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How to Leave a Legacy: Charitable Giving in Retirement
NewsRetirement presents a unique opportunity to de-stress, revel in the fruits of your labor, and leave a lasting impact on the world through charitable giving. By harnessing your resources and investing your time, you can contribute to causes that align with your values and promote beneficial societal change, all while leaving less to Uncle Sam.
The Baby Boomer Generation is an inspiring example of remarkable generosity, with each person contributing an average of $1,212 annually. This astonishing statistic represents an impressive 72% of the Baby Boomer population. It constitutes 43% of all donations made yearly. Their unwavering dedication to philanthropy serves as a genuinely commendable model.
This blog will delve into the significance of charitable giving during retirement, offering valuable insights on how to forge a meaningful and enduring legacy through your philanthropic endeavors. Prepare to discover actionable steps that enable you to make a significant difference in the world. Here’s what you should know.
Giving to Charity Beats Giving to Uncle Sam
We know that many clients and friends in our communities are charitably inclined. But as you work on your estate plan, don’t forget to consider charitable giving. Do it the right way and you basically are using some of Uncle Sam’s money. Do it the wrong way and Uncle Sam keeps his share and you are forced to use only your money (or your family’s inheritance) to make the gift.
While the actual gift structure can be technical, the gift concepts are not hard to understand, and the cost is usually minimal compared to the gift amount and the tax benefits to the donor. Donors at every income level can participate.
Reflect on Your Values and Passions
Before embarking on your charitable journey, it is vital to reflect on your values and passions. Take the necessary time to identify the profound reasons that resonate with you, whether it be education, healthcare, or any other area that sparks your passion. By profoundly understanding what truly matters to you, you can select the causes that align with your core beliefs and have a genuine impact through your charitable giving.
Creating a comprehensive giving plan is crucial once you have gained clarity on your values. Start by setting clear and measurable objectives for your philanthropic endeavors, taking into account your financial security. It may be helpful to seek guidance from an experienced financial advisor (preferably a Fiduciary you can trust) who can assist you in designing an effective plan aligned with your goals, ensuring that your giving strategy is optimized.
When donating to charities, conducting thorough research is paramount. Choose reputable organizations with a proven track record of utilizing resources effectively for their intended purpose. Evaluate their financial health, governance practices, and programmatic outcomes. Let’s explore some of the various gifting methods.
Exploring Different Gifting Methods
There are various ways to engage in charitable giving during retirement, each with unique advantages. Some options to consider include:
Each method has advantages and considerations, and the best choice depends on your circumstances and philanthropic goals. It is recommended to consult with financial advisors or professionals with experience in charitable planning to determine the most suitable gifting method for your specific situation.
Considerations for Tax Deductions on Charitable Giving
Regarding tax deductions for charitable giving, there are a few key factors to remember. Donors who itemize their deductions when filing their income tax returns can benefit from deducting their donations. However, there are limits to the amount that can be removed based on the type of donation and the donor’s adjusted gross income (AGI).
Deductions for donations to public charities, including donor-advised funds, are limited to 50% of the donor’s AGI. For cash gifts, the limit increases to 60% of AGI. When donating appreciated non-cash assets held for more than one year, the limit is 30% of AGI. If the contribution exceeds these limits, the excess amount can be carried over and deducted in the following five tax years.
Individuals who choose to itemize their deductions rather than take the standard deduction do so because their total itemized deductions surpass the typical deduction amount. For 2023, inflation-based adjustments have raised the average deduction amounts to new highs. Single filers can claim a standard deduction of $13,850, while married couples filing jointly can claim a standard deduction of $27,700.
These considerations regarding tax deductions for charitable giving highlight the importance of understanding the rules and limits associated with deducting donations. It is advisable to consult with a tax professional or financial advisor to ensure accurate and compliant reporting while maximizing the benefits of your charitable contributions.
Qualified Charitable Distributions (QCDs)
Speaking of charitable giving and tax planning, there is one very useful tool that many senior citizens are not aware of that can help with both; the “QCD” or Qualified Charitable Distribution.
A QCD is a direct transfer of funds from your IRA custodian, payable to a qualified charity. Use QCDs to manage your required minimum distributions from an IRA. A qualified charitable distribution (QCD) allows individuals who are 70½ years old or older to donate up to $100,000 total to one or more charities directly from a taxable IRA instead of taking their required minimum distributions.
Note: The more recent tax changes centered around the pandemic, specifically the CARES Act, did not change the rules around the QCD.
