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Behavioral finance is a field of study that looks at how psychological influences and biases affect the financial behaviors of investors. Research on investor behavioral biases suggests that when people face complex decisions, they often rely on basic judgments and preferences to simplify the situation rather than acting completely rationally.1 In other words, they allow emotions to drive decision making. Keep in mind, when financial decisions are at odds with your long-term strategy that can have negative consequences, such as delaying the time it takes to accomplish certain objectives.
Below are three of the most common behaviors that lead investors to veer off course and steps you can take to help remain on track toward your important financial goals.
If you have questions about how planning can help you stay on course in any market climate, contact the office to schedule time to talk.
From e-commerce to online banking, streaming services, and social media sites, Americans are spending more time than ever online. In fact, a recent Pew Research study reports that 85% of U.S. adults spend time online daily and 31% use the internet “almost constantly.”1 Over the past two years the pandemic has also played a role in driving the development, adoption, and popularity of many online and digital applications, such as video conferencing and telehealth services. As a result, the average user’s digital footprint has expanded significantly in recent years, creating the need for a “digital will” of sorts.
If you’re familiar with the estate planning process, you may have named an executor for your will, to handle the distribution of your property after you are gone and appointed someone to make legal and healthcare decisions on your behalf during your lifetime through a durable power of attorney. However, most people have given little thought to whom will be responsible for closing down their online presence in the event of permanent incapacity or death. This is important because the longer unmonitored accounts sit idle in cyberspace, the higher the likelihood that they could be forgotten or subject to fraud that goes undetected. Keep in mind, each website or online service will have its own legal requirements and/or process for closing accounts. For example, Facebook allows users to memorialize accounts by naming a “legacy contact” to care for your account after you pass away. If you prefer to have the account deleted, you can stipulate that at any time in your account settings.
Creating your digital road map To help ensure all aspects of your digital footprint are fully accounted for, begin by creating a list of all of your accounts and login credentials. This list should be updated as new accounts are created or closed, or as passwords are changed. Keep your list in a secure location along with your other estate planning documents. Providing a road map to your digital presence will make it much easier for your spouse or a trusted loved one to navigate your digital footprint and take actions aligned with your wishes, should the need arise. The following list will help you get started:
To learn more about the important role estate planning can play in pursuing your long-term financial objectives, contact the office to schedule time to talk about your needs.
This information was written by KRW Creative Concepts, a non-affiliate of the broker-dealer.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought
As the end of the year approaches, you may be thinking about tax-smart ways to meet your charitable giving goals. This year, cash donations may offer one of the best tax-savings opportunities, thanks to certain provisions under the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, which were extended for 2021.1 However, you’ll have to act fast since these provisions expire at year end.
To qualify under these special provisions, cash donations must be made by December 31. According to the IRS, cash contributions include those made by check, credit card, or debit card as well as unreimbursed out-of-pocket expenses incurred in connection with volunteer services to a qualifying charitable organization. Cash contributions don't include the value of volunteer services, securities, household items, or other property.
Keep in mind, to qualify for a tax deduction, charitable donations can only be made to tax-exempt organizations, as defined by section 501(c)(3) of the Internal Revenue Code. Since many nonprofits are not qualified tax-exempt organizations, it’s important to check an organization’s status before you donate. To determine if a charity is eligible to receive tax-deductible contributions under the IRS guidelines, access the IRS search tool here.
Always consult a tax professional before making decisions that could impact your tax exposure. To learn more about strategies that can help you pursue your tax planning and charitable giving goals, contact the office to schedule time to talk.
While the holidays can be a time of joy and excitement, they can also trigger feelings of sadness, anxiety, loneliness, and depression. These feelings are commonly referred to as the “holiday blues.”
Feeling blue? You’re not alone. The added stress and fatigue from juggling too many tasks and responsibilities during the holidays, as well as seasonal factors, such as shorter days and reduced sunlight, can contribute to feeling blue. The COVID-19 healthcare crisis has made the holidays even more challenging for many. Throughout the pandemic, healthcare providers have seen a major uptick in the number of U.S. adults reporting symptoms of stress, anxiety, depression and insomnia.1 There are many reasons for this from the way the pandemic has altered daily routines, to financial pressures, social isolation, and concerns about the health of family members and loved ones.
