Financial Planning Tips for Fall

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.

/by

Five Estate Planning FAQs

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

/by

Investing in Women

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.

/by

5 Key Mistakes to Avoid in Retirement Planning

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

/by

How to Manage Your Money Better in 2021

Being good with finances is about more than just making ends meet. And when it comes to managing your financial future, there really is no time like the present. 

There are many factors that come into play when managing your finances. Such as changes in tax laws, inflation, increased healthcare costs, job security and more. These uncontrollable and unknowable situations may make you feel powerless. Whatever your feelings about money are, it’s time to take control again.

*Spoiler alert: Money management doesn’t have to be stressful! If you follow these four steps, you’ll be able to move from financial stress to financial stability.*

1. Start Budgeting

If you are struggling to handle your finances, then you likely need to create a budget—a plan for how to spend your money each month, based on how much you typically earn and spend. A budget is your best tool to change your financial future. To start, write down your income and all your expenses, and then subtract the expenses from the income to determine your discretionary spending. To make this easier, use one of our financial calculators here to discover any problems for discounted cash flows, internal rates of returns, loan formulas, net present value and markup calculations and so on.

Next, at the start of each month, set up a budget to allocate how discretionary funds get spent. Track the spending over the course of the month, and at the end of the month, determine whether you stuck to the budget. If you spent more than you made, you can fix your budget by cutting unnecessary expenses or, if possible, earning more. Implement the revised budget the next month to start living within your means.

And don’t forget, the moments you spend filling the fields in of these calculators will give you a target, so that your financial freedom turns into a real goal. They’re free, they’re simple, and they’re everywhere. All it takes is a few minutes of your time to use one, and see the path you need to take.

2. Maximize your Savings

When it comes to maximizing your savings, the value of high savings rates cannot be overstated. Like the financial markets, life doesn’t usually move in a linear fashion. There will always be setbacks and unexpected hurdles (did someone say COVID!?). So if you’re only saving the bare minimum across your investment and cash accounts, or haven’t invested outside of your 401(k), you may be in a tough spot when things don’t go according to plan.

Did you know your savings can take a hit if you’re not proactively managing your taxes? Understanding tax strategies and managing your tax bill should be part of any sound financial approach. Some taxes can be deferred, and others can be managed through tax-efficient investing. With careful and consistent preparation, you may be able to manage the impact of taxes on your financial efforts.

Lastly, always have an emergency fund. A sudden change in income or an unexpected expense can happen at any time, and you’ll need something to handle these moments. Most financial experts recommend saving three to six months’ worth of expenses in an emergency fund. So in addition to having a regular savings and checking account, you should consider putting your emergency money into a separate savings account. A high-yield savings account in particular can be a great way to take advantage of the earning potential on money you won’t be touching anyway.

3. Pay off your Debt

One of the most expensive mistakes that you can make is to carry a lot of debt, especially high-interest credit card debt into your retirement years. If you want to change your financial picture and gain more financial opportunities, pay off your debt as quickly as possible.

Start by listing all of your current debt, be it credit card debt, student loan debt, or a car loan, and figure out the minimum amount you owe to remain current with each one. Simply paying the minimum amount won’t get you out of debt quickly, so evaluate your fixed expenses, and determine how much of your discretionary spending budget you can allocate toward debt repayment.

Try to reduce the interest rate on the debt by asking the issuer for a lower rate, consolidating multiple debts into one, or transferring high-interest debt to a low-interest credit card, such as a balance-transfer card. Then, set up a debt-payment plan, and adopt sound spending habits to pay off the debt as quickly as possible.

Debt management also includes monitoring your student loans. These loans can saddle you with debt for years if you are not proactive about paying them off. Whether you need to refinance or consolidate them, see whether you qualify for a student loan forgiveness program, or add them to your debt-payment plan. Getting control of your student loans is an excellent step to take right now to improve your finances.

You don’t have to drastically step up your loan-repayment schedule, either; by paying half your student loan amount every two weeks, you will make a full extra payment every year. Some lenders will even reduce your interest rate by around 0.25% when you sign up to make automatic loan payments.

4. Invest in Your Future

Once these three steps are covered, it’s time to shift your focus to money management for the long term. AKA investing. 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.

You don’t have to figure this out on your own. Connecting with an experienced financial advisor can help you go over your options so that you can feel confident with your investment choices. They’ll walk you through the good times and the bad, and help you stay the course or make any necessary adjustments to reach your goals and help your money grow over time.

