All Posts By

Zach Abraham

Your Year-End Financial Checklist

By | Financial Planning, Retirement, Tax Planning

The end of the year can help remind us of last-minute things we need to address as well as the goals we want to pursue and get serious about. To that end, here are some aspects of your financial life to contemplate as this year leads into 2022. 

Your investments. Set up a meeting to review your investments with your financial professional. You’ll want to come away from the meeting with an understanding of your portfolio positions and a revisit of your asset allocation based on your age, desires and personal circumstances. Remember, asset allocation and diversification are approaches to help manage investment risk, they do not guarantee against stock market drops or equities losses. Make sure your portfolio reflects your desire for protection and safety as well as growth.

Your retirement strategy. You may want to consider contributing the maximum to your retirement accounts—this may be a great time to decide on making catch-up contributions if you are 50 or older. It’s also a good idea to review any retirement accounts you may have through your work to see if your selections are still suitable for you. If you are getting close to retirement, you’ll want to start considering your Social Security filing strategy in advance, since that will dovetail with your overall retirement income plan.

Your tax situation. It’s a good idea to check in with your tax or legal professional before the year ends, especially if you have questions about an expense or deduction from this year. Also, it may be a good idea to review any sales of property as well as both realized and unrealized losses and gains. Look back at last year’s loss carryforwards. If you’ve sold securities, gather up cost-basis information. As always, bringing all this information to your financial professional as well as your tax professional is a smart move.

Your charitable gifting goals. Plan charitable contributions or contributions to education accounts and make any desired cash gifts to family members. The annual federal gift tax exclusion allows you to give away up to $15,000 in 2021, meaning you can gift as much as $15,000 to as many individuals as you like this year. Such gifts do not count against the lifetime estate tax exemption amount, as long as they stay beneath the annual federal gift tax exclusion threshold. Besides outright gifts, you can explore creating and funding trusts on behalf of your family. The end of the year is also a good time to review any trusts you have in place. Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, it’s important to work with a professional who is familiar with the rules and regulations.

Your life insurance coverage. The end of the year is an excellent time to double-check that your policies and beneficiaries are up to date. Don’t forget to review premium costs and beneficiaries and think about whether your insurance needs have changed. Several factors could impact the cost and availability of life insurance, such as age, health, and the type of insurance purchased, as well as the amount purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, you may pay surrender charges, which could have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Finally, don’t forget that any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Life events. Here are some questions to ask yourself when evaluating any large life changes in the last year: Did you happen to get married or divorced this year? Did you move or change jobs? Did you buy a home or business? Was there a new addition to your family this year? Did you receive an inheritance or a gift? All these circumstances can have a financial impact on your life as well as the way you invest and plan for retirement and wind down your career or business.

Keep in mind, this article is for informational purposes only and is not a replacement for real-life advice. Make certain to contact a tax or legal professional before modifying your tax strategy. The ideas presented are not intended to provide specific advice.

If you would like to discuss your year-end checklist items, please give us a call. You can reach Bulwark Capital Management at 253.509.0395.

 

The Latest Facts About Social Security

By | Retirement, Social Security

On October 13, 2021, the Social Security Administration (SSA) officially announced that Social Security recipients will receive a 5.9 percent cost-of-living adjustment (COLA) for 2022, the largest increase in four decades. This adjustment will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Additionally, increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on December 31, 2021.

 

Biggest COLA Increase in Decades?

While many predicted a bump of as much as 6.1% given recent movement in the Consumer Price Index (CPI), the announced 5.9% increase is still substantial. Some fear that rising consumer prices may dilute the impact of the increase with inflation currently running at more than 5 percent. While this remains to be seen, Social Security beneficiaries will no doubt welcome the largest adjustment since 1982.

 

How You Will Be Notified.

According to the Social Security Administration, Social Security and SSI beneficiaries are usually notified about their new benefit amount by mail starting in early December. However, if you’ve set up your SSA online account, you will also be able to view your COLA notice online through your “My Social Security” account.

 

Is it Enough?

