Zach Abraham, Author at Bulwark Capital Management

Jul 02

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Annuities Don’t Have to be Confusing

By Zach Abraham | Annuities, Retirement

In the past, annuities have been a topic avoided by many, but lately interest levels have risen—a lot. In fact, online searches for terms like “annuities” and “pensions” are up by 160% while “are annuities good or bad” are up by 200%, according to ThinkAdvisor.

With retirement lasting longer and retirees worried about recent market volatility, tariff uncertainty, potential Social Security cuts, and continued inflation, now may be a good time to learn more about how different tools, such as annuities, might work in a retirement portfolio. And since June was Annuity Awareness Month, we decided to open up the conversation and provide some clarity.

To start, whether you’re planning for retirement, getting close, or already in it, it’s important to have a retirement plan in place, and review it regularly. While accounts like 401(k)s or IRAs are important retirement savings vehicles, they don’t automatically come with a plan for how income will be drawn from those assets once paychecks stop. Planning for income distribution is a key part of creating a long-term financial plan.

As you get closer to retirement, it may make sense to review how much of your savings are subject to stock market volatility. One concept that highlights this is “sequence of returns risk.” This refers to the impact of market performance in the early years of retirement, which can significantly affect how long your savings last. For example, someone who retires during a market downturn and begins taking withdrawals might see their portfolio decline faster than someone who retires during a market upswing, even with the same average return. Since market timing is unpredictable, working with a financial professional to explore multiple income and investment strategies tailored to your needs can help manage these risks.

An annuity is a contract between an individual and an insurance company designed to provide a monthly stipend or income during retirement. There are many different types of annuities, and some have different fee structures and contract terms which may, or may not, befit your financial situation. That’s why it is generally a best practice to work with an independent financial advisor who has access to many different types of annuities to compare between.

Some annuities, such as certain lifetime fixed indexed annuities, can offer a stream of income in retirement that is designed to last as long as you live. These guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company and are subject to the terms of the annuity contract. Some policies may also include optional features, sometimes available for an additional cost, that are designed to help address inflation.

For some investors, annuities can be an appealing way to turn part of their retirement savings into a predictable monthly income stream. This may help reduce the complexity of managing withdrawals, aside from required minimum distributions (RMDs), and can complement other retirement income sources. With some income needs covered by the annuity, other portions of the portfolio may remain available for market participation or future use, depending on your goals and risk tolerance.

A study by David Blanchett and Michael Finke (2021) found that many retirees prefer the predictability of guaranteed lifetime income over drawing from their investment accounts, even when they have the means to do so. For some, it can feel more intuitive to spend income than to withdraw from long-accumulated savings. That’s one reason why consulting a financial professional may be helpful when designing a retirement income plan that aligns with your personal comfort, goals, and financial circumstances.

Roughly 10,000 Americans reach age 65 each day, highlighting the growing importance of retirement income planning. For some individuals, annuities may play a role in the fixed-income portion of their portfolio, depending on personal goals and needs. While traditional models often focused on the stock-to-bond ratio, research by Roger Ibbotson, Robert Shiller, and Wade D. Pfau has examined how certain annuity types, such as fixed indexed annuities, might contribute to addressing risks like longevity and market volatility. These studies suggest that, under the right circumstances, annuities may offer meaningful benefits alongside other fixed-income strategies. Specific outcomes depend on individual assumptions, product features, and planning context.

In today’s interest rate environment, some fixed indexed annuities offer optional bonus features that may increase the value of the annuity’s income benefit base, depending on the terms of the contract. These features often come with additional costs, conditions, or holding requirements. Other available riders may include provisions for long-term care, terminal illness, or spousal income, depending on the policy. Because features vary widely by provider, annuities can be tailored to individual needs. However, it’s important to understand the details and potential trade-offs involved.

With so many choices, it’s important to remember that every person’s situation is unique, meaning annuities may or may not be indicated depending on your specific needs and goals. That’s why we’re here to help you explore your options, explain how different annuities work, and create a long-term retirement plan. If you’d like to discuss how annuities might fit into your retirement strategy, give us a call! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395.

Sources:

https://www.thinkadvisor.com/2025/04/15/6-reasons-annuity-is-no-longer-a-dirty-word/

https://www.thinkadvisor.com/2025/04/23/for-most-americans-going-broke-in-retirement-is-a-bigger-fear-than-death-survey/

https://www.thinkadvisor.com/2025/04/15/7-things-retirement-savers-are-asking-google-about-annuities-now/

https://401kspecialistmag.com/retirees-prefer-spending-lifetime-income-over-savings/

https://www.kiplinger.com/retirement/annuities-what-you-dont-know-can-hurt-you

https://www.limra.com/en/newsroom/news-releases/2025/limra-2024-retail-annuity-sales-power-to-a-record-%24432.4-billion/

https://www.protectedincome.org/wp-content/uploads/2023/06/RP-20_Pfau_final.pdf

https://thequantum.com/a-closer-look-at-bonds-versus-fixed-indexed-annuities/

https://markets.businessinsider.com/news/stocks/insurmark-announces-barclays-bank-and-yale-economist-robert-shiller-research-showing-fixed-indexed-annuity-with-cape-index-would-have-outperformed-bonds-1028505495

https://safemoney.com/blog/annuity/shaquille-oneals-strategy-why-annuities-are-essential/

Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein.

Any annuity guarantees are backed by the financial strength and claims paying ability of the issuing insurance company and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Index or fixed annuities are not designed for short term investments and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Crediting methodologies can be complex and difficult to comprehend. You should make sure you understand the risks and rewards of any annuity before considering an investment.

Trek 25-249

May 15

0

Will Your Nest Egg Withstand Inflation and Market Volatility?

By Zach Abraham | Financial Planning, Investments, Retirement

It’s no secret that inflation is on the rise, impacting millions of Americans. Mix that in with on-again off-again tariffs, and it’s a good time to assess if your accumulated wealth is being managed in a way that will outlast inflation and a volatile market. It’s important to note that a financial plan is never supposed to be stagnant, it’s supposed to change as your situation and world economic conditions shift. But anxiety around the market and inflation is still very real, so how can we get ahead of it?

Remember, Nothing Stays the Same Forever

In early April, we saw massive swings in market sentiment as Trump teetered back and forth about tariffs. While we all hope to avoid increased inflation or, worse, a recession, we have to be strategic in how we face challenges in the market. This is a good time to remember that the markets are similar to us in the sense that nothing stays the same. The challenges you faced in your early 20s are not the same ones you have today. How long they took to resolve may vary, but they never stayed forever. Imagine if you followed your initial knee-jerk, emotional reaction to those challenges you faced when you were younger. Making decisions based on emotion, especially fear, rarely helps you reach your goals, and frankly, they can sabotage you from ever getting close to them.

