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Financial Planning

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. 

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. 

7 Tips to Resolve Financial Issues Between Couples

By | Financial Planning

No matter how long you have been together, financial issues can wreak havoc on a committed relationship. According to Investopedia, some of the top money issues between partners include money/personality style clashes, debt, personal spending, children, and extended family differences.

When couples don’t agree about spending and saving habits, it can lead to stress, arguments and resentment. Here are seven ways you can address financial issues positively, preferably before they arise.

  1. Understand Your Money Styles

Think of some extreme examples of money styles in your circle. Like your friend, the foodie, who won’t touch a bottle of wine that costs less than $75. Your sister who constantly surfs Amazon with boxes showing up at the doorstep day and night. Your mom who washes aluminum foil, folds and reuses it. And your stepdad who always insists on buying everything for the grandkids, fixing his own 30-year-old car, and keeping his handwritten savings ledger to the penny.

Everyone has a money style, and it’s helpful to talk about it without any name-calling or labeling involved. Understanding your partner’s spending habits often involves a deep-dive into money fears, scarcity memories and childhood traumas. Empathizing with your partner while freeing yourselves from negative patterns can be done if you work together. The most important thing is to come up with a spending plan that works for both of you, and hold yourselves accountable to work the plan together.

It’s also very important to check any power plays that may be happening at the conscious or subconscious level. The biggest money-earner shouldn’t think they have the largest say or the only right to dictate how the money gets spent; a marriage should be equally balanced. The partner who earns less and the partner who earns more both need to cooperate as a team to create a spending plan that’s fair for both of them.

So, check your ego at the door. It’s true that money is power, and few things build resentment faster than being made to feel inferior. The person earning more should take great care to act with empathy while taking care of their own needs reasonably rather than selfishly.

  1. Decide How to Divvy Up Bills…and Save for Future Goals

There are several ways to pay the bills. You can both put all your earnings in a joint account and pay everything out of that. You can divide bills based on a percentage of your earnings. Or you can split bills down the middle and keep the rest of your own earnings for yourselves.

Once you have decided how the bills get paid, you need to devise a plan for saving for your long-term goals—like purchasing a home or securing your retirement. Remember that you need to work closely together as life changes arise—such as one of you losing a job, cutting back on hours to care for a parent, or one of you becoming disabled. If 2020 has taught us anything, it’s that contingency plans are always advisable. Putting together a financial plan for your future is a great first step toward a financially healthy future.

  1. Create Personal Spending Allowances…That Stay Personal

Having some personal money that’s designated just for you each month can really help how you feel about your relationship. It can also help avoid relationship-ruining behavior like “financial infidelity,” when one spouse hides money or purchases from the other. The personal spending allowance gives each partner the chance to spend their money however they wish, no questions asked—including gifts to each other, a new pair of shoes, or coffee every day on the way to the office. In most cases, the personal monthly spending allowance amount should be equal for both of you so that resentments can’t arise.

  1. Compromise on Spending for Children and Family Members

On average, it costs $233,610 to raise a child to age 18, according to the U.S. Department of Agriculture. That doesn’t include expenses for grown children, helping them with the purchase of cars or homes, or funding other (expensive) needs that might arise for them.

Furthermore, spending related to the extended family on both sides can also be tricky, especially as your expectations can be very different from your spouse’s when it comes to helping family members out or getting involved with costly family vacations or activities.

Addressing these discretionary expenses and agreeing on them before to committing to children or other family members is critical.

  1. Face and Eliminate Undesirable Debt

Some debt may be necessary or even advisable depending on your tax situation, for instance, some people need or want a mortgage interest write-off. Other debt should be paid off following a plan that you both agree upon—be it credit card, car loan or student loan debt.

In most states, debts brought into a marriage stay with the person who incurred them and are not extended to a spouse, but debts incurred together after marriage are owed by both spouses. Debts incurred individually married are still owed by the individual, with the exception of child care, housing, and food, which are all considered joint debt no matter what.

