The 7 Most Common Retirement Planning Mistakes

The 7 Most Common Retirement Planning Mistakes

Free Online Workshop

Hey Everyone! I'd like to invite you to our next live online event: The 7 Most Common Retirement Planning Mistakes.

Thanks to your feedback, we've put together a workshop that will cover the top mistakes I see in my practice and how you can avoid them.  We'll be hosting the workshop this coming Thursday, 4/26, from 10-11am PST / 1-2pm EST.

This workshop will be live, and if I manage the time correctly we'll have room for an open Q&A at the end.  So come prepared with retirement planning & investment related questions. 

This event will be free, but space is limited so grab your spot now while there's availability.

Here's the link to register.  

 

Topics We'll Cover:

  • The most common retirement planning mistakes & how to avoid them
  • A proven method for maximizing your Social Security benefits
  • Powerful tips for reducing your tax burden both now AND in retirement
  • How to maintain a comfortable lifestyle and ensure you'll never run out of money

As I mentioned, this will be a free online event but seating is strictly limited to the first 100 attendees.  Feel free to spread the word to your friends/family members/colleagues who might be interested, but make sure you reserve your spot before space runs out.

Here's the link to register again.

I look forward to seeing you there!

 

 

Market Volatility Survival Guide

Free Online Training: Market Volatility Survival Guide

If you’ve been paying any kind of attention to the markets over the last two months, you’ve probably noticed a new trend: volatility.  Consistent market volatility isn’t something we’ve seen in quite some time.  Other than the market’s brief reaction to the Brexit, we really haven’t seen much upheaval since the depths of the financial crisis.

With tighter monetary policy from the Federal Reserve and both feet on the gas of our fiscal policy here in the U.S., there’s a good chance the choppy waters are here to stay.

Since I’ve been getting a ton of questions recently about how to handle market volatility, I figured it’d be a good subject for an online training.  So, this Tuesday, March 6th, from 10-11am PST / 1-2pm EST, I’ll be hosting a free online training on how to protect your retirement accounts during market corrections.  Here’s the link to register.

Topics We’ll Cover:

  • The single BEST strategy to protect your retirement portfolio when markets crash
  • The secret to surviving the next bear market
  • The top 5  mistakes you should avoid when saving in workplace retirement accounts
  • How to tune out the noise and identify what news you should actually pay attention to

This will be a free online event, but seating is strictly limited to 100 attendees.  Feel free to spread the word to your friends/family members/colleagues who might be interested, but make sure you reserve your spot before the spaces are filled.

Click Here to Register

I look forward to seeing you there!

Backdoor Roth Conversion: How to Contribute to a Roth IRA When You Make Too Much Money

Backdoor Roth IRA Conversion: How to Contribute to a Roth IRA When You Make Too Much Money

If you asked me to choose my FAVORITE type of account to invest in, it would definitely be the Roth IRA.  Roth IRAs allow you to save money tax free for the rest of your life.  They’re not subject to mandatory withdrawals in your 70’s, and your kids won’t even owe taxes on their withdrawals if they inherit the account from you down the road.  In my opinion the Roth IRA is just about the best deal out there.

Problem is, they’re not accessible to everyone.  The IRS considers Roth IRAs such a good deal that they won’t let you contribute to one if you make too much money.  Fortunately, there’s a work around: the backdoor Roth IRA conversion.  The backdoor Roth conversion allows you to get money into the Roth IRA by making non-deductible contributions to a traditional IRA.  Don’t worry if this sounds complicated.  We’ll go over the strategy step by step in this post.  Read on to learn more.

 

The Backdoor Roth IRA Conversion Strategy

So here’s how it works.  I’ll break it down into two-distinct steps.  But to start, let’s review the income limitations for direct contributions to a Roth IRA.  If your modified adjusted gross income on the year (MAGI) falls below the “Full Contribution” threshold, you can contribute to a Roth IRA directly.  If your MAGI falls into the phaseout region your contribution limit for the year begins to fall.  When it reaches the “Ineligible” threshold, you’ll be prevented from contributing to a Roth IRA altogether (at least in 2018).  If this is you, the backdoor Roth conversion might be a good fit.  (Here’s a review of how to calculate modified adjusted gross income).

Backdoor Roth Conversion: How to Contribute to a Roth IRA When You Make Too Much Money

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How to Use Strategic Asset Allocation to Reduce Your Tax Bill

How to Use Strategic Asset Location to Reduce Your Tax Bill

I’m a believer that the biggest factor contributing to the returns in your portfolio is asset allocation.  The amount of your portfolio you choose to invest in stocks, bonds, real estate, or anything else will ultimately have the biggest effect on how your portfolio does over the long run.