Let’s revisit some of the most common forms of Charitable Giving in more detail…
Donations of Appreciated Assets-Stocks
A simple and often overlooked method of donation involves directly giving appreciated stocks to a charity. Instead of selling the stocks first and then donating the proceeds, this approach provides the donor with an income tax deduction for the appreciated value, eliminates capital gains tax, and provides the charity with the larger, appreciated sum.
Donations of Life Insurance
Life insurance can be gifted to charity in three ways: naming the charity as the beneficiary (which provides no tax benefits), donating an existing policy (which provides an income tax deduction equivalent to the cash value), or allowing the charity to own and be the beneficiary of a policy on your life while making yearly donations to cover the premiums (which provides an income tax deduction equivalent to the annual premium donation). Donating life insurance is an excellent way to enhance the value of your gift.
Charitable Remainder Trusts
In a charitable remainder trust, the donor places appreciated assets into a trust and receives income. When the trust term ends, the remaining balance goes to the chosen charity. The donor’s income tax deduction is equal to the present value of the remainder gift, any appreciation is exempt from capital gains tax, and the asset is removed from the donor’s estate, thereby avoiding any estate taxes. This arrangement can be taken further by using the income to pay premiums on a life insurance policy that designates the charity as a beneficiary.
Charitable Lead Trusts
A charitable lead trust is utilized when a donor has an asset not needed during his or her lifetime, often a vacation home, but one the donor wishes for heirs to inherit. The charity receives income from the property, which ideally continues to appreciate for the benefit of the trust beneficiaries to whom it will be distributed upon the expiration of the trust term. Charitable lead trusts follow a complex set of rules governing the type and amount of the charitable tax deductions permitted, but given the right circumstances, it can benefit both the charity and the donor.
Donations of IRA and Pension Funds
Currently, only bequests of these assets (gifts made through a will) are eligible for favorable tax treatment, which avoids income and estate tax. However, gifts of these assets can be a vital part of charitable planning for a donor with a diverse portfolio. Otherwise, the income tax on the undistributed income and the estate tax would substantially reduce the value of these gifts to heirs.
Charitable Gift Annuity
This form of gift is popular among seniors and retirees who want to donate to charity but can’t afford to lose the necessary income. The interest rate allowed increases with the age of the donor when the annuity is established. For instance, a 75-year-old would receive a fixed 7.1%, an 80-year-old would receive a fixed 8.05%, and an 85-year-old would receive a fixed 9.5%. The income is guaranteed for life, and when the donor passes away, the designated charity receives the remainder.
Please note, there are many forms of Annuities available, but not all are created equal and some carry a high risk factor (like Variable Annuities). Always consult with your financial advisor before exploring your options.
Bequests
Finally, and importantly, creating a bequest (a provision in your will) to a charity is perhaps the most efficient and least expensive way to make a planned charitable gift. The charity could receive a specific amount, a particular asset (such as an IRA or pension asset), a percentage of the estate, or a part of the residue. Even those with modest incomes can leave a legacy.
Consider Volunteering or Non-Monetary Contributions
Remember that charitable giving does not always have to be monetary. Retirement offers an excellent opportunity to dedicate your time, skills, and knowledge to philanthropic organizations. Consider volunteering, serving on boards, mentoring others, or offering pro bono services. Your experience and knowledge can be transformative.
Engaging your family and loved ones in philanthropy can deepen the impact of your giving and instill a spirit of generosity across generations. Encourage open discussions about charitable values, involve family members in decision-making, and create opportunities for shared giving experiences. This can create a lasting family legacy of giving back and making a positive difference.
Final Thoughts
Leaving a legacy through charitable giving is a powerful way to create positive change in the world and inspire others to do the same. As you plan for retirement and consider the legacy you want to leave behind, remember that every contribution can significantly impact, no matter how big or small.
Agemy Financial Strategies is dedicated to providing knowledgeable guidance on charitable giving during retirement. We understand the importance of your generous contributions and the lasting impact they can have. Our team of Fiduciary Advisors is here to assist you every step of the way, ensuring that your retirement years are filled with immense fulfillment. With our guidance, you can leave a meaningful legacy that will endure for years.
Contact us today to get started and schedule your complimentary strategy session here.
Inflation-Proof Your Investment Portfolio
NewsAs companies push higher prices to protect their profits, inflation remains a significant concern for investors.
Higher prices have bolstered corporate profits, even as some of the costs of doing business have fallen in recent months.
The main suspects differ across party lines. Many economists and politicians say inflation has been caused by government spending and various aid programs (stimulus checks, student debt forgiveness).
Many other economists and politicians point to the war in Ukraine (for pushing up oil prices), and also greedy companies, many of which have been bringing in record profits despite tales of supply chain snarls and rising costs. But whoever is to blame, the fact remains: we are feeling the pinch.