There are nine states where all debts (and property) are shared after marriage regardless of individual or joint account status. These states include Arizona, California, Nevada, Idaho, Washington, New Mexico, Texas, Louisiana, and Wisconsin. In these states you are not liable for most of your spouse’s debt that was incurred before marriage, but any debt incurred after the wedding is automatically shared—even when applied for individually.

Both partners should have an honest discussion about curtailing bad spending or financial habits. Couples should also employ a strategy to pay off debt—such as paying off the higher-interest debt first or paying off the smallest loans first (the snowball method).

  1. Set a Budget You Can Both Live With

One of the best ways to keep in sync with your partner when it comes to finances is to have a budget as part of your overall financial plan. The budget includes your household bills, your personal spending allowance, your debt-paying strategy, and your monthly budget for long-term goals like retirement.

  1. Communicate Honestly

Lack of communication is the source of many marital issues, and talking regularly, honestly, and without judgment is where the hard work of marriage comes in. Some couples may even find it helpful to actually schedule a time once a month or once a quarter to revisit short- and long-term goals with each other, and meet at least once a year to discuss objectives with their financial advisor.

Don’t talk about things when you’re tired, angry or have had too much to drink—organize and adhere to clearheaded discussions for success. Honest communication can help you both face and conquer the financial challenges of life, changing course and adjusting along the way.

 

If you have any questions, or would like to review your finances together as a couple, call us! You can reach Bulwark Capital Management at 253.509.0395. 

 

Sources:

https://www.investopedia.com/articles/pf/09/marriage-killing-money-issues.asp

https://www.usda.gov/media/blog/2017/01/13/cost-raising-child

https://www.kiplinger.com/personal-finance/602036/a-marriage-starter-plan-for-finances-even-if-youre-late-to-the-party

https://www.marriage.com/advice/finance/how-to-overcome-financial-conflict/#:~:text=Married%20couples%20fighting%20over%20financial,couples%20fail%20to%20do%20so.

 

 

Your Annual Financial To-Do List

By | Financial Planning

Things you can do for your future as the year unfolds.

What financial, business, or life priorities do you need to address for the coming year? Now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:

 

Can you contribute more to your retirement plans this year? In 2021, the contribution limit for a Roth or traditional individual retirement account (IRA) is expected to remain at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation, but income limits are one factor in determining whether the contribution is tax-deductible.

Remember, withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty starting again in 2021 because the CARES Act ends December 31, 2020. Roth IRA distributions must meet a five-year holding requirement and occur after age 59½ to qualify for tax-exempt and penalty-free withdrawal. Tax-free and penalty-free withdrawals from Roth IRAs can also be taken under certain other circumstances, such as a result of the owner’s death.

Keep in mind, this article is for informational purposes only, and not a replacement for real-life advice. Also, tax rules are constantly changing, and there is no guarantee that the tax landscape will remain the same in years ahead.

 

Make a charitable gift. You can claim the deduction on your tax return, provided you follow the Internal Review Service (I.R.S.) guidelines and itemize your deductions with Schedule A. The paper trail is important here. If you give cash, you should consider documenting it. Some contributions can be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the I.R.S. does not equate a pledge with a donation. If you pledge $2,000 to a charity this year but only end up gifting $500, you can only deduct $500.  You must write the check or make the gift using a credit card by the end of December.

These are hypothetical examples and are not a replacement for real-life advice. Make certain to consult your tax, legal, or accounting professional before modifying your record-keeping approach or your strategy for making charitable gifts.

 

See if you can take a home office deduction for your small business. If you are a small-business owner, you may want to investigate this. You may be able to write off expenses linked to the portion of your home used to conduct your business. Using your home office as a business expense involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional who is familiar with home-based businesses.

  

Open an HSA. A Health Savings Account (HSA) works a bit like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $3,600 contribution for 2021 if you are single; $7,200 if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55.

If you spend your HSA funds for non-medical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you may be required to pay ordinary income taxes on HSA funds used for nonmedical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

 

Review your withholding status. Should it be adjusted due to any of the following factors?