Conclusion

One of the keys to a sound financial strategy is spending less than you take in, and then finding a way to put your excess to work. A money management approach involves creating budgets to understand and make decisions about where your money is going. It also involves knowing where you may be able to put your excess cash to work.

If knowing how to manage your money is still feeling challenging or you’re feeling ready to take more advanced steps with your money, consider speaking with a financial advisor at Agemy Financial Strategies. While you are the CEO of your financial resources, you can think of us as your CFO, bringing you strategies and ideas designed for YOU in your unique situation, helping you make smarter decisions and letting you focus on enjoying life!

But whether you go it alone or get professional advice, with a little planning and a lot of ongoing discipline, you know now that it’s possible to not only avoid financial hardship but also to paint a bright financial future.

Contact us today for more information on financial planning.

/by

Tax Strategies to Lower RMDs in Retirement

Is there a way to limit the impact of required minimum distributions (RMDs)? If you’ve built substantial savings in your tax-advantaged retirement accounts, you may become a victim of your own success. Proactive planning can help you avoid penalties and minimize taxes as you pull money out of your 401(k) or IRA.

Retirement plans offer an array of benefits, from smarter savings strategies to lower taxes. But eventually, Uncle Sam makes you pay for these benefits by requiring you withdraw money from your account whether you need it or not. And as a result, your savings fall victim to much higher income taxes than you anticipated.

So what exactly is an RMD? An RMD is an amount you must withdraw each year once you turn 72. The following retirement plans have RMDs:

  • IRAs: Traditional, SEP, and SIMPLE
  • Traditional 401(k), 403(b), and 457 plans
  • Roth 401(k), 403(b), and 457 plans
  • Profit-sharing plans

If you have tax-deferred retirement accounts, managing your annual Required Minimum Distribution (RMD) is a critical part of your financial plan. The key to avoiding a big tax bill is to start planning for RMDs well before your 70th birthday. Here are 4 tax-smart ways to help lower your RMDs in retirement.

1. Work Longer

One key reason for RMDs is that the Internal Revenue Service (IRS) wants to get paid for previously untaxed income. However, savers in a 401(k) who continue working past 72 and don’t own 5% or more of the company, can delay distributions from the 401(k) at their current workplace until they retire. Note that this only protects you from RMDs from your current employer’s retirement plan. You’ll still have to take RMDs from any employer-sponsored accounts you still have from prior jobs, and you can’t avoid RMDs from traditional IRAs this way.

Whether it makes sense to continue working to delay RMD taxes depends on a variety of factors, including your health, retirement goals and overall financial picture. If you enjoy your job and have no serious health issues that prevent you from doing it, delaying retirement might make sense for you.

2. Donate to Charity

If you make contributions to a charity or not-for-profit, you have the option with IRA’s to direct all or a portion of your RMD directly to these organizations. In doing so, you satisfy your RMD but avoid having to pay income tax on the distribution from the IRA…

A distribution from an IRA that is donated to charity is called a Qualified Charitable Distribution (QCD) and is not taxed as income. However, QCDs are not eligible to claim as a deduction if you itemize your tax deductions. You can also donate part of your required minimum distribution to charity and withdraw the rest as income.

3. Exploring Roth IRAs

There is one type of retirement plan that lacks RMDs: the Roth individual retirement account.

Allocating some of your retirement savings in an after-tax Roth account could set you up for tax-free investment growth and tax-free withdrawals in retirement. There are numerous factors regarding when and how much to convert to a Roth IRA. You have to do an analysis to make sure the benefits outweigh the cost to convert.

Be aware, though, that moving pre-tax money from a retirement account into a Roth IRA means you have to pay taxes all at once on those funds. Roth conversions can be expensive, whether you’re moving money from a 401(k) or a traditional IRA. Investigate your options in detail with your tax advisor.

4. Consider QLAC Annuities

A qualified longevity annuity contract (QLAC) is a multipurpose retirement-planning tool which can provide you with a guaranteed stream of income in retirement. You can fund a QLAC using money you’ve saved in your 401(k) or an IRA, and the annuity starts paying you back at the year of your choosing before you turn 85—when you must begin taking payments. Any money you move into a QLAC is excluded from RMD calculations.