What is Inflation?
Inflation is a broad and sustained rise in the prices of products and services that people use every day. It aims to measure the overall impact of price changes for a diversified set of products and services. It allows for a single value representation of the increase in the price level of goods and services in an economy over a period of time.
Its impact is often viewed through the lens of your household budget, as each paycheck purchases fewer of the same items it once did. But inflation can also affect the normal functioning of the economy and investment portfolios.
Here, we cover some of the effects of inflation in light of the recent spike and what it means for your investment portfolio.
What does inflation mean for your investments?
All investments – from cash and fixed income securities to mutual funds, and stocks to cryptocurrencies – come with their own set of risk and reward characteristics. Understanding the relationship between risk and reward, and your individual comfort level with both, is a crucial part of building your investment portfolio. The rate of inflation represents the rate at which the real value of an investment is eroded and the loss in spending or purchasing power over time.
In other words, if your investments aren’t inflation-resistant, the value of your portfolio will gradually decrease.
On the other hand, some areas of the market may benefit from rising inflation, including commodities and commodity-related stocks, as well as real estate. To preserve the value of your investments, consider investing in inflation-proof assets that tend to perform well even in an unstable economy.
I Bonds
U.S. Treasury issues these savings bonds specifically designed to protect against inflation. They have a unique yield of a fixed interest rate and an inflation-based component that adjusts every six months. The inflation-based element is contingent on changes in the Consumer Price Index (CPI), a widely used measure of inflation.
By investing in I Bonds, investors can earn a return that outpaces inflation, helping to preserve the value of their investment over time. However, it’s important to note that I Bonds have some limitations. For example, they have an annual purchase limit of $10,000 per Social Security Number, and they cannot be redeemed for the first 12 months after purchase. Additionally, depending on their specific investment goals and risk tolerance, there may be better fits for some investors.
As of April 2023, I bonds have a savings rate of 6.89%, including a fixed rate of 0.40%. Ultimately, whether or not I Bonds is a good fit for your portfolio depends on several factors, including your investment goals, risk tolerance, and current market conditions. Working with a financial advisor can help you evaluate your investment strategy that aligns with your needs and goals.
REITs
Real Estate Investment Trusts (REITs) are investments that own and operate income-producing real estate properties, such as apartment complexes, shopping centers, and office buildings. REITs typically offer high dividend yields and can provide investors with a steady source of income. REITs are often considered a hedge against inflation because real estate values and rental income tend to increase during rising prices.
There are four types of REITs:
Many REITs have built-in inflation protection mechanisms, such as rent escalation clauses in their leases, which allow them to increase rents in response to rising inflation. Ultimately, REITs can help ensure that their rental income keeps up with the pace of inflation, providing investors with a steady source of income while also benefiting from the potential for long-term growth.
As with any investment, it’s essential to carefully evaluate the risks and potential rewards of investing in REITs and to work with a financial advisor to develop a comprehensive investment strategy that aligns with your unique needs and goals.
Commodities
Commodities are another popular option for investors looking to protect their portfolios against inflation. Commodities are physical goods often used to produce other goods and services, such as oil, gold, and wheat. However, investing in commodities can also be done through exchange-traded funds (ETFs) or futures contracts. ETFs track the performance of a specific commodity or a basket of commodities, providing investors with diversified exposure to the commodity markets.
During periods of inflation, the prices of commodities often rise as demand increases and the purchasing power of currencies declines. This can make investing in commodities an attractive option for investors looking to hedge against inflation. Investing in things can also be risky, as prices can be volatile and subject to various market forces. Additionally, commodities can be more challenging than other asset classes, as they often require specialized knowledge and access to specific markets.
As with any investment, it’s essential to carefully evaluate the risks and potential rewards of investing in commodities and to work with a financial advisor to develop a comprehensive investment strategy that aligns with your unique needs and goals.
Savings, CDs, and Money Market Accounts
Traditionally, savings, CDs, and money market accounts have yet to be considered high-growth investments. However, as inflation rates have risen, these lower-risk options have become more appealing to investors seeking to protect their portfolios. Finding savings accounts with interest rates from reputable banks in the 4% range is now possible, providing a competitive return on cash holdings.
While these types of accounts may not offer the potential for high returns like riskier investments, they can provide a stable income source and help preserve the value of your savings over time. As with any investment, it’s essential to carefully evaluate the risks and potential rewards of investing in savings, CDs, or money market accounts and to work with a financial advisor to develop a comprehensive investment strategy that aligns with your unique needs and goals.