In other words, the decision of whether to buy Lowe’s or Home Depot isn’t nearly as important than the decision to be in large cap stocks or international bonds.

If you’re being strategic about your saving, you’ll probably try to utilize tax advantaged accounts like IRAs, Roth IRAs, and 401(k)s as much as you can.  If you’re using them (like most people), after a while your total portfolio will probably be spread across several different types of these accounts.

Today’s post covers asset location.  Rather than replicate the exact same asset allocation in each of your individual accounts, placing your investments across them strategically can work to reduce your tax bill and enhance your after tax returns.

Since some asset classes are more likely to distribute taxable income & capital gains, parking them in the accounts you don’t pay tax on (like a Roth IRA), only seems logical.  When done thoughtfully, asset location can as much as 0.25%-0.75% per year to your portfolio’s returns.

Read on to learn how it works.

 

 
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Defined Benefits Pension Plan: Helping Business Owners Shelter Thousands from Income Tax

The Defined Benefits Pension Plan: Helping Business Owners Shelter Thousands from Income Tax

Taxes are frustrating to nearly every small business owner I speak with.  Most people agree that we should all pay our fair share.  But after working countless thousands of hours to build a viable business, it’s easy to feel like Uncle Sam’s reaching into our pockets too far.  That’s why I focus on helping my clients who own businesses make sure they’re not paying more in taxes than they need to.  One great tool we can use in this endeavor is a defined benefit retirement plan.  Whatever you want to call it, DB plan, defined benefits pension plan, etc., it can be a killer way to defer a huge portion of your income from taxation.

I realize you might cringe when you read the words “pension” or “defined benefit”.  The idea of promising employees a monthly check throughout their retirement may not foster warm and fuzzies.  But if you don’t have employees, or only have a few, a defined benefit plan can offer some pretty major tax advantages.

Read on to learn how you might take advantage of them.

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Grantor Retained Annuity Trust: An Easy Way for Business Owners to Reduce Wealth Transfer Taxes

Grantor Retained Annuity Trust: An Easy Way for Business Owners to Reduce Wealth Transfer Taxes

For business owners starting to think about the next generation, the phrases”estate tax” or “transfer tax” almost seem like curse words.  The bad news is that when you build an estate of a certain size, the IRS wants to get in your pockets regardless of what, when, or how you transfer your assets to beneficiaries.  The good news is that there are plenty of strategies available to help you minimize these taxes.  The grantor retained annuity trust is one of them, and will be the topic of today’s post.  We’ll cover what they are, why they’re beneficial, and how you might go about using one.

 

 

Gift Tax Review

Ok – before we dive into the details, let’s review what taxes typically apply when you gift an asset to someone else.

First off, you’re allowed to give away $14,000 per year, per person tax free.  If you’re married, you and your spouse are both allowed $14,000 per person per year, or $28,000 total.  So, if you and your spouse want to gift each of your kids $28,000 for their birthday every year, you could do so tax free.  (It’d be one heck of a birthday present, too).

You also have a lifetime gift exclusion.  This is the amount that you can give away, either while you’re alive or after you die, without incurring any federal estate or gift taxes.  Anything that exceeds the $14,000 annual limit (or doesn’t qualify) works against your lifetime exclusion.  The lifetime gift exclusion in 2017 is $5.49 million, which inches higher with inflation over time.  Here again you can combine your lifetime exclusion with your spouse, for a total of $10.98 million.

So let’s say that one year you and your spouse decide to gift your oldest child $128,000.  The first $28,000 would be covered under your annual allowance and excluded from tax.  The remaining $100,000 would work against your lifetime exclusion.  Neither you nor your child would owe tax on the gift, but you’d have worked your lifetime exclusion from $10.98 million down to $10.88 million.  If your future gifts (either while you’re alive or after death) exceed $10.88 million, they’ll be subject to the federal gift/estate tax:

Grantor Retained Annuity Trust: An Easy Way for Business Owners to Reduce Wealth Transfer Taxes

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How to Tell Whether You Have Enough Money to Retire

How to Tell Whether You Have Enough Money to Retire

“I’m not sure I have enough saved up to retire.”

“How can I know for sure my savings will last after I stop working?”

“I”m concerned I’ll spend through my savings too fast and run out of money when I’m 80.”