If you’re interested in a QLAC, it’s important to understand what you’ll pay and what you’ll get in return, and the amount of retirement savings you can place in a QLAC is limited. For the 2021, you can contribute up to 25% of your retirement asset balance or $135,000, whichever is less. For example, if you have an IRA with a balance of $160,000, you can elect to contribute $40,000 to your QLAC, thus excluding $40,000 from your RMD.

Conclusion

If you have tax-deferred retirement accounts, your financial plan should always include managing your annual Required Minimum Distribution (RMDs). With some careful planning there may be ways to reduce what you owe.

If you’d like more resources on how you can minimize (or even prevent) unexpected retirement expenses, contact the retirement income advisors at Agemy Financial. Our firm exists for the purpose of helping people achieve their personal and financial goals. Our philosophy is to deliver quality financial programs and teach principles for successful living.

Located in Denver, Colorado and Guilford, Connecticut, we work hard to deliver a dependable retirement income strategy, in any market, so that our clients can enjoy the “best” of their lives during retirement. We look forward to working with you soon.

/by

Catching up on Retirement After COVID

The pandemic has had a big impact on saving for retirement, but things are starting to change now. With the economy rebounding, it’s a good time to get your retirement back on track with Agemy Financial. 

Since the pandemic started 16 months ago, hundreds of thousands of Americans have lost their lives, millions have lost their jobs and practically every family in America has endured online classes or work from home for months on end. We’ve changed how we work, how we shop and how we socialize.

In addition to everything else, the COVID-19 pandemic may have put a real dent in your retirement savings progress by hindering those who hadn’t started saving for retirement, the number of workers taking withdrawals from their 401(k)s last year jumped, and some companies cut their 401(k) matching contributions.

Regardless, it was probably the right move at the time, and you did what you had to do. But things are starting to change now. With the economy rebounding, it’s a good time to get your retirement back on track. To assist with that effort, here are three ways you can shore up your retirement plan for a financially secure future.

1. Reassess your plan

If you’re currently working and saving for retirement through a 401(k) or similar plan, it’s smart to stay the course, even if your employer, like many, temporarily suspended its match as a result of the pandemic. According to a November 2020 survey by the Plan Sponsor Council of America, nearly 95% of employers indicated they had not changed their retirement plans. That’s a much better outcome than what went down during and after the Great Recession.

If you had to take a 401(k) loan or withdrawal, empty an IRA out or dig into your Roth, there are ways you can get back on track without it greatly affecting your retirement goals. The first thing you need to do is take a look at where you are today and where you need to be in order to accomplish your goals.

Adding a little extra each month above your normal contribution and setting a calendar reminder every couple of months to nudge your contribution a bit higher are great ways to ramp up on saving opportunities. Big change is hard, but commit to small incremental changes to get your plan back on track. Consult with a financial advisor or planner to conduct a retirement income analysis, the results can guide you on the right path.

2. Revisit your investment portfolio

The COVID-19 outbreak has put tremendous pressure on stock prices, prompting some investors to blindly and indiscriminately sell positions at a time when the entire market is trending lower. As the world adjusts to a new normal after coronavirus, it’s time for associations to consider whether they need a new normal for their investment portfolios.  It’s important to ensure your asset allocation remains appropriate for your goals, risk tolerance, time horizon, or length of time you have to invest before reaching retirement, and rebalance as necessary.

When stock prices are trending lower, some investors can second-guess their risk tolerance. But periods of market volatility can be the worst times to consider portfolio decisions. A retirement strategy formed with a financial professional has market volatility factored in. As you continue your relationship with that professional, they will also be at your side to make any adjustments and help you make any necessary decisions along the way. Their goal is to help you pursue your goals.

3. Having a back up plan

As always, it’s important to have a backup plan. Many advisors suggest doing so to protect yourself from unexpected events, like say, a pandemic. Pulling from retirement accounts should be your last resort. A backup plan can combat the need to access funds earmarked for retirement during future financial crises.

Establishing an emergency fund is critical — most Americans cannot cover an unexpected expense of $1,000. Having savings set aside for emergencies means you don’t need to tap your retirement accounts for financial surprises. Most advisors suggest three to six months of living expenses. Others suggest you can start smaller, with a goal of building your emergency fund up to $500, and add to it over time.

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. 