So, going back to our current market situation, what can investors do right now? Well, depending on their specific situation, the answers vary.

If You’re Young, or You Have More Than 10-15 Years to Retirement¹

If you have a long time-horizon to retirement, you may want to consider waiting it out and potentially continue to invest. A financial principle called “dollar cost averaging” might apply to you, which in theory targets long-term growth by continuing to “buy” during both market lows as well as highs through the years.

See the chart below:

This chart shows that those who exit the market the day after every -2% market move or worse over a 25-year time period usually underperform those who remain fully invested. When you leave the market, you don’t just avoid future bad days, you also miss out on the future good days. Ultimately, missing even just a few of the market’s best days, or getting back into the market only after the market is already up, which can impact long-term returns. Because, remember, just like in life, nothing stays bad forever; good days will come again. The market is no different.

If You’re Older and Getting Close to Retirement

As you get closer to retirement, continuing to stay in volatile stock markets exposing all of your savings to stock market risk probably doesn’t make sense due to a financial principle called “sequence of returns risk.” With all things being equal, someone who retires during a down market can see their retirement savings drop precipitously for the long-term if they start withdrawing funds, versus someone who retires when markets are going up. This is a very important consideration at the very beginning of your retirement when your account balance is at its highest, but unfortunately, no one has a crystal ball. You probably need to rebalance in order to reduce portfolio risk.

Consider Rebalancing Your Portfolio

First, you’ll want to ensure your portfolio’s ratios of international stocks, large-cap and mid-cap, bonds, cash, and fixed options make sense in the current economic environment. Different asset classes have varying cycles of performance, which can help address inflation headwinds. But keep in mind that there are other ways you can de-risk your portfolio, especially as you head toward retirement.

Sometimes considered a separate asset class, in the last few years, annuity sales have risen as 10,000 people per day turn 65 in America. An annuity is a contract between an individual and an insurance company designed to provide a monthly stipend during retirement. Some annuities even provide retirement income that won’t run out no matter how long you live, guaranteed by the financial strength of the insurance company providing the annuity policy. There are many different types of annuities, contracts can be complex, they are illiquid, and there should always be other cash and investments to balance out your retirement plan even if you have an annuity or annuities. Furthermore, annuities are not right for everyone. It’s advisable to work with a financial professional to look at your overall plan, compare your options, and closely examine contract terms.

Other Personal Actions You Can Take To Manage Inflation

Additionally, to help make your dollar in your day-to-day life last longer, do a thorough review of your spending. This is the time to evaluate essential vs. discretionary expenses, for example, a mortgage versus a new car. This gives you a chance to identify unnecessary spending that you can cut back on. Most people are shocked by how much they were spending on things they did not need!

Some common expenses that are good to look at critically during this audit:

Takeout & Dining – Frequent restaurant visits, coffee runs, food delivery, and takeout orders.
Subscription Services – Streaming (Netflix, Hulu, HBO Max), music, gaming, news, and fitness apps.
Retail & Impulse Shopping – Clothing, accessories, home décor, and non-essential purchases.
Unused Memberships – Gym memberships, fitness classes, warehouse clubs, and subscription boxes.
Premium TV Packages – Expensive cable or satellite plans with unnecessary channels.
Frequent Travel – Weekend getaways, flights, hotels, and vacation entertainment costs.
Luxury & Self-Care – Salon visits, spa treatments, manicures, and pedicures.
High-End Brands – Designer clothing, accessories, and premium tech gadgets.
Hobby Expenses – Collectibles, gaming, crafting supplies, and other leisure-related purchases.
Tech Upgrades – Constantly replacing smartphones, tablets, and accessories with the latest models.
Costly Entertainment – Concerts, sporting events, amusement parks, and other high-ticket experiences.

Also, see if you can negotiate on those essential bills. While many essential bills are a fixed amount, some can be adjusted or reduced. You may be able to lower expenses for service contracts like internet or insurance. You may also be able to lower your credit card rates. While there’s no guarantee, it never hurts to call a service representative and see if you can get a better price for the things you have to pay for.

While dealing with inflation and market volatility is no one’s ideal situation, it doesn’t have to be a nightmare either. With a strategic approach, you can get through this stressful time and on to the other side! Do you need help getting your accumulated assets inflation-ready and putting a plan together to hedge against market risk? Call us today! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395.

Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 25-216

Sources

https://www.kitces.com/blog/clearnomics-10-charts-recession-fears-tariff-risk-market-volatility-economy-investor-anxiety/

https://www.limra.com/en/newsroom/news-releases/2025/limra-2024-retail-annuity-sales-power-to-a-record-%24432.4-billion/

https://www.aarpinternational.org/initiatives/aging-readiness-competitiveness-arc/united-states

Apr 25

0

Financial Literacy Month. Breakdown of retirement accounts.

It’s Financial Literacy Month. How Much Do You Know About Retirement Accounts?

By Zach Abraham | Financial Literacy, Retirement

April is often known for spring cleaning, Easter, and Passover, but it’s also Financial Literacy Month. At its core, financial literacy refers to understanding and effectively being able to use various financial tools and strategies. So, in honor of the month, we’re offering a basic financial primer, with some quick definitions and simple breakdowns of common retirement accounts.

Background: The Decline of Pensions

During the rise of the industrial age, as workers migrated and began working for factories and other enterprises, they shifted away from farming and self-sufficiency and began relying on pensions to fund their retirement. Because these pension plans were managed by their employers who tended to take care of and provide for their loyal employees, workers were little involved in strategies or decision-making when it came to planning for their own retirements.
But times have changed. The first implementation of the 401(k) plan was in 1978, and since then, has gradually supplanted the pension for most American workers. According to a congressional report, between 1975 and 2019, the number of people actively participating in private-sector pension plans dwindled from 27 million to fewer than 13 million, although public employees sometimes still have them. 2

Today, most workers are responsible for funding their own retirement, which makes understanding and participating in retirement accounts vital.

401(k) Plans

A 401(k) is an employer-sponsored retirement savings plan. With the traditional 401(k), employees can contribute pre-tax income into their own account, selecting among the plan’s list of options which funds they want their money invested in. Many employers may even match employee contributions up to a certain percentage.

(NOTE: In the public sector, there are 403(b)s, 457s, the TSPs (Thrift Savings Plan), and many other retirement plans which work similarly to the 401(k), but may have slightly different rules.)

