Saving for Life’s Experiences

While some advisors focus only on saving for “retirement”, we believe there are a lot of life experiences that need planning attention along the way. It is important to listen carefully to our clients and learn the specific goals which are priorities for them.  For some individuals it is planning for extended breaks from employment to fulfill goals for bucket-list experiences; or it might be returning to school full-time for an MBA; and for others it might mean stepping away from corporate life to open their own business. Regardless of your goals, you need an advisor who listens well to the things which are most important to you and helps you plan so you can achieve them. Goal planning involves not just accumulating the savings to pay for it, but also considering all the interrelated aspects of embarking on that goal. This may include maintaining health insurance during lapses in employment, ensuring coverage for international adventures, or making sure that appropriate legal filings and compliance are in place before launching a business. Regardless of the goal, it is critical that Read on! →

Russians and Fed Chiefs and Covid, oh my!

Well, we have certainly turned a corner as 2021 ended and 2022 has begun. Now that we are a month into the new year, let’s take a moment to see what’s different since we left 2021 behind. One thing that hasn’t changed is that we are still dealing with Covid and most of us are weary of the restrictions. After a few months of relative freedom from Covid’s lockdown during the summer and leading up to Thanksgiving, Omicron emerged. The variant spreads easily but isn’t as debilitating as earlier variants.  This has led to fewer negative economic impacts and a view held by some that we need to begin living with future Covid variants more like a seasonal flu virus.  One sidenote for portfolios; if China sees their infection rates increase steeply with Omicron or future variants, their zero-tolerance policy may result in factory shutdowns and put further strain on the already burdened supply chain issues. 2022 brought the Federal Reserve decision-making on interest rates to the forefront, as they work to reconcile increasing inflationary pressures with their stated policy Read on! →

Medal Winning Savings!

You have probably heard the advice that you should maximize contributions to your employer’s retirement savings plan. Because it lowers your current income taxation by deferring pre-tax dollars to the plan and grows tax-deferred until distributed, you are encouraged to save to your employer plan (401k, 403b, etc.). Employers may also match a percentage of what you contribute. This can be a powerful way to save, but it should not be the ONLY way you save for retirement. The following medal-winning strategies might add flexibility, potential retirement tax savings and a more secure future to your retirement savings mix. Bronze Medal Winner The bronze medal winner for savings might seem too simple to have an impact but can add versatility and flexibility when trying to increase tax efficiency in retirement. Many people step into retirement with inadequate non-IRA savings.  This forces them to distribute fully taxable income from their employer plan/IRA each time they need cash and increases their tax liability. For those individuals with a mix of IRA and non-IRA savings, more control can be gained over taxation in Read on! →

One positive outcome from Covid & 2020

While there are many aspects of 2020 which we might prefer be forgotten, there were a few positive outcomes from the year which need to be highlighted.  As a majority of individuals in the U.S. were sheltering-in-place during Covid-19 an interesting thing happened. Because we were unable to travel, dine out and generally entertain ourselves by spending lots of money, the U.S. personal savings rate jumped to a record 15% of gross income. As can be seen from the chart below, not since the early 80’s has the U.S. seen a savings rate even in excess of 10% and it has been as low as 3%, which occurred just prior to the Great Recession. Even though the jump in personal savings was not spread evenly throughout the population, it does represent a very positive change, one that shouldn’t be abandoned when the world returns to it’s new “normal”. It is interesting to note that in order to successfully fund retirement, it is recommended that a consistent annual savings rate of 10-15% is required. With this chart going back to 1960, Read on! →

Buckets of Savings!

When saving for retirement, most people save to their employer retirement plans, knowing they are reducing current taxable income, typically receiving an employer match on their contributions, and deferring taxation until retirement.  However, if this is the only place where retirement savings takes place, you can be in for a surprise when reaching retirement.  If all your usable savings resides in a tax-deferred bucket, every dollar you take out to meet expenses will be subject to income taxation at ordinary income rates, thereby forcing you to take additional money out to pay the taxes.  It can also be a shock to find that your retirement income tax bracket isn’t much different than your income tax bracket when you were working.  Additionally, higher taxable income levels in retirement will also impact the amount of your Social Security benefit which is subject to taxation and can also result in higher Medicare premiums. So what should you do differently to give yourself more flexibility and lower overall taxation in retirement?  There is great benefit in having multiple buckets of savings in retirement, each Read on! →