Retirement Planning for Couples this Valentine’s Day

Agemy Financial Strategies

February 02, 2022

With Valentine’s Day around the corner, what better time to sit down with your sweetheart to discuss all of your aspirations and goals for when you reach retirement? To help protect your lifestyle in retirement — and protect against the risk of outliving your savings — you and your partner can develop a holistic financial plan for every stage of your financial life. 

While it might not seem the most romantic of ways to spend the day, this Valentine’s Day is the perfect opportunity to evaluate your retirement plans to help you reach the dreams of a lifetime together. Here are some tips on how to discuss retirement planning for young couples, middle-aged couples and couples nearing retirement.

Young Couples: It’s Never Too Early To Start Planning

If you and your partner are at the start of your careers and life together, your financial concerns might focus on balancing immediate matters, such as buying your first home and starting your family, and paying down debt from student loans. Most Millennials are concerned with keeping up with the cost of living as well as the cost of meeting their children’s financial needs. Student loans, credit card debt and mortgage debt round out the top five.

Saving for the future should not take a back seat to your current expenses. Time is on your side if you use the power of tax-deferred compounding. Make an effort to start early and maximize your contributions on your 401(k)s and traditional IRAs. If both of you are working, be sure that you work together to save for retirement.

Compare the funds in your employers’ qualified plans and work as a team to select the best investments for your shared goals, instead of making these choices on your own. If one partner is not working outside the home, a spousal IRA may allow you to make contributions on their behalf. If one or both of you qualify for a Health Savings Account (HSA), this can be a way to save for future medical expenses while reducing your current taxable income.

Middle-Aged Couples: Protect Assets to Protect Against Outliving Savings

By now, you have had several years of planning and setting money aside for retirement. Both of your careers are on track, you’re earning more, you’ve built equity in your home, you’re saving to send your kids to college.

To continue on the right path, 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.

As you both progress towards your retirement years, concerns about protecting your assets may rise. Especially as volatility starts to feel like the new norm. Roughly two-thirds of pre-retirees expect volatility to increase in the next 12 months!

It’s always important to meet with your Fiduciary financial advisor to work on a strategy that’s built for you and your unique needs and goals as a couple. As your portfolio becomes more conservative, including more fixed income, you might consider asset location as a strategy to enhance your returns.

Couples Nearing Retirement: Income Now and for Life

At this point, you and your partner should already have a strategy to maximize your qualified accounts such as Social Security. It helps you maximize benefits as a couple if the higher-earning spouse waits until full retirement age, or later, to begin collecting.

In many cases, this means the lower-earning spouse can start collecting benefits as early as age 62, then apply for spousal benefits later when the higher-earning spouse begins collecting. With smart planning, a couple can secure higher benefits the longer the high earner waits — and this could also mean higher survivor’s benefits for the spouse who lives longest.

To complement Social Security, you could convert a portion of your portfolio into a guaranteed income stream by investing in a single premium immediate annuity (SPIA). This is also the time to consider “turning on” the income stream from any annuity you have available to you.

Another vital aspect for when you’re nearing retirement is factoring in healthcare. If you retire before age 65, you have several options for health insurance until you reach eligibility for Medicare. Which options you are eligible for and are best for you depend on your individual circumstances. You may enroll in the state health insurance marketplace, continue your employment-related benefits through COBRA or state continuation, enroll in your spouse’s health plan, or apply for Medicaid. The Affordable Care Act (ACA) has made health insurance coverage when retiring before age 65 a much less challenging situation. This is especially true for people with medical conditions or limited finances—both of which could be obstacles for early retirees seeking coverage in the pre-ACA era.

If you’re unsure where to begin, it’s always best to consult with a trusted financial advisor.

For ALL Ages: Communication is Key

The first step in creating a retirement plan is communication.

Couples who work through later-in-life decisions with respect and care for each other have a solid retirement communication plan. They will find that their golden years can often be happier because they know themselves better and can find peace together. With the increased likelihood that couples will reach and surpass their 50th wedding anniversary, keeping marriage harmonious by resolving conflict with a team approach will yield great contentment and increased satisfaction in companionship.

Undoubtedly, there will be difficult conversations and compromises that need to be made on your journey. Couples planning for retirement may experience many challenges as listed above. Open honest communication can transform your relationship as you enter the next phase of your lives. Each of you should discuss your expectations as a married couple for retirement to ensure that both of you are on on the same page.  Once you have both communicated about your retirement expectations, it’s time to move onto the financial aspects of retirement with your Fiduciary.

Final Thoughts

Retirement planning for couples involves navigating the waters together and it could, possibly, be the most challenging period of your relationship.  This Valentine’s Day, don’t just dream about a lifetime with the one you love. Make the initiative to be proactive and work together as a team with your partner and your advisor to ensure that you are financially prepared for the future.

At Agemy Financial Strategies, finding the right financial advisor that fits your goals and lifestyle doesn’t have to be hard. The trusted team at Agemy is here for you every step of the way to make some real progress on your journey to retirement.

Contact us here today to get started on a retirement plan as a couple. 

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Taking Groundhog Day Out of Retirement Planning

Agemy Financial Strategies

January 26, 2022

Is your retirement plan stuck in a time-loop? The better you plan for retirement, the more likely you’ll be to enjoy your senior years to the fullest. That’s why it’s imperative that you don’t repeat any of these glaring mistakes when it comes to your retirement outlook. 

If you wake up every morning thinking that you need to get your retirement plan updated, or worse, started, you might feel like Bill Murray in the classic movie “Groundhog Day.” Truth be told, a lot of days in 2021 felt like Groundhog Day: a never-ending time loop of new variants, working from home, eating at home, exercising at home, visiting with friends and family in small groups, etc. But did you know there’s a way to get out of an retirement plan time loop, and it won’t require you to go through endless mornings with a clock radio playing The Beatles’ “Tax Man” song?

A common mistake that people make when planning for retirement is that they focus on their present financial situation or the few years that lie ahead. They don’t look beyond the horizon of retirement. By making these mistakes they fall into the mindset of “I’ll get to it later” or creating a highly flawed plan.

Money is important, but time is of the essence. A lot of time has been lost due to the pandemic, and the need for getting back on track must be acknowledged. The sooner you can start your quest for retiring at your preferred age, the better. Here’s a couple tips on how to not fall victim to this mindset and how to constantly evaluate and update your retirement plan for years to come.

Having No Plan in Place

Too often there are retirees who don’t have their goals and needs laid out. The importance of having these goals and needs in place for when retirement approaches is crucial. Many people forget to update those goals and needs as they change. It’s the people who establish a good plan early on who have the most success.

You shouldn’t wait until your next life stage begins because there is always another life stage inviting you to postpone taking action until tomorrow (more on this below). If people wait to postpone saving and investing until their forties, they may have to save at double the annual rate of people who start investing in their twenties.

