2021 - Page 2 of 3 - Agemy Financial Strategies

Estate Taxes vs Inheritance Taxes (And Who Pays the Bill)

Agemy Financial

November 10, 2021

An inheritance tax is a state levy that Americans pay when they inherit an asset from someone who’s died, and is deemed a tax on your right to transfer property at your death. Inheritance tax is different from estate tax, and whether you pay might come down to the state you live in.

When a person passes away, their assets could be subject to estate taxes and inheritance taxes. This is depending on where they used to reside and how much they were worth. While the threat of estate taxes and inheritance taxes exists, the majority of estates do not charge federal estate tax because they are “too small”.

While it’s pretty uncommon for estates to be taxed, it’s still possible. As of 2021, only if the assets of the deceased person are worth $11.70 million or more can be taxed. So who is left to pay the estate tax? Here’s a look at understanding Estate and Inheritance Taxes and who is responsible for paying these taxes.

Estate or Inheritance? What’s the Difference?

Inheritance tax is a state tax on assets inherited from someone who passed away. For federal tax purposes, inheritance generally isn’t considered income. But in some states, an inheritance can be taxable. The person who inherits the assets pays the inheritance tax, and tax rates vary by state.

Mainly those in the bigger states face these taxes, but the chances are you won’t have to pay them. However, there are exceptions, and the specifics of your inheritance tax situation can dramatically change your tax bill.

The estate tax is a tax on a person’s assets after death. In 2021, federal estate tax usually applies to assets over $11.7 million, and the estate tax rate ranges from 18% – 40%. Particular states also have estate taxes and they might have much lower exemption thresholds than the IRS. Assets that spouses inherit generally aren’t subject to estate tax.

The main difference between an inheritance and estate taxes is the person who pays the tax:

Estate Taxes: These are calculated based on the net value of all the property owned by a decedent as of the date of death. The estate’s liabilities are subtracted from the overall value of the deceased’s property to arrive at the net taxable estate. Any resulting tax bill is paid by the estate.
Inheritance Taxes: These are calculated based on the value of individual bequests received from a deceased person’s estate. The beneficiaries are liable for paying this tax, although a will sometimes provides that the estate should pick up this tab as well.

Why They Both Matter

For tax purposes, both federal and state taxes are assessed on the estate’s fair market value. While that means appreciation in the estate’s assets over time will be taxed, it protects against being taxed on peak values that have potentially dropped.

Anything included in the estate that is handed down to a surviving spouse and is not counted in the total amount isn’t subject to estate tax. Spouses have the right to leave any amount to one another this is known as the unlimited marital deduction. When entering the situation of a surviving spouse who inherited an estate dies, the beneficiaries may then owe estate taxes if the estate exceeds the exclusion limit.

An heir can choose to decline inheritance through the use of an inheritance or estate waiver. The waiver is a legal document that the heir signs, declining the rights to the inheritance. In certain situations this waiver comes in hand when:

An heir chooses to waive their inheritance to avoid paying taxes.
To avoid having to maintain a house or other structures.
Bankruptcy proceedings – so that the property can’t be seized by creditors.

Federal and State Taxes

As mentioned above, for the tax year 2021, the Internal Revenue Service (IRS) requires estates with combined gross assets and prior taxable gifts exceeding $11.70 million to file a federal estate tax return and pay the relevant estate tax.

If you live in a state that has an estate tax, you’re more likely to feel its presence compared to when you have to pay federal estate tax. The exemptions for state and district estate taxes are all less than half those of the federal assessment. An estate tax is assessed by the state in which the decedent was living at the time of death. Here are the states that have estate taxes:

Connecticut
DC
Hawaii
Illinois
Maine
Massachusetts
Maryland
New York
Oregon
Minnesota
Rhode Island
Vermont
Washington

While the decedent is responsible for estate taxes, the beneficiaries have to pay the inheritance tax. So, if you receive property in the event that someone passes, you might be liable to pay this tax. Only certain states use it, however, instead of the estate tax. They include:

Iowa
Kentucky
Maryland
Nebraska
New Jersey
Pennsylvania

Among them, Maryland is the only one that uses both.

How to Keep Estate Taxes Low

To minimize estate taxes, keep the total amount of the estate below the $11.70 million threshold. For most families, that’s easy to do. For those with estates and inheritances above the threshold, try and set up trusts that allow the transfer of wealth, this can help ease the tax burden.

Another way to reduce estate tax exposure is to use an intentionally defective grantor trust. This is a type of irrevocable trust that allows a trustee to isolate certain assets as a separate income tax from estate tax. The grantor pays income taxes on any revenue generated by the assets but the assets can grow tax-free. By doing this, it allows the grantor’s beneficiary to avoid gift taxation.

There are ways to reduce estate taxes if you own a life insurance policy as well. On their own, life insurance proceeds are federal income-tax-free when they are paid to your beneficiary. One way to make sure things don’t go awry, is to transfer ownership of your policy to another person or entity, including the beneficiary.

How to Avoid Inheritance Tax

In most cases, assets you receive as a gift or inheritance aren’t taxable income at the federal level. However, if the assets you inherit later produce income (perhaps they earn interest or dividends, or you collect rent), that income is probably taxable. If you want to lower your estate’s tax burden and maximize the inheritance your beneficiaries receive, you’ll likely need to take steps before you pass away. You also want to watch out for capital gains taxes. If you sell any stocks, bonds, or other property that you received as part of an inheritance, capital gains taxes may apply to the profit you made.

Beneficiaries might not have much they can do to lower their bills, but they can work with their descendants or relatives on finding the best tax-saving strategy for passing on their wealth. These include strategies such as giving away assets before dying and possibly moving to a different state before dying.