For years organizations like the AARP have pointed out that the index used to calculate inflation—the CPI-W, a consumer price index that reflects the increasing cost of goods for urban wage earners—does not reflect the inflation on goods and services needed by the elderly, such as health care. In July, a bill titled “Fair COLA for Seniors Act of 2021” was introduced which would require the Consumer Price Index for the Elderly (CPI-E) be used when Social Security calculates their annual COLA (Cost of Living Adjustment).

 

Is Social Security Going Broke?

Per the Washington Post, each year, the Social Security Board of Trustees releases a report that analyzes the current and projected financial health of Social Security and Medicare. This year, the trustees found that: “The finances of both programs have been significantly affected by the pandemic and the recession of 2020.”

The trustees now project the Old-Age and Survivors Insurance (OASI) Trust Fund will be insolvent in 2033. What this means there will be enough income to pay out only 76 percent of scheduled payments.

One solution often debated is getting rid of the income threshold for the Social Security payroll tax. In 2021, the maximum taxable earnings subject to the Social Security tax is $142,800. Earnings above the maximum are not subject to the tax, which is 6.2 percent for employees and a matching 6.2 percent for employers. (NOTE: Even though many do not pay in, very few high-earners decline to file for Social Security payments.)

There’s no income cap for the Medicare tax, which is 2.9 percent. (Employers pay 1.45 percent, and employees cover the other half.)

A Gallup poll this year found that 38 percent of U.S. adults not yet retired thought Social Security would be a major source of their income, but the reality is that 57 percent of retirees rely on Social Security as their main source of income.

 

Your Next Steps?

If this information about Social Security surprises or concerns you, it’s always a good idea to seek guidance from your financial professional about changes to any of your sources of retirement income. We welcome the chance to talk with you about this. You can reach Bulwark Capital Management at 253.509.0395.

 

 

Sources:

https://www.ssa.gov/cola/#:~

https://www.cbsnews.com/news/social-security-benefits-cola-cost-of-living-2022-increase/

https://www.forbes.com/sites/davidrae/2021/07/21/will-congress-change-social-security-cost-of-living-adjustment-is-calculated/?sh=21dd13ca373c

https://www.washingtonpost.com/business/2021/09/03/social-security-insolvency/

https://www.latimes.com/business/story/2019-12-03/social-security-wealthy-benefits

 

 

 

What To Do If You’ve Lost a Retirement Account

By | Retirement

A recent study found that the problem of “forgotten 401(k)” and pension accounts is widespread, and amounts to approximately 24 million accounts containing $1.35 trillion in assets. The issue is so big that Congress is considering creating a national online “lost-and-found” database to help people track down their accounts as part of a larger bill containing more benefits and protections for retirees: the “SECURE Act 2.0” as some are calling it.

But until legislation is passed, you will be on your own when it comes to finding your lost retirement money. Whether you changed jobs and forgot about your old plan or your spouse passed away with you unaware of their old accounts with former employers, here are some things you can do.

  1. Search your paper files

Old retirement account statements can provide account numbers and plan administrator contact information to give you a good place to start.

  1. Contact former employers’ human resources departments

If you can’t locate any statements, try reaching out to the HR departments at former employers. You should have dates of employment in hand as well as your Social Security number, and you will need to prove your identity. If you are searching for a deceased spouse’s account, you may have to provide a death certificate or other evidence. Remember, a good HR department knows that they need to protect confidential information and will do so.

  1. If an old employer is no longer in existence

Your 401(k) balance is protected from creditors if an old employer filed for bankruptcy and is likely still at the investment company that administered the plan. By federal law, all 401(k) money must be held in trust or in an insurance contract, separate from the employer’s business assets.

If you are unable to reach the plan administrator, contact the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) toll-free at 1-866-444-3272.or go to their website at https://www.dol.gov/ebsa/.

  1. Search your state’s treasury department

Based on the state where you worked, it’s possible that your former employer turned over your 401(k) balance to that state’s unclaimed property fund. Often state treasury departments have online search tools to help you find money that is considered your “unclaimed property” in the form of bank account or retirement assets. You will have to fill out forms and provide proof of identification.

  1. Try a privately-owned online search tool

A service called the “National Registry” is a national database listing of unclaimed retirement plan account balances used by some employers. It is owned by a firm called PenChecks, Inc. located in La Mesa, California: https://unclaimedretirementbenefits.com/.