As a general rule of thumb, if you save 10–12% of your salary between the ages of 22 and 65, you will have roughly the same ability to cover retirement expenses as an individual who saves 25 percent between 40 and 65. Establishing good habits early pays off. Make a plan and stick to it.

The Imperfect Plan

The second kind of mistake happens when people have a plan but it’s flawed. You think you’re looking ahead but you’re not looking clearly or far enough. Here are the most common investment mistakes we see and the most important ones you should avoid:

  • Not investing properly: This can mean choosing the wrong asset allocation, keeping too much in cash, taking an improper amount of risk, or using expensive investment products.
  • Not planning for your own personal situation: Generally speaking, retired people spend about 20% less than when they were working. Since they no longer commute or entertain business colleagues. However, this can work the other way. Many retirees spend more in retirement than when they were working. They travel more, perhaps eat out more often, attend more cultural events, and take up new hobbies. Your plan should be customized to a realistic appraisal of your own lifestyle and likely future preferences.
  • Not having an estate plan: Putting an estate plan in place is essential and should happen long before retirement. Effective estate management enables you to manage your affairs during your lifetime and control the distribution of your wealth after death. An effective estate strategy ultimately will spell out your wishes and ensure that they’re carried out – even if you are unable to communicate.

To combat these imperfections in your plan, try the following:

  1. Know where you stand. Know your net worth, current income, expenses and savings patterns.
  2. Set concrete, time-bound goals. Periodically check in to make sure that you hit your goals. Some people do a monthly money date to review monthly spending and saving patterns.
  3. Use a retirement calculator to determine how much you need to save each year to reach your goal. Then, you should adjust your spending to make that happen. It may mean something small, like limiting meals out, or something big, like downsizing your home or relocating to a less expensive city.
  4. Put together a disciplined, low-cost investment strategy. If you don’t have the time or expertise to do this, you can always contact the financial advisors at agemy financial for help.
  5. Rebalance your investment portfolio at least annually. Our Investment Section of our website has some great tools that makes this step incredibly easy to evaluate where you stand relative to your goal.

Revsiting Your Retirement Plan with Agemy Financial Strategies 

There’s a tendency to see your retirement plan as a static document — a map that you follow throughout your working life leading you toward the finish line. Even if you presume your retirement plan is up to date, do you really know if that plan still works for you? Will it truly create a lifestyle that will stir your soul in the next chapter? You have to update it periodically to ensure that it’s still in alignment with your shifting goals, savings, and priorities. Here are six times you should review it and consider updates with your trusted Fiduciary at Agemy:

  • Annually: Ideally, you should look over your retirement plan at least once a year. You may not have to make any changes, but if you do, it’s easier to make these small adjustments once a year than it is to make larger adjustments as you near retirement and realize you don’t have enough savings.
  • After a major life event: Adding or losing a member of your family, experiencing a major health crisis, or buying a new home can affect how much you need to or are able to save. You might have to divert some of those funds toward new living expenses, requiring a whole new retirement plan.
  • If you’re about to retire: Before you exit the workforce for good, look over your plan again to make sure you’ve met your savings goals and that you’re comfortable with your withdrawal strategy.
  • If you’re turning fifty: Adults 50 and older are allowed to make catch-up contributions to their retirement accounts. These can be up to $25,000 to a 401(k) in 2019 and $7,000 to an IRA, compared with $19,000 and $6,000, respectively, for adults under 50. If you weren’t able to start saving for retirement as early as you’d hoped, you can make up for it now.
  • If you’re divorcing: When you end your marriage, you may find that your retirement savings take a serious hit. Typically, retirement funds saved during a marriage (including 401ks, pensions and social security) will be considered as part of the marital assets during divorce and subject to some type of division.
  • If you need to rebalance: Your retirement portfolio may be composed of various assets that have different rates of growth. It is a good idea to reevaluate your investments to make sure they are delivering the returns you expect or want. If they are not performing the way you would like, you could consider rebalancing your portfolio.

Do you fall into any of the above categories? If so, Agemy Financial Strategies is here for you every step of the way to ensure you create healthy retirement planning habits for years to come.

The Bottom Line

Everyone should have a retirement plan. Nobody wants to keep working into their golden years and nobody wants to struggle with financial hardship during that period of time in your life. The sooner you put a plan in place, the higher your chances of succeeding.

If your retirement plan is stuck in Groundhog Day, call our office at 800.725.7616 and make an appointment to meet with us by phone, video conferencing or in the offices in both Guilford, CT and Denver, CO. We can get your current plan updated, and get you out of the time loop. Eventually, Bill Murray got to tomorrow in “Groundhog Day, and the same can happen for your retirement years.

For more information on money management and retirement planning, talk to one of our financial advisors here today.

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Helping Adult Children Without Sabotaging Your Retirement

Agemy Financial Strategies

January 19, 2022

If you have an older child or children, there’s probably a question on your mind: How can I help them financially without going broke myself? As your adult children face financial challenges, your first thought may be to help them out. But this may not be the best plan of attack for setting them – or you – up for a secure financial future. 

A large portion of the millennial generation are finding it extremely tough to pay their rent and utility bills, afford groceries and car payments. This leaves parents wanting to help their struggling adult children make ends meet. For baby boomers in or near retirement, this is a big consideration as providing financial support to a family member can affect their own retirement plans. How can you help them without breaking your bank?

Tables Are Turning

As the elderly population grows and a new crop of young adults are financially struggling to attain a solid financial foothold in trying economic times, individuals ‘sandwiched’ between aging parents and adult children are adequately referred to as ‘the sandwich generation’. Over the past decade, studies on sandwich generation caregivers have become more popular, with the Pew Research Center and National Caregiving Alliance (NCA) performing regular surveys on caregiving habits. Several striking statistics show what makes this hard-working group unique:

  • More than one in 10 adults with a child under 18 also care for aging parents, according to a report on sandwich generation demographics by the Pew Research Center.
  • These caregivers spend about three hours a day on unpaid care. Nearly three quarters of them are employed full-time. That’s 21 hours a week of caregiving on top of a 40-hour job.
  • About 60% of sandwich generation caregivers are women. Male and female caregivers spend about the same amount of time a day caring for their aging parents, but mothers, on average, spend about 45 minutes more daily on child care, regardless of employment status.
  • Sandwich generation caregivers spend an average of 86 minutes less a day on paid work, and nearly half an hour less sleeping.

Some adults spend years as a sandwich generation caregiver, while others experience only a brief overlap. However, a new (and worrying) generational shift is happening: According to a recent study, 1 in 3 parents say they have delayed or are willing to delay their retirement to help pay for their children’s college education.

Modern Day Money Management 

Parents need to learn to set expectations and limits … for their children and for themselves.