Another way to help plan your assets and estate is to work with a financial advisor experienced in tax and estate planning. An trusted advisor can help you identify the best course of action for limiting your tax bill to ensure that you maximize the inheritance that you pass on to your beneficiaries.

Final Thoughts

Ultimately, the key difference between Estate and Inheritance tax comes down to who is financially responsible for the property transfer’s taxation. In the case of an estate tax, it is the deceased and their estate. By contrast, an inheritance tax requires the deceased’s inheritor or heir to pay to receive the assets.

Effective estate management enables you to manage your affairs during your lifetime and control the distribution of your wealth after death. An effective estate strategy can spell out your healthcare wishes and ensure that they’re carried out – even if you are unable to communicate. It can even designate someone to manage your financial affairs should you be unable to do so.

If you’re looking for a firm that handles estate planning and ways to reduce your taxes in life and death, look no further! Agemy Financial Strategies has a wide range of experienced advisors waiting for your call. For more information on our services, contact us today.

October 10, 2021/by Agemy Financial Strategies

Report: 41% of Americans Say it’s ‘Going to Take a Miracle’ to be Ready for Retirement

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Agemy Financial

September 28, 2021

The last two years have made it exponentially harder to stick to those retirement savings goals. As a result, many Americans dipped into the largest chunk of money they have — their workplace retirement savings accounts. Despite the latest retirement study data, it’s not too late to get back on track, and you don’t need a miracle to get you there!

The Covid pandemic has taken a heavy toll on Americans and their retirement security. Throughout living in a time where everything was uncertain, many lost their jobs. A majority of us had to dip into their savings and retirement accounts just to get by. A recent study found that saving for retirement has fallen behind due to job loss, unexpected expenses, giving financial help to family and friends or dealing with a health emergency.

The top concern is how significant increases in government spending to get the economy back on track will lead to decreases in Social Security benefits. In this article we will do a deep analysis of the Natixis Global Retirement Index study and the things you need to do to prepare for retirement.

Key findings of the study included:

41% of respondents, including 46% of Generation Y, 45% of Generation X and 30% of Baby Boomers, believe they will need a miracle to be able to retire securely;
73% recognize it is their responsibility to fund retirement versus relying on a pension or Social Security, 42% say it will be difficult to make ends meet if Social Security benefits are lower than expected, 31% of those with a net worth of $1 million or more;
Nearly six in 10 (59%) accept that they will have to keep working longer, 36% believe they will never have enough money to retire, this includes: 51% of Generation Y, 48% of Generation X and one in five Baby Boomers (20%)
Two-thirds (68%) see long-term inflation as a big risk to their retirement security, while 64% worry that healthcare costs will consume savings.
Half (50%) are concerned that low interest rates will make it harder to generate income in retirement.

As you can see, the pandemic unfortunately took a toll on many aspects of life. According to the Fidelity Investments’ 2021 State of Retirement Planning Study, more than eight out of 10 Americans (82%) indicate what’s taken place this past year has impacted their retirement plans, with one-third estimating it will take 2-3 years to get back on track, due to factors such as job loss or retirement withdrawals. The good news is that the US Government is looking ahead to what’s to come. Stimulus packages helped stimulate the economy and provide relief for many families. It also cut or froze interest rates, and flooded the capital markets with unprecedented liquidity.

While these policies brought relief to people, the long-term risk is still high for retirees who are vulnerable to low yields and face challenges of generating a sustainable income in retirement. Fortunately for today’s policy makers, low interest rates make debt a little bit more manageable. Still, there are levels of public debt and the need for budgetary solutions that will force tough decisions about government spending, including public retirement benefits, raising taxes, raising the retirement age, and cutting benefits.

Getting Back on Track

There’s further good news: you should not need a miracle to right the wrongs the pandemic threw at us.

Even though everybody knows to expect the unexpected, no one could have predicted how the events of the past 20+ months would change the world. As a result, many people had to shift their approach toward financial planning and retirement savings and are now looking for ways to get back on track. To assist with that effort, try these actionable tips to help your retirement funds rebound:

Start now: Even if you are only able to contribute a small amount a month into a retirement account, that’s still better than contributing nothing, thanks to the power of compounding interest. The sooner you start to save again the better.
Don’t shy away from investing: It’s important not to become shy about investing while bulking up your savings. Remember, investing remains a critical part of your overall financial planning strategy.
Open a HSA (Health Savings Account): HSAs can be a valuable retirement funding vehicle and are considered ‘triple tax advantaged’ accounts and as such have benefits that may outweigh contributions to other types of retirement plans.
Get smart with your cash: Eliminating big debt and building back up your emergency savings will help protect you from future financial downfalls. COVID-19 (or whatever else comes along) then becomes a matter of statement pain, not long term financial pain.
Seek professional help: Getting back on track is a matter of setting goals, creating a plan to achieve them, and sticking to that plan. Speaking with an experienced financial advisor will help you create a solid foundation to help to withstand financial volatility.

Final Thoughts

While the pandemic has changed our outlook on a lot of things, one thing has remained the same: It’s never too late to start saving for retirement. And while COVID has thrown a curveball to so many Americans who have worked their entire lives to retire comfortably, we are a resilient people – and now is a good time to regroup, reassess your retirement situation and establish a plan based on your goals and your needs.

No matter what your view, there are a number of questions and concerns that should be addressed to help you prepare for retirement living. For more information on how you can best prepare for retirement, contact the trusted financial advisors at Agemy Financial here today.

September 28, 2021/by Agemy Financial Strategies

How Much Will Your Social Security Check Increase in 2022?

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Agemy Financial

October 27, 2021

As fall arrives, the changing of the season can be an ideal time to revisit your financial plans with a fresh perspective. This includes what you can expect for your income and expenses for the year ahead. Social Security beneficiaries will soon see the biggest jump in monthly checks in 40 years. Here’s what you need to know.

