How to Determine Risk Tolerance During Retirement

Knowing your risk tolerance can make the difference between a smart investor and a sorry investor. 

Understanding your risk tolerance is essential in developing a successful retirement strategy. The overarching principle of risk is that the higher it is, the greater your potential for growth, but also the greater your potential for loss. Risk tolerance isn’t a static consideration. As your investments change over time, so should your tolerance for risk, especially as you near retirement.

Typically, the closer you are to retirement, the lower your risk tolerance will become. The younger you are, the more time you have to make up for short-term losses. However, if you’ve still got some ground to make up before or in retirement, you may need to accept additional risk for the opportunity to reach your financial goals.

Continue reading to learn more about risk tolerance, its importance and how to determine yours.

What is Risk Tolerance? 

Essentially, risk tolerance is the degree of volatility in investment returns an investor is willing to withstand over time. In other words, it’s how much you can stand to lose in the short term. How much risk an investor can tolerate varies widely and is determined by a number of different factors. It can be influenced by the news, friends, family, your gut and emotional connections to particular investments and money in general. The most considerable influence on risk tolerance for your retirement accounts show be driven by two factors, time to retirement and retirement goal. Once you’re in retirement, your risk tolerance again changes. Generally, retirees have a much lower risk tolerance, and would look for conservative investments.

Levels of Risk Tolerance

  • High risk tolerance

With high investment risk tolerance, you are a natural risk taker and an optimist. You like weighting your portfolio with lesser-proven stocks or other investments that have the opportunity for big gains, but could also dip dramatically if certain assumptions about markets and demand don’t pan out.

  • Moderate risk tolerance

If you can tolerate some risk, you probably prefer investments that are likely to produce solid gains over time but also have the potential to drop somewhat.

  • Low risk tolerance

If you’re uncomfortable with anything but small risk, you’re most likely to only invest in conservative assets. You only feel comfortable with the type of investments that typically generate more moderate gains in share prices but are less likely to dip.

How to Determine Your Risk Tolerance

When assessing how much investment risk you can take on, thinking practically is important. Your financial circumstances may justify some reasonable chances or may merit more conservative choices. If you’re not sure what your level of risk tolerance is, start by asking yourself the following questions.

What Are Your Investment Goals? 

Why are you investing? Everyone has their own reasons for investing but some common goals include:

  • Retirement
  • Buying a home
  • Paying for your children’s education
  • Financial independence

Determining the why of investing is the first step in understanding how much risk you’re willing to take on. Additionally, having a goal in mind helps assess your time horizon and estimate how much money you’ll need.

What’s Your Time Horizon? 

Your time horizon is the amount of time until you plan to use the money you’ve invested.

Generally, the larger your time horizon, the more risk you can take on. If your investments lose value, you have more time for them to recover. While downturns occur and past performance is no guarantee of future results, the stock market has historically bounces back, offering long-term returns.

A shorter time horizon means your investments have less time to recover from a potential downturn. If your goal is to earn a big return in a short period of time, larger risk is necessary. The closer you are to retirement, or if you’re already there, your time horizon would be short.

Do You Have an Emergency Fund? 

Regardless of your risk tolerance, it’s important to have savings set aside in liquid accounts. If you face an emergency, you want to have easy access to cash without having to liquidate investments. However, if you keep a large portion of your savings in cash because investing makes you nervous, this is a sign you’re risk averse.

Keeping a specific amount in cash to help ride out market fluctuations is extremely important, so always make sure your emergency fund is topped up.

How Comfortable are You Taking Short-Term Losses? 

It’s common for investments to fluctuate in the short term. With stocks and similar investments, it’s important to remember that your shares may decline in value, but you don’t realize the loss until you sell the investment. If you’re in need of the money in the near-term, you may be forced to sell at a loss. Investors with a longer time frame have the ability to hold onto the investment with the hopes of recovering and potential increases in value with time.

Final Thoughts

Every investment comes with risk, but it’s important to understand the balance of risk and reward that is best for you and is appropriate for your portfolio. Generally, as you near retirement or enter into it, it’s much safer to add more conservative, low risk investments into your portfolio. Of course, this always just depends on personal preference and what makes sense with your own financial situation.

Risk tolerance is a highly individual matter and can be sensitive once you move into retirement. You should consider working with an experienced and trusted financial advisor who can help further shape your risk capacity and suggest products that fit within it. At Agemy, we specialize in retirement income planning, helping you take care of yourself and your loved ones. Whether you’re looking to change up your financial strategy, need assistance with wealth management or legacy planning, or just want someone with you while you jump into retirement, we’re here for you!

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Six Common Issues That Can Cause Stressful Inheritance Disputes

Estate Planning can be a difficult topic to prepare for – but nonetheless, it’s essential to have.

Estate Planning is about more than just managing your assets and wealth. It’s also about making sure that your wishes are carried out, even when you’re not around to communicate them.

When you take part in estate planning, you’re planning for when you become incapacitated or dead. It’s even less fun to talk about unorganized estate planning, which oftentimes leaves your loved ones heartbroken or left with strained relationships.

Here is a look at six common issues that can cause inheritance disputes, and how you can avoid them.

Leaving Behind Surprises

We all want to keep our loved ones out of the dark, but there are some things that are just easier to talk about first with a financial planner. Estate planning is one of those things.

The biggest problem when it comes to estate planning is the tendency to keep things secret. That’s why conversations should start with a trusted advisor. Most clients are actually more comfortable talking to their advisors about difficult topics like debt, divorce, and you guessed it – death and incapacitation.

But it’s always in best practice to go home and talk to your loved ones about your plans as well. Talking about what’s going to happen when you die is a difficult subject, and we understand the impulse to push the conversation off. Planning ahead of time and talking as openly as possible now will alleviate heartache when the time comes.

Naming the Wrong Executor

When you decide to pass on and leave your estate to whomever you choose, it’s important to consider who will act as an executor on your behalf. The role of an executor can be with a person for years, and can include going to court, traveling, and working through reams of paperwork.

Executors take on a big role and it’s important to assign the role to someone who can handle it maturely. Too many times, estate issues will arise because the person in the role of executor was just not able to handle the responsibility.

The best way to handle this issue is by creating a short list of individuals you think are up for the job, and then think about their strengths and weaknesses. Are they responsible? Organized? Ethical? Do they have the flexibility in their schedule to handle the tasks they will need to accept as executor of your estate? Will they have the financial ability to ensure that your assets don’t lose value? Whoever you choose it is best practice to discuss with other family members on who you ultimately choose for the task.

Not Planning for Incapacitation

The last thing you want to think about when planning your estate is what happens when it’s your time to go. But it’s actually one of the most important things to prepare for, especially as we age.

