When should you take IRA withdrawals 2 – 2021

Hi all! As a follow up to last month’s article, here I will give you some additional information. And I’ll let you know how and if taking more income could affect your Medicare premium.

Several tax cut provisions, especially income tax cuts, will expire in 2025, and starting in 2021 will increase over time; this, by 2027 would affect an estimated 65% of the population and in that same year the law's provisions, for personal, not corporate, are set to be fully enacted.

Why do they expire, you ask? Well, that’s the only way that the prior administration was able to meet budget rules. The Biden administration recently has said that they will absolutely let them expire. Interesting, because Biden suggested a future Congress won't let middle class tax cuts expire. Recent precedents, like the often-extended Bush tax cuts. Still, there's zero guarantee of that. After all, a lot can change over eight years.

1. Will the extra income cause my SS income to be taxed if you’ve started taking it? Between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. more than $34,000, up to 85 percent of your benefits may be taxable.

2. Will this administration change the 2021 tax rules, mid-year (retroactively), like Bill Clinton did? I remember exactly where I was when I heard that news. I almost drove off the road, yelling “he can’t do that!” But he did. 

So, as you can see, it’s not that simple a question. There’s a lot to think about. Please understand that this is not a critique of this or any other administration. This is just a factual article about a choice, or a possible dilemma, that our clients have at this moment in time. It has nothing to do with
politics and everything to do with looking at the past and present to try to decide what the best move might be for YOU specifically.

If you would like to discuss this or any other financial questions with one of our expert advisors, please don’t hesitate to give the office a call. Remember, never a charge.

When should you take withdrawals from IRA? – 2021

Can your retirement handle travel? – 2021

It’s been sooooo long since most folks have traveled. I don’t mean to go visit the kids or your parents. That’s important. But I’m talking about just getting away. A real vacation. I know, my wife and I, are getting out of the heat for a week and going to Colorado for some cool air. So, how does a travel article wind up in the Financial Tip article, you ask? Well, the question is, can your retirement income plan handle the travel? Fuel prices are really getting high. Rental car prices are absolutely insane. Honestly, have you seen rental car prices? There are some ways to get some real discounts to help. You probably know the usual suspects. AAA, Costco and Sam’s Club, AARP and AMAC. Points from your credit card. (That’s a big one for me.) My Southwest
Airlines card through Chase Bank racks up the points quite nicely. I even have a companion pass so my wife flies free with me. You just must use the card forEVERYTHING. Don’t forget to join the hotel’s loyalty program before you book your stay. Most hotels have better rates and extra perks for reward members. Also, check travel routes when you fly. I flew one of my sons from Burbank to Tampa, but it was only about half the price when I added a stop in Las Vegas. I saved about 350 bucks.

Now, all of that being said, you still need to determine what your retirement nest egg can handle. If you like to travel and are able, you should build it into your retirement income plan. What’s that? You don’t have a retirement income plan? Well, you’re in luck. We specialize in Retirement Income Planning. Our advisors would be happy to have a consultative meeting to build you your own plan, tailored to your wants and needs so that you don’t have to worry. Of course, there’s never a charge.

Stay cool! Cheers!

Is there a safe place to shift assets too? – 2021

I'm writing my article today from sunny Florida… sitting on the beach dreaming about the perfect investment. What if there were a place that I could shift assets to that would never lose money? Wouldn't that would be great!?

Insured municipal bonds come to mind. But those aren't paying much. So, the perfect investment would also need to be able to participate in whatever gains the stock market achieves. But I don't want the risk of loss associated with investing in the stock market. Humm, so I want those potential market gains with no risk of loss. Oh, and I also don't want to pay any fees. Yeah, that would be great.

Over my 34-year financial career, I've seen folks who have lost sooo much money chasing the almighty dollar—investing in the next big thing, trying to time the market, day trading, options trading, and speculative trading. Sometimes they reach out to a well-known brokerage firm and pay high fees only to discover that the broker put them in mutual funds that already have commissions and high internal fees on top of the broker's fees. Most of the time, they have snuck in proprietary funds from the firm they work for that may have higher fees and com- missions and not necessarily better returns. So, it's hard to know who you can trust. One thing is for sure, though; nobody has a crystal ball.