  1. If you’ve lost track of a pension

If you have lost track of a pension held by a former employer, you can request a pension benefits statement from your plan administrator. If that employer no longer exists, the pension may have been taken over by an insurance company or PBGC, the federal Pension Benefit Guaranty Corp. You can track down your pension at: https://www.pbgc.gov/search-all.

  1. Detailed work history

If you need to prove your work history and eligibility for your pension and have lost old W-2 forms, you can request a detailed earnings statement from Social Security by using Form SSA-7020.

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Conclusion

We often recommend that you not leave money in a former employer’s 401(k) plan for the simple reasons that you may lose track of it and your money will not be in your control. If you are working, you can roll over the funds into your current employer’s existing 401(k) plan, or you can roll it over into your own IRA (Individual Retirement Account) which can be invested in many different ways.

Beginning at age 59-1/2, your company 401(k) plan may even allow an “in-service rollover” of part of your 401(k) money to your own IRA.

This article is provided for informational purposes only and is accurate to the best of our knowledge. It is not to be construed as financial or retirement advice. Please contact us if you need individualized help with examining your personal rollover options based on your unique situation.

 

Do you have questions? Call us! You can reach Bulwark Capital Management at 253.509.0395. 

 

 

Sources:

https://www.hicapitalize.com/resources/the-true-cost-of-forgotten-401ks/

https://www.kiplinger.com/retirement/retirement-plans/602821/secure-act-2-10-ways-the-proposed-law-could-change-retirement-savings

https://www.kiplinger.com/retirement/retirement-plans/401ks/603334/how-to-find-a-lost-retirement-account

5 Reasons to Consider Life Insurance

By | Financial Planning, Life Insurance

September is “Life Insurance Awareness Month.” Is your family using life insurance in the right ways as part of your comprehensive financial plan? Here are five reasons you should consider life insurance.

  1. You Have a Young Family1

Even though the pandemic has shown us all the need for financial protection for the family from sudden death or disability, there are roughly 102 million uninsured and underinsured Americans, representing 40% of the adult population according to the 2021 Insurance Barometer Study by LIMRA. One of the reasons cited was a lack of basic information about life insurance; less than a third of consumers said they were “very” or “extremely” knowledgeable about it.

Life insurance policies have completely changed in the last two decades. According to LIMRA research, simplified underwriting means that many term life policies don’t even require a medical exam anymore, depending on your age and general health. Term life insurance can be much less expensive than you think; the research showed that healthy 30-year-olds often overestimate costs by 5x.

Another reason people say they don’t pursue life insurance is that they have a policy through work. But even though you may have a small policy at your workplace, usually $20,000 or so according to the U.S. Bureau of Labor Statistics, these policies are often in place to help with burial costs and final expenses. In order to cover your family’s finances adequately, consider mortgage costs, existing debt, health care, living expenses for your spouse and children, and future college expenses for your children in order to get an idea of how much protection you should have.

  1. You Need More Tax-Advantaged Wealth Transfer2

Depending on your situation, if you are a business owner or person of high net worth, you may want to consider life insurance as an option as part of your succession and/or estate plan. Most of the time, life insurance passes to beneficiaries and heirs tax-free, and there are many different strategies to help mitigate taxes and provide other benefits by using life insurance policies. Here are some ideas.

  1. You Are Looking for Tax-Advantaged Retirement Income2

A permanent life insurance policy with cash value can provide a stream of income if necessary, depending on how the policy is structured. The cash value in the policy can build up and be borrowed against to pay for college expenses, retirement, or other costs during your lifetime, usually without any taxes owed if all IRS rules are followed.

  1. You Want to Protect Your Spouse2

Many people don’t realize that when one spouse dies, the surviving spouse only gets one Social Security check (the larger one) from that point forward. Permanent life insurance can protect your spouse’s lifestyle in the event of your passing.

  1. You Want Long-Term Care Insurance3, 4, 5

Some of today’s life insurance policies are called “hybrid” policies because they cover additional potential adverse events in addition to death, such as disability or the need for long-term care. These extra coverages may be part of the policy itself, or be available as optional insurance policy “riders” depending on the way an insurance company structures their contracts.