Final Thoughts
With inflation rising, many of us feel the pinch of higher prices and dwindling purchasing power. If you’re concerned about the impact of inflation on your retirement savings, consider inflation-proof investments like the options listed above. However, evaluating your investment options and developing a comprehensive strategy that aligns with your unique needs and goals can be complex.
That’s where working with a trusted Fiduciary advisor can be invaluable. An experienced financial professional can help you navigate the markets, adjust your asset allocation, and develop a plan to weather inflation and other market forces. Ultimately, working with a Fiduciary Advisor can help investors navigate complex market conditions and make informed investment decisions that can help protect and grow their wealth over time.
At Agemy Financial Strategies, we provide tailored solutions for your investment portfolio, retirement plan and lifestyle management needs. Our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and provide you with the highest level of service.
Whether you’re looking to help protect your nest egg against inflation or revise your current plan to make smart amendments, we’re here to help.
Connect with our team today to develop a comprehensive investment strategy for a stress-free retirement.
Harnessing the Power of Diversification in Retirement
NewsMay 29, 2024
Searching for optimal returns in the busy investing world leads individuals to seek the perfect balance between risk and reward. One of the most effective strategies to achieve this balance is diversification. Spreading investments across various assets can help mitigate risks and enhance potential returns.
Whether you’re a seasoned investor or just starting your journey, embracing diversification with the support of a trusted fiduciary advisor can set you on the path to financial stability and growth. Here’s what you need to know.
Why You Need Diversification
What does it mean to have a diversified portfolio? And why is it important? Diversifying your investments is a complicated process that requires spreading your money into different investment vehicles. Diversifying your portfolio can help reduce risk and allow your money to grow.
In life, you have probably heard the saying, “Don’t put all your eggs in one basket.” This popular saying references not putting your money all in one investment because you’ll lose it if it fails. This is especially crucial when saving for retirement. Diversification is part of a long-term investing strategy and should be taken with a balanced approach to help you build renewable wealth in retirement. Here’s why diversification is crucial:
Now that you know a little about why diversification is important, we can look at ways to implement diversification into your retirement portfolio.
Developing a diversified investment strategy involves spreading your investments across different asset classes, such as stocks, bonds, real estate, and commodities. Diversification helps minimize the impact of a single investment’s performance on your overall portfolio, providing stability and helping protect your wealth during market fluctuations. Here are some investment types to consider:
Remember, diversification does not guarantee profits or protect against losses, but it can help manage risk and enhance the potential for long-term returns. Regularly review your investment strategy, stay informed about market trends, and adjust your portfolio to align with your retirement goals and changing market conditions.
The Importance of Rebalancing
Maintaining a diversified portfolio is not a one-time task. Regular attention and adjustments are required to help ensure your investments align with your goals and risk tolerance. Over time, the performance of different asset classes within your portfolio will vary. Some investments will grow faster than others, causing your portfolio to drift from its original allocation. This drift can expose you to unintended risks or reduce the potential for returns.
Rebalancing your portfolio can help you with the following:
A fiduciary advisor can play a critical role in managing the rebalancing process. They can help guide you by giving you a comprehensive understanding of your financial situation and market conditions.
How a Fiduciary Advisor Can Help
Navigating the complexities of diversification can be daunting, especially for those new to investing. This is where a fiduciary advisor becomes valuable. At Agemy Financial Strategies, our fiduciary advisors provide tailored solutions for your investment portfolio, retirement plan, and lifestyle management needs. Our priority is helping you take care of yourself and your family. Here are just a few of the ways we can help:
We understand that retirement planning looks different for each individual, and with that in mind, we carefully craft your plan to meet your specific needs. For a complete list of our service offerings, see here.
Last Thoughts
Harnessing the power of diversification is a fundamental strategy to help you achieve financial success. Spreading investments across various asset classes can help investors reduce risk, enhance returns, and smooth out volatility. Collaborating with a fiduciary advisor adds an extra layer of personalized guidance, helping ensure that your diversification strategy is tailored to your unique financial goals.
In an ever-changing financial landscape, diversification remains a timeless principle. Agemy Financial Strategies can help diversify your investments and assets to create a balanced retirement plan. We provide solutions tailored to your specific financial situation. Whether it’s helping you strategize asset allocations to help stomach inflation or revising your current plan to make helpful amendments –we are here to help.
Contact us today to help you get started on your diversification journey.
5 Retirement Planning Mistakes to Avoid
NewsRetirement is an exciting phase of life that allows you to enjoy the fruits of your labor and pursue your passions. However, your retirement dreams can quickly become nightmares without proper planning.
Retirement planning involves setting goals, managing investments, minimizing tax obligations, and preparing for unexpected expenses. For those nearing their retirement date, these considerations become even more critical. In this blog, we have gathered some tips to help you secure your retirement. Here’s what you need to know.