While it is easy to forget that estate planning does more than help our loved ones after we’re gone; it can also provide them with critical guidance about our wishes while we’re still alive, but incapable of carrying those wishes out on our own.

You can have a POA (power of attorney) in place to make sure that you have someone to handle your affairs while you are still alive. This person can be someone close to you who has your best interests at heart, or it can be an attorney who specializes in these types of matters. Having a POA in place will help avoid any potential financial disasters that could come up during a time like this.

Not Having Correct Names Listed on Estate Documents

It’s easy to get confused about where you should list your beneficiaries. If you’ve listed a beneficiary on your will, but that same person isn’t listed on the account level, it can cause delays and even cause your estate to become the subject of contentious disputes.

This is a very simple and common issue that can cause problems further down the road. If there are any contradictions it can lead your estate to become open to contentious disputes. Make sure to check, double check, and triple check where you list your beneficiaries before filing.

Not Claiming/Allocating Personal Assets

Preparing for incapacity and death is an important process. While many people take the time and care to clearly indicate to whom their financially valuable assets will go after their death, they often neglect to make plans regarding sentimental items. This can cause awkwardness later on as family members may feel confused about what they can take.

One of the best ways to avoid this issue is by gathering your family members and discussing who takes what. There are many ways you can go about this, but one of the most popular ways is by having some sort of color coding method and having everyone take turns on claiming the items that they would like to inherit one day

Once this task is completed, have a document or spreadsheet in place that lists the items and their claimants and include it in your will.

Estate Planning Solo

When it comes to estate planning, having a financial fiduciary advisor you trust is key to ensuring all of your belongings will be left to your beneficiaries.

The process of estate planning can be difficult and intimidating. It’s important to have someone who has experience, who you trust, and who can guide you through the process so that you’re leaving everything to the right people in the right amounts.

Estate Planning with Agemy Financial

At Agemy Financial Strategies, we understand that you want to make sure your estate is handled properly and distributed according to your wishes.

We can help you craft an effective estate management strategy that will enable 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 have any questions regarding estate planning and other will planning services, contact us today.

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How to Prepare for Retirement in a Volatile Market

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For every investor, the world has become a hard place. But for those reaching retirement, pressure is significantly mounting. Here’s how to cope with a roller-coaster market on the lead up to your golden years. 

When you think of retirement, many Americans imagine a fun and relaxing lifestyle. However, preparing for retirement is no easy task– especially with volatility and rising interest rates. This past year has been especially challenging to plan for retirement. The economy has been turbulent and many are having a hard time keeping up with the cost of living.

It’s estimated that 1.5 million retirees have re-entered the U.S. labor market over the past year due to such factors as more flexible work arrangements, rising costs, and the inability to keep up while on a fixed income (according to an analysis of Labor Department data by Nick Bunker, an economist at Indeed). Additionally, 25% of Americans feel they have to delay their retirement plans because of disrupted savings resulting from increased prices and market instability.

During such an uncertain time many are second guessing their road to retirement. However, a down market should not deter you from reaping the benefits of a fruitful retirement. Here are a few tips to help you prepare for your golden years in a volatile market.

Evaluate Risk Tolerance

When it comes to risk tolerance, having a diversified portfolio will help minimize the impact of risk and total loss in a volatile market. The right mix of investments for you will depend on your unique circumstances, including your age, investment goals, and risk tolerance.

The key is to find the right balance of risk and reward for you.

Investing Without Emotions

It can be hard not to invest with emotions. After all, it’s your hard-earned cash you’re watching rise and fall. Market volatility is a stressful environment for anyone with money in the stock market. Investing with emotions can lead to significant losses.

It can be difficult to impulse buy or sell stocks when the market is experiencing a hiccup. In the end, it’s hard to predict market behavior—so try not to make any risky or permanent decisions regarding your portfolio when it’s likely that current market conditions are temporary. Stick to your investment plan and build on these important building blocks:

  • A retirement date. Figure out how long you’ll have to save.
  • Your major life goals. Plan for small and big events in the future.
  • Your tolerance for risk. Find your comfort zone.

Your plan is like a safety belt when the market starts seesawing. Stay on track by sticking to it during market swings.

Having a Plan in Place

When it comes to planning for retirement, having a long-term plan can help ease stress and keep you on track for the long-run. Market volatility can tempt you to want to ditch your plan, but it’s important to think long-term. If you’re nearing retirement it may be an appropriate time to make some small changes in order to reduce the chances of major risk. Make sure to rebalance your investment plan on a regular basis — quarterly, semiannually or once a year. Why? Because volatile markets can change the proportion of your funds in different asset classes. Therefore, rebalancing resets your portfolio to your desired investment mix.

Note: It’s important not to make any significant changes without consulting your financial advisor. A trusted advisor is crucial to your success when preparing for retirement during a volatile market.

Final Thoughts

Don’t let market volatility derail your retirement savings plan. With the market’s current conditions, it may not be as smooth of sailing as you’d hope for–but market downturns don’t last forever.

The investment professionals at Agemy Financial Strategies can help you make sure your investments and assets are mixed to create a balanced plan for your unique retirement goals. Regardless of a volatile market, we can help strategize asset allocations to help stomach inflation, or revise your current plan to make helpful amendments.

If you’re looking for more ways to prepare for retirement with inflation, connect with the team at Agemy Financial Strategies here to help you get started on your portfolio diversification journey today.

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How to Create a Diversified Portfolio for Retirement

We’ve said it before and we’ll say it again: Diversify your portfolio! This practice is designed to help reduce the volatility of your portfolio over time. Let’s take a deeper look.

What does it mean to have a diversified portfolio? And why is it important? Diversifying your investments is a complicated process that requires spreading out your money into different types of investment vehicles. By diversifying your portfolio you are reducing your chances of risk and allowing your money to grow.

In life, you have probably heard the saying “Don’t put all your eggs in one basket.” Essentially, don’t put your money all in one investment, because if it fails, you’ll lose it. Diversification is part of long-term investing strategy and should be taken with a balanced approach in order to build your wealth for the years to come.

Here is what you need to know about creating a diversified portfolio for retirement with Agemy Financial Strategies.

Why is Diversification Important?

One reason why most financial advisors suggest diversification is because it reduces your chances of risk. When it comes to investing there will always be some sort of risk involved. However, by having different types of investments you can still grow your money without destroying your financial future if one investment turns out poorly.

Here is an example. If you put retirement savings into one stock, what happens when the company goes under? Your investments are gone, and you can’t get them back. That is why investing in single stocks is not the best option.