* You tend to pay the federal or state government at the end of each year.

* You tend to get a federal tax refund each year.

* You recently married or divorced.

* You have a new job, and your earnings have been adjusted.

These are general guidelines and are not a replacement for real-life advice. Make certain to consult your tax, human resources, or accounting professional before modifying your withholding status.

 

Did you get married in 2020? If so, it may be an excellent time to consider reviewing the beneficiaries of your retirement accounts and other assets. The same goes for your insurance coverage. If you are preparing to have a new last name in 2021, you may want to get a new Social Security card. Additionally, retirement accounts may need to be revised or adjusted?

 

Consider the tax impact of any upcoming transactions. Are you planning to sell any real estate this year? Are you starting a business? Might any commissions or bonuses come your way in 2021? Do you anticipate selling an investment that is held outside of a tax-deferred account?

 

If you are retired and in your 70s, remember your RMDs. In other words, Required Minimum Distributions (RMDs) from retirement accounts. Under the SECURE ACT, in most circumstances, once you reach age 72, you must begin taking RMDs from most types of these accounts.

 

Vow to focus on your overall health and practice sound financial habits in 2021. And don’t be afraid to ask for help from professionals who understand your individual situation. Give us a call if you would like to discuss. You can reach Bulwark Capital Management in the Seattle area at 253.509.0395.

 

 

Sources:

https://thefinancebuff.com/401k-403b-ira-contribution-limits.html

https://money.usnews.com/money/retirement/iras/articles/what-is-the-secure-act

https://www.irs.gov/publications/p590b

https://www.azcentral.com/story/money/business/consumers/2020/11/22/these-tax-laws-charitable-donations-were-changed-help-pandemic/6295115002/

https://www.investopedia.com/articles/tax/09/self-employed-tax-deductions.asp

https://www.investopedia.com/articles/personal-finance/082914/rules-having-health-savings-account-hsa.asp#:~:text=You%20can%20only%20open%20and,as%20a%20catch%2Dup%20contribution.

https://www.thinkadvisor.com/2020/11/29/10-tax-tips-to-take-by-year-end/

 

2021 Limits for IRAs, 401(k)s and More

By | Financial Planning, Tax Planning

Numbers to know for the new year.

On October 26, the Treasury Department released the 2021 adjusted figures for retirement account savings. Although these adjustments won’t bring any major changes, there are some minor elements to note.

 

401(k)s. The salary deferral amount for 401(k)s remains the same at $19,500, while the catch-up amount of $6,500 also remains unchanged.

However, the overall limit for these plans will increase from $57,000 to $58,000 in 2021. This limit applies if your employer allows after-tax contributions to your 401(k). It’s an overall cap, including your $19,500 (pretax or Roth in any combination) salary deferrals plus any employer contributions (but not catch-up contributions).

 

Individual Retirement Accounts (IRA). The limit on annual contributions remains at $6,000 for 2021, and the catch-up contribution limit is also unchanged at $1,000. This total includes traditional IRA (pre-tax) and Roth IRA accounts or a combination.

 

Deductible IRA Contributions. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income.

For single taxpayers covered by a workplace retirement plan, the phase-out range is $66,000 to $76,000, up from $65,000 to $75,000. For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $105,000 to $125,000, up from $104,000 to $124,000.

 

Roth IRAs. Roth IRA account holders will experience some slightly beneficial changes. In 2021, the Adjusted Gross Income (AGI) phase-out range will be $198,000 to $208,000 for couples filing jointly. This will be an increase from the 2020 range of $196,000 to $206,000. For those who file as single or as head of household, the income phase-out range has also increased. The new range for 2021 will be $125,000 to $140,000, up from the current range of $124,000 to $139,000.

 

QLACs. The dollar limit on the amount of your IRA or 401(k) you can invest in a qualified longevity annuity contract is still $135,000 for 2021.

 

Although these modest increases won’t impact many, it’s natural to have questions anytime the financial landscape changes. If you’re curious about any of the above, please call Bulwark Capital Management in the Seattle area at 253.509.0395.