Mistake 1: Neglecting to Set Clear Goals
One of the most common mistakes retirees make is failing to establish clear and achievable retirement goals. Setting clear goals helps you prioritize your financial objectives and align your resources accordingly. With defined plans, making informed financial decisions and creating a realistic roadmap for your retirement becomes easier.
Start by visualizing your ideal retirement lifestyle. Consider the activities you want to engage in, the places you want to visit, and the experiences you wish to have. Consider whether you want to maintain your standard of living or downsize to a more modest lifestyle. Reflect on personal and philanthropic goals, such as leaving a legacy for your loved ones or contributing to an important cause. Break your goals down into specific, measurable objectives.
Mistake 2: Applying For Social Security Too Early
Delaying Social Security benefits until your full retirement age (FRA) or beyond can have significant financial advantages. While you can apply for benefits at age 62, the amount you receive will be reduced by up to 30% compared to what you would receive at FRA, as determined by the Social Security Administration.
It’s important to note that choosing to receive benefits before your FRA while continuing to work can further decrease your benefits. For every $2 you earn above a specific threshold of $21,240 in 2023, you will lose $1 in benefits. Unless you urgently need the money, it’s advisable to consider waiting to apply for benefits.
If you are financially able to delay applying for benefits until age 70, it can be even more advantageous. Your benefit will be approximately 32% higher at this age than your FRA. This increase can significantly impact your retirement income and provide greater financial security in the later years of your retirement.
By waiting to apply for Social Security benefits, you can maximize your monthly benefit amount and improve your retirement financial situation. However, the decision should be based on your circumstances and financial needs. Consulting with a retirement income planner can help determine the optimal timing for claiming Social Security benefits.
Mistake 3: Underestimating Healthcare Expenses
Underestimating healthcare expenses during retirement can significantly strain your finances, particularly as you age. Rising medical inflation, potential long-term care needs, and the cost of Medicare supplement plans should be considered. Healthcare costs tend to increase over time, often exceeding general inflation rates.
Evaluating the costs associated with long-term care insurance or alternative strategies is crucial. According to the Employee Benefit Research Institute, to have a 90 percent chance of meeting their healthcare spending needs in retirement, a man must save $166,000, and a woman must save $197,000. Couples enrolled in a Medigap plan with average premiums will need to save $212,000 to have a 50 percent chance of covering their medical expenditures in retirement and $318,000 to have a 90 percent chance. Failing to factor in this rising trend can lead to unexpected financial burdens.
Medicare, while providing some coverage, doesn’t cover all expenses. Medicare premiums, deductibles, copayments, and prescription drugs can accumulate. In 2023 without insurance, monthly long-term care costs could see you paying:
Individuals 65 or older have a 70 percent chance of needing long-term care services in the future, but only 11 percent purchase long-term care insurance. The rest are left scrambling to cover costs when the time comes.
Seeking guidance from a financial advisor with knowledge in insurance planning can help develop a comprehensive strategy incorporating healthcare expenses into your retirement plan.
Mistake 4: Failing to Diversify Investments
As retirement approaches, the importance of diversification becomes even more significant. Diversification is a crucial strategy for effectively managing investment risk. By spreading your investments across different asset classes, you can even help mitigate the impact of market volatility.
That is why it is essential to diversify your investment portfolio by including a mix of stocks, bonds, real estate, and other suitable investment vehicles. By diversifying, you reduce the risk of relying too heavily on a particular sector or asset class, which can leave your portfolio vulnerable to market fluctuations.
Furthermore, as you begin withdrawing assets from your retirement nest egg, a strategy prioritizing capital preservation becomes crucial. This means considering investments that can help protect the value of your portfolio while still providing potential growth. Refrain from considering capital preservation in your investment strategy to avoid exposing your portfolio to the dangerous combination of spending needs and volatile markets, potentially causing long-term damage.
Working with a financial advisor knowledgeable in investment planning is advisable to ensure a well-structured and resilient investment portfolio. They can help you design a diversified investment strategy aligning with your goals, risk tolerance, and time horizon.
Mistake 5: Miscalculating RMDs
Once you reach a certain age, you are required to take annual distributions, known as required minimum distributions (RMDs), from your 401(k), Traditional IRA, Simplified Employee Pension (SEP), and SIMPLE IRAs. The SECURE 2.0 Act of 2022, signed into law on December 29, 2022, increases the age at which RMDs must commence from 72 to 73 in 2023 and 75 in 2033. This requirement applies even if you don’t need the distributions, except for Roth IRAs. However, you may have flexibility in determining when to take the first-year distribution.