While financially caring for an adult child, it’s important to work together to find a solution. Teach children the concept of earning, budgeting and investing as early as possible. This may be done by giving them an allowance when they are younger or encouraging them to get a job when they are older. Teach them the important financial lesson of appropriately managing the money they earn, and consider allowing them to make small-scale mistakes along the way to help them learn.

If debt is an ongoing issue, you may want to get professional advice on debt management and payment strategies. Having too much credit card debt is not a good way to start off life. It can ruin your credit and force you to pay higher interest rates on new debt, which can cripple you financially. Instilling good financial habits in your children can set a positive foundation for their relationship with money in adulthood — and lessen the odds of them having to rely on “The Bank of Mom and Dad” as they grow up.

Figure Out How Much Help You Can Realistically Afford to Offer

You may need to have a candid talk about what you can and can’t do. Communicate with your children how much financial support you plan to give them, if any, during their adulthood. It’s a simple task but you’d be surprised at how many parents don’t prioritize their own finances.

There are many ways to go about helping your adult child without opening your checkbook. For example, you could offer to watch your child’s kids to reduce her daycare costs, or pick them up from school so it’s one less thing for them to stress about. If you’re not in a position to help your adult child right now, have an open talk with them about it.

Be honest and explain that there are certain things you as a parent are willing to do for your kids and certain things you won’t. Don’t be afraid to say “no” if you’re not in a position to help your grown kids financially.

Consider a Loan Instead of a Gift

It’s important to specify whether your financial help to your adult child is a loan or a gift.

If you decide on a loan, begin by writing a contract with a set timeline. How long it will take to be paid back and how frequent the payments will be. The payments can start out small and later increase, as your adult children find their footing. They write you a check every month, no matter how small it is, so there is some feeling of gratitude and payback. You should never feel guilty about making your child pay you back. This is a great way to hold them accountable which in turn would help them become more accountable later in life.

Get Professional Help

Giving your adult children money may help them in the short-term but may not give them the skills and tools they need to be financially successful. If providing financial assistance to your adult children is a priority for you, incorporate it into your own financial planning process. Sit down with your children and help them create a budget they can stick to. Look at what money is coming in every month and what is going out. See what can be completely cut out or reduced in the expenses column. If they are outspending what they make, devise a budget that is going to work within their parameters.

You won’t be doing your kids any good, though, if you give them so much financial assistance that doing so depletes your savings. Through your years of financial experience, you may have crossed paths with many financial professionals. Whether they were an acquaintance or you hired them to help you with your finances, you may know plenty of financial professionals that could help your children move toward a successful financial future.

A financial advisor or Fiduciary can help you plan for your and your children’s future, and develop a secure financial plan which includes debt repayment, saving for college, and developing a retirement investment strategy. They help you see the big financial picture and assist you in making financial decisions that align with your goals. The sooner your children begin to work with a financial advisor or planner, the sooner they can start achieving their financial objectives.

Final Thoughts

As a parent, it’s natural to want to help your children financially, but be careful not to do it at the expense of securing your own retirement. Above all, make sure you discuss your spending needs both as a family and with your financial advisor. You’ve put time and effort into building a sustainable retirement plan. Don’t derail your hard work by giving away more than you can afford.

Do you need assistance managing your retirement expectations with your loved ones? The trusted Fiduciaries at Agemy Financial Strategies are here for you every step of the way.

For more information on money management and planning, talk to one of our financial advisors here today. 

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Prepare for a Financial Emergency with These 4 Tips

Agemy Financial Strategies

January 04, 2022

The thought of being hit with a major negative event that could affect your finances, such as a job loss, an illness, or a pandemic, can keep anyone awake at night. Emergencies won’t wait until you’re financially ready, so prepare for them now.

Noone likes or wants them – but life emergencies happen. In these stressful times, having access to personal financial, insurance, medical and other records is crucial for starting the recovery process quickly and efficiently.

The best time to prepare for a financial emergency is by preparing well in advance. If you wait until something unfortunate happens, you could find yourself scrambling to be able to find the needed funds. Here are 4 tips to help you prepare for a financial emergency.

Create A Budget

This is by far the most overlooked part in financial planning. While budgeting can be tedious, you’ll have a picture of your income and expenses and you’ll be better equipped to build a bigger savings cushion. To get started, you’ll need to track your expenses. Use an online budgeting tool or app that links to your bank, investment, credit card and other accounts and automatically tracks and categorizes expenses.

A simple budget breakdown follows the 50-20-30 rule: Up to 50% of your take-home pay is for essential expenses, such as rent or mortgage payments, utility bills, transportation to work, groceries, and insurance premiums; at least 20% goes toward saving for retirement, an emergency fund and other goals, and paying down debt; and up to 30% is designated for nonessentials, which may include restaurant meals and travel and entertainment spending.

Our free online financial calculators are a great first step. Financial calculators are a helpful tool to assist you in managing your money and estimating your loan payments. All you need is some information about your finances and these specialized online math machines will spit out the numbers or percents you need to manage your finances and make budgeting decisions. Try out our fast, easy and free online resources here.

Have More Rainy Day Funds in Place

Without savings, a financial shock—even minor—could set you back, and if it turns into debt, it can potentially have a lasting impact.

Setting up a dedicated savings or emergency fund is one essential way to protect yourself, and it’s one of the first steps you can take to start saving. Instead of maintaining one fund for large, unexpected expenses, why not create two? Your true emergency fund is meant for catastrophes that may result in a total loss of income, such as divorce, job loss, or medical or mental disability that keeps you out of work. Set aside “rainy day” funds for urgent but less-catastrophic needs, such as car and home repairs, medical and vet bills, and short-notice travel to be with an ill relative.

How much should you put in each? For the rainy-day fund, financial advisors recommend setting aside about $1,500 for young, single renters and between $3,000 and $5,000 for homeowners, depending on how much upkeep your home needs. Your secondary emergency fund, you should have enough to cover at least six months of expenses. If starting small, try to set aside at least $500, but work your way up to half a year’s worth of expenses.

Paying Down Debt

Now that you have your rainy day fund set aside, you can start paying down some of your debt. People often find that a lot of their budget goes to paying off debt, which can make it even harder to devote money to emergency savings. There are a number of different options for paying off debt that may make sense for your situation.

Whether your current debt is your car payment or a credit card bill, it’s always a good idea to pay a little more than the minimum. You’ll save the most by paying off debts in order of highest to lowest interest rate. But eliminating the debt with the smallest balance first—even if it doesn’t carry the highest rate—may give you the momentum you need to stick with the plan.

If you feel overwhelmed by debt or your efforts to pay off debt are not making progress, a money management plan could be a helpful tool to lower your interest, save money and pay off debt faster.

Re-Allocate Your Assets

Financial advisors suggest young people who have time to withstand market changes should invest their nest egg in stocks and people closer to retirement age should ramp up their holdings in bonds and cash. This offers lower potential returns than stocks – but less volatility.