The Social Security Administration (SSA) announced a 5.9% cost-of-living adjustment (COLA) for Social Security benefits for up to 70 million Americans, the biggest increase since 1982. This raise will kick in for those who receive Social Security benefits in January 2022.

Americans who receive SSI benefits will see theirs increase a little earlier, starting on Dec. 30, 2021. How much is the new monthly benefit for the average American? And will the bigger payments combat the effects of inflation on household goods and health care? Here’s a look at how much your social security check will increase in 2022.

How the Social Security COLA is calculated

The annual Social Security COLA is based on the change in prices of a market basket of goods. To measure these changes, Social Security uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

For the 2022 COLA, they measured the change in the average CPI-W index from July, August and September of 2020 to the average CPI-W index for the same three-month span in 2021. The percentage change between the two quarterly averages is the COLA starting in January 2022.

The 2022 COLA was so large because prices of goods and services have significantly increased in the past year, due in part to extreme weather and COVID-19 outbreaks, which have driven up energy prices and strained the world’s supply chains. Since Congress initiated automatic annual COLAs in 1975, there have been three years in which benefits didn’t increase at all: 2010, 2011 and 2016.

Social Security Payment Increase

Due to the COVID-19 epidemic, it caused a major increase in goods and services. As the country started opening up, businesses had a hard time keeping up with the increased demand. This created a rise in prices, causing inflation to jump to 5.3%, which is the largest increase since Aug. 2008. The rise in inflation is the major driver for increases in Social Security payments.

The increased Social Security benefits are to be paid by American workers. The SSA announced increases to the wage base, which is the maximum amount an employee pays in Social Security taxes. The maximum amount of an employee’s wages subject to SS taxes has risen from $142,800 in 2021 to $147,000 for 2022, an increase of 2.9%. Even though everybody knows to expect the unexpected, no one could have predicted how the events of the past 20+ months would change the world.

As a result, many people had to shift their approach toward financial planning and retirement savings and are now looking for ways to get back on track.

How Agemy Financial Strategies can help you plan for 2022

At Agemy Financial Strategies, we have an array of will and retirement planning solutions to guide you through the entire process all with the help of our trusted financial planners. For those nearing retirement, reach out to your retirement income advisor. Not all financial advisors have the same level of experience or will offer you the same depth of services. It’s always important to do your due diligence and make sure the advisor can meet your financial planning needs.

It’s never too late to start saving for retirement. And while COVID has thrown a curveball to so many Americans who have worked their entire lives to retire comfortably, we are a resilient people – and now is a good time to regroup, reassess your retirement situation and establish a plan based on your goals and your needs.

No matter what your financial situation, there are a number of questions and concerns that should be addressed to help you prepare for retirement in 2022 and beyond. For more information on how you can best prepare for retirement, contact the trusted financial advisors at Agemy Financial here today.

September 27, 2021/by Agemy Financial Strategies

Should You Max Out Your 401(k)?

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Agemy Financial

September 22, 2021

Whether you’re nearing retirement or still in the workforce, you probably wonder if there’s enough in your 401(k) to sustain your golden years. The answer really depends on your personal financial situation. Here’s what you need to know…

A 401(k) is a powerful retirement savings tool. If you have access to it through work, it’s important to take advantage of any employer match. If you still have extra money remaining, there are other ways to boost your retirement nest egg.

Maxing out Your 401(k) and What to Do Next

There are a number of reasons to consider maxing out your workplace retirement account if you’re financially able. Being proactive in your retirement planning will help ensure you will live out your older years in comfort, so it’s important to understand the ins-and-outs of this practice. Here are some of the options you have available to make the most out of your retirement savings strategy.

Employer Matching & 401(k)

Employers offer their employees 401(k) plans, most may match contributions in order to compensate and attract employee involvement. This means that for every dollar you contribute to your employer-sponsored plan, the company matches a certain percentage. This increases the amount of money saved in your account. Some match as much as 50% of your contribution while others do a dollar-for-dollar match up to a certain limit.

Roth 401(k) plans are typically matched by employers at the same rate as traditional 401(k) plans. One notable difference between traditional and Roth 401(k) contributions is that the employer’s contribution is placed in a traditional 401(k) plan—taxable upon withdrawal. Most financial planners encourage investors to max out their 401(k) savings.

On average, individuals earn about $0.50 on the dollar, for a maximum of 6% of their salaries. If you can easily afford to max out your contribution based on the yearly limits, without it causing a large impact to your budget, you might want to do so.

Investing after Maxing out your 401(k)

Although 401(k) offerings can be hard for some newcomers to understand, most programs offer low-cost index funds, which are ideal for new investors. As you approach retirement age, it’s advised to shift most of your retirement assets to bond funds. Those who contribute the maximum dollars to their 401(k) plans can boost their retirement savings with a number of different investment vehicles.

You can contribute up to $6,000 to an individual retirement account (IRA) in 2021, provided your earned income is at least that much. If you’re 50 or over, you can add another $1,000, although some IRA options carry certain income restrictions. When it comes to your future, investing money is always a good thing to do. Diligent savers who max out their 401(k) contributions have other retirement savings options at their disposal.

When it’s NOT a Good Idea to Max Out Your 401(k)

The maximum 401(k) contribution is $19,500 for 2021 ($26,000 for those age 50 or older). But depending on your financial situation, putting that much into an employer-sponsored retirement account each year may not make sense. Rather, you may want to fund other accounts first.

When trying to decide what route is best for your financial future, meet with your trusted financial advisor to go over the following questions:

Do you have an Estate Plan in place? (This should include a basic will and trust plan.)

Do you have an emergency fund saved? (This should be around 6 month’s worth of living expenses)

Do you have an Insurance Strategy in place? (This should include health insurance, disability insurance, long term care insurance and life insurance.)