No matter the underlying reason why you (or a loved one) may be experiencing the blues, it’s important to focus on self-care and getting the help you need to cope. Many people have found that adding exercise to their daily routines can help lessen or alleviate many of these symptoms. One reason is that physical activity is known to increase the brain’s endorphins or “feel good” hormones.
Exercise packs important short- and long-term benefits Over the short term, exercise can reduce feelings of anxiety. That’s why even a short walk around the block or shopping mall can often help you feel less stressed or anxious. Regular exercise has been found to improve thinking and cognition and can help sharpen judgment skills as you age. Emerging research also suggests that physical activity can also boost immune function over time. According to the CDC, even a single session of moderate-to-vigorous physical activity provides immediate benefits for your health, including improved sleep quality, reduced feelings of anxiety, and reduced blood pressure.2
Fortunately, working physical activity into your busy schedule doesn’t require a significant time commitment. For example, if you want to walk 30 minutes a day, combine that with time spent holiday shopping or running errands—or break it into three 10-minute walks on days when you’re really pressed for time. Remember, whether you choose to spend time walking, swimming, dancing, or weightlifting, exercise of any kind provides significant benefits for your body, mind, and mood.
Know where to get help If you or someone you know is struggling emotionally, has concerns about their mental health, or is experiencing thoughts of suicide, don’t wait to reach out for help. Contact your doctor, a mental health professional, or the National Suicide Prevention Lifeline at 1.800.273.8255, which is one of many organizations that can provide immediate emotional support and helpful resources.
1 https://www.mayoclinic.org/diseases-conditions/coronavirus/in-depth/mental-health-covid-19/art-20482731 2 https://www.cdc.gov/physicalactivity/basics/pa-health/index.htm#brain-health
The Social Security Administration (SSA) recently announced the largest cost-of-living adjustment (COLA) in four decades. For Americans receiving Social Security benefits, the 5.9% increase, which is effective January 1, 2022, is expected to add $92 to the average monthly benefit, bringing that estimated amount to $1,657.1
While this is good news for retirees, it’s driven by the steep rise in inflation over the past 12 months, which reduces consumer buying power, especially for those living on fixed incomes in retirement. In September, the Consumer Price Index, a broad measure of inflation, rose 5.4% over the previous year, marking the largest annual gain since 2008.2 As a result, much of the Social Security COLA increase is expected to be absorbed by the rising cost of goods and services, along with the projected $10 rise in Medicare Part B premiums, from $148.50 in 2021, to $158.50 in 2022. For comparison, last year’s Part B increase was only $3.90 per month.3 For most retirees, Medicare Part B premiums are automatically deducted from their monthly Social Security benefit payments.
2022 marks the final incremental annual increase in FRA Next year also marks the 12th and final annual increase for the full retirement age (FRA). That’s the age when you are entitled to your full Social Security benefits. In 2022, the FRA will increase from 66 years and 10 months for persons born in 1959, to age 67 for anyone born in 1960 or later. While you can start receiving retirement benefits as early as age 62, the amount you receive is permanently reduced. However, if you delay taking benefits until after your FRA, up to age 70, your benefit amount will increase.4 That makes it important to have a plan in place for when you will claim your benefits.
What if you’re still working and receiving benefits? If you’re working and taking Social Security benefits before your FRA, you may receive a temporarily reduced benefit, due to the earnings test. However, because the earnings threshold increases each year, beneficiaries can earn more income from work next year, before benefits are reduced. In 2022, if you’re under your FRA, the SSA will hold back $1 in benefits for every $2 you earn from working, above $19,560 ($18,960 for 2021). If you reach your FRA in 2022, the earnings limit jumps to $51,960, from $50,520 in 2021, and $1 is held back for every $3 you earn until the month you reach your FRA. After that, the earnings limit no longer applies, the SSA stops holding money back due to work, and your monthly benefit will be permanently increased to account for the months in which benefits were withheld.5 For more information on Social Security changes for 2022, visit SSA.gov.
If you have questions about optimizing your benefits, contact the office to schedule time to talk.
