucial to consider the impact that the additional costs will have when trying to secure your retirement.

Medicare kicks in at 65, and there are premiums and surcharges that you need to know about.

What is IRMMA?

Income-related monthly adjustment amount (IRMAA) is an essential part of your Medicare because it’s a sliding scale percentage, which you’ll be required to pay based on your income. Depending on your income, you may or may not have this additional surcharge.

IRMAA is on top of the Medicare premiums that you pay, so it’s something to consider.

Note: We also have a flow chart, which will show you how much you’ll be required to pay for IRMAA based on your income. Call our office at (919) 787-8866 and ask Laura or Morgan for the chart.

IRMAA Medicare Surcharges FAQs

What is modified adjusted gross income?

Modified adjusted gross income is your income minus deductions and then added back items, such as your student loan interest or retirement account contributions. You’ll find this value on your tax form.

Did your modified adjusted gross income surpass $91,000 filing single or $182,000 filing jointly in the previous two years?

  • If you answer “no,” your premium for Part B will be $170.10 per month.
  • If you answer “yes,” your surcharges will be on a sliding scale, but there are a lot of additional questions to be asked.

You Answered, “Yes.” Now What?

If you answer “yes,” then the following questions will be asked:

  • Have you or a spouse experienced a life-changing event that significantly impacts your income? This includes marriage, divorce, widowing, retirement, loss of pension or income-producing property. If you answered “yes,” this will mean that you’ll submit a form to the IRS office to show that this income is no longer accurate. You’ll need to file form SSA 44, which shows your income has dramatically changed, putting you back to the previous premium.
  • No life-changing events but your modified adjusted gross income exceeds the figures above. Now, we’ll look at your tax return two years ago to find your modified adjusted gross income. Depending on this figure, you will pay:
    • $91,000 – $114,000 (single); $182,000 – $228,000 (married filing jointly): Additional surcharge is $68 per month for Medicare Part B and $12.40 per month for Part D.
    • $114,000 – $142,000 (single); $228,000 – $284,000 (married filing jointly): Additional surcharge is $170.10 per month for Medicare Part B and $32.10 per month for Part D.
    • $142,000 – $170,000 (single); $284,000 – $340,000 (married filing jointly): Additional surcharge is $272.20 per month for Medicare Part B and $51.70 per month for Part D.
    • $500,000+ (single); $750,000 (married filing jointly): Additional surcharge is $408.20 per month for Medicare Part B and $77.90 per month for Part D.

IRMAA is per person, so if you’re married and filing jointly, you’ll need to pay these additional surcharges for each person in the household on Medicare.

Strategizing for your Medicare is a smart decision because there are ways to reduce income to help save on these premiums.

Note: This will look back two years, so for 2023, your 2021 modified adjusted gross income will change.

If you liked this blog post, we highly recommend that you sign up for our podcast, where we share other great financial information with you.

Click here to listen to your Secure Your Retirement podcast.

September 19, 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 September 19, 2022 

This Weeks Podcast – The GPS Retirement System

When you think about the GPS in your car, you think about how it will direct you to the right destination. The most important part of your GPS is knowing where you are so it can help you get to your destination.

Our retirement program is similar to a GPS designed to help you get to your retirement destination without any worries.

 

This Weeks Blog -The GPS Retirement System

The concept of GPS – the same way you get from point A to point B on a road trip – is something we believe can be used to secure your retirement. In fact, we want to talk about what we call the GPS Retirement System.

The GPS Retirement System

The concept of GPS – the same way you get from point A to point B on a road trip – is something we believe can be used to secure your retirement. In fact, we want to talk about what we call the GPS Retirement System.

We really like the GPS analogy because you can use it to find your way to financial security and wealth in retirement.

However, before we begin, let’s start with a question that we ask when using this system.

What’s the Most Important Part of a GPS System?

If you said “the destination,” that’s true, but you also need to know where you’re at currently. When trying to find your way to a secure retirement, you must know where you are in this very moment.

During the journey, there may be accidents and detours along the way, and our GPS Retirement System will help you get back on track.

How We Identify Where You Are

Where we are today is very important, and we start working with every client by finding out exactly where they are financially so that we can figure out how to get them to their retirement goal.

A lot goes into this initial process to ensure that we help you get to the retirement you want.

We start by asking:

  • Are you currently working?
  • When do you plan to retire?