You can take the first-year distribution when you reach your RMD age or delay it until April 1st of the following year, known as the required beginning date. If you wait for the first distribution, you must take two distributions during that year—both the first-year’s and the second-year’s required distributions. It’s important to note that RMDs are generally taxable at your individual tax rate, and failing to take them can result in penalty taxes.
The calculation of RMDs is based on IRS life expectancy tables. While you can access these tables online and calculate the distributions independently, it’s always best practice to consult a trusted financial advisor.
Understanding the rules and requirements surrounding RMDs is crucial to ensure compliance and avoid unnecessary penalties. Consulting with a financial advisor or tax professional can provide personalized guidance tailored to your retirement accounts and circumstances.
Working With A Fiduciary Advisor
Working with a Fiduciary Advisor is paramount when planning for retirement and avoiding big mistakes. By partnering with a Fiduciary Advisor, you can streamline the retirement planning process. They will assist you in developing a comprehensive retirement income plan incorporating the essential factors:
At Agemy Financial Strategies, our Fiduciary advisors are dedicated to collaborating with you to devise the most effective strategies for minimizing taxes during retirement. We work diligently to create a reliable retirement income stream that can withstand market fluctuations, enabling you to enjoy your desired retirement lifestyle. With our expertise and personalized guidance, you can navigate the complexities of retirement income planning and feel confident in your financial future.
To Sum Up
To ensure a fulfilling retirement, it is crucial to understand the available options for protecting and growing your savings. Exploring these possibilities plays a vital role in securing an optimal retirement. Seeking guidance from a Financial Advisor can help initiate meaningful conversations and develop strategies tailored to your unique needs.
At Agemy Financial Strategies, our team of skilled financial advisors are ready to assist you at every stage of your retirement journey. We are here to provide the support and expertise you need to navigate the complexities of retirement planning and help you achieve your financial goals.
Contact us today to set up your complimentary retirement strategy session.
Fiduciary Guidance: Navigating Retirement For Older Americans
NewsMay 21, 2024
The end of May signals the end of Older Americans Month, honoring the seniors in our communities and reflecting upon the retirement challenges they often encounter.
With the last of the 73 million baby boomers hitting 65 in the next six years (2030), the pressures on the retirement system will only intensify. With its myriad savings, investments, and estate decisions, navigating retirement planning can be overwhelmingly complex. This is where a fiduciary advisor steps in to provide valuable assistance. Here’s what you should know.
When asked whether the nation is grappling with a retirement crisis, 79% of Americans agree. Additionally, over 55% harbor concerns about their ability to attain financial security during retirement. In such an environment, protecting your retirement funds becomes paramount. Collaborating with a fiduciary is a powerful strategy to help protect and preserve your financial future.
The term “fiduciary” signifies trust, as a fiduciary advisor is legally and ethically obligated to act in their client’s best interests. What sets a fiduciary advisor apart from other financial professionals is their commitment to prioritizing their clients’ well-being. This level of trust and integrity is particularly reassuring when navigating the intricate landscape of retirement planning.
One of the key advantages of working with a fiduciary advisor is their personalized approach. They invest time in comprehensively understanding each client’s financial situation, goals, and concerns. Whether you’re approaching retirement, already retired, or supporting an aging loved one through their golden years, a fiduciary advisor can craft a retirement plan that reflects your needs and goals. Let’s explore how a fiduciary can assist you in planning for retirement.
Retirement Income Planning
Have you ever wondered where your retirement money will come from? For most, it’s a mix of qualified retirement plans, Social Security, personal savings, and investments. Planning for retirement involves identifying your income sources, tallying up expenses, devising a savings strategy, and managing assets. Monitoring your potential income sources is crucial once you’ve estimated your retirement needs.
A fiduciary advisor will take the time to understand your specific financial situation. Together, you’ll craft a retirement plan tailored to your retirement age, desired lifestyle, healthcare requirements, and long-term aspirations. It’s important to note that everyone’s retirement income approach differs. The ultimate goal is to create a sustainable income plan that ensures financial security and peace of mind throughout your retirement journey.
Investment Management
Managing investments during retirement requires a delicate balance between growth and preservation of capital. While seeking more stable and low-risk investments is natural, balancing risk and return is crucial. Consider incorporating investments that offer steady income, such as bonds or dividend-paying stocks, into your portfolio. These options provide a regular income stream to supplement your retirement funds.
However, evaluating the risks associated with these investments and having them align with your risk tolerance and financial goals is essential. A fiduciary advisor can help you craft a well-diversified investment portfolio tailored to help meet your needs and goals. They consider factors like your risk tolerance and time horizon when developing a strategic investment plan.