With a traditional pre-tax 401(k), the employee’s contributions can reduce their taxable income for the year, since the money is deducted from their paycheck. Once an employee reaches age 59-1/2, per the IRS they can start taking withdrawals without incurring penalties, depending on their employer’s 401(k) plan rules. Withdrawals from traditional 401(k) plans are subject to income tax, which means employees will owe taxes on the amount withdrawn. Additionally, 401(k) plans are subject to required minimum distributions (RMDs), which mean an employee must begin taking withdrawals from the account every year beginning at age 73.

Some employers also offer a Roth 401(k) option, which uses after-tax dollars. Although you must pay income taxes on the money you put into a Roth 401(k), including any employer Roth account matching amounts, a Roth option offers tax-free withdrawals in retirement as long as the account has been in place for five years or longer, no RMDs, and no taxes to your beneficiaries or heirs.

While the 401(k) can be a great way to save, it’s important to be mindful of how much you’re contributing, how your funds are invested, and what the tax ramifications of your decisions may be.

Social Security

Social Security is a part of many Americans’ retirement planning. It was created as a national old-age pension system funded by employer and employee contributions, although later it was expanded to cover minor children, widows, and people with disabilities.

Established in 1935, Social Security payments started for workers when they reached age 65—but keep in mind at that time, the average longevity for Americans was age 60 for men and age 64 for women. With people living much longer today, Social Security usually needs to be supplemented with your own personal savings and other retirement accounts.1,8

IRAs

Individual Retirement Accounts (IRAs) were created in the 1980s as a way for those without pensions or workplace retirement plans to save money for themselves for retirement in a tax-advantaged manner. While the tax treatment and contribution limits vary, the goal is to provide you with the means to build a retirement nest egg that can grow over time.

Types of IRAs:
• Traditional IRA: Allows for tax deductible contributions for some people, depending on their income level and whether they have a plan through their workplace. Any growth in a traditional IRA is tax-deferred, and you’ll pay taxes when you withdraw the money in retirement. Contributions are subject to annual limits, and penalties apply if funds are withdrawn before age 59 ½, with some exceptions. RMDs must be taken annually beginning at age 73 and ordinary income taxes are due on withdrawals.
• Roth IRA: Contributions to a Roth IRA are made with after tax income, meaning you don’t receive a tax deduction when you contribute. However, qualified withdrawals in retirement are tax free if the account has been held for at least five years and withdrawals occur after age 59 ½. This account may be suitable for individuals who anticipate being in a higher tax bracket during retirement. Roth IRAs are also tax free to those who inherit them if all IRS rules are followed.
• SEP IRA (Simplified Employee Pension) and SIMPLE IRA (Savings Incentive Match Plan for Employees): For self-employed individuals and small business owners, a SEP IRA or SIMPLE IRA plan can allow for higher contribution limits for both themselves and/or their employees. Under the SECURE 2.0 Act, Roth contributions are now permitted in both SEP IRAs and SIMPLE IRAs if elected by the employer. These are made with after-tax dollars and follow Roth taxation rules for withdrawals.

Annuities

Annuities are insurance products designed to convert your savings into a stream of income, particularly during retirement. When you purchase an annuity, you exchange a lump sum or series of payments for periodic income. This income can be for a set term or the rest of your life, which functions similarly to a personal pension. (Guarantees are provided by the financial strength of the insurance company providing your annuity contract.)

Annuities can be funded with either pre-tax (qualified) or after-tax (non-qualified) dollars. They may be purchased with a single lump sum – such as funds rolled over from a 401(k). Alternatively, they may be funded through ongoing contributions – in the case of deferred annuities.

While annuities can provide predictable income, they may also involve fees, surrender charges, and tax implications that may not be suitable for everyone. It’s important to understand how each type of annuity works and to consult with a financial professional before purchasing.

Types of Annuities:
• Fixed Annuity: A contract offering a fixed interest rate for a set period of time.
• Fixed Indexed Annuity (FIA): A contract offering principal protection and the potential for growth based on the performance of a market index – such as the S&P 500. While the account value is not directly invested in the market, interest is credited based on a formula tied to index performance, subject to caps, participation rates, and spreads. (Guarantees are provided by the financial strength of the insurance company providing your annuity contract.)
• Variable Annuity: A contract where the value and income payments fluctuate based on the performance of investments chosen within the annuity. The choice of investment subaccounts, like mutual funds, can increase or lose value based on market performance.
• Registered Index-Linked Annuity (RILA): RILAs offer the opportunity for market-based growth with some downside protection. Unlike fixed indexed annuities, RILAs are registered securities products that allow for limited losses and limited gains based on index performance and contract terms. These products carry risk and are not suitable for all investors.

Life Insurance

Life insurance can provide financial protection for your loved ones by offering a death benefit paid to a beneficiary upon your passing. Policies vary widely, but they generally aim to replace lost income, cover debts, or fund future expenses. Some policies, like permanent life insurance, can also build cash value over time, which can be borrowed for various needs, including retirement income.

It’s important to work with your financial advisor to find the right policy for your needs, and remember, medical underwriting may be required.

Types of Life Insurance
• Term Insurance: Provides a death benefit if the insured passes away within a specified term (e.g., 1, 2, 10, 15, or 30 years). Premiums are typically level for a certain period but may increase with age. Once the term expires, the policy ends.
• Whole Life: A permanent policy with fixed premiums and cash value accumulation that grows at a tax-deferred rate set by the insurance company. Policyholders can borrow against the cash value; however, loans will accrue interest and reduce the benefit if not repaid.
• Universal Life: Offers flexibility in premium payments and death benefit amounts – subject to underwriting and contract limits. It accumulates cash value based on the credited interest rate set by the insurer. Indexed Universal Life (IUL) is a type of universal life where credited interest is tied to a market index -such as the S&P 500. The IUL policy is not directly invested in the market and typically includes a cap rate, floor, or participation rate – offering growth potential with downside protection.
• Variable Life: Comes in two forms—variable and variable universal life. Both variable life insurance (VL) and variable universal life (VUL) insurance are permanent coverage that allocate cash value to market investment subaccounts which can lose value, but with variable life, there is a fixed death benefit, while with VUL, there is a flexible death benefit and adjustable premium payment amounts.

Whether you’re just starting to think about retirement or are near retirement age, it’s never too late to learn more, or take action to create your own personal retirement plan. If you’re unsure about your retirement options or would like assistance planning for your financial future, please reach out to us! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395.

