Should You Prepare to Retire on 80% of Your Income?

27 Sep
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A classic retirement preparation rule states that you should retire on 80% of the income you earned in your last year of work. Is this old axiom still true, or does it need reconsidering?

Some new research suggests that retirees may not need that much annual income to keep up their standard of living.

The 80% rule is really just a guideline. It refers to 80% of a retiree’s final yearly gross income, rather than his or her net pay. The difference between gross income and wages after withholdings and taxes is significant to say the least.1

The major financial challenge for the new retiree is how to replace his or her paycheck, not his or her gross income.

So concluded Texas Tech University professor Michael Finke, who analyzed the 80% rule and published his conclusions in Research, a magazine for financial services industry professionals. Finke noted four factors that the 80% rule does not recognize.

1. Retirees no longer need to direct part of their incomes into retirement accounts.

2. They no longer involuntarily contribute to Social Security and Medicare, as they did while working.

3. Most retirees do not have a daily commute, nor the daily expenses that accompany it.

4. People often retire into a lower income tax bracket.1

Given all these factors, Finke concluded that the typical retiree could probably sustain their lifestyle with no more than 77% of an end salary, or 60% of his or her average annual lifetime income.1

Retirees need to determine the expenses that will diminish in retirement. That determination, rather than a simple rule of thumb, will help them realize the level of income they need.

Imagine two 60-year-old workers, both earning identical salaries at the same firm. One currently directs 25% of her pay into a workplace retirement strategy. The other directs just 5% of her pay into that strategy. The worker deferring 25% of her salary into retirement savings needs to replace a lower percentage of their pay in retirement than the worker deferring only 5% of hers. Relatively speaking, the more avid retirement saver is already used to living on less.

This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.

New retirees may not necessarily find themselves living on less. The retirement experience differs for everyone, and so does retiree personal spending. A recent Employee Benefit Research Institute survey found that over a third of retirees report spending more than they had originally expected. Only 9% reported that they were spending less than they had expected.2

A timeline of typical retiree spending resembles a “smile.” A 2013 study from investment research firm Morningstar noted that a retiree household’s inflation-adjusted spending usually dips at the start of retirement, bottoms out in the middle of the retirement experience, and then increases toward the very end.3

A retirement budget is a very good idea. There will be some out-of-budget costs, of course, ranging from the pleasant to the unpleasant. Those financial exceptions aside, abiding by a monthly budget (with or without the use of free online tools) may help you to rein in any questionable spending.

Any retirement income strategy should be personalized. Your own strategy should be based on an accurate, detailed assessment of your income needs and your available income resources.That information will help you discern just how much income you will need when retired.

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

Sources:

1 – http://www.michaelfinke.com/research.html [2022]

2 – https://www.ebri.org/retirement/retirement-confidence-survey [2022]

3 – https://www.thestreet.com/retirement/want-to-be-rich-in-retirement-plan-better-save-more [2/23/22]

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    What Happens When There Are No Beneficiaries

    26 Aug

    Some accounts have no designated beneficiary. Rarely, the same thing occurs with insurance policies. This is usually an oversight. In exceptional circumstances, it is a choice. What happens to these accounts and policies when the original owner dies? 

    The investment or insurance firm gets the first chance to determine what happens. On many retirement plans, for example, a spouse is often the default beneficiary, even if not named on a beneficiary form. If the deceased has no spouse, then the plan assets may just become part of that person’s estate. Brokerage accounts without any designated beneficiaries are also poised to become part of the estate of the decedent. The next stop for these assets could be probate.1

    The state may end up deciding where the assets go when beneficiary forms are blank. If the deceased failed to name account or policy beneficiaries but had a valid will or other valid estate documents, this will influence the path from here – but it may not exempt the assets from probate court.

    If no legally valid estate documents exist, then the deceased party dies intestate, and the state determines the destiny for the assets. Most states go by the same ladder of potential inheritors – surviving spouse at the top, then kids, then grandkids, then parents, grandparents, siblings, nephews or nieces. If absolutely no legitimate heir can be found, then the assets become property of the deceased’s state of residence.2

    What about life insurance policies? A life insurance policy usually has at least two levels of designated beneficiaries, and it is rare when a policyholder outlives them and even rarer when a policy has none. In such a circumstance, the proceeds of the life insurance policy become part of the estate of the policyholder upon the policyholder’s death.3

    Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments. 