Do you have any large debt hanging over you? (If so, pay that off ASAP.)

If the answer is “no” to any of the checklist items above, it is wise to first have these goals in place before maxing out your 401(k). If you’re unsure about your current strategy, it’s best to work with a financial advisor so they can answer your questions as they come up.

Final Thoughts

Whether you need the extra money or not, you’ll need to start taking it out of retirement accounts at age 72. This forces retirees to recognize taxable income and sacrifice future years of tax-deferred growth. Even if you reinvest the money in a brokerage account, you’ll still have to pay regular income tax on withdrawals from pre-tax retirement accounts. This is one of the reasons investors often save for retirement in a diversified mix of taxable, tax-free Roth, and tax-deferred accounts.

Plans that don’t bend will break, so flexibility in your savings strategy is paramount. The more you’ve saved along the way in your working years, the easier it will be to deal with unexpected challenges as they arise. Whether you’re already retired or just starting to think about it, contact the retirement income advisors at Agemy Financial. We’ll help you find answers to some of the most pressing 401(k) and IRA questions, and help set you up for a stress-free retirement.

September 22, 2021/by Agemy Financial Strategies

Why Estate Planning is Not Just for the Wealthy

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Simply the word ‘Estate’ alone can throw most people off including an estate plan in their retirement strategy. However, there is a lot more to who gets your belongings when you die. Spoiler alert: You don’t need millions or billions to get planning!

Estate planning is a financial strategy that prepares an individual to pass on their wealth and possessions to loved ones. Even if you don’t have a lot to give in your eyes, most people have assets they want to pass upon their death. Therefore it’s important to note that an estate plan is not just for the rich or elderly.

A well designed estate plan can do a lot for you and your loved ones. Deciding what happens to whatever is left of your money when you die is often passed over. There are many parts to estate planning, we’ve simplified a couple of those parts and how you can leverage estate planning to cater to you and your families needs.

Wills

A will is a document that spells out who gets what when a person passes. It’s important for everyone to have a will made in case of emergencies. Assets covered by a will go to those named in the will. This might include bank and investment accounts, personal property, collectibles and other assets. It can also specifically exclude those who someone doesn’t want to benefit from their estate.

Both financial advisors and attorneys play a big role in will planning. The right advisor should encourage their clients to review their will and have any needed changes made every few years. This is especially true if there has been a life change such as a marriage, divorce, or death of a spouse. Wills should be prepared by a professional who is well-versed in estate planning, including the laws of their specific state.

Beneficiary Designations

Certain assets pass to heirs based on beneficiary designations. These are known as “will substitutes.” This means that the beneficiary designation overrides anything that might be in the client’s will regarding the distribution of the asset. A couple of examples of these assets would be:

IRA accounts
Workplace retirement accounts such as a 401(k)
Life insurance policies
Annuities

It’s important that these beneficiary designations are current, especially after a major life change like getting divorced or getting married.

Trusts

A trust is a legal vehicle that holds assets for the benefit of the trust’s beneficiaries. A trust may conjure images of the rich and wealthy, but trusts can work well for people at various levels of wealth. Trusts can be used to ensure that assets are managed for the benefit of heirs until they are ready to manage them on their own.

Trusts can be established to hold assets while clients are alive and also be funded upon their death in other cases. An irrevocable trust is a trust that allows the creator of the trust to get the assets placed in the trust out of their estate and not be subject to any estate taxes. In exchange they surrender all ownership of and control over these assets.

A Couple of Things to Consider

Once you have your estate plan made, it is not something that you can forget about. As you approach your review process, you are looking to ensure that your intentions have not changed, that the right people are included, that major life changes are reflected, and that all other major changes are notated.

Effective estate management enables you to manage your affairs during your lifetime and control the distribution of your wealth after death. An effective estate strategy can spell out your healthcare wishes and ensure that they’re carried out – even if you are unable to communicate. It can even designate someone to manage your financial affairs should you be unable to do so.

At Agemy Financial Strategies, we have an array of will and estate planning solutions to guide you through the entire process of creating last wills and testaments, living trusts, powers of attorney, and living wills — all with the help of our trusted financial planners.

If you have any questions on our company, services, values or more, contact the retirement income specialists at Agemy Financial here today. Our financial advisors in both Denver, Colorado and Guilford, Connecticut are waiting for your call.

September 22, 2021/by Agemy Financial Strategies

5 Facts About Survivors Benefits

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More than 5.9 million people were receiving Social Security survivor benefits in May 2021. Typically, monthly payments go to the spouse, or children of the person who was receiving Social Security benefits. In certain situations, parents, grandchildren or stepchildren of a late worker may also qualify for survivor benefits.

Survivor benefits are based on the amount the deceased was receiving from Social Security at the time of death. Here are 5 facts about survivor benefits and how it will better prepare you and your family in the case of a loved one passing.

Social Security benefits are paid monthly

The government pays Social Security benefits monthly. The benefits are paid in the month following the month for which they are due. For example, you would receive your July benefit in August. Generally, the day of the month you receive your benefit payment depends on the birth date of the person for whose earnings record you receive benefits.

For example, if you get benefits as a retired worker, we base your benefit payment date on your birth date. If you receive benefits based on your spouse’s work, we base your benefit payment date on your spouse’s birth date.

They don’t pay benefits for the month of death

If a person receiving Social Security benefits dies, the social security office needs to be notified. They can’t pay benefits for the month of death. That means if the person died in July, the check received in August (which is payment for July) must be returned.

If the payment is by direct deposit, notify the financial institution as soon as possible so it can return any payments received after death. Family members may be eligible for Social Security survivors benefits when a person dies.