 

 

 

Sources:

https://www.irs.gov/newsroom/income-ranges-for-determining-ira-eligibility-change-for-2021

https://www.forbes.com/sites/ashleaebeling/2020/10/26/irs-announces-2021-retirement-plan-contribution-limits-for-401ks-and-more/

 

10 Reasons You Need a Financial Plan

By | Financial Planning

October is Financial Planning Month which serves as a useful, annual checkpoint to make sure you are on track to meet your financial goals. A written, up-to-date financial plan encompasses not only investments, but risk management solutions, tax reduction strategies and estate planning.

10 Reasons You Need a Financial Plan

  1. To have one comprehensive document to address your finances.

Financial planning provides one summary location for everything related to your family’s financial life. From your budget, to your savings, to your investments, to your retirement, a financial plan helps you consider your finances in a holistic manner, and gives you one central place to see everything at a glance.

  1. To ensure your investments are in line with your current short- and long-term goals.

A financial plan includes short-term goals like buying a house and long-term goals like saving for retirement, as well as everything in between. As your goals change through time, your financial plan is a living document that should get updated with your advisor on at least an annual basis.

  1. To ensure you’re not spending too much money each month—to have adequate cash flow.

A realistic budget is very important to keeping you on track with your goals. This doesn’t mean you have to deprive yourself of little luxuries—it just means that those are already built into the plan so you don’t overspend.

  1. To ensure you’re saving enough money, in the right places, including adequate reserves.

As many of us have learned during the pandemic, having adequate emergency funds is important. That amount varies from person to person, and your advisor can help you define the amount you have saved for emergencies, and help you find the right strategies to use so that your savings are liquid and accessible when you need funds.

  1. To ensure your retirement is on track.

Making sure your retirement funds are invested for best performance while matching your risk tolerance and time horizon to retirement is one part of making sure your retirement is on track. Another part is making decisions about your desired retirement lifestyle and the corresponding monthly budget you will need later. These retirement lifestyle decisions can change throughout your working career, but should get more solid as you get from five to 10 years away from retiring.

  1. To put and keep adequate protection in place against risks—like health, disability, accidental death and liability.

Providing for your family’s financial security is an important part of the financial planning process, as is assessing other risks you may face such as liability from lawsuits. Having the proper insurance coverage in place can protect your whole family. And today’s policy designs mean you may be able to cover multiple risks with fewer policies—and may even be able to enjoy “living benefits” while providing death benefit protection for your family members.

  1. To address and have a plan in place for your estate.

Everyone needs an estate plan. A will allows you to spell out your final wishes, such as listing recipients of each of your possessions and designating minor children’s guardians. A trust can bypass probate court, saving money and keeping things private while easily transferring wealth. Health care directives and powers of attorney are critical should you become incapacitated. When creating your estate plan, your ideal team should include an estate attorney, your financial advisor and your tax professional.

  1. To help you manage changes.

A financial plan includes all its various parts and pieces so that you can quickly see what needs updating when life changes happen. Remember, the beneficiaries you list on your individual insurance policies and your retirement accounts (like 401(k)s) take precedence over what is in your estate planning documents. Too many people have had their ex-spouses receive money because they forgot to update all documents properly.

  1. To help you mitigate taxes.

It’s truly not how much you have; it’s how much you get to keep. Tax reduction strategies can help you annually, but your advisor can also help you look further ahead to reduce taxes later, such as during retirement. Remember, all the money you have saved in accounts like traditional 401(k)s are pre-tax dollars—you will have to pay ordinary income tax on that money when you withdraw it, which you have to do starting at age 72. Making a plan for taxation can help.

  1. To help enhance your peace of mind.

Reducing stress and sleeping more soundly may be the best reason of all to have a financial plan in place.

 

If you would like to create, update or review your financial plan, please call us. Contact Bulwark Capital Management in the Seattle area at 253.509.0395.