    What if a person simply lacks possible heirs, or sees no worthy heirs? Occasionally, this happens. Some people remain single for life, and others are estranged from relatives or heirs who would otherwise be beneficiaries. 

    A person in this situation has a choice: charity. Perhaps a charitable or non-profit organization deserves the assets. Perhaps a college or university would be a worthwhile destination for them. Choices exist, and those who are single can explore them as they consider their estate.

    At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

    Sources:

    1. Kiplinger, June 6, 2022

    2. Schwab.com, September 24, 2021

    3. SmartAsset, April 28, 2022

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    The Behavior Gap and Your Financial Health

    14 Jul

    “It turns out my job was not to find great investments but to help create great investors,” writes Carl Richards, author of “The Behavior Gap.” From increasing our budget mindfulness to taking a steadier approach to investing, Richards has drawn attention to how our unexamined behaviors and emotions can be to our detriment when it comes to living a happy and financially sound life. In many cases, we make poor financial decisions when experiencing panic or anxiety due to personal or widespread events. 1

    The Behavior Gap Explained. Coined by Richards, “the behavior gap” refers to the difference between a wise financial decision versus what we decide to do. Many people miss out on higher returns because of emotionally driven decisions, creating a behavior gap between their lower returns and what they could have earned.

    Excitement When Stocks Are High. Whether in a bull market or witnessing the hype from a product release, many investors may feel tempted to increase their risks or attempt to gain from emerging investments when stocks are high. This can lead to investors constantly readjusting their portfolios as the market experiences upswings. 

    Fear When Stocks Are Low. In response to market volatility, investors may feel the need to choose more secure investments and avoid uncertain or seemingly unsafe investments. When stocks are low, a typical response may be to sell and effectively miss out on potential long-term gains.

    Short-Term Anxiety and Focus. As humans, viewing aspects of our lives through the lenses of current circumstances is normal. However, one emotional response to any event is letting the moment consume us. Many may find it difficult to think long-term and remember. However, making a rash decision can inhibit the long-term benefit of maintaining a balanced perspective without reactionary behavior.

    The market can go up or down at any given point, or it can remain the same. One thing we can control is how we handle our financial strategy. Remembering the likelihood of recovery over time — and the market’s nearly inevitable up-and-down movement — can provide a more logical angle to calm the nerves.

    If you’re experiencing financial anxiety in response to the markets, take a breath and remember the potential for long-term gains. Of course, you can and should always reach out to your financial professional for further clarification.

    At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

    Sources:

    1. BehaviorGap.com, May 16, 2022

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    Getting on the Same Page About Retirement

    31 May

    What does a good retirement look like to you? Does it resemble the retirement that your spouse or partner has in mind? It is at least roughly similar?

    The Social Security Administration currently projects an average retirement of 18 years for a man and 21 years for a woman (assuming retirement at age 65). So, sharing the same vision of retirement (or at least respecting the difference in each other’s visions) seems crucial to retirement happiness.1

    What kind of retirement does your spouse or partner imagine? During years of working, parenting and making ends meet, many couples never really get around to talking about what retirement should look like. If spouses or partners have quite different attitudes about money or dreams that don’t align, that conversation may be deferred for years. Even if they are great communicators, assumptions about what the other wants for the future may prove inaccurate. 

    Are couples discussing retirement, or not? According to a recent survey by Fidelity, seven in ten couples say they communicate at least very well with their partner about financial issues. Couples that do communicate with each other are more than twice as likely to report that they expect to live a comfortable lifestyle in retirement. They are also more likely to report their financial household’s financial health as “excellent” or “very good.”2

    If you’re having trouble building a retirement strategy with your significant other, working with a financial professional may help. According to the same survey, couples that work with a financial professional are more likely to talk about money with each other, feel confident about their finances, and agree on their visions of retirement. This may explain why nearly half of all Baby Boomers work with a financial professional.2

    Be sure to talk about what you want for the future. A few simple questions can get the conversation going, and you might even want to chat about it over a meal or coffee in a relaxing setting. Dreaming and strategizing together, even on the most basic level, gives you a chance to reacquaint yourselves with your financial needs, goals and personalities.