According to the 2020 Insurance Barometer study conducted by Life Happens and LIMRA, hybrid policies have become more popular than traditional long-term care (LTC) insurance policies because they offer a long-term care benefit that kicks in if you need it, or a death benefit that remains if you don’t. (One of the drawbacks of traditional LTC insurance is that you may end up paying a lot for something you may never need.)

If you do end up needing long-term care at home or in a nursing facility, it’s expensive. The average cost of a semi-private room in a nursing facility is $7,756 per month according to Genworth.

Remember, Medicare pays for short stays in nursing care facilities, but it does not pay for long-term care. Medicaid pays for long-term care, but qualifying for Medicaid requires a complete spend-down of assets, leaving your spouse and heirs with virtually nothing.

 

Do you have questions about life insurance? Call us! You can reach Bulwark Capital Management at 253.509.0395. 

 

Sources:

1 https://insurance-forums.com/life-insurance/study-reveals-common-misconceptions-that-prevent-americans-from-getting-life-insurance-they-know-they-need/

2 https://www.investopedia.com/articles/financial-advisors/111215/why-wealthy-should-buy-lots-life-insurance.asp

3 https://www.forbes.com/advisor/life-insurance/long-term-care-hybrid/

4 https://www.limra.com/en/research/research-abstracts-public/2020/2020-insurance-barometer-study/

5 https://www.genworth.com/aging-and-you/finances/cost-of-care.html

Retirement Saving at Each Age

By | Financial Planning, Retirement

While it’s true that each person is unique and every financial plan should be customized according to their situation, it is generally accepted that people should start saving for retirement early in their lives so they can take advantage of compounding returns.

Here is some general information and things to consider about saving for retirement for each age group.

Gen Z

Roth IRA accounts. As soon as children or grandchildren have earned income, either you or they can open and contribute to a Roth IRA (Individual Retirement Account) in their name. Roth IRA contributions can’t exceed the child’s earned income and the maximum amount that can be contributed for the year is $6,000 for 2021. The benefit is that Roth accounts grow tax-free as long as all IRS rules are followed. After the account has been open for five years, any amount contributed can be borrowed or taken out for any reason without any taxes or tax penalties due. (But Roth IRA account earnings—meaning returns or interest credited—can’t be taken out before age 59-1/2 without a 10% penalty.) That means your child could have a very flexible way to borrow for college, down payment on a house or any other purpose—including retirement—later on.

Permanent life insurance. Another option to help children, teens and young adults save for retirement is permanent life insurance. New types of life insurance policies can be a tax-advantaged way to save and borrow later from the policy for retirement, college or any other purpose. Often the cost of insurance is very low for healthy young people.

Gen Y

Workplace retirement plans. People in their mid-20s to 40s are often pursuing careers where their employers provide 401(k) or similar retirement plans with a “match” for contributions. One rule of thumb says to max out pre-tax contributions during these years up to the maximum match by your employer; you get the added benefit of lowering your taxable income.

Traditional IRA accounts, Roth IRAs, permanent life insurance, investment portfolios. For those who don’t have a workplace retirement plan, or for those that want to invest beyond their employer’s group retirement offering, traditional pre-tax IRAs are available depending on your income level while providing a tax write-off, while tax-advantaged Roth IRAs and permanent life insurance can offer other benefits. Once you reach the maximums on retirement savings, you may want to begin to invest in stocks and bonds, forming your first investment portfolio. If possible, hire a financial professional to help you create a complete financial plan which can be updated and reviewed every year.

Gen X

Save, invest, and save some more. People in their 40s and early 50s can be sandwiched between providing for their older children’s expensive needs—like transportation, health care and college—while caring for their parents as they get older. Yet it is incredibly important for Gen X to begin to maximize their retirement savings. All of the possibilities discussed for younger ages also apply to Gen X, and after age 50, you can contribute $7,000 per year ($1,000 extra) to an IRA or Roth IRA in 2021, depending on your income and IRS rules. Some permanent life insurance or deferred income annuity products can allow you to save for retirement while providing other optional benefits like disability, long-term care insurance or spousal protection should you need it. Find efficient ways to pay for your kids’ college, and as you make more money, use it for retirement investing while keeping your spending on housing, automobiles and similar items as low as you can. Work closely with your financial professional to make sure you are on track to achieve your retirement goals.