1 https://www.ssa.gov/news/press/factsheets/colafacts2022.pdf 2 https://www.bls.gov/news.release/pdf/cpi.pdf 3 https://www.helpadvisor.com/medicare/medicare-rate-increase 4 https://www.ssa.gov/benefits/retirement/planner/agereduction.html 5 https://www.ssa.gov/oact/cola/rtea.html
Despite supply chain bottlenecks, inventory challenges, and rising prices, this holiday season is expected to break records for online shopping and spending. According to Adobe Analytics, online holiday sales are expected to hit $207 billion for the Nov. 1 to Dec. 31, 2021 period, a 10% increase over 2020.1 The ease and convenience of online shopping gradually pushed ecommerce adoption rates upward in recent years. However, the pandemic sealed the deal by exponentially driving adoption rates as ecommerce became an essential service.
While 43% of Americans plan to do all or a part of their shopping at brick-and-mortar retail stores this year, 57% say most of their holiday shopping will take place online.2 However, one potential drawback to ecommerce sites it that they are available 24/7, which can lead to impulse purchases or spending more than you intended. While it can be easy to overspend when shopping online, consider the following tips to help keep your budget in check this holiday season:
If you have questions about ways to stay on track toward your important spending and savings goals, contact the office to schedule time to talk.
1 https://blog.adobe.com/en/publish/2021/10/20/adobe-forecasts-record-billion-holiday-season-online-us-billion-globally.html#gs.ebjzvm 2 https://footwearnews.com/2021/business/retail/more-proof-the-consumer-is-back-survey-suggests-increases-in-early-in-person-holiday-shopping-1203167334/
October marks the start of Medicare’s annual open enrollment period, where more than 63 million Americans who receive benefits through the federal health insurance program can make changes to their coverage.1 Any changes made during open enrollment are effective January 1, 2022. In addition, eligible new enrollees, who missed their 2021 enrollment period and didn’t qualify for a Special Enrollment Period, can enroll between October 7 and December 15.2
Whether you or a loved one are enrolling for the first time or making changes to next year’s coverage, navigating the Medicare maze can be complicated. Before making important decisions that could impact your health and your wallet for years to come, Medicare encourages new and existing members to take the following steps to learn what’s new and where to get help if you need it.
Importantly, the budget reconciliation bill being debated in Congress includes a proposed expansion of Medicare benefits to include dental, vision and hearing services, which are not currently covered under Medicare, as well as changes impacting prescription drug plans and pricing. If you’re currently enrolled in Medicare or will be eligible to enroll in 2022, you will want to watch for any developments in the weeks and months ahead.
If you have questions about planning for your healthcare costs in retirement, contact the office to schedule time to talk.
1 https://www.cms.gov/research-statistics-data-systems/cms-fast-facts/cms-fast-facts-mobile-site 2 https://www.medicare.gov/sign-up-change-plans/joining-a-health-or-drug-plan
It’s no coincidence that Medicare-related scams increase as the annual fall open enrollment period begins each October. Current Medicare beneficiaries, as well as those who will be eligible in the following calendar year, are inundated with information and advertisements from television commercials to social media ads, and information arriving through the mail. That can make it hard to determine what’s legitimate and what’s not. For example, did you know that unsolicited phone calls from Medicare providers are prohibited?
Insurance companies that are approved to offer Medicare health and prescription drug plans, such as Medicare Advantage or “Medi-gap” plan providers, may send brochures or other marketing materials to you through the mail. However, they are not allowed to call you or come to your home without an invitation from you. If you receive unsolicited calls from parties identifying themselves as Medicare providers, assume it’s a scam and hang up.
One of the fastest growing scams in 2021 involves a robocall from “Becky, a Medicare advocate,” offering “precautionary genetic cancer screening.”1 The caller states that if you don’t act soon, Medicare may label you as ineligible for coverage. It’s important to know that Medicare will never call you to sell or promote any type of services or coverage.
Another popular scam involves fake invoices sent through the mail from an unknown hospital, doctor, or medical provider. The scammers bank on people paying these bills without checking into them first. To avoid this scam, save all medical receipts and statements and keep track of your quarterly Medicare Summary Notices. These notices list any services you received during the previous three months. When in doubt, contact the healthcare provider’s billing department to make sure the charges are valid. If you suspect fraud, call 1-800-MEDICARE.
Below are five rules of thumb to help protect yourself and loved ones from these and other Medicare-related scams.
To learn more about avoiding Medicare scams and steps you can take to protect yourself or report suspected fraud, visit CMS.gov.