Zach Abraham Wall Street Journal

Zach Abraham Discusses Options for Cash in the Wall Street Journal

By | Financial Planning, In The Headlines, News

With interest rates so low, many consumers wonder where to find the best place for their savings. High-yield savings accounts are now paying around 0.6%, while the national average for traditional savings accounts is a meager 0.05% according to the FDIC.

Other options that offer more yield, however, often mean taking on more risk and sacrificing liquidity.

“If you think you see something higher than 2%, with liquidity, be very careful—there’s no silver bullet here,” says Zach Abraham, Chief Investment Officer at Bulwark Capital Management.

Zach told the Wall Street Journal that he’s seen people think outside the traditional options, looking instead at accounts with transactional requirements such as balance thresholds or debit-card usage. He has spoken to some clients about moving cash to CDs that fit their timeline. As of October 2020, the national average for 2-year CDs is 0.23% according to the FDIC.

 

 

Read the whole article here:   (subscription to Wall Street Journal required) https://www.wsj.com/articles/stashing-cash-in-a-low-interest-world-11602149402 

Or Download the PDF.

 

 

UPDATE:

The Wall Street Journal article quickly went viral around the globe, reaching millions of readers:

 

QQ China 57,048,000 https://new.qq.com/omn/20201014/20201014A01EAY00.html

ADVFN – US USA 8,067,000 https://www.advfn.com/stock-market/stock-news/83450961/u-s-stocks-drop-as-earnings-season-begins

Morningstar USA 8,024,000 https://www.morningstar.com/news/dow-jones/202010138472/us-stocks-drop-as-earnings-season-begins

La Republica Colombia 2,092,000 https://www.larepublica.co/globoeconomia/las-acciones-estadounidenses-caen-a-medida-que-comienza-la-temporada-de-ganancias-3073156

Marketscreener USA 2,081,000 https://www.marketscreener.com/news/latest/U-S-Stocks-Drop-as-Earnings-Season-Begins–31533030/

ADVFN – UK UK 2,084,000 https://uk.advfn.com/stock-market/stock-news/83452201/u-s-stocks-end-lower-as-earnings-season-begins

Beursduivel Belgium 1,054,000 https://www.beursduivel.be/Beursnieuws/601995/Wall-Street-op-verlies.aspx

Beursgorilla Netherland 729,038 https://www.beursgorilla.nl/beursnieuws/601995/Wall-Street-op-verlies.aspx

Beleggen Netherlands 455,046 https://www.beleggen.nl/financieel_nieuws/602011/Wall-Street-sluit-lager.aspx

ADVFN – Australia Australia 1,879 https://au.advfn.com/p.php?pid=nmona&article=83452201

7 Money Moves to Consider This July

By | Financial Planning

The coronavirus has given us all a lot of stress, as well as a lot of free time to think. If you’re postponing your summer vacation plans, now may be the perfect time to implement some financial planning “to-do’s” that could enhance your personal wealth and financial well-being.

Here are seven things to consider:

  1. Is there too much risk in your portfolio?

If you’re younger, you may have been told to just wait out the volatile stock market, and indeed that may be best for you. But some people—no matter what their age—are more risk-averse than others, and that’s where working with a qualified financial professional comes in. They can help make sure your portfolio matches your individual tolerance for market risk.

As a general rule of thumb, every year as you get older, your financial advisor should ensure that your portfolio contains less and less risk, as asset preservation and protection from market risk becomes more critical with a shorter timeline to retirement.

  1. Does your portfolio contain a lot of bonds or bond funds?

Some financial advisors only have one tool in their toolbox when it comes to lowering risk in your portfolio as you get older—bonds or bond funds. But with today’s low interest rates, and bond yields tied to those interest rates, bonds or bond funds may not be your best option. And with some public figures1 asking that the Fed consider negative interest rates (like they have in seven other countries), bonds could offer you less than ever in the future.

