AssuredPartners Financial Advisors' Blog

Is a Variable Annuity Right for Me?

Wed, 03 Sep 2025 13:55:10 GMT

For the casual observer, it sometimes seems that variable annuities are either “terrible” or “wonderful.”

Commentators in the financial media seem to occupy a polarity of opinions we might see in politics. What gets lost when these commentators collide is “the individual.” Unfortunately, the discussion is rarely centered on whether a variable annuity is relevant and useful to you and your set of needs.

Before considering investing in a variable annuity, you may want to make sure that you are exhausting the contribution limits of your 401(k), IRA, or other qualified retirement plan.

Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy a variable annuity contract. The prospectus is available from the insurance company or from your financial professional. Variable annuity subaccounts will fluctuate in value based on market conditions, and may be worth more or less than the original amount invested if the annuity is surrendered.

At the end of the day, however, variable annuities are really a value judgment.

Do you value the guarantees and predictable income that annuities can provide?

Are the fees charged worth the price of mitigating the risk fluctuating markets can have on your financial security in retirement? Only you can be the judge of what constitutes value to you. Leave the punditry on variable annuities to others and focus on whether they make sense for you.

The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Remember variable annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits.

Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies). Annuities are not guaranteed by the FDIC or any other government agency.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Variable Annuities are suitable for long-term investing, such as retirement investing. Withdrawals prior to age 59 ½ may be subject to tax penalties and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

Data Breach - Your Security Checklist

Mon, 07 Jul 2025 23:27:23 GMT

Data Breach - Your Security Checklist

According to recent statistics, data breaches have become common in today’s digital world. In fact, it is estimated that more than 350 million Americans have their personal information exposed to data breaches every year. Whether it’s a major retailer, a subscription service, or another online platform, the risk of a data breach is a reality that we all face.

Names, email addresses, passwords, and other sensitive information are being swept up by hackers for fraudulent activities. These breaches come in two flavors: breaches of institutions that people trust with their data, such as retailers and banks, and breaches of entities that acquire user data secondarily, such as credit bureaus and marketing firms. However, individuals can take steps to protect themselves and minimize the impact of a breach.

If you receive a notification that your sensitive information has been stolen in a data breach, it’s important to take immediate action to mitigate the damage. Data breaches can occur even if you practice good cybersecurity habits and are not personally targeted. Organizations and businesses can leak data due to human error, leaving your information vulnerable to bad actors.

To help you navigate this stressful situation, we have compiled a checklist of steps you should take if you have experienced a data breach.

Stay informed: Keep yourself updated about the breach by setting up news alerts or signing up for updates from the affected company. This will ensure that you are aware of any developments or actions being taken to address the breach.
Understand what data has been compromised: Read the notification carefully to understand what specific information may have been exposed. This could include your name, address, email, passwords, credit card details, or even your Social Security number. Knowing exactly what data has been compromised will help you take appropriate action.
Set up multi-factor authentication: Enable multi-factor authentication for all your online accounts. This adds an extra layer of security by requiring a second form of verification beyond your password, such as a unique code sent to your phone.
Change passwords: Change the passwords of all your online accounts, especially those that may have been compromised. Use strong, unique passwords for each account, and consider using a password manager to keep track of them.
Credit and financial accounts: Monitor your credit reports and financial accounts for any suspicious activity. You can request a free credit report annually from each of the three major credit bureaus (Equifax, Experian, and TransUnion).
Watch out for phishing attacks: Be vigilant against phishing attempts, in which scammers try to trick you into revealing personal information or login credentials. Be skeptical of emails, messages, or phone calls asking for personal information or directing you to click suspicious links, and avoid clicking those links or providing sensitive information through email or phone calls. When in doubt, contact the organization directly through its official website or phone number to verify the request.
Report identity theft: If you suspect you are a victim of identity theft, report it immediately to the Federal Trade Commission (FTC) through its website IdentityTheft.gov. This resource will guide you through the necessary steps to recover from identity theft and protect yourself from further harm.
Use strong, unique passwords: Avoid using common or easily guessable passwords. Instead, use a combination of letters, numbers, and symbols. Additionally, use a different password for each online account to minimize the risk of multiple accounts being compromised if one password is breached.
Be cautious of phishing attempts: Phishing is a common tactic used by hackers to trick individuals into revealing their personal information. Be skeptical of emails, messages, or phone calls asking for personal information or directing you to click on suspicious links. When in doubt, contact the organization directly through their official website or phone number to verify the request.
Update your software: Keep your operating system, web browser, and antivirus software up to date to ensure you have the latest security patches and protections against known vulnerabilities.
Limit the information you share: Be cautious about sharing personal information online, especially on social media platforms. Avoid posting your full address, phone number, or other sensitive details that could be used for identity theft.
Use secure Wi-Fi networks: When accessing the internet in public places, use secure, password-protected Wi-Fi networks. Avoid using public Wi-Fi networks that are unsecured, as they can easily be intercepted by hackers.
Regularly back up your data: To be prepared for a breach or other data loss event, regularly back up your important files and data to an external hard drive or cloud storage service.

While these steps can minimize the risk of personal data breaches, it’s important to remember that no security measure is foolproof. It’s crucial to stay vigilant and be proactive in protecting your personal information.

Experiencing a data breach can be a stressful and overwhelming situation. Following this checklist enables you to take the necessary steps to protect yourself and minimize the potential damage caused by the breach. Remember to stay informed, be proactive in securing your accounts, and report any suspicious activity to the appropriate authorities.

1. Statista.com, 2025

2. CISA.gov, 2025

3. CISA.gov, 2025

Breaking Down the Parts of Medicare

Mon, 28 Apr 2025 13:53:37 GMT

Generally, the different parts of Medicare help cover specific services. Most beneficiaries choose to receive their Parts A and B benefits through Original Medicare, the traditional fee-for-service program offered directly through the federal government. It is sometimes called Traditional Medicare or Fee-for-Service (FFS) Medicare. Under Original Medicare, the government pays directly for the health care services you receive. You can see any doctor and hospital that takes Medicare (and most do) anywhere in the country.

In Original Medicare:

You go directly to the doctor or hospital when you need care. You do not need to get prior permission/authorization from Medicare or your primary care doctor.
You are responsible for a monthly premium for Part B. Some also pay a premium for Part A.
You typically pay a coinsurance for each service you receive.
There are limits on the amounts that doctors and hospitals can charge for your care.
If you want prescription drug coverage with Original Medicare, in most cases you will need to actively choose and join a stand-alone Medicare private drug plan (PDP).

Note: There are a number of government programs that may help reduce your health care and prescription drug costs if you meet the eligibility requirements.

Unless you choose otherwise, you will have Original Medicare. Instead of Original Medicare, you can decide to get your Medicare benefits from a Medicare Advantage Plan, also called Part C or Medicare private health plan. Remember, you still have Medicare if you enroll in a Medicare Advantage Plan. This means that you must still pay your monthly Part B premium (and your Part A premium, if you have one). Each Medicare Advantage Plan must provide all Part A and Part B services covered by Original Medicare, but they can do so with different rules, costs, and restrictions that can affect how and when you receive care.

It is important to understand your Medicare coverage choices and to pick your coverage carefully. How you choose to get your benefits and who you get them from can affect your out-of-pocket costs and where you can get your care. For instance, in Original Medicare, you are covered to go to nearly all doctors and hospitals in the country. On the other hand, Medicare Advantage Plans typically have network restrictions, meaning that you will likely be more limited in your choice of doctors and hospitals. However, Medicare Advantage Plans can also provide additional benefits that Original Medicare does not cover, such as routine vision or dental care.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services offered through Global Retirement Partners, LLC dba AssuredPartners Financial Advisors, an SEC registered investment advisor. AssuredPartners Financial Advisors and LPL Financial are separate non-affiliated entities. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

New Retirement Contibution Limits for 2025

Fri, 17 Jan 2025 18:19:53 GMT

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Ways to Maximize your 401k

Tue, 17 Sep 2024 21:26:02 GMT

Ways to Maximize your 401(K)

A 401(k) account is one of the most valuable tools for saving and planning for retirement. Many plans offer features that can help you set aside more of the money you earn for retirement and grow wealth for your financial future.

Contribute as much as you can.

These days, it’s customary for many 401(k) plans to set default contribution rates for participants. While these defaults can help savers who are new to retirement planning, eventually you should save more if you are able to - up to 10-15% of your salary, according to many financial planners. There are hard-dollar limits to how much you can contribute to a 401(k) in a calendar year, but these limits are higher for workers who are over age 50.

Get the full amount of company match.

If your employer matches a portion of your 401(k) contributions, you should contribute enough to get all of this money. Plan rules may not let you take all this money if you leave your job before you’re vested, so it’s important to know the vesting schedule for matching contributions.

Make after-tax contributions, if available.

Many 401(k) plans permit after-tax contributions, so you can save more toward retirement above the annual contribution limits. After-tax contributions grow tax deferred while inside the 401(k), but the full amount of the withdrawals (principal and earnings) will be taxed as ordinary income. A better option for after-tax contributions is a Roth 401(k), if offered by your employer. All money you withdraw from a Roth 401(k) is tax-free, as long as the withdrawals meet certain conditions.

Consider increasing your contribution rate every year.

Many people find saving in a 401(k) easy because contributions come out automatically from their paychecks, before they’re able to spend these earnings. The more you can make saving automatic, the better off you’ll be. For example, consider automating your contribution increases, raising the portion of your pre-tax that’s contributed to your 401(k) by 1 percentage point every year.

Avoid loans and early withdrawals.

Taking money out of your 401(k) before retirement means you erase all the good progress you’re making toward your financial future. While it may be tempting to tap these funds in times of emergency, first consider other options such as cutting spending, consolidating debt and using short-term savings accounts. Once you start digging a hole in your 401(k) through borrowing and early withdrawals, it can be difficult to get yourself back to where you were.

Distributions from 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59 1/2, may be subject to a 10% federal income tax penalty. Generally, once you reach age 73, you must begin taking required minimum distributions. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of

principal.

Are You Ready to Retire?

Wed, 10 Jul 2024 21:27:37 GMT

The pandemic sparked some interesting retirement trends. First there was an unexpected decline in the share of workers in the United States who were 55 and older, prompting a study called “The Great Retirement Boom” by economists with the Federal Reserve. By early 2022, the trend was reversing. “Unretirements” were on the rise, with an estimated 1.5 million retirees returning to work in the U.S. labor market by March 2022. A study of Labor Department data by Nick Bunker, an economist with Indeed, revealed that as of March 2022, 3.2% of workers who had retired a year earlier had gone back to work, becoming unretired.

To retire or not to retire—that is the question

The question is not really whether you’ll retire. The question is when.

The Labor Department reported in early 2022 that there were twice as many available positions as there were unemployed Americans—in part because of the “great retirement boom.” Many unretired employees said they chose to return to work because they were given more flexible work arrangements by employers desperate for workers—and they had become less worried about catching COVID-19. In January 2023, the Labor Department released data showing that 2022 was the second-best year on record for raw job growth. Another factor in the unretirement trend has been inflation, with rising costs causing difficulties for people trying to stick to a fixed-income retirement budget. Before the pandemic, 57% of Americans in their early 60s were still working, compared to 46% in that age group during the 1990s. Add in the increases to full retirement age (FRA)—which is the age you’re eligible to claim 100% of your Social Security benefits—and postponing retirement makes a more sense. Also, many would-be retirees have chosen to work longer in order to keep their employers’ health insurance plans until they qualify for Medicare at age 65.

When do you want to retire? If you’re 65 or younger and claim benefits from Social Security, you’ll only receive 75% of the full amount. Retiring at 66 or 67 will give you the full benefit, depending on when you were born. Age 70 is the latest age to start receiving benefits.

Calculate your anticipated income. Your monthly Social Security retirement benefit is based on your highest 35 years of earnings. Years with no earnings count as zeros. Learn your estimated benefit amount by reading your Social Security Statement at www.ssa.gov/myaccount. Consider too any income from a pension, IRA, or other account.

How’s your health? If you’re at retirement age and feeling emotionally burnt out at work—or if you’re starting to feel that your physical or emotional health is on the decline—you should probably consider retirement. If you’re younger than 65 and don’t qualify for Medicare, talk to someone in your employer’s human resources department to see if they are able to provide you partial or temporary health coverage after you’ve retired.

Establish a budget for retirement, and try to live on that budget for six months before retiring. (Estimates typically range from 70% to 80% of their pre-retirement income for the average American.) Consider what you’ll be earning from Social Security and/or other financial resources, and determine how much you may need to cut back on expenses. Also, take inflation into consideration. You may want to use a retirement calculator, such as this one by NerdWallet.

Ask yourself: Am I emotionally ready to retire? Consider more than the financial support you need to get yourself through retirement. Having a support network is also an important part of your transition. It’s also a good idea to create a retirement routine that enables you to pursue your passions and keeps you socially engaged.

Redefine your identity. Don’t let yourself be identified only by your retired status. Create connections with the activities that bring you joy, and follow your passions. Remember that retirement isn’t the end. It’s a fresh beginning for the rest of your life. By preparing for it now, you can truly turn your retirement into your golden years.

Important Disclosures This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. This material was prepared by LPL Financial. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity. Not Insured by FDIC/NCUA or Any Other Government Agency

Term vs. Permanent Life Insurance

Fri, 28 Jun 2024 16:07:59 GMT

According to industry experts, most people don't have enough life insurance. The American Council of Life Insurers recently reported that average coverage equals $197,000, which is equivalent to almost 3.5 years in terms of income replacement (with the median income being $59,540 in 2024, according to the Bureau of Labor Statistics). That's only half the recommended 7-year threshold. Furthermore, 38 percent of consumers said that their households would financial trouble within six months if a wage earner died today. When considering life insurance, one of the most important factors to understand is the difference between term and permanent insurance. Here’s an inside look at both.

TERM AND PERM

Term life insurance is temporary; it provides a death benefit for a specific term, such as 10, 20, or 30 years. Unlike other types of life insurance, it does not accumulate a cash value. If the policyholder dies during that term, their beneficiaries receive the benefit from the policy. When the contract ends, so does the coverage.

This limited term leads to term life insurance’s main advantage: price. Generally, term life insurance costs less than permanent life insurance, especially if the purchaser is younger. This has the potential to free up funds for other household expenses.

Permanent insurance remains in place as long as the policyholder makes payments. In addition, permanent policies are designed to build up “cash value,” a cash reserve that accumulates with the policy. Typically, this cash reserve pays a modest rate of return. However, the policyholder has limited access to the funds.

WHICH SHOULD YOU CHOOSE?

Term life insurance can be designed to provide protection against upcoming expenses, such as putting children through college. Permanent life insurance, on the other hand, can be more useful for covering long-term financial needs, such as estate planning.

Many people find that they have a combination of short- and long-term needs. In such circumstances, it may be prudent to have both types: a basic level of permanent life insurance supplemented by a term policy. A review of your situation may help determine what type of life insurance is appropriate.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder may also pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

TERM OR PERM?

In 2022 people purchased more permanent life insurance policies than term life insurance policies. However, term policies account for approximately 71% of the face amount of the policies issued. ¹

Source: ACLI.gov, 2023

1. ACLI.com, 2023
2. BLS.gov, 2024
3. LIMRA.com, 2023

Understanding Homeowners Insurance

Fri, 28 Jun 2024 16:07:47 GMT

Purchasing homeowners insurance is not only critical for protecting your home, your personal property and against any potential liability, but if you have a mortgage, your lender will require it.

What’s Covered

A homeowners insurance policy is a package of coverages, including:

Dwelling: Covers damages to your house and any attached structures, including fixtures such as plumbing, electrical and HVAC systems.
Other Structures: Pays for damage to unattached structures, including a detached garage, tool shed, fence, etc.
Personal Property: Covers personal possessions such as appliances, furniture, electronics, clothes, etc.
Loss of Use: Reimburses for additional living expenses while you are unable to live in your home.
Personal Liability: Pays claims if you are found liable for injuries or damages to another party.
Medical Payments: Pays the medical bills incurred by people who are hurt on your property or by your pets.

Remember, these coverages pertain only to losses caused by a peril covered by your policy. For instance, if your policy doesn’t cover earthquake damage, then losses will not be reimbursed.

Types of Homeowners Policies

The types of covered perils will depend on the type of policy you buy.

The Special Form is the most popular policy since it insures against all perils, except those specifically named in the policy. Common exclusions include earthquake and floods. Typically, flood insurance is obtained through the National Flood Insurance Program, while earthquake coverage may be obtained through an endorsement or a separate policy.

Limits of Coverage

Your policy will impose limits on the amount of covered losses.

If you have a valuable art collection or jewelry, you may want to secure additional insurance on those items.

Be aware of whether your policy insures for replacement cost (pays the cost to rebuild your home or repair damages using materials of similar kind and quality) or actual cash value (home value based on age and wear and tear), which may not cover all your losses.

Coordinating Umbrella Liability Coverage

Individuals with significant assets may want to consider attaching an umbrella policy to their homeowners policy, which provides liability coverage in excess of the liability limits of your current policy.

Estate Planning for Second Marriages and Blended Families

lucy.hamrick@assuredpartners.com (Lucy Hamrick) — Fri, 22 Mar 2024 14:06:14 GMT

Estate Strategies for Second Marriages and Blended Families

Preparing your estate can be complicated, and if you're on a second marriage or are part of a blended family, estate decisions can be even more complex and nuanced. When second marriages or kids from prior marriages are involved, there are often special considerations to take into account. Often times, each spouse is bringing previously owned assets into the marriage and they may have differing views on who should inherit those assets when they pass. Here are some ideas to think about to help make sure the distribution of assets takes place how you intend:

Simple wills are often structured to leave all assets to the surviving spouse. If your estate strategy relies on this type of will, you could risk overlooking children from previous marriages.

You may want to ensure that your children from your first marriage are set up to receive assets from your estate, even as you provide your second spouse with adequate resources to live on should you die first.

Do you have comingled assets or joint accounts with your second spouse? If you do, those assets will be inherited completely by your spouse. However, if you have assets kept separately, you may be able to leave those directly to your children of a prior marriage.
How are your assets titled? Assets that are jointly owned in your name and your second spouse’s name are set up to pass to your spouse, often regardless of any instructions in your will.

Consider a home owned prior to your second marriage. If your new spouse is added to the title, the home will be passed directly to the spouse and not to your children.

Alternatively, if the home is passed to your children, they could potentially evict your spouse after your death leaving him/her no place to live.
Do you have important family heirlooms and memorabilia? If something holds sentimental value to you and your kids but not to your spouse, make sure you are specifying how those items are distributed so they go to who values them.
If you are designating your second spouse as the beneficiary on your retirement accounts, remember that once you die, the surviving spouse can name any beneficiary of their choice, despite any promises to name your children from a previous marriage as successor beneficiaries.
If your new spouse is closer in age to your children than to you, your children may worry that they may never receive an inheritance. Consider passing them assets directly, upon your death.
Look for approaches to help protect against the drain that extended care may have on assets designed to support your spouse or pass to your children.
Who do you want to have medical power of attorney? In a second marriage, do you want your adult children or your spouse to have the final say? Make sure they know your intentions and the proper documents are completed.
While the divorce rate has been trending lower, the number of remarriages (2nd or more marriages) has increased. One person entering into a new marriage may have more assets than their spouse, given that 40% of all new marriages are remarriages for one or both spouses.1

Consider a prenuptial or postnuptial agreement to protect your re-owned assets in the unfortunate circumstance of divorce.

What if your spouse gets remarried after your death? You may want to put protections in place to keep their inherited assets from being comingled with their new spouse’s assets.
In blended families, a trust can help provide clarity in how your assets are inherited and even enforce the terms of an estate plan for years into the future. This may prevent unhappy situations such as a spouse throwing out items that belonged to the deceased’s children, children evicting the spouse from an inherited home, the spouse leaving all her inherited assets to her family and disinheriting the deceased’s children, and protecting inherited assets from future spouses.

Second marriages and blended families can bring immense joy to your life. However, it is important to be aware of these complications when it comes to estate planning. Having a clear plan for where you want your assets to go, and finding a professional to help you accomplish that provides an opportunity for a better outcome. Each state may have their own variations on estate and marriage laws. Make sure you are working with a qualified estate attorney in your state to put together your plan.

1. Forbes.com, August 8, 2023 LPL Financial representatives offer access to Trust Services through The Private Trust Company N.A. an affiliate of LPL Financial. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advisory services offered through Global Retirement Partners, LLC dba AssuredPartners Financial Advisors, an SEC registered investment advisor. AssuredPartners Financial Advisors and LPL Financial are separate non-affiliated entities.

SECURE Act 2.0: An Overview

Thu, 02 Mar 2023 21:14:22 GMT

In the final days of 2022, Congress passed a new set of retirement rules designed to facilitate contribution to retirement plans and access to those funds earmarked for retirement.

The law is called SECURE 2.0, and it is a follow-up to the Setting Every Community Up for Retirement Enhancement (SECURE) Act passed in 2019.

The sweeping legislation has dozens of significant provisions; here are the major provisions of the new law.

New Distribution Rules

Required minimum distribution (RMD) age will rise to 73 years in 2023. By far, one of the most critical changes was increasing the age at which owners of retirement accounts must begin taking RMDs. Further, starting in 2033, RMDs may begin at age 75. If you have already turned 72, you must continue taking distributions. However, if you are turning 72 this year and have already scheduled your withdrawal, we may want to revisit your approach. ¹

Access to funds. Plan participants can use retirement funds in an emergency without penalty or fees. For example, 2024 onward, an employee can take up to $1,000 from a retirement account for personal or family emergencies. Other emergency provisions exist for terminal illnesses and survivors of domestic abuse. ²

Reduced penalty. Starting in 2023, if you miss an RMD for some reason, the penalty tax drops to 25 percent from 50 percent. If you promptly fix the mistake, the penalty may drop to 10 percent. ³

New Accumulation Rules

Catch-up contributions. From January 1, 2025, investors aged 60 through 63 years can make annual catch-up contributions of up to $10,000 to workplace retirement plans. The catch-up amount for people aged 50 and older in 2023 is $7,500. However, the law applies certain stipulations to individuals with annual earnings more than $145,000. ⁴

Automatic enrollment. In 2025, the Act requires employers to automatically enroll employees into workplace plans. However, employees can choose to opt-out. ⁵

Student loan matching. In 2024, companies can match employee student loan payments with retirement contributions. The rule change offers workers an extra incentive to save for retirement while paying off student loans. ⁶

Revised Roth Rules

529 to a Roth. Starting in 2024, pending certain conditions, individuals can roll a 529 education savings plan into a Roth individual retirement account (IRA). Therefore, if your child receives a scholarship, goes to a less expensive school, or does not go to school, the money can get repositioned into a retirement account. However, rollovers are subject to the annual Roth IRA contribution limit. Roth IRA distributions must meet a five-year holding requirement and occur after age 59½ to qualify for the tax-free and penalty-free withdrawal of earnings. Tax-free and penalty-free withdrawals are also allowed under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals. ⁷

SIMPLE and SEP. 2023 onward, employers can make Roth contributions to savings incentive match plans for employees (SIMPLE) or simplified employee pension (SEP). ⁸

Roth 401(k)s and Roth 403(b)s. The new legislation aligns the rules for Roth 401(k)s and Roth 403(b)s with Roth IRA rules. From 2024, the legislation no longer requires minimum distributions from Roth accounts in employer retirement plans. ⁹

More Highlights

Support for small businesses. In 2023, the new law will increase the credit to help with the administrative costs of setting up a retirement plan. The credit increases to 100 percent from 50 percent for businesses with less than 50 employees. By boosting the credit, lawmakers hope to remove one of the most significant barriers for small businesses offering a workplace plan. ¹⁰

Qualified charitable donations (QCDs). 2023 onward, QCDs will adjust for inflation. The limit applies on an individual basis; therefore, for a married couple, each person who is 70½ years and older can make a QCD as long as it remains under the limit. ¹¹

The change in retirement rules does not mean adjusting your current strategy is appropriate. Each of your retirement assets plays a specific role in your overall financial strategy, so a change to one may require changes to another.

Moreover, retirement rules can change without notice, and there is no guarantee that the treatment of specific rules will remain the same. This article intends to give you a broad overview of SECURE 2.0. It is not intended as a substitute for real-life advice. If changes are appropriate, your trusted financial professional can outline an approach and work with your tax and legal professionals, if applicable.

1. Fidelity.com, December 23, 2022
2. CNBC.com, December 22, 2022
3. Fidelity.com, December 22, 2022
4. Fidelity.com, December 22, 2022
5. Paychex.com, December 30, 2022
6. PlanSponsor.com, December 27, 2022
7. CNBC.com, December 23, 2022
8. Forbes.com, January 5, 2023
9. Forbes.com, January 5, 2023
10. Paychex.com, December 30, 2022
11. FidelityCharitable.org, December 29, 2022

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

The Pros and Cons of a NUA Strategy

Tue, 21 Feb 2023 20:58:05 GMT

Employer-issued stocks can be one attractive benefit an employer can offer. But while it has its benefits, it's natural to wonder what happens if you leave that job.

That's where net unrealized appreciation (NUA) strategies can sometimes be helpful. An understanding of NUA strategies can help you determine what to do with those company stocks to potentially manage your tax bill.

Remember, this article is for informational purposes only and is not a replacement for real-life advice. Make sure to consult your tax professional before modifying your approach with any unrealized appreciation issues.

Once your tax professional has provided guidance, your financial professional can offer insights regarding your overall asset allocation if you decide to realize any gains. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.

What is Net Unrealized Appreciation (NUA)?

NUA is the difference between how much you paid or contributed to your company stock and its current market value. For example, if you were issued employer stock at $20 per share and it is now worth $50 per share, you would have an NUA of $30 per share ($50 - $20 = $30).

What are the NUA Rules?

Your NUA may be taxed differently than other payments. If the lump-sum distribution includes employer securities, the NUA may not be subject to tax until you sell the securities.1

With this in mind, a participant may be able to transfer company stock from their previous plan into a taxable investment account without treating the entire amount as ordinary income. But before exploring any choice in detail, seek the guidance of a tax professional while keeping your financial professional apprised of your decisions.

1.IRS.gov, January 23, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Pay it Forward

Tue, 07 Feb 2023 12:00:00 GMT

Looking To Teach a Child Some Important Money Lessons? Consider a Roth Custodial IRA.

You started early and have saved hard in your 401(k). You’ve also paid close attention to your investing strategy over the years. And you definitely understand the benefits of tax-deferred compounding over the long term and the potential for growth. Heck, you’ve even remembered to

change your account password every 90 days. Maybe now it’s time to pay it forward and pass along some of your retirement savings wisdom!

How a Roth Custodial IRA Works

A Roth individual retirement account (IRA) may be a great way to instill the value of investing for a child or teenager with earned income (or grandchild, niece or nephew for that matter). This income could be from a dog-walking or babysitting job, regularly scheduled household chores or

from a job that provides a W-2 form.1

The account is managed by a parent or another adult, such as a grandparent or uncle, on behalf of the child. The contribution limit for a Roth IRA in 2023 is the lesser of $6,500 or your child’s total compensation for the year.

Benefits of a Roth Custodial IRA

Once your child has earned income, it doesn’t matter where the IRA contributions come from. You may be able to entice your child to open an account by offering matching contributions from you or a grandparent or by funding the account up to the allowable amount. That way they will still have money left from their paycheck to go shopping or out with friends.

Once the Roth IRA is open for a minor, all assets are managed by the custodian until the child reaches age 18 (or 21 in some states). Given the tax bracket most teens are in, and the length of time they have to invest, a Roth IRA may provide the most potential long-term financial gain. Because of this, it’s important to stress to your child that using the money to help fund their retirement will likely be their most advantageous option. However,

contributions are available anytime and withdrawals of earnings can be made penalty-free in some circumstances prior to age 59½. For example:

Your child can withdraw money for college, to open a business or for other expenses.
In addition, your child can withdraw up to $10,000 worth of earnings from the IRA, without a penalty, for the purchase of their first home.

The most powerful benefit of a Roth custodial IRA may be the potential for personal growth for a child or teenager. Getting an early taste of working life, in addition to learning about money and the power of saving, can be invaluable.