Asset allocation is an investment strategy that will not guarantee a profit or protect you from loss.
These examples are hypothetical only, and do not represent the actual performance of any particular investments. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and when sold or redeemed, you may receive more or less than originally invested.
According to a recent national survey, 90% of adults, age 50 or older, say they want to remain in their current homes as they age. The survey also notes that the pandemic has led many to give some serious thought to the resources they may need to age in place safely, from assistance with daily living activities to how they will access medical care.1
Aging in place can be a cost-effective housing solution—if you plan ahead. However, due largely to a shortage of paid caregivers that began well before the pandemic, the average annual cost of homemaker services ($53,768) and home health aides ($54,912) has risen to a level on par with assisted living facilities ($51,600) in recent years. However, skilled nursing home care still far outpaced all other options at an average annual cost of $93,075 for a semi-private room and $105,850 for a private room in 2020.2
So what can you or someone you care about do to remain at home longer? Consider how technology is helping more retirees age in place safely. For example, wearable emergency alert systems can detect falls and summon help, while certain smart watches, fitness bands, mobile apps and devices can monitor heart rate or detect blood glucose levels. Telehealth services, which are now covered by most insurers, including Medicare, enable virtual visits with healthcare providers. Other smart technology is designed to help safeguard your home and its occupants, such as:
Ecommerce is also helping more retirees to age in place, especially those who may no longer drive or have access to public transportation. In fact, people age 65-plus are the fastest-growing group among online shoppers and increasingly rely on the convenience of home delivery for everything from groceries and clothing to prescription medications, personal care items, pet supplies, and more.3 These and other technological advances continue to make life safer, easier and more convenient for those who prefer to remain in their homes in retirement.
If you have questions about planning for your lifestyle needs and preferences in retirement, contact the office to schedule time to talk.
1 https://www.capitalcaring.org/nearly-90-of-americans-age-50-and-older-want-to-age-in-place/ 2 https://www.genworth.com/aging-and-you/finances/cost-of-care.html 3 https://clarkstonconsulting.com/insights/ecommerce-adoption-by-seniors/
One of the best ways that grandparents can provide a lasting legacy is by helping to fund a grandchild’s education expenses. Below are four ways to help accomplish this goal during your lifetime, or afterward.
If you have questions about planning your legacy, contact the office to discuss your specific situation and schedule time to talk.
1 https://www.finra.org/investors/learn-to-invest/types-investments/saving-for-education/529-savings-plans 2 https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
In June, the Consumer Price Index, which measures the change in the prices of a broad range of goods and services over time, rose 5.4% from a year earlier, marking the sharpest increase in inflation since 2008.1 Whether prices are rising at the gas pump or grocery store, inflation decreases your purchasing power, meaning you pay more money for the same things. While experts debate whether recent increases are a signal that we’re entering a period of sustained higher prices—or if inflation will be temporary—there are ways to help manage the impact on your purchasing power.
Why it’s different this time
It’s important to note that the price hikes we’re seeing now are different from those seen at the beginning of the pandemic, which were largely due to shortages and panic buying. In fact, a rise in inflation was expected this year as the economy picked up steam, business restrictions eased, and consumer demand surged. While ongoing supply chain disruptions and pent-up consumer demand may continue to drive prices upward in the coming months, the Federal Reserve (the Fed), which sets U.S. monetary policy, expects steep rises to be transitory and inflation to remain within its 2% target over the long term, into 2022 and 2023.2 However, there is no guarantee that the Fed will be successful in keeping inflation in check. Conditions could change based on direction of the COVID-19 pandemic, as well as other market, economic, and geopolitical factors. So what can you do to help protect your income from the eroding effects of inflation? Consider the following steps:
To learn more, call the office to schedule time to talk about ways to help protect your income in retirement.
1 https://www.bls.gov/news.release/cpi.nr0.htm 2 https://www.federalreserve.gov/monetarypolicy/files/20210709_mprfullreport.pdf
*for a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks, LLC nor any of its representatives may give legal or tax advice.
National Women’s Equality Day is celebrated on August 26 to commemorate the certification of the 19th Amendment in 1920, which guarantees women the right to vote. While women’s voices and votes continue to influence social, economic and public policy, as a group, women still face challenges when it comes to financial equality—especially where retirement is concerned.