There are financial instruments like annuities which are not correlated to the stock market and offer guaranteed returns regardless of interest rates. Annuities are not investments, they are complex contracts with insurance companies. The guarantees they offer are based on the financial strength and claims-paying ability of the issuing insurance company, some of which have been around for more than a century. Some annuities offer potential for market growth along with protection from stock market risk, or even lifetime retirement income. Examining the options and clauses for various annuity contracts which might (or might not) work for you requires expertise from a qualified financial professional.

Make sure your financial advisor isn’t a “one-trick pony” and has more than just bonds or bond funds to recommend to you for the fixed, or safer part of your portfolio. You deserve access to other options.

  1. Do Roth conversions make sense for you this year?

Roth IRA accounts have many long-term tax advantages, including tax-free earnings with no RMDs (required minimum distributions) due in retirement—meaning you never have to withdraw any money if you don’t want to. Additionally, you can leave Roth IRAs to your heirs tax-free.

If you roll money over to a tax-free Roth from a taxable retirement account like a traditional IRA, you will pay ordinary income taxes on the amount rolled over in the year that the rollover is completed. This year may be ideal if you’ve earned less and will therefore be in a lower tax bracket already. Or if your traditional IRA account is down in value, you could withdraw some of that money and reinvest it inside a Roth IRA. That way, when the stock market rebounds, those earnings could be tax-free.

NOTE: Rollovers can’t be undone, so it’s best to work with an advisor to do this.

  1. Do you have enough money in your emergency fund?

If the pandemic has taught us anything, it’s to be prepared for the unprecedented. Now is the time to make sure you’ve set aside adequate liquid funds for emergencies. A rule of thumb is three to six months’ worth of living expenses.

  1. Do you have an estate plan in place?

If there is one thing we all hate thinking about, it’s passing away from this earth. But in today’s crazy world, it’s more important than ever to make sure you have everything in place to make things as smooth as possible for your loved ones should the worst happen to you.

Some people think they don’t have enough money to need an estate plan, or they think they are too young, but pretty much everyone needs one to protect their family members. Estate planning includes a will containing your final wishes, possibly a trust which can bypass probate, a health care directive and a power of attorney should you become incapacitated, and other documents depending on your state of residence.

Don’t put this off. And don’t leave your financial advisor out of the process, either, they often have real-life experience and knowledge about what happens to families in cases of death and can help you and your estate attorney address issues you may not have considered.

  1. Do you understand the basics behind filing for Social Security and Medicare?

The age that you file for Social Security—at age 62 when you are able to file, at your full retirement age of 66 or so depending on your month and year of birth, or at age 70 when your Social Security benefit stops growing—is pretty much your only decision if you are single. But if you are married, widowed or are divorced but had been married for 10 years, getting advice on filing to optimize your Social Security benefits is critical.

Similarly, some people don’t understand that Medicare is not free; it is usually deducted from your Social Security check. If you fail to file for Medicare by age 65, you could have higher premiums for the rest of your life. Get the facts well in advance, and know that co-pays, deductibles, and other out-of-pocket health care expenses can really add up even when you’re on Medicare.

  1. Do you have a plan for long-term care?

People still believe that Medicare covers long-term care (LTC). It does not. Medicaid can cover long-term care if you or your spouse needs a nursing care facility, but in order to qualify for it, you have to spend down all of your assets leaving your spouse and/or heirs with nothing.

It’s very important to have LTC coverage in place. The good news is that the traditional long-term care insurance model has been upgraded to plans that can pay for LTC if you need it, but pay other benefits if you don’t.

We are here for you as a sounding board on these and many other issues. Call us. Contact Bulwark Capital Management in the Seattle area at 253.509.0395.

 

 

This article is provided for informational purposes only, and is not intended to provide any financial, legal or tax advice. Before making any financial decisions, you are strongly advised to consult with proper legal or tax professionals to determine any tax or other potential consequences you might encounter related to your specific situation. Insurance products like annuities contain fees, such as mortality and expense charges, and may contain restrictions such as surrender periods.

Source:

1 https://www.cnbc.com/2020/06/10/heres-what-negative-interest-rates-from-fed-would-mean-for-you.html