Please note that the child’s income may need to be declared as taxable self-employment income in the year it is earned. Be sure to consult with a tax professional.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Reaching Retirement Readiness

Tue, 31 Jan 2023 12:30:00 GMT

Study Reveals Plan Participants Are on a Positive Trajectory, Aided by Auto Features

Being able to replace working income with income generated from retirement savings is the essential definition of retirement readiness. The percentage of working income that an individual may need in retirement will vary, depending on a number of factors, such as whether or not they will still have a mortgage, the amount of their Social Security benefit, their tax bracket, variable healthcare costs, lifestyle choices and having income from part-time work, among others.

When projecting retirement income needs, a 70%-85% target replacement ratio is commonly cited . Recent research by Vanguard reveals that that goal may be well within reach for many plan participants. The 2022 Vanguard Participant Saving Rate Index suggests that 7 in 10 DC plan participants are currently saving at rates that would enable them to attain a 65% replacement rate in retirement. Furthermore, their data show that just a modest increase in participant elective deferral rates would enable most plan participants to attain a 75% replacement rate.

Assumptions Used

Vanguard’s researchers analyzed approximately 1.9 million eligible employees and 1.5 million actively contributing participants in approximate 880 plans for which the firm serves as recordkeeper. Research modeling assumes that target saving rates are 9% where income is less than $50,000, 12% where income is between $50,000 and $100,000, and 15% where income is more than $100,000 (saving rates include both the employee elective contributions and any employer contributions). It also assumes a 75% target replacement ratio, 4% real return, 1% real wage growth, 40 years of saving (from age 27 to 67), and a 4% withdrawal rate at retirement.

The Impact of Automatic Features

The researchers note that while some participants may not be saving at or above their target rate, many are close. Auto-enrollment coupled with auto-escalation will be instrumental in helping many of the participants get the rest of the way. Currently, 4 in 10 of the participants in the study are automatically enrolled and will see their saving rates rise by 1 - 3 percentage points over the next few years. At this rate, the study’s modeling shows that 70% of participants would reach a 75% replacement rate in retirement.

Additional Observations

Across all eligible participants in plans with automatic enrollment, employees are much more likely to be saving effectively (45% compared with 26% in plans without automatic enrollment). As of year-end 2021, 58% of plans default at a rate of 4% or higher, compared with just 32% ten years ago. An automatic enrollment default of 6% or higher was a strong predictor of participants saving effectively, along with a generous employer match. Plan size did not affect the results of the study.

The 2022 Vanguard Participant Saving Rate Index can be viewed at: https://tinyurl.com/yahvzrwn .

For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Top of Mind

Tue, 24 Jan 2023 12:00:07 GMT

Practicing Mindfulness With Money Can Help Boost Your Financial Wellness

Many people practice mindfulness through yoga, tai chi or other forms of movement, often incorporating breathing exercises. Others rely on their smart watch or phone to ping them at the same time each day, urging them to practice it for a few minutes. While there are many definitions of mindfulness, this one from mindful.org seems to capture it well:

Mindfulness is the basic human ability to be fully present, aware of where we are and what we’re doing, and not overly reactive or overwhelmed by what’s going on around us.

Practicing mindfulness with your money can be a valuable exercise, too. Here are four ways it can help you boost your financial wellness.

Pay Yourself First

Practicing mindfulness here is about determining a savings amount and considering it a bill, the same as any other bill, like electricity or rent. Whether it’s building up an emergency account or saving for some other financial goal, put away what you can, such as $100 a month, $50 or even just $25. Small amounts add up, and can be incrementally increased over time. The good news here is that you’re already practicing pay-yourself-first indfulness with your 401(k). Which leads us to…

Increase Your Retirement Account Contribution

You should be looking at your retirement account at least once a year and seeing if you can improve how you’re saving for the future (hint: the start of a new year is a great time to do this). For example, how much are you contributing? Are you contributing enough to get the full employer match? Can you increase the amount you are contributing? The longer you put off increasing your retirement savings, the more you miss out on the mindfulness of compound interest. So don’t wait — even a $50 per month increase in retirement savings has the potential to grow to nearly $75,000 over 30 years, assuming an 8% annual rate of growth, compounded monthly.

Make a Game Out of Saving

A no-spend challenge is when you don’t spend money for a certain period of time. It could be a weekend, a week or a month. You can set rules to spend only on essentials or other allowances. Doing this forces you to be creative with what you have and learn new skills and possibly open up ideas for

more ways to save. Visit https://tinyurl.com/yt6cj5rv for more information on taking on a no-spend challenge.

Leverage Technology Apps

One popular savings app is called Acorn (a subscription-based app). You tie Acorn to your debit card, and it rounds the purchase up to the nearest dollar, effectively allowing you to invest your spare change. For example, if you buy something that costs $5.44, when you use your debit card, $6 will

be taken out of your account, with $5.44 going to the store and $0.56 going into your investment account. What could be more money mindful than an app that allows you to save money as you make everyday purchases — without having to even think about it?

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Tackling the Trend

Tue, 17 Jan 2023 12:00:01 GMT

Dealing With Inflation’s Negative Effect on Employee Retirement Planning

An August 2022 survey from Nationwide Retirement Institute found that 40% of workers age 45 and older plan to delay their retirement due to inflation and rising living costs. That figure is double the percentage of workers who said they delayed retirement last year due to the COVID-19 pandemic. While the current inflationary environment presents a host of retirement plan challenges for both employers and employees, tackling the trend with prudent and sensible solutions remains the best course of action.

Inherent Costs to Employers

The 2022 Nationwide In-Plan Lifetime Income Survey indicates that 36% of private-sector employers say workers’ delayed retirements have affected their ability to hire new talent. In addition, 34% said delayed retirements have affected promoting young workers and 35% said they have made their health benefits plans more expensive.

Nationwide also found that employers are reporting effects to the well-being of their employees because of delayed retirements. Data show that among employers:

30% reported lower team morale
29% reported negative effects on employees’ mental health
27% have noticed lower workforce productivity
22% reported negative effects on the physical health of employees.

The study also found that only 58% of workers have a positive outlook on their retirement plan and financial investments, compared with 72% in 2021.

Potential Solutions To Consider

The survey found that 66% of all employees cited inflation as a top retirement concern, versus 53% in 2021. General education campaigns, in partnership with your plan advisor and recordkeeper, should continue to be prioritized and promoted. Focused topics for consideration include defining inflation and current contributing issues and factors, historical contexts, managing inflation risk in your portfolio and staying the course over the long term. These topics could be supplemented with information on general financial wellness, such as budgeting and managing spending, paying down high-interest debt and building an emergency fund.

In addition, plan sponsors may want to consider ways to further support their older workforce and improve their confidence in meeting their income needs as they near retirement. The Nationwide report shows growing interest from workers in lifetime income investment options. According to the data, 53% of all employees age 45 and older are interested in guaranteed lifetime income investment options included as part of a target-date fund, compared with 42% in 2021; 48% reported they are interested in contributing to such investment options as part of a managed account; and 41% would likely roll over retirement savings into a guaranteed lifetime income investment option if they had the chance.

The 2022 Nationwide In-Plan Lifetime Income Survey can be viewed at: https://tinyurl.com/5hxxa3nk .

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

This material is not a recommendation to buy or sell a financial product or adopt an investment strategy. Plan sponsors should discuss their specific situation with their financial professional.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Are You Ready for Your Portfolio to Make a Difference?

Tue, 10 Jan 2023 12:30:00 GMT

Interest in making an impact with one’s investments has grown in recent years, which means many investors may have an increased interest in environmentally or socially focused investments as well. In fact, impact investments account for $502 billion of managed investments worldwide, with 58% held in North America. Curious to learn more about impact investing? Read on. ¹

What Are Impact Investments?

Impact investments are made with a measurable or tangible goal for social change in mind. From there, the criteria may differ depending on your own values and focuses. For example, you may choose to invest in a company that commits to planting a certain amount of trees per year or another organization that provides resources to school districts in low-income communities.

You may hear other phrases used in conjunction with impact investing, such as socially responsible investing (SRI) or environmental, social, and governance investing (ESG). These investment models follow more specific criteria and guidelines such as ethical business practices, environmental conservation, and local community impact. ²

Impact Investments, SRI and ESG investments have certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.

Setting Expectations

Making a difference in the world is only one consideration with impact investing. In a 2020 survey of impact investors, 88% indicated that the financial performance of their investments were either in line with or outperformed their expectations. ³

Tips For Impact Investing

Here are a few concepts to keep in mind with Impact Investing:

Your values: What specific areas of impact are you hoping to make with your investments? Are you focused on sustainability, social justice, your religion, or another area? Deciding what you’re looking to accomplish can help narrow your focus.
Types of investments: There are a variety of investments that are structured to help pursue your goals when it comes to Impact Investing. As you define your values, the types of investments may become more clear.
Impact reports: Impact reports are designed to provide information that breaks down how the company is making a difference and what measurable goals they’re following. Impact reports are one factor to consider as you evaluate opportunities.

Impact investing can help keep your investment aligned with your personal beliefs. As you consider whether this choice may be appropriate for you, don’t hesitate to reach out. We may be able to provide some information or identify some resources that you may find insightful.

1. TheGIIN.org, April 2019
2. CFAinstitute.org, April 2021
3. TheGIIN.org, 2020

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

A Look at Diversification

Tue, 03 Jan 2023 12:30:00 GMT

Ancient Chinese merchants were said to have developed a unique way to manage their risk. They would divide their shipments among several different vessels. That way, if one ship were to sink or be attacked by pirates, the rest stood a good chance of getting through. Thus, the majority of the shipment could be saved.

Your investment portfolio may benefit from that same logic.

Diversification is an investment principle designed to manage risk. However, diversification does not guarantee against a loss. The key to diversification is to identify investments that may perform differently under various market conditions.

On one level, a diversified portfolio should be diversified between asset classes, such as stocks, bonds, and cash alternatives. On another level, a diversified portfolio also should be diversified within asset classes, such as a diverse basket of stocks.

A Diversified Approach

For example, let’s say a stock portfolio included a computer company, a software developer, and an internet service provider. Although the portfolio has spread its risk among three companies, it may not be considered well diversified, as all the firms are connected to the technology industry. A portfolio that includes a computer company, a drug manufacturer, and an oil service firm, however, may be considered more diversified.

Similarly, a bond portfolio that invests exclusively in long-term U.S. Treasuries may have limited diversification. A bond fund that invests in short-term and long-term U.S. Treasuries, plus a variety of corporate bonds, may offer more diversification.

Mutual Funds and ETFs

The concept of diversification is one reason why mutual funds and Exchange Traded Funds (ETFs) are so popular among investors. Mutual funds accumulate a pool of money that is invested to pursue the objectives stated in the fund’s prospectus. The fund may have a narrow objective, such as the auto sector, or it may have a broader objective, such as large-cap stocks. ETFs also can have a narrow or broader investment objective. Keep in mind, though, the more narrow an investment objective, the more limited the diversification. Furthermore, a narrow investment objective may result in more volatility and additional risks associated with a particular industry or sector.

The concept of diversification is critical to understand when you are evaluating a portfolio. If you want more information on diversification or have questions about how your money is invested, please call us to review your situation.

Mutual funds and exchange-traded funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money. Shares, when redeemed, may be worth more or less than their original cost.

Retirement Seen Through Your Eyes

Tue, 27 Dec 2022 12:30:01 GMT

How do you picture your future?

Some see retirement as a time to start a new career. Others see it as a time to travel. Still others plan to spend more time with family and friends. With that in mind, here are some things to consider.

What do you absolutely need to accomplish? If you could only get four or five things done in retirement, what would they be? Answering this question might lead you to compile a “short list” of life goals, and while they may have nothing to do with money, the financial decisions you make may be integral to pursuing them.

What would revitalize you? Some people retire with no particular goals at all. After weeks or months of respite, ambition may return. They start to think about what pursuits or adventures they could embark on to make these years special. Others have known for decades what dreams they will follow ... and yet, when the time to follow them arrives, those dreams may unfold differently than anticipated and may even be supplanted by new ones.

In retirement, time is really your most valuable asset. With more free time and opportunity for reflection, you might find your old dreams giving way to new ones.

Who should you share your time with? Here is another profound choice you get to make in retirement. The quick answer to this question for many retirees would be “family.” Today, we have nuclear families, blended families, extended families; some people think of their friends or their employees as family.

How much do you anticipate spending? We can’t control all retirement expenses, but we can manage some of them. The thought of downsizing your home may have crossed your mind. One benefit of downsizing is that it can potentially lead to no mortgage or a more manageable mortgage payment.

Could you leave a legacy? Many of us would like to give our kids or grandkids a good start in life, but leaving an inheritance can be trickier than many realize. Tax laws are constantly changing, and the strategies that worked years ago may have more limited benefits today.

Keep in mind this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax or legal professional before modifying any part of your overall estate strategy.

How are you preparing for retirement? This is the most important question of all. If you feel you need to prepare more for the future or reexamine your existing strategy in light of recent changes in your life, conferring with a financial professional experienced in retirement approaches may offer some guidance.

End of The Year Financial Planning

Tue, 20 Dec 2022 12:00:06 GMT

Do you ever feel overwhelmed after the holidays?

We spend so much time and money during the holiday season that the last thing we want to do is check our bank accounts and hope we aren’t in the red. It’s time to bite the bullet and start to reassemble our financials for the upcoming year in hopes to avoid this exact feeling next year.

To help get you started, here are four ways to financially plan for a smooth 2023.

1. Reevaluate your budget

By reevaluating your budget, you dissect each expense to see where you can save money. Some things to be attentive to are adjusting your rent or mortgage costs, unsubscribe from any subscriptions you may have forgotten about, average out your monthly gas cost, or rework your limit of gas station snacks. It all adds up!

2. Pay off Debt

Plan to pay off your bad debt. Examples include credit card debt, medical debt, tax debt, a car loan, and a pay day loan. Debt only weighs you and your credit score down so it’s time to take care of it. Once a plan is in place to pay off your debt and incorporated in your budget, live by it.

3. Plan your Emergency Fund and for Large Expenses

Planning for an upcoming large expense or an unknown future is one of the smartest things you can do to avoid financial heartache. As a rule of thumb, you want to have around 5 months of living expenses saved up to be your emergency fund.

4. Set a New Financial Goal

It’s important to set goals in general, but a financial goal will specifically help you either save money or cut down on the debt burden that many Americans face. Start by writing it down in a SMART way. Make it specific, measurable, achievable, and relevant!

The end of the year is symbolically a final wrap-up for so many things – including your finances. These four steps to a better financial year can be done at any time, but why not before the new year for a fresh start.

Help yourself out by taking a minute to adjust your budget. Because finances can change from time-to-time, try to keep up with the changes so you don’t have to play catch up. It’s important to take ownership of your debt and develop a plan to pay it off. Not only will that help your credit score, but your wellbeing as well.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This material contains general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about the specific insurance needs or situations, contact your insurance agent.

What is a Roth 401(k)?

Tue, 13 Dec 2022 12:00:02 GMT

While many people are familiar with the benefits of traditional 401(k) plans, others are not as acquainted with Roth 401(k)s.

Since January 1, 2006, employers have been allowed to offer workers access to Roth 401(k) plans. And some have introduced offerings as part of their retirement programs. ¹

As the name implies, Roth-401(k) plans combine features of 401(k) plans with those of a Roth IRA. ^2,3

With a Roth 401(k), contributions are made with after-tax dollars – there is no tax deduction on the front end – but qualifying withdrawals are not subject to income taxes. Any capital appreciation in the Roth 401(k) also is not subject to income taxes.

What to Choose?

For some, the choice between a Roth 401(k) and a traditional 401(k) comes down to determining whether the upfront tax break on the traditional 401(k) is likely to outweigh the back-end benefit of tax-free withdrawals from the Roth 401(k).

Please remember, this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax professional before adjusting your retirement strategy to include a Roth 401(k).

Often, this isn’t an “all-or-nothing” decision. Many employers allow contributions to be divided between a traditional-401(k) plan and a Roth-401(k) plan – up to overall contribution limits.

Considerations

One subtle but key consideration is that Roth 401(k) plans aren’t subject to income restrictions like Roth IRAs are. This can offer advantages to high-income individuals whose Roth IRA has been limited by these restrictions.

* This is an aggregate limit by individual rather than by plan. The total of an individual’s aggregate contributions to his or her traditional and Roth 401(k) plans cannot exceed the deferral limit – $20,500 in 2022 ($27,000 for those over age 50).

Source: IRS.gov, 2022

Roth-401(k) plans are subject to the same annual contribution limits as regular 401(k) plans – $20,500 for 2022; $27,000 for those over age 50. These are cumulative limits that apply to all accounts with a single employer; for example, an individual couldn’t save $20,500 in a traditional 401(k) and another $20,500 in a Roth 401(k). ⁴

Another factor to consider is that employer matches are made with pretax dollars, just as they are with a traditional 401(k) plan. In a Roth 401(k), however, these matching funds accumulate in a separate account, which will be taxed as ordinary income at withdrawal.

Setting money aside for retirement can be part of a sound personal financial strategy. Deciding whether to use a traditional 401(k) or a Roth 401(k) often involves reviewing a wide range of factors. If you are uncertain about what is the best choice for your situation, you should consider working with a qualified tax or financial professional.

To qualify for the tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal also can be taken under certain other circumstances, such as a result of the owner’s death or disability. Employer matches are pretax and not distributed tax-free during retirement. Once you reach age 72, you must begin taking required minimum distributions.
In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 72. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.
Roth IRA contributions cannot be made by taxpayers with high incomes. In 2022, the income phaseout limit is $144,000 for single filers, $214,000 for married filing jointly. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal also can be taken under certain other circumstances, such as a result of the owner’s death or disability. The original Roth IRA owner is not required to take minimum annual withdrawals.
IRS.gov 2022

Find That Lost Retirement Account

Tue, 06 Dec 2022 12:00:01 GMT

Do you have a long-lost retirement account left with a former employer? Maybe it’s been so long that you can’t even remember. With over 24 million “forgotten” 401(k) accounts holding roughly $1.35 trillion in assets, even the most organized professional may be surprised to learn that they have unclaimed “found” money. ¹

What Are “Forgotten” Retirement Accounts?

Considering that baby boomers alone have worked an average of 12 jobs in their lifetimes, it can be all too easy for retirement accounts to get lost in the shuffle. ² Think back to your first job. Can you remember what happened to your work-sponsored retirement plan? If you’re even slightly unsure, then it’s time to go looking for your potentially forgotten funds.

Starting Your Search

One of the best ways to find lost retirement accounts is to contact your former employers. If you’re unsure where to direct your call, try the human resources or accounting department. They should be able to check their plan records to see if you’ve ever participated. However, you will most likely be asked to provide your full name, Social Security number, and the dates you worked, so be sure to come prepared.

If your former employer is no longer around, look for an old account statement. Often, these will have the contact information for the plan administrator. If you don’t have an old statement, consider reaching out to former coworkers who may have the information you need.

Even if these first steps don’t turn up much info, they can help you gather important information.

Websites to Check

Next, it’s time to take your search online. Make sure you have as much information as possible at hand and give the following resources a try.

National Registry of Unclaimed Retirement Benefits

This database uses employer and Department of Labor data to determine if you have any unpaid or lost retirement account money. Like most of these online tools, you’ll need to provide your Social Security number, but no additional information is required. ³

FreeERISA

If your forgotten account was worth more than $1,000 but less than $5,000, it might have been rolled into a default traditional Individual Retirement Account (IRA). Employers create default IRAs when a former employee can’t be located or fails to respond when contacted. You can search for retirement and IRA accounts for free using this database, but registration is required. ⁴

Once you reach age 72, you must begin taking required minimum distributions from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10 percent federal income tax penalty.

The U.S. Department of Labor

Finally, the Department of Labor tracks plans that have been abandoned or are in the process of being terminated. Try searching its database to find the qualified termination administrator (QTA) responsible for directing the shutdown of the plan. ⁵

What’s Next?

Once you’ve found your retirement account, what you do with it depends on the type of plan and where it’s held. Your location also matters. Depending on where you live, the rules and regulations may differ.

No matter what you decide to do, be sure to involve your tax and financial professionals since they’ll be informed on current regulations for your state. They can also help you identify a strategy for your newfound money: travel, investment, or maybe that vacation home you’ve always wanted. You worked hard for that money, after all, so you should get to enjoy it!

1. Kiplinger.com, August 27, 2021
2. USNews.com, October 22, 2021
3. UnclaimedRetirementBenefits.com, 2022
4. FreeERISA.BenefitsPro.com, 2022
5. DOL.gov, 2022

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Taking a Hike

Tue, 29 Nov 2022 12:00:10 GMT

Four ways interest Rate Hikes Can Affect Your Finances

Unless you live on another planet, you are fully aware of this thing called inflation — whether you’re at the grocery store, a gas station, buying clothes online, hiring a contractor or doing almost any other thing that requires spending money for something. Earlier this year, the Federal Reserve started raising interest rates to rein in inflation, which reached another 40-year high in June. By raising rates, the Fed hopes to slow the economy and inflation. That’s because as borrowing becomes more expensive, consumers tend to reduce spending. The drop in demand for goods eventually leads to lower prices.

The Fed doesn’t set interest rates on credit cards, mortgages, auto loans, and savings accounts, but its actions influence those rates. Here are four ways interest-rate hikes can affect your finances and how to deal with the impact:

1. Credit Cards

Most cards charge a variable rate that’s tied to the bank’s prime rate — the rate banks charge their best customers (many consumers pay an additional rate on top of prime, based on their credit profile.) Banks typically raise their prime rate quickly after the Fed boosts its key rate. HIKING TIP: It may take a couple of statements before you notice the impact of a rate increase. Start paying down any balance before rates get much higher, focusing on the card with the highest rate first.

2. Mortgages

If you have a fixed-rate mortgage, your monthly payments will stay the same. If you refinanced over the last few years and locked in a rate in the 2% to 3% range, that was really good timing. However, if you have an adjustable-rate mortgage (ARM), you may be faced with having to make larger payments, depending on the terms of your loan. HIKING TIP: If you have an ARM, budget for higher payments. Or, if you anticipate buying a home within the next year or two, take steps to improve your credit score so you can secure a lower interest rate.

3. Home Equity Line of Credit

This allows you to borrow against the equity in your home as needed, usually at a variable interest rate. Borrowers typically pay only interest on the amount borrowed for the first 10 years, and thereafter must repay interest and the principal over the next, say, 15 or 20 years. Your Home Equity Line of Credit (HELOC) rate can adjust monthly or quarterly. So, if you have an outstanding balance, your payments will likely go up when the Fed implements a rate hike. HIKING TIP: If you have a HELOC, budget for higher payments. You can also pay down your HELOC balance to reduce the interest you pay, or talk to your lender about options, such as refinancing.

4. Auto Loans

It’s already more expensive to buy a new or used car, as their prices have increased dramatically over the last two years. This is due to a number of reasons that have resulted in supply not keeping up with demand. Unfortunately, if you’re planning on financing the purchase of a vehicle in the near future, you’ll need to add in the higher cost of borrowing. HIKING TIP: Make a down payment of at least 20% of the purchase of a new car, and no less than 10% for a used car. A sizable down payment will lower your monthly payments and could help secure a lower interest rate.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation.

Taking a Look into Long-Term Care

Mon, 21 Nov 2022 18:13:50 GMT

Every year, November holds the status of Long-Term Care awareness month.

Throughout the month, important pieces of Long-Term Care are highlighted to inform those that either might start thinking about their loved ones who may need assistance or simply planning for your future. It is important to incorporate Long-Term Care into your financial plan, so you don’t get blindsided by the cost.

Long Term Care Basics

Long-Term care isn’t just one thing. It is a term that houses multiple duties that fall under medical and non-medical. The majority of the time, individuals who seek Long-Term Care have a chronic illness or disability usually associated with aging. Services that are included in Long-Term Care can range from simple assistance to more intensive medical care.

Dressing
Bathing & Grooming
Mobility
Medication Management
Alzheimer’s or Dementia Care
Post Hospital Care
& More

The Likelihood of Needing Long-Term Care

As of 2022, more than half of Americans after the age of 65 will develop a disability and most will need care for less than three years. ² Those who count themselves in the less than 50% are gambling a dangerous game of old age and health. For example, if you are in poor health, the probability of you needing assisted care rises to around 60%. It’s hard to tell what kind of health you will be in at 65 when you are 32.

How Much Does Long Term Care Cost?

Costs vary throughout the United States for Long-Term Care, but the 2020 national average for a skilled nursing home for a single occupant was $105,850 per year. ¹ Care in an assisted living center was $51,600 a year. ¹ The more hands-on assistance you seek, the higher the cost.

The shock of Long-Term Care expenses can be avoided if you start planning early for your future medical care.

How to Pay for Long-Term Care

Those who have planned for Long-Term Care, have purchased Long-Term Care insurance. Long-Term Care insurance can help cover in-home assistance, supportive daily care, to more experienced care. Individuals who haven’t purchased Long-Term Care insurance tend to self-insure using investments and personal savings to cover the costs of extended care.

[1] Most retirees will need long-term care. These are ways to pay for it (cnbc.com)

² Long-Term Care Services and Supports for Older Americans: Risks and Financing, 2022 Research Brief (hhs.gov)

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Eyes on the Prize

Tue, 15 Nov 2022 12:00:14 GMT

Despite Challenges, Americans Remain Focused on Saving for Retirement

In the face of economic uncertainty, market volatility, geopolitical unrest and the ongoing COVID-19 pandemic, plan participants have continued to save for retirement. Vanguard’s annual report, “How America Saves 2022,” cites a number of encouraging factors that are contributing to this trend.

Plan Sponsor Support

The report acknowledges that the pandemic has brought more attention to the unstable position of most Americans’ finances (70% of Americans surveyed say anxiety over finances is their top stressor). Survey results also indicate that more employers are realizing that anxiety over finances jeopardizes an employee’s path to a successful retirement. Therefore, they are working with their advisors to implement smart plan design strategies to get their employees enrolled and saving at higher rates. In addition, more employers are broadening their focus beyond retirement to help employees manage other basic financial needs, such as budgeting, debt management, emergency savings and student loan repayment.

Contribution Rates Stay Steady

Vanguard’s survey found that participants’ median total contribution rate — including participant and employer contributions — was 10.4% in 2021, compared to 10.5% in 2020. Vanguard credits plan sponsors adopting automatic deferral and automatic escalation for the rate staying constant through the pandemic, market volatility and rising inflation. However, roughly half of retirement plan participants continue to save below the recommended savings rate of 12% to 15% of their salary. Vanguard found that slight deferral increases could help close this savings gap, as about 20% of participants saving below these levels are just 1%-3% away from the target savings rate.

Growth in Managed Account Advice Services

Plan sponsors are also increasingly offering tools and resources to support employees with their saving and investment planning. For example:

Forty-one percent of all Vanguard DC plans offered managed account advice in 2021, versus 30% in 2017.
The percentage of participants who were offered managed account advice was 74% in 2021, versus 55% in 2017.
The percentage of participants who were offered managed account advice and used the service was 10% in 2021, versus 7% in 2017.

Other Notable Progress in 2021

Only 2% of participants stopped contributing and only 7% decreased their salary deferrals.
Seventeen percent of participants made a participant-directed increase, 25% made an increase due to auto-escalation and 49% made no change.
Fifty-eight percent of plan sponsors using auto-enrollment increased the default contribution rate to 4% or higher.

Vanguard’s “How America Saves 2022” can be viewed at: https://tinyurl.com/k3j6fkhp .

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

9 Facts About Social Security

Tue, 08 Nov 2022 14:57:19 GMT

Social Security's been a fact of retirement life ever since it was established in 1935. We all think we know how it works, but how much do you really know? Here are nine things that might surprise you.