According to the U.S. Bureau of Labor Statistics, women only earned 82.3% of what men earned in 2020.1 Lower earnings can have long-term consequences as women prepare for and enter retirement. In fact, the combination of lower lifetime earnings and longer average lifespans is a leading reason why women experience higher rates of poverty in retirement than men.2 Not only do many women start out with less—it also has to last longer. Yet, lower wages alone don’t tell the whole story. On average, women leave the workforce to care for children or relatives at a higher rate than men. That can reduce their Social Security benefits in retirement, which are based on earnings during their working years.3
In addition, the pandemic exacerbated many of these challenges. According to the National Women’s Law Center, more than 2.3 million women have left the workforce since February 2020, bringing their labor force participation rate down to levels not seen in more than three decades.
If you, or the women who are important to you, are concerned about having the income needed to meet important lifestyle goals in retirement, consider the following steps.
For those saving for retirement:
If you are in or nearing retirement:
If you have questions about your income in retirement, contact the office to schedule time to talk.
1 https://blog.dol.gov/2021/03/19/5-facts-about-the-state-of-the-gender-pay-gap 2 https://www.americanprogress.org/issues/women/reports/2020/08/03/488536/basic-facts-women-poverty/ 3 https://www.ssa.gov/pubs/EN-05-10127.pdf
This summer looks remarkably different than last year. As pandemic-related restrictions are lifted, retail, sports, travel, dining and entertainment venues are welcoming consumers back in droves. It’s likely that you’ve experienced changes in your life and your finances in recent months, as well. These may be subtle changes in your savings and spending habits as you resume travel or social activities, or more pronounced shifts that impact your goals and priorities. When faced with change, ensuring you remain on track toward your goals is critical. That’s where a mid-year financial review can help.
By mid-summer, you’re far enough into the year to gauge progress toward your goals, but still have time to make important adjustments to savings and spending, as well as your tax and investment strategies. A financial checkup can help you optimize your planning by:
Consider the following tips to ensure you get the most out of your mid-year financial review:
Gather and review all relevant paperwork and account statements prior to your scheduled review. This may include a list of action steps from your last meeting or review.
Write down any questions you may have about specific accounts, strategies, or fees.
Document any changes that have taken place in your life since your last checkup. Have certain goals or priorities changed? What about family dynamics, such as marital status, welcoming a new grandchild, or becoming an empty nester? Did you recently change jobs or receive a promotion? If you’re retired, did you sell a home, experience a change in health status, or make changes to your estate plan?
Consider your future plans. Maybe you’re thinking about changing careers, retiring earlier than planned, purchasing a vacation home, or moving closer to family members. Be prepared to share any new goals or changes in your priorities. This will provide an opportunity to discuss how your current plan may support these goals, or if adjustments are needed.
The past 18 months have been marked by rapid change, which can take a toll on your physical, emotional and financial health. Taking time now for a mid-year review can provide the confidence that you’re still on track toward the goals you have established for yourself and your family.
To learn more about the benefits of regular account reviews, call the office today to schedule time to meet.
The United States experienced a flood of baby boomer retirements in 2020. According to the Pew Research Center, 1.2 million more Americans born between 1946 and 1964 retired last year than the historical annual average. Rising home prices, a surging stock market, and robust savings account balances have all played a significant role in the uptick in retirements. In addition, a growing number of workers, tiring of web conferencing and remote work, are also reluctant to return to grueling commutes, cramped office spaces, or rigorous business travel schedules.1 If you’re nearing retirement and thinking about joining them, take some time to determine if you’re ready to fully retire—or just need a break.
What’s Your Plan?
Transitioning to life after work is not without challenges. It’s important to understand how you will spend your time and who you will spend it with. Will you become bored or lonely if your spouse, other family members, or friends are still working? Do you plan to pursue a hobby or sport, join a club, or spend time volunteering for an organization? Having a plan for how you will spend your days is important for remaining mentally and physically engaged, which contributes to a sense of overall wellbeing. If you’re not sure if you’re emotionally prepared to retire, consider a trial period, such as a sabbatical or extended vacation. Other opportunities to test the waters may include part-time work or consulting in your field of expertise.
Before pulling the plug on work, you also need to understand how you will replace your paycheck and how long your savings may last, especially if you retire earlier than originally planned. That can be a hard question to answer without a comprehensive plan in place for how you will receive tax-efficient income in retirement.