Sources:
1. https://en.wikipedia.org/wiki/401(k)#
2. https://www.usatoday.com/story/money/2024/03/19/pensions-are-popular-why-dont-more-americans-have-them/72968970007/
3. https://www.schwab.com/ira/traditional-ira/withdrawal-rules?msockid=29dc569f2e1f64ea0d3c46022fac6511
4. https://u.demog.berkeley.edu/~andrew/1918/figure2.html
5. https://home.treasury.gov/system/files/131/WP-91.pdf
6. https://www.indeed.com/career-advice/career-development/financial-litteracy
7. https://www.investopedia.com/guide-to-financial-literacy-4800530
8. https://www.ssa.gov/history/age65.html

This document is for informational purposes only. All information is assumed to be correct but the accuracy has not been confirmed and therefore is not guaranteed to be correct. Information is obtained from third party sources that may or may not be verified. The information presented should not be used in making any investment decisions. It is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

Any annuity guarantees are backed by the financial strength and claims paying ability of the issuing insurance company and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Index or fixed annuities are not designed for short term investments and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Crediting methodologies can be complex and difficult to comprehend. You should make sure you understand the risks and rewards of any annuity before considering an investment.

Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 25-205.

Mar 31

0

Wealth Planning Ahead of Inflation

By Zach Abraham | Financial Planning, Inflation Risk

It’s no secret that inflation is on the rise, impacting millions of Americans. Mix that in with ongoing tariffs, it’s a good time to assess if your current wealth plan is ready to tackle inflation. It’s important to note that a financial plan is never supposed to be stagnant, it’s supposed to change as your situation and the situation of the world shift. But anxiety around inflation is still very real, so how can we get ahead of it?

Portfolio Rebalancing

At Bulwark Capital Management, we use a cost, risk and growth decision-making process when developing investment plans in tandem with our clients’ risk tolerance, investment objectives, investment preferences, and time horizons. A strategic portfolio management approach helps our clients’ plans adapt to changing market conditions.

With inflation on the rise, you may want to look at further diversifying your portfolio, making sure the portfolio’s ratios of international stocks, large-cap and mid-cap, bonds, cash, and fixed options make sense in the current economic environment. Different asset classes have varying cycles of performance which can help address inflation headwinds. This is why we encourage our clients to keep a diverse portfolio. By investing in multiple classes, the overall investment returns can be more stable and less susceptible to adverse movements in any one class.

Personal Actions You Can Take

Additionally, to help make your dollar in your day-to-day life last longer, do a thorough review of your spending. This is the time to evaluate essential vs. discretionary expenses, for example, a mortgage versus a new car. This gives you a chance to identify unnecessary spending that you can cut back on. Most people are shocked by how much they were spending on things they did not need!

Some common expenses that are good to look at critically during this audit:

Takeout & Dining – Frequent restaurant visits, coffee runs, food delivery, and takeout orders.
Subscription Services – Streaming (Netflix, Hulu, HBO Max), music, gaming, news, and fitness apps.
Retail & Impulse Shopping – Clothing, accessories, home décor, and non-essential purchases.
Unused Memberships – Gym memberships, fitness classes, warehouse clubs, and subscription boxes.
Premium TV Packages – Expensive cable or satellite plans with unnecessary channels.
Frequent Travel – Weekend getaways, flights, hotels, and vacation entertainment costs.
Luxury & Self-Care – Salon visits, spa treatments, manicures, and pedicures.
High-End Brands – Designer clothing, accessories, and premium tech gadgets.
Hobby Expenses – Collectibles, gaming, crafting supplies, and other leisure-related purchases.
Tech Upgrades – Constantly replacing smartphones, tablets, and accessories with the latest models.
Costly Entertainment – Concerts, sporting events, amusement parks, and other high-ticket experiences.

Also, see if you can negotiate on those essential bills. While many essential bills are a fixed amount, some can be adjusted or reduced. You may be able to lower expenses for service contracts like internet or insurance. You may also be able to lower your credit card rates. While there’s no guarantee, it never hurts to call a service representative and see if you can get a better price for the things you have to pay for.

While dealing with inflation is no investor’s dream, it doesn’t have to be a nightmare either. With a strategic approach and willingness to adapt your life and portfolio to market conditions, you can get through this time and on to the other side!

Do you need help getting your wealth plan inflation-ready? Call us today! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395.

This document is for informational purposes only. All information is assumed to be correct but the accuracy has not been confirmed and therefore is not guaranteed to be correct. Information is obtained from third party sources that may or may not be verified. The information presented should not be used in making any investment decisions. It is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein.

Trek 25-185.

Feb 25

0

What’s Your Relationship with Your Finances?

By Zach Abraham | Financial Planning

An often-overlooked relationship is the one we have with our finances. As we celebrate the month of love, reflect on whether the relationship you have with your finances supports your long-term goals, or if a shift in that relationship is needed.

When you think about your finances, what’s the first feeling that comes to mind? Is it confidence? Indifference? Or perhaps anxiety? Like any relationship, your relationship with money requires consistent effort and care if you want it to be a fulfilling one. It’s also a malleable relationship, meaning that even if you feel overwhelmed by financial stress or detached from your goals right now, you can always change it to one that makes you feel confident about your financial future.

In psychology, a common way professionals assess relationships is through attachment theory. Attachment theory offers a framework for understanding how people form emotional bonds, particularly in early life with caregivers. These attachment styles include anxious, avoidant, and secure. Attachment theory can help us see how we approach all kinds of relationships, including the one we have with money!

First, understand your relationship with money was probably determined early on in life, maybe before you even understood the concept of money. This could be when you were a child seeing your parents or caregivers anxiously struggling to make ends meet, or seeing them spend money without considering long-term goals, etc. These early experiences shape how we interact with money and should be considered when assessing your current relationship with your finances. With that in mind, here’s how each attachment style may manifest in present-day financial behaviors:

Anxious

In the clinical sense, anxious attachment is characterized by a fear of abandonment and rejection. These individuals probably had inconsistent caregivers who were sometimes there and sometimes not. This made it hard for them to trust when things were good that the other shoe wouldn’t soon drop. When applied to finances, this could manifest as someone feeling overwhelmed, constantly worried that anything and everything could derail the progress they’ve made. These individuals often lack confidence in their ability to achieve their financial goals, even when all evidence suggests otherwise. Consumed by worry, they may find themselves paralyzed, unable to make the decisions necessary to reach their goals.