With all of the world's uncertainty, you want to know that what you have saved will last your lifetime. My musing about the perfect investment is not just a pipe dream. What if I told you it actually exists. There is a place one can put assets that have the characteristics I want. I actually own them myself and have been protecting clients' assets in them for years. A place with:

No fee

No market risk

ׄSemi-liquid for a period, then 100% liquid. ׄ

Tax-advantaged ׄ

Returns tied to the upside of market indexes that can be adjusted periodically.

Ability to create a lifetime income while preserving access to the full value.

Most folks approaching retirement or already retired should consider having a percentage of this type of position in their portfolio. Maybe even half. I do.
To find out if something like this is right for you, call our office for an appointment with your advisor. As always, no charge.
Cheers

No fee liquid.

No market risk Tax-advantaged

Semi-liquid for a period, then 100% Returns tied to the upside of market

indexes that can be adjusted periodically. Ability to create a lifetime income while
preserving access to the full value.
Most folks approaching retirement or already retired should consider having a percentage of this
type of position in their portfolio. Maybe even half. I do.
To find out if something like this is right for you, call our office for an appointment with your
advisor. As always, no charge.
Cheers

Questions about Social Security? – 2021

Hi all! So, I am asked the same Social Security questions all the time. So, I thought I would share answers to some of the most asked questions from our clients.

Q: How much do I have to earn to stop contributing to Social Security in a single year as an individual?

A: $142,800 in 2021

Q: How much am I allowed to earn at work before I reach my full retirement age and not be penalized?

A: For 2021, that limit is $18,960. In the year you reach full retirement age, Social Security will deduct $1 in benefits for every $2 you earn above a different limit.

Q: What is the required minimum distribution amount you must begin taking out of my IRA or (401)k?

A: If you became 70 ½ prior to 2019, you must take in the year you turn 70 ½ - 3.65% of the December 31st previous year balance of all of your retirement accounts. If you did not turn 70 ½ prior to 2019, you must begin taking distributions from your retirement accounts by age 72. That distribution must be 3.91% of the December 31st previous year balance of all of your retirement accounts.

Q: I heard that I can request from Social Security, a lump sum check when I start my benefits.

A: Yes. They can back date your benefits and provide up to six months in a lump sum payment.

If you have more questions that you would like answered, please feel free to take advantage of our Online Social Security Workshop, offered once a month. The dates are on the back of this newsletter. Need answers quicker and don’t want to sit on hold with the Social Security office for 2 hours?

Just call and schedule an appointment with one of our Advisors. Of course, there is no charge

Is my Stimulus payment taxable? – 2021

The Internal Revenue Service (IRS) sent out more than 159 million stimulus payments since the CARES
Act was signed into law on March 27. Now it’s sending out millions more checks in the second round of payments. Folks are wondering, “Is my stimulus payment taxable?”

The short answer: No. In the more precise words of the IRS: “No, the payment is not income and taxpayers will not owe tax on it. The payment will not reduce a taxpayer's refund or increase the amount they owe when they file their 2020 or 2021 tax return next year. A payment also will not affect income for purposes of determining eligibility for federal government assistance or benefit programs."

Not your average tax credit…
The stimulus payment, or economic impact payment, as the IRS calls it, is technically a tax credit for 2020. Some people assume that the IRS will add the amount to your income, generating a bigger tax bill, or reduce your future tax refund when you file your tax return next year. Neither is correct.

In the tax world, a tax deduction is a good thing. It reduces your income, which reduces the amount of tax you owe. If you had $50,000 in income and had a $5,000 tax deduction, your deduction would reduce your taxable income by $5,000. If you were in the 12 percent tax bracket, you would reduce your taxes owed by $600 (12 percent of $5,000). A tax deduction is good, but a tax credit is great. A tax credit reduces your tax bill dollar for dollar. If you owe $1,500 in federal income taxes and you get a $1,000 tax credit, your tax bill sinks to $500.

A refundable tax credit is the best! A regular tax credit can reduce your tax bill to zero, but it can't turn a tax bill into a tax refund. Refundable tax credits can. For example, if you owed $1,000 in taxes but had a refundable tax credit of $1,200, you'd get a $200 tax refund check from the fed.

Because, if you qualify, you're getting what amounts to a refundable tax credit now in the form of a stimulus payment, rather than waiting to get the money from the credit in 2021 when you actually file your 2020 tax return, you're in effect getting an advanced refundable tax credit.