The planning process provides an opportunity to model various scenarios to determine the probability of meeting different goals and helps to identify any adjustments or tradeoffs that may be required to accomplish your objectives. It can also help provide answers to important questions, such as:
If you have questions about whether now is the right time for you to retire, contact the office to schedule time to talk.
Like many business owners, you may have spent more time over the last year focused on keeping your businesses afloat and navigating rapidly changing public health orders, rather than planning your exit strategy. However, a rebounding economy, the prospect for tax hikes, and buyers flush with cash have many business owners thinking about selling. Below are four reasons why you may want to join them and cash in now.
If you would like to learn more about the importance of having an exit strategy in place that considers these and other factors impacting business owners, or want to discuss your unique business situation, call the office to schedule time to talk.
1 https://www.bizbuysell.com/insight-report/?utm_source=inc&utm_medium=referral&utm_campaign=inc04282 2 https://www.inc.com/bob-house/should-you-sell-your-business-in-2021.html
Medicare and most private insurers expanded coverage for a broad range of telehealth services early in the COVID-19 pandemic to include virtual access to care via phone or web conferencing for office visits, consultations, and more.1 While Americans across all age groups quickly adapted to this new way of accessing healthcare services, it was widely embraced by seniors, many of whom were concerned about contact with people outside of their own households during the pandemic.
According to the CDC, telehealth visits during the last week of March 2020 increased by 154% over the same period in 2019.2 Additional government data shows that in just one week in April, nearly 1.7 million Medicare beneficiaries received telehealth services, compared with 13,000 in a typical week before the pandemic. In addition, more than 9 million Medicare enrollees received telehealth services during the four-month lockdown, which started in mid-March 2020.3
Below are five ways seniors are benefitting from virtual appointments and why telehealth is likely here to stay:
While virtual visits are not expected to fully replace in-person care, in many cases, telehealth can provide greater convenience and confidence along the path to maintaining health and wellness.
1 https://www.medicare.gov/coverage/telehealth 2 https://www.cdc.gov/mmwr/volumes/69/wr/mm6943a3.htm 3 https://www.aarp.org/health/conditions-treatments/info-2020/telehealth-goes-mainstream.html 4 https://www.ortholive.com/blog/new-study-shows-telehealth-saves-1500-per-visit/
You may be familiar with the role 529 plans play in helping families set aside funds for future education expenses. Established in 1996 under Section 529 of the Internal Revenue Code, these plans are versatile savings accounts that offer tax incentives while minimizing the impact on financial aid. In addition to being one of the most popular education savings programs, 529 plans also offer important estate planning benefits, including:
To learn more about tax-smart ways to help you pursue your legacy goals, call the office to schedule time to talk.
Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer’s official statement and should be read carefully before investing.
Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state's 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investing in any state's 529 Plan.
This information is not intended as specific legal or tax advice.
Roughly one year ago, the COVID-19 lockdown put the housing market on hold. A few months later, it not only bounced back, but has been booming ever since, thanks to the combination of low interest rates, high demand, and low inventory. In recent months, these conditions have triggered bidding wars in many parts of the country, further driving up home prices.1 In fact, the median selling price for existing homes jumped 17.2%, year-over-year, to $329,100 in March.2 While this may be great news for sellers seeking top dollar, it’s important to weigh the pros and cons of selling now. After all, you will still need someplace to live, which may be harder and more expensive to find in the current market. Below are several considerations if you’re thinking about selling in the months ahead.
Interest rates are expected to remain low: While mortgage rates have recorded modest increases in recent months, they are expected to remain low compared to historical averages. While that’s good if you anticipate buying a new home after selling yours, keep in mind that rising home prices can erode some of the benefits of low mortgage rates. This is especially true in tight markets where buyers may find themselves bidding well above a property’s asking price to secure the home of their choice.
You recently refinanced: When you refinance, you generally want to remain in your home until you recover the closing costs on your new loan, known as your break-even point. However, in certain cases, selling now could lead to greater savings over the long term if the value of your current home has increased substantially and/or you are able to purchase a new home at a significantly lower interest rate. Just keep in mind that closing costs will also apply to your new purchase, so it’s important to run all the numbers to ensure a move makes good financial sense.