Survivors’ benefits can replace a percentage of the worker’s earnings for family members

The eligible family members of a retired or disabled beneficiary may receive a monthly payment of up to 50 percent of beneficiary’s amount. Survivors’ benefits usually range from about 75 percent to 100 percent of the deceased worker’s amount.

Work credits determine eligibility for benefits

You can continue to work and still get Social Security retirement benefits. Retired workers need 40 work credits to be eligible for benefits, but your work credits alone do not determine how much you will receive each month. Your lifetime earnings are used to calculate your monthly benefit amount. When we figure your retirement benefit, we use the average of your highest 35 years of earnings.

Your earnings in and after the month you reach your full retirement age won’t affect your Social Security benefits. They will reduce your benefits, however, if your earnings exceed certain limits for the months before you reach your full retirement age. The full retirement age is 66 and 10 months for people born in 1959 and increases to 67 for people born in 1960 or later.

If you receive retirement benefits before you reach age 65, you will be automatically enrolled in Medicare.

When you’re already receiving retirement benefits, we automatically sign you up for Medicare Parts A and B when you turn 65. Medicare Part Ais hospital insurance and it helps pay for inpatient care in a hospital or skilled nursing facility following a hospital stay. It also pays for some home health care and hospice care. Medicare Part B is medical insurance, and it helps pay for services from doctors and other health care providers, outpatient care, home health care, durable medical equipment, and some preventative services.

When you’re signing up for a plan, you can decline Part B if you decide you choose not to take part in it, this plan requires a monthly premium. It’s important to know your options and all the costs that come with healthcare plans when you’re planning for retirement. If you are not receiving retirement benefits as you approach age 65, you should contact Social Security three months before age 65 to sign up for Medicare Part A and B.

Learn More

Survivor Benefits could help take care of your loved ones if you die prematurely. The most accurate way to determine your potential survivors’ benefits is to create an account at www.ssa.gov and view your Social Security statement. In addition to information about your own benefits, you can find estimated survivors benefit amounts, whether you’ve earned enough credits for your family to qualify, and the maximum total survivors benefits that could be collected on your work record.

As always, the team at Agemy Financial Strategies are here to help you plan for retirement, including making sure you’re aware of every financial benefit available to you as you enter your golden yeas. Contact us here today to learn more.

September 8, 2021/by Agemy Financial Strategies

Financial Planning Tips for Fall

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Now that the dog days of summer are winding down, there are many reasons why you should make financial planning a priority this fall. Start by revisiting your savings goals and getting your financial health in tiptop shape before the year’s end.

As the seasons change and we get closer to the end of the year, it’s a great time to get a head start on end of year planning. When a calendar year ends, the window slowly closes on a set of financial opportunities.

Here are a few things to keep in mind to get your financial plan in shape as we enter the fall season.

Organize your Financial Records

As you work towards building your dream retirement this autumn, you should begin by getting a clear picture of where you are currently positioned. Work very deliberately on all of the data collection to give yourself the best 360 degree view as a base to make improvements.

Use this opportunity to organize where you keep all of your financial information. This includes but is not limited to:

Bank investment statements.
Insurance policies.
Updated spreadsheets of monthly expenses.
Copies of estate documents.

Once this data is collected, sit down with your financial advisor to analyze the year to date, and take a look at where your money’s been going and what you can cut back on. Using a tool like Agemy Financial Strategies’ online calculators is a great resource – from tracking expenses to investments, they will tag your transactions, gains and losses and categorize them, so it’ll show you what areas you need to make improvements on.

Harvest Tax Strategies

As we enter the last quarter of the year, it’s a good time to brainstorm tax planning strategies. Now is the time to conduct 2021 tax planning and think about 2022 tax planning as well. A proactive approach to tax planning now can help you make material changes while there is still time. Some ideas will help cut your tax bill for the current year; others may allow you to minimize future taxes.

Tax-loss harvesting is a strategy that can help investors minimize any taxes they may owe on capital gains or their regular income. It can also improve overall investment returns. As a strategy, tax-loss harvesting involves selling an investment that has lost value, replacing it with a reasonably similar investment, and then using the investment sold at a loss to offset any realized gains.

Tax-loss harvesting only applies to taxable investment accounts. Retirement accounts such as IRAs and 401(k) accounts grow tax-deferred so are not subject to capital gains taxes. This leads nicely into our next financial tip…

Autumn Investing

Changes happen all the time in the finance world, especially taxes and laws, and these tend to go into effect as the new year rolls in. If you’re looking ahead with your other investments, such as your stock portfolio, be proactive and well educated about your options and about what’s happening—and expected to happen—moving forward. The best course of action is to touch base with your financial advisor, who can steer you on the path that’s right for you.

At Agemy Financial Strategies, we offer principles and strategies that may enable you to put together an investment portfolio that reflects your risk tolerance, time horizon, and goals. Understanding these principles and strategies can help you avoid some of the pitfalls that snare some investors.

Reconsider your 401(k) Terms

Can you max out your contribution to your workplace retirement plan? Most employers sponsor a 401(k) or 403(b) plan, and you have until the end of December to boost your 2021 contribution.

Can you do the same with your IRA? You can withdraw contributions tax-free at any time, for any reason, from a Roth IRA. This year, the traditional and Roth IRA contribution limit is $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year. You can withdraw earnings from a Roth IRA, but it could trigger taxes and penalties depending on your age and that of the account. Due to the CARES Act, you can withdraw as much as $100,000 from a Roth or traditional IRA without paying a penalty for being under 59½, if you have been affected by COVID-19.