Market fluctuations can alter the composition of your investments over time, potentially disrupting the initial asset allocation. By conducting regular reviews and rebalancing your portfolio, fiduciary advisors can help you adapt to shifting market dynamics.
Tax-Efficient Strategies
In retirement, your income will likely consist of a blend of resources. This includes an array of investments and personal savings like 401(k)s and IRAs. Yet, it’s common to underestimate the intricate connection between these income sources and their tax implications. Here are just a few tax-efficient strategies to consider:
Remember, these strategies’ effectiveness depends on your financial situation and goals. Working with a fiduciary advisor can help tailor these strategies to best suit your needs.
Estate planning is another crucial aspect of retirement planning as it allows retirees to set a blueprint for the distribution of their assets after their passing. Without an estate plan, retirees risk leaving their loved ones without clear instructions on handling their estate. This can lead to confusion, disputes, and potentially costly legal battles.
As life changes, so will your estate plan. It’s important to periodically review your estate plan to help ensure everything is current and meets your requirements. Here are some factors to consider when it’s time to update your estate plan:
A fiduciary advisor can work with you and your estate planning attorney to develop an estate plan that minimizes taxes, ensures your wishes are fulfilled, and provides for your loved ones.
Choosing The Right Advisor
When choosing a fiduciary advisor, look for professionalism, experience, transparency, and a strong ethical foundation. It’s important to know if they have a proven track record and are willing to provide references. A good fiduciary advisor is not just a professional in finance but also an excellent communicator who can explain complex concepts in understandable terms. To showcase our professionalism, see our client reviews:
“I have found the team at Agemy Financial Strategies to be very professional and caring. They are always looking out for what is best for me. If you are planning for retirement or just investing, this is the place. Andrew has always made time to meet with me and answer questions. If you want what’s best for your financial portfolio, look no further.” – Vincent B.
“We have been clients of Andrew for over 30 years. His team are professionals who truly care about our financial future. He has demonstrated results and earned our trust. He is representing the next generation as our daughter is also now a client.” – David B.
“The entire Agemy team has always been professional, courteous, and friendly. But most importantly, they have made the road to retirement and beyond financially stable for me. They have taken the worry out of navigating my financial path. I highly recommend their services.” – Roleen S.
Working With Agemy Financial Strategies
Retirement planning is not a one-time event but an ongoing process that requires regular monitoring and adjustment. A fiduciary advisor can offer assistance by making adjustments based on changes in life events, market conditions, tax laws, and more. For over 30 years, Agemy Financial Strategies has helped clients plan and prepare for retirement.
Our fiduciary advisors offer customized retirement planning services so our clients can get sound advice and gain knowledge in the following areas:
We understand that retirement planning looks different for each individual, and with that in mind, we carefully craft your plan to meet your specific needs. For a complete list of our service offerings, see here.
Contact us today for more information on our retirement and financial planning services.
Exploring Inflation-Proof Investments for Your Portfolio
NewsMay 20, 2024
Millions of households still face the prospect of paying higher interest rates, as the Reserve Bank continues its fight against inflation; making now a crucial time to reassess your investments.
Consumer prices rose 0.3% from March to April, the Labor Department said last week, down slightly from 0.4% the previous month. Measured year-over-year, inflation ticked down from 3.5% to 3.4%. A measure of underlying inflation, which excludes volatile food and energy costs, fell to the lowest level in three years.
Inflation had been unexpectedly high in the first three months of this year after having steadily dropped in the second half of 2023. The elevated readings had dimmed hopes that the worst bout of inflation in four decades was being rapidly tamed.
However, the fight against inflation is far from over, and volatility remains rife.So, how can you protect your investment portfolio? In this blog, we’ll explore strategies and assets that can strengthen your portfolio against the impact of inflation. Here’s what you need to know.
Understanding Inflation
Inflation is a broad and sustained rise in the prices of products and services. The inflation rate is calculated as the average price increase of a basket of selected goods and services over one year. High inflation means that prices are increasing quickly, while low inflation means that prices are increasing more slowly.
So, what causes inflation? One big reason is when there’s more money floating around. This can happen in different ways:
Regardless of the causes, when there’s a surplus of money in circulation, its purchasing power diminishes, leading to inflation. Let’s take a look at how it can impact your investments.
What Does Inflation Mean for Your Investments?
Understanding the relationship between risk and reward and your comfort level is crucial when building your investment portfolio. The rate of inflation represents the rate at which the real value of an investment is eroded and the loss of spending or purchasing power over time. This means that if your investments cannot keep pace with inflation, the real value of your portfolio will decline over time.