    To start, ask each other what you see yourselves doing in retirement – individually as well as together. Is the way you are saving and investing conducive to those dreams?

    Think about whether you are making the most of your retirement savings potential. Could you save more? Do you need to? Are you both contributing to tax-advantaged retirement accounts? Are you comfortable with the amount of risk you are assuming?

    If your significant other is handling the household finances (and the meetings with financial professionals about a retirement strategy), are you prepared to take over in case of an emergency? When one half of a couple is the “hub” for money matters and investment decisions, the other spouse or partner needs to at least have an understanding of them. If the unexpected occurs, you will want that knowledge.

    Speaking of knowledge, you should also both know who the beneficiaries are for your retirement plans, workplace retirement accounts, and investment accounts, and you both need to know where the relevant paperwork is located.

    A shared vision of retirement is great, and respect for individual variations on it is just as vital. A conversation about how you see retirement today can give you that much more input to prepare for tomorrow.

    At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

    Sources:

    1 – SSA.gov, 2022

    2 – Fidelity.com, 2021

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    Are You Retiring Within the Next 5 Years?

    22 Apr

    You can prepare for the transition years in advance. In doing so, you may be better equipped to manage anything unexpected that may come your way.

    How much monthly income will you need? Unfortunately, there is no “magic” number for everyone to strive for. Instead, examine your monthly expenses, considering any trips, adventures, or pursuits you have in mind for the near term. As a test, you can even try living on your projected monthly income for 2-3 months prior to retiring.

    Should you downsize or relocate? Your home is not only a significant asset, it also represents a significant part of your lifestyle. After all, our homes are often a reflection of who we are. It follows that the decision of how much home we want—or need—may vary with each situation; it is not strictly a financial decision. However, if you are considering downsizing or relocating, the financial component of the decision should be considered thoughtfully.

    How should your portfolio be constructed? For many retirees, the top priority is generating consistent income. With that in mind, your financial professional can adjust your portfolio with respect to your time horizon, risk tolerance, and goals. For example, some retirees prefer to maintain an amount of risk-averse investments that can provide income during retirement. However, even the most risk-averse investments aren’t immune to risk entirely.

    How will you live? Whether you dream of endless Saturdays or dedicating your time to volunteering, remember that retirement is a beginning. Ask yourself what you would like to begin doing now. Think about how to structure your days to pursue that goal, and give it a shot! There’s no better way to prepare for what may come, than to practice in the present.

    How will you take care of yourself? If you retire before age 65, Medicare may not be an option. If you’re considering early retirement, check if your group health plan extends certain benefits into retirement. 

    Even if you retire at 65 or later, Medicare may not be your ideal solution. Consider items Medicare doesn’t traditionally cover, such as extended care or other specialized medical services.

    Review your retirement strategy as the transition approaches. Give your financial professional a call today. An adjustment or two before retirement may be all you need for a successful next chapter.

    At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. Investments seeking to achieve higher rate of return also involve a higher degree of risk.

    Major Risks to Family Wealth

    23 Mar

    All too often, family wealth fails to last. One generation builds a business—or even a fortune— lost in the ensuing decades. Why does it happen, again and again?

    Often, families fall prey to serious money blunders, making classic mistakes, or not recognizing changing times.

    This article is for informational purposes only and is not a replacement for real-life advice. Make sure to consult legal and tax professionals before modifying your overall estate strategy.

    Procrastination. This is not just a matter of failing to create a strategy but also failing to respond to acknowledged financial weaknesses.  

    As a hypothetical example, say there is a multimillionaire named Alan. The designated beneficiary of Alan’s six-figure savings account is no longer alive. He realizes he should name another beneficiary, but he never gets around to it. His schedule is busy, and updating that beneficiary form is inconvenient. Alan forgets about it and moves on with his life.