Start Planning for the Holidays

With Halloween, Thanksgiving, Hanukkah and Christmas on the horizon, the best part of fall financial planning is looking ahead to the holidays. But while it’s great fun to spend time with family and friends, it can also put a huge strain on your budget. Make sure to craft your holiday budget now and start planning for it. That way when the holiday craziness starts, you won’t be taken by surprise and there won’t be a big hole in your budget. If you’re planning on traveling over the holidays, don’t put it off until the last minute – start planning now. Air fare and hotel prices tend to skyrocket the closer it gets to the holidays, so the further out you can book the better.

Final Thoughts

The return of cool breezes, comforting foods, and pumpkins can be invigorating. It’s also a bookmark of sorts, especially for your finances—a perfect time to take stock of your spending after the summer’s over to see what lies ahead.

It’s always important to meet with your Financial Advisor to get the facts from the source. Be sure to provide them with updates on your financial situation, including your expected retirement date, income needs, and any other family situations that may affect your financial plan.

Contact us today for more important information on financial planning throughout the rest of 2021 – and into 2022 and beyond.

August 31, 2021/by Agemy Financial Strategies

Five Estate Planning FAQs

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No matter how big your estate is, one day you will want to pass it on to your loved ones. But there is more to estate planning than simply writing a will. Throughout this Estate Planning FAQ Series, we hope that one or more of the following questions and answers will help you understand this deceptively complicated area.

Estate planning can be an uncomfortable topic to talk about, but it’s an important one. And while everyone knows that they need an estate plan, few of us do anything about it. In fact, by most estimates, anywhere from 50–60% of Americans don’t have a will.

There is some good news on the horizon, however: the COVID-19 Pandemic has changed the nation’s perspective on many things, and estate planning is definitely one of them. Caring.com’s 2021 Wills and Estate Planning Study found that while middle- and older- aged adults are less likely to have a will now than they were just one year ago, younger adults are 63% more likely to have one this year than they were pre-pandemic. Shockingly, 18-34 year-olds are now 16% more likely to have a will than those in the 35-54 age group. The younger generation was also the most likely to cite COVID-19 as the reason they started taking estate planning seriously.

Estate Planning 101

If you have an estate plan already in place, then you have started off on the right path. If you do not have one yet, it is time to get one drawn up so you can have a plan in place.

In a nutshell, estate and trust planning is the process of using professional advisors who are familiar with your goals, concerns, and assets to organize your estate and/or set up your trust. It mainly involves setting up a plan that establishes who will eventually receive your assets. It also makes known how you want your affairs to be handled in the event you are unable to handle them on your own for any reason. It’s a complicated process, and it can definitely feel overwhelming.

There are many components to estate planning, and while there’s a common misconception that it’s just about your finances, the truth is there’s a lot more to it. This is why there are many questions that come to mind when it comes to estate planning. Most people want to know how to provide as much as they can now so their family isn’t left wondering or questioning what’s next once you’re gone: This is why understanding estate planning is key. So, where do you get started? Below are some of the most asked questions when it comes to estate planning.

Q: What’s the Difference Between a Will, and a Trust?

A: Wills and trusts have some similarities. While many people think simply having a Will is sufficient, the fact is you need more. If you have a Will, you’re off to a great start. But a Will by itself is just a small piece of the Estate Planning puzzle.

There are some advantages and disadvantages to both wills and trusts, so it’s always important to speak with your financial planner about your circumstances to determine which of the options are best for you. Ultimately, wills and trusts are both estate planning tools and can work together to create the best plan for an estate. The main differences between a will and a trust are:

Wills become effective after death, whereas some trusts are effective upon creation.
Wills direct who receives property upon death and appoint a legal representative to oversee this process, whereas a trust can distribute property prior to death.
Trusts cover only property placed in the trust, whereas wills cover anything owned solely by the person creating the will.
Wills are public record, whereas generally a trust remains private.

Q: I’m worried my family will contest my will. What can I do to prevent this from happening?

A: All families have challenges and sometimes, issues spill into the planning and settling of an estate. There are several things you can do to make the arrangement you intend more likely to be upheld once you are gone:

Ensure your will is properly executed by working with an experienced fiduciary highly experienced in estate planning.
Be clear and concise naming your beneficiaries.
Sign and notarize your estate plan.
Explain your decisions to family while you are still alive.

Q: My parents never talk about their estate plan with me. How can I break the ice?

A: The thought of death can be an uncomfortable conversation, especially for older parents and grandparents. This topic can make them feel “unwanted”. Many people mistakenly picture estate planning as aggressive battles for assets, so they become hesitant to proceed during their lifetime because they wrongfully think it might take away their right to enjoy their own properties. In addition, some parents think that depending on a future inheritance will discourage children from working hard.>Breaking the ice with parents and grandparents might be easier than you thought. Based on past experiences, the following factors can lead to successful communications:

Be honest and sincere.
Find the right time and right environment.
Stress the importance and benefits of having a solid estate plan and discuss the costly consequences if no plan is in place.
Be helpful to older parents and grandparents.

Q: How do I Avoid Estate and Inheritance Tax?

A: Much of your Estate Planning is done with taxes in mind. The ultimate goal is to leave the absolute most you can to your heirs. Strategizing by taking action to minimize assets lost to taxes is an effective way to achieve your goal. Understanding potential types of taxes is important:

Estate tax: A tax imposed on estates worth more than a set value. The tax is only assessed on the amount that exceeds the maximum, not the entire value of the estate.
Inheritance tax: A tax paid by someone who inherits either property or money from someone who has died.
Gift tax: A tax that’s applied on gifts exceeding a certain dollar amount. Note the giver, not the receiver, is responsible for any tax.

For many years, average families used their estate plans to avoid or reduce estate and inheritance taxes – the taxes due on your estate when you die. However, federal estate tax is now levied on only very wealthy estates – estates worth well over $11 million. So most people with average-size estates do not need to worry about estate taxes. That said, a few states do levy estate and inheritance taxes on smaller estates and if you live in one of those states and you have a substantial amount of property, you may want to use your estate plan to try to reduce or avoid these taxes.