Avoidant

An avoidant attachment style involves a fear of closeness and difficulty trusting others as trusting others involved consistent disappointment in their earlier life. If someone has an avoidant style when it comes to their relationship with money, they may detach themselves from financial planning and long-term goals. If they avoid making goals, then there’s no fear of failure, but there will also never be any progress. These individuals might procrastinate, downplay the importance of financial milestones, or dismiss the need for accountability, all as a means of maintaining control while avoiding the potential disappointment that comes with falling short of their goals.

Secure

Finally, a secure attachment style enables an individual to feel safety, stability, and trust in close relationships. These are the people who had caregivers who offered affection when needed, encouraged independence, and were consistent. In the context of finances, someone with this attachment style approaches their goals with confidence. They trust their ability to make decisions that support their goals. They’re able to be present, engaged, and adaptable as circumstances change without feeling overwhelmed. Rather than fixating on the possibility of failure, they focus on success and the steps needed to achieve it.

Cultivating a Secure Attachment Style

If you feel like your attachment style leans avoidant or anxious at times, don’t worry! As stated previously, these attachment styles are malleable. This means you can change them! To cultivate a more secure attachment with your finances, think about what the behaviors of someone with a secure attachment might be. Some things you may want to consider:

General Financial Wellness: This includes having a monthly budget, an emergency fund, and a robust savings account. All of these will lay a foundation for you to build towards your bigger goals, but remember growing a “robust savings account” or creating a monthly budget are goals in themselves. So don’t let this first part overwhelm you, break it down into smaller, manageable steps and turn each one into its own goal!
Maintain Financial Awareness: It’s so easy to check out or lose focus on money. You see your monthly power bill or insurance premium go up, and you think, “Well it’s only $20.” But remember, that’s $240 a year! Push back the resistance that makes you want to ignore things, and instead keep track of bill increases, unnecessary purchases, and anything else that can burn a hole through your wallet. Being aware of these increases is the first step in mitigating them!
Set Goals: Know what you want to accomplish, because if you neglect to define your goals you will never achieve them. If your goals feel overwhelming, break them up into smaller goals. When you’re setting bigger, long-term goals, consider the power of compound interest. The returns you can gain over time can significantly help you reach those goals. For example, if you know you want to retire one day and your employer has a matching 401(k) plan, perhaps at the very least contribute enough to take full advantage of that match. If you want to send your child off to college one day, look into a 529 plan. If you are starting younger with a few decades before retirement, time is on your side, so take advantage of it.
Protect Yourself and Your Family: While preparing for the unexpected can be difficult, having a plan in place can help you face these challenges without feeling overwhelmed or shutting down. For this, you may want to consider a life insurance policy that works for you and your family. Life insurance policies have evolved over the last decade and can be better shaped to a policyholder’s needs, these policies can even have riders added to them to help you plan for long-term care. A will and/or estate plan will also help give you peace of mind knowing that if anything were to happen to you, you have taken steps to ensure your family will be taken care of, with your wishes spelled out and legally documented.
Know Your Triggers: If your attachment style leans anxious or avoidant, understand what triggers that attachment style. You can change your attachment style, but it requires a commitment to remaining present and addressing those maladaptive traits when they pop up. For example, maybe when you receive a bill you put off looking at it until the day before a late fee kicks in. Receiving a bill is the trigger, how can you address that trigger? Maybe you can enroll in automatic payments, or maybe set aside time every so many days to go over your bills, or maybe something entirely different altogether. Addressing your triggers will be something for you to figure out and can widely vary from person to person. The first step for everyone, however, is to face those triggers head-on and look for a solution.
Seek Help: Changing your attachment style is no small task, but you don’t have to do it alone! Partnering with an experienced financial advisor can make the process more manageable and less overwhelming. An advisor can help you define your goals, break them down into actionable steps, and provide guidance and support along the way!

If you’re looking for support in navigating your financial attachment style or want guidance to maintain a secure mindset, we’re here to help! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395.

This document is for informational purposes only. All information is assumed to be correct but the accuracy has not been confirmed and therefore is not guaranteed to be correct. Information is obtained from third party sources that may or may not be verified. The information presented should not be used in making any investment decisions. It is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 25-160.

Jan 31

0

Start 2025 Strong with These 5 Financial Wellness Tips!

By Zach Abraham | Financial Planning

The new year is here, which means a fresh start to be the best, healthiest version of yourself, but don’t limit that to just physical health. Make 2025 the year of prioritizing your financial wellness!

As we welcome 2025, it’s the perfect time to refocus on your health and set the tone for your year. Remember, wealth and health often go hand in hand. Use this time to take a closer look at your financial wellness and identify areas where you can grow, improve, and create a stronger foundation for your future. From doing a general review of your budget to revamping your portfolio, harness the momentum of the new year to help set yourself up for 2025!

1. Review Where Your Money is Going

Do you know where all your money is going? From small impulse buys to monthly bills, the start of the year is a great time to review your spending habits. Take a close look at your spending history to get a clear picture of where your money is going. To begin, think of your expenses as being in one of two groups: either needs or fun. For example, healthcare expenses would fall under needs, while a new wardrobe might fit into the fun category.

Next, break down your expenses into fixed, flexible, and discretionary costs. Fixed expenses are those that stay the same each month, like rent, mortgage, or insurance, while flexible (but necessary) expenses fluctuate, such as utility bills or groceries.

Discretionary costs can be decreased or increased. For instance, if you have necessary extra health or dental expenses for the month, you can choose to spend less on coffee or going out to eat. Remember to think about your life goals when you decide what is discretionary. If you have been putting only a small amount that’s left over each month into savings or retirement, consider changing that to have a fixed amount of savings deducted from your income before it ever hits your checking account.

This is also a great time to review your subscriptions to ensure they are still important to you as well as automatic payments to make sure there haven’t been any overlooked changes you need to rectify. Additionally, you may want to set up spending alerts on your accounts to help you monitor your finances throughout the year.

2. Update Your Budget

Once you understand where your money is going, you can begin to determine your necessary monthly spending. Start by identifying your fixed expenses and calculating an average for your flexible and discretionary expenses to estimate your total essential monthly costs for the new year. You can input this information into a spreadsheet or your budgeting app of choice to compare it with your monthly income. Whether you rely on active income from work or retirement income sources such as 401(k)s, pensions, or Social Security, having a clear understanding of how much money you need to maintain your lifestyle is key.

Living within your means should be your biggest goal, and that may require taking an honest look at your spending habits and developing a strategy to better manage your income. By comparing your income streams to your budget and keeping savings and other financial goals in mind, you can create a sustainable plan for the year ahead.