Baby Boomers

How much money will you need to retire? If you are 55 or older, it is probably time to get serious about what you want your retirement lifestyle to be so that you can get some idea of what kind of retirement savings you will need to support yourself after you are no longer receiving a paycheck. For instance, someone who wants to do a lot of international traveling will need a lot more saved than someone who plans to stay close to home during retirement. Retirement planning is essential, since pulling money out of your portfolio is much different than putting money in as you have been used to. Make sure your financial professional is focused on retirement; retirement planning is a distinct specialty.

Claiming Social Security. It’s time to start learning about Social Security. The Social Security Administration recently changed the design of your statement to show you how much your benefit will be at the earliest time you can file (age 62), at full retirement age (around age 66 or 67 depending on your birth year) and at age 70, when your benefit amount stops growing. You can obtain your latest statement here. Important: Remember that Medicare is not free; premiums come out of your Social Security check.

Consider taxation. Remember that if you have the majority of your retirement savings held in taxable accounts like traditional 401(k)s, you will owe income taxes on that money. Depending on your tax bracket, your savings may actually be from 22% to 35% less after you pay income taxes. As an example, someone with $500,000 saved for retirement may actually only have $385,000 if they are in the 23% tax bracket. Current tax law requires you to start withdrawing money and paying income taxes on taxable, tax-deferred retirement accounts every year beginning at age 72. Start working with your financial professional early, because there may be ways to save on taxes for the long-term using strategies over the five to 10 years preceding retirement.

Multigenerational Wealth

As part of retirement planning, it is important that each member of the family works together for tax-efficient wealth transfer in the future, minimizing the chance for strife, confusion or excess taxation during family transitions or adverse events. New legislation—the SECURE Act—changed the rules about inherited traditional IRA accounts, and potential tax impacts should be addressed now rather than later.

The family that plans together, stays happy together, hopefully for the long-term. Whenever possible, everyone should be involved in financial, retirement and estate planning matters working hand-in-hand with a trusted financial professional, tax professional and estate attorney to document inheritance matters, final wishes, health care directives, wills and trusts.

If you have any questions about this article, please call us. We’re happy to help you and your family members. You can reach Bulwark Capital Management at 253.509.0395. 

7 Budgeting Tips For July

By | Financial Literacy, Financial Planning
Budgeting can help you achieve your goals faster.

Once you realize that budgeting can help you achieve the goals you’ve set out for yourself, you may find the process inspiring.

  1. Think of your budget as a spending plan

Think of your budget as your “how-to” plan for spending your money rather than what you “can’t” spend. The upside is that by budgeting for short- and long-term expenditures, you can spend money without feeling guilty about it, because you’ve actually planned to spend it!

With a budget, you will simply be allocating all your expenditures with a means to an end, whether it’s getting out of debt, keeping your food bill down, having some fun in life, or saving for retirement. You may even discover that you have more money than you thought. Once you become intentional about what you’re spending, you may realize that your gym membership or all those monthly subscriptions you’re not using won’t be missed and you’ll have more cash free for other purposes, like the occasional Starbucks run or other little treat that makes you happy.

  1. Try using a zero-sum approach

A zero-sum budget means that every penny you have coming in each month gets allocated to a category. The goal is that your monthly income minus your allocations equals zero, so that you’ve put every dollar you have to use.

Start your zero-sum budget by figuring out your monthly net take-home pay or income amount, then allocate all of it to either savings, investments, bills, expenses or debt payoff. This forces you to be accountable for every penny, which puts you in control.

  1. Start with the most important categories first

Start with your true necessities, like mortgage, utilities, food and transportation. Make sure savings is a top priority. Then you can fill in the other categories that are discretionary.

  1. Strive to save 20-30% of your net for short- and long-term goals, and limit housing costs to 30%

So how does this break out? If your net income is $4,000 per month, you should strive to save $800 – $1,200 per month towards short- and long-term goals* and limit your mortgage or rent to $1,200 per month or less.

*Your short-term goals might include a vacation, wedding or down payment for a home. Long-term goals might be accumulating an emergency fund that equals six months’ expenses, getting out of debt, or saving for college or retirement.