The Social Security trust fund is huge. It was $2.8 trillion at the end of 2021. ¹
Most workers are eligible for Social Security benefits, but not all. For example, until 1984, federal government employees were part of the Civil Service Retirement System and were not covered by Social Security. ²
You don't have to work long to be eligible. If you were born in 1929 or later, you need to work for 10 or more years to be eligible for benefits. ³
Benefits are based on an individual's average earnings during a lifetime of work under the Social Security system. The calculation is based on the 35 highest years of earnings. If an individual has years of low or no earnings, Social Security may count those years to bring the total years to 35. ⁴
There haven't always been cost-of-living adjustments (COLA) in Social Security benefits. Before 1975, increasing benefits required an act of Congress; now, increases happen automatically, based on the Consumer Price Index. There was a COLA increase of 5.9% in 2022, but there was an increase of 1.3% in 2021. ⁵
Social Security is a major source of retirement income for 64% of current retirees. ⁶
Social Security benefits are subject to federal income taxes – but it wasn't always that way. In 1983, Amendments to the Social Security Act made benefits taxable, starting with the 1984 tax year. ⁷
Social Security recipients received a single lump-sum payment from 1937 until 1940. One-time payments were considered "payback" to those people who contributed to the program. Social Security administrators believed these people would not participate long enough to be vested for monthly benefits. ⁸
In January 1937, Earnest Ackerman became the first person in the U.S. to receive a Social Security benefit – a lump sum of 17 cents. ⁸

1. SSA.gov, 2022
2. Investopedia.com, April 25, 2022
3. SSA.gov, 2022
4. SSA.gov, 2022
5. SSA.gov, 2022
6. EBRI.org, 2022
7. SSA.gov, 2022
8. SSA.gov, 2022

Healthcare Costs in Retirement

Fri, 28 Oct 2022 16:27:53 GMT

In a 2022 survey, 35% of all workers reported they were either “not too” or “not at all” confident that they would have enough money to pay for their medical expenses in retirement. Regardless of your confidence, however, being aware of potential healthcare costs during retirement may allow you to understand what you can pay for and what you can’t. ¹

Health-Care Breakdown

A retired household faces three types of healthcare expenses.

The premiums for Medicare Part B (which covers physician and outpatient services) and Part D (which covers drug-related expenses). Typically, Part B and Part D are taken out of a person’s Social Security check before it is mailed, so the premium cost is often overlooked by retirement-minded individuals.
Copayments related to Medicare-covered services that are not paid by Medicare Supplement Insurance plans (also known as “Medigap”) or other health insurance.
Costs associated with dental care, eyeglasses, and hearing aids – which are typically not covered by Medicare or other insurance programs.

It All Adds Up

According to a HealthView Services study, a 65-year-old healthy couple can expect their lifetime healthcare expenses to add up to around $597,389 before accounting for inflation. ²

Should you expect to pay this amount? Possibly. Seeing the results of one study may help you make some critical decisions when creating a strategy for retirement. Without a solid approach, healthcare expenses may add up quickly and alter your retirement spending.

Prepared for the Future?

Workers were asked how much they have saved and invested for retirement – excluding their residence and defined benefit plans.

Source: EBRI.org, 2022

1. EBRI.org, 2022
2. HVSFinancial.com, 2022

3 Estate Challenges for Blended Families

Tue, 25 Oct 2022 20:53:49 GMT

Preparing your estate can be complicated, and if you’re a part of a blended family, estate decisions can be even more complex and nuanced. Blended families take on many forms, but typically consist of couples with children from previous relationships. Here are a few case studies to help illustrate some of the challenges.

Case Study #1: Children From Previous Marriages

Simple wills often are structured to leave all assets to the surviving spouse. If your estate strategy relies on this type of will, you could risk overlooking children from previous marriages. Also, while it's unsettling to consider, the surviving spouse can end up changing a will without proper measures put in place. ¹

When new children join a blended family, estate strategies can get even more complicated. But with a well-structured approach, you can direct how to distribute your assets.

Case Study #2: When One Partner Has Significantly More Assets

While the divorce rate has been trending lower, the number of remarriages (2nd or more marriages) has increased. One person entering into a new marriage may have more assets than their spouse, given that 40% of all new marriages are remarriages for one or both spouses. An estate strategy can help ensure that your assets pass down according to your wishes. ²

Case Study #3: Traditional Trusts May Not Be Enough

In blended families, a traditional trust is a good start, but it may not go far enough. One possible solution is to create three trusts (one for each spouse, in addition to a joint trust) to help address different scenarios. ³

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional familiar with the rules and regulations.

Starting the Process

Blended families are pretty common these days. If you’re in that position, it’s important to remember that you can create an estate strategy to address your specific situation. The first step may be an estate document review.

1. Investopedia.com, April 25, 2021
2. OnlineLibrary.Wiley.com, January 5, 2020
3. Investopedia.com, November 14, 2021

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Emergency Fund: How Much is Enough?

Tue, 18 Oct 2022 11:00:00 GMT

How much money is enough when it comes to your emergency fund?

Have you ever had one of those months? The water heater stops heating, the dishwasher stops washing, and your family ends up on a first-name basis with the nurse at urgent care. Then, as you're driving to work, you see smoke coming from under your hood.

Bad things happen to the best of us, and sometimes it seems like they come in waves. That's when an emergency cash fund can come in handy.

One survey found that nearly 25% of Americans have no emergency savings. Another survey found that 40% of Americans said they wouldn't be able to comfortably handle an unexpected $1,000 expense. ^1,2

How Much Money?

How large should an emergency fund be? There is no “one-size-fits-all” answer. The ideal amount may depend on your financial situation and lifestyle. For example, if you own a home or have dependents, you may be more likely to face financial emergencies. And if a job loss affects your income, you may need emergency funds for months.

Coming Up with Cash

If saving several months of income seems unreasonable, don't despair. Start with a more modest goal, such as saving $1,000, and build your savings a bit at a time. Consider setting up automatic monthly transfers into the fund.

Once your savings begin to build, you may be tempted to use the money in the account for something other than an emergency. Try to avoid that. Instead, budget and prepare separately for bigger expenses you know are coming.

Where Do I Put It?

Many people open traditional savings accounts to hold emergency funds. They typically offer modest rates of return.

The Federal Deposit Insurance Corporation (FDIC) insures bank accounts for up to $250,000 per depositor, per institution, in principal and interest. ³

Others turn to money market accounts or money market funds in emergencies. While money market accounts are savings accounts, money market funds are considered low-risk securities. Money market funds are not backed by any government institution, which means they can lose money. Depending on your particular goals and the amount you have saved, some combination of lower-risk investments may be your best choice.

Money held in money market funds is not insured or guaranteed by the FDIC or any other government agency. Money market funds seek to preserve the value of your investment at $1.00 a share. However, it is possible to lose money by investing in a money market fund. ⁴

Money market mutual funds are sold by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

The only thing you can know about unexpected expenses is that they're coming. Having an emergency fund may help to alleviate stress and worry that can come with them. If you lack emergency savings now, consider taking steps to create a cushion for the future.

1. MarketWatch.com, 2020

2. Bankrate.com, 2021

3. FDIC.gov, 2022

4. Investopedia.com, 2021

8 Mistakes That Can Upend Your Retirement

Tue, 11 Oct 2022 11:00:02 GMT

Pursuing your retirement dreams is challenging enough without making some common, and very avoidable, mistakes. Here are eight big mistakes to steer clear of, if possible.

No Strategy: Yes, the biggest mistake is having no strategy at all. Without a strategy, you may have no goals, leaving you no way of knowing how you’ll get there—and if you’ve even arrived. Creating a strategy may increase your potential for success, both before and after retirement.
Frequent Trading: Chasing “hot” investments often leads to despair. Create an asset allocation strategy that is properly diversified to reflect your objectives, risk tolerance, and time horizon; then make adjustments based on changes in your personal situation, not due to market ups and downs. ¹
Not Maximizing Tax-Deferred Savings: Workers have tax-advantaged ways to save for retirement. Not participating in your employer’s 401(k) may be a mistake, especially when you’re passing up free money in the form of employer-matching contributions. ²
Prioritizing College Funding over Retirement: Your kids’ college education is important, but you may not want to sacrifice your retirement for it. Remember, you can get loans and grants for college, but you can’t for your retirement.
Overlooking Healthcare Costs: Extended care may be an expense that can undermine your financial strategy for retirement if you don’t prepare for it.
Not Adjusting Your Investment Approach Well Before Retirement: The last thing your retirement portfolio can afford is a sharp fall in stock prices and a sustained bear market at the moment you’re ready to stop working. Consider adjusting your asset allocation in advance of tapping your savings so you’re not selling stocks when prices are depressed. ³
Retiring with Too Much Debt: If too much debt is bad when you’re making money, it can be deadly when you’re living in retirement. Consider managing or reducing your debt level before you retire.
It’s Not Only About Money: Above all, a rewarding retirement requires good health, so maintain a healthy diet, exercise regularly, stay socially involved, and remain intellectually active.

1. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Asset allocation and diversification are approaches to help manage investment risk. Asset allocation and diversification do not guarantee against investment loss. Past performance does not guarantee future results.

2. Under the SECURE Act, in most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 72. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty."

3. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss. Past performance does not guarantee future results.

Everybody Wins

Tue, 04 Oct 2022 11:00:00 GMT

Select Plan Design Features Can Help Improve Outcomes for Lower-Income Workers

Depending on the nature of your business and the varied experience, education and expertise required of your workforce, you may have a significant population of lower-income workers. In a highly competitive hiring environment, the following plan design ideas can help attract and retain workers. By adding just a little flexibility to better accommodate your lower-income workers, everybody wins.

Automatic Features

Research from the Program on Retirement Policy at the Urban Institute in Washington, D.C., shows that the best way to get lower-income workers to participate in a plan is to automatically put them in the plan. At the same time, plan sponsors must also consider the effect on lower-income workers if it is paired with automatic escalation. Setting the automatic deferral and auto-escalation rates too high can be particularly harmful to lower-income workers, who make their deferrals from lower earnings.

The Defined Contribution Institutional Investment Association defines low income

as $20,000 – $47,500 in annual household income.

One tactic employers can use to help lower-income workers save is to defer part of their pay raise automatically into the retirement plan, rather than straight into their paycheck. These workers may not necessarily feel like they’re losing out on something, because they still get a slight bump up in their salary while getting a bump up in their retirement savings.

Adjusting the Match To Encourage Higher Deferral Rates

Employers and their advisor often adjust the plan’s match rate to encourage higher deferral rates. The Program on Retirement Policy’s research shows that participants often defer up to the maximum rate required to receive the full match. The higher the level at which the match ends, the more people feel encouraged to contribute. However, plan sponsors wanting to increase lower-income workers’ retirement savings by tweaking the match must remain sensitive to setting the threshold so high that they price these workers out.

Combining a Financial Wellness Program With an Emergency Savings Program

The DCIIA’s Retirement Research Center in Boxford, Massachusetts, recommends offering a financial wellness program combined with an emergency savings program. Offering both programs emphasizes the importance of having sufficient savings to cover emergencies and is the most powerful tool available for lower-income participants. Findings from the Life Insurance Marketing and Research Association show that almost 30% of lower-income workers have no emergency savings fund, which can lead them to not save, or to withdraw money from their retirement accounts. Funding an emergency savings account can give lower-income employees a sense of feeling in control and more security about their day-to-day experience. That’s a great foundation to build before beginning a long-term retirement savings program.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Rekindle The Romance

Tue, 27 Sep 2022 11:00:00 GMT

Your 401(k) Offers You Valuable Benefits You Just Can't Find Anywhere Else

In the midst of economic adversity, market volatility, geopolitical uncertainty and a host of other things (including a still-active pandemic, now in its third year), it can be hard to find a silver lining. However, there is one thing that keeps showing you some love every day — your 401(k)! Here are some tips to remind you why you got together in the first place — and help keep the romance alive.

Your Savings Are Automatic

With your 401(k), you’re following the core financial planning principle of “pay yourself first.” Money is deposited from your paycheck to your account without you even having to think about it. It doesn’t get much easier than that.

Tax Savings

You can defer paying income tax on up to $20,500 that you save in a 401(k) plan in 2022. A worker in the 24% tax bracket who saves this amount could reduce their tax bill by $4,920. Income tax won’t be due on this money until it is withdrawn from the account. Workers who earn less than $34,000 in 2022 ($68,000 for couples) might additionally qualify for the saver’s credit, which is worth between 10% and 50% of 401(k) contributions up to $2,000 for individuals and $4,000 for couples. The biggest saver’s credits go to workers with the lowest incomes.

Savings on Top of Savings

Employees who are age 50 and older are eligible to contribute an additional amount (called a catch-up contribution) to 401(k) plans. The 401(k) catch-up contribution limit is $6,500 in 2022. That means older workers can defer paying income tax on up to $27,000 in a 401(k) account. As a result, someone in the 24% tax bracket could potentially reduce their current tax bill by $6,480.

Free Money Courtesy of the Employer Match

If you can’t max out your 401(k), you can always save at least enough to get a full 401(k) employer match (subject to your plan’s vesting rules). A 401(k) match of 50 cents for each dollar you save in the 401(k) plan up to 6% of pay is a 50% return on your investment. A dollar-for-dollar 401(k) match doubles your money. That’s a pretty excellent return despite the market volatility occurring these days!

Your Money Goes Where You Go

If you leave your employer for any reason, you can take your vested balance (including the employer match) with you. It’s fully portable, and you can roll it into an individual retirement account or a new employer’s 401(k) plan (if allowed).

Account Management Made Easy

Your recordkeeper provides you with comprehensive account access where you can view your balance, perform transactions and talk to a call center representative for guidance. On top of that, you can view retirement planning education materials and calculators, and likely even model various saving scenarios and assumptions
to help gauge your progress toward retirement readiness.

The stock market will always have its ups and downs…but in the end, your 401(k) is your partner for life!

T his material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

LIAM

Tue, 20 Sep 2022 11:00:11 GMT

Do I Need Life Insurance?

Back-to-school season is a good reminder that we should never stop learning. Since September is Life Insurance Awareness Month, it seems a good time for some simple lessons about life insurance. Why does life insurance get observed for a whole month? Because it’s that important for individuals and families to educate themselves about the need to incorporate life insurance into their financial plan.

What is Life Insurance?

You spend your whole life caring for your loved ones and ensuring they are set up for success. Life insurance is a chance for you to take care of your family after you pass by providing a financial safety net if you have loved ones who rely on your income.

Why Should You Purchase Life Insurance?

Nothing is ever entirely within our control – accidents do happen. Life insurance is a valuable safety net whether single, married, with children, or without. For peace of mind, the time to purchase life insurance is today!

Life insurance can help pay off debts, such as a mortgage or medical bills, cover funeral costs, and pay for college tuition. The financial protection that comes from life insurance is an affordable way to take care of loved ones when you pass.

How Much Life Insurance is Enough?

Determining how much life insurance you need can be difficult to answer because everyone has different needs and circumstances. Many experts recommend an amount between 10 to 15 times your gross income. For a general idea, Life Happens suggests considering the following:

1. Add up the immediate, ongoing, and future expenses your family or loved ones would incur if you were to pass away.

2. Add up the financial resources your loved ones already have. This can mean a spouse’s income and any life insurance already in place.

3. Subtract your financial resources from the anticipated expenses. The difference between the two numbers is the approximate life insurance to buy.

Life insurance is one of the best ways to care for your family. And even though death is not a pleasant subject to talk about, it’s a meaningful conversation to have. No matter your budget or situation, there’s a life insurance policy for you. Take the time to speak with a life insurance professional for help determining the policy and mount that makes the most sense for you.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about the specific insurance needs or situations, contact your insurance agent.

College Savings Month

Tue, 13 Sep 2022 21:03:39 GMT

September is College Savings Month

Not only does September showcase back-to-school season, but it’s also home to College Savings Month! Each year, September encourages children, parents, relatives, and other guardians to learn more about college costs. A college education can be costly, so it’s important to consider the pros and cons of higher education to prepare for the future.

When kids are set up with a growing college savings fund, they are 2.5 times more likely to enroll and graduate from college than kids without a college fund. On average, your college savings goal for a public, in-state college is recommended to be $60,400.[1] That number may seem disheartening, but there are ways to break it down to a more achievable goal.

529 Plans or Qualified Tuition Programs are tax-advantaged investment plans that work similarly to a Roth IRA. A 529 Plan offers tax-free growth and tax-free withdrawal. However, you can only use this account for tuition costs.
Coverdell Education Savings Accounts (ESA) are tax-deferred trust savings accounts. These accounts help lower-income families save money for their child or grandchild’s higher education. Each year, you are allowed to invest up to $2,000. The Coverdell ESA can be used for tuition and other school expenses.
The One-Third Rule is based on the idea that few people will pay for a major expense in one large sum. Instead, many people spread out the cost over time. The One-Third rule combines savings, current income, and loans. One-third of the cost comes from existing savings, one-third from current income, and one-third is paid using a loan. Remember that you don’t need to pay the total cost of college. Some families use the One-Third rule to pay one-third of the cost per child.
Start Early when it comes to saving for college. The earlier you start, the more you will benefit from compounding interest.
Communicate with your kids. It helps to have an open conversation with your kids about what you are willing to do to help and ways they can pitch in.

This article covers just some of the ways to begin saving for your child’s college education. A conversation with a financial professional can help you identify specific tools and services to help you pursue your goals.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are inly available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level max vary. Please consult with your tax advisor before investing.

[1] HerMoney.com, November 4, 2021

A Decision Not Made

Tue, 06 Sep 2022 11:00:06 GMT

A Decision Not Made is Still a Decision

Whether through inertia or trepidation, investors who put off important investment decisions might consider the admonition offered by motivational speaker Brian Tracy, "Almost any decision is better than no decision at all."

This investment inaction is played out in many ways, often silently, invisibly, and with potential consequences to an individual's future financial security.

Let's review some of the forms this takes.

Your 401(k) Plan

One of the worst decisions may be the failure to enroll, although more and more companies are automatically enrolling workers into their retirement plans. Not only do nonparticipants sacrifice one of the best ways to save for their eventual retirement, but they also forfeit the money that any employer matching contributions represent. Not participating holds the potential to be one of the most costly indecisions one can make. ¹

The other way individuals let indecision get the best of them is by not selecting the investments for the contributions they make to the 401(k) plan. When a participant fails to make an investment selection, the plan may have provisions for automatically investing that money. And that investment selection may not be consistent with the individual's time horizon, risk tolerance, and goals.

In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 72. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10 percent federal income tax penalty.

Non-Retirement Plan Investments

For homeowners, "stuff" just seems to accumulate over time. The same may be true for investors. Some buy investments based on articles they have read or based on the recommendations of a family member. Others may have investments held in a previous employer's 401(k) plan.

Over time, we can end up with a collection of investments that may have no connection to our investment objectives. Because of the dynamics of the markets, an investment that may have once made good sense at one time may no longer be advantageous today.

By not periodically reviewing what we own, which would allow us to cull inappropriate investments – or even determine if the portfolio reflects our current investment objectives – we are making a default decision to own investments that may be inappropriate.

Whatever your situation, your retirement investments require careful attention and may benefit from deliberate, thoughtful decision-making. Your retired self will be grateful that you invested the time... today.

1. CNBC.com, December 28, 2021

Risk Perspective

Tue, 30 Aug 2022 11:00:23 GMT

What's Your Risk Perspective?

Risk is a factor in any investment decision that you make. Your tolerance for risk is something that you will want to consider when you make decisions alongside your trusted financial professional. Your risk tolerance is balanced against your time horizon, meaning the time between now and when you anticipate needing your money.

But is it possible to avoid a loss? No, not completely, but you can take steps to manage that risk when investing. This is where conversations about your risk tolerance are critical.

What would you rather have, $500 right now or a 50% chance at $2,000? Many people go for the $2,000 and rightfully so. Since you have a 50/50 chance, a decision tree shows the $2,000 answer carries a potential value of $1,000.

But let’s add a few zeros and see if that changes your perspective.

What would you rather have, $50,000 right now or a 50% chance at $200,000? The decision tree says the opportunity to win $200,000 has the highest potential value. But in reality, many people second-guess that decision because $50,000 is a lot of money.

Remember, there is no correct answer to these questions. They simply help you better understand the concept of risk.

Investment risk can be managed, but it can’t be eliminated entirely. All investments carry some level of risk. And in general, the greater the risk an investment carries, the higher its potential return.

Risk happens, but don’t let it get in the way of your dreams. Ultimately, these concerns should only serve to inform you and the questions that you ask the financial professional you are working with. The conversation should include your questions about the risks for each strategy presented as well as questions from your professional about the investment goals you want and the aspirations you hope to realize.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Conquering Retirement Challenges for Women

Tue, 23 Aug 2022 11:00:00 GMT

Conquering Retirement Challenges for Women

When it comes to retirement, women may face unique obstacles that can make saving for retirement more challenging. Given that women typically live longer than men, retirement money for women may need to stretch even further. ¹

Despite these challenges, a wise strategy can give women reasons to be hopeful.

Get clear on your vision.

Do you want to spend your retired years traveling, or do you envision staying closer to home? Are you seeing yourself moving to a retirement community, or do you want to live as independently as you can? If you’re married, sit down with your spouse to discuss your visions for retirement.

You can't see if you're on track for your goals if you haven't defined them. If you do find you’re falling short of where you want to be, a financial professional can help you strategize about how you can either get to where you want to go or adjust your strategy to fit your situation.

Get creative with your strategy.

If you expect to or have taken time off from the workforce, you may want to increase your contributions to your retirement accounts while you are working. If you’re staying home while your spouse works, you may be able to contribute to an individual retirement account.

Once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account and other retirement plans in most circumstances. 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. Traditional IRA contributions may be fully or partially deductible, depending on your adjusted gross income.

Look for sources of additional income.

If you’re caregiving for an elderly relative, there are ways to be paid for your time. According to AARP, the Veteran’s Administration or Medicaid may be a potential source of income. Working with a professional who has expertise in this field can help you navigate your options and potentially find a way to earn income for work that you’re doing. ²

Keep the conversation open.

One of the best things you can do is to make sure you are having regular conversations about finances and hearing from well-informed sources. There are more resources than ever at your disposal, and working with a trusted financial professional can help ensure that you always know where things stand.

While women can face many challenges as they save for retirement, careful preparation and a creative approach can help you rise to the occasion and pursue the fulfillment of your goals.

1. Transamerica.com, 2021
2. AARP.org, 2021

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

National Financial Awareness Day

Tue, 16 Aug 2022 11:00:02 GMT

August 14th is National Financial Awareness Day

Each year, we observe August 14 as a day for learning how to manage finances and become financially independent. National Financial Awareness Day started in 1946 when John Biggins, introduced the ‘Charge It’ card. This opened many opportunities for easy spending, but in return, required keeping a closer eye on your bank statement each month.

National Financial Awareness Day is an important reminder about the need to understand your financial wellbeing because it acts as a checkpoint, prompting you to takes steps toward understanding how much you’re spending and saving each month.

Many Americans’ struggle with finances but getting started is not as difficult as it may seem. It’s as simple as spending less than you earn. The first step is getting organized by creating a budget.

Add up all monthly income, but don’t include anything that you can’t count on.
Add up all monthly expenses. You may need to review your credit card and bank records – it’s can be surprising how much you spend each month, especially if you have accounts on auto-pay.
Subtract your income from your expenses. You may find your expenses are more than your income, but now you know and can take steps to reduce expenses and/or increase income.

Physically looking at your financial transactions is a great way to calculate what you’re spending versus how much you’re earning each month. Once you know the details of your monthly spending, you can set a goal on how much you want to save or invest so you can adjust your spending to reach that goal.

When it comes to budgeting, put yourself first. In other words, first put the money you want to set aside for goals into savings or investments. Participate in your employer-sponsored retirement plan. And put any bonuses or raises you receive toward savings. When you make savings a habit, you may find that what you don’t see, you won’t miss.

We often forget that we are all capable of learning finance, but sometimes we need a little guidance. That’s when a financial advisor can step in. An advisor can help with that uncomfortable feeling of not knowing how to responsibly manage your money. By getting to know you and your financial situation and goals, a financial advisor will help you build a plan that helps you better understand your finances so you can work toward reaching your financial goals.

Required Minimum Distributions 101

Tue, 09 Aug 2022 11:00:03 GMT

Understanding mandatory retirement account withdrawals

If you are approaching your seventies, get ready for required minimum distributions. You may soon have to take RMDs, as they are called, from one or more of your retirement accounts.

You can now take some RMDs a bit later in life, which is good. Recent rule changes give your invested savings a little more time to potentially grow in your retirement savings vehicles before that first required drawdown.

What account types require RMDs? Any retirement plan sponsored by an employer, plus traditional Individual Retirement Arrangements (IRAs) and IRA-based retirement plans, such as SIMPLE IRAs and Simplified Employee Pension plans (SEPs). Original owners of Roth IRAs do not have to take RMDs. ¹

You can take your initial RMD from a retirement plan by December 31 of the the calendar year in which you turn 72. You actually have the choice of taking that first annual RMD as late as April 1 of the following year, i.e., the year in which you will turn 73, but you’ll have to take your second RMD by December 31 of that same year. So if you wait 16 months to take your first RMD, you will end up taking both your first and second RMDs from that account in the same year – and since each RMD represents taxable income, that could lead to higher-than-anticipated tax bill for that year. ¹

How are RMDs calculated? The Internal Revenue Service provides calculation formulas in Publication 590-B. Commonly, you calculate your yearly RMD by dividing the balance of your retirement account on December 31 of the previous year by a life expectancy factor, a number you take from tables published within Publication 590-B. ¹

If you have multiple retirement accounts (as many of us do), each one will require an annual RMD calculation. If you own multiple traditional IRAs, you have the choice to calculate RMDs for each of those IRAs and take the combined RMD amounts for all three IRAs from just one of those IRAs. You have the same choice if you have multiple 403(b) plan accounts. ¹

What do you need to do to avoid penalties with RMDs? The most important thing to do is to take them by the annual December 31 deadline. The second most important thing to do is to withdraw the right amount.

If you take an RMD after the December 31 deadline or withdraw less than you should, a penalty may apply. The I.R.S. may levy as much as a 50% tax on the amount not withdrawn. ¹

The good news is some investment firms will update you on your upcoming RMDs well in advance of annual deadlines, and your RMDs may even be calculated for you. This is not a given, however, and even when you receive such information, you must act on it, because it takes time to authorize and execute the RMD.

Lastly, take a look at how the RMD income may affect your taxes. There are ways to manage the tax impact of RMDs, and you can explore those choices with a financial or tax professional.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advisory services offered through AssuredPartners Financial Advisors, a registered investment advisor. AssuredPartners Financial Advisors and LPL Financial are separate non-affiliated entities.

Citations

1. Internal Revenue Service, March 16, 2022

Eliminate The Guesswork

Tue, 02 Aug 2022 21:03:44 GMT

Creating an estate plan is a key component of achieving financial wellness

Most people don’t spend too much time thinking about end-of-life planning on a daily basis. But you may have loved ones who will soon face those issues. While it’s not pleasant to think about, you may be the one who ends up having to sort out their affairs. In addition, there will come a time when you need to think about yourself and your own family.

In a nutshell, estate planning is writing down what you want to happen after you die. This is commonly accomplished using wills, trusts, advance directives and beneficiary designations on accounts. If you don’t have an estate plan when you pass away, you force people to guess what you wanted. Guessing can place a lot of stress on your family. Creating an estate plan is actually one of the most generous things you can do for them. Here are four key reasons to create an estate plan.

Choose How To Distribute Your Assets

An estate plan allows you to allocate your assets according to your wishes. If you don’t have an estate plan, your money and property may not get to the correct person. In addition, some people who get an inheritance in one big sum may have the potential to spend it all pretty quickly. Creating an estate plan identifies specific inheritances for certain beneficiaries, especially those who might be young, immature or irresponsible.

In addition, if there is not a will when you die, it is called dying intestate. Each state has a succession formula for who receives money and property left behind. In most cases, if the state can’t find anyone, it goes to the state where you passed away.

Set Up Care for Dependent Children

Families with dependent children should make a plan for childcare if both parents pass away. Many young couples don’t think about it, but in the event of both of their untimely deaths, they need to appoint someone to be the guardian of their children. Make sure that if you have minor children, that you have named someone to be the proper caretaker. Although it can be uncomfortable having the conversation on who will be the caretaker (your parents or your spouse or partner’s parents, for example), setting up an estate plan can prevent arguing among family members.

Avoid Probate

If you die without a will, your estate will go through probate. The probate process in most states takes a minimum of seven months to allow creditors to put through claims. In addition, it’s a public hearing, which allows people to know your personal business. The probate process can also be expensive, and legal costs will reduce the amount your loved ones inherit. Essentially, the probate process gets in the way of a smooth transition of your assets to your loved ones.