Diversification by Assets

When it comes to diversification, having various types of asset classes in your portfolio is a good strategy to implement. Here are the most common types of investments:

  • Mutual Funds
  • Single Stocks
  • Bonds
  • ETFs
  • Index Funds
  • Real Estate

Second, be sure your stock investments are diversified. You can achieve this in a few different ways:

  1. Invest in companies across different stock market sectors
  2. Invest in companies of different sizes (large-cap, mid-cap, and small-cap)
  3. Invest in both domestic and international stocks

If you own your home, you are already taking part in diversification. Being a homeowner is a great way to build equity outside of traditional investing options. There are also many ways to invest in real estate. Investing in mutual funds is also another great approach in diversifying your portfolio.

Here are some reasons why mutual funds are slightly better than traditional asset classes:

  • Mutual funds are naturally diversified
  • Long term government bonds yield between 5-6%, while mutual funds will double the rate of return
  • Index funds and EFTs try to mirror the market, but by picking the right mutual funds, you can beat the markets growth

Now that you know a little about why diversification is important, we can take a look at ways to implement diversification into your portfolio for retirement.

Choose Your Account

You probably already know that spreading your 401(k) account balance across a variety of investment types makes good sense. If you’re still in the workforce, get started by opening your 401(k) or 403(b) at work and see what mutual fund options you have. Workplace retirement plans like these have many advantages—they give you a tax break, they can be automated through your payroll deduction, and your employer most likely offers a match.

If you don’t have access to a retirement account, then your best option is a Roth IRA. Using a Roth is an added bonus as your money will grow tax-free!

Diversify Through International Funds

As you explore your account, you’ll see a list and description of your fund options. Here are the four types of mutual funds you should spread your investments into:

  • Growth and Income: This fund is a good choice if you want to invest in large companies without taking on a lot of risk. These funds are almost guaranteed to make money while offering less volatility than other funds.
  • Growth: These funds are made up of stocks from growing companies and tend to have higher returns than other types of funds. They often earn more money than growth and income funds but less than aggressive growth funds.
  • Aggressive Growth: This fund has the highest risk, but also the potential for the greatest financial rewards. It’s run by professional fund managers who buy the stocks of different companies at a low price, and sell them at a high price. This is because these stocks are risky and volatile, but have high growth potential once they have been established.
  • International: A globally diversified portfolio is an ideal way to reduce your risk and gain exposure to different parts of the world. By owning these types of investments, it can help stabilize your portfolio in times when the market dips domestically.

In order to diversify your portfolio, it’s important to put your money in different funds and classes. That way, if one type of fund isn’t doing well, the other three can balance it out.

Never Forget Risks Involved

As mentioned, the primary goal of diversification is to spread out your risk so that the performance of one investment doesn’t necessarily correlate to the performance of your entire portfolio. Diversified portfolio or not – always remember there is risk involved.

Examples include:

  • Market risk: How the movements of the overall stock market affect your returns.This is also known as systemic risk and is unavoidable if you’re investing in assets other than cash.
  • Interest rate risk: How changes in interest rates affect your returns and yields, especially for fixed-income assets (for example, how long-term Treasurys suffer when rates rise).
  • Geographical risk: How changes in political or social regimes affect the equities and fixed-income assets of a particular market (for example, in the recent Russian stock market collapse).
  • Idiosyncratic risk: How specific changes in the fundamentals of a particular company can affect the returns of its stock (for example, if you were invested in Enron before it declared bankruptcy).

In general, the more assets your portfolio holds, the more diversified and resilient to different types of risk it is.

Let’s Talk Strategy!

You’ve probably got lots of questions about how to get started diversifying your portfolio. The investment professionals at Agemy Financial Strategies can help you make sure your investments and assets are mixed to create a balanced plan for retirement.

We provide solutions for your specific financial situation. Whether it’s helping you strategize asset allocations to help stomach inflation, or revising your current plan to make helpful amendments –we are here to help.

Connect with the team at Agemy Financial Strategies here to help you get started on your portfolio diversification journey today.

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Agemy’s Guide to Understanding Inflation in 2022

Inflation is on the increase around the world, with food and energy prices hitting record highs – exacerbated by the Russian invasion of Ukraine. But has inflation peaked? And what’s the fix? 

If you’re like most Americans, you may be wondering where all of your money is going at the end of the month.

Inflation has taken a toll on many Americans this past year. Inflation is at an all time high coming in at a rate of 8.6%, which is the highest level it has reached since 1981. Whatsmore, the average American household is spending as much as $460 more on the same things they were purchasing last year. 

There are countless amounts of articles and blogs that will walk you through inflation and how it works, but not enough on how Americans can survive this historic inflation crunch. Whether it’s budgeting, cutting expenses, or boosting your income, there are always ways to help counter the impact of inflation.

Here is what you need to know.

Lifestyle Changes

Before we get into ways to grow your money back, there are day-to-day changes you can make that will add up quickly and positively impact your nest egg. 

Budgeting

Budgeting isn’t fun for anyone (well, aside from number-crunching fanatics), but it is a crucial aspect of getting your finances in order. Time and time again, too much money goes out and not enough comes in. Mastering your money is key to financial success and happiness that lasts. Luckily, there are many online resources you can use to help you budget more effectively. 

The very first thing most individuals do when it comes to creating a budget is pay their bills. While this is not a bad thing, maybe you can look at it in a different lens. Perhaps trying a new approach can help you save more in the long run? 

When you create your budget, start the other way. Ask yourself, “How much money can I use to pay myself first and treat myself as your main priority in life?” Either way, establishing a realistic foundation of your current financial status is the best way to establish your footing against the raging inflation storm. A great place to start is with our free online calculators here.  

Cutting Expenses

When it comes to cutting expenses, you should think about doing this realistically. In a perfect world, we could cut our rent or mortgage payments in half and have this solve many of your money problems. However, it’s not a perfect world, so we must go after cutting unnecessary expenses instead.

In the past most people would be able to pass on a nice dinner out monthly to cut unnecessary expenses. However, inflation has made it easier to see shrinkage even by cutting out this cost. In order to combat that shrinkage, have a conversation with yourself: “Is this something I need? Is this something I’m getting the value out of? For most people, there’s a lot of expenses that they can cut and they’re not even going to notice a difference.

An easy way to start is by canceling services you don’t use as much as you thought you would such as streaming services and gym memberships. You can track these down yourself, or you can utilize online apps such as mint to help monitor your spending.

Other ways to trim your expenses during inflation include:

  • Join your grocery’s shopper-loyalty plan; some programs automatically load digital coupons for things you already buy.
  • Look over your grocery store’s weekly sales flyers.
  • Organize your errands to cut down on driving. 
  • Can you work remotely? Discuss a hybrid schedule with your boss to cut your weekly commuting costs.
  • Shop your necessities: mobile phone and internet plans, insurance policies (home, auto, health), banking services.

At the end of the day, sit down and map out what is no longer serving you and cut it. You will be surprised with how much you can save by canceling subscriptions or switching to a different provider.