Q: How Can I Start a Conversation with my Family about the importance of Having a Will or Estate Plan in place?

A: In modern days, the best results come from continuous and transparent estate planning efforts. Some important benefits of this method include:

Start by eliminating conflicts, and open up room for hard conversations. Parents and family members should address issues now to avoid misunderstanding and conflicts after death, which will be very expensive and hurtful to reconcile.
Bring your family together and pass family values. Clear and thoughtful instruction from estate planning documents will unite family members to go through a tough time together, increasing their pride for family history.
Help prepare your family for uncertainties. It will make the transition to assisted, memory care or long-term care facilities less stressful and allow family members to have a sense of the financial assets available for such care.

Updating Your Estate Plan

Once you have your estate plan made, it is not something that you can forget about. As you approach your review process, on broad terms, you are looking to ensure that your intentions have not changed, that the right people are included, that major life changes are reflected, and that all other major changes are notated.

There isn’t a hard rule about when you should update your Estate Plan, but a good rule of thumb is try to update it whenever you have a major life event (birth of a child, death of someone important to your plan, marriage, divorce, etc.). And if you find you haven’t had any life events in recent years, try to review and update as needed every 3 – 5 years.

Final Thoughts

An effective estate strategy can spell out your wishes and ensure that they’re carried out – even if you are unable to communicate. It can even designate someone to manage your financial affairs should you be unable to do so. At Agemy Financial Strategies, we have an array of will and estate planning solutions to guide you through the entire process of creating last wills and testaments, living trusts, powers of attorney, and living wills — all with the help of our trusted, friendly financial planners.

If you have any questions on our company, services, values or more, contact the retirement income experts at Agemy Financial here today. Our financial advisors in both Denver, Colorado and Guilford, Connecticut are waiting for your call

August 26, 2021/by Agemy Financial Strategies

Investing in Women

News

Both men and women want to achieve long term financial security. So how is financial planning for women different? No matter whether you are young, mature, married or single, financial planning should be a top priority for you.

It’s no secret that saving for retirement is important, yet many women face challenges in building their retirement portfolios. Women save less than men, and they have fewer working years. These are factors that have made planning and saving for retirement a serious challenge for a lot of women.

Different financial needs coupled with family responsibilities make it difficult for women to save adequately for retirement. Saving for retirement is not a top priority for some women who must pay off debt and cater to their daily living costs. For many, thinking about day-to-day, immediate financial needs comes first rather than long-term goals. Here’s a look at some ways to invest in a brighter future.

Retirement Savings (and how women can recover)

Firstly, as a woman, you need to assess your financial situation to get a clear picture of how they use your money. To start saving, you need to analyze your income and spending. Then, you can adjust their spending habits to save more money efficiently. Try our financial calculators here to get started.

Secondly, prioritizing savings contributions goes a long way in recovering retirement savings. When it comes to money you should put yourself first and start saving for you. It is important to invest in things that help support and secure your future.

To succeed, you should set aside funds for your savings first before spending. As you budget, you should treat retirement savings as an urgent bill that needs to be paid. If you’re employed, your workplace retirement plan may be a great place to begin investing as it offers numerous perks. Your employer-sponsored 401(k) allows you to easily contribute a portion of your salary into long-term investments and build your retirement portfolio efficiently.

Rebalancing Your Portfolio

Rebalancing/reallocation of your portfolio may have a positive impact on your retirement savings plan, and variation can help minimize risk. If you are in your 20s or 30s, you should diversify your portfolio among several stock styles and sizes. You could consider large-, mid- and even small-cap stocks to round out your diversification.

When you get closer to retirement, you might want to move your portfolio into a less aggressive mix. Aggressive investment mixes are ideal for people who are close to the retirement age, since they are shifting their focus to preservation of capital and moderate growth. Working with a financial advisor will not only help you prepare in managing your portfolio but also help make the right choices for you.

Educate yourself on Investments and Retirement

Misinformation can easily come down the pipeline when taking the time to learn about investing in your portfolio and retirement. It’s crucial that women take the time to educate themselves on these financial matters. It will save you time in the long run. Being knowledgeable about your future will help you make well-informed decisions on your retirement/investing plans.

Last Thoughts

In a nutshell, investing should be easy – just buy low and sell high – but most of us have trouble following that simple advice. There are principles and strategies that may enable you to put together an investment portfolio that reflects your risk tolerance, time horizon, and goals. Understanding these principles and strategies can help you avoid some of the pitfalls that snare some investors.

However, a good financial plan is more than just a budgeting exercise or a hands-off investment strategy. It takes into account all your assets, your retirement savings, and your future plans. Working with an experienced financial advisory firm like Agemy Financial – that offers everything from investments to estate planning services – will help you create a comprehensive financial plan that addresses your dreams and lifestyle.

We can help you get individualized support tailored to your situation and goals, which may be more beneficial than trying to learn everything on your own. The right advisor can serve as a trusted partner throughout a woman’s financial journey and can provide you support and guidance to invest wisely and grow wealth.

Contact us today for more information on investment portfolios and preparing for retirement to help make your money grow for you. We look forward to hearing from you.

August 19, 2021/by Agemy Financial Strategies

5 Key Mistakes to Avoid in Retirement Planning

News

The pandemic has pushed individuals across the nation into thinking about their retirement plans – or for many, their lack of plans. No matter where you’re at in your retirement journey, the road to a successful, stress-free future lies in proactive planning and learning how to avoid financial potholes that could set you back even further.

Retirement planning is one of the most important financial goals for your future. When executed correctly, you’ll help you maximize your potential for financial independence later in life.