The asset allocation that’s right for you depends on your capacity and tolerance for risk. The former gauges how a downturn might impact your lifestyle or derail your goals. The latter is how much of a loss you could stand before you abandon your plan. Rebalance your holdings periodically to make sure they’re in line with your target mix.

Furthermore, you may already have some amount of assets that could be channelized to your emergency fund. It could be extra cash lying around in your savings accounts, some fixed deposits that are not linked to any particular goal, among others. You can allocate some of that amount towards your emergency fund.

Final Thoughts

When the unexpected happens, it’s downright debilitating to your long-term financial health. A financial emergency plan is an exceptionally valuable tool for an unexpected situation that often happens in life.

Finding the right Fiduciary that fits your goals and lifestyle doesn’t have to be hard. The trusted team at Agemy Financial Strategies is here for your every step of the way to make some real progress on your journey to financial freedom this coming year.

For more information on money management and financial emergency planning, talk to one of our financial advisors here today. 

 

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Your Full-Service Financial Planning for the Year Ahead

Agemy Financial Strategies

December 22, 2021

For over 31 years, Agemy Financial Strategies has helped our clients plan and prepare. This way, when the unforeseen occurs, their clients are uniquely positioned for success. As we enter the new year, here’s what you need to keep on top of for financial success in 2022.

At Agemy Financial Strategies, 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.

With 2022 around the corner, now is the best time to plan for the new year. An annual financial plan can determine where you are financially at that particular moment. Consider all of your assets such as—how much you get paid, what’s in your savings and checking accounts, how much is in your retirement fund—as well as your liabilities, including loans, credit cards, and other personal debts.

Here’s how Agemy Financial can assist in being your full service financial planning firm to help you plan for your year ahead.

Annual Financial Plan Check-Up

In your financial plan check up you should include things like your mortgage or rent, utility bills and other monthly expenses. This snapshot should also factor in what your goals are and what you’ll need to accomplish in order to get there. This can include things such as retirement planning, tax planning, and investment strategies.

Check off each step that you’ve considered. The idea is to make sure you’ve looked at the issue. It’s vital for you to cover every item in the above section, so that you have a full financial inventory. Here’s what your inventory should look like:

  • Your credit report and score.
  • A list of assets, such as: emergency fund, retirement accounts, other investment and savings accounts, real estate equity, and education savings.
  • A list of debts, such as: mortgage, student loans, car loans, credit cards, and other loans
  • A calculation of your credit utilization ratio, which is the amount of debt you have versus your total credit limit.
  • A review of the fees you’re paying to a financial advisor, if any, and the services they provide.

Set Financial Goals

Once you have a personal financial inventory completed, you can move on to setting goals for the remainder of the year or and for the next 12 months. Your goals will be divided into short-term, mid-term, and long-term ones.

Among your short-term goals might be to:

  • Establish a budget, which can be made easier with one of the best budgeting apps currently available
  • Create an emergency fund or increase your emergency fund savings
  • Pay off credit cards

Your mid-term goals might include:

  • Getting life insurance and disability income insurance
  • Thinking about your dreams, such as buying a first home or vacation home, renovating, moving, or saving so that you’ll have money to have a family or to send children or grandchildren to college

Then review your long-term goals, including:

  • Determining how much of a nest egg you’ll need to save for a comfortable retirement
  • Figuring out how to increase your retirement savings

Review Your Retirement Savings Plans

Saving for retirement in an individual retirement account IRA or a 401(k) is a smart way to enjoy some tax advantages. As you put together your annual financial plan, you should consider whether you need to:

  • Decide whether a Roth or traditional IRA is best for you now
  • Consider switching an existing IRA to a different brokerage
  • Convert a 401(k), which can be traditional IRA, Roth or regular
  • Rollover any old 401(k) accounts from a previous employer. If your employment status has changed from employed to self-employed, update yourself on the limits for SEP IRA or other self-employment retirement accounts and maximize your contribution amounts.
  • Increase or decrease your annual contribution amounts to retirement accounts.

Get Set For Financial Success with Agemy

The most important step in reaching any goal is to develop a plan to achieve it. That’s why it’s so important to plan ahead for your financial future. We work hard to deliver a dependable retirement income strategy, in any market, so that clients can enjoy the “best” of their lives during retirement.

Agemy Financial Strategies provides retirement planning services designed to educate clients as to their best options for meeting their current financial needs, achieving their long-term financial goals, avoiding common retirement-planning mistakes, and enjoying a lifetime of financial stability.

Our goal is to give clients confidence in a custom developed robust retirement portfolio and provided investment options designed to generate interest and dividends regardless of market conditions. This is income that can be spent or reinvested for dependable “organic” portfolio growth.

  • Educating retirees and pre-retirees to make smart financial decisions
  • Purpose-based investing
  • Implementing generational wealth transfers
  • Generating income (a retirement paycheck), you can depend on in all market conditions

As a fiduciary and Registered Investment Advisor, you can be confident AFSi will recommend only what is in your best interest.

Five Star Professionals 

There are a hundred reasons to work with Agemy Financial Strategies, but winning the Five Star Professional award for 10 consecutive years are at least ten of those reasons. Celebrating 31 years, we are dedicated to educating retirees through retirement planning, legacy planning, wealth management and more. Our goal is to help retirees achieve their personal and financial goals. Our education-driven financial advisors, Daniel Agemy in Denver, Colorado and Andrew Agemy in Guilford, Connecticut, are delighted to win the Five Star Wealth Management award for three and 10 years!  

Are your most important decisions being made with the advice and guidance of a Five Star Professional?

  • Andrew A. Agemy, MRFC® has been recognized for the quality service he provides to the clients in his community. He has an unbroken record of receiving nine consecutive Five Star awards for his outstanding service.
  • Additionally, Andrew has been actively teaching and coaching people with their finances for over 31 years in the Shoreline community.
  • Daniel J. Agemy, CPM®, RFC®, has been working in the world of finances for most of his life! He, too, has an unbroken record of receiving nine consecutive Five Star awards for his outstanding service.
  • Five Star is an international research group that helps identify top providers of service in their field.
  • Agemy Financial Strategies: because your assets are too important for anything less than Five Stars or AAA (Andrew A Agemy)

Final Thoughts

An annual financial plan is an exceptionally valuable tool for your life (and peace of mind) today and for your future. Best-case scenario: You’ve checked off all the items on this punch list by now. If not, don’t hesitate to put time on your calendar to do so.

Finding the right financial advisor that fits your goals and lifestyle doesn’t have to be hard. The trusted team at Agemy Financial Strategies is here for your every step of the way to make some real progress on your journey to financial freedom this coming year.

