Creating a Tax-Efficient Retirement Plan Can be More Complex Than You May Think
Wednesday, 09 September 2020
If anyone ever describes the United States Tax Code as “simple” or “straightforward” then it’s a clear sign they know very little about it! In truth, it is one of the most complex administrative codes in the world, and this becomes all the more accurate when you’re about to retire and you have to determine how your various sources of retirement savings income will be taxed. (Spoiler alert: many of them will have different tax treatments!)
Below, we will review the different types of retirement savings and how the IRS taxes each one. In doing so, we hope to give you a sense of what you might owe, as well as whether it makes sense to adjust your retirement savings strategy.
This Year has Heightened Financial Fears, but it's Possible to Move Forward Confidently
Wednesday, 19 August 2020
Although the year isn’t over yet, 2020 has certainly been one for the books. None of us could have predicted a pandemic, let alone the financial implications this health crisis has created for many people. It has changed the way we work, the way we interact with the people we love, and the way businesses serve their customers and clients. And, the COVID-19 pandemic plunged the U.S. economy into a recession.
While experts say all indications are that the recession is likely over now, many people are still feeling the fallout from the last several months. The possibility of a recession always heightens fears, and the reality of what we have recently experienced as a nation has many people wondering how we move forward when so much remains uncertain. Below, we’ll discuss the most common recession fears, as well as how to combat them.
Five Considerations to Help You Start Planning
Monday, 03 August 2020
Too many entrepreneurs develop the habit of putting all their focus on building, nurturing, and growing their business, without giving enough forethought to their own eventual retirement. It can often take several years to plan the successful sale of a business, so it’s smart to get started as soon as possible on creating a business succession plan to layout your strategy for passing your business to someone else.
As you begin, we recommend asking yourself the following five questions:
What are your retirement goals?
While it may not be in your nature, this type of planning requires you to slow down, look inward, and think about what you want out of retirement for yourself and your family. How do you want to spend your free time? Who do you want to spend it with? Do you have hobbies and interests you’ll further cultivate? Are they mostly outdoor or indoor activities? Will you move from your current home or stay put? Make sure you spend time thinking about these questions and more so that you can plan a retirement that feels fulfilling and meaningful to you.
What will your transition into retirement look like?
There are many different strategies you could choose for your exit plan. Some business owners choose to make the transition slowly, going from full-time work to part-time in a stair-step plan that helps you exit gradually over the course of a year or two. Conversely, you could choose to remove yourself from business operations much more quickly and leave things in the hands of a successor you hand-selected. Regardless of the type of transition you have in mind, you should map out a timeline and think through how long it will take for you to feel comfortable transferring clients or customers to someone else.
Strategic Planning for Life After the SECURE Act
Tuesday, 21 July 2020
The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law in December of 2019, bringing with it some meaningful changes to the rules governing retirement savings. Among other changes, the SECURE Act eliminated the so-called “stretch” IRA for the vast majority of beneficiaries. This change could prove troublesome for those who have built some of their long-term financial plans around passing down an IRA to heirs – or inheriting one themselves.
If you find that your future plans were disrupted by the elimination of the stretch IRA, you’re not alone. Below, we’ll dig into the details of the change and provide guidance on what steps you might consider next.
Understanding the Changes
In years past, the stretch IRA provision allowed someone who inherited an IRA to withdraw the funds as slowly as they wished. This allowed many people to use their inherited IRA as a source of income for life. Per changes in the SECURE Act, the funds in inherited IRAs are now required to be withdrawn in full within ten years (with a few exemptions, discussed below).
How Our Emotions and Biases Impact Our Financial Decisions
Monday, 22 June 2020
When it comes to financial decision-making, we are oftentimes our own worst enemies. Human nature makes us susceptible to emotional responses, lack of willpower, overconfidence, and personal biases that impact our money mindsets and our financial decisions. Any one of these things can lead us to make less-than-wise decisions with our money, and this is certainly true when it comes to our investments.
As in many areas of life, we all make smarter decisions when we become aware of our inherent weaknesses and put measures in place to overcome them. Understanding more about the psychology around investing is one way to protect yourself from yourself.
In his bestselling book, The Little Book of Behavioral Investing, author and expert James Montier discusses some of the most important behavioral challenges facing investors. He also shares time-tested advice on how to avoid investment pitfalls and achieve your wealth-building goals. Below, we’ll review several of his key concepts.
Planning Ahead with a Trusted Team Can Ease the Financial Transition
Wednesday, 10 June 2020
These past few months have been filled with a collective sense of grief over what many of us have lost: loved ones, financial stability, job security, a sense of freedom, or normalcy. While all of these are incredibly hard to deal with in their own ways, losing your life partner is uniquely devastating, and navigating the aftermath on your own can be incredibly difficult.
When you lose your spouse, you can feel adrift, untethered, and fearful of what the future may hold. While you’re in the midst of tragedy, it can be difficult to simply get through each day, let alone make important decisions and think through the implications for your finances. This is why it is so important to plan ahead by assembling a team of trusted advisors who can help to make the financial transition as smooth as possible during your time of grief.
Family members, trusted friends, financial advisors and attorneys can all play a role in helping you accomplish the following steps after you’ve lost your spouse:
Learn All You Need to Know About these Sweeping New Provisions.
Monday, 25 May 2020
With so much focus on the economic volatility and stimulus packages stemming from the COVID-19 pandemic, many people have overlooked a piece of far-reaching new legislation signed into law in late 2019 meant to alleviate America’s retirement savings crisis. Called the Setting Every Community Up for Retirement (SECURE) Act, it took effect on January 1, 2020 and there are significant provisions that may impact your retirement planning.