Financial Changes

Now we have your lifestyle changes noted, it’s time to talk money. More importantly, how to grow your money in these challenging financial times. 

Boosting Income

We are currently in the peak of the workers market. Meaning, there are jobs and opportunities for many people. Depending on where you work and if you’re still in the workforce, now may be the most efficient way to increase your income. With job openings at an all time high and layoffs at a historic low, employers are trying hard to keep their employees.

Asking for a raise is one way to boost your income. Another way to do this is by reviewing the salary data for your role and job description. Could you earn more elsewhere? Having a well-planned strategy, but pointing out the truth of the marketplace is fair game. 

Maybe it’s time to scratch that side-hustle itch. The gig economy remains very much with us, and picking up extra cash might be no more than a mouse click away. This is especially true if you have expertise gained through education and experience. This could easily lead you to market your freelance skills as a retiree. 

This applies especially to seniors who’ve lately discovered their retirement financial plan needs some patchwork. A great opportunity for seniors is working for a small business that needs someone highly experienced with flexible hours. It could be a win-win for someone looking to do a phased retirement. 

Savings Strategies

Taking advantage of your company’s 401(k) is the best way to pay yourself first –especially if your employer offers a match. Make a contribution or take full advantage of this opportunity. 

After age 50, your retirement plan may allow you to make catch-up contributions. These let you make additional contributions—beyond the regular maximum contribution, which you must first meet—to your IRA or your organization’s plan (if applicable). In 2022, you can make a maximum annual contribution of $20,500 to your employer’s retirement plan if you’re still working. And if you’re age 50 or older, you may be able to make an additional catch-up contribution of up to $6,500.

Focus on Investments – Safe Investments

When you’re nearing retirement, you need a somewhat different approach to protect yourself from inflation. You can’t afford to take as much short-term risk with your investments because you need them to provide a steady income for you to live on.

In this situation, you need investments that offer decent yields with little risk. Good lower-risk investments as you near retirement include certificates of deposit (CDs), Treasury bonds, municipal bonds, and annuities.

These investments protect your principal, but they carry a risk of their own: the interest rate they pay might not keep pace with inflation. If the inflation rate is high, money tied up at a low, fixed interest rate will lose value over time.

Finally, have you considered using dollar-cost averaging to build wealth over time? Dollar-cost averaging requires the investor to invest the same amount of money in the same stock on a regular basis over time, regardless of the share price. The number of shares purchased each month will vary depending on the share price of the investment at the time of the purchase. The idea being when the share value rises, your money will buy fewer shares per dollar invested. When the share price is down, your money will get you more shares. Over time, the average cost per share you spend should compare quite favorably with the price you would have paid if you had tried to time it.

Beating Inflation with Agemy

If you’ve checked in on your retirement savings during a period of volatility and noticed lots of seesawing in value, it’s possible your current mix of investments, called an asset allocation, could use some adjusting. This is where speaking with your trusted Fiduciary advisor can help. This is because an experienced financial professional can help talk you through what’s happening in the markets that you don’t understand.

At Agemy Financial Strategies, we provide solutions for your specific financial situation. Whether it’s helping you strategize asset allocations to help stomach inflation, or revising your current plan to make helpful amendments –we are here to help.

Connect with the team at Agemy Financial Strategies here to help you get started on your retirement planning journey today. 

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How to Manage Your 401(k) for Retirement Success

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Are you making the most of your 401(k)? A well-managed 401(k) is the cornerstone of a secure retirement, yet many people miss out on maximizing its potential. A recent survey reveals that while 57% of workers contribute to a 401(k) or company-sponsored savings plan, a staggering 41% are leaving money—and peace of mind—on the table.

In this blog, we’ll break down essential strategies to help ensure your 401(k) works harder for you. We will cover everything from smart asset allocation to minimizing fees. Here’s what you need to know to help protect your future and avoid common retirement pitfalls.

Understanding Your 401(k): The Basics

A 401(k) is a retirement plan employers offer that lets you save and invest part of your paycheck before taxes are taken out. One of its biggest benefits is tax-deferred growth, which allows your savings to grow over time without being taxed until you withdraw them in retirement. Here’s a breakdown of the key features of a 401(k):

  • Tax Advantages: Your 401(k) contributions are made pre-tax, lowering your annual taxable income. For 2024, you can contribute up to $23,000 as an employee or $69,000 when combining employee and employer contributions. If you’re 50 or older, you can add an extra $7,500 as a catch-up contribution, raising your limit to $30,500.
  • Employer Matching: Many companies will match a portion of what you contribute to your 401(k), which is essentially free money. However, about 25% of workers don’t contribute enough to get their full match. Ensure you’re contributing enough to get the full match and take advantage of this opportunity.
  • Investment Options: Most 401(k) plans offer a variety of investment choices, such as stocks, bonds, and mutual funds. Selecting a mix that fits your risk tolerance and long-term retirement goals is key.

Diversify Your Investments

Diversification is a fundamental principle of investing that involves spreading your money across different asset classes, such as stocks, bonds, and cash, to help minimize risk. For 401(k) holders, diversification can provide a potential cushion against market volatility and help reduce the impact of a downturn in any single investment.

A well-diversified portfolio might include a mix of:

  • Equities (Stocks): These offer the potential for higher returns but come with increased risk. Consider allocating a percentage of your portfolio to stocks depending on your age and risk tolerance.
  • Bonds: These are generally considered safer investments, providing steady income with lower risk. As you near retirement, increasing your allocation to bonds can help protect your portfolio from market fluctuations.
  • Cash or Cash Equivalents: These provide stability and liquidity but usually offer lower returns. It’s advisable to keep a small portion of your portfolio in cash or cash equivalents for emergencies.

Consider Roth 401(k) Contributions

While traditional 401(k) contributions are made pre-tax, some employers offer a Roth 401(k) option, where contributions are made after-tax. This means you pay taxes now, but qualified withdrawals in retirement are tax-free. This strategy can be effective for high-net-worth individuals, especially if you anticipate a higher retirement tax bracket. To determine whether Roth contributions are right for you, consider the following:

  • Current vs. Future Tax Rates: If you expect your retirement tax rate to be higher, Roth contributions might be more beneficial.
  • Diversification of Tax Treatment: By having both traditional and Roth savings, you can have more flexibility to manage your tax liability in retirement.
  • Required Minimum Distributions (RMDs): Traditional 401(k)s require you to begin taking required minimum distributions (RMDs) once you reach age 73, which can push you into a higher tax bracket if you’re forced to withdraw more than you’d like. On the other hand, Roth 401(k)s don’t have RMDs during your lifetime, allowing your money to continue growing tax-free for as long as you want.