You’re concerned about paying too much for your next home: While cashing in on today’s booming market may be tempting, if you’re on the fence, or you and your spouse disagree on when, where or if you should move, it may make sense to wait. A move is a big decision and one you don’t want to regret later. On the other hand, if you’re committed to moving but are concerned about paying too much for your next property, you may want to consider selling now and renting until the current seller’s market cools down.
Don’t forget about taxes: If you've owned your home for at least two years and meet the primary residence rules, you may still owe tax on the profit if it exceeds IRS thresholds. Individuals can exclude up to $250,000 of the gain and married couples filing jointly can exclude up to $500,000.3
For help in determining if this is the right time for you to sell, or to learn about strategies to help offset capital gains, call the office to schedule time to talk.
Often, people view estate planning through a narrow lens, thinking it’s only about what happens to their property and assets after they’re gone. While the tax-efficient transfer of your assets to the people and organizations you designate is an important component, estate planning encompasses so much more. First and foremost, it’s about protecting your lifestyle and the people you care about during your lifetime. It answers critical questions, including: Who will have the legal authority to act on your behalf if you’re unable to do so, due to an accident or illness? Who will manage your assets and make important healthcare and end-of-life decisions on your behalf? And how will your legacy be carried out now and after you’re gone?
Ask yourself: If a crisis occurred today, would your loved ones have the knowledge and legal authority to follow through and act on your behalf? Without the right legal documents in place, it can be hard—if not impossible—for those you appoint to carry out their obligations and responsibilities. To protect yourself and loved ones, plan to meet with an estate planning attorney who can help you draw up important legal documents, including:
To learn more about how estate planning can help you live your best life, while protecting the people and things you care about most, call the office to schedule time to talk.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.
While understanding basic financial concepts, such as saving, investing and budgeting, is important at any age, it’s critical for those nearing or living in retirement. That’s because retirement marks a major shift from a lifetime of accumulating assets during your working years, to how you will use those assets to create a tax-efficient income stream to support your lifestyle for the next 20 or 30+ years.
That requires a comprehensive approach to protecting and growing your assets to support your desired lifestyle. Mastering financial basics, including how to budget, avoid scams, and manage income and debt can also help you accomplish other important retirement goals, such as remaining independent longer.
Whether you’re looking to brush up on a single topic or enroll in a course on financial management, consider the following resources, available at no cost to you.
If you have questions about managing your finances, we’re happy to help. Call the office to schedule time to talk.
How would you pay for an unanticipated home or car repair, medical emergency, or other expense? A recent study indicates that fewer than 4 in 10 Americans have enough savings to pay for an unexpected $1,000 expense in cash. The rest would have to borrow, use a credit card or take out a personal loan.1 The ability to pay for unexpected expenses without incurring debt is among many reasons why retirees need adequate cash reserves. Cash reserves or emergency savings play a significant role in helping to protect your income and your assets in retirement, by helping you:
What If You Haven’t Saved Enough?
The general rule of thumb for cash reserves is to set aside three to six months’ worth of living expenses. How much you will need may differ based on your personal circumstances and lifestyle goals. Whether you need to boost or replenish cash reserves in retirement, there are several ways to do so.
If you have questions about maintaining optimal cash reserves in retirement, call the office to schedule time to talk.
After years of juggling competing responsibilities and obligations during your working years, retirement should be a breeze, right? You’ll finally have the time to do all of the things you put on the backburner during your working years, or while raising a family. So, why do so many people find themselves busier than ever and just as stressed as they were in their working years? According to time management experts, managing an abundance of time can be as challenging as managing a scarcity of time because it requires you to prioritize what really matters to you.1
If you’re looking for ways to create a more intentional life in retirement, consider the following tips:
Shortly after the pandemic hit, the CARES Act was passed in March 2020, allowing those age 72 or over to waive their required minimum distributions, or RMDs. While that resulted in a significant reduction in taxable income for many retirees in 2020, RMDs are back this year, along with the potential tax burden and steep penalties (50% of the required distribution amount) for those who fail to take them by year end. In addition, many retirees, especially those who did not take RMDs last year, may be subject to higher distribution amounts this year, due to higher account balances. That makes it even more important to have a strategy in place for managing RMDs.