Here are a few SECURE Act changes to know.
More and more investors are choosing to align their money with their values.
Monday, 11 May 2020
The world we live in has undergone significant change in recent months, leading some investors to rethink their strategies. While it’s usually best to stay the course during a time of market volatility, it’s also a good time to self-reflect and ask yourself whether you are using your wealth in alignment with your values. More and more young investors are leveraging their assets to make an impact in the world by using an investment strategy meant to produce some sort of positive social result. It’s called impact investing, and it has given rise to a new trend in financial planning.
If you think impact investing may be right for you, get intentional about what you want to accomplish. This means taking three steps at the outset.
Americans Can Defer for 90 Days
Friday, 20 March 2020
As we continue to face uncertain times, the IRS has made a welcome announcement.
Treasury Secretary Steven Mnuchin has announced that the IRS has decided to extend the filing and payment deadline for 2019 tax returns, allowing taxpayers to defer until July 15. Mnuchin indicated this move will put $300 billion into the economy during a time of great economic concern over the consequences of the COVID-19 pandemic.
The payment deferment is subject to certain caps, however. Individuals may defer tax payments of up to $1 million, while corporations may defer up to $10 million. The limits were purposefully selected to benefit small businesses that report income through S corporations, partnerships or other pass-through entities.
Tuesday, 17 March 2020
We are facing something we have never faced before in our lifetimes. That is a fact and, in a time, when the news of the pandemic spreading and the recommendations on social distancing getting broader by the day, it can be hard to feel certain or safe about anything.
As troubling as it is to watch the unprecedented market decline and as hard as it is to tune out the decline of your investments, we need to maintain our health and the health and safety of our family, friends and neighbors as the number one priority. Covid-19 which emerged late in 2019 in China has spread rapidly and is a global pandemic. The measures taken by leaders around the globe have been unsettling leaving children without a classroom, parents working from home or without a job altogether and investors panicking about what is to come.
This disruption to daily life and to our psyches is substantial and it’s terrible. The coming weeks will not be easy, but these measures are practical and prudent.
Why Pursuing Success in the Short-Term Often Leads to a Long-Term Cost
Wednesday, 04 March 2020
We live in a world with unpredictable financial markets, with the truism that past performance is never a guarantee of future results. Why, then, do we collectively continue to chase historical success by selling our holdings in slow-to-perform active fund managers and investing in recent winners instead?
The answer is largely psychological, in that we are ruled by a combination of outcome bias and an overemphasis on the power of skill over randomness. Taken together, this leads many investors down the damaging path of chasing past performance – and ultimately ending up disappointed.
Volatile Markets and the Ongoing Spread of the Virus are Causing Economic Uncertainty
Tuesday, 03 March 2020
Last week saw the worst week on Wall Street since 2008, as the Dow fell into correction likely due to the outbreak and spread of COVID-19, commonly called novel coronavirus. A market correction is a nerve-wracking event for investors, but the current uneasiness in the markets is no cause for panic.
While the spread of COVID-19 is atypical, market correction is not. In fact, it’s an entirely normal process, and not altogether unexpected after experiencing the longest-running bull market on record. There have been 22 market corrections since 1974, and they are aptly named because the market usually “corrects” itself and returns prices to their longer-term trends. While the coronavirus is likely to cause economic impact into at least the second quarter of 2020, historically, Wall Street’s reaction to these types of epidemics has been short-lived, including in the recent past.
With a $30 trillion wealth transfer underway, Baby Boomers have the power to shape the next generation’s financial future.
Monday, 17 February 2020
Albert Einstein might be best known for the theory of relativity, but did you know he also had an interest in finance and economics? In fact, he once referred to compound interest as the “eighth wonder of the world.”
Einstein wasn’t wrong; compounding is both powerful and fascinating. When combined with education, it can become a veritable superpower – one which Baby Boomers can wield as they continue making the largest transfer of wealth in American history.
It’s Time for a New Kind of Post-Work Planning
Monday, 03 February 2020
During your working years, retirement seems like a dream. It’s that glorious time on the horizon when you can spend your life in leisure with no cares in the world. Why, then, are many new retirees finding this phase of life to be confusing, frustrating or even downright miserable? The answer lies in the inherent flaws in traditional retirement planning.
Here’s How to Find the Equilibrium You’re Searching For
Wednesday, 22 January 2020
Brian Dyson, former COO of Coca Cola, is famous for his quest to find balance among work, family and self-care. Dyson understood what so many of us fail to remember at times – that all the balls we’re juggling in life aren’t created equal. Here’s how he described it:
“Imagine life as a game in which you are juggling some five balls in the air. You name them — work, family, health, friends and spirit and you’re keeping all of these in the air. You will soon understand that work is a rubber ball. If you drop it, it will bounce back. But the other four balls — family, health, friends, and spirit — are made of glass. If you drop one of these, they will be irrevocably scuffed, marked, nicked, damaged, or even shattered. They will never be the same. You must understand that and strive for balance in your life.”
So, how do we find this balance, exactly? Many people say it isn’t possible, and that it’s just a myth that keeps us chasing something unattainable. After all, we have a finite number of hours in the day, limited energy to disperse across all areas of life and the need for a paycheck. Is it truly possible to find equilibrium? As it turns out, the answer is yes. It simply takes a commitment to the following simple, yet effective, strategies.