    However, this can cause significant headaches for those left behind. If the account lacks a payable-on-death (POD) beneficiary, those assets may end up subject to probate. Using our example above, Alan’s heirs may discover other lingering financial matters that required attention regarding his retirement accounts, real estate holdings, and other investment accounts.1

    Minimal or absent estate management. Every year, some multimillionaires die without leaving any instructions for distributing their wealth. These people are not just rock stars and actors but also small business owners and entrepreneurs. According to a recent Caring.com survey, 58% of Americans have no estate preparations in place, not even a will.2

    Anyone reliant on a will alone may risk handing the destiny of their wealth over to a probate judge. The multimillionaire who has a child with special needs, a family history of Alzheimer’s or Parkinson’s, or a former spouse or estranged children may need a greater degree of estate management. If they want to endow charities or give grandkids an excellent start in life, the same idea applies. Business ownership calls for coordinated estate management with consideration for business succession.

    A finely crafted estate strategy has the potential to perpetuate and enhance family wealth for decades, and perhaps, generations. Without it, heirs may have to deal with probate and a painful opportunity cost—the lost potential for tax-advantaged growth and compounding of those assets.

    The lack of a “family office.” Decades ago, the wealthiest American households included offices: a staff of handpicked financial professionals who supervised a family’s entire financial life. While traditional “family offices” have disappeared, the concept is as relevant as ever. Today, select wealth management firms emulate this model: in an ongoing relationship distinguished by personal and responsive service, they consult families about investments, provide reports, and assist in decision-making. If your financial picture has become far too complex to address on your own, this could be a wise choice for your family.

    Technological flaws. Hackers can hijack email and social media accounts and send phony messages to banks, brokerages, and financial professionals to authorize asset transfers. Social media can help you build your business, but it can also expose you to identity thieves seeking to steal both digital and tangible assets.

    Sometimes a business or family installs a security system that proves problematic—so much so that it’s silenced half the time. Unscrupulous people have ways of learning about that, and they may be only one or two degrees separated from you.

    No long-term strategy in place. When a family wants to sustain wealth for decades to come, heirs will want to understand the how and why, and be on the same page. If family communication about wealth tends to be more opaque than transparent, then that communication may adequately explain the mechanics and purpose of the strategy.

    No decision-making process. In some high net worth families, financial decision-making is vertical and top-down. Parents or grandparents may make decisions in private, and it may be years before heirs learn about those decisions or fully understand them. When heirs do become decision-makers, it is usually upon the death of the elders.

    Horizontal decision-making can help multiple generations commit to the guidance of family wealth. Financial professionals can help a family make these decisions with an awareness of different communication styles. In-depth conversations are essential; good estate managers recognize that silence does not necessarily mean agreement.

    You may attempt to reduce these risks to family wealth (and others) in collaboration with financial and legal professionals. It is never too early to begin.

    At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

    Sources:

    1. SmartCapitalMind.com, February 4, 2022

    2. Yahoo.com, January 18, 2022

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    Retirement Preparation Mistakes

    1 Feb

    Much is out there about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Aside from these blunders, some classic financial missteps plague retirees.    

    Calling them “mistakes” may be a bit harsh, as not all of them represent errors in judgment. Yet whether they result from ignorance or fate, we need to be aware of them as we prepare for and enter retirement.         

    Timing Social Security. As Social Security benefits rise about 8% for every year you delay receiving them, waiting a few years to apply for benefits can position you for higher retirement income. Filing for your monthly benefits before you reach Social Security’s Full Retirement Age (FRA) can mean comparatively smaller monthly payments.1      

    Managing medical bills. Medicare will not pay for everything. Unless there’s a change in how the program works, you may have a number of out-of-pocket costs, including dental, and vision.   

    Underestimating longevity. Actuaries at the Social Security Administration project that around a third of today’s 65-year-olds will live to age 90, with about one in seven living 95 years or longer. The prospect of a 20- or 30-year retirement is not unreasonable, yet there is still a lingering cultural assumption that our retirements might duplicate the relatively brief ones of our parents.2 

    Withdrawing strategies. You may have heard of the “4% rule,” a guideline stating that you should take out only about 4% of your retirement savings annually. Some retirees try to abide by it.

    So, why do others withdraw 7% or 8% a year?In the first phase of retirement, people tend to live it up; more free time naturally promotes new ventures and adventures and an inclination to live a bit more lavishly.          

    Talking About Taxes. It can be a good idea to have both taxable and tax-advantaged accounts in retirement. Assuming your retirement will be long, you may want to assign this or that investment to its “preferred domain.” What does that mean? It means the taxable or tax-advantaged account that may be most appropriate for it as you pursue a better after-tax return for the whole portfolio. 