Minimize Taxes

Some advance planning can save your heirs from getting a big tax bill. For example, depending on whether or not your heir is a spouse or non-spouse (and subject to certain rules), they may need to pay income tax on money they inherit and withdraw from a traditional IRA. However, if they inherit a Roth IRA that was funded for five years or more prior to your death, distributions can be taken tax-free. In addition, if you plan to leave behind an estate in excess of $12.06 million (based on 2022 Internal Revenue Service figures), you need to make a plan for estate taxes, or the so-called “death tax.” Some states also have an estate or inheritance tax with a different threshold. You can reduce these estate taxes with an estate plan.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Using your Plan to Help Attract and Retain Employees

Tue, 26 Jul 2022 11:00:03 GMT

More employers are enhancing their retirement plan to compete for new employees — and keep the ones they have

Increasingly, plan sponsors are refreshing their workplace retirement plans to give employees both the opportunity to save more for retirement and the flexibility to use both their personal and employer contributions in innovative ways to manage their financial needs. This trend comes as employers increasingly look to boost their employees’ retirement security and financial well-being, according to findings in the 2022 Next Evolution of DC Plans Survey ¹ from Willis Towers Watson.

The survey results show that more than one in four respondents (28%) expect to make changes to their plans’ automatic deferral features, whereas four in 10 plan sponsors (38%) expect to adopt an innovative contribution strategy. These strategies include allowing participants to use their contributions to reduce student loan debt or directing contributions to an emergency savings fund or a health savings account.

Using the Retirement Plan As a Key Attraction and Retention Tool

More than half of the survey respondents (55%) expect to have attraction and retention issues over the next two years, with one-third (36%) of those considering their retirement plan as an important tool to attract and retain employees. Significant gaps in priorities are expected over the next two years between sponsors that connect their plan with attraction and retention and those who do not. Those that do are focusing on using their defined contribution (DC) plan to enhance employee engagement for retention, raise the importance of attracting new talent and align diversity, equity and inclusion goals.

According to the survey, 75% of employers plan to enhance their defined contribution retirement plan offerings to better support the financial needs of their current employees and remain competitive to potential recruits. Eighty-two percent of employers plan to focus on changing and enhancing the employee experience when engaging with their retirement plans. Almost all employers plan to offer personalized one-on-one support, and 91% plan to boost their digital tools to help employees with budgeting and spending.

The 2022 Next Evolution of DC Plans Survey was conducted during January and February 2022. A total of 363 U.S. employers that sponsor a DC plan participated in the survey. Respondents employ 8.4 million employees and represent a broad range of industries.

The “Great Job Switch?”

According to the Bureau of Labor statistics, while 4.4 million workers decided to leave their jobs in February 2022, about 6.7 million people were hired during that same time. Many industry analysts believe it’s more appropriate to call this trend “The Great Job Switch” instead of “The Great Resignation.”

¹ https://www.napa-net.org/sites/napa-net.org/files/DC Pulse Survey Results_WTW_0322.pdf

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Money in Motion

Tue, 19 Jul 2022 11:00:01 GMT

When it comes to old 401(k) accounts, it pays to know your options

Like most people, you’re likely to change jobs several times during your working life. And you’ll likely have a 401(k) account through your former employer to deal with. Here are the four options for what to do with an old 401(k) account.

1. Leave Your Money Where It Is

If the plan allows, you can leave the assets in your former employer’s 401(k) plan, where they can continue to benefit from any tax-advantaged growth. There is something to be said for having familiar investment choices, and your former employer’s plan may provide access to investment choices and plan services that aren’t available in your new plan.

If you’ve just changed employers, find out if you must maintain a minimum balance in your old plan, because many plans require a minimum balance of $5,000 to remain in the plan. You’ll also want to review and understand the plan’s fees, investment options and other provisions, especially if you may need to access these funds at a later time.

2. Roll Your Money Into a New Employer Plan

If you’re changing jobs, you can roll your old 401(k) account assets into your new employer’s plan (if permitted). Many people like the convenience of having just one account to keep track of and manage. In addition, your new employer’s plan may offer investment options and services not available in your former employer’s plan. This option also maintains the account’s tax-advantaged status.

Find out if your new plan accepts rollovers and if there is a waiting period to move the money. If you have Roth assets in your old 401(k), make sure your new plan can accommodate them. Also, review the differences in investment options and fees between your old and new employers’ 401(k) plans.

3. Roll Over Your Money to an IRA

For more retirement investment options and to maintain the tax-advantaged status of the account, roll your old 401(k) into an individual retirement account (IRA). You will have greater flexibility over access to your savings (although income taxes may apply, along with early withdrawal penalties, if you don’t directly transfer the funds and are under age 59½). Before-tax assets can roll over to a traditional IRA whereas Roth assets can roll directly to a Roth IRA. Review the differences in investment options and fees between an IRA and your old and new employers’ 401(k) plans.

4. Cash Out

Cashing out your old 401(k) may have significant financial consequences. Not only are those funds considered taxable income and subject to an immediate tax withholding, you may also be subject to a 10% early withdrawal tax penalty if you cash out before age 59½. Additionally, withdrawals will lose the potential for tax-deferred growth.

The Bottom Line

If possible, choose an option that allows you to continue to benefit from your savings’ tax-advantaged status and preserve and increase the growth potential of your wealth. Other important factors to consider include fees and expenses, along with available services. Please consider consulting with a tax professional.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Making Portfolios Personal

Tue, 12 Jul 2022 11:00:02 GMT

A recent survey showcases the increasing desire for in-plan ESG investment options

A new survey offers some key insights into why plan sponsors may want to consider building an investment lineup to meet the growing demand for sustainable options from workplace retirement plan participants. Most notably, nearly three-quarters (74%) of retirement plan participants said they would increase their contribution rate if offered sustainable investments, compared to 69% in 2021, according to the Schroders 2022 U.S. Retirement Survey. ¹ Survey respondents said they want their investments to be aligned with their values (87%), and they see environmental, social and governance (ESG) investments as a driver of performance (78%).

In addition, of the 31% of 401(k) plan participants who have ESG options in their plan, 90% invested in those options and 73% estimate allocating 50% or more of their assets to sustainable investments. The survey also revealed where participants want to make an impact. Although ESG is typically associated with issues such as climate action and product integrity, the survey found that the top ESG issues for U.S. investors are actually social in nature—focused on workers and communities. When asked which ESG segments they would like their investments to make an impact on, plan participants that currently invest in ESG, or would if they had the option, said:

Employee welfare/living wage: 51%
Climate change/global warming/carbon reduction: 39%
Human rights: 36%
Biodiversity (pollution, deforestation, clean water): 30%
Diversity and inclusion: 22%
No specific area: 17%.

Guidance for Plan Sponsors and Advisors

The Schroders survey also offers this general guidance for plan sponsors and their advisors:

Plan sponsors that are considering adding ESG options must adhere to the same rigorous fiduciary investment selection and monitoring process.
Any ESG funds included must be based on their economic rationale; engaging with an ESG plan expert may help expedite the process.
Plan sponsors and advisors will also have to plan for a comprehensive campaign to educate participants on ESG investing.
If the plan sponsor selects an investment for the plan based on its ESG attributes, it will need investment managers to provide sufficient data to demonstrate how the fund is promoting ESG and meeting its stated objectives and guidelines.
Once the plan sponsor has a clear understanding of its goals in making ESG options part of the plan offering, an important next step is to ensure the investment policy statement reflects those goals.

For supplemental guidance and information, check out the Defined Contribution Institutional Investment Association white paper, “Incorporating ESG in DC Plans: A Resource for Plan Sponsors.” ²

¹ https://www.schroders.com/en/us/defined-contribution/dc/retirement-survey-2022/

² https://tinyurl.com/2p9y93wh

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

The Retirement Reality Check

Tue, 05 Jul 2022 11:00:02 GMT

Little things to keep in mind for life after work.

Decades ago, there was a book entitled What They Don’t Teach You at Harvard Business School. Perhaps someday, another book will appear to discuss certain aspects of the retirement experience that go unrecognized - the “fine print”, if you will. Here are some little things that can be frequently overlooked.

How will you save in retirement? More and more baby boomers are retiring with the hope that they can become centenarians. That may prove true thanks to healthcare advances and generally healthier lifestyles.

We all save for retirement; with our increasing longevity, we will also need to save in retirement for the (presumed) decades ahead. That means more than budgeting; it means investing with growth and tax efficiency in mind year after year.

Could your cash flow be more important than your savings? While the #1 retirement fear is someday running out of money, your income stream may actually prove more important than your retirement nest egg. How great will the income stream be from your accumulated wealth? ¹

You might have heard of the 4% rule, the concept that retirees should plan to withdraw 4% of the funds in their retirement account balance for each year of retirement. The truth is, figuring out how much money you can or should withdraw each year from your retirement account is a complicated calculation that’s often best left to a financial professional. ²

Opinions vary, and your strategy should always take into account your unique situation. For example, some research suggests that 3.3% is a better goal than 4%. That means, assuming a $1 million account balance, you’d withdraw $33,000 instead of $40,000 during your first year of retirement. A $7,000 annual difference could present you with significant budgeting decisions to make. ²

What will you begin doing in retirement? In the classic retirement dream, every day feels like a Saturday. Your reward for decades of work is 24/7 freedom. But might all that freedom leave you bored?

Impossible, you say? It happens. Some people retire with only a vague idea of “what’s next”. After a few months or years, they find themselves in the doldrums. Shouldn’t they be doing something with all that time on their hands?

A goal-oriented retirement has its virtues. Purpose leads to objectives, objectives lead to strategies, and strategies can impart some structure and order to your days and weeks – and that can help cure retirement listlessness.

Will your spouse want to live the way that you live? Many couples retire with shared goals, but they find that their ambitions and day-to-day routines differ. Over time, this dissonance can be aggravating. A conversation or two may help you iron out potential conflicts. While your spouse’s “picture” of retirement will not simply be a mental photocopy of your own, the variance in retirement visions may surprise you.

When should you (and your spouse) claim Social Security benefits? “As soon as possible” may not be the wisest answer. An analysis is needed. Talk with the financial professional you trust and run the numbers. If you can wait and apply for Social Security strategically, you might realize as much as hundreds of thousands of dollars more in benefits over your lifetimes.

Citations.

1 – transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2021_sr_four-generations-living-in-a-pandemic.pdf [8/1/21]

2 – cnbc.com/2021/11/11/the-4percent-rule-a-popular-retirement-income-strategy-may-be-outdated.html spending [11/11/21]

Rehearsing for Retirement

Tue, 28 Jun 2022 11:00:02 GMT

Try living as a “retiree” for a month or two before you commit to leaving your career.

Imagine if you could preview your retirement in advance. In a sense, you can. Financially and mentally, you can “rehearse” for the third act of your life, while still enjoying the second.

Pretend you are retired for a month or two. Take two steps to act out your rehearsal – one having to do with your budget, the other with your expectations.

Draw up a retirement budget & live on it for one, two, or three months. Make a list of essential expenses (groceries, gas, utilities, mortgage, medicines), and then a list of discretionary expenses (such as movie tickets, dinners out, spa treatments). This may reveal that you can live handily on less than what you currently spend each month.

Next, list your income sources for retirement. They might include Social Security benefits (depending on when you want to claim them), retirement plans, pension checks, dividends, freelance or consulting payments, or other revenue streams. Investment income is also in the mix here, so check with a financial professional to determine a withdrawal rate from those accounts that you can safely maintain through your retirement. (It might differ slightly from the long-recommended 4%.) When you have your list, stack the projected total income up against your essential expenses and see how much you have left over.

Try living off of that level of monthly income for a month or more while you are still working. If it covers your necessary monthly expenses and not much else, then some adjustments in your retirement strategy might be needed – a housing change, a change in your retirement date.

See how it feels to retire. Before you conclude your career, try to arrange some “previews” of your retirement lifestyle. If you want to serve your community, volunteer avidly for a month or two to get a taste of what daily volunteer work is like. If you see yourself traveling enthusiastically at the start of retirement, take a dream vacation or even a couple of consecutive trips (if your schedule allows) to see how they truly fit into your financial picture.

Your “rehearsal” need not be last-minute. If you think you will retire at 65, you could try doing this at 63, 60, or even before then. The earlier your attempt, the more time you have to alter your retirement strategy if needed.

What else should you consider as you rehearse? Besides income, expenses, and the day-to-day retirement experience, there are a few other factors to gauge.

How much cash do you have on hand? Starting retirement with a strong cash position provides you with some insulation if you happen to retire during a market downturn. The possibility of a bear market coinciding with your entry into retirement may make you want to revisit your portfolio allocations as well.

Take a second look at your projected monthly income. Will it be consistent? If it will vary, you will want to address that. If you are in line for a pension, you will face a major, likely irrevocable, financial decision: should it be single life, or joint-and-survivor? The latter option may reduce your pension income in retirement, but give your spouse 50% or more of your pension payments after you die. Your employer might also offer you a lump-sum pension buyout; if that turns out to be the case, you might want to consult with a financial professional who can help you to decide if the lump sum constitutes the better deal versus a lifelong income stream. ¹

How about your entry into Medicare? You may enroll in it at medicare.gov within a window of your 65th birthday (that is, beginning three months prior to your birthday month and ending three months after it). If you sign up before your birthday, you will be covered beginning on the first day of your birthday month. Sign up following your 65th birthday, and you may have to wait for coverage to begin. ²

If you expect to stay on the job after 65, consider signing up for Medicare Part A (the part that pays for hospital care) within the usual window. It will not cost you anything to do so, and sometimes Part A makes up for shortcomings in employer-sponsored health plans. You can enroll in Part B and other Medicare component parts later – within eight months of your retirement, to be precise. You will want to pay attention to that 8-month deadline, as your premiums will jump 10% for every 12-month period afterward that you refrain from enrolling. If you pay for your own insurance, you will still need to enroll in Medicare when you are eligible (Medicare will make that coverage superfluous, so you can anticipate dropping it). ³

Rehearsing for retirement can be very insightful. Some new retirees leave work abruptly only to have their financial and lifestyle assumptions jarred. As you want to make a smooth retirement transition to a future that corresponds to your expectations, test-driving your retirement before it begins is only wise.

Citations.

1 – TheBalance.com, December 13, 2021

2 – Medicare.gov, 2022

3 – CMS.gov, 2022

Creating a Retirement Strategy

Tue, 21 Jun 2022 11:00:03 GMT

Most people just invest for the future. You have a chance to do more.

Across the country, people are saving for that “someday” called retirement. Someday, their careers will end. Someday, they may live off their savings or investments, plus Social Security. They know this, but many of them do not know when, or how, it will happen. What is missing is a strategy – and a good strategy might make a great difference.

A retirement strategy directly addresses the “when, why, and how” of retiring. It can even address the “where.” It breaks the whole process of getting ready for retirement into actionable steps.

This is so important. Too many people retire with doubts, unsure if they have enough retirement money and uncertain of what their tomorrows will look like. Year after year, many workers also retire earlier than they had expected, and according to a 2022 study by the Employee Benefit Research Institute, about 47% do. In contrast, you can save, invest, and act on your vision of retirement now to chart a path toward your goals and the future you want to create for yourself. ¹

Since it’s impossible to predict the future, some people dismiss having a long-range retirement strategy. Indeed, there are things about the future you cannot control: how the stock market will perform, how the economy might do. That said, you have partial or full control over other things: the way you save and invest, your spending and your borrowing, the length and arc of your career, and your health. You also have the chance to be proactive and to prepare for the future.

A good retirement strategy has many elements. It sets financial objectives. It addresses your retirement income: how much you may need, the sequence of account withdrawals, and the age at which you claim Social Security. It establishes (or refines) an investment approach. It examines financial implications and possible health care costs, as well as the transfer of assets to heirs.

A prudent retirement strategy also entertains different consequences. Financial professionals often use multiple-probability simulations to try and assess the degree of financial risk to a retirement strategy, in case of an unexpected outcome. These simulations can help to inform the financial professional and the retiree or pre-retiree about the “what ifs” that may affect a strategy. They also consider sequence of returns risk, which refers to the uncertainty of the order of returns an investor may receive over an extended period of time. ²

Let a retirement strategy guide you. Ask a financial professional to collaborate with you to create one, personalized for your goals and dreams. When you have such a strategy, you know what steps to take in pursuit of the future you want.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – EBRI.org, 2022

2 – Investopedia.com, October 4, 2021

The Behavior Gap and Your Financial Health

Tue, 14 Jun 2022 11:00:01 GMT

How might the behavior gap affect you?

“It turns out my job was not to find great investments but to help create great investors,” writes Carl Richards, author of “The Behavior Gap.” From increasing our budget mindfulness to taking a steadier approach to investing, Richards has drawn attention to how our unexamined behaviors and emotions can be to our detriment when it comes to living a happy and financially sound life. In many cases, we make poor financial decisions when experiencing panic or anxiety due to personal or widespread events. ¹

The Behavior Gap Explained. Coined by Richards, “the behavior gap” refers to the difference between a wise financial decision versus what we decide to do. Many people miss out on higher returns because of emotionally driven decisions, creating a behavior gap between their lower returns and what they could have earned.

Excitement When Stocks Are High. Whether in a bull market or witnessing the hype from a product release, many investors may feel tempted to increase their risks or attempt to gain from emerging investments when stocks are high. This can lead to investors constantly readjusting their portfolios as the market experiences upswings.

Fear When Stocks Are Low. In response to market volatility, investors may feel the need to choose more secure investments and avoid uncertain or seemingly unsafe investments. When stocks are low, a typical response may be to sell and effectively miss out on potential long-term gains.

Short-Term Anxiety and Focus. As humans, viewing aspects of our lives through the lenses of current circumstances is normal. However, one emotional response to any event is letting the moment consume us. Many may find it difficult to think long-term and remember. However, making a rash decision can inhibit the long-term benefit of maintaining a balanced perspective without reactionary behavior.

The market can go up or down at any given point, or it can remain the same. One thing we can control is how we handle our financial strategy. Remembering the likelihood of recovery over time — and the market’s nearly inevitable up-and-down movement — can provide a more logical angle to calm the nerves.

If you’re experiencing financial anxiety in response to the markets, take a breath and remember the potential for long-term gains. Of course, you can and should always reach out to your financial professional for further clarification.

Citations

1. BehaviorGap.com, May 16, 2022

Couples Retiring on the Same Page

Tue, 07 Jun 2022 11:00:01 GMT

Agreeing about what you want from retirement is crucial.

What does a good retirement look like to you? Does it resemble the retirement that your spouse or partner has in mind? It is at least roughly similar?

The Social Security Administration currently projects an average retirement of 18 years for a man and 21 years for a woman (assuming retirement at age 65). So, sharing the same vision of retirement (or at least respecting the difference in each other’s visions) seems crucial to retirement happiness. ¹

What kind of retirement does your spouse or partner imagine? During years of working, parenting and making ends meet, many couples never really get around to talking about what retirement should look like. If spouses or partners have quite different attitudes about money or dreams that don’t align, that conversation may be deferred for years. Even if they are great communicators, assumptions about what the other wants for the future may prove inaccurate.

Are couples discussing retirement, or not? According to a recent survey by Fidelity, seven in ten couples say they communicate at least very well with their partner about financial issues. Couples that do communicate with each other are more than twice as likely to report that they expect to live a comfortable lifestyle in retirement. They are also more likely to report their financial household’s financial health as “excellent” or “very good.” ²

If you’re having trouble building a retirement strategy with your significant other, working with a financial professional may help. According to the same survey, couples that work with a financial professional are more likely to talk about money with each other, feel confident about their finances, and agree on their visions of retirement. This may explain why nearly half of all Baby Boomers work with a financial professional. ²

Be sure to talk about what you want for the future. A few simple questions can get the conversation going, and you might even want to chat about it over a meal or coffee in a relaxing setting. Dreaming and strategizing together, even on the most basic level, gives you a chance to reacquaint yourselves with your financial needs, goals and personalities.

To start, ask each other what you see yourselves doing in retirement – individually as well as together. Is the way you are saving and investing conducive to those dreams?

Think about whether you are making the most of your retirement savings potential. Could you save more? Do you need to? Are you both contributing to tax-advantaged retirement accounts? Are you comfortable with the amount of risk you are assuming?

If your significant other is handling the household finances (and the meetings with financial professionals about a retirement strategy), are you prepared to take over in case of an emergency? When one half of a couple is the “hub” for money matters and investment decisions, the other spouse or partner needs to at least have an understanding of them. If the unexpected occurs, you will want that knowledge.

Speaking of knowledge, you should also both know who the beneficiaries are for your retirement plans, workplace retirement accounts, and investment accounts, and you both need to know where the relevant paperwork is located.

A shared vision of retirement is great, and respect for individual variations on it is just as vital. A conversation about how you see retirement today can give you that much more input to prepare for tomorrow.

Citations.

1 – SSA.gov, 2022

2 – Fidelity.com, 2021

What is an Annuity?

Tue, 31 May 2022 11:00:00 GMT

What you should know about them.

Individuals hold about $2.5 trillion in annuity contracts; a tidy sum considering an estimated $12.2 trillion is held in all types of IRAs. ¹

Annuity contracts are purchased from an insurance company. In exchange, the insurance company makes regular payments to the buyer — either immediately or at some future date. These payments can be made monthly, quarterly, annually, or in a single lump sum. Annuity contract holders can opt to receive payments for the rest of their lives or a set number of years.

The money invested in an annuity grows tax-deferred. The amount contributed to the annuity will not be taxed when the money is withdrawn, but earnings will be taxed as regular income. There is no contribution limit for an annuity.

There are two main types of annuities. Fixed annuities offer a guaranteed payout, usually a set dollar amount or a set percentage of the assets in the annuity. Variable annuities offer the possibility to allocate premiums between various subaccounts. This gives annuity owners the ability to participate in the potentially higher returns these subaccounts offer. It also means that the annuity account may fluctuate in value.

Indexed annuities are specialized variable annuities. During the accumulation period, the rate of return is based on an index. Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contract. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made before age 59½, a 10% federal income tax penalty may apply (unless an exception applies). The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities are not guaranteed by the FDIC or any other government agency.

Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks as well as charges and expenses. You are encouraged to read the prospectus carefully before investing or sending money to buy a variable annuity contract. The prospectus is available from the insurance company or your financial professional. Variable annuity subaccounts will fluctuate based on market conditions and may be worth more or less than the original amount invested when the annuity expires.

Case Study: Robert’s Fixed Annuity. Robert is a 52-year-old business owner. He uses $100,000 to purchase a deferred fixed annuity contract with a 4% guaranteed return.

Over the next 15 years, the contract will accumulate, tax-deferred. By the time Robert is ready to retire, the contract should be worth over $180,000.

At that point, the contract will begin making annual payments of $13,250. Only $7,358 of each payment will be taxable; the rest will be considered a return of principal.

These payments will last the rest of Robert’s life. Assuming he lives to age 85, he’ll eventually receive over $265,000 in payments.

Citations

1. Investment Company Institute, 2020

Should You Downsize for Retirement?

Tue, 24 May 2022 11:00:00 GMT

Some retirees save a great deal of money by doing so; others do not.

You want to retire, and you own a large home that is nearly or fully paid off. The kids are gone, but the upkeep costs haven’t fallen. Should you retire and keep your home? Or sell your home and retire? Maybe it’s time to downsize.

Lower housing expenses could put more cash in your pocket. If your home isn’t paid off yet, have you considered how much money is going toward the home loan? When you took out your mortgage, your lender likely wanted your monthly payment to amount to no more than 28% of your total gross income, or no more than 36% of your total monthly debt repayments. Those are pretty standard metrics in the mortgage industry. ¹

What percentage of your gross income are you devoting to your mortgage payments today? Even if your home loan is 15 or 20 years old, you still may be devoting a significant part of your gross income to it. When you move to a smaller home, your mortgage expenses may lessen (or disappear) and your cash flow may greatly increase.

You might even be able to buy a smaller home with cash (if finances permit) and cut your tax liability. Optionally, that smaller home could be in a state or region with lower income taxes and a lower cost of living.

You could capitalize on some home equity. Why not convert some home equity into retirement income? If you were forced into early retirement by some corporate downsizing, you might have a sudden and pressing need for retirement capital, another reason to sell that home you bought decades ago and head for a smaller one.

The lifestyle reasons to downsize (or not). Maybe your home is too much to keep up, or maybe you don’t want to climb stairs anymore. Maybe a condo or an over-55 community appeals to you. Maybe you want to be where it seldom snows.

On the other hand, you may want and need the familiarity of your current home and your immediate neighborhood (not to mention friends close by).

Sometimes retirees underestimate the cost of downsizing. Even the logistics can be expensive. Just packing up and moving a two-to-three-bedroom home will cost about $1,250 if you are resettling locally. If you are sending it long distance, you can expect the journey to cost around $5,000, if not more. If you can’t sell or move everything, the excess may go into storage, and the price tag on that may be around $90 a month. In selling your home, you will probably pay commissions to both your agent and the buyer’s agent that add up to 6% of the sale price. ^2,3,4

Some people want to retire and then sell their home, but it may be wiser to sell a home and then retire if the real estate market slows. If you sell sooner instead of later, you can always rent until you find a smaller house that could save you thousands (or tens of thousands) of dollars over time.

Run the numbers as accurately as you think you can before you make a move. Downsizing always seems to have a hidden cost or two, but for many retirees, it can open a door to long-term savings. Other seniors may find it cheaper to age in place.

Citations.

1 - nerdwallet.com/blog/mortgages/two-ways-to-determine-how-much-house-you-can-afford/ [4/26/22]

2 - investopedia.com/articles/personal-finance/061914/downsides-downsizing-retirement.asp [9/16/21]

3 - moving.com/movers/moving-cost-calculator.asp [4/27/22]

4 - gobankingrates.com/saving-money/home/why-still-wasting-money-storage-units/ [8/31/21]

Retirement Preparation Mistakes

Tue, 17 May 2022 11:00:28 GMT

Why are they made again and again?

Much is out there about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Aside from these blunders, some classic financial missteps plague retirees.

Calling them “mistakes” may be a bit harsh, as not all of them represent errors in judgment. Yet whether they result from ignorance or fate, we need to be aware of them as we prepare for and enter retirement.

Timing Social Security. As Social Security benefits rise about 8% for every year you delay receiving them, waiting a few years to apply for benefits can position you for higher retirement income. Filing for your monthly benefits before you reach Social Security’s Full Retirement Age (FRA) can mean comparatively smaller monthly payments. ¹

Managing medical bills. Medicare will not pay for everything. Unless there’s a change in how the program works, you may have a number of out-of-pocket costs, including dental, and vision.

Underestimating longevity. Actuaries at the Social Security Administration project that around a third of today’s 65-year-olds will live to age 90, with about one in seven living 95 years or longer. The prospect of a 20- or 30-year retirement is not unreasonable, yet there is still a lingering cultural assumption that our retirements might duplicate the relatively brief ones of our parents. ²

Withdrawing strategies. You may have heard of the “4% rule,” a guideline stating that you should take out only about 4% of your retirement savings annually. Some retirees try to abide by it.

So, why do others withdraw 7% or 8% a year? In the first phase of retirement, people tend to live it up; more free time naturally promotes new ventures and adventures and an inclination to live a bit more lavishly.

Talking About Taxes. It can be a good idea to have both taxable and tax-advantaged accounts in retirement. Assuming your retirement will be long, you may want to assign this or that investment to its “preferred domain.” What does that mean? It means the taxable or tax-advantaged account that may be most appropriate for it as you pursue a better after-tax return for the whole portfolio.

Retiring with debts. Some find it harder to preserve (or accumulate) wealth when you are handing portions of it to creditors.

Putting college costs before retirement costs. There is no “financial aid” program for retirement. There are no “retirement loans.” Your children have their whole financial lives ahead of them.

Retiring with no investment strategy. Expect that retirement will have a few surprises; the absence of a strategy can leave people without guidance when those surprises happen.

These are some of the classic retirement mistakes. Why not attempt to avoid them? Take a little time to review and refine your retirement strategy in the company of the financial professional you know and trust.

Citations

1. Forbes.com, December 9, 2021

2. SSA.gov, January 24, 2022

States Are Requiring Retirement Plans

Tue, 10 May 2022 11:00:05 GMT

Will new mandates solve an old financial problem?

Too many Americans save too little for retirement. This problem has been discussed for decades in all kinds of media, and there seems to be no easy way to solve it.