When the hustle and bustle has passed and the holiday dust has settled, talk to one of our wealth management professionals so we can make sure you’re starting 2022 off on the right foot.

The entire team at Agemy Financial Strategies would like to wish you a safe, happy and healthy New Year!

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Financial New Year’s Resolutions to Keep

Agemy Financial Strategies

December 15, 2021

2021 is winding down, which means it’s time to think about resolutions for the coming year. With the rising taxes and out-of-control inflation, financial resolutions are foremost in the minds of many pre-retirees and retirees alike.

If you’re someone who likes to make New Year’s resolutions, you already know how hard it is to stick to them. One report puts the failure rate at 80%. Yet, more than 55% of U.S. adults think they’ll follow through on their resolutions this year, a recent survey by the Finder found.

This year however, why not embrace the fresh start the new year brings? 65% of Americans age 18 and older are considering a financial goal for the new year, according to this 2021 financial resolutions study. It’s a great time to commit to your money goals, budget better, pay down debt, plan your taxes, ditch bad habits and improve your financial picture to reach your goals.

Here are a couple of resolutions that could help increase your financial planning strategy and hopefully inspire you to stay committed to them throughout the new year.

Create a Budget 

Saving and investing during your working years should lead to a rising net worth over time, helping you to achieve many of life’s most important goals. Creating your own budget and net worth can help you build your road map and stay on track. Here are steps that can help:

  • It’s important to have a budget with these three things in mind: how much you’re taking in after taxes, how much you’re spending, and how much you’re saving. Try tracking your spending using a spreadsheet or an online budgeting app for 30 days. Determine how much money you need to cover your fixed expenses, such as your rent/mortgage and how much you’d like to put away for other goals. If you aren’t retired, create an emergency fund with three to six months’ worth of essential living expenses, set aside in a savings account. The emergency fund can help you cover unexpected and necessary expenses when you least expect it.
  • Calculate your personal net worth annually. Make a list of your assets and subtract your liabilities. Subtract the liabilities from the assets to determine your net worth. Don’t panic if your net worth declines during tough market periods. What’s important is to see a general upward trend over your earning years. If you’re retired, you’ll want to plan an income and distribution strategy to help make your net worth last as long as necessary and to support other objectives.
  • If you’re retired, consider keeping 12 months of living expenses after accounting for Social Security or a pension in short-term CDs, an interest-bearing savings account. Consider keeping another two to four years’ worth of spending laddered in short-term bonds or invested in short-term bond funds as part of your portfolio’s fixed income allocation. This helps provide the money you need in the short-term. It also allows you to invest other money for a level of growth potential that makes sense for you, while reducing the chances you’ll be forced to sell more volatile investments (like stocks) in a down market.

Manage Your Debt

For most people, some level of debt is a practical necessity, especially to purchase an expensive long-term asset to pay back over time, for example the purchase of your first home. However, problems arise when debt becomes more of a burden than a tool. Here’s a couple tips on how to stay in control.

  • Keep your total debt load manageable. Keep the monthly costs of owning a home (principal, interest, taxes, and insurance) below 28% of your pre-tax income, and your total monthly debt payments (including credit cards, auto loans, and mortgage payments) below 36% of your pre-tax income.
  • Eliminate high-cost, non-deductible consumer debt. Try to pay off credit-card debt and avoid borrowing to buy depreciating assets, such as cars. The cost of consumer debt adds up quickly if you carry a balance. Consider consolidating your debt in a low-rate home equity loan or line of credit and implement a schedule to pay it back.
  • Match repayment terms to your time horizons. Create a plan to pay off the mortgage on your primary home before you plan to retire. If you’re likely to move within five to seven years, you could consider a shorter-maturity loan or an adjustable-rate mortgage (ARM), depending on current mortgage rates and options.

Protect Your Estate

An estate plan may seem like something only for the wealthy. But there are simple steps everyone should take. Without proper beneficiary designations, and a will, the fate of your assets or minor children may be decided by attorneys and tax agencies. These fees can eat away at these assets, and delay the distribution of assets just when your heirs need them most. Here’s how to protect your estate—and your loved ones.

  • Review your beneficiaries, especially for retirement accounts, annuities, and life insurance. A beneficiary is designed to be your first line of defense, to make your wishes for assets known, and ensure that they transfer to who you want quickly.
  • Update or prepare your will. A will isn’t just about transferring assets. It can provide for your dependents’ support and care, and help you avoid the costs and delays associated with dying without one. It can also spell out plans to repay debts, such as a credit card or mortgage. Keep in mind that a beneficiary designation or asset titling trumps what’s written in a will, so make sure all documents are consistent and reflect your desires.
  • Coordinate asset titling with the rest of your estate plan. The titling of your property and non-retirement accounts can affect the ultimate disposition and taxation of your assets. Talk with an estate planning professional about debts and the titling of assets, such as a home, that don’t have a beneficiary designation, to make sure they reflect your wishes and are consistent with titling laws that can vary by state.

Put Yourself First

It’s all too easy for you to become engrossed in the day-to-day demands of life, work and family. Paying yourself first generally means “paying” your future self money. It’s important to do it first because if you pay yourself last, chances are you won’t pay yourself at all. An easy way to pay yourself first is by contributing to a 401(k), especially if your employer offers matching contributions.

Set a goal of setting aside 10% of your income each month for a future need such as retirement. If your employer matches up to 4% of your annual income, then you would only need to contribute 6% of your income to pay yourself 10% of your income for retirement.

Finally, invest in your financial future by making an appointment with your wealth management advisor. Financial advisors can be a great help in getting a handle on debt. They’re experts at helping their clients get their finances in shape for today and the future. They may provide several services, such as investment management, income tax preparation, and estate planning. When you meet with your advisor, ask them (and yourself):

  • Is my investment strategy on track?
  • Am I saving in the most tax-efficient way?
  • Do I have adequate life insurance for my situation?

Hiring a reputable financial advisor to help draft a debt reduction strategy and a financial plan going forward is an extremely beneficial way to get your debt under control.

Final Thoughts

Lastly, remember you don’t have to do everything at once. There’s a lot you can do to improve your financial health by taking one step at a time and think of these resolutions as a checklist. It’s all about taking the time (no matter how hard it may be to squeeze it in), doing some planning and keeping your eye on the prize.

There’s no one-size-fits-all financial plan. Your situation is unique, and your goals are your own. Our financial advisors can help you create a personalized plan that fits your life. Want to gain better control of your finances? The trusted team Agemy Financial Strategies is here for your every step of the way to make some real progress on your journey to financial freedom this coming year.

When the hustle and bustle has passed and the holiday dust has settled, talk to one of our wealth management professionals so we can make sure you’re starting 2022 off on the right foot.

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Do You Need to Rebalance Your Portfolio?