When done incorrectly however, you’re facing a future that could be laden with stress and worry. Now is a good time to look at what you currently have, what you may need in retirement and a solid plan to get you there.

A new survey from Credit Ninja shows that the financial uncertainty has 21% of people reassessing their retirement age. To avoid a negative outcome in your golden years, consider these 5 key mistakes to avoid in retirement planning, and make moves now to avoid them!

Not Having a Retirement Plan

The most common mistake that many people make is not having a retirement plan in place. While short-term panicking isn’t the answer to your unpreparedness, trying to predict future expenses instead of focusing on future income is a recipe for disaster.

There are many factors that come into play when planning for retirement. Such as, where you will retire, the kind of lifestyle you want to have while in retirement, and most importantly, your health. What some people fail to realize is not having a retirement plan in place sets them back significantly.

It could mean working longer or making serious adjustments to your lifestyle to get you there. Most people without any 401(k) savings are put in that position because they don’t have access to a plan at work, which is caused by their employer not having a plan at all. Another situation could be, they’re part-time or they haven’t been at the company long enough to qualify for a retirement plan. The best way to get around this is to see if your company offers retirement plans, if they do make sure to contribute enough to take advantage of any match your company offers.

It’s never too late to start your retirement income plan, so reach out to your trusted financial advisor and get started today.

Not Saving Money Now

A rule of thumb for retirement planning is, you should always know your savings rate. Savings rates are calculated by dividing the amount in your savings by your annual income – and trying to increase it every year. The lower your savings rate, the less money you’ll have to last you through your golden years and the less you’ll have to afford all of the necessities you’ve grown accustomed to.

According to the U.S. Bureau of Economic Analysis, the average American saved just 9.4% of his or her disposable income as of June 2021. However, most financial advisors recommend saving 10 to 15% of your income for retirement. No matter what sum you need or feel is right for retirement, the sooner you start saving and investing, the more secure you’ll be in the future.

Spending too much

Many retirees start by pursuing all the things they didn’t get to do while working, such as travelling, picking up a new hobby, buying a new car or renovating their homes. But so many underestimate the actual cost of these monumental expenses. To avoid this mistake, create a detailed but realistic budget – and stick to it. Be sure to work with your financial advisor to find a withdrawal rate that will stretch your money for as long as possible.

To help compensate for the additional spending you have in mind, as retirement nears, you’ll want to make sure you are maximizing your 401(k) or individual retirement account contribution and decreasing your debt and spending. Take a look at anything that has double-digit interest and eliminate that. Ideally, you don’t want anything you are paying 5% interest on. A great example of this is home mortgages. Refinancing your loan could benefit you in the long run.

If you’re having trouble saving more of your income, take a look at your spending habits and see where you need to cut back. It can be eye opening to see how little things can add up.

Not Planning for Medical Expenses & Long-Term Care Costs

Long-term care is expensive. A study by Fidelity Investments found that a couple retiring at 65 would need $295,000 to cover medical costs in retirement. That figure doesn’t even account for long-term care, such as assisted living or nursing home costs. The yearly average cost of a nursing home in the U.S. is $93,075 for a semi private room and $105,850 for a private room. Not considering these costs in your retirement plan now, means you could be like many families who run out of money within a year of entering a nursing home.

You might have a few medical bills now, but you’ll likely have more as you get older. If you’re having a hard time finding the money to pay for your current medical bills, you might have an even harder time paying medical expenses when you enter retirement. By saving money now, you won’t have to worry about not being able to pay hospital bills in the future. Planning for medical expenses is an important part of overall retirement planning.

Not Implementing Estate Planning

While estate planning is an ongoing and ever changing strategy, there are common documents that are part of it: a Will, Living Trust, Powers of Attorney for your assets and healthcare directives, customized tax planning and other more complex components of a customized Trust.

The overarching goal is to protect your assets on the journey to retirement and to make sure that your wishes are executed correctly, so that your loved ones have an easier process and your assets are maximized.

Effective estate management enables you to manage your affairs during your lifetime and control the distribution of your wealth after death and can spell out your healthcare wishes and ensure that they’re carried out – even if you are unable to communicate. It can even designate someone to manage your financial affairs should you be unable to do so.

Final Thoughts

In 2021, the path to retirement success includes a mixture of saving strategies consisting of steady pension contributions from your employer, retirement annuities, estate planning, investments, emergency savings and more.

For those nearing retirement, reach out to your retirement income advisor. (Note: Not all financial advisors have the same level of experience or will offer you the same depth of services. So when contracting with an advisor, do your own due diligence first and make sure the advisor can meet your financial planning needs.)

At Agemy Financial Strategies, we have an array of retirement planning solutions to help you save and grow your money. If you have any questions on our company, services, values or more, contact the retirement income experts at Agemy Financial here today. Our trusted advisors in both Denver, Colorado and Guilford, Connecticut are waiting for your call

August 12, 2021/by Agemy Financial Strategies

Archive for year: 2021

Estate or Inheritance? What’s the Difference?

Why They Both Matter

Federal and State Taxes

How to Keep Estate Taxes Low

How to Avoid Inheritance Tax

Final Thoughts

Getting Back on Track

Maxing out Your 401(k) and What to Do Next

Employer Matching & 401(k)

Investing after Maxing out your 401(k)

When it’s NOT a Good Idea to Max Out Your 401(k)

Final Thoughts

Wills

Beneficiary Designations

Trusts

A Couple of Things to Consider

Organize your Financial Records

Harvest Tax Strategies

Autumn Investing

Reconsider your 401(k) Terms

Start Planning for the Holidays

Final Thoughts

Estate Planning 101

Updating Your Estate Plan

Final Thoughts

Retirement Savings (and how women can recover)

Rebalancing Your Portfolio

Educate yourself on Investments and Retirement

Disclaimer

Quick Links

Contact Info