  1. Label savings

Rather than have a lump savings account that includes everything you are saving for, try to use separate accounts or find a way to label them using a software program. That way you can see at a glance how close you are getting to each individual goal, like your vacation fund, emergency fund, etc.

Labeled savings accounts can help you keep track of progress toward your goals separately and feel a sense of accomplishment as you achieve each one.

  1. Remember each month’s varying expenses

Your spouse’s birthday, your birthday, holidays, back-to-school, annual car or home maintenance, Christmas each December—don’t forget to include varying annual expenses in each month’s budget. Not having money allocated for special occasions or annual expenses can take the joy out of life, while planning for them can do the opposite.

  1. Create a buffer, and use cash for problem areas

Create a buffer of cash that’s available; think of it as a little temporary augment to your emergency fund until you’ve been budgeting for a year or more. That way if something you forgot comes up, you’ll have the money for it—and you can put it in the regular budget for next time.

If you run into problem areas—for example, maybe you always grab extra unplanned items at the grocery store—consider using cash for problem categories rather than a credit card. Envelopes with cash can hold you more accountable because when the cash runs out, you have to stop spending.

 

If you’d like to discuss this or any other financial matter, please call us. We’re here to help. You can reach Bulwark Capital Management at 253.509.0395. 

It’s Annuity Awareness Month. How much do you know about annuities?

By | Financial Literacy, Retirement

Because June is Annuity Awareness Month, here is an overview about them.

Annuity product designs and types continue to evolve, primarily to meet the demands of people nearing retirement. In addition to their original purpose of providing retirement income, insurance companies have developed hybrid policies, adding features to address the multiple risks consumers face as they get older.

The most important thing you should know about annuities is that they are insurance policies, or contracts between you and an insurance company. Guarantees in them are backed by the financial strength and claims-paying ability of the issuing insurance company.

As with any contract, it’s important to read and understand the fine print before you sign, and you should compare policies from multiple insurance companies to find the best value. That’s where a good independent financial advisor can help.

Fixed Annuities

Fixed annuities are probably the easiest type of annuity to understand. (They are also the oldest—a simple form of the fixed annuity was originally created for Roman soldiers who grew too old to serve.) An insurance company will guarantee* a fixed interest rate on your fixed annuity contract for a selected term, usually from one to 15 years. You can usually purchase a fixed annuity with either a lump sum of money or a series of payments over time.

At the end of the contract term, you can take the money out, put it into another investment, or “annuitize,” meaning you can begin to take periodic payments over time to create income for retirement. This is called the “payout phase” of an annuity contract and it may last for a specified number of months, years, or be guaranteed* for as long as you live.

If you do choose to annuitize a fixed annuity policy, you can begin to receive periodic payments at once (called an immediate fixed) or you can wait until a certain age or time in the future to start receiving payments (called a deferred fixed).

If you purchase one of these annuities with non-qualified money (meaning you have already paid taxes on it), the interest in the annuity policy accrues on a tax-deferred basis. At the point where you take the money out of the annuity or begin taking periodic annuity payments, distributions are taxed based on an “exclusion ratio” so that you only pay taxes on the interest or gains.

If you purchase one of these annuities with qualified money, such as by rolling it over from a traditional 401(k) or IRA, distributions are 100% taxable, since you have not paid any taxes on any of the money yet. As with any qualified plan, if you take or withdraw money before age 59-1/2 you may owe additional tax penalties.

Variable Annuities

Variable annuities were developed in the 1950s. The best way to explain variable annuities is to compare them to fixed annuities. First of all, most variable annuities require a prospectus since part of your money will actually be invested in the stock market, called “sub-account investments.” That means that there is market risk involved with variable annuities, because you can either make money on the amount invested in sub-accounts, or you can lose it depending on market performance.

Variable annuities are usually purchased with the expectation that at some point the contract owner will annuitize or begin taking periodic payments. These are called deferred variable annuity contracts. (You can also purchase an immediate variable annuity contract.)

The important thing to understand about the variable annuity contract is that your periodic annuity payments may fluctuate based on stock market performance, depending on policy terms. And it’s possible that some variable annuity policies can lose principal due to stock market losses.