/by

How to Have Enough Money for an Early Retirement

The road to retiring early isn’t easy. It takes time and discipline to earn, save, and invest as much as you possibly can.

Many Americans dream of having more free time in their later years. Perhaps you want to relocate some place warmer. Or maybe you feel led to do volunteer work, or even set off on a brand new business venture. Whatever the reason, the question is the same: What would it take for me to retire at 60? Or even younger? Unfortunately the reality of quitting work can be far different from the fantasy.

In order to retire from your job early entails finding a way to replace the income it provides, or produce enough income to fund your lifestyle. which is why unfortunately, early retirement isn’t for everyone. In fact, it isn’t for most people. Just 11 percent of today’s workers plan to retire before age 60, according to an Employee Benefit Research Institute (EBRI) survey. For many of those who do take the plunge, the reality of early retirement can turn out to be far different than the dream. But it’s not impossible.

5 questions to ask yourself before retiring early include:

  • Can I really afford to stop working?
  • Do I need to get a part-time job to make ends meet?
  • How will I get health insurance?
  • What will I do to occupy my time?
  • Are my plans in sync with my spouse/partner’s?

Here are three moves to help make the early-retirement fantasy a reality.

1. Making Adjustments to your Current Budget

You can get by with less if you’ll have other sources of income. Retiring early means making some changes to how you earn and spend money, so in the future you get to relax. For many people, that means cutting their budget to the bare minimum. To learn to budget is a very important life skill. Here are some tips you can use to budget successfully.

  • Write down all your expenses: what you spend and what you have to pay back on loans.
  • Work out your income minus your expenses.
  • Work out a budget you can stick to.
  • Use a financial calculator
  • Check at the end of the month if you have spent what you budgeted for. If not, decide:
    − Where you can reduce your expenses on unnecessary items.
    − Whether your budget is perhaps unrealistic.
    − Whether you have to adjust your budget.

2. Calculate your Annual Retirement Spending

Living on a small portion of your income translates into needing less money for retirement. To do that, take a look at your current monthly spending and consider what will go down, what could go up, and what might be added or eliminated altogether. Add your final monthly expense estimates up, multiply by 12 and you have the magic number: your annual retirement needs. Most financial advisors recommend increasing it by 10% to 20% so you have some wiggle room.

There are a few exceptions to the early distribution rules. One popular among early retirees is to start a series of substantially equal periodic distributions, which are allowed by the IRS provided you follow specific protocol. Working with a financial planner to develop a strategy for tapping your investments while ducking taxes — where you can — and avoiding penalties.

3. Invest for Growth

When it comes to investing, there’s no shortage of ideas. At the risk of stating the obvious, retiring early means (1) you have a shorter period during which you can save, and (2) you have a longer period during which the money you’ve saved needs to support your spending.

Both of those mean investment returns are going to be your best friend. And to achieve the best returns, you need to invest in a balanced portfolio geared toward long-term growth. We recommend low-cost index funds, with an allocation that is tilted toward stocks for as long as you can stomach it. Here are5 smart investing strategies to follow when investing for growth.

  • Don’t time the market
  • Asset allocation
  • Investment selection
  • Dollar-cost averaging
  • Rebalance your financial portfolio

And remember, you can’t control all the risks associated with early retirement, but what you can control is having a plan. Work with a financial advisor that is knowledgeable in early retirement planning to develop a customized portfolio, and help you manage your finances before and during retirement.

Summary

It takes planning and discipline to retire early. The earlier you start investing, the more you can benefit from compounding. That’s why you need to get going as soon as possible!

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.

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.

/by

How Retirement Planning and Life Insurance go Hand-in-Hand

Life insurance, first and foremost, is about protecting loved ones after you’re gone. But some insurance types can actually help you in retirement as well.

Most people think of life insurance in terms of the payout it provides beneficiaries after the policyholder dies. But did you know that certain life insurance policies can financially assist you through your lifetime and into your golden years?

Why Life Insurance is Vital

Life insurance plays a significant role in protecting you and your family during your primary income-earning years. Ultimately, striking the right balance between investing for your future so you can retire when and how you want to, and purchasing the right amount of life insurance to protect your interests today is ideal.

What’s more, insurance transfers the financial risk of life’s events to an insurance company, and a sound insurance strategy can help protect your family from the financial consequences of those events. A strategy can include personal insurance, liability insurance, and life insurance.