Fourteen states are giving it a try, however: they have passed or introduced laws requiring or urging companies to provide retirement savings opportunities to employees. In most of these 14 states, employers must either sponsor a retirement plan, or automatically enroll their workers in a state program. ¹

Payroll giant ADP notes that a majority of states have considered mandatory retirement saving programs. A similar mandate is being discussed on Capitol Hill: H.R. 2954, informally called SECURE ACT 2.0, would require employers to auto-enroll employees in workplace retirement plans. This bill stalled in Congress in 2021, but the House and Senate are likely to revisit it this year. ^2,3

California and New York are among the states now stipulating worker enrollment. By June 30, 2022, any private employer in California with more than five full-time employees (FTEs) must offer those FTEs a retirement savings program, enroll them in the new CalSavers retirement plan, or face fines after 90 days of non-compliance. New York now requires most businesses and non-profits with ten or more employees to either provide retirement savings choices for them or auto-enroll them in the New York State Secure Choice Savings Program. ^1,4

In Vermont and Washington, the employer mandate is voluntary. In all 14 states, employees have the right to opt out of the state-run retirement programs. ¹

Will efforts like this solve the problem of inadequate retirement saving? Not entirely. Only about 50% of Americans participate in employer-sponsored retirement programs. Tens of millions of Americans lack access to any kind of retirement plan. ⁵

Even if SECURE Act 2.0 becomes law, its automatic enrollment stipulation would not be retroactive. Automatic enrollment would only be a requirement for new workplace retirement plans, not those created in the past. It could also allow employer-sponsored retirement plans to set a deferral rate as low as 3%, and many financial professionals would like to see savers direct greater percentages of their earnings toward retirement. ⁵

The list of states with retirement program mandates either live or oncoming includes California, Colorado, Connecticut, Illinois, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Vermont, Virginia, and Washington. Twenty-one other states have introduced bills into their legislatures that could create similar requirements. ¹

Citations

1. Nasdaq.com, January 12, 2022

2. ADP, January 30, 2022

3. Barron’s, January 3, 2022

4. National Law Review, October 29, 2021

5. MarketWatch, March 31, 2021

Taking Charge of Your Financial Life

Sun, 01 May 2022 22:01:25 GMT

Delegating responsibilities to others may lead to problems down the road.

When you are putting together a household, it isn’t unusual to delegate responsibilities. One spouse or partner may take on the laundry, while another takes on the shopping. You might also decide which one of you vacuums and which one of you dusts. This is a perfectly fine way to divvy up household tasks and chores.

One household task it’s valuable for both partners to take part in, however, is your shared financial life. It’s important, regardless of your level of wealth or stage of life. Counting on one spouse or partner to handle all financial decisions can create a gap for the other partner. Should the one in charge of the money separate, become severely disabled, or pass away, that may leave the other partner in a bind. A situation like that is probably difficult enough without adding additional stress.

Begin the conversation. If you are the partner who isn’t steering the household finances, ask yourself why. It may be that you have preconceived notions about how difficult it might be to educate yourself to make informed decisions. Maybe you know how to do it, but you would simply rather not be bothered. It’s also possible that you recognize that your spouse or partner has a particular expertise in these matters and doesn’t need your help.

Regardless of the reason, it’s probably a good idea that you should at least be able to hop into the driver’s seat, should misfortune strike your household. In that unfortunate circumstance, you should feel confident that whatever the reason or the duration, you won’t have any unnecessary concerns about managing your household’s finances.

For example, what if you have insurance that covers extended care, in case of a severe injury that causes your spouse or partner to be away from work for an indefinite period? How will you be certain that the claim is made? Who will make sure the bills get paid? The job will fall to you.

Getting involved. The good news is that through communication, regular conversations, and a little effort, you can probably learn what you need to know in order to help yourself in these situations. Part of this, too, may be meeting and getting to know the financial professional who works for your household.

The more knowledge you have, the more confident you can become. Starting the conversation is just the first step. It may take you some time to become comfortable in taking a greater role in the decision-making, but when you do, you may feel more confident if the responsibility ever falls solely to you.

Deconstructing Your Debt-To-Income Ration

Tue, 26 Apr 2022 11:00:04 GMT

Use this tool to help keep your debt in check and improve financial wellness

Your debt-to-income ratio (or DTI) measures your monthly debt payment against your monthly income (before taxes or before other deductions have been made). To calculate your DTI, add your total monthly debt payments and divide them by your total pretax monthly income. For example, if you pay $200 a month toward your car loan and another $800 toward your mortgage, your monthly debt payments are $1,000. If your pretax monthly income is $4,000, your DTI is 25% ($1,000 divided by $4,000).Guidelines vary widely, but in general, a DTI of 35% or less is preferred by lenders (closer to 20% is ideal), whereas a DTI over 45% is likely to be considered problematic. Lenders use your DTI ratio to measure your ability to manage debt — so having a low DTI is very important, especially when it comes to buying a home, car or other major asset. The following are some ways to lower your DTI ratio.

Pay Off Debt

Surprise! While it’s easier said than done, reducing your debt can help you reduce your monthly payments, and therefore the percentage of your monthly income going toward debt. Aside from lowering your DTI, paying off your debt can also improve your credit score by reducing your credit utilization ratio, which is your total debt divided by your total available credit. A higher credit score could help improve your chances of qualifying for a mortgage or getting a favorable interest rate.

Increase Your Income

Increasing your income is another way to reduce your DTI. Not only will you have a higher gross income for the calculation, but you’ll also have the opportunity to put more money toward your debt, which can further reduce your DTI. A few ways you might increase your income include working toward a work promotion, working overtime or picking up a second job or side gig.

Lower Your Monthly Payments

By reducing your monthly debt payments, you can reduce the percentage of your income being used for debt. There are several ways to lower your monthly payments, including refinancing your loans or negotiating the interest rate on your debt. While negotiating your interest rate may be possible for credit cards, installment loans — like personal loans, auto loans or student loans — will likely require a refinance to adjust the rate.

Reduce Your Nonessential Spending

Look at where your money is going every month and cut back as much as you can. For example, are you paying for things like subscriptions that you no longer need? Freeing up that extra money in your monthly budget means you’ll have more available to pay off debt. And the more quickly you can pay off debt, the more quickly you can reduce your DTI.

Increase Your Down Payment

When lenders calculate your DTI, they consider the impact of a mortgage loan on your finances and aim to keep your DTI with your mortgage under a certain level. You can reduce your DTI when you own a home by putting down a larger down payment, which will result in lower mortgage payments each month.

This material was prepared by LPL Financial, LLC.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Are You Retiring Within the Next 5 Years?

Tue, 19 Apr 2022 12:55:11 GMT

What to focus on as the transition approaches

You can prepare for the transition years in advance. In doing so, you may be better equipped to manage anything unexpected that may come your way.

How much monthly income will you need? Unfortunately, there is no "magic" number for everyone to strive for. Instead, examine your monthly expenses, considering any trips, adventures, or pursuits you have in mind for the near term. As a test, you can even try living on your projected monthly income for 2-3 months prior to retiring.

Should you downsize or relocate? Your home is not only a significant asset, it also represents a significant part of your lifestyle. After all, our homes are often a reflection of who we are. It follows that the decision of how much home we want—or need—may vary with each situation; it is not strictly a financial decision. However, if you are considering downsizing or relocating, the financial component of the decision should be considered thoughtfully.

How should your portfolio be constructed? For many retirees, the top priority is generating consistent income. With that in mind, your financial professional can adjust your portfolio with respect to your time horizon, risk tolerance, and goals. For example, some retirees prefer to maintain an amount of risk-averse investments that can provide income during retirement. However, even the most risk-averse investments aren't immune to risk entirely.

How will you live? Whether you dream of endless Saturdays or dedicating your time to volunteering, remember that retirement is a beginning. Ask yourself what you would like to begin doing now. Think about how to structure your days to pursue that goal, and give it a shot! There's no better way to prepare for what may come, than to practice in the present.

How will you take care of yourself? If you retire before age 65, Medicare may not be an option. If you're considering early retirement, check if your group health plan extends certain benefits into retirement.

Even if you retire at 65 or later, Medicare may not be your ideal solution. Consider items Medicare doesn't traditionally cover, such as extended care or other specialized medical services.

Review your retirement strategy as the transition approaches. Give your financial professional a call today. An adjustment or two before retirement may be all you need for a successful next chapter.

In the Driver’s Seat

Tue, 12 Apr 2022 11:00:03 GMT

A survey of fiduciary liability insurance carriers offers insights on prioritizing and managing fiduciary duties

In the spring of 2021, Aon Investments surveyed 12 top carriers for fiduciary liability insurance to better understand how plan management typically impacts pricing for fiduciary liability insurance. The ultimate goal was to identify the biggest sources of fiduciary risk within the control of fiduciaries for Employee Retirement Income Security Act of 1974 (ERISA) defined benefit and defined contribution plans. Survey findings were published in Aon’s July 2021 white paper, “ What Drives Fiduciary Liability .” Below are a few key highlights from the survey.

Fees are very important

Fees ranked as top drivers of fiduciary liability insurance premiums. Specifically, 88% of respondents said that it was a “significant” driver of insurance premiums if the investment committee does periodic plan administration fee benchmarking reviews. For defined contribution plans, 75% of respondents said that it was a significant driver of insurance premiums if plans use mutual funds generating revenue sharing or subtransfer agency (sub-TA) type revenues (i.e., revenue sharing), and 63% said mutual funds using retail share classes would be a significant driver of premiums. As such, monitoring and managing fees, along with documentation, should be a very high priority for plan sponsors.

Investment committee minutes are important (but it matters less who takes them)

All respondents said that formally taking minutes would have an impact on premiums. About one-third of respondents said that the impact would be significant and the remainder said that it would be small. However, when asked about the impact of engaging an outside advisor or legal counsel to take minutes, half the respondents said that would have no impact, and most of the remainder described the impact as small.

Investment advisors are viewed as moderate influencers of premiums

When asked about the impact of having an investment advisor, respondents were almost evenly split among the impact being significant, small or nonexistent. The advisor’s firm had little or no impact. Whether the plan sponsor uses an ERISA 3(38) outsourced investment advisor was viewed as having a small impact by 50% of respondents, no impact by 38% and a significant impact by 12%. Free comments in this area of the survey included “experienced advisor is expected,” “the level of investment expertise deployed in investment decisions is a factor in our underwriting and greater expertise would be a positive factor among the multiple factors we consider” and “we are interested in evaluating the overall favorable impact that a 3(38) may have in this space.”

Employer stock in defined contribution plans remains a top concern for insurers

Eighty-eight percent of respondents viewed employer stock as a significant driver of premiums when company stock is held in the plan with no cap on investment limits. That figure drops to 50% when there is a limit on the size of such investments.

Environmental, social and governance (ESG) options in defined contribution plans play a minor role

Sixty-two percent of respondents said that ESG options have no impact on pricing and the remainder described the impact as small.

The white paper can be viewed at: https://tinyurl.com/2p94c5rx .

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Rx for Success

Tue, 05 Apr 2022 11:00:06 GMT

Preventive care strategies to help you deal with healthcare expenses in retirement

According to the 2021 Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 may need approximately $300,000 saved (after tax) to cover health care expenses in retirement. There are a number of factors behind this escalating cost challenge. In general, people are living longer and health care inflation continues to outpace the rate of general inflation. In addition, according to Gallup’s 2021 Economy and Personal Finance Survey, the average retirement age is 62, which is 3 years before the Medicare eligibility age of 65.

Of course, the amount you’ll personally need will depend on when you retire, how healthy you are, and how long you live. Whether retirement is a long way off for you, or it’s starting to get closer, it’s a smart move to start planning for health care costs.

Understand the Timing Trade-offs

As retirement nears, you will have several big decisions to make, including when to stop working, when to take Social Security, how to pay for health care, and how to generate cash flow from your retirement assets. These decisions are interconnected and could make a difference in your living costs and lifestyle in retirement — and when you can retire.

According to the Social Security Administration, approximately one-third of early retirees who claim Social Security at age 62 do so to help pay for health care expenses until they are eligible for Medicare coverage at age 65. But if you can postpone retirement or save enough to cover health care costs until 65, then you may be able to defer your Social Security benefits. Generally speaking, the longer you can wait until age 70 to take Social Security benefits, the more you can collect.

Save as Much as You Can

Now is the time to save as much as you can, especially if you are within 10 years of retirement. In 2022, you can contribute up to $20,500; if you’re age 50 or older, you can make an additional catch-up contribution up to $6,500, for a total contribution of $27,000. If you can’t save that much, just make sure you are saving enough to get your full employer match, if offered.

Take Advantage of a Health Savings Account

If you have access to a health savings account (HSA) through your employee benefits, they are a financially smart way to set aside money for expenses related to your health. Contributions reduce your taxable income, and earnings growth and qualified withdrawals are also tax-free. Many programs allow you to invest your HSA money once you hit a certain threshold. This makes it a great way to save for future health expenses during retirement. For 2022, you can contribute a maximum of $3,650 (individual coverage) and $7,300 (family). For those age 55 or older, the Internal Revenue Service allows an additional catch-up contribution of $1,000.

Sidebar: Rx Retrospective

Rx is commonly known as the symbol for a medical prescription. However, the symbol is derived from the Latin word recipe or “recipere,” which means “to take.” The word was later abbreviated and became Rx as we know it today.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

A Window Into Wellness

Thu, 31 Mar 2022 11:00:03 GMT

A recent survey sheds light on the state of financial wellness since the pandemic.

According to the TIAA 2022 Financial Wellness Survey, Americans currently define financial wellness as simply feeling comfortable with their financial situation. Over 50% believe wellness is defined as having the means to take care of family, not worrying about money or debt, and feeling protected financially from life’s unexpected events. In fact, 51% of Americans are now more aware of their overall financial wellness since the pandemic.

Over the past two years:

Thirty-seven percent say their financial wellness increased
Forty-two percent say it stayed the same
Twenty-one percent say it decreased

However, when it comes to actually achieving overall financial wellness during the pandemic, many people still feel challenged in a number of ways including:

While 7 in 10 people say they have a budget, only 25% of them actually follow it
Six in ten people report some or a great deal of stress regarding their finances
Only 38% have a written financial plan; only 16% have one created by a professional
Seventy-eight percent say they have an emergency fund; less than half say they can cover six months of expenses.

It’s probably no surprise that workers who have participated in a financial wellness program are twice as likely to have a high financial wellness rating than those who are not offered resources or who do not participate (32% vs. 15%). The survey indicates that higher financial wellness ratings can translate into improved engagement with their retirement plan.

Implications for improving retirement outcomes

Ninety-two percent of those with high financial wellness scores report understanding their retirement plan extremely or very well. Conversely, 39% with low financial wellness scores report understanding their plan extremely or very well.

Of those employees who have participated in a financial wellness program:

Fifty-four percent are confident they will retire when they want
Fifty-four percent are confident they will afford the retirement lifestyle they want
Fifty percent are confident they will not run out of money.

In addition, people with higher financial wellness scores are willing to put more money toward retirement. If given an additional $200 a month, nonretired Americans would put an average of 60% toward their retirement savings. This increases to 71% among those who rate their financial wellness higher (vs. 45% of those with low financial wellness). Those with higher financial wellness are also already more likely to have retirement savings and to be contributing to an employer retirement plan.

The TIAA “Financial Wellness Survey” was conducted online from October 22 to November 3, 2021, surveying 3,008 Americans ages 18 and older on a broad range of financial management issues and topics. It can be viewed at: https://tinyurl.com/5e2vpvbm .

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2022 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

How Market Cycles Can Impact Retirement

Tue, 22 Mar 2022 12:40:31 GMT

Sequence of returns can play a role in your overall portfolio.

A thoughtful retirement strategy may help you pursue your many retirement goals. That strategy must consider many factors, and here are just a few: your income needs, the order of your withdrawals from taxable and tax-advantaged retirement accounts, the income tax implications of those withdrawals, and sequence of return risk.

Just what is the sequence of return risk? In brief, it is the risk that market declines in the early years of retirement, combined with steady withdrawals, could reduce your portfolio’s outlook.

A recent CNBC article mentioned how sequence of return risk can affect retirement accounts. It used a 20-year example – someone retiring in 2000 with $1 million in an account tracking the returns of the S&P 500, making withdrawals of $40,000 a year that increased 2% annually in view of inflation.

In 2000, a bear market began. The 37% pullback for the S&P 500 that occurred in 2000-02 would have reduced the $1 million account to about $470,000 by January 1, 2020, the end of the 20-year period. The balance reflects the annual withdrawals of $40,000 and the 2009-20 bull market. ¹

Now, if the order of yearly returns were flipped, the portfolio would show much different performance. At the end of the 20-year period, the retiree would have had more than $2.3 million in that account after the exact same schedule of income distributions. ¹

It’s critical to point out that investing involves risk, and past performance does not guarantee future results. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

The S&P 500 Composite Index is an unmanaged index that is considered representative of the overall U.S. stock market. Individuals cannot invest directly in an index, and index performance is not indicative of the past performance of a particular investment.

In retirement, it is vital to address risk and volatility. You have less time and may have fewer opportunities to rebuild your savings. Fortunately, there are ways to address the challenge of sequence of return risk and manage your portfolio risk while looking for opportunities.

Citations

1. CNBC, January 21, 2022

When should I claim Social Security benefits?

Tue, 15 Mar 2022 11:00:05 GMT

At what age you elect to begin taking your Social Security Benefits is a big decision – a decision that should not be taken lightly. In fact, it’s a wise exercise to model different scenarios to determine the best option for you and your family.

When making your election consider each of the following:

Am I planning to work and have earned income while I draw benefits?

If you claim benefits before your Full Retirement Age (FRA), you will need to be mindful of the amount you can earn and not be affected by a penalty. For 2022, benefits are reduced by $1 for every $2 a worker earns above $19,560.00.
At FRA, your income is no longer a factor, and you will not be impacted by any penalty. You can simply earn all you want.

If I am married, how does my election affect my spouse and their election?

During the planning period, be sure to calculate the benefit of your spouse. Will one of you have a much higher benefit than the other?
Should the high wage earner hold off on claiming their benefit until FRA or age 70?
Often misunderstood is the survivor benefit when the first spouse passes away. The survivor will be reduced to one monthly Social Security check, which will be the larger of the two. Household expenses do not decrease by 50% when the first spouse passes away.

If I am divorced, what are my benefits and how does it impact my former spouse’s benefits?

You and your former spouse would have had to have been married for 10 years.
If your former spouse’s benefit is more than 50% of your individual benefit, you will receive an additional payment to at least equal 50%. If your Social Security benefits are greater than 50% of your former spouse, no additional benefit available.
Does not impact former spouse benefits.

What age can I claim benefits?

Benefits can be claimed as early as age 62, with a penalty.
Age 65 is no longer FRA and is often confused with Medicare age.
FRA is determined by your year of birth: 66 for individuals born between 1943 and 1954; 67 for individuals born after 1960

Will my monthly check increase?

Generally speaking, each year a cost-of-living increase will be determined and included with the January payment
If you are enrolled in Medicare B and claiming Social Security benefits, your monthly Social Security check will be reduced by the amount of your Medicare B premium.
Taxes can be withheld from monthly social security income checks.

Concerns continue around the solvency of Social Security Benefits and how that will impact the American retiree. If possible, the best solution is to create additional income sources during your working years and take advantage of your employer-sponsored retirement plan. Minimize unnecessary spending and become a good steward of your earnings and savings. Stay abreast of changes to better understand how they might affect you, your family, and/or beneficiaries.

As a reminder register for your online account at www.SSA.gov to monitor your progress and projections.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Major Risks to Family Wealth

Tue, 08 Mar 2022 12:00:17 GMT

Protect your family assets for future generations.

All too often, family wealth fails to last. One generation builds a business—or even a fortune— lost in the ensuing decades. Why does it happen, again and again?

Often, families fall prey to serious money blunders, making classic mistakes, or not recognizing changing times.

This article is for informational purposes only and is not a replacement for real-life advice. Make sure to consult legal and tax professionals before modifying your overall estate strategy.

Procrastination . This is not just a matter of failing to create a strategy but also failing to respond to acknowledged financial weaknesses.

As a hypothetical example, say there is a multimillionaire named Alan. The designated beneficiary of Alan's six-figure savings account is no longer alive. He realizes he should name another beneficiary, but he never gets around to it. His schedule is busy, and updating that beneficiary form is inconvenient. Alan forgets about it and moves on with his life.

However, this can cause significant headaches for those left behind. If the account lacks a payable-on-death (POD) beneficiary, those assets may end up subject to probate. Using our example above, Alan's heirs may discover other lingering financial matters that required attention regarding his retirement accounts, real estate holdings, and other investment accounts. ¹

Minimal or absent estate management . Every year, some multimillionaires die without leaving any instructions for distributing their wealth. These people are not just rock stars and actors but also small business owners and entrepreneurs. According to a recent Caring.com survey, 58% of Americans have no estate preparations in place, not even a will. ²

Anyone reliant on a will alone may risk handing the destiny of their wealth over to a probate judge. The multimillionaire who has a child with special needs, a family history of Alzheimer's or Parkinson's, or a former spouse or estranged children may need a greater degree of estate management. If they want to endow charities or give grandkids an excellent start in life, the same idea applies. Business ownership calls for coordinated estate management with consideration for business succession.

A finely crafted estate strategy has the potential to perpetuate and enhance family wealth for decades, and perhaps, generations. Without it, heirs may have to deal with probate and a painful opportunity cost—the lost potential for tax-advantaged growth and compounding of those assets.

The lack of a “family office.” Decades ago, the wealthiest American households included offices: a staff of handpicked financial professionals who supervised a family’s entire financial life. While traditional “family offices” have disappeared, the concept is as relevant as ever. Today, select wealth management firms emulate this model: in an ongoing relationship distinguished by personal and responsive service, they consult families about investments, provide reports, and assist in decision-making. If your financial picture has become far too complex to address on your own, this could be a wise choice for your family.

Technological flaws. Hackers can hijack email and social media accounts and send phony messages to banks, brokerages, and financial professionals to authorize asset transfers. Social media can help you build your business, but it can also expose you to identity thieves seeking to steal both digital and tangible assets.

Sometimes a business or family installs a security system that proves problematic—so much so that it's silenced half the time. Unscrupulous people have ways of learning about that, and they may be only one or two degrees separated from you.

No long-term strategy in place. When a family wants to sustain wealth for decades to come, heirs will want to understand the how and why, and be on the same page. If family communication about wealth tends to be more opaque than transparent, then that communication may adequately explain the mechanics and purpose of the strategy.

No decision-making process. In some high net worth families, financial decision-making is vertical and top-down. Parents or grandparents may make decisions in private, and it may be years before heirs learn about those decisions or fully understand them. When heirs do become decision-makers, it is usually upon the death of the elders.

Horizontal decision-making can help multiple generations commit to the guidance of family wealth. Financial professionals can help a family make these decisions with an awareness of different communication styles. In-depth conversations are essential; good estate managers recognize that silence does not necessarily mean agreement.

You may attempt to reduce these risks to family wealth (and others) in collaboration with financial and legal professionals. It is never too early to begin.

Citations

1. SmartCapitalMind.com, February 4, 2022

2. Yahoo.com, January 18, 2022

Social Security 101

Tue, 01 Mar 2022 12:00:17 GMT

How does Social Security work?

The historical Social Security Act was signed into law by President Franklin D. Roosevelt on August 14, 1935. In January 1937, the government started collecting taxes and the first one-time, lump-sum payments were made. It wasn’t until 1940 that retirees started receiving regular monthly payments.

Initially, only the primary worker received benefits. A 1939 law added survivor’s benefits and benefits for the retiree’s spouse and children. Finally, in 1956, disability benefits were added.

Ida Fuller was the first recipient of the monthly social Security Benefits in 1940, and so much as changed since then!

As recently as 2015, the U.S. Supreme Court issued a decision in Obergefell v. Hodges, holding that same sex couples have a constitutional right to marry in all states and have their marriage recognized by other states. This decision made it possible for more same-sex couples and their families to benefit from Social Security programs.

Social Security has supported many individuals and families with monthly income, including a small death benefit of $255.00 (if certain requirements are met).

How does Social Security work?

One becomes eligible for benefits by working at a Social Security covered job to earn 40 credits.
Your highest 35 years of earnings are tallied. If you work more than 35 years, the highest 35 years earnings will count. If you worked fewer than 35 years, the years with no earnings will count as zeroes.
Your benefit will be 70-75% of your Primary Insurance Amount (PIA) amount depending on your year of birth.
You can apply for benefits as early as 62. If you elect benefits at age 62, you will receive lower benefits for life.
Full Retirement Benefits (FRA) is determined by your year of birth, generally between 66 and 67. FRA is often misunderstood by individuals as it is often thought it is the same as Medicare eligibility. By waiting until FRA, you can avoid any early reductions in benefits. For those that can wait to draw benefits until age 70, the SSA benefit will increase by 8% per year, pro-rated monthly.
Each October, any increase in benefits due to an increase in cost of living are determined by the Consumer Price Index and is announced. Those that draw benefits will see an increase in their January retirement check.

Your election for Social Security Retirement Benefits requires thoughtful consideration and should not be taken lightly. There are also special rules that apply to spousal benefits, divorced spouses, survivor benefits, taxability of benefits, and how working affects your Social Security benefits.

More information can be found online at SSA.gov or by calling 800-772-1213. In person meetings with SSA can be hard to schedule and often long wait times are necessary.

Please consult legal or tax professionals for specific information regarding your individual situation.

Roth IRA Conversions

Tue, 22 Feb 2022 12:00:03 GMT

What are your choices? What are the benefits?

If you own an Individual Retirement Account (IRA), perhaps you have heard about Roth IRA conversions. Converting your traditional IRA to a Roth IRA might be a sound financial move depending on your situation.

But remember, this article is for informational purposes only, not a replacement for real-life advice. A professional should be consulted before attempting this type of strategy. Tax rules are constantly changing, and there is no guarantee that the tax treatment of Roth or Traditional IRAs will remain the same as it is now.

Also, Roth conversions have come under much scrutiny during the past few years. Congress has considered legislation that would prevent high-income Americans from Roth conversions. While no action has taken place, it is possible that Roth rules may change in the future.

Why go Roth? Every Roth IRA conversion is based on a belief: the belief that income tax rates will be higher in the future than they are now. If you hold this belief, then you may want to consider a Roth conversion.

Once you are 59½ and have had your Roth IRA open for at least five calendar years, withdrawals of the earnings from your Roth IRA are exempt from federal income taxes. In addition, once five calendar years have passed, you can withdraw your Roth IRA contributions tax-free and penalty-free. ¹

Under current I.R.S. rules, if you are the original owner of a Roth IRA, you never have to make mandatory withdrawals from your account. And you can make contributions to a Roth IRA as long as you continue to have earned income. ²

Currently, if your federal tax filing status is married filing jointly and your adjusted gross income (AGI) is $204,000 or less, you can contribute a maximum of $6,000 to your Roth IRA, $7,000 if you’re age 50 or older. The maximum contribution is also available to single filers with an AGI of $129,000 or less. Depending on how high your AGI is, the amount you are able to contribute may change. ³

Why not go Roth? There are many reasons, but here are two to consider: you have to be prepared for the taxable event and time may not be on your side.

A Roth IRA conversion cannot be undone. The I.R.S. regards it as a payout from a traditional IRA prior to that money entering a Roth IRA, and the payout represents taxable income. That taxable income stemming from the conversion could have tax consequences in the year when the conversion occurs. ⁴

In many respects, the earlier in life you convert a regular IRA to a Roth, the better. Your income may rise as you get older; you could finish your career in a higher tax bracket than you were in when you were first employed. Those conditions relate to a key argument for going Roth: it is better to pay taxes on IRA contributions today than on IRA withdrawals tomorrow.

On the other hand, since many retirees have lower income levels than their end salaries, they may retire at a lower tax rate. That is a key argument against Roth conversion.

You could choose to “have it both ways.” As no one can reliably predict the future of American taxation, some people contribute to both Roth and traditional IRAs – figuring that they can be at least “half right” regardless of whether taxes increase or decrease.

If you do go Roth, your heirs may receive tax-free distributions. Lastly, Roth IRAs can prove to be very useful estate management tools. If I.R.S. rules are followed, Roth IRA heirs may end up with a tax-free inheritance from the account. In contrast, distributions of inherited assets from a traditional IRA are taxed. ¹

Under the 2019 SECURE Act, most non-spouse beneficiaries of a Roth IRA are required to have the funds distributed to them by the end of the tenth calendar year following the year of the original owner’s death. ⁵

Securities offered through LPL Financial. Member FINRA / SIPC . Investment advisory services offered through AssuredPartners Financial Advisors, a registered investment advisor. AssuredPartners Financial Advisors and LPL Financial are separate non-affiliated entities.