    Retiring with debts. Some find it harder to preserve (or accumulate) wealth when you are handing portions of it to creditors.    

    Putting college costs before retirement costs. There is no “financial aid” program for retirement. There are no “retirement loans.” Your children have their whole financial lives ahead of them.     

    Retiring with no investment strategy.  Expect that retirement will have a few surprises; the absence of a strategy can leave people without guidance when those surprises happen.

    These are some of the classic retirement mistakes. Why not attempt to avoid them? Take a little time to review and refine your retirement strategy in the company of the financial professional you know and trust.

    At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan! 

    Sources:

    1. Forbes.com, December 9, 2021

    2. SSA.gov, January 24, 2022


    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    Annual Financial To-Do List

    28 Dec

    What financial, business, or life priorities do you need to address for the coming year? Now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:

    Can you contribute more to your retirement plans this year? In 2022, the contribution limit for a Roth or traditional individual retirement account (IRA) is expected to remain at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation, but income limits are one factor in determining whether the contribution is tax-deductible.1

    Keep in mind, this article is for informational purposes only and not a replacement for real-life advice. Also, tax rules are constantly changing, and there is no guarantee that the tax landscape will remain the same in years ahead.

    Once you reach age 72, you must begin taking required minimum distributions from a traditional Individual Retirement Account in most circumstances. Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

    To qualify for the tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner’s death. Employer match is pretax and not distributed tax-free during retirement. 

    Make a charitable gift. You can claim the deduction on your tax return, provided you follow the Internal Review Service guidelines and itemize your deductions with Schedule A. The paper trail can be important here. If you give cash, you should consider documenting it. Some contributions can be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the IRS does not equate a pledge with a donation. If you pledge $2,000 to a charity this year but only end up gifting $500, you can only deduct $500.2

    Make certain to consult your tax, legal, or accounting professional before modifying your record-keeping approach or your strategy for making charitable gifts. 

    See if you can take a home office deduction for your small business. If you are a small-business owner, you may want to investigate this. You may be able to write off expenses linked to the portion of your home used to conduct your business. Using your home office as a business expense involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional who is familiar with the tax rules as they relate to home-based businesses.3

    Open an HSA. A Health Savings Account (HSA) works a bit like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $3,650 contribution for 2022 if you are single; $7,300 if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55.4

    If you spend your HSA funds for non-medical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you may be required to pay ordinary income taxes on HSA funds used for nonmedical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

    Pay attention to asset location. Tax-efficient asset location is one factor that can be considered when creating an investment strategy.  

    Review your withholding status. Should it be adjusted due to any of the following factors?

    * You tend to pay the federal or state government at the end of each year.

    * You tend to get a federal tax refund each year. 

    * You recently married or divorced.

    * You have a new job, and your earnings have been adjusted. 

    Consider consulting your tax, human resources, or accounting professional before modifying your withholding status.

    Did you get married in 2021? If so, it may be an excellent time to review the beneficiaries of your retirement accounts and other assets. The same goes for your insurance coverage. If you are preparing to have a new last name in 2022, you may want to get a new Social Security card. Additionally, retirement accounts may need to be revised or adjusted?

    Are you coming home from active duty? If so, go ahead and check on the status of your credit and any tax and legal proceedings that might have been preempted by your orders.  

    Consider the tax impact of any upcoming transactions. Are you preparing to sell any real estate this year? Are you starting a business? Might any commissions or bonuses come your way in 2022? Do you anticipate selling an investment that is held outside of a tax-deferred account? 

    If you are retired and in your seventies, remember your RMDs. In other words, Required Minimum Distributions (RMDs) from retirement accounts. In most circumstances, once you reach age 72, you must begin taking RMDs from most types of these accounts.5 

    Vow to focus on your overall health and practice sound financial habits in 2022. And don’t be afraid to ask for help from professionals who understand your individual situation.

    At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

    Sources:

    1. thefinancebuff.com, August 11, 2021

    2. irs.gov, January 22, 2021

    3. nerdwallet.com, July 31, 2020

    4. irs.gov, September 8, 2021

    5. irs.gov, May 3, 2021

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    Wise Decisions with Retirement in Mind

    30 Nov
    Photo by cottonbro on Pexels.com

    Some retirees succeed at realizing the life they want; others don’t. Fate aside, it isn’t merely a matter of investment decisions that makes the difference. There are certain dos and don’ts – some less apparent than others – that tend to encourage retirement happiness and comfort. 