Variable annuities often come with a death benefit for your beneficiaries based on the contract terms, but some specify that there must be enough money left in the policy after annuitization payments have been taken out and/or will pay the death benefit as long as the sub-accounts have not lost too much money.

Fixed Indexed Annuities

Fixed indexed annuities were first designed in 1995. The biggest difference between them and variable annuities is that fixed indexed annuities are not actually invested in the stock market so they are not subject to market risk. With fixed indexed annuities, after you have owned the policy for a specified number of years your principal is guaranteed*.

With fixed indexed annuities, any policy gains are credited and then locked in annually, bi-annually or at specified points in time. The gains credited to the policy are determined by the insurance company based on the performance of a selected index (for instance, the S&P 500) or multiple indexes. Some fixed indexed annuity gains are capped relative to index performance, meaning you can only be credited a certain percentage, but some are uncapped.

Index performance is used as a benchmark for policy gains or periodic crediting and lock-in. With fixed indexed annuities, you have the potential to participate in market gains. And if the benchmark index loses money, your policy is credited with 0%, keeping the most current locked-in principal value in place.

Fixed indexed annuities can be purchased on an immediate or deferred basis. They can be purchased with qualified or non-qualified money. And they can offer a lifetime income option and/or a death benefit.

Other Things to Know About Annuities

*The guarantees provided by annuities rely on the claims-paying ability and financial strength of the issuing insurance company.

Annuities must be considered carefully based on your particular situation because they are not liquid. Almost all annuities are subject to early withdrawal penalties. Make sure you understand the contract terms and the type of annuity you are purchasing. Your financial advisor can help you compare and analyze policies.

This article is provided for information purposes only and is accurate to the best of our knowledge. This article is not to be relied on or considered as investment or tax advice.

Have questions about annuities? Please call us! You can reach Bulwark Capital Management at 253.509.0395. 

 

5 Ways to Give Your Finances a $pring Cleaning

By | Financial Planning

Spring is here! Time to get your finances in shipshape condition. Here are five ideas to get you started.

 

  1. Check your credit reports.

While you’re reviewing your expenses and debts in order to see how you are faring in terms of staying within your personal budget, make sure that there aren’t any expenses or debts on your credit report that aren’t yours.

It’s free to check your credit reports once a year to ensure no one has used your name or identity to make unauthorized purchases. Here is what to do: https://www.consumer.ftc.gov/articles/0155-free-credit-reports

 

  1. Consider banking / credit card changes.

If you find yourself with open accounts at multiple banks, it may be time to consolidate, depending on your total balance/s. (FDIC insures each account up to $250,000.) By consolidating, you may be in a better position to negotiate for lower fees and better interest rates.

You may find that you want to move your banking life online in order to reduce clutter and find a bank paying the highest rates / charging no fees. But be sure to download and back up your statements (and make backups of the backups) since most banks only keep them around for 12-18 months.

While you’re taking stock of your banking situation, take a look at your credit cards and assess whether or not you’re getting the best deals. It’s easy to do a little online investigating about cards have the best cash back benefits. (But make sure you pay off the balances monthly.)

 

  1. Home maintenance to save money in the long run.

Your home is often one of your bigger assets, so consider putting these important home maintenance projects on your financial to-do list:

  • Repair any roof leaks the minute you spot them to help prevent mold, structural damage and loss of personal property. Make sure your gutters and downspouts are clean and debris-free every year.
  • Water on the ground can cause even more expensive problems. Grading and drainage issues need to be dealt with lest they damage your home’s foundation or cause flooding, often not covered by insurance.
  • Deal with plumbing leaks immediately. Inspect and caulk around showers and tubs as well as windows and doors on a regular basis. Caulk is cheap, but water damage is very expensive.
  • Just like you remove lint from your dryer vent with each load of laundry, you should change your HVAC filter monthly to prevent system problems as well as reduce monthly electric bills.
  • Take immediate measures to eliminate pests like termites, roaches, ants or rodents if they take up residence. Waiting can only lead to more damage.

 

  1. Tax changes / tax record storage.

Very importantly this year, get up to speed on the new tax changes and how they might affect you by meeting with your financial advisor and tax specialist. The two disciplines often have different perspectives and you can often benefit by including both of them in your discussions. Make sure you review your retirement tax distribution plan in terms of RMDs (Required Minimum Distributions) which start at age 72, because there may be ways to mitigate income taxes for the long term if you start early.