Citations

1 - U.S. News, January 27, 2022

2 - Internal Revenue Service, November 27, 2021

3 - Internal Revenue Service, November 5, 2021

4 - Investopedia, February 2, 2022

5 - Forbes, December 14, 2021

RMDs Get a Small Reprieve

Tue, 15 Feb 2022 12:00:04 GMT

2022 brings new life expectancy tables.

For the first time in nearly 20 years, the IRS has released updated actuarial or life expectancy tables. Those who take required minimum withdrawals (RMD) from retirement accounts may already know we use these tables to calculate your RMD. Using these new tables is relatively simple, but here are some considerations to keep in mind.

What’s my RMD? We determine the required amount you must withdraw annually by dividing the previous year-end balance of your qualifying accounts by what the IRS calls a “life expectancy factor.” The newest tables assume we’ll live longer, which may impact the amount you need to withdraw.

What about inherited accounts? There are some exceptions, but you must generally withdraw all assets within ten years, regardless of your life expectancy. The Secure Act eliminated the ability to “stretch” your withdrawals across your lifetime if the original account owner passed away in 2020 or later.

While most RMD calculations are straightforward, the process can get more complicated if you have multiple accounts or other sources of retirement income. Before modifying your current strategy, consider reaching out to your financial or tax professional for help.

Wake-Up Call

Tue, 08 Feb 2022 12:00:07 GMT

Try these morning rituals to get your day off to the right start.

What’s your current morning routine? Maybe it goes something like this: mutter an expletive as the alarm goes off, begrudgingly pull yourself out of bed, throw on a robe and take the dog out, while suddenly realizing that you forgot to set up the coffee maker last night (again)? Or maybe it’s something like this: you don’t mutter an expletive at the alarm clock (because you already woke up at 4 a.m. and couldn’t go back to sleep), pour yourself some coffee (because you did remember to set it up last night), turn on the news (nothing but traffic reports, weather updates and general mayhem) while checking emails and wondering how you’ve received over 25 already. Not to mention that your dog is jumping all over you because he wants to be fed.

If your routine is anything like either of those scenarios, or if you are just searching for a better way to jumpstart your day, check out the following tips.

Tune Into Your “Ikigai”

Your “ikigai” is literally the reason you get up in the morning, which is why tuning into it when you first wake up can be extremely beneficial to your mood for the rest of the day. Your ikigai, also known as your purpose in life, is a Japanese concept that combines the words “iki”, meaning life, and “gai”, meaning benefit. Taking steps toward your ikigai is easy. You can start by practicing any small habits that make you feel good, such as meditation, stretching, walking outside or performing a random act of kindness. For help finding your ikigai, answer the following questions: What do you love? What makes you happy? What gets you really pumped up inside?

Create a Soft Landing

Try to wake up naturally (without an alarm) to the natural light of the morning. This way you’re not waking up to a hideous-sounding alarm causing you immediate anxiety that could remain for the rest of the morning. If that’s not possible, use soft music or something more mellow and happy-sounding as an alarm. You should also set your phone to ”do not disturb” so your sleep isn’t disturbed with notifications and spam emails during the night.

Get Some Fresh Air

Before opening your computer or heading out on your morning commute, take a few minutes to go outside and get some natural light — and take your dog with you. Try not to just think of this as a potty break for the dog — it’s the time when you set yourself up for the day. Neuroscientists call this grounding, and you may find that this creates a very positive mindset and mood and helps you to slow down.

Water Before Coffee

Hydrating before having caffeine can be extremely beneficial as it can improve both your digestive system and metabolism (a bonus if you’re trying to lose weight), reduce any heartburn and indigestion, as well as strengthen your immune system.

Make Some Moves

If possible, wake up 30 minutes earlier than usual and fit in some time to either exercise, stretch or do yoga. Stretching and exercising are beneficial for the brain and engage a brain frequency called SMR, or sensory motor rhythm, which is used all day for cognitive thinking, problem solving and more.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation.

Combatting Cybersecurity Threats

Tue, 01 Feb 2022 12:30:03 GMT

Nearly one-third of retirement plan recordkeepers expect to increase their cybersecurity staff, according to a recent survey.

According to findings in the latest Cerulli Edge U.S. Retirement Edition, the threat of retirement account fraud has increased in recent years — particularly during the remote work environment. As a result, 31% of plan recordkeepers intend to increase staffing capacity to address cybersecurity initiatives.

According to the Cerulli report, the Internet Crime Control Complaint Center of the Federal Bureau of Investigation reported 791,790 cybercrime complaints in 2020 — a 69% jump in total complaints from 2019. Cybersecurity crimes in 2020 resulted in financial losses of more than $4 billion. Although many recordkeepers have not experienced a data breach yet, many believe it’s just a matter of time as the techniques employed by cybercriminals get more sophisticated. One fraud surveillance expert at a large defined contribution (DC) recordkeeper suggested to Cerulli that older participants tend to be the most frequent targets for cyberattacks, partly because they typically have higher account balances than younger employees, but also because criminals may perceive them to be less technologically savvy than younger participants.

Implementing new technologies, such as biometric log-in credentials like thumbprints or facial recognition, is one part of building an effective cybersecurity practice. To prove effective, Cerulli suggests that providers will need to play an active role in encouraging participants to adopt these technologies and enhance the security of their accounts and personal information on their own. Moreover, recordkeepers should look to evaluate the cybersecurity practices of the service providers with whom they exchange or share participant data.

In April, the U.S. Department of Labor (DOL) released cybersecurity guidance for recordkeepers, plan fiduciaries and participants. The guidance includes tips for plan sponsors to evaluate the cybersecurity practices of recordkeepers and other retirement plan service providers and tips plan sponsors and/or service providers should relay to plan participants for their part in keeping their accounts safe (in June, the DOL began conducting retirement plan cybersecurity audits). In addition, the SPARK Institute published cybersecurity best practices last July, which provide specific recommendations for mitigating retirement account fraud. The report offers suggested practices to be implemented by plan fiduciaries, participants and service providers with regard to authenticating accounts, establishing and re-establishing account access, protecting contact data and communications, conducting fraud surveillance and developing custom reimbursement policies.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Money Mantras

Tue, 25 Jan 2022 12:00:05 GMT

Market swings causing you some anxiety? These four money mantras can help you overcome it.

Whether it’s the continuing presence of the COVID-19 pandemic, a sudden boost in prices related to gas, food, housing and other essentials, supply chain hiccups, an uncertain labor market (or any number of other things), the stock market has certainly seen its share of ups and downs over the past six months. As always, it’s impossible to predict what the market will do on any given day. But at the start of a new year, it’s always a good idea to take some deep, measured breaths and focus on some basic money mantras. Doing so will help you push through any anxiety you may be feeling regarding your retirement account (no yoga pose required).

Mantra #1: I Am Investing for the Long Term

An old saying goes, “saving for retirement is a journey, not a sprint.” A volatile market can push the most experienced investors into making emotional decisions. However, it’s never a good idea to change your investments simply because of day-to-day volatility. Set a strategy that’s right for you and stick with it. Having a diversified portfolio can help you build confidence in your long-term plan — so don’t just throw it out the window during big market swings!

Historically, equity markets have trended upward over the long term. However, past performance is not a guarantee of future results. Investing involves risk, so you may want to consider working with a financial professional who can help you review your current tolerance for risk, keeping in mind your other financial goals.

Mantra #2: I Will Diversify My Portfolio

Putting your money into a number of investment options that include different types of asset classes can help reduce risk. Generally speaking, if your dollars are invested in materially different types of investments (stocks, bonds and cash), and market conditions cause one of your investments to decline, all of your money shouldn’t be affected.

A simpler way to understand diversification is to look at the food you put on your plate. The more food groups and colors on your plate, the more nutrients your body consumes and the healthier you are. If, however, you only ate pizza every day, your body would suffer from a lack of key nutrients. The same is true for an investment portfolio’s diversification. Investors who put their money in only one type of asset (such as stocks) are at an increased risk for loss of principal due to a lack of variety in their portfolio.

Mantra #3: I Will Rebalance My Portfolio on a Regular Basis

Over time, market changes can lead to shifts in your portfolio’s asset allocation. For example, you may have started with a 75/25 stock fund-to-bond fund split, but changes in the market caused stocks to now account for 85% of your portfolio’s value. That’s why it’s important to periodically check your asset allocation to see if it aligns with your current strategy and risk tolerance. Keep in mind, you may also want to rebalance to a more aggressive or conservative allocation should your tolerance for risk change due to where you are in life or how close you
are to retirement.

Mantra #4: I Will Seek Professional Help If I Need It

Many people consult with an investment advisor for guidance regarding their retirement plan investments. An advisor can help you determine an appropriate investment strategy to achieve your financial goals that is based on your risk tolerance and time frame.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Everything’s Better With Bacon

Tue, 18 Jan 2022 12:00:10 GMT

It even makes understanding inflation easier.

“Bacon’s the best. Even the frying of bacon sounds like applause. Bacon bits are like the fairy dust of the food community.”

– Jim Gaffigan

Let’s face it: talking about bacon is always fun. It can even help illustrate a topic that has been in the financial media a lot lately — inflation. In 1991, the price of a pound of bacon cost $2.22 (according to the Bureau of Labor Statistics). Thirty years later, in August of 2021, a pound cost $7.10. That’s inflation at work. Inflation is simply the rise in the cost of living, and it eats away at your money’s purchasing power and may not buy as much retirement in the future as it does today.

Over the past several months, inflation has crept back into the financial media limelight. Last year, price increases began to grow out of pandemic-related shutdowns and supply chain disruptions. As an example, the Consumer Price Index, a key measure of inflation, climbed 5.4% in September of 2021 compared with the prior year.

Keep Inflation in Mind in Your Retirement Planning

When you retire, one thing is a given: the cost of basic necessities as well as other things you enjoy will continue to rise. The following table provides some hypothetical examples to help increase your awareness of inflation.

2021 prices are based on Kmotion Research and general averages, including data from the U.S. Labor Department’s Bureau of Labor Statistics. Projections for 2051 prices assume a 3% annual inflation rate.

Get Real With Inflation

When managing inflation risk with your investments, it’s important to understand a couple of basic terms. Your nominal rate of return is the amount of money you make on an investment before expenses — this rate of return does not take inflation into account. Your real rate of return is the nominal return on your investment minus the inflation rate, and gives you a better sense of the purchasing power of the money you make from your investments. For example, if your investment portfolio earns an 8% rate of return in a particular year, and the inflation rate is currently 3%, your real rate of return is just 5%.

Conventional wisdom says you should consider keeping an appropriate amount of your assets allocated to stocks and stock mutual funds to help offset inflation risk. Although past performance is no guarantee of future results, historical average stock returns have stayed ahead of inflation over the long term.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Good Vibrations

Tue, 11 Jan 2022 12:00:18 GMT

A recent survey of retirement plan participants shines a light on their positive perspectives — which can help inform plan changes you may be considering.

Released in October of 2021, American Century’s 9th Annual Survey of Retirement Plan Participants found that more workers are optimistic about their futures in 2021 than they were in 2020. Not surprising, following more than a year of dealing with the pandemic, participants are now more positive about saving, risk and expectations. Because it’s the start of a new year, now may be an opportune time to discuss the findings with you plan advisor as you consider any plan design changes or adding features that may help improve retirement outcomes for your employees.

Optimism is trending up

Fifty-two percent of survey respondents expect their retirement lifestyle to be about the same as it is now.
Three in 10 expect their retirement lifestyle to be better than it is now.
More Millennials expect their retirement lifestyle to be a little or much better than it is now.

However, concerns about running out of money in retirement are felt by workers of all generations and regrets about saving are still felt by many:

Not saving enough was the #1 regret (especially, as you might expect, among those with less savings)
Those with more assets are more likely to regret not taking more time to enjoy life.

As in past years, the overwhelming majority of workers see the value of their retirement plan benefits. Many welcome automatic features to give them the “kick in the pants” or “slight nudge” they are looking for from employers:

More than 6 in 10 support auto enroll and annual auto increases
Four in 10 say retirement plans should be automatic for all
Ninety percent of respondents say their retirement plan is a top benefit
Two in 3 prefer an employer match over a raise, regardless of percentage
Two in 3 support auto enroll at 6%
Three in 4 would leave money in the plan if it had specific investments for retirement withdrawals
Seven in 10 need a little guidance on withdrawals for retirement
More than half are interested in environmental, social and governance (ESG) funds
Two in 3 would be more interested in ESG funds if performance was comparable
Market risk is a top concern, although only slightly more than longevity.

To download a presentation of American Century’s survey findings, go to: https://tinyurl.com/pte2v3ka .

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Breaking Down the Real Costs of Purchasing a Home

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 04 Jan 2022 12:00:17 GMT

Home ownership has several advantages over renting, including lower monthly payments, deductible mortgage interest, and the accumulation of equity. But there is a definite price to pay for these benefits, including the expenses we detail here.

The biggest spend is your initial equity. There are two costs that constitute the beginning equity in your home. The first is earnest money, typically $500 to $2,000 ¹ , that ensures your commitment to the deal. You can get a refund if the deal falls through due to no fault of your own. The other initial spend is your down payment, which typically ranges from 3.5 to 20%. You make the down payment at the closing. Your mortgage covers the difference between the purchase price and the initial equity.

Fees, fees, fees. It seems like every time you turn around, you’ll encounter another fee. Sellers typically pay the broker’s fee, but if you use a buying agent, expect to pay up to 3% ² of the purchase price. Frequently, mortgage lenders charge an origination fee up to about 1% for the privilege of lending you money. You’ll encounter various other fees, such as those for inspections and surveys. Often, you’ll be asked to pay points, which is prepaid interest on the mortgage loan ³ . Other fees may be charged by a homeowner’s association, a title company, the recorder of deeds, and others.

Don’t forget the insurance and taxes. You won’t be able to get a mortgage without first getting homeowner’s insurance, with an average annual premium of approximately $1,200. You may also need flood insurance, based upon your location. Many lenders require you buy private mortgage insurance at an annual cost of 0.5 to 1.0% if your down payment is below 20%. You may also want to buy title insurance to ensure you have clear title to the property. Many folks purchase title-lock insurance to cover losses from mortgage fraud due to identity theft.

Figure move-in costs and initial repairs. Unless you do it yourself, it may cost you several thousand dollars to engage a moving service – the cost depends on the distance to the new property and how much stuff is being moved. In addition, you may face immediate repair expenses for problems that the seller has not agreed to fix before closing. Expensive repairs can include a new roof, new HVAC, structural changes, expansions, landscaping, etc. You may also have to pay a fee for a building permit. The worst-case scenario involves necessary, unexpected repairs not identified in the engineer’s inspection report.

Buying your first home is an enormous step. That’s why it’s essential to have your finances in order first. A well-rounded financial plan will show you how much home you can afford without shortchanging your retirement and other life events. Contact me today to review your financial plan and ensure you are on solid ground before making an expensive commitment. Together, we can find the financial comfort zone for your home purchase.

AssuredPartners Financial Advisors does not offer mortgage or lending services. We suggest that you contact a mortgage or lending professional regarding those services.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.

This material was prepared by LPL Financial, LLC.

Citations:

¹ https://www.hud.gov/topics/common_questions

² https://www.thebalance.com/how-do-buyer-s-agents-get-paid-1798872 [4/22/20]

³ https://www.policygenius.com/homeowners-insurance/how-much-does-homeownersinsurance-cost/ [6/2/20]

Making Sense of Your Credit Score

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 28 Dec 2021 12:00:36 GMT

Anyone who has ever applied for a loan to purchase a car or house has encountered their credit score. This elusive figure can be perplexing, a three-digit assessment of your credit worthiness that has the potential to impact your financial health. We offer insights into understanding your credit score and taking steps to improve it.

Why Credit?

If you want to buy a house or automobile and need to take out a loan, or you wish to take out a credit card to pay for purchases over time, it’s important to have a positive credit history.

There are some general concepts that can help you manage your credit and establish a positive credit history:

Charge only items that you can pay off in a month or two.
Do not pay only the minimum amount on your credit card bill; this will incur interest on the balance, which has the potential to erode your credit.
Pay your bills on time.
Use your credit for larger purchases rather than on small non-durables, such as restaurant meals.

What’s In a Number?

You can get a general sense of your credit worthiness by checking your credit score. The score commonly used by lenders is FICO, a three-digit number from 300 to 850. It fluctuates continually, reflecting the interest rate of your credit cards, outstanding loans, and even a lack of credit.

A score of 700 or above is considered good by many lending standards. You can request a copy of your credit score (there is a small fee) from the three major credit reporting companies, Experian, Equifax, and TransUnion. The score is a snapshot that captures your credit history and current financial status.

Credit Worthiness

Check your credit report once or twice each year, making sure that there are no errors, while using it as a tool to make sure that you’re paying your bills on time and staying within your established credit limits. Such actions will help increase your credit score. You can receive a free copy of your credit report once each year from AnnualCreditReport.com .

If you spot any errors, report the discrepancies to the appropriate credit bureaus (the report may differ among the three). They are required to take reasonable steps to correct any errors.

Your credit report will generally include the following (in addition to your personal information):

Your employer’s name and contact details, along with your income
Those parties that have requested your credit history in the past six months
A list of your charge cards and mortgages, along with their terms and payment history
Your maximum charge amount for each card, your current debts with repayment details, and how many times you have made a delinquent payment
Past accounts that are paid in full
Repossessions, liens, bankruptcies, foreclosures, and court judgements against you for money
Debtor names
All debts cosigned to you
Bill disputes

Current law allows delinquent payments to remain in your report for no more than seven years, and bankruptcies for no more than 10 years. There are special rules related to medical bills.

Establishing Credit

If you are a first-time credit seeker — someone applying for a credit card or loan, for instance — you may have to establish your credit score, which you can do in several ways, including by getting a secured credit card or becoming an authorized user of someone else’s card.

Improve Your Score

Not satisfied with your credit score and want to increase it? There are a number of steps you can take, like paying your bills on time, decreasing the amount of debt you carry, and staying within your established credit limits.

By overseeing your credit history and managing your credit score, you are taking important steps to improving your overall financial health.

This material was prepared by LPL Financial, LLC

Indefinitely Working from Home?

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 21 Dec 2021 12:00:04 GMT

Use this opportunity to save money.

Your savings might not stem from tax breaks, but rather from other financial benefits. You won’t be spending money on commuting, restaurant lunches, after-work happy hours, etc. Now is a great time to update your budget and financial plans accordingly.

You might be surprised at how much you’ll save. USA Today reports that remote workers can save about $4,000 a year by working from home. ¹ Other sources put the annual savings as high as $7,000. ² No offense to Starbucks, but just cutting out daily $6 lattes can make a big difference. You can also save money by not spending on a professional wardrobe, fancy lunches, and drinks after work. Think of the money you’ll save on gasoline (and/or public transportation). You can measurably improve your finances if you apply the $4,000 to $7,000 savings to high-priority items.

Cutting back on child care costs can make a big difference. Although it might not be possible for you to work with children at home, with a little flexibility and creativity you may be able to cut down the time they need to spend in daycare. Consider taking the money that would have been spent on child care and funnel it into your Individual Retirement Account (IRA), or you could increase your 401k contributions to the maximum allowed, which is $19,500 in 2021, thereby ensuring you receive every cent of employer matching funds.

Attack short-term needs first. Consider your immediate priorities. The first should be to establish an emergency fund with at least six months of expenses set aside. You may never use it, but you’ll thank yourself every day for the peace of mind it brings. Another consideration is insurance, both life and health. Setting up your life insurance plans involves a clear-eyed look at how much your family would need if you were no longer able to provide income. Also consider health savings plans and perhaps a better-quality health insurance policy.

You can really improve your investment plans. Saving for retirement is important at any age, and the sooner you start, the more beneficial it becomes. Lest you think it selfish to sock away retirement contributions rather than spending the savings on your kids, remember that you don’t want them to have to support you in your later years. However, your kids will directly benefit by your contributions to a 529 education plan. Perhaps some family life events, like a bigger home, confirmations or bar mitzvahs, weddings, etc., will require long-term savings as well.

Don’t fritter away a golden opportunity. Establishing a budget if you don’t already have one and tracking your spending closely will let you quantify how much you’re saving by working from home. Then it’s a question of clarifying and funding your priorities. Please contact use to discuss your financial plans and how to help you make the most of your current situation.

This material was prepared by LPL Financial, LLC.

Citations:

¹ usatoday.com/story/money/2020/03/22/working-home-likely-save-you-money/5024967002/ [3/22/20]
² doughroller.net/personal-finance/how-much-money-can-you-save-working-from-home/ [12/5/19]

Fed Chair Changes His Tune

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 14 Dec 2021 19:28:35 GMT

Powell’s testimony to Congress may be telling.

If you weren’t paying close attention, you might have missed it.

Fed Chair Jerome Powell dropped the word “transitory” when describing inflation during his recent testimony to Congress. ¹

Powell had told the story of transitory inflation for the past several months while the Consumer Price Index showed eye-popping, year-over-year gains of 5% to 6%. ²

But now it appears that the Fed Chair has changed his tune.

Powell said that rising energy prices, higher rents, and strong wage gains could keep inflation elevated, though he maintained that inflation would decline sometime in 2022. ³

So does that mean it’s time for investors to prepare their portfolios?

Inflation and interest rates are only two factors in an overall investment strategy. And at this point, the Fed has only provided a rough timeline about when to consider raising short-term rates. ⁴

As hard as it can be, sometimes wait-and-see is the best approach. Recent market volatility has been making headlines, which can be unnerving. If you find yourself second-guessing your overall approach, speaking to your financial professional may be a smart move.

The forecasts or forward-looking statements about the 2022 interest rates are based on assumptions, subject to revision without notice, and may not materialize.

Citations

1. Reuters.com, November 20, 2021

2. BLS.gov, November 10, 2021

3. WSJ.com, November 30, 2021

4. CNBC.com, November 10, 2021

Caring for Aging Parents

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Thu, 09 Dec 2021 12:00:04 GMT

There are important steps you can take to help your aging parents.

Many adults have aging parents who are in need of living and health care assistance. There are a number of resources today that can help them grow old gracefully, either in their existing home or in a facility, along with multiple options for financing the cost of the care.

Living options

Living alone

Depending on the independence of your parents, living alone in their existing house may be an option. However, you may need to make several modifications — some of them expensive — to make their home environmentally safe and suitable for an aging person. For instance, important safety features such as a first-floor bathroom, grab bars in hallways in bathrooms, and an emergency response system may be necessary.

If your parent requires assistance with meals or chores, there are several services which can provide support, such as Meals on Wheels, which are free for anyone over 60.

You can also consider an in-home aide if your parent needs additional personal assistance.

Living with Family

Some families choose to move an aging parent into their own home. If you can do this with minimal conflict, this can be beneficial as it avoids having to maintain a second home and of course can be less expensive. If your parent has dementia or other health issues, adult day care can be helpful, as it allows them to socialize with other adults.

Assisted living

If your parents are independent and can care for themselves, they may be eligible to enter a continuing-care retirement community, where they can rent (or purchase) an apartment and be eligible for nursing care, if it becomes necessary. Consider purchasing long-term care insurance, which can help pay for nursing home costs or the cost of an in-home aide.

Nursing home

If your parents need more extensive care and require a nursing home, research the options extensively. You may need to reserve a space far in advance, as waiting lists are often long at popular facilities. The government provides limited financial assistance for families paying for nursing home care. Financing long-term care can be a tremendous challenge for many adults.

Financing long-term care

Medicare will only pay the full cost of professional help if a physician certifies that your parent requires nursing care and if the services are provided by a Medicare-certified home health care agency. However, Medicare will pay for nursing home care for the short-term only, with benefits restricted to low-income individuals with limited assets.

You can offset some of these costs, as you can claim a federal tax credit up to $3,000 off the cost of in-home care or day care.

You can use a flexible spending account, too, which helps your pay for a certain amount of covered expenses with pretax dollars.

With the cost of elderly care continually on the rise, financial planning can be an important step in providing adequate support for your parents’ future well-being.

This material was prepared by LPL Financial, LLC

The Power of the Consumer

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 30 Nov 2021 15:58:04 GMT

In recent months, consumer confidence has been falling.

A confident consumer can be a powerful ally in an economy. But when the consumer starts to have questions, we can measure consumer confidence in everything from retail sales to home buying to the personal savings rate.

In recent months, consumer confidence has been falling as inflation expectations have been rising. So, if inflation slows, does that mean the consumer will regain confidence? It’s possible, but other factors can influence consumer confidence, including perceptions of COVID-19. ^1,2

When the consumer does regain confidence, we may expect it to be a powerful force driving economic growth. Many may base the 2022 U.S. economic outlooks on a rebound in consumer confidence, leading to increased spending. ³

In some ways, the only consumer confidence that matters is yours. Are you optimistic about 2022, or do you have concerns or doubts that are holding you back? We look forward to hearing from you.

The forecasts or forward-looking statements about the 2022 economy are based on assumptions, subject to revision without notice, and may not materialize.

Citations

1. SCA.ISR.UMich.edu, November 2021

2. Conference.Board.org, November 2021

3. MorganStanley.com, November 22, 2021

Is Inflation Peaking?

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 23 Nov 2021 12:00:06 GMT

One lesser-known indicator is called the Baltic Dry Index.

You see it in prices at the grocery store and the gas station. You feel it in your monthly budget. So why don’t the financial markets seem too concerned about inflation?

Remember, financial markets are considered “discounting mechanisms,” meaning they are looking six- to nine-months into the future. And by June 2022, the financial markets expect that inflation will lower than today. ¹

One lesser-known indicator helps support that forecast is called the Baltic Dry Index. It measures the cost of transporting raw materials, such as coal and steel. The index has been trending lower for several weeks, which in the past has suggested that prices may be more manageable in the months ahead. ²

No indicator is fool-proof. That’s why the Baltic Dry Index is just one of the many indicators that our professionals follow when watching inflation. They also keep a close eye on the Fed, which is responsible for controlling inflation. ³

With the economy improving, the Federal Reserve has indicated it will be tapering bond purchases this month. That may help with inflation. The Fed also has prepared the markets for higher interest rates in 2022. That, too, may help. ⁴

For now, it’s important to understand that Inflation can influence interest rates, which often play a role in how a portfolio is constructed. We’re keenly focused on what’s next for inflation to determine if any portfolio changes are appropriate in the future.

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.

Citations

1. Investopedia.com, 2021

2. CNBC.com, November 10, 2021

3. ClevelandFed.org, 2021

4. CNBC.com, November 3, 2021

2022 Contribution Limits

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 16 Nov 2021 12:00:06 GMT

Is it time to contribute more?

Preparing for retirement just got a little more financial wiggle room. The Internal Revenue Service (IRS) announced new contribution limits for 2022.

Staying put for 2022 are traditional Individual Retirement Accounts (IRAs), with the limit remaining at $6,000. The catch-up contribution for traditional IRAs remains $1,000 as well. ¹

For workplace retirement accounts (i.e. 401(k), 403(b), amongst others), the contribution limit rises $1,000 to $20,500. Catch-up contributions remain at $6,500. ¹

Eligibility for Roth IRA contributions has increased, as well. These have bumped up to $129,000 to $144,000 for single filers and heads of households, and $204,000 to $214,000 for those filing jointly as married couples. ¹

Another increase was for SIMPLE IRA Plans (SIMPLE is an acronym for Savings Incentive Match Plan for Employees), which increases from $13,500 to $14,000. ¹

If these increases apply to your retirement strategy, a financial professional may be able to help make some adjustments to your contributions.

Once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA) or Savings Incentive Match Plan for Employees IRA in most circumstances. 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.

Once you reach age 72, you must begin taking required minimum distributions from your 401(k), 403(b), or other defined-contribution plans in most circumstances. Withdrawals from your 401(k) or other defined-contribution plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner's death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Citations

1. CNBC.com, November 5, 2021

Wise Decisions with Retirement in Mind

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 09 Nov 2021 14:54:54 GMT

Certain financial & lifestyle choices may lead you toward a better future.

Some retirees succeed at realizing the life they want; others don’t. Fate aside, it isn’t merely a matter of investment decisions that makes the difference. There are certain dos and don’ts – some less apparent than others – that tend to encourage retirement happiness and comfort.

Retire financially literate. Some retirees don’t know how much they don’t know. They end their careers with inadequate financial knowledge, and yet, feel they can prepare for retirement on their own. They mistake creating a retirement income strategy with the whole of preparing for retirement, and gloss over longevity risk, risks to their estate, and potential health care expenses. The more you know, the more your retirement readiness improves.