Ultimately, deciding between traditional and Roth 401(k) contributions—or a combination of both—depends on your financial situation and long-term retirement goals. Consulting a fiduciary advisor can help tailor a strategy that maximizes your tax savings and helps ensure you’re on track for a successful retirement.

Consider Rolling Over to an IRA

Effectively managing your retirement accounts, such as 401(k)s and Roth IRAs, requires a strategic approach that maximizes tax benefits. Many individuals choose to roll their 401(k) into an Individual Retirement Account (IRA) upon retirement. This move can offer several key benefits:

  • Increased Contribution Limits: In 2024, more Americans will qualify for Roth IRA contributions, with the adjusted gross income (AGI) limits rising. For single filers, the AGI range will increase to $146,000–$161,000, up from $138,000–$153,000 in 2023. For married couples filing jointly, the range will rise to $230,000–$240,000, up from $218,000–$228,000.
  • Wider Range of Investment Options: IRAs typically provide more investment choices than 401(k) plans, offering the potential for greater diversification flexibility.
  • Consolidation: If you have multiple 401(k) accounts from different employers, rolling them into a single IRA can simplify account management.

However, be mindful of potential downsides, such as losing certain creditor protections unique to 401(k) plans. Consult a fiduciary advisor to help weigh the pros and cons based on your specific situation.

Regularly Review and Adjust Your Plan

Over time, market movements can cause your retirement portfolio to stray from its intended asset allocation. Rebalancing is the process of selling assets that have performed well and buying those that have underperformed to help restore your portfolio to its original target allocation. This practice helps maintain your preferred risk level so that your 401(k) remains aligned with your retirement goals.

Regular reviews of your 401(k) and similar accounts are essential to keeping your plan on track. It’s a good idea to set a schedule to review your account at least once a year, making adjustments as necessary based on:

  • Life Changes: Significant events like marriage, divorce, or the birth of a child may require you to rethink your financial strategy.
  • Retirement Goals: As your goals evolve, you may need to adjust your contributions, asset allocation, or even your retirement timeline.
  • Market Conditions: Shifts in the economic environment can prompt necessary changes to your investment strategy.

Working with a fiduciary advisor can help you navigate timely adjustments that will help ensure your 401(k) stays on course as your circumstances and the market evolve.

Seek Professional Guidance

Properly managing a 401(k) requires knowledge and ongoing attention. Consulting with a fiduciary advisor can help you make informed decisions tailored to your unique circumstances. At Agemy Financial Strategies, our team of fiduciary advisors is here to walk you through the process of achieving renewable wealth so that your money can work hard for you and you can reap the benefits of a comfortable retirement.

Here are just some of the many ways we can help our clients:

  • Goal Setting: We will help you establish clear and attainable retirement goals, crafting a personalized financial blueprint to realize your retirement lifestyle aspirations.
  • Risk Assessment: Identifying potential financial risks is the cornerstone of our approach. 401(k) plans come with specific rules and regulations that must be followed to maintain their tax-advantaged status. A fiduciary can help ensure that your plan complies with ever-changing tax laws and regulations, reducing the risk of penalties and setbacks.
  • Portfolio Management: We’re highly experienced in implementing and managing a diversified investment portfolio meticulously aligned with your long-term objectives and risk tolerance.
  • Regular Reviews: Beyond managing your 401(k), a fiduciary can help you develop a comprehensive financial plan encompassing your entire financial picture. This includes tax management, estate planning, and other critical components contributing to your financial well-being.

Last Thoughts

In the quest for financial independence, your 401(k) stands out as a promising tool for a secure financial future. Its high contribution limits and tax advantages can significantly boost your retirement savings. However, partnering with a fiduciary is valuable in navigating the complexities for long-term success.

At Agemy Financial Strategies, you can rest assured knowing that your financial affairs are in capable hands. Our priority is helping you take care of yourself and your family. We want to learn more about your situation, identify your dreams and goals, and provide you with the highest level of service.

If you want to learn more about how we can help you manage your wealth, schedule a complimentary strategy session here today.

Disclaimer: This content is for educational purposes only and should not be considered financial or investment advice. Please consult with the fiduciary advisors at Agemy Financial Strategies before making any investment decisions.

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How to Manage Your 401(k) for Retirement Success

To maximize your 401(k), you’ll need to understand the types of investments offered, which are best suited for you, and how to manage the account going forward, among other strategies.

Ask older Americans what they regret in their retirement planning, and chances are, they’ll say they wish they had started saving for retirement earlier. According to a survey conducted by the Insured Retirement Institute, 44% of workers believe they will not have enough income to last throughout retirement. It’s never too early to start thinking about the future — and never too late to start catching up on saving.

A 401(k) plan is an employer-sponsored retirement savings account that allows you to make pre-tax contributions to your retirement fund. One of the biggest perks about having a 401(k) through your employer is that you can set up automatic payroll deductions so that money is taken from your paycheck and deposited into your account. Which makes it easier to maximize your savings potential.

401(k)s offer you a wide variety of investment options to choose from, including stocks and bonds. You can even invest in mutual funds made up of other investments or a combination of all three options.

However, there are also restrictions on how much you can contribute each year. Here’s what you need to know about 401(k)s and how you can set them up for retirement in order to benefit you in the long run.

How They Work

There are two main options, each with distinct tax advantages. 

Traditional 401(k): With a traditional 401(k), employee contributions are deducted from gross income, meaning the money comes from the employee’s payroll before income taxes have been deducted. As a result, the employee’s taxable income is reduced by the total amount of contributions for the year and can be reported as a tax deduction for that tax year. No taxes are due on the money contributed or the investment earnings until the employee withdraws the money, usually in retirement.

Roth 401(k): With a Roth 401(k), contributions are deducted from the employee’s after-tax income, meaning contributions come from the employee’s pay after income taxes have been deducted. As a result, there is no tax deduction in the year of the contribution. When the money is withdrawn during retirement, no additional taxes are due on the employee’s contribution or the investment earnings.

Now we understand how they work, it’s time to discuss ways to maximize them. 

Consider Contributing the Max for Your Company Match

If you are still in the workforce and your company is matching the funds you contribute to a 401(k) savings account up to a certain point, contribute as much as you can until they stop matching the funds. Regardless of the quality of your 401(k) investment options, your company is giving you free money to participate in the program. Never say no to free money!

Once you reach the maximum contribution for the match, you might consider contributing to an Individual Retirement Account, also known as an IRA, to diversify your savings and have more investment choices. Just don’t miss out on the match!

Learn the Basics of Investing

Investing (especially in a bear market) may seem complicated and even a little overwhelming. To help you understand the basics of investing, start by reading through your 401(k) plan; essentially you should know the ins and outs of your terms.

Evaluating different funds in your 401(k) plan can be confusing. If you don’t know what an expense ratio is, or 12B-1 fees, risk tolerance, etc, it’s easy to feel overwhelmed by the jargon and miss the point of the information you’re given.