Agemy Financial Strategies

December 07, 2021

After a second year of a bull market in stocks, the end of the year could be a great time to rebalance your portfolio. However, be sure to manage the levels of risk in your portfolio, which is often a major concern for those in or near retirement. Here’s what you need to know. 

With 2022 around the corner, now is the perfect time to tune up your stock portfolio. As we close out 2021, most people are in the midst of figuring out what they need to change as they enter the new year. As most people know, a new year calls for a fresh perspective.

When it comes to your retirement income planning, investing well requires you to get your head around some pretty unique (and sometimes counterintuitive) concepts. Common wisdom tells us that we should periodically rebalance our investment portfolio, but it might not always make sense.

Advantages of Rebalancing

Part of the purpose of an asset allocation is to dilute the impact of each asset class by limiting both the upside and downside impact of the investments. But, when a particular investment grows in value faster than the other investments, you are exposed to more risk than you originally intended. Rebalancing your portfolio returns your investments to your original risk tolerance and reduces the risk that your portfolio will drop in value.

Disadvantages of Rebalancing

Rebalancing is an uninformed strategy that assumes that high-flying investments have nowhere to go but down or, at best, have no room for further growth. But, past performance does not predict future results. Rebalancing also conflicts with other common strategies, such as buy-and-hold and harvesting losses to offset capital gains. The decision to rebalance should be forward-looking, based on expectations about where the stock and bond markets will head in the future.

Be Responsible with your Investments

Your investments should be in line with your financial goals, starting with where you are currently sitting at and where you’d like to be down the line. As long as you are on your path towards your goals, you should try not to let emotions get involved when you see the latest downward trend. When investing in the stock market, the responsibility is on you to make the most of the information available to you.

A great way to do some internal housekeeping is to tally up the total dollar value of the stocks, bonds and cash you hold in your taxable and retirement accounts. If you own a fund that invests in both stocks and bonds, such as a balanced fund or target-date fund, review the fund’s latest holdings to see how much it holds in each major asset class. To find out your current asset mix, calculate the percentage of each asset class relative to your total portfolio.

There is a lot of internal and external environment that influences equity prices. Equity prices today are linked to expectations of profits for tomorrow. Sectors like consumer technology, financial services, healthcare, technology services, infrastructure could continue to see new investments each year. But again, you must…

Do Your Research

Overall, one of the most overlooked aspects of updating your portfolio or getting into stocks in general, is doing your research. Looking at a range of factors to evaluate a stock, and then decide whether it deserves attention in your portfolio. Stocks are considered long-term investments because they carry quite a bit of risk; you need time to weather any ups and downs and benefit from long-term gains.

Key steps in evaluating any stock includes:

  • Gathering stock materials: Quantitative research begins with pulling together a few documents that companies are required to file with the U.S. Securities and Exchange Commission. These include Forms 10-K and 10-Q.
  • Narrow Your Focus: Zero in online items such as revenue, net income, EPS and ROAs to become familiar with the measurable inner workings of a company.
  • Turn to Qualitative Research: This reveals the black-and-white financials of a company’s story to give you a truer picture of its operations and prospects.

A majority of the population needs to understand that financial markets move in cycles. Profitability of companies influences stock markets. Fixed income markets move on the back of the inflation and interest rate trends. You need to keep yourself informed and make calculated decisions. At the end of the day, before you buy any stock, you want to build a well-informed narrative about the company and what factors make it worthy of a long-term partnership.

Tweaking and Rebalancing

If you determine you need to make some changes to your current portfolio from your research, you may want to go back to your saved portfolio and do some amendments. Conventional wisdom holds that there are two ways to rebalance–either you can rebalance on a set schedule, say, every December, or you can rebalance whenever your portfolio gets dramatically out of whack with your targets.

Rebalancing can require that you sell, so it’s important to factor in rebalancing efforts on your tax-sheltered accounts to help reduce tax costs. In some cases, the alterations you need to make might be obvious–if you’re heavy on bonds, for example, trimming your bond funds should resolve the problem. Getting to the bottom of other bets might take a little more research. This is where advice from a financial professional can help.

Hire A Trusted Financial Advisor

When planning your financial future, it’s always a good idea to seek professional guidance. A financial advisor should be the first member that you add to your team. With the right financial advisor, you can ask them any money-related issues and gain answers to your most sought-after financial questions. Your advisor is there to help you succeed on your financial journey. Some choose to delay this decision for a multitude of reasons. If you are not into finance, it is good to discuss the standards of all possible investment avenues with your financial professionals.

Another part of internal housekeeping would be to keep your personal finances in check. You should discuss your insurance needs and check if the health insurance plan you are currently enrolled in is adequate for you. The same should be done with your life insurance policy. Your life insurance should comfortably cover any liabilities. In short, these housekeeping tips must be a regular feature for all things finance. Your financial advisor will help you with all of the things mentioned above in order to organize your finances in a simple manner.

Final Thoughts

Maintaining ideal levels of risk and the correct asset allocation is a critical component of any long-term financial plan. Taking the time to rebalance your portfolio on a regular basis can help achieve both these goals. Meeting with an advisor to perform regular maintenance now may help you avoid major headaches during the next market correction.

If you’re interested in learning more about stock portfolios and financial advising strategies for 2022, contact us today!

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No Increase in IRA Limits? Here’s How You Can Still Save in 2022.

Agemy Financial

December 01, 2021

If you’re proactive about retirement savings or want to up your savings game this year, you may already know that retirement contribution limits stayed the same for 2022. Here’s what you need to know on how you can still save more for retirement.

High earners have a variety of options for saving for retirement—but income limits mean that direct contributions to Roth IRAs may not be among them. Roth IRAs offer tax-free earnings growth and withdrawals in retirement. This makes them a potentially valuable part of a broader investing and tax-planning strategy. Having both Traditional and Roth accounts can help with tax diversification in retirement. Let’s break down what this and other recent changes can mean for your retirement plans, whether you’re already saving or just getting started.

Are you getting the most from your 401(k)s?

Maxing out contributions to a traditional 401(k) is a good place to start. These accounts have no income phase-out limits, so you can generally contribute the lesser of your income or $19,500 (plus an additional $6,500 if you are 50 or older).  Pre-tax contributions will reduce your taxable income and in turn, your earnings will grow on a tax deferred basis.

If your employer also offers access to a Roth 401(k), then you could consider using one to set aside some post-tax retirement savings. Like their traditional 401(k) counterparts, Roth 401(k)s don’t have income phase out limits. So even if you don’t qualify for a Roth IRA because your income is above IRS income limits you can make after taxes contributions to a Roth 401(k). Your earnings will grow tax-free, and you will pay no taxes when you take withdrawals after 5 years and over the age of 59½.

The annual contribution limit applies across all of your 401(k) accounts, not on each account individually. The IRS broke down the amount of Roth IRA contributions you can make for 2022. This table shows whether your contribution to a Roth IRA is affected by the amount of your modified AGI as computed for Roth IRA purpose.