A goal to retire debt free – or close to debt free? Even if your retirement savings are substantial, you may want to consider reviewing your overall debt situation. ¹

Retire with purpose. There’s a difference between retiring and quitting. Some people can’t wait to quit their job at 62 or 65. If only they could escape and just relax and do nothing for a few years – wouldn’t that be a nice reward? Relaxation can lead to inertia, however – and inertia can lead to restlessness, even depression. You want to retire to a dream, not away from a problem.

The bottom line? Retirees who know what they want to do – and go out and do it – are positively contributing to their mental health and possibly their physical health as well. If they do something that is not only vital to them, but important to others, their community can benefit as well.

Retire healthy. Smoking, drinking, overeating, a dearth of physical activity – all these can take a toll on your capacity to live life fully and enjoy retirement. It is never too late to change habits that may lead to poor health.

Retire where you feel at home. It could be where you live now; it could be a nearby place where the scenery and people are uplifting. If you find yourself lonely in retirement, then look for ways to connect with people who share your experiences, interests, and passions; those who encourage you and welcome you. This social interaction is one of the great, intangible retirement benefits.

Citations

1. CNBC.com, December 2, 2020

The Many Faces of Risk

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 02 Nov 2021 16:21:47 GMT

Knowing the different types of investment risk can help you cope with market volatility.

When was the last time you checked your retirement plan balance? If your balance was less than it was the last time you checked, you probably felt a bit of pain. Everybody does. Where exactly does that pain come from? It’s called risk, and all investments involve some degree of risk. In finance speak, risk refers to the degree of uncertainty and/or potential financial loss inherent in an investment decision. In general, as investment risks rise, investors seek higher returns to compensate themselves for taking such risks.

Every saving and investment product has different risks and returns. Differences include how readily investors can get their money when they need it, how fast their money will grow, and how safe their money will be. Let’s take a look at the many faces of risk we all experience as investors. While it may not take the pain away, it will at least help you cope a little better with market volatility.

Business Risk

With a stock, you are purchasing a piece of ownership in a company. With a bond, you are loaning money to a company. Returns from both of these investments require that the company stays in business. If a company goes bankrupt and its assets are liquidated, common stockholders are the last in line to share in the proceeds. If there are assets, the company’s bondholders will be paid first, then holders of preferred stock. If you are a common stockholder, you get whatever is left, which may be nothing.

One of the advantages of investing in a stock fund (versus a single company’s stock) in your retirement plan is that business risk is mitigated to a certain degree. Because your money is diversified among several companies, the business risk is spread out. The same can be said about investing in a bond fund versus a single bond issuer (in particular a single corporation).

Volatility Risk

This is the type of risk you are likely most familiar with (and the one that you hear about the most in the media each day). Even when companies aren’t in danger of failing, their stock price may fluctuate up or down. Market fluctuations can be unnerving to some investors. A stock’s price can be affected by factors inside the company, such as a faulty product, or by events the company has no control over, such as political or market events. The 2008 financial crisis and the onset of the COVID-19 pandemic in 2020 were prime examples of market events that significantly affected stock prices.

Inflation Risk

Inflation is a general upward movement of prices. Inflation reduces purchasing power, which is a risk for investors receiving a fixed rate of interest. The principal concern for individuals investing in cash equivalents is that inflation will erode returns.

Interest Rate Risk

Interest rate changes can affect a bond’s value. If bonds are held to maturity, the investor will receive the face value, plus interest. If sold before maturity, the bond may be worth more or less than the face value. Rising interest rates will make newly issued bonds more appealing to investors because the newer bonds will have a higher rate of interest than older ones. To sell an older bond with a lower interest rate, you might have to sell it at a discount.

Liquidity Risk

This refers to the risk that investors won’t find a market for their securities, potentially preventing them from buying or selling when they want. This can be the case with the more complicated investment products. It may also be the case with products that charge a penalty for early withdrawal or liquidation such as a certificate of deposit (CD).

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Go to the Head of the Class

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 26 Oct 2021 11:00:03 GMT

Go to the Head of the Class

According to Nationwide’s 8th Annual Social Security Consumer Survey, more than half of Americans express confidence that they know exactly how to optimize their Social Security benefits. However, only 6% actually understand all the factors that determine the maximum benefit someone can receive. In addition, the report highlighted additional knowledge gaps:

A full 39% don’t know at what age they are eligible to receive their full benefits.
Just over half (51%) do not have a clear understanding of how much they will receive in future income.
Over a third (37%) incorrectly assume that Social Security benefits are not protected against inflation.
Nearly half (45%) mistakenly believe if they claim their benefits early, their benefits will go up automatically when they reach full retirement age.

By mastering these lessons, you’ll immediately go to the head of the class for retirement planning—and avoid being an unfortunate statistic in some company’s future survey!

Lesson #1: Your “full retirement age” for Social Security benefits is the age at which you may first become entitled to full or unreduced retirement benefits.

Match your birth year to the full retirement ages shown below. Now, kindly memorize it!

Birth Year Full Retirement Age

1955 66 + 2 months

1956 66 + 4 months

1957 66 + 6 months

1958 66 + 8 months

1959 66 + 10 months

1960 & later 67

Lesson #2: Social Security will only replace a portion of your preretirement income.

The rule of thumb is that you’ll need to replace about 75%–80% of your preretirement income. Social Security will help fund part of your income needs, generally somewhere between 25%–40% (depending on your earnings history). Your personal savings and retirement account will have to make up the difference.

Lesson #3: The longer you wait until you start taking your Social Security benefits, the more money you’ll receive.

Age 62 is the minimum age at which you can choose to begin receiving Social Security benefits. However, the math is pretty black and white: claiming earlier gives you a reduced benefit and claiming later gives you an increased benefit. For each year you postpone taking your benefit (until age 70), your monthly check will be larger. Check out the Social Security Benefits Planner (www.ssa.gov/planners) for more comprehensive information, including calculators and other resources.

Lesson #4: Social Security benefits are somewhat protected against inflation.

For 2021, the Social Security Administration is paying out a cost-of-living adjustment of 1.3%. In planning for your retirement income, it’s important to note that any cost-of-living adjustment from the Social Security Administration can vary each year and is not guaranteed. Cost-of-living adjustments are typically announced in October of each year.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Want to Improve Retirement Outcomes? Make Sure Employees Understand Social Security Basics

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 19 Oct 2021 21:03:56 GMT

New research reveals Americans have a significant knowledge gap regarding Social Security benefits.

According to a recent survey ¹ , more than half of Americans express confidence that they know exactly how to optimize their Social Security benefits. However, only 6% actually understand all the factors that determine the maximum benefit someone can receive. In addition, the report highlighted additional knowledge gaps:

A full 39% don’t know at what age they are eligible to receive their full benefits.
Just over half (51%) do not have a clear understanding of how much they will receive in future income.
Over one-third (37%) incorrectly assume that Social Security benefits are not protected against inflation.
Nearly half (45%) mistakenly believe if they claim their benefits early, their benefits will go up automatically when they reach full retirement age.

Respondents Worry About Social Security’s Future

The report suggests that one big reason that Americans may not be staying informed on the benefits of Social Security is that they have doubts that it will be around when they need it. Approximately 7 in 10 adults age 25+ (71%) worry about the Social Security program running out in their lifetime.

What might the future of Social Security look like? The 2020 Social Security trustees report ² estimated that the combined reserves of the various Social Security programs (retirement, survivor, and disability) would be depleted in 2035 unless changes are made. The Social Security Board of Trustees believes the most likely adjustments will come in the form of reduced benefits or an increase in taxes (or some combination of both). But it’s extremely unlikely that Social Security will go away.

The Opportunity for Plan Sponsors and Advisors

This might be a timely opportunity to help close the knowledge gap that many employees have regarding Social Security benefits. Plan sponsors should work with their advisor and plan recordkeeper to provide educational materials (or possibly provide employees with a quick education campaign) that cover the following:

Realistic Social Security preretirement income replacement expectations
Eligible ages to receive retirement benefits (the range is 62–70)
Definition and clarification of “full retirement age” (for the majority of employees, this will be age 67)
Factors to consider when deciding whether to take benefits earlier versus later
Annual cost-of-living adjustments to Social Security benefits (as an example, in 2021 the cost-of-living adjustment is 1.3%)

Nationwide’s 8th Annual Social Security Consumer Survey can be found at https://tinyurl.com/yxjt8xwf .

¹ Nationwide’s 8th Annual Social Security Consumer Survey, https://tinyurl.com/yxjt8xwf

² At the time of the publication of this newsletter, the 2021 trustees report has not yet been released.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Find Your Happy Place

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 12 Oct 2021 11:00:03 GMT

Follow these three tips to help reach a state of happiness on a daily basis.

Do you find that happiness is hard to come by on some days? With all the challenges of the past year, it’s sometimes just easier to find imperfections in everything and let crankiness rule your day. However, if you want to boost your mood and positivity, here are three things you can do to help find your happy place.

“There is no key to happiness; the door is always open.”
– Mother Teresa

Get Moving

If you find yourself grappling with negative thoughts and emotions, getting outdoors and exercising regularly can boost both your health and your mood. Whether you take a walk, ride a bike, or go for a run, aerobic activity releases mood-boosting hormones within your body that ease stress levels and lift your spirits. When your muscles contract repetitively in exercises like jogging, yoga, or swimming, this increases your body’s production of serotonin. Increased levels of this brain chemical, targeted by many antidepressants, are linked to a happier mood.

Health experts suggest at least 30 minutes of moderate-intensity exercise five days a week or a vigorous 20 minutes three times a week. You can even start small — a brief 15-minute walk around the neighborhood may likely put you in a more cheerful mental space.

“Most folks are as happy as they make up their minds to be.”
– Abraham Lincoln

Don’t Overthink

Did you know that the average adult makes more than 35,000 decisions each day? If this sounds mind-boggling (even crazy), you can Google it. Some prominent institutions stand behind it, including a scientific group at Harvard Medical School and Psychology Today. This may be why “decision fatigue” is a real thing. While having lots of choices may sound great, it can be mentally draining. Every day, you choose from a variety of options, from the time you select what to wear in the morning to the time you decide if you’re going to floss or not before bed. Not only do you have to make these decisions, but the choices can often lead to worry and regret — especially not flossing! Practice limiting your choices — and not putting too much pressure on yourself for making those choices. You can ask yourself: “will this decision lead to major, negative consequences?” If it won’t, make a quick choice and move on. Don’t second-guess yourself. Save the heavy-duty reflections for more significant issues that arise.

“I had an unexplained burst of happiness today. My doctor said not to worry, it will go away.”
– Albert Brooks

Embrace the Small Stuff

You get in your car and turn the ignition…and the car battery is dead. You order your favorite latte…and the barista seems like they are doing you the biggest favor in the world. You call a plumber about performing a minor repair…and they laugh at you, saying they are booked three months out. Let’s face it, these annoyances can steal the joy from our day if we let them.

Researchers say one key to happiness is to notice and appreciate the small pleasures in life. Shift your focus from your to-do list and your worries to the little moments of pleasure within your day. Notice the way your dog looks at you when you’re fixing breakfast. Enjoy the sound of someone laughing at something funny you said. Take in the smell of your favorite latte — preferably the one the snooty barista served you. The next time you find yourself fixating on what is going wrong with your day, concentrate instead on what is going right!

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Pondering the Next Stage in the Evolution of Retirement

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Mon, 04 Oct 2021 20:51:29 GMT

A recent survey confirms that there is no single path to retirement.

Franklin Templeton’s June 2021 “Voice of the American Worker” survey confirms that retirement today feels “less cookie cutter than it used to be,” according to 82% of those polled.

The survey found that individuals can benefit from personalized guidance to achieve their financial goals — an area where a financial advisor can help. The survey also showed that many participants are looking to their employers for more tools and resources. But most of all, the survey found that the way participants think about retirement is changing.

A More Holistic View of Financial Well-Being

The vast majority of survey respondents associate their current physical (74%), mental (70%), and financial (66%) health with well-being. More than half say their financial well-being isn’t primarily about money but includes their health and lifestyle (57%). Interestingly, while workers today place nearly equal importance on mental (81%), physical (80%), and financial (76%) health, they feel the least in control of their financial (55%) health as compared to their physical (62%) and mental (58%) health.

The Future of Workplace Benefits

Three out of four workers want their workplace to provide more resources to help them with their overall financial well-being (75%), believing their employer should provide incentives for good financial habits (79%) — as well as good health habits (78%). In fact, workers are more interested in long-term support over today’s monetary gains, with most preferring a boosted 401(k) match to a raise.

Nine in 10 respondents are also looking for tools to visualize their future and optimize well-being, with top choices being planning tools and resources (89%). Tools designed to help achieve financial independence (35%) and visualize long- and short-term financial goals side by side (35%) top their wish list.

The Changing Retirement Landscape

Eighty percent of respondents agree that the traditional idea of retirement is no longer accurate for most people’s expectations or experiences, while at the same time, three quarters (75%) say that their future financial goals and plans look different today than they did five years ago.

Respondents also feel it is more important to achieve financial freedom than to retire but that financial freedom is not always as attainable. More specifically, 76% of respondents say there is appeal in achieving financial freedom, whereas only 56% think it is likely achievable. At the same time, 69% say there is appeal in retirement, whereas 61% say it is likely achievable — a notably smaller gap.

Workers identified their most important financial milestones today as financial freedom (76%) and financial independence (74%), also indicating that financial independence feels more empowering than retirement (81%). Women find financial independence particularly appealing (81% vs. 68% men).

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

Are Your Taxes Going to Change?

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Wed, 29 Sep 2021 13:47:55 GMT

Wise investors take the “big picture” view.

Most likely, you’ve heard what’s brewing in Washington, D.C., called by one of these names.

The Build Back Better Act. Or the $3.5 trillion budget reconciliation bill. Or the Jobs and Economic Recovery Plan for Working Families. ¹

Regardless of what name you’ve heard, one fact is clear: It is likely to be months before any action is taken.

When bills are being worked on—especially one that’s this size—it’s a good time to take a quick Civics refresher. Right now, the bill is “in committee” with both the House of Representatives and the Senate. The committees are filling in the policy details and the exact financial figures, which can be a long process. ²

It will then be up to the House and Senate to vote on an identical version of a final bill—if both can agree to a final version. ²

Right now, it would be hasty to make any portfolio changes based on what’s being discussed and debated. An ambitious investor would have to guess at what policies will be in the final bill, estimate the financial impact, and determine what portfolio changes should be made. That’s a tall order.

So as difficult as it may be, the best approach is to wait-and-see. We work with professionals who are watching every twist and turn. If something starts to take shape, we will evaluate the impact.

We also understand that some of you may have concerns about whether your taxes are going to change. If that’s the case, please reach out. We would welcome the chance to speak with you.

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and financial professionals before modifying your tax strategy.

Citations

1. Forbes.com, August 25, 2021

2. NPR.org, September 14, 2021

Annual Financial To-Do List

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Wed, 22 Sep 2021 21:24:12 GMT

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 2022, 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. ¹

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.

Once you reach age 72, you must begin taking required minimum distributions from a traditional Individual Retirement Account in most circumstances. 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.

To qualify for the tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner's death. Employer match is pretax and not distributed tax-free during retirement.

Make a charitable gift. You can claim the deduction on your tax return, provided you follow the Internal Review Service guidelines and itemize your deductions with Schedule A. The paper trail can be 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 IRS 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. ²

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 the tax rules as they relate to home-based businesses. ³

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 $3,650 contribution for 2022 if you are single; $7,300 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. ⁴

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.

Pay attention to asset location. Tax-efficient asset location is one factor that can be considered when creating an investment strategy.

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.

Consider consulting your tax, human resources, or accounting professional before modifying your withholding status.

Did you get married in 2021? If so, it may be an excellent time to review 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 2022, you may want to get a new Social Security card. Additionally, retirement accounts may need to be revised or adjusted?

Are you coming home from active duty? If so, go ahead and check on the status of your credit and any tax and legal proceedings that might have been preempted by your orders.

Consider the tax impact of any upcoming transactions. Are you preparing to sell any real estate this year? Are you starting a business? Might any commissions or bonuses come your way in 2022? 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. In most circumstances, once you reach age 72, you must begin taking RMDs from most types of these accounts. ⁵

Vow to focus on your overall health and practice sound financial habits in 2022. And don’t be afraid to ask for help from professionals who understand your individual situation.

Citations

1. thefinancebuff.com, August 11, 2021

2. irs.gov, January 22, 2021

3. nerdwallet.com, July 31, 2020

4. irs.gov, September 8, 2021

5. irs.gov, May 3, 2021

Making Sense of Seemingly Inconsistent Numbers

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Mon, 13 Sep 2021 21:10:38 GMT

Wise investors take the “big picture” view.

It can be incredibly difficult to make sense of data. A report coming from one body may tell you one thing, and another report might seem to offer a wholly different perspective.

Such is the case with August’s jobs numbers from the Department of Labor. There was a vast difference between the number projected in surveys of economists (720,000) and the number we received: a 235,000 increase for nonfarm payrolls. Adding to the confusion, the unemployment numbers dropped in the same period: from 5.4% to 5.2%. ¹

You might be better versed in these matters than the average person. For example, you might understand that these numbers are calculated differently, and with totally disparate factors considered. That accounts for how unemployment can decrease, yet jobs numbers come in so low.

To make matters more confusing, the Department of Labor and other groups measure employment in other ways. For example, ADP puts out a monthly report while the Department of Labor also releases a weekly report on unemployment insurance claims. ²

Wise investors take the longer view, understanding that while these numbers do affect and reflect the markets, they don’t always represent the full picture. By investing in a strategy that takes years to play out, you know that the economic “big picture” isn’t a snapshot, it’s an epic film. You also have someone who thinks in terms of the big picture in your corner, happy to talk you through any questions you might have.

Citations

1. CNBC.com, September 3, 2021

2. adpemploymentreport.com, September 7, 2021

The Delta Factor

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 07 Sep 2021 15:15:06 GMT

The après-COVID party is in full swing. Travel is booming. Restaurants are full. Real estate is on a roll. Even used cars are a hot commodity. In 2021, the Dow Jones Industrial Average (DJIA) recently topped 35,000 and other major stock hit all-time highs.

But an uninvited guest has crashed the party. Her name is Delta, and she’s out to spoil the fun. The Delta variant of the COVID-19 virus has spread rapidly around the globe. It now accounts for the overwhelming majority of new cases in the U.S. Its high rate of transmission has brought about a new wave of infections across the country. As of August 18, the number of new Covid-19 cases had risen to levels not seen since February. Ditto hospitalizations. Although the overall caseload remains well below levels seen at the peak of the pandemic, infections have skyrocketed in a number of areas, and some states are seeing record numbers of new infections. ¹

Critical Reaction

The first to react to the Delta wave was, unsurprisingly, Wall Street. Stocks fell sharply on July 19 following the announcement of pandemic stats, with the DJIA tumbling over 700 points, its biggest decline in almost 10 months. Prices quickly recovered and the index went on to post new highs, although volatility has since tested those highs.

More concerning is what effects the upsurge of infections might have on the economy. Even before the rebound in COVID cases, shortages of labor, computer chips, and other goods were holding back a full recovery. A new surge could bring about renewed supply chain delays. The reopening of schools and offices could be postponed or even cancelled. Already, Apple decided to delay the planned reopening of its sprawling Cupertino campus. Many other companies have followed suit.

More importantly, restrictions are being reimposed across the country on dining, entertainment, and travel. Although lockdowns and full closures seem unlikely at this stage, the uptick in cases has brought about a return to enforced social distancing, mask mandates, and restrictions on public gatherings in many areas -- all of which impacts consumer confidence and demand.

Is the Party Over?

With over 70% of U.S. adults now vaccinated, ² no one expects the economic fallout to approach last year’s recession. But the Delta wave is likely to affect different areas differently.

In some southern and Midwestern states, new vaccinations have plateaued and rates remain stubbornly low, even after a recent Delta-inspired uptick. Unless they improve further, higher infection and hospitalization rates could derail economic recoveries in those areas.

State and local restrictions will also play a role. The CDC tightened its mask guidance in late July, and many areas have reinstated some restrictions. Los Angeles County and San Francisco in California have reinstituted mask mandates and other restrictions, and towns and cities in other states have followed suit. What’s more, a growing number of government jurisdictions and businesses now require workers to show proof of COVID-19 vaccination or submit to regular testing. How all these moves will impact the economy is unknown, but they are likely to have some effect on consumer spending and confidence.

Delta’s long-term impact on the economy will ultimately depend on how widely it spreads, vaccination rates, and how effective the vaccines are in preventing serious illness. To date, the vast majority of new cases, hospitalizations, and deaths have been with unvaccinated people. But breakout cases are growing, and soaring infection rates could spur the emergence of ever-new variants, which could eventually become more resistant to existing vaccines and boosters. That’s a sobering thought, but one to keep in mind as you plan for an uncertain future.

Notes

¹ New York Times, Coronavirus in the U.S.: Latest Map and Case Count , July 26, 2021.

² CDC, COVID Data Tracker , August 19, 2021. Represents adults 18 or older that have received at least one dose.

This material was prepared by LPL Financial. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that they views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All company names noted herein are for educational purposes only, and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

Money Well Spent

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 31 Aug 2021 11:00:03 GMT

A fresh approach to spending can help put some sizzle in your retirement savings

Despite all the budgeting and cash flow tracking apps available, many people still struggle to manage their spending habits on a daily basis. What if there was a simple blueprint you could follow that could help you manage the way you spend your money and hold yourself accountable?

The 70/20/10 rule of thumb helps provide a framework for managing your finances, limiting your spending, and assessing any debt that you plan to take on. According to the 70/20/10 rule, you should spend:

70% of your after-tax income on living expenses, such as food, childcare, insurance, discretionary expenses, and your rent or mortgage.
20% on savings, such as your retirement account, emergency fund, college fund, or other savings goals.
10% on consumer debt, such as credit card payments or a car loan.

Under this rule, the 70% and 10% are maximums; in other words, you should spend no more than those percentages of your income. The 20% is a minimum; you should put at least 20% of your income toward savings goals — and even more if you can. The following are some additional ways to build better spending habits.

Record Your Progress

Just as maintaining a food diary may help you determine if you are eating healthy meals and snacks, the same strategy can help you become a more self-aware — and better — spender. That’s why it’s so important to keep track of your actual spending and see how it matches up against your ideal household budget.

There are a host of budgeting apps available through the Apple Store and Google Play, and many are free. Using a formal spreadsheet program, such as Microsoft Excel or Google Sheets may make more sense for people who prefer to track and store their budget history on a computer. The Google Sheets monthly budget can be set up on a PC or laptop, or you can download the app. And best of all for your budget — it’s available for free!

Sleep On It

Try forcing yourself to delay purchases by at least one day so you have more time to consider if you really need them. For instance, you might wait 30 hours before buying anything over $30. Or you might impose a spending threshold, such as $250, over which you must discuss a potential purchase with a spouse, partner or friend.

Stay Away From Your Favorite Stores

If there’s an online retailer or a local shopping avenue where you can’t resist buying something, avoid it. Understanding what tempts you the most will help you avoid making purchases you can’t afford.

Make It a Habit

Once you get in the habit of making better spending decisions, you shouldn’t be too hard on yourself if you don’t see the desired results overnight. It may take more than a few weeks of smarter spending before your financial well-being shows signs of long-lasting improvement. So be patient, stay focused and let yourself feel good about doing the right thing one day at a time.

This material was prepared by LPL Financial, LLC.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Retirement Assets Grow, But Are Some Being Left Behind?

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 24 Aug 2021 11:00:06 GMT

More than a year after the start of the pandemic, you may be pleased with the overall growth of the assets in your company’s retirement plan. After all, more assets generally mean better prospects for retirement security for your valued employees. But according to a recent triennial survey of wealth held by Americans, some may not be enjoying growth to the same degree as the overall population — nationally and at your company. The Employee Benefit Research Institute (EBRI) examined data from the Federal Reserve’s Survey of Consumer Finances (SCF) for the year ending 2019. True, that’s pre-COVID-19 and thus doesn’t account for the impact of the virus. But EBRI’s analysis, published in their March 2021 Issue Brief, reveals real disparities facing minority families as they strive to save for retirement.

Summarizing the retirement landscape in general, the information shows that 18.2% of families had an active participant in both a defined contribution plan and a defined benefit plan. While just 15.8% of families with an active participant in an employer-sponsored retirement plan had only a defined benefit plan in 2019, 66% of those families had an active participant in only an employer defined contribution plan, up from 37.5% in 1992.

The importance of individual account plans as a source of wealth for American workers has grown over the years. In 1992, the average account balance for families with money in individual account plans was $79,262. By 2019, the figure had risen to $258,453. The money within these accounts has become the main source of assets for Americans investing in them, accounting for 68.3% at the median.

Individual account plan balances play a large role in overall wealth, too. Those families who have balances in individual account plans have a much higher net worth than families without one. Median net worth in 2019 was $284,050 for families with individual account plan assets, compared to $35,460 for families without.

EBRI’s Issue Brief points out that families headed by someone whose race or ethnicity is in the minority are generally less prepared for retirement when preparation is based on their retirement assets. The gap between families having white, non-Hispanic heads as compared to minority family heads has persisted since at least 1992, according to the SCF. Not only were the minority-headed families much less likely to have an individual account plan, the amount of assets held within them was much less. Still, when families with minority heads did have individual account plans, they tended to contain a larger proportion of their total financial assets than those of white, non-Hispanic-headed families.

EBRI’s Issue Brief is available here: https://tinyurl.com/EBRI-SCF-2019 and from there you can view the full analysis

This material was prepared by LPL Financial, LLC.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Catching a Phish

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 17 Aug 2021 11:00:05 GMT

Tips to help you identify common phishing scams and take steps to avoid trouble

If you spend any time online, you’ve probably been the target of a phishing attack. This is when a scammer pretends to be from a reputable company to get you to reveal personal information they can use for their own gain. They do this through a number of communication mediums, including emails, website pop-ups, text messages and even mobile apps. Here are some tips to help you spot the most common phishing scams and take the necessary steps to avoid trouble.

Common Email Phishing Scams

Email phishing scams take on the appearance of a legitimate email. They may even appear to be from a company you’re familiar with (such as Amazon, Costco or Netflix), to take advantage of your trust and gain personal or financial information. Here are some common email scams:

Foreign lottery. Congratulations! You just won a big prize! Unfortunately, it’s often in a foreign country, and you must pay a small amount upfront to receive the larger reward.
Survey says. You get a request to take a survey for a social issue you may care about. When you click the link, you get infected with malware.
Bank on it. You receive an email saying there is something wrong with your bank, Netflix or PayPal account “that needs your attention.” You’re then directed to a fake site where you are instructed to login so they can steal your user name and password for the actual site.

Common Phone Scams

Phone scams come in many forms. Some seem friendly, while others try and use intimidation. Either way, the goal is to get your personal information and money. Here are some common phone scams:

Fix your credit. Give them some money and they promise to “fix” or “remove” your debt.
Please give now. You need to give money today to help these people in need.
Extended car warranties. Almost everyone with a cell phone has had one of these robocalls. The scammers access public purchase records to try and sell you overpriced or worthless car warranties.

You’ve Been Scammed. Now What?

If you think you’ve received a suspicious communication, here are some questions to ask yourself and defeat the scam before it even gets started:

Does it pass the eye test? Phishing emails often contain a number of spelling, punctuation and grammar errors. In addition, the email may contain an embedded logo of a well-known company (to try to make it look “official”) that looks a bit fuzzy or blurry. If you read through it and spot any of these things, it’s a pretty good bet that it’s a scam email.
Is this asking for too much information? Be on the alert if anyone seems to be asking for sensitive information, like your Social Security or bank account number, even if you are talking to a company or bank you do business with.
Do I know you? Ask this simple question before responding to a message. First check to see if you recognize the sender’s name and email address. If you don’t do business or haven’t requested information from a particular company, don’t click on any links or take any surveys.
Do you know me? Avoid communications that lack personalization. “Dear valued customer” is your clue to ignore it.
Is this a legitimate link? Before clicking on a link, hover over it with your mouse to see if the URL address looks legitimate.
Am I on the web page I think I’m on? Before logging into an online account, make sure the web address is correct. Phishers often counterfeit legitimate websites, hoping to trick you into entering your login details.
Is it too good to be true? Avoid “free” offers or deals that sound too good to be true.
Is my security software active? Always use comprehensive security software to protect your devices and information from malware and other threats that might result from a phishing scam.