You can usually find definitions and explanations anywhere online, and if you’re still unsure then, it’s probably best to set up a complimentary call with your financial advisor to clear up any confusion. And don’t forget, you don’t have to pick just one fund. Instead, you could spread your money over several funds. How you divvy up your money—or your asset allocation—is your decision. However, there are some things you should consider before you invest.

What to Consider Before Investing

The elephant in the 401(k) investing room is risk tolerance. If you have a long time horizon, it can be smart to get aggressive with your portfolio, but those closer to retirement should be careful, too. For those close to retirement, it may be time to shift into preserving your assets rather than trying to play catch-up. Only you and your Fiduciary advisor can say what is considered “risky” for you, so always consult together first to ensure you don’t take on more risk than necessary. The least-risky investment in a 401(k) would be either money market funds or U.S. government bonds (known as Treasuries). However, these investments will typically offer a very low rate of return and may not keep up with inflation.

The risk tolerance equation also plays into your age – specifically how many years you are from retirement. The basic rule of thumb is that a younger person can invest a greater percentage in riskier stock funds. At best, the funds could pay off big. At worst, there is time to recoup losses since retirement is not imminent.

Routine Maintenance of Your 401(k)

In life there are many things that need routine maintenance on, such as your car or home. Think of your 401(k) as just another asset that needs a check-up.

Why? As different assets move up or down in value, they become a smaller or larger percentage of your overall portfolio. If you don’t rebalance on a regular basis, try to make a habit of rebalancing once every six months.

This is because the various positions in a portfolio grow at different rates, and over time the portfolio can deviate from its target allocation. Investors should look at their portfolios to see if they need to be rebalanced. Rebalancing returns the 401(k) from its current allocation to its target allocation.

Diversify, Diversify, Diversify

This is what good asset allocation is all about. Don’t put all your eggs in one basket, or all your assets into one asset class. Spread them among different asset classes and investment styles. Doing so will spread your assets over an assortment of investments and should reduce your risk.

Over time, a diversified portfolio of stocks generally returns more than a typical bond portfolio. The Standard & Poor’s 500 index has gained an average of about 10 percent annually for decades. And with many retirees living longer than ever, they’re going to need to ensure their investments provide a high rate of return. An example here is a target-date fund…

Target Date Funds

When it comes to investing your 401(k) money, many people choose a target-date fund. Target-date funds are geared to evolve as you move closer to retirement. For example, if you’re planning to retire in 2035, you would invest in a target-date fund that matures in that year. The fund’s managers will continually re-balance the fund to maintain an appropriate allocation as the target date gets closer.

But there are also some reasons as to why this type of fund may not be the best choice. Firstly, funds use different allocation strategies, which may or may not be a good match with your goals. A target date fund’s performance is largely based on the fund managers. Since you probably don’t know the difference between a good manager from the bad, picking a fund will be difficult.

Equally important, fees for these funds are often high, and novice investors don’t understand the golden rule of target-date funds: If you invest in one, don’t mix it with other investments. These funds have been notorious for being an “all or nothing investment”. Investing in it can throw off the allocation of your 401(k).

How Do I Start a 401(k)?

If you work for a company that offers a 401(k) plan, contact the human resources or payroll specialist responsible for employee benefits. You’ll likely be asked to create a brokerage account through the brokerage firm your employee has selected to manage your funds. During the setup process, you’ll get to choose how much you want to invest as well as which types of investments you want your 401(k) funds invested in.

How Agemy Can Help

Nothing is more central to your retirement plan than your 401(k). It represents the largest chunk of most retirement nest eggs. A comprehensive financial plan can help you make the right investment decisions and prepare for retirement.  

At Agemy Financial Strategies, our Fiduciary financial advisors are equipped with the tools to help you make the right investments and make the most out of your retirement savings. We are here to help you navigate any questions you have regarding investments, retirement savings and anything else that comes up during your retirement process.

As Fiduciary advisors, it’s our duty to act on your behalf in finding the right solutions for your individual wants and needs. For more information on investing, retirement and financial planning services, contact us here today.

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Is an Early Retirement for You?

Early retirement or late retirement – that is the question! If you’re thinking about retiring early, you’ll want to carefully weigh this life-changing decision. Here’s what you should know!

Retirement plans can be affected by many factors, such as job loss, health, or family responsibilities. These issues can lead people to leave the workforce and retire sooner than expected. On the flipside, many are forced to work longer than they planned to make up for the shortfalls of such events. However, if you’re lucky enough to be in control of your retirement, it is important to note the benefits and pitfalls of retiring early before you make any decisions.

What is considered early retirement? Typically, leaving the workforce before the age of 65 is considered early retirement. But most see retiring “early” being in their 40s or 50s. Increasingly, employers are not offering traditional pensions to their employees, which in the past allowed them to supplement their guaranteed income and potentially retire early. What’s more, Social Security can begin being collected as early as 62, but you won’t receive your full benefits until age 66. With or without a traditional pension, it’s important to have a plan in place if you wish to make your dream to retire early a reality.

Pros of an Early Retirement

If you’ve had the same commute or schedule for years, it might be exhilarating to think of breaking free. Before doing so, you’ll need to ensure you have enough money set aside.

Improvement to Your Well-Being

Sleeping in and being able to do the things you have been wanting to do for an extended period of time sounds nice right? Many of us can imagine how good it feels to leave the office behind and opt in for healthier habits.

Studies have shown that retiring earlier in life makes you live longer. Obviously gender, race, ethnicity, education and other aspects of life play into that factor. An analysis in the United States found about seven years of retirement can be as good for health as reducing the chance of getting a serious disease (like diabetes or heart conditions) by 20 percent.Positive health effects of retirement have also been found by studies using data from Israel, England, Germany and other European countries.

More time to Enjoy Activities

Once you have retired, you no longer have to worry about taking time off from work to go do the things you’ve always wanted to do. One of the biggest benefits of retiring early is the health and flexibility you will have to retire. You will also have more time to see your friends and family, potentially more time with your grandchildren too. Oh the places you can go!

Plus, the earlier you retire, the more years you’ll have before health issues begin to limit your mobility.

New Opportunities

If you’re feeling like it’s time to make a change, don’t wait until later. Starting your own business or switching fields at age 60 tends to be a challenging and risky move. However, starting earlier will give you more time to get established in your new career path.

If changing careers is something that you do want to do, it’s better to retire early. A business that’s launched at age 60 could easily keep you intellectually challenged and out of mischief for another 20 years or more.

Reduce The Cost of Living by Moving

If you’re considering early retirement, you may be in a position to sell your home and move to a new city or state. This is especially true if you live in an area that has a high cost of living.