Maintaining a diversified approach to your portfolio can help protect its value. By spreading investments across different asset classes, investors can help reduce overall exposure to inflation risk. Additionally, certain market sectors, such as commodities and real estate, tend to perform well during periods of rising inflation, providing a hedge against inflationary pressures.
Given that inflation has both advantages and drawbacks, working with a fiduciary advisor can help provide guidance based on your goals and risk tolerance. By understanding the implications of inflation on your investments, you can develop a resilient investment strategy that preserves your assets and withstands inflationary pressures.
Treasury Inflation-Protected Securities (TIPS) are bonds issued by the U.S. Department of the Treasury that offer protection against inflation. Unlike traditional bonds, the value of TIPS is based on changes in the Consumer Price Index (CPI). When inflation rises, the principal value of TIPS increases. This means the interest payments also increase because they are calculated based on the adjusted principal value. This feature helps ensure that investors receive a return that keeps pace with inflation, providing a hedge against the erosion of purchasing power over time.
TIPS are available in maturities ranging from 5 to 30 years and pay interest semiannually. The interest payments fluctuate with changes in inflation. Investors can expect higher interest payments when inflation is high and lower payments when inflation is low. At maturity, investors can receive either the adjusted principal value or the original principal value. This feature can help protect investors from experiencing a loss of principal due to inflation.
This type of investment is considered relatively low-risk because they are backed by the U.S. government. However, like any investment, evaluating the pros and cons of investing in TIPS is important. Working with a fiduciary advisor can help you find the right strategy for your risk tolerance and goals.
I Bonds
U.S. Treasury issues these savings bonds specifically designed to protect against inflation. They have a unique yield of a fixed interest rate and an inflation-based component that adjusts every six months. The inflation-based element is contingent on changes in the Consumer Price Index (CPI), a widely used measure of inflation.
I bonds are a safe choice to help shield yourself from inflation while earning a reasonable return. Although they might not yield the high returns of riskier options such as stocks, they offer a low-risk alternative. However, it’s important to note that I Bonds have some limitations. In a calendar year, one Social Security Number or Employer Identification Number may purchase up to $10,000 in electronic I bonds and up to $5,000 in paper I bonds (using your tax refund).
As of May 2024, I bonds have a savings rate of 4.28%, including a fixed rate of 1.30%. Ultimately, whether or not I Bonds is a good fit for your portfolio depends on several factors, including your goals, risk tolerance, and current market conditions. Working with a fiduciary advisor can help you evaluate your investment strategy that aligns with your needs and goals.
REITs
Ultimately, REITs can help ensure rental income keeps up with the pace of inflation, possibly providing investors with a steady source of income and the potential for long-term growth. As with any investment, evaluating the risks and potential rewards of investing in REITs demands careful consideration. Working with a fiduciary advisor can help develop a comprehensive investment strategy that aligns with your unique needs and goals is essential.
Commodities
Commodities are another popular option if you’re looking to protect your portfolio against inflation. Commodities are physical goods often used to produce other goods and services, such as oil, gold, and wheat. However, investing in commodities can also be done through exchange-traded funds (ETFs) or futures contracts. ETFs track the performance of a specific commodity or a basket of commodities, providing investors with diversified exposure to the commodity markets.
During periods of inflation, the prices of commodities often rise as demand increases and the purchasing power of currencies declines. This can make investing in commodities an attractive option for investors looking to hedge against inflation. Additionally, commodities can be more challenging than other asset classes, as they often require technical knowledge and access to specific markets.
As with any investment, it’s essential to carefully evaluate the risks and potential rewards of investing in commodities and to work with a fiduciary advisor to develop a comprehensive investment strategy that aligns with your unique needs and goals.
Savings, CDs, and Money Market Accounts
Traditionally, savings, CDs, and money market accounts have yet to be considered high-growth investments. However, as inflation rates have risen, these lower-risk options have become more appealing to investors. Finding savings accounts with interest rates from reputable banks in the 5.35% range is possible, providing a competitive return on cash holdings.
Final Thoughts
If you’re concerned about the impact of inflation on your retirement savings, consider inflation-proof investments like the options listed above. However, evaluating your investment options and developing a comprehensive strategy that aligns with your unique needs and goals can be complex. That’s where working with a trusted fiduciary advisor can be valuable. At Agemy Financial Strategies, we provide tailored solutions for your investment portfolio, retirement plan, and lifestyle management needs.
We can help you navigate the markets, adjust your asset allocation, and develop a plan to help weather inflation and other market forces. By working with our fiduciary advisors, we can help you navigate complex market conditions and make informed investment decisions.
Contact our team today to develop a comprehensive investment strategy for a stress-free retirement.