    Retire financially literate. Some retirees don’t know how much they don’t know. They end their careers with inadequate financial knowledge, and yet, feel they can prepare for retirement on their own. They mistake creating a retirement income strategy with the whole of preparing for retirement, and gloss over longevity risk, risks to their estate, and potential health care expenses. The more you know, the more your retirement readiness improves. 

    A goal to retire debt free – or close to debt free?  Even if your retirement savings are substantial, you may want to consider reviewing your overall debt situation.1 

    Retire with purpose. There’s a difference between retiring and quitting. Some people can’t wait to quit their job at 62 or 65.  If only they could escape and just relax and do nothing for a few years – wouldn’t that be a nice reward? Relaxation can lead to inertia, however – and inertia can lead to restlessness, even depression. You want to retire to a dream, not away from a problem. 

    The bottom line? Retirees who know what they want to do – and go out and do it – are positively contributing to their mental health and possibly their physical health as well. If they do something that is not only vital to them, but important to others, their community can benefit as well. 

    Retire healthy. Smoking, drinking, overeating, a dearth of physical activity – all these can take a toll on your capacity to live life fully and enjoy retirement. It is never too late to change habits that may lead to poor health.

    Retire where you feel at home. It could be where you live now; it could be a nearby place where the scenery and people are uplifting. If you find yourself lonely in retirement, then look for ways to connect with people who share your experiences, interests, and passions; those who encourage you and welcome you. This social interaction is one of the great, intangible retirement benefits.

    At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

    Sources:

    1. CNBC.com, December 2, 2020

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    End-of-the-Year Money Moves

    30 Oct

    What has changed for you in 2021? For some, this year has been as complicated as learning a new dance. Did you start a new job or leave a job behind? That’s one step. Did you retire? There’s another step. If notable changes occurred in your personal or professional life, then you may want to review your finances before this year ends and 2022 begins. Proving that you have all the right moves in 2021 might put you in a better position to tango with 2022.

    Even if your 2021 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can manage your overall personal finances.  

    Keep in mind this article is for informational purposes only and is not a replacement for real-life advice. Please consult your tax, legal, and accounting professionals before modifying your tax strategy.

    Do you engage in tax-loss harvesting? That’s the practice of taking capital losses (selling securities worth less than what you first paid for them) to manage capital gains. You might want to consider this move, but it should be made with the guidance of a financial professional you trust.1  

    In fact, you could even take it a step further. Consider that up to $3,000 of capital losses in excess of capital gains can be deducted from ordinary income, and any remaining capital losses above that amount can be carried forward to offset capital gains in upcoming years.1

    Do you want to itemize deductions? You may just want to take the standard deduction for the 2021 tax year, which has risen to $12,550 for single filers and $25,100 for joint. If you do think it might be better for you to itemize, now would be a good time to get the receipts and assorted paperwork together.2,3

    Are you thinking of gifting? How about donating to a qualified charity or non-profit organization before 2021 ends? Your gift may qualify as a tax deduction. For some gifts, you may be required to itemize deductions using Schedule A.4

    While we’re on the topic of year-end moves, why not take a moment to review a portion of your estate strategy. Specifically, take a look at your beneficiary designations. If you haven’t reviewed them for some time, double-check to see that these assets are structured to go where you want them to go, should you pass away. Lastly, look at your will to see that it remains valid and up-to-date.   

    Check on the amount you have withheld. If you discover that you have withheld too little on your W-4 form so far, you may need to adjust your withholding before the year ends.

    What can you do before ringing in the New Year? New Year’s Eve may put you in a dancing move, eager to say goodbye to the old year and welcome 2022. Before you put on your dancing shoes, consider speaking with a financial or tax professional. Do it now, rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.

    At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

    Sources:

    1.  Investopedia.com, January 8, 2021 

    2.  NerdWallet.com, April 12, 2021

    3.  Investopedia.com, August 23, 2021 

    4.  Investopedia.com, December 28, 2020

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.