RMDs are commonly used to supplement income received in retirement from guaranteed income sources, such as Social Security or a pension. You can choose to take RMDs on a regular schedule throughout the year, such as monthly, quarterly or semiannually, or once a year as a lump sum. However, it’s important to remember that distributions from qualified retirement accounts are taxable, so if you choose not to have taxes automatically withheld, you’ll need to set money aside to pay any taxes owed on your distributions.
Should You Take Regular Distributions or a Lump Sum?
Many people find it easier to manage their income and expenses in retirement by taking distributions throughout the year. In addition to providing regular cash flow, regular installments can help ensure that you receive a range of prices for the assets you sell, which may provide some stability during periods of increased market volatility. Regularly scheduled distributions can also help retain the benefits of tax-deferred compounding in your retirement account(s) throughout the year, versus taking a lump sum withdrawal at the beginning of the year. If you don’t need the regular income, waiting until year-end to take a lump sum distribution may also help bolster tax-deferred growth, as your money remains invested in your account(s) throughout the year. However, because markets fluctuate over time, there is no guarantee that account values will be higher or lower at the time you take your distribution(s). In addition, taking a large lump sum withdrawal may also create the need to rebalance your portfolio.
Managing Your Tax Burden
There are many ways to help manage taxes associated with RMDs. Those who may not need the income from an RMD, and are seeking to avoid taxable distributions, may choose to make a qualified charitable distribution (QCDs). A QCD allows you to donate up to $100,000 annually directly from a traditional IRA to an eligible charitable organization without counting that amount as taxable income. Instead, it would count toward your RMD and reduce the taxable amount of your mandatory withdrawal. Other options for managing taxes on income in retirement may include a Roth IRA conversion, which requires paying taxes on any amounts converted in the year assets are converted. (Roth IRA accounts are not subject to RMDs). Since these strategies are complex and may have significant tax consequences, it’s important to meet with your tax and financial professionals before taking action.
If you have questions, call the office to schedule time to talk about your retirement income strategy.
The COVID-19 pandemic has up-ended many norms and routines from family and social gatherings, to community activities, how we shop, and how we access services, such as healthcare and transportation. That’s a lot of change to digest in a relatively short period of time. It’s no wonder that separate surveys conducted by researchers at the Boston University (B.U.) School of Public Health and Johns Hopkins University found that the prevalence of depressive symptoms (B.U.) and “serious psychological distress” (Hopkins) reported during the COVID-19 pandemic were triple the level measured in 2018. According to the B.U. study, these rates were higher than those seen after other large-scale traumas like September 11 and Hurricane Katrina.1
If you’re feeling somewhat off-kilter, consider the following steps to help restore a sense of balance in your life.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.
Will your tax bracket change in 2021? Each year the tax rate schedules are adjusted for inflation. That could result in your income being subject to a higher or lower tax rate in the new year. It’s especially important to check your tax bracket for this year if your taxable income was lower in 2020, due to:
For tax year 2021, the top tax rate of 37% will apply to income above $523,600 for individuals ($628,300 for married couples filing jointly), compared to income above $518,400 for individuals ($622,050 for married couples filing jointly) in 2020.
The Standard Deduction Increases in 2021
The standard deduction increases to $12,550 for single filers ($25,100 for married couple filing jointly) for tax-year 2021, up from $12,400 ($24,800 for couples) for 2020.1 Taxpayers over age 65 taking the standard deduction receive even more. For single filers age 65 and older, the standard deduction increases by $1,700 to $15,750. Joint filers can increase the standard deduction by $1,350 each for a total of $27,800 if both joint filers are age 65 or over. Keep in mind, if you’re considering itemizing on your 2020 or 2021 returns, your total tax deductions will need to exceed the amount of your applicable standard deduction for that tax year to make itemizing worthwhile.3
Taxes are one of the biggest risks to income in retirement. Having a plan in place to manage your tax bill in retirement is critical to helping to ensure your income will last as long as you will need it.
If you have questions about tax-smart strategies for managing your income in retirement, call the office to schedule time to talk.
If you’re suffering from pandemic fatigue, you’re far from alone. The distribution of the first COVID-19 vaccines in December marked a major milestone in the fight to end the global pandemic. However, public health experts urge patience, warning that it could take until the summer or fall to administer the vaccine to enough Americans to achieve herd immunity. In the meantime, here are five ways to help boost your emotional and physical health to maintain a positive outlook in the months ahead.