Let’s use the example of a homeowner who purchased a house in Connecticut in the 1990s and is considering selling it and moving to a state where the cost of living is much less, such as Colorado.

This is a clear win-win for the homeowner, who can sell the home that has increased significantly in value over the years since its purchase. The owner may move to a new state with a lower cost of living and purchase a similar-sized home for much less. Any remaining money from the original home sale can go into retirement savings

If Your Financial Advisor Recommends It – Do it!

Retirement is a big deal. It’s the culmination of a lifetime of hard work, and it’s a milestone that deserves to be celebrated. But if you’re ready to retire early, no matter how much you’ve saved up or how much you’ve planned for your golden years, it can still be a scary thing to do.

If your financial advisor signs off on an early retirement, go for it! The first 12 to 15 months of retirement can feel somewhat like jumping off a cliff — no doubt about it. This is natural: Retirees are adjusting and settling into an enjoyable retirement during this timeframe.

Trust that your advisor knows what is best for you. As Fiduciary financial advisors, it’s our job to provide an overview of their solutions and overall retirement plan — and the confidence regarding their decision on when to retire falls into place.

Cons of an Early Retirement

Even if you save enough, there’s no guarantee that bidding farewell to the workplace will bring happiness. For some, early retirement can even lead to a sense of anxiety or a desire to go back to work. Some of the main drawbacks include:

Your Social Security Benefits Fall

The sooner you start to take Social Security, the lower your benefits will be. If you were born in 1960 or later, for example, and you start taking benefits at age 62, the earliest age at which you’re eligible, your monthly benefits will be 30% less than if you wait until age 67, which Social Security refers to as your “full retirement age”.

More Time Without Income

Leaving the workforce early means you’ll have to support yourself for a longer time, which could last for decades. As mentioned, Social Security benefits typically aren’t available until you reach age 62. There could also be tax penalties if you withdraw from certain retirement accounts before the age of 59 1/2.

You Could Pay More Health Insurance

Medicare kicks in for health insurance when you’re 65. Before then, you’re responsible! This also applies to health insurance benefits you could be receiving from your employer.

Your Money Needs to Stretch Further

If you retire at age 62 and live to 90, your individual retirement accounts (IRAs) and other savings will have to cover you for 28 years. If you retire at 70 and live for the same length of time, however, your savings will only have to last for 20 years. Working longer also means you’ll have more years to contribute to a 401(k) or another retirement plan, and the money in your plan will have more time to compound.

Loneliness

What’s the point of retiring early if you’re the only one doing it? Retirement is meant to be enjoyed, so keeping it in line with your spouse of great friends will mean less alone time for you. What’s more, office environments tend to create natural settings for social engagement. If you don’t schedule activities that involve others, you could soon be bored or disengaged with your community.

Early Retirement Planning with Agemy Financial Strategies

There is a lot at hand that needs to be considered before you decide to retire. Consider talking to your friends and family members who are pursuing early retirement before making a decision. You might also get in touch with your financial advisor to see if you have enough to retire early.

Having a trusted advisor on your side will make planning for the golden years easier –especially when it comes to creating a retirement plan.

At Agemy Financial Strategies, we take the time to handcraft a retirement plan for you based on your individual wants and needs. We’re here to help you navigate any questions you have regarding investments, retirement and anything else you may have questions on during your retirement process. As fiduciary advisors, it’s our duty to help you find the right solutions for your wants and needs.

If you have any questions regarding early retirement and our retirement planning services, contact us today.

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Important Tasks & Decisions for Each Phase of Retirement Planning

Retirement planning is a process that maintains your finances throughout the course of your post-career years. This process essentially has 5 steps, knowing where to start, seeing how much money you’ll need, setting your priorities, choosing accounts and choosing investments.

The retirement process begins ideally when you’re young, and when you can invest as aggressively as your budget allows. Over the course of time – as you get older – you dial back to a mix of investments.

We know this process can be stressful and often overwhelming. That’s why we’ve put together a road map for you. Read on to learn five key steps that will help you stay on track as you approach retirement.

When Can You Retire?

This boils down to when you want to retire, and when you’ll have enough saved to do so. The earliest age you can begin claiming social security benefits is 62 and full retirement age is recognized at 67.

Most people choose to retire early either because they can afford to do so or because they might have to. This generally applies  for people who decide to retire later in life. Many people have found that it’s ideal to ease into retirement and opt for a phased retirement, which is also an option you can discuss with your financial advisor. Ultimately, it all comes down to what makes the most sense for you, as there is no one size fits all plan.

Step 1: Knowing When to Begin Retirement Planning

When you first enter the workforce you’re most likely to be in your early twenties. This is when you want to start your retirement planning. The earlier you begin, the more time your money has to grow and the more risks you can take with those investments

That being said, it’s never too late to start planning for retirement. Even if you haven’t given much thought to how old you’ll be when you retire or what kind of lifestyle you want for yourself at that point, now is the time to start thinking about it—and taking action! Every dollar that goes into a retirement account now will be much appreciated when that day comes.

Step 2: Figure out How Much Money You Need to Retire

To determine how much money you’ll need to retire, you need to consider two factors: your current income and expenses, and how those expenses will change once you’re retired.

The typical advice is that retirees should expect to replace 70% to 90% of their annual pre-retirement income through savings and Social Security. For example, a retiree who earns an average of $63,000 per year before retirement should plan for $44,000 to $57,000 per year in retirement.

Step 3: Prioritize Your Financial Goals

Your needs will likely change depending where you fall in this roadmap. If you’re just getting started on saving for retirement, it can be tempting to focus your efforts on the short term. However, if you’re nearing retirement, retirement is not your only savings goal. Many people have financial goals they feel are more pressing, such as paying down various forms of debt, or building up an emergency fund.

Generally, you should aim to save for retirement at the same time you’re building your emergency fund — especially if you have an employer retirement plan that matches any portion of your contributions.

Step 4: Choose a Retirement Plan Catered to You

Retirement planning is equal parts how much money you save, and where you save it. If you have a 401k or employer retirement plan, start by utilizing the company matching policy. If you don’t have a workplace plan in place, you can open your own.

There is no single best retirement plan, but there is likely a good combination of retirement accounts for you. In general, the best plans provide tax advantages, and, if available, an additional savings incentive, such as matching contributions. That’s why, in many cases, a 401(k) with an employer match is the best place to start for many people.