These are a few common phrases I hear from people who are approaching retirement.  Many people I speak with in the their mid 50s and early 60s these days have saved diligently for years for their own retirement.  But now as they approach the transition from accumulating wealth to spending their savings, the question of whether they’ve saved enough becomes extremely important.

Plus, when you mix in longer life expectancies, rising health care costs, and expensive stock and bond markets, there’s a lot of uncertainty surrounding the issue.

So in today’s post, I’ll cover some of the leading ways you can determine whether you have enough saved up to stop working.  Without putting you and your family’s future at risk, that is.

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What Everyone Ought to Know About Long Term Care Insurance

What Everyone Ought to Know About Long Term Care Insurance

You’ve seen the stats.  Long term care is expensive, and we’re all likely to need it at some point in our lives.  The cost of spending time in a nursing home or assisted living facility adds up quickly, which is why many retirees choose to insure against it through a long term care insurance policy.

Problem is, since there’s a high likelihood of requiring long term care, insurance is an expensive proposition in its own right.

Are you better off crossing your fingers and hoping you don’t need expensive care for a long period of time?  Or is it better to cover this risk through an insurance policy that will cost you an arm and a leg anyway?

This post will cover the essentials of long term care insurance, including exactly how to decide whether picking up a policy is a good decision for you and your family.

 

Long Term Care: The Stats

So here’s the big question.  What are the chances you’ll ever need long term care?  According to longtermcare.gov, about 70% of people turning 65 will need long term care services at some point in their lives.  With the average annual cost of a nursing home totaling about $96,000 these days, this can be a scary proposition.

The stats can be misleading, though.  Many people who need long term care services only need them for short periods of time.  And since most long term care policies have elimination periods (the period before the policy starts paying out) of around 90 days, many people won’t even need care long enough for their coverage to kick in.

What Everyone Ought to Know About Long Term Care Insurance

What Everyone Ought to Know About Long Term Care Insurance

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You've Inherited an IRA. Now What?

You’ve Inherited an IRA. Now What?

Inheriting an IRA is quite a bit different than inheriting any other asset.  Unlike cash or investments in a traditional investment account, if you inherit an IRA you’ll need to start withdrawing from the account in order to avoid hefty penalties.  In this post we’ll cover what your options are when you inherit an IRA, and how you can best manage it for you & your family.

 

How IRAs are Passed After Death

Whereas many of your assets will be distributed to heirs according to your will, IRAs are instead distributed by contract. Your custodian (the brokerage firm that holds your account, like Vanguard or TD Ameritrade) lets you designate as many beneficiaries and contingent beneficiaries as you like.  Once you die, your account bypasses your will, the probate process, and is distributed according to this beneficiary designation.

When account holders don’t designate any beneficiaries things get a little murkier.  When the account holder dies, their account is distributed according to their custodian’s default policy.  At most custodians this default policy diverts the IRA back to their estate (and goes through probate) but at some it’s diverted to their spouse first.  Unfortunately, if the account holder didn’t designate a beneficiary while they were alive, you’re at the mercy of your custodian’s policy.

If the account is indeed diverted back to their estate, it’ll be distributed according to your state’s interpretation of their will.  And if they didn’t have one (meaning they died intestate), the state will make its own decision on who should inherit the asset.

The moral of the story?  Take advantage of the opportunity to bypass probate, and designate your beneficiaries formally while you’re still alive.

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Essential Financial Moves for New Parents

You’ve heard it before: life changes once you have kids.  As the proud parent to a six month old baby boy, I can attest that the rumors are true.

Having kids brings a quite a bit of chaos to your life.  And to try to get a handle on things we’ve read several of the popular contemporary baby books.  In most of them the message is the same: apply a consistent routine.  When your baby knows when to expect sleep time, feeding time, or play time, they gain confidence and often start to excel.  In other words, routine = fewer moving parts, less chaos, and more confidence.

I think our personal finances have a lot do with this as well.  When you have a kid your financial picture changes.  You have different and greater obligations, and need to start thinking about college costs.  The fewer “loose ends” you have with family finances, the less chaotic your family life will be and more you’ll thrive.

So to help us get a feel for the financial side of parenting, I’d like to welcome my guest Josh Brein to the blog.  Josh is a Seattle financial advisor and president of Brein Wealth Management, LLC.  He’s also a proud dad to his daughter Erin.

Today, Josh will share with us how your finances change once you become a parent, as well as essential financial moves new parents should make.

Welcome, Josh!  Let’s get to it:

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