These two questions allow us to know when income will stop coming in from your job and when you’ll need to dip into your retirement. Of course, we will also want to know about other forms of non-employment income that you have, such as:

  • Pension (potential survivorship)
  • Social Security
  • Rental property
  • Business sale income
  • Part-time or consulting that you may consider

If you’re not taking Social Security, we’ll also run an analysis to determine when the optimal time for you to take Social Security is.

We will work to understand your full income potential so that we know how much money you’ll have coming in during retirement. Next up, we’ll also need to know about the assets that you have accumulated over time.

Asset Considerations

Assets can also help you get through detours and roadblocks on the way to retirement. Some assets include:

  • 401(k)
  • IRA
  • Brokerage accounts
  • Annuities
  • Insurance policies
  • Savings and checking accounts
  • Property 

Assets are so important because they help fill in the blanks for us. You may have properties that generate a positive net income every month and annuities that can help cover a large chunk of your expenditures each month.

There’s also the possibility that you may sell a home or downsize to help fund your accounts or save more money each month.

Once we consider all of your income and assets, it’s time to look at expenses.

Expense Analysis

Now we have all of the information in the GPS System to understand how you can get to your destination, but we have to consider roadblocks. One of the major roadblocks people experience during retirement planning is their expenses.

If there’s one area that can make or break a retirement plan, it’s going to be your spending.

We need to know:

  • Flat expenses: Mortgage, car payment and any account with an end date.
  • Needs: Pay the bills, go out to eat, entertainment, etc.
  • Wants: Travel, second home and other fun things.

We often create a “fun fund,” and this would be the fund to travel heavily when you first enter retirement and want to travel or whatever “fun” you want to have.

Knowing what you “must” spend is time-consuming. Often, people know they have enough income to pay their expenses, but when you hit retirement, you will be drawing from retirement accounts, so it’s crucial to know what you’re spending your money on.

Plugging These Figures into Our Retirement System

At this point, we have a lot of retirement information available that can help you get to your retirement goal. And through our system, we’ll plug all of these figures in to have a better idea of how to get to your retirement goals.

Unfortunately, there is always one variable that we can’t account for fully: retirement length.

We can always base the retirement length on life expectancy, but there are some people who will be retired for 40 years and some 1 year – we just don’t know.

Our goal is to make sure your account will last until you’re 90.

We’re extremely conservative with these estimates and will account for:

  • Inflation
  • Healthcare
  • Investment growth (very conservative rates used)

Now, looking at this information, we can determine if you can get to the retirement destination on your GPS.

We like to create scenarios and adjust them to find out the best way to reach your goals. For example, you may find that you need to cut back expenses by $500 a month, and instead, you would rather go into consulting a few hours a week instead.

Unfortunately, getting to your destination is never easy.

There are roadblocks, detours and other issues that pop up along the way. However, when we have all of these baselines in place, we can then run simulations every year to ensure that you’re doing everything right, year by year, to reach your goals.

If you have a long-term care scenario occur, your plan will obviously change a lot.

Running simulations allow us to predict what will happen in the future based on numerous variables, such as a spouse passing away, long-term care being needed, more money coming in or going out, or other scenarios.

The GPS Retirement System considers all of these variables, including the fun ones.

Once we have a baseline set, that’s when we can see all of the great things that come out of our hard work today. Perhaps you’ll have enough money to travel the world for a decade, and this is something we can simulate.

All throughout retirement, we can run simulations on things like:

  • Going into a continuous care community
  • Remodeling your kitchen
  • Buying or selling your home
  • Helping pay for your grandkids’ education
  • Moving overseas
  • Virtually anything

If you want to secure your retirement, the GPS System works very well and allows you to account for the unknown variables that inevitably pop up in the middle of retirement.

Did you like this post and want to learn more about retirement? 

Sign up for our free 4 Steps to Secure Your Retirement video course.

September 12, 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 September 12, 2022 

This Weeks Podcast – Beneficiary Designations – What You Need to Know

Have you been wondering whether to do a beneficiary and how to do it? There are different accounts that require you to have beneficiaries, including your retirement accounts.

A beneficiary is a person you assign while you’re living to receive the benefits of your accounts after you pass.

 

This Weeks Blog -Beneficiary Designations

Beneficiary designations are so important. You’ve set up accounts for estate and retirement planning, paid your dues, and you want to be sure that the right person is left these accounts. Sometimes, you might not even know about designations for certain accounts, so this is an article that we think can help a lot of you that trust in our Secure Your Retirement podcast.