The Retirement Planning Connection

For many of us, life insurance is something to worry about “later.” Or, if provided by an employer, just another part of the employee benefits package. But life insurance can and should be an important aspect of retirement planning.

During retirement, it is well advised to financially prepare for unexpected expenses. Did you know that medical bills are the leading cause of bankruptcy in America? This disturbing fact is that over half of those who are forced to file for bankruptcy have health insurance. Without an emergency cash fund, where will you come up with the money to pay the doctor if your health insurance is denied?

You may be able to cover income shortfalls by using your life insurance for retirement income.

Using Life Insurance for Retirement Income

First things first, you need to understand the different types of life insurance and how they can assist your cash flow in retirement. Unlike ‘term’ life insurance, which covers only a set number of years, ‘permanent’ life insurance is meant to be for life. Permanent life insurance can provide a source of supplemental retirement income, which include whole life, universal, and variable life insurance policies. Here’s a breakdown of the differences you should be aware of:

  • Term insurance is the least expensive, so you can afford to purchase higher amounts of coverage. You can layer term life insurance on top of permanent life insurance to have protection during those high-need years when the loss of your income would be the most devastating to your family. It pays “if you die” during the set term period.
  • Permanent (or cash value) life insurance is an important foundation to establish protection over your lifetime. It pays “when you die.” The two primary types of permanent life insurance are whole life and universal life.
    • Whole Life Insurance offers consistency, with fixed premiums and guaranteed cash value accumulation.
    • Universal life insurance gives consumers flexibility in the premium payments, death benefits, and the savings element of their policies.

Determine a Retirement Plan That’s Right for You

Before deciding on an insurance plan, you should decide what you want your golden years to look like. Some key questions to consider include:

  • Do I have enough coverage now?
  • Is it the right type of coverage?
  • How much coverage will I need later?
  • What are expectations for the financial markets in the short and long term?
  • Which type of insurance will best meet my future needs?
  • How can insurance be integrated with other retirement assets?
  • Should I buy a term or permanent policy?
  • If I choose permanent, what type?
  • Which provider should I choose?

Since choosing a life insurance policy with a cash value component requires a bigger investment, it’s important to understand how this aspect of your policy works and what your options are for using it.

What Can I Do With the Cash in a Permanent/Cash Value Plan?

Permanent/Cash Value policies provide a living benefit, or a perk of your policy that you can use while you are in fact alive and well. Here’s a look at the ways you can use your life insurance to accumulate cash value:

  • Withdraw Cash: The cash value component serves as a living benefit for policyholders from which they may draw funds. But make sure to review how your policy works before you do so. Generally, withdrawing your cash value will reduce your death benefit, therefore a more tax-effective option is to withdraw only what you need each year.
  • Pay Premiums: These life insurance policies are often favored because they allow you to use the policy’s cash value to pay premiums. This strategy will only work for a short period of time if you start while the cash value is too small or if interest rates are low. Be sure to carefully monitor the cash value to make sure it doesn’t drop too far, or you may lose your coverage.
  • Exchange it for an Annuity: The IRS lets you swap your permanent life insurance for an annuity through a 1035 exchange, which is a tax-free transfer of one contract for another. This move can generate more retirement income.
  • Convert to a New Policy to Pay for Long-Term Care: If you’d like coverage for long-term care, consider converting your life insurance into another policy with a long-term care rider. You keep your life insurance, but part of the death benefit can be used to pay for long-term care expenses.
  • Use it as Collateral: The cash value is an asset that increases your chances of qualifying for a loan or mortgage from a lender. It can even serve as the loan’s collateral. Always ask your insurance expert before using cash value this way.
  • Let it Grow: Left alone, the cash value will continue to accumulate, leaving a larger inheritance for your heirs, as withdrawals and loans reduce the final death benefit.

Income Tax Advantages

While its primary function is to help protect loved ones in the event of your passing, life insurance, in particular whole life insurance, can also help you and your beneficiaries manage tax consequences. The following three advantages apply to whole life insurance and other permanent insurance policies: 

1. The death benefit is generally paid out income tax free: Life insurance policy payouts can be pretty hefty and avoiding a major tax bite can be consequential.

2. The total cash value accumulates on a tax-deferred basis: Whole life insurance builds up cash value over time as you pay premiums. This is money that grows without the IRS dipping their hands in.