3. Have an Emergency Fund

Once your budget is set, ensure you have an emergency fund of liquid assets to cover at least three to six months of expenses. (Some people may want or need to have more than that, depending on their situation.) Your emergency fund should remain untouched unless needed for those necessary expenses. This will allow you some cushion during market downturns, unexpected expenses like a car breakdown, or hiccups in your income.

4. Check-Up on Your Portfolio

Your portfolio can play a significant role in your overall financial plan, so it’s important to reassess its performance and consider any adjustments for the year ahead. Take some time to reflect on your goals and any planned life events for the upcoming year. While you can’t predict the future, you can evaluate what you expect the year may bring.

This assessment can influence your risk tolerance and guide decisions about diversifying your investments. If your current strategy doesn’t align with what you anticipate for the new year, now is the perfect time to rebalance your portfolio to help support your financial goals.

5. Keep Your Goals in Mind

In everything you do, keep your goals at the forefront. Whether you’re aiming to build a nest egg for retirement, save for your child’s education, or leave a legacy for your loved ones, your financial strategy should reflect that. This is where strategic financial planning comes in.

For your bigger or more long-term goals, you may want to consider exploring strategies such as Roth conversions or charitable contributions to help with taxes, setting up 529 college savings plans for your children, or purchasing life insurance to create a tax-advantaged legacy for your loved ones. There are countless tools and strategies available, and the right ones for you will depend entirely on your unique situation and goals. By keeping your goals in mind with every financial decision you make this year, you’ll be supporting your long-term success.

Planning for the year ahead and goals it entails can be stressful, but rest assured we’re here to help! If you need help with your financial wellness, give us a call! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395.

Sources:

https://sfs.harvard.edu/financial-fitness-basics

https://solsticeseniorliving.com/financial-wellness-tips-for-seniors/

https://smartasset.com/investing/portfolio-management-tips

This document is for informational purposes only. All information is assumed to be correct but the accuracy has not been confirmed and therefore is not guaranteed to be correct. Information is obtained from third party sources that may or may not be verified. The information presented should not be used in making any investment decisions. It is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 25-112.

Dec 11

0

Setting Financial Goals for the New Year

By Zach Abraham | Financial Literacy

It’s that time of year again—the time when many people set ambitious goals but struggle to follow through on achieving them.

As you reflect on your financial health, it’s important to remember that everyone is in a different place financially. Tailoring your resolutions to fit your unique situation can make a significant difference. Here are five steps that can help you set and achieve your financial goals, along with suggestions and strategies for short-term, mid-term, and long-term goals to help keep you on track.

Step 1: Reflect on Your Current Financial Situation

Begin with a thorough examination of your existing financial landscape. Review your income, expenses, assets, and liabilities. This analysis will provide a comprehensive understanding of your economic standing and help you craft a personalized plan for your financial future.

Step 2: Establish Clear Objectives

Articulate your financial objectives clearly. Whether your aim is to build an emergency fund, plan for a dream vacation, buy a home, or prepare for retirement, identifying your goals sets the foundation for your financial journey. Consider the time frame associated with each objective, from short-term to long-term commitments. (See below for more.)

Step 3: Make Your Goals SMART

Adhering to the SMART criteria helps to ensure your goals are clear and achievable:

Specific: Clearly define what you want to accomplish. For example, “Save $10,000 for a car down payment.”
Measurable: Set specific amounts and deadlines, like “Save $500 per month for 20 months to reach $10,000 by a specific date.”
Achievable: Make sure your goals are realistic within your current financial situation.
Relevant: Align your financial goals with your overall life objectives.
Time-Bound: Set a deadline for each goal to create a sense of urgency.

Step 4: Seek Professional Advice

Consider consulting a financial advisor, especially for complex goals like retirement planning or investment strategies. Advisors can provide tailored guidance and valuable insights to help you make informed decisions. Don’t hesitate to ask for help; their knowledge can greatly enhance your financial well-being.

Step 5: Stay Disciplined and Motivated

To achieve your goals, discipline is crucial. Regularly check your progress and celebrate milestones. Keep your ultimate dreams at the forefront of your mind. This personal financial journey requires consistency and enthusiasm.

Short-Term Financial Goal Ideas

Create and Stick to a Budget

Establishing a budget is a foundational step in financial planning. Track your income and expenses to understand your financial habits and use budgeting tools to categorize your spending. Identify areas to cut back and allocate funds toward savings or debt repayment.

Build an Emergency Fund

An emergency fund is important for financial stability. Start small with a goal of $500 to $1,000, and gradually expand it to cover three to six months of living expenses, or more depending on your situation. Consider automated savings transfers to this dedicated account, helping you prepare for unexpected financial shocks.

Mid-term Financial Goal Ideas

Save for Major Life Events

Consider significant life events like buying a home or funding a child’s education. Start by estimating the total amount needed and set a timeline for achieving it, breaking it down into monthly savings targets.

Pay Off Student Loans

If you have student loans, strategize to pay them off effectively. Explore refinancing options to help secure a lower interest rate while considering the potential loss of federal loan benefits.

Long-Term Financial Goal Ideas

Save for Retirement

Experts recommend that you work toward a comfortable retirement by saving 10-15% of your income in tax-advantaged retirement accounts, or more if possible. As you get closer to retirement, you should work with an advisor to create a customized retirement income plan based on your personal retirement lifestyle goals. Estimate your desired annual expenses to help gauge how much you will need.

Plan for Major Life Transitions

Consider potential long-term goals, such as caring for aging parents or planning for long-term care. Early planning and dedicated savings can help alleviate future financial pressure.

The Importance of Ongoing Financial Planning

Remember, achieving financial goals is not always a linear process. Life can throw unexpected challenges your way. It’s beneficial to remain flexible and adjust your goals as needed. Embrace the new year as an opportunity to shape your financial future, and take proactive steps toward achieving your dreams.

Call us and let’s talk about your goals for 2025!

(253) 509-0395

Sources:

Nov 19

0

Navigating Holiday Sales without Breaking the Bank

By Zach Abraham | Lifestyle

Thanksgiving brings up many traditions. From watching the Macy’s Thanksgiving Day Parade to enjoying family dishes passed down for generations, there’s so much to look forward to. One tradition that excites countless Americans is Black Friday, and the more recent addition to it, Cyber Monday. These major sales kick off the holiday shopping season. While it might seem exciting to embrace spending money in the name of price markdowns and holiday cheer, it’s important to keep your finances in mind. Here are some tips to get the most out of these sales without breaking the bank.