I hope this helps. Feel free to schedule a free Retirement Income Planning appointment with your American Retirement Advisor representative and see how we can help maximize and protect your retirement income.

Better year greetings! – 2021

As of the writing of this article, all 2021 issues still have not been resolved. So, as of now, we are still sitting in conservative portfolios.

So, let’s talk about health, as it relates to money.

Over the past 34 years, I have protected hundreds of portfolios from the possibility of huge medical and long-term care (LTC) bills as well as funeral expenses. Yes, I know, nobody wants to talk about this stuff but it’s prudent to do so.

A LTC policy can cover nursing home costs as well as assisted-living facilities. If you want to try to stay home and receive care in your own surroundings, they will even cover that. We decide on these plans the same way we do everything else - that being as a fiduciary for you. We calculate what your needs are and run your information through our software with all the companies that offer LTC plans in your area. Then, we choose the most appropriate fit for you.

What’s that? You don’t want to pay another monthly premium. No worries. There are companies that created products that you deposit one lump sum and grow the asset while covering you for a potential long-term-care stay. Some even have a tax-free death benefit to cover funeral expenses and more.

The key is to custom tailor your plan to your needs and budget. This is something that I have found is not the usual methodology used by brokers and insurance agents. They usually find a product and company that they like and present the same thing to everyone. Don’t let them do that. Make them show you everything that’s available and run a side-by-side analysis so you know you are choosing wisely.

In my opinion, you should make sure that your plan has an extraordinarily strong Home Health Care benefit. With COVID, I want to stay home and receive my care there, if possible. Questions? Please feel free to call our office. Your advisor is well-versed and experienced with this topic and is ready to help.

Cheers

Nobody really wins with this shut down – 2021

What will the new year bring? – 2020

What will the new year bring? Will the stock market soar? Will it be flat? Will it decline?

As we continue to experience high levels of volatility in the markets due to several factors, I think it’s important that folks understand what it takes to recover from a downturn in the market. What is the Break-Even Point? It’s essentially the return that you’ll need to recover from a downturn in the market.

Example – If you experienced a 20% decline in your account, it does not require just a 20% upswing to recover. It requires a 25% return. A 35% decline requires a 53.8% just to get back to even. A 50% decline will require a 100% return just to get to even. One bad year can wreak havoc on an investment portfolio and the required return just to break even could be significant and take a long time to recoup. The time our clients do not have. That is why we always have about half of our client’s assets in 100% insured and guaranteed positions. The other half we position in a well-balanced actively managed portfolio of nimble, easily repositionable investments

It’s time to be Safeguarding & De-risking assets by providing that downside protection. As they like to say ZERO is your hero!

There will be turmoil in the market – 2020

Well, I am getting excited for the weather to cool down soon. I’m a little apprehensive though as we get closer to the election. Regardless of who gets in, there will be turmoil in the market. I’ve discussed the strategies that we will implement as we get closer. Our portfolio management team here is proactive. In my 33 years as a financial planner, I’ve seen way too many advisors that are reactive and make moves after a paradigm shift in the market. When you can see things coming, why not try to get ahead of it.

We plan on shifting assets to a more conservative position in advance of the election and take advantage of the direction the market takes, post-election. This is not a decision based on politics, but one based on change caused by events. Democrat or Republican is irrelevant. The decisions are made based on policies that can and will affect the market.

We always have around 50% of clients’ portfolios in strategies that can take advantage of good markets without having any risk of loss in a declining market. Remember, 99% of our clientele are 64 years of age and older. Most cannot afford to lose, so we always manage with this in mind.

When using a financial advisor, we believe that you should always use advisors who are fiduciaries. What this means is that they have an obligation to act in the best interest of the client. When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his own benefit in relation to the subject matter. Some advisors claim to be a fiduciary but, by definition, they may fall short. Some questions that I have are, do you use proprietary products? Proprietary products usually pay a representative a higher compensation than third party products. Does your company only offer your company’s products? I have seen firsthand things that management forces their brokers to do. I have been in offices and heard branch managers offer bonuses if they sold certain funds or stocks, or even requiring brokers to add specific funds or stocks to all portfolios.

In short, whether you are managing your own portfolio or have an advisor, please make sure that they are bracing for a possible impact of known events that are about to happen. Unlike the black swan event of COVID 19, we can prepare for this one. And please make sure that you have a true fiduciary working for you.