Here are some examples of retirement plans that might work for you:

  • 401k
  • Roth 401k
  • Traditional IRA
  • Self-Directed IRA
  • Simple IRA
  • SEP IRA
  • Solo 401k

Step 5: Choose Your Retirement Investments

Retirement is a time for celebration and reflection, but it’s also a time when you’ll have to make some big decisions about your investments. The two most important questions to ask yourself are:

  1.  How long do I have until I need the money?
  2.  How comfortable am I with risk?

Again, depending where you find yourself on this road map, you will have different choices to make in terms of investing strategies. If you’re young and have a long way to go until retirement, you can afford to invest aggressively. This is because there’s plenty of time for those assets to recover if the market goes down. However, as you get older, your retirement savings begin to account for a larger part of your total net worth, so even small losses could be devastating. In that case, it’s wise to review your investment portfolio and sit down with a fiduciary advisor to discuss all of your investment options.

As you move through life and gain more experience managing your finances, it’s important that your investments evolve alongside you—especially as you start thinking about what kind of lifestyle you want after retirement. This means making sure that when the time comes for drawing down on those savings you’re able to live comfortably without having to constantly make compromises.

Work With Agemy Financial Strategies

At Agemy Financial Strategies, we value the opportunity to get to know you and your situation so that we can create a plan specifically tailored to you. Our purpose is to educate our clients – whether that be planning for retirement, legacy planning, wealth management, or being by your side when it’s time to leap into retirement.

We want you to know that we’re here to help you navigate any questions you have regarding investments, retirement and anything else that comes up during your retirement process. As Fiduciary advisors, it’s our duty to act on your behalf in finding the right solutions for your individual wants and needs.

For more information on our investing, retirement and financial planning services, contact us here today.

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Fall Financial Checklist for 2022

With the final hot snap of summer in the rearview mirror, it’s time to get your finances ready for the last few months of 2022.

Having a fall financial checklist in place will allow you to make fall a financially productive season. It’s a great time to start thinking about what you can do to save some money, prepare for the following months, and improve your life.

There are a number of financial moves you can make in the final months of the year to ensure you are set up for success come January and throughout the new year.  Agemy Financial Strategies has put together a fall financial checklist to help you get your financial house in order.

The tasks on this fall financial checklist will help you to remember to sign up for health insurance, beef up your retirement savings, reviewing your estate plan and more!

Health Insurance

This is the time of year where we should get our health insurance information together. Open enrollment for 2022 through the Health Insurance Marketplace (HealthCare.gov) starts on Monday, November 1 and you have to enroll by December 15, 2022 for coverage that starts January 1, 2023. Some states have their own ACA exchanges which in turn have different date ranges for open enrollment. Colorado and Connecticut fall under this category.

State State Open Enrollment Period for 2023 Plans
Colorado November 1, 2022 – January 15, 2023
Connecticut November 1, 2022 – To Be Announced

If you have private health insurance or health insurance through your employer, you will want to find out what important dates you need to sign up for or get information from them, so that you do not miss out.

By doing as much research as you can now, you will ensure that you will have the best health insurance plan for you and your family. Holidays typically sneak up on us; you will probably be quite busy. By taking care of this now you can avoid many headaches in the future.

If you are nearing retirement, this is an especially important step to protect your nest egg. Did you know that health care continues to be one of the largest expenses in retirement? To help fill a gap in saving for health care expenses, consider increasing contributions to your tax-advantaged accounts, especially HSAs (if you have one), which enable tax-free spending on health care in retirement.

Max Out Your Retirement Savings

Saving for retirement is one of the best financial strategies you can take part in. Everyone will hopefully retire at some point in their lifetime. Saving early on in life for your golden years will help prevent you from running out of money. Whether you’re on track for retirement or need to catch up, a Fiduciary financial advisor can help prepare you for your later years. Here are a couple ways you can max out your savings:

  • Take advantage of your company 401k or 403b
  • Apply for retirement savings credits
  • As mentioned, contribute to a health savings account (HSA)

It’s important to look at your retirement plan and see if any of our tips could maximize your savings. If you’re like most people, qualified-retirement plans, Social Security, personal savings and investments are expected to play a role. Once you have estimated the amount of money you may need for relocating in retirement, a sound approach involves taking a close look at your potential retirement-income sources.

Tax Return Extension

If you received an extension on your tax return, make sure you complete and file it by October 17, 2022. You can get an automatic extension of time to file your federal income tax return by filing Form 4868. This gets you from April 18, 2022, to October 17, 2022, to file without incurring any penalties.

However, getting an extension doesn’t give you more time to pay, it only gives you more time to file your return. Anything you owe after the deadline is subject to interest and a late-payment penalty–even if you get an extension. Fortunately, you may be able to catch a break on the late-payment penalty if you’ve paid at least 90% of your actual tax liability by the deadline.

Tax-Loss Harvesting

Tax-loss harvesting may be able to help you reduce taxes now and in the future.

Tax-loss harvesting allows you to sell investments that are down, replace them with reasonably similar investments, and then offset realized investment gains with those losses. The end result is that less of your money goes to taxes and more may stay invested and working for you.

If you have more capital losses than gains, you may be able to use up to $3,000 a year to offset ordinary income on federal income taxes, and carry over the rest to future years.

Rebalance if Needed

Rebalancing refers to the process of returning the values of a portfolio’s asset allocations to the levels defined by an investment plan. Those levels are intended to match an investor’s tolerance for risk and desire for reward.

This sound investment strategy involves cashing in some profits on your better-performing assets and reinvesting the proceeds into your laggards. Rebalancing assumes you own a mix of investments and have a target for how to allocate them, holding certain percentages in stocks, bonds, cash and so on, including subcategories such as small or international stocks. It also assumes that hot investments will cool off, and laggards will perk up, eventually.

Review Your Estate Plan

Benjamin Franklin said it: “Nothing in this world can be said to be certain but death and taxes.” Perhaps once a year, you should verify that you have listed the right people to take over your wealth should the time come.

Once you’ve created your estate plan, it may be tempting to put it on a shelf and forget about it. However, factors that affect your estate plan can quickly change, resulting in a need to update your plan so that it continues to match your goals and minimize taxes.

Budget for the Holiday Season

The holidays are right around the corner. With Halloween, Thanksgiving, Christmas, New Year’s and many other holidays, the holiday season can be expensive. If you haven’t yet, creating a holiday budget can help you save in the long run. Start saving money for the holidays if you haven’t done so already, and find ways to make extra cash if you think your budget is cutting it close.

A great way to start is by creating a list of all of your expected expenses. For example:

  • Travel
  • Holiday meals
  • Gifts for loved ones
  • Charitable donations

Final Thoughts

As we head towards the holidays, it’s important to know where your financial assets stand so you can avoid any missteps when it comes to managing your money.  It’s always important to meet with your Financial Advisor to get the facts from the source. Preferably a Fiduciary. “Fiduciary” means trust, and a person with a fiduciary duty has a legal obligation to maintain that trust.

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.

However you’re spending the holidays this year, the team at Agemy Financial Strategies are always on-hand to help guide you through your financial planning journey. Contact us here today to get started.

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