3. You can access the cash value of the policy on a tax-advantaged basis: Money borrowed or taken from the cash value of a life insurance policy is not subject to taxes up to the “cost basis” – the amount paid into the policy through premiums.

Conclusion

Generating income during retirement is challenging. Fortunately, your life insurance policy can be a valuable source of funds to cover retirement expenses by offering tax-free income, (be part of a tax management strategy), and enhance the overall returns from an investment portfolio. 

And don’t forget that life insurance only gets more expensive the longer you wait, so starting as soon as possible will only help you in the long run. For more information on how you can best utilize your life insurance policy in retirement, contact the trusted financial advisors at Agemy Financial here today. 

/by

Why Choose Agemy to Achieve Your Personal and Financial Goals?

Not working with a financial planner? You could be missing out. If you are serious about building long-term wealth, Agemy Financial Strategies offers a variety of services you aren’t getting that you may not even know about.

Deciding whether to get a financial advisor or manage your own investments is a big decision. But did you know financial planners assist in more than just managing your money? A good financial planner can organize your overall financial picture and implement strategies that will help you achieve your goals, from organizing your estate to retiring when you want.

To answer the common question of “Do you need a financial advisor?” consider the services and benefits of a financial advisor:

  • Creating an investment strategy
  • Minimizing taxes
  • Avoiding emotional decisions
  • Lowering your risks
  • Structuring withdrawals from accounts, and so much more

Whether you’re a busy executive, business owner, working parent, caretaker or even retired – the truth is, everyone can use professional advice.

About Agemy Financial Strategies

Financial advisors aren’t exactly hard to come by. But not all financial advisors are created equal. Finding the right fiduciary for your financial needs, objectives, and unique circumstances is a must when it comes to building a solid working relationship that helps you make smart financial decisions.

At Agemy Financial, our services specialize in retirement income planning, or as we like to say, “helping you make it down the mountain.” Many financial advisors and financial planners will help you to build your assets and “get up the financial mountain.” However, Mr. Agemy, “a financial sherpa,” and his team focus on helping investors who have already “climbed the wealth accumulation mountain, plan and strategize to have enough income in retirement to have a safe and pleasurable journey “back down” and enjoy the best of life. Agemy Financial’s objective is to see that our clients can retire and stay retired.

Our purpose is to educate investors – whether that be planning for retirement, legacy planning, wealth management, or just holding your hand when it’s time to leap into retirement. Celebrating 30 years in business, and we remain steadfast in our dedication to serve and educate investors.

Our Process

We understand personal finance isn’t interesting to everyone! And it doesn’t have to be. But if you’re neglecting your finances, it’s likely worth giving us a call. When we get started working with you, our initial assessment includes gathering a complete picture of your assets, liabilities, income, and expenses.

We then synthesize all of this initial information into a comprehensive financial plan that will serve as a roadmap for your financial future. Our full spectrum of financial services includes:

Estate

Manage personal affairs while you’re alive and control the distribution of wealth upon your death.

Insurance

A well-structured insurance strategy can help protect your loved ones from the financial consequences of unexpected events.

Investment

Create an investment strategy that’s designed to pursue your risk tolerance, time horizon, and goals.

Lifestyle

How to strike a balance between work and leisure is just one aspect of the wide-ranging Lifestyle matters.

Money

Managing your money involves more than simply making and following a budget.

Retirement

Steps to consider so you can potentially accumulate the money you’ll need to pursue the retirement activities you want.

Tax

Understanding tax strategies can potentially help you better manage your overall tax situation.

 

Our Core Values

Our firm exists for the purpose of helping people achieve their personal and financial goals. Our philosophy is to deliver quality financial programs and teach principles for successful living. We live, work and breathe by the following three values:

  • We Listen: We specialize in conservative retirement strategies with the goal of minimizing our client’s risk with an effective return. Our core objective is to satisfy our client’s needs.
  • We Partner: A customized approach is used with each individual situation. There are no preconceived ideas as each person has very different needs, backgrounds and circumstances. Being sensitive to each person’s situations, issues and concerns is a core value of our organization.
  • We Care: We aim to use a servant’s attitude to develop long-term relationships as we strive to treat others as we would like to be treated.

Summary

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.

If you have any questions on our company, services, values ore more, contact us here today. Our trusted advisors in both Denver, Colorado and Guilford, Connecticut are waiting for your call.

/by