Know Your Budget

Before even thinking about all the goodies you want to buy, look at your current finances and understand how much you realistically can spend. A big sale should not come at the expense of your financial goals. If you want to get into the nitty-gritty, you can allocate funds to specific categories like electronics, appliances, beauty, sports, etc. Using cash or prepaid credit cards can also help if you are really concerned about overspending.

Make Your List, and Check it Twice

The best way to avoid buying too much is to know what you need to buy in the first place. Make a list of what you plan to buy and stick to it. Once you know what you need, prioritize everything on your list. If you can’t afford everything, a prioritized list will help you decide what to buy now, and what you can put off buying later. On top of that, go back through it a second time and compare the prices to make sure you’re actually saving. If a Black Friday sale only offers 5% off, or a future sale offers more off, it may make more sense for your budget to push that purchase out, so it doesn’t create as much of a strain on your finances.

Avoid Buyer’s Remorse

Many post-sale shoppers are plagued by buyer’s remorse. Making a list is not enough to avoid buying things you don’t need; you must stick to that list. This way you can steer clear of impulse purchases and stay on track with your budget. If for some reason you still find something not on your list that you feel compelled to buy, take a moment to pause and honestly assess if this additional purchase will be beneficial to you. You can do this by closing your eyes and breathing in to the count of four. Fill your belly with air, then hold that breath for the count of eight, and then finally exhale from your belly for the count of four. While doing this, remind yourself not every deal is a must-have and the small amount of regret over not getting something will likely not outweigh the regret of overspending your budget.

Remember, You Have Other Opportunities to Shop and Save

It’s important to highlight that a lot of sales go throughout the entire holiday season now. While Black Friday is still a major sale, it’s not the only sale. Despite this, sales like Black Friday will market themselves as a once in a season opportunity and use tactics that encourage you to buy more than you need. Do your best to refrain from this scarcity mindset that makes you think you need to buy everything during one specific sale. You can ease your mind that if you can’t get something you want on that day, there will likely be another opportunity later in the holiday season.

If you need help defining your budget for the holiday shopping season, give us a call! You can reach Bulwark Capital Management in Tacoma, Washington at 253.509.0395.

This document is for informational purposes only. All information is assumed to be correct but the accuracy has not been confirmed and therefore is not guaranteed to be correct. Information is obtained from third party sources that may or may not be verified. The information presented should not be used in making any investment decisions. It is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 24-391.

Oct 30

0

10 Considerations for Year-End Tax Planning

By Zach Abraham | Tax Planning

As we head into the holiday season, another season looms in the distance: tax season. Don’t wait until March to see how 2024 shook out for you tax-wise.

Before the year draws to a close, it’s an ideal time to evaluate financial strategies and take advantage of year-end tax planning opportunities. Now is the time to proactively review, consult with professionals, and implement strategies that can potentially benefit you now and in the years ahead.

RMDs (Required Minimum Distributions) Due In Retirement

Required minimum distributions (RMDs) must be withdrawn from traditional retirement accounts like 401(k)s and IRAs by December 31 each year beginning at age 73. There is no grace period to April 15 tax day; RMDs must be taken by December 31.

Calculate RMDs (Required Minimum Distributions) Before Retirement

Even if you are not 73 or older, remember, all the money you have socked away in traditional 401(k)s, IRAs, and similar qualified retirement accounts will require annual withdrawals, and ordinary income taxes will be due on the amounts withdrawn. According to the Social Security Administration, around 40% of Americans must pay federal income taxes on their Social Security benefits—up to 85%—because they have substantial income, like the income created by required minimum distributions.

Strategic Timing for Roth Conversions

Converting traditional IRAs or other tax-deferred accounts to Roth IRAs can be a strategic move, particularly if you anticipate being in a higher tax bracket in the future. Roth accounts contain already-taxed money, so they offer tax-free growth and withdrawals, meaning you can access your money in retirement without owing any federal taxes provided the account has been in place five years and all other IRS rules are followed. They are also tax-free to your heirs.

While there are no limits on the amounts you can convert, it’s essential to remember that the converted amount will be added to your gross income for the year, potentially affecting your overall tax situation. And since Roth conversions cannot be undone, it’s important to seek professional tax advice.

RMDs (Required Minimum Distributions) Due On Inherited Accounts

This July, the IRS finally issued clarifications about the SECURE Act 1.0 changes on the rules for non-spousal inherited traditional accounts, stating that enforcement will begin in 2025 on accounts inherited after 2019. If you inherited a traditional IRA or 401(k) or similar account, check with your CPA or tax professional now because RMDs will be due or you may owe penalties.

Maximize Retirement Account Contributions

If you are still working, contributing the maximum allowable amounts to tax-deferred retirement accounts like traditional 401(k)s and IRAs can offer a significant opportunity to grow your retirement savings while reducing your taxable income for the tax year. The contribution limit for 401(k) plans for 2024 is $23,000 for individuals under 50, with an additional catch-up contribution of $7,500 for those 50 and older, bringing the total to $30,500. For IRAs, the limit is $7,000, or $8,000 with the catch-up provision for those 50 and older.

Implement Tax Loss Harvesting

If you’re seeking to reduce your taxable capital gains in 2024, tax loss harvesting may be a strategy worth considering. This involves selling underperforming investments, such as stocks and mutual funds, to help realize losses that can offset any taxable gains you may have accrued throughout the year.

Charitable Contributions

A charitable donation is a gift of cash or property given to a nonprofit organization to support its mission, and the donor must receive nothing in return for it to be tax-deductible. Taxpayers can deduct charitable contributions on their tax returns if they itemize using Schedule A of Form 1040, and contributions may be deductible to up to 60% of adjustable gross income for 2024.

Defer Income

Another way to help reduce your tax burden is by deferring, or shifting, income to the next year. If you’re employed, you won’t be able to defer your wages; however, you could delay a year-end bonus to the following year, so long as it’s a standard practice at your company.

Be Mindful of the Alternative Minimum Tax (AMT)

The alternative minimum tax (AMT) is designed to ensure that high-income individuals pay a minimum level of tax, regardless of how many deductions or credits they claim under the regular tax rules. The AMT is calculated by adding back certain deductions, such as state and local taxes, that are allowed under the regular system but not under AMT rules. In 2024, the AMT tax exemption for individuals is $85,700, and for married couples it’s $133,300.