If your filing status is… And your modified AGI is… Then you can contribute…
married filing jointly or qualifying widow(er)

< $204,000

up to the limit
married filing jointly or qualifying widow(er)

> $204,000 but < $214,000

a reduced amount
married filing jointly or qualifying widow(er)

> $214,000

zero
married filing separately and you lived with your spouse at any time during the year

< $10,000

a reduced amount
married filing separately and you lived with your spouse at any time during the year

> $10,000

zero
single, head of household, or married filing separately and you did not live with your spouse at any time during the year

< $129,000

up to the limit
single, head of household, or married filing separately and you did not live with your spouse at any time during the year

> $129,000 but < $144,000

a reduced amount
single, head of household, or married filing separately and you did not live with your spouse at any time during the year

> $144,000

zero

Amount of your reduced Roth IRA contribution

The IRS stated that If the amount you can contribute must be reduced, figure your reduced contribution limit as follows.

  1. Start with your modified AGI.
  2. Subtract from the amount in (1):
    • $204,000 if filing a joint return or qualifying widow(er),
    • $-0- if married filing a separate return, and you lived with your spouse at any time during the year, or
    • $129,000 for all other individuals.
  3. Divide the result in (2) by $15,000 ($10,000 if filing a joint return, qualifying widow(er), or married filing a separate return and you lived with your spouse at any time during the year).
  4. Multiply the maximum contribution limit (before reduction by this adjustment and before reduction for any contributions to traditional IRAs) by the result in (3).
  5. Subtract the result in (4) from the maximum contribution limit before this reduction. The result is your reduced contribution limit.

See Publication 590-A, Contributions to Individual Retirement Accounts (IRAs), for a worksheet to figure your reduced contribution.

What about non-deductible IRAs?

Does it ever make sense to contribute to a Traditional IRA even if you can’t deduct the contributions? At the very least, you could still enjoy the potential for tax-deferred growth in the account.

You wouldn’t be getting any upfront tax break, and future withdrawal of growth on your original contribution would be taxed at your ordinary income tax rate. It’s possible that the future tax rates you’d pay would be higher than what you would owe if you’d invested in a tax-efficient way in a regular taxable brokerage account. With today’s low long-term capital gains and qualified dividend rates, non-deductible contributions to a traditional IRA may make less sense.

In 2022, long-term capital gains are taxed at a federal rate of either:

  • 0% for single filers with taxable income up to $41,675 or joint filers with taxable income up to $803,350.
  • 15% for single filers with taxable income between $41,675-$459,750 or joint filers with taxable income between $83,351-$517,200.
  • 20% for single filers with taxable income above $459,751 or joint filers with taxable income above $517,201.

It’s important to have money in taxable accounts as well as tax-advantaged accounts because it can give you flexibility and access to savings for needs prior to age 59½. At 59½, you can withdraw from traditional IRAs and retirement accounts without a 10% early withdrawal penalty. These methods can also provide flexibility in managing your tax bracket as you plan for post-retirement cash flows.

What about Medicare Tax?

In addition to the above, filers may have to pay the Medicare surtax.

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees and self-employed workers — one for Old Age, Survivors and Disability Insurance, which is commonly known as the Social Security tax, and the other for Hospital Insurance, which is commonly known as the Medicare tax.

There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2022, the FICA tax rate for employers is 7.65% — 6.2% for Social Security and 1.45% for Medicare (the same as in 2021).

2022 updates

For 2022, an employee will pay:

  • 6.2% Social Security tax on the first $147,000 of wages (6.2% of $147,000 makes the maximum tax $9,114), plus
  • 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus
  • 2.35% Medicare tax (regular 1.45% Medicare tax plus 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return).

For 2022, the self-employment tax imposed on self-employed people is:

  • 12.4% OASDI on the first $147,000 of self-employment income, for a maximum tax of $18,228 (12.4% of $147,000); plus
  • 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a return of a married individual filing separately), plus
  • 3.8% (2.90% regular Medicare tax plus 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return).

Final Thoughts

Contribution limits didn’t increase for the 2022 tax year, but through understanding your contribution limits and future taxes, you can still continue to make good progress toward saving for retirement. Where will your retirement money come from? If you’re like most people, qualified-retirement plans, Social Security, and personal savings and investments are expected to play a role. Once you have estimated the amount of money you may need for retirement, a sound approach involves taking a close look at your potential retirement-income sources. What’s more, understanding tax strategies can potentially help you better manage your overall tax situation.

At Agemy Financial Strategies, we have an array of will and retirement and tax planning solutions to guide you through the entire process, all with the help of our trusted financial planners.

For more information on IRA limits and how you can put your best foot forward in 2022, contact us today!

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Understanding RMDs and What You Need to Know for 2022

Agemy Financial

November 26, 2021

How well do YOU understand RMDs? With the RMD deadline looming, you need to take action now before it costs you big bucks. 

A required minimum distribution (RMD) is the amount of money that must be withdrawn from an employer-sponsored retirement plan, traditional IRA, SEP, or SIMPLE individual retirement account (IRA) by owners and qualified retirement plan participants of retirement age. RMDs are calculated separately for each account and must come out of said account unless an exception applies.

There’s still time to withdraw your required minimum distribution (RMD) from your traditional IRA, 401(k) or other retirement account (except a Roth IRA) before the end of the year…but you should hurry! The 2020 RMD suspension was for one year only, so don’t think you can skip it again in 2021. And if you don’t take enough out of your retirement plans this year, you could be hit with a 50% penalty from the IRS on the amount not distributed as required. Here’s what you need to know for 2022.

RMD Tables for 2022

In 2022, various life expectancy tables used by owners and beneficiaries to calculate required minimum distributions (RMDs) from retirement plans, are being updated. This is being done to reflect the increase in life expectancies experienced since the current tables came out in the early 2000s.

These changes mean that smaller distributions will be required to be taken on an annual basis, resulting in less taxation and longer lasting account balances which in turn creates an opportunity to grow the funds that are in the account. You can calculate your 2022 RMD by taking your Dec. 31, 2021, account balances and dividing by a factor from an IRS table.

If you are single or married to someone not more than 10 years younger than you, use 2022 Table III, Uniform Life Table which lists the factor for a 72-year-old at 27.4. If your spouse is more than 10 years younger than you, use the factor in 2022 Table II, Joint and Last Survivor Life Expectancy.

Impact of RMDs in 2022  

Beneficiaries of IRAs, retirement plans and nonqualified annuities who will start using their life expectancy to take out the annual RMD in 2022 will use the new factors from the Single Life table to start their payout schedule. Those beneficiaries who have been using their life expectancy to take out their annual RMD need to adjust the life expectancy used in 2022 to reflect these new tables.