In terms of tax document storage, Kiplinger recommends keeping your tax returns indefinitely, and supporting documentation for seven years. If you decide to clean out old tax supporting documents, make sure to shred them to reduce the possibility of identity theft.

 

  1. Beneficiary review: Insurance policy / retirement accounts / estate plans.

You may not realize that the beneficiaries you have listed on your insurance policies and retirement accounts take precedence over wills and trusts. It’s really important to keep all of your documents, including your estate documents, up to date at all times. Life changes, and so does your family. You probably don’t want an ex-spouse receiving your 401(k) money if you pass.

If you have a lot of assets and a very large estate, you may want to meet with your financial advisor and estate attorney since the new, higher estate tax exclusion sunsets in 2026 (or may be changed sooner by Congress under the new Biden Administration.)

 

If you want to discuss any of these ideas, or have questions about your financial or retirement plan, please don’t hesitate to contact us. You can reach Bulwark Capital Management at 253.509.0395. 

Zach Abraham Featured on MSN

By | Bonds, In The Headlines, News

RMDs Are Back for 2021

By | Retirement, Tax Planning

RMDs, or Required Minimum Distributions, are withdrawals that are required by the IRS each year out of your traditional retirement accounts like 401(k)s and IRAs starting at age 72. The money that you have to take out annually by December 31st at midnight is taxed based on your income tax rate for that tax year.

Some retirees forget about RMDs when planning for retirement, and don’t realize how big the tax bite may be for them. This year, because of the pandemic, the CARES Act suspended the RMD for the 2020 tax year in an effort to help retirees avoid withdrawing money from accounts when the market was down.

(An RMD is calculated based on the closing balance of the account at the end of the previous year. When the markets drop significantly, the RMD represents a much higher percentage of a diminished portfolio and that reduces the ability to recover from big losses.)

In 2021, the RMD will be back. As an example, a 75-year-old man with a traditional IRA worth $100,000 will have to withdraw $4,367 this year.

Roth 401(k) Plans

Roth 401(k) plans, which are funded with after-tax dollars, are subject to the same RMD rules that traditional 401(k) and IRA plans are. The amounts are calculated using the same IRS life expectancy tables and account holders must begin taking them after they turn 72. (One exception is if you continue working after age 72 for the company that sponsors the plan and you don’t own more than 50% of the company.)

The difference is that Roth 401(k) withdrawals are usually not taxed.

You can avoid taking the minimum distributions entirely by rolling a Roth 401(k) into a personal Roth IRA, which is not subject to RMD rules.

2020 RMDs Without Penalty, But With Taxes

As part of the CARES Act, the IRS allowed COVID-related withdrawals from traditional retirement plans up to $100,000 without penalty in 2020 for those who were impacted by the pandemic. Income taxes were due on those withdrawals, which could be paid over a three-year period. Those who can afford to can pay the withdrawals back this year (or over a three-year period) can get the taxes back by filing amended tax returns.

Those Who Just Turned 72—It’s Complicated

The SECURE Act of 2019 raised the age when RMDs must begin to age 72. If you turned 70-1/2 in 2019, the old rules applied—your first RMD should have been due April 1st, 2020. However, because the CARES Act suspended RMDs, the new due date was April 1, 2021 for those individuals.

For retirees who turned 72 in 2020 or will turn 72 this year, you can take your RMD at any point in 2021, or even delay it up until April 1, 2022. But if you choose to delay it, you will owe two RMDs in 2022, which could put you into a higher tax bracket.

You should check with your tax professional before making decisions about RMDs, because there are strict rules about which accounts must be withdrawn from and stiff penalties for mistakes—to the tune of taxes owed plus an additional 50%!

 

To discuss your retirement plan, including RMDs, please call us. We are happy to discuss ideas with you and/or your tax professional. You can reach Bulwark Capital Management at 253.509.0395. 

 

This article is provided for educational purposes only and its content should not be relied upon for tax advice. As always, check with your tax professional or attorney for specific tax advice related to your situation.

Source:

https://www.cnbc.com/2021/03/01/required-minimum-distributions-on-retirement-plans-are-back.html