This material was prepared by LPL Financial, LLC.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Great Challenges Teach Important Lessons

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 10 Aug 2021 11:00:03 GMT

On the surface, retirement readiness did not suffer significantly in 2020, according to a close examination of the 1.1 million participants in 1,076 plans reviewed for a recent white paper. Of course, the market experienced significant dips in the first quarter of 2020, but results were broadly positive the rest of the year. Overall, year-over-year retirement readiness was down fewer than two percentage points — concerning, but not devastating.

The paper, John Hancock’s State of the Participant 2021, examined data for the year ending September 30, 2020, digging deeper to see how participants reacted to 2020’s challenges. The information may help plan sponsors shape ongoing communication efforts.

Lesson: Don’t panic

Among the key results was that very few participants moved money out of equity investments. Those who did, moving their money out of stocks and into a cash equivalent, unwittingly locked in their losses. Participants who took a wait-and-see approach, on the other hand, found their account balances returning to levels at (or even above) where they were immediately prior to the lockdowns.

There is a lesson here for ongoing plan communications: even when the unexpected occurs, panic-driven decisions are seldom best.

Among the participants studied for the paper, very few took money from their 401(k) plan accounts using the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Just 3.4% of participants took a distribution, and even fewer (0.15%) took a COVID-related plan loan. On average, distributions were $20,768 and loans were $16,699.

Lesson: Look at individuals, not just statistics

Although the numbers of participants taking money from the plan were low, the impact on the individuals could be significant. The report calculated the net effect on potential retirement savings at -13% for a participant in his or her 30s; had they not taken a distribution, the projected balance at retirement was $895,403, compared to $779,242 with the distribution.

Another key takeaway from the research is a reminder to look at participant behaviors, not just account balances. By figuring out which participants are most impacted by the pandemic, plan sponsors can offer targeted help to get them back on track.

Lesson: Aim high

In a year of dramatic changes, it’s encouraging to see that some things remain stable. One thing that has not changed is receptiveness to plan auto features. In fact, don’t be afraid to set a default contribution higher than the typical 2% or 3%. According to this research, plans that set their auto-enrollment default contribution rates lower tend to have higher opt-out rates. The 2021 report shows that 14.2% of employees opted out when the default contribution rate was set at 2%, but when it was set at 7% of pay, just 1.6% opted out. The opt-out rate hovered around 9% for most other default contribution levels (1%–8%). Higher default contribution rates can help aim employees toward greater retirement security, so it’s a strategy worth considering.

John Hancock’s State of the Participant 2021 can be viewed here: https://tinyurl. com/JH-2021-Stat

This material was prepared by LPL Financial, LLC.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Annual Maintenance

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 03 Aug 2021 11:00:03 GMT

Perform this five-point inspection to help keep your retirement plan’s motor running smoothly

Just like with a car, it’s a good idea to perform some annual maintenance on your retirement plan. Here’s a five-point inspection guide to help you continue to get good mileage out of your plan and ensure it stays reliable on your trip to retirement.

1. Review Your Retirement Saving Goals

It’s challenging to predict your retirement needs, particularly if you’re in your 20s or 30s. But financial planners generally recommend replacing about 75% of preretirement income. Even if your retirement is decades away, you should use a retirement calculator at least once a year to estimate whether you’re on track to reach your goals. Your recordkeeper will likely have retirement calculators and other planning tools on their website. You can also check out the interactive retirement calculator at aceyourretirement.org, which includes a digital “retirement coach” that can help walk you through some personalized retirement plan action steps that may help you achieve your retirement goals.

2. Increase Your Retirement Plan Contribution

While the ultimate goal is to max out your retirement account contributions, don’t stress if you aren’t there yet. Focus first on making sure you contribute enough to receive your full employer match if your plan offers one — otherwise, you’re missing out on free money. Then, aim to increase your contribution by at least 1%–2% each year, working up to saving 10%–15% of your pretax income each year. Finally, make sure to review current retirement plan contribution limits ($19,500 in 2021, plus an additional $6,500 catch-up contribution if you’re age 50 or older). While you might not have been able to contribute the maximum amount in the past, you may have more to save now.

3. Rebalance Your Investment Portfolio

Over time, market changes can lead to shifts in your portfolio’s asset allocation. For example, you may have started with a 75/25 stock-fund-to-bond-fund split, but changes in the market caused stocks to now account for 85% of your portfolio’s value. That’s why it’s important to periodically check your asset allocation to see if it aligns with your current strategy. Keep in mind, you may also want to rebalance to a more aggressive or conservative allocation should your tolerance for risk change.

4. Consolidate Your Accounts

You may have a 401(k) from a past job that you no longer contribute to. Rolling over the funds from one or more other accounts into one retirement account can help make your financial life more manageable, keep your savings organized and potentially reduce your account management fees. Just make sure you follow transfer or rollover rules so you don’t get hit with an unexpected penalty or tax bill.

5. Review or Name Your Beneficiaries

When you first signed up for your retirement plan, you may have skipped this step. Or, you may want to make adjustments if your family status has changed. Make sure your designated beneficiaries align with your will, if you have one. Also, please note that when it comes to employee-sponsored retirement plans, the law requires written consent from your spouse if you decide to name anyone besides them as the beneficiary.

This material was prepared by LPL Financial, LLC.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

COVID-19 Impacts Retirement Prospects for Each Workforce Generation

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 27 Jul 2021 11:00:04 GMT

Let’s play a little fill-in-the-blank game. Complete the following sentence: Those poor (Millennials, GenXers, Boomers)! They really got the short end of the retirement stick, especially in light of the pandemic.

Which is the correct answer? Brace yourself for a difficult truth: all of them did. Here’s how.

Millennials started out behind in some respects, coming of age as they did during the Great Recession. They watched their parents struggle through the financial challenges of that time, then entered the workforce well-educated but with a huge amount of student loan debt. Many among this group believe Social Security will be bankrupt long before they can get it, and worry they won’t be able to save enough to retire comfortably on their own. Still, those Millennials who began investing early have enjoyed one of the longest bull market cycles in history.

Generation X was present in the workforce during the decline and fall of the pension empire — and the concurrent rise of the 401(k) plan. As such, many started saving for their own retirement early in their careers, although they took a significant hit to their savings during the Great Recession. Now that these “sandwich generation” folks are caring for both children and parents, many have been unable to recover the losses in spite of the bull market. And now, along comes a pandemic that further impacts their jobs and thus, their ability to save for the future.

Baby Boomers were well-established in their pension-earning careers when the shift to 401(k) plans began. While they were in the midst of their peak earning years, many did begin to save on their own. The Great Recession affected their balances, of course, and unlike their younger colleagues, they have less time left to recover. Simply because of age, they are more likely to be laid off or let go when the economy shifts as it did in 2020; members of this generation have lost jobs at almost the same rate as the Millennials.

The pandemic’s impact on jobs and savings is undeniable, yet workers across all generations continue to have an optimistic viewpoint of how retirement will look for them. The data, from the Transamerica Center for Retirement Studies, report that 70% of people who responded to their recent survey say they are looking forward to retirement. Sixty-five percent say they want to travel, 57% want to spend time with their family, and 46% want to pursue a hobby.

While saving enough continues to be a source of worry for all generations, 60% believe they are saving enough. Millennials either “strongly agree” or “somewhat agree” with that sentiment, with 59% of Generation Xers and 60% of Baby Boomers sharing a similar belief.

Employers have a key role to play in helping employees achieve retirement security. Many employers already sponsor a 401(k) plan, and that alone helps employees save. But there is more employers can do. For example, the Transamerica report suggests workplace financial wellness programs and phased retirements, among other suggestions.

The report is available online at https://tinyurl.com/TCRS-2020.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Record Gains and New Highs: There is Some Good News, After All

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 20 Jul 2021 11:00:03 GMT

Do you feel like you spent the last year gripping the steering wheel and waiting to see what would happen? You aren’t alone. Still, as we collectively look ahead and the chaos wanes, bits of good news are emerging. In the investing world, 2020 was a year of records and firsts. The Dow Jones Industrial Average closed out the year at well over the 30,000 mark, setting a new record high as it increased more than 7% from the beginning of the year.

And right on the heels of that good news comes the annual survey from the Profit Sharing Council of America (PSCA). Based upon 2019 data — the most recent available — and released in December of 2020, the PSCA 63rd annual survey showed some record-breaking statistics. This industry-leading survey is eagerly anticipated each year because of the wealth of information presented and the large number of plans involved.

According to the report, 2019 was the third year in a row when new records were set in contribution and participation. More than 90% of employees eligible to participate had a balance in the plan, and nearly the same percentage (87.3%) of eligible employees contributed during the year — an increase from the previous year’s record high of 84.2%. On average, participants are contributing 7.6% of their pay, whereas their employers put in an average of 5.3% of pay, also hitting a new high. Between the two, participants were adding 12.9% of pay in 2019.

Roth accounts, target date funds among design trends

There were some notable changes in plan design trends for 2019. The availability of Roth accounts within 401(k) plans climbed during the year, reaching 75.1%. There has been a steady increase in the availability of Roth accounts over the last decade, rising from 45.5% in 2010. More than one-quarter of employees took advantage of the availability of Roth accounts in 2019, reaching 26.4%, an increase of 3.4% from the prior year.

In 2019, 80% of plans offered a target date fund, which is a significant increase from 2018 when 68.6% made them available. One investment trend that seemed to lose a little traction was in the socially responsible investment (SRI) arena. ESG, or environmental, social, governance and SRI investments accounted for less than 0.1% of plan assets in 2019, and fewer than 3% of plan sponsors responding to the survey reported including such options on their investment menu — representing a slight decrease from 2018. The smallest plans, those with 50 or fewer participants, and the largest — with more than 5,000 participants — were most likely to offer ESG/SRI options: 4.2% of the largest plans and 4.4% of the smallest had them on the menu.

There is much more information available from the PSCA report. You can purchase a copy on the PSCA website at https://www.psca.org .

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

Real Estate Is Booming. Is a Bust Ahead?

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Tue, 13 Jul 2021 16:55:46 GMT

Anyone looking to buy or sell a home lately has probably been hit by sticker shock. Residential real estate prices have gone through the roof, increasing at rates unseen since 2005. According to S&P Case-Shiller, home prices in March saw their highest annual rate of growth in over 15 years -- up 13.2% from a year earlier, following a 12.0% annual gain in February. Some markets -- most notably Phoenix, San Diego, and Seattle -- saw gains of 18% to 20%. ¹ What’s more, the median price of a new home sold in April was $372,400, up 20.1% from a year earlier, the strongest annual gain since 1988. ²

Bidding wars are now common, and in some neighborhoods, competition is so fierce that many homes are sold before they even hit the market. According to Zillow, nearly half of the people who sold homes in April accepted an offer within a week. ³

What’s Behind the Surge

Several different factors are driving the frenzy. For one, mortgage rates remain historically low. Although they have crept up some since their all-time low in January, the rate on a 30-year conventional mortgage was just 2.93% as of June 27. ⁴ That means that anyone looking to spend a fixed amount per month on a mortgage can now afford much more house than they could a few years ago.

There are also demographic factors at work. Millennials, who, as a group, have long shunned buying in favor of renting, are now entering the market in force. COVID-19 and the prospect of long-term telecommuting have encouraged many to move from urban apartments to suburban homes. Many others are transitioning into larger homes to accommodate families.

Perhaps the biggest reason for the current spike in prices is supply -- or lack thereof. The inventory of new houses has been sharply constricted by a widespread lumber shortage, along with shortages of kitchen appliances and other building supplies, such as copper and PVC pipe. Transportation logjams, brought on in part by COVID lockdowns and business closures, continue to impact new home construction. This has put pressure on the overall inventory of existing homes as well, as would-be buyers of new homes opt for existing homes instead. Although existing home sales are up year-to-date, they dropped in April for the third consecutive month, according to the National Association of Realtors. ⁵

Will it continue?

Although the current supply shortage shows no signs of abating, over time, the bottlenecks will likely work their way out, as the post-COVID economy kicks into gear. Price appreciation is unlikely to continue at its current heady pace, but most real estate analysts do not foresee any major price drop, as happened back in 2006 to 2012 when overbuilding and lax lending standards posed more fundamental issues. The bigger concern may be mortgage rates. Average rates remain below 3%, but that could change if inflation prompts the Federal Reserve to raise interest rates. The Fed has indicated that it intends to hold rates steady for the time being, but should inflation continue at its recently reported level of over 4%, it will likely take action. Should that happen, mortgage rates would rise and property demand would cool down.

So stay tuned, but be prepared for more of the same in the immediate future.

Notes:

¹ S&P Dow Jones Indices, S&P Corelogic Case-Shiller Index Shows Annual Home Price Gains Climbed to 13.2% in March , May, 25, 20121.

² Source: Wall Street Journal, U.S. Home-Price Growth Surges as Demand Overwhelms Supply , May 25, 2021, based on figures released by the Commerce Department.

³ Source: NBC News, It's a red-hot real estate market — so why are home sales plunging? , May 22, 2021

⁴ Source: Freddie Mac , as of June 17, 2021.

⁵ National Association of Realtors, Existing Home Sales , May 27, 2021.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Despite Pandemic, Americans Are Saving for Retirement

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Wed, 30 Jun 2021 14:59:24 GMT

The global pandemic has taken a grim toll on lives and livelihoods. Many have been laid off, furloughed, or taken on more debt to tide things over. Many others have had to scale back their lifestyle or help support family or friends affected by the ravages of COVID-19.

The good news is that despite the pandemic and its economic fallout, Americans are still saving for retirement and are confident in their ability to live comfortably when they do retire. In its 31 ^st Annual Retirement Confidence Survey, ¹ the Employee Benefit Research Institute (EBRI) found that, on the whole, Americans were able to stay the course in saving for retirement. In fact, overall retirement confidence actually increased, continuing an upward trend seen since 2017.

Other findings of the survey include:

7 out of 10 workers were confident in having enough money for a comfortable retirement.
8 in 10 retirees were confident they will have enough money to live comfortably throughout retirement.
Half of workers and 7 in 10 retirees say the pandemic has not changed their confidence in achieving a secure retirement.
More than 4 in 5 workers who are offered a workplace retirement savings plan are satisfied with the benefit.
Two-thirds of workers feel confident they will have enough money to take care of medical expenses in retirement.
Only 3 in 10 workers made changes to their workplace retirement plan since January 2020. Of this share, nearly 6 in 10 increased the amount they contribute.
Over half of workers surveyed were confident that Social Security benefits would at least maintain their value in the future.

But those most negatively impacted feel the pinch

Although the overall retirement picture may be positive, those hit hardest by the economic fallout from the pandemic reported a negative impact on their retirement confidence and ability to save. About 4 in 10 workers reported that their household experienced income or job loss in the past year, and half of those reported feeling less confident they will have enough money for a comfortable retirement. What’s more, 6 in 10 workers who experienced income or job loss said the pandemic has had a negative impact on their ability to save for retirement, compared with just 1 in 8 of those who did not.

For those still recovering financially, here are some tips for getting back on track with your retirement savings.

Make your match. Your employer may match a certain percentage of your contributions, which can make a big difference over time. So be sure to contribute enough to get the full match from your employer.

Take advantage of catch-up contributions. Individuals aged 50 or older can contribute an additional $6,500 to their workplace retirement plan and $1,000 more to an individual retirement account (IRA) in 2021.

Find the money to invest. Start by looking closely at where your money goes each month. Most people don’t have much flexibility in meeting basic costs for housing, food, utilities, and health care. But they do have discretion over items such as vacations, clothing, entertainment, and eating out. With restaurants and shows opening up again, consider scaling back some of your pre-pandemic spending on entertainment expenses. And if you are among the many who are now working more from home, you may also be able to significantly cut back on commuting expenses. Taken together, a few modest changes can add up to a significant monthly retirement savings contribution.

¹ Source: EBRI, 2021 Retirement Confidence Survey , April 22, 2021.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Practical Steps You Can Take to Improve Your Small Business's Financial Health

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Thu, 17 Jun 2021 21:18:54 GMT

Running a small business carriers with it unique financial planning challenges, with money concerns an ongoing burden for those who work for themselves.

After all, unlike salaried jobs where income is predictable, small business owners are often the last to get paid and the only one paying the bills. While there’s no magic formula to right the ship when it comes to your company’s finances, there are some practical things you can do in the day-to-day management of operations that can improve your bottom-line. We offer a few of the more practical recommendations:

Separate business and personal expenses

When times are tight, the small business owner can be tempted to just write a check from personal funds to pay that overdue bill or purchase that quickly depreciating asset. But resist the urge: Mixing business and personal expenses is fraught with downsides, like tax issues, imprecise accounting records, and personal liability, among others. To separate your expenses, establish clear and separate budgets for personal and business, and stick to them. If you have a personal credit card and checking account, don’t use them to pay for business expenses, and vice versa.

Net 30

Failing to pay your bills, loans, or credit card charges on time can incur steep penalties and fees. The same goes for taxes — miss the payment deadline and the IRS can add a penalty to your tax liability.

If it’s simply a process issue for your tardy actions, whenever possible, set up bill payments to occur automatically. Additionally, establish a reliable monthly reminder that prompts you to pay your bills.

Of course, if your delinquency is the result of cash flow issues, see the other sections in this article for tips on getting things flowing more efficiently.

Deal or no deal

Look for deals and rebates when purchasing office supplies, especially big-ticket items like a computer or furniture, the latter which you can buy used to save money.

Self-educate

No matter your background or formal education, you can find value in taking finance-related classes, like accounting and business finance. Your local community college is a great source to find applicable courses, but don’t overlook online options, too.

Persistent collecting

Few things can damage your bottom-line as much as clients who pay late. Review your accounts receivables regularly, pinging those customers whose accounts are overdue. This can be a sensitive topic for most, so consider offering incentives for paying early.

Expanded client base

While landing a big client is an event to celebrate, try to expand your base to minimize losses should a major client leave. Additionally, if all your revenue comes from one source — i.e., a physical store — consider adding an online component to complement sales.

Promote the firm

Marketing can become expensive, but it’s critical to build brand awareness and credibility in the marketplace. While you should always review your marketing budget to identify areas where you can save money, consider reallocating those funds to other marketing initiatives that can produce a better return.

Seek help

Just because you’re working for yourself doesn’t mean you have to work alone. A skilled financial professional can be an invaluable source for helping you develop a winning business strategy.

Additionally, work with an accountant to understand tax liabilities and ways to minimize your tax burden.

Owning a business can be an exciting and rewarding proposition. To maximize your enjoyment and minimize your stress, adopt practical and mindful financial habits, a critical step to achieving financial success.

This material was prepared by LPL Financial, LLC

Managing A Budget During Your Retirement

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Wed, 19 May 2021 21:08:29 GMT

Unless you have accumulated substantial wealth where money is not a concern, you face a critical task when you reach retirement to make sure that your assets will support you through your lifetime.

When you retire and no longer earn an income to pay for your bills and living expenses, developing and adhering to a financial plan, where cash flow is clearly defined, can help you balance your income and expenses. Especially as longevity continues to rise among certain demographics, this task is more critical than ever before. For instance, the “average” person who retires at age 60 can expect to live 25 or more years after they retire.

There are important steps that you can take to maximize your cash flow and better manage your income and expenses during retirement.

Step One: Careful Planning

As you reach retirement, try to obtain a clear picture of your financial situation and projected income and expenses. Start by creating a detailed net worth statement, which provides a comprehensive overview of your assets, debt, and cash-on-hand.

Next, assemble an accurate budget that itemizes your income and expenses. If you anticipate any major lifestyle changes after retirement — for instance, you plan to sell your house and downsize to a rent controlled apartment — make these notations. Include your anticipated income during retirement, such as Social Security, pension, and other income streams.

Include all of your expenses, including recurring fees (membership, insurance, college tuition), prorating them to account for them on a monthly basis. Consult a financial professional for assistance, as you want to make sure that you are accurate (and certainly not under) in your calculations.

After you develop your statement, review the figures for any potential cash flow issues. Look for areas that you can improve your income/expense balance. For example, you may have fees or expenses that you can reduce or even eliminate.

Step Two: Ongoing Monitoring

Creating a detailed budget is not a one-and-done proposition. Revisit your planning tool regularly and readjust the figures if your actual income and expenses change.

By monitoring your income and expenses on a regular basis, you can best address any shortcomings and proactively look to reduce expenses, to avoid any ongoing cash flow issues.

Step Three: The Fine Print

As you monitor your finances, there are several items that could impact your cash flow in profound ways:

Interest rates: These fluctuate and could reduce the income from your savings and investments. If rates drop, you may need to find living expenses that you can decrease to offset the impact.
Tax rates: Federal, state, and local tax rates change over time; so, too, do tax regulations. Make sure that you understand the impact, if any, that these changes will create on your overall cash flow. For instance, if you’re moving between states where the tax rate is substantial, consider the impact on your bottom-line and revisit your budget to make any necessary adjustments.
Healthcare costs: These can be unpredictable and have a major impact on your cash flow and expenses.
Miscellaneous life events: You may also incur life events that impact your cash flow, either on a one-time basis or even continually. For instance, if your spouse dies, your monthly living expenses will decrease; and if your child gets married, you may have a (hefty) one-time expense to pay for the wedding.

By developing and monitoring a budget during retirement, you minimize the possibility of cash flow issues that could otherwise constrain your lifestyle expectations.

This material is for general information only and is not intended to provide specific advice or

recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.

This material was prepared by LPL Financial, LLC.

Budgeting For A Family

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Wed, 19 May 2021 20:22:25 GMT

Starting a family is one of life’s most rewarding experiences. However, it will also profoundly impact your financial picture, with a list of expenses that grows by the year. (One estimate pegs the total expenses for a child’s first 18 years at $233,610.) ^[1]

As you begin planning for your first child, consider these key areas and their associated expenses.

Healthcare

One of the first steps you are likely to take prior to welcoming your child is to modify your healthcare plan to make sure that you baby is covered. You can choose a managed care plan, such as a health maintenance organization (HMO), which offers lower up-front costs than a preferred provider organization (PPO) plan, though which may require you to pay at least 20 percent of care costs. However, a PPO plan may provide you with more options as to which providers you can see and whether you need a referral to see a specialist.

Deductibles, coinsurance amounts, copayments and monthly premiums vary greatly; review the options available to you carefully before making your selection.

For those expenses not covered by health insurance, consider a medical reimbursement account (MRA) or health savings account (HSA), if available from your employer. These can pay for items such as deductibles, copayments, and orthodontics.

Childcare

You may be eligible to receive tax benefits as a parent, with the Child Tax Credit providing a credit of up to $2,000 per child under age 17 (as of 2020). ^[2] Part of the credit is refundable, which means that you could receive a tax refund (up to $1,400 per qualifying child) even if you don’t owe any tax.

To qualify, your child must have a Social Security number before you file your tax return.

Note that the credit is reduced for married taxpayers filing jointly if their adjusted gross income (AGI) exceeds $400,000, and for other taxpayers if their AGI exceeds $200,000.

Insurance

As you enter parenthood, consider the value of purchasing disability insurance or life insurance.

A financial professional may be able to provide guidance as to the recommended amounts of coverage for each. Some general guidelines include a disability policy that covers at least 60 percent of your income and a life insurance policy that equals 5 to 10 times your family’s annual income.

Check to see if your employer offers these policies, they are often less expensive than those that you purchase independently.

Estate Planning

Consider drawing up a will that designates a legal guardian for your child, in the event that you and your spouse die together (or if you are a single parent, if you should die). Without a will, if you and your spouse die together, a court will decide whom to appoint as your child’s guardian.

The will should apply to your future children, too.

By carefully budgeting for your baby, you can help secure the financial futures of both you and your child.

This material is for general information only and is not intended to provide specific advice or

This material was prepared by LPL Financial, LLC.
[1] https://www.usda.gov/media/blog/2017/01/13/cost-raising-child.

[2] https://www.irs.gov/newsroom/child-tax-credit-by-the-numbers.

Making Sense of Your ROTH 401(k)

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Wed, 19 May 2021 18:34:35 GMT

The Roth 401(k) has become an attractive investment account, with investors attracted to their qualified tax-free withdrawals and contributions which receive after-tax treatment. But like other 401(k) plans, the Roth 401(k) carries with it numerous rules that impact their ultimate tax treatment. Understanding these rules is critical for optimizing your tax consequences.

Tax-Free? Really?

Distributions from your Roth 401(k) qualify for tax- and penalty-free treatment if the following are met:

The participant reaches the age of 59 1/2 or in the event of the participant’s death or disability AND
The participant has held the account for at least five tax years.

If the distribution does not meet these requirements, they are characterized as non-qualified and are subject to income taxes and possibly penalties.

Rollover Options

If you have been contributing to a Roth 401(k) while working at an employer and then leave that employer, you have a few options:

Maintain the 401(k) with your (now) previous employer
Rollover the 401(k) balance into another employer-sponsored retirement plan that allows for rollovers
Rollover the account into a Roth IRA
Cash out the account value

While all of the above options generally have no tax consequences, if you decide instead to cash out from your plan and the cash out does not meet qualified distribution requirements, you will incur a tax obligation on the distribution that represents earnings and possibly a 10% additional federal tax.

Minimum Distributions

The minimum distribution requirements for both Roth 401(k) and traditional 401(k) plans are similar and begin when participants reach age 72 (the age was increased from 70 1/2 on January 1, 2020. Account holders who turned 70 1/2 prior to that date are subject to the old rules). However, Roth IRAs do not require account holders to take distributions during their lifetime.

Other Considerations

Contributions made to a Roth 401(k) incur tax obligations when made, making them attractive when you anticipate that tax rates are likely to increase or you expect your income to rise significantly over time. If either of these scenarios fit your situation, by locking in present day tax rates, you may avoid future tax increases.

Additionally, if your income places you in a high tax bracket that prohibits you from contributing to a Roth IRA, a Roth 401(k) may be advantageous. In 2020, the phase out for Roth IRA eligibility begins at modified adjusted gross income of $124,000 for single taxpayers and $196,000 for married individuals filing jointly.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

This material was prepared by LPL Financial, LLC

The Basics of Financial Fitness

jenny.boudreau@assuredpartners.com (Jenny Boudreau) — Wed, 19 May 2021 18:20:34 GMT

There’s a subjective uncertainty associated with financial wellness. Are you financially fit? And if so, how fit are you?

While there is no clearly defined threshold for answering affirmatively, much less grading your level of fitness, there are baseline elements associated with financial fitness. To make sure that you’re on the right track, develop a financial plan that lays out clear goals and timelines. Below are steps to consider to get you started:

Budget Crunch

As a first step, make a reasonable and practical budget, assessing your income and expenses (by month, if possible), to understand your cash flow, identifying areas where you can trim costs. Revisit and revise your budget regularly to make sure it aligns with your personal circumstances.

Save for Unexpected Expenses

Expect unexpected expenses, such as a medical emergency, major car repair, and an appliance replacement, establishing an emergency fund that can pay for these costs. (Ideally, you want to keep three to six months’ worth of living expenses in the fund.) Without such a backup source of payment, you may have to incur credit card debit, which can be unwise.

Stay Credit-Worthy

Check your credit report periodically, making sure that there are no errors, while using it as a tool to make sure that you’re paying your bills on time and staying within your established credit limits. Such actions will help increase your credit score. NOTE: You are entitled to a free copy of your credit report annually from the three major credit reporting companies, Experian, Equifax, and TransUnion.

Establish Long-Term Financial Goals

Saving for your retirement is a personal decision that will help shape your lifestyle during your Golden Years. It’s never too early (or late) to work with a financial professional to strengthen your retirement plan.

Review Your Plan

Establishing a financial plan is not a one-and-done proposition. Review your plan at least annually, revising it as necessary to align with your financial goals.

Increase Investments Potential Faster With Early Contributions

Investing early and often, such as a small recurring investment over a long period of time, has the potential to produce greater returns than investing a larger amount over a shorter period of time.

For instance, If you invest $75 a month beginning at age 25 and continue until you are 65, your earnings will be greater than the 35-year-old who invested $100 a month until reaching 65 (assuming an equal rate of interest for each).

(This is a hypothetical example and is not representative of any specific investment. Your results may vary.)

This material was prepared by LPL Financial, LLC.