For many owners and beneficiaries, the overall increase in life expectancy represented in the updated tables is a good change. These changes will reduce the taxation on required distributions and provide more opportunity for growth and longer lasting account balances. If you’d like to learn more about the payout options beneficiaries of IRAs and nonqualified annuities check out our RMD webinar on our website.

Planning for the Future 

At this time of year, the most important thing is that you get the ball rolling now! Looking into the years ahead, your first RMD (for 2022) may be taken as late as April 1, 2023. Only this first RMD for 2022 can be delayed into the following year. Your second RMD will be for 2023 and will be due by Dec. 31, 2023. Your 2024 RMD needs to be out by Dec. 31, 2024 and so on every year for the rest of your life.

If you don’t take the first RMD in 2022 and delay it into spring of 2023, you will be taking two RMD in 2023 and reporting the income from both on your 2023 return. That may or may not be problematic; If your 2022 marginal tax rate will be lower than 2023, delaying is probably not wise. If your 2023 marginal tax rate is lower than 2022, delaying could save you some money. To avoid taking two RMD in 2023, don’t delay taking your 2022 RMD and take it during 20222. The 2022 RMD can be taken any time in 2022, even before you turn 72. The IRS automatically counts any distributions taken in a given year as part of the RMD for that year until the RMD is met.

If you have retirement accounts, you owe it to yourself to understand the rules that apply to distributions, such as the RMD rules discussed here. And at Agemy Financial Strategies, we can help with this often complicated process. Our experienced advisors carefully explain the calculations necessary to convert to the new RMDs, as well as a breakdown of all of the new tables for those looking for a by-the-numbers approach.

Final Thoughts 

It’s important to note, a large RMD can push you into a higher tax bracket. One strategy for reducing the amount of RMDs is to make a qualified charitable distribution (QCD). If you’re 70½ or older, a QCD allows you to distribute up to $100,000 tax-free directly from an IRA to a qualified charity and to apply that amount toward your RMDs.

In addition, the income-based limits on charitable deductions don’t apply. Any amount excluded from your income by virtue of the QCD is similarly excluded from being treated as a charitable deduction. If you haven’t withdrawn the necessary funds yet, don’t delay. Contact the financial advisors at Agemy right away for help setting up a distribution.

At Agemy Financial Strategies, we have an array of will and retirement planning solutions to guide you through the entire process all with the help of our trusted financial planners. If you have any questions on our company, services, values and more, contact the team at Agemy Financial here today. Our highly experienced financial advisors in both Denver, Colorado and Guilford, Connecticut are waiting for your call!

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2022 Tax Inflation Adjustments

Agemy Financial

December 08, 2021

On Nov. 10, 2021, the IRS announced inflation adjustments for 2022 affecting standard deductions, tax brackets, and more. The changes (effective when you file in 2023) are the result of higher inflation in 2021. There are also changes to the alternative minimum tax, estate tax exemption, earned income tax credit and flexible spending account limits, among others. 

Over the past few years, your tax bill has been affected by many law changes. These changes can be somewhat confusing at times. The best way to be prepared for these changes is to make year-round tax planning your top priority.

Overview

Recently, the IRS announced higher federal income tax brackets for 2022 due to the rise of inflation. The standard deduction is increasing to $25,900 for married couples filing together and $12,950 for single taxpayers. The consumer price index surged by 6.2% in October compared to the previous year, the biggest jump in more than three decades.

Here are a couple ways Agemy Financial Strategies can help you make the necessary adjustments for your tax planning in 2022 and beyond.

Last Chance for Deductions and Credits

Several deductions and credits will expire in 2021. It’s important to take advantage of these credits and deductions now to consider how their elimination could affect your income and corporate tax rate in 2022. The best way to do this is to consult with your tax advisor to see what credits and deductions you qualify for.

The Employee Retention Tax Credit is an incentive that was created within the Coronavirus Relief and CARES Act that was intended to encourage employers to keep employees on the payroll as they navigate the unprecedented effects of COVID-19. With ERTC, companies can get a maximum of $21,000 for keeping workers employed through September 30, 2021. However, if you started your business after February 15, 2020, it’s considered a recovery startup business, and the maximum credit is $50,000. Learn more by reviewing IRS Notice 2021-49.

If you paid qualified sick or family leave related to COVID-19 or vaccinations through September 30, 2021, you may be eligible for a credit due to the Families First Coronavirus Response Act (FFCRA) and American Rescue Plan (ARP). Review the IRS comparison chart to see how rules for time frames in 2021 differ.

As of now, you can deduct expenses paid for with PPP loans. Guidance may change before tax filing time, so it’s very important to track payroll and fees paid with PPP funds or other government grants or loans.

2022 Tax Year: Leverage these deductions before they expire

2022 will be the last year you can take the total deductions for Section 179, bonus depreciation, and qualifying business meals. Although this could change, it’s a good idea to take advantage of these deductions before the January 1, 2023 deadline to acquire and place assets into service.

For 2021, the maximum expense deduction is $1,050,000. This limit is reduced by the amount by which the cost of Section 179 property placed in service during the tax year exceeds $2,620,000. Although the TCJA offers deductions for 50% of qualifying client-related business meals, the Consolidated Appropriations Act (CAA) made an exception for 2021 and 2022.

Further Adjustments

The IRS also made other inflation adjustments, such as changes to the alternative minimum tax, a parallel system for higher earners, and an increased estate tax exemption. Moreover, there’s a boost for the earned income tax credit, a write-off for low- to moderate-income families, and higher flexible spending account limits, among other changes. The key takeaways of these changes include:

  • Basic tax rates have not changed for 2022 although income levels (brackets) for each rate have.
  • Standard deductions and about 60 other provisions have been adjusted for inflation to avoid bracket creep.
  • The maximum Earned Income Tax Credit for 2022 will be $6,935 vs. $6,728 for tax year 2021 for taxpayers with three or more qualifying children.
  • Basic exclusion for decedents who die in 2022 will be $12,060,000 vs. $11,700,000 for 2021.
  • The annual gift exclusion for calendar year 2022 will be $16,000 vs. $15,000 for 2021.

Workers may also save more to 401(k) plans in 2022, according to last week’s announcement. But there won’t be a higher limit for individual retirement accounts.

Final Thoughts 

Lastly, before making any tax and/or business decision, you should always consult a professional who can advise you based on your individual situation. 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.

A strong tax planning strategy can save you money on retirement withdrawals, keep your investments efficient, help you give more to charity, maximize your estate, and put more money in your pocket. At Agemy Financial Strategies, our seasoned financial advisors are highly experienced in managing taxes and understand the importance of a well-executed tax plan for financial success. Click here to find forms, explanations, and other tools to help you manage your taxes.

For more information on 2022 tax inflation adjustments and tax advising services, contact us here today.

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