Utilize Flexible Spending Accounts (FSAs) and Other Tax-Advantaged Accounts

For 2024, flexible spending accounts (FSAs) offered an increased contribution limit of $3,200, up from $3,050 in 2023, allowing employees to use pre-tax dollars for eligible medical expenses. Contributions to FSAs reduce taxable income, as funds are deducted before federal, Social Security, and Medicare taxes are applied. However, it’s essential to use all FSA funds before year-end to avoid forfeiture under the “use it or lose it” rule. Some employers offer a grace period, extending the deadline to use 2024 funds until March 15, 2025. Exploring other tax-advantaged accounts for 2025, such as dependent care FSAs, might further reduce future taxable income while maximizing the benefit of pre-tax dollars for qualifying expenses.

Don’t let time pass you by, start planning for this upcoming tax season today! If you’re not sure how these tips could be plugged into your overall financial plan, let’s meet together with your tax professional. We’re here to help you end the year strong financially. Give us a call today!

This article is provided for general information only and is believed to be accurate. This article is not to be used as tax advice. In all cases, we advise that you consult with your tax professional, financial advisor and/or legal team before making any changes specific to your personal financial and tax plan.

Sources:

Oct 23

0

Now Is the Time To Do Your Year-End Planning

By Zach Abraham | Tax Planning

Don’t wait until it’s too late. Some important deadlines loom on December 31, 2024, and many other things should be reviewed, so be sure to meet with your financial advisor as soon as possible.

As the year wraps up, it is important to meet with your financial advisor to make sure you meet all IRS year-end requirements and take steps to plan ahead for 2025. The end of the year is a busy time for everyone and critical due dates are fast approaching. It’s crucial to stay on top of your financial deadlines to avoid last-minute issues!

RMDs (Required Minimum Distributions) Due In Retirement¹

Required minimum distributions (RMDs) must be withdrawn from traditional retirement accounts like 401(k)s and IRAs by December 31 each year beginning at age 73. There is no grace period to April 15 tax day; RMDs must be taken by December 31.

Failure to adequately withdraw funds could result in a 25% excise tax in addition to taxes owed, and there are many rules to follow about amounts due as well as which accounts require withdrawals or can be aggregated for one withdrawal. This is why it’s recommended that you work with your tax and financial professionals to do the calculations and implement the withdrawals on your behalf.

Calculate RMDs (Required Minimum Distributions) Before Retirement

Even if you are not 73 or older, at least five to 10 years before you plan to retire you should start working with your financial advisor to calculate your future RMDs in case there are strategies you can implement now that can help you lower your overall tax burden in the future.

Remember, all the money you have socked away in traditional 401(k)s, IRAs, and similar qualified retirement accounts will require annual withdrawals, and ordinary income taxes will be due on the amounts withdrawn.

According to the Social Security Administration,² around 40% of Americans must pay federal income taxes on their Social Security benefits—up to 85%—because they have substantial income, like the income created by required minimum distributions.

RMDs (Required Minimum Distributions) Due On Inherited Accounts³

This July, the IRS finally issued clarifications about the SECURE Act 1.0 changes on the rules for non-spousal inherited traditional IRAs (individual retirement accounts), stating that enforcement will begin in 2025 on accounts inherited after 2019.

The clarifications are as follows:

a.) If the original retirement account owner had started taking RMDs before passing away, non-spousal beneficiaries must continue taking annual RMDs based on the owner’s schedule and deplete and close the account completely by the end of year 10.

(According to the IRS, if you chose not to take a RMD while waiting for this clarification to come out, you won’t be subject to the typical 25% penalty on the amount you should have withdrawn based on the original account owner’s schedule. But when the rules go into effect next year, the 10-year clock will still begin the year you inherited the account.)

b.) If the original IRA account owner hadn’t taken any RMDs before passing away, annual RMDs are optional, but the account must be emptied by the end of the 10^th year of inheritance.

Inherited 401(k) Accounts⁴

Inherited traditional 401(k) accounts must also be closed and taxes paid within 10 years of inheritance. But keep in mind that each company’s retirement plan has its own set of rules which will also have to be followed; for instance, some companies will allow you to keep the account in their plan during the 10 years and others won’t.

Inherited Roth Accounts

Roth accounts are created and contributed to with already-taxed money; therefore, taxes are not due as long as all rules are followed, but inherited Roth IRA and Roth 401(k) accounts must also be emptied and closed within 10 years of inheritance. Non-spousal inherited Roth 401(k) accounts do require RMDs.⁴

Roth Conversions⁵

As part of your retirement plan, your tax and financial advisor may recommend that you do a series of Roth conversions—converting taxable accounts to tax-free Roth accounts—in order to mitigate taxes for the long-term.

If you decide to do these, ordinary income taxes will be due on the amounts converted, and Roth conversions they must be completed by December 31. These cannot be undone, so they must be undertaken very carefully following all IRS rules.

Charitable Contributions⁶

Tax-deductible charitable contributions must be completed by December 31, and the fair market value (FMV) of non-cash items must be determined.⁷

FSA (Flexible Spending Accounts), Spend It Or Lose It⁸

Flexible savings accounts (FSAs) through your employer allow you to have pre-tax funds deducted from your paycheck to spend on allowable expenses like healthcare and child care. Most FSAs don’t allow you to roll your excess funds into the next year. Some ideas to avoid losing funds left in your FSA include booking general wellness appointments like visits to the eye doctor, annual physicals and dental cleanings.

(If you are able to procure a high-deductible health insurance plan, you may be able to contribute pre-tax funds to an HSA (health savings account) which will not have to be emptied, but may be used for allowable healthcare expenses in retirement. Be sure to ask your financial advisor about this possibility.)

Other Things to Review

It’s very important to review your named beneficiaries on retirement accounts, insurance policies, and your estate plan. Births, deaths, divorces, and marriages can change your family through the years, and it’s important to keep everything up to date.

You should also review your expected tax liability for 2025, your FSA/HSA contribution amounts for 2025, your paycheck withholding amount if you are still working, your monthly budget, and your investment portfolio.

As you get older, it’s important to start lowering your market risk in order to protect the assets you have accumulated. It’s important to know that diversifying with different asset classes can help protect your overall portfolio, especially important during times of increased market volatility and as you get closer to retirement.

We’re here to help you with year-end planning as well as meeting IRS deadlines in conjunction with your tax professional. Call us as soon as possible if we haven’t spoken already! You can reach Bulwark Capital Management at 253.509.0395.

Sources:

This document is for informational purposes only. All information is assumed to be correct but the accuracy has not been confirmed and therefore is not guaranteed to be correct. Information is obtained from third party sources that may or may not be verified. The information presented should not be used in making any investment decisions. It is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

Investment Advisory Services offered through Trek Financial LLC, an investment adviser registered with the Securities Exchange Commission. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein.

Zach Abraham